Since the outbreak of the COVID-19 pandemic, global trade and the rules-based multilateral trading system have experienced unprecedented disruptions and mounting challenges. While COVID-19 is a well-known cause, many other problems are arguably more fundamental and hence likely to have a systemic and enduring impact.Footnote ¹ One prominent problem concerns the nexus between trade and sustainability. The early 2000s were dominated by ‘trade and … ’ debates that explored the intersection of trade and environmental and social values. Since the mid-2010s, however, that nexus has been increasingly warped through the rise of economic nationalism and (green) industrial policy, the escalation of geopolitics, and strategic competition among major powers, amongst other factors. Cumulatively, these disruptions and challenges have pushed governments to shift their thinking, strategies, priorities, and even their definition of the ‘end goal’ of trade policy. With trade increasingly being viewed as a means rather than the end, resilience, diversification, national security, inclusiveness, and sustainability have become possible end goals of trade policy.

The 2030 Agenda for Sustainable Development, adopted by member states of the United Nations in 2015, embraces wide-ranging sustainable development goals (SDGs).Footnote ² When it comes to the role of trade, the World Trade Organization (WTO), as the backbone of the multilateral trading system, is reorienting its priorities by focusing more on how trade can be used to achieve many of the SDGs.Footnote ³ In the words of the WTO Director-General, Dr Ngozi Okonjo-Iweala, the global trading system enters, or needs to embark on, a phase of ‘re-globalization’, thereby offering a new narrative to help stabilize and strengthen the trading system in light of broader goals of economic development and sustainability.Footnote ⁴ Instead of criticizing globalization as a problem, re-globalization provides a solution through reforming, improving, and updating the current international trade and economic system to reverse the trend of deglobalization and fragmentation and reinvigorate international cooperation in tackling the ‘key challenges of today’.Footnote ⁵

Against this background, this special issue has collected nine papers to advance the academic and policy debate about the ongoing shift of global trade and the trading system. The papers address a series of controversial questions, focusing on select dimensions and aspects of the trade and sustainability linkages. These include, inter alia, the extent to which sustainable development has emerged from recent disruptions as a dominant goal of trade policy, how the disruptions have changed trade, trade narratives, and trade institutions in relation to sustainable development and other (competing) policy objectives; how possible trade-offs are or can be resolved; and how international cooperation has provided, or can provide, a solution to disruptions, uncertainties, and trade frictions.

As the special issue will show, the ongoing shift of policy priorities and strategies of governments is reshaping international trade cooperation at all levels. As the only ‘global’ trade institution, the WTO remains vital to enhancing inclusiveness, transparency, and predictability in such cooperation, especially in addressing the intricate relationship between trade and sustainability. As green policies are increasingly driven by a mix of policy goals that are not always reconcilable, governments and trade institutions are facing existing and emerging challenges concerning the fundamental tension between trade liberalization and domestic autonomy in an era of re-globalization.

We begin with Bernard Hoekman and Douglas Nelson's paper titled ‘Industrial Policy and International Cooperation’. To set a broad context for more specific discussions, this paper applies ‘the theory of economic policy’ to develop a framework for explaining the benefits of international cooperation and guiding how such cooperation may be conducted in addressing national industrial policies, particularly the increased use of trade-related policies for non-economic objectives. The paper expounds, with some useful examples, why domestic (trade) policies are increasingly driven by a mix of economic and non-economic objectives and how policy constraints and the underlying causes can vary from state to state. The paper argues that existing trade agreements and commitments have paid insufficient attention to the reasons behind industrial policies and therefore that the proposed framework could help governments exchange information and deliberate on their reasons (i.e. objectives) and policy space (i.e. instruments). The paper then offers more detailed case studies on competition policy (as an example of largely economic objectives), environmental policy (as an example of a mix of economic and non-economic objectives), and national security (as an example of largely non-economic objectives), showing how the framework can facilitate international cooperation in these areas. The paper concludes that a global trading system such as the WTO ‘should not only monitor the use of trade related policies but provide mechanisms for members to understand the goals motivating policy interventions, consider their effectiveness, and assess their spillover effects’.

A majority of the subsequent contributions explore the nexus between trade and environmental sustainability more specifically. Following a theoretical approach to addressing non-economic objectives, Mandy Meng Fang's paper titled ‘Multi-Purpose Green Industrial Policy and the WTO: An Unavoidable Clash?’ navigates the phenomenal development of green industrial policies (GIPs) worldwide. While clearly serving climate goals, these policies have also been driven by geopolitical concerns and strategic competition between the world's powers, particularly the United States (US) and China. Thus, the paper presents an ongoing shift whereby GIPs are extending beyond correcting market failures and advancing green industries and technologies to also address security and geopolitical goals in response to disruptions and uncertainties. To further expound this trend, the paper provides a detailed discussion of GIPs in the US, China, and the European Union (EU), showing noticeable commonalities in the deployment of GIPs for diverse policy objectives, such as industrial competitiveness, environmental protection, supply chain resilience, security, etc. Since some of these objectives tend to be irreconcilable, multi-purpose GIPs may not be effective but rather counterproductive at achieving the desired goals. An existential challenge for the global trading system concerns hidden protectionism in multi-purpose GIPs, which would not only cause further disruptions of trade and investment but also exaggerate geopolitical tensions and uncertainties. The rise of GIPs in the context of economic nationalism and allyshoring does not bode well for multilateral cooperation. That many of the GIPs are developed unilaterally, regardless of their potential inconsistencies with WTO rules, may continue to undermine the integrity, credibility, and efficacy of the rules-based system.

What actions have governments and trade institutions taken in response to these disruptions and challenges? Pasha L. Hsieh's paper titled ‘Green Regionalism in World Trade Law’ offers a detailed discussion of a major trend of regionalization in the green transition, termed as ‘green regionalism’. This trend has witnessed the continued development of environmental or climate-related provisions and enforcement mechanisms in free trade agreements (FTAs), which are also complemented by ‘the new evolution of sectoral and soft-law initiatives devoted to a green economy’. Not only are FTAs used to fill potential gaps in the WTO rulebook and advance cooperation on sustainability issues among like-minded countries, the WTO itself has also increasingly resorted to plurilateral approaches to facilitate negotiations on these issues. At the same time, however, climate policies have become increasingly unilateral, with the US's Inflation Reduction Act (IRA) and the EU's Carbon Border Adjustment Mechanism (CBAM) being two of the most controversial examples. These unilateral mechanisms are subject to intense international debates over their legitimacy and spillover effects on trading partners, showing a lack of consensus and an emerging trend that deviates from (regional) cooperation. Selective engagement based on values and geopolitical concerns, or engagement on selected issues, under a new generation of economic arrangements, such as the Indo-Pacific Economic Framework (IPEF), can also be potential disruptions of cooperation. These ongoing challenges leave great uncertainties as to how far green regionalism, which requires concerted effort and action by all governments involved, can go and how much it can achieve in the pursuit of SDGs.

Amid the general trend of green regionalism, Gregory Messenger's paper titled ‘Free Trade Agreements as Sites of Economic Diplomacy: Agreeing Common Standards for Sustainable Development’ discusses the extent to which FTAs have been ‘used to leverage ongoing novel developments in the world of standards and quasi-standards’ in relation to climate policy. It argues that ‘the practice (and scope for future expansion) of FTAs as sites of economic diplomacy is fundamentally related to the reorientation of today's trade regime’. In advancing this argument, the paper focuses on the development of standards in supporting environmentally sound trade policies. While the WTO Agreement on Technical Barriers to Trade (TBT Agreement) gives weight to international standards as a justification for the use of trade tools for legitimate goals, such standards remain complex, diverse, and hard to agree upon in practice. The paper critically assesses these complexities, diversities, and difficulties through three case studies. These include the Agreement on the International Dolphin Conservation Program and challenges for determining an international standardizing body, auto-related standards and the harmonization of specific standards among FTAs, and difficulties in setting an international standard for nutrient profiles. The paper then considers the ISO Net Zero Guidelines as an ISO instrument having a different status compared to ISO standards and hence unlikely to be treated as a standard under the TBT Agreement. Given the slow-paced WTO negotiations, the paper advocates for the use of FTAs to strengthen the Net Zero Guidelines as a pathway to uplift it to a standard under the multilateral regime. This approach and process reinforces the paper's central claim that FTAs can be reframed ‘not only as sources of obligations but as institutions, social spaces, through which legal obligations become the tools and drivers of diplomatic efforts, which in turn draw on, and build, new legal obligations to further the [climate] agenda’.

The following four papers address the trade-environmental sustainability nexus in more specific areas, sectors, or jurisdictions. Sanvid Tuljapurkar and Ruosi Zhang's paper titled ‘Developing Countries’ Participation in Environmental Services Negotiations: What are the Challenges and What Should be Done?’ provides a meticulous discussion of environmental and related services, an under-researched and less understood area so far. Their discussion covers major components of environmental and related services, patterns of international trade, relevant WTO rules and negotiations particularly in the context of the General Agreement on Trade in Services (GATS), and implications for the ongoing debate about the role of trade and the WTO in the pursuit of sustainability. Based on available data, the paper finds that international trade in environmental services has occurred mainly between developed economies, leaving a great potential for developing countries to play a larger role in both imports and exports. One way, as the paper suggests, is for developing countries to create markets for environmental technologies and services through environmental laws and policies and promote foreign investment in these technologies and services. Yet, current GATS commitments remain limited in terms of coverage and degree, thereby providing insufficient market access and opportunities for the trade of environmental services, particularly where developing countries are concerned. While the ongoing WTO negotiations are aimed at reducing major barriers to environmental services trade, the engagement of developing countries in the negotiations remains limited. Developing countries continue to oppose further liberalization of environmental services which in their view serves the economic interests of developed countries as opposed to environmental interests. Thus, even though developing countries are generally in need of foreign capital and technologies in their environment-related sectors, they are not ready to open their markets for development and other concerns. In negotiations, they are keener to discuss issues related to environmental technology transfer, financial support and capacity building, special and differential treatment, and how the principle of common but differentiated responsibility can be incorporated in the negotiations. At the same time, however, positive developments have been achieved in FTAs with many developing countries undertaking commitments that extend beyond their GATS commitments. These developments are mostly seen in FTAs between developed and developing economies while much less so in FTAs between developing countries themselves. This phenomenon suggests that it is developed countries that have been leading and pushing progressive liberalization in environmental services trade, and a compromise is much easier to secure in bilateral negotiations. While WTO negotiations have also continued to evolve, how the negotiations can address common and in some areas diverse interests of developing countries will remain a major obstacle to further liberalization of environmental services trade on a global scale.

The green transition has led to rapidly growing demand for critical minerals which are vital for many major green technologies. As a consequence, national strategies and policies to secure the supply of critical minerals have proliferated.Footnote ⁶ These strategies and policies, sitting in the upstream of green industrial policy, are first addressed in Giulia Claudia Leonelli's paper titled ‘Critical Raw Materials, the Net-Zero Transition and the “Securitization” of the Trade and Climate Change Mitigation Nexus: Pinpointing Environmental Risks and Charting a New Path for Transnational Decarbonization’. Faced with a race for critical minerals among major powers and tensions between national security and decarbonization goals, this paper shows the extent to which securitization of climate actions may institutionalize ‘the grey area between decarbonization, the defence of fair competition, de-risking, and reshoring via industrial policy … making it increasingly difficult to disentangle the “environmental” from the “non-environmental”’. It argues that ‘a narrow national security-centred approach jeopardizes recourse to environmental “leverage” and can undermine decarbonization at both national and transnational levels’. Instead, it puts forward ‘an outward-looking, constructive, and long-term approach’ to ‘advance decarbonization and promote truly sustainable supply chains’. The paper conceptualizes a range of circumstances where national security has driven the formulation of climate and trade policies related to, inter alia, geopolitical challenges, economic supremacy, and supply chain risks in strategic sectors, and security-centred policy responses such as subsidies, de-risking, onshoring, allyshoring, etc. Yet, multi-purpose regulatory interventions, with security at the core, ‘blur the boundaries between heterogenous and often conflicting policy goals’ and ‘disrupt the trade and climate change mitigation nexus’. Through case studies of recent US legislative actions, the paper criticizes the IRA through which the US seeks to decouple from China in the supply of critical minerals, the imposition of 100% tariffs on Chinese electric vehicles (EVs), and longstanding protectionist instruments against the Chinese solar photovoltaics industry. It contrasts these actions with the more moderate and cautious approaches adopted in the EU. Another major issue with these security-driven unilateral measures concerns their illegality under WTO law. The paper highlights several potential WTO-inconsistencies in the IRA and the broader implications of the law in terms of the EU's policy shift towards a similarly more security-centred approach in the regulation of green industries. Finally, the paper points out a glaring gap ‘between opportunistic friendshoring under national security-centred paradigms versus inclusive and value-driven partnerships to promote transitional environmental protection and decarbonization’. The increasing number of partnerships or cooperative arrangements between the US and its allies does not focus on addressing the major problems or obstacles to critical minerals supply chains such as export controls, dual pricing, preferential treatment for local industries, etc. However, addressing these problems as well as enhancing policy coordination and standards harmonization should be the focus of international cooperation to advance the net-zero transition.

A central concern about critical minerals supply chains has been the dominance of China. China is criticized for dominating the supply chains through ambitious, state-driven strategies and industrial policies, and for becoming increasingly assertive in its foreign policy through the weaponization of trade. To what extent does this narrative hold true? This question is addressed in the paper by Weihuan Zhou, Victor Crochet, and Haoxue Wang, titled ‘Demystifying China's Critical Minerals Strategies: Rethinking “De-risking” Supply Chains’. The paper argues that the prevailing narrative against China has been developed predominantly through a geopolitical lens and suggests a misunderstanding of China's strategies and policies on critical minerals. The paper shows that China similarly relies on a few sources of supply, hence facing similar challenges of dependency, supply disruption, and price fluctuation. This is not surprising given China's longstanding ambition for technological advancement and innovation in strategic industries, with green technologies being a major priority. As critical minerals strategies and policies proliferate worldwide causing supply chain disruptions, China's strategies and policies are not fundamentally or effectively different. The paper then offers an objective assessment of China's strategies and policies on critical minerals since the 1970s and argues that a more balanced narrative is warranted. That is, the key driver of these strategies has been China's domestic economic needs and policy priorities. While these strategies did and will continue to have spillover effects on trading partners, such effects are often by-products of China's pursuit of internal regulatory goals. Based on this understanding of Chinese strategies and policies, the paper critically reviews the so-called ‘de-risking’ strategy adopted by the G7 governments. Despite being touted as a more moderate strategy vis-à-vis ‘de-coupling’, when it comes to strategic matters such as the supply of critical minerals, ‘de-risking’ is being developed into supply chain ‘de-coupling’ in practice. Thus, the shift of the policy description from ‘de-coupling’ to ‘de-risking’ may not change the policy prescription. The paper argues that the ‘[c]onfrontational strategies with China being the risk at the core might themselves be a risk by undermining rational policymaking and leading to disruptive policies’. To de-risk supply chain risks, international cooperation is needed, and many of the existing collaborative arrangements, such as IPEF, should seek to engage with, rather than exclude, China. Since the ongoing geopolitical tensions are likely to remain a major obstacle for China to join these arrangements, ‘the WTO provides an ideal forum for inclusive deliberation on what is truly a global issue’.Footnote ⁷

As mentioned above, the EU's recourse to unilateral tools for climate goals has generated considerable and widespread concerns. Michael Jakob and Michael Mehling's paper titled ‘Addressing Competitiveness Concerns of EU Exporters with Industrial Policy: The Role of Innovation Support’ offers more detailed discussions of these tools with a focus on the CBAM. As a complement to the EU Emissions Trading System (ETS), the CBAM has come to the fore of academic and policy debates over its legality, effectiveness, and implications for trading partners. This paper focuses on one major aspect of the CBAM, that is the issue of carbon leakage risks for EU exported goods to third countries. Despite the currently limited evidence of carbon leakage, widening gaps in climate policies among different jurisdictions may increase such leakage. For the EU, the introduction of the CBAM leads to gradual phase-out of the free allocation of emission allowances which has been a major mechanism to prevent carbon leakage under the ETS. Yet, the CBAM applies to imports only and does not yet have a mechanism to address carbon leakage. Carbon leakage would ‘result in a situation where European goods lose market share abroad and are substituted by more emissions-intensive goods from third countries, leading to an overall increase in emissions’. A major objective, therefore, is to restore the competitiveness of EU exports by levelling the playing field in overseas markets. After having considered a number of potential policy options, the paper proposes ‘targeted innovation support’ as a desirable mechanism to facilitate ‘industrial decarbonization … , limit leakage and level the competitive playing field’. This mechanism seeks to ‘incentivize the diffusion of abatement technologies by lowering their cost or reducing the financial risk of related investments’ for eligible industries. The paper then outlines more detailed plans for how this mechanism may be established. In considering the global implications of the mechanism, the paper discusses, for example, how it may promote ‘the transformation of carbon-intensive industries across the globe’ and provide the momentum for policymakers to mobilize ‘additional support with regard to finance, technology transfer and capacity building for third countries’. More broadly, the paper contemplates options to finance ‘the transformation of emission-intensive industries in other countries … by recycling CBAM revenues, either directly, or via a commensurate increase in climate finance by EU Member States’. Such approaches would help ‘ease resistance from the EU's trade partners against the CBAM while at the same time lowering the support that will be required to make EU producers competitive on the world market’.

The final contribution in this special issue features Tolulope Anthony Adekola and Bryan Mercurio's paper titled ‘mRNA Technology Transfer Hub and Intellectual Property: Towards a more Equitable and Sustainable Model’. This paper moves away from environmental sustainability and climate policy to discuss the sustainability of global supply chains concerning vaccines and essential medicines and the resulting trend of localization of ‘pharmaceutical production as a means of reducing dependence on external sources for supply’. The paper focuses on critically evaluating the so-called ‘mRNA technology transfer hub (mRNA hub) [which] was launched by the World Health Organization in response to the inequities in access to COVID-19 vaccines and the trade disruptions during the pandemic’. In particular, it discusses major ‘intellectual property issues that may impact the mRNA hub's sustainability and … potential strategies for addressing them’. These include: (1) the hub's intellectual property (IP) arrangement does not guarantee legitimate use of the relevant IP so that recipient countries may be challenged for IP infringements; (2) patent holding companies can establish their own production facility in recipient countries, hence operating separately from the hub; and (3) high concentrations of patents in mRNA technologies lead to high transaction costs for potential licensees/recipients under the hub and excessive control by patent owners/licensors. These problems are demonstrative of the difficulties in balancing the need to promote innovation and technological advancement on the one hand, and public interest on the other. As far as the hub is concerned, the solution, as the paper proposes, largely lies in ‘addressing some key pre-patent grant and post-patent grant issues for mRNA technologies’. The pre-patent issues essentially concern how to determine whether mRNA patents are limited to technologies needed for protecting the public interest and ensure recipient countries have the capacity to run the necessary assessments. When it comes to technology transfer, transparent patent protection and effective enforcement mechanisms can facilitate such transfer to the less- or least-developed countries, thereby contributing to enhancing the hub's sustainability. In addition, the transfer of manufacturing know-how and the involvement of patent holders are also necessary for vaccine manufacturing by recipients and avoidance of IP litigations. The compulsory licencing process contemplated under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs Agreement) does not necessarily legitimate third-party use of patents without the authorization of the rights holder. The mRNA hub may promote the negotiation of voluntary licenses and/or ‘increase the credibility of threats to issue a compulsory license by the spokes’. Regional coordination is needed to pursue the objectives of the hub, including harmonization of ‘regulatory standards and processes’ as well as ‘the public health-related TRIPs flexibilities within the national laws of the spokes and their regional target markets’. While several TRIPs rules already provide some flexibility for spoke countries (e.g. the compulsory licensing mechanism under Article 27), these countries are advised to develop specific provisions under their national law to enhance their position in negotiations while at the same time pushing for the implementation and potential strengthening of TRIPs rules that would promote technology transfer to least-developed countries (e.g. Articles 67 and 66.2).

This special issue provides only limited space for demystifying the intricate and fast-evolving nexus between trade and the SDGs. By focusing on selected aspects and dimensions of the trade and (environmental) sustainability linkages, it offers fresh evidence, valuable insights, and critical analysis of how major disruptions in the global trading system have been driving governments and trade institutions to redefine priorities, repurpose trade policies, and redesign approaches to cope with new challenges and demands, arguably in an emerging paradigm of re-globalization.

Re-globalization does not need to and should not exaggerate or intensify existing disruptions, challenges, and trade frictions. Quite to the contrary, it provides an improved narrative for rebuilding the political will needed to reconstruct the current trade architecture and facilitate international cooperation. While bilateral and plurilateral approaches are necessary for addressing many trade-related challenges of today, they will bring about some degree of fragmentation and uncertainties. ‘A multilateral trading system, therefore, remains a core foundation upon which international trade cooperation is to stand, to deliver long-term peace and prosperity for all’.Footnote ⁸

I conclude with an important message that emerges from this special issue, which is that in many cases green policies are not driven solely or primarily by climate goals but also by a mix of other (competing) objectives such as protectionism, geopolitics, and strategic rivalry, which can pull climate policies in different or even opposing directions. For trade policymaking at domestic and international levels, a fundamental challenge, therefore, remains to be how to strike a proper balance between protecting the value of trade liberalization and cooperation and preserving policy space for governments to pursue non-trade objectives. As economic and non-economic goals become increasingly intertwined, this longstanding yet unsettled balancing act becomes not only more difficult but also more delicate.