Integrating energy into the world trading system: law and policy

Abstract

Energy is required to manufacture a good or create a service and the energy sector is the backbone of every economy. Until recently, governments worldwide have considered the energy sector too cmcial to be left to market forces. Accordingly, energy markets have been fragmented and segmented into national and highly protected markets. Likewise, international trade in energy has traditionally been synonymous with petroleum trade, which in turn has been effectively regulated by the Organization of the Petroleum Exporting Countries (OPEC), outside the reach of the multilateral trading system. However, the past two decades have seen the emergence of a trend towards the introduction of the trade discourse into the energy sector. This trend has two main components. The first component has its roots in the efforts made at the bilateral, regional, and international levels to impose GATT-type and even GATT-plus disciplines on energy trade. In this regard, mention may be made of the Canada-United States Free Trade Agreement, the NAFTA agreement, and the Energy Charter Treaty. The second component, initially originated at the national level, has been the deregulation movement, namely reforming the electricity and natural gas industries. As a result of this policy shift, the electricity and national gas industries have been evolving from monopolistic into competitive industries with increasing numbers and types of participants. Accordingly, trade in electricity and gas is a new dimension of trade in energy, which is particularly relevant to the trade in services debate. It should be noted, however, that the GATS ongoing energy services negotiations also include the liberalization of oil and gas field services, which are related to the upstream segment of the oil and natural gas industries. Two WTO agreements, namely the GATT and the GATS, are of particular importance in analysing these components. Furthermore, in order to give the full picture of the current energy trade debate, the dual pricing debate and the relevant developments of the Subsidies and Countervailing Measures Agreement and their potential implications for trade in energy-intensive products should also be examined. The purpose of this study is to explore in extensive detail the two aforementioned components that shape the current energy debate. It is aimed at analysing the relationship between these components in the context of the energy trade discourse. The overall aim is to provide a better understanding of the processes and trends relating to this complex, multidimensional and dynamic subject and to identify how and to what extent trade in energy is integrated into the world trading system. Some tentative observations are also made with the desire to point towards the next steps