Why applying WTO rules to trade in biofuel might not be such a bad idea

Production, trade and use of biofuels can bring about significant social, environmental and economic benefits especially to the many nascent, developing economies as well as to rural communities. It happens that the most ideal conditions for the production of high-quality, high energy-efficient biofuel feedstocks, such as sugarcane and palm oil, are primarily located in developing countries in tropical and sub-tropical climates. Additionally, those countries' comparative advantage in the production of biofuels is enhanced by longer growing seasons and lower labors costs in comparison to OECD countries.

So why are developed countries such as the European Communities and the Unites States placing so high barriers in the way of the international trade of biofuels?

I suppose that is due to the emerging "grand agricultural subsidy deal" in exactly those countries. Existing farm subsidies, that have come under considerable and successful pressure in the last decade, are repackaged as "energy security" or "ecological support" measures so that, from a global perspective, an economically and environmentally inefficient and socially harmful domestic production of biofuels can be upheld.

Apply WTO rules to trade in biofuels
Therefore, for many reasons, it could be interesting to apply WTO rules to this sector in order to raise questions about environmentally harmful subsidies for industrial-scale biofuel production, steep import tariffs and other barriers that lock developing countries into the status of raw-material exporter as well as the design of uniform standards, e.g. an international eco-label for sustainably produced biofuel. (a superb collection of papers on trade in biofuels: here)

Another highly interesting issue related to the future of the WTO would be the clarification of the relation between obligations and rights emerging under the kyoto/post-kyoto agreements and global trade rules. (if you're interested in this topic, read on)

But, as regards the need for focusing scantly available resources, i have a strong suspicion that elimination of environmentally harmful biofuel subsidises would have the highest chances for realization. There is a potentially large alliance to be mobilized for that goal, ranging from environmentalists and free-market enthusiasts in developed countries to most developing countries.