Challenges for Multilateral Energy Trade Regulation: WTO and Energy Charter

Abstract

The general rules of the multilateral system cover trade in energy, although they are arguably not designed to specifically tackle major issues pertinent for energy trade. The traditional focus of GATT has been market access of domestic manufactured products abroad rather than access to foreign supplies. The multilateral trade rules have therefore been designed in a way to address mainly import barriers related to market access rather than export barriers. These rules do not address to the full extent the issues of export restrictions and investment protection, commonly regarded as the most crucial aspects of oil and gas trade. Transit problems, access to transportation networks, issues related to restrictive practices of the energy exporting countries, practices of the energy enterprises that occupy monopoly position and often are granted exclusive rights and privileges are not addressed to a substantial degree by the existing multilateral trade rules.The most significant challenges related to dealing with energy trade stem from the fact that a significant part of international energy trade takes place through fixed infrastructure, built specifically for the purpose of carrying hydrocarbons or electricity. In order to address infrastructure issues WTO would need to develop effective investment rules; not something feasible in the midterm future.Energy-specific fora such as Energy Charter are likely to be more effective in addressing such matters specific to energy trade. For the ECT to play a more important role it is crucial to complete the negotiations on the Transit Protocol. Furthermore, it is important to expand the Treaty’s constituency to have a larger geographical coverage.