Prospects for a transit regime on energy in the WTO
| Autor | Pamela Ugaz |
| Páginas | 247-298 |
Agenda Internacional
Año XVIII, N° 29, 2011, pp. 247-298
ISSN 1027-6750
Prospects for a transit regime on energy in the WTO
Pamela Ugaz
Introduction
Undoubtedly trade in energy resources such as oil and gas represents a significant
part of world trade flows. For instance, fuels alone represented 77% of the world
natural resources exports (USD 2.9 trillion) in 2008.1 Its relevance will increase in
the coming years driven chiefly by emerging economies. Indeed, the International
Energy Agency (IEA) projects that oil demand will increase 1% per year, while gas
demand 1.5% per year by 20302.
Unfortunately, not all countries posses their own energy resources and they therefore
need to import such resources from remote regions. Transit has, hence, always been
considered a major issue for the energy sector, which by its nature develops at the
international level.
Nonetheless, political volatility in transit States constantly threatens trade flows in
the energy market. In addition, the absence of a reliable international legal framework
and contradictory domestic laws make it difficult, if not impossible, to invest in
transit activities on a long-term basis.
As a result, governments currently acknowledge the urgent necessity of an international
regulatory framework on the transit of energy goods. These governments are conscious
that increased global integration requires measures on an international scale.
Although the World Trade Organization (WTO) Agreements, particularly the
General Agreement on Tariffs and Trade (GATT), were not specifically designed to
1 WORLD TRADE ORGANIZATION. World Trade Report 2010: Trade in Natural Resources. Geneva:
WTO, 2010, at 54-56.
2 INTERNATIONAL ENERGY AGENCY. World Energy Outlook 2009. Paris: IEA, 2011, at 51.
248 Pamela Ugaz
address energy matters per se, their provisions are still applicable to trade in energy.3
Nevertheless, WTO disciplines may not perfectly suit the energy sector’s features.
The WTO system mainly addresses import barriers rather than export barriers. In
other words, the main objective of the WTO has been market access of domestic
products abroad. Conversely, trade restrictive practices in the energy sector are
primarily encountered on the export side.4
The purpose of this study is to sketch the essential elements for elaborating a transit
regime on energy in the WTO framework. For this purpose, it will analyze the
current treatment granted to the transit of energy goods at the international level,
highlighting their weaknesses and proposing improvements.
The first section presents an overview of the energy market. Moreover, the birth
and evolution of the freedom of transit principle will be explained through three
international conventions: i) the Barcelona Convention; ii) the Convention on
Transmission in Transit of Electrical Power; and iii) the United Nations Convention
on the Law of the Sea. The real meaning of the freedom of transit principle cannot be
understood without a reference to its background.
In the second and third sections, the WTO and the Energy Charter Treaty (ECT)
provisions on transit will be analyzed. The aim is to provide a comprehensive
understanding of the most pertinent rules since these provisions will be the grounds
for a future transit regime on energy at the multilateral level. In this regard, their
features and interaction will be closely examined.
The fourth section addresses issues regarding the transit of energy goods under
current debate. Special attention will be placed on: i) the classification of electricity
as a good or as a service; and ii) the regulation of fixed means of transport.
Finally, this study will provide an update of the ongoing discussion on transit
under WTO accession processes and Doha negotiations. It will also point out the
mechanisms for the implementation of transit regulation in the WTO. Last but not
least, the essential provisions for a future regulatory body will be sketched out and
analyzed.
3 MARCEAU, Gabrielle. “The WTO in the Emerging Energy Governance Debate”. In Joost Pauwelyn
(ed.). Global Challenges at the Intersection of Trade, Energy and the Environment. Geneva: Graduate Institute of
International and Development Studies, 2010, at 25.
4 COSSY, Mireille. “Energy Transport and Transit in the WTO”. In Joost Pauwelyn (ed.). Global Challenges
at the Intersection of Trade, Energy and the Environment. Geneva: Graduate Institute of International and
Development Studies, 2010, at 113.
Prospects for a transit regime on energy in the WTO 249
Section I: The energy sector and the freedom of transit principle
This section aims to set the stage for this study. The various contours of the energy
sector will be outlined, followed by an analysis of the basic Conventions that enshrine
the freedom of transit principle in the international arena.
A. Energy market: setting the scene
1. Energy resources and products in transit
Focus will be placed on the transit of three leading energy commodities: oil, gas and
electricity, which are classified as follow:
a) Primary energy
Also called energy resources or raw fuel, it involves exclusively the extraction or capture
of sources before the energy embodied in them can be transformed into heat or
mechanical work.5 This concept covers:
Oil: It is the energy resource with the highest demand worldwide. In 2008, fuels
alone represented 77% of the world natural resources exports (USD 2.9 trillion).6
Regarding its means of transport, oil may reach international markets by ships or
through pipelines.
Natural Gas: gas demand currently arises from residential and commercial sectors.
However, in the coming years it will become the preferred fuel in the power industry
for economic and environmental reasons.7 Gas is transported through pipelines or
by ships when it is turned to liquid natural gas (LNG)8. Almost three-quarters of
trade in gas are carried out through pipelines, but LNG transportation is growing at
significant rates.9
5 UNITED NATIONS. Concept and Methods in Energy Statistics, with Special Reference to Energy Accounts
and Balances: A Technical Report. New York: United Nations, 1987, at ix URL. http://unstats.un.org/unsd/
publication/SeriesF/SeriesF_29E.pdf
6 WORLD TRADE ORGANIZATION. World Trade Report 2010. Op. cit., at 54-56.
7 SELIVANOVA, Julia. The WTO and Energy: WTO Rules and Agreements of Relevance to Energy Sector,
ICTSD Trade and Sustainable Energy Series Issues Paper N° 1. Geneva: International Centre for Trade and
Sustainable Development, 2007, at 3.
8 As trade in gas is dependent to a large extent on transportation via pipelines, it has been subject to
regional trade i.e. Canada exports gas to the U.S.; Argentina exports gas to Chile, Brazil and Uruguay; Bolivia
exports gas to Brazil.
9 ORGANIZATION OF THE PETROLEUM EXPORTING COUNTRIES. World Oil Outlook 2010.
Vienna: OPEC, 2010, at 51.
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