Environmental Goods and Services negotiations:Challenges and opportunities WTO Workshop on Environme

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Environmental Goods and Services
negotiationsChallenges and opportunitiesWTO
Workshop on Environmental GoodsPara 31 (iii) of
the DDAGeneva 11 October 2004

• -Mahesh Sugathan,
• International Centre for Trade and Sustainable
  Development (ICTSD)

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Introduction

• Environmental goods and services (EGS) always on
  trade-liberalisation agenda but specifically
  singled out in Doha Ministerial declaration
• Para 31(iii) calls for the reduction or as
  appropriate elimination of tariff and non-tariff
  barriers to environmental goods and services.
• What does this mean in actual negotiating terms-
  a mandate for accelerated liberalisation? Not
  clear. No deadlines set and no multilaterally
  accepted consensus on what constitutes
  environmental goods.

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Diffusion of Para 31 (iii) Mandate

• Negotiations on environmental goods as mandated
  by Para 31 (iii) has been assigned to the
  negotiating group on Non-Agricultural Market
  Access (NAMA)
• Negotiations on environmental services are under
  the auspices of the Special Sessions of the
  Council for Trade in Services (CTS)
• The special sessions of the Committee on Trade
  and Environment (CTE) has been given a monitoring
  role over progress and is to contribute by
  examining the definitional aspects and scope of
  Environmental goods and services

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Overview of Environmental goods negotiations
definition vs lists

• On Environmental goods, no clear agreement among
  WTO Members on definitions and coverage of such
  goods despite reference to definition of
  environment industry by the OECD as activities
  which produce goods and services to measure,
  prevent, limit, or minimise or correct
  environmental damage to water, air and soil, as
  well as problems related to waste, noise and
  ecosystems.

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• Modalities for environmental goods negotiations
• OECD and APEC lists used as starting point for
  discussions on Environmental goods in the WTO.
  APEC list based on goods proposed by Member
  countries-heavily focussed on end-of pipe
  pollution treatment and monitoring equipment.
  OECD list broader and includes goods and services
  under 3 headings-pollution management, cleaner
  technologies and products and resource
  management. APEC list has broader support
  including Members such as Canada, Singapore, US,
  Australia and New Zealand.
• OECD Classification Group C category Resource
  Management is broad and includes sustainable
  agriculture, forestry and fisheries. However the
  reference is to goods (equipment, technology or
  specific materials) that are inputs required for
  sustainable agriculture, forestry and fisheries
  and not outputs emerging from these activities

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• Many members propose list-based approach
  instead of seeking a prior defintional clarity on
  environmental goods. EgU.S proposal on
  core-list (on which consensus exists) and
  complementary list for which individual
  countries could nominate products. Faster
  liberalisation envisaged for core-list products
  (zero tariffs by 2010) and liberalisation of a
  minimum of x on goods in complementary list
  (which Members could choose) US-TN/TE/W/3 US
  proposal is the only one on concrete modalities
  so far for EG negotiations.

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• China (TN/TE/W/42) has called for a common-list
  including goods of export interest to both
  developed and developing countries and a
  development list (or SD) list which would
  include those goods from the common list eligible
  for lesser reduction commitments
• On specific products only Japan (TN/MA/W/15) and
  Qatar (TN/TE/W/19) and Taiwan have submitted
  proposals. Japans list includes products from
  both APEC and OECD lists plus some additional
  products. Energy efficient consumer equipment
  notable. Qatar has proposed efficient, lower
  carbon pollution emitting fuels and technologies.
  Taiwans submission focuses on pollution control
  equipment.

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Environmental goods Challenges and
opportunities for developing countries

• Negotiations on environmental goods presently
  taking place in Negotiating group on
  non-agricultural market access (NAMA) with the
  definitional aspects being examined by Committee
  on Trade and Environment (CTE)-special session

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• 1. Operationalisng Para 16 for the Doha Mandate
• Challenge in NAMA for developing countries is how
  to operationalise Para 16 of the Doha Ministerial
  Declaration in the case of environmental goods
• Para 16 of the DMD provided the mandate for the
  negotiations on market access for
  non-agricultural products which requires
• Reduction or elimination of tariff-peaks,
  tariff-escalation as well as non-tariff barriers
  with emphasis on products of export interest to
  developing countries
• Take fully into account the special needs and
  interests of developing and least-developed
  country participants including through less than
  full reciprocity in reduction commitments,
• Take fully into account the principle of special
  and differential treatment for developing and
  least-developed countries

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• 2. Identifying products of export interest to
  developing countries What about agriculture?
• OECD/APEC lists mostly contain products of which
  developing countries are net importers
• Some of the few products in the OECD/APEC which
  developing countries (as a group) were net
  exporters eg Methanol, ethanol, mats and
  screems, fluorescent lamps, plastics. Most top
  exporters are middle income or emerging economies
  (Mexico, Singapore, Korea, Malaysia and Brazil)(
  UNCTAD-TD/B/COM.1/EM.21/CRP.1)

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• If agricultural products of export interest are
  discussed as part of Para 31 (iii) where would
  they be negotiated and what modalities would
  apply? See proposal by Kenya, Ghana, Mauritius
  and others-TN/MA/W/40 The 1st August General
  Council decision (WT/L/579) in Annex B encourages
  the NAMA group to work closely with the
  Committee on Trade and Environment(CTE) with a
  view to addressing the issue of non-agricultural
  environmental goods. Whether this excludes NAMA
  as a forum for discussing agricultural
  environmental goods is an open question.
• Para 49 of Annex A (framework for establishing
  modalities within agriculture) within the Ist
  August decision also lists sectoral initiatives
  among other issues of interest. WTO Members may
  wish to explore the possibility of using this to
  consider agricultural environmental goods in
  case it is decided that such goods will be part
  of negotiations on agriculture

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• 3. Tackling the issue of Environmentally
  preferable products (EPPs)
• EPPs distinct from pollution-control goods and
  technologies as environmentally beneficial
  effects arising during course of production, use
  or disposal in terms of less pollution or greater
  resource-efficiency. They are not used to treat
  or deal with environmental problems as such.
• For most developing countries, products of export
  interest lie in EPPs rather than environmental
  equipment, per se. However a number of EPPs eg
  those based on energy-efficiency ( refrigerators)
  raise issues of appropriate classification and
  evolving technologies
• Many developing countries including India
  (TN/MA/W/10) have supported inclusion of
  environmentally friendly products such as jute
  products or those based on biodiversity, but no
  specific list has been submitted to NAMA.

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• Many developing countries interested in organic
  agriculture exports-here the PPM issue is
  contentious if it is non-product related. Most
  Members (including both developing and OECD
  countries) would avoid a PPM-based criteria.
  MERCOSUR-TN/MA/W/23 India-TN/MA/W/10.
  Certification and labelling issues need to be
  addressed in the context of NTBs.
• In most cases of EPPs, like or close
  substitutes exists which is environmentally less
  benign. Here the question to ask is Does the
  Doha mandate intend to extend a trade-preference
  for such EPPs as opposed to their
  non-environmental counterparts? If so, for how
  long?( as ultimately the intention is to remove
  tariffs and NTBs for all goods.)
• EU for instance has advocated deeper cuts
  (TN/MA/W/11/Add.2) while Chile for example
  advocates cuts as part of overall exercise of
  tariff reduction on all goods. Any additional
  reductions in Envtal goods should be
  compensated in other areas (TN/MA/W/17)

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• Also if the intention is to provide such
  preference, how can this be reconciled with
  already existing free trade for many
  EPP-substitutes(eg within Preferential
  agreements or Free Trade Areas)
• 4. Gains from an import-perspective
• Developing countries could tackle many crucial
  environmental problems like air-pollution,
  water-pollution etc through increased access to
  Environmental goods resulting from lower tariffs
  and NTBs-consequently beneficial health
  indicators-a step forward in facilitating
  Millennium Development goals.
• Greater access to environmental goods also induce
  energy/resource-efficiency within productive
  sectors of the economy
• Access to technology and know-how embedded in
  imports however affordability and suitability to
  local conditions is important

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• Lower trade-barriers may not necessarily make
  these goods affordable if other costs remain high
  such as licensing fees. This could impede access
  by and tech-transfer for SMEs-IPRs may be an
  important consideration.
• The Investment channel for environmental goods
  also needs to be considered in addition to trade
  channels as these could be more significant for
  building domestic capacity in developing
  countries, create jobs and build backward and
  forward linkages in the economy.
• Imports of certain environmental goods may lead
  to greater capacity to comply with environmental
  requirements in export markets. Countries may
  wish to look at which environmental goods are
  critical in this regard.
• Capacity building, infrastructure and training
  for customs officials will be important
  particularly if further tariff-classifications or
  sub-divisions are created for environmental
  goods.

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Other cross-cutting Considerations for
developing countries

• The following considerations on environmental
  goods negotiations could be important to ensure a
  meaningful outcome for developing countries from
  EGS negotiations

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• Coherence in WTO negotiations and rule-making
• Reducing tariffs and non-tariff barriers to
  Environmental goods and services implies close
  coordination between negotiations taking place in
  NAMA, CTE-SS, Services, TBT (standards) and
  possibly agriculture.
• In case organic products (based on whatever
  criteria) are negotiated as part of the EGS
  mandate on an accelerated, then the relationship
  to agricultural liberalisation modalities (
  export subsidies, domestic support) on
  non-organic products must be defined.

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• As environmental services and goods are
  frequently inter-linked it may be important to
  coordinate market access in both areas. For
  example opening up the solid waste treatment
  services sector while maintaining high tariffs
  and NTBs on waste-treatment equipment may not
  result in meaningful market-access unless perhaps
  the developing country has an adequate and
  competitive domestic environmental goods sector
  which could supply these services
• The role of CTE and CTD under Para 51 of the Doha
  mandate could be important in ensuring such
  coherence and to identify developmental and
  environmental apsects of EGS negotiations.

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• Multiple-use environmental goods
• Liberalisation of goods having multiple end-uses
  (including environmental) requires careful
  consideration as it may be difficult to verify
  the intended end-use for such goods

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• Can natural-resources be considered
  environmental goods?
• Qatars proposal on natural gas raises the
  question as to whether natural resources can also
  be considered an environmental good and benefit
  from lower tariff and NTBs ( including subsidies
  to alternative fuels like coal).If the intention
  is to promote environmentally friendly fuels,
  relativity considerations must be kept in mind.
  Eg Hydrogen EthanolNatural Gaspetroleumcoal.
  What would happen to trade-preferences to natural
  gas once use of ethanol or hydrogen becomes
  common? Again lowering barriers should also look
  not only at tariffs but also internal taxes,
  subsidies that may provide strong incentives or
  disincentives to use a particular fuel
• Energy-efficient technologies Dealing with
  tariff-classification,relativity and
  continuous evolution
• Japans proposal on energy-efficient products
  raises issues of how appropriate tariff
  classification distinctions and trade preferences
  will be created, say for example, between a
  normal and energy-efficient washing machine, the
  latter which may become obsolete the following
  year as technology improves.

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• Non-tariff barriers How and when will they be
  tackled?
• Tariff levels for most industrial goods are low
  in developed countries. (NTBs may be more
  important. Eg labelling, subsidies, taxes)
  Identifying and negotiating removal of these
  various NTBs will take time. This needs to be
  kept in mind given the time-horizon of completing
  the Doha negotiations as well as any accelerated
  liberalisation, if accepted, of EGS. The
  challenge will increase if agricultural goods are
  also negotiated.
• Coordination and communication between
  trade-negotiators and regional policy makers (
  trade, industry, agriculture, environmental,
  municipal authorities) as well as among various
  national stakeholders needs to be considered
• Trade-negotiations in EGS could reflect domestic
  and regional sustainable development priorities
  emerging from such communication

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• 5. Developing countries may want to use certain
  instruments such as subsidies as incentives to
  develop the domestic EG sector. Here some form of
  time-bound special and differential treatment
  could be possibly considered.Eg Chinas proposal
  on modalities (TN/TE/W/42)
• 6.Consideration of bilateral and regional trade
  negotiations also important in order to assess
  environment for market access and investment in
  EGs
• 7. Even if not directly discussed under WTO
  negotiations, Policymakers and trade negotiators
  could also keep in mind mandate from other fora
  (such as the WSSD Johannesburg mandate and the
  Millennium Development goals) particularly if
  access to certain environmental goods are
  critical to these goals