TWN Info Service on WTO and Trade Issues (Jul14/06)
16 July  2014
Third World Network  

Group of WTO members launch talks on ‘green goods'
Published in SUNS #7842 dated 11 July 2014
 
Geneva, 10 Jul (Kanaga Raja) -- A small group of members of the World Trade Organisation (WTO) formally launched negotiations Tuesday on an Environmental Goods Agreement (EGA) aimed at eliminating tariffs on a broad range of environmental goods.
 
The initiative on liberalising global trade in ‘green goods' was first launched by some 14 WTO Members on the sidelines of the World Economic Forum held in Davos earlier this January.
 
The countries involved in this initiative are Australia, Canada, China, Costa Rica, the European Union, Hong Kong-China, Japan, Korea, New Zealand, Norway, Singapore, Switzerland, Chinese Taipei and the United States.
 
The participants in the initiative, which they claim together to account for 86 per cent of the global trade in environmental goods, had also declared that their work will build upon the Asia-Pacific Economic Cooperation (APEC) Leaders' commitment to reduce tariffs on the APEC List of 54 Environmental Goods.
 
(The list of 54 environmental goods on which the APEC economies committed to reduce applied tariff rates to 5 per cent or less by the end of 2015 include such goods ranging from steam or other vapour generating boilers, gas turbines, solar water heaters, wind powered electric generating equipment, filters, furnaces and ovens including waste incinerators, waste water treatment equipment, catalytic converters to solar cells.)
 
Some trade observers have pointed out that while this ‘green goods initiative' is being touted as an environmental one, in effect it would appear to be part of the zero-for-zero sectoral tariff negotiations that the United States has been seeking as part of the non-agricultural market access (NAMA) chapter of the Doha Single Undertaking.
 
At the 2005 Hong Kong Ministerial Conference, Ministers, in accordance with paragraph 16 of the Ministerial Declaration, had decided that participation in sectoral initiatives "should be on a non-mandatory basis."
 
Though called "environmental goods", the sectoral initiative in the Doha Single Undertaking did not get very far, with many critics noting that many of the goods so described had dual use, and the US and others were trying to get zero tariffs for goods of export interest to them, by merely dubbing them as ‘green goods'.
 
To mark the occasion of the launch of the negotiations on liberalising trade in green goods, the representatives of the 14 WTO members participating in the initiative held a media briefing at the WTO on Tuesday.
 
At the briefing, Australia, in an opening joint statement on behalf of the group, said that earlier this year, the representatives of the 14 countries committed to begin preparations for negotiations to liberalise trade in environmental goods, building on the APEC List of Environmental Goods.
 
"The global challenges we face, including environmental protection and climate change, require urgent action. Today, we are pleased to announce the launch of negotiations on the Environmental Goods Agreement (EGA), through which we aim to achieve our shared goal of global free trade in environmental goods," said Australia.
 
"We will now engage in intensive negotiations, meeting regularly in Geneva, to discuss the substance of the agreement, including product coverage. We are committed to work towards the timely and successful conclusion of the agreement."
 
In this process, said Australia, "we are committed to work together and with other WTO Members similarly committed to liberalisation that are interested in joining our ambitious efforts."
 
"We are convinced that this WTO initiative will strengthen the rules-based multilateral trading system, support its mission to liberalise trade, provide important impetus to the DDA [Doha Development Agenda] negotiations and benefit all WTO Members, including by involving all major traders and applying the principle of Most Favoured Nation, once a critical mass of Members agree to participate," said Australia.
 
Asked about the group's definition of ‘critical mass', Australia said that at this stage, the group would not be entering into that sort of detailed question, "but what we do know is [that] looking at environmental goods, the participants around the table at the moment have a very large percentage of trade in environmental goods and we know that by adding in more WTO members, we can increase that significant proportion even more."
 
The European Union highlighted its longstanding commitment to the liberalisation of environmental goods and services. It said that it undertook a number of plurilateral initiatives including the initiative to liberalise climate-friendly goods at the margins of the Copenhagen Climate Summit in 2007, and also bilaterally where it is a priority in the EU's free trade agreements.
 
On this particular initiative, the EU said that the participants all agree to concentrate on goods, at least for this phase.
 
"We are committed to eliminate tariffs on a broad range of green products," said the EU, adding that at the same time they will look forward to a second stage where they will want to address non-tariff barriers (NTBs) and environmental services.
 
In the ‘global value chains' of today, environmental goods and services are closely interlinked and this is a strong economic reality. "At the same time, we have to be realistic on what can be done and clearly the focus for this stage is a pragmatic approach on green goods," it said.
 
As to the impact of this initiative on trade, Australia said that no particular estimates have been done at this stage but that clearly the broader the initiative, the broader the product coverage, and that the broader and more comprehensive the elimination of tariffs, the more significant the benefits will be.
 
The US was of the view that about $1 trillion annually is traded in terms of environmental goods. There are some cases where the tariffs that are applied to these products are as high as 30 or 35% and so moving to liberalise and eliminate tariffs on these products obviously will be meaningful. And even where tariffs are at a potentially lower level of 5% or under, "still we think that the impact of liberalisation can be very significant."
 
For example, in the area of clean technologies for power generation, such as wind turbines, the US said that these are extremely costly procurements, and so a 3 or 5% tariff does impose an impediment.
 
Here again, the objective of tariff elimination will have a very significant effect economically as well as for the environment, the US claimed.
 
Japan emphasised the importance that this agreement will have on the diffusion of innovative technologies. For example, for many of the environmental issues including in particular, climate change, there is need for innovative technologies so that ambition can be reached in those areas. Tariff liberalisation in environmental goods will lead to the diffusion of those innovative technologies.
 
Canada said that some estimates suggest that as early as 2020 this market globally could grow to $3 trillion.
 
Canada's exports alone account for about $20 billion, as well as account for about 50,000 workers and 700 different firms. "So, its impact is very broad."
 
On the definition of environmental goods and whether some products can be classified as environmental goods or agricultural products, for example, biofuel extracted from sugarcane, Australia said that this is one of the issues that the participants are going to be working through.
 
The EU acknowledged that the wider question of the definition of environmental goods has not been sorted out, and there is no international definition of ‘environmental goods' acceptable by all. "We hope that through this process, we will get to an outcome of the kind," it said, adding that the orientation of this initiative is clearly to talk about industrial products that will contribute to the NAMA discussions.
 
"The kind of products that we are looking at are energy-efficient products, products to combat air pollution, to provide clean drinking water, used for waste management and renewable energy equipment, for example, wind, solar, hydro, biomass."
 
There is no international consensus on the precise list of what those products are but the negotiations are starting with the intention to advance efficiently and relatively quickly, "so we look forward to dealing with this important aspect of the definition too," the EU said.
 
Underlining the importance of green services in terms of market share, the EU cited the OECD estimates of 65% for green services, while green goods account for 35%.
 
Asked about the fact that two-thirds of the WTO membership are outside this initiative and that the issue of credibility could arise in the coming days in that this initiative is perceived to be bringing in through the back-door sectoral tariff elimination, Australia said, "we think we have a group of WTO members who want to move forward with liberalisation on environmental goods."
 
"We are approaching it in a very constructive manner consistent with the way we have done plurilateral initiatives within the WTO before, i. e, approaching it with the objective of [an] MFN [most-favoured-nation] tariff outcome. We think that is a very constructive and productive way to approach it and we welcome broader participation by more WTO members as we go forward. So, from our point of view, we think it's a very constructive initiative and one that will contribute ... to broader processes of tariff and other trade reform globally and will help with the WTO."
 
China said that it decided to join this process for two purposes. The first is to work together with the other participants to reduce or eliminate tariffs on environmental goods in order to promote environmental protection and sustainable development.
 
The second is to ensure the credibility of the multilateral trading system, and this exercise should take place within the context of the WTO. At the end of the day, it should be implemented on an MFN basis.
 
It would like to see in particular more developing countries join this process to make it more credible and to make contributions to the post-Bali work programme and to the multilateral trading system.
 
Switzerland recalled that sectoral tariff negotiations are part of the WTO toolbox, and that in the past members have done sectoral tariff negotiations on, for example, chemicals and information technology goods, and "I think that's part of what we are doing in the WTO."
 
Switzerland was of the view that it is of benefit to all WTO members "if we are doing agreements which are MFN. The result which we will get out of these negotiations will be changes in our schedules, which will be an opening for the members of this organisation."
 
New Zealand said that "this initiative should really support and give impetus to our broader efforts within the organisation," adding that the results here would be applied on an MFN basis to all WTO members.
 
Obviously, it said, this sectoral initiative has some very specific benefits not only in terms of eliminating tariffs on "a very ambitious and broad range of goods", but also the very specific objective of addressing environmental challenges.
 
"We think that it should very much reinforce our broader work here at the WTO," said New Zealand.
 
Norway said that it is a strong supporter of the multilateral trading system and it sees this effort as "supporting the efforts that we are undergoing in this organisation. And we see this as a very open initiative - others can join as we move along."
 
And the important aspect here is the application of the end result on an MFN basis, bringing the result into the WTO system. These negotiations deal with the liberalisation of trade, but they will also contribute to environmental protection and hopefully have a positive impetus on the establishment of a global climate agreement, it said.
 
The EU said that what is being talked about here is a process where those mostly involved in this very important sector "are trying to do an agreement where tariffs will be hopefully eliminated for a wide range of products on an MFN basis, which means everybody else will benefit from it without paying anything."
 
Korea said that what is being pursued is unconditional MFN, adding that the objective is to reinforce trade and environment at the same time.
 
(In a footnote to the joint statement issued by the group, Korea said that the domestic procedures for its participation are still in progress.)
 
Asked as to what is being offered to those who are not in the initiative and are seeing that their issues are not being addressed such as tariffs on ethanol in the US market or NTBs on environmental goods, Switzerland said that what is being offered to them is to join. "We offer them to join these negotiations", and to bring forward their interests.
 
The EU said the agreement that is being sought will boost global trade in green goods and services; it will be a valuable instrument to support green industry globally; it will help us all to meet climate and energy targets; it will provide cheaper access to those technologies worldwide contributing to environmental protection, climate action and green urbanisation; it will enhance security of energy supply in the EU and elsewhere and reduce dependency of fossil fuels; and it will create an impetus to the WTO discussions.
 
Asked about the linkage between environmental goods and intellectual property rights (IPRs) which has been an issue since the 1992 Rio Earth Summit, Australia said that this is one of the many issues that the participants will grapple with through the negotiations.