“Green goods” trade talks kick off in Geneva
Negotiations have started towards an environmental goods trade agreement. Participants hope that the eventual deal will make a useful contribution to tackling climate change.
A group of 14 WTO members – including the US, EU, and China – formally launched negotiations last week for a new agreement aimed at liberalising trade in environmental goods.
“The challenges we face, including environmental protection and climate change, require urgent action,” the participating members said in a joint statement at a press conference in Geneva, Switzerland. Through this planned Environmental Goods Agreement (EGA), the group hopes to “achieve our shared goal of global free trade in environmental goods,” the statement continued.
Participants said that they plan to hold intensive talks in Geneva, which began last week, geared at hammering out the substance of the eventual agreement. The first round of talks, held on 9-10 July, reportedly focused on the framework and structure of the negotiations. The next round of talks will be held in September.
While the group is aiming to reach agreement on an ambitious and broad range of goods, the selection would also be based on the specific objective of a product’s ability to meet environmental challenges. This might include, for example, goods related to energy efficiency, combating air pollution, providing clean drinking water, and scaling up renewable energy equipment.
Total global trade in environmental goods reached roughly US$955 billion in 2012, according to US data, with tariffs on some products as high as 35 percent. At the initiative’s launch, Canada also stressed the sizable expected growth in these markets in the coming decades. With Australia, the EU, US, China, Canada, Costa Rica, Hong Kong, China, Japan, Korea, New Zealand, Norway, Singapore, Switzerland, and Chinese Taipei on board, the group represents some of the world’s largest importers and exporters of such products.
An oft-repeated message by participants at the launch last week was the hope that an EGA would eventually serve the dual aim of tackling climate change as well as providing a lift to the multilateral trading system. “This agreement will boost global trade in green goods and services. It will be a valuable instrument to support green industry. And it will help us all to meet climate and energy targets,” EU Ambassador to the WTO Angelos Pangratis told reporters.
Bringing a deal to the WTO
At the launch, participants also reaffirmed their commitment to bring the agreement into the WTO as a most-favoured-nation (MFN) style pact, which would extend the eventual benefits to the global trade body’s full membership.
In order to do so, however, the initiative would need to be joined by enough WTO members to achieve a “critical mass.” In other words, the deal would have to encompass a significant enough portion of trade in the list of covered goods to stave off potential free riders. EGA participants say that they have not yet decided on what threshold would constitute a “critical mass,” and that this is the kind of detail that will be discussed in the coming months.
Trade watchers have speculated that the EGA group might set the number at 90 percent, following a precedent set by the WTO’s Information Technology Agreement (ITA), a plurilateral tariff-cutting deal covering information and communication technology products. The current 14 participating members of the EGA make up around 86 percent of global trade of the environmental goods that are under initial consideration by the group.
The group also stressed at the launch that they remained open to working with other trading partners interested in pursuing similar objectives and ambition. “We would like to see more developing members in particular join this process,” said China’s WTO Ambassador to the WTO Yu Jianhua at the launch.
Welcoming the news, WTO Director-General Roberto Azevêdo also highlighted this point, noting that EGA participants have made very clear that the negotiations are open to any and all interested WTO members. “The topic of environmental protection is of utmost importance in the WTO and the liberalisation of environmental goods is also a significant element of negotiations under the Doha Development Agenda,” the WTO chief added.
According to a UN Environment Programme (UNEP) report released at the inaugural UN Environment Assembly (UNEA) meet in Nairobi Kenya earlier this month, developing countries moved from being net importers to net exporters of certain green goods in 2007, a trend driven in part by strong export growth from China, including in the renewables sector. (See BioRes, 2 July 2014)
Tariff-only focus, for now
EGA officials, such as Australian WTO Ambassador Hamish McCormick, explained at the launch that the negotiations would initially focus on tariff issues related to environmental goods. Other participants added, however, that this did not preclude returning to issues such as environmental services and non-tariff barriers (NTBs) at a later stage.
Several experts at a meeting held following the launch stressed the importance of eventually addressing such issues as an integral part of any effort to scale up green trade.
Other experts participating in the event said that the green goods initiative could be a very important and useful contribution from the trade community to the effort to seal a global climate deal under the UN Framework Convention on Climate Change (UNFCCC) by the end of next year in Paris, France. [Editor’s note: the meeting was hosted by ICTSD, the publisher of BioRes]
Questions have been raised, however, among the trade community as to whether environmental services should be considered elsewhere as part of other initiatives. For instance, some have suggested the inclusion of environmental services in separate trade talks focusing specifically on services – known as the Trade in Services Agreement (TISA) – among a group of different, albeit overlapping, WTO members.
Doha in the background
A commitment to negotiations towards lowering tariffs and NTBs in both environmental goods and services (EGS) trade was included in the WTO’s original Doha Round negotiating mandate, launched in 2001. Progress at the multilateral level in this area stalled, however, with members running into hurdles such as how to identify an environmental good and what products to put forward.
The overall Doha Round has itself been deadlocked for several years, despite the recent advance seen at the WTO’s latest ministerial conference in Bali, Indonesia, last December. At the time, the global trade body’s members signed off on a new agreement on trade facilitation, as well as some agriculture and development-related deliverables, while pledging to develop a Doha Round “work programme” by end-2014 that would outline how to bring the negotiations to a successful conclusion.
Meanwhile, initiatives such as the EGA and TISA have been raised by some WTO members as possible avenues for advancing trade liberalisation – and potentially contribute to breaking the Doha Round deadlock – in line with the direction given by trade ministers at the 2011 ministerial conference to pursue new, more flexible negotiating approaches.
The EGA group first signalled its intention to pursue a green goods trade agreement in January, making the announcement during the World Economic Forum’s annual meet in Davos, Switzerland. (See BioRes, 28 January 2014)
At that time, the group said that it would use a list of environmental goods agreed to by the 21 economies that make up the Asia-Pacific Economic Cooperation (APEC) forum as a starting point. In late 2012, APEC members had announced their plans to reduce applied tariffs on a list of 54 green goods – including wind turbines and solar panels – to five percent or less by the end of 2015, following up on a commitment they made in 2011.
The decision was hailed at the time as a positive step in this area, and one that could have the potential to reinvigorate WTO talks on environmental goods and services. This latter idea, however, received a cold welcome by some members, who argue that agreements made outside the WTO should not influence the Doha Round negotiations. (See Bridges Weekly, 14 November 2012)
Some of the APEC members are also involved in the new EGA initiative, and how the two commitments will later intersect remains unclear, given that the APEC deal is non binding.
Experts have also said that, while the APEC 54 list provides a good start to the new negotiation, some lessons might also be learned from the way in which APEC members implemented voluntary cuts and the goods that were subject to such cuts. For example, the APEC group leaves it up to member economies to decide whether or not to cut tariffs at the Harmonized System (HS) 6-digit level – a World Customs Organization classification – or pick and choose more specific products from within these categories. This approach has created a degree of uncertainty in the APEC agreement, trade sources say.
Changing trade realities, balancing interests
Along with considering these questions, EGA negotiators will also need to address other tricky areas, such as how to make sure a green goods trade deal keeps up with rapidly changing technological developments, consistent with participants’ pledge earlier in January to negotiate a “future-oriented” agreement.
The WTO’s ITA, for instance, has run into that same problem, given the myriad technological advances that have been seen in the information and communication technology field since the mid-1990s, when the agreement was originally negotiated.
Some of the participants in the ITA have attempted in recent years to expand the product coverage of the existing pact in order to reflect current trade and technological realities, only for those negotiations to stall in light of certain members’ sensitivities.
Although pitted as a “win-win” initiative, EGA negotiators will also need to strike a balance between the commercial interests of participating countries and the stated environmental aims of the agreement. Some delegates from participating countries have said that the agreement will need to be based on a list that is both credible and practical.
The plans for this new environmental goods deal comes even as a number of participating members are engaged in a series of spats over allegedly unfair trade practices in this sector. Some of the most high-profile rows to date have involved the US, EU, and China. These disagreements, among others, have highlighted the question of how to support renewable energy generation and innovation domestically, while at the same time advancing the deployment of such goods at a global level and ensuring fair trade.
Last week at the launch, some delegates suggested that the new negotiations could help to assuage these renewables trade tensions. Others stressed that an EGA would nevertheless not go so far as to impose a moratorium on relevant trade remedies – actions deployed to address allegedly unfairly traded imports – in this area.