“Green goods” trade initiative kicks off in Davos

28 January 2014

A group of 14 WTO members - including the US, EU, and China - has agreed to pursue "global free trade" in environmental goods, announcing last week their plan to negotiate a plurilateral deal that would eliminate tariffs on such products.

"We are convinced that one of the most concrete, immediate contributions that the WTO and its members can make to protect our planet is to seek agreement to eliminate tariffs for goods that we all need to protect our environment and address climate change," the participants said in a joint statement on Friday, on the sidelines of the World Economic Forum in Davos, Switzerland.

The group plans to use the list of environmental goods agreed by the Asia-Pacific Economic Cooperation (APEC) group as a starting point for their discussions. APEC members had announced in 2012 that they would reduce tariffs on a list of 54 green goods - such as wind turbines and solar panels - to five percent or less by the end of 2015. However, that regional pact was non-binding for its 21 members, and featured many products that already have low tariffs. (See Bridges Weekly, 12 September 2012)

Participants in this new initiative did not say how long they expect negotiations to take, nor did they say when these would be formally launched. However, they did say that the agreement - while first tackling tariffs - is meant to be a "future oriented" pact that might later address other barriers to green goods.

Total global trade in environmental goods reached nearly US$955 billion in 2012, according to US data, with tariffs on some products as high as 35 percent.

Critical mass needed

Along with the US, EU, and China, current participants in the initiative also include Australia, Canada, Costa Rica, Hong Kong, Japan, Korea, New Zealand, Norway, Singapore, Switzerland, and Chinese Taipei - a group that together make up 86 percent in global environmental goods trade.

The group intends to bring this deal into the WTO as a most-favoured-nation (MFN) style pact. For this to happen, however, enough participants would need to sign on for the pact to have a "critical mass" - in other words, to cover a sufficiently high percentage of environmental goods world trade. This number is often set at 90 percent, as seen with the WTO's Information Technology Agreement, a plurilateral tariff-cutting mechanism for information and communication technology products.

Once enough participants have signed on to reach this critical mass, the agreement's benefits would be extended to the global trade body's entire membership, though only its participants would be required to make concessions.

"All WTO members need better access to the goods and technologies that protect our environment and combat climate change," EU Trade Commissioner Karel De Gucht said on Friday. "Today's commitment is an important trade contribution towards addressing key environmental challenges as part of our broader, ambitious sustainable growth agenda."

The group says it is interested in bringing other WTO members on board, without specifying which members exactly. The participants have particularly stressed the importance of including all major traders.

Post-Bali momentum

The announcement comes just weeks after WTO members concluded a global trade deal at their ministerial conference in Bali - their first such pact in nearly two decades - that resolved some of the less contentious topics of the Doha Development Agenda. Trade watchers say that one of the main challenges for WTO members in 2014 will be to establish a "work programme" to address the remaining Doha Round issues, which are widely expected to be more difficult to resolve.

Trade ministers involved in the environmental goods initiative, such as US Trade Representative Michael Froman, have said that these types of "fresh, credible approaches to trade negotiation" could serve to keep the Bali momentum going back in Geneva.

Lowering tariff and non-tariff barriers in environmental goods and services (EGS) were part of the Doha Round's original negotiating mandate, launched in 2001. The negotiations, however, have struggled to advance at the WTO, with members at odds over issues such as how to identify these goods, and what products a global deal in this area would cover. (See Bridges Weekly, 27 April 2011)

When the APEC deal was announced just over a year ago, some in the trade and climate community had hoped that this could lead to a rejuvenation of EGS talks at the WTO. However, the idea of multilateralising the APEC deal - and making it binding - has received a lukewarm approach from some of the WTO's members, skeptical as to whether outside agreements should influence discussion at the global trade body. (See Bridges Weekly, 14 November 2012)

Washington is among those members to have advocated for plurilateral and regional negotiations as ways to advance trade liberalisation, while serving also as a complement to the multilateral process. However, some WTO members have questioned whether these types of efforts actually detract from multilateral talks, particularly as plurilaterals such as the proposed Trade in Services Agreement gain steam.

The post-Bali agenda was the main focus of a separate meeting held in Davos by Swiss Federal Councillor Johann Schneider-Ammann, which was attended by WTO Director-General Roberto Azevêdo and a group of two dozen ministers. Along with calling for "fresh and credible approaches" to address the rest of the Doha Round agenda, the Swiss official also reported a "common understanding" among ministers that the new work programme must address Doha's hardest topics: agriculture, industrial market access, and services.

ICTSD reporting.

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