APEC members slash tariffs on environmental goods, group says

4 February 2016

Members of the 21-nation Asia-Pacific Economic Cooperation (APEC) alliance have released documents detailing the implementation of their joint pledge to cut most-favoured nation applied tariffs to five percent or less by 2015 on environmentally-friendly goods contained under 54 product categories.   

The products involved range from wind turbines and solar panels, to water filtering machinery and oceanographic, hydrological, or meteorological surveying equipment.

The “implementation lists” provide information on tariffs levied last year and for 2016, although some also do so for 2012, reflecting early implementation. For the most part, goods are identified at the six-digit level of World Customs Organization (WCO)’s Harmonised-System (HS) tariff category nomenclature; by a national tariff line (NTLs); and with an accompanying description, in order to provide clarity where APEC members agreed only to liberalise specific items within these.

While most APEC economies were already in compliance, China and South Korea were among those that reported significant drops in applied tariff rates on several goods as a result of the exercise.

However, according to the submissions five economies – Malaysia, Thailand, Russia, Chinese Taipei, and Indonesia – have partially missed the deadline, with a handful of tariff lines or specific products not yet in compliance for various reasons.

APEC leaders signed up to lowering tariffs on select environmental goods at a meeting held in Honolulu, Hawaii in 2011, as part of a commitment to promote green growth and seek “trade-enhancing solutions” to global environmental challenges. The 21-country group released an agreed list of products the following year in Vladivostok, Russia. (See Bridges Weekly, 16 November 2011 and 12 September 2012, respectively) [Editor’s note, Bridges Weekly is ICTSD’s flagship publication on trade news]

Several analysts speaking to BioRes have suggested that some sectors in the APEC region, particularly clean energy, would benefit from the initiative. The overall value of trade flows affected by the cuts is likely to be relatively small for now, however, due to the specific nature of the commitments.

Environment, trade commitment

Some experts welcomed the implementation lists and said that APEC economies appear to have taken the exercise “very seriously.” The level of specificity in the lists suggests a commitment to “environmental credibility,” given that the cuts should focus on NTLs that include green products, and only a small number of unrelated products in these will also benefit.

Since announcing the initiative, APEC delegates and experts have met regularly to address some of the challenges linked to implementing the tariff cuts, which are said to have varied in nature and scope between members. Identifying particular environmental goods or parts at the border was considered by many to be a key hurdle, given that the WCO’s HS six-digit subcategories often included a wider array of items, while NTLs also include a range.  

In some instances, countries have used existing NTLs to implement the cuts, whereas others have split certain lines into two or more, in order to address the environmental goods more narrowly. Some, such as South Korea, have in certain cases created entirely new national lines by indicating the environmental end-use of certain parts and components.

Some commentators also said last week that the implementation lists provide a practical demonstration of a trade-related commitment directly targeting environmental goods that could be useful for other efforts.

A group of 17 WTO members are currently working towards securing a binding tariff-cutting “Environmental Goods Agreement” (EGA). At the initiative’s launch in 2014, EGA participants had signalled plans to build on the APEC list, although varying interpretations of this mandate were among the reasons these negotiations stumbled at the end of last year. (See BioRes, 9 December 2015)

Marie Sherylyn D. Aquia, chair of the APEC Committee on Trade and Investment, said last week in a press release that the Asia-Pacific group’s progress on implementation would now add “impetus” to the EGA talks.

More time needed, more work ahead

How the group will respond to the five nations not yet fully in line remains to be seen. Unlike the EGA, the APEC effort is technically non-binding, with no formal penalties for non-compliance.

Malaysia’s implementation document reveals seven items still undergoing legislative approval for tariffs cuts to five percent. However, six items are not directly covered by the APEC list, but instead represent additional commitments taken under a relevant HS six-digit tariff line. Kuala Lumpur explains that these reductions should be in place by March.

A 20 percent tariff on bamboo flooring products will also be tackled this year. In order to do so, Malaysia will need to create a new NTL to exclude “other types of flooring” that fall within the HS six-digit code, but are not on the APEC list.

Bamboo flooring products also proved challenging for Russia and Thailand. As a member of the newly-formed Eurasian Economic Union (EAEU), which implements a common customs tariff, Russia indicates that the changes from the current 11 percent will be completed once approved by Armenia, Belarus, Kazakhstan, and Kyrgyzstan. (See Bridges Weekly, 5 June 2014)

Moscow cites several other items, including parts of steam turbines and of civil aircraft engines or motors, where tariffs are expected to go down to five percent by next September at the latest.

Thailand’s 20 percent tariff on bamboo flooring products is marked as “under consideration” by its Ministry of Finance, along with more than a dozen other items with tariffs at 10 percent. According to Bangkok, these products will be considered for cuts between 0-5 percent, following domestic consultations with stakeholders. A final determination, however, will only be made later as part of the country’s ongoing tax reform.

Indonesia highlighted 13 items whose tariffs remain at 10 percent, with reductions scheduled to take place gradually year by year, for full compliance by 2021. These include among others condensers for steam or other vapour power units, some wind-powered generating sets, along with certain electric generating sets.

Chinese Taipei, an EGA participant, has also signalled that a legislative review remains ongoing for reducing a 10 percent tariff on electric generating sets that involve turbines and an 8.5 percent tariff on alternating current (AC) turbine generators.

Progress on further implementation is on the agenda for an APEC officials meeting being held in Lima, Peru, later this month. Further work on an Environmental Services Action Plan (ESAP) to help boost trade and cooperation within the region by the end of the decade is also on the docket. (See BioRes, 3 June 2015)

EGA talks in Geneva

According to trade sources, an EGA negotiating round has been set for the first week of March, although the meeting’s agenda was not finalised at press time. Several players expect the talks to identify next steps after difficulties in December held back a potential delivery at the WTO’s Tenth Ministerial Conference (MC10) in Nairobi, Kenya.

Some players had also hoped to secure an initial EGA deal around the time of the UN climate talks in Paris, France in December that resulted in a new universal emissions-cutting deal, given that lower tariffs on certain climate-friendly goods could contribute to boosting their uptake worldwide. (See BioRes, 13 December 2015)

Some stakeholders suggest that China’s G-20 presidency this year might provide a new opportunity to land an EGA deal, although no formal discussions have taken place on this front yet, and key details would need to be addressed. For example, not all EGA participants are members of the G-20, and vice versa.

Progress on the EGA negotiations is nevertheless included in a list of priorities for bolstering a robust international trade and investment system, along with several other objectives, according to a document by Chinese President Xi Jinping on the G-20 process published in December.

ICTSD reporting. 

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