Environmental goods agreement negotiators agree roadmap for conclusion

4 August 2016

A group of countries participating in a tariff-liberalising effort on green goods trade have identified a series of steps geared towards securing a deal by the end of the year, following a round of talks held last week in Geneva, Switzerland.

According to several trade watchers, another “highlight” of last week’s round was the release of a revised list of products by the chair of the talks, Andrew Martin of Australia, following a series of meetings with each participant in the Environmental Goods Agreement (EGA) initiative.

The list, based on an earlier version circulated last December, reportedly includes around 300 tariff lines and “ex-outs.” Initial reactions to the chair’s list indicated that this would be a suitable basis on which to move forward, sources said. 

The move comes hot on the heels of a statement following a meeting of trade ministers from the Group of 20 (G-20) major advanced and emerging economies in early July aiming to conclude an ambitious, future-oriented EGA by the close of 2016. The deal should seek to eliminate tariffs on a broad range of environmental goods. (See Bridges Weekly, 14 July 2016) [Editor’s note, Bridges Weekly is ICTSD’s flagship publication on trade and sustainable development news]

The trade ministers’ statement also calls for EGA participants to reach a “landing zone” by the annual G-20 leaders’ summit this time scheduled to take place in Hangzhou, China from 4-5 September. Sources said that the statement had helped participants focus on charting a roadmap to reach these targets, especially in light of earlier stalls in the talks. (See BioRes, 9 December 2015)

The EGA has been billed as an “open plurilateral” deal with participants signalling plans to extend the tariff elimination benefits of the deal to all WTO members on a most-favoured nation (MFN) basis.

Steps to a deal

An ambassadors-level meeting for the 17 WTO participants – with the 28-nation EU participating as one in these talks – will be held at the end of August. The occasion will likely confirm last week’s progress toward a landing zone, along with any intersessional work that occurs throughout this month.

Some sources said that the Hangzhou G-20 summit could then provide another opportunity to demonstrate political support for the deal or to welcome a landing zone, which could involve acknowledging the chair’s draft product list as well as the importance of other systemic issues.

However, several sources signalled that they did not expect an agreement to be unveiled at that stage either in terms of product coverage alone or in its completed form, suggesting that there was not enough time to address outstanding issues before then.

Additional opportunities for high-level political engagement are on the cards. Ministers from EGA participants may meet informally or bilaterally on the margins of a ministerial event in Oslo, Norway, at the end of October.

Negotiators last week also discussed holding another ministerial meeting towards the end of the year – as referred to in the G-20 trade ministers’ statement – in order to bring the deal across the finish line, although the precise timing of this is still to be determined. Several technical rounds of talks will also likely be held in mid-September and mid-October to help shape the final agreement. 

Landing zone

The chair’s list will be reviewed in further detail throughout August by governments participating in the EGA. The list reduces the number of products under consideration and draws on technical efforts over the last few months to identify product coverage.

Several commentators suggested, however, that some commercially sensitive products have been maintained on the chair’s list in recognition that countries will likely need to bargain over these in the final stages. These goods include bamboo, bicycles, electric motors, and batteries, among others.

Building on work undertaken since the formal launch of the talks in July 2014, other products under discussion involve areas such as clean energy, energy efficiency, air pollution control, and environmental monitoring and analysis, among others.

EGA participants had previously signalled that the deal will build on a voluntary effort to cut tariffs to five percent or less on a list of 54 environmental goods agreed by the 21-nation Asia-Pacific Economic Cooperation (APEC) alliance. Some of the goods under consideration in the EGA also reportedly overlap with those included in the recent update of a separate plurilateral tariff-cutting deal known as the Information Technology Agreement (ITA).

Participants also recognised the need to identify landing zones on systemic issues relating to the deal, such as setting the level of “critical mass” – in other words, ensuring participants cover a significant volume of world trade in the goods selected for liberalisation. Other topics still pending include addressing related concerns over “free-riders,” as well as options for staging periods for eliminating tariffs on certain products. 

Some sources said that while it was tricky to discuss critical mass and staging before having a deal on which products will form part of a final EGA, participants have recognised the importance on moving forward on all fronts.

More work ahead

China has floated a few proposals during the EGA talks to address the potential issue of free-riding, including a “snap-back clause” that would see participants restore tariffs under certain circumstances. More recently, Beijing has suggested the possibility of seeking a waiver to WTO rules in order to exclude a clear free-rider from receiving most-favoured-nation (MFN) treatment. (See BioRes, 30 June 2016)  

Regarding critical mass, convergence is reportedly emerging around a 90 percent critical mass threshold, although it is unclear yet whether this will be an exact or approximate criteria.

On staging, several parties have suggested building on the ITA expansion model, where tariffs on an additional 201 information and communication technology goods are either eliminated immediately or progressively over a three year period. In exceptional cases some tariffs can be eliminated of a period of five or seven years. (See Bridges Daily Update #3, 16 December 2015)

The US had circulated a proposal for the EGA along these lines last March, which provided additional details on what percentage of products could be included in each staging category. China also offered a staging proposal that month, which would give developed countries three years to remove tariffs, while developing countries would have several different options. (See BioRes, 10 March 2016)

China’s staging offer had also included the possibility of maintaining indefinitely a low level of tariffs on certain products, a move panned by others. References to “tariff elimination” in the G-20 trade ministers’ statement in July may suggest political progress in addressing this issue, trade watchers say. 

Other areas that will need to be clarified include a potential work programme that could focus on non-tariff barriers (NTBs) to environmental goods trade and barriers to accompanying services trade. Many EGA participants have also expressed interest in establishing a process for updating the list as new environmentally-beneficial goods are developed.

While the EGA’s primary focus is on tariff elimination, several participants support discussing other issues such as NTBs or environmental services trade as part of a work programme once the deal is concluded.

A few other WTO members are reportedly actively considering whether to join the EGA. Some analysts said that the unveiling of a final deal could see new partners come on board once it is clear what they are signing up to.

ICTSD reporting.

29 July 2016
The European Commission proposed country-specific emissions targets last week, clarifying the roles individual members could play in helping the bloc reach a 40 percent reduction in greenhouse gas...
14 September 2016
The world’s two largest greenhouse gas emitters have ratified the Paris Agreement on climate change, bringing the landmark deal significantly closer to entering into force. The news of the US-China...