Environmental goods agreement negotiators discuss tariff cut offers

27 April 2016

The thirteenth round of talks geared towards securing a trade-liberalising Environmental Goods Agreement (EGA) focused on several proposals for tariff cuts and phase outs during a variety of meeting configurations held last week in Geneva, Switzerland, according to sources.

At the invitation of the chair of the EGA talks, Andrew Martin of Australia, these proposals were presented both before and during the round by most of the 17 WTO members participating in the plurilateral deal, with the 28-nation EU counted as one in this context.

The chair reportedly asked EGA participants to categorise products in his “convergence list” of 350 tariff lines circulated last December into those suitable for immediate liberalisation, those where tariffs might need to be phased out over a period of years, and items deemed sensitive or unclear on how best to treat.

This convergence list is based on a universe of some 650 tariff lines covering over 2000 items nominated and discussed by EGA participants since the talks formally launched in July 2014. Possible products slated for inclusion are those relevant to cleaner and renewable energy generation, air pollution control, and energy efficiency, among other things. (See BioRes, 24 June 2015)

According to some sources, last week’s discussion focused on products identified as sensitive, with participants looking to build consensus around which items should go into the final list. Several reported constructive conversations, with differing levels of product sensitivities identified, such as those products that might prove very difficult to include and others with the potential for compromise.

This included work in small groups – one with the EU, US, Japan, and Canada and another led by Switzerland, Norway, Hong Kong, and Israel – to compare proposals. Sources also noted a continued focus on environmental credibility alongside the mercantile push-and-pull of trade negotiations.

For example, one delegation raised sensitivities around some products despite their own country currently imposing low tariffs, arguing that the environmental rationale for liberalisation was not apparent. Conversely, other participants pushed for flexibility where environmental arguments were strong, as a leverage for taking on the tariff cut.

Based on these efforts, some sources estimated that over 200 tariff lines could be included in some way in the final list without much difficulty, depending on the political landscape moving forward.

Mixed forecasts

Sources speaking with BioRes gave varying forecasts for next steps. Several suggested that on a technical front the talks could be concluded this year, but much would depend on resolving some key issues.

The EGA talks hit a snag last December after participants diverged on how to interpret a negotiating mandate to “build upon” a list of 54 product categories targeted for a voluntary reduction of tariffs to five percent or less by end-2015 by the 21-nation Asia-Pacific Economic Cooperation (APEC) alliance.

At that time, China reportedly reiterated concerns to the US over a push for immediate, full elimination of tariffs under a completed EGA on a handful of APEC goods, with attempts by other participants to manoeuvre around the block proving unsuccessful.

This development dashed hopes among some stakeholders that a deal might have been secured in time for a landmark UN meet that birthed a new multilateral climate accord and the WTO’s Tenth Ministerial Conference (MC10), held back-to-back in the same month. (See BioRes, 9 December 2015)

“The deal makers will be the US and China,” said one source following the latest round, suggesting that the US had been pushing for a swift conclusion this year before President Barack Obama leaves office in January 2017, but that recent efforts to craft a high-level political intervention on the EGA between the two trading giants had also faltered.

Some reports also suggest that Beijing has indicated that acceptance of its long-standing bid to participate in ongoing talks for a separate, plurilateral Trade in Services Agreement (TiSA) would facilitate the EGA negotiations, a move panned by Washington, among others. (See Bridges Weekly, 26 September 2013)

Other outstanding areas to be resolved include addressing China’s proposals for special and differential treatment (S&DT) for developing countries within the EGA and a “snap back” clause to raise tariffs if the portion of world trade in goods covered by the deal drops below a certain level.

On the former, China has suggested crafting different tariff phase out or “staging” periods for developed and developing countries, with the possibility of maintaining an indefinitely low level of tariffs on certain products for the latter group. This proposal is relatively controversial for other EGA participants.

Sources confirmed, however, that Beijing’s “snap back” clause is a major sticking point for many delegations, who are concerned that it would violate fundamental trade law principles. The EGA is being negotiated on the basis of “bound” tariffs that represent the maximum duty ceiling levels WTO members can apply, contrary to “applied” tariffs, which signify the actual duty levied at the border.

EGA participants have signalled intentions to conclude the deal as a most-favoured-nation (MFN) style pact, which would extend the eventual bound tariff reductions to the WTO’s entire membership.

Similar plurilateral initiatives, such as the WTO’s Information Technology Agreement (ITA), have defined a “critical mass” of participants, which should represent a significant volume of world trade in order to stave off potential free riders benefiting from tariff concessions without offering anything in return.

China has expressed concerns vis-à-vis EGA participants over how to manage critical mass in a world of rapidly shifting trade and investment flows. Some stakeholders have pointed to the recently concluded ITA expansion effort that agrees to future discussions if necessary should trade patterns alter participants’ critical mass, without prejudice to the outcome. (See Bridges Weekly, 16 December 2015)

EGA participants also held a briefing session for the wider WTO membership last week. Some commentators have noted that the addition of new countries could help to assuage critical mass concerns.

Next steps

While some sources maintained that the disagreements with China soured the EGA waters last week, others suggested that the country needs to navigate complex domestic procedures and considerations, and said that its concerns were not new but instead have been raised in previous rounds.

In that context, time will tell whether EGA participants will be able to keep each other engaged and find landing zones for the list, one commentator reflected. Another source suggested that the broad view remained among all EGA participants to push towards a conclusion as soon as possible and at an appropriate moment.

EGA negotiators have signalled that work will continue intersessionally through bilateral and group conversations in order to provide further guidance on identifying an acceptable product list. Some participants may update their staging proposals in light of information gathered last week. The next round is scheduled for 20-24 June.

A G-20 trade ministers meeting on 9-10 July in Shanghai could provide a useful political milestone and opportunity for guidance, even though not all EGA members are G-20 economies, and conversely not all of the G-20 participate in the EGA.

Efforts are also reportedly underway in the G-7 grouping of industrialised economies – that includes the US, Canada, France, Germany, Italy, Japan, and the United Kingdom – to send positive signals to the talks. The G-7 is set to hold its annual summit on 26-27 May in Japan.

ICTSD reporting.

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