Environmental goods agreement negotiators prepare for December deadline

26 October 2016

A group of 17 WTO members – counting the 28-nation EU as one – negotiating tariff cuts on select environmental goods will engage in a busy schedule of consultations over the coming weeks in a bid to secure a deal in time for a ministerial meeting in early December.

Several sources confirmed that while the latest round of talks for an Environmental Goods Agreement (EGA) yielded good progress, some key aspects still need to be worked out.

This includes making decisions on whether to include certain products, finalising a text with appropriate modalities and institutional arrangements, as well as determining the level of “critical mass” participation for the deal to enter into force.

The 16-20 October round held in Geneva, Switzerland, this time featured a series of small group meetings, which sources said was a slight change in approach from the earlier process of having participants meet primarily on a bilateral level and in plenary.

In those small groups, participants focused on a handful of product categories which were identified as relatively contentious by the EGA talks’ chair, Andrew Martin of Australia. The small group discussions were attended by proponents and opponents of select products, allowing negotiators to refine their understanding of different participants’ relative priorities and sensitivities, and suggest compromises.

According to some sources, potential solutions included offers to further sharpen “ex-out” descriptions to clearly capture the environmental good within broader trade tariff classifications, or to allow for tariffs to be eliminated over a longer time period for select commercially sensitive items.

The latest round also saw several participants show conditional support for some products, depending on the balance of the final deal. Participants additionally discussed some text-related issues during bilateral exchanges.

The Geneva talks were followed by an informal ministerial breakfast meeting last Saturday among a selection of EGA participants. The occasion took place on the sidelines of a “mini-ministerial” gathering held in Oslo, Norway on 21-22 October on WTO issues.

At the Oslo gathering, ministers reaffirmed a strong commitment to conclude the EGA by the end of this year and discussed individual product priorities. Leaders from G-20 nations had endorsed the year-end goal in September, a target also supported by non-G20 EGA participants. (See BioRes, 28 September 2016)

Since the formal launch of talks in July 2014, EGA participants have nominated some 650 tariff classifications covering more than 2000 products related to various environmental activities for inclusion in the deal.

These were pared down to an estimated 300 tariff classifications and related ex-outs on a draft product list prepared by the chair in August. This is now known among trade negotiators as the “L-list,” reflecting efforts through the G-20 to identify landing zones for the agreement this year.     

Still to do

The EGA ministerial meeting is scheduled for 3-4 December, with a negotiating round due to be held directly beforehand, starting on 28 November. Sources report that the interim consultations – which will include meetings at ambassador’s level – will work on some of the proposed solutions to product sensitivities.

Some participants suggested during last week’s round that the current draft product list still includes too many outstanding issues to be sent to ministers, implying that another iteration could be produced by the chair before the next negotiating round. Others were more cautious on the possibility of a revised list.

Interim consultations will likely also consider a revised draft text for the deal. The chair is due to circulate this document shortly among EGA participants, following drafting support from the EU. The revised text could provide an opportunity to further discuss sticking points around critical mass participation.

Setting a “critical mass”

As the EGA is being negotiated as an “open plurilateral” within the framework of the WTO, tariff cuts by participants will be extended to the organisation’s full membership on a most-favoured nation (MFN) basis. Open plurilateral deals tend to determine a critical mass threshold of world trade captured by participants in order to ensure benefits.

A 90 percent threshold of world trade in goods covered by the deal, as captured by EGA participants, has been suggested as one option for defining critical mass. This would mirror an approach used in a separate tariff-cutting Information Technology Agreement (ITA) and its revision at the end of last year.

Some EGA participants remain divided, however, on whether to use exports, imports, or two-way trade to define “world trade.” Others suggest that critical mass could be constructed around the level of trade by participants in those goods which are eventually selected for liberalisation.

A ministerial declaration on the ITA revision refers to “approximately 90 percent of world trade” in products covered by the declaration. 

Determining critical mass is also linked to concerns among some participants that major non-participating traders will benefit from increased market access without having to lower their own tariffs – dubbed by some as “free-riding.”

China has proposed options for addressing significant future free-riders, as production patterns shift and potentially change participants’ critical mass, but the issue has not yet been resolved among the group as a whole. (See BioRes, 30 June 2016)

Staging debate, review mechanism

While participants are considering longer time periods for implementing tariff cuts for a few items – a process known as staging – more general modalities on how to implement these have not yet been finalised. Some participants have again looked to the ITA framework – where tariffs are either eliminated immediately or progressively over a period of three, five, or seven years – though other variations are also being considered.

Several sources also confirmed that the text would include a review mechanism, along with a work programme on services trade and non-tariff barriers to environmental goods trade.

A built-in review mechanism would enable participants to update the list periodically in light of rapid technological developments in many of the product categories under discussion. Several experts have also suggested that this would help boost deployment of the most effective environmental solutions.

While the concept has gained broad support from a wide number of participants, specific details still need to be agreed, including how often such reviews might take place.

Judgement day

Talks during the Oslo ministerial breakfast reportedly touched on some of the most sensitive items. This included, for example, debates around wood products and divergences around whether bicycles should make it on the list.

Several sources suggested that the exchanges helped prepare ministers for the December gathering, particularly as that occasion will likely not permit as much time for the dissection of product priorities.

WTO Director-General Roberto Azevêdo, who attended the breakfast, reportedly said that the EGA would be an important contribution to the organisation. He suggested the deal was ripe for harvest if participants were prepared to take some final key decisions.

“I'm confident that participants can conclude negotiations by the end of the year,” the WTO chief tweeted on Saturday morning.

Sources also indicated that Azevêdo highlighted the importance of agreement’s environmental credibility, suggesting that the final outcome would ultimately be judged by a wide spectrum of stakeholders – beyond those who are currently around the negotiating table.

Several experts have said that the products that are likely to be included on the final list, such as photovoltaic cells used in solar panels or parts and components for wind turbines, could make a contribution to achieving the new Paris Agreement on climate change. EGA participants have also signaled that the deal could help support climate action efforts under the UN climate process. 

The Oslo meeting was nonetheless overshadowed by the difficulties facing the EU in signing a Comprehensive Economic and Trade Agreement (CETA) with Canada, symptomatic of mounting political and popular backlash against global trade deals in major trading nations over the past year. The mood has left many trade watchers concerned for future liberalising efforts and searching for ways to better explain why trade matters.

“My concern is not that anti-trade arguments are being made in public discourse. My concern is the echo that they attract from the people. That echo is loud. It is heartfelt. And it has to be heard,” said Azevêdo in a speech given to Norwegian business representatives before the Oslo ministerial.

“It is up to all of us to make trade work better. We have to work harder to ensure that the benefits of trade are more widely shared,” he added.

ICTSD reporting. 

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