Environmental goods agreement trade talks set to review draft final list

10 November 2015

A “draft final list” of potential products slated for tariff cuts as part of an effort to secure an Environmental Goods Agreement (EGA) will soon be circulated to participating WTO members on behalf of the talks’ chair, officials confirmed following the latest negotiating round.  

The draft list will reflect the latest areas of convergence among the 17-member group – which counts the 28-nation EU as one – around various product nominations, building on work undertaken during talks held from 29 October-4 November in Geneva, Switzerland, sources say. The document will be reviewed at the next negotiating round scheduled from 30 November-4 December, although it could also be subject to some revisions intersessionally, based on participants’ comments.

Since the EGA plurilateral talks launched in July 2014, participants have been discussing the types of products that might be included, followed by product nominations put forward by most players last April equal to around 650 tariff lines.

This collection was subsequently streamlined by the chair in August into a list of 450 possible tariff lines covering over 1000 products, and related to areas such as clean energy, energy efficiency, air pollution control, environmental monitoring and analysis, among others.

Some sources said that while the talks are not aiming for a specific number of tariff lines, participants had agreed to build on a list of 54 environmental goods set for tariff reductions to five percent or less by the end of the year by the 21-nation Asia-Pacific Economic Cooperation (APEC) alliance, and that the EGA should therefore seek to go beyond this figure.

The latest round of talks served to focus attention on particular sensitivities and areas of agreement regarding the proposed EGA list coverage, several sources confirmed, adding that some of these sensitivities were discussed during bilateral meetings.

In addition, several days were dedicated to technical talks among customs officials, designed particularly to clarify over 100 or so “ex-out” product nominations that have proved tricky to navigate at the negotiator level. Several sources confirmed that the results of this work would help the EGA chair, Andrew Martin from the Australian mission to the WTO, put together the draft final list.

Other sources, however, noted that more work between customs officials would be needed again in the next round.

Ex-outs in trade jargon refer to the description of a particular product not specifically captured by the World Customs Organization Harmonised System (HS) tariff classifications. These are expressed in terms of chapters (two-digit code), headings (four-digit code), or subheadings (six-digit code).

In some instances, EGA participants have nominated ex-outs within a six-digit code without intending to liberalise the entire subheading, or are only detailed by national tariff codes that may vary by country. In addition, customs officials during the latest round also dealt with instances where multiple and different ex-outs had been nominated by participants under the same HS six-digit subheading.

Target dates

The next round will take place just ahead of the WTO’s Tenth Ministerial Conference (MC10) scheduled for mid-December in Nairobi, Kenya, and will also coincide with the first week of the annual UN climate talks that are hoping to secure a new climate regime.

Several EGA participants have commented on the “unique convergence” of events in the international community’s agenda relevant to these talks. Although the scope of the EGA goes beyond products relevant to climate action, some nominations have been made in these areas.  

A number of participants have signalled MC10 as a preferred date for delivering a list of products, with some time and space reportedly already set aside at the conference for talks at technical and eventually ministerial level to finalise outstanding issues, if required after the December round.

In recent months, however, not all participants have backed this target date and some have suggested that negotiations in Nairobi will depend on how much progress is made in the December round. 

Other possible dates that have been floated by some EGA participants include potential delivery at the World Economic Forum’s annual meeting in Davos, Switzerland in January 2016, or even later next year at the G20 trade ministers’ meeting in China.

All participants have nevertheless indicated that this plurilateral is not intended to distract from the ongoing multilateral talks on possible deliverables for Nairobi, as well as the systemic question of how to deal with the Doha Round of trade negotiations after that meet, but should instead serve as a complement to updating global trade rules. The EGA is being negotiated as an “open plurilateral,” meaning that the eventual tariff cuts will apply to all WTO members on a most-favoured nation (MFN) basis.

Heads of delegation from WTO members participating in the EGA held a meeting with the global trade body’s Director-General Roberto Azevêdo on Tuesday 27 October to discuss the talks’ progress. The trade chief reportedly voiced support for the negotiations and expressed hope that these would be able to deliver something in time for Nairobi.

The meeting with Azevêdo was also designed to maintain a link between the talks and the broader WTO framework, particularly given the Director-General’s involvement in the expansion negotiations for the Information Technology Agreement (ITA), according to some participants.

Key weeks ahead

Several sources, however, have cautioned that some uphill work is needed to smooth out tricky areas in order to be able to deliver in the near-term. Outstanding areas to address include some tariff lines as well as the scale of planned tariff cuts. 

In addition, while the latest round reportedly saw China supporting several others’ product nominations, the Asian giant is also said to have indicated some significant sensitivity around goods covered by the APEC tariff lines.

Beijing has also reportedly raised concerns that the APEC list was negotiated on the basis of applied tariff cuts to five percent, rather than a full liberalisation of tariffs to zero as envisioned by many other EGA participants for this plurilateral. Applied tariffs represent the actual customs duty levied while bound tariffs signify the maximum duty ceiling that WTO members could potentially levy.

Several commentators have voiced concern that in this crucial stage the EGA talks will hit the same roadblocks as efforts to revise the scope of the WTO’s ITA, which stalled multiple times before participants in the expansion initiative – a subset of the full membership of the original ITA – were able to announce a final product list this past July.

With the product list for the ITA expansion completed, participants are currently working to finalise the staging – in other words, the length of tariff phase-outs – for the various products covered under the new list, aiming to sign off on the completed outcome in Nairobi. (See Bridges Weekly, 23 July 2015) [Editor’s note: Bridges Weekly is ICTSD’s flagship trade and sustainable development news publication]

Other trade watchers are hoping that EGA negotiators will be able to avoid ITA-like crises that could see these talks stall for lengthy periods of time.

According to some sources, the use of staging might be a way to get around some of the more sensitive areas in the EGA, although this has only been discussed at a general level to date.

Some participants have reportedly pointed towards the modalities for ITA-II, as the expanded deal is known, as a model for the EGA liberalisation. Under the draft declaration released in July together with the product list, items included under the ITA-II would see a default tariff elimination over three years through a series of four annual reductions, unless otherwise agreed.

Negotiations since have seen participants also discussing the potential for some five-year or seven-year extensions for agreed products. Which products would see the three, five, or seven-year extensions are still being fleshed out among ITA-II participants.

Next steps

With pressure mounting ahead of the December round, EGA participants remain flexible on the working mode for that session, which could see further bilateral talks held over the more difficult products. 

Details such as staging, meanwhile, could be included in an eventual decision for adopting the EGA. The EU in July distributed a draft ministerial declaration to that effect, although that document did not envision any staging. (See BioRes, 3 August 2015)

Brussels presented a revised version of the declaration during the final day of the latest round with some revisions to reflect other participants’ comments. The EU’s draft declaration reportedly pares back commitments suggested around environmental services liberalisation following resistance by other countries.

The draft text continues to include institutional provisions such as, for example, a review mechanism to examine the deal’s scope in future years. Whether participants will be able to deliver a text alongside a final list, or instead complete it afterward, nevertheless remains an open question.

Agreement on the final list may eventually see other WTO members come on board accepting the deal in its completed form, a move that some experts say would help to boost the deployment of environmentally-friendly goods.

ICTSD reporting.

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