Environmental goods agreement trade talks stall ahead of Nairobi ministerial

9 December 2015

A bid to seal the product list for a tariff-liberalising “Environmental Goods Agreement” (EGA) among a group of 17 WTO members ran into difficulties during the latest negotiating round held in Geneva, Switzerland from 30 November-4 December, implying that the deal’s conclusion will not be announced at the WTO’s Tenth Ministerial Conference (MC10) in Kenya next week.

According to several sources, EGA participants clashed over whether to revisit a list of 54 environmental goods agreed by the 21-nation Asia-Pacific Economic Cooperation (APEC) alliance, which the group had previously indicated plans to build upon. The 2012 APEC list pledges to cut applied tariffs to five percent or less by the end of this year.

Different interpretations of “build upon,” however, have emerged among EGA participants since the initiative’s announcement in January 2014 at the World Economic Forum’s annual Swiss alpine retreat and the talks’ formal launch six months later.

China last week reportedly raised concerns with the US over a handful of APEC-list goods and repeated reservations expressed in recent months on moving immediately to full tariff elimination for these under the EGA. Meanwhile, Washington along with others such as the 28-nation EU have said that the EGA deal aims at full tariff elimination, as previously agreed.  

Participants reported that attempts last week to manoeuvre around this gridlock by various players were unsuccessful. However, several sources confirmed that all EGA participants appeared to remain genuinely committed to finding ways forward, with talks likely to resume early next year in the hope of clinching a deal in the near future. A number of sources speaking with BioRes also pointed to advances made at the technical level in a customs officials working group.

“It’s the nature of things,” said one EGA participant speaking with BioRes. “We hit a speed bump and we were going really fast so it was quite a jolt,” the source continued, echoing comments made by other EGA participants that these talks have nevertheless made good overall progress.

Another source estimated that once a way around the current roadblock is found the deal could be wrapped up within a few months.

In November EGA members had received a draft list of possible products to liberalise under the deal put together by the talk’s chair – Andrew Martin from the Australian mission to the WTO – reflecting areas of convergence in the negotiations up to that point. A total of 650 or so product nominations have been made by various participants in the context of the EGA, covering over 1000 products related to areas such as clean energy, energy efficiency, air pollution control, and environmental monitoring and analysis, among others. (See BioRes, 10 November 2015)

Following last week’s talks, the chair has circulated the latest convergence list to participants, now reportedly equal to roughly 350 tariff lines and ex outs.

Progress at technical level

As in previous rounds, customs officials continued efforts last week on clarifying tariff classifications for nominated goods, reportedly making headway through a collection of some 130 products requiring attention.

International goods trade is guided by the World Customs Organization Harmonised System (HS) nomenclature from which countries define their tariffs. The HS categorisation of goods is expressed in terms of chapters (two-digit code), headings (four-digit code), or subheadings (six-digit code). However, in some instances a particular product may not be specifically captured by these codes, subsequently known in trade jargon as “ex-outs.”

A number of “ex outs” have been nominated as part of the EGA talks, with some participants targeted a specific good without intending to liberalise an entire six-digit subheading, or only detailing a national tariff code that may vary by country.

Sources say that efforts last week focused both on the “implementation” aspects of particular ex outs – in other words, making sure that customs officials are realistically and clearly able to identify the good at the border – as well as sorting out some instances where EGA members have nominated similar ex-outs under different subheadings. Progress was also made on clarifying a number of ex-out nominations in order to maintain their environmental focus.

Several analysts say this work is essential to help negotiators move towards a final deal, either in terms of ensuring that the good at hand can be feasibly identified, or by helping to alleviate concerns around the deal’s integrity. EGA participants have signalled strong intentions to maintain the “environmental credibility” of the deal, which some experts note can be tricky where nominated goods fall into a broader subheading.  

Next steps

EGA participants have indicated that they will likely meet again in late February or early March, with details not yet confirmed at press time. 

In the face of the gridlock last week, participants on Friday reportedly discussed a possible ministerial statement for the upcoming Nairobi gathering, designed to showcase convergence to date.

Divisions also emerged among participants over that document, however, with one large WTO member expressing reservations around reconfirming the Davos statement. At the time of writing, one source said that it looked unlikely a statement would be delivered in Nairobi, although this was not yet confirmed. Ministers’ attentions are now also focused squarely on the wider agenda for the biannual multilateral trade meet, with WTO Director-General Robert Azevêdo on Monday outlining a bleak picture for potential outcomes.

Heading into the EGA talks a number of participants had eyed the Nairobi WTO ministerial as a possible delivery date for the list of goods to be liberalised. Nevertheless, in recent weeks experts began to report concerns that this target might be missed in the face of outstanding issues to tackle, with the WEF’s January gathering cited as one possible alternative.

While sources report that the latter is no longer on the cards, another occasion may be next year’s G20 trade ministers’ meeting in China, although not all EGA participants are part of this economic group. 

Progress in the EGA negotiations is cited as part of a list of priorities for bolstering a robust international trade and investment system, along with several other objectives, in a message from Chinese President Xi Jinping on the G20 process.

Several stakeholders have expressed disappointment over last week’s result and others also worry that the negotiations might drag on. A green business coalition had recently released a letter calling for a swift conclusion of the talks in time for Nairobi. This would be important in order to help “lower the cost of adopting environmentally-friendly technologies and integrating into global supply chains,” the letter read.

In a bid to unlock progress in the EGA, one proposal last week reportedly suggested harvesting an “early list” focused on renewable energy goods trade only for Nairobi, building on the momentum from the expected positive conclusion of UN climate talks in Paris, France. That move, however, was quickly panned by a number of participants who warned that negotiating realities mean the deal will need to be delivered as whole.    

Nearly 200 nations are on the brink of concluding a new multilateral deal this week, set to come into force from 2020 onwards, which will for the first time see all nations contribute to cutting back on planetary-warming emissions. Although a few final tough days of negotiations are expected in Paris, observers remain cautiously optimistic that the deal will be struck, with many now anxiously waiting to see the level of ambition and type of provisions it will contain. (See BioRes, 6 December 2015)

A number of stakeholders this year have said that an EGA could make a positive contribution to much-needed climate action. According to several experts, lower tariffs on clean energy products and parts would help to tip the playing field towards low carbon investment and growth, although other areas such as environmental services and non-tariff barriers will also need to be addressed in due course.    

ICTSD reporting.

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