WTO Environmental Goods Talks Focus on Climate

7 July 2010

The WTO's negotiations to open up trade in environmental goods and services saw solid progress last week, according to sources with knowledge of the 30 June and 1 July special session of the Committee on Trade and Environment (CTE-SS).

Progress was stimulated by a new proposal from Qatar that identifies specific tariff lines for environmental goods, a submission by Singapore that also identifies environmental products, a communication from Brazil on biofuels, and a joint proposal from Argentina and Brazil on special and differential treatment for developing countries. Climate-friendly goods - specifically those related to energy efficiency - continued to be at the heart of the various proposals.

Members appeared to be responding to the chair's request that members identify products of trade interest; several delegates stressed that this generated a positive atmosphere in the negotiations. Some delegates noted that there had been less progress on the most contentious issues - namely whether to use a list approach, a project approach, a request-offer system, or an integrated approach to identify environmental goods and services for liberalisation. Others, however, contend that such negotiations are too time consuming and would be better tackled after delegates have determined a specific basket of goods.

Highlights of the meeting

The submissions by Brazil, Argentina, Singapore, and Qatar were a continuation of contributions from countries like Korea and Taiwan that are outside the ‘Friends of Environmental Goods’ group. The ‘Friends’ group comprises Canada, the EU, Japan, Korea, New Zealand, Norway, Switzerland, Taiwan and the United States.

The joint proposal from Brazil and Argentina on special and differential treatment (TN/TE/W/76) attracted a fair amount of attention. The WTO agreements include certain provisions that accord developing countries special rights and privileges that are often referred to as “special and differential treatment” (or S&DT). The provisions generally allow the global trade body’s poorer members greater flexibility in cutting their tariffs and subsidies. Exactly how this special treatment should be structured, however, is a matter of ongoing debate.

The Brazil-Argentina submission does not propose specifically how much smaller the tariff cuts should be for developing countries compared to developed countries. It does, however, outline a guideline that would offer developing countries longer implementation periods for the liberalisation of goods and services, although it does not precisely indicate how much longer the implementation periods for developing countries should be.

The Brazil-Argentina proposal also contains a clause that would require developing countries to provide importers of their products with information about any subsidies they have provided to developers, suppliers and traders of environmental goods before the developing countries could qualify for any reduction or elimination of tariffs. One delegate stressed that it would be good to keep in mind that subsidies for the production of environmental goods are not the only subsidies that affect the development and diffusion of the products. Subsidies for fossil fuels, for example, might have a substantial impact as well.

In line with the submission by Argentina and Brazil on special and differential treatment, a number of delegations stressed the need for technical assistance and capacity building.

Singapore submitted a list of 35 environmental products in seven categories: waste management, air pollution control, noise pollution control, wastewater treatment, environmental monitoring, analysis and analysis equipment, renewable products and energy sources, and energy-efficient products. The list was based on Singapore’s own trade data analysis – an approach that could be useful for determining the impacts of EGS liberalisation and that could help ease market-access concerns.

Saudi Arabia clarified that it would put carbon capture and storage (CCS) into its own category, separate from air pollution control, renewable energy, waste management and water treatment and environmental technologies. Saudi Arabia also added standards (conformity assessment, certification and labeling) and intellectual property rights to its list of non-tariff barriers.

Less polluting fuels: environmental?

Brazil and Qatar made submissions on fuels (natural gas and biofuels) that are supposed to be cleaner than crude oil and coal.

Qatar’s submission contains a list of gas to liquids (GTL), natural gas, CCS, gas flaring and fuel cell products.  This submission complements Qatar’s 2003 proposal (TN/TE/W/19) and identifies specific HS tariff lines at the 6-digit level and product descriptions of energy sources that are “relatively cleaner” than crude oil and goods that can be used to make fossil fuel production more sustainable (both in terms of carbon dioxide and sulphur, nitrogen and other particulate emissions).

Interestingly, the Qatari proposal identifies components of these goods by ex-outing them from corresponding tariff lines. In the language of trade negotiations “ex outs” are goods that are not separately identified at the 6-digit level of the HS code and have to be identified in national tariff schedules at the 8- or 10-digit level.

In line with Qatar’s submission, Brazil’s proposal praises the climatic benefits of biofuels relative to traditional fossil fuels. Brazil also raises the issue of energy security through the use of biofuels. Thus, Brazil called for biofuels to be recognised as relevant goods for liberalisation under the EGS negotiations.

All submissions stated that they were without prejudice to the submitters’ positions on the specific items that would be included in any final coverage of environmental goods. Thus, the submitting members retain the right to add, withdraw or revise items in their submission or make appropriate proposals on other items.

On the implementation side, a practical issue to be solved is the question of HS codes vs. ex-outs. Some delegates have indicated an interest in converting ex-outs into HS sub-headings for specific environmental or climate-friendly goods in the countries that have the required data and substantial trade in these products.

While ex-outs may make the negotiations more complicated, most members that have submitted product lists so far offer ex-outs in their proposals. However, one problem with ex-outs is that they can produce extra work for national customs authorities. It is unclear whether members that criticise certain ex-outs would be willing to liberalise the entire HS code that it falls under instead.

Some experts say that even if the codes are not harmonised, members might at least agree on common product descriptions of ex-out items to be liberalised and implement those tariff reductions in their national codes.

Looking ahead, members are expected to continue to revise different lists of environmental goods for liberalisation. However, some delegates believe that it would be most efficient to start identifying a single list of specific goods that all members can agree on as a basis for further negotiations. Further technical discussions will be needed to identify the environmental goods more precisely.

The next CTE SS meeting is planned for the end of September or October this year.

ICTSD reporting.

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