The APEC List of Environmental Goods: An Analysis of the Outcome & Expected Impacts

Research
Date period
15 June 2013

This paper delves into the APEC agreement to liberalise environmental goods and concludes that because applied tariffs on the defined list of goods are generally low, only a relatively small number of products will actually benefit from a tariff reduction.  However, the author notes that given the political importance of the achievement, the agreement may provide a positive experience to build on in other contexts. The APEC agreement marks the first time a group of major trading partners has managed to agree to a set of environmental products on which they will apply tariff reductions, in stark contrast with the stalled Doha negotiations on environmental goods and services.

 

Foreword

Environmental goods and services (EGS) as a subset of goods and services was singled out for attention in the negotiating mandate adopted at the Fourth Ministerial Conference of the World Trade Organization (WTO) in November 2001. Increasing access to and use of EGS can yield a number of benefits including reduced air and water-pollution, improved energy and resource-efficiency and facilitation of solid waste disposal. Gradual trade liberalization and carefully-managed market openings in these sectors can also be powerful tools for economic development as they generate economic growth and employment, enable the transfer of valuable skills, technology, and knowhow, all of which are embedded in EGS.  In short, well-managed trade liberalization in EGS can facilitate the achievement of sustainable development goals laid out in global mandates such as the Johannesburg Plan of Implementation, the UN Millennium Development Goals and various multilateral environmental agreements.

 

A more recent development that provides significant policy momentum is the 2012 Rio +20 Summit where the declaration document reaffirm the importance of trade as an “engine for development and sustained economic growth”. While Paragraph 31 (iii) of the Doha mandate calls for a reduction, or as appropriate, elimination of tariffs and non-tariff barriers (NTBs) on EGS, the lack of a universally-accepted definition on EGS has meant that trade delegates at the WTO have struggled over the scope of goods and services that could be taken up for liberalization. On the other hand the Asia-Pacific Economic Cooperation (APEC) economies have moved ahead concluding a first ever trade outcome on environmental goods, when on 9 September 2012, the leaders of the 21 Asia-Pacific Economic Cooperation (APEC) economies meeting in Vladivostok, Russia agreed to voluntarily liberalize tariffs on 54 environmental goods.

 

The Vladivostok Declaration states that applied tariffs will be cut to five percent or less, taking into account economies’ economic circumstances and without prejudice to their positions in the World Trade Organization (WTO).  The declaration is politically significant as it is the first time a large group of trading partners have decided to liberalize trade for an agreed list of environmental goods. This of course raises the issue of why APEC economies could make progress whereas the WTO, so far at the time of writing, can not. The same set of issues has hung, like a Damocles sword, over both negotiations particularly the issues of definition and the fact that numerous products could be used for both ‘environmental’ as well as ‘non-environmental’ purposes. One reason why the APEC negotiations succeeded probably was that APEC economies did not attempt to define an ‘environmental good’ rather only agree on a set of 54 broad product categories acceptable to all economies. The other more critical reason for success is the fact that the outcome is legally nonbinding and implementation voluntary, yet bolstered by political commitment at the highest level.

 

This paper highlights important issues and considerations that APEC economies need to keep in mind in order to voluntarily implement and reflect the APEC outcome on EGS within their national tariff lines so as to ensure ‘minimum’ compliance with the APEC mandate. By ‘minimum’ compliance is meant lowering applied tariffs to 5 percent on national tariff lines. These tariff lines will ultimately be selected at the discretion of the APEC economies. However if economies choose to be selective, issues of what may or may not be an environmental good covered by a national tariff line could still be a challenge. There are obviously benefits for the environment and ‘green growth’ that APEC economies could enjoy if they go beyond this ‘minimum’, for instance lowering applied tariffs to zero. The paper however does not examine this and rightly assumes that it is upto every economy to decide how to do so and what tariff lines they may wish to select in accordance with their national priorities and circumstances.

 

The paper indicates that the overall impact of tariff-cuts is likely to be small given that applied tariffs are mostly quite low or zero, but that there may be significant impacts in some sectors and some economies. The latter, however, largely depends on what only a few APEC economies will do. This again underscores the need for further building on the APEC initiative by addressing outstanding obstacles to environmental goods that remain, particularly non-tariff barriers in addition to addressing barriers to environmental services and rules that could impede access and affordability. In that regard the APEC outcome may well encourage further momentum at the WTO when the overall ‘atmospherics’ for a Doha deal improves as well as encourage similar initiatives on environmental goods and services in other trade-settings that may involve non-APEC economies outside the WTO as well.

René Vossenaar formerly worked with UNCTAD as Head of the Trade, Environment and Development

Branch. After his retirement in March 2005, he has occasionally worked as an independent consultant. He has prepared several studies for ICTSD on linkages between the deployment of climate-friendly technologies and international trade, in particular on the renewable-energy supply, buildings and transport sector. He also contributed a paper on climate-related single-use environmental goods. Before joining UNCTAD, he worked for the Economic Commission for Latin America and the Caribbean (ECLAC) in Santiago de Chile, Buenos Aires and Brasilia.

 

The paper is part of a series of issue papers commissioned in the context of ICTSD’s Environmental

Goods and Services Project, which address a range of cross-cutting, country specific and regional issues of relevance to the current EGS negotiations. The project aims to enhance developing countries’ capacity to understand trade and sustainable development issue linkages with respect to

EGS and reflect regional perspectives and priorities in regional and multilateral trade negotiations.

We hope you will find this paper to be stimulating and informative reading and useful for your work.

 

 

Ricardo Meléndez-Ortiz

 

Chief Executive, ICTSD