The “Green Goods” Trade: Ongoing Negotiations on the Environmental Goods Agreement

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The “Green Goods” Trade: Ongoing Negotiations on the Environmental Goods Agreement

By Satoko Sawada, GIELR Online Staff Editor

On July 8, 2014, fourteen members of the World Trade Organization (WTO) including China, the European Union (EU) and the United States officially launched a negotiation to conclude the Environmental Goods Agreement (EGA) to eliminate tariffs on a variety of environmental goods and technologies, such as wind turbines and solar panels. Roberto Azevêdo, Director-General of the WTO, welcomed this launch and stated that “we remain conscious of the positive role that trade can play in environmental protection. The topic of environmental protection is of utmost importance in the WTO.”

According to the United States Trade Representative (USTR), global trade in environmental goods is estimated at nearly $1 trillion a year, and the number is expected to increase, in the effort to fight climate change. The fourteen WTO members participating in the EGA negotiations account for 86% of global trade in environmental goods. Therefore, the elimination of tariffs is expected to increase the trade and usage of environmental goods, potentially contributing to environmental protection and sustainable development (the preamble of the WTO Agreement refers to protection and preservation of environment as well as sustainable development).

“Elimination of tariffs is expected to increase the trade and the use of environmental goods which could contribute to environmental protection and sustainable development…”

The EGA will build on a list of 54 environmental goods that had been put together by the Asia-Pacific Economic Cooperation (APEC) back in 2012, in which the leaders of APEC countries agreed to reduce tariffs to five per cent or less by the end of 2015. The APEC list includes 1) renewable and clean energy technologies (e.g. solar panels); 2) wastewater treatment technologies (e.g. filters and ultraviolet disinfection equipment); 3) air pollution control technologies (e.g. soot removers); 4) solid and hazardous waste treatment technologies (e.g. waste incinerators); and 5) environmental monitoring and assessment equipment (e.g. air and water quality monitors). The APEC list of 54 environmental goods may expand to a total of 411 goods. If the EGA is concluded, all the WTO members (which may not join the EGA) can get the benefit of the EGA (i.e. market access with zero tariffs) due to the most-favoured nation (MFN) principle.

Environmental groups identified at least three issues with the current EGA negotiations. First, a definition of “environmental goods” may be too broad. Many of the environmental goods considered at the negotiations such as waste incinerators and centrifuges can be used in a way negative to the environment. Second, eliminating tariffs on environmental goods will discourage countries from developing its domestic infant industries to produce and export competitive environmental goods and technologies in the future. According to the report by the United Nations Environment Programme (UNEP), renewable energy trade among developing countries is growing much faster than trade between developed countries and between developed and developing countries. Third, the EGA negotiations are conducted among the rich WTO members without a full and meaningful participation of developing countries and least developed countries (LDC). Of the fourteen WTO members currently at the negotiating table, most are in the bracket of high-income economies with a Gross National Income (GNI) per capita of $12,746 or more, and two are in the upper-middle-income economies, according to the World Bank’s classification.

As a result, countries with lower-middle-income and low-income economies (which are free to join the negotiations but have no reason to want to eliminate tariffs on environmental goods as non-exporters) are left out from the negotiations and cannot input their interests. These may be among the reasons why some countries, including Brazil and India, have not chosen to participate in the EGA negotiations. Other WTO members have shown interest in joining the EGA negotiations, including Israel, Turkey, Peru and Chile.

“Countries with lower-middle-income and low-income economies are left out from the negotiations and cannot input their interests, [a reason why] some countries, including Brazil and India, have not chosen to participate in the EGA negotiations.”

In September 2014, a second round of the EGA negotiations was held in Geneva, Switzerland. The participating WTO members made some progress to determine what types of environmental goods should be included in the EGA, based on a number of categories as described above. Although the current negotiations are focusing on tariff elimination on environmental goods, it may address trade in environmental service and non-tariff barriers (NTBs) at a later stage. Some argue that eliminating trade barriers on environmental service is critical because environmental-related projects often involve both the use of environmental goods and environmental service. The third round of the EGA negotiations is expected to take place in December 2014.