Willemien Viljoen, tralac Researcher, discusses the proposed multilateral liberalisation of global trade in environmental goods

During the World Economic Forum Annual Meeting held in Switzerland between 22 and 25 January 2014 a number of World Trade Organisation (WTO) member countries committed to work towards achieving a global free trade agreement in environmental goods. In a joint statement countries, including the US, EU countries, China and Japan committed to begin preparing for negotiations to achieve the liberalisation of global trade in environmental goods in cooperation with other WTO member countries. The negotiating process will likely be based on that of negotiating a plurilateral agreement with concessions required only by those party to the final agreement. According to the joint statement the agreement will also come into force only when a critical mass of WTO members have signed on, with benefits then extended to the rest of the WTO members under the principle of Most-Favoured Nation (MFN).

According to the Office of the US Trade Representative total global trade in environmental goods is worth approximately US$ 955 billion per year, with the signatories of the joint statement representing 86 percent of this global trade. However, tariffs are still an obstacle to increasing trade in environmental goods, with some countries applying tariffs of 30 percent and higher to some products. According to the joint statement, the agreement will build on the commitment made by the Asian-Pacific Economic Cooperation (APEC) countries to reduce applied tariffs on the environmental goods identified in the APEC list to 5 percent or less by the end of 2015. The APEC list of environmental goods consists of 54 product categories or subheadings of environmental protection, including renewable energy; environmental monitoring, analysis and assessment equipment; environmental-protection and environmentally preferable products.

Tariff data sourced from the WTO shows the following regarding MFN applied tariffs on the APEC list of environmental goods:

• Environmental goods imported into a number of WTO countries are done so mainly duty-free, including imports into Mauritius and Angola.

• Numerous countries apply a tariff of 5 percent or less on the majority of goods in the APEC list. These include New Zealand, Australia, Japan, the Common External Tariff of SACU, the EU, Canada, Mozambique and the US.

• A number of WTO member countries apply medium to high tariffs on the importation of various environmental goods. These include Zimbabwe (average of 10% on the majority of environmental good imports), Zambia (15% import tariff on numerous imports including parts of engines and motors, solar water heaters and instruments used for analysing environmental samples), Uruguay (16% on instruments to analyse environmental influences and 18% on parts and accessories for measurement instruments) and Argentina (20% on imported solar water heaters).

• The environmental good in the APEC list that attracts the highest MFN applied tariff rate is other assembled flooring panels of bamboo (HS 441872). The import tariffs on this product range from high (including 40% on imports into Zimbabwe, 25% on imports into Zambia, Tanzania, Malawi and Kenya and 20% on imports into Egypt and Benin) to medium (including 14% on imports into Uruguay and Costa Rica and 10% on imports into India) to low import duties (including 7.5% on imports into Mozambique).

• Numerous countries that apply a high to medium tariff on the importation of bamboo flooring panels apply a tariff of 5 percent or less on the importation of the majority of other environmental goods. These countries include Costa Rica, Tanzania, Benin, Kenya and Egypt.

According to the Trade Minister of Costa Rica Anabel Gonzalez, the liberalisation of environmental goods is crucial for promoting both economic development and environmental protection. A global free trade agreement will play a vital role in facilitating access to environmentally-friendly technologies, promoting innovation and the development of green economic activities. According to the EU Trade Commissioner Karl De Gucht, a global trade agreement can hold benefits for both trade and the environment while improving access to green technologies for developing and least developed economies. The envisaged tariff negotiations can also set the tone for future negotiations on issues like non-tariff barriers to environment goods trade and the liberalisation of environmental services.

However, many environmentalists have criticised the negotiation of a global free trade agreement. According to the critics, limiting trade in environmental goods through higher tariffs will assist with employment creation in green industries in the countries where there is a demand for environmental goods. This will enable countries to improve their capacity to develop and utilise environmentally-friendly products and reduce carbon emissions from shipping and trucking. The starting point for the negotiations, i.e. the APEC list, has also been criticised for the number of dual-use goods included in the list. Although the APEC list contains a number of single-use environmentally-friendly goods, including solar water heaters (HS 841919) and wind turbines (HS 850231) the list also includes many dual-use goods that can be utilised for either environmentally-friendly uses or uses harmful to the environment. These include steam generators (HS 840290) that can be found in equipment used in coal-fired power plants, centrifuges (HS 842199) that can be used for either purifying water or in the production of oil and tar sands and parts of engines and motors (HS 841290) that can be used either for wind turbines or aeroplanes. According to those opposing the liberalisation of trade in environmental goods the key to sustainable development, green growth and the overall reduction in greenhouse gas emissions is to develop national approaches to renewable energy production and manufacturing and green technology development.

Tell us what you think.

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Sources:

Australian Ministry of Trade and Investment (http://www.trademinister.gov.au)

ICTSD (http://ictsd.org),

Office of the US Trade Representative (www.ustr.gov),

Reuters (www.reuters.com),

WTO (www.wto.org)