Trade in Environmental Goods and Services and Sustainable Development Domestic Considerations and Strategies for WTO Negotiations
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 reducing air and water-pollution, improving energy and resource-efficiency and facilitating solidwaste disposal to name a few of the benefits. Gradual trade liberalisation and carefully managed market opening in these sectors can also be a powerful tool for economic development by generating economic growth and employment and enabling the transfer of valuable skills, technology and knowhow embedded in such goods and services. In short, well-managed trade liberalisation 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 (MEAs).
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 have struggled over the scope of goods and services that would be taken up for liberalisation. Further, while the aim of the EGS mandate is to liberalise, it provides no indication of the pace, depth or sequencing of liberalisation vis-à-vis ‘other’ goods and services. A major fault line in the negotiations on environmental goods is the dispute over whether only goods intended solely for environmental protection purposes should be included as opposed to goods that may have both environmental and non-environmental uses. A number of developing countries are concerned about the inclusion of goods which they perceive as only vaguely linked to environmental protection. They are also worried about the import-led impacts of including a broad range of industrial goods on their domestic industries, employment and tariff revenues. In a broader context, a lack of movement on issues of interest to developing countries, particularly agriculture, also inhibits proactive developing country engagement on EGS negotiations.
Developing countries are clearly interested in including, as part of ongoing WTO negotiations, products of export interest that could provide environmental benefits, export earnings and livelihoods to local populations. At the same time, many developing countries lack a comparative advantage in the so-called ‘traditional’ environmental goods and services that are reflected in lists developed by the Organisation for Economic Cooperation and Development (OECD) and the Asia-Pacific Economic Cooperation (APEC) and are often capital and technology-intensive. This has also led experts to point to environmentally preferable products (EPPs) as an export category worth consideration by developing countries. The global market size and export share of developing countries in these products is, however, still relatively small. There are also systemic concerns developing countries have with regard to environmentally preferable products, particularly in those cases where environmental benefits arise as a result of the process and production methods (PPMs).
Negotiations on environmental services have also not made much headway. The issue of classification of environmental services is important as it will set clear parameters on the types of services that are actually liberalised. The development of sound domestic regulatory frameworks in the environmental services sector is also an important pre-requisite to liberalisation. It is feared that lack of strong regulatory mechanisms in the environmental services sector, combined with the ‘public service’ dimension of a number of these services, would hinder developing countries’ ability to ensure that trade liberalisation in these services was compatible with sustainable development objectives such as universal and equitable access.
It is obvious that the economic and social dimensions of sustainable development will play as important a role as environmental ones in guiding WTO Members’ negotiating strategy on EGS. But these elements also need to be more clearly defined by each country taking into account domestic sustainable development priorities and concerns. WTO Members should respond to these priorities and concerns by negotiating appropriately-crafted language and numbers.
The reality, however, is that clear knowledge gaps exist on the various dimensions of trade in EGS as well as the methods and options by which countries can formulate a domestic and negotiating strategy on EGS. This EGS Policy Discussion Paper is an attempt to bridge some of the knowledge gaps in this area and facilitate strengthened engagement of developing countries in the EGS negotiations so that they can work towards an outcome meaningful for their sustainable development goals and priorities.
The EGS Policy Discussion 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.