Environmental Goods Agreement Trade Talks on Track for Negotiation Stage

This article first appeared in Bridges, Volume 19, Number 11 (ICTSD)

Talks towards securing a tariff-cutting deal on environmental goods are now ready to shift from technical discussions into a second negotiation stage, trade sources have confirmed after the fifth round held last week in Geneva, Switzerland.

This next negotiating stage would focus on whittling down a compilation of potential tariff lines to a final list of goods for tariff liberalisation under the Environmental Goods Agreement (EGA) negotiations, as the trade talks are formally known. A current draft compilation of most participants’ indicative proposals made during the last eight months of scoping discussions includes nearly 600 tariff lines and goods.

To date the talks among the now 17 participating WTO members – both Turkey and Iceland formally joined the negotiations in the latest round – have covered products falling under ten categories of environmental goods since kicking off in July last year.

Last week’s discussions focused specifically on possible products relating to the categories of environmental monitoring, analysis, and assessment (EMAA), environmentally preferable products (EPP), as well as resource efficiency.

Officials say this “category approach” is geared towards ensuring the environmental credibility of the overall agreement, in other words, that the eventual goods included have positive environmental applications.

Before this second negotiation stage begins, each participating member will formally put forward a list of product nominations by early April, officials confirmed last week. Participants’ lists will collate their various indicative product proposals made during the categories discussions.

During the next EGA round, scheduled for the first full week in May, trade negotiators will then move line-by-line through a full compilation of all participants’ product lists. This exercise will be geared towards streamlining proposals and starting to identify areas of consensus.

Officials said that that they did not plan on using specific criteria to filter through the compiled list, although they may group similar products together, such as those related to LED lighting equipment.

At the launch last July, participants said that they plan to build on and add to a list of 54 tariff lines agreed to by the Asia-Pacific Economic Cooperation (APEC) forum in 2012. The 21-country APEC group has committed to lowering applied tariffs on these 54 tariff lines to five percent or less by the end of this year. (See Bridges Weekly, 10 July 2014)

March categories discussion

Sources said that last week’s discussion on the three categories made good progress. Proposed products relating to EMAA reportedly garnered broad support. These include, for example, goods such as multimetres used to measure voltage, resistance, and current in electrical equipment.

Some officials have said that May’s negotiations might kick off with EMAA-relevant products and then continue to move in reverse order through the categories discussed over the past eight months.

Several participants also put forward indicative nominations last week relating to the EPP category. While these proposals reflected differences in understanding between participants around the term “environmentally preferable,” officials said that the category nevertheless proved useful, and helped to bring forward some nominations not made elsewhere. Some EPP goods tabled range from sealing devices, bamboo, and bicycles.

EGA negotiators were also briefed by experts from the Organisation for Economic Co-operation and Development (OECD) on various descriptions of environmentally preferable products and the potential benefits of liberalising trade in these.

According to the OECD, the EPP term was first defined at the international level in 1995 by the UN Conference on Trade and Development (UNCTAD) as products that cause “significantly less environmental harm” at some stage in their life cycle. Many countries have since adopted a variety of definitions for products considered environmentally superior, ranging from “environmentally friendly” to “green.”

Regarding the resource efficiency category, some participants did not nominate in this category due to overlaps with previous rounds, for example goods related to energy efficiency discussed in January. (See Bridges Weekly, 5 February 2015)

Goods on the table

In addition to last week’s categories, EGA participants had previously discussed products related to cleaner and renewable energy; energy efficiency; wastewater management and water treatment; environmental remediation and clean-up; noise and vibration abatement; air pollution reduction and mitigation; and solid and hazardous waste management.

Most EGA participants have come forward with indicative product nominations across the range of categories. Some duplicate nominations have been made between the categories, as well as between participants’ nominations.

Countries such as Canada, the US, Japan, and Chinese Taipei are said to be among those that have made the most indicative proposals during the technical discussions.

Israel, which formally joined the EGA during the January round, as well as newcomers Turkey and Iceland have not yet made proposals. However, this was not a measure of these countries’ ambition but rather due to their slightly later arrival to the talks, trade sources said.

The latest round saw China, which had previously not proposed any products, circulate its indicative list relating to nine out of the ten categories. This list reportedly includes around 70 tariff lines covering products related to water, air pollution, bamboo products, and high-efficiency goods, among others. In addition to these Beijing would also support the 54 tariff lines covered by the APEC agreement.

Based on the current indicative nominations, trade sources estimate that all 54 six-digit level Harmonised System (HS) subheadings from the APEC deal have been put forward during the various category discussions.

Parts of the APEC list are complicated, according to trade experts, because of the use of “ex-outs” to indicate that only one part of a particular HS subheading may be considered an environmental good.

EGA delegates have, however, said that they are focused on the 54 tariff lines in the broadest sense in order not to get caught up in APEC implementation.

Environmental services?

While EGA officials at the launch last July explained that the negotiations would initially be focused on reducing tariffs on environmental goods, some participants would also like to see issues related to environmental services and non-tariff barriers (NTBs) tackled further down the line.

During a lunchtime side-event discussion held last Friday by the Swedish National Board of Trade, researchers and panellists discussed how to liberalise trade in environmental services. Some differences of opinion emerged among participants and interventions from delegates, however, on whether to tackle these in the EGA or elsewhere.

Negotiations are also ongoing among a separate group of WTO members – although with some overlapping membership – on a proposed standalone pact known as the Trade in Services Agreement (TISA), designed to liberalise services trade in all sectors. Some EGA participants also involved in TISA would prefer to see environmental services addressed in the latter negotiation.

Canada has tabled a specific annex in TISA dedicated to environmental services. This proposal, however, has reportedly faced some resistance in the services-focused talks.

Some countries have reportedly said that a focus on environmental services alone may not be enough to cover all the services relevant for the delivery of environmental goods, such as engineering, maintenance, repair, training, and legal services.

The next TISA round will be held in April, and is expected to set the groundwork for a July stocktaking session that aims to provide more clarity on the perimeter of the future services agreement, including which of the various proposals on the table have most support. (See Bridges Weekly, 19 February 2015)

Next steps

Formal discussion on the institutional arrangements for the planned Environmental Goods Agreement, covering issues such as how to include some sort of review mechanism to periodically update the list of covered goods, will likely only take place sometime after the May round.

Talks on this review mechanism may be prompted by the eventual tabling of a draft text, which could be forthcoming from the EU, according to some other participants.

As agreed in January, two further sessions are scheduled for the coming months: one planned for 15-19 June and another for 27-31 July.

EGA participants have signalled a desire to successfully hammer out the main points of the deal in time for the WTO’s Tenth Ministerial Conference, scheduled to take place from 15-18 December in Nairobi, Kenya.

That international meet will follow hot on the heels from the UN climate talks in the first part of the month. EGA officials have in the past said that addressing climate change is an important dimension of their planned trade deal, although these talks have no formal link to the UN Framework Convention on Climate Change (UNFCCC) process.

New members?

Sources said that, while no new members have formally requested to join, there might be a broader interest from some developing countries later on in the year as the UN climate talks approach. EGA officials have said that they continue to remain open to other WTO members joining the talks.

The EGA talks are a plurilateral initiative negotiated among a group of WTO members. Participants have said they plan to extend the agreement to the rest of the global trade body on a “most-favoured nation” (MFN) basis once the deal is concluded and if sufficient countries trading in the liberalised goods participate. Joining the talks before their conclusion, however, offers countries the opportunity to shape the terms of deal.

Meanwhile China reportedly told other EGA members last week that it would soon circulate a non-paper outlining the various development dimensions of the talks. Beijing said that this non-paper would, among other things, reflect on how to attract more developing country participation in the future.