Environmental Goods Agreement (EGA) – What, When and Why?

Introduction:

It has been accepted world-wide that environmental issues like climate change transcend national boundaries. Hence, environmentalists have always called for international management and co-operation in combatting climate change and working in furtherance of the environment. As simple and desirable as it may sound, this objective faces multiple obstacles in the form of other conflicting international regimes. One such example is that of the international trade regime under the World Trade Organisation (WTO). It has been clarified by trade specialists that the primary objective of the WTO is to govern trade. Hence, the WTO is not receptive to any and all positive actions taken for the environment, if they are inconsistent with the trade regime established under it.[1] This has also been witnessed in multiple WTO disputes whereby environmental justifications were out rightly rejected.[2] However, this does not mean that WTO is completely ignorant of global environment issues. In-fact, the Preamble of the Marrakesh Agreement establishing the WTO mentions the need for – “optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment”.[3] In tandem with this objective, the WTO has shifted from a rigid stance against the environment, and has been trying to achieve a balance between trade and environmental concerns. In furtherance of this, a Committee for Trade and Environment was formed under the aegis of the WTO.[4] Subsequently, one of the major developments pursuant to this objective was witnessed in the form of negotiations to reduce tariffs on Environmental goods and services, termed as Environmental Goods Agreement (EGA).[5] Here, I intend to discuss the issue of EGA in brief.

Environmental Goods Agreement (EGA):

In order to enhance the mutual supportiveness of trade and environment, the WTO Members in the Doha Ministerial Declaration of 2001, agreed to negotiate for “the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services”[6]. The primary purpose was to achieve free trade in green-goods in order to facilitate cheaper access to environment-friendly technologies.[7]  This is especially important considering that the global trade in environmental goods is estimated at nearly $1 trillion annually, and growing fast.[8] However, the negotiators in the Doha Round were unsuccessful in such endeavour.[9] Consequently the issue was placed on the agenda by Andrew Martin, Chair of the Environmental Goods.[10] Hence, in 2014, around eleven WTO members started plurilateral negotiations to reduce tariffs on Environmental goods. By 2016, the negotiations involved eighteen members representing forty-six countries, and were open to any other Member wishing to join.[11]

This was not the first time such an initiative had been envisaged. Similar clauses and provisions existed in other agreements as well.[12] In-fact, the negotiations at the WTO were modelled on the Asia-Pacific Economic Cooperation Agreement (APEC), where twenty-one member states had started working on reduction of tariffs on fifty-four environmental goods in November, 2011.[13] While the negotiations at the WTO were intended to conclude by the end of 2016, they got stalled in December, 2016. [14] This is because the countries were unable to achieve a consensus regarding the exact goods that would be covered under the scope of the agreement, especially in light of the last-minute additions suggested by China.[15] This indicates that the negotiations portrayed a “win-win-win” model for all stakeholders because they facilitate trade, environment and development, are not devoid of loop-holes.[16]

On the face of it, the EGA negotiations seemed to promise a robust means to achieve reduction of emission of green-house gases and other climate-change related goals. However, it is crucial to note the other side of the coin and imperative to analyse the loop-holes existing in the model proposed in these negotiations in order to realistically perceive the situation. First, the proposed initiative only deals with reduction of tariff barriers. However, non-tariff barriers, countervailing and anti-dumping policies, weak intellectual property etc. are the major obstacles stopping free trade of environment goods.[17] This is further evident from the fact that the tariff levels for green goods for most of the negotiating countries are already quite low and almost negligible.[18] Statistical studies revealed that even if tariffs were reduced on 153 goods as had been listed in a larger list, the Members would only  achieve a maximum reduction of 0.1 to 0.9% of 2030 total greenhouse gas emissions.[19] Hence, it has been argued that mere reduction of tariffs cannot achieve the target being sought.

Second, one of the most daunting tasks is to identify the goods that would be covered under the scope of the agreement. The EGA negotiations also had to be stalled because of the inability to arrive on a consensus with regards to the list of goods. Currently, the goods that are included in the list are of the likes of wind turbines, solar panels and other “products that can help achieve environmental and climate protection goals, such as generating clean and renewable energy, improving energy and resource efficiency, controlling air pollution, managing waste, treating waste water, monitoring the quality of the environment, and combatting noise pollution.”[20] However, the question is whether the term ‘green-goods’ encompass goods used for monitoring impacts of climate change on environment, or goods facilitating use of alternative sources of energy or goods that are more environment friendly as compared to their counterparts and so on.[21] Further the exercise of identification of goods needs to shift from being a political process, with countries pitching in for goods sensitive to them, to an objective exercise.[22]

Third, the agreement needs to be a living document. This is important because green-goods are contingent on technology, and hence changing times. With newer innovations in future, the list will have to be revised to prevent redundant advantages to green-goods of an out-dated technology.[23] The fourth challenge arises out of the disparity in development levels of WTO Members and the differentiated trade volume in environmental goods. Developing and Least-Developed Countries (LDCs) are primarily net importers of environmental products, and their share in exports of green-goods is very less.[24] Hence, they are not highly receptive to the idea of letting themselves act as markets for goods from industrialised nations, while not being able to capture the same through their low-share in exports. Further, they are not in a similar economic position as the developed countries to grant zero percent preferential treatment for listed green goods. Thus, developing countries and LDCs have been arguing for Special and Differential Treatment in such negotiations.[25]

Hence, there do exist challenges attached to these negotiations. However, I believe that they should not act as an obstacle to the commencement of this initiative. First, the argument of redundancy of reduction of mere tariffs should not be an impediment to  taking the  initial steps towards free trade in Environmental Goods. It has been correctly argued that even though tariffs are low, when added in a supply-chain for multiple parts for a final good, the tariffs may amount to high values.[26] Further, even if it were to be agreed that non-tariff barriers are the primary obstacles, it is imperative to understand that all objectives cannot be accounted for in the first step of an initiative itself. EGA should at-least start with reduction of tariffs, and aim at further improvements in the longer run. Second, the problems pertaining to identification and listing of goods can be solved by adopting better classification regime for environmental goods and services.[27] Third, the Members have already committed that the agreement will be a living document with necessary revisions being made with changing times.[28] Fourth, the developing countries and LDCs should not seek special and differential treatment. This is primarily because even their share in exports is increasing and they are particularly equipped to trade in specific environment goods.[29] Further, they should view this initiative from an environmentalist perspective rather than routing for only development. Import of green goods from industrialised nations into these economically weaker countries at cheaper rates will only be used to benefit the environment of these nations and will therefore help them in the longer run.

Conclusion:

Hence, I believe that the EGA negotiations are a huge development from the previous adopted strict stance of the WTO. Not only will the initiative help in liberalisation of trade by making access to environmental goods and technologies available at a cheaper cost, it will also benefit the environment largely by making high-quality environmental products available to all countries. Thus, it is unfortunate that the negotiations had to be stalled in December, 2016. Hopefully, the negotiations will restart soon and conclude on a positive note. Surely, free trade in environmental goods seems to be a “win-win” situation for all.

This post has been authored by Adya Garg, 3rd student at the West Bengal National University of Juridical Sciences.

[1] Matsushita et. al, The World trade Organization: law, practice, and policy (Oxford, 2nd ed., 2006), 786.

[2] GATT Panel Report, United States – Prohibition of Imports of Tuna and Tuna Products from Canada, L/5198, adopted 22 February 1982, BISD 29S/91; GATT Panel Report, United States – Restrictions on Imports of Tuna, DS21/R, DS21/R, 3 September 1991, unadopted, BISD 39S/155; GATT Panel Report, United States – Restrictions on Imports of Tuna, DS29/R, 16 June 1994, unadopted; Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, adopted 6 November 1998, DSR 1998:VII, p. 2755; Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, DSR 1998:I, p. 135.

[3] Marrakesh Agreement Establishing the World Trade Organization, 1994, Preamble.

[4] Matsushita et. al., supra note 1.

[5] WTO, Environmental Goods Agreement, available at https://www.wto.org/english/tratop_e/envir_e/ega_e.htm (Last accessed on March 01, 2017).

[6] WTO, Doha Ministerial Declaration, WT/MIN(01)/DEC/1, 20 November 2001, available at https://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm (Last accessed on March 01, 2017).

[7] Tom Warstall, How Excellent, WTO Talks on Environmental Goods Agreement Collapses, 4 December 2016, Forbes, available at

http://www.forbes.com/sites/timworstall/2016/12/04/how-excellent-wto-talks-on-environmental-goods-agreement-collapse/#2921daca7d28 (Last accessed on March 01, 2017).

[8] Office of the United States Trade Representative, Environmental Goods Agreement, available at https://ustr.gov/trade-agreements/other-initiatives/environmental-goods-agreement

[9] Bill Krist, Eliminating Tariffs on Green Goods–A Potential Win-Win, 18 March, SSPP Blog, available at http://ssppjournal.blogspot.in/2014/03/eliminating-tariffs-on-green-goods.html (Last accessed on March 01, 2017).

[10] Department of Foreign Affairs and Trade, Chair’s update on Environmental Goods Agreement, 23 October 2014, available at http://dfat.gov.au/trade/agreements/environmental-goods-agreement/Pages/chairs-update-on-environmental-goods-agreement.aspx (Last accessed on March 01, 2017).

[11] Environmental Goods Agreement, supra note 5.

[12] APEC Agreement; Economic Partnership Agreement, Art. 183(5).

[13]APEC, Future Green Goods Trade Pact considered,

http://www.loc.gov/law/foreignnews/article/apecindonesiafuturegreengoodstradepactconsidered/1/1Libraryof Congress (Last accessed on March 01, 2017).

[14] Id.

[15] Id.

[16] World Trade Organization, Eliminating Trade Barriers on Environmental Goods and Services, available at https://www.wto.org/english/tratop_e/envir_e/envir_neg_serv_e.htm.

[17] Aaron Cosbey, The Green Goods Agreement: Neither green nor good? (International Institute for Sustainable Development, February 2014) 1.

[18] Id; Bill Krist, supra note 7.

[19] Id.

[20] Environmental Goods Agreement, supra note 5.

[21] Joachim Monkelbaan, Trade Preferences for Environmentally Friendly Goods and Services (International Centre for Trade and Sustainable Development, Working Paper, November 2011).

[22] Cosbey, supra note 17.

[23] Id.

[24] Monkelbaan, supra note 21, 9.

[25] Id., 4.

[26] Bill Krist, supra note 7.

[27] See Monkelbaan, supra note 21, for such classification regimes.

[28] Claudia Weiss, Environmental Goods Agreement (EGA): The Technology -Trade Nexus: A Key Enabling Force for Achieving the SDGs (European Union Mission to the WTO, 16 September, 2016), 5.

[29] Id., 15; Monkelbaan, supra note 21, 12.