Synergies between trade in environmental services and trade in environmental goods E-mail
Wednesday, July 15, 2009

This report explores the connections between trade in environmental services and trade in environmental goods. As the OECD has long argued, many of the goods that it and other organisations have identified as essential for environmental protection and remediation are so important, in fact, because they are used in the provision of environmental services. When discussing the benefits of liberalising trade in environmental goods and services it is salutary to keep this synergy in mind.

Merely asserting that there are synergies is not likely to be convincing, however. This paper is addressed to those involved with, or interested in, the current WTO (DDA ¶31(iii)) negotiations on environmental goods and services, and seeks to help them better understand, in as concrete a fashion as possible, why environmental goods on the OECD and APEC (Asia-Pacific Economic Co-operation1) lists are essential inputs for environmental services.2 It: (i) describes the different environmental services; (ii) highlights the main key environmental goods that are vital for carrying them out; and (iii) shows how trade in particular services stimulates the demand for certain goods.

The final section demonstrates, through real-world examples, why liberalisation of environmental services functions best when trade in the environmental goods they require is also made freer. These examples focus on business-to-business trade in different environmental services, such as between chemical companies or steel plants, which have decided to turn over the management of their wastewater treatment to companies that specialise in that activity. The reasons why businesses choose to do that are many: to focus on their core areas of expertise, to reduce their debt burden, to ensure that the technologies and techniques used to manage their waste streams are the best available. In virtually all the cases examined, some goods used in the provision of the service were imported, but many were procured locally. Indeed, there is tentative evidence suggesting that as the market for environmental services expands in particular countries or regions, so does the number and scope of local suppliers of associated goods.

Synergies between trade in environmental services and trade in environmental goods

OECD Trade and Environment Working Paper No. 2005-01 by Ronald Steenblik, OECD Trade Directorate, George Stubbs, Environmental Business Journal, and Dominique Drouet, Recherche Développement International

Introduction

At the start of the twenty-first century, much of the world’s population still lacks adequate sanitation or has no access to safe drinking water. Urban and suburban sprawl in developing and developed nations alike is putting pressure on air quality, water tables and biological diversity. Development of industrial and agricultural capacity — crucial for economic development and reduction of poverty in many countries — poses similar environmental challenges.

In recent years, there has been an increasing trend towards technology-led responses to these environmental challenges, mostly, but not only, in developed countries. This has created new markets for environmental goods and services to remedy and prevent problems related to hazardous waste, air pollution, noise, habitat degradation and unsustainable resource use. Accordingly, a key issue for policy makers is the role that global trade liberalisation can play in building international markets for environmental goods and services to deliver solutions to these problems. But, perhaps more importantly, is the key role that environmental goods and services can play in meeting the development needs of countries that are trying to grow out of poverty while protecting the environment on which the health and welfare of their population depends.

International commitment to further liberalisation of trade in environmental goods and services was made concrete when WTO Ministers, in paragraph 31(iii) of their 14 November 2001 Declaration, mandated negotiations on “(iii) the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services.” These negotiations are currently taking place in separate WTO bodies: the Negotiating Group on Non-Agricultural Market Access (NAMA) and the Special Session of the Council for Trade in Services. Meanwhile, the Committee on Trade and Environment in Special Session (CTESS) has been actively engaged in clarifying the concept of an environmental good for the purposes of the NAMA negotiations, and on monitoring developments relating to this mandate that are taking place in the other two negotiating groups. Yet the desirability of pursuing liberalisation of international trade in environmental services, in tandem with efforts to liberalise international trade in environmental products and clean technologies, remains as valid as ever. Environmental products, technologies and services are increasingly provided commercially on an integrated basis, whether “horizontally” by firms bringing together the range of materials and expertise required to undertake an entire project for a particular environmental medium (e.g. water, air, landscape), or “vertically” by firms specialising in construction and engineering across several environmental media.

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