Trade that Benefits the Environment and Development: Opening Markets for EGS E-mail
Tuesday, July 21, 2009

What could be less controversial than liberalising trade in environmental goods and services? Or, to put it another way, why should any country want to maintain barriers that inhibit such trade?

This collection of studies is intended as a practical tool to help negotiators navigate the numerous, complex issues that have arisen in international discussions over liberalising trade in environmental goods and services. In addition to explaining the background to the two earlier lists of environmental goods, the different chapters:

Explore various practical issues related to the classification of environmental goods, including "dual use" goods;
Provide concrete examples of synergies between trade in environmental services and environmental goods;
Synthesise the findings of various country studies on environmental goods and services undertaken by the OECD and other inter-governmental organisations.

Executive Summary 

Chapter 1. Environmental Goods and Services: A Synthesis of Country Studies 
This chapter presents a synthesis of 17 country studies on environmental goods and services (EG&S) commissioned by the OECD, UNCTAD and the UNDP. The countries examined are Brazil, Chile, China, Cuba, the Czech Republic, the Dominican Republic, Guatemala, Honduras, Israel, Kenya, Korea, Mexico, Nicaragua, Pakistan, Panama, Thailand and Vietnam. Its aim is to identify determinants of demand for EG&S; to show common themes and experiences in the EG&S markets of different countries; and to draw attention to key trade, environment and development policy linkages. It also seeks to contribute to the exchange of expertise and experience in the area of trade and environment so that liberalisation of trade in EG&S can benefit all countries, developing and developed alike.

Chapter 2. Environmental Goods: A Comparison of the APEC and OECD Lists .
This chapter compares two lists of environmental goods that have been used in the WTO negotiations on liberalising trade in environmental goods and services. It describes the genesis of the lists, which were compiled in the late 1990s. The OECD list was developed as a basis for analysing trade and tariffs. The APEC list emerged from nominations by member economies of the Asia-Pacific Economic Co-operation forum, as part of an effort to attain early voluntary liberalisation of trade in particular sectors. The concluding section of the chapter identifies common elements in the two lists and explains important differences.

Chapter 3. Liberalising Trade in “Environmental Goods”: Some Practical Considerations
This chapter explores some practical issues that have arisen in the WTO negotiations on environmental goods and services, especially issues pertaining to liberalising trade in environmental goods. Since environmental goods are not covered by a single chapter of the Harmonized Commodity Description and Coding System (HS) — the international basis for codifying trade and tariffs — an agreement on environmental goods must be defined by reference to an agreed list. In such a case, when the most detailed (6-digit) product level is insufficiently specific, it becomes necessary to agree to create common commodity descriptions at the 8- or 10-digit level in national tariff schedules. Another important concern is the so-called “dual use” problem: many goods with environmental uses also can be used for non-environmental purposes. Possible solutions to these problems are explored, drawing on past experience in negotiating and implementing sectoral liberalisation agreements. The chapter also discusses issues relating to separate tariff lines for whole plants and to goods distinguished by their superior environmental performance in use. Finally, it considers some procedural and institutional issues that will have to be addressed before an agreement is concluded, notably whether to allow for the periodic addition of new goods to the agreement, and how to deal with the problem of changes over time in the relative environmental performance of competing goods.

Chapter 4. Managing Request-Offer Negotiations under the GATS: The Case of Environmental Services
This study is part of ongoing OECD work on trade in services, in co-operation with UNCTAD, to assist WTO members manage request-offer negotiations under the GATS. The objective is to help officials in WTO members both to gain greater insight into issues of importance in the environmental services sector and to see how they might be approached in the negotiations. The current GATS negotiations offer WTO members an opportunity to achieve greater liberalisation of environmental services, and this may lead to significant economic and environmental benefits for all countries. Nevertheless, liberalisation, particularly of environmental infrastructure services, must be appropriately designed and supported by a strong regulatory framework. Making commitments in these services thus raises questions relating to their nature, although the flexibility provided for in the GATS makes it possible to schedule them to take account of their characteristics. Risks of market failure to achieve social objectives appear to be less significant for environmental services unrelated to infrastructure and for support services.

Chapter 5. Synergies between Trade in Environmental Services and Trade in Environmental Goods
This chapter examines the synergies between trade in environmental services and trade in environmental goods. Environmental services are here defined as wastewater management services, solid-waste management services, sanitation and similar services and other environmental services. Services related to the collection, purification and distribution of water are also discussed. After describing each of the environmental services, the chapter identifies broad categories of goods used in their performance and notes that, for some goods, environmental services are driving growth in their markets. Case studies of business-to-business exports of environmental services, mainly from OECD countries to developing countries, are used to gain insight into the kinds of environmental goods used by service providers and how these goods are procured. The case studies provide qualitative evidence that many goods included on either the APEC or the OECD lists of environmental goods are used in the performance of environmental services. These include, in particular, items for holding, conveying, treating and filtering liquids, and instruments for monitoring and measuring. Many of these goods are procured from local suppliers, if not initially then over time as local demand for the associated services develops. The benefits to businesses that engage environmental services providers are many, allowing them to concentrate on their core activities and to shift some of the liability of meeting environmental regulations to other companies. Local employment is also generated. The general implication for developing economies is that the potential benefits of simultaneously liberalising trade in environmental services and in environmental goods are likely to be much greater than liberalising trade in only one or the other.

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