In much of the early development literature, “transfer of technology” (ToT) was conceptualised as the “transfer” of machinery and equipment from North to South through trade, aid and licensing or foreign direct investment (FDI). At first it was regarded as a cost free process. Research in the 1970s discovered that the financial costs of technology transfer stemmed from technology payments and the way in which technology is embedded in social and political institutions that affect the process of technological mastery. During the late 1970s and 1980s, despite the conventional wisdom that argued against “reinventing the wheel”, effective ToT was increasingly conceptualised in terms of domestic capacity building in a small number of Asian and Latin American countries. This resulted in their ability not only to operate new technologies efficiently but also to modify, adapt and improve upon imported technology and to innovate in the development of new designs, production processes and products.

The key to successful negotiations lies in the ability and capacity of the negotiating participants to feel that it can result in a “win-win” mutually beneficial outcome for all concerned – or in the case of the WTO environmental goods and services negotiations, a “win-win-win” outcome for trade, environment, and development. This means that participants must be willing to adopt “integrative” approaches to the negotiations – i.e. the participants must be willing to work towards a negotiated outcome that addresses their respective interests in an integrated manner.

The achievement by the World Trade Organization (WTO) of its development objectives depends, in large part, on the ability of the organization’s institutional governance mechanisms to balance competing interests among Members, reflect and take into account differing perspectives, provide adequate mechanisms to address and redress institutional structural deficiencies, and ensure equitable and fair decision-making outcomes. The current impasse in the negotiations reflects the difficulties that Members face in doing this balancing act.

Negotiations on environmental goods and services are not new to the multilateral trading system. While there is no universally acceptable definition on what environmental
goods are, they have always been part of negotiations under industrial or agricultural goods negotiations and, at least in principle continue to remain so.

The growing importance of environmental issues has generated a parallel interest in evaluating the opportunity for trade in environmental goods and services (EGS). Sustainable development strategies worldwide further contribute to the overall growth of the global environment industry which is currently estimated at over USD 650 billion. Trade in EGS is estimated to amount to a tenth of that amount. Liberalising trade in EGS may in theory, assist developing economies to build their economies along more environmentally sustainable lines. Continued growth in the EGS sectors in a way that provides economic benefits to the trading partners, both developed and developing countries, depends on the existence not only of policy conditions that allow freer trade in these goods and services, but also on a viable domestic consumer market for such goods and services. This paper shows that while environmental problems arise in almost all developing countries, trade in EGS is restricted to only a handful of countries. Thus not all environmental hotspots are serviced by trade in environmental goods (EGs). The main reason for lack of trade is the absence of a viable market.

The paper empirically explores the linkages between environmental regulations and international trade flows. So far, empirical studies either have failed to find any close statistical relationship or have delivered questionable results due to data limitations. Using a comprehensive new database for environmental regulations across countries, a thorough empirical investigation of that linkage for 119 countries and five high-polluting industries is performed. No evidence is found to support the pollution hypothesis that industries facing above-average abatement costs with environmental regulations would prefer pollution havens and relocate their activities. The exception is iron and steel products, where a negative and statistically significant link is established, implying that higher compliance with international treaties and conventions and more stringent regulations are associated with reduced net exports. High-income countries, where environmental regulations are usually more stringent in comparison to middle or low income countries, have experienced a considerable decline in the export-import ratio of iron and steel products since the late 1970s. There is no clear evidence that national governments choose sub-optimal policies that result in insufficient regulations, so the case for environmental standards within the WTO framework is relatively weak.