This paper examines the synergistic relationships between trade in environmental services and trade in environmental goods. It forms part of a series of OECD studies that analyse various issues related to Paragraph 31(iii) of the World Trade Organization’s 2001 Doha Development Agenda, which mandates negotiations at the WTO on “the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services.” For the purpose of this study, environmental services are 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 in the paper. After describing the nature of each environmental service, the paper identifies broad categories of goods used in the performance of those services, and notes that for some goods environmental services are what is driving growth in their markets. The analysis then draws on case studies of actual business-to-business exports of environmental services, mainly from OECD countries to developing countries, to form general insights into the kinds of environmental goods used by service providers, and how these goods are procured. The case studies provide qualitative evidence that many of the 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 the businesses that engage environmental-service providers are many, allowing them to concentrate on their core activities, and to shift some of the liability of meeting environmental regulationsto other companies. Local employment is also generated. The general implication of this study for developing economies is that the potential benefits to 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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