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UNCTAD Environmental Goods and Services. Where We Are. Call for liberalization: “ the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services ”, Doha Ministerial Declaration, para 31(iii)

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where we are
Where We Are...
  • Call for liberalization:
    • “the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services”, Doha Ministerial Declaration, para 31(iii)
  • Uncertainty about definitions and classifications
  • Defining negotiations or negotiating definitions?
definitions and classifications
Definitions and Classifications
  • Historically, each sector is a response to a regulation (demand factor)
  • All definitions are based on supply side approach
  • No comprehensive international statistical definitions
  • No international agreed criteria for classification
  • Where these exist, differ from from country to country
narrow approach
Narrow approach
  • Technology/capital goods, based on HS
  • GATS/SSCL W/120, based on CPC
    • A. Sewage services
    • B. Refuse disposal services
    • C. Sanitation and similar services
    • D. Other
problems with hs
Problems with HS
  • No chapter for environmental goods
  • Harmonized up to 6 digit - comparison of tariff levels across markets
  • “National lines” differ
  • Based on physical characteristics, precludes defining goods through services
problems with gats w 120
Problems with GATS W/120
  • Only partial correlation with primary media, especially in case of water and solid waste
    • Water management > sewage services
    • Solid waste management > refuse and sanitation
  • “End-of-pipe”, does not cover pollution prevention and sustainable resource management
  • Includes services provided in operation, but not services that make facilities operable
  • Overlooks services provided directly to industry
wide approach oecd
Wide Approach: OECD
  • Definition:
    • Measuring, preventing, limiting, minimizing or correcting environmental damage to water, air and soil, as well as problems related to waste, noise and ecosystems
  • Indicative list of goods and services:
    • all environmental media
    • three broad rubrics
  • APEC modeled after OECD
mixed picture
Mixed Picture
  • Cleaner technologies and resource management are key to potential development
  • Classifications hardly distinguishes between goods and services
unctad
UNCTAD
  • Environmental (public) infrastructure (“core”)
    • water and waste management
  • APC
    • design, engineering, installation, operation
  • Remediation
    • site clean up, emergency response to specific accidents, remediation, assessment and design
  • Support
    • Analytical, monitoring, legal, consulting, auditing R&D
environmentally preferable products
Environmentally Preferable Products
  • More environmentally friendly at some stage in life/cycle
    • superior to petroleum-based products
    • PPMs: organic coffee, cocoa, tea, jute, tropical timber from sustainable forests
    • contribute to preservation of environment, e.g. non-timber forest products – rattan and bamboo
  • Cross-overs, e.g. jute: superior to polyethylene, organic
global market
Global Market
  • Global market: $550bn (services = 50%)
  • EU: $183bn (1/3), USA 1/3, Japan: $84bn (5x Asia), Canada: $36bn
  • USA, Japan and EU = 85%
  • OECD = 90 %, overcapacity, looking to penetrate emerging markets
  • Growth in developing countries averages 8 -12%
  • $ 640bn by 2010, same size as pharmaceuticals and information technology
market structure
Market Structure
  • Major structural factors:
    • technological shift from “end-of-pipe” to clean(er) technologies
    • privatization (OECD: 50/50, developing countries: 70/30)
  • Few dominant multinationals, large firms (water treatment)
  • Large number of SMEs (esp. waste management), including in developing countries
market trends
Market Trends
  • “Horizontal” delivery: diversified delivery for a particular medium
  • “Vertical” delivery: specialized delivery across several media
  • Trend towards packaged environmental solutions, integrated approaches – favours large firms, market consolidation
  • Liberalization may include several sectors in a single package
  • “Packaged” approach makes definitions and classifications particularly relevant
scope for trade
Scope for Trade
  • Increasing tradability owing to
    • privatization
    • liberalization
    • harmonization of standards
  • Matching trade interests of exporter with importing country’s objectives in:
    • environmental protection and
    • building domestic capacity in EGS
trade flows
Trade Flows
  • In Triad - strong and diverse export sector
  • EU - biggest exporter
  • Northern America - EU’s biggest market
  • SE Asia replaced as a second biggest market by para-EU countries
developing countries
Developing Countries
  • Few have an industry of their own
  • Oriented towards the local market
  • In the top 50: Sabesp (water, Brazil)
winning propositions
Winning Propositions
  • In developing countries:
    • pulp and paper processing, steel smelting and refining, energy, coal, textiles and footwear
  • For the moment, developed country firms meet most of the demand
  • Building domestic capacity depends on:
    • access to technology
    • market access in sectors and modes of supply of interest to developing countries
    • targeting regional markets
    • offering specialized services
    • establishing links with foreign firms
market forecast
Market Forecast
  • Industry: significant technological upgrading in environmental energy sector, set to become the fastest growing sector
  • Trade: volumes are set to increase, particularly in sectors where sales price is affected by labour costs
challenges for negotiators
Challenges for Negotiators
  • Defining negotiations
    • Doha: negotiations or work programme?
  • Negotiating definitions
    • Defining goods through services has its limitations
    • Classifying sectors in mutually exclusive manner - some environmental activities fall across sectors
    • Competitiveness concerns and risk of untended commitments
  • Treaty interpretation
    • potentially both GATT and GATS apply
    • links to TBT, SPS, ASCM, TRIPs
slide20
GATT
  • Does not define environmental goods
  • Good is synonymous to product (Articles I, II, III and IX)
  • WTO members are free to decide what products constitute environmental goods for the purposes of trade liberalization
slide21
GATS
  • Defines services by modes of supply
  • No references to environmental services
  • Chapter 6 of SSCL, based on CPC (W/120)
  • W/120: each sector is mutually exclusive
  • Implications for cross-sectoral approach
environmental goods
Environmental Goods
  • Doha: liberalization in goods to take place in conjunction with services
    • only goods that are part of the delivery of services?
    • other types of goods, to be negotiated separately from services, e.g. sustainable agriculture (organic foods), fisheries, forestry and mining?
  • EPPs fall into cleaner technologies or resource management in OECD (may be integral or incidental to delivery of services)
w 120 scope for updating
W/120: Scope for Updating
  • Sewage: + water services for human use, wastewater treatment
  • Refuse disposal: + (hazardous) waste
  • Cleaning: + protection of air quality and climate
  • Noise abatement: +prevention
  • Nature and landscape protection: + biodiversity and habitat
  • Other: + remediation and prevention
  • Other not elsewhere specified: + R&D, design; maintenance and repair
  • New: Services for sustainable resource use
broadening w 120 pros and cons
Broadening W/120: Pros and Cons
  • Environmental benefits
  • May draw members into commitments beyond their intentions, especially in cases of liberalization across all modes of supply
matching w 120 and oecd
Matching W/120 and OECD
  • “Core” and “cluster” approach
  • “Core” W/120, mainly APC and waste management – subset of pollution management group – update, particularly for water
  • Cleaner technologies and resource management can fall under “Other” in W/120
  • Some OECD categories may fall under other GATS sectors, classified elsewhere in W/120 (“cluster”)
  • Degree of departure from CPC is a collective decision
  • Mutual exclusive nature is to be preserved
gats state of play
GATS: State of Play
  • EC proposal for re-classification, all environmental media
  • US proposal to reclassify, not specific
  • India - opposes reclassification
  • Opposition of some countries is not specific to environmental services
ec proposal
EC Proposal
  • New classification
    • 7 sub-sectors - increases the possibility for commitments
    • “purely” environmental
    • according to environmental media
    • does not include “conceptual” services (design, engineering, R&D, consulting)
    • “checklist” for services with an environmental component
ec proposal 2
EC Proposal (2)
  • 6A. Water for human use & wastewater management
  • 6B. Solid/hazardous waste disposal
  • 6C. Protection of ambient air and climate
  • 6D. Remediation and cleanup of soil & water
  • 6E. Noise & vibration abatement
  • 6F. Protection of biodiversity and landscape
  • 6G. Other environmental & ancillary services
us proposal
US Proposal
  • “Core” services, primarily currently classified
  • Related services - construction, engineering, consulting
  • Focus liberalization on:
    • mode 3 (commercial presence)
    • mode 4 (movement of personnel)

plus

pressure points
Pressure Points
  • Water utilities - selling water to end users: service or resource?
  • Waste management
  • Moving recycling to “core” services?
  • Other changes in the boundaries of GATS classification
treaty interpretation
Treaty Interpretation
  • GATS governs ALL measures affecting trade in services
  • Measures that discipline trade in environmental goods (governed by GATT)?
  • Would give GATS a broad reach
  • Possibility that measures may be subject to obligations under GATT and GATS
  • Need a provision for simultaneous, or even earlier liberalization of environmental services under the GATS, when negotiating commitments on market access for environmental goods?
gatt and gats 1
GATT and GATS (1)
  • Major obligations (MFN, national treatment, quantitative restriction, tariff commitments) would attach to EGS
  • GATT disciplines are based on origin and destination
  • GATS: crucial issue - presence or absence of supplier
    • mode 3: durable presence
    • mode 4: temporary presence
  • GATT does NOT apply where producer and consumer are in the same jurisdictions
gatt and gats 2
GATT and GATS (2)
  • Large part of trade is through modes 3 and 4, i.e. production and consumption occur inside the territorial/legal jurisdiction of importing state
  • What about goods produced in importing state as part of delivery of environmental services – “domestic goods” for the purposes of GATT? Like products of national origin within meaning of Article III?
gatt and gats 3
GATT and GATS (3)
  • Recent WTO case law on overlapping GATT and GATS provisions:
    • Bananas, Canada Periodicals, Canada Auto-Pact
  • Appellate Body: any measures taken by members to regulate trade in goods also has to comply with member’s obligation arising from GATS
gatt and gats 4
GATT and GATS (4)
  • Commercial or personal presence is key – effective market access requires that disciplines apply to all phases of transaction
  • Unlike in goods, treatment accorded to persons and PPMs is important
  • Measures applied to aspect of transactions other than products (persons, legal remedies) have been found to be within the scope of GATT Article III
  • GATS Article XVII is a voluntary provision (members can opt into and out) - what if it is found to be analogous to GATT Article III?
gatt and gats 5
GATT and GATS (5)
  • GATT prohibits export restrictions
  • GATS contains no explicit liberalization of export
  • Absence of disciplines in export – environmental services may be easily used as inputs to other services (mode 1)
  • Traditional, in situ services would be at a disadvantage
other aspects
Other Aspects
  • Qualitative restrictions arise from regulatory regimes (corporate responsibility, consumer protection, Article VI of GATS, similar to Article 2 of TBT)
  • Not necessarily discriminatory, simply different
  • Will necessary be interpreted the same way as in Article XX, meaning “least trade restrictive”?
  • Panels resolving conflicts may second-guess regulators
like products
Like Products?
  • Central issue in liberalization
  • Embedded technologies – distinguishing like products on the basis of PPMs?
  • Non-product related PPMs (organic foods), not visibly incorporated
meaning of like
Meaning of like
  • Relevant to MFN and national treatment
  • Technological sophistication makes it a complex issue
  • Combination of goods and services may involve regulatory distinction based in differences between acts, products and technologies
tbt and sps
TBT and SPS
  • TBT, Article 2.2: necessary = least trade restrictive
  • SPS, Article 2: “based on scientific principles, not maintained w/o scientific evidence…”
  • The interpretation of necessary is key to determine whether measures were barriers to trade
  • Significant WTO case law
ests and iprs
ESTs and IPRs
  • Trade in service and capital goods - the most direct channel for technology transfer Negotiations: state-to-state
  • Transfer of technology: firm-to-firm
  • Disjunction between provisions and their implementation
  • 90% of ESTs involve proprietary knowledge
  • Growing misallocation of ESTs between developed and developing countries
  • Barriers to trade where specific (patented or patentable) knowledge is adopted as standards in industry (licensing under reasonable conditions under Article 31 of TRIPS)
subsidies
Subsidies
  • Eliminate subsidies for environmentally harmful PPMs
  • Provide subsidies for:
    • R&D of new ESTs and products
    • environmental adaptation
  • Subsidies for environmental services are subject to disciplines yet to be negotiated under GATS
wto environmental goods
WTO: Environmental Goods
  • Definitional/conceptual issues: CTE (ss)
  • Negotiating Group on Market Access for Non-agricultural Products
  • Committee on Agriculture (CTE to keep track)
  • No sequencing between the work of CTE and Negotiating Group
  • CTE to monitor other negotiating groups on para 31 (iii)
wto environmental services
WTO: Environmental Services
  • Proceed on the basis of existing definitions
  • Negotiations: Council for Trade in Services (special session)
  • Timing and sequencing of liberalization of trade in services in relation to that of goods?
baseline mfn tariffs
Baseline: MFN Tariffs
  • North America, EU, Japan
    • applied: 6% or below, few tariff peaks
    • bound rates lower - downward trend
  • Developing countries
    • applied: 18%
    • bound: higher (29 %)
    • Malaysia (6%), Indonesia (7%), Thailand (12%), India (61%)
baseline gats
Baseline: GATS
  • Some 50 (1/3) members made commitments on environmental services
  • In Asia: Australia, Japan, Korea Thailand
  • Main restrictions:
    • purchase or rental of property, equity holdings, residency requirements for directors, tax and subsidy measures
  • Commitments under mode 4 limited to quotas and length of stay
  • No commitments for low-skill staff (important for refuse disposal, sustainable forestry or fisheries)
preferential tariffs
Preferential Tariffs
  • Seek to establish presence in regional markets, with similar environmental problems
  • RTAs
    • Focus on integration - harmonization of standards
    • Focus on trade facilitation - cooperation programmes in sectors, e.g. chemicals, waste management (e.g. ASEAN and SAARC)
  • GSP, e.g. new EU effective 1 Jan 2002)
apec evsl initiative
APEC EVSL Initiative
  • Environmental goods and services - one of the 15 (9 A+) sectors earmarked for early voluntary trade liberalization initiative, complements IAPs
  • Tariff portion - accelerated tariff liberalization - moved to the WTO
  • APEC concentrates on non-tariff measures and ECOTECH
conclusions 1
Conclusions (1)
  • Avoid being drawn into unintended or burdensome commitments
  • Avoid onset of later disputes
  • Preserve “space” for development of own industry
conclusions 2
Conclusions (2)
  • Pay attention to all environmental media in negotiations (nature protection and resources use as well as water, waste and pollution)
  • Carefully set market access goals for “related” services classified elsewhere in W/120
  • Establish goals for desire level of market access
  • Differential approaches for LDCs
conclusions 3
Conclusions (3)
  • Seek definitive but flexible classifications
  • Then decide whether to negotiate within GATS rules, or – for some goods - separately within GATT rules
  • Carefully consider and properly work out during negotiations issues associated with existing provisions to :
    • like products, services, suppliers
    • PPMs
conclusions 4
Conclusions (4)
  • Possibly seek to impose limitations on market access under GATS (Article IV and XIX)
    • ceilings on prices for public goods
    • min level of profits reinvested in national infrastructure
    • technology transfer and training
conclusions 5
Conclusions (5)
  • Coordinate with other policy contexts:
    • intellectual property protection
    • subsidies
    • government procurement
    • access to ESTs
    • various supply and demand factors
    • promoting reliable and substantial supply from SMEs
  • Case studies on win-win outcomes to guide negotiators and formulate strategies with respect to
    • classifications and
    • negotiations
two scenarios
Two Scenarios
  • Strengthen regulatory regime in relation to own developmental and environmental needs
  • Follow developed country standards - create demand for EGS (e.g. NAFTA)
implications
Implications
  • Scenario (1):
    • possibility of leap-frogging into clean technologies
    • “space” for development of own industry
    • match between problems and solutions
  • Scenario (2):
    • extends the trajectory of end-of-pipe,
    • inhibits local environmental industry
    • potential for mismatch between problems and solutions
ad