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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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UNCTAD Environmental Goods and Services

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Unctad environmental goods and services

UNCTADEnvironmental Goods and Services


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


Unctad environmental goods and services

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


Unctad environmental goods and services

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


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