PANic Ministry of Development, Industry and TradeMIFIC The Situation of Environmental Goods in Nicaragua with Reference to the APEC and OECD Lists A study conducted within the framework of the UNCTAD project “Building Capacity for Improved Policy Making and Negotiation on Key Trade and Environment Issues” (INT/0T/AQ). José Guillermo López López Head of Foreign Trade Policy, (DPCE), MIFIC.
MIFIC • Trade and Environment in the Global Context • Much progress made in the legal field. International agreements for the protection and preservation of the environment. • Severe imbalances in the production and distribution of goods and services. • A high proportion of the world’s population lives in extreme poverty. • Rapid technological change on a global scale; not matched by coordinated environmental management, which always lags behind social and economic development.
Study on Environmental Goods in Nicaragua • Conducted within the framework of the WTO Ministerial commitments made in Doha, Qatar. • The WTO Ministerial mandate: to negotiate “the reduction or, as appropriate, elimination of tariff or non-tariff barriers to environmental goods and services”. Doha Ministerial Declaration, paragraph 31(ii).
Has been considered within the context of national environmental issues, but not directly MARENA (Ministry of the Environment and Natural Resources Political Constitution Environmental Law Development of the Environmental Goods Issue in Nicaragua Has not been developed in a manner specifically linked to trade
Aims of the Study • To contribute to securing the basic tools for building capacity for policy-making and negotiation on environmental goods with a view to eliminating tariff and non-tariff barriers. • To identify the need to use these goods in conditions that favour the preservation and protection of the environment. • To propose a conceptual framework that allows the negotiation process to be defined by means of clear rules. • To determine what constitutes an environmental product, an environmentally preferable product (EPP) or an organic product. • To evaluate environmental goods in Nicaragua by examining trade flows, tariff protection levels, production and production limitations.
Functions of the Environment Provides resources needed for production A place to deposit wastes and residues that generate production and consumption A source of services related to enjoyment of the environment: scenic beauty, clean air, etc.
Environmental Goods Arising From These Three Functions Capital goods Inputs and raw materials Equipment Medicines Etc. Air purifiers, water purifiers, aspirators, etc. Natural medicine, etc. ‘Cleaner’ machinery Chlorine, chemicals, etc.
WTO Negotiations on Environmental Goods Eliminate bound tariffs Remove non-tariff barriers • Import licensing • Quotas • Quantitative restrictions • Permits • Import controls • Etc. Reduce import tariff to 0% Result: to allow access free of trade barriers, so as to encourage their use in less costly conditions, thereby promoting an environment that is better protected and preserved.
A clear definition of environmental goods is needed for the purpose of trade negotiations The standard definition used in some countries does not relate to trade: “Tangible resources used by human beings as production inputs or for final consumption and which are used up and transformed in the process”.
The definition normally used:Makes no reference to any environmental properties.Covers products of all types.Relates more to ‘friendly’ production methods and processes. Wood, fruit, animal hides, meat, seeds, medicines, etc.
Definition proposed by Nicaragua’s consultant: “Environmental goods are goods which allow raw materials, inputs, capital goods and consumer goods in general to be produced and marketed under technologically and ecologically rational conditions, which allow compliance with environmental requirements in international markets, and which aim to preserve and protect the environment and human, plant and animal health. This includes cleaner technologies and products which reduce environmental risks and minimize pollution and the use of resources”.
Indicative Lists Compiled by APEC and the OECD • Were drawn up before trade negotiation objectives were undertaken in the WTO. • Are based on the interests of highly industrialized developing countries (USA, EU, Japan, etc.). • Were drawn up taking into account the expansion and facilitation of trade rather than environmental effects. • A common list accommodating the interests of all WTO Members must be drafted within the WTO. • Nicaragua must negotiate the inclusion of a list of goods not yet included in the APEC and OECD lists, e.g. medicines, chemicals, etc. • Nicaragua: liberalization in other countries could serve to attract investment in these goods.
Trade Based on the APEC and OECD Lists • There is no tariff classification of any kind, but Nicaragua does grant unilateral preferential treatment to all. • Environmental goods do not feature in WTO, regional or bilateral integration agreements.
WTO Bound Tariffs - 2003 • 168 items. Tariffs = 40% • Tariff item = 44%, but in 2004 = 40% No major sensitivities at WTO level as no APEC or OECD products were bound at levels higher than the overall 40%. Of these, 70% enjoy 0% MFN.
Conclusions • The definition of environmental goods must not cover agricultural, organic or environmentally preferable goods. • Environmental goods must lend themselves to specific functions for achieving ‘friendly’ production methods and processes. • Importance of tariff and non-tariff liberalization of environmental goods within the WTO. • Need for clear identification of these goods in the Harmonized Commodity Description System at international level. • OECD and APEC lists must be treated as indicative, i.e. as a reference for the purpose of establishing a common list. • Nicaragua has a high level of unilateral tariff liberalization with regard to APEC and OECD environmental goods. • Nicaragua must negotiate and request reciprocal access levels in line with its unilateral liberalization, with a view to promoting investment in environmental goods.