Events & Issues

New Delhi, 16 November 2009

Trade Groups’ Appeal

CUT BARRIERS ON GREEN GOODS

By Dr P K Vasudeva

General Electric, the iconic US-based multinational technology and services conglomerate, has called the governments to cut tariffs and other barriers to trade in environmental goods and services in order to help combat climate change.

The WTO members should strike an ‘environmental goods and services agreement’ (EGSA) without waiting for a broader deal in the long-running Doha Round of trade negotiations, according to Thaddeus Burns, GE’s senior counsel for intellectual property and trade.

In a paper presented in October last at the conference on trade, energy, and the environment, Burns argued that tariffs and domestic purchasing requirements on products like wind turbines and solar panels increase the cost of clean energy investments, undermining governments’ efforts to cut greenhouse gas (GHG) emissions.

Liberalising trade in environmental goods and services is one of the many issues under consideration in the Doha negotiations. However, with a broad multilateral trade deal nowhere in sight after nearly eight years of negotiations, Burns said, “it is time for governments to make a firm commitment to reducing the costs they impose on EGS.” He rejected suggestions that taking EGS liberalisation out of the struggling negotiations would undermine the Doha Round, saying “it makes little sense to delay action on climate-change related cost reduction.” Other business interests, including the Washington-based National Foreign Trade Council, have made similar appeals.

It is not without precedent in the WTO for a group of countries to agree to cut tariffs on a particular class of goods outside the context of a trade round. For instance, in 1997 a group of major traders enacted the Information Technology Agreement, which cut tariffs on a wide range of products. In principle, there is no reason why a critical mass of WTO members could not do the same for environmental goods, a point that ICTSD and other analysts have made for several years.

GE has an interest in seeing major markets cut tariffs on wind turbines and other clean energy technology: it is the world’s second largest manufacturer of wind turbines, behind Denmark’s Vestas and ahead of Spain’s Gamesa, Germany’s Enercon, and India’s Suzlon. Burns’ paper noted that the majority of WTO members still levy tariffs on wind turbines, ranging from 14 per cent in Brazil and Mexico, to 8 percent in China and Korea, and 2.7 and 1.3 per cent respectively in the EU and the US. Significant tariffs also face solar panels and gas turbines: India levies duties of 15 per cent on the former and 7.5 per cent on the latter.

Burns’ paper also pointed to non-tariff barriers that were “often even more destructive to GHGs reduction goals and worldwide economic recovery than traditional tariffs.” ‘Buy domestic’ requirements and other local content restrictions in China, the US, and two Canadian provinces were closing off opportunities to foreign suppliers. An EGSA that addresses these non-tariff barriers would make cleaner energy technologies cheaper, he said.

GE envisions a multi-step process for implementing an EGSA: first, a subset of WTO members accounting for the bulk of existing trade would eliminate tariffs on a list of products (all WTO members, not just participants, would receive the concessions). Next, more countries could join, and coverage could extend to more products, services, and non-tariff barriers.

The Doha Round talks on EGS liberalisation has long been blocked over disagreements among members on which goods should be covered. And within the framework of the round, large developing countries have jealously guarded their freedom to choose whether to sign on to initiatives slashing tariffs across entire industrial sectors.

This became apparent at the conference, held at the WTO headquarters, when a senior Brazilian diplomat noted that clean-burning ethanol would deserve to be part of an EGS deal. Ethanol, however, faces tariffs of over 40 per cent in the EU and the US, where ethanol producers are heavily subsidized and politically influential. Oil, in contrast, enters duty free. “If people are serious about emissions, why tax clean, renewable fuels while dirty, non-renewable and price-volatile oil is admitted duty-free?” asked Flavio Damico, Brazil’s deputy ambassador to the WTO. He observed that even measures intended to promote sustainable development could be discriminatory.

The US government has made proposals similar to GE’s call for an EGSA in the past. In late 2007, just before an important UN climate conference, Washington joined hands with the EU to urge all major economies to eliminate tariffs on a list of ‘climate-friendly’ goods - but not ethanol.  At the time, several developing countries complained that the list did not adequately reflect products in which they had an export interest.

Nefeterius McPherson, a spokesperson for the US trade representative’s office, said the US “remain[ed] eager to move ahead with negotiations to eliminate tariff barriers on climate-friendly technologies and spur momentum on a larger WTO Doha package on environmental goods and services.” However, she declined to comment on whether an EGS agreement should also cut tariffs on ethanol, along with subsidies to biofuels and government support for fossil fuel production.

A group of trade associations, including the National Foreign Trade Council (NFTC), sent a letter to President Obama recently urging the Administration to pursue a swift conclusion of a comprehensive Environmental Goods and Services Agreement.

The associations wrote, “Lowering trade barriers on green goods and services would be good for the environment and the U.S. economy.” Liberalizing green trade, they continued, “would help create the green jobs that will accelerate recovery of the U.S. economy.”

While the Doha Round of WTO negotiations is one potential forum to pursue an international agreement on green goods and services, the associations noted, “the combined economic and environmental benefits of an agreement warrant the exploration of alternative or complementary efforts.”

The trade associations suggested the Administration consider the Forum on Asia Pacific Economic Cooperation (APEC) and the Organization for Economic Cooperation and Development (OECD) as forums to help secure interim commitments in advance of a WTO agreement.

The groups also encouraged the President to promote the utility of lowering trade barriers on green goods and services in international environmental forums, including the United Nations Framework Convention on Climate Change (UNFCCC) and the Major Economies Forum. The letter also underscores the importance of protecting intellectual property rights in green technologies with respect to stimulating American innovation and creating green jobs.

Finally, the letter expresses concern over the lack of discussion of global trade in environmentally friendly goods and services in the House-passed American Clean Energy and Security Act of 2009.

“Emphasizing the importance of an environmental goods and services agreement in domestic legislation would enhance legislative efforts to deliver clean technologies to the developing world. We hope that you and your Administration will work with Congress to generate clear signals of support for lower trade barriers, which can help to reinforce a positive message on lowering green tariffs to the international community,” the associations concluded.

The countries both developed and developing should, therefore must commit to reduce trade barriers on environmental goods and services in the future Doha Round talks to save the planet.---INFA

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