Trade & Environment Negotiations Sanjay Kumar 16 th December 2005

Objectives of Negotiations ► Economic benefit – promote dynamic efficiency in production and greater access to consumption of goods at lower prices ► Development benefit – addressing basic human needs in terms of Millennium Development Goals ► Environmental benefit – promote sustainable modes of production and consumption.

Para 31(iii) Mandate ► To negotiate on reduction or, as appropriate, elimination of tariffs and non- tariff barriers to environmental goods and services ► With a view to enhancing the mutual supportiveness of trade and environment. ► ► Mandate is essentially environmental- benefit oriented, and market access is a means to that objective; not the objective itself.

EG Negotiations Approaches  List Approach – earlier discussion on the definitional aspects and now, on preparing the list.  Definitions: Some definitions given; no agreement on a common definition.  Bottoms-up approach preferred - carving out WTO list out of OECD / APEC lists.  9 submissions so far - all from developed countries  Project Approach – by India

Problems with the “list approach” ► ► Dual and multiple use – 480 goods; e.g. electricity meters, heat exchangers, microwave ovens, etc. ► ► No synergy between goods and services – many environmental activities entail delivery of services. ► ► Too diffused to meet environmental objectives ► ► Appears basically to address only market access objectives. Most of the developing countries are net importers.   Export from South to South only; imports are from North. This will affect SMEs, which are 60% of the industrial base. ► ► Always need to negotiate – changes the balance of rights & obligations ► ► Lack of technology transfer mechanism.

Problems of developing countries ► Though developed countries have average tariff of less than 5%, and developing countries around 25%, exports from developed countries are around 80% of the environmental goods. ► Any indiscriminate tariff reduction would increase the trade deficit of developing countries.

Export / Import Ratio for OECD and APEC list Source: UNCTAD Study

Top EG Exporting DevelopingCountries

EG Trade Patterns of DCs ► ► Trade significance based on OECD/ APEC lists of EG is low. ► ► Export dynamics to developed countries is high. ► ► If EPPs are included, it brings some marginal improvement in EG trade pattern.

Environmental Project Approach ► Objective of the approach  To bring trade liberalization to meet environmental and developmental goals  To bring synergy between environmental goods and services.  To address diversity in environmental standards.  To bring common but differentiated responsibilities.  To give policy space to national governments.  Capacity building, technology transfer.

Environmental Project ► Any activity with a view to achieving environmental objectives ► Tariff concessions for goods used in the project for the project period ► Both public or private projects to be included ► Many countries already have something like this – e.g. India, Indonesia, China & Thailand.

Environmental Objectives  Examples:  Water management – drinking water or surface water  Waste management – solid or soil  Energy saving management  Renewable resources – energy or water  Industrial applications – energy saving management or devices, process optimization  Land, air and water pollution clean up  noise abatement  Can include any other environmental objective.

Advantages of ‘Project Approach’ ► Integrates goods and services. ► Focused & direct – goals of environmental objectives ► Accommodates changing needs of global environmental requirements ► Positive measures ► Technology transfer – with the services. ► Does not affect market access schedules of the goods – does not lead to “zero-for-zero” sectoral NAMA negotiations ► Enhances mutual supportiveness of trade & environment. ► National flexibility and policy space available. ► Approach – need-based and objective oriented.

Thank You