1st October 2005
Defining Environmental Goods and Services and their Trade and Sustainable Development Implications: a Case Study of Mexico
Environmental goods and services (EGS) as a subset of goods and services were singled out for attention in the negotiating mandate adopted at the Fourth Ministerial Conference of the World Trade Organization (WTO) in November 2001. Increasing access to and use of EGS can contribute to improving environmental quality and pollution abatement in both developed and developing countries. Trade in these sectors can also be a powerful tool for economic development by generating economic growth and employment and enabling the transfer of valuable skills, technology and know-how embedded in such goods and services. Furthermore, trade in EGS can facilitate the achievement of sustainable development goals laid out in global mandates such as the Johannesburg Plan of Implementation, the UN Millennium Development Goals and various multilateral environmental agreements. On the other hand, the negative impacts of liberalisation on vulnerable industries in developing countries, in particular fledgling small and medium-sized enterprises, and sections of populations without the purchasing power to access privately-delivered EGS, such as sanitation, has often been cited. This has also led to calls among some stakeholders that liberalisation should be gradual or carefully qualified and in certain cases that countries should be able to stop or roll back liberalisation that may have these negative impacts.
Developing countries have been slow in articulating their positions in the WTO Committee on Trade and Environment (CTE) in light of prevailing uncertainty regarding the sustainable development impacts of EGS liberalisation for their own countries. To add to the confusion, the type of goods and services deemed ‘environmental’ is a definitional debate that, at the time of writing, still awaits resolution at the WTO. Members have been trying other approaches such as proposing specific lists of goods or even identifying goods and services that are inputs into specific environmental projects. A number of goods and services proposed are based on lists developed by the Organization of Economic Co-operation and Development (OECD) and the Asia Pacific Economic Co-operation Mechanism (APEC) which heavily focused on capital, technology and knowledge-intensive goods exported primarily by developed countries. Others go beyond this categorisation to include environmentally preferable goods and services that many developing countries have a comparative advantage in producing.
As a contribution to the debate, this study – a joint output of the International Centre for Trade and Sustainable Development (ICTSD) and the Commission for Environmental Cooperation (CEC) – provides an initial assessment of the sustainable development impacts of EGS liberalisation in Mexico under different scenarios. Starting from a framework of Mexico’s sustainable development goals, as embodied in its national legislation, the study looks at EGS from both a ‘traditional’ and ‘broad’ definitional perspective and attempts a comparative qualitative analysis of the sustainable development impacts of these definitions, namely, in the economic, social and environmental spheres. Having established a free-trade area with its neighbour and the largest economy in the world, the United States, as well as the EU and Japan, Mexico is well-suited to provide lessons on the sustainable development impact of EGS liberalisation to the rest of the developing world, particularly similarly placed middle-income developing countries.
The study is the first of a series of forthcoming issue papers which will address a range of cross-cutting, country specific and regional issues of relevance to the current EGS negotiations, commissioned in the context of ICTSD’s Environmental Goods and Services Project. This project aims to enhance developing countries’ capacity to understand trade and sustainable development issue linkages with respect to EGS and reflect regional perspectives and priorities in regional and multilateral trade negotiations. This study is also one of many published by the CEC since 1996 under the trade in environmentally preferable goods and services project. This project aims at greening trade in North America by removing barriers and promoting through policy recommendations and cooperation among stakeholders across the three NAFTA countries, the best use of market-based approaches to support environmental protection and the conservation and sustainable use of biodiversity.
We hope you will find this pleasant and informative reading and an effective contribution to the debate.