Bridges Weekly Trade News Digest • Volume 11 • Number 38 • 7th November 2007

Brazil Peru Discuss New Ideas On Environmental Goods Liberalisation

Do More

See also

Negotiations on expedited liberalisation for environmental goods and services were front and centre at last week’s meeting of the WTO Committee on Trade and Environment-special session (CTE-SS).

The US, the EU, and others rebuffed Brazil’s recent calls to classify biofuels as an environmental good qualifying for deep tariff cuts (see BRIDGES Weekly, 10 October 2007).

Discussions on 1 November focused on a recent Brazilian proposal (JOB (07/146)), as well as a related informal paper from Peru (JOB (07/161)) that called for organic farm products to be classified as environmental goods. Both countries are trying to ensure that the scope of the environmental goods talks is not restricted to industrial products.

The talks demonstrated "progress sideways" but "not forward," said one developed country delegate.

Brazil explains ‘request-offer’ proposal

Brazil opened the environmental goods discussions by responding to questions about its proposed approach for environmental goods to be identified through a multi-round process of requests and offers.

It had proposed the approach as a compromise to persistent divisions on how to go about meeting the Doha mandate to reduce or eliminate barriers to trade to environmental goods and services.

Brazil said that the ‘request-offer’ process would reflect the procedure followed in previous GATT/WTO negotiations, under which countries would request specific liberalisation commitments from each other, and then extend tariff cuts they deemed appropriate equally to all WTO Members. At the meeting, it also outlined a ‘basket’ approach as a ’second-best’ option, under which each Member could offer to make tariff cuts on a handful of environmental goods. Members’ compiled ‘baskets’ could then be subject to negotiations to arrive at a common one. Brazil characterised its proposal as a ‘work in progress’ and stressed that it was open to comments and suggestions from other Members.

Many developing country delegates were more favourable to the ‘request-offer’ methodology than the ‘basket’ one. Some told Bridges that they would prefer a combination of the approaches being considered in the negotiations - a negotiated ‘list’ , of environmental goods, an ‘integrated’ approach that foresees tariff cuts for goods used towards certain environmental activities, and a ‘request-offer’ process.

Some countries from the ‘friends of environmental goods and services’ group, especially New Zealand, expressed concern that a request-offer process would be time consuming and cumbersome. The group, made up mainly of developed countries, favours a list approach.

Proposal to include biofuels comes under fire

The US and the EU, along with Korea, argued against Brazil’s proposal to include ethanol and other biofuels as environmental goods. They claimed that expedited liberalisation was reserved solely for industrial goods, and not farm products. The US places a tariff of over 14 cents per litre on ethanol, in order to protect its politically influential corn-based ethanol industry. EU tariffs are roughly twice as high; it too richly subsidises ethanol production.

Brazil countered that the negotiating mandate (in Paragraph 31(iii) of the Doha Declaration) did not exclude the consideration of agricultural products. Moreover, it noted, the EU had included agricultural products in its original list of environmental goods (TN/TE/W/47). Both the EU and the US have described ethanol as an environmental good in reports to the UN Framework Convention on Climate Change, it added.

According to the Associated Press, the US claim that biofuels are agricultural goods is inconsistent with its stance in an ongoing WTO farm subsidy dispute with Brazil, where Washington officials have described payments for ethanol production as industrial subsidies (and not farm payments, as Brasilia claims).

Cuba, too, was critical of counting biofuels as environmental goods, albeit for food security and environmental considerations. Growing demand for biofuels has seen corn prices spike. So have wheat prices, as farmers shift production towards corn.

The Brazilian delegation responded that sugarcane production for ethanol in Brazil had not affected domestic food availability or nutrition.

Peru calls for preferential treatment for organics

In addition to expressing support for the Brazilian paper’s request-offer approach, the Peruvian submission openly called for granting organically and biologically grown agricultural products swift liberalisation. It said that this could give strong encouragement to agricultural producers in developing countries. In many poor nations, it added, "organic agriculture is identified with ancestral forms of production typical of indigenous or native communities." Peru also suggested that in the Andean region, increased market access for organic crops could help combat poverty and reduce the attraction of growing narcotics.

Although Brazil’s paper had stopped short of specifically calling for organic farm products to be designated as environmental goods, it alluded to the possibility by urging the CTE to ask the Codex Alimentarius Commission, which sets global food standards on behalf of the UN, to develop standards for organic foods. This, it said, could ease the path for environmentally beneficial exports. In response to comments that Codex already had such guidelines, Brazil stated that many WTO Members were not abiding by them, and that the standard-setting body should decide whether the guidelines needed to be revised.

Peru: sustainable development should be criterion

Peru’s wide-ranging submission stressed the need for ’sustainable development and environmental protection’ to be substantive criteria not only when Members agree on terms for liberalising trade in environmental goods and services, but also in the talks on disciplining fisheries subsidies and cutting tariffs on tropical farm products.

According to Peru, indigenous communities living in the tropical forest ecosystems that combat global warming require special support for developing forms of agriculture compatible with these environments. Peru suggested that they could be among the first to receive support under the WTO’s incipient ‘aid-for-trade’ initiative.

Repeating a demand it has made in WTO discussions on intellectual property, Peru called for amending the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS) to require patent applicants to disclose the origin of genetic resources or traditional knowledge used in their inventions, along with proof of benefit sharing. Peru said that this was necessary to support patent-related obligations arising from the Convention on Biological Diversity (CBD). The Doha mandate on trade and environment called on Members to examine the "relevant provisions" of the TRIPS Agreement.

A Peruvian delegate told Bridges that the proposal was primarily intended to be ‘conceptual’, but that it was ‘well-received’ by many developing countries such as China, Ecuador, Egypt and India, despite the lack of detailed discussion.

Sources say that it met with scepticism from delegations including the US, the EU, Korea and Australia. Australia, Norway and Taiwan also raised questions as to how Peru proposed to address concerns about differentiating organic agricultural products from others based on process and production methods (PPMs).

As for how to negotiate specific liberalisation commitments for individual environmental goods, Brazil said that if Members could agree on the broad ‘approach’ by December, along with acceptable results in the Doha Round negotiations as a whole, discussions about product coverage could begin immediately thereafter. One developing country delegate said it was premature to begin discussions on the treatment of specific products before the approach was resolved. Another told Bridges that terms for the selection and treatment of environmental products could be finalised within the CTE-SS, and commitments reflected within Members’ industrial goods and agriculture commitment schedules as appropriate.

The chair, Ambassador Mario Matus (Chile), is expected to convene further informal discussions to narrow differences before the next formal session in December.

ICTSD reporting; "US, EU block Brazilian Attempt to Slash Bio-fuel Tariffs at WTO," INTERNATIONAL HERALD TRIBUNE, 5 November 2007.