Environmental Priorities and Trade Policy for Environmental Goods: A Reality Check
by Veena Jha
Environmental Goods and Services Series • Issue Paper 7
Environmental goods and services (EGS) as a subset of goods and services was 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 yield a number of benefits including reducing air and water-pollution, improving energy and resource-efficiency and facilitating solid waste disposal to name a few of the benefits. Gradual trade liberalisation and carefully managed market opening 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 knowhow embedded in such goods and services. In short, well-managed trade liberalisation 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 (MEAs).
While Paragraph 31 (iii) of the Doha mandate calls for a reduction, or as appropriate, elimination of tariffs and non-tariff barriers (NTBs) on EGS, the lack of a universally accepted definition on EGS has meant that trade delegates have struggled over the scope of goods and services that would be taken up for liberalisation. Further, while the aim of the EGS mandate is to liberalise, it provides no indication of the pace, depth or sequencing of liberalisation vis-à-vis ‘other’ goods and services. A major fault
line in the negotiations on environmental goods is the dispute over whether only goods intended solely for environmental protection purposes should be included as opposed to goods that may have both environmental and non-environmental uses. A number of developing countries are concerned about the inclusion of goods which they perceive as only vaguely linked to environmental protection. They are also worried about the import-led impacts of including a broad range of industrial goods on their domestic industries, employment and tariff revenues. In a broader context, a lack of movement on issues of interest to developing countries, particularly agriculture, also inhibits proactive developing country engagement on EGS negotiations.
Beyond the possible socio-economic impacts of EGS negotiations, it is essential to ensure that liberalisation of environmental goods, most of which are used for both environmental and non-environmental purposes, ultimately produce the environmental benefits intended by such disciplines.It is useful in this regard to examine and analyse relevant environmental indicators and the extent to which these are correlated with economic data and trade indicators on environmental goods. It is also important to understand the key drivers of trade in environmental goods so that the relative importance of tariff-liberalisation vis a vis other drivers can be weighed in relation to each other in various categories of environmental goods.
This paper by Dr. Veena Jha provides a reality check on these issues through rigorous empirical analysis and econometric modeling. The paper is also unique in that it tries to bring together environmental knowledge generated through the UNEP Global Environmental Outlook and relevant environmental performance indices with trade data on a set of 153 environmental that have informally been proposed for liberalisation by a group of WTO Members which may or may not be relevant in addressing these problems.
The paper assesses the extent to which countries and regions which suffer from various environmental problems trade in the set of these 153 environmental goods and the main factors driving such trade. In addition, it analyses the trends in dynamic comparative advantage enjoyed by the main exporters and importers of these goods-both developed as well as developing countries. Finally the paper also examines the implications of these findings in informing a meaningful negotiating strategy on environmental goods at the WTO.
Dr. Veena Jha is a Visiting Professorial Fellow at the Institute of Advanced studies, University of Warwick, UK, and a research fellow at the International Development Research Centre, Canada. In addition, she is the executive director of Maguru Consultants Limited, London, UK. She has worked with the United Nations in various capacities for over twenty years. She was the Coordinator of an important UNCTAD/ DFID/Government of India initiative on ‘Strategies and Preparedness for trade and Globalisation in India’. She has published twelve books on trade and development issues, articles in journals, and was a member of some consensus building initiatives on trade and environment issues in the last decade. She has been a member of several national and international Advisory Boards, notably the United Nations Secretary General’s Task Force on Millennium Development goals. She has served as an expert on technical committees of the Government of India, industry associations, and non-governmental organisations on trade and development issues.
The paper is part of a series of issue papers commissioned in the context of ICTSD’s Environmental Goods and Services Project, which address a range of cross-cutting, country specific and regional issues of relevance to the current EGS negotiations. The 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. We hope you will find this paper to be stimulating and informative reading and useful for your work.
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