Building Supply Capacity for Environmental Services in Asia

The Role of Domestic and Trade Policies

by Aparna Sawhney

Environmental Goods and Services Series • Issue Paper 5

Do More

See also

Discuss this publicationShare your views with other visitors, and read what they have to say

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. 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 know-how 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 (MDGs) and various multilateral environmental agreements.

Rapid liberalisation in EGS, whether including traditional ‘end-of pipe’ goods and preventive technologies only, or environmentally preferable products (EPPs), will create enormous market opportunities for EGS firms and for countries that have a competitive domestic capacity in EGS. In order to capture a share of this growing market, developing countries must build up their domestic capacities for production and export of EGS. At the moment, the greatest potential for doing so lies in Asia. While constituting a small part of the environmental services sector globally, the sector has witnessed double-digit growth in Asia. Asia is also a region characterised by rapid economic growth, urbanisation and increasing pressure on available urban infrastructure to meet human needs. The environmental services sector is particularly geared towards essential public services such as solid waste management and wastewater treatment and is also relevant in terms of meeting important MDGs such as improvement in the life of at least 100 million slum dwellers by 2020. There is scope, therefore, for developing the environmental services sector to not only meet domestic requirements but also to serve as a base for regional and global exports.

Asian countries, particularly those from South, Southeast and East Asia make interesting candidates for a study of policies and policy instruments that have successfully created a nascent but rapidly growing sector constituted by Small and Medium Enterprises (SMEs), as in India, and a well-developed environmental goods and services sector, as in Chinese Taipei and Korea.

The priorities for these countries, with regard to development of environmental services, may vary. While most countries will want to develop their domestic industrial capabilities to meet their local environmental needs and generate employment through foreign direct investment and small and medium enterprise initiatives, some others might be interested in facilitating the emergence of large firms that compete in regional markets and, eventually, at a global level. These objectives will require a diverse and carefully selected mix of domestic and trade policies. Such policies, while market-friendly and conducive to the emergence of a strong competitive environmental service sector, should also responsive to the realities of local and regional conditions.

This paper examines the different domestic and trade policies used in building domestic capacities in the environmental services sector, based on empirical evidence from a select number of Asian countries. It is clear from the paper that while many of the domestic and trade policy measures that were used are similar, the diversity of local conditions and levels of economic development as well as varying needs and priorities, argue against a ‘one-size fits all’ approach. This highlights the importance of proper design of policies and policy tools such as contracts. In that regard the paper draws some useful lessons and conclusions from the examination of these policies which Asian countries could use as a ‘guiding tool’ while they set about further developing and strengthening their domestic environmental services sector.

Dr Aparna Sawhney Associate Professor at the Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi, has written extensively in her field of specialization in international trade, environment and WTO negotiations.

The paper is part of a series of issue papers commissioned in the context of ICTSD’s Environmental Goods and Services Project, to 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.

Add a comment

Enter your details and a comment below, then click Submit Comment. We’ll review and publish the best comments.