Environmental Goods Agreement

Setting Standards for Environmental Goods

Setting Standards for Environmental Goods

Trade in environmental goods plays a central role in addressing global environmental challenges. It facilitates the advancement, adoption, and dissemination of environmental technologies to mitigate environmental risks, reduce pollution, and optimize resource utilization. In ATC’s previous Policy Brief (23-02), we discussed two main categories of environmental goods: 1) products that are supportive of environmental protection or yield positive environmental outcomes and 2) products that are comparatively more “environmentally friendly” than similar products serving the same purpose.

The latter category presents particular challenges for the trading system, as identifying environmentally friendly goods necessitates clear criteria and standards, which can be complex to define. Moreover, establishing interoperable standards and labelling criteria for environmental goods requires a delicate balance between setting ambitious environmental objectives and ensuring feasibility and cost-effectiveness for manufacturers. The absence of universally accepted standards and labels for environmental goods leads to variability across countries and regions, which can hinder trade and create disparities in the assessment of product environmental performance. Despite the challenges, institutional and country-level initiatives have gained momentum in developing internationally recognized standards, particularly in areas such as carbon footprint measurement, energy efficiency, water efficiency, and greenhouse gas emissions. Quantification of such production emissions and performance outputs provide increased knowledge base and data to promote international cooperation in the exchange of environmental and trade policy-relevant technical and scientific information, and support work to harmonize product standards and labels relevant to achieving environmental objectives. Our newest Policy Brief, released today, discusses two types of environmental standards and labels – mandatory or voluntary. Mandatory standards and labels are imposed by government regulations and can be considered non-tariff measures (NTMs). Voluntary standards, on the other hand, are typically developed by non-governmental entities or corporations and are not regulated by laws. Both approaches have their advantages and disadvantages, and their selection depends on industry-specific objectives and regulatory environments.

The Devilishly Hard Job of Defining an Environmental Good

The Devilishly Hard Job of Defining an Environmental Good

What explains this apparent paradox of accelerating focus on taking steps to tackle climate change with limited forward progress in crafting trade policies that are responsive to climate-friendly objectives?  The Asian Trade Centre’s newest Policy Brief looks in detail at the difficulties of defining environmental goods.  [This Talking Trade post merely highlights some of the issues explored in the Brief—be sure to read the whole thing!] Policymakers in search of answers zeroed in on challenges in moving environmentally-friendly products across borders.  They were able to identify one specific issue: potentially high levels of tariffs applied to certain goods at the borders.  These tariffs were acting as a brake, impeding the flow of goods and driving up costs. Hence, one early and sensible idea was to consider how to reduce tariffs on environmentally friendly goods.  If tariffs are leading to lower utilization of climate-friendly products, the reduction or elimination of tariffs on these products should lead to their greater use. APEC members intended to have signatories agree to reduce tariffs on listed products to less than five percent within three years.  There would be “real world” consequences to inclusion/exclusion from APEC’s list of environmental goods (EGs).  Items on the list would have tariffs reduced or eliminated while those not included would not. Getting to the final set of 54 EG products, released in 2012, was not an easy process.  Understanding why it was so hard highlights the difficulties that are likely to affect a range of policy responses ahead.

What Does 2017 Mean for the WTO?

Last year ended with a whimper for the World Trade Organization (WTO).  The multilateral trade institution had hoped for several big announcements that would show the organization could do more than just fight trade disputes.  But as the last day fell in 2016, the countdown on the number of countries that have ratified with Bali Trade Facilitation Agreement (TFA) remained stubbornly stuck.  For the agreement to come into force, 108 members have to ratify it.  The countdown has now been changed to show that only six more ratifications are needed before TFA comes into force.