EGS

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.

2015: A Promising Year for Trade

I am pleased to announce the launch of the “Talking Trade” blog with the Asian Trade Centre!

This blog provides my commentary on trade and trade-related news and events.  The opinions presented here are given in my personal capacity.  I hope you enjoy it! --Deborah Elms

The coming year holds a number of key trade milestones that we will be tracking.  For example:

1)   The Trans-Pacific Partnership (TPP) is due to be concluded.  I know, I know, I’ve been promising this for six months.  But it’s serious this time!  The electoral calendar in the United States means that the deal will need to get done as soon as possible so the American Congress will grant Trade Promotion Authority (TPA) and move towards implementing legislation before the 2016 presidential campaign season heats up.

2)   The ASEAN Economic Community (AEC) debuts on December 31, 2015.  While ASEAN will miss the targets for this hugely ambitious agenda, the year will include efforts by members to schedule new commitments in sensitive areas, such as market opening for additional services sectors and investment areas.  More on the AEC at a later date, but with the ambition of delivering “free trade in goods, services, investment, skilled labor and freer movement of capital” among the 10 ASEAN countries and a deadline that was moved forward five years, it is not surprising that members will struggle to reach the targets.  Compounding the problems of integration are extreme levels of diversity across the ASEAN membership from Singapore and Brunei to least developed country members like Lao PDR, Myanmar and Cambodia. 

3)   Several key bilateral arrangements are coming in 2015.  Most important is the announcement of the China-South Korea FTA.  The document is undergoing a more complicated than anticipated legal scrub at the moment, but should be out at the end of the month.  Although this agreement is likely to include many carve-outs of key sectors and long implementation periods for some items, the impact of linking these two economies together will be significant. 

4)   Other key bilateral arrangements in Asia include China/Australia announced on November 17, 2014; New Zealand/Korea initialed on December 22, 2014; Vietnam with the Customs Union of Russia/Belarus/Kazakhstan on December 18, 2014; and Vietnam/South Korea signed in November 2014.  Implementation of many of these agreements will be forthcoming in 2015.

5)   The European Union continues to move ahead with its efforts to spread trade integration with ASEAN.  EU Parliamentary ratification of the EU-Singapore agreement is stalled, pending the outcome of a case in the European Court of Justice over whether the EU has the negotiating competence to create commitments for its members in investment.  In the meantime, the Philippines and Vietnam are finishing up their EU FTAs.  [Note that EU GSP preferences for Thailand expired on January 1, 2015.]

6)   Costa Rica is set to enter the Pacific Alliance in 2015.  This means that half of this trade association (Mexico, Peru and Chile) will be inside the TPP while half (Columbia and Costa Rica) will remain outside.   Given the tight integration of these markets--both planned and underway in the Pacific Alliance--this split could be challenging to manage. 

7)   Changes in the Pacific Alliance could put pressure on APEC as well, since neither Columbia nor Costa Rica are currently members.  APEC has an expired “moratorium” on new members that is getting increasingly difficult to defend.  2015 could be the year for discussion of membership of countries like India and these Pacific states.

8)   At the multilateral system, implementation of the World Trade Organization’s agreement on trade facilitation should proceed in 2015.  The Bali deal has been stalled over India’s objections on a separate deal over food subsidies, but the blockage appears to be clearing up now. 

9)   Negotiations continue at the WTO over revisions to the Information Technology Agreement (ITA2).  This deal is meant to update the list of IT goods granted tariff free access to WTO members.  Right now, covered items include record players, but not smartphones since the current list is decades old.

Potential deals for 2015 include:

10)   In the category of potential agreements due in 2015:  the 16 parties of the Regional Comprehensive Economic Partnership (RCEP) are currently scheduled to conclude talks this year.  But the members have held 6 rounds so far and are still basically arguing over where to start.  Nonetheless, the schedule has been mapped out for conclusion of this FTA with the 10 members of ASEAN plus Japan, South Korea, China, India, Australia and New Zealand. 

11)  Another potential trade deal that might get finished in 2015 is the 23 member talks in Geneva under the heading Trade in Services Agreement (TiSA).  These trade talks are currently on the sidelines of the WTO, but may eventually be pulled back into the larger community.  The agreement is intended to update the rulebook on services trade that was first created in the early 1990s.  Given the importance of services, even in manufactured goods trade, creating a freer flow of services with greater certainty should spur economic growth and investment by companies.

12) Also possible in Geneva is a finished deal covering Environmental Goods and Services (EGS) for WTO members.  This agreement would lower tariffs on items valuable for addressing climate change like wind turbines. 

13)    And, finally, although not an Asian agreement, if concluded the Trans-Atlantic Trade and Investment Partnership (TTIP) between the United States and the European Union, could radically reshape the face of global trade, especially if the two major partners managed to coordinate regulations and standards in a meaningful manner.