Trade Negotiations on Environmental Goods and Services in the LDCs Context

1
Trade Negotiations on Environmental Goods and
Services in the LDCs Context

• by
• Fahmida Khatun, PhD
• Additional Director
• Centre for Policy Dialogue (CPD)
• 24 September 2009

2
Introduction

• In view of the increased intensity of global
  environmental problems, and as a result of the
  integration of the global economy environmental
  issue has emerged as an important area of concern
  for policy makers.
• Since the beginning of the 1990s when trade
  liberalisation took place at a faster pace,
  environmental aspects became a prominent
  phenomenon in the context of its interface with
  trade policies.

3
Introduction

• The relationship between trade openness and the
  environmental quality has been discussed at
  length both theoretically and empirically by
  several authors during the last twenty years.
• An ideal situation would require compatible trade
  and environment policies as a result of which
  trade, environment and sustainable development
  can join paths in one direction.

4
Doha Ministerial Declaration on environment

• Paragraph 31(iii) of the Doha Ministerial
  Declaration (DMD) mandated negotiations on the
  reduction or as appropriate elimination of tariff
  and non-tariff barriers to environmental goods
  and services as part of single undertaking.
• Environmental goods and services have been
  specifically singled out in DMD though it was
  always on trade-liberalisation agenda of the WTO.
• Trade-environment issues as laid out in the work
  programme of the Doha Declaration are of critical
  importance to LDCs particularly in terms of
  market access opportunities for its exports to
  the global market.

5
Challenges of LDCs

• LDCs face multiple problems in the areas of
  environment which range from air and water
  pollution to soil degradation and desertification
  to depreciation of forest and fish resources to
  loss of biodiversity and ecosystem to
  urbanization and congestion.
• Some of the LDCs are also vulnerable to the risk
  of climate change which is feared to lead to sea
  level rise with severe impact on the lives and
  livelihoods of a large number of people in the
  country.
• For LDCs the challenges are (1) how to get market
  access without degrading the environment, and (2)
  how to protect the environment without affecting
  economic growth adversely and make progress in
  the trade liberalisation process.

6
Challenges of LDCs

• LDCs can tackle many crucial environmental
  problems through increased access to EGS at a
  lower tariff rate and Non Tariff Barrierss.
• This can contribute to their economic growth as
  well as to the improvement of social indicators,
  such as health.
• Access to EGS at a lower cost gives an
  opportunity to access to technology and know how.
  This can also induce energy and
  resource-efficiency in the economy.

7
Rationale for the study

• There is a dearth of adequate capacity in terms
  of general awareness as well as in terms of
  understanding on the issues of EGS negotiations
  among LDCs.
• These lacunae may undermine their policy efficacy
  in the related area in terms of identifying their
  export and import interests of EGS.
• It will be useful for LDCs to engage themselves
  in exploring the benefits and costs associated
  with liberalization of the EGS in order for them
  to be able to engage themselves fully in the
  negotiations.

8
Objectives of the study

• Based on secondary data the paper estimated the
  pattern of EG trade in LDCs, their share in
  global EG trade, and major EG exports and imports
  by LDCs.
• Meaningful statistics on trade of ES are not
  available for LDCs on the basis of which any
  analysis can be made.

9
Definition and coverage of environmental goods

• No clear agreement among WTO Members on
  definitions and coverage of environmental goods.
• OECD and APEC lists used as starting point for
  discussions on EGs in the WTO after the Doha
  Declaration.
• Member countries continued to submit their own
  proposals.
• In 2007 the WTO 153 list has been proposed by
  the Friends of EGs (mainly developed countries).
  This list is currently under discussion.

10
EGs according to WTO 153 list
Air Pollution Control Management of Solid and Hazardous Waste and Recycling System Clean up or Remedial of Soil and Water Renewable Energy Plant Heat and Energy Management Waste Water Management and Portable Water Treatment Environmentally Preferable Products, Cleaner or More Resource Efficient Technologies and Products Natural Risk Management Natural Resources Protection Noise and Vibration Abatement Environmental Monitoring, Analysis and Assessment Equipment
11
Definition of environmental services

• Similar to EG there is no clear cut universally
  accepted definition of environmental services.
• The General Agreement on Trade in Services
  (GATS)s Services Sectoral Classification List,
  W/120, sorts environmental services as (a)
  sewage services (b) refuse disposal services
  (c) sanitation and similar services and (d)
  other (cleaning services of exhaust gases, noise
  abatement services, nature and landscape
  protection services, and other environmental
  services).

12
Trade of EGs by regions, WTO 153 lists

• The market of EG trade is dominated by the
  developed countries with a share of 69
• Developed countries make up 76.4 of EGs exports
  developing countries 23.5 and LDCs only 0.1.
• Developed countries make up 61.2 of EGs imports
  developed countries 37.9 and LDCs 0.8.

13
Trade of EGs by Regions

• Growth of Environmental Goods Export, 2001-2007

Source ITC Trade Map.
14
Trade of EGs by Regions

• Growth of Environmental Goods Import, 2001-2007

Source ITC Trade Map.
15
Trade of EGs by Regions

• Share of Environmental Goods Trade, 2007

Export
Import

Source
ITC Trade Map.

16
Trade of EGs by Regions

• Trade in Environmental Goods, 2007

Source ITC Trade Map.
17
EG export according to WTO 153 product lists,
2007 (in mln USD)
Sl No. Product Group World Developed Countries Developing Countries All LDCs
1 Air Pollution Control 71937 55756 19636 7
2 Management of Solid and Hazardous Waste and Recycling Systems 130730 112925 15360 42
3 Clean Up for Remediation of Soil and Water 5905 4367 3174 40
4 Renewable Energy Plant 202314 126973 52941 65
5 Heat and Energy Management 13400 10664 2432 2
6 Waste Water Management and Portable Water Treatment 198216 158682 53638 79
7 Environmentally Preferable Products, Based on End Use or Disposal Characteristics 548 389 1969 328
8 Cleaner or More Resource Efficient Technologies and Products 8252 3900 5151 2
9 Natural Risk Management 7320 6580 2107 24
10 Natural Resources Protection 861 713 1938 14
11 Noise and Vibration Abatement 56677 43497 13960 11
12 Environmental Monitoring, Analysis and Assessment Equipment 87047 74078 11745 18
Total Total 783207 598525 (76.4) 184051 (23.5) 631 (0.1)
18
EG import according to WTO 153 product list, 2007
(in mln USD)
Sl No. Product Group World Developed Countries Developing Countries All LDCs
1 Air Pollution Control 71028.05 39974.24 30317.69 416.77
2 Management of Solid and Hazardous Waste and Recycling Systems 120349.17 66512.24 46436.98 1083.13
3 Clean Up for Remediation of Soil and Water 5469.29 3713.44 5182.74 42.91
4 Renewable Energy Plant 190689.40 121025.83 61955.97 1629.31
5 Heat and Energy Management 12493.87 1158.89 4536.07 121.89
6 Waste Water Management and Portable Water Treatment 193121.96 137971.75 68810.21 1810.00
7 Environmentally Preferable Products, Based on End Use or Disposal Characteristics 436.53 151.07 3770.69 21.08
8 Cleaner or More Resource Efficient Technologies and Products 9741.66 504.86 5554.27 123.96
9 Natural Risk Management 6172.38 3910.22 5431.66 214.10
10 Natural Resources Protection 654.34 395.87 3746.69 62.40
11 Noise and Vibration Abatement 57615.68 32929.32 20737.94 313.63
12 Environmental Monitoring, Analysis and Assessment Equipment 86023.91 53378.40 29508.55 341.49
Total Total 753796.24 461626.1 (61.2) 285989.5 (37.9) 6180.7 (0.8)
19
Trade of EGs by LDCs, 2007

• On the basis of WTO 153 list of EGs the share of
  EG export in total EG exports was 0.08 in 2007
  and the share of EG import in total EG import was
  0.82 in 2007.

20
Trade of EGs by LDCs, 2007
21
Export Value of EG in Top 10 EG Exporting LDCs
Country Export Value in 2007 (in mln USD) Export share in total EG Exported by all LDCs ()
Bangladesh 351.1 55.6
Tanzania 31.1 4.9
Nepal 29.9 4.7
Uganda 27.9 4.4
Liberia 27.0 4.3
Yemen 25.1 4.0
Angola 20.9 3.3
Madagascar 18.0 2.9
Senegal 14.7 2.3
Myanmar 14.1 2.2
Total of top 10 LDCs 559.9 88.7
Rest of the LDCs 71.25 11.3
Total LDCs 631.10 100.0
22
Import Value of EG in Top 10 EG Importing LDCs
Country Import Value in 2007 (in mln USD) Import share in total EG Imported by all LDCs ()
Angola 1248.6 20.2
Sudan 677.6 11.0
Bangladesh 488.0 7.9
Yemen 376.2 6.1
Zambia 335.9 5.4
Ethiopia 311.2 5.0
Myanmar 295.4 4.8
Tanzania 261.6 4.2
Senegal 181.8 2.9
Democratic Republic of the Congo 163.0 2.6
Total of Top 10 LDCs 4339.3 70.2
Rest of the LDCs 1841.3 29.8
Total LDCs 6180.7 100
23
Top 10 LDC EGs Exporters

• Among LDCs the share of Asian LDCs in total LDCs
  EG export was 67.8 and of African LDCs was 32
  in 2007.
• However, in case of imports Asian LDCs import
  share of EG in all LDCs EG import was 26.9
  while of African LDCs it was 77.2 in 2007.
• Top 10 LDC exporters of EGs are Bangladesh,
  Tanzania, Nepal, Uganda, Liberia, Yemen, Angola,
  Madagascar, Senegal and Myanmar.
• These 10 LDCs export 88.7 of all LDC EG exports.

24
Top 10 LDC EGs Importers

• Top 10 LDC importers of EGs are Angola, Sudan,
  Bangladesh, Yemen, Zambia, Ethiopia, Myanmar,
  Tanzania, Senegal and Democratic Republic of the
  Congo.
• These 10 LDCs import 70.2 of all LDC EG imports.

25
Top 10 LDC EGs export products

• At 6 digit level HS code top 10 EG export
  products comprise 69.5 of all LDC EG exports
• Jute and other textile bast fibres, raw or
  retted,
• Sacks bags,for packg of goods,of jute or of
  other textile bast fibres
• Buoys, beacons, coffer-dams, pontoons and other
  floating structures
• Twine, cordage, ropes and cables, of jute or
  other textile bast fibres
• Tubes, pipe hollow profiles,i/s,welded,of non
  circ cross sect,
• Tubes, pipe hollow profiles, iron or welded,of
  circ cross sect,
• Parts and accessories for use with the apparatus
  of heading No 90.15
• Prisms, mirrors other optical elements of any
  material unmounted,
• Machines mechanical appliances nes having
  individual functions
• Turbines, output , 40 MW

26
Top 10 LDC EGs import products

• At 6 digit level HS code top 10 EG import
  products comprise 33 of all LDC EG imports
• Towers and lattice masts, iron or steel
• Machines mechanical appliances nes having
  individual functions
• Parts for diesel and semi-diesel engines
• Taps, cocks, valves and similar appliances,
• Articles, iron or steel,
• Parts of electric motors, generators, generating
  sets rotary converters
• Crushing/grinding machines for earth/ stone/ores
  o oth minerals subs etc
• Static converters,
• Boards, panels, including numerical control
  panels, for a voltage lt1000 V
• Tubes, pipe hollow profiles, iron or steel,
  welded

27
Tariffs on EGs

• It has been estimated that complete elimination
  of tariffs and non-tariff barriers would lead to
  an average increase of trade in clean coal
  technology, wind/solar power generation and
  efficient lighting technology by 13.5 percent
  (World Bank 2008).
• Tariffs on EGs are already low in developed
  countries. The effective applied tariff on LDCs
  top 10 export and import EG products range
  between 0-2
• LDCs still stands to benefit from liberalization
  of EGs since much of LDC exports of EGs are
  destined to a number of developing countries
  where they face high export duty for EGs.
• Tariff rates for EGs on the WTO 153 list at six
  digit level HS codes for top 10 products exported
  from LDCs face up to 31 percent tariffs in the
  developing country markets.

28
Average applied tariffs
29
Preference Erosion

• LDCs benefit from preferential duty free
  treatment on nearly 84 percent of dutiable MFN
  tariff lines on average (WTO 2009).
• It is likely that many of the EGs will fall under
  various preferential programmes offered to LDCs
  by developed countries.
• Therefore, if these products are listed as EGs,
  tariff will be reduced at a faster pace for these
  items which will erode LDCs preferences in those
  markets and reduce their competitiveness.

30
Non-Tariff Barriers

• Standards, certifications, and environmental
  regulation limit trade to a great extent.
• Products from LDCs face difficulties in entering
  foreign markets due to a lack of appropriate
  standards for their products, which may be quite
  stringent to protect domestic suppliers.
• The lack of uniformity of environmental
  requirements and technical regulations in
  different national markets are known to affect
  the type of environmental goods that are used to
  meet environmental requirements, and thus act as
  an NTB.

31
Liberalisation of environmental services

• The main way to trade in ES through commercial
  presence (Mode 3) and temporary movement of
  natural persons (Mode 4).
• Export of ESs by LDCs is not very significant
  though some LDCs may extract economic benefits by
  exporting environment related professional
  services in the form of studies, assessments and
  consultancies.
• However, increased export of ES also requires
  less stringent regulations of importing developed
  countries as regards movement of service
  providers.

32
LDC strategy for EGS negotiations

• The negotiating strategy of LDCs should stem from
  their own requirements for import and potential
  for export of EGS.
• Additionally, domestic social, political and
  economic factors need to be kept in mind in
  arriving at a decision on liberalising EGS market
  in LDCs.
• Opportunities and challenges for liberalisation
  of EGS should be examined through in-depth
  benefit-cost analysis on a case by case basis.

33
LDC strategy for EGS negotiations

• LDCs have, to certain extent, undertaken
  autonomous liberalisation, thus significant
  further liberalisation of EGS may not be
  necessary.
• LDCs may work out an approach for the
  negotiations of EG to make it suitable for their
  domestic conditions. Considerations of narrow
  list of EGs, preference erosion, DFQF should be
  made.
• The common goal is poverty alleviation through
  employment generation and income distribution.

34
LDC strategy for EGs negotiations

• Identification, harmonisation and elimination of
  NTBs for products identified as EG are needed in
  order to facilitate trade in such goods by LDCs.
• LDCs should be exempted from the obligation of
  patent protection of EGs for a longer period.

35
LDC strategy for EGS negotiations

• Commitments by LDCs on Mode 3 and Mode 4 related
  to various infrastructural sectors of LDCs should
  stipulate the degree of market access of foreign
  firms, regulation, and standards on the basis of
  which companies should be allowed to access such
  sensitive areas in the economy of LDCs.
• This is important in order to ensure
  accessibility and affordability of essential
  products and services such as drinking water and
  sanitation

36
LDC strategy for EGs negotiations

• In order for LDCs to take full advantage of
  liberalisation of EGS technical and financial
  assistance is essential.
• Such considerations should be part of LDCs
  priority areas for resource mobilisation in the
  context of AfT initiative.
• In LDCs SME dominate the industrial sector and
  thus are not in a position to buy clean
  technologies.

37

• Thank you
• for your attention