Tariffs and Trade in Environmental Goods

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Tariffs and Trade in Environmental Goods

• WORKSHOP ON ENVIRONMENTAL GOODS
• Geneva, 11 October 2004
• Bijit Bora and Robert Teh
• WTO Secretariat

2
Outline

• Trade in environmental goods
• Link between trade in environmental goods and
  environmental quality
• Tariffs on environmental goods
• Will not cover non-tariff barriers
• Summary and conclusions

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I. Trade in environmental goods
4
Definitions

• Environmental goods in this paper will refer only
  to goods defined by APEC and OECD lists
• Lists are products of long international effort
• One list has been created for the purpose of
  trade liberalization
• They cover a wide range of subsectors that
  alternative lists will most likely contain some
  subsets of these goods
• Trade and tariff data are aggregated at the HS 6
  level.
• Trade and tariff data based on UN Comtrade and
  WTO IDB sources

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Differentiating between APEC and OECD lists

• There are some differences such as
• Large group of chemicals are excluded from APEC
  list
• Clean technology is in OECD but not APEC list
• But otherwise many more similarities
• Sectors in one list can be easily mapped into
  sectors in the other list
• Bulk of trade is in common tariff subheadings

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APEC and OECD lists
7
Bulk of trade is in tariff subheadings common to
both lists

• APEC-only 24

• OECD-only 31.4

• Common Subheadings 76

• Common Subheadings 68.6

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Trends in overall trade in environmental goods

• In 2002, total exports of environmental goods
  amounted to about 238.4 ( 215.3) billion when
  one uses the OECD (APEC) defined list,
  representing between 3.6 to 4.0 per cent of world
  exports.
• It is smaller than textiles trade a third the
  size of chemicals trade and a tenth of trade in
  machinery and transport.
• But n the past dozen years (1990-2002), trade in
  environmental goods has grown more than twice as
  fast (14) as total merchandise trade (6).
• Factors fuelling this dynamism
• Greater awareness of the value of the environment
  and concern about pollution (Conca and Dabelko)
• Institutionalization of environmental protection
  in countries around the globe (series of OECD
  country studies)

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Env. goods compared to other sectors
10
Growth of environmental goods trade, 1990-2002
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Trade by regions and level of development

• The major traders are Western Europe, Asia and
  North America making up over 90 per cent of
  exports of environmental goods and over 80 per
  cent of imports of environmental goods.
• Western Europe alone accounted for almost half of
  environmental goods exports and is a net exporter
  whether the APEC or OECD definition is used.
  Asia is the second largest trader of
  environmental goods and is a net importer whether
  the APEC or OECD definition is used. North
  America is a net exporter only if the APEC
  definition is used. All the other regions are
  net importers of environmental goods, whichever
  definition is used.
• Developed countries make up 79 of environmental
  goods exports developing countries about 20
  and LDCS less than 1. Developed countries make
  up 60 of environmental goods imports developed
  countries 39 and LDCs less than 1.

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Regional distribution of trade, 2002
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Share of env. goods trade, by level of development

• LDCs 0.2

• LDCs 0.04

• Developing 22

• Developing 37.7

• Developed 62

• Developed 78

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Trade in env. goods by level of development
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Top traders of environmental goods

• A list of the top 20 exporters and importers of
  environmental goods for the year 2002 has been
  drawn up.
• 19 of the top 20 exporters are the same (although
  the ordering is slightly different) whether the
  APEC or OECD list is used. For importers, the
  top 20 countries are the same.
• There are a fair number of developing (mostly
  from Asia) and transition countries in the top 20
  traders.
• The top 20 exporters of environmental goods
  accounted for about 93 per cent of world exports
  in those goods while the top 20 importers
  comprised nearly 87 per cent of world imports of
  environmental goods. This degree of
  concentration is greater than in overall
  merchandise trade where the top 20 exporters in
  2002 accounted for just a little over 82 per cent
  of world exports.

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Top 20 exporters of env. goods (OECD list), 2002
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Top 20 importers of env. goods (OECD list), 2002
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Major categories of environmental goods trade

• Biggest traded sectors are waste water
  management, environmental monitoring and
  analysis, solid waste management, air pollution
  control, noise and vibration abatement

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Trade by categories of (OECD) environmental goods

• Resource Management

• Air pollution control

• 10

• 10

• Cleaner Technologies

• 1

• Environmental monitoring

• analysis and assessment

• 15

• Waste water management

• 34

• Noise and vibration abatement

• 12

• Remediation and clean-up

• 5

• Solid waste management

• 13

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Trade by categories of (APEC) environmental goods

• Renewable Energy Plant

• 4

• Air Pollution Control

• Noise/vibration abatement

• 12

• 7

• Other Recycling Systems

• Remediation/cleanup

• 1

• 0

• Solid/Hazardous Waste

• 9

• Heat/Energy Management

• 1

• Potable Water Treatment

• 5

• Monitoring/Analysis

• 35

• Waste Water Management

• 26

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II. Trade in environmental goods and
environmental quality
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Trade in environmental goods and environmental
quality

• It would strengthen the argument that
  liberalization of environmental goods would not
  only increase trade in these goods but also
  improve environmental quality if we can find
  econometric support that countries which trade
  more environmental goods also achieve better
  environmental outcomes.
• Environmental indicators analyzed nitrogen oxide
  (NOx), biochemical oxygen demand (BOD) and per
  capita energy consumption.
• International data (from over 200 countries) on
  environmental indicators is available only for
  1995 1999. Source The Emission Database for
  Global Atmospheric Research (available from
  World Resources Institute) and the World Bank.

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Results and qualifications

• Equation Qi a0 a1(GDP/Cap)i a2(GDP/Cap)i2
  a3(GDP/Cap)i3 a4(Envtrade)i a5Zi ui
• Explanatory Variables GDP per capita (following
  Grossman and Krueger), value of environmental
  goods trade, land area, OPEC membership, etc.
• Conclusion There is a negative (i.e., a4 lt 0)
  and statistically significant link between trade
  and environment. Countries which trade more
  environmental goods have less pollution or
  consume energy more efficiently. This holds
  whether the OECD or APEC list is chosen as the
  explanatory variable in the regressions.
• Qualifications This is an ongoing exercise. Need
  to expand the range of environmental indicators
  beyond those indicated. There is a need to look
  at more recent international data.

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Environmental goods trade and nitrogen oxide
emissions
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Environmental goods trade and biological oxygen
demand
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Environmental goods trade and energy consumption
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III. Tariffs on environmental goods
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Tariff issues

• Level of tariffs based on APEC and OECD
  definition
• Cross-country distribution of tariffs
• Binding coverage
• Modality by which tariff reductions on
  environmental goods will be addressed.

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Binding coverage
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Average applied tariff
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Applied and bound Rates

• APEC

OECD
32
Avg applied tariff by category
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DDA and environment

• Mandate from para 31 (iii)
• Broader mandate for NAMA in para 16
• Tariff issues
• Binding
• Tariff reductions
• Less than full reciprocity

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Approaches to tariff reductions

• Formula
• Line by line reduction
• Will not target environmental goods
• Sectoral approach
• Deeper reductions on agreed sectors
• Environmental goods have not been discussed

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July package

• No agreement on specific elements
• Broad contours of interest to para 31(iii)
  mandate
• Exempt LDCs from tariff reductions
• Exempt low binding countries 35 from formula
  reductions

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July Package

• 16. We furthermore encourage the Negotiating
  Group to work closely with the Committee on Trade
  and Environment in Special Session with a view to
  addressing the issue of non-agricultural
  environmental goods covered in paragraph 31 (iii)
  of the Doha Ministerial Declaration.

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Summary of tariff issues

• Binding coverage is high for most countries and
  slightly better than the non-agricultural
  average.
• Applied tariffs on environmental goods are lower
  than the Non-agriculture average for most
  countries.
• Large gap between bound and applied rates.
• Developed countries have lower tariffs on
  environmental goods than developing and LDC
  countries.

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IV. Summary and conclusions

• Trade
• Env. goods trade is still small but growing
  rapidly
• Mostly intra-developed country trade
• Developing countries are net importers of
  environmental goods
• Trade and environment
• there is some statistical evidence that link more
  trade in env. goods to lower pollution levels
• Tariffs
• Binding coverage is slightly better for
  environmental goods than for non-agricultural
  goods
• Applied tariffs on environmental goods are also
  lower on average than on non-agricultural goods
• Binding coverage of developed countries is high
  and applied tariffs low. Binding coverage is
  lower in developing countries, but higher applied
  tariffs.

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Summary and conclusions (cont.)

• DDA and environment
• Continue to enhance co-operation between NAMA and
  Trade and Environment (SS).
• Sequence environment and non-environment, or do
  together?