EGA, Energy & Environment

Will we see an Environmental Goods Agreement in 2016 ?  

2016-09-28-peter-brun

Chances that EGA, the WTO’s Environmental Goods Agreement, is concluded this year are high, argues Peter Brun. EGA wll bring many systemic benefits for the world trading system and for the climate. But there still are many difficult outstanding issues to resolve.

 

The negotiations for an Environmental Goods Agreement (EGA) launched in July 2014, have now entered their very end-stage. After sixteen rounds of technical talks, the prospects for a ‘green’ trade agreement with the potential to boost global exports of environmental goods by US$ 119 billion [€ 105 billion] per year, are very good. EGA is now ready for the final push !

 

An opportunity for the climate and for the multilateral trading system

 

EGA will deliver global systemic benefits.

 

It will make an important contribution from environmental trade and technology to the December 2015 Paris Climate Agreement. EGA could also be the first new international ‘formula agreement’, showing that the new approach to trade agreements adopted after the defunct Doha-round in the World Trade Organisation delivers effectively. This in turn will help deliver a positive, long-awaited contribution from the WTO to securing new international trade agreements and supporting the global economy.

 

The EGA negotiation process so far has set new standards of openness of international ‘government-to-government’ negotiations: industry, NGOs and trade experts have been actively engaging with delegations and held several workshops and mini-seminars during the sixteen negotiation rounds in Geneva and in the capitals over the last two years. Close public-private-engagement has so far shown its positive effect for new international trade negotiations, which others should learn from. EGA negotiators must have felt an inspiring strong interest – and gentle pressure – from civil society for this green trade agreement. This of course is always an encouragement if you are a trade negotiator to ensure your work and efforts make a clear positive difference.

 

Another clear sign of why EGA is in its end-game is the strong political commitment which has been shown at the highest level at the G20 trade ministers meeting in July and more recently the G20 heads of state summit at Hangzhou earlier this month, where is was stated: “G20 Environmental Goods Agreement (EGA) participants welcome the landing zone achieved in the WTO EGA negotiations, and reaffirm their aim to redouble efforts to bridge remaining gaps and conclude an ambitious, future-oriented EGA that seeks to eliminate tariffs on a broad range of environmental goods by the end of 2016, after finding effective ways to address the core concerns of participants.”

 

Sticking points

 

Despite the good preparation and high-level political support, there are a number of serious sticking points to be resolved in the coming last twelve weeks of negotiations.

 

The most important ones are not surprisingly associated with the level of tariff elimination on the chairman’s list of 304 products. Although the mandate of the EGA clearly was to seek full tariff elimination on what can be regarded as already low tariffs (so-called ‘nuisance tariffs’ at 2-8 percent of the value of the product), it is still not clear if some tariffs will go down to zero. A small group of EGA members wants to seek long phase-out periods over time for a number of products which they deem sensitive. The instrument for dealing with this is the staging-format used in the December 2015 Information Technology Agreement concluded in Nairobi – with phase-out periods of three, five and seven years for a limited number of tariff-lines not included for immediate elimination.

 

The EGA mandate did however build on the structure of an APEC – Asia Pacific Economic Cooperation group – list of 54 environmental products, but with a view and commitment to make EGA go further than APEC, which foresees a 5 percent tariff ceiling for these products.

 

Industry players have been very vocal in their calls to see an ambitious agreement with the potential of having a real impact: they want the great majority of tariff lines to see duties go to zero, as it does not make a lot of sense to maintain already low nuisance tariffs.  If EGA is supposed to deliver a strong trade contribution to the Paris agreement, it does not make a lot of sense to maintain tariff protection of home markets. This will just make climate-friendly technologies relatively more expensive.

 

A further sticking point in the discussion has been to what degree ‘sub-components’ used in the environmental ‘end-product’ should be included in the agreement. Here again industry has been very vocal about the need to have all core components included in the tariff elimination, as such sub-components may be essential for the very functioning of the end-product – for example a gearbox in a wind turbine.

 

There are more ‘horizontal’ issues outstanding. One is the structure of the planned review clause. All participants seem to recognize the need for an annual or at least bi-annual technical review mechanism – to deal with new environmental products and components in the broader supply-chains. The other is the issue of free-riding of major economies not yet part of the EGA,  because the EGA will be an MFN-type agreement eliminating tariffs for other WTO members even if they are no EGA signatories.

 

The positive effects of the recent G20 declarations were strongly felt during the 16th EGA round last week in Geneva, where negotiators appeared cautiously optimistic. Despite the difficult outstanding issues, there is  a very good and constructive atmosphere in and around the EGA negotiations, which gives hope that we will see an international green trade agreement this year.

 

I am very optimistic that the seventeen governments behind the EGA will do the right thing and close an ambitious, living environmental trade agreement this year. This is clearly documented to be a compelling and smart policy with many win-wins for sustainable growth and the climate change challenge.

 

Also finally let me use this article to send a strong encouragement to all countries currently outside the EGA to join the agreement as soon as possible. I know from my many meetings with governments and industries outside the EGA over the years that there is a lot of interest in this trade agreement: so do join! This will be applauded by both your citizens and companies who are eager to take part in the global environmental value chains and use of clean technologies in the future.

 

Peter Brun is a trade and green industry expert based in Denmark. He can be contacted at pbrun@outlook.dk

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