Liberalising trade in environmental goods: some practical considerations

This chapter explores some practical issues that have arisen in the TO negotiations on environmental goods and services, especially issues pertaining to liberalising trade in environmental goods.

The paper outlines the following concerns:

• environmental goods are not covered by a single chapter of the Harmonised Commodity Description and Coding System and therefore an agreement on environmental goods must be defined by reference to an agreed list
• when the most detailed (6-digit) product level is insufficiently specific, it becomes necessary to agree to create common commodity descriptions at the 8- or 10-digit level in national tariff schedules
• the so-called “dual use” problem: many goods with environmental uses also can be used for non-environmental purposes

Possible solutions to these problems are explored, drawing on past experience in negotiating and implementing sectoral liberalisation agreements. The chapter also discusses issues relating to separate tariff lines for whole plants and to goods distinguished by their superior environmental performance in use. Finally, it considers some procedural and institutional issues that will have to be addressed before an agreement is concluded, notably whether to allow for the periodic addition of new goods to the agreement, and how to deal with the problem of changes over time in the relative environmental performance of competing goods.

Depending on what countries ultimately propose, negotiators may also have to consider how to treat goods:

• with multiple uses, some of which are not “environmental”
• goods sold as entire plants or systems
• goods of interest because of the processes or production methods by which they were manufactured, extracted or harvested
• goods defined by their superior environmental performance

Procedures for including such goods under a trade liberalisation agreement exist, though usually not without imposing some costs on the multilateral trading system because of the need to create additional documentation or institutions.

Should negotiators decide to create a mechanism to periodically review an agreed product list of environmental goods, and to entertain the possibility of revising it, they will eventually have to decide what institution or institutions should be assigned the various tasks. These tasks relate to the evaluation of proposals for goods to add to the list and to the creation or modification of customs codes. Environmental goods, like many other goods, are subject to rapid technological changes. Identifying them can be difficult, however, particularly if the definition extends to goods defined by their relative environmental performance in use.