Options for liberalising trade in environmental goods in the Doha Round

This paper stems from WTO discussions of the mandate from paragraph 31(iii) of the Doha Ministerial Declaration to “reduce or as appropriate eliminate tariffs and non-tariff barriers” on environmental goods since 2001. It argues that environmental benefits from liberalising this first category of environmental goods are only likely to flow if the price effect is large enough to persuade governments to adopt stricter regulation. Hence, WTO negotiators need to move beyond focusing on these goods, derived primarily from lists developed by the Organisation for Economic Co-operation and Development (OECD) and Asia-Pacific Economic Co-operation (APEC). It notes that, in an era of dynamic technological innovation, it will be to the advantage of developing countries to invest in state-of-the-art technology, avoiding second-best technologies, and any approach to liberalising environmental goods that hopes to be supportive of the environment and development must take this into account.

Some key points are:

• on the economic side, the environmental goods industry will gain from tariff liberalisation of established environmental technologies to the extent that the export market for environmental goods in developing countries will be enlarged
• however, it must be borne in mind that tariff liberalisation alone may not suffice to foster the transfer of latest technologies and active policies by the government targeted to induce or create a conducive environment for technology transfer may need to be put in place
• further WTO Members must make sure that liberalisation does not encourage ‘dumping’ of old or outdated technologies

For the second category of environmental goods, known as environmentally preferable products (EPPs), there are direct environmental impacts as a result of consumer behaviour:

• tariff reduction will change the relative prices of EPPs and non-EPPs in the market place such that some consumers will substitute EPPs for non-environmentally preferable products
• to address this problem, members could agree to lower tariff rates on goods that fulfil the criteria and as such are ‘environmentally preferable’; or they could they could sign a protocol or separate treaty that could include a positive list of products that would implicitly include any product that meets the criteria-based definition of an EPP
• however, while many developed country consumers already prefer EPP-type products, and are likely to consume more of them as a result of reduced prices stemming from tariff cuts, developing country preferences for EPPs are relatively low, with price and functionality acting as more important purchasing criteria.