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This Earth Day, Washington is debating legislation to renew Trade Promotion Authority (TPA). TPA is necessary for the United States to enter into new market-opening, job-creating trade agreements, including those under negotiation across the Pacific and the Atlantic.
It also will be necessary if the World Trade Organization (WTO) negotiations for an Environmental Goods Agreement (EGA) are to bear fruit. This proposed accord promises to lower the cost of environmental goods and make them more widely available. These are technologies that help keep clean the air we breathe, the water we drink and the land we farm for today and future generations.
The United States, China, the 28 members of the European Union and 11 other members of the WTO last year launched negotiations for a multilateral trade agreement to eliminate tariffs on environmental goods. Cutting these tariffs will lower the cost of these goods and make them more widely available.
This proposed agreement has drawn the Chamber’s enthusiastic support because it is both pro-environment and pro-growth. Negotiators will consider the inclusion of such products as catalytic converters, clean-running turbines, and products to control air pollution and treat wastewater.
It’s not all glamorous, but these are important products. The WTO reports: “For instance, wastewater management includes the removal, treatment and disposal of household, commercial and industrial sewage and other waste water. These services require in most cases the use of goods, such as waste pipes, sewers and drains, cesspools or septic tanks, etc.”
The Office of the U.S. Trade Representative has noted that global trade in environmental goods approaches $1 trillion annually. However, some countries apply tariffs to these goods as high as 35%, discouraging their use.
A study by the World Bank investigated the impact of tariff barriers on environmental goods and services. It found that China applies a 15% tariff to clean coal technologies; so does India, which applies the same steep tariff on wind and solar technologies. Brazil slaps duties of 18% on solar technologies and 14% on wind turbines and related goods.
According to a report by Australia’s Institute of Public Affairs, “in Asia and Latin America the average tariff on environmentally sensitive technologies is between 15 and 20 per cent.” If governments want to promote the wider use of environmental goods, “they can do something immediately — remove their tariff barriers.”
The negotiations aim to build on the Asia-Pacific Economic Cooperation (APEC) Leaders’ commitment to reduce tariffs on a list of 54 environmental goods. However, we are keen to expand the list to additional products as well, as the Chamber suggested in comments submitted to the Office of the U.S. Trade Representative last May.
The EGA is also an opportunity to strengthen the global rules-based trading system embodied by the WTO. Recent steps forward such as the WTO’s Trade Facilitation Agreement bode well for the organization. At the same time, the negotiations to expand the Information Technology Agreement’s product coverage represent a vital and immediate opportunity. A successfully negotiated EGA would add to this momentum at the WTO.
It’s worth saying twice: Eliminating barriers to trade in environmental goods is both pro-environment and pro-growth. It’s one more good reason why Congress should renew TPA.