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A new initiative was launched today in Geneva that promises to lower the cost of goods that help keep clean the air we breathe, the water we drink, and the land we farm for future generations.
The United States, China, the 28 members of the European Union, and 11 other members of the World Trade Organization (WTO) launched negotiations for a multilateral trade agreement to eliminate tariffs on environmental goods. The aim is to lower the cost of these goods and make them more widely available.
The proposed Environmental Goods 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, solar hot water heaters, gas and wind turbines, and products to control air pollution and treat wastewater.
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 entitled International Trade and Climate Change investigated the role 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.
In today’s generally low-tariff world, these duties are sky high. 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 in May.
Support from the global business community is significant. The Chamber was one of more than 40 business groups from around the globe who have signed onto a letter urging “governments to make the swift negotiation of an ambitious international agreement to eliminate tariffs on a broad range of environmental goods a priority.”
The EGA is also an opportunity to strengthen the global rules-based trading system embodied by the WTO. The important agreements achieved at last December’s Bali Ministerial — particularly the new Agreement on Trade Facilitation — 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, as we noted yesterday. 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. The Chamber will be following these developments with interest — and weighing in with our members’ views — as the negotiations unfold.
Read our previous post on the Environmental Goods Agreement.