Sustainability and Trade: Recommendations from the U.S. Chamber

Friday, June 5, 2020 - 4:30pm

Sustainability and Trade

According to the Office of the U.S. Trade Representative and OECD  global trade in environmental goods exceeds $1 trillion annually. This includes such products as catalytic converters, clean-running turbines, and products to control air pollution and treat wastewater — in sum, technologies that help keep clean the air we breathe, the water we drink, and the land we farm.  In recent years, services ranging from environmental consulting to satellite data provision for precision agriculture to financial analytics for green bonds, have added billions of dollars to global economy. The business of providing sustainability solutions has reached its present scale thanks to growing international demand and expectations of considerable growth potential. Trade policies can play an important role in enabling private sector to mobilize its resource and creativity to deliver innovations where they are most needed and where they can have the biggest environmental payoff.

Below are trade policies that will contribute immediately to environmental sustainability:

Reducing tariffs on environmental goods.

Despite the obvious benefits of trade in environmental goods, some countries apply tariffs to these goods as high as 35%, discouraging their use. APEC leaders in 2012 agreed to reduce tariffs on a list of 54 environmental goods, setting an example for other governments. Negotiations at the WTO for a multilateral trade agreement to eliminate tariffs on environmental goods were launched in 2014. Eventually, 44 countries representing nearly 90% of global trade in environmental goods were taking part, but the negotiations came to a halt in 2016. Those plurilateral negotiations should be revived or another approach to eliminate tariffs on environmental goods should be devised covering as broad a list of environmental products, materials and technologies.

Value retention in global supply chains.

The value embodied in capital goods and other products must be retained in productive use in order to reduce the environmental costs of material inputs. Remanufacturing, refurbishing, remaking and recycling are well recognized methods of value retention.  Companies should be allowed to compete internationally based on their life cycle product management. Specifically, remanufacturing helps reduce owning and operating costs by providing quality components and equipment at a fraction of the cost of a new product, and it also reduces waste and minimizes the need for raw materials. Such products have a life expectancy similar to a new product. Countries should open their borders to trade in remanufactured parts and products as well as ancillary services, including maintenance and training. New trade agreements such as the USMCA include commitments to ensure nondiscriminatory market access for remanufactured products that should be adopted worldwide as a direct and tangible support to sustainability.  Countries should promote efficient, and streamlined regulatory approvals for innovative products made with recycled materials.

Trade in Plastics

Marine plastic pollution is a major global threat.  Up to 13 million tons of plastic waste end up in the world’s oceans every year, where it damages the ecosystems vital to supporting life on Earth, with devastating impacts on people’s health and local economies.  The oceans in the Asia-Pacific alone account for an estimated 11.1 billion items of plastic, a number which is predicted to rise to 15.7 billion by 2025. According to the UN, plastics make up about 60-80% of total marine litter and if current trends continue, by 2050, the oceans will contain more plastic than fish.

Existing government policies tend to address plastics as a waste management issue, not as one involving materials design and utilization.  In addition to promoting waste management practices and investments, countries should incorporate government policy to value retention in the life cycle of plastics, including greater and transparent responsibility by producers for the end-of-life treatment of their products requires international agreements and practical cooperation.  At a minimum, such cooperation must include global technical standards and efficient regulatory approval processes for innovation in  plastics, recycled plastics, and plastic products; guidelines on circularity in plastics use and re-use; and phasing out harmful additives.

International guidelines for sustainable “green” public procurement.

Public purchasers should aim to make their purchasing as sustainable and resource efficient as possible by using international standards and eco-labels for product performance. The public sector should be a role model for resource efficient purchasing, leading the way for other sectors to follow. International agreement on sustainable procurement principles and norms will increase transparency and value-for-money competition in the public sector with better environmental outcomes. It will also bring transparency and global credibility to the various environmental claims and labels.

Sustainability-based border adjustments.

Absent agreements on international methods and data sets, national policies promoting border adjustment based on assessment of sustainability practices in exporting countries are counterproductive. At their extremes, border measures amount to trade boycotts and arbitrary exclusion of countries from the global markets. Border adjustments are not an efficient method for building up sustainable trade.

Systemic approach to product bans.

Any policies aiming to phasing out specific products or compounds must be based on a systemic approach and international consultation that allow governments, producers and consumers to engage in a coordinated action based on credible scientific evidence.

Securing a WTO agreement on fisheries subsidies.

Overfishing and depletion of global fisheries is a widely recognized problem that is made measurably worse by extensive subsidies afforded to fishing fleets worldwide. Negotiations at the WTO for a multilateral agreement to limit those subsidies could ameliorate the problem of overfishing, but talks have dragged on for years. It is rare for the nexus between a possible trade agreement and a specific environmental problem to be so clearly identified and recognized but converting goodwill into action has proven difficult. Governments must commit to concluding these negotiations at the next WTO ministerial, which will likely be held in 2021.