In a speech at the Informal TradeMinisters’ Dialogue on Climate Change in Bali on 8-9 December 2007,WTO Director-General Pascal Lamy said that the Doha negotiations on environmental goods and services could deliver “a double-win for some of ourMembers: a win for the environment and a win for trade”. Lamy believes that the issue of climate change intersects with international trade in amultitude of different ways, and that while theWTO does not have specific rules relating to energy, to the environment, or to climate change per se, theWTO rules are, nonetheless, relevant to solving the issue of climate change. Susan Schwab (US Trade Representative) and PeterMandelson (EU Trade Commissioner) also declared, on 7 December, that climate change is a trade and investment challenge “because the technology that helps us drive down greenhouse-gas emissions is traded like any other. The skills and expertise to tackle climate change can be exported.”

According to Pascal Lamy: “much work is being conducted at themoment—in various quarters—on how theWTO tool box of rulesmay be leveraged in the fight against this environmental challenge.While some are looking atWTO rules on taxes, others are looking at the rules on subsidies and intellectual property for instance.” However, he cautions that “it is not in theWTO that a deal on climate change can be struck, but rather in an environmental forum, such as the United Nations Framework Convention on Climate Change. Such an agreementmust then send theWTO an appropriate signal on how its rulesmay best be put to the service of sustainable development”.

According to the Organisation for Economic Cooperation and Development (OECD), the globalmarket for environmental goods and services is estimated to be worthmore than US$550 billion every year (of which green services account for 65% and green goods 35%of thismarket). The European Commission reports that trade in green goods and services is growing twice as fast as globalmerchandise trade as a whole. The EU accounts for around 30%of thismarket; other countries are also developing strong capacity, such as China, India (a leading exporter of hydraulic turbines), Indonesia (a leading exporter of steamcondensers),Malaysia (a leading exporter of photovoltaic cells) and Thailand (a leading exporter of filtering and purifyingmachinery for gases).

It is in this context that the EU launchedwith the US a proposal formuch freer trade in green goods and services as part of the Doha Round. This proposal aims to eliminate tariffs and non-tariff barriers in trade in key climate-friendly goods and services that have a clear role in protecting the environment and promoting sustainable development. Bymaking it cheaper and easier to trade in these goods and services, the EU proposal hopes to help spread green technologies globally, especially to industrialising developing countries. The EU and the US proposal is a two stage process as part of a final Doha agreement: 

  • First, agreement to liberalise trade in at least 43 goods with clear environmental benefits drawn fromaWorld Bank list including wind turbines and related products, solar panels, solar driven stoves and boilers, thermostats, and refrigeration equipment. This list could be supplemented by other products with a clear environmental benefit, such as goods related to air pollution control, waste watermanagement and potable water treatment, and wastemanagement.
  • Second, an evenmore far-reaching Environmental Goods and Services Agreement (EGSA) to be negotiated byWTO Members, which would entail further binding commitments to abolish tariffs and non-tariff barriers in trade in green technologies. In services, the proposal includes commitments forWTOMembers interested in liberalising sectors that contribute to their efforts to combat climate change such as environmental services, engineering, architecture, and construction of energy-efficient facilities. Furthermore,WTOMembers participating in services negotiations would be expected to schedulemarket access commitments on climate change-related services such as air pollution and climate control services, technical testing and analysis, energy-related services, and services for the design and construction of energy-efficient buildings.

However, agreement on such a listwill be difficult to reach as evidenced by Brazil’s rejection of the EU-US proposal on 4 December. According to Roberto Azevedo, deputy viceminister for economic affairswith Brazil’sMinistry of Foreign Affairs, the proposal is “modest, biased and protectionist.” Azevedo said the absence of biofuels and biofuel-related goods fromthe US-EU list of covered goodswas “particularly striking.”He noted thatwhile the list includes all parts and components necessary to build wind and solar energy plants, the list does not include a single part or component used to build ethanol plants.

Brazil is a leading producer of ethanol biofuel, which itmanufactures fromsugarcane; this is cheaper than ethanol derived fromcorn or sugar beets, themain source for ethanol production in the US and the EU. Yet, Brazil is hindered from exporting ethanol to these twomarkets due to the high import tariffs designed to shelter US and EU producers.

However, the US and the EU have refused to include biofuels as they consider it to be an agricultural good which should therefore be dealt with in the Doha Round talks on farmtrade. In contrast, the US-EU proposal on environmental goods and services has been submitted within the context of the Doha talks on non-agriculturalmarket access (NAMA) and services.