US and G7 allies pressure China on zero-tariff EGA

The US and other industrial countries are seeking to push China to scrap tariffs on a wide array of “environmental goods” under a plurilateral treaty currently being negotiated.

by D. Ravi Kanth

GENEVA: The United States and its allies in the G7 group of leading industrial countries are planning to pile up pressures on China to agree at the forthcoming G20 summit on a trade agreement to eliminate tariffs on a broad range of environmental goods or face international criticism they will engineer for blocking efforts to combat climate change, trade envoys told the South-North Development Monitor (SUNS).

At their annual summit gathering (held in Japan this year in May), the G7 leaders said they “aim to conclude an ambitious Environmental Goods Agreement (EGA) that eliminates tariffs on a broad range of environmental products by the G20 Summit in September in Hangzhou, having in mind a future oriented agreement.”

The EGA is being projected as an attempt to combat climate change, even as the drivers of the proposed mercantilist-environmental goods agreement at the WTO are creating numerous hurdles in the way of developing countries’ efforts to obtain commitments on financing and technology transfer in the UN climate change negotiations.

The G7 have turned their backs on the financing and technology-sharing commitments for complying with the Paris Agreement adopted in the UN climate talks last December. For example, they did not even mention what they intend to do on the $100 billion financing commitment and proposed technology-sharing disciplines to enable the developing countries to implement the Paris Agreement.

The seven developed countries, however, exhorted the developing countries to agree to bring the Paris Agreement into force by the end of this year and implement the nationally determined contributions. They want the developing countries to comply with onerous “transparency” provisions in the climate change agreement.

The statement issued by the seven developed countries from their May summit maintained: “The G7, continuing to take a leadership role, commits to taking the necessary steps to secure ratification, acceptance or approval of the Paris Agreement as soon as possible, and calls on all Parties to do so striving for a goal of entry into force in 2016. We commit to take the lead by early, transparent and robust implementation of our nationally determined contributions, and promoting increased ambition over time. We also commit to actively participate in the regular review of global stock-take progress every five years. We commit to formulate and communicate ambitions [sic] mid-century long-term low greenhouse gas (GHG) emission development strategies well ahead of the 2020 deadline.”

Move to isolate China

Prior to the summit in Japan, the US had already created a small group of seven countries – the US, the European Union, Japan, Canada, Australia, New Zealand and South Korea – in Geneva to isolate China in the ongoing negotiations for a plurilateral agreement on environmental goods because of Beijing’s opposition to complete tariff elimination.

China had stated unambiguously at a meeting of heads of delegation at the WTO that the proposed EGA is not a multilateral agreement and that it cannot be concluded at the G20 summit as demanded by the US, according to trade envoys familiar with the development.

The EGA members include Australia, Canada, China, Chinese Taipei, Costa Rica, the EU, Hong Kong, Iceland, Israel, Japan, New Zealand, Norway, Singapore, South Korea, Switzerland, Turkey and the US.

In an attempt to isolate China in the group, the US and its coalition of willing allies have now drawn up a list of 150 environmental goods that would be further subjected to negotiations. The seven countries are required to indicate which items among the 150 can be agreed for immediate tariff elimination, which items can be placed in the staging-period list, and which items cannot be negotiated at all, according to trade envoys familiar with the development.

Following intense negotiations among the technical experts and negotiators of the seven countries on 31 May and 1 June, the trade ministers of the US, the EU, Japan, Canada, Australia, New Zealand and South Korea were to meet on 2 June in Paris to issue a ministerial statement. That ministerial statement will emphasize the need to conclude the EGA at the G20 leaders’ meeting in September.

Effectively, the US is resorting to divide-and-rule policies in the EGA negotiations because of opposition from China, which is maintaining that countries must have enough policy space before eliminating tariffs.

At the heart of the divide between the US on the one side and China on the other is whether the tariffs have to be fully eliminated or maintained close to 5% as agreed in the Asia-Pacific Economic Cooperation (APEC) forum. The US and its allies have maintained that the EGA requires members to eliminate tariffs on the basis of what was agreed in an APEC agreement.

But the APEC List of Environmental Goods refers to goods that “directly and positively contribute to green growth and sustainable development objectives [and] on which we will reduce applied tariff rates to 5 per cent or less by the end of 2015 taking into account economies’ economic circumstances and without prejudice to their positions in the World Trade Organization (WTO), as we committed in 2011.”

The 21-member APEC had agreed to cut most-favoured-nation (MFN) applied tariffs to 5% or less by 2015 on environmentally friendly goods grouped under 54 product categories. The APEC list of green goods includes a range of products from wind turbines and solar panels to water filtering machinery and oceanographic, hydrological or meteorological surveying equipment.

Out of 350 environmental goods outlined by the chair of the EGA negotiations, Andrew Martin of Australia, negotiators from over a dozen EGA countries agreed to submit their list of products based on national, commercial and environmentally justifiable criteria.

In all probability, the landing zone for the final list of products would be in the vicinity of around 200 products, including products for immediate tariff elimination and those with a transition period for bringing the tariffs to zero. The transition period would include different staging periods for sensitive environmental products.

But China has not submitted its list of products until now because of the pronounced differences with the US.

“We hope China becomes more open to the concerns raised during the consultations and members need to cover a lot of ground,” a European trade envoy told SUNS.

Privately, several countries in the EGA talks have expressed sharp concern over attempts by the US and a few other allies to create a small group for pressing ahead with an ambitious zero-for-zero tariff elimination of over 200 environmental goods, another trade envoy told SUNS.

The US wants China to agree to zero duties on the APEC List of Environmental Goods. But China maintained firmly that the APEC commitments do not require members to bring tariffs to zero.

In short, the erstwhile colonial strategies of divide-and-rule, double standards and shifting the goalposts are on full display as the seven countries ratchet up pressure on developing countries to agree on a mercantilist market-capturing environmental goods agreement under the guise of combating climate change, trade  envoys  said.  (SUNS8252)          

Third World Economics, Issue No. 616/617, 1-31 May 2016, pp12-13, 19