Talks to finalize EGA intensify but deal remains uncertain

Whether a plurilateral agreement to scrap import tariffs on a range of so-called environmental goods can be secured by December remains up in the air.

by D. Ravi Kanth

GENEVA: Even as efforts to finalize a plurilateral tariff-elimination agreement on environmental goods among 17 countries by early December intensify, prospects for concluding a comprehensive deal remain uncertain due to several imponderables, trade envoys told the South-North Development Monitor (SUNS).

During a meeting of trade envoys from the 17 countries on 30 August, there was a tentative agreement to accelerate negotiations on the basis of the chair’s revised draft list of 304 tariff lines.

The chair of the so-called Environmental Goods Agreement (EGA) negotiations, Andrew Martin of Australia, after bilateral consultations, had circulated a revised draft list of 304 tariff lines to the participating countries more than a month ago.

The EGA negotiating countries are Australia, Canada, China, Costa Rica, Chinese Taipei, the European Union, Hong Kong (China), Japan, Korea, New Zealand, Norway, Switzerland, Singapore, the United States, Israel, Turkey and Iceland.

At the 30 August meeting, the envoys directed their negotiators to discuss four issues in the next round of consultations beginning on 16 September. The four issues are:

(i) the final list of products based on the chair’s list;

(ii) the staging of products for phasing out tariffs in three, five and seven years;

(iii) the critical mass for bringing the agreement into force;

(iv) the work plan to further discuss environmental services and non-tariff barriers.

Continued differences

Despite agreeing to pursue the four issues, the EGA members continue to differ on each issue, said a developing-country trade envoy who asked not to be quoted.

The envoy suggested that the list of 304 products is not acceptable to some members like China, which wants a realistic outcome for reducing or eliminating tariffs on around 50-odd tariff lines. Although China agreed to discuss on the basis of the chair’s revised list, it is not clear how it would engage on so many products during the next three rounds, the envoy suggested.

Also, there is no clarity yet on how many products will be eligible for immediate tariff elimination once the agreement comes into force. Several industrialized countries led by the US, the EU and Japan want to include a large majority of products for immediate tariff elimination, but several developing countries, especially China, might push for a modest list of products for immediate tariff elimination.

There are also differing views among EGA members as regards staging of products. While some members want the issue of the staging periods of three, five and seven years for eliminating tariffs on EGA products to be discussed after there is convergence on the final list of products, major industrialized countries such as the US and the EU want to discuss both the number of products and staging of products simultaneously, the envoy added.

An associated issue is how members would include their preferred products in the categories of three, five and seven years – i.e., whether members will frontload the products in the three-year category or backload them in the seventh year.

Without clarity on the list of products and the staging issue, it would be difficult to decide the issue of critical mass, i.e., when the agreement could be brought into force based on the percentage of products that are going to be covered in the agreement and their share of the global market.

Several industrialized countries led by the EU also want to discuss other issues such as environmental services and non-tariff barriers, but there is skepticism on the part of some countries like Turkey towards bringing environmental services into an agreement concerned with goods, trade envoys said.

Applicability to non-members

Significantly, the EGA members will also have to decide whether the tariff elimination on the final list of products agreed among the 17 countries will be multilateralized or whether there will be exceptions to keep non-participants from availing themselves of the proposed benefits.

[The “most favoured nation” (MFN) provisions of the WTO and the General Agreement on Tariffs and Trade (GATT) 1994 require that any concessions (tariff or non-tariff) exchanged among members become unconditionally applicable to all other WTO members. Whether the new tariff concessions are bound or merely applied makes no difference.

[The EGA members themselves are obliged to notify the WTO of any concessions exchanged among themselves even if among themselves they have agreed on some conditions. The moment they notify, the concessions are unconditionally applicable to all other WTO members. If an EGA good is exported to an EGA member by a non-EGA member but does not receive the same concessional treatment, this can automatically be raised as the subject of a trade dispute in the WTO.

[There is no provision or exception in GATT 1994 to enable a conditional exchange of trade concessions in such a case. The EGA will not qualify as a customs union or a free trade agreement, restricted as it is to only one sector of goods.

[The tariff concessions under the Information Technology Agreement (ITA-1) became applicable to all non-members unconditionally. – SUNS]

Earlier, China had insisted that “free riders” cannot avail themselves of the benefits of the EGA; if Beijing continues to adopt the same stand, then there will be fresh problems, the envoy suggested.

Given these imponderables and differences among members, it remains to be seen whether the US will succeed in its attempts to conclude the agreement before President Barack Obama completes his term in about five months.

Against this backdrop, it is highly unlikely that the 17 countries will conclude the final EGA deal by early December despite optimism on the part of the EU and other industrialized countries. (SUNS8305)                                         

Third World Economics, Issue No. 624, 1-15 September 2016, pp7-8