Reducing trade tariffs on environmental goods is a worthwhile idea, but what constitutes the “good”?

The chemical industry is strongly committed to the protection of health, safety and the environment in its operations. ACC supported the inclusion of environmental objectives in recent U.S. bilateral trade agreements, which highlight the potential for positive synergies between trade agreements and environmental objectives.

It’s also important, however, to ensure that these environmental objectives don’t inadvertently lead to undesirable outcomes. The recent announcement of negotiations on a WTO Environmental Goods Agreement provides an interesting case in point.

In January 2014, fourteen countries, including the U. S., Australia, Canada, China, Chinese Taipei, Costa Rica, the European Union, Hong Kong, Japan, Korea, New Zealand, Norway, Singapore, and Switzerland, announced their intent to explore opportunities to reduce trade tariffs on “environmental goods” in the WTO. Utilizing the Asia-Pacific Economic Cooperation (APEC) agreed list of 54 environmental goods as a basis of negotiations for an environmental goods agreement (EGA), these governments aim to demonstrate that the potential for strong synergies between trade and environmental objectives at the global level.

ACC has long advocated for a holistic approach to removing trade tariffs – one that includes all industries and products rather than focusing on a narrow segment of products. A more comprehensive approach would avoid the many practical issues associated with a specific agreement on “environmental goods,” including defining what constitutes an “environmental good.”

View ACC’s Formal Comments on the proposed Environmental Goods Agreement

Perhaps more importantly, an initiative that includes a broader scope could ensure against favoring the current set of product and input “winners” without running the risk of settling far too early on solutions and dampening innovation. Technological tools to enhance energy efficiency are dynamic and continually evolving. Any agreement on environmental goods should therefore be as expansive as possible so as not to incentivize innovation only within a relatively narrow range of technologies, which would be counter to the objectives of the agreement.

Chemicals are essential building blocks for a diverse range of environmentally friendly technologies. ACC member companies are principal suppliers of innovative materials that make many economies more energy efficient. Materials for solar panels, wind turbine blades, insulation, vinyl windows and siding, and vehicle light weighting, are all derived from products of chemistry. Recent industry studies, including the ICCA Buildings Technology Roadmap and McKinsey Report on Innovation for Greenhouse Gas Reduction, demonstrate the important role the chemical industry plays in providing solutions to address challenges associated with climate change.

While trade agreements can be important tools for achieving environmental objectives, there is a risk that focusing on a narrow set of final products in an environmental goods negotiation could make it more difficult in the future to reduce tariffs on the inputs to those products or on new and emerging technologies in the future (see the WTO Information Technology Agreement for a case in point).

For the EGA to meaningfully achieve both the economic and environmental benefits intended by such efforts, we believe the agreement must comprehensively take into account the tariffs of product inputs, such as chemicals. Although ACC has many questions and concerns regarding potential scope and structure of an EGA, we look forward to maintaining a dialogue with the US government and other stakeholders as negotiations proceed.

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