'Tariff liberalisation for environmental goods should be embedded in market access negotiations'

Ulrike Schmuelling, Advisor, Federation of German Industries (VCI) / Member of the German Federation of Industries (BDI), speaks to Clifford Polycarp on the priorities for the European industry in the trade and environment agenda of the Doha Development Agenda


CP: What are the priorities for the European industry with respect to the trade and environment issues in the Doha agenda as we head towards Cancun?
US: The relationship between WTO and trade measures set out in multilateral environmental agreements (MEAs) needs to be clarified. We think that the mandate dealing with this issue is very narrow because it refers only to members of MEA and of WTO and furthermore sets out that the outcome of the negotiations shall not add or diminish to the rights and obligations of Members under existing WTO agreements. It is regrettable that the mandate is so narrow because the European industry needs legal certainty and clarity on the relationship between MEAs and WTO rules. The second issue is Environmental Labelling. We would like negotiations to be opened because we consider useful a clarification on whether the technical barriers to trade (TBT) agreement applies to eco-labelling schemes which award labels on the basis of so-called non-product related process and productions methods (PPMs). 


CP: Are you in favour of the introduction of eco-labelling schemes?
US: We live with them. Environmental labelling is already in widespread use in the western societies, especially in Europe. The European Commission, too, is strongly promoting their growth. The scope of these schemes has also been broadened to include a wider range of products. Industry has to make best use of it. However, environmental labelling schemes cause concerns because they may provide unnecessary barriers to trade and influence market access for developed and developing countries. They can have significant effects on market access if the consumer becomes more responsive to labelling. Hence, we feel that these schemes should have strict requirements to prevent them from becoming unnecessary trade barriers. The TBT agreement, which deals with technical regulations and standards, would be the most appropriate agreement to deal with environmental labelling. The GATT agreement provides for non-discrimination and national treatment. The TBT goes beyond non-discrimination and also asks for stricter transparency requirements . . It says that there must not be any unnecessary obstacles to trade. This is stricter.


CP: Does the European Commission (EC) share the same view as yours or does it have a different view of eco-labelling? From what I understand, they want to introduce eco-labelling to make it more applicable to the larger WTO membership. Is that correct?
US: With regards to environmental labelling, the European industry generally supports the approach of the European Commission. However, it will be difficult to agree on negotiations on labelling for environmental purposes in Cancun, since many WTO members are reluctant to start such negotiations. Hence, we have to live with a set of unclear rules. 


CP: What are the other priorities?

US: Another important issue is the tariff liberalisation of environmental goods. The main problem involved here is that it is very difficult to find an objective, non-discriminatory definition of what constitutes an environmental good. For example, chlorine, a chemical, is used for water purification, and therefore can be considered an environmental good. Yet, chlorine may also pose risks to the environment. This is where the ambiguity in the definition of an environmental good arises. But, how should a definition look like? I can only tell you what we don't want. We don't want the definition of an environmental good to include an end-use category. Take the example of polystyrene; it is used for the purpose of insulation of houses and to save energy; but it is also used to make a disposable cup, which could be environmentally questionable if not recycled. If the definition of an environmental good classifies polystyrene used for housing insulation as environmentally friendly, then its tariff would be reduced whereas polystyrene used for other purposes would have a higher tariff. But at the customs, it would be impossible to identify for what purpose the polystyrene will be used. It is also unknown who are the final users of this chemical. Additionally, if subjected to different tariffs we would undermine the spirit of the like-product principle laid down in Article III GATT. Given the fact that the tariff classification is one criterion to to distinguish between products, a use category introduced into the tariff schedule could also be used as a justification to prohibit the importation of the product. 


CP: Right now, there are negotiations on non-agricultural goods that are taking place. There are suggestions that once that is over, one could look at drawing a list of environmental goods and look at deeper cuts in tariffs on them. What is UNICE's/BDI's view on this?
US: We think that tariff liberalisation for environmental goods should be embedded in the overall comprehensive market access negotiations for non-agricultural goods without a priori exclusions. We believe that WTO members could, on the basis of objective and non-discriminatory criteria establish a preliminary list of goods that can be considered as environmental goods. 




CP: Does it make sense to restrict the list to end-of the-pipe uses?
US: End of the pipe products which are useful for the environment can surely be included on a list of environmental goods. Probably there will be more goods which can be identified as environmental goods, but this will depend on the negotiations. 

CP: Why do you oppose the introduction of product and non-product related PPMs in the definition of an environmental good?
US: An introduction of PPMs in the definition of an environmental good would seriously undermine the like product principle and the sovereignty of nations to set their own laws and regulations. A different tariff classification for goods on the basis of their non-product related PPMs would allow WTO members to distinguish at the border between identical goods on the basis of their process and production measure. We therefore oppose any attempt to introduce PPMs in the definition of an environmental good. This would open the door to green protectionism and discrimination, thereby undermining the basic pillar of our multilateral trading system.



CP: India, like some other developing countries, has been suggesting goods whose disposal is environmentally friendly. For example, jute and coir - essentially natural fibre based products. What is your view on that?
US: If there is already a distinction in the tariff schedule between for instance jute bags and plastic bags, jute bags could be classified as an environmental good. However, if these have the same tariff classification, then these two bags should not be distinguished in environmentally friendly or environmentally unfriendly goods.