Market Access on Environmental Goods and Services: Implications for India

1. Market Access on Environmental Goods and Services: Implications for India Rajan Sudesh Ratna Professor Centre for WTO Studies rsratna@nic.in rsratna@iift.ac.in

2. Doha Mandate Paragraph 31 (iii) of the Doha Ministerial Declaration calls for negotiations on "the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services", with a view to enhancing the mutual supportiveness of trade and environment.

3. Proposals • During the negotiations, members have tabled the following approaches: • Environmental Project Approach (tabled by India); • List Based Approach (by USA, EC, Japan, Canada, Qatar, Switzerland, Korea, Norway, New Zealand, Chinese Taipei etc.) • Integrated approach (initially by Argentina) • Request – Offer approach (Brazil).

4. The Lists • Earlier the Secretariat in its paper provided a list of 480 items as environmental goods. Convergence list of 153 tariff lines (Canada, EC, US, Japan, Korea, New Zealand, Norway, Taiwan, Switzerland, Penghu, Kinmen & Matsu). • The WTO Secretariat has circulated a list of 43 items identified as “climate friendly goods” by the World Bank for discussions. • Though USA & EC are at the moment supporting the World Bank list of 43 “climate friendly goods” but it is not very clear that the list will stop here.

5. July 2008 Report • In his report submitted to the Trade Negotiations Committee (TNC) in July 2008, Chairman of the Committee on Trade and Environment in Special Session (CTESS) has listed out the approaches that are on the table – list approach, integrated approach, request & offer approach and possible combination of approaches. • Report further stated that by 10 September 2008 the members submit to the Secretariat: • environmental goods of interest to them identified across as many categories as possible; and/or • environmental goods identified in any requests/offers they would have made to other Members. • Submit proposals on issues such as technical assistance, capacity building, S&DT and ToT.

6. Request Offer Approach • Members to exchange request/ offer lists of environment goods on a bilateral/ plurilateral plane for reduction/ elimination of tariffs. • Results of negotiations to be multilateralised and made available to all Members on MFN basis.

7. Possible advantage • Approach non-prescriptive, voluntary and optional and provides flexibility. • Project/ Integrated approach has limited support • Less damaging compared to list/ basket approach • Lists to be agreed depending on own needs/ priorities.

8. Present Status • Focus of discussion - elimination of duties • No talks on removal of non-tariff barriers • No talks on Services • USA & EC are at the moment supporting the World Bank list of 43 “climate friendly goods” but it is not very clear that the list will stop here. • Chairman of CTESS has submitted progress report to TNC (TN/TE/19 dated 22 March 2010) discusses para 31 of Doha Mandate.

9. INDIAN SCENARIO

10. Analysis of 43 items • There are 32 items in this list on which sectoral proposal under NAMA has been made. Chemical – 1 item, Electronics & Electrical Equipment - 13 items, Electrical & Industrial machinery (in both Sectors) – 4 items, and Industrial Machinery – 14 items. • There are 37 items which are bound. On these lines the average UR Binding duty is 33.43%. • The current applied rate is approx 8%. • The above levels will become 11.92% as new binding due to Swiss Coefficient of 20 & 12.65% if we use 22 as Coefficient. • India's export in 2007-08 was US $ 1.68 Bn as against import of US $ 2.41 Bn. During 2008-09 the export was US $ 2.66 Bn against the imports of US $ 3.38 Bn. • The major exporters to India are EC, China, US, Japan, Malaysia, South Korea in that order. They take more than half the share of our total imports.

11. Analysis of 153 items • There are 132 items in this list on which sectoral proposal under NAMA has already been made. • There are 143 items which are bound. On these lines the average UR Binding duty is 30.43%. • The current applied rate is approx 6.91%. • The above levels will become 11.20% as new binding due to Swiss Coefficient of 20 & 11.87% if we use 22 as Coefficient. • India's export in 2007-08 was US $ 5.31 Bn as against import of US $ 11.18 Bn. During 2008-09 the export was US $ 6.78 Bn against the imports of US $ 13.05 Bn. (Base year 1999 – 2001 : US $1.74 Bn.)

12. Analysis of 480 items: Facts • These represent a total of 705 items at 6 digit HS. • There are following entries as well: • 6 items from Agriculture (HS 121190, 130214,151590,152110,152190 & 251200). • 2 entries at Chapter level i.e. 2 digit HS ( 14 – vegetable plaiting materials & 48 – all types of recycled papers). • 65 entries at 4 digit HS level. • There are 551 items which are bound. On these lines the average Base Rate of binding for Doha reduction is 39.83%. • 135 items are unbound in UR. • No information available on 19 items.

13. 480 list : Tariff and trade • The average applied rate is 11.91%. • The above levels will become 12.84% as new binding due to Swiss Coefficient of 20 & 13.66% if we use 22 as Coefficient. • India's export in 2007-08 was US $ 16.72 Bn as against import of US $ 28.29 Bn. During 2008-09 the export was US $ 19.83 Bn against the imports of US $ 32.56 Bn. (Base year 1999 – 2001 : US $4.76 Bn.)

14. 480 list : Sectoral proposal • There are 316 items in this list on which sectoral proposal under NAMA has already been made. • The base rate of duty is 33.75%. • If Swiss Coefficient of 20 is applied, the Doha Round duties will become 11.89%. For SC 22 it will be 12.62%. • Imports during 1999-2001 (Av.) was US $ 2.84 Bn. Imports in 2005 – 2006 was US $ 9.15 Bn & in 2006-2007 was US $ 11.53 Bn. • Average applied rate of duty on these 316 items is 11.13%.

15. Issues • List based approach could bring outdated technology. • Most environment-related technologies of the developed world are under IP protection i.e. ToT either does not take place or comes with export restrictions/ conditionalities. • Many products are dual/multiple use products. E.g. Microwave oven, energy efficient refrigerators, electricity meters, heat exchangers, conveyers and centrifugal drums. • NAMA backdoor - SMEs could be hurt. • Are members really serious for protecting environment or is this also one of the ways to seek market access?

17. Issues (2) • No fixed definition of “Environmental goods and Services” • Avoid inverted duty structure: • Certification of only end product as being environmentally benign would provide tariff benefits to these products but in long run open up case for tariff reduction for all its sub-components/components and raw materials thereof as otherwise inverted tariff structures may arise. • This would weaken the position to negotiate for sub-components and materials which are of polluting nature but go in for manufacture of environment friendly end products. • Identifying ex-outs • Identifying dual use risk • Possibility to monitor end use: • Is it possible to certify that an environmental product will only be used for environmental purposes (i.e., actual user)? E.g. many of the renewable energy products , such as mechanical devices like AC generators, steam generators and controlling instruments are dual/multiple purpose devices which can even be used where conventional fuels are adopted for power energy/applications. • Are Customs in developing countries equipped?

18. Issues (3) • Technology Transfer & Investment: • Most environment goods are of export interest to developed countries. If developed countries get duty-free market access to the developing country, why will the investments come to the developing countries and how will TOT take place? If there is no mechanism for TOT, in the long run the developing countries may become dependent on the developed countries for their imports and the major players may create a monopolistic situation that is neither warranted nor desirable.

19. THANK YOU