1 Environmental Goods: Lessons from GATT and WTO Sectoral Initiatives Ronald Steenblik OECD Secretariat (Trade Directorate) WTO Workshop on Environmental Goods Geneva, 11 October 2004

2 Prior GATT or WTO sectoral liberalisation agreements & initiatives µ 1979 (Tokyo Round) Agreement on Trade in Civil Aircraft (ATCA) µ 1995 (Uruguay Round) Chemical Tariff Harmonization Agreement (CTHA) µ 1995 Uruguay Round zero-for-zero initiative on Trade in Pharmaceutical Products µ 1996 Information Technology Agreement (ITA)

3 Decision variables (1) µ Participation µ Product coverage by type or end use? µ Procedures and criteria for selecting goods, especially when: l there is insufficient specificity at 6- digit HS level; l some goods have multiple end uses; l sector includes sensitive products.

4 Decision variables (2) µ Modalities for liberalisation: l end level(s) of tariffs; l timing and formula for tariff reductions; l non-tariff barriers (NTBs) µ Post-agreement institutions and procedures: l to deal with unfinished business; l to deal with mistakes; l to expand product coverage; l to address problem of moving targets?

5 A comparison of the different agreements and initiatives

6 Participation Civilian Aircraft Initially 17 signatories (among which Commission of European Communi- ties and 9 EU members); currently 28 Chemicals Initially 22 signatories (incl. CEC & EU 15); currently over 30 Pharmaceutical Products Initially 22 participants (incl. CEC & EU 15) Information Technology Initially 29 signatories (incl. CEC & EU 15) approx 90% of world trade in covered products; currently 63 (incl. CEC and 25 EU)

7 Product Coverage (1) Civilian Aircraft All CA, as well as CA engines and parts and components, all components and sub-assemblies of CA, and flight simulators and their parts and components; mainly concerns HS chapter 88. Chemicals All of HS chapters 28-39, except for a few items considered part of the Uruguay Round agricultural negotiations.

8 Product Coverage (2) Pharmaceutical Products Active pharmaceuticals, their derivatives, dosage-form products, and chemical intermediates intended for the manufacture of pharmaceuticals, mainly concerns chapter 29 (Organic chemicals) and 30 (Pharmaceutical products) of the HS. Information Technology Mostly products from Chapters 84, 85 and 90 of HS.

9 Insufficient specificity at 6-digit HS (1) Civilian Aircraft Not initially seen as a major problem; some changes incorporated into later versions of the HS; others made into ex outs Chemicals Because coverage of Agreement is comprehensive, specificity is not considered an issue

10 Insufficient specificity at 6-digit HS (2) Pharmaceutical Products Any product classified in HS chapter 30 or in sub-headings 2936, 2937, 2939, or 2941 is eligible for duty-free entry. However, because of insufficient specificity in other sub-headings of HS chapter 29, notations (cross-reference to list) in national tariff schedules are required for other products

11 Insufficient specificity at 6-digit HS (3) ITA Two specific lists (Annex A) negotiated with many ex outs; participants expected to create sub-divisions in their national tariff schedules, and indicate these in schedules of concessions for tariff reductions submitted to the WTO. Another positive list (Annex B) of products to be covered by the ITA wherever they are classified in the HS; participants expected to attach an annex to their schedules of conces- sions specifying the detailed HS headings for those products at either the national tariff line level or the HS 6-digit level.

12 Decision tree: classification of non-specific goods Go beyond harmonised tariff lines? Across-the-board liberalisation of all industrial goods Liberalisation at 6-digit HS level only Decisions on classification handled by WTO alone? Countries agree to implementex-outsat national level Countries refer classification issues to World Customs Organisation (delayed implementation) Discussions take place to agree both descriptions and classification Separate treatment of goods? no yes Go beyond harmonised tariff lines? Across-the-board liberalisation of all industrial goods Liberalisation at 6-digit HS level only Decisions on classification handled by WTO alone? Countries agree to implementex-outsat national level Countries refer classification issues to World Customs Organisation (delayed implementation) Discussions take place to agree both descriptions and classification no yes

13 Dealing with multiple end use Civilian Aircraft Criterion of essential character of, but also markings allowed. How to distinguish civilian from military use remains an issue. Chemicals Not considered an issue Pharmaceutical Products Some products included if more than ½ of consumption is used for finished pharmaceutical prods Information Technology Some end-use distinction at the border

14 Modalities for liberalisation (1) Civilian Aircraft Eliminate by all customs duties and other charges; government- directed procurement also banned. NTBs eventually covered by Agreement on Technical Barriers to Trade (TBT Agreement) Chemicals Tariffs to be reduced and harmonised at a maximum level of 5.5% or 6.5% by NTBs (not addressed) dealt with by TBT Committee

15 Modalities for liberalisation (2) Pharmaceutical Products Tariffs reduced to zero (on an MFN basis) to all WTO members, without counter- concessions from non- participants, effective 1 January NTBs (not addressed) dealt with by TBT Committee

16 Modalities for liberalisation (3) ITA Tariffs on all products listed in the Declaration reduced to zero (on an MFN basis) by , and all other duties and charges bound at zero. (However, possible to extend implementation period up to 2005 for sensitive items.) NTBs in ITA were unfinished business; work programme commenced in Many NTBs identified so far.

17 Institutional and procedural issues (1) Civilian Aircraft The Committee on Trade in Civil Aircraft (the Committee) meets at least once often twice a year, to afford Signatories the opportunity to consult on any matters relating to the operation of the Agreement. There is also a Technical Sub-Committee of the Committee, which last met in 2001, mainly to discuss product coverage; and a Sub-Committee of the Committee, which last met in 1995.

18 Institutional and procedural issues (2) Chemicals Because coverage of Agreement is comprehensive, and only deals with tariffs, there has been no need to create any new institutions

19 Institutional and procedural issues (3) Pharma- ceutical Products No new Committee created at the WTO. Negotiations on which new products to include in the Pharmaceutical Annex take place among participants (i.e., outside the WTO), at least once every 3 years, on the basis of: µ a list of active pharm. and dosage-form products (listed by their Int. Non-proprietary Names) provided by the World Health Org; and µ lists of chemical intermediates intended for the manufacture of pharms. suggested by industry.

20 Institutional and procedural issues (4) Information Technology Participants to meet periodically under the auspices of the Council on Trade in Goods to review product coverage. Most work gets done by the Committee of Participants on the Expansion of Trade in Information Technology Products. Some informal consultations have taken place with the WCO over classification issues.

21 Lessons

22 Many ways in which sectoral initiatives have been designed … µ Participation: l plurilateral or multilateral µ Product coverage: l by product characteristic, function, end use, or combination; wide or narrow µ Procedures and criteria for selecting goods: l specificity expected to be reflected in amendments to HS, or agreed among participants with or without formal WTO involvement; l multiple use problem avoided ex ante or through end-use customs procedures (e.g., ATCA)

23 … and implemented µ Modalities for liberalisation: l Tariffs: to zero or to a small %; immediate or phased over several years l Non-tariff barriers: not addressed; addressed separately (ITA), or delegated to TBT Committee (ATCA) µ Post-agreement institutions and procedures: l CTHA was simplest: no new institutions l Others anticipated they had to periodically review (with a view to expanding) product coverage l ITA and ATCA left unfinished business, which has proved to be considerable

24 Where we are with EGs (1) µ Participation: multilateral µ Product coverage: l so far by product characteristic or function, across many HS chapters µ Procedures and criteria for selecting goods: l Specificity to be agreed among participants with formal WTO involvement? l Multiple use problem to be avoided through ex ante decision criteria?

25 µ Modalities for liberalisation: l Tariffs: to be decided l Non-tariff barriers: not yet addressed, but could be significant for some products µ Post-agreement institutions and procedures: l Will depend on outcome of above, but some procedure or institution will be needed for keeping product list(s) up-to-date. l Deal with NTBs separately or in TBT? l How to maintain link with env. services? Where we are with EGs (2)

26 Thank you for your attention. Questions?