INSIGHT: Industry bemoans Davos trade progress

24 February 2014 15:44 Source:ICIS News

By Nigel Davis

LONDON (ICIS)--“Make no small plans” European chemical trade group Cefic said in a statement this month bemoaning the thrust of an agreement made at the World Economic Forum in Davos, Switzerland, to liberalise trade in environmental goods.

The industry is clearly concerned that the plurilateral trade proposal - the US, Japan, the EU and 10 other World Trade Organisation (WTO) member nations had agreed a process to liberalise trade in products that are seen as beneficial to the environment - probably makes it even more difficult to make real progress on wider multilateral deals.

Multilateral trade talks foundered time and again in the Doha round of negotiations, which began in 2011, and prompted a resurgence in bilateral agreements that some see as divisive and ultimately detrimental to global trade. The breakthrough in Bali, Indonesia, late last year, however, was recognised as a welcome positive step for the WTO.

There is particular concern in the chemical industry now, though, that a plurilateral agreement on environmental goods would be based on a controversial product list agreed at the Asia Pacific Economic Forum (APEC) in 2012.

That list includes products such as bamboo floor panels, municipal incinerators, chlorine dioxide generators, solar heaters, waste treatment plant and machinery, and wind power equipment but no chemicals.

“We would expect the WTO to free up trade across the board,” said Cefic’s director general, Hubert Mandery. “Bolder steps are needed by them to regain their lead in trade liberalisation.”

The chemical industry believes that any list of so-called environmental goods risks “being arbitrary, discriminatory and clouding the tariff classification system”. Polystyrene, for instance, may be classified as a packaging material but in producer’s eyes it is “green” because it is used in insulation.

APEC agreed in 2012 that tariffs for its 54 chosen materials would be lowered to a maximum of 5%. In trying to move to a trade agreement based on that list, the group of nations at Davos suggested that the list would be extended to include other environmentally friendly products.

“We are committed to exploring a broad range of additional products, in the context of a future oriented agreement able to address other issues in the sector and to respond to changes in technologies in the years to come, that can also directly and positively contribute to green growth and sustainable development,” it said.

“Building on the momentum created by the agreement reached in Bali, we strongly believe that this effort in the WTO will add impetus and energy to the multilateral trading system and support its mission to liberalise trade, and make a significant contribution to the international environmental protection agenda.”

It is argued that a reduction in tariff and non-tariff barriers for environmental goods and eventually on some of the services that facilitate the use of those goods will be beneficial to trade and to the promotion of environmentally favourable actions and industries.

The chemical industry doesn’t necessarily see it that way.

The EU said in January that the WTO members behind the initiative “hope to create a 'living agreement' that will grow and evolve according to future needs, thereby making it possible to address other barriers to trade in green goods and services”.

“This initiative does not reflect the reality of global value chains,” the VCI’s director general, Utz Tillmann said when the agreement was announced.

“For example, no plant for renewable energy generation would be possible without inputs from the chemical industry. Tariffs need to be eliminated along entire value chains," he added.

The list focuses on finished goods so the chemical industry rightly feels short changed by what the VCI has called a “one-sided approach”.

“Such a race of particular individual interests usually discriminates against other products and necessitates work and cost-intensive adaptations, over and again,” Tillmann added.

A more ambitious approach to trade liberalisation is needed, said Cefic, "given the increased intertwining of economies through global value chains".

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By Nigel Davis