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NFTC Welcomes APEC Leaders’ Statement on Trade and Investment in Environmental Goods and Services
Date: 11/14/2011
Written By: Jennifer Cummings, The Fratelli Group for NFTC, (202) 822-9491

Washington DC – National Foreign Trade Council (NFTC) Vice President Jake Colvin released the following statement regarding the APEC leaders' statement on trade and investment in environmental goods and services following the completion of talks in Hawaii:

"We commend leaders for committing to a set of policies that will encourage green growth and development across APEC member economies. We're particularly pleased by the commitment to reduce by the end of 2015 applied tariff rates to 5 percent or less on an APEC list of environmental goods, and encourage leaders to make clear the importance of developing a robust and concrete list of those goods in 2012.

"NFTC is also gratified to see leaders pledge to eliminate existing local content requirements that distort environmental goods and services trade in the region by the end of 2012, and refrain from adopting new ones. NFTC joined with Australian Industry Group, BusinessNZ and Federation of Korean Industries in a May 6 letter to trade ministers during the APEC meetings in Big Sky, Montana, to call for exactly this pledge.

"APEC leaders should be applauded for recognizing the importance of green trade to sustainable economic growth and development and the leadership role that Asia-Pacific economies will play as the world moves increasingly to adopt clean technologies.

"This outcome would not have happened without the sustained leadership of the United States Government. NFTC would like to thank President Obama and the White House for placing such a high priority on green growth and the United States Trade Representative and State Department for their tremendous work.

"The key now will be implementing the commitments that have been made, which will be important in its own right, and which could also have a positive impact on the effort underway in Geneva to eliminate green trade barriers under the World Trade Organization. NFTC and our member companies look forward to working with the United States and other APEC member economies to explore creative and innovative solutions at the WTO to build on the positive outcome that was announced in Hawaii."

Below is a copy of the letter that NFTC, Australian Industry Group, BusinessNZ and Federation of Korean Industries sent to trade ministers on May 6, 2011.


May 6, 2011

Dear Ministers:

In advance of the Senior Officials meetings taking place in Big Sky, Montana from May 7-21, we write to suggest that APEC has an opportunity to strengthen its role as one of the premier forums to promote economic growth and sustainability by taking bold action as part of the 2011 work program to address non-tariff measures (NTMs) affecting environmental goods. Addressing barriers to environmental goods would spur growth in an industry that will help drive the 21st Century global economy and help member countries better address the pressing challenge of climate change.

Over the years, APEC has made energy and environment issues an important focus. Last year in Yokohama, APEC Leaders emphasized the link between economic growth and sustainability, stating that "both economic growth and environmental sustainability should be advanced in a holistic manner, and progress toward a green economy should be accelerated by promoting trade and investment in environmental goods and services, developing this sector in APEC economies and enhancing energy efficiency and sustainable forest management and rehabilitation." Leaders agreed to "take further concrete actions on EGS, prioritizing work related to addressing non-tariff measures on environmental goods, technology, and services." APEC has also been at the forefront in analyzing trends in environmental markets of member economies and has done important work to identify potential NTMs in energy efficiency standards.

This year, economies have the opportunity to take further action to encourage the development and adoption of environmental technologies. While eliminating tariffs is critical to the expansion of markets for environmental goods, companies increasingly face more opaque impediments behind the border that affect their ability to compete.

APEC can help advance global efforts to identify, catalogue and address NTMs affecting environmental goods. Although there are a variety of NTMs, APEC Governments could usefully address several categories of barriers which global businesses often cite as priorities:

Government procurement policies.
Discriminatory government contracting procedures is a growing problem. Examples include the adoption of local content requirements for particular projects and bidding processes for government procurement contracts that are either closed or which give preference to local producers. One area of particular frustration is the formal or informal priority governments may give to local content in the auction of clean energy projects, where such consideration goes above and beyond established minimum content requirements.

Local input requirements.
The adoption of laws and policies requiring or favoring local labor, parts or manufacturing processes accelerated following the onset of the global economic downturn. One example is the series of "buy national" policies that were included or contemplated as part of efforts to stimulate economies following the economic downturn. Buy national policies are particularly troubling as they are politically popular and are mentioned often in the context of clean energy projects. The adoption of such measures encourages other countries to enact similar policies, which leads to higher project costs and delays around the world as businesses scramble to retool production according to a series of national requirements or abandon efforts to enter some local markets altogether.


Standards development.
While reasonable standards and voluntary labeling programs can encourage energy efficiency and the adoption of low-carbon technologies, overly-prescriptive local standards and obstacles to the development and recognition of internationally-accepted standards and conformity assessment programs can create compliance and cost headaches for producers and exporters and can serve to limit trade. Examples of standards include: renewable energy generating requirements for utilities, renewable fuel standards, green building codes, mandatory or voluntary eco-labeling or energy measurement arrangements, and in-country testing and certification programs. Taking steps to encourage collaboration between regulatory agencies, develop international criteria, and harmonize standards among APEC member countries would promote green growth and could lower the cost to adopt technologies.

Lack of transparency.
Any lack of transparency in government regulation or decision-making is troubling for businesses. Companies cite issues such as insufficient lead time in publishing procurement opportunities and a lack of transparency in the criteria and decisions surrounding contract awards as obstacles to doing business. Non-transparent or seemingly arbitrary customs, licensing and regulatory procedures may also frustrate businesses looking to invest or sell environmental goods locally. Regulations which attempt to promote sustainability, environmental goals or local innovation may also be unclear and have the potential to be unevenly applied. There is a particular need for transparency in the renewable energy sector with respect to publishing laws, regulations and standards in a timely, transparent manner. Companies in the renewable energy sector operate in a fast-moving policy environment in which full information about proposed policy measures – whether portfolio standards, feed-in tariffs, loan guarantees, grants, or energy efficiency standards – is key to their ability to understand and operate effectively in the marketplace.

Subsidies and preferences.
Subsidies for investments in environmental technologies may be harder to detect, but can significantly alter the competitive playing field. To the extent that governments provide consumption or investment incentives to encourage the production or adoption of environmental technologies, they should create a level playing field that enables local and global companies to compete fairly.

Attempts to tilt the playing field through non-tariff measures conflict with the reality of the 21st Century global economy and may harm local industries and consumers. Products, particularly the kind of large, complex manufactures that comprise much of the environmental goods market, are rarely made entirely with labor and materials from one country. Global supply chains permit the manufacture of efficient, high-quality products at the lowest-possible cost using inputs from across the globe. Enacting discriminatory rules that favor one producer or technology over another threatens to disrupt those supply chains, eliminates the benefit of economies of scale, could raise government project or consumer energy costs, and potentially sacrifices quality and expertise. Such policies undermine international rules and encourage imitation by trading partners, which leaves all countries worse off. Non-tariff measures can be particularly challenging for small and medium-sized companies, which tend to have a more limited reach into overseas markets.

Addressing green trade barriers through APEC

APEC could serve as a particularly useful forum in crafting solutions to the issues outlined above. Options for addressing NTMs to environmental goods by APEC could include the following:

• Commit to eliminate local content requirements. APEC economies could take the lead in phasing out and pledging to avoid local content requirements, which are increasingly outdated in a world of complex global supply chains.

• Develop a model agreement to promote transparency in environmental technologies. APEC could draw from efforts under the Organization for Economic Cooperation and Development (OECD), which has developed a model agreement on the exchange of information on tax matters, to promote transparency among member countries. Leaders could leverage current anti-corruption and transparency efforts underway in APEC to develop a framework to promote best practices related to government procurement, trade and tax issues affecting environmental technologies and energy efficiency measures, potentially in consultation with the OECD.

• Expand upon APEC's work surveying standards and evaluating environmental markets to ensure open trade among APEC members. Leaders should build upon the work that APEC has already done to survey members' energy efficiency standards. Efforts should be made to encourage greater cooperation on standards development and harmonization among APEC economies.

• Develop a resource on NTMs and behind the border measures. APEC would be a useful forum to research and catalogue NTMs and behind the border measures. Finally, although our focus here is on NTMs, APEC can also play an important role in driving progress on green tariff barriers. APEC economies are leading the world in the production and use of environmental technologies. While countries often see lowering their own tariffs as a price they must pay, getting rid of high taxes on a broad set of environmental goods would lower the costs of mitigating and adapting to the effects of climate change. Removing environmental tariffs encourages green development and can lower the cost of adopting advanced clean technologies by emerging and least-developed economies.
 

Thank you for your consideration of these comments. We look forward to working with you on these issues to improve the development and adoption of environmentally-friendly goods and clean technologies.

Sincerely,

Australian Industry Group
BusinessNZ
Federation of Korean Industries
National Foreign Trade Council


 


About the NFTC
Advancing Global Commerce for Nearly A Century- The National Foreign Trade Council (www.nftc.org) is a leading business organization advocating an open, rules-based global trading system. Founded in 1914 by a broad-based group of American companies, the NFTC now serves hundreds of member companies through its offices in Washington and New York.
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