Beyond Bicycles: A New Momentum behind Environmental Goods Negotiations?
Negotiations on the Environmental Goods Agreement (EGA) collapsed in 2016. However, given the global momentum behind combating climate change, climate and trade constituencies have begun to revisit the need for a fresh round of negotiations.
Q1: What is the EGA?
A1: The Environmental Goods Agreement (EGA) was a multilateral effort within the World Trade Organization (WTO) to liberalize tariffs on environmental goods. Key countries involved in the negotiations, which occurred between 2014 and 2016, included Canada, China, the European Union, New Zealand, and the United States, among others. Negotiations largely centered around how to define what constitutes an environmental good—for example, to what degree should the environmental remediation aspects of a good should be considered (or not). The original list of negotiated goods grew to nearly 303, far exceeding the APEC list of environmental goods.
A famous sticking point in negotiations centered around bicycles, which the Chinese sought to add to the list of environmental goods at the eleventh hour of negotiations. The Chinese argued that a bicycle clearly constitutes an environmental good because it is an emissions-free form of transportation. The Europeans, however, were reluctant to liberalize tariffs on bicycles for fear that a large influx of foreign-produced lower-cost bicycles would damage EU bicycle producers. Other factors also complicated the negotiations, such as the U.S. reluctance to enter into an agreement that would be viewed politically as aiding China, as well as the surprise 2016 election of Donald Trump, who negotiators believed would withdraw from the agreement if it were reached. Nevertheless, struggles to define an environmental good were arguably the most problematic element of discussions, and that same problem is likely to resurface in new negotiations.
Q2: Why is the EGA in the news?
A2: The push to use trade as a tool to combat climate change has gained currency in recent years, which has elevated the importance of renegotiating the EGA. WTO director-general Ngozi Okonjo-Iweala has emerged as a chief proponent of relaunching negotiations on environmental goods. Speaking at the 12th Ministerial Conference of the WTO in June 2022, she said, “Let me also state that I am disappointed that the Environmental Goods Agreement was suspended at the end of 2016. I understand there is still strong interest among many Members to resume work on both environmental goods and services.”
At the 27th Conference of the Parties (COP27) in Egypt in November 2022, Okonjo-Iweala noted the power of trade in achieving decarbonization objectives. She urged countries to “[harness] trade as a force multiplier for climate mitigation and adaptation efforts” and added that “Examples of such trade actions include opening up trade in environmental goods and services, improving cooperation on carbon measurement and verification, and transforming the WTO's Aid-for-Trade initiative.”
Leaders outside the WTO are also increasingly cognizant of the need for more aggressive trade and climate action. At Davos, a group of 50 ministers from 27 jurisdictions joined to launch the Coalition of Trade Ministers on Climate. This new initiative aims to cooperate on using trade as a tool for combating climate change. While it will serve as “a forum of high-level political dialogue to foster international cooperation on climate, trade and sustainable development,” the initiative does not explicitly call for the reduction of tariffs on environmental goods. Nevertheless, statements from WTO leadership and enthusiasm among a diverse set of countries underscore an evolving climate and trade agenda in international relations.
Q3: What have foreign partners said about the EGA?
A3: Close trading partners of the United States have been very active in the trade and climate space since the suspension of EGA talks. In particular, New Zealand and the European Union have continued to lead global efforts to harness trade for decarbonization purposes. New Zealand, for example, has pursued a host of trade arrangements aimed at climate change mitigation efforts, including launching the Agreement on Climate Change, Trade and Sustainability (ACCTS) within the WTO. The European Union has also been active on climate and trade. The European Union is participating in the Global Arrangement on Sustainable Steel and Aluminum and has recently concluded final negotiations on its historic carbon border adjustment mechanism (CBAM), which seeks to reduce carbon leakage and spur deeper decarbonization through a border tax on a set of carbon-intensive commodities.
Q4: Where does the United States stand on renegotiating the EGA?
A4: The Biden administration has thus far not demonstrated an appetite for relaunching negotiations on environmental goods. This reluctance broadly aligns with the administration’s preference against negotiating tariff reductions in favor of more expansive and nontraditional trade arrangements, such as the U.S.-EU Trade and Technology Council (TTC) or Indo-Pacific Economic Framework (IPEF). One complicating factor that has changed significantly since negotiations collapsed in 2016 is that the need to reach a common methodology for how to calculate embodied emissions in goods (the lifecycle carbon content of goods, or “carbon accounting”) has risen in prominence in the climate and trade communities. While emissions associated with steel and aluminum used in bicycles was a cursory issue in 2016 EGA talks, it is likely to play a much more central role in a new iteration of negotiations.
Another potentially contentious issue in the event of reopened renegotiations will involve the liberalization of environmental services. The WTO defines environmental services as “[encompassing] infrastructure services, including sewage, refuse disposal and sanitation as well as ‘non-infrastructure’ services, such as those related to air pollution prevention and mitigation, noise abatement and the remediation of contaminated sites.” The European Union has advocated for the inclusion of environmental services in new rounds of negotiations, although it remains unclear whether the United States would agree to a significant expansion of the list of negotiating topics.
Relaunching negotiations would also likely require the United States and its partners to integrate discussions currently underway in other talks, such as the Global Arrangement on Sustainable Steel and Aluminum, in which the United States and European Union are seeking to determine definitions for what constitutes green steel and aluminum. For example, it will be more difficult today to argue that countries should liberalize tariffs on industrial air purifiers if the steel that goes into those purifiers is produced primarily with coal power and if the European Union and United States have bilaterally agreed to a definition of green steel.
Despite these potential minefields, there is mounting enthusiasm for the relaunch of negotiations. U.S. Representative Suzan DelBene (D-WA) and former House Ways and Means Committee chairman Kevin Brady (R-TX) last year introduced a resolution calling on the Office of the U.S. Trade Representative (USTR) to relaunch negotiations. It remains unclear if these negotiations would be carried out under the WTO umbrella or whether they would follow the Biden administration’s approach of pursuing non-WTO plurilateral agreements with a smaller group of countries.
Q5: What are immediate prospects for an EGA? How can it move forward?
A5: While extant issues are likely to remain sticking points in new negotiations, making it more efficient to buy and sell environmental goods is a winning message that would please both the climate and trade communities. The administration, in particular USTR, has heard from domestic political constituencies and foreign partners alike that the administration’s failure to pursue trade liberalization has been frustrated and, in some cases, left a leadership void in global trade policy. Relaunching negotiations would in part satisfy these demands that the administration pursue tariff reductions. It would also help advance the administration’s broad “all-of-government” approach to combating climate change by more explicitly recognizing that trade itself is not incompatible with a livable planet. However, concerns about cooperating with China continue to stymie further progress. Given that climate change is a global commons problem, the United States should pursue greater cooperation on climate change, which includes negotiating with China on issues relating to the environment.
Emily Benson is a senior fellow with the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.