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Developing Countries' Participation in Environmental Services Negotiations: What are the Challenges and What Should be Done?

Published online by Cambridge University Press:  30 January 2025

Sanvid Tuljapurkar  and
Ruosi Zhang
Sanvid Tuljapurkar
Affiliation:
World Trade Organization, Geneve, Switzerland
Ruosi Zhang*
Affiliation:
World Trade Organization, Geneve, Switzerland
*
Corresponding author: Ruosi Zhang; Email: ruosi.zhang@wto.org
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Abstract

The urgency to tackle climate change has placed sustainable development at the centre of recent trade related debates. An emerging consensus is that trade should be considered and can be used as means to achieve sustainable development goals. As the circumstances are changing, one issue to be addressed is how to adjust trade negotiations which used to be the main approach to pursuing market opening and liberalization with the support of the theory of comparative advantage. In this context, this paper examines trade negotiations on environmental services by focusing on developing countries' participation. Environmental services and related trade play a critical role in achieving environmental and sustainable development goals. Nevertheless, developing countries' participation in environmental services trade negotiations has been limited. By analysing the reasons behind such limited participation and assessing some new approaches, this paper attempts to explore how environmental services trade negotiations could be adapted to better engage developing countries and serve Sustainable Development Goals.

Keywords

Environmental servicesdeveloping countriestrade negotiationsF13F18F63
Type
Original Article
Information
World Trade Review , First View , pp. 1 - 23
Copyright
Copyright © The Author(s), 2025. Published by Cambridge University Press on behalf of The Secretariat of the World Trade Organization

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Footnotes

*

Sanvid Tuljapurkar was a Legal Affairs Officer of Trade in Services and Investment Division, WTO when drafting the paper.

†

Ruosi Zhang is Counsellor of Trade in Services and Investment Division, WTO.

References

1 For instance, SDG 7 aims at ensuring access to affordable, reliable, sustainable, and modern energy for all. This includes increasing energy efficiency and facilitating access to clean energy. Achieving this goal requires a wide range of services, including engineering, construction, and design. Moreover, renewable energy technologies are sold with several services, such as installation, maintenance, and repair services, that are essential for a consumer to effectively use the technology. Services are also important for achieving other SDGs such as sustainable cities and communities (SDG 11), responsible production and consumption (SDG 12), and climate action (SDG 13) (accessed 12 November 2022).

2 J. Monkelbaan and S. Kar, ‘Accelerating Decarbonization through Trade 2022 in Climate Goods and Services’, World Economic Forum, September 2022, www3.weforum.org/docs/WEF_Accelerating_Decarbonization_through_Trade_2022.pdf (accessed 12 November 2022).

3 GATS Article XIX provides: ‘In pursuance of the objectives of this Agreement, Members shall enter into successive rounds of negotiations, beginning not later than five years from the date of entry into force of the WTO Agreement and periodically thereafter, with a view to achieving a progressively higher level of liberalization. Such negotiations shall be directed to the reduction or elimination of the adverse effects on trade in services of measures as a means of providing effective market access. This process shall take place with a view to promoting the interests of all participants on a mutually advantageous basis and to securing an overall balance of rights and obligations.’

4 Proposals include WTO document S/CSS/W/112, 1 October 2001; WTO document S/CSS/W/51, 14 March 2001; WTO document S/CSS/W/121, 27 November 2001; WTO document S/CSS/W/142, 22 March 2002; WTO document S/CSS/W/38, 22 December 2000; WTO document S/CSS/W/76, 4 May 2001; WTO document S/CSS/W/25, 18 December 2000.

5 Article XIX of the General Agreement on Trade in Services.

6 For example, the Extended Balance of Payments Services (EBOPS) Classification SJ32 provides data on trade in waste treatment and de-pollution, agriculture, and mining services between 2005 and 2017 without disaggregating waste treatment and de-pollution from the rest.

7 ‘World Trade Report 2019: The Future of Services Trade’, World Trade Organisation, 2019, p. 25. Updates on this data are not available yet.

8 ‘Environmental and Related Services’, Publication 4389, USITC, March 2013.

9 ‘Engineering News Record Top 20 Environmental Firms’, Engineering News Record, www.enr.com/toplists/#Top%20Environmental%20Firms (accessed 5 August 2023).

10 ‘ENR 2022 Top 200 Environmental Firms’, Engineering News Record, www.enr.com/toplists/2022-Top-200-Environmental-Firms-Preview (accessed 5 August 2023).

11 Ibid.

12 J. Sauvage and C. Timiliotis, ‘Trade in Services Related to the Environment’, COM/TAD/ENV/JWPTE(2015)61/FINAL, OECD, 27 March 2017, pp. 27–28.

13 ‘Environmental economy – statistics by Member State’, Eurostat Statistics Explained, https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Environmental_economy_%E2%80%93_statistics_by_Member_State&oldid=571372#Key_figures (accessed 5 August 2023). The remainder of the environmental economy stems from production for own use (ancillary or final) or for non-market purposes (as give-away for free or at non-significant prices).

14 Ibid.

15 Ibid.

16 Q. Zhao, ‘Services in Global Value Chains: Solar Panel Manufacturing in China’, International Trade Center and Fung Global Institute, 9 April 2015, p. 3.

17 Ibid.

18 ‘Cross Border Indicators’, IMF Climate Change Dashboard, https://climatedata.imf.org/pages/bp-indicators (accessed 5 August 2023).

19 Based on calculations of the IMF data.

20 Based on calculations of the IMF data.

21 S. Zarilli, ‘International Trade in Environmental Services and Developing Countries’ in Energy and Environmental Services: Negotiating Objectives and Development Priorities, UNCTAD/DITC/TNCD/2003/3, 2003, pp. 287–330.

22 Ibid.

23 G. Ferrier, ‘The Global Environmental Market: Trends and Characteristics’ in lndustry Technology, and the Environment: Competitive Challenges and Business Opportunities, OTA-ITE-586, US Congress, Office of Technology Assessment, January 1994, pp. 89–116.

24 M. Closset and M. Meloni, ‘Investment Policy Trends in Climate Change Sectors 2010–2022’, Investment Policy Monitor, Special Issue 9, UNCTAD, September 2022, p. 2.

25 Ibid.

26 Ibid.

27 ‘International Tax Reforms and Sustainable Development’, World Investment Report 2022, UNCTAD/WIR/2022, UNCTAD, p. 35.

28 T. Ehlers, C. Gardes-Landolfini, F. M. Natalucci, and A. Prasad, ‘Scaling Up Private Climate Finance in Emerging Economies’, Financial and Monetary Systems, World Economic Forum, 14 October 2022, www.weforum.org/agenda/2022/10/how-to-scale-up-private-climate-finance-in-emerging-economies (accessed 15 March 2023).

29 ‘International Tax Reforms and Sustainable Development’, supra n. 27.

30 Ibid.

31 M. George, ‘Global Waste Trade and its Effects on Landfills in Developing Countries’, Global Waste Cleaning Network, 14 November 2021, https://gwcnweb.org/2021/11/14/global-waste-trade-and-its-effects-on-landfills-in-developing-countries/ (accessed 8 August 2021).

32 S. Zarrilli (n. 21).

33 Engineering News Record (n. 10).

34 A. Chugh and N. Cooper, ‘How Climate Finance and Adaptation can Help Support Vulnerable Countries’ (Climate Change, World Economic Forum, 7 November 2022), https://www.weforum.org/agenda/2022/11/cop27-how-climate-finance-and-adaptation-can-support-vulnerable-countries/ (accessed 15 January 2023).

35 M. Closset and M. Meloni (n. 24).

36 Note by the Secretariat on Experiences in the Promotion and Facilitation of Environmental Goods and Services, WTO document INF/TE/SSD/W/18, 23 March 2022, para. 2.89.

37 WTO document JOB(08)/93, 30 July 2008, paras. 19 and 20.

38 WTO document TN/S/W/28, 11 February 2005, para. 5.

39 Background Note by the Secretariat on Environmental Services, WTO document S/C/W/320, 20 August 2010; WTO document JOB/SERV/299/Rev.4, 21 July 2022; WTO document JOB/SERV/308, 22 June 2021.

40 WTO document S/CSS/W/38, 22 December 2000, para. 12; WTO document S/CSS/W/76, 4 May 2001, para. 9.

41 WTO document S/CSS/W/51, 14 March 2001; WTO document S/CSS/W/112, 1 October 2001.

42 WTO document S/CSS/W/121, 27 November 2001; WTO document S/CSS/W/142, 22 March 2002. In S/CSS/W/121, Colombia proposed that developed countries undertake market access commitments for the movement of natural persons in order for trade in services to become more balanced. According to Cuba's proposal S/CSS/W/142, negotiations will have to provide appropriate guarantees with regard to: (i) the real transfer, on a favourable commercial basis, of technologies which ensure competitiveness; (ii) the transfer of associated know-how; (iii) the creation of national technical capabilities, both human and institutional, to promote development of these services; and (iv) the export of services from developing countries in the modes of supply identified as being of interest to them.

43 WTO document JOB/SERV/303, 23 November 2020, para. 1.16.

44 WTO document TN/S/M/13, 28 January 2005, para. 187.

45 WTO document S/CSS/M/12, 28 November 2001, para. 239.

46 For example, Peru and Brazil noted that the definition of environmental goods and services should be compatible with sustainable development needs of developing countries, consider different levels of social and economic development among Members, increase developing countries’ participating in the production and international trade in environmental goods, and ensure effective environmental benefits. WTO document JOB(09)/177, 27 November 2009.

47 Ibid; WTO document S/CSS/W/121, 27 November 2001, para. 5.

48 WTO document TN/S/M/1, 5 June 2002, para. 359.

49 Ibid; WTO document S/CSS/W/142, 22 March 2002, para. 5.

50 WTO document S/CSS/W/121, 27 November 2001, para. 4.

51 WTO document JOB/SERV/304, 21 January 2021, para. 3.2.

52 Ibid.

53 WTO document JOB/SERV/311, 30 July 2021, para. 3.14.

54 WTO document JOB/SERV/311, 30 July 2021, para. 1.13.

55 WTO document JOB/SERV/303, 23 November 2020, para. 1.16.

56 WTO document TN/TE/W/79, 15 April 2011, para. 1.

57 See WTO document WT/CTE/M/52, 6 September 2011; WTO document TN/TE/W/79, 15 April 2011; WTO document TN/S/M/1, 5 June 2002.

58 WTO document TN/S/M/1, 5 June 2002, para. 259.

59 WTO document TN/TE/R/11, 30 May 2005, paras. 67 and 69.

60 WTO document JOB/SERV/303, 23 November 2020, para. 1.29.

61 WTO document TN/TE/W/79, 15 April 2011, section 4.

62 Ibid.

63 Ibid. Suggestions in reference to a financial mechanism include creating a Trade and Environment Fund with objectives such as facilitating transfer of environmental technologies at reasonable prices; providing grants to developing country Members that intend to import specific environmental technologies; financing the cost of change of production practices in existing manufacturing facilities in developing countries; financing research and development activities; financing appropriate environmental technical assistance and capacity building programmes; and establishing technology transfer centres/exchanges/mechanisms in consultation and cooperation with the relevant multilateral environmental agreement secretariats. Another suggestion involves developed and developing countries that declare themselves to be in a position to do so giving soft loans, aid for trade, and other incentives to facilitate the purchase of goods, implementation of projects, the acquisition and transfer of technologies, and the contracting of environmental services by developing countries.

64 WTO document JOB/SERV/303, 23 November 2020, para. 1.28.

65 WTO document TN/TE/W/79, 15 April 2011, para. 17.

66 WTO document TN/TE/R/16, 22 December 2006, para. 221

67 WTO document TN/TE/W/73, 9 July 2008, para. 15.

68 WTO document JOB/SERV/311, 30 July 2021, para. 1.13.

69 WTO document WT/GC/W/868, 1 March 2023, para. 9.

70 Ibid., paras. 5 and 9.

71 WTO document JOB/TE/78, 10 February 2023.

72 WTO document WT/GC/W/894, 13 July 2023, para. 3.7.

73 WTO document WT/GC/W/894, 13 July 2023, paras. 5.1 and 5.2.

74 Specific commitments may be undertaken based on a positive list approach, i.e., commitments apply to those modes and sectors where specific commitments are undertaken, or a negative list approach that removes all restrictions on all services unless specifically excluded from a party's market access and national treatment commitments.

75 For example, Canada–European Union Comprehensive Economy and Trade Agreement (CETA), Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the United States–Mexico–Canada Agreement (USMCA) incorporate measures aimed at promoting trade in environmental services in ‘Trade and Environment’ or ‘Trade and Sustainable Development’ chapters. These are usually commitments by the parties to cooperate and facilitate trade and investment in environmental goods and services. Such provisions are generally soft obligations to cooperate and facilitate trade and investment in environmental goods and services and are often excluded from the scope of the dispute settlement mechanism.

76 Note by the Secretariat on Experiences in the Promotion and Facilitation of Environmental Goods and Services, WTO document INF/TE/SSD/W/18, 23 March 2022, para. 2.94.

77 Note by the Secretariat on Experiences in the Promotion and Facilitation of Environmental Goods and Services, WTO document INF/TE/SSD/W/18, 23 March 2022, para. 2.95.

78 The Cariforum countries are Antigua and Barbuda, Barbados, Belize, Dominica, Dominican Republic, Grenada, Guyana, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadine, Suriname, Trinidad, and Tobago.

79 Examples of FTAs liberalizing environment related services include EU–Singapore, EU–Korea, and EU–Vietnam FTA.

80 According to Ruosi Zhang and Chuwankorn Sasanabanchakul, ‘Means of Liberalization and Beyond: Understanding Scheduling Approaches in Services Trade Agreements’ (2022) WTO Staff Working Paper ERSD-2022-13, www.wto.org/english/res_e/reser_e/ersd202213_e.pdf (accessed 7 August 2023), out of the 187 services trade agreements notified to the WTO under Article V of GATS until 30 April 2022, 83 agreements have a negative list approach. Among the 83 negative list FTAs, 38 are concluded between developing economies.

81 See, Annex I and Annex II of the CPTPP.

82 Background Note by the Secretariat on Environmental Services, WTO document S/C/W/320, 20 August 2010, para. 110. Nevertheless, a few Members, such as Australia, the European Union, Japan, and Norway, go further than their GATS commitments in some positive list FTAs. New Zealand, which does not have GATS commitments, has undertaken environmental services commitments in several positive and negative list FTAs.

83 According to the World Bank Handbook of Deep Trade Agreements, about 20% of the preferential trade agreements contain various WTO-plus environmental provisions. See Mattoo, A., Rocha, N., and Ruta, M. (eds.) (2020) Handbook of Deep Trade Agreements. World Bank, p. 8CrossRefGoogle Scholar.

84 C. Bellman and A. Bulatnikova (2022) ‘Incorporating Environmental Provisions in Regional Trade Agreements in Chapters and Articles Dealing with Trade in Services’, OECD Trade and Environment Working Papers 2022/01, p. 27.

85 Monteiro, J.A. and Trachtman, J.P. (2020) ‘Environmental Laws’, in Mattoo, A., Rocha, N., and Ruta, M. (eds.), Handbook of Deep Trade Agreements, World Bank, p. 577Google Scholar.

86 Ibid.

87 Ibid.

88 FTAs in this regard include Japan–Mexico FTA, Nicaragua–Taiwan FTA, China–Switzerland FTA, EFTA–Indonesia CEPA, EU–Cariforum (Caribbean Forum) Economic Partnership Agreement and EU–SADC (Southern African Development Community) EPA.

89 APEC Committee on Trade and Investment, ‘Study Report on Environmental Provisions in APEC Member Economies’ FTAs/RTAs’, November 2017.

90 C. Bellmann and M. Sugathan, ‘Promoting and Facilitating Trade in Environmental Goods and Services: Lessons from Regional Trade Agreements’, Forum on Trade, Environment & SDGs (TESS), 20 June 2022,

91 M. Pigato et al. (2020) ‘Technology Transfer and Innovation for Low-Carbon Development’, World Bank, p. 65.

92 World Investment Report 2023 (UNCTAD 2023).

93 The environmental services proposal in the CTS-SS is sponsored by Australia, Canada, EU, Korea, Mexico, New Zealand, Switzerland, and UK.

94 WTO document JOB/SERV/293/Rev.2, 14 April 2021, para. 1.2; WTO document JOB/SERV/299/Rev.4, 21 July 2022, para. 1.4.

95 WTO document JOB/SERV/293/Rev.2, 14 April 2021, para. 1.2.

96 WTO document JOB/SERV/303, 23 November 2020, para. 1.8.

97 WTO document JOB/SERV/311, 30 July 2021, para. 1.10.

98 WTO document JOB/SERV/303, 23 November 2020, para. 1.23; WTO document JOB/SERV/304, 21 January 2021, para. 3.2.

99 WTO document JOB/SERV/305, 12 February 2021, para. 4.17.

100 The Members actively engaged in environmental services discussions in TESSD include Canada, Iceland, Korea, Norway, Switzerland, and UK.

101 WTO document INF/TE/SSD/R/14, 30 November 2022, para. 3.1.

102 Ibid, para. 3.5.

103 Ibid para. 3.7.

104 Ibid; WTO document INF/TE/SSD/R/13, 21 October 2022, para. 2.5.

105 WTO document INF/TE/SSD/R/8, 14 July 2022, para. 3.7.

106 Ibid.

107 D. O'Connor, ‘Joint Statement on the Agreement on Climate Change, Trade and Sustainability (ACCTS) at MC12’, The Official Website of New Zealand Government, 15 June 2022, www.beehive.govt.nz/release/joint-statement-agreement-climate-change-trade-and-sustainability-accts-mc12 (accessed 18 January 2023).

108 Ibid.

109 Singapore Australia Green Economy Agreement (Green Economy Agreements), www.gea.gov.sg/sagea/ (accessed 8 February 2024).

110 Ibid.

111 Ibid.

112 Ibid.

113 ‘Environmental Services in the APEC Region: Definition, Challenges and Opportunities’ (APEC, May 2021) p. 41.

114 Larsen and Turbo Integrated Annual Report 2021–22: Sustainability in Progress’, https://investors.larsentoubro.com/upload/AnnualRep/FY2022AnnualRepL&T%20Annual%20Report%202021-22.pdf (accessed 1 August 2023).

115 Ibid.

116 Ibid.

117 Ibid.

118 Ibid

119 Ibid.

120 Ibid.

121 ‘Larsen and Turbo Annual Report 2020–21: Technology for Sustainable Growth (Larsen and Turbo). https://investors.larsentoubro.com/upload/AnnualRep/FY2021AnnualRepLnT%20Annual%20Report%202020-21.pdf (accessed 1 August 2023)

122 Proxa. https://www.proxawater.com/ (accessed 1 August 2023).

123 Ibid.

124 Ibid.

125 Ibid.