China’s eleventh-hour demands derail talks on environmental goods deal

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4 December 2016. By Jennifer Freedman.

Efforts to secure an agreement to eliminate tariffs on environmental goods failed today after China presented a new list of products that World Trade Organization members including the US and the EU said was “impossible” to accept.

Talks collapsed following days of intensive negotiations and a weekend meeting of trade ministers in Geneva that had been expected to culminate in an announcement that a deal on the Environmental Goods Agreement had been reached.

The aim of the EGA had been to abolish duties on products including renewable energy and energy-saving technologies such as solar cells, waste-handling and recycling systems, water-treatment and air-pollution control devices. Discussions on the deal among 17 WTO members representing more than 90 percent of world trade in green goods began in July 2014.

Ministers’ hopes of announcing a deal today were dashed when China presented a new list of goods in the afternoon that removed many items — such as valves and wind turbines — that had been part of a list drawn up earlier, referred to as the “A” list.

“China refused to engage on the ‘A’ list,” EU trade chief Cecilia Malmström told journalists in Geneva. Beijing’s new list came “very late in the process” and it had a “different point of departure and made a lot of changes,” she said. “That was impossible to deal with in a couple of hours.”

There were “lots of things” that many delegations couldn’t accept, including the removal of some clear-air technologies, Malmström added.

Green goods are products that can help countries reduce their dependency on fossil fuels, cut their greenhouse-gas emissions and use natural resources more efficiently. Eliminating customs duties on such products would reduce costs and promote their use.

‘Unacceptable, unfair, unbalanced’

The Chinese list included 231 products such as bicycle parts, wood products and home appliances. The so-called A list included about 300 environment-friendly goods, from solar-powered air conditioners and LED light bulbs to dual-flush toilets — worth more than $1 trillion in annual trade.

A trade official told MLex that during today’s meeting, China’s vice minister described the “A” list as “unacceptable, unfair and unbalanced” — which is why Beijing presented its own list of goods.

The Chinese official said the products on his country’s list were worth $1.1 trillion in trade and that China accounted for about $310 billion of that.

China would lose $9 billion in revenue — or 46 percent of the tariff revenue that would no longer be collected on these products if duties were abolished — if the list were accepted, the official is understood to have argued at today’s meeting.

But countries including Iceland and Turkey criticized China for presenting its list so late in the negotiations. Malmström was also critical.

“Many delegations said that it’s unfortunate this comes so late,” Malmström said. “It would have been very helpful if they had engaged earlier on this level of specificities because, of course, they came out with a list that surprised everybody.”

“We had to wait quite a long time before we could see it, and it was not possible to negotiate on these terms,” she said. “We deplore that very much.”

“I do think China is ready to do an agreement, but they’re not ready to do it now,” she added.

US Trade Representative Michael Froman, who co-chaired today’s ministerial meeting along with Malmström, noted at the meeting with trade ministers that the Chinese list included 35 of China’s 36 priorities, but only 15 of the Obama administration’s 33 priorities.

Froman rushed out of the WTO building after the meeting, refusing to speak with journalists.

In a terse, five-line e-mailed statement, Froman and Malmström said that “a high-standard Environmental Goods Agreement would enhance global access to clean technologies; advance environmental protection; and benefit workers, businesses and consumers.”

Singapore noted that there were 213 “tariff lines” that were common to both the “A” list and the Chinese list of green goods, and suggested “ringfencing” these products — or isolating them from the rest of the deal — without committing to anything.

It is understood that Japan rejected the inclusion of coniferous wood on the Chinese list, saying that it does not accept China’s list as a starting point for future talks.

Trump uncertainty

Participants will return to their capitals to consider the next steps, Malmström said, adding that the plan now is to “reinforce efforts” to reach a deal in 2017.

But it’s not clear how enthusiastic the incoming administration of US President-elect Donald Trump will be about continuing the EGA discussions next year. Malmström acknowledged that “there is a risk” the US will have no appetite to resume the talks.

“It’s very difficult to determine,” she said. “We don’t know very much about the incoming administration . . . but we hope that the US will be on board, of course.”

Many American business groups support the EGA, including the Business Council for Sustainable Energy, the Business Roundtable and US Chamber of Commerce, which have all pressed for a deal on green goods.

Dozens of business groups — including the Australian Industry Group, Business New Zealand, the Canadian Association of Importers and Exporters, the Japan Machinery Center for Trade and Investment, the Singapore Business Federation and the Solar Energy Industries Association — signed a letter earlier this year calling for negotiators to reach the accord this year.

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