Raed Safadi

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Environmental Aspects of A Successful Doha Deal
Raed Safadi Deputy-Director, OECD Trade and
Agriculture Directorate
Workshop on Recent Analysis of the Doha
Round, Geneva, 2 November 2010
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Environmental goods and services

• The struggle to avert climate change is one of
  the greatest challenges facing the international
  community today.
• Strong and urgent action is needed to stabilize
  greenhouse gas concentrations.
• Access to clean air, clean water, efficient
  sanitation, and modern forms of energy are
  problems that cannot be solved by technological
  fixes, but for which environmental technologies
  and services are likely to play an important
  role.
• Trade liberalization in goods and related
  services can and should support actions to
  safeguard the environment.

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Meanwhile, environmental goods are made more
expensive/prohibitive as a result of trade
barriers

• Responses to an OECD survey of 77 companies
  across 10 OECD and non-OECD countries have
  confirmed the presence of significant barriers
  (i.e. rated major or prohibitive)
• Testing and certification (27 firms)
• Customs procedures (24)
• Regulations on payments (23)
• Adequacy of intellectual property protection (19)
• Government procurement procedures (14)
• Product standards and technical regulations (13)

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A triple-win agreement

• A win for increased trade through a reduction or
  elimination of tariff and non-tariff barriers
  (NTBs). Domestic purchasers, including business
  and governments at all levels, would be able to
  acquire environmental technologies at lower costs
  and have facilitated access to specialized
  technologies.
• A win for the environment by improving access to
  high-quality environmental goods and services.
  This can lead to direct quality-of-life benefits
  for people everywhere, to the extent that greater
  availability of such goods and services helps
  achieve a cleaner environment and improve energy
  efficiency, while satisfying basic human needs,
  such as access to safe water, sanitation or clean
  energy.
• A win for development, enabling developing
  countries to obtain the tools they need to
  address key environmental priorities as part of
  their on-going development strategies.

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The WTO negotiations on EGS

• Concern about dual uses (i.e., non-environmental
  as well as environmental) of many of the goods
  proposed
• The sheer number of goods on the compiled lists
  (several hundred at one point) and
• The poor coherence among the three liberalization
  components tariff and non-tariff barriers on
  goods, and barriers to trade in related services.

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Counting the benefits

• According to a World Bank study, International
  Trade and Climate Change, liberalizing a small
  number of low-carbon goods (wind turbines, solar
  PV cells, clean-coal technologies and efficient
  lighting) in 18 developing countries would lead
  to
• 7 trade gains if only tariffs are removed, and
  13 if both tariffs and non-tariff barriers
  (NTBs) were removed.
• Another paper, by the IISD, estimated the
  greenhouse gas emission focusing on the Friends
  of the EGS list of 153 goods its conclusion the
  impact on GHG emissions is almost exclusively due
  to the lists inclusion of renewable electricity
  generation technologies. No other parts of the
  list would have a comparable material impact on
  GHG emissions.

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Still, a worthwhile exercise

• Worldwide, studies estimate that increased
  renewable electricity generation from the
  technologies whose goods are included within the
  list of 153 could result in reductions of 0.96.5
  GtCO2 annually by 2030.
• A rough upper boundary approach to ascribing what
  share of these savings could result from tariff
  removal concludes that less than 5 of savings
  could be ascribed.
• Whilst relatively small, the analysis does
  confirm the view that trade liberalization would
  be beneficial as it would result in higher trade
  (and thus production) of climate-friendly
  technologies.

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Two key conditions that must be met to maximize
the potential

• A broader coverage needs to be achieved for the
  goods that are necessary in each relevant
  technology.
• Accompanying measures would be necessary to
  ensure that the potential for uptake offered by
  tariff liberalization is actually exploited
• Attention to non-tariff barriers.
• Attention to the capacity of host states to
  absorb new technologies --

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Natural resources and agriculture

• Agriculture is a major user of natural resources
  and its environmental performance needs to be
  monitored and evaluated.
• Impact on environment occurs on and off farm
  includes both pollution degradation of soil,
  water air, but also the provision of
  environmental services, such as biodiversity,
  flood drought control, a sink for greenhouse
  gases
• Agriculture currently accounts for about 70 of
  world freshwater withdrawals (45 in OECD
  countries).
• In 2004 agriculture directly contributed about 14
  of global GHG emissions. Land use, land use
  change and forestry account for a further 17.
• Agriculture will inevitably be called on to
  contribute to the mitigation effort.
• It will also need to apply adaptation strategies
  in order to avoid significant losses in
  production.

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Relying on markets is key

• To resolve the different pressures the agro-food
  sector is facing.
• To resolve climate change and resource scarcity
  issues.
• Land, water and other resource prices will need
  to reflect the real underlying costs,.
• Where markets do not exist, they will have to be
  created.

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The WTO is part of the solution

• Trade and an efficiently functioning
  international trading system will be a key
  framework condition allowing global supply to
  match global demand and meeting consumer
  requirement for quality and variety.
• Production patterns globally are likely to shift
  and the general consensus is that fragile, food
  deficit areas in parts of Asia and Africa may be
  even less able to feed their growing populations
  than before.
• This implies that trade will become increasingly
  important in connecting food surplus with food
  deficit areas.
• In parallel, development strategies are needed
  that will create employment outside agriculture
  for poor populations whose already meager
  livelihood from farming will come under threat.
• The multilateral trading system will need to be
  strong enough and reliable enough to satisfy food
  deficit countries that trade is indeed a reliable
  component in a broad food security strategy.

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WTO rules necessary though not sufficient

• Attention to improving the framework policy
  conditions in many less developed economies is
  also required, as is increased investment in
  developing country agriculture.
• Without improvement in the supply capacity on
  many poor countries, they will not be able to
  respond to markets at either local, regional,
  national or international levels.
• Both public and private investment can provide
  the needed capital for further development, but
  the private sector has an additional contribution
  to make with respect to bringing know how and
  networks to less developed regions.
• We should always keep in mind that agricultural
  policy reform and trade liberalization are a
  necessary but not sufficient condition for
  sustainable development in agriculture, and they
  must be accompanied by appropriate environmental
  policies.

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Externalities positive and negative

• To a large extent environmental effects are
  largely determined by farmers choices of how and
  what to produce, and these decisions in turn can
  be influenced by the way agriculture policy
  attempts to integrate environmental concerns.
• The dilemma faced by the agricultural sector is
  that the policy failures due to government
  intervention in agricultural markets tend to
  reinforce rather than mitigate market failures in
  agriculture.
• Agriculture support programmes, import
  restrictions on efficient biofuels and fossil
  fuel subsidies have encouraged production methods
  that did not pay attention to environmental
  impact.
• Subsidies have also encouraged over-exploitation
  of natural resources.

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Reforming agricultural policies A for the
environment

• OECD countries are responding to the
  environmental impacts of agriculture through a
  combination of agricultural and trade policy
  reform, and specific environmental policy
  instruments.
• However, the starting point should always be the
  reform of agricultural policies in order to
  reduce the production distortions associated with
  many forms of agricultural support.
• Regulations and taxes continue to be important,
  but OECD analyses show that environmental
  objectives can be achieved more efficiently by
  innovative approaches such as cross-compliance
  and decoupling.
• In this approach, payments and other forms of
  support depend on meeting targets other than
  increased production of specific commodities, for
  example preserving the landscape.

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Looking for win-win solutions

• The effects on environmental performance of
  reforming agriculture policies will depend on the
  type of policy measure in place.
• Most harmful interventions for the environment
  are market price support, output payments and
  input subsidies (such as fertiliser, pesticide
  and energy subsidies).
• Cross compliance mechanisms require farmers to
  fulfil specific environmental requirements in
  order to be eligible for specific agricultural
  support payments. In the EU, US and Switzerland,
  cross-compliance is significant.
• Agri-environmental payments. Some OECD countries
  (EU countries, Norway, Switzerland and US) have
  also developed a wide range of agri-environmental
  payments under voluntary programmes providing
  payments to farmers to adopt specific farming
  practices, with positive environmental effects
  and/or providing public goods (such as landscape,
  biodiversity, etc).

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The overall burden of agricultural support has
declined across all OECD

• Total support to the OECD agricultural sector,
  was USD 368 billion in 2006-08.
• This is equivalent to 0.9 of OECD GDP, down from
  2.5 in 1986-88.
• The reduced burden of agricultural support on the
  overall economy is characteristic of all OECD
  countries and primarily is a reflection of the
  falling share of agriculture in their GDP.

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and more payments are giving greater
flexibility to farmers, including no obligation
to produce

• Payments to farmers are less tied to producing a
  specific commodity, either by allowing a group of
  commodities or any commodity to be eligible for a
  payment.
• In 2006-08 around one quarter of total support to
  producers in the OECD area was arising from
  policies that did not oblige farmers to produce
  any commodity in order to receive support, in
  particular direct payments in the US or single
  payments in the EU.
• However, commodity-specific support is
  significant for rice, sugar, and some livestock
  products. In the case of rice, such support
  amounted to 60 of total producer rice receipts
  in 2006-08.

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Despite notable progress, policy distortions
inthe OECD area remain large

• Progress has been made in reforming support
  policies
• The level of support is down from 37 of farm
  receipts in 1986-88 to 23 in 2006-08
• The share of the most production and trade
  distorting support is also down, from 86 of
  total support PSE to 56.
• The implementation of more decoupled policy
  instruments has played a very important role in
  the reform process in OECD countries. But more
  needs to be done
• Better targeting of policies to specific income
  objectives or market failures remains a major
  challenge of ongoing policy reforms.