What if you could eliminate taxes of up to 35 percent on environmental technologies?
This week, the United States, China, the EU and other trading partners start a process to eliminate tariffs imposed on imports of green technologies as a means to encourage their development and use, removing duties that discourage their adoption globally.
The negotiations are already making producers and consumers of environmental technologies—everything from LED lighting to large natural gas turbines to solar technologies—take notice.
In the U.S., producers of green goods including Corning, General Electric and Ingersoll Rand have made clear their priorities to the government, variously urging negotiators to prioritize products such as automatic thermostats, natural gas locomotives, and mobile emissions control technologies in the negotiations.
Major buyers of environmental technologies are also interested. Walmart notes that a green goods agreement will result in reduced cost and wider adoption of products and technologies that advance its environmental sustainability goals. The company identified a series of products, from LEDs and components to solar, wind and geothermal technologies, which would promote energy efficiency in and around their stores and increase their adoption of renewable energy.
Other countries’ private sectors are also pressing the case.
Earlier this week, business representatives from Asia, Europe, and the Americas gathered in Geneva to outline their priorities for an environmental goods agreement. More than 40 associations, representing economies from Canada to Singapore to South Africa, released a letter that calls for trade officials to negotiate swiftly an ambitious agreement to eliminate tariffs on a broad set of green goods.
The effort underway offers an opportunity to demonstrate that sometimes-esoteric trade policies can benefit a pressing global challenge—in this case, addressing climate change and helping to improve environmental outcomes.
It is also a chance for policymakers to show that the World Trade Organization can serve as an efficient forum where diplomats can roll up their sleeves and knock out a deal that benefits their economies and the global good.
There is precedent for negotiators to follow. In the 1990s, major producers of information technologies negotiated an Information Technology Agreement at the WTO, eliminating duties on products including computers, software, telecommunications equipment and semiconductors. International trade in those products has increased three-fold, to more than $4 trillion, since the agreement took effect.
That agreement also demonstrated how cutting costs on a core set of technologies can have positive follow on effects for the broader economy.
Lowering the cost of IT hardware promoted its adoption, which in turn created an environment that benefited broader swaths of national economies. In India, the private sector National Association of Software and Services Companies estimates that the country’s business process outsourcing rose from 1.2 percent of GDP in 1998, the year after the IT agreement first took effect, to 7.5 percent in 2012. Eliminating tariffs on technology hardware made it possible for India to emerge as a global giant in IT and business services.
In the case of green goods, lowering costs of products such as smart grid technologies could pave the way for the more rapid development of next generation grid-enabled services like smarter home monitoring.
Traditionally, the challenge with trade talks is that negotiators think of cutting tariffs as a concession. Eliminating tariffs on green goods is a chance for economies around the world to reduce the costs of improving environmental sustainability and economic growth.
Jake Colvin is Executive Director of the Global Innovation Forum and a Vice President with the National Foreign Trade Council.