Given Israel’s geography and climate, Israelis have long understood that the economic future cannot be separated from the environmental future. Informed and inspired by this understanding, Israeli businesses have long been among the leaders worldwide in spurring and spreading new environmental technologies for sustainable economic development.
Beckoning now is a new opportunity for Israel to help lead the way toward a greener global economy.
The United States, China, the 28 member states of the European Union and 11 others among the 160 member countries of the World Trade Organization have recently launched negotiations to help speed the spread of new green technologies worldwide by eliminating global tariffs on green goods.
Much is at stake for the WTO in these new talks. Similar previous negotiating efforts among like-minded coalitions of WTO members on information technology and on government procurement have resulted in successful, binding WTO agreements. The hope is that these new negotiations on green goods will prove equally successful, and will also demonstrate a more effective way of concluding trade deals that can build over time toward global trade rules within the WTO.
Elsewhere, complex negotiations on a global climate treaty proceed slowly toward an uncertain conclusion in Paris at the end of next year. Hindering the progress of the climate talks is the widespread perception that there would be both “winners” and “losers” in a global climate deal. The green goods talks in the WTO seem more likely to be “win-win.” Thus, there is the very real prospect that the first binding global agreement to fight climate change will come from what may seem to many an unlikely source – the WTO.
Israel has not yet become a participant in these new negotiations on green goods. The commercial leadership of Israel on solar energy, sustainable transport, energy efficiency, electric cars, desalination, pressure- retarded osmosis, water treatment, waste treatment, waste to energy, green building materials, drip irrigation, and other innovative agricultural technologies are all reasons for Israel to give participation in these new WTO negotiations serious consideration.
As a WTO member, Israel has the right to join these talks any time it chooses simply by saying it wishes to do so. Israel may wish to begin crafting a practical agenda for doing so now.
The first step would be for Israeli businesses with a stake in the outcome of these new negotiations to urge the Industry, Trade and Labor Ministry to get involved and, importantly, to offer to help along the way. The next step would be for Israel to raise its hand in Geneva at the WTO and ask for a seat at the negotiating table. Once at the table, Israel could then maximize the ultimate benefits of its participation in the talks by working with like-minded countries as well as with like-minded business groups, environmental NGOs, and others in trying to shape the outcome. The United States and Israel are likely to share much the same perspective on the issue of green goods.
Initially, these new trade talks are solely about tariffs.
Tariff-cutting is the right first task. Total global trade in environmental goods such as wind turbines and solar panels is about $1 trillion and growing fast. Tariffs on some of these products are as high as 35 percent. Eliminating needless taxes at the world’s borders would accelerate the flow of new green technologies to all the places in the world that need them urgently in the struggle to confront climate change.
This tariff-cutting will be no easy task. The WTO has been laboring without success to liberalize trade in environmental goods and services in global trade negotiations for more than a dozen years now. The decision of this subset of WTO members to deal with the issue of green goods separately is a good sign. But hurdles remain.
The biggest hurdle will be agreeing on a definition of an “environmental good.” At the outset, the countries engaged in these new talks seem inclined for now toward a fairly narrow definition. They have chosen to begin with a list of 54 environmental products. This list is a good starting point – but only a starting point.
Another hurdle will be agreeing up-front on how to add new products easily as green technologies continue to evolve. WTO members have learned this lesson from their experience with their agreement abolishing tariffs on information technology products. The IT product list is frozen in 1996. Negotiators are trying now to add such “newfangled” IT products as tablets and smart phones.
The goal is for these tariff cuts to take effect once enough WTO members have joined sufficient to account for a “critical mass” of world trade in environmental goods. The countries launching the negotiations account for 86% of that trade. A “critical mass” may be viewed as 90%. At that point, the tariff cuts would be extended to all 160 WTO members – including those who have not yet signed the agreement.
As it stands, Israel is one of the most important global traders in environmental goods not yet participating in these new trade talks. (Others are Brazil, India, Malaysia, Mexico, the Philippines, Russia, South Africa, Thailand, Turkey, Ukraine and Vietnam.) In 2012, Israel had $2.1 billion in exports and $2.4b. in imports of the 54 environmental goods on the current negotiating list.
Under WTO rules, Israel will get the benefit of whatever results. In a world with many priorities and limited resources, the temptation may, understandably, be simply to wait for the results. But the benefits could be much greater for Israeli businesses if Israel joins the talks and helps shape those results. For example, more of the green goods most important to Israel could be included on the duty-free list.
Israel could also benefit considerably if, as the countries initiating these new negotiations have implied, these talks eventually extend beyond tariff-cutting.
Cutting tariffs alone will have little effect on overall global carbon emissions. The larger challenge for those negotiating on green goods is to show that these new efforts in the WTO can lead to more than merely cutting tariffs. A WTO agreement to eliminate duties on green goods could become the foundation for a broader agreement to confront climate change on many fronts by promoting global trade in sustainable energy.
If they are truly visionary, the countries engaged in these new trade talks could choose not to stop at eliminating border taxes on trade in environmental goods.
They could go on to eliminate barriers, too, to trade in environmental services. They could address standards, regulations, and other non-tariff trade barriers that are often more restrictive than tariffs.
They could strengthen intellectual property regimes for clean innovations, enhance the sustainability of global supply chains, encourage sustainable government purchases, and call a halt to dueling trade remedies over green subsidies. And they could take real action to discipline energy subsidies of all kinds in ways that promote sustainability.
While the world continues to deliberate over climate change in the ongoing United Nations negotiations, the WTO could serve trade and climate together by transforming this proposed tariff agreement into a comprehensive sustainable energy trade agreement for all the world. Israel could help shape and thus considerably enhance this vital effort, and Israel could benefit all the more from it by helping lead the way.
The author chairs the global practice group of Greenberg Traurig, an international law firm with a Tel Aviv office and an extensive Israeli practice. He is a former member of the Congress of the United States, and a former chief judge for the World Trade Organization. He chairs the sustainability council of the World Economic Forum, and is a member of the High Level Advisory Panel to the United Nations on the current climate negotiations.