Contributing to Environmental Objectives
through RTAs: Trade in Organic Agricultural
Products and Renewable Energy Technologies
OECD Workshop on “Regional Trade Agreements and the Environment”
Tokyo, June 19-20, 2007
Mark Elder, Ph.D.
Senior Policy Researcher
IGES
This presentation is based on work from one of our
projects: RISPO-II (Research on Innovative and
Strategic Policy Options)
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Mark Elder
"Promotion of Sustainable Development in the Context of
Regional Economic Integration: Strategies for Environmental
Sustainability and Poverty Reduction"
RISPO II aims to provide strategic policy options using the
partnership framework of the United Nations Environmental
Programme-Network for Institutions for Sustainable Development
(UNEP-NISD).
This study includes 3 case study areas, including renewable
energy, organic agriculture, and waste/recycling; this presentation
will focus on the first 2 areas.
This presentation is not a comprehensive, systematic treatment,
but focuses selectively given limited time.
This presentation represents the views of myself and other
researchers working on the project, and is not the official view of
IGES.
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OECD Workshop on RTAs & Environment
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Overall Message:
1.
Trade liberalisation’s potential contribution to
promoting renewable energy and organic
agriculture may be limited.
2.
Direct measures by national governments to
promote renewable energy and organic agriculture
have significantly more potential.
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3.
Mark Elder
Mandate increased use of renewable energy
Reduce costs of organic relative to non-organic agriculture
However, priority liberalization of renewable energy
and organic agriculture is still worth pursuing.
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OECD Workshop on RTAs & Environment
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Agriculture
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Organic agriculture is widely seen as a good way to
address negative environmental impacts from
agricultural activity (especially land degradation &
water pollution from synthetic fertilizers & pesticides,
and inappropriate use of pesticides).
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Mark Elder
It is a market-based solution (not command & control)
It has the potential to benefit from trade liberalization and
economic integration (more trade => economies of scale =>
reduced transaction costs)
Current organic market share is very small (1-2%), but if this
could be increased by even a small amount, to 3-5%, the
environmental and other benefits could be significant.
(Main focus may be fruits & vegetables, including processed
as well as fresh, & perhaps rice)
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Therefore, prioritization of liberalization of
organic products is one way that RTAs
could contribute to promoting organic
agriculture (including classification as
Environmentally Preferable Products
(EPP)).
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Mark Elder
Farmers would have strong incentives to
grow organic products for export
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Difficulties in Liberalizing Trade in Organic
Agricultural Products
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Mark Elder
Difficult to agree on organic standards,
labelling/certification systems
It may be difficult for some developing
countries to establish organic standards,
labelling/certification systems
Falsely labelled products could be a large
problem if organic products are liberalized
first
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Maybe more realistic to focus more directly
on organic promotion measures
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First priority should be on developing certification and labelling
schemes (conformity assessment systems), before trade
liberalization
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Including domestic infrastructure for implementation
Then, work towards harmonization of standards and conformity
assessment systems, beginning with intermediate steps such as
promotion of ‘equivalence’
Other measures
 General organic marketing promotion, consumer awareness
 Subsidy switching—to activities related to organic agriculture
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Mark Elder
From non-organic to organic fertilizers & pesticides & integrated
pesticide management
Coordination with livestock industry—win-win scenario: use
livestock waste as source of organic fertilizers
Stricter enforcement against illegal pesticides
Stricter standards for pesticide use; incentives for integrated pest
management (IPM)
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Still, prioritization of liberalization of
organic agricultural products is probably
worth pursuing
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Organic agriculture could be potentially beneficial for
developing countries if trade is liberalized
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Mark Elder
Demand for organic products is increasing in high income
countries
Organic products generally receive a price premium
Organic products can be labor intensive
Trade liberalization will increase the scale of the market, and
reduce transaction costs
Therefore, this could be an opportunity for developing countries to
exploit
Trade liberalization of organic products by developed countries
could provide a strong incentive for developing countries to
make strong efforts to develop or strengthen their own organic
standards and conformity assessment systems
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Political feasibility of prioritization of
liberalization of trade in organic agriculture
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Certainly not easy, but may be easier than broader agricultural
liberalization, since the quantities involved are much smaller (now)
Uncertainty about whether developing countries will actually be
able to meet strict organic standards and certification
requirements could provide an incentive for developed countries
to agree to organic agriculture trade concessions.
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Mark Elder
It may take developing countries a long time before they could meet
the standards
So developed countries could offer it as a concession for something
else
But it may be potentially valuable enough for some developing
countries to trade something for it
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Renewable Energy (RE)
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Renewable energy (in addition to energy conservation) is
widely seen as a way to address negative environmental
impacts from the energy sector (especially GHG emissions)
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May be preferred by business compared to taxes or regulation
Has the potential to benefit from trade liberalization
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Mark Elder
Short run: Lower tariffs = immediate, direct cost reduction
Long run: More trade => economies of scale => reduced costs
Can also play a large role in rural electrification in developing
countries to meet Millennium Development Goals
Therefore, prioritization of liberalization of renewable energy &
equipment is one way that RTAs could contribute to promoting
renewable energy (including classification as Environmentally
Preferable Products (EPP))
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Potential for Trade Liberalization of Renewable
Energy & Equipment
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RE Equipment: Many countries have significant tariffs on
various renewable energy equipment & parts, for example solar
power.
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RE: Much RE is not tradable, because of difficulty of storage or
lack of grid connection. Biofuels and biomass, though, can be
traded
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Mark Elder
Lower tariffs could promote greater use of RE and promote FDI in
RE parts in developing countries
RE equipment can be subjected to unintended protection due to
lack of special classifications for RE equipment
Many countries have tariffs or other trade barriers on biofuels
and/or biofuel crops/raw materials
Lower protection would promote biofuel production & use
But some mechanism is necessary to ensure that sustainable
production methods are used for biofuels; otherwise there is a
significant danger of negative environmental effects, such as
deforestation or agricultural pollution
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The overall potential of trade liberalization to
promote renewable energy is limited, as long as
the cost of renewable energy is ‘significantly’
higher than fossil fuel-based energy
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Therefore, domestic policies that mandate
increased use of RE will have much more
effect on its rate of adoption, regardless of
the extent of trade liberalization of RE or RE
equipment.
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Mark Elder
Example: requirement that a certain percent of electric
power be generated using renewable energy
In other words, through government policy, society would pay a
price premium for RE in order to pay for the environmental and
other benefits (such as energy security)
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Trade in Renewable Energy & Equipment and
Economic Competitiveness
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Many countries are reluctant to raise RE mandates, because they fear
losing economic competitiveness if energy prices increase as a result.
This may be a good reason for countries to jointly implement higher
RE mandates, to minimize relative competitive effects on energy
consuming industries.
However, greater use of RE appears to be a long term trend, and
countries who can develop RE & RE equipment faster may gain a long
term advantage.
Countries with higher RE mandates may enjoy competitive benefits
sooner:
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Mark Elder
Increased RE standards will increase economies of scale, thereby enabling
cost reductions and increasing market size
Domestic RE-related businesses will have earlier incentives compared to
countries that delay higher mandates
Better chance to get CDM/JI projects, participate in emissions trading
Countries that liberalize RE & RE equipment sooner (even unilaterally)
will enjoy benefits sooner (lower cost RE, environmental benefits,
energy security benefits, rural electrification)
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Caution: Need to analyze renewable
energy forms using Life Cycle
Analysis to carefully assess potential
negative environmental effects
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Examples:
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Mark Elder
Large windmills need large amounts of concrete
Solar systems may result in significant amounts of
e-waste at end-of-life
Biofuel production may result in deforestation,
biodiversity loss, water shortages, agricultural
pollution
IGES | http://www.iges.or.jp
OECD Workshop on RTAs & Environment
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Caution:
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Need to analyze renewable energy forms
using Life Cycle Analysis to carefully assess
potential negative environmental effects of
renewable energy forms
Examples:
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Mark Elder
Large windmills need large amounts of concrete
Solar systems may result in significant amounts of
e-waste at end-of-life
Biofuel production may result in deforestation,
biodiversity loss, water shortages, agricultural
pollution
IGES | http://www.iges.or.jp
OECD Workshop on RTAs & Environment
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