THE TTALK QUOTES 

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No. 82 of 2014 

TUESDAY, DECEMBER 2, 2014     

 

   

Filed from Portland, Oregon  

     

Click here for last Wednesday's quote from the Honorable Bill Frenzel.

This time the link will take you not to the original but to a revised version of the quote for November 26.  There were really two parts to that entry.  The first part, the core of it, was Bill Frenzel's acceptance speech on receiving the Mexican Government's Order of the Aztec Eagle on October 20, 2014, for his work on NAFTA.  We have made no changes there.  The second part was an anecdote from Bill's work as a member of GBD's Board of Advisers.  The original version omitted the opening background sentences to that episode and the revised version restores them.  For ease of reference, the same anecdote is repeated at the end of today's entry.
THE EGA, PART II - THE VIEW FROM DOWN UNDER

"[W]we are the driest inhabited continent in the world, and we are the highest users of water."

Simon Newnham
November 20, 2014
CONTEXT
Simon Newnham is the Minister-Counsellor for Trade at the Australian Embassy in Washington, and he was one of two government speakers at the November 20 colloquium on the Environmental Goods Agreement (EGA) being negotiated in the WTO in Geneva.  The other was Jennifer Prescott, the Assistant U.S. Trade Representative for Environment and Natural Resources.  The event was sponsored jointly by NAM and the Global Business Dialogue. 

Admittedly, we chose today's quote from Mr. Newnham's very rich presentation as much for what it says about how Australia sees itself as for how it sees the EGA.  But the two are clearly related.  Here is more from the section of Mr. Newnham's remarks with the above observation:

"So, to Australia, to be honest, we are a relatively small producer of environmental goods.  About $1.3 billion, roughly, in exports.  Our imports [of environmental goods] vary between $4 and $7 billion, depending on which year you look at the stats.*  But we are the driest inhabited continent in the world, and we're the highest users of water.  So, we've had to become competitive and expert at water management.  We've also had to become pretty competitive in renewable energy.  And those two areas for us are real offensive interests in the negotiations.  [They are areas where] we think we can be competitive with our products, if some of those barriers are lowered."

The issue of water arose again in the event's concluding Q&A session.  Responding to an open-ended question on water, Orit Frenkel of GE talked about her company's ability to turn highly polluted effluent into clean drinking water.  We will share more of her presentation in a subsequent entry.  Mr. Newnham responded to the same question with an emphasis on his basic point about Australia and water.  He said:

"From our perspective, it's about consumption.  Cleanliness, of course, but consumption.  And if there are technologies that mean we can do more with less water, that's hugely important in our part of the world.  So that's what we are focused on."

***

An Australian diplomat chairs the WTO EGA negotiations in Geneva, and, although we chose to begin this discussion with a focus on water, Mr. Newnham's talk was an overview of the negotiations in four parts: 1) the history, "how we got here";  2) the present, how the talks are going;  3) what's in it for Australia; and 4) a look at some of the challenges the negotiators will face.  Here is a Readers' Digest version of each of those.

History. Like some of the other recent breakthroughs in global trade - the progress on ITA and Trade Facilitation for example - the EGA is a demonstration of how ideas and projects can evolve, with the work in one organization building on work in another.  Agreeing with the first speaker at the event, Mr. Newnham said:

"As Jennifer very aptly put it: the launch was in Davos earlier this year, but that built on the Leaders's statement in 2012 in APEC and the prior work there, which itself build on the WTO work, which had been going on for many years.  So [the EGA is] a terrific example of the interplay between those organizations.  [And] most of the goods on the APEC list, the 54 products, can be traced back to the lists that WTO members had submitted in years prior to that."

Current Progress.  There have been two rounds of negotiations to date.  "We're off to a strong start," Mr. Newnham said, and "the largest traders are all involved: China, EU, U.S., Korea."

What's In It for Australia?  There were four strands to Mr. Newnham's answer to that question.  One, of course, had to do with anticipated commercial advantages, and some of that has been mentioned, but not fully.  Mr. Newnham took note of the fact, for example, that the average tariff on the 54 products now at issue is 6 percent.  That's not an insignificant barrier.  Yet the commercial opportunities from a successful EGA are potentially much larger, especially if the negotiators are successful in adding both more products and more economies into the mix.

But the EGA is about more than just imports and exports.  It's about development.  And most importantly, it is also about the environment.  "It is really an example of where trade can play an important role in dealing with big environmental issues, including climate change,"  Mr. Newnham said.

He underscored the point with this reference to China's participation:

"It is both a major exporter - so there are commercial gains for them from these products - but it has environmental challenges.  And one of the tools it wants in its toolkit is this sort of agreement to lower trade [barriers on] environmentally friendly goods."

Finally, Mr. Newnham emphasized that a successful EGA would benefit the WTO and the multilateral trading system.

The Challenges.  Mr. Newnham joked that this was the longest segment of his presentation.   We will touch on these issues lightly as they either have been or will be dealt with elsewhere in this series. 

Environmental Credibility was the first challenge he mentioned.  "In the absence of a universal agreement on what is an environmental good, we need to make sure that the product list we come up with has environmental credibility," Mr. Newnham said.

Sorting Out the H.S. Codes was his second challenge.  This too has to do with selecting products.  Because the current APEC list is at a fairly broad level of generality - the six digit level in the Harmonized Commodity Description and Coding System - it may include products whose credibility as environmental goods are open to question.

Critical Mass was challenge Number 3 in his list.  The issue has to do with just how much trade needs to be covered before the participating WTO members are willing to say they have a deal they can implement, one which will allow them to eliminate tariffs on the listed products for every member of the WTO?  Mr. Newnham's answer to that question: it can wait.  First, the negotiators need to come up with a final product list and a final list of participating countries.  Only after those issues have been decided will it be time to worry about critical mass.

Relationship to the Doha Round.  Should WTO members be concerned that the EGA talks will undercut the Doha Round?   Alternatively, is there a danger that countries will hold back in the EGA negotiation because they are waiting for talks in the wider Round?  Mr. Newnham's view was that these are essentially non-issues.  The EGA and Doha are complementary exercises, he said, not competing ones.
 
What About the Non-Participants?  Mr. Newnham acknowledged that plurilateral negotiations like the EGA "are not everyone's cup of tea in Geneva."   On balance, however, he took the view that those WTO members who do not participate will nevertheless benefit from the EGA.  And besides - back to critical mass - most of the trade in the affected products will be accounted for by WTO members which are participants in the EGA negotiations. 

The Need for Business (And NGO/Environmental) Support for the EGA was the last of the challenges Simon Newnham mentioned.  "In any trade negotiation," he said, "you often live and die by the champions," those who will go to bat for the outcomes.

COMMENT
Asked in the Q&A about the seriousness of the above challenges, Mr. Newnham described them all as "manageable."  We suspect he was right about that.  But this negotiation has a long way to go, and more challenges are likely to emerge. In the United States, for example, we assume Congress will turn its attention to Trade Promotion Authority legislation early next year, and we further assume that that legislation will make some reference to the EGA negotiations.  Will that reference be non-controversial?  Or will it be a road map to yet more challenges?  We don't know.
NOTES, LINKS, AND SOURCES
A Double Opportunity takes you to the audio recording of the colloquium on the Environmental Goods Agreement, which was held last Thursday, November 20, at the National Press Club in Washington.  Mr. Newnham's comments at this event were the source for today's quote.

EGA, Part I is a link to the TTALK Quote for November 25, which focused Jennifer Prescott's presentation at the same November 20 event.

The List of 54 is a link to the APEC list of environmental goods which is the current basis for the EGA negotiations, though it is clear that the participants intend to build on that list.

An Announcement by Ambassador Froman takes you to the U.S. Trade Representative's statement from Davos last January announcing the decision to enter a WTO plurilateral negotiation on trade in environmental goods.

A Note on the Numbers.  In his announcement on the EGA negotiations last January, Ambassador Froman said "Global trade in environmental goods totals nearly a trillion dollars annually."  Simon Newnham in his presentation on November 20 referred to "about $400 billion worth of trade on those 54 products."  Our guess is that they are both right but measuring different things.  In any event, all the estimates will need to be revised once there is a final list.   In the meantime, those interested in this aspect of the issue should look at the estimates put together by Terence Stewart of Stewart and Stewart for the April 2 Issue of Trade Flows.

*Dollars, US or Australian? We are not sure whether Mr. Newnham was referring to U.S. or Australian dollars.  Our guess is that he was using U.S. dollar estimates.  Currently, 1 Australian dollar equals about $0.85 US; and so, given the ranges he was talking about, the difference is not particularly significant.

REVISED FROM THE TTALK FOR  NOVEMBER 26 - The final segment of that entry should have read:
Bill Frenzel could make you laugh.  He was famous, among other things, for his habit of doodling during meetings, and those doodles became an issue in a GBD meeting many years ago.  It was a very early meeting, and we were concerned then, as we are now, with the challenge of keeping the Global Business Dialogue afloat financially.  Watching Bill draw, another board member, Howard Lewis, offered a suggestion.  "Maybe we could sell your doodles, Bill," he said.



"Yes," Bill said.  "They do have a certain value.  The problem is that the supply is endless."

****

Tomorrow is Thanksgiving.  At GBD we'll be thinking about how lucky we were to have known Bill Frenzel.
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