The failure of the recent WTO Doha Round ministerial in Geneva seems to have doomed the chances that a comprehensive multilateral trade agreement can be reached during the remainder of the Bush Administration. However, as trade ministers consider whether and how to resume negotiations under the Doha Round, initiated in 2001, momentum is building among key WTO Members to carve out specific trade sectors where prospects for agreement seem to be within reach. One such prospect is an Environmental Goods and Services Agreement (”EGSA”), which would liberalize trade in certain deemed “environmental” goods and services. The fundamental goal of EGSA is to harness trade liberalization to encourage the global dissemination and deployment of environmentally friendly technologies that, among other things, help mitigate climate change.

The Bush Administration has strongly supported EGSA over the last year, promoting it both as an important component of the Doha Round negotiations towards a comprehensive trade deal as well as a complement to ongoing efforts to negotiate an international greenhouse-gas emissions reductions pact to replace the Kyoto Protocol commitments, which expire in 2012. Since the failure of the WTO ministerial in Geneva, U.S. Trade Representative Susan Schwab and her General Counsel, Warren Maruyama, have both spoken publicly of possible U.S. interest in pursuing EGSA on its own track. Also, the National Association of Manufacturers (”NAM”) recently announced the formation of an international coalition of companies and industry associations to press for EGSA.

However, several obstacles may stall the efforts to reach a stand-alone environmental goods and services deal. One is a major rift between the U.S. and the EU, on the hand, and Brazil, on the other, concerning the inclusion of biofuels in the list of deemed “environmental goods” under EGSA. While Brazil strongly supports the inclusion of biofuels, the U.S. and the EU have been advocating an approach which would first liberalize trade for a defined range of technologies, excluding biofuels, believed to be most effective in reducing greenhouse gas emissions. Negotiations to bridge this gap have, to date, failed. Indeed, Brazil has moved aggressively to try to open foreign markets to its biofuels, including through its recent announcement that it is contemplating a challenge under the WTO to the U.S. import tariff on ethanol.

Another obstacle is whether there would be full participation in a sector-specific agreement such as EGSA. Under the latest Doha Round compromise, there is some question of whether developing countries would be required to meaningfully participate in these sector-specific agreements. For instance, there is a possibility that certain WTO Members representing major markets for environmental goods and services - such as China and India - may decline to participate in EGSA negotiations and thereby maintain current market access restrictions for environmental goods and services. Such non-participation could undermine any market opening commitments agreed to by the participating countries. In this scenario, the non-participating WTO Members would likely still have the right, through the most-favored nation principle, to take advantage of the market access commitments made by the participating WTO Members. This type of asymmetrical outcome would, of course, be undesirable for many WTO Members.

While WTO trade ministers could decide to recommence the comprehensive Doha Round negotiations shortly, it could also take months before this would occur. In the meantime, EGSA seems poised to attract more attention, and is perhaps better positioned for success than it was before the failed Geneva ministerial.

For further information about this topic, please contact Akin Gump.