In introducing a hearing earlier this month on “Growing U.S. Trade in Green Technology,” Congressman Bobby L. Rush (D-IL), who chairs the House Subcommittee on Commerce, Trade, and Consumer Protection, painted a dismal picture of U.S. competitiveness in the field of emerging environmental, or green, technology.  There is no single definition of green technology, but the concept is widely understood as encompassing emerging technologies related to renewable energy, energy efficiency and the conservation of natural resources.

Citing statistics from the New America Foundation, Congressman Rush claimed that, over the last decade, the U.S. has moved from a positive overall green technology trade balance of $12 billion to a deficit of nearly $9 billion.  For some green technologies, the trade deficit has grown particularly severe.  According to written testimony submitted for the hearing by Steve F. Hayward of the American Enterprise Institute, the U.S. trade deficit for wind power components has, in recent years, grown to $20 billion.  To correct this imbalance, Congressman Rush urged the adoption of a vigorous and long-term U.S. export promotion policy to reclaim U.S. green technology leadership.

Expert testimony before the hearing addressed a variety of factors explaining the seeming decline in the global competitive position of U.S. green technology firms, including stiff tariff and non-tariff trade barriers maintained by major trading partners of the U.S.  These barriers to trade in green technology are maintained even as many U.S. trading partners provide substantial assistance to their domestic green technology firms, exacerbating the negative impact on U.S. firms.

For example, according to written testimony submitted by GE’s Managing Director for International Energy Policy, Timothy J. Richards, 91 of 153 WTO member states impose tariffs on wind turbines and solar panels.  In the case of wind turbines, the WTO-wide mean tariff rate is 7.4%.  These tariffs are also highly variable among WTO member states.  In the case of wind turbines, while the U.S. has bound its tariff rate at 1.3%, China applies a tariff rate of 8%.  Brazil’s is even higher at 14%.  Also according to Richards’ testimony, many WTO member states, including Canada, China and the U.S., have recently adopted procurement policies that effectively bar competition from foreign suppliers.

Several witnesses advocated that a central aspect of a U.S. strategy for promoting U.S. green technology exports should be a renewed commitment to an old idea - an Environmental Goods and Services Agreement (EGSA) under the WTO.  The basic principle underlying EGSA is to liberalize global trade for a defined range of green technologies to promote efficient and rapid global dissemination of these technologies.  The mandate for the negotiations dates back to the 2001 Doha Ministerial Declaration, which at paragraph 31(iii) calls for “the reduction, or as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services.”  While this mandate does not expressly identify greenhouse gas emissions, the ongoing EGSA negotiations have, in recent years, come to be seen as an adjunct to the global negotiation of a successor to the Kyoto Protocol to the U.N. Framework Convention on Climate Change, which is set to expire in 2012.

The Bush Administration strongly supported EGSA, and in 2007 attempted to reinvigorate the talks with a multilateral proposal, submitted jointly with Canada, the EU, Japan, Korea, New Zealand, Norway, Taiwan and Switzerland.  This proposal identified a “Potential Convergence Set” of green technologies, mostly related to climate change mitigation, that might be more amenable to inclusion in the first phase of a market-opening agreement.  The Obama Administration recently signaled its agreement with the Bush Administration’s approach, and earlier this month resubmitted the 2007 proposal to the WTO entity overseeing the talks - the Committee on Trade and Environment - Special Session.

Notwithstanding the sense of urgency evident at Congressman Rush’s hearing to advance the competitive position of U.S. green technology industries, however, EGSA appears to face the same hurdles today as it did when sought by the Bush Administration.  One such hurdle is that the EGSA negotiations are currently linked to the broader trade negotiations in the ongoing Doha Round.  Unless WTO member states agree to sever the EGSA negotiations from the Doha Round, EGSA’s prospects will remain linked to highly controversial and difficult aspects of these negotiations - such as agricultural subsidies - that have defied resolution.  Further, the EGSA negotiations have not been able to overcome a deep divide between the proponents of the 2007 proposal and a group of developing countries, led by Brazil, that seek the inclusion of biofuels in any EGSA. 

While U.S. law- and policy-makers seem to agree that they must quickly find new ways to stimulate U.S. green technology industries, EGSA remains a distant and uncertain prospect.

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