 
  WORLD TRADE  
ORGANIZATION  TN/TE/INF/8 
11 October 2004 
 (04-4236) 
Committee on Trade and Environment 
Special Session Original:   English 
 
 
 
STATEMENT BY THE OECD SECRETARIAT ON THE OECD’S WORK ON 
ENVIRONMENTAL GOODS AND SERVICES AT THE  
COMMITTEE ON TRADE AND ENVIRONMENT  
SPECIAL SESSION (CTESS) MEETING  
OF 12-13 OCTOBER 2004 
 
Paragraph 31 (iii)  
  
 The following communication, dated 8 October 2004, is being circulated at the request of the 
OECD Secretariat
. 
_______________ 
  
I. A SUSTAINED INTEREST IN ENVIRONMENTAL GOODS AND SERVICES 
1. OECD interest in the environmental goods and services (EG&S) goes back more than a 
decade.  It arose initially as part of its work on environmental policy and industrial competitiveness.  
A report prepared by the Industry Committee in 1992 described market developments in the 
environment industry and the role of environmen tal policies (OECD, 1992).  A subsequent report 
(OECD, 1996a) expanded and deepened the analysis, collected available data, and showed a clear 
need for improving information on the industry and undertaking further analysis. 
2. Publication of these results prompted numerous questions.  What had been the record in 
exporting environmental technologies?  Could the impact on industrial competitiveness due to the 
application of cleaner technologies be measured?  How could environmental and economic policy be 
modified to encourage and supp ort growth, job creati on and trade in goods and services of the 
environment industry?  It soon became apparent  that answering these questions would require 
addressing major statistical and methodological difficulties related to problems of industry 
delimitation and data availability.   
3. Before statistics could be gathered, however,  a clearer definition and classification of the 
environmental goods and services industry had to be  developed.  To this end, the OECD, in 
collaboration with Eurostat (the Statistical Office of the European Communities), formed an Informal 
Working Group on the Environment Industry composed  of experts from OECD countries who, as part 
of their work at national ministries for economics or industry, national statistical offices, or public or 
private research institutes, were responsible for collecting and analysing data on the environmental 
goods and services industry.  The fruits of th is collaboration were published in 1996 in The 
Environmental Goods and Services Industry:   Manual on Data Collection and Analysis . 
4. This exercise did not, however, address trade aspects.   That task was taken up by the OECD’s 
Joint Working Party on Trade and Environment (JW PTE), which decided to deepen the analysis first 
by identifying a list of representative goods (ident ified by 6-digit HS code) and services for the 
purposes of gaining a better understanding of the exte nt of international trade in the sector, and the TN/TE/INF/8 
Page 2  
 
 tariff and non-tariff barriers affecting it.  Foll owing the preliminary phase of the work, the JWPTE 
turned to the development dimension.  In partic ular, it wanted to know wh ether concrete examples 
existed of “win-win” benefits accruing to de veloping countries from liberalisation of their 
environmental services markets.  The results of these studies are compiled in a report published 
in 2001 under the title Environm ental Goods and Services:  The Benefits of Further Global Trade 
Liberalisation . 
II. CURRENT WORK FOCUSSED ON THE DDA PARAGRAPH 31(III) 
NEGOTIATIONS 
5. Following the WTO (Doha) Ministerial Declara tion decision to launch negotiations on “the 
reduction or, as appropriate, elimin ation of tariff and non-tariff barri ers to environmental goods and 
services”, the JWPTE in 2003 once again turned its atte ntion to the topic.  The general aims of the 
current phase of this work are: 
(a) To explain the background to the paragraph 31(iii) initiative. 
 
(b) To explore some of the practical issues likely to arise in the negotiations on 
environmental goods, as well as options for addressing them. 
 (c) To explore issues associated with particular categories of goods.  
(d) To develop, through analysis, a better unde rstanding of the nature of the market for 
environmental goods and services - especia lly in rapidly industrialising countries - 
and what complementary policies they can a dopt to help ensure that they reap the 
maximum benefits from liberalisation. 
 
(e) To document the synergies created by the liberalisation of trade in environmental 
services and trade in environmental goods. 
 
A. A
 COMPARISON  OF THE  APEC  AND  OECD  LISTS 
6. The first study carried out under the current wo rk programme on EGS had a simple objective: 
to explain the origins, and the similarities and differences between the lists of environmental goods 
produced by the OECD and by Asia-Pacific Economic Co-operation (APEC). 
7. These two lists are seen as separate but, in fact, their developmental phases closely paralleled 
each other and intersected at several points, the on e exercise informing the other.  That is not 
surprising, as six (eventually seven) countries were  members of both organisations.  However, the 
purposes that the lists were intended to serve differe d from the start.  The OECD list was meant to be 
indicative, particularly as a framework for undert aking economic analyses in general, and of trade 
flows and tariff barriers in particular, whereas the APEC list - for which the negotiation process came to an end before full consensus was reached - was th e direct result of negotiated offers in the context 
of a trade-liberalisation initiative. 
8. The OECD list was the result of an exercise intended to illustrate, primarily for analytical 
reasons, the scope of the “environment industry.”  The selection of categories of goods could 
therefore be broad, because there were no specific po licy consequences of adding products to the list.  
Moreover, the OECD’s larger list was created deduc tively:  starting from general categories based on 
the classifications appearing in the environment i ndustry manual, and adding more specific examples, 
in order to produce an estimate of average ta riffs on a previously undefined class of goods.  TN/TE/INF/8 
 Page 3 
 
 
 9. By contrast, the APEC list resulted from polic y discussions directed toward anticipated 
changes in tariffs.  The drafters of the APEC list consciously based their categories of environmental goods in large part on the work being undertaken at the time by the OECD/Eurostat informal working 
group on the environment industry.  But the process of choosing which specific goods to include 
started with nominations - not unlike the requ est/offer procedures traditionally used in trade 
negotiations.  These were then arranged according to the agreed classification system.  Since the aim 
of the APEC list was to obtain more favourable  tariff treatment for environmental goods, APEC 
member economies limited themselves to considerin g only those specific goods that could be readily 
distinguished by customs agents and treated different ly for tariff purposes.  For this reason, issues 
related to “like products”, products defined by  particular processes or production methods, and 
products defined by their life-cycle impacts, were not addressed, with the result that some goods were 
left off the list that could be included on the OECD  list.  This constraint of practicality could be 
relaxed in the OECD’s analysis because its aim w as merely to illustrate what could potentially be 
included.
 
B. LIBERALISING  TRADE  IN ENVIRONMENTAL  GOODS:  PRACTICAL  
CONSIDERATIONS 
10. Discussions on the paragraph 31(iii) negotiating mandate are still at an early stage, and their 
eventual outcome is uncertain.  Ho wever, on the basis of the lists of  goods nominated to date, there is 
a possibility that an eventual tariff-reduction or  –elimination initiative could include goods not 
separately identified under the current Harmonized Commodity Description and Coding System tariff 
nomenclature (HS).  Additionally, depending on wh at countries ultimately propose, negotiators may 
also have to consider whether to include goods:  (i) that have multiple uses, some of which are not 
“environmental”;  (ii) goods that are sold as entire plants or systems;  (iii) goods of interest because of 
the processes or production methods by which they we re manufactured, extracted or harvested;  and 
(iv) goods that are defined by their s uperior environmental performance. 
11. The OECD undertook a study that explores possible ways that these types of goods could be 
accommodated while remaining true to the pr inciples of the WTO and the World Customs 
Organization (WCO).  While the procedures for d ealing with such goods often create additional 
transaction costs, there are preceden ts from previous sectoral agreements and initiatives that could be 
followed. 
12. The study considers also the institutional and pro cedural implications of considering different 
categories of goods in a WTO initiative on envir onmental goods.  Unless WTO Members decide to 
restrict any initiative on environmental goods to goods already described at the 6-digit HS level, they 
may eventually need to decide on how to deal with “ex heading” goods.  Encouragingly, countries 
proposing “ex heading” goods so far have been diligent in identifying the HS sub-heading under 
which they would classify such goods;  this suggest s, perhaps, that agreem ent on goods coverage 
could be reached before an initiative on environmen tal goods is implemented - thus obviating the need 
for protracted ex post negotiations on classification matters. 
13. Finally, the study points out that WTO Members may need eventually to decide whether to 
treat a tariff-reduction or elimination initiative on environmental goods as a one-off exercise, or to 
review its product coverage as changes in technol ogies and environmental requirements necessitate.  
Such a review mechanism would be virtually impe rative if the initiative were to include among its 
coverage goods that are defined by th eir relative environmental performance. 
C. ENERGY-EFFICIENT  ELECTRICAL  APPLIANCES 
14. One such category of goods that are defined by  their relative environmental performance are 
energy-efficient electrical appliances.  Househol d and office electrical appliances are produced and TN/TE/INF/8 
Page 4  
 
 consumed in large and increasing numbers, both in industrialised a nd, increasingly, in developing 
countries.  Energy-efficient electrical appliances ar e not currently distinguished in national tariff 
schedules from their less-efficient homologues, but many countries do already regulate the minimum 
energy performance of electrical appliances sold w ithin their borders, and ap ply these regulations to 
imports.  Could goods with better-than-average ener gy efficiency therefore be considered to be 
environmentally preferable, or even “environmental goods” in the sense implied in the DDA 
paragraph 31(iii) mandate to libera lise trade in environmental goods? 
15. The JWPTE is currently working to finalise a pa per that examines the practical issues that 
would have to be addressed were countries ever to seek to selectively improve market access for this 
class of goods. 
16. Some relatively energy-efficient applia nces employ technologies that are readily 
distinguishable from those used in their less-effi cient counterparts;  indeed, these can be found in 
some of the proposed lists of environmental goods submitted to the WTO.  These types of goods do 
not present any particular problems in tariff schedul es.  But many electrical appliances achieve their 
high performance levels through co mbinations of features that would be difficult to characterise 
succinctly in the types of product descriptions norma lly used for customs purposes.  This suggests 
that, were relatively energy-efficient goods as a broa d category to be defined as “environmental” for 
the purposes of a market-access negotiation, it might  be necessary and desirabl e to distinguish many 
of them according to a single criterion:  their energy performance in use. 
17. Currently, technical regulations and standards relating to energy performance vary widely 
from country to country.  For one, only 30 to 40 countries currently regulate a minimum energy 
performance standard (MEPS) for one or more classes  of electrical appliances.  Most of these are 
developed or rapidly industrialising countries.  Of those that have established MEPS, major 
differences exist in how countries classify and describ e the products for which energy performance is 
regulated.  Countries also specify the standards diffe rently, and at different levels, and many require 
test procedures to measure energy performance that are not substantially identical to those set out in 
internationally established test standards. 
18. The study considers whether there could be  ways to reduce tariffs for relatively 
energy-efficient electrical appliances, and explores ma ny of the associated technical barriers to trade 
in this category of goods.  It finds that ongoing work towards harmonising test procedures for measuring the energy performance of electrical app liances is crucial, and progress in this area would 
itself help to lower an important non-tari ff barrier affecting energy-efficient goods. 
D. NATIONAL
 CASE  STUDIES 
19. The liberalisation of environmental goods and ser vices (EG&S) can translate into real gains 
for both importing and exporting countries whatever thei r stage of development.  In recognition of the 
importance of this liberalisation, the OECD commi ssioned eight country-specific studies which aimed 
to “identify complementary measures to ensure the maximum realisation of benefits from the 
liberalisation of trade in environmental goods a nd services”.  At the same time, UNCTAD and the 
UNDP commissioned, respectively, six and four, similar country-specific studies. 
20. In addition, the OECD has put together a synth esis report that:  aims to identify determinants 
of demand for EG&S;  to show common themes a nd experiences in the EG&S markets of eighteen 
countries;  and to draw attention to key trade, e nvironmental and development-policy linkages.  It is 
hoped that this report, and the case studies, will c ontribute to the exchange of expertise and 
experience between countries in the field of trade an d environment and that the findings will assist in 
ensuring that the liberalisation of trade in EGS works for all countries - developing and developed alike.  TN/TE/INF/8 
 Page 5 
 
 
 E. SYNERGIES  BETWEEN  LIBERALIZATION  OF TRADE  IN ENVIRONMENTAL  
SERVICES  AND  IN ENVIRONMENTAL  GOODS 
21. The JWPTE’s latest project in this area is exploring the connections between trade in 
environmental services and trade in environmental goods.  As the OECD has long argued, many of 
the goods that it and other organizations have iden tified as essential for environmental protection and 
remediation are so important, in fact, because th ey are used in the pr ovision of environmental 
services.  When discussing the benefits of liberalising trade in environmental goods and services it is salutary to keep this synergy in mind. 
22. This study will:  (i) describe the different environmental services;  (ii) highlight the key 
environmental goods that are vital for carrying them out;  and (iii) show how trade in particular 
services stimulates the demand for certain goods.  A fi nal section is expected to demonstrate, through 
actual case histories, how the provision of environmental services - including goods produced by firms within the country importing the service - interacts with trade in environmental goods. 
23. It is expected that the study will be a useful ai d to those involved with, or interested in, the 
current WTO (DDA paragraph 31(iii)) negotiati ons on environmental goods  and environmental 
services, and show, in as concrete a fashion as po ssible, why, for each environmental services sub-
sector, environmental goods on the OECD and APEC lists are essential inputs.  
F. BIBLIOGRAPHY 
OECD (1992), The OECD Environment Industry:  Situation, Prospects and Government Policy , 
OECD Publications, Paris.  OECD (1996a), The Global Environment Goods and Services Industry , OECD Publications, Paris. 
 OECD (1996b), The Environment Industry - The Washington Meeting , OECD Publications, Paris. 
 
OECD (1996c), Interim Definition and Classification of the Environment Industry , 
OCDE/GD(96)117, Paris.  OECD (1999a), Future Liberalisation of Trade in Envir onmental Goods and Services:  Ensuring 
Environmental Protection as  well as Economic Benefits , COM/TD/ENV(98)37/FINAL, Paris. 
 OECD/Eurostat (1999b), The Environmental Goods and Services Industry:  Manual on Data 
Collection and Analysis,  OECD Publications, Paris. 
 OECD (2001), Environmental Goods and Services:  Th e Benefits of Further Global Trade 
Liberalisation , OECD Publications, Paris. 
 OECD (2003), Environmental Goods:  A Comparison of the APEC and OECD Lists , 
COM/ENV/TD(2003)10/FINAL, Paris.  
OECD (2004a), Liberalising Trade in "Environmental Goods":  Some Practical Considerations , 
COM/ENV/TD(2003)34/FINAL, Paris.  OECD (2004b), Environmental Goods & Services - A Synthesis of National Case Studies , 
COM/ENV/TD(2004)10/FINAL, Paris. 
http://www.oecd.org/trade/
 or http://www.oecd.org/environment  
__________ 