Dodwell in CTI Meetings at Singapore - Post 3

March 31, 2012


The convenor and panelists from the GOS workshop

If you think an “environmental good” is hard to define, then wait until you start to wrestle with “environmental services”. In the austere and arcane world of trade policy, few issues are as fascinating – or frustrating – as environmental goods and services. So we attended Friday’s full day workshop on environmental services with some trepidation. The workshop had been organized by China as part of a capacity-building initiative, but a clear majority of presentations came from Americans – and most were fascinating.

Profound insight number one: in environmental services, the market does not work. There is no natural demand for them. As Dale Andrews, head of the OECD’s Environment Division noted: “Who would purchase, for example, sewage or air cleaning services out of sheer altruism?” In effect, regulations (for which read Government officials responding to public opinion) determine the market. This means that Government officials by necessity play an extraordinarily significant role in determining the size and nature of trade in environmental services.

Profound insight number two: the more rigorous a country’s environmental protection regime, the more export-competitive its environmental services seem to be. A tantalizing scatter chart from the OECD showed Germany – deemed to be the world’s most stringent environmental regulator – to be by far the most successful exporter of architectural and engineering services, for example. By contrast, Hong Kong, which is among the least stringent of 21 economies surveyed, ranks down with Hungary and the Slovak Republic in terms of its export competitiveness in this area. The OECD concedes that the data is shaky, and that more work needs to be done, but the conclusion, if validated, would be important for us all: environmental stringency is good for export competitiveness in environmental services.

But what are environmental services? If Grant Ferrier, President of the US-based Environmental Business International is to be believed, half of the world’s US$830 billion environmental market is attributable to solid waste management, and water delivery and treatment. Clean energy systems add another 15%. Of this US$830 billion market, 59% is services, and three quarters is in the US, Europe and Japan.

Most at the workshop would probably protest at Grant’s definition – which pretty much coincides with the GATS definition. But the OECD uses three quite different categories – pollution management, cleaner technologies and resource management. And the European Union includes air/climate protection, noise/vibration, remediation and cleanup, and biodiversity. If you can find common ground here, you have a clearer head than me!

At the end of the day, most agreed that exact definitions don’t much matter. These services are growing; the shape of growth is determined by regulators not by market forces; innovation is likely to be driven by regulatory change; government procurement (often via municipal monopolies) plays a dominant role; and technology transfer (and proper compensation for this transfer) from developed economies to developing economies remains an unrecognized elephant on the table.

The workshop provided a fascinating set of discussions. Quite where it takes us in terms of drawing up an APEC list of Environmental Goods, heaven knows…

Delegates treated to a dinner at sea


* Read Dodwell's blog posts from CTI Meetings at Singapore


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