couv 8-06-05 rouge 2ok 28/11/05 14:16 Page 4 October 2005 Trade and Environment ICTSD Project on Environmental Goods and Services Defining Environmental Goods and Services: A Case Study of Mexico The ICTSD project on Bridging Trade and Sustainable Development in Environmental Goods and Services aims at enhancing developing countries’ capacity to understand trade and sustainable development issue By Enrique Lendo linkages with respect to environmental goods and services and reflect regional perspectives and priori- Consultants in Environmental Strategy and Negotiations (COESNA) ties in regional and multilateral trade negotiations. The current phase of the project got underway in January 2005 and will continue until June 2006. Other project activities and resources include: ● Options for Liberalisation of Trade in Environmental Goods in the Doha Round. By Robert Howse and Petrus B. van Bork, November 2005. ● The Economics Of Trade In Environmental Services: The Implications For Developing Countries In The GATS. By Colin Kirkpatrick, forthcoming. ● Technology transfer Issues in environmental goods: Will the Doha Round of negotiations facilitate access? By Lynn Matelka, forthcoming. ● Latin American Consultation on Environmental Goods and Services, Diálogo regional sudamericano sobre bienes y servicios ambientales, Cartagena de Indias, Colombia, 1-2 June 2005. For further information, visit http://www.trade-environment.org/page/ictsd/projects/egs_desc.htm. One of the mandates of the CEC is to conduct an ongoing assessment of the environmental impacts of A study commissioned by the Commission for Environmental Cooperation trade liberalisation in North America. This assessment work shows that liberalised trading rules under NAFTA do not in and of themselves lead to the increased use of environmentally preferable products. The CEC’s project on Trade in Environmental Goods and Services (alternatively, Greening Trade in North America) seeks to understand what constrain this development. That work aims to break down barriers to environmentally preferable goods and services, including low consumer awareness of the environ- mental effects of purchasing habits, confusion about eco-labelling, difficulties in financing small compa- nies in this field, lack of understanding about the best use of market-based approaches to support envi- ronmental protection and the conservation and sustainable use of biodiversity; and supporting coopera- tive efforts to increase these programs (e.g., renewable energy and energy efficiency, shade coffee, eco- Photos : DigitalVision palm fronds, grass-fed bison). It also aims to connect the growing numbers of suppliers and consumers of greener goods and services throughout North America. A complete listing of CEC publications on trade and environment in general, and on environmen- tal goods and services, is available at http://www.cec.org/bibliographies. ICTSD Issue Paper No. 1 International Centre for Trade and Sustainable Development i October 2005│ Trade and Environment ICTSD Project on Environmental Goods and Services . Defining Environmental Goods and Services: A Case Study of Mexico Executive Summary By Enrique Lendo Consultants in Environmental Strategy and Negotiations (COESNA) A study commissioned by the Commission for Environmental Cooperation. Issue Paper No. 1 ii Published by International Centre for Trade and Sustainable Development (ICTSD) International Environment House 2 7 chemin de Balexert 1219 Geneva, Switzerland Tel: +41 22 917 8492 Fax: +41 22 917 8093 Email: [email protected] Internet: www.ictsd.org Executive Director: Ricardo Meléndez-Ortiz Programme Manager: Heike Baumüller Programme Officer: Mahesh Sugathan Commission for Environmental Cooperation (CEC) 393, rue St-Jacques Ouest, Bureau 200 Montréal (Québec), H2Y 1N9 Canada Tel: (514) 350-4300 Fax: (514) 350-4314 Email: [email protected] Internet: www.cec.org Head, Trade and Environment Programme: Chantal Line Carpentier The full-length study is available at www.ictsd.org and www.cec.org ICTSD and the CEC welcome feedback and comments on this document. These can be forwarded to Mahesh Sugathan, [email protected]. Founded in 1996, the International Centre for Trade and Sustainable Development (ICTSD) is an independent non-profit and non-governmental organisation based in Geneva. By empowering stakeholders in trade policy through information, networking, dialogue, well-targeted research and capacity building, the Centre aims to influence the international trade system such that it advances the goal of sustainable development. The Commission for Environmental Cooperation (CEC) was established under the North American Agreement on Environmental Cooperation (NAAEC) to address environmental issues from a continental perspective, with a particular focus on those arising in the context of liberalised trade. Citation: Lendo, E. (2005) Defining Environmental Goods and Services: A Case Study of Mexico, ICTSD Trade and Environment Series Issue Paper No. 1, CEC and ICTSD, Geneva, Switzerland. Acknowledgements We wish to thank Sabrina Shaw for her editorial review of this document. We are also most grateful to ICTSD and CEC staff, and particularly Mahesh Sugathan, Heike Baumüller and Chantal Line Carpentier, for their useful comments and assistance. This project is made possible through the support of the Luxembourg Ministry of Foreign Affairs. Copyright © ICTSD and CEC, 2005. The views expressed in this publication are those of the authors and do not necessarily reflect the views of ICTSD or the CEC. ISSN 1816-6970 iii CONTENTS Foreword iv Summary v 1. Introduction 1 2. Sustainable Development Patterns in Mexico 2 3. Environmental Goods and Services in the International Context 4 4. Trends in the Mexican Market for Environmental Quality Support Goods and Services 5 5. Trends in the Mexican Market for Selected Environmentally Preferable Products 7 5.1 Tourism 7 5.2 Agriculture 7 5.3 Forestry 8 5.4 Fisheries 8 5.5 North American Trade in EQSGS and EPPs 8 6. Assessing the Sustainable Development Impacts of EGS Trade Liberalisation in Mexico 10 6.1 Adapting the OECD Classification of EGS 10 6.2 Preliminary Impact Assessment 12 6.2.1 Causal Chain Analysis 12 6.2.2 Potential Impact Analysis 14 6.3 Enhancing and Flanking Measures 16 6.4 Consideration of Tariffs and Non-tariff Barriers 17 7. Ways Forward for an EGS Negotiating Strategy at the WTO 18 7.1 Environmental Goods 18 7.2 Environmental Services 20 7.3 Cross-cutting Issues 22 Boxes Box 1 Amendment Proposals to the OECD/Eurostat Classification to facilitate the incorporation of a broad definition of EGS 11 Diagrams Diagram 1 Causal Chain Analysis Applied under Two Comparable EGS Definitions 13 References 23 Annex: Tables 27 Endnotes 31 iv v FOREWORD Environmental goods and services (EGS) as a subset of goods and services were singled out for attention in the negotiating mandate adopted at the Fourth Ministerial Conference of the World Trade Organization (WTO) in November 2001. Increasing access to and use of EGS can contribute to improving environmental quality and pollution abatement in both developed and developing countries. Trade in these sectors can also be a powerful tool for economic development by generating economic growth and employment and enabling the transfer of valuable skills, technology and know-how embedded in such goods and services. Furthermore, trade in EGS can facilitate the achievement of sustainable development goals laid out in global mandates such as the Johannesburg Plan of Implementation, the UN Millennium Development Goals and various multilateral environmental agreements. On the other hand, the negative impacts of liberalisation on vulnerable industries in developing countries, in particular fledgling small and medium-sized enterprises, and sections of populations without the purchasing power to access privately-delivered EGS, such as sanitation, has often been cited. This has also led to calls among some stakeholders that liberalisation should be gradual or carefully qualified and in certain cases that countries should be able to stop or roll back liberalisation that may have these negative impacts. Developing countries have been slow in articulating their positions in the WTO Committee on Trade and Environment (CTE) in light of prevailing uncertainty regarding the sustainable development impacts of EGS liberalisation for their own countries. To add to the confusion, the type of goods and services deemed ‘environmental’ is a definitional debate that, at the time of writing, still awaits resolution at the WTO. Members have been trying other approaches such as proposing specific lists of goods or even identifying goods and services that are inputs into specific environmental projects. A number of goods and services proposed are based on lists developed by the Organization of Economic Co-operation and Development (OECD) and the Asia Pacific Economic Co-operation Mechanism (APEC) which heavily focused on capital, technology and knowledge-intensive goods exported primarily by developed countries. Others go beyond this categorisation to include environmentally preferable goods and services that many developing countries have a comparative advantage in producing. As a contribution to the debate, this study – a joint output of the International Centre for Trade and Sustainable Development (ICTSD) and the Commission for Environmental Cooperation (CEC) – provides an initial assessment of the sustainable development impacts of EGS liberalisation in Mexico under different scenarios. Starting