Trade and Environmental Sustainability Structured Discussions (TESSD)

Informal WORKING GROUP Meetings
HELD ON 29-30 October 2024

Summary of discussions[1]

1  REMARKS BY THE TESSD CO-CONVENORS

1.1.  In their opening remarks, the Co-convenors recalled discussions taking place in a Co‑convenor‑led session during the WTO Trade and Environment Week on 7 October, which drew out linkages between sustainable agriculture and TESSD's four Working Groups. They also provided an overview of the two days of Working Group meetings, underlining that discussions would be rich in development perspectives. They encouraged Members to engage in discussing the way forward in preparation of the stocktaking plenary meeting on 4 December 2024, which would be an important opportunity for Members to provide guidance on priorities and outcomes towards MC14. When closing the meeting, the Co-convenors underlined that TESSD would continue carrying out work in a non‑negotiating form and strengthen outreach to encourage participation by a greater number of developing Members.

2  WORKING GROUP ON TRADE-RELATED CLIMATE MEASURES (TRCMS) – 29 OCTOBER 2024 (A.M.)[2]

Use of TrCMs aimed at achieving the objective of climate change adaptation

2.1.  The International Institute for Sustainable Development (IISD) and the WTO Secretariat provided presentations on the role of trade in climate change adaptation. IISD outlined three pathways for trade to support adaptation: through domestic trade policy measures that enhanced access to adaptation goods and services; through access to trade-related financing mechanisms that supported climate adaptation, with Aid for Trade and the Enhanced Integrated Framework (EIF); and through international collaborative frameworks on trade in support of climate adaptation.

2.2.  The WTO Secretariat presented insights from the World Trade Report 2022 on Climate Change and International Trade, covering preparedness aspects (through climate-resilient technologies) as well as copying and recovery aspects (through critical goods such as food, medical supplies and telecommunication services) related to climate change adaptation. The presentation illustrated that provisions in trade agreements were typically aimed at promoting cooperation, and that trade‑related adaptation measures were mostly support measures and focused on agriculture, and to a lower extent on services.

2.3.  As part of the discussion, Members reacted to the presentations and shared their experiences, including by responding to the following questions:

·_              How can trade and trade policy contribute to climate change adaptation?

·_              What TrCMs are Members pursuing to adapt to climate change? What TrCMs in support of climate adaptation have you included in your national adaptation plan (NAP) or adaptation strategy? What are the key characteristics of these measures?

·_              How can international cooperation on TrCMs assist Members in enhancing their climate change adaptation strategies?

2.4.  Members shared experiences on how trade policy contributed to climate change adaptation, highlighting that developing countries were most vulnerable and affected by climate change adaptation, and the importance of local context. Besides agriculture, water and energy sectors were mentioned, including measures to prevent flooding or depletion of resources, such as water, through droughts. Several Members highlighted the important role of trade in deploying climate‑resilient technologies. One Member noted the importance of people and communities in the development of adaptation plans as well as the importance of investments and interconnected insurance. A few Members suggested that there were limited linkages between adaptation and TrCMs, while another Member called for avoiding unilateral measures that may represent a barrier to trade. Members reflected on the importance of international cooperation, with different Members calling for sharing of experience to support inter-operability, ensuring that climate change adaptation is not overlooked in trade discussions, and the inclusion of provisions on adaptation in trade agreements.

Developing country perspectives

2.5.  The World Bank made a presentation on strategies for adaptation and resilience (A&R), highlighting the importance of economic development for providing resources for A&R, elements of resilient development such as climate-resilient infrastructure, climate-smart agriculture and climate‑informed land use planning, and targeted adaptation priorities such as climate data services, early warnings, drought-tolerant crops, nature-based solutions and insurance. Trade could support adaptation and resilience by supporting economic growth and resources for adaptation, promoting economic diversification, enhancing supply chain resilience, and facilitating access to adaptation technologies and knowledge.

2.6.  Two small island states, Barbados and Samoa, shared their experiences. Barbados shared its experience on leveraging trade for climate adaptation. Barbados is heavily impacted by climate change in tourism, water supply, agricultural production and fisheries. Initiatives to address climate change included Barbados 2035, a plan for investment in prosperity and resilience, and the Physical Development Plan, which aims to address scarcity and irreplaceable resources, and guide more sustainable investment, land use and infrastructure decisions including in the transport and tourism sectors. As part of its presentation, Samoa elaborated on the 2050 Strategy for the Blue Pacific Continent, and the Pacific Framework for resilient development. It stressed the vicious circle of rebuilding and the need to consider adaptation as an integral part of sustainable development. Samoa pointed to the development of the regional sustainable trade environment strategy and to the important influence of international policies.

2.7.  As part of the discussion, Members reacted to the presentations and shared their experiences, including by responding to the following questions:

·_              What are the main trade-related challenges faced by developing countries in their efforts to adapt to climate change?

·_              How can cooperation be enhanced to further exploit synergies between aid for trade and climate finance, in order to support developing countries meet their adaptation needs?

2.8.  As part of the discussion, one Member enumerated several sectors that were affected by climate change such as agriculture, forestry, fisheries and tourism, and noted that the WTO would be a relevant forum to enhance transparency and understanding of adaptation measures, especially how they could promote both trade and environmental objectives. A number of Members highlighted the importance of international cooperation and financial support that needed to be increased towards adaptation, with a role for Aid for Trade to play. One Member underlined that adaptation need not be overshadowed by trade-related mitigation measures. Another Member said that, through trade, the private sector could provide solutions to address climate change in developing countries, and that policy could address challenges that companies were facing such as misaligned technical standards and regulations between countries, lack of infrastructure, and a need for capacity building and better climate data.

Way forward

2.9.  Members broadly supported the proposal by the Facilitators to work on a compilation and mapping of policy measures shared by Members towards MC14, serving as reference material on possible trade policy measures that Members could consider adopting domestically to meet their climate objectives. The outcome document could also identify practical ways to enhance cooperation to achieve these climate objectives. Recognizing the contribution made by TESSD to progress discussions in the CTE, a number of Members pointed to the importance that, going forward, the Working Group would continue to support, and not duplicate, multilateral work on TrCMs in the CTE. One Member expressed interest in deepening work on TrCMs in high‑emission, trade‑exposed sectors such as glass, cement and fertilizers, and their upstream and downstream effects, while another Member suggested to have technical discussions on embedded emissions complementing possible work in the CTE. One Member suggested to further build on the Group's MC13 outcome document and develop design guidelines for TrCMs, which could be submitted by TESSD Members as a proposal to the CTE for the broader membership to be considered.

3  WORKING GROUP ON ENVIRONMENTAL GOODS AND SERVICES (EGS) – 29 OCTOBER 2024 (P.M.)[3]

Trade-related aspects of water management

3.1.  The UNEP Copenhagen Climate Centre presented on climate change adaptation technologies with a focus on water management. At the outset, it explained that technologies were understood to cover hardware (equipment, products); software (know-how, skills); and orgware (organization, management). Technology needs assessment projects in developing countries identified water and agriculture as two priority sectors for climate change adaptation. Priority technologies for water included irrigation systems (e.g. drip irrigation), water storage (e.g. bladder tanks), water harvesting (e.g. rooftop rainwater) and water management (e.g. smart metering, leakage detection and repair, pressure management). Challenges to technology diffusion included the absence of local suppliers, costs (including for transport and tariffs), as well as lack of know-how and skills for installation, repair and maintenance.

3.2.   The UNFCCC Climate Technology Centre & Network (CTCN) presented insights from experiences of technology transfer in developing countries, including the deployment of mobile flood barriers in Burundi and the development of hydrologic forecasting systems for river basins in Bangladesh. Barriers to the development and uptake of climate technologies included institutional, financial and technological barriers (e.g. limited absorption capacity, lack of knowledge for technology operation, lack of qualified personnel and training facilities, and lack of standers and certification). Examples of trade-related barriers included high costs for hardware due to import duties and transportation fees, and complexities regarding software and data ownership.

3.3.  As part of the discussions, Members reacted to the presentations and shared their experiences on water management, including by responding to the following questions:

·_              What are the key goods, services and technologies associated with water management and climate change adaptation? These include, inter alia, water quality assurance (wastewater treatment and recycling), sustainable water supply (e.g. irrigation, supply and storage; catchment and harvesting, desalination, groundwater extraction, water saving technologies), monitoring and early warning systems, water resource management and water-related disaster risk management.

·_              What are your experiences with trade and trade policy in goods and services related to water management technologies? What are the bottlenecks and opportunities in the supply chains of these goods and services?

3.4.  When discussing key goods, services and technologies, Members, inter alia, mentioned drippers and sprinklers for irrigation solutions, water meters, filtration systems, leak detection technology, water treatment and desalination technologies, data management and digital technologies (e.g. AI, sensors, data analytics, smart water solutions), quality water conveyance systems (e.g. pipes, valves, pumps and storage structures), as well as services such as monitoring and maintenance, consulting, engineering and design, and testing and analysis. One Member suggested that relevant goods, services and technologies could be categorized into three groups of products: (i) water treatment; (ii) water efficiency; and (iii) disaster risk and climate adaptation.

3.5.  Members exchanged experiences regarding water management technologies for adaptation in agriculture, coastal erosion, desertification, flood control, water quality and supply. For instance, Chile shared on its sectoral plan for adaptation to climate change in agriculture, which included measures relating to capturing and reserving intra-farm water, the optimization of irrigation techniques and technologies and the regulation of water resources through the planning of off‑property water infrastructure. Australia shared its experience with nature-based solutions and water-related climate change mitigation measures, including wetlands restoration, biological wastewater treatment processes and offsetting emissions from water infrastructure.

3.6.  Members also noted different supply chain bottlenecks, including non-tariff measures such as complex regulatory frameworks and differing standards regimes, high tariffs on specialized technologies and inadequate infrastructures. Members also pointed to opportunities for trade policy and international collaboration regarding water efficiency standards and labelling, promoting regulatory coherence, facilitating technology transfer, public-private partnerships and trade agreements with environmental provisions or combined commercial and environmental objectives.

Environmental goods and services: Identification and trade promotion

3.7.  Australia presented on its experience with the APEC Non-Binding Guidelines on Services that Support the Clean-Up of Marine Debris. The role of services and trade policy in cleaning up marine debris was highlighted, including trade-facilitating measures such as mandated access to waste management systems and trade-restricting measures such as lack of access to public procurement markets at the municipality level. Trade and investment in marine debris clean-up services could be supported by facilitating the temporary entry of relevant goods, supporting cross-border movement of marine debris experts, encouraging the mutual recognition of professional services suppliers, sharing data and working together on standards. It was highlighted that the non-binding nature facilitated the development of these useful guidelines, which, inter alia, covered the reduction of barriers to marine debris clean-up services and providers, good regulatory practice, market development, access to port facilities, temporary entry of specialized equipment, capacity building and international cooperation.

3.8.  Finland presented on the study Environmental Goods and Services in Trade: Building a new assessment framework and an EGS list – case study Finland. The study proposed a new framework and criteria for identifying environmental products. Its starting point was that a product could be helpful in addressing an environmental problem. It then applied a number of exclusion criteria related to possible environmental harm and circular economy, as well as inclusion criteria regarding how a product mitigated an environmental problem (disruption, decarbonization, dematerialization, environmentally preferred, environmental measurement, monitoring and research).

3.9.  The WTO Secretariat provided an overview of the environmental goods and services included in the Analytical Summary and their comparison to other lists of EGS, including in the Singapore‑Australia Green Economy Agreement, free trade agreements (EU-New Zealand, New Zealand-United Kingdom) and under APEC. Most goods included in the Analytical Summary were also included in at least one other list. It was noted that, while the objective of TESSD was not to replicate other lists, the comparison could provide insights for the Analytical Summary. The presentation also illustrated types of provisions linked to lists of EGS in agreements such as provisions on review mechanisms, cooperation, reduction of tariffs and non‑tariff barriers as well as facilitation of services trade and investment.

3.10.  Members were invited to discuss the presentations, also considering the following guiding questions:

·_        What considerations can the Working Group take into account when identifying environmental goods and services in line with its objective-based approach?

·_        What can we learn from international experiences and other international agreements in finding trade policy solutions in this area?

3.11.  A number of Members noted that environmental objectives and benefits, dual use and lifecycle analysis were considerations that could be taken into account when identifying EGS. Members also discussed how trade agreements and other international experiences, including with non-binding guidelines and voluntary cooperation, or with domestic services regulation at the WTO, offered insights for policy solutions to facilitate trade in EGS.

Analytical Summary and way forward

3.12.  The Facilitator provided an update on the revised Analytical Summary (_INF/TE/SSD/W/24/Rev.7), which integrated the discussions on climate change adaptation and water management from the Working Group meeting on 17 June. He noted that Annex II provided a summary of the revisions made to the document. He also invited Members to discuss the way forward towards MC14, including on: (i) the process to expand and refine the TESSD list of EGS in the Analytical Summary and (ii) Members' objectives and concrete actions that they would like to explore as foreseen in the updated Work Plan.

3.13.  A number of Members supported work on expanding and refining the list of EGS included in the Analytical Summary, with some Members suggesting carrying out related conceptual work on environmental criteria. Another Member saw the need for greater clarity on the scope and process of expanding the list and pointed to the resource intensity of possible technical work. A number of Members also suggested working towards non-binding outcomes for MC14, including identification of non-tariff barriers and regulatory measures for trade facilitation, or voluntary guidelines or actions to facilitate trade in EGS.

4  WORKING GROUP ON SUBSIDIES – 30 OCTOBER 2024 (A.M.)[4]

Critical minerals

4.1.  The International Energy Agency (IEA) presented on market trends and policy developments for critical minerals based on the IEA Global Critical Minerals Outlook 2024. It highlighted that government incentives for supply chain diversification were increasing as the demand for critical minerals was projected to increase in the future. The African Development Bank (AfDB) presented on the African Green Minerals Strategy, including challenges and opportunities for moving up in the battery and electric vehicle value chains. The presentation pointed to the importance of financial incentives by African countries to attract investment in the sector, as well as building critical infrastructure, which could be supported by the AfDB.

4.2.  Australia shared its experience on its critical minerals sector and relevant policy initiatives. It highlighted its policy initiative, the Future Made in Australia package, which aimed to support the move to net zero and secure Australia's place in a changing global economic and strategic landscape. Australia also expounded on its critical minerals strategy of June 2023 and its emphasis on working with international partners to build diverse, resilient and sustainable global supply chains while attracting investment.

4.3.  Members were invited to react to the presentations and share their experiences on subsidy design, including by responding to the following questions:

·_              What types of policy incentives including subsidies or other financial support mechanisms are Members pursuing along critical minerals supply chains, from extraction to processing down to recycling?

·_              What are key design elements and best practices, including for striking a balance between environmental benefits and potential trade‑distorting effects?

·_              How can trade-related international cooperation support developing countries in addressing challenges and seizing opportunities related to critical minerals value chains sustainability?

·_              What are opportunities at the sectoral, national and international levels, including at the WTO, to enhance transparency and data availability?

4.4.  A number of Members shared their experiences with financial support mechanisms across the critical mineral value chain as well as with international cooperations aimed at ensuring a stable supply, promoting recyclability and circularity, and supporting developing countries in seizing opportunities related to critical minerals value chain sustainability.

Outcome document and way forward

4.5.  The Facilitators introduced the revised draft compilation of Member experiences and considerations regarding subsidy design (_INF/TE/SSD/W/29/Rev.5), noting that the updated TESSD Work Plan envisaged further developing the outcome document towards identifying best practices and recommendations on how to enhance transparency and data availability. They also invited Members to exchange views on their priorities and way forward towards MC14, including on possible outcomes of the Group such as: (i) guidelines / best practices for subsidy design; (ii) recommendations on how to enhance transparency and data availability; and (iii) the possibility of increased private sector engagement.

4.6.  A number of Members supported work towards best practices or guidelines for the design of subsidies promoting environmental policy objectives while minimizing negative trade impacts for MC14. One Member suggested that it would be easier for Members to agree on good practices rather than prescriptive elements for subsidy design, while another Member considered it premature to discuss outcomes at this stage. Members broadly supported further work on how to enhance transparency and data availability on subsidies. One Member suggested to focus discussions on how to ensure that all Members met their transparency and notification requirements in the WTO, while another Member pointed to the importance of also enhancing information on subsidies domestically, including by establishing related governance mechanisms. Possible increased private sector engagement in the work was also welcomed by some Members. A number of Members expressed interest in again taking up discussions on subsidies for agriculture, while other Members suggested further work on industrial subsidies for the climate transition.

5  WORKING GROUP ON CIRCULAR ECONOMY – CIRCULARITY – 30 OCTOBER 2024 (P.M.)[5]

Transport: Upstream policies and circularity

5.1.  The Global Batteries Alliance (GBA), a partnership of businesses, governments, academics and international and non-governmental organizations, presented its work on battery passports and other initiatives such as certification and scoring with sustainability metrics, towards a battery value chain proving transparency on health, environmental sustainability and human rights.

5.2.  Rwanda presented its experience on circular economy in the transport sector. It highlighted actions to minimize pollution and waste in transport and actions to extend product lifecycles and promote the repurposing of physical and natural assets. One example was the adoption of the E‑vehicle strategy, including fiscal incentives (VAT-0 on electric vehicles, spare parts, batteries and charging station equipment, tariff caps, exemption of import and excise duties), emission limits standards for imported vehicles, testing and promotion of collective transportation.

5.3.  Members were invited to share their experiences by responding to the following questions:

·_              What trade policies, tools and collaborative actions have Members identified or put in place to enhance circularity in the transport sector? How can upstream circular economy policies contribute to facilitate trade while also ensuring environment and health protection?

·_              How can international cooperation on trade-related aspects of circularity, such as transparency (classification, labelling and product passports), standards, regulations on product design, and extended producer responsibility (EPR) be relevant to enhance circularity in transport, including with regard to batteries?

5.4.  Members shared their domestic programmes, including on renewable fuels obligations, circular economy policies with waste regulation and battery passports, and EPR systems. Some Members shared their experiences in recycling batteries and EVs. Members also underlined the importance of transparency, standards and international cooperation, both upstream (referring to labelling, product design, tracking materials across their lifecycle) and at end-of-life (when used batteries are crossing borders).

Presentations on recent analytical work

5.5.  The International Chamber of Commerce (ICC) presented on the report "Putting the circular economy into motion: From barriers to opportunities". The report surveyed industry, which had reaffirmed the importance of circularity for business and outlined key barriers in policy, technology, finance, infrastructure organization and social domains, such as lack of collection and sorting infrastructure, as well as opportunities such as harmonization of regulations and shifting consumer behaviour and perception regarding the circular economy.

5.6.  The OECD presented on the report "Trade implications of upstream product circular economy policies". Analyzing data from the WTO Environmental Database (EDB), the report had found that circular economy product requirements relating to recyclability, material content and product lifespan (reusability, repairability, durability, refurbishment, remanufacturing) were covered by policies such as Product-based Standards, Eco-labelling, Eco-design, and Extended Producer Responsibility. There were challenges to international trade such as the fact that the recycled content of a good could not be easily distinguished from the physical quality of the traded good. The presentation also highlighted that circular initiatives upstream in the value chain could help promote products that could contribute to sustainable trade opportunities by creating proper incentives early in the supply chain that helped align trade and sustainability objectives, and that government support and green public procurement were used to promote circular goods and services.

5.7.  TESS presented the findings of its recent report "Trade, Circular Economy, and Sustainable Development: Guidance on Approaches and Good Practices for the Design of Trade-Related Circular Economy Policies and Measures" (TrCEMs). TESS observed that design and implementation of TrCEMs largely took place at the national level with important differences across jurisdictions (e.g. in definitions, product classifications, standards and regulations). It was considered important to ground measures on relevant international standards where available. Relevant guidance for the design and implementation of TrCEMs could focus on: avoiding fragmentation; non-discriminatory and least trade-restrictive approaches; fostering coherence and responsible practices; and transparency and consultations.

5.8.  One Member suggested a focus on how existing trade policies and implementation of existing agreements including TBT, SPS and FTA, could be leveraged for circular economy. Answering a question from a Member, the OECD said that trade rules generally did not hamper circular economy but that policymakers would benefit from an understanding and consideration of trade rules when designing circular economy regulations.

Way forward

5.9.  The Facilitators introduced a possible way forward towards MC14, building on the mapping outcome document and based on presentations and discussions held in the TESSD Working Group on Circular Economy – Circularity. Possible outcomes the Group could work towards included: (i) trade-related guidelines for a circular economy; and (ii) trade aspects and good practices in key sectors (e.g. electronics, batteries, renewable energy, textiles) for the circular economy.

5.10.  A number of Members supported the Co-Facilitators' way forward on trade-related guidelines for a circular economy as well as on the sectoral focus. Some Members highlighted that there could be a focus on two or three key sectors and work towards trade priority actions and best practices. Support for internationally recognized standards was also voiced.

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