Environment protection is big business

Environment protection is not only about green forests, tigers, blue skies and a handful of NGOs arguing for a noble cause. It is big business. With rapid population growth and the aggressive speed of industrialisation the world over, suppliers of pollution control equipment, cleaner technologies and related services are looking to cater to an enormous and growing market. It has been estimated that the global market in these goods and services is around $550 billion, and is likely to touch $640 billion by 2010, a figure comparable with the size of the pharmaceuticals and information technology industries. In the international trade context, the Doha Ministerial Conference of the WTO, held last year, had given a call for the liberalisation of environmental goods and services. Paragraph 31 of the Doha Declaration had mandated negotiations among member countries on "the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services". Close to a year after the Doha Ministerial, things are becoming clearer, and one realises that primarily, it is only industrialised countries that are going to gain out of liberalisation in terms of international trade. It has been argued in the past by many trade experts that one reason, among many others, for pushing the environmental agenda in the WTO, was that the developed countries were looking for new markets for environmental goods and services in developing countries. The Doha Declaration was, thus, a shot in the arm for the industry in the West. The market in these goods and services is clearly dominated by companies from the industrialised world. The United States is the world's largest producer and consumer of these goods and services, apart from being the second largest net exporter after Germany. The US, Japan and the European Union, put together, control 85 per cent of the trade in this industry. Most of the developing countries, including India, are net importers. On the other hand, with increasing environmental awareness and the imposition of stricter environmental standards and regulations, markets in the developing countries are catching up fast. In fact, markets in these countries are growing faster than those in the developed countries. The forecasts by the Organisation for Economic Co-operation (OECD) indicate that the average growth in the environment-related industry in the next few years in the developing countries of Asia and Latin America will be 5-7 per cent, against the overall annual rate of growth of 3-4 per cent in the Western industrial countries and Japan. The important factor for developing countries, including India, to consider is that the environmental industry in the developed countries is extremely well-organised and competitive. Moreover, with the faster rate of growth of demand in developing countries and the overcapacity of supply in developed countries, the latter are looking vigorously to penetrate the emerging developing country markets. However, as far as WTO negotiations are concerned, the definitional aspects are yet to be resolved. The Declaration does not, for instance, define clearly what constitutes "environmental goods". In the post-Doha scenario, the pendulum of opinion on the "definitional" aspects swings from the narrower definition to the broader. According to the narrower definition, environmental goods are those whose use results in a beneficial environmental impact ? capital goods or technologies required for `end-of-the-pipe' pollution abatement. If India accedes to this definition, there are hardly any possible gains in trade terms, as it is not a major exporter of these products. On the contrary, given the country's rapid population growth, the aggressive speed of urbanisation, and the lack of infrastructure, there exists a huge market for these products. Furthermore the existing tariff level in the OECD countries on this category of goods are already very low as against those maintained by India, thereby leaving little hope for India to gain by liberalisation. The broader definition, on the other hand, takes into account the environmental characteristics of the goods themselves and/or their production processes. This includes the goods that have relatively less negative impact on the environment at the production, consumption or disposal stage, or even in terms of being produced in an environmentally benign manner or with "clean technology". Here, India might have some advantages in terms of export of organic products, etc., but this would go against India's stand of avoiding non-product related process and production methods (PPMs). The WTO rules do not allow discrimination in products based on the process or method of production unless it leaves some characteristics in the final product, which might be harmful for human health or environment. In yet another approach, some experts have interpreted environmental goods as goods with inherently beneficial environmental aspects such as biodegradability. According to this view, products like organic fertilisers, natural dyes and, jute and bamboo products should be included in the list of environmental goods. India, like other developing countries, might have a possible advantage in getting these goods included in the negotiating list. However, detailed studies about the potential market size and comparative advantage are warranted before reaching any conclusion. Moreover, there is also the possibility that the developed countries might insist on the inclusion of other goods whose use/consumption or disposal is less negative or beneficial for the environment, but whose production mandates technical know-how ? for instance, energy-efficient consumer goods. The US, in its recent submission to the WTO Committee on Trade and Environment (CTE), has advocated the preparation of a list of goods for negotiation based on end-use approach, that is, goods that are used to clean the environment or contain pollution. India has maintained that it will not accept a definition of environmental goods that includes goods `produced in a sound environmental manner'. While this position is fine, it seems that a lot more homework is needed before taking a definitive stand on inherently environmentally-friendly goods. Having said that, looking ahead to the negotiations to take place this year and beyond, there is much to play for, with opportunity and danger in equal measure. Only intense debates on the domestic front involving industry, research organisations and other stakeholders can provide the basis for appropriate negotiating strategies to ensure the right balance between economic and environmental interests.