Considerations for promoting regional cooperation on

environment, trade, and the economy in Northeast Asia

Mark Elder Institute for Global Environmental Strategies

October 14, 2015

International Workshop on FTA and Integrated Cooperation of Environment and Economy Seoul, Korea

Outline

Regional Context

Environmental Provisions in Japan’s RTAs

Overall Considerations on Environment and Trade

Way Forward

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Regional Context • Notheast Asia is not the main stage for action on trade or

environment – Countries focus more on global or wider regional levels & frameworks – Other global/regional initiatives influence NEA

• Regional trade agreements in Northeast Asia might not be prioritized

3

Korea

Japan China

TPP EU

RCEP

WTO

TTIP

FTAAP

Comparison of FTA Coverage Ratio

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In Force Under Negotiation Trade Value (bil. USD 2013)

Japan 18.2%* 84.2% 1,548 China 27.1% 53.0% 4,160 Korea 36.0% 82.9% 1,075 US 39.8% 70.8% 3,846 EU28 28.4% 68.0% 4,537

*Including substantive agreement: 22.6% Source: METI 2014

ENVIRONMENTAL PROVISIONS IN JAPAN’S RTAS

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Background

• RTAs will become more important for Japan

• The Japan Revitalization Strategy (the Cabinet decision on June 14, 2013) also stipulates that “the government will raise the FTA coverage ratio (proportion of the value of trade accounted for by trade with FTA counterpart countries) from the current 19% to 70% by 2018.” (METI 2014, p. 464)

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Overall characteristics of Japan’s RTAs with Developing Countries

• Overall, few relevant environmental provisions • Often include environment only in preamble

and/or provisions on investments, standards, and economic cooperation

• Most typical provision in investment chapter, prohibiting encouraging investment by relaxing environmental regulation

• No environmental chapters or side agreements

7 Source: Yanai 2014

Environmental provisions in Japan’s RTAs as of 2012 (Yanai 2014) Country Date Pre-

amble Side

Agreem’t Chap-

ter Invest-ment

Env. Coop

Specific Other Provisions

Singapore 2002 N N N N N Exceptions (mutual recognition)

Mexico 2005 N N N Y Y Investment dispute settlement Public comment procedures

Malaysia 2006 N N N Y Y

Chile 2007 Y N* N Y N Investment dispute settlement

Thailand 2007 N N N Y Y Exceptions (mutual recognition)

Indonesia 2008 N N N Y Y Energy & minerals (env consid)

Brunei 2008 Y N N Y Y Energy

ASEAN 2008 N N N N Y Exceptions (standards)

Philippines 2008 N N N Y Y Conformance of env. standards Exceptions (mutual recognition)

Switzerland 2009 Y N N Y N Environmental products Patents

Vietnam 2009 N N N N Y Exceptions (standards)

India 2011 Y N N Y Y Levels of protection Enforcement of env. laws Relation to other int’l regimes

Peru 2012 Y N* N N Y General exceptions Notification (technical regulation) Government procurement

8 * Joint statement

Japan’s RTA’s in negotiation (as of 2014) Negotiation Partners Start of Negotiations South Korea 2003 (Negotiation suspended) Gulf Cooperation Council 2006 (Negotiation postponed) Australia 2007 (Completed 2014, in force) Mongolia 2012 (Completed 2015, signed) Canada 2012 Colombia 2013 China-Japan-South Korea 2013 EU 2013 RCEP 2013 TPP 2013* (Completed 2015) Turkey Discussing the possible scope

9 * TPP began in 2010 but Japan joined in 2013

OVERALL CONSIDERATIONS ON ENVIRONMENT AND

TRADE

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Overall Considerations on Environment & Trade

Reduced formal trade barriers

Increased trade effects of economic &

environmental regulation 11

Focus Areas of New Trade Agreements • Expand scope to “economic

partnership” • Continued liberalization of

traditional “difficult” sectors like agriculture & autos

• Liberalization of new sectors like data

• New, broader issues like intellectual property

• Domestic regulatory issues (environment & labor)

Economic Benefits of New Trade Agreements are Modest or Low, Not Clear

• Usually less than 1 or 2 % of DGP, esp. for large countries

• Formal trade barriers are already low, especially for goods (some exceptions for agriculture, services)

So Why Bother With New Trade Agreements? • Low tariffs may still have effects • Economic and environmental impacts

may be concentrated in a few sectors. • Focus on new sectors & areas Creates winners & losers, but

losers usually not compensated

Long Run Considerations of Environment & Trade: EU Experience

Lower formal trade barriers

Greater importance of non-tariff barriers

Greater importance of non-trade related policies

Pressure for policy harmonization (esp. various regulatory policies)

Pressure for formal economic integration

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• Environment • Finance • Competition

(antitrust) • Etc.

European Union Economic

pressure for neighbors to join

TPP Highlights

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TPP Highlights: Moving beyond specific goods

Sectors • Pharmaceuticals • Autos • Agriculture • Internet data Issues • Intellectual property • State owned enterprises • Dispute settlement • Labor • Environment • Tobacco

Difficult sectors New sectors

Beyond trade

Domestic regulation

Non-tariff barrier beyond

regulation

Special case:

excluded from

dispute settlement

TPP Environmental Provisions (Preliminary Information)

• Environmental provisions are enforceable (USTR) • Effectively enforce environmental laws (USTR) • Follow existing MEAs

– CITES, Montreal Protocol mentioned specifically

• Wildlife protection – Enforce wildlife protection laws & regulations or face economic sanctions – Require cooperation among law enforcement agencies of participating countries,

including information sharing o Promote long term conservation of marine species (whales, dolphins, sharks, sea

turtles, others)

• Limits fishing subsidies • Reduce/ eliminate tariffs on environmentally friendly products & tech.

– Solar panels, wind turbines, wastewater treatment, air pollution equipment, water quality analyzers

• Cooperative efforts – Energy efficiency, low emission technology, renewable energy, deforestation,

resilient development

Sources: New York Times Oct. 5, 2015; USTR website 14

WAY FORWARD

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Traditional Ways to Address Trade & Environment

Measures Limitations 1. Environmental clauses in trade

agreements and/or side agreements

• Vague & general • Difficult to enforce • Could be circumvented

2. Trade liberalization of environmental goods & services

• Difficult to define and agree on what is “environmental”

3. Environmental impact assessment of trade agreements

• Few countries do it (EU, US, Canada) • Only focuses on new agreements • Typically finds limited impacts • How to address impacts • Timing (before, during, after negotiation?) • Needs technical capacity

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Overall Strategies to Consider for Northeast Asia

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Strategies Rationale 1. Focus on promoting

environmental cooperation 2. Cooperation on promoting

green economy, sustainable production & consumption, etc.

• Emphasize before RTA negotiations accelerate or become concrete

• Environment should be the leading field of economic integration

• Earlier cooperation will reduce the potential for future trade agreements to undermine environment

3. Continue traditional trade and environment measures

4. Promote stronger trade and environment measures

• Environment ministries need to become involved before and during trade negotiations not at the end.

Possible ideas for promoting environment first, not trade first

• Overall goal should be sustainable development (2030 Agenda for Sustainable Development)

• Policy harmonization/ coordination, and/or mutual recognition – Pollution standards, emission standards – Ecolabeling – Waste & recycling (trading?) – Resource efficiency

• Green economy, sustainable production & consumption – Green procurement – Circular economy – Green supply chain – CSR 18

Ambient air quality standards for selected Northeast Asian countries (µg/m3)

Country

PM2.5 PM10 TSP SO2 NO2 O3 CO

24-H

r An

nual

24

-Hr

Annu

al

24-H

r An

nual

1-H

r 24

-Hr

Annu

al

1-H

r 24

-Hr

Annu

al

1-H

r

8-H

r

1-H

r

8-H

r

China: Gr. I 35 15 50 40 150 50 150 50 20 120 80 40 160 100 10 -

China: Gr. II 150 70 150 70 500 150 500 150 60 240 80 40 200 160 10 -

China: Gr. III - - 250 150 - - - 250 100 - 120 80 200 - 20 -

Japan 35 15 100 - 262 105 - 75-113

118 - - 23

Rep. of Korea - - 100 50 - - 392 131 52 188 113 56 196 118 28.6 10.3

Mongolia 50 25 150 50 150 100 - 30 10 85 40 30 - 100 30 10

WHO AQG 25 10 50 20 - - - 20 - 200 40 - 100 30 10

WHO IT-3 37.5 15 75 30 - - - - - - - - - - - -

WHO IT-2 50 25 100 50 - - - 50 - - - - - - - -

WHO IT-1 75 35 150 70 - - - 125 - - - 40 - 120 - -

EU - 25 50 40 - - 350 125 - 200 - 40 - 120 - 10

US 35 12 150 - - - 7 5 p pb

0.5 ppm 3h

- 100 ppb

188 100 - 147 40 10

Sources: CAI Asia 2010, pp. 10, 12, and CAA 2014d, USEPA, EU. Data from China was updated from MEP cited in Lin and Elder 2014 (new standards for Grade I PM2.5, and Ozone 8-Hr; and Grade II PM2.5, PM10 annual, NO2, Ozone 8-Hr.)

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Comments • CJK standards

not so different • Some standards

have different formats

Standards for sulphur content of fuels in Northeast Asia

Diesel Standard (ppm)

Petrol Standard (ppm)

Japan 10 10 South Korea 50 10 China (nationwide)* 50 50 Mongolia 5000 No info.

Sources: CAI-Asia 2011, UNEP 2014. * 10 ppm by 2017. Source does not indicate whether this refers to diesel or petrol or both. 20

Early Involvement of Environment Ministries in RTA Discussions Is Important

• RTA Scope: need to ensure an environmental chapter and environmental provisions

• Environment ministries may need capacity building on trade and environment

• EIA should be conducted before and during the negotiations, not just after agreement is reached.

• EIA should be incorporated officially into the negotiation process from the start 21

Ideas to Strengthen the Text of RTAs 1. Specific provisions on problematic trade-related sectors

such as wildlife, biodiversity, fishing, logging, waste. 2. Shipping pollution (MARPOL) 3. Countries should strengthen and/or harmonize

environmental standards 4. Countries should enforce their environmental laws &

regulations 5. Countries should meet MEA obligations 6. Clause stating that the RTA will not be used to weaken

environmental laws & regulations 7. Environmental provisions should be subject to dispute

settlement 8. Citizen groups should have same rights as companies

under dispute settlement 9. Green procurement 22

References • Clean Air Asia. 2014. Compilation of Ambient Air Quality Standards: 21 Asian Countries. June 30.

Unpublished. • CAI-Asia. 2011. “Road Map to Cleaner Fuels and Vehicles in Asia.” CAI-Asia Factsheets, no. 17. • CAI-Asia. 2010. “Air Quality in Asia: Status and Trends 2010 Edition.” Pasig City, Philippines.

http://cleanairinitiative.org/portal/node/3869. • Elder, Mark. 2015. “Air Pollution and Regional Economic Integration in East Asia: Implications and

Recommendations.” In Greening Integration in Asia: How Regional Integration Can Benefit People and the Environment, edited by IGES, 117–47. Hayama, Japan: Institute for Global Environmental Strategies. http://pub.iges.or.jp/modules/envirolib/upload/6054/attach/IGESWhitePaperV2015_C07.pdf.

• IGES. 2015. Greening Integration in Asia: How Regional Integration Can Benefit People and the Environment. White Paper V. Hayama, Japan: Institute for Global Environmental Strategies. http://www.iges.or.jp/en/pmo/wp5.html.

• Lin, Xinyan, and Mark Elder. 2014. “Major Developments in China’s National Air Pollution Policies in the Early 12th Five-Year Plan.” Hayama, Japan. http://pub.iges.or.jp/modules/envirolib/view.php?docid=4954.

• METI. 2014. White Paper on International Economy and Trade 2014. Tokyo: METI. http://www.meti.go.jp/english/report/data/gWT2014fe.html.

• UNEP. 2014. “Status of Fuel Quality and Vehicle Emission Standards in Asia-Pacific.” UNEP. http://www.unep.org/Transport/PCFV/pdf/Maps_Matrices/AP/matrix/AsiaPacific_FuelsVehicles_April2014.pdf.

• Yanai, Akiko. 2014. “Environmental Provisions in Japanese Regional Trade Agreements with Developing Countries.” 467. IDE Discussion Paper. http://www.ide.go.jp/English/Publish/Download/Dp/pdf/467.pdf.

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