The liberalization of environmental goods and services: Overview and implications for Latin America and the Caribbean

Combating climate change is one of the most important challenges facing the international community, in particular how to balance the goals of poverty reduction and development, better global economic governance, and environmental sustainability. Trade policy has an obvious role to play in reducing overall emissions of products and promoting more sustainable, “greener” economies. One proposal to accomplish this is to reduce the trade barriers of goods and services that are in themselves more climate friendly, or that are used in the production of climate friendly products can help accelerate the adoption of greener technologies and processes around the world. In addition to its direct environmental effect, liberalizing Environmental Goods and Services would be an opportunity for some countries in Latin America and the Caribbean to compete in new markets and leverage existing advantages. However, many countries are also trying to promote domestic competitive sectors to produce and export EGS and are reluctant to open their borders to competition from China and the United States.

This paper focuses primarily on proposals to liberalize trade of Environmental Goods, characterizing the trade of these products in Latin America and the Caribbean. The objective is to help identify trends, risks and opportunities for exporters as well as for importers, in a context of increased global competition in manufactured products from Asia and China in particular. For Latin America and the Caribbean, implementing policies aimed at both lowering trade barriers to environmental goods and services and “greening” the region’s export basket will result in gains both for the environment and for productive and export diversification since some countries are already leaders in global markets of environmental goods and services and are well positioned to expand their positions. There are large risks, however, given the existing preferential access by some developing countries and the significant differences in manufacturing capacity that threaten domestic industries of key technologies.