EU, US eye green goods tax pact in climate fight

The European Union and the United States are holding talks on forging a pact with OECD countries and China to eliminate duties on green goods, as part of a deal with Beijing in view of a global climate agreement to be reached in Copenhagen by the end of the year.

EU diplomats told Reuters that under a plan being discussed by Brussels and Washington, the 30 nations in the Organisation for Economic Cooperation and Development (OECD) and China would agree a global pact to phase out import tariffs on goods such as wind turbines, renewables and green technologies.

But any deal is unlikely to include environmentally friendly hybrid cars, the diplomats said.

"The talks are entering an advanced stage. Brussels and Washington hope this could be one of the incentives needed to get China on board in the lead up to the Copenhagen climate change talks," one EU diplomat told Reuters.

A spokeswoman for the US Trade Representative's office said the US and the EU had been pushing within the Doha round of world trade talks since November 2007 for a deal to cut tariffs on environmental goods "and continue to work closely in pushing for concrete progress".

"We remain eager to move ahead with negotiations to eliminate tariff barriers on climate-friendly technologies and spur momentum on a larger WTO Doha package on environmental goods and services," said USTR spokeswoman Carol Guthrie.

US businesses such as United Technologies Corp (UTX.N) and General Electric Co. (GE.N), which are frustrated with the slow pace of the Doha round, have urged the Obama administration to consider alternative paths to reach a deal to boost trade in environmental goods and services.

"It's a chance to jump-start US trade policy and aid global climate negotiations at the same time," said Jake Colvin, vice-president for global trade policy at the National Foreign Trade Council, a US business group.

China is on course to become the world's largest producer of wind turbines in the world this year and is a major manufacturer of solar products.

China under pressure

The Asian powerhouse - the world's biggest polluter - is under pressure from Europe and the US to cut its carbon dioxide (CO2) emissions as part of negotiations on a new global climate treaty to succeed the Kyoto Protocol, which lapses at the end of 2012.

In return Beijing wants billions of dollars in cash from the EU and the US to help it harness new greener technologies for its export-driven economy.

"This deal would save Chinese exporters billions of euros and dollars and could form a large part of the overall package offered to Beijing to cut emissions," another diplomat said.

India and Brazil are also being wooed by the EU and Washington before global climate talks in Copenhagen in December, but are considered unlikely to take part in the initiative.

"Brazil and India are not seen as part of the deal since reducing their import tariffs would not benefit them. They can opt in, but it is expected they will opt out," the first diplomat said.

EU trade ministers gave the green light earlier this month to current EU presidency holder Sweden and the European Commission - which oversees trade policy for the 27-nation bloc - to pursue the negotiations with Washington.

"Member states will get a complete update on 6 October in Sweden and if approved, formal negotiations could start with the OECD and China before Copenhagen," the second diplomat said.

Any negotiations would take place between ambassadors at the World Trade Organisation in Geneva, but any deal would be formally agreed outside the global trade watchdog, the diplomats said.

"It would be similar to an agreement in the pharmaceutical sector and would not contravene WTO rules," one envoy said.

Pharmaceutical-producing countries accounting for approximately 90% of global production, including the US, EU and China, have agreed to "zero-for-zero" tariffs for pharmaceutical products and for chemicals used in the production of pharmaceuticals.

EurActiv