Shaping trade in goods relevant to renewable energy generation: the RCEP’s potential and limitation

ABSTRACT

The Regional Comprehensive Economic Partnership Agreement (RCEP) has shaped the legal regime of the ‘new Asian regionalism’ that emerged due to the region’s rising economic power and increased partnerships. However, the pact has been criticized to bypass rules dealing with environmental protection. This article demonstrates that the RCEP can potentially contribute to trade in certain renewable energy generation products through its tariff liberalization scheme. It also submits that the pervasive use of unilateral trade remedies and local content requirements could impede greater trade potential facilitated by these tariff cut commitments. Looking ahead, a number of proposals are tabled in this article to improve the quality of the RCEP in advancing regional trade partnership in green energy promotion.

KEYWORDS:

• RCEP
• environmental goods
• renewable energy
• tariff
• local content requirements

Acknowledgements

The author is grateful to Pasha Hsieh, Julien Chaisse, and Yueming Yan for their helpful comments and suggestions. The author would like also to thank Joanna Christy for her research assistance. Any and all mistakes are mine.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 OECD, ‘Trade and the Environment’ <www.oecd.org/trade/topics/trade-and-the-environment/> accessed 7 August 2022.

2 Joseph Francois and Manfred Elsig, ‘Short Overview of the Regional Comprehensive Economic Partnership (RCEP)’ (2021) European Parliament’s Committee on International Trade Paper, 6 <www.europarl.europa.eu/RegData/etudes/BRIE/2021/653625/EXPO_BRI(2021)653625_EN.pdf> accessed 7 August 2022.

3 UNESCAP, ‘Key Environment Issues, Trends and Challenges in the Asia-Pacific Region – Note by the Secretariat’, ESCAP/CED/2018/1, 12 September 2018, <www.unescap.org/sites/default/files/CED5_1E_0.pdf> accessed 7 August 2022.

4 To check each’s party climate pledge, see UNDP, ‘Climate Promise’ <https://climatepromise.undp.org/what-we-do/where-we-work> accessed 17 February 2023.

5 ITC, ‘Trade Map’ <www.trademap.org/Index.aspx> accessed 20 February 2023.

6 The term ‘environmental goods’ in this article is used interchangeably with the phrases ‘green goods’, ‘climate-friendly goods’, and ‘environmentally friendly goods’.

7 Pasha L Hsieh, New Asian Regionalism in International Economic Law (Cambridge University Press, 2021) 1. The author defines the phrase ‘new Asian regionalism’ as a new normative integration process which has evolved with the ASEAN Plus Six FTAs and sustains Asia’s increased power in shaping the world’s economic order. See also Julien Chaisse and Pasha L Hsieh, ‘Rethinking Asia-Pacific Regionalism and New Economic Agreements’ Asia-Pacific Law Review (forthcoming).

8 William A Reinsch, Emily Benson, and Catherine Puga, ‘Environmental Goods Agreement – a New Frontier or an Old Stalemate?’ (CSIS, 28 October 2021) <www.csis.org/analysis/environmental-goods-agreement-new-frontier-or-old-stalemate> accessed 14 August 2022.

9 OECD, ‘The Environmental Goods and Services Industry – Manual for Data Collection and Analysis’ (1999) OECD Publication Service, 9 <www.oecd-ilibrary.org/industry-and-services/the-environmental-goods-and-services-industry_9789264173651-en> accessed 14 August 2022.

10 Tom Miles, ‘EU Blames China for WTO Environmental Trade Talks Collapse’ Reuters (Geneva, 4 December 2016) <www.reuters.com/article/us-trade-environment-idUSKBN13T0MX> accessed 11 November 2022.

11 APEC, ‘2012 Leaders Declaration’ (8 October 2012) <www.apec.org/meeting-papers/leaders-declarations/2012/2012_aelm> accessed 28 August 2022.

12 APEC, ‘Annex C – APEC List of Environmental Goods’ <www.apec.org/meeting-papers/leaders-declarations/2012/2012_aelm/2012_aelm_annexc>. See also, Carlos Kuriyama, ‘A Review of the APEC List of Environmental Goods’ (2021) APEC Policy Support Unit Policy Brief No. 41 www.apec.org/docs/default-source/Publications/2021/10/A-Review-of-the-APEC-List-of-Environmental-Goods/221_PSU_Review-of-APEC-List-of-Environmental-Goods.pdf> accessed 28 August 2022.

13 Ibid.

14 Ronald Steenblik, ‘Environmental Goods: A Comparison of the APEC and OECD Lists’ (2005) OECD Trade and Environment Working Paper No. 2005-04, 6 <www.oecd.org/environment/envtrade/35837840.pdf> accessed 5 September 2022.

15 OECD, ‘The Environmental Goods and Services Industry’ (n 9) Annex 2.

16 Carlos Kuriyama, ‘Time to Expand the APEC List of Environmental Goods’ (APEC, 17 May 2022), <www.apec.org/press/blogs/2022/time-to-expand-the-apec-list-of-environmental-goods> accessed 9 September 2022.

17 James Bacchus and Inu Manak, ‘Free Trade in Environmental Goods Will Increase Access to Green Tech’ (2021) Free Trade Bulletin No. 80, 3 <www.cato.org/sites/cato.org/files/2021-06/free-trade-bulletin-80.pdf> accessed 11 November 2022.

18 US Energy Information Administration, ‘What is Energy?’ <www.eia.gov/energyexplained/what-is-energy/sources-of-energy.php> accessed 16 September 2022.

19 Legal Text of the RCEP Agreement <https://rcepsec.org/legal-text/> accessed 16 September 2022.

20 Ibid.

21 Alessandro Nicita, ‘An Assessment of the Regional Comprehensive Economic Partnership (RCEP) Tariff Concessions’ (2021) UNCTAD Research Paper No. 73, 8 <https://unctad.org/system/files/official-document/ser-rp-2021d16_en.pdf> accessed 16 September 2022.

22 Ibid, 6–7.

23 Annex I Schedule of Tariff Commitments Singapore <https://rcepsec.org/wp-content/uploads/2020/11/Singapore-Headnotes.pdf> accessed 16 September 2022.

24 For each party’s tariff lines, see Annex I – Schedules of Tariff Commitments, Legal Text of the RCEP Agreement, <https://rcepsec.org/legal-text/> accessed 16 September 2022.

25 International Renewable Energy Agency, ‘Wind Energy’ <www.irena.org/wind> accessed 25 September 2022.

26 Ibid.

27 Office of Energy Efficiency and Renewable Energy, ‘How Does Solar Work?’ <www.energy.gov/eere/solar/how-does-solar-work#pvbasics> accessed 25 September 2022.

28 International Renewable Energy Agency, ‘Solar Energy’ <www.irena.org/solar> accessed 25 September 2022.

29 ITC, ‘Trade Map’ <www.trademap.org/Country_SelProduct_TS.aspx?nvpm=1%7c%7c%7c%7c%7c8541%7c%7c%7c4%7c1%7c1%7c1%7c2%7c1%7c2%7c1%7c1%7c1> accessed 25 September 2022.

30 International Renewable Energy Agency, ‘Hydropower’ <www.irena.org/hydropower> accessed 30 September 2022.

31 International Renewable Energy Agency, ‘Geothermal Energy’ <www.irena.org/geothermal> accessed 2 October 2022.

32 There are three types of geothermal power plants: dry steam, flash steam, and binary cycle. See: National Renewable Energy Laboratory, ‘Geothermal Electricity Production Basics’ <www.nrel.gov/research/re-geo-elec-production.html> accessed 2 October 2022.

33 UNCTAD, ‘Non-Tariff Measures (NTMs)’ <https://unctad.org/topic/trade-analysis/non-tariff-measures> accessed 5 October 2022.

34 UNCTAD, ‘International Classification of Non-Tariff Measures – 2019 Version’ <https://unctad.org/webflyer/international-classification-non-tariff-measures-2019-version> accessed 5 October 2022.

35 Ilaria Espa and Gracia Marín Durán, ‘Promoting Green Energy Through EU Preferential Trade Agreements: Potential and Limitation’ (2020) 47(2) Legal Issues of Economic Integration 115, 116.

36 UNCTAD, Trade Remedies: Targeting the Renewable Energy Sector (United Nations Publication, 2014) <https://unctad.org/system/files/official-document/ditcted2014d3_en.pdf> accessed 7 October 2022.

37 Ibid, 5. The survey estimated that these AD/CVD cases affect around USD 32 billion of trade in green products.

38 Commission Implementing Regulation (EU) 2020/776 of 12 June 2020 <https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32020R0776&from=EN>; Commission Implementing Regulation (EU) 2020/870 of 24 June 2020, <https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32020R0870&from=EN> accessed 7 October 2022.

39 US Department of Commerce, ‘Oil Country Tubular Goods from the People’s Republic of China: Final Affirmative Determinations of Circumvention’ Federal Register Vol. 86 No. 225, 26 November 2021, <www.govinfo.gov/content/pkg/FR-2021-11-26/pdf/2021-25832.pdf> accessed 7 October 2022.

40 Petition Letter Submitted to US Department of Commerce (8 February 2022) <www.seia.org/sites/default/files/2022-02/Circumvention%20Petition%20Filed%202.8.22.pdf> accessed 7 October 2022.

41 The White House, ‘Declaration of Emergency and Authorization for Temporary Extensions of Time and Duty-Free Importation of Solar Cells and Modules from Southeast Asia’ (Statements and Releases, 6 June 2022) <www.whitehouse.gov/briefing-room/statements-releases/2022/06/06/declaration-of-emergency-and-authorization-for-temporary-extensions-of-time-and-duty-free-importation-of-solar-cells-and-modules-from-southeast-asia/> accessed 10 October 2022.

42 US Department of Commerce, ‘Department of Commerce Statement on President Biden’s Proclamation on Solar Cells and Modules’, Press Release (6 June 2022) <www.commerce.gov/news/press-releases/2022/06/department-commerce-statement-president-bidens-proclamation-solar-cells> accessed 10 October 2022.

43 Victor Crochet and Vineet Hegde, ‘China’s “Going Global” Policy: Transnational Production Subsidies under the WTO SCM Agreement’ (2020) 23 Journal of International Economic Law 841.

44 WTO, ‘Glossary Term’ <www.wto.org/english/thewto_e/glossary_e/local_content_measure_e.htm> accessed 12 October 2022.

45 MOI Regulation No. 54/2012, Art 2.

46 Ibid, Arts 5–13. See also Michelle Limenta and Lili Yang Ing, ‘Indonesia Local Content Requirements: Assessment with WTO Rules’ (2022) ERIA Discussion Paper Series No. 414 <www.eria.org/uploads/media/discussion-papers/FY21/Indonesias-Local-Content-Requirement-WTO-Rules.pdf> accessed 12 October 2022.

47 See WTO DS412/DS426, DS456.

48 RCEP Agreement, Art 10.6.

49 Regarding types of PRs under the WTO’s TRIMs and investment treaties, see Julien Chaisse, ‘Renewable Re-Energized? The Internationalization of Green Energy Investment Rules and Disputes’ (2016) 9 Journal of World Energy Law and Business 269.

50 RCEP Agreement, Art 10.18; Michael Ewing-Chow and Junianto James Losari, ‘The RCEP Investment Chapter: A State-to-State WTO Style System for Now’ (Kluwer Arbitration Blog, 8 December 2020) <http://arbitrationblog.kluwerarbitration.com/2020/12/08/the-rcep-investment-chapter-a-state-to-state-wto-style-system-for-now/> accessed 9 November 2022.

51 RCEP Agreement, Art 10.2.

52 The RCEP economies commit to undertake a general review of the Agreement with a view to updating and enhancing it five years after the RCEP’s entry into force. See: RCEP Agreement, Art 20.8.

53 EU – New Zealand FTA, Annex X10A (Draft) <https://circabc.europa.eu/rest/download/5b1523f5-4758-4ce5-892a-9c4828063d69?ticket=> accessed 14 October 2022.

54 UK Department for International Trade, ‘UK-New Zealand FTA Chapter 22: Environment’ (28 February 2022) <www.gov.uk/government/publications/uk-new-zealand-fta-chapter-22-environment> accessed 14 October 2022.

55 DFAT, ‘Singapore-Australia Green Economy Agreement Official Text’ <www.dfat.gov.au/geo/singapore/singapore-australia-green-economy-agreement/singapore-australia-green-economy-agreement-text> accessed 11 November 2022.

56 EU – Singapore and EU Viet Nam FTAs, Chapter 7 on Non-Tariff Barriers to Trade and Investment in Renewable Energy Generation.

57 EU – Singapore FTA, Art 7.1; EU – Viet Nam FTA, Art 7.1.

58 EU – Singapore FTA, Arts 7.2 and 7.4; EU – Viet Nam FTA, Arts 7.2 and 7.4.

59 EU – Viet Nam FTA, Art 10.4.2(d).

60 However unlike the EU – Viet Nam FTA, the EU – Singapore FTA does not specify any procedures or mechanisms to assess or address issues that may raise related to these subsidies.

61 Espa and Durán (n 35) 648; Douglas Nelson and Laura Puccio, ‘Nihil Novi Sub Sole: The Need for Rethinking WTO and Green Subsidies in Light of United States – Renewable Energy’ (2021) 20 World Trade Review 491, 504.