Balanced Process, Balanced Results: Sustainability Assessments and Trade

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Balanced Process, Balanced Results: Sustainability Assessments and Trade When governments negotiate powerful new treaties regulating international trade and investment, what role does sustainable

1 Balanced Process, Balanced Results: Sustainability Assessments and Trade When governments negotiate powerful new treaties regulating international trade and investment, what role does sustainable development really take? Stakeholder-oriented sustainability assessments can help drive results which are balanced and take into account the fundamental needs of the planet and its people. A rapid review of global data on trade, poverty, and environmental degradation reveals that governments have been much more successful at creating a global marketplace than at eradicating poverty and protecting the environment. World trade has grown fourteen-fold since 1950, due largely to the elimination of trade barriers, and recent years have seen an explosion in foreign direct investment by international corporations. Developed and developing countries alike have grown increasingly dependent on international trade and investment. Biodiversity, on the other hand, has declined over the same period, while pollution has increased and many of the world's natural resources have been depleted. But it is not just the natural world which has suffered the differential in income levels between developing and developed countries increased in absolute terms between 1960 and 1998, although the relative gap between some countries has declined. 1 GNP per capita actually fell in 59 countries, mainly in sub-saharan Africa, Eastern Europe and the former Soviet Union, between 1980 and In a few wealthy countries, the richest fifth of the world s population enjoy 82 percent of the expanding export trade and 68 percent of foreign direct investment, while the poorest fifth participate in barely more than 1 percent of either. 3 In short, global economic integration has been accompanied by greater environmental stress and growing inequality. What are Sustainability Assessments? Sustainability assessments are tools for integrating environmental and developmental considerations into trade and investment policies. By involving both government experts and non-governmental stakeholders, sustainability assessments help determine how to maximise the positive effects and mitigate/avoid the adverse impacts of trade and investment policies. But sustain-ability assessments are more than just environmental impact assessments of trade. Sustainability assessments should: While increased trade and investment cannot be blamed for all the poverty and environmental problems around the world, they can directly aggravate these issues (see box on Liberalisation of the Mexican Corn Sector, for example). More often, the potential is lost to realise social and environmental benefits from trade and investment, due to the failure to assess trade-related im- shape policies, not just assess them, starting at the earliest stages of policy formulation; put sustainability first, as the analytic baseline; effectively involve all stakeholders, in governments and in society; change real outcomes, not just how people talk. 1 UNDP Human Development Report p UNDP Human Development Report p Ibid.

2 pacts. This leads to trade and investment agreements, which ignore developmental and environmental demands and opportunities. As globalisation widens, how we trade and invest across borders has profound implications for human development and the health of our planet. Will more liberalisation drive overconsumption, or introduce eco-efficiency? Should countries reduce tariffs on wood and fish, or concentrate on eliminating perverse subsidies and ending trade in illegally harvested goods? Will agricultural liberalisation encourage sustainable practices or further marginalise small farmers? Instead of constructive debate over questions like these, globalisation has often provoked polarised rhetoric and civil strife. Street protests in Seattle followed by Washington, Prague, Davos, Porto Allegre, Quebec City among others reveal strong public concern, extending at times to violent disagreement, with the current direction of the global economy. In both political and practical terms, there is a deep need to improve trade and investment policies and the way in which they are developed and implemented. Sustainability assessments are one important tool offering a more balanced and inclusive approach. Sustainability Assessment: A Growing Practice With significant new trade negotiations on the horizon, including the Free Trade Area of the Americas, the potential launch of a new round of negotiations at the World Trade Organization, the EU-Mercosur negotiations, and the Mediterranean Free Trade Zone, the time is ripe to move forward with sustainability assessments. Although the term sustainability assessment is relatively new, the notion of assessment is well grounded in practice. Most governments are familiar with environmental impact assessment or EIA. Increasingly, EIA procedures have been applied not only to physical projects (such as bridges and dams), but also to major policies that have environmental impacts. For nearly a decade, NGOs and other stakeholders have been calling for the further extension of these assessments to trade and investment agreements, such as NAFTA or the Uruguay Round. Some governments and stakeholders (including WWF) have now expanded the assessment concept beyond a purely environmental focus, to include the broader range of issues relevant to sustainable development. Leading governments and intergovernmental organisations have recognised the need for assessment of trade and investment agreements. As early as 1993, the OECD called on governments to examine or review trade and environmental policies and agreements with potentially significant effects on the other policy area. The Commission on Sustainable Development has also repeatedly affirmed the need to conduct assessments of the impacts of trade policies, taking into account the special concerns of developing countries. The United Nations Environment Program (UNEP) has recently released a handbook and a series of sectoral case studies to assist governments with sustainability assessments and to promote their use. At the national level, the US, Canada, the EU and Norway have all committed themselves to carrying out assessments of new trade agreements. In the United States, this commitment was contained in a presidential order which makes environmental review of new trade agreements mandatory. Canada, the US, and the EU have already conducted some preliminary assessments of multilateral trade agreements, while Canada and the US have also launched formal 2

3 processes to assess the environmental impacts of the proposed Free Trade Area of the Americas. The increased attention to sustainability assessments has raised both interest and some concerns, particularly on the part of governments and stakeholders in developing countries. How can sustainability assessments best be implemented? Will they strain the resources of government agencies? Could they be used as yet another trade barrier and a new form of 'green protectionism? In March 2000, WWF joined with Fundacion Futuro Latinoamericano (FFLA) to organise a major international experts meeting hosted by the government of Ecuador. More than 100 experts from 30 countries attended to discuss the concept, purpose and utility of sustainability assessments. There was a growing consensus that in the hands of national governments and their stakeholders, sustainability assessments are a promising tool for improving trade and investment policies. Today, a number of initiatives are moving ahead, not only in countries where official assessment processes are underway, but also in a range of locations and regions where civil society organisations, think-tanks, regional bodies and private groups are undertaking sectoral or economy-wide studies to understand the economic, development and environment effects of key trade and investment policies. More Than Just a Study Sustainability assessments are not academic studies gathering dust on the bookshelves. Properly implemented through a rigorous and participatory process, sustainability assessments can be: Be a valuable information tool Informing policy-makers and the public about the potential economic, developmental, and environmental implications of trade and investment agreements. Depending on its purpose, sustainability assessment can be carried out prior to the negotiation or adoption of a proposed agreement, or can evaluate the impacts of existing policies. WWF is Committed to Making SAs Work WWF has made a strong commitment to promoting sustainability assessment (SAs) as a tool for reforming trade and investment policymaking in favour of sustainable development. In January 2001, WWF launched a series of activities on sustainability assessments that aim to: Enhance government coordination For trade and investment policies to be balanced and serve broad public interests, they must be formulated through a process that gives full voice to government agencies charged with protecting the environment and promoting the health, education, and development of all citizens. Sustainability assessments make use of an interdisciplinary process that can improve government coordination. By establishing a common lan- promote the adoption and implementation of effective sustainability assessment processes by national governments; build local capacity for stakeholders and governments to undertake and participate in sustainability assessments; and demonstrate the value of sustainability assessments through their application in different sectors and regions. Included will be a series of regional capacity-building workshops and case-studies (mainly focused at the sectoral level) conducted with local experts and partners. 3

4 guage, they can improve communication and understanding among the various governmental actors in trade and investment policymaking. Improve stakeholder participation Providing a useful mechanism for engaging a wide range of stakeholders affected by trade and investment flows and policies. Understood as a stakeholder-oriented process and not just a research and drafting exercise sustainability assessments enable relevant parties and stakeholders to make their views known and influence the policymaking process in an orderly and transparent way. Thus they can help develop trade policies which reflect the interests of all who are affected by them not just the interests of multinational corporations. Build confidence and capacity Enhacing the capacity of government and non-government stakeholders to make informed choices about trade and investment policy decisions, especially in the context of negotiations. Sustainability assessments are primarily national instruments a tool applied by governments in their own political, economic, environmental, and social contexts. Applied domestically, sustainability assessments can help build a consensus, in support of balanced trade and investment. They can also help governments to identify trade and investment policies which best promote sustainable development. Internationally, sustainability assessments can help identify issues which negotiators must confront together to build trade and investment agreements that give real support to sustainable development. A Time for Action Consensus is growing among both governments and non-governmental actors that sustainability assessments are a valuable tool for ensuring that trade liberalisation promotes sustainable development. Governments which have made commitments to do assessments must now undertake them in a meaningful way. Governments that have not yet committed to sustainability assessments should give prompt consideration to their use. It is also important for governments and Liberalisation of the Mexican Corn Sector In 1998, Oxfam and WWF commissioned a study to review the impacts of economic liberalisation on the Mexican corn sector. The study provides an important example of the social and environmental problems resulting from a rapid and poorly-planned adjustment to a more liberal agricultural regime in the absence of adequate transitional state support. The planned 15- year transition period was compressed into 30 months. Domestic corn prices fell by 48% between January 1994 and August Other key findings of the study include: In spite of a sharp drop in corn prices and the increase in imports, Mexico's production has not declined and has remained stable at about 18M tons/year. The cultivated surface devoted to corn has expanded, while yields have dropped. Small-scale traditional producers are being forced to migrate to urban areas or to other countries. Migration and the weakening of social institutions are contributing to genetic erosion as traditional knowledge of corn seeds is lost. Restructuring of the corn sector is also contributing to accelerating soil erosion trends (i) through specialization and monoculture, coupled with increased use of fertilizers, by the more competitive producers, and (ii) because of a more intensive use of soils by traditional producers. The study argues that one reason for the failure to foresee the impacts of liberalisation of the corn sector was the government s mistaken assumptions about how rural subsistence producers would respond to new price signals. The study demonstrates that the stakes are too high to move ahead with liberalisation without taking full account of the human and environmental impacts on the ground, and of the need for private markets to function in the context of strong public policies. Source: The Environmental & Social Impacts of Economic Liberalisation on Corn Production in Mexico (WWF & Oxfam GB, 2000). 4

5 stakeholders to develop a concrete understanding of how they will make sustainability assessments effective in their own national and regional contexts. In order to ensure that sustainable development concerns are fully integrated into current and future trade and investment negotiations, sustainability assessment procedures should be developed that: Start with Sustainable Development Sustainability assessments should not be tools simply for assessing the impacts of trade and investment policies after they have been set or implemented. On the contrary, sustainability assessments are meant to help formulate those policies in the first instance. To accomplish this, sustainability assessments must begin by looking proactively at environmental and developmental issues. Is commerce in a given sector sustainable now? If not, why not? What can governments do to remedy the problem? How can governments act in the context of trade and investment agreements to make commerce more sustainable? What must be done to ensure that liberalisation does not further aggravate existing problems, or cause new ones? Involve all Relevant Government Departments Trade and investment policy should not be heavily dominated by agencies with a narrow economic focus. Sustainability assessments should be conducted through a process that is under the control or substantial influence of government agencies with lead responsibility for protecting the environment and natural resources and encouraging social development, among other issues. The process should be interdisciplinary, and supervised at senior levels of a government s executive (e.g., the office of the president or Prime Minister). Include a Broad Range of Stakeholders Sustainability assessment provides an opportunity for all stakeholders to participate in the dialogue on globalisation and its impact on sustainable development. Stakeholder participation can ensure that there is broadbased consensus for trade and investment policies and an adequate understanding on all sides of their potential impacts on development, poverty and environment. But this participation must be meaningful. It must be timed to affect decisions. And it must be based on open access to information, including maximum feasible access to negotiating texts and positions. Examine all Relevant Issues UNEP Case Study on the Senegalese Fisheries Sector The fisheries sector in Senegal has grown rapidly during the last decades, both in terms of overall production and exports (the latter rose from 84,036 tons in 1980 to 124,672 tons in 1990). The rationale for expanding production and exports was that the sector's economic expansion, notably through exports, would address problems of balance of payment's deficit, unemployment and food security While exported volumes expanded rapidly in the 1970s and 1980s, the study notes that they seem to have reached a ceiling (around 100,000 to 110,000 tons/year) and recent trends may even indicate a decline in exported volumes. The main reason is resource constraints, as fishing stocks are fully exploited to overexploited. This case study explores the effects of further liberalisation likely to result from WTO-led tariff reduction and the phasing-out of trade advantages with the EU, and what policies are needed to ensure sustainable management of Senegalese fisheries in a liberalisation context. The study concludes that: solutions should focus on increasing exports of processed products rather than volumes; pricing of fisheries resources must consider issues of both access and usage, as free access by exportoriented fishing units has resulted in exploitation of the coastal stocks beyond maximum sustainable yields; enforcement of existing fisheries and environmental regulations is a first step to more sustainable fishing practices (such as those related to fishing gear and marketed breed sizes); and institutional and regulatory measures targeted at small-scale fishermen must be developed and implemented to ensure that local fish trade continues to provide much needed local income and food, and is not conducted at the expense of the very resource its survival depends upon. 5 Source: Environmental Impacts of Trade Liberalisation on the Fisheries Sector in Senegal (UNEP Country Projects on Trade and Environment, forthcoming).

6 The scope of a sustainability assessment should be limited only by the potential relevance of the issues examined. In many cases, the most significant environmental or developmental impacts associated with a proposed trade or investment agreement will be outside the national jurisdiction of the government conducting the sustainability assessment. While due consideration must always be given to the sovereignty of national governments, such international or foreign impacts should not be excluded from assessments. In some cases, sustainability assessments may also include analysis of pre-existing trade or investment agreements, as a basis for developing future policies. Create an Ongoing Process Sustainability assessment should be part of an integral part of the process, not just a study. It should start at an early phase, and continue as decisions are made and implemented. In some cases, the sustainability assessment process may also usefully lead to mechanisms for monitoring the implementation of trade and investment agreements after they are in force. Have an Impact The bottom line is that sustainability assessments need to have an impact on policy Practical Considerations Timing: when should the assessment be implemented? Before, after or during the negotiations? How can the assessment ensure meaningful and timely access to negotiators? Scope: What should be the scope of an assessment and what determines it? Should it focus on a particular sector, market and/or geographic area? Should extra-territorial effects be considered? If so, how? Participation: What agencies or ministries should initiate the process? Who should participate in the process? How will the non-governmental stakeholders be identified? How will consultations be carried out? For example, will a formal advisory body or structure be created that includes representatives of stakeholder groups? What information will stakeholders need to effectively participate in the process? When and how will it be disseminated? How will information and input from the public be solicited? For example will official public notices be placed in government gazettes? What other types of outreach strategies should be used? Methodology: Should the assessment be based on quantitative analysis, qualitative analysis, or both? Is the methodology adopted accessible to a wide range of users? How should the methodology deal with constraints such as lack of data? What are the sustainability indicators used? How costly is it? How likely is it to lead to policy-relevant results? Responding to the results of sustainability assessments: How will the results of an assessment be used? Does the trade agreement need to be modified? Do specific environmental or social safeguards need to be incorporated into the trade agreement? Are there appropriate market-based instruments for addressing anticipated adverse impacts, for example, modifying pricing structures? What kinds of flanking or parallel measures should be put in place, for example, improved law enforcement, supplementary legislation, transitional measures, and/or better regulatory structures? For more information on the practical side of doing assessments, see Reference Manual for the Integrated Assessment of Trade-Related Policies (UNEP 2001) available at < 6

7 Conclusions Implementation of trade-related policies can directly promote or deter trade in environmentally beneficial goods or methods of production, and can indirectly reinforce patterns of comparative advantage and specialisation, all of which have social and environmental consequences and involve costs. Failing to take into account the social and environmental impact both positive and negative of implementing trade-related policy has costs that policymakers cannot afford to ignore. Sustainability assessments have a vital role to play in promoting conservation and sustainable development in a world of rapid globalisation. They are an important tool for improving trade and investment policies, and for guaranteeing a real seat at the policymaking table for all those whose lives stand to be affected by them. For More Information... There is a growing literature on sustainability assessments, including WWF s own publications. A good technical synopsis of methodological and political issues surrounding sustainability assessments can be found in the full meeting report of The International Experts Meeting on Sustainability Assessments of Trade Liberalisation (Quito, Ecuador, 6-8 March 2000). For copies of the Quito report, or for further information, please contact: Mireille Perrin Claudia Saladin Policy Adviser, Trade and Investment Unit Senior Program Officer WWF International World Wildlife Fund (WWF-US) Ave du Mont-Blanc th Street, NW 1196 Gland Washington, DC Switzerland USA Tel: Tel: Fax: Fax: mperrin@wwfint.org claudia.saladin@wwfus.org Website: Website: 7

ANNUAL 2011 SESSION OF THE PARLIAMENTARY CONFERENCE ON THE WTO Geneva, March 2011

ANNUAL 2011 SESSION OF THE PARLIAMENTARY CONFERENCE ON THE WTO Geneva, 21-22 March 2011 Organized jointly by the Inter-Parliamentary Union and the European Parliament Item 2(b) PC-WTO/2011/2(b)-R.2 7 March