Experience with ex-ante impact

assessments and lessons learned

Carlos J. de Miguel

(carlos.demiguel@cepal.org) Sustainable Development and Human Settlements Division

OECD WORKSHOP on

“Regional trade agreements and the environment: monitoring implementation

and assessing impacts”

Paris, France, 1-2 June 2010

Socioeconomic Context LAC

- Middle income, strong disparities among countries

- Economic growth (around 4%), but less than other

developing economies

- Per capita income diverges from OECD (1980 + 35%,

2006 + 25%)

- Poverty (2008): slightly positive balance in comparison

to the 2 previous decades (33%, 13% of indigence). Poor

population :180 millions (71 indigents).

- Most uneven region in the world

- Unemployment around 8%, increasing informality

Production and Trade

- Low share in world exports (around 5% vs 4% at early 90s)

- Heterogeneity of productive structure and asymmetries

- Heterogeneity of exports structure

- Mexico & Central America: maquila, dynamic manufactures (ICT)

- Caribbean: services (tourism, financial sectors)

- South America: commodities and natural resources intensive products

- Dynamisms of exports, 7% (with subregional differences linked to the export pattern). Natural resources

- Competitiviness of environmentally sensitive industries

- Decoupling?

LAC and its subregions: evolution of exports, by

technological content, From 1980 to 2008

(In percentages of total exports, 1980-2008)

c) Mexico d) South America

a) Latin America and Caribbean b) Central America

0%

20%

40%

60%

80%

100%

1980-1984 1990-1994 2000-2004 2005-2008

0%

20%

40%

60%

80%

100%

1980-1984 1990-1994 2000-2004 2005-2008

0%

20%

40%

60%

80%

100%

1980-1984 1990-1994 2000-2004 2005-2008

0%

20%

40%

60%

80%

100%

1980-1984 1990-1994 2000-2004 2005-2008

0% 100%

1980-1984 1990-1994 2000-2004 2005-2008

High Technology Medium Technology Low Technology Manufactures based on NN.RR. Primay Products

LAC: MFN tariff levels 1980, 1990 and 2008

AVERAGE MFN TARIFF

Weighted by preferential agreements,

the average regional tariff drops to 4,5%

> 100%

29%

9%

Mercosur – Unión Europea;

CARICOM – Unión Europea;

CARICOM – Canadá

Chile – Canadá, Estados Unidos, Unión Europea, Asociación Europea de

Libre Comercio (AELC), Turquía, Japón;

México – Estados Unidos, Canadá, AELC, Unión Europea, Japón;

CAFTA –RD – MCCA; República Dominicana – Estados Unidos, Unión

Europea; Costa Rica – Canadá; MERCOSUR-Israel; Colombia-Estados

Unidos, Canadá, AELC; Perú – Canadá, Estados Unidos;

Panamá-Canadá ;CARICOM-Unión Europea; MCCA-Unión Europea;

Current Agreements Future Agreements

(subscribed) (Negotiations)

Brasil – Marruecos; Brasil – Egipto

Chile – República de Corea; Chile – Nueva Zelandia, Singapur, Brunei;

Mercosur – India (450 productos); Chile – China, India; Perú – Tailandia,

Singapur, China; Mercosur – Unión Aduanera del África Meridional (SACU);

CARICOM – MERCOSUR;

Comunidad Andina – El Salvador,

Guatemala, y Honduras;

México – Mercosur

Comunidad Andina (CAN): Bolivia, Colombia, Ecuador, Perú y República

Bolivariana de Venezuela;

Mercado Común del Sur (Mercosur): Argentina, Brasil, Paraguay y Uruguay;

Mercado Común Centromericano (MCCA): Costa Rica, El Salvador, Guatemala,

Honduras y Nicaragua;

Chile – CAN, MCCA, México, Panamá;

México – Centroamérica; México – Uruguay;

México – Bolivia; CAN – MERCOSUR;

Comunidad del Caribe (CARICOM); CARICOM – Costa Rica

CARICOM – República Bolivariana de Venezuela; CARICOM – Colombia; Grupo

de los Tres: Colombia, México y República Bolivariana de Venezuela; MCCA –

República Dominicana; Chile -Perú

Norte

Sur

Trade Agreements in LAC

Until May 2010, more than 55% of total exports are

covered by some trade preferences (intra or extra)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Venezuela (Bol. Rep.)

Brazil

Ecuador

Uruguay

Argentina

Peru

Costa Rica

Panama

Latin America & the Caribbean

Honduras

Paraguay

Bolivia (Plur. State of)

Colombia

Guatemala

Nicaragua

Dominican Rep.

Chile

Mexico

El Salvador

Intrarregional preferences Extrarregional preferences trade without preferences

Latin American and the Caribbean, exports covered by Preferential

Agreements (shares in total exports)

Source: ECLAC, International Trade and Integration Division

There are methodologies for

environmental/sustainability

assessment • UNEP (2001), OECD (1994), EU – SIA (1999,

2006), NAFTA/NAAEC-Commission for

Environmental Cooperation (1999), Canada

(2001, 2008), WWF (1994), USA Executive

Order 13141 (1999), etc.

Executive Order 13141: Any process of trade policy, consistent and comprehensive:

• Consider the environmental impacts

• Identify the complementarities between trade and environmental goals

General Objetives of an

Environmental Assessment

1. Promote sustainable development through trade

agreements => improve welfare

2. Create positive synergies and balance among

trade, environmental and social interest (global,

regional and local)

3. Inform negotiators

4. Design sound public policies

Structure of the Assessments

1. Assessment of the policy measures related to

the trade agreement: tariffs, barriers, subsidies, trade

incentives, investment provisions, norms & standards for

products and process

2. (Socio)Economic effects of the measures: Scale

(-), income (-), structure/composition (?, depending on

comparative advantages), technology (+), regulatory/institutional

3. Environmental Impacts: on natural resources,

ecosystems and environmental quality (air, water, soil)

Evidence: ?, Kuznets SO2 +, NO2 +, Part ?, CO2 ?,

RILEs -, deforestation -. Local +, global -. For LAC the

result is not positive in general

Environmental Assessments usually are not

included explicitly in trade agreements…

Reasons:

- No rule/obligation

- Reluctance to include environmental issues in the

framework of the trade negotiations.

- Complexity of the technical and methodological analysis

- Budgetary constrains for empirical work

- Lack of information, statistics and indicators

- Room for improvement on participation, access to inf. …

In practice increasing number of assessments, but:

- They are economic (mainly macro and sectoral), partial,

Ex-post, without environmental asessments

What say the numbers?

Mainly with CGE models

Confirm theory:

Trade not necessary improve welfare or the

environment (when environmental externalities are

not accounted)

Trade may improve welfare, despite externalities,

if positive composition effects dominate

ECLAC Assessments/Studies

– Raúl O'Ryan, Carlos de Miguel, Sebastian Miller and Mauricio Pereira (2010), “The Socioeconomic and Environmental effects of Free Trade Agreements: A dynamic CGE analysis for Chile”, Environmental Development Economics, forthcoming.

– J. Durán, De Miguel, C., Pereira, M. and Véliz, G. (2010), “Assessing the impact of non-Tariffs Barriers during the global Crisis: the experience in Argentina, Ecuador and Venezuela”, Serie Comercio Internacional, forthcoming CEPAL

– Carlos de Miguel, Carlos Ludena and Andres Schuschny (2010) “Climate change and reduction of CO2 emissions: the role of developing countries in carbon trade markets”, Serie Medio Ambiente y Desarrollo, forthcoming CEPAL

– R.J. Herrera and M. Bonilla (2009) “Guía de Evaluación Ambiental Estratégica” Colección documento de proyecto, CEPAL

– Jose Durán, Carlos Ludeña, Mariano Alvarez and Carlos de Miguel, (2008) “Acuerdo de Asociación Centroamérica-Union Europea: Evaluación utilizando Equilibrio General computable y Equilibrio Parcial”, Colección documento de proyecto, CEPAL

ECLAC Assessments/Studies

– Andrés R. Schuschny, José E. Durán Lima and Carlos de Miguel (2008) “Política comercial de Chile y los TLC con Asia: evaluación de los efectos de los TLC con Japón y China” Serie estudios estadísticos y prospectivos 66, CEPAL

– Andres Schuschny, Carlos Ludena, Carlos de Miguel and Jose Durán (2008) “Trade and Sustainable Development: Spatial Distribution of agricultural effects of an US-Ecuador FTA”, Serie Medio Ambiente y Desarrollo, CEPAL Nº 138

– A. Schuschny, J. Durán and De Miguel, C. (2007) “El modelo GTAP y las preferencias arancelarias en América Latina y el Caribe: reconciliando su año base con la evolución reciente de la agenda de liberalización regional”, Serie Manuales No 53, CEPAL LC/L 2679-P, febrero 2007

– J. Durán, De Miguel, C. and Schuschny, A. (2007) “Trade agreements by Colombia, Ecuador and Peru with the United States: effects on trade, production and welfare”, CEPAL review 91, April

ECLAC Assessments/Studies

– Sánchez, Marco V. (2007) “Liberalización comercial en el marco del DR-CAFTA: efectos en el crecimiento, la pobreza y la desigualdad en Costa Rica ”, CEPAL, Serie Estudios y Perspectivas, No. 80. México, D.F.

– Sánchez, Marco V. y Rob Vos (2006). “DR-CAFTA: panacea o fatalidad para el desarrollo económico y social en Nicaragua?”, CEPAL, Serie Estudios y Perspectivas, No. 57. México, D.F.

– Parada, Soledad and Cesar Morales (2006). Los efectos potenciales del Tratado de Libre Comercio entre Ecuador y los Estados Unidos en las mujeres rurales ecuatorianas. CEPAL-FAO, Serie desarrollo productivo, No 171.

– Ramirez, Juan Carlos (ed) (2005), “Temas no comerciales en la negociación comercial entre Colombia y Estados Unidos”, CEPAL, Serie estudios y perspectivas, No 6, Bogotá.

– De Miguel, Carlos and Georgina Nuñez (2001), “Evaluación ambiental de los acuerdos comerciales: un análisis necesario”, CEPAL, Serie medioambiente y desarrollo, No 41.

SIA in LAC

• EU African Caribbean Pacific (ACP) trade relations: – PricewaterhouseCoopers (2007) “Sustainability Impact Assessment of the EU-

ACP Economic Partnership Agreements”

• EU-MERCOSUR Trade Negotiations: – The University of Manchester (2009) “Trade Sustainability Impact Assessment

(SIA) of the Association Agreement Under Negotiation Between the European Community and MERCOSUR”

• EU-Chile Free Trade Area: – PLANISTAT-LUXEMBOURG and CESO-CI (2002) “Sustainable Impact

Assessment (SIA) of the trade aspects of negotiations for an Association Agreement between the European Communities and Chile”

• EU-Central America: – ECORYS(2009) “Trade Sustainability Impact Assessment of the Association

Agreement to be negotiated between the EU and Central America”

• EU- Andean: – Countries Development Solutions-CEPR-Manchester1824 (2009) “EU-Andean

Trade Sustainability Impact Assessment”

Environmental Reviews

in LAC

• United States Trade Representative (USTR)

– United States-Chile FTA

– United States-CAFTA-DR FTA

– United States - Colombia Trade Promotion Agreement

– United States-Andean Free Trade Agreement

– United States - Panama Free Trade Agreement

– United States - Peru Trade Promotion Agreement

Some results…

• Chile – USA and Chile – EU: improve welfare, reduce poverty, reduce inequality, mix environmental impacts (increase in air pollution)

• Peru – USA: improve welfare (23 plus 8)

• Colombia – USA: may not be welfare improvement

• Ecuador – USA: may not be welfare improvement, agricultural impacts according to accessibility

• Chile – Japan: improve welfare, reduce ESI exports

• Chile – China: improve welfare, increase ESI exports although less in relative terms

FTAs + IVA: Environmental Impacts (%)

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

TOXAIR

TOXW

AT

TOXSO

L

BIOAIR

BIOW

AT

BIOSO

L

PART

VOC

SO2

NO

2

CO

TSS

BOD

2005

2020

NET NOMINAL WELFARE EFFECTS OF ALL THE SIMULATED SCENARIOS (in million 2001 dollar with regard to the 2004 baseline scenario)

Countries Baseline

2004 AC3 – USA

No FTA /

No ATPDEA (Includes

ATPDEA) Full liberalization

Excluding

sensibles

LAC 864 -442 -335 -220

Andean Community 229 -256 -203 -255

Bolivia 10 -4 -1 -9

Colombia 88 -163 -128 -95

Ecuador 20 -31 -23 -14

Peru 121 -43 -35 -141

Venezuela

MERCOSUR

-10

-90

-15

-89

-15

-61

4

-8

Chile 784 -27 -24 -2

United States -287 759 628 105

World 1005 -133 -75 4

Note: The net effect is the difference between each considered scenario and the 2004 baseline benchmark Base line includes the following trade agreements: Chile – USA, EU, EFTA, Korea; México – Uruguay; ATPDEA

The accessibility map becomes from a model that

takes into account urban zones, road quality, slope,

land use and barriers to create a friction surface.

Accessibility to Local Markets and Land Use

Source: CIAT (2004), Accessibility to Local Markets in Ecuador,

International Center for Tropical Agriculture (CIAT), available from

http://www.ecuamapalimentaria.info

Source: Global Land Cover 2000,

http://www-gvm.jrc.it/glc2000/

Aggregate loses (corn, rice, oil seeds, plant based fibers)

Subsistence Farming

Traditional enterprises Modern enterprises

Environmental sensitive exports

FTA with Japan reduces Chilean dependency in environmental

sensitive exports industries (ESEI), and with China maintains

its ESEI pattern Cuadro 16

Impacto sobre el patrón exportador en función de las industrias ambientalmente sensibles

TLC (liberalización completa) Chile – Japón Chile – China

Grado (mundo)

Sectores Ambientalmente

Sensibles Mundo Japón Mundo China

B Otros alimentos 0.28 13.67 1.08 37.17

A Forestal -2.03 -1.64 -0.31 8.18

B Madera -4.20 -3.22 0.00 26.19

B Minería -2.52 -2.50 -0.25 -0.12

A Derivados del petróleo -0.04 16.65 0.15 0.20

A Química -3.74 -3.61 2.16 49.61

A Metal -5.27 2.38 0.48 14.48

A Productos Metálicos -4.95 -5.36 0.12 183.10

A Otras manufacturas -5.61 -2.75 0.03 1.81

Total IAS -3.60 2.17 0.50 11.85

Total Otros sectores 17.50 1074.00 1.42 193.87

Total Xs bienes 2.56 71.70 0.77 20.67

Fuente: Autores, sobre la base de simulaciones GTAP 6.1

Notas: A = Alta sensibilidad ambiental; B = Baja sensibilidad ambiental.

Policy Options: necessity of

EIA/SIA…

considering:

Encourage a previous economic assessment

Comprehensive and integral assessments

Flexibility in the application of tools/methodologies

Sustain and continuous process (ex-ante, in the

meantime and ex-post)

…always remembering that…

A bad environmental policy and a trade barrier: two different distortions treat it separetely?

When there are a number of distortions, an arbitrary reduction of one of them may reduce or improve welfare. “Second best problems”.

Trade and environmental policies are imperfect substitutes. To use one instrument suboptimum. Coordinated progressive efforts on both policies towards the optimum (zero tariffs and tax on emissions equivalent to marginal damage).

Complement international integration with adequate environmental policy reinforced by a solid institutional structure

Price signals…

• Doha Declaration (paragraph 33): need to share

technical knowledge and expertise with less

developed countries who wish to develop

environmental assessments at a country level.

• Global Alliance for Development (Millennium

Summit, 2000). Goals 7 and 8.

• Climate Change (Copenhagen Declaration) and

the Green Economy

… developed countries have

commitments …

Experience with ex-ante impact

assessments and lessons learned

Carlos J. de Miguel

(carlos.demiguel@cepal.org) Sustainable Development and Human Settlements Division

http://www.cepal.org/dmaah/