Trade and Sustainable Trade and Sustainable

DevelopmentDevelopment

Policy Integration and Analysis BranchPolicy Integration and Analysis Branch

Division for Sustainable DevelopmentDivision for Sustainable Development

UNUN--DESA DESA

UNITAR Seminar on International UNITAR Seminar on International Trade and the Doha RoundTrade and the Doha Round

New York, 3New York, 3--7 December 20077 December 2007

• Trade Liberalization and Sustainable Development: the links, the issues

• Market access: changing nature of challenge

-- Non-Tariff Barriers (NTBs)

-- Labeling, voluntary certification

-- Domestic regulations and trade

• Fast-tracking trade lib in env goods and services

• Trade in biofuels, low-carbon goods and services

• Trade and climate change: what are the issues?

Outline of presentation:

Trade and Sustainable Trade and Sustainable

Development Development –– the linksthe links

Greater trade openness generally provides:Greater trade openness generally provides:

•• Incentives to adopt efficient, clean Incentives to adopt efficient, clean

technologytechnology

•• Access to imported clean technologyAccess to imported clean technology

•• Technology transfer through exportTechnology transfer through export--

oriented FDIoriented FDI

But also …

• Supports production on a much larger scale than most countries’ domestic markets would ...

• Potentially overwhelming effects of greater resource efficiency … and

• Exacerbating pollution, resource degradation

Also, on demand side Also, on demand side ……

••Environmental, other consumer Environmental, other consumer

preferences in major markets call preferences in major markets call

for new supply capacities, e.g., for new supply capacities, e.g.,

––new production methods new production methods

––tighter quality controltighter quality control

––product testing, certificationproduct testing, certification

––cold chain for perishablescold chain for perishables

Market access:Market access:

Changing nature of the challengesChanging nature of the challenges

Facing developing countriesFacing developing countries

Non-traditional agricultural export opportunities for developing countries

• Moving up value-chain does not always mean moving from primary commodities to manufactures

– Adding value along the agricultural supply chain one option (but tariff escalation…)

– Producing high-value fresh produce another: agriculture, horticulture, fisheries and livestock products (SPS an issue …)

NonNon--tariff barriers (NTBs)tariff barriers (NTBs)

•• Even as tariffs have reached low levels for Even as tariffs have reached low levels for

many products many products ……

•• NTBs are becoming key marketNTBs are becoming key market--access access

concerns, especially for the worldconcerns, especially for the world’’s poorer s poorer

nationsnations

•• CCurrently affect up to 40% of the exports urrently affect up to 40% of the exports

of the least developed countriesof the least developed countries

Some concerns posed by NTBsSome concerns posed by NTBs

•• Can affect higher value agricultural, aquaculture Can affect higher value agricultural, aquaculture exports exports ––making moving up value chain more making moving up value chain more difficult; difficult;

•• Risk of market fragmentation;Risk of market fragmentation;

•• Measures may exceed multilaterally accepted Measures may exceed multilaterally accepted norms;norms;

•• Duplication of testing measures;Duplication of testing measures;

•• NTBs are encountered also in SouthNTBs are encountered also in South--South South trade. trade.

Evolution of NTB use by categoryEvolution of NTB use by category

Source: UNCTAD (2005) with UNCTAD-TRAINS data.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Developed countries Developing countries Developed countries Developing countries

1994 2004

Tariff measures Price control measures Finance measures Automatic licensing measures

Quantity control measures Monopolistic measures Technical measures

3 different ways of looking at the 3 different ways of looking at the

incidence of nonincidence of non--tariff barrierstariff barriers

1. Frequency of non1. Frequency of non--tariff measures facing tariff measures facing

developing countries' exportsdeveloping countries' exports, by market and group , by market and group

of productsof products

0

10

20

30

40

50

60

70

Developed

countries

South Asia Middle East and

North Africa

Latin America and

the Caribbean

Europe and Central

Asia

East Asia and the

Pacif ic

Sub-Saharan

Africa

Agricultural and f ishery products Minerals and fuels Manufactures

Source: Bacchetta and Bora (2001) with UNCTAD-TRAINS data.

2. Share of non-tariff barrier notifications, by product group, 2003/2004

Live animals and related

products

Machinery and electronics

Chemical products

Textile articles

Footw ear and headgear

Vehicles, aircraft and

vessels

Base metal articles

Foodstuffs and beverages

Miscellaneous manufacturesMedical devicesPlastic articles

Other

0

10

20

30

40

50

60

70

80

90

100

Number of NTB notif ications by product group

Source: OECD (2005), based on notifications to the WTO Negotiating Group on Market Access for Non-Agricultural Products (NAMA).

3. Agricultural imports: 3. Agricultural imports:

Percentage of regulatory violations in the EU and the US, by Percentage of regulatory violations in the EU and the US, by

region of origin and hazard category (2003region of origin and hazard category (2003--2004)2004)

0

10

20

30

40

50

60

70

80

90

100

Afri

ca (1

33)

Asi

a (9

90)

Eur

ope

(748

)

Latin

Am

eric

a an

d th

e C

arib

bean

(208

)

Nor

th A

mer

ica,

Oce

ania

and

oth

er (6

2)

Afri

ca (2

37)

Asi

a (4

768)

Eur

ope

(169

9)

Latin

Am

eric

a an

d th

e C

arib

bean

(290

5)

Nor

th A

mer

ica

and

Oce

ania

(715

)

Perc

enta

ge

Other (e.g. incomplete labelling or lack of adherence to other formal requirements)

Microbiological (e.g. Salmonella)

Chemical (e.g. pesticide, veterinary drug and toxin residues)

European Union (2004) United States (2003/04)

Source: Wiig and Kolstad (2005) with data from the EU’s Rapid Alert System for Food and Feed (RAASF) and the US’s

Food and Drug Administration.

Voluntary labels and standards Voluntary labels and standards •• Informing consumers of the environmental Informing consumers of the environmental

and labour conditions associated with and labour conditions associated with specific products and their production is specific products and their production is increasingly pursued through voluntary increasingly pursued through voluntary standards and labelsstandards and labels

•• Transparency, nonTransparency, non--discrimination & discrimination & technical assistance principles technical assistance principles

•• But is this enoughBut is this enough? What about low ? What about low income countries, smallincome countries, small--scale and datascale and data--deficient fisheries, agriculture and deficient fisheries, agriculture and industries? industries?

–– Only 3 developing country fisheries Only 3 developing country fisheries have been certified by the MSC: have been certified by the MSC: South African hake, Baja California South African hake, Baja California Rock Lobster and Argentine Rock Lobster and Argentine Patagonian scallops. Patagonian scallops.

–– Case studies on coffee and timber Case studies on coffee and timber show that sustainability certifications show that sustainability certifications can marginalize smaller producers can marginalize smaller producers and producers in smaller countries.and producers in smaller countries.

–– Only Only ““old waveold wave”” initiatives, such as initiatives, such as organic and fair trade pay regular organic and fair trade pay regular premia at the farm level and bear part premia at the farm level and bear part of the certification costs.of the certification costs.

SPS and Technical Barriers to Trade in SPS and Technical Barriers to Trade in

the WTOthe WTO

1) A separate agreement on food safety and animal and plant heal1) A separate agreement on food safety and animal and plant health th standards (the standards (the Sanitary and Phytosanitary Measures AgreementSanitary and Phytosanitary Measures Agreementor or SPSSPS) sets out the basic rules to ensure that strict health and ) sets out the basic rules to ensure that strict health and safety regulations are not being used as an excuse for protectinsafety regulations are not being used as an excuse for protecting g domestic producers. domestic producers.

2) The 2) The Agreement on Technical Barriers to TradeAgreement on Technical Barriers to Trade (TBT) tries to (TBT) tries to ensure that regulations, standards, testing and certification ensure that regulations, standards, testing and certification procedures do not create unnecessary obstacles to trade.procedures do not create unnecessary obstacles to trade.

Domestic environmental legislation and Domestic environmental legislation and

barriers to tradebarriers to trade

•• The The phasephase--out of hazardous substancesout of hazardous substances in in developed country markets has forced producers developed country markets has forced producers of electrical and electronic equipment in third of electrical and electronic equipment in third countries to change production processes and countries to change production processes and even product designeven product design

•• EU approval of EU approval of biotech productsbiotech products is long and is long and complexcomplex

•• Foreign Foreign organic production systemsorganic production systems are not are not recognized in the EU and the US, thus requiring recognized in the EU and the US, thus requiring recertificationrecertification

Fast Tracking:Fast Tracking:

environmental goods and servicesenvironmental goods and services

•• Negotiations were launched in 2003 on the Negotiations were launched in 2003 on the reduction or, as appropriate, the elimination reduction or, as appropriate, the elimination of tariff and nonof tariff and non--tariff barriers to tariff barriers to environmental goods and services.environmental goods and services.

•• In 2002, total exports of environmental In 2002, total exports of environmental goods amounted to about $ 238.4 billion goods amounted to about $ 238.4 billion when one uses the OECDwhen one uses the OECD--defined list, defined list, representing around 4.0 per cent of world representing around 4.0 per cent of world exports.exports.

0

100

200

300

400

500

600

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Year

Ind

ex (

1990=

100)

OECD Env. Goods Exports

APEC Env. Goods Exports

Total Merchandize Exports

Growth of environmental goods Growth of environmental goods

trade, 1990trade, 1990--20022002

Source: Bora and Teh (2004). Tariffs and Trade in Environmental Goods. WORKSHOP ON ENVIRONMENTAL GOODS, Geneva, 11 October 2004. WTO Secretariat.

Growth Factors for environmental Growth Factors for environmental

goods and servicesgoods and services

•• Domestic regulation and public pressureDomestic regulation and public pressure

•• Customer requirements: global supply chainsCustomer requirements: global supply chains

•• EU enlargement; regional trade agreementsEU enlargement; regional trade agreements

•• Infrastructure developmentInfrastructure development

•• MEAs and associated financing mechanismsMEAs and associated financing mechanisms

Biofuels: trade and sus devBiofuels: trade and sus dev

•• Market access concerns in US and EUMarket access concerns in US and EU

•• Key trade + development issues:Key trade + development issues:

–– BiofuelsBiofuels are of agricultural origin, thus are of agricultural origin, thus

affected by protective trade rules and affected by protective trade rules and

domestic subsidies, legislationdomestic subsidies, legislation

–– Competition with food production: ethanol Competition with food production: ethanol

feedstocksfeedstocks

–– Impacts on deforestation: biodiesel feedstocksImpacts on deforestation: biodiesel feedstocks

EU tariffs and domestic legislationEU tariffs and domestic legislation

•• Ethanol tariff: Ethanol tariff: €€073073/gal/gal

–– Tariff equivalent in excess of 60%Tariff equivalent in excess of 60%

–– ACP and LDC tariff free (@ 100 countries)ACP and LDC tariff free (@ 100 countries)

–– Not Brazil, Thailand, Mexico, So Africa Not Brazil, Thailand, Mexico, So Africa

•• Domestic legislation: Directive 98/70/EC Domestic legislation: Directive 98/70/EC

limiting ethanol blends in fuel to 5% limiting ethanol blends in fuel to 5%

US price supportUS price support

•• Ethanol subsidy: $1.40Ethanol subsidy: $1.40--1.70 per gal gasoline 1.70 per gal gasoline equivalent, includingequivalent, including–– Ethanol import duty of $0.54 per galEthanol import duty of $0.54 per gal

–– Cost per tonne of CO2e displaced: cornCost per tonne of CO2e displaced: corn--based based ethanol: $295; cellulosic ethanol: $109ethanol: $295; cellulosic ethanol: $109

•• Biodiesel subsidy: $1.80Biodiesel subsidy: $1.80--2.30 per gal diesel 2.30 per gal diesel equivalentequivalent–– Cost per tonne of CO2e displaced: biodiesel: $239Cost per tonne of CO2e displaced: biodiesel: $239

•• Local content regulations in some statesLocal content regulations in some states

Source: Global Subsidies Initiative, IISD, 2007Source: Global Subsidies Initiative, IISD, 2007

Outstanding issues for biofuels Outstanding issues for biofuels

tradetrade

•• Countries that are competitive face high tariffsCountries that are competitive face high tariffs–– Brazil, Thailand, Malaysia, Indonesia and South AfricaBrazil, Thailand, Malaysia, Indonesia and South Africa

•• Potential EU certification for sustainable palm oilPotential EU certification for sustainable palm oil

•• Need to look at:Need to look at:–– food vs feedstock food vs feedstock

–– land use impact of feedstock expansion land use impact of feedstock expansion

•• Alternative feedstocks:Alternative feedstocks:–– CellulosicCellulosic

•• R&D to dampen price increases in cassava, corn and oilseedsR&D to dampen price increases in cassava, corn and oilseeds

–– Jatropha Jatropha •• Moderates landModerates land--use impacts of biofuels, using degraded landuse impacts of biofuels, using degraded land

WTO and MEAsWTO and MEAs

•• Agenda 21 of the Rio Conference states that measures Agenda 21 of the Rio Conference states that measures should be taken to should be taken to ““avoid unilateral action to deal with avoid unilateral action to deal with environmental challenges outside the jurisdiction of the environmental challenges outside the jurisdiction of the importing countryimporting country””..

•• Of the approximately 200 MEAs currently in force, about Of the approximately 200 MEAs currently in force, about 20 contain trade provisions, including Montreal Protocol20 contain trade provisions, including Montreal Protocol–– These can be used to deter free ridingThese can be used to deter free riding

–– Also as an enforcement mechanismAlso as an enforcement mechanism

•• WTO Members have agreed to clarify the legal WTO Members have agreed to clarify the legal relationship between WTO rules and MEAsrelationship between WTO rules and MEAs

•• No disputes have thus far come to the WTO regarding No disputes have thus far come to the WTO regarding the trade provisions contained in an MEA the trade provisions contained in an MEA

International trade and Greenhouse International trade and Greenhouse

effect (1)effect (1)

•• Under the Kyoto Protocol, climate regulation is Under the Kyoto Protocol, climate regulation is

characterized by:characterized by:

–– Asymmetrical commitments among its partiesAsymmetrical commitments among its parties

–– Territorial responsibility principleTerritorial responsibility principle

•• As a result, free trade tends to reduce the force As a result, free trade tends to reduce the force

of these commitments:of these commitments:

–– Existence of a carbon deficit in the regulating Existence of a carbon deficit in the regulating

economieseconomies

–– Incentives for consumers to substitute imports for Incentives for consumers to substitute imports for

locally produced goodslocally produced goods

International trade and Greenhouse International trade and Greenhouse

effect (2)effect (2)

•• These effects are still debated as some These effects are still debated as some

economists argue that technological economists argue that technological

change could offset the cost of climate change could offset the cost of climate

regulation.regulation.

•• The risk of carbon leakage is likely to The risk of carbon leakage is likely to

increase if governments commit to increase if governments commit to

significantly cut the level of greenhouse significantly cut the level of greenhouse

gas emissions. gas emissions.

What role for the WTO in the What role for the WTO in the

mitigation of carbon leakage?mitigation of carbon leakage?

•• The World Trade Organization recognizes that The World Trade Organization recognizes that

any contracting party is entitled to apply any contracting party is entitled to apply

measures measures ““necessary to protect human, animal necessary to protect human, animal

or plant life or healthor plant life or health”” and and ““relating to the relating to the

conservation of exhaustible natural resourcesconservation of exhaustible natural resources””

(article 20)(article 20)

•• In principle, WTO member states that are In principle, WTO member states that are

committed to reducing their GHG emissions committed to reducing their GHG emissions

could apply tariffs on their imports to offset the could apply tariffs on their imports to offset the

cost of these regulations. cost of these regulations.

Introducing carbon tariffs: Introducing carbon tariffs:

modalities and debates (1)modalities and debates (1)•• However, the WTO Dispute Settlement Body has However, the WTO Dispute Settlement Body has not clarified its jurisprudence on the ways trade not clarified its jurisprudence on the ways trade regulation could be used to offset the cost of regulation could be used to offset the cost of climate regulation.climate regulation.

•• Some economists (J. Stiglitz) suggest that Some economists (J. Stiglitz) suggest that countervailing duties could be utilized to tax countervailing duties could be utilized to tax imports from countries with low carbon imports from countries with low carbon efficiency.efficiency.

•• A more systematic system of tariffs has been A more systematic system of tariffs has been suggested as an alternative (OECD, 2006). In suggested as an alternative (OECD, 2006). In this context, border tax adjustment is perceived this context, border tax adjustment is perceived as a possible mechanism whereby WTO as a possible mechanism whereby WTO regulation could help mitigate carbon leakage. regulation could help mitigate carbon leakage.

Introducing carbon tariffs: Introducing carbon tariffs:

modalities and debates (2)modalities and debates (2)

The implementation of carbon tariffs raises The implementation of carbon tariffs raises concerns asconcerns as

•• It goes against the free trade dynamic that has It goes against the free trade dynamic that has ensured the wealth of many countries over the ensured the wealth of many countries over the last decades.last decades.

•• It requires the certification of the carbon content It requires the certification of the carbon content of internationally exchanged goods, which may of internationally exchanged goods, which may prove costly and difficult to organize.prove costly and difficult to organize.

•• It would de facto involve developing countries, It would de facto involve developing countries, including the least developed ones, in the global including the least developed ones, in the global effort to cut emissions, which many of them effort to cut emissions, which many of them refuse at this stage. refuse at this stage.

Future trade issues in WTOFuture trade issues in WTO

•• FastFast--tracking env goods and services: tracking env goods and services:

what about agriculturalwhat about agricultural--based ones?based ones?

•• IPRs: revisit rules, exceptions given IPRs: revisit rules, exceptions given

urgency of lowurgency of low--carbon technology carbon technology

transfer?transfer?

•• WTO and MEAs: what role for WTO in a WTO and MEAs: what role for WTO in a

carboncarbon--constrained world?constrained world?

Priorities for dPriorities for d’’ing countries?ing countries?

•• Successful conclusion of Doha RoundSuccessful conclusion of Doha Round

–– Significant agr trade liberalization could help Significant agr trade liberalization could help

reduce poverty, meet MDGsreduce poverty, meet MDGs

–– Improve market access for dImprove market access for d’’ing cntry biofuelsing cntry biofuels

•• Building supply/trade capacity in LDCs for: Building supply/trade capacity in LDCs for:

–– seizing opportunities from liberalization of agr seizing opportunities from liberalization of agr

markets markets

–– environmental goods and services, inc.environmental goods and services, inc.

–– sustainable production, certification of sustainable production, certification of

biofuelsbiofuels

Measures to address market access Measures to address market access

concernsconcerns

•• Enable developing countries to be more Enable developing countries to be more

involved in standard settinginvolved in standard setting

•• Enhance the capacity of developing Enhance the capacity of developing

countries to deal with NTBs, includingcountries to deal with NTBs, including

–– Understanding and as appropriate challenging Understanding and as appropriate challenging

NTBsNTBs

–– Assisting exporters, esp SMEs, to meet SPS, Assisting exporters, esp SMEs, to meet SPS,

other requirements in major mkts other requirements in major mkts