Memorandum submitted by WWF-UK
SUMMARY
WWF supports a rules-based trading system, but
believes the WTO is flawed and must undergo major reform if it
is to support sustainable development (see attached paper).
EU ISSUES
WWF does not support the scope of the EU's Millennium
Round proposals, and believes this proposal damages chances for
mainstreaming environmental issues into the WTO. Any new negotiations
should be preceded by a development and environmental assessment
of the Uruguay Round agreements and their implementation.
Resistance from developing countries to some
environmental issues in the WTO stems from protectionist abuse
of existing trade rules, and is not essentially a "green"
issue.
The EU needs a strategy on environmental issues
aimed at providing net environmental gains in the next round.
This requires a more proactive approach to achieving gains for
developing countries, and concrete targets for "flanking"
policies in other institutions.
The EU sustainability assessment is a first
step in the right direction, but has flawed terms of reference.
The SIA will have little impact on negotiations unless followed
through with a much more ambitious initiative over a longer negotiation
timetable.
The Commission is not capable of ensuring non-trade
issues are effectively promoted during negotiations. In areas
such as environment, specialist officials from member states must
be directly involved in negotiations, as occurred during the OECD-MAI.
UK ISSUES
The UK's core priorities on international investment
rules have changed little since the collapse of the OECD-MAI.
Liberalisation proposals are still emphasised above more pressing
regulatory initiatives, and key problems raised by the MAI are
unresolved.
Given the views of developing countries, the
UK should not push for investment rules at the WTO and should
support scaling back the TRIMs agreement. The UK should promote
a positive investment regulation agenda in its domestic law and
through other institutions.
NGO communication with the UK Government has
improved since the MAI, but consultation procedures need redesigning—especially
at ministerial level. Interdepartmental co-ordination on trade
issues is still rudimentary.
The UK has no clear strategy on environmental
(or other non-trade) issues at the WTO, though the Cabinet Office
has recently initiated a project to develop one.
Even inside the Millennium Round proposals the
UK can push for reforms to EU positions which would improve mainstreaming
of the environment at the WTO (see 9.3).
1. WWF's overview of Trade, Sustainable Development
and the WTO
1.1 WWF is an international non-governmental
organisation that works to preserve biodiversity by protecting
species and habitats, preventing destructive resource use and
reducing pollution. We are currently active in over 80 countries
worldwide.
1.2 WWF has worked for over 10 years on
trade and investment issues. We have trade policy units in Geneva,
Brussels and Washington, and policy staff working on trade issues
in eight countries, including India and Brazil.
1.3 WWF has carried out major research into
liberalisation, and is currently undertaking studies on agricultural
liberalisation around the world1. WWF is also promoting work on
the environmental and social assessment of trade agreements ("sustainability
impact assessments"), and—supported by several governments—is
organising an international workshop on assessment in Ecuador
on 25-28 January 2000.
1.4 Our research shows there is a complex
relationship between trade liberalisation and sustainable development.
Increasing trade can improve environmental quality by increasing
efficiency, or cause damage by shifting production to less regulated
or more vulnerable areas. The impact of trade liberalisation also
depends on the ability of economies to change their production
structures without experiencing massive social upheaval, breakdown
of governance and impoverishment of affected groups.
1.5 Increased competition has also made
it harder for countries to unilaterally raise environmental standards.
Increasing the scale of economic pressure will tend to cause more
environmental damage if unaccompanied by adequate policies in
other areas.
1.6 Therefore, the social and environmental
impacts of specific trade liberalisation measures must be assessed
before they are put into place, and negative consequences avoided
through new policies and assistance at the national and international
level.
1.7 The rules and procedures of WTO must
be reformed to ensure legitimate environmental laws are protected
from challenge, sustainability issues are mainstreamed inside
all decision-making processes, and needs of developing countries
and the poorest communities are addressed in a coherent manner.
1.8 WWF believes that delaying such reforms
would fatally undermine the WTO. The current drive to complete
ambitious liberalisation proposals, and expand the WTO's mandate
into new areas, will reduce the public support for open trade
and introduce insurmountable tensions into the negotiations.
1.9 Reforming the WTO is not the solution
to sustainable development, but it must play its part. The international
system is currently unbalanced with governments giving higher
political priority to the WTO and trade liberalisation than to
processes supporting the other components of sustainable development.
1.10 A signal of governments' commitment
to a sustainable global economy will be the result of Earth Summit
III in 2002, and its preparatory processes; ensuring that international
agreements on environment, development and poverty reduction are
adequately funded and implemented, and supporting national policies
implemented.
1.11 If the new WTO negotiations finish
in 2003 without real reform of the institution, and continued
stagnation in the Earth Summit processes, ratification of any
WTO agreement will face serious opposition in domestic legislatures
and from civil society.
EUROPEAN UNION
APPROACH TO
THE ENVIRONMENT
IN THE
NEW ROUND
2. EU Positions on the Environment in the
Millennium Round
2.1 WWF welcomes the greater weight given
to environmental issues inside the European Union's position for
Seattle. However, current proposals do not form a balanced or
sufficient strategy on trade and environment issues. WWF has identified
five key components of a balanced strategy (these are detailed
in the attached briefing paper):
— Reform WTO processes of negotiation,
decision making and dispute resolution.
— Greater protection of legitimate
environmental laws from WTO challenge.
— Prioritisation of social and environmentally
beneficial trade reforms.
— Coherence of complementary policies
in the WTO and other institutions.
— Restriction of the WTO to its core
tasks, excluding investment and competition.
THE EU'S
GENERAL APPROACH
TO SUSTAINABLE
DEVELOPMENT
2.2 The EU position does not contain a detailed
analysis of the relationship between trade liberalisation, environment,
development and poverty reduction. Though it asserts the general
compatibility of these objectives. However, such broad statements
conflict with most research that shows positive environmental
outcomes from liberalisation depend on complementary policies
at national or international levels.
2.3 Indeed the UK's Strategy on Sustainable
Development states: "where economic activity is unsustainable,
trade can act to magnify this, increasing pollution and depletion
of natural resources such as forests, fish and other wildlife"
9.18.
2.4 All current surveys show that unsustainable
environmental trends are accelerating2. Though the effects of
trade liberalisation will differ markedly between sectors and
countries, this fact should introduce a precautionary approach
into negotiations.
2.5 WWF sees past liberalisation as being
characterised by three negative environmental effects:
— Increased trade has overwhelmed environmental
governance: the concentration, pace and scale of international
demand gives large incentives to use the environment unsustainably,
for example: shrimp farming in Asia; exotic vegetable growing
in South America; the growth in transport pollution in the European
Single Market.
— Liberalisation has caused permanent
"transition" effects: liberalisation causes radical
economic shifts which can lead to permanent environmental and
social damage: for example, the illegal conversion of Indonesian
forest to oil palm; destruction of the subsistence livelihoods
of Mexican maize farmers; the predicted impact of P&O's planned
port in India in stimulating inappropriate development.
— Increased competition has lowered
or chilled environmental standards: environmental regulations
are constantly under attack for inhibiting competitiveness; for
example, current objections to the UK Climate Change Levy; wholesale
deregulation in the Asia-Pacific mining sector.
2.6 WWF believes that trade and investment
is increasingly driving pressures for environmental destruction.
WTO member governments, and the lead ministries responsible for
WTO agreements, cannot continue to claim that environment is not
their business. They must take responsibility by assessing the
environmental impact of liberalisation proposals, and by implementing
complementary policies to mitigate any negative effects.
2.7 The starting point of the EU's approach
to new WTO negotiations should be to secure a package of measures
which give a net improvement to the global environment, understanding
that this will also involve reforms in institutions outside the
WTO.
2.8 However, the current EU position does
not aim for such a net gain but merely states: "Environmental
considerations should be integrated into the EU's approach and
therefore effectively addressed throughout the negotiations so
as to achieve at the end of the Round an overall outcome where
environmentally friendly consequences can be identified in the
relevant parts of the final package". (page 14, paragraph
4).
2.9 The EU lacks a coherent strategy that
would ensure adequate policy reforms both inside the WTO and in
other institutions. Without such a clear strategy and commitment
to action it is difficult for NGOs to trust that complementary
policies will be put in place alongside liberalisation proposals.
2.10 The lack of an EU environmental strategy
also presents political problems. Developing countries have expressed
opposition to including environmental issues in the new round.
Their fear is of the abuse of an "environmental clause"
(ie codifying the legality of unilateral sanctions based on environmental
process and production measures), though this has not been proposed.
Other environmental reforms—eg on environmental assessment
and TRIPs—are supported by developing countries.
2.11 Fears of protectionist abuse of environmental
measures are real, and stem from existing abuses of anti-dumping
rules, countervailing measures and tariff peaks and escalation.
All of which limit developing country imports in key sectors.
2.12 Environmental issues have become the
political victim of protectionist abuses by trade officials in
other areas. The barriers to implementation inside the WTO is
not a "green" issue, but a lack of trust between developed
and developing countries.
2.13 Building trust that environmental reforms
can be protected from protectionist abuse will require the EU
to show good faith on issues important to developing countries.
Key to this would be moving away from a broad round of negotiations
and new issues, such as investment and competition policies. With
emphasis shifting to a more incremental approach of reviewing
and reforming existing agreements.
3. Conflicts between WTO Rules and Environmental
Regulations
3.1 The EU position is most well-developed
on rule based issues discussed in the WTO's Committee on Trade
and Environment (CTE): WTO-MEA conflicts; eco-labelling; and the
incorporation of the Precautionary Principle into WTO agreements.
3.2 On the MEA issue, WWF favours the negotiation
of a new WTO agreement to balance the jurisdictions of these international
treaties when they clash with WTO rules. Simpler solutions such
as clarifications and declarations, are not adequate to deal constructively
with the complexity of conflicts between these agreements.3
3.3 Recent experience over Beef Hormone
and labelling of Genetically Modified Organisms shows that the
EU must continue to prioritise the firm inclusion of the Precautionary
Principle inside WTO agreements, especially the agreement on Technical
Barriers to Trade (TBT). A more sophisticated attitude to risk
management must be institutionalised to replace the current erroneous
faith the sole adequacy of "sound science" in the TBT.4
3.4 Resolution of environmental rule-based
issues will also require reform of the WTO's dispute settlement
system to increase public accountability and transparency, and
include adequate representation of environmental expertise.5
3.5 WWF also believes that the legalistic
nature of WTO agreements and judgements is not helpful in promoting
constructive dialogue and solutions. For example, the current
complaints by Colombian flower growers over the proliferation
of diverse organic flower standards in the EU would be best dealt
with in a co-operative manner, rather than through formal WTO
challenge. However, mechanisms to achieve this are very under-developed.
To this end WWF is supporting work into conflict resolution procedures
through the Expert Panel on Trade and Sustainable Developments.6
3.6 WWF would also like to see the EU reverse
its position not to review the TRIPs agreement (page 16 paragraph
2 "Present achievements and the current transitional periods
must not be re-opened on the occasion of new negotiations").
WWF supports a wide ranging review of TRIPs to grant greater protection
to traditional knowledge, and ensure the benefits from use of
genetic resources flow back to the communities that have developed
and protected them in the "wild". This would greatly
improve incentives for the in situ conservation of biodiversity.
3.7 Reconsidering its TRIPs position would
improve the EU's relations with developing countries who have
made renegotiation of its rules a priority. The G77 have called
for negotiations on the "TRIPs Agreement relating to .
a balanced protection of biological resources and
disciplines to protect traditional knowledge".7
4. EU Positions on Liberalisation Measures
and the New Round
4.1 EU positions on the relationship between
liberalisation processes and environmental protection are less
well developed, being restricted to a commitment to pursue:
"integration" of environmental issues;
liberalisation of environmentally beneficial sectors; and to conduct
some measure of environmental and social assessment.
4.2 To WWF's knowledge, no detailed work
has been produced by the Commission as to which areas might be
approached, only an outline paper on "win-win" situations8.
Proposals fall short of requiring that sustainability issues be
"mainstreamed" across the board. This is disappointing
because the EU provides some of the most environmentally and trade
distorting subsidies in both agriculture and fisheries.
4.3 Despite having carried out little analysis,
the EU is seen by other governments as using the environment as
a rationale for preventing liberalisation of its agricultural
sectors. Many governments are concerned that the EU's approach
to "multifunctional agriculture"—which includes
environmental and landscape issues—is merely a cloak for
continued production subsidies. WWF would object to this type
of "green protectionism" as it undermines trust and
raises barriers to measures that produce true environmental gains.
The EU must work to ensure "multifunctionality" is not
abused as a protectionist device or it will lose the support of
environmental groups.
4.4 "Mainstreaming" environment
and sustainable development in the WTO is a prerequisite to meet
the Amsterdam Treaty's environmental clause (Article 6), which
requires environment to be considered in the development of EU
policies, including external trade policy. "Mainstreaming"
implies addressing environmental concerns in all negotiating bodies
or committees, where the environment is affected by WTO rule-making
or liberalisation.
4.5 Experience over the first five years
of the WTO Committee on Trade and Environment's (CTE) existence,
clearly demonstrates that this body alone is a wholly inadequate
mechanism to achieve this mainstreaming. WWF is therefore disturbed
that initial drafts of the Ministerial Declaration for Seattle
(October 1999—available from WWF-UK) only refer to the CTE
having "an advisory role" in negotiations, and do not
create a new forum or mechanism for including environmental concerns.
4.6 The process of mainstreaming should
be guided by Sustainability Impact Assessments undertaken by individual
WTO members, and through more co-operative efforts among its members,
other international agencies and NGOs.
4.7 If the EU is unable to move on these
substantive areas surrounding mainstream liberalisation the environmental
impact of the Round is likely to be negative. This is because
other "win-win" liberalisation proposals—such
as on environmental goods and services—are likely to produce
only marginal environmental gains9.
4.8 The EU should also create a strategy
on environmental issues which includes concrete targets for initiatives
in other institutions—for example, the World Bank, UNEP,
bilateral aid programmes—to necessary "flanking"
policies to ensure trade liberalisation provides environmental
and social gains.
5. The EU Sustainability Impact Assessment
(SIA) of the New Round
5.1 WWF welcomed the EU's announcement of
a sustainability asessment of its Millennium Round proposals,
but is concerned that the project's terms of reference restricts
its value and is biased towards maintaining the status quo
in WTO negotiating processes.
5.2 WWF, in partnership with two research
institutes and independent experts, entered a bid for the EU assessment.
The bid was based on our research into SIA methodologies10, but
though short-listed WWF's consortium was not chosen as the executant.
5.3 In preparing our bid WWF raised several
concerns with the Commission about the terms of reference of the
SIA, specifically:
— the assessment was limited to proposals
for the New Round, whereas WWF believed an analysis of the impact
of the Uruguay Round—which could be based on real data—was
the only appropriate starting point;
— the terms of reference asked the
executant to identify policies to offset negative impacts, but
did not specifically call for the identification of the need to
delay, slow or sequence liberalisaton proposals ("to make
a broad qualitative assessment of the sustainable impact of the
New Round any ideas for how best to maximise the positive impacts
of the expected liberalisation of rule making" DG1/M-3 call
for tender).
5.4 WWF believes that these terms of reference
introduce a bias towards liberalisation in the study that will
undermine confidence in both its results, and the EU's commitment
to objective assessment of trade proposals.
5.5 WWF also stresses the importance of
placing any SIA by the EU inside a broader framework and process
that co-ordinates with other countries. We are concerned that
current EU efforts are being carried out in isolation, and therefore
risk being isolated from policymakers in international institutions
(eg World Bank) and at country level who will be major implementers
of the policy recommendations stemming from SIAs.
5.6 The SIA executant's web site confirms
it will basically be an exercise in exploring different methodologies
and assessment of existing studies, focused around some key sectors
in the upcoming negotiations11. No new empirical research will
be carried out at country or sectoral levels, but the study will
still recommend policy changes. The Commission has stated that
it intends to carry on assessment during negotiations. However,
given the time needed to do good quality research work at the
sectoral level, it is hard to see how work not already underway
will inform negotiators if the WTO negotiations will really conclude
in three years.
5.7 WWF's experience of environment and
trade research is that carrying out empirical research centred
around a particular sector is the core of any useful assessment.
Such work underpinned our work on the effect of NAFTA on Mexico's
corn sector, and our on-going studies on agricultural liberalisation
in China, Brazil and Morocco12.
5.8 Attempting "paper" research
generalised over many sectors and countries will give little insight
into the complex interactions between trade liberalisation, economic
change, social impacts and environmental quality. At most it can
help identify those sectors which deserve greater study. The problems
with an aggregated approach are shown by recent assessments by
the US forest industry of the proposed "Free Logging"
agreement, and in an overview paper on trade and environment by
the Overseas Development Institute13.
5.9 The need to carry out adequate environmental
and social assessments is a powerful argument for delaying, or
limiting the scope, of the upcoming WTO negotiations. We would
not accept an environmental impact study for a dam that was completed
after the foundations had been poured. The same criteria should
apply to trade liberalisation proposals which have far greater
environmental and economic impacts.
5.10 WWF is concerned that SIA should involve
real assessments based on actual data. Enough time must be taken
to perform good assessments, rather than driving research according
to an arbitrary negotiating timetable, resulting in unreliable
and superficial results. The EU exercise is unlikely to meet these
criteria. At its best it could form the basis for further work,
but at its worst could descend into a "paper" exercise
that is merely used to deflect criticism away from the Commission.
6. Democratic Control of EU Negotiations—the
new challenge
6.1 WWF supports in principle the EU's position
on incorporating development, environment, consumer and other
non-trade issues into WTO discussions. However, we have concerns
that these issues will not receive adequate prioritisation inside
the EU's negotiating position once detailed talks begin.
6.2 While the General Affairs Council of
EU Trade Ministers will finally agree the EU's position at Seattle,
this only gives high level guidance to the trade directorate (DG
Trade) that will lead the detailed negotiations. WWF is not confident
that DG Trade has either the expertise or incentive to actively
promote non-trade issues in post-Seattle negotiations. Especially
when these may conflict with their primary objectives of trade
liberalisation and rule making.
6.3 WWF, along with other NGOs, has proposed
a set of suggestions on how the European Parliament may provide
oversight to the negotiations, especially in non-trade areas14.
Though such legislative oversight is vitally important, it cannot
substitute for the direct representation of non-trade issues at
the negotiating table.
6.4 Our experience of other negotiations,
particularly the OECD-MAI, and normal EU operations is that other
directorates—for example, environment and development—do
not have sufficient staff of institutional power to adequately
balance the DG Trade in economic negotiations.
6.5 WWF therefore recommends that in areas
where there is no exclusive Commission competence—for example,
environment, development, consumer issues, investment, competition
(if negotiated)—groups of member state officials (under
the Presidency) are formed to support the Commission's negotiators.
This would institutionalise more ad hoc arrangements between
member state officials that emerged spontaneously during the OECD-MAI
on environment and development issues.
6.6 WWF believes this suggestion is compatible
with EU treaties, and is needed to strengthen the democratic control
of member states over areas where they have full or shared competence,
and therefore must face ultimate political responsibility.
UK GOVERNMENT PERFORMANCE
7. The UK Position on International Investment
Rules in the New Round
7.1 WWF has had lengthy discussions on investment
with the UK Government since the collapse of the OECD MAI. We
have also carried out new research into foreign direct investment
(FDI) and the environment, and the role of international investment
agreements (IIAs) in promoting sustainable development15, 16, 17.
7.2 WWF has been an active contributor to
on-going OECD work in this area, including the review of the OECD
Guidelines for Multinational Enterprises and conferences on FDI
and the Environment Conference (February 1999) and FDI and Development
(September 1999). We have also been acting as expert contributors
to UNCTAD's capacity building process for developing country negotiators
on IIAs.
7.3 WWF does not support the inclusion of
investment in the next WTO round for three reasons: developing
countries have little expert capacity to negotiate binding multilateral
rules18; multilateral rules on investment are most urgently needed
in areas of regulation (eg incentives) where the WTO has no competence;
the lessons of the MAI have not led to fundamental changes in
the structure of proposed IIAs.
7.4 WWF does welcomes the publication of
the UK government discussion paper International Investment:
The Next Steps as a real effort to improve dialogue around
these issues. We would encourage the Government to circulate more
"ideas" papers—giving their overall rationale
and strategy on an issue—rather than final statements of
positions or non-analytical consultation documents.
7.5 However, in WWF's view The Next Steps
shows that the UK government has not absorbed the lessons of the
MAI. While it does present a broader view of international investment
agreements than seen in the past, the paper is weak on issues
of: actively promoting sustainable development; national development
policy; international investment regulation; corporate responsibility
and the role of civil society.
7.6 The paper gives the UK Government's
objective for international investment rules as "to foster
flows of international investment so as to bring benefits ...to
the world economy as a whole in a stable and sustainable way".
WWF does not believe this is synonymous with achieving sustainable
development, the stated aim of all UK policy.
7.7 Just increasing flows of investment
does not necessarily lead to efficient or sustainable economic
growth in the presence of market imperfections—eg monopoly
power, insufficient regulation. This objective elevates a tool—increasing
investment flows—into an aim. Rather than targeting actual
desirable outcomes (such as, increased productivity and competition;
technology transfer; environmental improvement) and seeing how
FDI could contribute to them more effectively.
7.8 This flawed objective then influences
the priorities laid out in the rest of the paper. There is welcome
acknowledgement that "a package of reinforcing measures"
is needed "rather than focusing on the contribution that
any one institution might make". However, the overwhelming
focus of the paper is on justifying a limited agreement on transparency,
investor protection and market access at the WTO.
7.9 Work in other areas is identified in
passing, and no specific commitments or concrete targets are given
in these areas. Also no linkages are made between achieving these
objectives and pursuing investment rules in the WTO. For example,
on incentives—the UK "supports" a new initiative
(para 14); on capacity to regulate—the UK will "progress
work as fast as possible" (para 26); on investment discussions
at the CSD—the UK will take a "view to looking at the
scope for further work" (para 39); and on investor responsibility
the UK will "seek to discuss this issue with other countries"
(para 44).
7.10 The financial crisis has shown the
problems created by liberalising markets before adequate regulatory
frameworks are in place at the national or international level.
The concept of "sequencing" must be introduced into
UK policy, to ensure similar levels of political attention are
focused on building regulatory frameworks as exist to support
liberalisation.
7.11 One major conceptual advance in the
paper is a recognition that more work needs to be done to ensure
that any IIA only prohibits discrimination based on ownership
(where specified), and not differentiation based on legitimate
policy criteria (para 17). One of the major features of the OECD-MAI,
and the experience of investment rules in NAFTA, has been how
current legal formulations of "national treatment" are
being abused by investors to prevent legitimate differentiation
between companies. However, no concrete suggestions are given
as to how to achieve this balance.
7.12 The paper also does not give solutions
as to how to ensure rules on expropriation do not allow legitimate
regulations to be attacked. This type of problem is growing even
outside discussions on IIAs. WWF has seen the "rights to
property" under the European Convention on Human Rights invoked
in discussions on land reform, flood defence, water abstraction
and wildlife legislation. In all cases it has been used to prevent
environmental legislation being introduced without large amounts
of compensation.
7.13 The paper is weak on development issues,
a major source of friction with developing countries. There is
virtually no discussion of how IIAs will allow developing countries
to preserve their rights to policy flexibility in industrial development.
WWF's extensive discussions with developing country officials
has shown us that they all value and desire FDI flows, but see
little value in new rules for attracting more FDI. However, many
fear the potential impact of a WTO investment agreement on their
policy flexibility. These fears have been reflected in the wide-spread
opposition to WTO investment negotiations by developing countries7
.
7.14 In particular, developing countries
wish to retain the right to impose performance requirements on
incoming investors, especially in the areas of joint ventures,
technology transfer and research and development. These performance
requirements can greatly improve the environmental performance
of investors, particularly in natural resource sectors and tourism
where it is important for local communities to benefit from investment
if they are to manage resources sustainably17.
7.15 The UK Government seems to have done
little research into why it considers "the reduction in the
use of performance requirements as a valuable long term objective"
(paragraph 30), and does not specify what time scale it might
consider as "long term". WWF considers existing WTO
disciplines on trade-related investment measures (prohibiting
export requirements and local content requirements) as overly
restrictive and potentially damaging to development prospects.
We therefore regret the Government's commitment to "preventing
any weakening of the [TRIMs] agreement and to achieve some modest
expansion".
7.16 In UNCTAD and OECD seminars on investment
a general consensus has emerged from developing countries on an
alternative positive agenda on investment rules. This agenda would
focus on: limiting investment incentives, especially those given
by OECD countries; a common framework on limiting regulatory incentives—including
lowering environmental and labour standards, international rules
controlling transfer pricing and restrictive business practices
by TNEs; greater efforts to promote investment to least-developed
countries—including South-South investment.
7.17 WWF's work shows that the incentives
issue is probably the most urgent issue that needs to be addressed.
Developed countries are giving rising amounts of money to retain
or attract firms, often for small economic returns15, 19. To compete
developing countries are forced to grant tax holidays, drop concession
fees or lower environmental and social standards. All these actions
lower the benefits of FDI to the host economy, and increase environmental
damage by reducing incentives for sustainable use and lowering
regulatory capacity and standards.
7.18 More insidiously, the fear that companies
might relocate is "chilling" the evolution of environmental
regulation in all countries. For example, climate change levy
proposals in the UK have led to many threats of relocation, even
though the worst hit industries will only suffer a very small
increases in their costs (maximum 1-2 per cent) 20.
7.19 Such chilling of environmental laws
can be solved by making FDI a positive force for raising environmental
standards worldwide. However, the "Next Steps" paper
avoids the realities of raising the environmental and social quality
of FDI. Instead of discussing what practical measures can be put
in place to improve FDI, the paper raises, and then unsurprisingly
rejects, binding of global standards: "We see no scope at
the moment for the creation of a single comprehensive international
code of legally enforceable social and environmental rules"
(paragraph 38).
7.20 The spectre of a single code of binding
standards is a straw man. Improving TNE behaviour requires a variety
of push and pull factors including: pressure from home and host
country stakeholders, including financial markets; a level playing
field for providing information on environmental impacts; an open
corporate culture which sees environment as both a risk and opportunity
to their core business; a framework of international regulation
which allows host countries and communities to earn fair returns
from TNE use of their natural resources.
7.21 Rules to achieve this can be achieved
in a multitude of ways. For example, using company law in the
home country (eg on information disclosure); international treaties
(eg limits on incentives); bi-lateral agreements (eg access to
home country courts for host nationals; government sponsored codes
of conduct); through home country incentives (eg conditions on
export credits and investment guarantees) 15.
7.22 In fact, the lack of a pro-active approach
by governments has forced markets and civil society to make their
own standards: for example, private investment banks are beginning
to demand compliance with the World Bank's environment guidelines
and standards as part of their environmental risk management procedures.
7.23 WWF believes that the UK could do much
more to promote the positive international agenda of regulating
the global economy, and that this work should occur outside the
WTO and before any new rules on investment liberalisation are
negotiated. However, the UK seems to continue to make liberalisation
its primary objective, concluding in paragraph 39 that: "The
UK looks forward to participating in this [the CSD 2000], with
a view to looking at the scope for further work on the interaction
between foreign investment and sustainable development".
7.24 This weak formulation gives WWF no
confidence that the UK is ready or willing to promote a balanced
agenda on international investment outside the WTO. Though the
MAI experience has bought about some changes in language, stated
aims and process there is no concrete evidence that the overall
focus of UK policy has changed.
8. Process Issues: Has the UK Government
learnt from the MAI?
8.1 The UK government has been far more
open in its preparations for the new WTO negotiations than over
the OECD-MAI. Consultations have been held with NGOs and civil
society at all levels: officials, departmental leads, policy advisors
and ministers.
8.2 Many of these meetings—especially
when focused on specific issues like the environment—have
been very useful in terms of information exchange and dialogue.
The mix of officials from different departments has given a broader
approach to the discusions. The new procedure of submitting written
questions in advance, and receiving written replies after the
meeting, has improved information flows.
8.3 However, discussions at a more political
level have been disappointing. NGOs hoped that joint meetings
at ministerial level (usually Trade, Environment and Development)
would provide real discussion of cross-departmental issues. However,
the large scale of the meetings, lack of structure and short time
allotted to them (usually just one hour) has reduced their usefulness
and made them rather ritualistic.
8.4 It is also clear to WWF that there has
been little substantive inter-ministerial discussion on trade
and environment, and that the joint ministerial meetings have
not significantly improved communication. WWF thinks joint ministerial
meetings should continue, but must be redesigned to promote useful
dialogue between all parties.
8.5 Meeting with the inter-departmental
committee responsible for co-ordinating WTO positions was also
disappointing, with little evidence of true co-ordination between
departments. There is clearly no strategy for environment and
trade issues across Whitehall, despite the few paragraphss in
the Government's Sustainable Development Strategy. Indeed, officials
concede that the current issues have been chosen in an ad hoc
way, based on those highlighted by the WTO's CTE.
8.6 The lack of co-ordination is exemplified
by the DTI's consultation document on services liberalisation21.
This document asks UK businesses to prioritise barriers to trade
in different countries, and prompts them with lists of "restrictive"
regulations. These include many environmental regulations that
the UK itself uses; such as bans on out of town shopping developments
and technology based environmental standards! Neither was there
a statement of UK environmental policy in the document, or an
explanation of it which circumstances the UK will push for changes
to other countries' regulations in an effort to liberalise service
sectors.
8.7 WWF was particularly worried that the
document seemed to promote a highly liberalised approach to tourism.
This seems at odds with UK Government attempts to increase the
benefits to local populations from tourism, which often involves
performance requirements on investors such as ownership restrictions.
8.8 This evidence of continuing inconsistencies
in Government policy emphasises a lack of co-ordination between
departments, and also the complexity of integrating these agendas;
which WWF does not underestimate.
8.9 The complexity of these issues argues
for a strategic approach across Whitehall that could guide disparate
policy processes. However, there is no existing UK strategy on
environment and trade issues. The Cabinet Office's Performance
and Innovation Unit has initiated work on a strategy for WTO and
non-trade issues for completion by May 2000. WWF supports this
initiative, and will sit on the project's steering committee,
but it seems unusual to form a negotiating strategy after talks
have already started.
8.10 WWF applauds the UK Government's commitment
to greater openness, and has found many of the meetings useful.
However, there is danger of consultation fatigue (probably on
both sides) especially when there appears to be no change in UK
policy—or even emphasis—as a result. The format of
on-going consultations during the negotiations will have to be
better designed to ensure more effective meetings.
9. Towards a Strategic Approach to Trade
and the Environment
9.1 WWF believes that the scope and focus
of the current EU Millennium Round proposal will disadvantage
developing countries and is creating a "climate of rejection"
among the G77 countries. This dynamic threatens the introduction
of non-trade issues such as environment into the WTO, and the
successful initiation of new trade negotiations at Seattle.
9.2 The EU should follow the suggestion
of the G77 Chair and commit to a process of reviewing, repairing
and reforming existing WTO agreements, while moving forward with
the built-in agenda on agriculture, services, TRIPs and TRIMs.
9.3 However, even within the current EU
negotiating mandate the UK could immediately take a more strategic
approach to achieving trade and environment goals, by:
— Helping reform EU negotiating processes
to ensure non-trade issues are not downplayed when talks begin.
Forming a "green alliance" with like minded EU countries
(for example, Sweden, the Netherlands) would facilitate these
changes.
— Extending the negotiating timetable
to allow comprehensive assessments of the impact of both the Uruguay
Round and new EU proposals. Delay would also give a realistic
timeframe for the capacity building of developing country negotiators.
— Producing a clear EU commitment to
link the conclusion of trade liberalisation talks with support
for greater regulatory capacity at international and national
levels. This would be implemented through multilateral environmental
agreements, UN bodies, the World Bank, EU development assistance
and bilateral donor agencies.
— Promoting outreach to developing
countries in order to understand their concerns over non-trade
and new issues proposed by the EU. Discussions should be held
outside the WTO to explore solutions to potential abuse of new
rules ("green protectionism"), in a way that supports
both environmental and development objectives.
— Convincing the EU to actively promote
issues of concern to developing countries: reform of anti-dumping
measures; reform of TRIPs; removal of tariff escalation and peaks;
elaboration and implementation of special and differential treatment.
9.4 Trade and environment issues cannot
be treated in isolation from other issues at the WTO, because
the resistance to EU proposals from developing countries stems
from abuse of non-environmental trade rules such as anti-dumping
measures.
9.5 WWF believes that the EU will have to
limit its proposals for a Millennium Round if it is to gain the
trust of developing countries, and consequently have environmental
issues integrated inside the WTO. The EU will have to decide whether
it prioritises issues such as investment at the WTO, over mainstreaming
of the environment.
9.6 If environmental issues are not integrated
into the next round of negotiations, the EU will not be able to
escape responsibility by blaming developing countries for this
failure. WWF does not believe the EU has lived up to its treaty
commitments and truly integrated or prioritised environmental
issues in the New Round; despite repeated statements, rhetoric
and partial commitments.
9.7 WWF will judge the EU, and UK within
it, by results. We will be looking for a real commitment to advance
environment issues, and a more holistic approach to negotiations
than has been seen in the past.
9.8 The EU's performance at Earth Summit
III in 2002, and the meetings leading up to it, will be a critical
test of its commitment to balance the WTO with other international
institutions covering environment, development and poverty reduction.
NOTES:
1 For example, Reed, David ed. (1996), Structural
Adjustment, the Environment and Sustainable Development, Study
by WWF Macroeconomics Programme Office, Earthscan, London. WWF
is currently studying the potential impacts of agricultural trade
liberalisation in Brazil, China and Morocco.
2 UN-ECOSOC-United Nations Economic and
Social Council (1997), Global Change and Sustainable Development:
Critical Trends, Report of the Secretary General, UN E/CN.
17/1887/3, Prepared for the Fifth Session of the Commission on
Sustainable Development 7-25 April 1997, New York; January 1997.
3 See Trade Measures and Multilateral
Environmental Agreements—Resolving WTO Uncertainty,
a paper for WWF International by the Centre for International
Environmental Law, October 1999.
4 The Economics of Precaution: the strengths
and weaknesses of an economic interpretation of the Precautionary
Principle, WWF-UK, Godalming; April 1998.
5 Reform of the WTO's Dispute Resolution
System for Sustainable Development, WWF-International, August
1999.
6 EPTSD—Expert Panel on Trade and
Sustainable Development, Work Programme on Conflict Resolution
in the WTO, EPTSD Secretariat (Aimee Gonzales) WWF-International,
Geneva; October 1999.
7 G77 Ministerial Declaration on the New
WTO Round, Marrakech 14-16 September 1999.
8 See DG. I.ivl.3 113 COMMITTEE MD:
649/98, NOTE FOR THE ATTENTION OF THE 113 COMMITTEE (DEPUTIES),
TRADE AND ENVIRONMENT—Preparation of Informal National
Experts meeting of 25 January 1998, DG1, January 1998.
9 OECD (1998), Future Liberalization
Of Trade In Environment Goods And Services: Ensuring environmental
protection as well as economic benefits, OECD Secretariat
note prepared for the OECD Joint Session of Trade and Environment
Experts, 6-7 May, 1998, Paris.
10 See Initiating and Environmental Assessment
of Trade Liberalisation in the WTO, WWF-International: Part
I, June 1998; Part II, April 1999; Part III, October 1999.
11 See executant's web site at fs2.idpm.man.ac.uk/sia/text.html.
12 Current research materials on these projects
are available from www.panda.org/resources/publications/sustainability/MPO.
13 Page, Sheila (1999), Environmental
Benefits from removing trade restrictions and distortions: background
for WTO negotiations, Overseas Development Institute, London.
14 Options for Promoting Increased Scrutiny
of WTO Issues by the European Parliament, July 1999; available
from WWF European Policy Office, Brussels.
15 WWF-UK (1999), FDI and the Environment:
from pollution havens to sustainable development, WWF-UK Research
Report, Godalming: September 1999.
16 WWF-UK (1999), International Investment
Agreements and their Implications for Developing Countries,
paper presented to the UNCTAD Inter-regional symposium "International
Investment Agreements and their Implications for Development",
Xiamen, China, 9-10 September 1999.
17 WWF-UK (1999), A Draft Alternative
Framework for a Multilateral Agreement on Investment, Draft
1.2, WWF-UK Research Paper, Godalming, Surrey, UK; March 1999.
18 See the "Message from Xiamen"
agreed by over 40 developing country investment policy officials—"The
issue of whether further multilateral rules [on investment] were
necessary were discussed. There were arguments for and against
this. It was recognised that multilateral negotiations are complex
and require adequate preparation." Outcome of UNCTAD Inter-regional
symposium "International Investment Agreements and their
Implications for Development", Xiamen, China, 9-10 September
1999.
19 For example, for new research showing
how FDI gives few technological spillover effects to domestic
firms see: Wages, Productivity and Foreign Ownership in UK
Manufacturing, Katharine Wakelin, Sourafel Girma and David
Greenaway, Centre for Research on Globalisation and Labour Markets,
University of Nottingham, October 1999; Why do foreign owned
companies in the UK have higher labour productivity? Nicholas
Oulton, Bank of England, London, October 1999.
20 Ecotec (1999), Who gains from the
climate change levy?, report to WWF-UK, London, September
1999.
21 Department of Trade and Industry (1998),
Consultation Document on the GATS 2000 negotiations, London;
September 1998.
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