House of Commons - Environmental Audit

Select Committee on Environmental Audit Eleventh Report

The Doha Development Round

82. The WTO Seattle Ministerial[84] in 1999 was accompanied by violence on the streets as campaigners became increasingly frustrated about the process of 'globalisation' and a process of trade liberalisation which appeared to benefit developed countries and corporations over developing countries. The Ministerial ended in disagreements between Members and a failure to start a new round of trade talks.

83. In order to end the impasse, a reappraisal within the WTO established that trade could deliver far more to developing countries than aid ever could, leading to the launch of the Doha Development Round. The Doha Ministerial Declaration stated that:

… international trade can play a major role in the promotion of economic development and the alleviation of poverty. We recognise the need for all our peoples to benefit from the increased opportunities and welfare gains that the multilateral trading system generates. The majority of WTO members are developing countries. We seek to place their needs and interests at the heart of the Work Programme adopted in this Declaration'.[85]

84. The Declaration was also bold in its language in reference to sustainable development, by not only reasserting the principle extolled in the Marrakech Agreement that trade and sustainable development can be compatible, but establishing that they must be. Paragraph 31 of the Declaration provided a mandate on environmental negotiations, to focus on clarifying the relationship between the WTO and MEAs, improving coordination between the WTO process and MEA secretariats and liberalisation in environmental goods and services.

85. Despite the laudable aims expressed at the outset of the Doha Round, progress has been slow and intermittent. Although agreement has been reached on some issues, such as the ending of agricultural export subsidies by 2013 and a 'development package' for Least Developed Countries, key issues remain unresolved.[86]

86. Progress in the Round probably requires resolution of three key issues: the US must agree to deeper cuts to domestic farm support; the EU to increased agricultural market access; and developing countries such as Brazil and India to lower industrial tariffs.[87] Ultimately, the Doha talks were suspended on 24 July 2006 for an indefinite period, with no clear picture of when they may restart.[88]

The likely environmental outcome of a completed Doha Round

87. A number of witnesses to the Sub-committee claimed that the Round is likely to have negative consequences for environment and development objectives. Friends of the Earth concluded that these impacts will be so severe that current negotiations should be stopped, leading to an independent review of the entire world trade system.[89]

88. Chatham House stated:

Although the Doha Development Agenda (DDA) contains several references to environment,[90] none of these negotiations appear to be making any progress. The main area of contention—agriculture—is an activity that has profound implications for the environment, and yet the environmental aspects are almost completely ignored in that stream of negotiations… The current DDA negotiations are imperfect in many ways and are unlikely to achieve positive results for the environment.[91]

89. The EU Sustainability Impact Assessment (EU SIA) of the Doha negotiations came to a similar conclusion with regards to the Round's likely impact on the environment:

Global environmental impacts are expected to be negative as the volume of international trade increases. The impacts on climate change and global biodiversity are adverse overall, arising primarily through increased transport and pressures for increased agricultural production in biologically sensitive areas. Local effects occur for water, air and soil quality, water quantity, soil erosion and biodiversity, and are particularly significant in areas of high existing stress. These adverse environmental effects can in principle be countered by technology or regulatory measures. However, in many developing countries, environmental regulation tends to be insufficiently strong to counter adverse effects.[92]

90. The Government in its written evidence considered that it is not possible to predict precisely the environmental impact of the Round as these would 'depend on the measures adopted in the final agreement'. It accepted that there will be both negative and positive impacts and that these would likely vary across sectors and regions.[93]

91. Although the Government acknowledges that there may be some negative environmental consequences of the Round, we are surprised that it does not appear to be more concerned. WTO Members have failed to consider adequately the environmental impacts of the negotiations, making it likely at this stage that the legacy of a completed Round will include a loss of biodiversity and increased greenhouse gas emissions. We urge strongly the Government and EC to pursue aggressively a more sustainable outcome. Failure to address these issues will give the lie to the EU and UK Government assertions that they are at the forefront of action on climate change and sustainable development.

Is there a lack of political will to deal with environment-trade issues?

92. Although the Doha Declaration made explicit the aim to incorporate sustainability into the negotiations, some of our witnesses claimed that there has been a lack of political will to translate this into meaningful action during the Round.[94]

93. The RSPB felt that negotiators focus very much on their national interests, to the detriment of global priorities. It believed that this was associated with the ad hoc approach to environmental measures in negotiations, whereby they may be used as trade-offs against other measures. This results in a 'demonstration of inconsistency and self-interest' in the use of environmental measures which does not 'foster trust or transparency' between Members.[95] WWF asserted that while the greatest imbalances in international trade remain, particularly in agriculture, the political will to address environmental issues will not be forthcoming, especially amongst developing countries.[96] Chatham House also acknowledged that movement on agricultural imbalances will be part of a solution to better engagement with developing countries.[97]

94. The Government rejected the assertion that there is a lack of political will, at least on the part of developed countries, by emphasising a statement by the G8 leaders the preceding weekend about their commitment to complete the Doha Round and therefore achieve the environmental objectives which are a part of it. Later, following suspension of the talks, Oxfam remarked that this commitment now 'rings very hollow indeed'.[98]

95. The Government did acknowledge that there is some difficulty in translating political will into action.[99] It went on to say that there is a gap 'between our ambitions to ensure that sustainability and, particularly, environmental sustainability issues are reflected in the focus of the negotiation and the views of some of our partners'.[100]

96. The EU has displayed a lack of political will to address sustainability issues by, for example, failing to remove agricultural market distorting measures within the EU. Until the EU has the political will to ensure that our negotiating positions are fully consistent with sustainable development objectives, we can not expect other WTO Members to take these issues seriously. The UK Government and the EU must demonstrate clear leadership on this, even when it may be against our short-term economic interests to do so.

Agriculture

ENSURING THAT DEVELOPING COUNTRIES BENEFIT FROM AGRICULTURE

97. DfID describes agriculture as having a central role in efforts to reduce global poverty and to achieve the Millennium Development Goals.[101] Promoting agricultural development, it argues, not only benefits the poorest farmers in developing countries, but also stimulates wider economic development outside agriculture 'where growth and job creation are faster and wages higher'.[102]

98. DfID believes that subsidies, tariffs and non-tariff barriers in agricultural trade must be reduced, highlighting the fact that one estimate put the benefit of removing such subsidies to low and middle income countries at as much as $60 billion a year.[103] A significant outcome of the 2005 Hong Kong Ministerial was an agreement that agricultural export subsidies will be ended by 2013. The UK Government had hoped for a 2010 phase out. However, this was pushed back by the EC to tie in with the end of the current CAP reforms and therefore does not require the EU to make any significant new commitments.[104]

99. In written evidence to the Sub-committee, the Government recognised that 'more progress needs to be made on both the reduction of agricultural tariffs and quotas and the levels of domestic support if the potential benefits of the DDA are to be realised'.[105] We commend the Government for pushing for more action to reduce agricultural tariffs and quotas. Although the EU and the US have sought to address this imbalance in international trade, they have not gone far enough. As it is widely held by WTO Members that agriculture can help raise people out of poverty, it is very disappointing that more has not been offered by the EU and US. A lack of movement on these key issues has now, in part, caused the suspension of these negotiations. The UK Government should do its utmost to ensure that the Round does not fail in its stated development aims, and do more to fight for the interests of the poorest people. This not only means that the Government should work to improve the EU offer, but should also use our special relationship to seek to ensure that the US goes much further.

100. Although more action to reduce subsidies and tariffs is required there are concerns that, even with this, Doha negotiations have not gone far enough to ensure that the benefits that developing countries might expect from their agricultural sectors will be guaranteed. A report by the Carnegie Endowment for International Peace actually found that the benefits of agricultural trade liberalisation in Doha 'overwhelmingly' flow to rich countries while most developing countries suffer slight losses. These losers include many of the world's poorest countries including Bangladesh and Sub-Saharan Africa.[106] The reasons for this include the loss of special preference programmes, but are primarily 'the reality that low-productivity, small-scale subsistence farming makes up a large portion of agricultural activity in many developing countries [the products of which] are generally not competitive on global markets'.[107] The report went on to state that special treatment for the agricultural sector in these countries would be required to prevent this.

101. Such concerns have galvanised the G33 group of countries to argue for special treatment in the form of permitted exemptions for "special products" in agriculture and "special safeguard measures" to prevent import surges to ensure food security and protect people dependent on small-scale farming from the impact of cheap subsidised food imports.[108]

102. A DfID policy paper recognises that there may be a case for permitting certain countries which are least developed to implement actions to stimulate their own markets through, for example, the provision of subsidies. It goes on to warn that these must be temporary measures and should not be used to support farmers' incomes as they believe this is unlikely to be affordable and may benefit larger farmers.[109] One of the actions identified in the document included to:

…ensure that international negotiations about agricultural liberalisation deal with the transitional needs of countries facing immediate difficulties, including those that rely upon imported food or will lose preferential market access.[110]

103. Friends of the Earth stressed the need for the special treatment of developing countries. There has, however, been resistance to these proposals by the US and others:

What is really going to make a difference is whether developing countries are allowed to restrict imports. On agriculture, that is the key issue. Of course it is also at the heart of negotiations at the moment because the G33 group of countries, led by the Philippines and Indonesia, for example, are requesting that they be allowed to self-designate any special products that they think are critical for their small farmers and for rural developments in general. There is a real battle taking place, primarily between the G33 and the US—which wants extensive agricultural-market-opening in the developing world and is basically being told by its lobbies domestically that it cannot proceed with the negotiations unless it gets that. The position that the UK and the European Union take with respect to the G33 proposal is also very important. I would say it is a key developmental and environmental issue.[111]

104. Concerns that developing countries will lose out as a result of the Round were also expressed in the EU SIA, which concluded that some of the poorest countries are thought to be adversely affected under all Doha scenarios, especially where their preferential treatment is eroded:

The impact of preference erosion on the estimated global welfare effects, particularly for developing countries has also been highlighted in Bouët at al (2006). The authors find that when the full array of preferences is considered, the positive impacts of trade liberalisation are estimated to decline, especially for the African and Caribbean economies, whose exports largely rely on preferences (such as sugar, bananas, and meat), whereas Sub-Saharan African countries are estimated to experience welfare losses.[112]

105. As it is now known that liberalisation in the agricultural sector may have serious consequences for some developing countries, it is paramount that the G33 proposals to protect developing country agriculture are taken seriously. This is needed to ensure that the Doha Development Round can truly lead to gains for the poorest countries. We are convinced that a level of special and differential treatment must be granted to developing countries in agricultural products in order to prevent the most vulnerable in these countries from being devastated by trade liberalisation. Such protection need not go on ad infinitum, but is essential to enable developing countries to ease into the global market. Considering the depth and longevity of protectionism that has gone on in the West this seems reasonable, especially as this protectionism will be continuing in the near future. The Government and EC must actively engage with the G33 proposals and urge those resistant to it to change their stance. This could also act as an olive branch to developing countries so that negotiations can develop in a more conciliatory tone. Failure to do this could lead to the completion of a Round which exacerbates poverty and is therefore likely to accelerate environmental damage. Such an outcome could be considered a fundamental betrayal of the poorest people on Earth.

AID FOR TRADE

106. The Government highlighted Aid for Trade as an important component of the flanking measures which will be adopted to mitigate the negative consequences of trade liberalisation in the Round. This programme:

… should aim to help developing countries, particularly LDCs[113], to build the supply-side capacity and trade-related infrastructure that they need to assist them to implement and benefit from WTO Agreements and more broadly to expand their trade.[114]

107. The EU SIA considers that for the Round to truly be considered a development Round, Aid for Trade will be a necessity as the negotiations in themselves are unlikely to benefit many developing countries as highlighted above. Indeed, the EU criticised the Carnegie endowment report (which stressed that the Round will be overwhelmingly negative for many developing countries) for neglecting to consider the positive implications of the Aid for Trade programme, which will provide 'billions in new annual funds for infrastructure and trade capacity [which] are huge development gains above and beyond the potential benefits of market opening'.[115] Although Aid for Trade will greatly assist poor countries in developing their capacity for trade, this does not preclude the need for some of the poorest countries to be able to protect their agricultural sector, or to ease slowly into the global market.

108. How Aid for Trade will be delivered is being debated at the WTO in a number of taskforces. The Government explained that the primary objective of Aid for Trade is to build developing countries' capacity to engage in trade, linked to poverty reduction and development strategies. How the issue of sustainable development will be dealt with in Aid for Trade will, the Government explained, 'very much depend on how developing countries make their requests… the UK will continue to encourage them to frame those in a way which reflects sustainable development objectives'.[116]

109. Initial recommendations on Aid for Trade were published on 27 July 2006 by the WTO Aid for Trade Task Force. The recommendations include that such aid should be guided by the Paris Declaration on Aid Effectiveness, and that it should take full account of sustainable development goals. The Paris Declaration includes a commitment to the application of environmental assessments as well as the strengthening of environmental capacity.[117] DfID has stated that these recommendations are 'broadly in line' with the UK position.[118]

110. We welcome the statement in the Aid for Trade recommendations that it should take full account of sustainable development goals. However we are concerned that there is little in the way of specific examples of how the programme will indeed be made sustainable. The EC and UK Government should make strongly the case for the inclusion of a specific commitment to the strengthening of domestic capacity in environmental analysis, regulation and enforcement in developing countries. This is required to help avoid environmental degradation being an outcome of the programme.

Consideration of the environment in agricultural negotiations

111. Although there are potential benefits in terms of poverty reduction from international trade in agricultural products, there are also likely to be negative environmental impacts. The EU SIA anticipated that these impacts may include deforestation, increased use of agrochemicals and increased greenhouse gas emissions from transport.[119]

112. A number of witnesses raised concerns about the lack of consideration of these environmental impacts in agricultural negotiations:

Of all trade areas, agricultural trade has the most far-reaching impacts in terms of habitat destruction worldwide, due to the widespread changes in land use that it provokes. Yet, agricultural trade negotiations are taking place in the absence of any consideration of environmental sustainability... For example, no holistic assessment has been made by negotiators of the likely impact of changes on the global environment, even though they will be significant.[120]

113. Chatham House agreed that the environmental aspects of agriculture 'are almost completely ignored in that stream of negotiations', and recognised that many developing country negotiators remain deeply suspicious of demands to include environmental issues in the DDA negotiations, 'out of fears that environmental provisions will be used as cover for protectionist trade policy'.[121]

114. Although the Government told us that it is often other WTO members who are less engaged with sustainability issues[122], there is evidence that there is a lack of consideration of the environmental impact of increased agricultural production within the Government itself. The DfID policy paper Growth and poverty reduction: the role of agriculture recognises as one of its guiding principles for agriculture development strategies, the need to 'ensure the sustainable use of the main productive resources such as land and water and minimise any adverse impact of increasing productivity on the environment'.[123] The paper recognises that sustainability is 'fundamental to achieving future growth in agriculture' and that a lack of sustainability is already beginning to lead to a compromise in agricultural performance in some areas. [124]

115. Although the paper recognises the importance of sustainability, it neglects to include details on how agricultural development projects will be made sustainable. It simply provides a general assertion that they will support developing countries to 'ensure that agricultural development strategies provide incentives for the sustainable use of natural resources and environmental services'.[125]

116. The implementation of many of the recommendations throughout this report will go some way to ensure that agricultural negotiations take better account of the environment, but it is also essential that relevant MEA secretariats are granted observer status on the WTO Agriculture Committee. MEA secretariats must also be able to contribute effectively to the negotiations, to ensure more effective consideration of the environment in its deliberations.

117. Seeking to integrate environmental concerns more fully into WTO agricultural negotiations will seem like hypocrisy if we do not fully integrate this issue into all UK policies. The fact that policy documents are still produced by UK Government departments which fail adequately to account for the environment makes it harder to argue a case for more sustainable practices in the WTO. It also raises questions as to the Government's commitment to sustainable development in practice.

Climate change

118. Along with a lack of consideration of other environmental issues in agricultural negotiations, some witnesses also raised concerns that negotiations have failed to consider the potential increase in greenhouse gas emissions. The RSPB said that this is made more complex, particularly for agricultural products, which are perceived to be a way of lifting people out of poverty. The charity argued that, 'rather than seeking magic formulae or ideologically-based solutions, we should see these complex factors as an area requiring urgent action as an integral part of the trade equation—something on which trade negotiators cannot turn their backs'.[126]

119. As outlined earlier, the EU SIA found that one of the major negative impacts of the Doha Round and trade liberalisation will be increased greenhouse gas emissions from an increase in transport. The Government pointed out the complicated nature of this issue, and that changes under liberalisation may not necessarily lead to increases in emissions:

One of the examples would be the ending of export subsidies which sees food being exported from the EU to other countries due to a subsidy programme that is in place. The removal of that subsidy programme is widely expected to reduce EU production and, therefore, will reduce the amount that is being exported. I think we also need to be clear about the number of food miles that may be being travelled. Regional markets are obviously very important as well as local markets. A lot of some of the highest tariffs do exist between neighbouring countries as opposed to between the EU and some of the developing countries. So regional markets are important; they are an important way of driving up prosperity in terms of increasing trade. It is not just about importing into the EU markets or, indeed, any other developed country markets.[127]

120. A DEFRA official pointed out that they have looked at the issue of food miles and have found that often the contribution global transport of food makes to greenhouse gas emissions could be quite small in comparison to the amount generated by people driving to supermarkets.[128] Nevertheless, they stated, 'that is not to say that changes in food and agricultural policies do not have impacts on climate change factors'.[129]

121. DEFRA's Food Industry Sustainability Strategy provided information on the issue of food miles. It found that they are a 'significant source' of CO₂ emissions, giving rise to around 20 million tonnes of CO₂ in 2002, half of which were emitted overseas. This equates to roughly 1.8% of total UK annual CO₂ emissions.[130] It also found that food air miles have the highest relative CO₂ emissions, are the fastest growing mode of transport and account for roughly 10% of food miles CO₂ equivalent emissions.[131] Because of these emissions, a report undertaken by Transport 2000 concluded that a lower carbon food system would include features such as the use of seasonal or indigenous produce in preference to non-indigenous foods or foods imported out of season.[132] Such characteristics are counter to an increased global trade in food products. Pascal Lamy called for such emissions to be better accounted for:

Of course the transportation of goods involves the consumption of energy, whether in the course of maritime, road, or air transport. It is vital for countries to internalize the negative environmental externalities that arise in the course of this process. The harm done to the environment must begin to feature as a "cost" in international trade transactions.[133]

122. Ronnie Hall from Friends of the Earth stressed that her organisation is opposed to an export-led model of agriculture due to the 'immense problems it is causing subsistence farmers in exporting countries'. She went on:

… we think there is a real win-win opportunity here, in terms of supporting subsistence farming and reducing food miles by buying food locally in countries around the world. We very much support the general call for food sovereignty in different countries.[134]

123. Tom Crompton from WWF felt that a balance may be struck which would allow the poorest developing countries to continue to export goods where this could be shown to have benefits for poverty eradication, even where greenhouse gases will be emitted. He stressed that this issue is unlikely to be dealt with in the short term until greater confidence has been built, particularly on behalf of developing countries, that developed countries are serious at tackling the issue of climate change and are willing to undertake actions that may be against their own short-term economic interest.[135] He also stressed that redressing the current imbalances in agricultural trade will be required before any dialogue could be hoped to start to address this challenge.

124. This is a complicated issue which requires concerted analysis, as it may ultimately involve the balancing of environmental concerns against developmental concerns. It should not be forgotten that climate change is anticipated disproportionately to effect developing countries, so this should be a major concern to them. The Working Group on Climate Change and Development warned in its report Up in Smoke, that climate change may make it difficult to reach Millennium Development Goals, and may even reverse existing development achievements.[136] In the short-term, dealing with the question of food miles and the impact of increased global trade on climate change is too thorny an issue for the WTO. The Government should act to remove the most egregious of imbalances in the international trade regime as part of a longer process to start dealing with climate change through the WTO.

125. As other Members of the WTO are unwilling to deal with climate change in the short-term, and given its pressing nature, the UK Government and the EU must themselves do much more to tackle emissions from international transport. In line with our previous reports[137] we recommend that transport emissions be better accounted for through, for example, taxation of aircraft fuel, the robust inclusion of aviation in the EU emissions trading scheme and the reduction of emissions from shipping at European ports. The Government should also explore the potential to help tackle this issue through consumer awareness programmes linked to labelling of country of origin. Eventually we consider it necessary to ensure that all the external costs of products are internalised in their final price.

Environmental Goods and Services

126. Paragraph 31 of the Doha Declaration mandated negotiations on the liberalisation in trade of environmental goods and services (EGS). There is no clear definition of what could constitute an EGS, but they may include products and services that could either prevent or limit pollution, or contribute to the clean-up of pollution. Some WTO Members have also argued for the inclusion of goods on the basis of more environmentally friendly production methods. Pascal Lamy outlined the environmental benefits that EGS liberalisation could have:

Examples of the environmental goods that have been proposed are wind turbines, solar panels, geothermal energy sensors, fuel cells, and electricity meters. Lowering barriers to trade in renewable energy could reduce its price, making it a more viable alternative to the more polluting fuels. Environmental services, such as consultancy services, have also featured in some of the services offers that WTO members have tabled. Such consultancy services in the energy sector could help countries boost their energy efficiency.

… In many of the developing countries that have experienced strong economic growth in the past few years, emissions have also risen; in some instances by up to 75%. In the US, the EU and Japan the transport sector has seen the fastest growth in greenhouse gas emissions, with emissions from international aviation growing far more rapidly than other transport sectors. Greater access to environmental goods and services can help combat these emissions, which pose both a health and an environmental challenge to all of us.[138]

127. Environmental NGOs expressed doubts to us as to how useful liberalisation in EGS would prove. Much of this concern stems from a lack of a specific definition of an EGS, and whether any final definition would, or could, ensure an environmentally beneficial outcome. NGOs have also been concerned about the EU's preferred approach to EGS The RSPB argued that this approach is inflexible and will fail to address the 'nuances that exist in goods'.[139] WWF also argued that it would be difficult to designate a good or service as environmental, as any benefits would depend on the context in which it was used:

For example, if you put in something to clean pollutants in pipe in a paper pulp factory, the impact that has on the environment may in some circumstances be positive because you evade the pollution of the watercourse. If that in turn leads to more unsustainable deforestation to feed the paper pulp factory, then it is clearly contributing to the environmental problem. There are many examples of that type of context specificity.[140]

128. The CBI argued that it also does not support the current approach as they believe it to be 'impractical and impossible to administer' and that it would place an undue burden on customs authorities.[141] It stressed that its opposition to the list approach is due to perceived practical difficulties, rather than the principle of liberalising trade in such goods.[142] The CBI pointed out to us that there is already a successful list approach for pharmaceutical products and the ingredients used in pharmaceutical products, which are subject to zero-rated duty:

There is a distinct tariff code for pharmaceutical ingredients, so it is relatively easy to say, "Yes, those ingredients only go to pharmaceuticals". Customs officers do not have an issue in terms of what the chemicals may go into because they are just used for pharmaceuticals. We do not have a problem with the list system if it is run in a very transparent way.[143]

129. The ICC warned that the proposals should not be dismissed out of hand as they believe it is common sense that it should be possible to identify a long list of environmental goods and services that would provide considerable environmental benefits.[144] WWF itself has highlighted the benefits of liberalising trade in energy efficient products:

Some Chinese producers of white goods produce energy efficient goods for which they do not have full access to the European markets because of tariff access restrictions to the EU. Here would be an example where the EU could take a step which demonstrated the importance that it attached to using trade rules in order to promote, in this case, the emergence of more sustainable business in China, which is in all our interests.[145]

130. There is concern from developing countries about the impact that liberalisation in EGS will have. These concerns have been compounded by the lack of EGS included in lists which are of interest to developing countries. This has led some countries to support an approach based on identifying goods and services which are to be inputs to specific environmental projects.[146]

131. The Government stressed its support for the European Commission in taking forward its negotiations on an EGS list approach, but acknowledged that negotiations have not made much progress. It raised concerns that the project-based approach put forward by developing countries may increase the risk of corruption. It also highlighted that developed countries seem to have been responding to some developing countries' concerns about the goods listed, but that there is a long way to go in reaching a solution.[147]

132. We believe that in the short term there is a case for the liberalisation of environmental goods and services, although we are sceptical as to the extent to which any agreed list produced could be considered sustainable. Key to this whole debate is ensuring that the goods and services listed are relevant to developing countries. There may also need to be flanking measures adopted so that developing countries will not be negatively affected. Nevertheless, the fact that this issue is being dealt with in the WTO is a positive sign that there is, at least, an acknowledgement that trade could be harnessed to deliver environmental benefits. Ultimately we feel that there must be a much tighter linkage between trade policy and sustainable development. The Government should initiate a debate on whether it would be possible to develop a more sustainable global trade system. This could focus on the formulation of sustainability indicators by which to classify different products or services. Classifications could then be used to lead more sustainable trade through labelling schemes or more directly through tariffs on the basis of sustainability. We accept that these issues are challenging, but the Government must start to look for more long term solutions to environment-trade problems.

EU policy and trade

The EU Sustainable Development Strategy

133. The EU issued a revised Sustainable Development Strategy (SDS) on 16 June 2006, following concerns that there had been failings in the original strategy.[148] The UK Government criticised the original SDS for failing to adequately consider the impacts of EU policies:

A revised EU SDS must give sufficient consideration to the external impacts of EU policies, particularly on developing countries, addressing both how the EU can help developing countries achieve sustainable development and how it should work with the international community to meet agreed objectives including the Millennium Development Goals (MDGs) and WSSD targets and commitments. The global objectives agreed by the Development Council should be more explicitly incorporated into the EU SDS and endorsed at Heads level. However, global issues should not simply be bolted on to the strategy, but be more effectively mainstreamed into one integrated set of objectives, shared by all relevant Council formations.[149]

134. The revised strategy has as one of its key objectives to 'actively promote sustainable development worldwide and ensure that the European Union's internal and external policies are consistent with global sustainable development and its international commitments'.[150] The SDS also includes as an objective significant progress on reaching agreement on the Doha Development Agenda as well as promoting sustainable development in accordance with the Marrakech Agreement:[151]

The Commission and Member States will increase efforts to make globalisation work for sustainable development by stepping up efforts to see that international trade and investment are used as a tool to achieve genuine global sustainable development. In this context, the EU should be working together with its trading partners to improve environmental and social standards and should use the full potential of trade or cooperation agreements at regional or bilateral level to this end.[152]

135. In oral evidence WWF raised concerns that this commitment to sustainable development was not fully translating into meaningful EU action in the WTO.[153] This was echoed by the RSPB which believes that the EU is failing to incorporate the environmental consequences of liberalisation fully into its negotiating position.[154] Friends of the Earth gave a more mixed view on the basis that its concerns about the liberalisation of natural resources had been accepted by the EU. The EU said that this stance was taken as a result of evidence from its sustainability impact assessments which concluded that liberalisation in these sectors could exacerbate environmental problems.[155] The fact that the EU has adopted a stance against the liberalisation of natural resources in order to avoid negative environmental impacts is very positive and we commend the UK Government and EU for this.

136. Nevertheless, Friends of the Earth stated that some policies with major environmental impacts are still being pursued by the EU, such as the elimination of export taxes from developing countries. The NGO believes that there is a 'certain lack of consistency in its positioning'.[156] The Government told us that they will 'do what they can' to ensure that the revised SDS commitments to the principles of sustainable development in all EU policies are met, including in trade policy.[157]

137. We are heartened that the revised EU Sustainable Development Strategy includes a commitment to incorporate the principles of sustainable development into its international trade policy, and that international trade will be used as a tool for achieving global sustainable development. It is essential that these do not become empty words and that they are actually translated into concrete action.

138. We fear that there is still a lack of consideration of sustainable development issues in some EU negotiating positions and call on the Government and EU to urgently reassess our positions to ensure that they are fully compatible with the revised Sustainable Development Strategy. Ensuring that all EU external policies promote global sustainable development demonstrates to developing countries that environmental and developmental considerations are being considered at the heart of our work, rather than as an afterthought or as a protectionist measure. This should ultimately help better integrate these issues into the WTO.

139. The RSPB told us that where EU negotiation stances are thought to have serious negative impacts there has been a lack of emphasis on the need to adopt appropriate flanking measures to offset them. The charity also stressed the need for an ex post evaluation of any flanking measures which may be adopted in order to assess their efficacy.[158]

140. We reluctantly accept that there will be occasions when the economic or development benefits of a policy will mean that it is adopted, even where there will be negative environmental impacts. It is therefore imperative that adequate emphasis is placed on the need to adopt flanking measures to mitigate negative environmental impacts. Indeed, without the use of effective flanking measures, it is unlikely that trade liberalisation can be sustainable. The significance of such measures makes it extremely important that their effectiveness is evaluated following adoption.

European Union Sustainability Impact Assessments

141. The EU undertakes Sustainability Impact Assessments (EU SIA) of major trade negotiations to 'identify the economic, social and environmental impacts of any given trade agreement'.[159] These assessments are used to better integrate sustainability into trade policy, as well as provide information on the potential for adopting flanking or accompanying measures to reduce any negative impacts.[160] The final global EU SIA for the Doha negotiations was published in July 2006. It described the overall environmental impact of the Round as 'negative'.[161]

142. Witnesses were generally positive about the use of SIAs. However, some argued that EC negotiators have not been taking adequate account of the analysis. The RSPB stated that when it asked the Directorate General on Trade why the results were not being taken to the negotiating table it did not get a clear answer 'they just said the fact that these studies keep on showing up the same results is having a trickling effect on negotiators which are becoming more aware of the consequences of unmanaged trade liberalisation'.[162] Friends of the Earth accused the European Commission of failing to adequately change its negotiating position in relation to the SIA's findings. Rather, they went on, the studies are used to simply establish mitigating or flanking measures afterwards which have not necessarily been proven to work.[163] RSPB felt that there is a lack of political will at the top of the EU to take the results of the SIA into account.[164]

143. The Government accepted that not enough is being done to ensure a link between the SIAs and the negotiating positions and, it believed, the Commission would agree that this is the case. It argued that the Commission is very aware of this issue and that 'they are working to try and improve that process'.[165] However, they did reject the criticism that the SIA has not been influencing the negotiations. It agreed that flanking measures are often used to mitigate negative impacts, but that this is an important tool because there are often both positive and negative impacts from trade liberalisation.[166]

144. We greatly welcome the use of SIAs in trade negotiations. Nevertheless we are concerned that its full findings are not being incorporated into our negotiating positions. Given that the EU SIA anticipates that the outcome of Doha will be negative for the global environment, and will have variable social benefits, the EU could fail in its commitments to more sustainable trade. Recognising that trade negotiations on the scale of Doha occur rarely it is paramount that the principles established in the Sustainable Development Strategy, and the recommendations highlighted in the SIA, are brought into Doha to ensure a more sustainable outcome. This may involve a change of negotiating stances where possible, such as on agricultural subsidies, or the full implementation of an effective range of flanking measures to offset any negative impacts.

145. WWF and RSPB claimed that our negotiators have found it difficult to engage with other members over the issues raised in the SIAs, partly due to the way in which the assessments were conducted. They argued that increasing the involvement of the EU's trading partners in the process would provide joint ownership of the assessments, thereby improving the chances of a convergence of views on issues raised in the assessment.[167] Failure to fully involve trading partners in this process will undermine confidence that the EU is taking steps to seriously address sustainable development challenges, rather than simply using environmental measures as protectionism. The Government stressed that the SIA process is new and that the Commission has been looking at ways to improve the link between the SIA and the negotiating positions, as well as other issues.[168]

146. We are concerned that in what could have been the end stages of the Doha Round, the EU's primary method for ensuring that trade agreements will be sustainable, SIAs, could be described as a work in progress. It is of utmost importance that our trade policies are sustainable and we therefore urge the Government to ensure that the effectiveness of the SIA process is fit for purpose by calling for its complete reassessment. This should focus on, inter alia; the better incorporation of findings into negotiating positions including a commitment to reject liberalisation where it can be shown to have serious negative consequences; greater involvement of trade partners in formulating SIA; the identification of effective flanking measures and an ex post evaluation of flanking measures adopted.

Bilateral and regional trade agreements

147. In addition to WTO negotiations, the EU also deals with third parties through an extensive system of bilateral and regional trade agreements.[169] Due to greater flexibility in bilateral negotiations, such agreements can act as a 'breeding ground' for pioneering solutions to environment-trade problems where the WTO has made limited progress. Internationally, bilateral agreements have also acted as an important foundation for international cooperation on environmental and development issues.[170]

148. Nevertheless, there are some major concerns about a rapid proliferation of such agreements, not least because developing countries have less negotiating power in such situations than they do in multilateral negotiations.[171] As Pascal Lamy told the International Development Committee, 'if you are a developing country, if you are poor, if you are weak, if you are small, getting a bit of the EU market or the US market or of the potential Chinese market is so important for you that you will concede things you would not concede around a multilateral table'.[172] Oxfam fears that following the suspension of the Doha Round, the EU and US will turn to bilateral and regional agreements as a means to gain market access, and to impose intellectual property and investment rules, which are disadvantageous to developing countries.[173]

149. In evidence to us WWF anticipated that in the short-term, action to address environment-trade problems will not proceed significantly in the fraught WTO negotiations. It therefore believes that bilateral agreements may be a way in which to move the environment-trade agenda forward by establishing useful precedents.[174] Doing this should also help to 'substantiate some of [the EU's] assertions on the part of the importance it gives to sustainable development'.[175] WWF went on to say that the EU has yet to demonstrate the political leadership required to fully utilise bilateral agreements in this way.[176]

150. Although we are concerned about a shift of emphasis onto bilateral and regional trade agreements from the WTO and the multilateral trading system, we do believe that these provide a unique opportunity for the UK Government and EU to demonstrate its commitment to sustainable development, particularly in the short term. We should pursue innovative agreements that seek to address global environmental challenges through trade, such as free trade in energy efficient goods.

Conclusion

151. Should agreement be reached on the Doha Round, we believe that the WTO, and the international trade system itself, will be ripe for an urgent reassessment with regards to its interaction with the environment and sustainable development. The current system must be improved to make it better equipped to deal with the wide-ranging environmental and development consequences of international trade.

152. The Government and the EC should now focus its efforts on getting the Doha Round restarted, with the ultimate goal being to achieve a pro-poor, environmentally sustainable, conclusion. Anything less than this will mean that the developed world will have reneged on its commitment to making international trade work for, and not against, those people who need it most.

84 Ministerial-level conferences (Ministerials) are held every two years Back

85 "Doha WTO Ministerial Declaration 2001", WT/MIN(01)/DEC/1, 14 November 2001 Back

86 The Doha WTO trade round - Hong Kong and progress since, Standard Note SN/EP/2605, House of Commons Library, July 2006, p2 Back

87 "Doha round suspended indefinitely after G-6 talks collapse", Bridges Weekly Trade News Digest, 26 July 2006, www.ictsd.org Back

88 "Talks suspended. 'Today there are only losers.'", WTO, 24 July 2006, www.wto.org Back

89 Ev9 Back

90 E.g. Paragraphs 19, 31, and 51 Back

91 Ev26 Back

92 Colin Kirkpatrick et al, "Final Global Overview Trade SIA of the Doha Development Agenda", Impact Assessment Research Centre, July 2006 Back