Examination of Witnesses (Questions 48-59)
DR PAUL
JEFFERISS AND
MS ALEX
GONZALEZ-CALATAYUD
11 JULY 2006
Q48 Chairman: Good morning. It is nice
to see you here this morning on our second oral evidence session
of this Sub-Committee and I would just like to say it is very
good to see you here. In your evidence to the Committee you have
raised concerns about the impact of trade liberalisation on the
environment and I just wanted to start off by exploring some of
those concerns in greater depth and if you could say what are
your major concerns about trade liberalisation on the environment?
Dr Jefferiss: Yes, well thank
you very much for the opportunity to talk to the Committee. I
think we would say that while, in theory, there are some benefits
to both economy and environment, or that certainly in theory the
two should not be entirely incompatible because trade can generate
wealth that enables environmental protection, at least after a
period of environmental degradation on the road to wealth, and
although in theory it is possible to trade in advanced low-impact
technologies that could help environment protection and in theory
high standards from importing countries could raise standards
everywhere, the evidence seems to suggest overwhelmingly that
on balance and in practice the effects on the environment are
actually negative. And those effects can take the form of habitat
loss, they can take the form of natural resource degradation,
resource depletion, bio-diversity loss, being the principal concern
of ours amongst others, straightforward air and water pollution,
waste generation and, probably of most concern, climate change.
And that those kinds of impacts occur because while trade may
generate wealth, it can do so by leaving a lasting legacy of degradation,
so even though wealth may allow the protection of what remains,
what remains is often only a residue of what was once there; I
think we are in that situation in the UK. I think it is also true
to say that there are some environmental problems for which, so
far at least, no amount of wealth has found solutions: bio-diversity
loss is one such problem, waste generation of one kind or another
is another example, but probably again the most significant example
is climate change. Trading in technology is not normally in the
most advanced cutting edge low impact technologies, but in older
generations of technologies. And unfortunately liberalisation,
rather than resulting in the export of high standards of environmental
protection, generally results in the import of low standards,
so that rather than being a race to the top, if you like, it is
generally a race to the bottom. And any increase in trade, and
trade is increasing, without a corresponding increase in the quality
of trade, is almost inevitably going to lead to environmental
degradation, simply by virtue of exploiting new areas of land
or new resources, converting them from a natural state to a converted
state that had not been exploited before. And an RSPB-Cambridge
study has found that on average the conversion of natural ecosystems
to systems for productive use lost half of the economic value
associated with that system. And the reason why we do it as a
society anyway is that by conversion, while a private benefit
is accrued, which is what provides the incentive to undertake
the conversion, various types of public benefit associated with
the eco system services that the land or the resource had provided
are generally either lost or reduced. And the net effect is a
reduction in total economic value of about 15% and so if we are
to have trade liberalisation we feel that it should, at the very
least, be managed and understood and analysed for its effects
and that various flanking measures should be applied in terms
of national environmental protection and regulation and so on.
Q49 Chairman: I mean that seems to
me overall a very gloomy picture. Have you been able to identify
any benefits to the environment of trade liberalisation or significant
benefits shall we say?
Dr Jefferiss: As I say, certainly
over time experience suggests that the provision of wealth, and
we are talking about environmental benefits here, that the provision
of wealth in society creates the ability for that society to undertake
some mitigating measures, some restorative measures and measures
to reduce the impact of ongoing trade, agricultural and industrial
activity. But, as I said, often that is too little or too late
and irreplaceable natural resources, habitats, species in some
cases, have been lost. And, as I said, in some cases no amount
of wealth has yet been able to discover means of dealing with
the most pernicious of environmental problems, namely bio-diversity
loss and climate change.
Q50 Chairman: You have argued that
"equal weight should be assigned to the delivery of economic,
social and environmental outcomes and that where unacceptable
damage to one of these pillars may occur, this concern should
override all others". That is obviously going to call for
a number of trade-offs between these different priorities. Do
you think that one should really always override another, I mean
the environment seems to underpin the others and if we degrade
the environment to the extent that we cannot sustain the others,
should that not be our overriding pillar and that the other two
are subordinate?
Dr Jefferiss: I think I would
first say that rather than frame the question in terms of balancing
and trade-off, I would prefer to frame the question in terms of
integration, trying wherever possible to deliver both benefits
simultaneously. I think probably in order to do that we would
need to internalise, in economic terms, internalise external costs
in various ways. And because the private market system generally
does not do that, that means that we have to have some form of
regulation or some form of fiscal measure like a tax of some kind
that recognises the value of external costs. But, broadly speaking,
I would agree with you that while environment and economic goals
are not necessarily or always in conflict and should be integrated
wherever possible through sensible trade measures, that there
are situations inevitably where there is going to be tension and
conflict. And in those situations it would just be, well it is,
simply perverse and wrong-headed to enable the degradation of
the foundation resource that enables trade and economic growth
in the first place. So it is simply folly, I think, for any country
to quite literally liquidate an asset to extinction on which it
has based its economic development, because inevitably that will
lead to a temporary state ofaffluence. And so for that reason,
along with using externality values to try and integrate environmental
and other external cost benefit into the equation, then I would
favour in trade policy the use of a lower discount rate for the
future so that the future is valued as highly, at least, or certainly
not as much less highly as it is currently valued, through the
use of commercial discount rates which inevitably look on present
costs and benefits as being more valuable than future ones.
Q51 Chairman: Who is going to do
this costing exercise, the internalising of external costs? It
does not seem to me that there is anybody capable of doing that,
least of all the WTO and the fact that environmental degradation
can occur on a drip-drip, very long term effects, it is not that
easy to measure as against creating X number of jobs or producing
X amount of investment?
Dr Jefferiss: No, I do not think
that the trading system itself or the WTO is a sensible place
to locate the analysis and capturing of those external costs and
benefits because the WTO and the trading system is precisely about
the generation of wealth through the commercial system which,
by definition at the moment, does not take account of external
costs and benefits. But I do not think that should prevent trading
partners undertaking analysis of the long-term effects of their
trading decisions and trading policies and that is the kind of
thing, I think, that the EU sustainability impact assessments
could sensibly look at. And there is nothing to stop individual
countries undertaking analysis of that kind in order to adopt
the kind of flanking measures that do more adequately take account
of external costs and benefits. So I think you are right that
the WTO and the trading system itself is not the place to locate
such analysis. But I think there are plenty of other locations
and at an international level, the obvious loci for that kind
of assessment are through the various multi-lateral environmental
agreements that exist which do precisely try to take account of
both present and future values of both environmental goods and
services.
Q52 Chairman: Does anybody take notice
of those in the WTO? I mean we might have these analyses, they
might be very good and so on, but if nobody pays any attention
to them.
Ms Gonzalez-Calatayud: At the
moment negotiators are not taking account of the analysis or the
assessments that are being made externally, we can see that very
clearly in the case of the EU sustainability impact assessment
and we have questioned DG trade and Defra as to why negotiators
are not taking the results of these assessments on the negotiating
table. The DG trade did not give us 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.
Defra said that they agree with the results of the assessment
but that they cannot take them to the negotiating table because
their trading partners just do not want to talk about that and
do not want to negotiate about this, that they have other priorities
and we think that that is probably true, but if that is true you
also have to ask why do they not want to discuss these issues
and it is probably on one hand because their trading partners
have not been sufficiently involved in the analyses that have
led to the results, to the conclusions of the sustainability impact
assessments, and on the other hand their expectations of the negotiations
are not being fulfilled and that is why their priorities lie elsewhere.
Q53 Chairman: Addressing some of
these concerns WTO set up the committee on trade and the environment,
but we have heard in evidence that it has not really had much
impact at all, so why do you think there has been so little action
on these issues? It seems to me that there is a great concern
in civil society that more should be done, but this is not percolating
through the chain of command, is it, I mean where is it breaking
down, why are the concerns of a great many ordinary people not
reflected when it gets into the quagmire of negotiations?
Dr Jefferiss: Well I would address
the general question about the lack of progress, and then perhaps
Alex should talk about the committee on trade and environment.
I think, clearly, globally speaking, there has been insufficient
political will, combined with, I think, a lack of trust that arises
from the lack of political will. I think there has been insufficient
political will to deal with the problem on a truly global scale,
so in spite of the rhetoric to move in that direction, I think
most countries, in one way or another, at the end of the day,
when it comes to the negotiating table are more interested in
the national interest than the global interest. And so there has
not been any kind of, what you might call strategic, concerted,
I think, or consistent effort, particularly on the part of the
developed world, to move the environmental agenda within the context
of trade forward in any kind of way that takes the perspective
of the whole world and the public good, rather than individual
parts of the world and the private good. So I do not think that
that failure to take a strategic view is the result of a desire
to use environmental measures for protectionist purposes explicitly.
And to the extent that mistrust in the developing world is based
on the perception that the developed world has used environmental
measures for protectionist purposes, I would not say that is quite
accurate. I think what tends to happen, though, is that environmental
measures in trade are dealt with in an ad hoc way in the
context of specific negotiating situations where they can be used
as trade-offs of one kind or another to acquire various other
kinds of benefits that are in the interest of the country doing
the trade-off. And that that results in a demonstration of inconsistency
and self-interest and that is not going to foster trust or transparency
for anyone. So I think that if we are going to move forward it
has to be through some deliberate, explicit transparent, multi-lateral
recognition that this is a strategic problem that needs a strategic
approach, rather than dealing with it piecemeal in the context
of this bit of negotiation and that.
Q54 Chairman: Well that seems rather
consonant with the idea some of our witnesses put forward there
should be a new international body to address the lack of progress
on the environmental issues. Would you agree that that might be
called for and, if so, what form might it take?
Dr Jefferiss: I think there are
pros and cons to that approach. One of the pros would be precisely
a unified, strategic, coherent, transparent approach to environmental
issues. But I think unless the WTO itself is party to that strategic,
coherent, unified, approach, then inevitably it will create a
situation in which you have one powerful environmental body going
up against one powerful economic body. And, I am not sure, but
I suspect that for political reasons the outcome would be that
the powerful economic body would be likely to prevail in most
situations. So I think a sine qua non is for the WTO itself
to acquire a greater understanding of environmental issues. And
I suspect that a better way forward than the establishment of
a rival body to the WTO would be greater clarity both within the
WTO and within other bodies of the UN, and within the secretariats
of various multi-lateral environmental agreements, about the relationship
between multi-lateral environmental agreements and WTO rules which,
by and large, are not clear in legal terms. And even where attempts
were made explicitly to clarify them, as in the case of the bio-safety
protocol to the convention on bio-diversity, I would have to say
they were unsuccessful. And it remains the perception, I think,
that where there is conflict, probably WTO rules would take precedence.
And I think probably there is also room for clarification, possibly
through case law, of what WTO rules actually imply for the environment
and which I think is sometimes slightly misunderstood.
Q55 Chairman: Can you just expand
on that last point, this misunderstanding?
Dr Jefferiss: I think there is
a perception that WTO is antithetical to the environment in one
way or another in its rulings and decisions.
Ms Gonzalez-Calatayud: Because
of the dispute settlement mechanism that WTO has which foresees
trade sanctions. In the end it is perceived as more powerful as
the MEA in case of a conflict and that leads inevitably to the
perception that the commercial rules or trade rules by the WTO
are more powerful or are superior to the rules set by the multi-lateral
environmental agreement, although legally this is not the case,
they are on the same level.
Q56 Chairman: But, in practice, that
is true, the trade rules rule?
Ms Gonzalez-Calatayud: Yes.
Q57 Chairman: Lastly from me, the
WTO's incorporation of the precautionary principle I think you
described as "fundamentally unsatisfactory". Could you
elaborate on that and perhaps give us some idea of what effect
this unsatisfactory co-operation of that principle means?
Ms Gonzalez-Calatayud: Yes. The
precautionary principle is dealt with specifically in Article
5, paragraph 7 of the SPS measures. We believe that this is a
very weak formulation on the one hand, because it is perceived
as being a provisional measure and on the other hand it also reverses
the burden of proof in the sense that the proponent of the precautionary
principle is the one that has to prove that there is a risk or
that there might be a danger, whereas the importer or a product
that is considered dangerous is free from any proof and therefore
any cost, so we would like to see that reversed. We believe that
the precautionary principle is rational and legitimate form of
protection and where there is a risk of damage, of irreversible
damage, then a government should be free to make use of it. For
instance, in the case of loss of bio-diversity, GMOs or other
issues, that there should not be this threat of a challenge of
the WTO hanging over this decision, so we think that the phrasing
of the way the precautionary principle is framed in the WTO should
be ammended to give governments more security and more autonomy
in the adoption of their policy measures.
Q58 Chairman: Is that because the
current frame is simply too woolly?
Ms Gonzalez-Calatayud: Yes, it
is too woolly and, for instance, in the sense that it asks for
a periodical review of the measures that have been taken in the
light of scientific advice but it does not definite enough what
periodical means, so it is up to the dispute settlement mechanism
to make this definition and of course it gives a lot of uncertainty
to the governments and makes them more averse to make use of the
precautionary principle.
Dr Jefferiss: I think that there
is a worry—it is more than an implication, it is a statement—
in the SPS agreement, to use the precautionary principle, but
it is only ever a temporary measure that science will eventually,
and in quite short order, be able to provide the definitive answer
to So it is a sort of stop-gap which can only really be invoked
in situations where you have got some pretty compelling evidence
that there is a problem, rather than the possibility that there
might be. And even then the assumption is that it can only allow
restrictive measures for environmental reasons on a temporary
basis while the problem is sorted out and the answer is discovered.
And of course there are many environmental problems which include,
for example, the release of genetic organisms into the environment
which may take many years, decades or centuries to manifest fully.
So I think in a number of ways it is problematic and inconsistent
and it does not give confidence to governments for that reason.
So they tend not to invoke it as readily as they would, for example,
where it is cited elsewhere in a much stronger form, in the Rio
principles, in the protocol to the CBD itself and so on.
Q59 Mr Vaizey: I was going to ask
about what you thought about the current Doha round given that
most people think it is in its crisis and also the failure to
deal with the removal of trade barriers for agriculture and so
on, but I think to a certain extent you answered those questions
earlier in the sense that you were talking there was no one strategic
world view. Is that a fair summary of why you think Doha has gone
so badly wrong?
Dr Jefferiss: I think what I said
about the absence of a strategic approach to the relationship
between the environment and trade within the negotiations has
been characteristic of the WTO's relationship with the environment
for a long time and in lots of situations. With respect to the
progress of the Doha round itself, Alex, do you have some comments?
Ms Gonzalez-Calatayud: Yes. We
all know that the negotiations are in disarray and it is difficult
to foresee how they will achieve an agreement within the next
two weeks which is the framework that negotiators have set themselves.
From what we have seen so far and what we can see with the current
drafts that are on the table, they are just a reflection of what
my colleague said, that there is no strategic vision and the environment
has not been considered in the current round, so even if negotiators
manage to reach an agreement in the next two weeks, we do not
think that it will be very positive for the environment which
is very negative in the present situation, but I think they will
also have negative consequences for the future because many promises
have not been kept and this will not create an environment of
trust which is necessary to solve some of the issues, some of
the problems relating to the interface between trade and environment.
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