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STATEMENT PRESENTED BY MARTIN KHOR, DIRECTOR, THIRD WORLD NETWORK

AT THE PANEL ON SYNERGIES BETWEEN LIBERALISATION, ENVIRONMENT AND SUSTAINABLE DEVELOPMENT, WTO SYMPOSIUM ON TRADE AND ENVIRONMENT, GENEVA, 16 MARCH 1999


Introduction

The topic of this panel is "Synergies between trade liberalisation, environmental protection, sustained economic growth and sustainable development." Firstly, I will try to answer whether there usually and necessarily are such synergies, especially between liberalisation, environment and development. Then I will try to suggest some areas where liberalisation could help environment and sustainable development; and also some areas where the careful management of the liberalisation process is required to aid sustainable development. Finally, I will cover some systemic issues about the WTO and its link to the trade, environment and development debate.

The framework used here is that of the relation between trade and sustainable development, thus placing "environmental concerns" in the context of development, or the need to fulfil human needs for all in the present and future generations. Since natural resources and carrying capacity are limited, sustainable development requires equitable solutions, in which the rich bear the greater share of the burden of adjustment to a more environmental system. The rich nations, and the elite of the South, should bear the costs for changes to production and consumption patterns and levels, and lifestyles, whilst poor people everywhere and developing countries should be given the economic and environmental space to fulfil their right to development. Some members of the environmental community call this the principle of "fair shares in environmental space" and have mapped out in detail the cuts and changes in consumption and output that can be done in the North, in order to free up resources for the South to develop. Assistance to the South should be through aid and technology transfer, but also through fair rules in trade and finance that fully take into account the needs of developing countries but also the equity principle.

Liberalisation and Sustainable Development

There is often an assumption in the trade community that trade and trade liberalisation usually leads to a better environment and also to growth and development. This assumption is correctly challenged by many civil society organisations, especially environmental, consumer and health groups. They point out that in many cases international trade has facilitated the transfer of technologies, products and consumption patterns that are harmful to the environment, to long-term development prospects and to human health. The spread of toxic wastes and hazardous chemicals, the unsustainability of modern chemical-based agriculture, the environmental damage due to extraction of minerals and timber, the threats posed by nuclear materials, the epidemic of deaths due to the trade in tobacco products, the replacement of breast-feeding with cow-milk powder are just a few examples of how trade facilitates unsustainable patterns of production and consumption.

Trade can bring economic benefits, but not in all cases or for all countries or communities. Factors determining benefits, costs and the net outcome include the nature and prices of and the demand for and capacity to supply the products exported by a country, and the nature and prices of products it imports. It is not necessarily so that the balance of these factors results in a positive net outcome for any country or all countries. For example, many developing countries still mainly export raw materials. The continuous decline of their commodity prices, especially when contrasted with rising prices of industrial products they import, has depressed their export earnings, contributed significantly to their longstanding debt crisis, and to stagnation and continued poverty. Moreover, when these poor countries reduce import duties, the cheaper imports often take over the markets of local products of small and medium sized local firms that are unable to compete, causing the phenomenon of "deindustrialisation." This point should be re-emphasised as commodity prices are presently once again falling rapidly, causing great distress to many exporting countries.

Trade and trade liberalisation can thus have positive and negative effects. It follows thus that liberalisation cannot be the ultimate goal of a process, even (or especially) in the WTO. The ultimated objective of trade and the trade system should be sustainable development, and liberalisation should be pursued only when it contributes to that objective. A deep understanding of the conditions, and of the stages and levels of development, required for liberalisation to have positive effects on sustainable development, is urgently required. Correspondingly, when those conditions are not present, liberalisation should not be pursued. In cases (products, sectors, conditions) where there are negative effects, "synergy" cannot be claimed between liberalisation, environment and development. In such cases, liberalisation should not be pursued (at least not yet), and in fact a reversal to some degree may be needed if the goal of sustainable development is to be achieved.

A deep and honest review of the Uruguay Round agreements is thus required, and sections of these should be amended where it is found that they impede or undermine sustainable development. In particular, the WTO system (in fact, the major or dominant Members) must not shy away from allowing developing countries much more leeway and flexibility in implementing the Agreements. including exemptions from liberalisation obligations in selected areas where such flexibility is necessary to their development needs. For example many developing countries could face social, economic and environmental dislocation if they take liberalisation measures under the Agriculture Agreement and later find that their small farmers are unable to compete with cheaper imports. Thus, WTO Members should consider exempting food produced for domestic consumption and the products of subsistence farmers and small farmers from the Agriculture Agreement's obligations on import liberalisation and domestic subsidies. This would enable the developing countries to pursue the goal of food security, the protection of small farmers' livelihoods and the promotion of of sustainable agriculture.

This would be an example of "synergy" between the proper treatment of liberalisation (in this case, recognising its limitations and negative aspects) and the pursuit of sustainable development (in this case, food security, sustainable livelihoods and sustainable agriculture).

There are other examples where state intervention and international cooperation are required to channel trade towards sustainable development goals:

** The commodity trade is damaging to both the environment and to development prospects, especially in light of further depression of commodity prices. A new round of international commodity agreements could help to at least reduce the problems. Producing countries could according to an agreed plan agree to produce less quantities (which would reduce the glut of supply, and also reduce pressures on natural resources and the environment). At the same trime consumers would agree to pay higher prices for commodities to reflect their ecological and social values. Developing countries that are exporters would produce less volume but receive attractive prices and levels of export earnings; developed countries that import would pay more, and thus to some extent offset the longterm trend decline in the commodities-manufactures terms of trade; and this would be in the spirit of implementing the "common but differentiated responsibility" principle.

** The trade community should re-orientate the trading system to be more responsible in promoting safe products and to deiscourage or bar the trade in harmful products. For example, domestically prohibited products should not be exported; at the least such exports should be conditional on a "prior informed consent" (PIC) basis. This procedure (which can also be upgraded to a ban) should then be applied to hazardous products (as it has in the Basel Convention on toxic wastes). At the very least, the WTO should not stand in the way of efforts by other international organisations and by governments to discourage the use of products harmful to health and the envioronment. For example, the US government is taking legal action on the tobacco industry (including obtaining large compensations for harmful effects of smoking) to curb cigarette sales and advertising. Yet it aids American tobacco companies spread their products to developing countries by pressurising these countries (by threatening to apply unilateral Super 301 action or to use free-trade rules in the WTO) to open up their markets to foreign firms. After several Asian countries succumbed to these threats, the rate of smoking increased as consumers were influenced by the high-pressured marketing efforts of the tobacco multinationals. The commercial interests of major trading countries cynically over-rode the health interests of trading partner countries, seriously damaging the trading system's credibility.

In another topical case, negotiations for a biosafety protocol under the Biodiversity Convention reached a near-consensus in February 1999 but were undermined by the US (which is not even a member of the Convention) and a handful of countries that put their commercial interests before global ecological and safety concerns. Negative actions like these two examples that so blatantly make use (or abuse) the slogan of "free trade" to sabotage vital health, safety and environmental concerns are precisely the reasons for the rapid erosion of public confidence in the "free trade" and by association the WTO system. They make the attainment of "synergy" between trade and environment so difficult. Fallacious claims should not be made by WTO members that "free trade principles" disallow countries (even acting in concert in a multilateral Convention) from agreeing on actions towards responsible regulation of harmful products. with potentially devastating effects.

Some areas of synergy between liberalisation and sustainable development

Developing countries face protectionist measures in the North on several of their exports. This is well known in the trade community. Towards the goal of sustainable development, these measures should be removed. Among these are tariff escalation, in which raw materials are imported at very low (or no) duties, but the tariffs are progressively increased if the materials are processed. This discourages developing counties from processing their raw materials due to the obstacles placed in the developed countries on importing processed materials. Developing countries can obtain significantly greater value-added and gross revenue if they are able to process their raw materials and export them, and even more so if they produce manufactured products out of them. For example, processed wood fetches a higher price than saw logs, and furniture earns much more than processed wood. The exporting country can thus earn many times more from the same volume or quantity of raw material should the material be converted to a processed or manufactured form before export. The country could be encouraged to reduce the rate of extraction or exploitation of raw materials (thus reducing the pressures on the environment) and instead put more efforts in exporting processed and manuafactured products. However this requires increased market access, particularly in the developed countries which should thus remove tghe practice of tariff escalation. It also requires that developing countries are permitted to restrict the export of their raw materials in raw form so that the domestic processing and manufacturing sectors can have adequate supply. In the past, some developing countries have come under pressure because they took such measures.

The misuse of anti-dumping measures as a protectionist and anti-competitive action also hinders sustainable development in developing countries as it discourages or depresses their exports of the items subjected to these measures. The misuse of such measures should thus be stopped.

Developing countries find another major protectionist obstacle in the TRIPS agreement which is a protectionist device that enables technology owners to reap extra profits from monopoly pricing, whilst hindering or altogether preventing the transfer of technology. There can be "synergy" between liberalisation and environmental protection as well as development if exemptions or flexibility in implementing provisions of the TRIPS agreement are permitted for environmentally-sound technologies and products (in order that developing countries can have greater and cheaper access to them) and for products that are harmful to the environment and human health (in order to discourage their viability and spread).

This has been suggested by India in the Committee on Trade and Environment and should be seriously considered. An example of how IPRs hinder technology transfer is the case of some Indian companies that manufacture products that use CFCs which are to be phased out under the Montreal Protocol for causing harm to the ozone layer. The protocol incluides articles on technology transfer to the South on fair and favourable terms. Three of the companies successfully commissioned a Alocal institute to produce a substitute for CFCs. However the patent rights to the substitute substance, HFC 134A, are held by a few multinationals. Some of the Indian companies were willing to pay the market price or more for the use of the technology but a multinational holding the patent refused to license it unless it can take a majority share in the companies' equity. This shows the predicament of developing countries that are promised technology transfer on favourable terms but instead face obstacles to accessing technology even if they are willing to pay commercial terms. In order to have "synergy" between liberalisation, environment and development, the TRIPS agreement should be amended to exempt environmentally sound technology from patentability.

An area of even greater concern to civil society is the TRIPs article 27.3b relating to biological materials. It obliges countries to patent microorganisms and to accord protection to plant varieties. This opens the road to patenting of life forms and biological materials, especially those that have been subjected to genetic engineering. The adverse effects include the facilitation of the appropriation of traditional and indigenous knowledge by local communities about the use of biological resources by corporations that are able to (or claim to) meet the patent test; the promotion of environmentally harmful technologies; and the promotion of technologies that are against the interests of small farmers (such as the "terminator technology" or "suicide seeds" or seeds which are engineered not to reproduce themselves so as to deprive farmers from saving them for the next harvest).

Again, the relevant clauses of the TRIPS agreement should be amended or "liberalised" so that the protectionist and unethical barriers it facilitates can be removed. This is an important area where "synergy" between liberalisation and sustainable development can be attained.

Systemic issues

One reason civil society views the WTO with skepticism is its non-transparent and non-participatory nature where the majority of developing countries (and the majority of WTO members) are unable to adequately have their views represented and reflected in the decisions and policies. Most decisions are really made by a few major countries, particularly the US and the EU. The most important meetings are held in small informal groups to which most developing countries are not invited. Even when there is no consensus on some important issues advocated by the major countries, due to opposition from several developing countries, these issues are invariably put through the WTO system until agreements are produced. This was evident at the Singapore Ministerial Conference in relation to new issues, and again at the Geneva Conference of 1998 where a decision on electronic commerce was pushed through.

Several years now after the Uruguay Round's conclusion there is a growing and now widespread view that the WTO rules are stacked against the developing countries. Not only are the benefits shared inequitably, but some countries (and developing countries as a whole) are likely to suffer net losses.

Developing countries now find themselves in the midst of serious problems arising from their having to domestically implement what they agreed to multilaterally. A review of these problems arising from the WTO agreements and a process of amending these agreements in order to improve them and make them more suitable for developing countries are urgent and will require enormous efforts. Yet even more "new issues" are being advocated, mainly by the major countries, and even a New Comprehensive Round. Such a demand, if it succeeds, would deprive developing countries and civil society the opportunity to contribute properly to reviewing and revising the existing agreements, as the energies and verfy limited resoiurces would be devoted to the "new issues" which have very serious implications, including for the environment and sustainable development.

The lopsided nature of the WTO system and its trade rules is what makes developing countries and many civil society organisations around the world so suspicious of the WTO. It is also a major reason why the WTO is not seen as an appropriate forum in which to discuss the complex and important issues relating to trade, environment and sustainable development. The WTO is seen as an organisation dominated by a few major powers, which are able usually to successfully provide their interpretation of issues, and make this interpretation formally acceptable to all.

The systemic issues of transparency and participation in the WTO should be resolved as soon as possible, otherwise the atmosphere of suspicion and the tense relations between civil society and the trade system are bound to continue.

 


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