8:21 AM Nov 13, 1995


Geneva 13 Nov (Chakravarthi Raghavan) -- An UNCTAD working group has firmly turned down the idea of green countervailing duties and taxes to promote for environmentally beneficial domestic processes and compensate for negative competitiveness effects.

The UNCTAD Ad Hoc Working Group on Trade, Environment and Development, in its final report which will go before UNCTAD-IX has made this recommendation on such proposals advanced from time to time by some of the Northern environment groups.

Work on trade, environment and development should be pursued at an "adequately high level" in the future structure of the UN Conference on Trade and Development after the ninth session of UNCTAD (in South Africa next year), the Working Group has recommended.

The Working Group has held three sessions and adopted its final report on Friday at the end of its third session. The discussions in the group over the last three sessions, and the negotiation and discussion before adoption of the final report showed both some convergence between the North and the South, but also some major divisions.

The final report and recommendations said "the Working Group firmly rejects demands sometimes made for introduction of socalled green countervailing duties or other protectionist or WTO inconsistent trade measures to compensate for negative competitiveness effects, whether real or perceived, of environment policies."

The report added: "It is important to ensure appropriate transparency of newly emerging environmental policy measures with possible trade effects, including eco-labelling, inter alia by considering inputs from interested countries".

The Working Group invited eco-labelling organizations to take fullest possible account of interests of developing countries and invited national governments and standardization bodies to explore the scope for mutual recognition and equivalencies at an appropriate level of environmental protection.

Trade provisions in Multilateral Environmental Agreements (MEAs), the Working Group recommended, should be transparent and should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade.

The importance of FDI in developing countries in order to promote sustainable development was also emphasized.

Due account should be taken of the role of different environmental and developmental conditions in environmental policy making, particularly in reconciling national with international concerns and efforts should be made to identify 'win-win' situations and in designing and implementing policies that maximise the mutual supportiveness of trade and environmental policies.

In its main findings, the working group's report said empirical evidence suggested that stringency of environmental regulations had not had significant effects on competitiveness of developed countries.

But case studies elaborated so far showed that, in a number of sectors, environmental policies and regulations have a significant effect on competitiveness of developing countries.

While national competitiveness or national welfare was not simply a linear aggregation of competitiveness of individual firms and, at national levels,, loss of competitiveness in some sectors might be compensated by gains in others, these possibilities may be higher in diversified and dynamic economies and more limited in developing countries whose export basket comprise only a few products.

Possibilities were also higher in countries with a capacity to compete in a growing international market for environment related services, equipment and technologies as well as in new market niches created by products considered more environment friendly.

But the balance of advantage weighed heavily in favour of the developed countries, the Report said.

The Working Group noted that environmental requirements were emerging in sectors of special export interest to developing countries such as in textiles, leather, footwear, furniture etc.

But while some delegations expressed concern that Uruguay Round gains should not be eroded by stringent environmental requirements, particularly in these sectors, some others (from the North) noted potential benefits of increasingly stringent requirements and that there was no reason to assume that non-discriminatory approaches to environmental issues would erode any Uruguay Round gains.

In other findings, the Working Group referred to the 'life cycle approach' and use of process-and-production-method (PPM) related criteria for products, the Working Group noted that specific PPM-related criteria may not be effective and relevant in terms of environmental protection in the exporting country as they are in the importing countries. Differences in environment conditions and the development dimension were important factors.

On establishing specific PPM-related criteria, while some delegations questioned whether eco-labels which do not take account of different environmental conditions in the country of production could provide relevant information, others felt use of such PPM-related criteria was necessary to provide information to the consumer and maintain the credibility of eco-labelling.

Technology-based criteria or criteria based on environmental conditions and priorities of the importing countries, it was found, could negative affect imports, particularly from developing countries where environmental and developmental conditions are substantially different from those in the importing country.

And the costs in complying with eco-labelling criteria could be high for developing country producers, particularly small and medium-sized firms.

The report noted that there have been few systematic studies assessing the environmental effects of eco-labels and their contribution to reducing the environmental stress and unsustainable consumption patterns in developed countries. The potential contribution of eco-labels in reducing environmental stress in developing countries may be limited due to a range of factors.

The working group stressed the importance of improved transparency in eco-labelling schemes.

The Working Group noted that eco-labels were being increasingly used in sectors of export interest to the developing countries and this trend was generating concerns in developing countries.

Many delegations from developing countries in the working group, the report noted, had questioned the rationale for establishing eco-labelling criteria for products that were principally imported, in particular when these criteria related to use of specific materials or process and production methods (PPMs).

"Developing countries," the report said, "emphasized that the benefits accruing from improved market access in developed country markets for goods and services for sustainable development far outweighed whatever impact trade-related environmental measures may have."

In recommending a programme of further work at UNCTAD, the report suggested, among others:

* further work on competitiveness effects of environmental policies, standards and regulations focusing on sectoral, cross-country studies and on new and emerging environmental policies, standards and regulations in sectors of export interest to developing countries including those where removal of trade barriers have been negotiated in the Uruguay Round,

* further analytical and empirical work on positive and negative trade and competitiveness effects of MEAs,

* empirical work on exports of domestically prohibited goods including coverage of existing/proposed instruments like UNEP's Prior Informed Consent system to determine if the issue had been sufficiently dealt with from the perspective of developing countries,

* studies on environmental and competitiveness effects of distortions in price-setting mechanisms and such economic instruments as subsidies and taxes and effects of tariff-escalation on environment of developing countries,

* studies focusing on transfer of environmentally sound technologies, including those needed to meet external environmental measures and requirements,

* conceptual and empirical studies on ways in which developing countries could attract and foster FDI in environmentally sound technologies,

* further work on environmental management systems (EMS) involving (i) rationale for different types of EMS standards, (ii) trade effects of proliferation of different EMS standards not considered to be equivalent, and (iii) factors affecting and means to improve participation of developing countries in development and application of EMS standards.