7:03 AM Feb 8, 1994

TRADE-DEVELOPMENT 'PACKAGE OF PRINCIPLES'

Geneva 8 Feb (Chakravarthi Raghavan) -- A set of "principles" to guide, what is described as trade and trade-related environment and development policies and agreements, has been advanced by an international Working Group which some of its members would like to see reflected and fully accepted in the work programme on trade and environment being developed for the Marrakesh GATT ministerial meeting.

The Marrakesh meeting is for signature and acceptance by Ministers of participating countries of the outcome of the Uruguay Round negotiations concluded last December. But the occasion is expected to be used by the Ministers to flag future trade agenda issues. But, according to an agreed decision of the TNCs, the Ministers will also adopt a declaration/decision for a work programme on Trade and Environment by the future World Trade Organization.

The working group, whose report was published Wednesday, was convened by the Canada-based International Institute for Sustainable Development (IISD), a non-profit private corporation funded by the governments of Canada and one of its constituents, Manitoba State.

In presenting the report, and the "principles" advocated by them, two of the members of the working group -- Richard Blackhurst, GATT's Chief Economist, and Konrad Moltke of the World Wildlife Fund of the United States -- told newsmen Tuesday that the principles had to be accepted as a package and not in parts.

The other members of the group (in their individual capacities) were: Janine Ferreti (of 'Pollution Probe', Toronto), Arthur Hanson (Chief Executive Officer of IISD) and David Runnals (senior advisor to the International Development Research Centre, Ottawa); Rubens Ricupero Brazil's Minister for Environment (and former Brazilian Representative to GATT), Nurul Islam (Bangladesh economist and former planning minister, now at International Food Policy Research Institute in Washington), Mohamed Sahnoun (from Algeria, a former UN Special Representative in Somalia and member of the Bruntland Commission, now a fellow at the IDRC), and Erna Witoeler (of Indonesia, President of the Amsterdam-based International Consumers' Union and founder of the WALHI, the Indonesian Environment Forum).

While generally worded to ensure consensus within the group, the report and its principles, Moltke's remarks at a press briefing clearly suggested that some of its sponsors would be using it to influence the just hotting up debate over Trade and Environment and the WTO in the directions favoured by the North.

Both Blackhurst and Moltke hoped that the principles put forward by them would be picked up by some governments and would figure at Marrakesh and hopefully get some endorsement. Both also claimed that the group had not reached a consensus by shirking differences or pushing them under a carpet.

Asked about their position on the highly controversial idea of PPMs and trade restrictions which the WWF-USA and WWF International were pushing, but not dealt with in the 'principles', Moltke said that while the group had not dealt with the PPMs in formulating the principles, GATT and the WTO would have to come to terms with and address PPMs.

He then went on to claim that in fact GATT was already doing so and that the Uruguay Round agreements on subsidies and Trade-related Intellectual Property Rights (TRIPs) were PPMs that enable trade-restrictions by importing countries and that similarly environment-related PPMs too have to be dealt with.

Somewhat surprisingly, the GATT's Chief Economist (even though he participated in the group and was at the briefing in his individual capacity) remained silent, thus lending support to the view that the subsidy agreement and the TRIPs were PPMs -- though in fact they are not.

TRIPs extends to the international arena and for the benefit of Northern-based TNCs, monopolies for IPR holders which the Paris Union Convention provides with some safeguards to balance public interest. Many Third World environment/development groups considered it to be anti-environment (during the UNCED process), though many Northern groups remained equivocal and would not take a position.

Contradicting the Moltke view, other GATT officials later said privately that whatever the rationale or merits of the subsidies and Trips disciplines, in terms of GATT's 'free trade theories', it was just nonsense to call these rules PPMs and a precedent for introducing environment-related PPM restrictions.

PPMs is an acronym for socalled 'Processing and Production Methods' -- a concept and code word for the view that a country should be able to restrict imports, not only of products and like products which for environment or health reasons it domestically prohibits, but also products made of cheaper or alternative processes abroad that it might prohibit or restrict domestically.

Like the dubious trade theory of reflecting 'social costs' and the concept of 'market disruptions' (first introduced in the Multifibre Agreement) to justify selective and targeted restrictions on imports of goods from countries with low-wages, PPMs are capable of abuse as an instrument for hidden protection, by invoking a suitably reworded GATT provision under 'General Exceptions' for health and environment protection which would place the decision-making in the domestic jurisdiction of the country.

On the grounds of autonomy of decision-making at local levels, and the right of communities to have higher standards than agreed to an international levels, the PPM concept is being pushed by many Northern environment groups.

Though many of them also argue for 'internalization' of external environmental costs, many of them find it difficult to understand that through PPMs, a community seeking higher environment standards is actually trying to shift the adjustment burden on to other communities, rather than internalizing the costs and finding ways of meeting them without violating internationally agreed trade rules.

While the consumer is being penalized by higher costing products of a permitted process, the exporting country in effect is being asked to choose a different process, which might not even be needed in terms of its environment protection and sustainable development, acquiring the IPRs from the TNC of the country.

While clearly the issue would need to be explored fully, researched and debated, before any international consensus or policy could emerge, the environment groups appear to be attempting to force a decision now -- both in terms of the ongoing work about a possible ministerial declaration at Marrakesh for a work programme under the WTO on Trade and Environment as well as other decisions.

While the South governments, and their NGOs, are still to formulate their views and positions, or even meet among themselves, Northern governments, NGOs and international organizations are all getting into this act, with some having prepared for this over last several months and now seeking support in the South.

The US and EC recently held a meeting at the Hague, with their NGOs. The UNEP is organizing a meeting, next week, of selected environment ministers to discuss Trade/Environment link -- even though UNEP itself has no jurisdiction over trade.

Because of objections over its involvement, the UNEP has now got UNCTAD to cosponsor this meeting, according to some invitees.

In trying to formulate what it calls trade, environment and development policies, the IISD report implicitly proceeds on the misleading view, that North having achieved 'development' and the South being under-developed, 'economic growth' relates to the North which has to undertake environment protection, and development is a concern of the South to be qualified now by 'sustainable development'.

The ecologically sounder view that in fact the world's environment problems are due to the mal-development of the North whose other side of the coin is the 'under-development and poverty' of the South, and hence the North's sustainable development requires curbs on its resource use and high consumption standards and life-styles, does not clearly figure in the IISD report.

Moltke though sought to explain this by arguing that the best way to deal with North's consumption is for full internalization of costs. He did not explain how this could be done, for e.g. for commodities produced and exported by the South (for import needs and paying debt service) in an economic environment of a handful of TNC traders and buyers and hundreds of thousands of sellers -- without international agreements to provide countervailing power against the TNCs.

The IISD report however said that "properly applied" its principles could form the framework for determining the adequacy of existing international agreements and formulating new accords.

The IISD principles take the Bruntland report and its definition of 'sustainable development' as the starting point, and adds on to it as "points of departure", the issues of poverty alleviation, importance of environment policies and role of trade liberalization.

It does not appear to have dealt with the post-Bruntland UNCED process where the issue of North's consumption patterns and life-styles came to the forefront.

Among its principles, it suggests efficiency and internalization of environmental costs. Internalizing such costs, it concedes, is a difficult process with many technical difficulties to be resolved and in terms of "exports" would need international payments from the rest of the world for biodiversity preservation and carbon-sink services.

Many in the South see these last two (maintaining tropical forests and increasing them) as of great concern and benefit to the North and its corporations (as a resource base for biogenetic engineering), but not necessarily responsive to the national strategies and priorities of sustainable development of a country.

A second principle, it suggests, is of equity -- within and between generations of physical and capital, including knowledge and technology. It also talks of 'domestic equity' as a fundamental goal of governments and its short- and long-term trade offs, but does not address squarely issues of 'international equity' between North and South in the present generation -- except in terms of industrialized countries, in the transition to sustainability, assuming additional obligations because of having used up resources in the past that limit options for future generations.

A third principle advocated is of 'Environmental Integrity' -- with trade and development respecting and help maintaining environmental integrity by recognizing the impact of human activities on ecological systems. Aspects like species survival or functioning of biological food chains cannot be dealt with through cost internalization and need other policy instruments.

Measures to protect environment, it argues, might represent an "important exception" to normal trade rules, and could take the form of trade bans or quantitative restrictions.

The IISD document then goes on to note that there is a continuing debate over the extent to which trading rules should permit unilateral trade actions (such as bans and restrictions). In such cases of "extra-jurisdictional" environmental problems, depending on how GATT Art XX (general exceptions clause) is interpreted, there might be a need to revise GATT rules to allow special measures to protect the environmental integrity, it adds.

A footnote says that by 'unilateral trade restrictions' the report means those restrictions made in the context of internationally agreed criteria.

A fourth principle invoked is that of 'subsidiarity', namely, action and decision-making priority to be given to lowest jurisdictional level of action; and international policies to be adopted only when this is more effective than actions by individual countries or jurisdiction within countries.

Environmental policies, it concedes, could reflect differences in environmental conditions or development priorities -- leading to different environmental standards within and among groups of countries. Where the environment consequences remain within domestic jurisdiction, other countries should not use economic sanctions or other coercive measures, but where there are significant transborder environmental impacts, solutions should be sought multilaterally.

A fifth principle advocated is of strengthening international cooperation at all levels encompassing environment, development and trade policies, and with procedures for handling disputes that could address all these concerns together.

These, the report adds, might involve changes to existing rules, changes to existing dispute settlement mechanisms or creation of new mechanisms.

The most desirable form of international cooperation to avoid conflicts would be by improving the functioning of the global trading system, with international disputes being resolved internationally through open, effective and impartial dispute settlement procedures.

It then goes on to add: "Unilateral action on transboundary environmental issues -- an option generally available only to a few large countries should be considered only when all possible avenues of cooperative action have been pursued. Trade sanctions are the least desirable policy option, signifying failure by all the parties concerned".

The report goes on to discuss some of these implications including about "cooperation" to achieve full benefits of competition in the international market place, and everyone subscribing to a rules-based international trading system defining conditions of competition in world markets. Making such a system work for sustainable development, it adds, would need new forms of cooperation in some areas. For e.g. introduction of sustainable practices for production of internationally traded commodities with significant environmental impacts might require in innovative new joint regimes of producers and consumers.

In some countries it may involve "exchange of national sovereignty for global progress on sustainable development", it says, and then adds:

"This type of international cooperation will be critical to achieving sustainable development in today's context. Progress on climate change, biodiversity and sustainable forestry practices can only about with the sustained cooperation of developing countries. Such cooperation is unlikely to be forthcoming if these countries feel they are being victimized by unilateral trade sanctions undertaken by large economic powers, in the absence of internationally agreed rules for their use."

The three areas chosen are those where the 'resources' are in the South and their use or non-use or sustainable use needs action by the South. Areas like resources in the North -- past accumulations of capital and technology using the South's resources as 'universal heritage' -- and subjecting the North's sovereignty to international disciplines and agreements do not figure.

Advocating the precautionary principle, the report adds as a sixth principle, that in policies to reconcile trade, environment and development science, specially ecological science and science of complex systems, could provide a basis for many necessary decisions.

However actions might still be needed in face of uncertainty and scientific disagreement, particularly where mistakes may have very serious consequences. It was therefore essential to adopt a precautionary and adaptive approach seeking prevention and easing of environmental stress before conclusive evidence of damage exists and adapt policies as new scientific information becomes available.

A final principle advocated is that of 'openness'. Public participation, including open and timely access to information is seen as essential for formulation and practical implementation of environmental policies and in minimizing risk of "protectionist capture", namely of trade policies manipulated to favour inefficient producers at expense of others.

While it is recognized that openness and accountability should be enshrined in domestic processes, this is much less true at international level. Since action by individual governments often have a significant international effect, there is need for internationally agreed criteria and mechanisms of public participation, access to information and accountability at international level.