Jul 25, 1998

 

DEVELOPMENT: TRADE AND ENVIRONMENTAL SERVICES

 

Geneva 24 July (Chakravarthi Raghavan) -- An expert meeting under UNCTAD auspices has called for increased and improved access to international financing for developing countries to facilitate their access to environmental goods and services and for improving their domestic capacities to provide environmental services. 

The expert meeting on 'Strengthening Capacities in Developing Countries to Develop their Environmental Services Sector', in agreed conclusions and recommendations to the UNCTAD Commission on Goods and Services and Commodities also called on the international community to provide technical support for institutional capacity-building, enhancement of social awareness and human resource development in developing countries for the preparation and enforcement of environmental standards and regulations.  

Other recommendations and conclusions to governments included:

The three day meetingwas chaired by France's Mme Laurence Tubiana who is in the Office of the Prime Minister, with several environment and ecological experts, and business participation.  

One of the experts who participated, noted Indian ecologist, Dr. Vandana Shiva noted later that the concept of 'environment service' came up in the UNCED preparatory process - when several governments of the North and some NGOs tried to make the tropical forests, bio-diversity and other such natural resources are a 'global commons', and the countries where these are located rejecting this idea. 

This gave rise to the concept that the forests and other natural resources that these resources and their preservation are an 'environmental service' being provided by the countries where they are located, and that they should be compensated for them.  

But the nature and methodology of the compensation -- cash payments, free access to technology and other resources that have been made into private monopolies of corporations in the North -- became a matter of some dispute, and nothing much came of it.  

But, said Shiva, this concept in travelling from Geneva (where the UNCED prepcom meetings were held) to Rio de Janeiro where the UNCED Earth Summit took place, and coming back to the Geneva of UNCTAD, WTO and its GATS, appears to have undergone a metamorphosis and has become one about privatization of water, sewage and other public utilities in the South, and Northern Corporations able to grab such projects, perhaps with World Bank loans (to the host countries), and providing some technology and other services for profit. Apart from the merits of this, in the whole process the original concept and its implication of a global public good that the international community, and in particular the affluent, richer North which benefits most, paying for this has been lost, and is threatening to become a concept by which the South could provide the growth market for Northern corporations and their profit, said Shiva. 

In opening the meeting, UNCTAD Secretary-General Rubens Ricupero said the issue of trade liberalization in the environmental industry was being discussed in other fora, including the APEC forum, and the EC making such liberalization of environmental services as a priority area for the forthcoming GATS negotiations at the WTO.  

Ricupero noted that the environmental problems faced by developing countries were enormous and put in jeopardy the ecological equilibrium not only of those countries but of the entire ecosystem. One in five of the world's population lacked potable water and half lacked adequate sanitation.  

Efforts to strengthen the capacities in environmental sectors in developing countries are aimed primarily at addressing and eventually solving those problems, but they could also result in their ability to become international providers, increase their capacity to meet environmental requirements in importing markets, become more appealing destinations for FDI, obtain easier access to capital and strengthen their domestic sectors such as tourism.  

The trade in environmental services, Ricupero added, was relatively free of restrictions, but there was scope for further liberalization, especially foreign commercial presence and movement of natural persons.  

In this particular sector of trade, Ricupero saw no conflicts between different objectives of trade liberalization and public health and interest. But the benefits of trade liberalization may not be realized if some preconditions are not satisfied. These included appropriate domestic environmental legislation and setting of economic incentives, transfer of ESTs.

A secretariat paper before the group said that as in other service sectors, trade in environmental services may be affected by lack of market access in other sectors. Engineering, consulting and analytical services are almost invariably in the vanguard of the provision of environmental services, and that liberalization would hence include several sectors in a single package.  

The experience of the developed countries shows that a mixture of regulatory approach and economic incentives are needed, the secretariat paper says, though it uses a questionable terminology of 'command-and-control', evoking the image of the failed centrally-planned economies, to describe the regulatory process.  

The paper however notes that the environmental services sector presents equity problems similar to those in the health sector, and that this points to the need for governments providing a strong and effective regulatory and incentive framework for the private actors to provide the environmental services.  

"Developing countries," it argues, "may therefore wish to set conditions under which domestic and foreign private companies are to operate, possibly in the form of qualifications to market access commitments under GATS."

These qualifications, UNCTAD adds, "could focus on measures to ensure equity -- e.g. maximum prices for consumers; percentage of profits to be reinvested in the infrastructure; or capacity building such as technology transfer, training of personnel, minimum local content etc.  

The focus on 'liberalizing' trade in environmental services and sectors, within the APEC forum, and the EC desire to make this a priority area for the second round of the GATS negotiations -- both alluded to be Ricupero in his opening remarks -- become evident from the data in the UNCTAD report on the state of the market.  

The environmental industry, UNCTAD notes, includes activities producing goods and services that measure, prevent, limit, minimise or correct environmental damage to water, air and soil, as well as problems related to waste, noise and eco-systems. These include cleaner technologies, products and services that reduce environmental risk and minimise pollution and resource use. They also include products and processes to clean up the pollution.  

In the OECD countries, the total environmental expenditure is about evenly divided between public and private sectors, while in developing world about 70% is accounted for by the public sector.  

In 1996, the global environmental market is estimated at $452 billion in revenues (by private and public sector bodies). Around 87% is generated in the US, Western Europe and Japan - with respective shares of 38, 29.5 and 19.3 percent. Asia generated 4.2 percent of the revenues, Latin America 1.9 percent, Middle East one percent and Africa 0.9 percent.

 In the industrialized world, the industry is showing decelerating growth, intense competition, increased consumer sophistication, pricing pressures and attempts at consolidation of market share by larger players and reduced profitability. Rapid growth of the sector in the industrialized world was brought about by implementation and enforcement of environmental legislation.  

While growth was in the range of an annual 10-15 between 1985-1995 in the USA, it has declined to between 1 and 5 percent between 1991 and 1996. In Western Europe and Japan, annual growth rates of 6-12 percent between 1980 and 1990 has declined to between 0 to 5 percent.  

This has induced suppliers in the North to look to the South where rapid market growth can occur.