(a) Market Access and Environmental Requirements:

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1 TRADE, ENVIRONMENT AND DEVELOPMENT (Item 6): Facilitating Market Access and Making Trade Work for Sustainable Development Presentation by Mrs. Lakshmi Puri, Director, Division of International Trade in Goods and Services, and Commodities 22 March 2007 (a) Market Access and Environmental Requirements: In the recent 2-3 years, UNCTAD s activities at the interface of trade and environment have very much shifted to emphasize non-tariff measures formed as part of environmental, health and food-safety requirements and their impact on market access for developing countries. In this regard, a project on Building Capacity for Improved Policy Making and Negotiation on Key Trade and Environment Issues, funded by DFID-UK and completed in 2006, laid the groundwork for the creation of the Consultative Task Force on Environmental Requirements and Market Access for Developing Countries (CTF), on the occasion of UNCTAD XI, as an extra-budgetary initiative. The key objectives of the CTF are to: (1) analyse the growing number of non-tariff measures, and environmental requirements in particular, that affect trade by developing countries; (2) identify both impacts and opportunities arising from these requirements; and (3) assist developing countries in moving towards pro-active, strategic responses to adjusting to environmental and related health requirements in key export markets. UNCTAD's work at the interface of environmental, health, food-safety requirements and market access has significantly benefited from financial support provided by the Dutch and the UK Governments Activities of on market access and environmental requirements included sectorfocused country case studies involving a large number of developing countries, including Bangladesh, Cambodia, China, Malaysia, the Philippines, Thailand and Viet Nam in Asia; Argentina, Brazil, Costa Rica, Cuba, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua and Panama in Latin America; and Kenya, Uganda and Ghana in Africa. These studies were extensively discussed at national and sub-regional stakeholder dialogues. They showed that voluntary, private-sector-set environmental, health and food-safety requirements are crucial market access requirements in many sectors of key interest to developing countries, yet there is no formal permanent forum for affected stakeholders to raise their concerns with standard-setters. The CTF is unique in providing this function. Online information: The CTF is investigating the possibility of creating an online portal that would help stakeholders identify and retrieve relevant information from the large number of existing databases that already exist. CTF activities and findings have been useful to WTO debates in the SPS Committee and the Committee on Trade and Environment. The WTO secretariat summarized recent UNCTAD findings on environmental requirements and market access in a dedicated document to the Committee on Trade and Environment (WT/CTE/W/244). The UNCTAD secretariat was also requested by WTO to submit a document to the SPS Committee on the impact of private-sector standards on market access (G/SPS/GEN/761). UNCTAD s Trade and Environment Review 2006 was devoted to the subject of developing pro-active approaches and strategies to environmental, health and food-safety requirements in key export markets of developing countries. In addition, a number of monographs that synthesize the main findings of country-case studies are currently under print. These include: 1

2 Food Safety and Environmental Requirements in Export Markets: Friends or Foe for Producers of Fresh Fruit and Vegetables in Asian Developing Countries? Environmental Requirements, International Competitiveness and Market Access in Central America, Cuba and the Dominican Republic - International context and national experiences with special reference to agricultural products Codes for good agricultural practices: opportunities and challenges for fruit and vegetable exports from Latin American developing countries - Experiences of Argentina, Brazil and Costa Rica Challenges and opportunities arising from private-sector standards such as EurepGAP for fruit and vegetable exporters in Asian developing countries - Experiences of Malaysia, Thailand and Viet Nam, and Mandatory and private sector requirement in key export markets and the role of national codes for good agricultural practices in Eastern and Central African countries: opportunities and challenges for fruit and vegetable exports - Experiences of Ghana, Kenya, and Uganda The main findings of analytical and empirical work under the CTF show that in key export markets, requirements on environmental, health and food-safety issues are becoming more stringent, complex, and multi-dimensional. While standards and regulations are not de jure trade barriers as most of them are WTO-consistent measures, they might become trade barriers against the background of lack of capacity in exporting developing countries, and/or aggressive use of legitimate safeguard measures in a manner that restricts rather than facilitates market access. Against this background, weaker economic players in particular, including small countries and small producers, are at risk of marginalization. It is therefore particularly important that Governments pay special attention to their concerns and capacity building needs. When designing pro-active adjustment policies, developing countries should also take full advantage of potential opportunities arising from new requirements that lie in enhancing competitiveness, securing positions in global supply chains, increasing resource efficiency, improving workers health, and reducing pollution. For example, UNCTAD s recent work on National Codes of Good Agricultural Practice indicates that such standards can be useful in upgrading capacities and quality and thus facilitating market access, provided such codes are developed in close consultation with all key stakeholders, and balance national priorities and circumstances with key requirements in export markets, rather than aiming for unrealistic export goals that may disadvantage weaker stakeholders. (b) Organic Agriculture: A Trade & Sustainable Development Opportunity: Latest estimates for global organic markets in 2005 were US$ 33 billion with growth rates of 16%! Sales are concentrated in North America and Europe, but production there lags far behind demand. The share of imported products in total sales is rising steadily and price premiums remain high, with developing countries benefiting tremendously. In fact, a main constraint on export growth in many developing countries is a lack of supply, not demand. Study after study, including recent research co-financed by UNCTAD, shows that in developing countries, organic farmers earn more than conventional farmers. Moreover, organic production systems offer huge advantages in terms of improved health of farmers and their families, better local food security and nutrition, in situ preservation of traditional agricultural knowledge and landraces, and a range of environmental benefits including improved soil, less soil erosion, greater resistance to drought and other types of climatic stress, mitigated climate change, and enhanced biodiversity in and around the farm. 2

3 It is for these reasons that UNCTAD has been giving special attention to organic agriculture in its analytical and technical cooperation activities, guided by the detailed recommendations of the UNCTAD Trade Commission on its sixth session in In 2006, a large section of the Trade and Environment Review 2006 is devoted to this topic. A workshop on maximizing the contribution of organic agriculture to the achievement of MDGs in the Asia-Pacific region was held in October 2006 in Bangkok. And UNCTAD continued its partnership on organic agriculture with other organizations in two collaborative task forces: The International Task Force on Harmonization and Equivalence in Organic Agriculture (ITF), in partnership with the FAO and the International Federation of Organic Agriculture Movements (IFOAM), the global umbrella organization for the organic sector. And the Capacity Building Task Force on Trade, Environment and Development (CBTF), a partnership with UNEP. UNCTAD/FAO/IFOAM International Task Force on Harmonization and Equivalence in Organic Agriculture (ITF): Founded in 2003, the ITF is a open-ended platform for dialogue between private and public institutions dealing with trade and regulatory activities in the organic agriculture sector. Its objective is to facilitate international trade in organic agricultural products and market access of developing countries. The ITF seeks solutions to facilitate international trade in organic products and access of developing countries to international organic markets. It focuses on opportunities for harmonization, recognition, equivalence and other forms of cooperation within and between government and private sector organic guarantee systems. It commissions technical studies to fill information gaps and meets at least once a year to discuss and agree on next steps. It publishes the results of its work in books and on a dedicated website. At its 6th meeting in October 2006, the ITF issued a Communiqué summarizing its main points of agreement, recommendations to Governments, and work plan. The basic vision of the ITF is that organic production should be suited to local environmental and socio-economic conditions, with international trade based on international standards. It therefore encourages Governments to commit to using international standards as the reference point for organic import approvals. The ITF is currently developing the following tools: (a) a set of essential international requirements for organic certification bodies, as a basis for equivalence; and (b) a guidance document for judging equivalency of organic standards. Its next meeting is at the end of The work of the ITF has been made possible through the financial support of the Governments of Sweden and Switzerland. CBTF East African Organic Project (Kenya, Uganda, United Republic of Tanzania, Rwanda, Burundi): Within the framework of the UNEP-UNCTAD Capacity Building Task Force on Trade, Environment and Development (CBTF), a project is being implemented on promoting production and trading opportunities in East Africa. A number of background studies were prepared, including an Overview of the Current State of Organic Agriculture in Kenya, the United Republic of Tanzania and Uganda. Advanced drafts of the studies on best practices for organic policy, organic agriculture and food security in Africa, and international demand for organic products from East Africa are available on the CBTF website. National integrated assessments of the economic, social and environmental impact of organic agriculture are currently being finalized in Kenya, the United Republic of Tanzania, and Uganda. The project has fostered regional cooperation by regularly bringing together key players from the public and private sector from these three countries since Since 2006, Burundi and Rwanda have joined all regional activities. 3

4 This project has facilitated public-private partnerships at national, regional and international levels and catalyzed policy processes to promote organic agriculture in the region. Dozens of activities have been carried out, including facilitating the development of an East Africa Organic Standard (EAOS), with IFOAM, to raise awareness, promote production, unify the regional market and enhance international market access. The EAOS will replace the six public and private sector organic standards that existed in East Africa at the beginning of The text of this standard has now passed the East African Community Standards Committee, and awaits only the approval of the Council of Ministers for official adoption. It will be the first regional organic standard after the EU and the only one developed in a public-private sector partnership in this manner. The East African experience proves that harmonization in organic standards is do-able if the will is there. This is being shared with the ITF, so that other countries can learn from this experience. The European Union and the Governments of Sweden and Norway provided financial support of these activities. The project is convening an East Africa Organic Conference, 28 May 1 June 2007, in Dar-es-Salaam, together with six partners including IFOAM, FAO and ITC. In respect of best practices for organic policy, analytical work carried out for the Trade and Environment Review, the ITF, the CBTF among others leads to a large body of information useful for policy makers who wish to take full advantage of the trade and sustainable development opportunities offered by organic agriculture. The CBTF publication on Best Practices for Organic Policy: what developing country governments can do to promote production and export of organic products, will be published this year. It contains over 40 annotated recommendations, of which five are as follows: First, it is important to engage in dialogue with the organic sector in countries, so that government actions respond to their identified needs. Second, organic agriculture should be mainstreamed into a range of policies, including agriculture, trade, environment, planning and poverty alleviation. Third, strengthen domestic supply by including organics in education and extension, helping farmers to organize themselves, and strengthening domestic organic markets. The latter provides an important springboard for entering export markets. Fourth, don t over-regulate too soon. For emerging organic markets, it is better for governments to play an enabling role to help the production and market grow, rather than focusing scarce resources on policing who uses the word organic. Fifth, embrace the recommendations of the ITF. In particular, have a trade-friendly organic regime that allows for easy import of organic products from other countries that have been produced in a manner equivalent to international standards. Having a wide range of organic products available can actually grow the domestic market as it serves to raise consumer awareness and interest. It can also compensate for shortterm gaps in domestic supply. (c) Liberalization of trade in environmental goods: contributing to mutual supportiveness of trade, environment and development" The Doha Ministerial Declaration Paragraph 31 (iii) provides a new, first-time mandates on liberalization of liberalization of trade in environmental goods. Such new mandates are never easy to deal with. In this particular case, there was a lack of understanding of what constitutes an environmental good; and a total lack of engagement on the part of the developing WTO Members, who perceived the mandate as an agenda essentially driven by 4

5 the developed Members. This perception was amplified by the lack of negotiating experience and the initial focus on the OECD and APEC lists, which, by default rather than by design, provided a starting point in the negotiations. Promoting understanding is thus a priority in dealing with this negotiations mandate. Over three and a half years UNCTAD has produced quite a number of notes and briefs, which form part of the official records of the WTO Committee on Trade and Environment Special Session (CTESS). The Trade Commission considered the subject in 2004, 2005 and The 2003 issue of UNCTAD s Trade and Environment Review was entirely devoted to issues relating to environmental goods and services. UNCTAD conducted statistical analysis of the OECD and APEC lists - and these lists are rather selective in their coverage - trying to help CTESS Members to evaluate the scope for reciprocity. UNCTAD revisited its work on environmentally preferable products, to see whether they can offer export opportunities. And we have used our technical assistance work the projects we have run alone and with our partners, UNEP and the World Customs Organization - to test the results of our analysis. Promoting engagement in the negotiations on the basis of enhanced understanding is the next step. Unlike the OECD members, who had gone through the OECD/Eurostat exercise and have the Joint Working Party on Trade and Environment to discuss CTESS matters, or unlike APEC Members with their experience with the Early Voluntary Sectoral Liberalization, the developing WTO Members needed a platform for collective learning, brainstorming and coordination purposes. At their request, UNCTAD set up a consultative mechanism, which has become known as the Bangkok Group as the first meeting of the Group was held in Bangkok. Over the past two years, the Group has considered quite a number of technical issues, such as the concept of likeness and definitions and criteria, the use of ex-outs in the negotiations and at the implementation stage, and some legal (WTO law) issues implicit in negotiating proposals. UNCTAD has facilitated these meetings, providing, upon request, information, briefings, conducting studies. Learning by doing is another option. Not only did UNCTAD assisted the developing CTESS Members to learn from OECD s, APEC s and UNCTAD s experience, it assisted them engage the expertise necessary to promote their interests as exporters or as importers; take a first step in evaluating reciprocity (through statistical analysis); and to prepare technically viable proposals to the CTESS. Four lines of expertise were indispensable for the task: (1) environmental industry to identify actual products on the market; (2) trade policy and negotiations to evaluate reciprocity and position particular products in the negotiations; (3) environmental policy and regulations primary drivers of the environmental industry; (4) and, last but not least, Customs (tariff classification), which will be responsible for any eventual agreement by WTO Members. In cooperation with the World Customs Organization, UNEP and environmental industry experts of international renown such as Environmental Business International, UNCTAD has put together a multi-disciplinary team and fielded a number of advisory missions to interested WTO Members. In terms of the current focus of work, the soft resumption of Doha negotiations presents the CTESS with a question: how to move forward in a practical and expeditious manner? This was the point made by the US delegation at the last CTESS. A related question is how to ensure a comprehensive treatment of the mandate, which encompasses goods and services, tariffs and NTBs? There are unresolved issues on the table. Other special interests to be addressed include special and differential treatment of developing Members, NTBs and developing countries' interests. 5