The impact of international trade on sustainable development

In document Schwerpunkt Außenwirtschaft 2019/2020 (Page 186-190)

complementary for many years now (Repetto, 1995). This complementarity implies a two-way street: in many countries, open trade policies have promoted sustainable development. Conversely, certain environmental policy objectives would be needed to ensure countries reap the benefits of liberalising interna-tional trade (Repetto, 1995). An example of this in the European Union is the introduction of Trade and Sustainable Development (TSD) chapters in trade agreements.

186 European trade policy and a sustainable world: facing the challenges ahead Figure 5: Food: greenhouse gas emissions across the supply chain

Source: retrieved from, February 2020.

International trade is recognised as a driver for inclusive growth and poverty reduction (World Trade Organization and The World Bank, 2018). The EU, as the world’s largest exporter and importer combined, is in a pivotal position to help the world’s poorest economies to surmount their difficulties when it comes to exporting and realizing the full benefits of international trade. The EU has deployed several trade policy instruments to assist developing countries, and in particular LDCs, to use trade as an engine for sustainable development.

The EU has put in place three types of unilateral trade preferences to the benefit of developing countries:

• Standard GSP: The general arrangement grants duty reductions for around 66% of all EU tariff lines to low income or lower-middle income countries (according to the World Bank classification), which do not benefit from oth-er prefoth-erential trade access to the EU market (currently 15 beneficiaries1).

• GSP+: The special incentive arrangement for Sustainable Development and Good Governance (‘GSP+’) grants full duty suspension for essentially the

187 same 66% of tariff lines as the Standard GSP to eligible countries that are vulnerable in terms of their economic diversification and export volumes.

In return, beneficiary countries (currently 8 of them) must ratify and ef-fectively implement 27 international conventions, which cover human and labour rights, environmental protection and good governance.

• Everything But Arms (EBA): This special arrangement grants full duty-free, quota-free access for all products except arms and ammunition to coun-tries classified by the United Nations as Least Developed Councoun-tries (LDCs).

Unlike for the beneficiaries of the Standard GSP and GSP+, LDCs benefiting from the EBA (currently 48 of them) do not lose EBA status by entering into a trade agreement with the EU.

An issue of particular relevance when discussing international trade and pover-ty is labour rights. It is a well-known fact that poorer countries have a compara-tive advantage in producing labour-intensive products, due to unskilled, cheap labour. The inclusion of labour standards in trade agreements has long been seen as a way to promote better working, in line with ILO core labour stand-ards (Artuso and McLarney, 2015). The GSP+ arrangement is one of the EU’s primary tools to promote sustainable development in vulnerable developing countries. Countries have to fulfil two additional sets of criteria: (i) vulnerabil-ity (consisting of imports share and economic diversification) and (ii) sustain-able development. As concerns the latter, they have to ratify 27 core interna-tional conventions on human and labour rights, environmental protection and good governance. Moreover, countries must not have formulated reservations which are prohibited by these conventions; and the most recent conclusions of the monitoring bodies under those conventions must not identify any serious failure to effectively implement them (European Commission, 2020a).

In the particular case of the EU, the support for workers’ rights, and envi-ronmental and climate objectives, have made their way into the community’s Free Trade Agreements. In accordance with the Trade for All strategy, the EU’s FTAs must contribute to boosting jobs, sustainable growth and investment in Europe and outside, through the Trade and Sustainable Development (TSD) chapters (European Commission, 2017). The TSD chapters include inter alia commitments on the effective implementation of the fundamental conventions of the International Labour Organisation (ILO), and on promoting the sustain-able management of natural resources, as well as on ruling out the lowering of labour and environmental standards in order to promote trade and invest-ment. All EU FTAs since the EU-Korea FTA include these TSD chapters. These chapters also contain articles to promote trade and FDI in environmental goods and services (like renewable energy and energy efficient products) and in goods that are subject to schemes such as fair and ethical trade and those involving corporate social responsibility. They also promote dialogue and cooperation be-tween the parties on sustainability related issues and reserve an active role for civil society monitoring. Other concerns can also be addressed through trade agreements. An example of this is the EU-Chile FTA, which will include com-mitments on gender.

188 European trade policy and a sustainable world: facing the challenges ahead

International trade also has a role to play when it comes to addressing cli-mate change. Some of the most relevant effects of trade liberalization and trade agreements on the environment can be explained through three “mechanisms of action”: the scale effect (the liberalization of trade and the subsequent eco-nomic growth will increase resource depletion and pollution), the composition effect (with the liberalization of trade, countries specialize in sectors in which they have a greater comparative advantage – this advantage may result from more lenient environmental regulations, which will be detrimental for the en-vironment), and the technique effect (following trade liberalization, methods of production may change, leading to less output of pollution per unit of product – this is particularly true for developing countries) (Grossman and Krueger, 1991). There are plenty opportunities to stimulate climate-friendly trade flows, from the removal of tariff and non-tariff barriers on environmental goods and services, to more transformative policies like border adjustment carbon taxes (The Economist Intelligence Unit, 2019).

There are those who find that international trade might not be supportive of global environmental objectives. This line of argument is followed by recom-mendations such as eating locally – the idea of buying produce and protein closer to our homes (Ritchie, 2020). This is, however, a fallacy, as most of the detrimental impact for the environment comes from food production itself and not from its transport to our plates. Figure 5 displays the greenhouse gas emis-sions from land usage (for growing produce or for feeding cattle), until packag-ing. The two most important takeaways from figure 5 (which is the result of the work by Joseph Poore and Thomas Nemecek) are the fact that greenhouse gas emissions vary greatly across different foods and the fact that land usage and farming are by far the most responsible for the emission of gases, and not the transport of the food. It is important to note, however, that not all trans-port is innocuous. The (little) food that is air freighted is responsible for up to 50 times more carbon dioxide emissions that the food that is transported by boat (Ritchie, 2020).

Although the TSD chapters have come a long way – from being non-existent to being part of major EU trade agreements –, there is still room for improve-ment when it comes to their impleimprove-mentation and enforceimprove-ment. The way for-ward regarding this issue is clearly outlined in a 15-point action plan. The first of the four major strands of the action plan is working together. This includes strengthening the partnership with Member States and the European Parlia-ment, and other institutions in Brussels, and promoting a systematic coordina-tion with the internacoordina-tional organisacoordina-tions, including the ILO (European Com-mission, 2018). The second focus of the action plan is the enabling of civil society.

In this regard, the action plan intends to support the civil society in monitor-ing the FTAs implementation, promotmonitor-ing best practices, extendmonitor-ing the scope of these bodies to other parts of the agreements (eg technical barriers to trade, or sanitary and phytosanitary measures), and enhancing the role of business to promote sustainability by working with the parties of FTAs to promote Corpo-rate Social Responsibility/Responsible Business Conduct.

189 The action plan also focuses on delivering results under the TSD chapters. To achieve these objectives, the European Commission aims at identifying priori-ties per FTA partner to enable a more efficient implementation of commitments under the agreement, improving the compliance with commitments through the full use of the tools available (like resorting to the dispute settlement mechanism), and ensuring that the partner countries ratify key conventions in labour and environmental international agreements. Monitoring of the TSD chapters is a priority, as illustrated in the preparation of annual reports on FTA implementation, as is the increase in resources that support the implementa-tion of TSD chapters, and stronger and more detailed provisions on climate ac-tion and labour convenac-tions. Equally important, there is also a strong focus in the action plan on transparency and communication.

The European Commission aims at communicating developments and re-sults of the work carried out with development partners and civil society on TSD, as well as giving timely responses to submissions received from stake-holders on the matter at hand. Besides ensuring the proper implementation and enforcement of the TSD chapters in EU FTAs, the European Commission also strives to measure the impact of potential FTAs, as well as evaluating the objectives accomplished by FTAs already in place. To do this, the Commission services make use of specific instruments like ex-post evaluations and Sustain-ability Impact Assessments.

3 Sustainable development: measuring success and evaluating

In document Schwerpunkt Außenwirtschaft 2019/2020 (Page 186-190)