26 September, 2016 - The year 2015 marked a defining chapter in the international agenda for sustainable development with key milestones. These include the Financing for Development conference in Addis Ababa in July, the UN summit in September where the 2030 agenda for Sustainable Development and the Sustainable Development Goals (SDGs) were adopted, the Paris Climate Change Conference with its historic agreement, and the 10th World Trade Organization (WTO) Ministerial Conference concluded in Nairobi with a package of trade and development initiatives. The outcomes of these events are expected to guide the way for sustainable development in the post-2015 era and advance the global agenda of environment and trade.
The changing landscape of global trade and environment
Over the past decades, world trade has gone through vast changes in several ways. In terms of volume, international trade has doubled its share of world GDP over the past 50 years to about 30 per cent. The rising scale and scope of global value chains have transformed the way of trade as well as consumption and production. Emerging economies and developing countries have played a growing role in international trade and production networks. The share of developing economies’ exports in world trade expanded from 26 per cent in 1995 to 44 per cent in 2014.
Today, south-south trade takes up one third of world trade and continues to grow at full speed. More than half of developing country exports in value-added terms involve global value chains. A growing number of developing countries have benefited from value chain integration. These developments impact the environment. Trade openings and connecting to the global market add additional pressure on natural resources. Growing demand for food, energy and raw materials could accelerate resource depletion and ecosystem imbalance, particularly in many least developed countries whose exports are dominated by natural resource products. In addition, relocation of production from developed countries to developing countries gives rise to cross-border environmental impacts which are more difficult to monitor and manage. All of these are likely to be further exacerbated by the immense challenge of climate change and its impact both on trade patterns and the environment.
On the other hand, trade allows more efficient allocation of resources at global level, which, if managed properly, leads to sustained and sustainable economic growth and welfare improvement. For example, by opening markets and facilitating technology diffusion, trade helps to boost the development of goods and services that contribute to environmental sustainability. This has been vividly demonstrated by recent developments in renewable energy.
The International Energy Agency estimates that renewable energy will represent the largest single source of electricity growth over the next five years, driven by falling costs and significant expansion in emerging markets. A recent UNEP study shows that south-south trade in renewable energy grew at a rate of about 30 per cent annually from 2000-2011, faster than global trade in the same sectors. Overall, the southsouth trade in renewable energy products made up more than one quarter of all global trade in this sector. Developing countries led by China went from net importers to net exporters of renewable energy goods in 2007.
These opportunities arising from green trade and investment are also open for developing countries. UNEP’s Green Economy and Trade Opportunities Project (GE-TOP) has recently assessed and explored economic and social gains from greening trade in five developing countries. It finds, for example, that a grid connected 100 MW solar plant in Ghana could drive annual exports of US$ 38 million, save 40,000 tonnes of carbon annual emissions, create 3,000 direct jobs, and provide livelihoods for 23,000 of the poorest people. In Peru, the studies found that between 2009 and 2014, biotrade exports increased from US$ 7.6 million to US$ 58.8 million, offering a high potential of improving the economic and social conditions in the least developed regions in the country. Sustainability certification in Peru results in better market access and sales for native biodiversity-based products. In Vietnam, UNEP’s study illustrates that sustainability certification for shrimp increases a farmer’s profit up to 15 per cent due to increased export opportunities. These cases provide strong evidence that developing countries could harvest multiple gains from green trade.
An evolving agenda
The global agenda on environment and trade dates back to the 1972 Stockholm Conference. The landmark Rio summit in 1992 further advanced the debate by reaffirming the role of trade in promoting sustainable development. The establishment of the WTO in 1994 opened a new era for global trade governance, with sustainable development clearly enshrined in its founding document. Later on, the Doha Development Agenda included the environment as part of the negotiations with the overarching objective of enhancing the mutual supportiveness of trade and environment. Within this context, work focused on the liberalization of environmental goods and ser vices, while improving synergies between WTO rules and multilateral environmental agreements as well as reducing environmentally harmful subsidies.
The changing landscape of global trade and the environment over the past few years adds new dimensions to the debate and prompts new policy responses. While Heads of State at the Rio +20 Conference in 2012 already emphasized the role of trade as an engine for sustainable economic growth and development, the newly adopted ‘2030 Agenda for Sustainable Development’ concretely identifies trade as a crosscutting vehicle for implementation of the SDGs and calls for trade-related policy and institutional coherence (Goal 17). The SDGs are, for the first time in history, universal in nature.
Trade policy instruments, such as sustainability standards and certification, government procurement, subsidies, and the tariff reductions for environmentally sound technologies, can – if applied properly– serve as effective levers to foster environmentally friendly growth and contribute to several SDGs. These include SDG 1 on poverty elimination, SDG 2 on food security and sustainable agriculture, SDG 7 on energy, SDG 12 on Sustainable Consumption and Production, SDG 13 on climate change and SDG 14 on marine resources.
At the same time, the rise of plurilateral trade agreements and regional trade agreements, particularly the megaregional, have brought new prospects, but also many new challenges, to environment and trade linkages. One of the promising examples is the ongoing plurilateral negotiations between 17 parties on Environmental Goods Agreement (EGA), including some of the biggest traders of environmental goods such as the EU, China and the US. The deal aims to reduce tariffs for selected environmental goods and thus further boost trade in green goods. In the longer run, and if extended in scope and to more countries, this could provide an important stimulus to international trade in environmental technologies. The European Commission estimated that a successful completion of the EGA would lead to an increase of EUR 21 billion in trade and a potential reduction of 10 million tonnes of C02 emissions by 2030 on the baseline scenario.
Other examples can be found in growing environmental provisions in regional trade agreements. The WTO estimates that nearly 60 per cent of these agreements contain provisions related to environment that go beyond WTO commitments.The newly launched mega-regional trade agreement, the Trans-Pacific Partnership (TPP), between 12 pacific rim states including the US, Canada, Japan, New Zealand, Vietnam, and the Philippines, pays particular attention to conservation of marine species, sustainable fisheries management, combating wildlife trafficking and biodiversity. In the Transatlantic Trade and Investment Partnership (TTIP) negotiations, issues related to the environment, including common standards and regulatory norms, corporate social responsibility, transparency, and dispute settlement, still remain very controversial.
Apart from the public sector, business and industry increasingly recognise the trade opportunities arising from shifting towards more sustainable consumption and production patterns. Business practices – such as sustainable management of supply chains, innovations that improve resource and energy efficiency of production and closed loop recycling of materials – can substantially reduce the environmental footprint of production and trade while generating tangible economic gains for companies. UNEP study shows that eco-innovative companies are growing at an average rate of 15 per cent annually. A growing number of public and private sector players are taking action to scale up clean energy technologies under the Sustainable Energy Trade Initiative and calling for tailor-made trade policies for sustainable energy solutions. It is also noteworthy that more than 50 large companies, including IKEA, Swiss Re, Bloomberg and Coca-Cola have joined the RE100 Initiative and committed to switch to 100 per cent renewable electricity.
The way forward
Following the historic breakthroughs in 2015, the year 2016 will be a crucial for implementation of the sustainable development agenda. To fully harness the synergies between environment and trade and fill in the gap between policy and practice, UNEP has launched the Environment and Trade Hub as a new mechanism to offer capacity building and policy advice on sustainable trade and investment. As a demand-driven mechanism, the Hub offers capacity building and related policy advice on sustainable trade and investment that are tailored to local needs and circumstances.
Through the Hub, UNEP as the leading global environmental authority assists countries in developing capacity towards using trade as a driver for achieving the 2030 agenda. This would include targeted training to support international, regional and national design along with the implementation of sustainable trade and investment policies; assistance in designing trade and environment related agreements; identification and dissemination of best practices; as well as the identification of sector or region-specific sustainable production and trade opportunities.
SDG 17 gives special emphasis on partnership as key to achieving sustainable development. By working through a network of national, regional, and international partners, the work of the Hub will contribute to global efforts in achieving sustainable development through green trade and investment. It will also help to engage and encourage collaboration between different stakeholders that only through exchange, better mutual understanding and partnership can make a difference. Particularly, alliances and partnerships among public and private sector, civil society and financing institutions will be key in scaling up green trade and driving a paradigm shift towards more sustainable patterns of trade, consumption and production, reduced poverty and better natural resource protection.
This article was originally published in On Trade magazine
