8:53 AM Feb 18, 1994

TRADE MEANS TO DEVELOPMENT, NOT END IN THEMSELVES

Geneva 17 Dec (TWN) -- Trade and Environment protection are not end in themselves, and the pursuit of sustainable development is the ultimate goal, and national and international policies and instruments must subserve this, UNCTAD Secretary-General Kenneth Dadzie told a high-level meeting on Environment and trade here.

UNEP Executive Director, Elizabeth Dowdeswell, in a similar vein told the same meeting that trade and environment should share a common purpose and be "mutually supportive".

Acknowledging the jurisdictions and competences of various organizations, Dowdeswell that a starting point for working together would be a recognition of the "jurisdictional rights of countries, in particular developing countries, to exploit their own resources -- a fundamental principle of Rio".

"We must provide individual countries, on their terms and in pursuit of their national self-interests -- with better access to environmental technologies and with the means to close widely differing marginal social costs in environmental protection. Developing and developed countries are not at conflict over diverging environmental values, but over development gaps."

The concept of 'getting the price right', a long cherished goal of trade specialists, she said, was an important tenet of the environmental community and called for internalization of ecological externalities -- a long and exacting process, she noted.

An issue of crucial importance to the trade-environment debate, she said, was the clarification of expectations from science in setting environmental policies, national standards and minimum international standards. However, it was almost impossible to link environmental cause and effect with 100 percent certainty, and even more so in understanding ecological risk. Hence the strong advocacy of the precautionary principle, she said.

Dadzie said that making trade and environment mutually compatible in pursuit of sustainable development should be an important element of national economic policy-making in developing countries. And this would require, at national levels, encouragement of "sustainable consumption", strong incentives for "sustainable production", and acceleration of development and diffusion, especially to developing countries.

While this required a profound understanding of linkages between trade and environment, "often too much is made of this linkage", Dadzie said.

Only those policy measures should be chosen with the most direct and effective impact on the problem to be resolved. In particular the appropriate measure to resolve an environmental problem was an environmental one, which could include economic instruments like tax and subsidy. But trade policies were not appropriate in such situations, unless trade itself created the problem -- such as emission of carbon dioxide and nitrous oxides from lorries transporting goods across borders.

Trade could also promote global environmental goals, by facilitating dissemination of environmental standards, as countries found themselves obliged for reasons of competitiveness to adhere to higher standards for their traded goods sector compared to their domestic economy. Having incurred fixed costs to make the change over to higher standards, they might well decide to realise scale economies and use the same technologies and practices in the domestic sector.

However, trade or any other economic activity could also harm the environment if based on prices not reflecting the true resource scarcities. But where the true environmental costs are not internalized and reflected in prices of goods and services, trade could be a magnifier of the distortions due to underlying policy failures but was not creating the distortions.

The fears that environmental policies of the OECD countries might act as non-tariff barriers to trade dominated most of the debates on trade and environment in developing countries, Dadzie noted. While empirical evidence on this was scant, and UNCTAD had now a programme to collect information, what could be said was that in a context when a large number of developing countries had launched bold trade liberalising reforms, trading opportunities and sustainable development of these countries could be seriously affected if national environmental policies of the OECD countries acted as disguised barriers to trade.

"Adherence to multilateral principles on use of trade measures for environmental purposes is therefore essential," Dadzie said, adding that multilateralization should also play an important role in the efforts towards cost internalization.

Adoption of a process for cost internalization to be agreed and coordinated multilaterally would avoid adverse impacts and help build "peace between trade and environment".

Also needed were incentive-based mechanisms to encourage developing countries to internalize environmental costs such as by facilitating transfer of environmentally sound technologies and finance to encourage countries to adopt and implement higher standards.

A major reason why environmental policies and standards of OECD countries were perceived to be potential barriers to trade of developing countries, the UNCTAD head continued, was that in formulating them the characteristics of productions or production processes used in developing countries were generally ignored.

Even the information requirements for certifying a product to be environmentally sound might be onerous, particularly in the context of small-scale production units in the developing world. Even if their products were environmentally sound, it might be difficult to obtain the necessary certificates.

A possible solution would be to set in motion some special forms of certification for 'environmentally friendly' products produced by developing countries -- an area where UNEP and UNCTAD were considering joint initiatives and actions.

Such standards though should be based on equivalent environmental standards, namely, certification of products that improve the local environment of the producing country. The system for setting and recognising such standards should provide for mutual recognition of certification schemes and should be based on internationally agreed guidelines outlining the broad criteria for certification.