EU-LDC Themes - Social, Environmental & Welfare
aspects of Trade - Policy
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Background
Issues and instruments
Relevant policy documents
Links
Background
The European Union recognises that trade, investment and aid can
have both positive and negative impacts on actors within the European
Union and in the rest of the world. Since the European Union is
an important trading partner of, investor and donor in developing
countries, its policies can have a deep impact on sustainable development
in developing countries. In its treaties the European Union and
its member countries have formally committed themselves to contribute
to sustainable development. Accordingly, the policies of the European
Union should comply with this objective. This does not only relate
to the internal policies of the Union but also to the external policies
such as trade, investment and aid policies.
Trade policy
Trade policies themselves can be used as a means to address issues
of sustainable development. In the words of the European Commission,
trade is not an end in itself but a means to an end. An example
is linking trade to environmental standards in order to protect
natural resources. In
cases where trade policies harm sustainable development, the European
Union can change policies or take additional measures to deal with
negative aspects of trade.
The European Union has several policy instruments to address social,
environmental and welfare aspects of trade. The instruments include:
- Trade
agreements among which are the WTO, regional/bilateral agreements
and the General System of Preferences (GSP).
- Sustainability
Impact Assessments (SIAs).
- Development
co-operation.
Trade agreements
The European Union believes that for trade the multilateral level
is imperative since many social, environmental and welfare implications
of trade have a global character and solutions can only be found
at the international level. Therefore, as a multilateral organisation,
the WTO is important to the European Union for addressing issues
of sustainable development through trade policies. Moreover, the
WTO is important as it is one of the few global institutions which
have a mechanism for dispute settlement and enforcement. In addition
to the multilateral level of the WTO, the European Union wants to
contribute to sustainable development at the bilateral and regional
level by including social and environmental issues in trade agreements
between the Union and third parties. Trade agreements can cover,
for instance, clauses on social equity or environmental protection.
Another instrument, which the European Union has at its disposal
is the Generalised System of Preferences (GSP). The GSP aims to
give developing countries preferential access to the EU market through
lower tariffs. In January 2002, the European Commission adopted
a new GSP scheme which is valid until 31 December 2004. The renewed
scheme includes clauses on labour and environmental standards as
well as on illicit drugs production and trafficking. Countries which
abide to these clauses will qualify for additional preferences.
Least developed countries (totalling a number of 49 countries in
February 2003) are furthermore eligible for duty free access to
the EU market (with the exception of a few products) under the ‘Everything
But Arms’ initiative.
Some countries such as India claim that the special clauses
in the GSP are in breach with WTO regulations. At the request of
the South Asian country, the WTO established a panel within the
Dispute Settlement mechanism of the WTO to investigate whether the
EU’s GSP scheme is violating WTO rulings.
User’s
guide to the European Union’s Scheme of Generalised Tariff Preferences,
DG Trade, February 2003
This guide sets out the background and rules of the GSP scheme.
European
Communities – Conditions for granting of tariff preferences to developing
countries – request for the establishment of a Panel by India,
WTO, WT/DS246/4, December 2002
This document has been submitted by India for the establishment
of a panel within the WTO which is to judge on WTO compatibility
of the EU’s GSP.
Sustainability Impact Assessment (SIA)
Another important policy instrument are the Sustainability Impact
Assessments (SIAs). The European Union has introduced SIAs as a
way to assess ex-ante the impact of all its trade policies. If a
SIA shows that a policy harms social and/or environmental conditions,
then the European Union can adjust the policy or take additional
measures to cushion negative effects. An example of a SIA is the
one which is conducted now on the effects of the Doha Development
Round negotiations on developing countries. In the future, SIAs
will not only be concluded for trade policies but for all important
external and internal policy initiatives of the European Union’s
institutions.
Development co-operation
Finally, development co-operation is an important policy instrument
to address negative impacts of trade. The European Union outlines
the overall development co-operation policies in its Country – or
Regional – Strategy Papers (CSPs). The CSPs serve as overall guiding
documents for European Union development co-operation in a specific
country. The papers include issues of sustainable development. In
regard to possibly negative impacts of trade on sustainable development,
the CSPs identify which steps can ex-post be taken to mitigate these
negative implications. For more information on development co-operation
visit the policy
section Development Co-operation theme on our website.
Investment
policies
Similar to trade, investments will
have social, environmental and welfare effects. The promotion of
investment can help to raise labour and environmental standards.
However, investments can also have a negative impact on the economies
in which they are conducted, for example on social conditions when
foreign investors employ children in their factories. Thus far,
there are no international rules for foreign investors. There have
been attempts in the OECD to reach a Multilateral Agreement on Investment
(MAI). In the negotiations for the MAI, there were supporters of
including labour and environmental standards in the agreement. However,
the negotiations for the MAI failed and no agreement was reached.
In the WTO there are ongoing discussions to include investment in
the negotiations, but this is still in a preliminary phase. (For
more information on MAI and the discussions within the WTO on investment
visit the policy section of the FDI/International
Capital Markets theme).
The European Union’s main instrument
to address the social and environmental impacts of investment is
the concept of Corporate Social Responsibility (CSR). The
concept of CSR is that the responsibility of the effects of investment
rests with companies themselves. The European Union aims to promote
the awareness of investment implications among private enterprises
through CSR.
Aid
policies
The discussion on effects on social
and environmental conditions of European Union policies is not complete
without considering aid policies. In most cases aid policies share
objectives of sustainable development and therefore directly contribute
to the social and environmental situation in developing countries.
Different aspects of aid policies are discussed into greater detail
in the policy
section Development Co-operation.
Issues and instruments
In this section you will find information on several issues and
instruments, for which the European Union identifies a link between
trade, investment and sustainable development. The position of the
European Union is described together with the position of developing
countries The issues and instruments discussed here are:
Relevant documents
Communication
from the Commission to the Council on “fair trade”, European
Commission, COM(1999)619 final, Brussels
In this document the European Commission sets out the background
and strategies for the promotion of “fair trade” principles.
ASEAN
Report to the World Summit on Sustainable Development, ASEAN
Secretariat, 2002
This document describes the ASEAN point of view as it was presented
ahead of the World Summit on Sustainable Development in Johannesburg
2002. It describes economic, social and environmental issues from
an ASEAN perspective.
Links
Trade
and development, DG Trade
This link gives on overview of recent policy documents and press
releases on development related trade issues.
Sustainable
trade, DG Trade
This site pays attention to sustainability issues in trade. The
site also serves as input for dialogue with civil society.
UK
Department of Trade and Industry’s section on Europe and World Trade
In the section on Trade issues you can find information on environment
and labour issues. In the section on Trade and Developing countries
there is an explanation of the European Union’s GSP scheme.
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