Building a coherent role for trade in the post-2015 development agenda
What role for trade, and how to build coherence between, the proposed sustainable development goals and the ongoing financing for development talks?
The post-2015 development agenda scheduled to be agreed in New York in September will – it is hoped – guide development plans and policymaking for the next fifteen years. The initiative stems from a UN Conference on Sustainable Development, known as Rio+20 after the Brazilian host city in June 2012, where UN members agreed to develop a set of sustainable development goals (SDGs) to govern future international priorities out to 2030. The SDGs would build on and replace the current Millennium Development Goals (MDGs) that are due to expire at the end of this year. The Rio+20 outcome was geared towards tackling economic, environmental, and social concerns in an integrated manner.
The final set of sustainable development goals and targets will need to be supported by a suite of means of implementation (MOI) measures, which are expected to be drawn in part from the outcome document of the Third International Conference on Financing for Development (FfD3) due to be held in Addis Ababa, Ethiopia in July. The post-2015 agenda and financing for development processes are interrelated in both substance and politics. Getting the goals and targets and support measures over the threshold in September is a delicate negotiating process that is still underway.
Trade-related targets and elements are currently present across the core documents linked to both processes. In an ideal scenario these trade elements would be internally and externally coherent.
To be internally coherent the trade elements of the post-2015 agenda should be mutually supportive. There is also a political element to this internal coherence. Given the breadth of the 17 proposed sustainable development goals, and the 169 targets under them, it is important that the financing for development outcome delivers an agenda that is just as ambitious as the goals themselves.
In terms of external coherence, the trade-related elements of the post-2015 development agenda should ideally not only reflect the global trading system as it is, but point to trade policy’s potential contribution to sustainable development through to 2030. Part of this contribution, for example, could be helping to manage the shift from commodity export-led growth to more diversified and sustainable production and consumption patterns.
A zero draft for the Addis Ababa outcome, prepared by co-facilitators of the preparatory process, usefully updates and fills in critical gaps left by the SDGs’ trade-related references. However, even when read together, the two documents do not yet point to a clear agenda for trade’s contribution to future sustainable development. This article analyses the trade references across both documents and suggests key additions that would help to fill out the broader vision.
Trade and the proposed SDGs
A proposed framework of 17 SDGs and 169 targets agreed in late July last year by a dedicated UN working group includes a variety of trade-related policy reforms – hereafter trade-related targets – that could contribute to different aspects of sustainable development.
The proposed SDG framework includes two kinds of targets. These are general targets whose accomplishment would lead to the achievement of a sustainable development goal and “means of implementation” (MoI) targets that identify enabling actions to support the achievement of other targets. Nearly all of the trade-related targets in the framework are classified as means of implementation. A target around fisheries subsidies in the proposed oceans goal is one exception to this rule.
Several trade-related targets are identified as MoI for specific sustainable development goals. The reform of distortions in agricultural markets, including export subsidies, and other perverse subsidies for fossil fuel consumption and production are listed under proposed goals 2 and 12. Increased support for Aid for Trade is one of only two MoI targets under proposed goal 8 on sustainable economic growth and employment. Several targets also refer to support for access to technology to help address social and environmental priorities, including access to clean water and sustainable energy.
Other trade-related targets are listed under proposed goal 17, “Strengthen the means of implementation and revitalise the global partnership for sustainable development,” as cross-cutting MoI. This means that they are geared towards achieving the framework as a whole. They include strengthening the multilateral trade system under the WTO and completing the Doha Development Agenda (DDA) round of trade negotiations. The targets also cover improving market access for developing countries including through duty-free, quota-free market access with simplified rules of origin (RoO) for exports from least developed countries (LDCs).
The SDG framework of goals and targets is now almost finalised. With 17 goals and 169 targets it is an extremely ambitious and wide-ranging agenda.
Trade in the financing for development zero draft
A zero draft for the financing for development outcome document, the Addis Ababa Accord, released on 16 March, lists eight areas where further action is needed to boost development finance. These include domestic public finance; domestic and international private business finance; international public finance; international trade for sustainable development; debt and debt sustainability; systemic issues; technology, innovation, capacity building; data, monitoring, and follow up.
The trade section in the current zero draft starts by providing a complementary narrative to the trade targets in the SDGs. It explains in paragraph 73 that “a universal, rules-based, open, non-discriminatory and equitable multilateral trading system and meaningful trade liberalisation can serve as an engine of economic growth and promote sustainable development,” while adding that flanking policies are also necessary, “with appropriate supporting policies, trade can also promote decent work, combat inequality and contribute to the realisation of the SDGs.”
The zero draft, building on the outcome documents of the two previous financing for development conferences, complements and adds to the trade agenda in the SDG targets in several important ways. First the zero draft expands on the scope of the SDG trade targets by including trade policy issues beyond multilaterally-agreed rules, explicitly referring to regional integration, regional trade agreements, and investment agreements. It also refers, albeit briefly, to the importance of domestic flanking policies to ensure that trade contributes to sustainable development outcomes. The zero draft also brings back into the post-2015 agenda the crucial issue of trade facilitation that was left out of the final proposed SDGs.
Multilateral trade system
At the multilateral level the zero draft reiterates several trade-related SDG targets, but adds references to recent WTO decisions, thus improving their external coherence. In paragraph 76 the zero draft reiterates the commitment in SDG target 2.b to correct and prevent restrictions and distortions in global agricultural markets, including removing all forms of agricultural export subsidies and disciplining measures with equivalent effect, but amends the target’s language slightly to reflect more precisely the 2005 WTO Hong Kong ministerial mandate.
The zero draft also reiterates in paragraph 78 the call in proposed SDG target 17.12 for implementation of duty-free quota-free (DFQF) market access for LDC exports, in accordance with relevant WTO decisions, including those taken at Bali. The zero draft would also have UN members “consider” simplifying preferential RoO for DFQF exports, which may be a wider, if less ambitious, target than language found in SDG target 17.12.
The zero draft in paragraph 77 would have WTO members reaffirm that special and differential treatment (S&D) is an integral part of WTO agreements, building on proposed SDG target 10.a, but goes further by adding a reference to the 2013 WTO Bali ministerial decision to establish a monitoring mechanism for S&D provisions. It also adds to the proposed SDG framework by calling in paragraph 76 for acceleration of developing country, particularly LDC, accessions to the WTO.
The final proposed SDG framework did not include references to trade facilitation. The zero draft usefully fills this gap by calling on WTO Members in paragraph 74 to ratify the 2013 WTO Trade Facilitation Agreement (TFA). This agreement focuses on the procedural aspects of trade facilitation, like customs systems, sometimes called “soft” trade infrastructure. [Ref 1] The zero draft complements the TFA by adding a focus on “hard” trade infrastructure in paragraph 79 by encouraging multilateral development banks and others to address gaps in regional trade and transport infrastructure.
Policy tensions around regional trade
Paragraphs 73 and 74 of the zero draft reiterate the SDG framework’s commitment to strengthening the multilateral trading system and to concluding the DDA but also emphasise, drawing on language from paragraph 281 of the Rio+20 outcome document, the importance of “meaningful trade liberalisation” as a driver of sustained economic growth. The zero draft then goes on to underscore the importance of regional integration and regional trade and investment agreements, both issues which were not explicitly covered in the proposed SDG targets.
The draft also appears to acknowledge that there are policy tensions associated with the creation of regional trade rules. The first tension relates to the fragmentation of the trade system. In paragraph 79 the zero draft includes commitments both to strengthen regional integration and, where relevant, regional trade agreements. At the same time paragraph 74 commits to strengthen the multilateral trading system and to work towards reducing fragmentation resulting from international trade and investment agreements.
The second tension relates to balancing the benefits of trade rules with the right to regulate for other policy objectives. In paragraph 81 the zero draft suggests transparent negotiation and implementation of regional trade and investment agreements will help to ensure the agreements do not constrain policymakers’ ability to address other sustainable development priorities, including addressing inequality, protecting the environment, or ensuring adequate tax revenues. The same paragraph would also see UN members commit to strengthen safeguards in investment treaties, through the review of investor-state-dispute-settlement (ISDS) clauses, in order to ensure policy space for social, economic, and environmental policy objectives.
Domestic policy frameworks
In paragraph 80 the zero draft calls on countries to “implement sound domestic policies and reforms conducive to realising the potential of trade for sustainable development.” This crucial addition underscores the importance of countries’ domestic policy frameworks for harnessing the benefits of trade for sustainable development. The national public finance section of the zero draft points to some relevant policies in this regard, including around transparent public procurement in paragraph 30, as well as the gradual elimination of harmful subsidies such as those to fossil fuel production and consumption in paragraph 33. Both of these issues are also reflected in some of the proposed SDG targets.
Read together the proposed SDGs and the zero draft provide a comprehensive, but arguably incomplete, to-do list for trade’s contribution to sustainable development through to 2030. Some key elements that could be given greater priority are those that could support diversification of low-income economies. These include the reduction of trade costs, the importance of services, as well as support for building productive capacity to use the market access targeted in several of the proposed SDGs.
At a multilateral level it might be useful to articulate a role for the WTO beyond simply concluding the Doha Round and accelerating accessions. With respect to regional trade agreements, the financing for development outcome document could say more about how to address the two policy tensions hinted at in the zero draft. For example, the final outcome document could encourage governments to design regional agreements to be inclusive, to avoid, or limit potential fragmentation effects in the global trade system.
For low-income countries seeking to increase and diversify their exports, and become part of global value chains of production, reducing the costs of trade generally can be important. While the inclusion of trade facilitation in the zero draft is very welcome, experts have argued that having a specific reference to the reduction of trade costs could help to galvanise further action. Not only could this help to make exports more competitive but it could also widen the range of inputs available to produce those exports. Another element that could help to support the SDG targets on economic diversification and access to global value chains is an explicit reference to the importance of services both for domestic consumption and export.
More broadly, it would seem to make sense for the financing for development outcome document to underscore the importance of building productive capacity in low-income countries to trade both goods and services and explicitly link this to possible sources of support, such as Aid for Trade.
At a domestic level one area of perverse subsidies that is mentioned in the proposed SDG targets but not directly in the zero draft, despite its direct implications for sustainable development, is the reform of fisheries subsidies. Fishery trade is now woven into the reference to reform of distortions in agricultural markets, but this clouds the issue of agricultural market reform, and obscures the very real need to address harmful subsidies that contribute to unsustainable levels of fishing activity and distort global markets.
The proposed trade-related targets in the SDGs and the financing for development zero draft contain many of the key elements of a coherent trade agenda for sustainable development to 2030. Some gaps are nevertheless evident. The next fifteen years will present challenges and opportunities for many countries looking to manage the shift from commodity export-led growth to more sustainable and diversified production and consumption.
A coherent vision for trade’s contribution to the post-2015 development agenda could emphasise the importance of building diversified productive capacity and mobilise support to do so. It could include support for targets around access to global value chains by underlining the importance of reducing the cost of both exports and inputs and investing in services. It could point to an ongoing active role for the WTO through to 2030 and signal the importance of ensuring that, as far as possible, regional trade agreements are designed to be inclusive.
Alice Tipping, Senior Programme Officer, Environment and Natural Resources Programme, International Centre for Trade and Sustainable Development (ICTSD). Tipping is also the Group Manager of the E15Initiative Expert Group on Oceans, Fisheries, and the Trade System and a member of the E15 Task Force on Subsidies.
This article draws on ideas discussed at ICTSD’s dialogue on Trade in the Post-2015 Agenda: Building coherence held on 31 March 2015.
[Ref 1] Portugal-Perez, Alberto and John S. Wilson, 2010, Export Performance and Trade Facilitation Reform: Hard and Soft Infrastructure, World Bank Policy Research Working Paper, No. 5261.