Harnessing trade policy in the sustainable development goals

2 September 2014

Trade-related issues have been included across the proposed SDGs. This article focuses on key places where the integrated framework brings trade or economic tools to bear on environmental challenges. 

UN working group tasked with developing a recommended list of sustainable development goals (SDGs) in July released an outcome document setting out 17 proposed goals supported by over 160 targets. The new goals will be geared towards replacing the Millennium Development Goals (MDGs) when they expire next year. In addition to integrating and balancing the social, economic, and environmental dimensions of sustainable development, the SDGs are meant to build on a vast array of existing international commitments, including elements of the MDGs that have not yet been achieved. The debate around the new framework is important for a number of reasons. The final set of SDGs, as a list of universal targets endorsed by UN member states, will be an important signal of policy priorities for the global community. If they follow the pattern established by the MDGs, political attention and funding is likely to gravitate towards at least some of them. [Ref 1] The overriding objective is that the goals and targets will shape national sustainable economic development plans and the subsequent actions of governments, international organisations, and civil society pursuant to these.

Designing an integrated, universal agenda of priority goals and targets has been far from easy. Despite efforts by the co-chairs of the Open Working Group on Sustainable Development Goals (OWG) – as the UN body is formally known – participants were not able to agree to shorten the list below the current proposed 17 goals, compared to just eight MDGs. With such a comprehensive mandate, delegations have been particularly concerned to ensure the goals and targets chosen are coherent with existing international commitments, while not pre-judging the outcomes of ongoing international processes. One of these is the WTO’s Doha Development Agenda (DDA) negotiations a number of elements of which overlap with trade-related targets discussed in the OWG.

Trade-related targets in the SDG framework

Trade-related issues appear across July’s outcome document. Several systemic trade-related targets are included under proposed goal 17 as cross-cutting “means of implementation” (MoI) for the entire framework of goals. Trade-related targets are also linked to specific goals, usually but not always as MoI, which suggests recognition that carefully designed trade policy, as part of a broader policy framework, can make a contribution to many aspects of sustainable development.

The trade-related targets under proposed goal 17 reflect, with some updating and expansion, several of the targets and indicators included under MDG 8 on developing a global partnership for development. The first proposed target refers to the promotion of a “universal, rules-based, open, non-discriminatory and equitable multilateral trading system under the WTO,” including the conclusion of the DDA. The focus on the global trade body sends a strong message about the centrality of that institution and the Doha Round to sustainable development. However, it also arguably narrows the scope of the proposed target to just one part of the international trade system, leaving out new trade rules increasingly being developed in bilateral, regional, and plurilateral trade agreements. The second proposed target refers to increasing exports of developing countries, including doubling least developed countries’ (LDCs) share of global exports by 2020.

The third proposed target refers to implementing duty-free quota-free (DFQF) market access for LDC exports, consistent with WTO decisions. Recent WTO decisions encourage both developed countries, and developing countries declaring themselves in a position to do so, to provide or improve DFQF treatment to imports from LDCs. Several developing country WTO members – China, India, the Republic of Korea, Chinese Taipei and Turkey – already provide some DFQF access to LDC exports. [Ref 2] The proposed target also includes ensuring that rules of origin (RoO) are transparent and simple to facilitate LDCs’ use of their preferential market access. Rules of origin dictate how much processing must take place on a particular good or product before it can be considered to originate from a given country. Restrictive and complex RoO – which a country must comply with in order to take advantage of an intended trade preference – can make it difficult for poor countries to use such preferences. [Ref 3] At a ministerial meet last December, WTO members adopted a set of non-binding guidelines for preferential RoO for LDCs, also with the objective of making them simpler and more transparent.

More specific trade-related MoI and targets are integrated across the framework. For example, the correction and prevention of restrictions and distortions in global agricultural markets, including elimination of agricultural export subsidies and export measures with equivalent effect through the DDA, is identified as a means of implementation that would support the proposed goal 2 on ending hunger and supporting sustainable agriculture. More Aid for Trade support – including through the WTO-coordinated Enhanced Integrated Framework that mainstreams trade into LDC development plans – is one of only two MoI put forward under proposed goal 8 on sustainable economic growth. The specific MoI and targets that deserve most attention from a trade and environment perspective, however, are those that bring trade or economic tools to bear on environmental challenges.

Fossil fuel subsidies

Finding language for a universal target on fossil fuel subsidy reform did not prove easy in the New York process and a separate contact group was established in the last week of the OWG’s meetings in July to try and find compromise text. Previous drafts of the SDG framework included relatively straight-forward language around phasing out fossil fuel consumption and production subsidies, with the need to ensure access to energy for the poorest, as a target under the proposed sustainable energy goal.

The final goal-specific MoI under the sustainable production and consumption goal broadly reflects, with some revisions and new caveats, the language agreed in the outcome document from the UN sustainable development conference held in June 2012 in Rio de Janeiro, Brazil that launched the SDG process. Paragraph 225 of The Future We Want reaffirms the commitment by some countries – namely G20 and APEC economies – to phase out inefficient and harmful fossil fuel subsidies. It then invites other countries to consider rationalising their own subsidies by removing various market distortions, including those created by taxation systems, and subsidies where they exist. The MoI target in the proposed SDGs framework draws on the invitation element of this language, focusing on rationalising inefficient fossil fuel subsidies that encourage wasteful consumption through the removal of market distortions, in accordance with national circumstances. As in paragraph 225, the removal of distortions can include restructuring taxation systems and reforming harmful subsidies, where they exist, to reflect their environmental impacts.

Returning to previously agreed language is a common solution for negotiators short on time, but if the language were to be revisited in the UN General Assembly (UNGA), a couple of points are worth noting. The broader language around removal of market distortions probably widens the scope of the target so it is relevant to many national situations, but the inclusion of caveats like “in accordance with national circumstances” also provides countries with more flexibility around how they address the issue. In addition to identifying the implications of the final proposed language coming out of the OWG in this area, commentators around fossil fuel subsidies have also pointed out that the target should be linked to the sustainable energy goal.

Fisheries subsidies

The fisheries subsidies target under the proposed oceans goal also proved controversial, as OWG participants grappled with its scope and how to ensure it was consistent with the slow-moving DDA negotiations, which include disciplines on fisheries subsidies. The target is one of the only trade-related targets not classified as a means of implementation. The proposed target’s language is a negotiated outcome and not completely clear, but it appears to set a date of 2020 for the achievement of three things: the prohibition of certain fisheries subsidies that contribute to overcapacity and overfishing; the elimination of subsidies that contribute to illegal, unreported, and unregulated (IUU) fishing; and a standstill on new such subsidies. According to a footnote these three elements should be achieved while taking into account the ongoing WTO negotiations and the integral nature of special and differential treatment for developing countries in those negotiations.

This language raises a number of questions. The first, more general, issue is that it is not clear from the drafting how the target and its various elements should relate to the WTO negotiations on fisheries subsidies. For instance, the Doha Round is mandated to develop a prohibition on certain subsidies that contribute to overcapacity and overfishing. Establishing a prohibition as part of an SDG could make achievement of this target – by a certain date – dependent on the outcome of a negotiation in another forum. A similar question around the feasibility of this approach came up during OWG discussion in connection with the climate change targets and their relationship to the UN Framework Convention on Climate Change (UNFCCC) process. Tying the scope of the target too closely to the WTO negotiations could also limit the reform activity, and corresponding financial support, that could otherwise be covered by the target.

One way of clarifying the relationship could be to set a broad target of the elimination of fisheries subsidies that contribute to overcapacity and overfishing, including through the completion of the DDA mandate on fisheries subsidies. This wider formulation would enable countries to establish their own nationally-appropriate subsidy reform targets, and implement them in parallel with the WTO negotiations, ideally with the support that inclusion in the SDGs could bring. This structure would mirror a similar target around the elimination of subsidies that contribute to IUU fishing and over-capacity under para 31.f of the Johannesburg Plan of Implementation, the outcome document of the World Summit on Sustainable Development held in 2002 in South Africa. A broader target could be supplemented with what appear to be the other two priority issues identified in the current proposed fisheries subsidy target. A standstill together with the elimination of IUU fishing subsides, by 2020, would signal the urgency of required action. Similar ideas have received high-level political attention. The Global Ocean Commission, for example, has called for the capping of fuel subsidies to high seas fishing and their phase-out within five years.

A further option that could fill a gap in the framework would be to reflect the need to address trade in illegally harvested fish products. In 2009 UN Food and Agriculture Organization (FAO) members concluded an Agreement on Port State Measures to Prevent, Deter and Eliminate Illegal, Unreported and Unregulated Fishing designed, among other things, to stop IUU fish products from being accepted at fishing ports and then entering trade. This element could be reflected in target 14.4 on IUU fishing or under target 15.7 under the proposed terrestrial ecosystems and biodiversity goal, which highlights the need for urgent action to end illegal trade in protected species of plants and animals.

Environmentally sound technologies

Several targets in the outcome document refer to increased international cooperation to improve diffusion of, and access to, technologies that would help to address environmental challenges. One of the specific MoI identified under proposed goal 6 on water and sanitation is the expansion of “international cooperation and capacity-building support to developing countries” around water and sanitation activities and technology. Similarly, proposed goal 7 on access to sustainable energy includes an MoI around enhanced “international cooperation to facilitate access to clean energy research and technologies.” Several of the cross-cutting means of implementation under proposed goal 17 also relate to technology, including promoting the transfer, dissemination, and diffusion of environmentally sound technologies to developing countries on favourable terms, as mutually agreed. Most of the rather general wording on these issues replicates language already agreed-upon at Rio+20 and does not go further into specifics. Options for a UN technology facilitation mechanism are also under discussion elsewhere as part of the follow-up to the Rio+20 outcome document.

Trade in environmental goods

One possible aspect of improving access to technology is through increasing the diffusion of environmental goods and services. Removing trade barriers to access such goods could be one aspect of the international cooperation referenced in the targets described above. There are already several trade-related processes underway designed to reduce the trade barriers that affect particular environmental goods and thus increase their accessibility. The WTO Doha Round includes negotiations on the liberalisation of environmental goods and services, but in the absence of progress in Geneva, economies are also using other forums to move ahead. In 2012, the 21 member economies of Asia Pacific Economic Cooperation (APEC) endorsed a list of 54 environmental goods on which they committed to lower their tariffs to five percent by 2015, with the explicit objective of improving their accessibility for domestic businesses and consumers. This past July, a group of 14 WTO Members – counting the 28 member states of the EU as one – launched formal negotiations towards “global free trade” in environmental goods, using the same APEC list of goods as a starting point for their talks. [Editor’s note, see related article in this BioRes edition]

The fact that trade-related cooperation around environmental technologies is already underway, with different combinations of participants and goods, and across a number of forums, suggests that coherence may be best achieved not by explicit reference in the final proposed SDG text but by allowing national governments to refer to the priorities established in the framework when they pursue their cooperative trade initiatives. While reducing trade barriers to access environmental goods can contribute to technology diffusion many other flanking policies, including enabling environments, are also required to ensure such diffusion takes place and is used in support of sustainable development.

The road ahead

Trade-related targets have been deployed across the proposed sustainable development goals framework. In various different ways, they arguably reflect recognition that carefully designed trade policy, within coherent policy frameworks, can play a role in integrating economic and environmental objectives and supporting sustainable development. Some observers expect that the UNGA, scheduled to pick up negotiation of the SDGs as part of its work towards the post-2015 development agenda, will aim to reduce the number of goals and perhaps also some of the targets. While there will almost certainly be further jostling around language in the months ahead, keeping trade-related targets within the SDGs would help to ensure the overall framework makes good use of available tools, in order to effectively support the environmental, social, and economic dimensions of sustainable development in the coming decades.

[Ref 1] The Power of Numbers project synthesis report notes that the effect of different Millennium Development Goals on policy prioritisation and funding varied considerably. See: Sakiko Fukuda-Parr, Alicia Ely Yamin and Joshua Greenstein (2013), Synthesis Paper - The Power of Numbers: A Critical Review of MDG Targets for Human Development and Human Rights, FXB Centre for Health & Human Rights Working Paper Series, Harvard University, Boston.

[Ref 2] World Trade Organization (2013), Market Access for Products and Services of Export Interest to Least-Developed Countries, Note by the Secretariat, WT/COMTD/LDC/W/58, World Trade Organization, Geneva.

[Ref 3] Work by the Overseas Development Institute has discussed links between trade and the SDGs debate, including around regional trade agreements, and the importance of simplified rules of origin. See for example:   Dan Gay, Jodie Keane and Yurendra Basnett (2014) From the Millennium Development Goals to the Sustainable Development Goals: Learning the lessons from the trade diagnostic studies in the Pacific. Overseas Development Institute, London.

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