Small and vulnerable: Increasing SIDS resilience and development through international trade

1 September 2014

Small island developing states face a number of specific sustainable development  challenges, some of which might usefully be addressed at the WTO. 

In September, delegates will gather in Apia, Samoa for the Third International Conference on Small Island Developing States (SIDS) guided by the overarching theme of the “sustainable development of SIDS through genuine and durable partnerships.” The conference offers an opportunity to reaffirm commitments already taken and to further advance issues related to the sustainable development of SIDS. At the pivotal 1992 Rio Earth Summit held in Rio de Janeiro, Brazil and in the resulting Agenda 21, SIDS were recognised as having particular characteristics that make them unique from both environment and development perspectives. Twenty years later, “The Future We Want” the outcome document of the follow-up UN conference on sustainable development held in the same South-American city, brings a new sense of momentum to addressing SIDS sustainable development needs.

Notwithstanding the significant strides forward SIDS have made as a group towards mainstreaming the principles of sustainable development into national development plans and priorities, persistently low rates of economic growth, high levels of external debt, high input costs, remoteness from external markets, and a host of other structural rigidities continue to weaken their capacity to respond to current and future development demands. Key to overcoming these challenges is a deeper and more beneficial integration into the global economy. Such efforts aimed at beneficially integrating SIDS into the multilateral trading system must be supported by strategies focused on strengthening supply-side capacities and increasing macro-economic competitiveness, which is defined as the mix of institutions, policies, and factors that determine the level of productivity in a country. Furthermore, the Marrakech Agreement establishing the WTO inter alia mandates the “optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with the respective needs and concerns [of countries] at different levels of economic development.” WTO members in general, and SIDS in particular, should therefore pursue an international legal architecture that links economic development to environmental sustainability.

It is notable that some of the elements of the zero draft of the outcome document proposed for the September SIDS conference either directly or indirectly addresses disciplines and market access issues currently being considered within the context of the WTO Doha Round negotiations. The rules-based nature of the WTO supports both trade liberalisation and a governance framework that can effectively enable and support the long-term development prospects of SIDS. Translating the theory to practice, however, will continue to challenge countries both small and large. This paper proposes approaches that could support the responsiveness of the multilateral trade system to some of the specific development challenges faced by SIDS. It is nevertheless recognised that a trade-focused response the challenges faced by SIDS is but one ingredient in a policy mix needed to promote and foster sustainable development. Beyond trade reforms, developing countries and in particular SIDS, have been key demanders for adjustment and supply side capacity support. In order for the welfare gains from trade reforms to be realised within the multilateral framework, complementary support aimed at enhancing productive capacity, value enhancement, and accessing markets is also important. The capacity of SIDS to respond to non-tariff measures remains an obstacle to sustainable growth. These issues, along with domestic policy reforms, must be pursued in tandem to enhance the prospect of sustainable and sustained economic development.

Oceans and seas

Oceans and seas, along with coastal areas, form an essential component of the earth’s ecosystem and are intrinsically linked to sustainable development. Healthy, productive, and resilient oceans are critical to the economic viability of SIDS. Many of the marine resources harvested in oceans and seas are not targeted for local markets but exported as raw materials, intermediates, or final products. The demand for goods and services originated from the oceans is likely to increase in the near future as global population and terrestrial food production constraints grow. If done sustainably, trade in marine products can create opportunities for economic growth, export diversification, and new investments. Major trade sectors where opportunities exist or could emerge in the near future include: sustainable fishing and aquaculture; certain marine transport services and port management; marine renewable energy; marine bio-prospecting and biotech; regulated seabed mineral resource extraction; and maritime and coastal tourism. Trade in marine sectors can be supported by the introduction of sound regulatory and institutional frameworks that also assist in developing ancillary services required to undertake marine related economic activities. These services include financial, insurance, telecommunication, testing and certification, as well as research and development.

Optimising the use of natural oceanic resources that are directly traded or serve as inputs to industrial and services activities must, however, extend beyond economic considerations by incorporating environmental and social factors into the equation to ensure long-term sustainability. Over-exploitation and poor management of marine resources have resulted in lost opportunities to sustain growth, heightening risks to global food security, and threatening livelihoods. These risks are of particular importance to SIDS who stand to be more heavily impacted by the depletion of marine resources than other country groupings. For example, according new UN-backed research, most of the Caribbean’s coral reefs – which generate around US$3 billion annually from tourism and fisheries – are in danger of disappearing in the next 20 years due to overfishing, destructive coastal development, and pollution. [Ref 1]

Fisheries subsidies and SIDS

Recognising the need to regulate subsides that contribute to the unsustainable harvesting of the world’s fisheries, the 2001 WTO Doha Ministerial Declaration launched negotiations to clarify and improve WTO disciplines on fisheries subsidies. The mandate to advance negotiations on fisheries was further elaborated at WTO Hong Kong ministerial conference in 2005, where members agreed to strengthen disciplines including the prohibition of certain forms of fisheries subsidies that contribute to overcapacity and overfishing. The main challenge that confronts WTO negotiators is finding the appropriate balance between, on the one hand, disciplining the use of subsidies that result in overcapacity and resource depletion and, on the other, protecting the needs of developing and least developed countries (LDCs). 

Excess fishing capacity has been pointed to as one of the main contributors to overfishing and is mainly a consequence of the provision of ill-conceived subsidies to domestic fishing industries. Such realities bring into sharp focus the need to align the sometimes-competing interests of potential economic gains with environmental sustainability. These conflicting priorities also highlight the need for countries to agree on binding multilateral rules aimed at governing the sustainable harvest of marine resources within the framework of a broader strategic approach to safeguarding the ecological diversity of the world’s oceans. In this context, SIDS can explore approaches within the WTO Rules negotiations specific to fisheries subsidies, as well as in the negotiating group on Market Access in relation to fish and fish products, to achieve balanced outcomes that take account of the economic, trade, and ecological imperatives of SIDS. In theory, the negotiations on fisheries subsidies at the WTO hold potential for the multilateral trading system to rise to the challenge of effectively balancing ecological governance with economic considerations, although stalled progress in the talks demonstrates some of the pitfalls of this process.

While SIDS should seek to eliminate harmful subsidies through the disciplining of unsustainable practices, it is in the interest of SIDS to preserve policy space to build domestic sustainable fishing sectors. A draft negotiating text put forward by the Chair of the WTO Rules negotiations on fisheries subsidies in 2007 provides for general exceptions and special & differential treatment (S&DT) for developing countries. These flexibilities, including those proposed for small economies, are linked to fisheries management systems aimed at regulating marine wild capture within a member’s jurisdiction. While such systems imply financial costs, they can have positive effects on the sustainability of local fish stocks in the medium and longer terms. The 2007 draft text inter alia promotes: fisheries management systems; monitoring; control and surveillance and marine protection. The document also calls for enhancing and implementing the regime for monitoring, control, and surveillance of fishing vessels to tackle illegal, unreported, and unregulated (IUU) fishing, including by investing in institutional capacity at the national, regional and international levels. It also calls on the UN system and regional fisheries bodies to pay increased attention to the value of small-scale fisheries and also to improve food security. These are all key objectives of SIDS as reflected in the Apia Outcome Document and are all in line with the objectives of SIDS negotiating within the WTO.

Sustainable energy, environmental goods and services

Worldwide demand for renewable energy is expected to increase two and half times by 2035, according to the International Energy Agency, (IEA). Renewable energy generation can contribute to energy security, diversify a given country’s energy mix, and contribute to efforts to mitigate the effects of climate change. SIDS typically have low levels of renewable energy infrastructure and high-energy costs. They could thus potentially explore investment incentives and consumption subsidies such as feed-in-tariffs as a means of attracting investment, although past disputes at the WTO suggest such policies would need to be carefully formulated in order to comply with multilateral trade rules. Partnerships and technical assistance with key agencies can also play an important role in undertaking the necessary analytical work to support the adaptation of local regulations and attract financing for pilot projects. It must, however, be acknowledged that the economic, technical, and public policy capacity of SIDS is not at the same level as their developed counterparts. Therefore, while SIDS should pursue renewable energy options, expectations should be calibrated in accordance with their capacities in this area. [Ref 2]

Environmental goods and services are included in a subset of the goods and services negotiations in the Doha Round and members could use these negotiations to pursue liberalisation of products that support sustainable energy. It should be noted that a group of WTO members are now engaged in negotiations on environmental goods trade liberalisation, and separately, on negotiations aimed at the establishment of regional trade agreements that might include environmental services. While SIDS are not party to these negotiations or agreements, progress should be monitored with a view to assessing the possible systemic impacts and the specific trade related opportunities they may give rise to. Additionally, SIDS could encourage enhanced multilateral dialogue on products and services that support sustainable development, including clean energy. Such an approach would not only support energy independence but also reduce national dependence on fossil fuels. SIDS may also want to encourage renewed dialogue on the liberalisation of trade in environmental services.

Small islands face numerous challenges with respect to fresh water resources, including wastewater. SIDS also recognise the need for the management of chemical effluent and waste as critical to the protection of human health and the environment. Negotiations on trade in environmental services provides an opportunity for SIDS to respond to emerging demands for water, chemical, and waste disposal. During the last 13 years, as part of the Doha Round, several WTO members have called for the identification of core environmental services. To this end, WTO members have submitted various communications aimed at improving environmental services classification by including  the following environmental services; (1) liquid waste services, (2) refuse disposal services, (3) sanitation, water and wastewater and, (4) other environmental services (S/C/W/320). One difficulty with drawing up lists is that some green services, like green goods, can have both environmental and non-environmental end-uses. Broadly speaking, however, most environmental services can be divided into two general categories: infrastructure and non-infrastructural environmental services. Under the ambit of both regional and multilateral trade agreements, SIDS could consider pursuing liberalisation of sectors specific to wastewater and sewage services, remediation services, and renewable energy. SIDS can assess the opportunities presented through multilateral negotiations on environmental services and consider the role that private participation, regulations, and institution building can play in creating economic opportunities while simultaneously mitigating the impacts of human activities.

Food security

As identified in the proposed Apia Outcome Document, SIDS are in the main net food importing countries, and are exceptionally vulnerable to the availability and price volatility of food imports. This situation is complicated by the fact that, in most cases, imported food is cheaper than the like-product locally produced. The existing WTO draft agriculture modalities negotiating text (TN/AG/W/4/Rev.4), allows Small Vulnerable Economies (SVEs) – the majority of them SIDS – the flexibility to strengthen the domestic supply of sensitive agricultural products. With this in mind SIDS should seek to ensure that any new or amended agricultural modalities reflect the needs of small states to maintain policy space in support of food security.

Conclusion

The multilateral trading system as embodied in the WTO is at a watershed moment in the context of finding an appropriate road ahead following decisions made at the ninth WTO ministerial conference held last December in Bali, Indonesia. It should be noted that while progress has been made on trade facilitation, food security for developing countries, and within the generalised rubric of LDC issues, there has been no significant movement or early harvest on issues relevant to SIDS. The WTO now has a mandate to establish a work programme that would guide the negotiating process beyond 2014. The areas outlined above demonstrate possible synergies between multilateral trade negotiations and sustainable development opportunities for SIDS. The time is also  ripe for focusing on these opportunities as the international community gears up to agree on a set of sustainable development goals within the post-2015 development agenda. The SIDS Apia conference in September will provide a platform for island voices, and needs, to be heard in this area. Trade-related issues are on the agenda for both the Apia and the New York processes; ensuring coherence with future WTO work will be important for securing the sustainable development of SIDS.

The views expressed in this article are those of the author and do not necessarily represent the views, and should not be attributed to, the Commonwealth.

 

[Ref 1] Jackson JBC, Donovan MK, Cramer KL, Lam W (editors), (2014), Status and Trends of Caribbean Coral Reefs: 1970-2012. Global Coral Reef Monitoring Network, International Union for the Conservation of Nature.

[Ref 2] Fevrier et al., (August 2014), Sailing into Oceans Economy: Opportunities and Challenges for Small Island Developing States, Commonwealth.

 

Author: Stephen Fevrier - Trade Adviser to Small States, the Commonwealth Secretariat, Geneva, and former diplomat.

 

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