Sumario: Speech by EU Trade Commissioner Mandelson: "Sustainable Trade: observations on trade and protectionism" (Brussels, 21 March 2006)
Speech by EU Trade Commissioner Peter Mandelson at the DG Trade Stocktaking Conference on Trade Sustainability Impact Assessments
I welcome you all to this Conference. In particular, I would like to welcome Minister Christine Lagarde and all the other speakers.
Over the next couple of days you will be assessing the introduction of Sustainability Impact Assessments into trade policy. The aim of this new system was that it should lead to better policies and a broader and shared understanding of the economic, social and environmental impact of our action - not just on us, but for our children and grandchildren.
Have we managed to do this? Have we succeeded in improving the way the European Union shapes its trade policies and objectives? And have we drawn on better analysis to deliver agreements that work for Europe and for our partners around the globe?
I look forward to reading the results of your assessment. Because these questions matter. In my period as Trade Commissioner I have become firmly convinced of the following. Let me share seven observations with you.
First, for the problems of trade policy there are no simple text book answers. Free market ideologues, even might I add NGO ideologues, need more than a little humility before they lay down the law on these complex questions. I feel this every time I am told by a neo liberal economist that agricultural protectionism is what stands in the way of making poverty history, or by an NGO activist that negotiating better access for industrial goods and services in developing country markets - so called "forced liberalisation" - is bound to result in devastating economic and social consequences. The truth is that in virtually every case, it depends on the circumstances.
Second observation there is no automatic rule that trade liberalisation will lead to greater economic growth, never mind long term sustainability. It can certainly lead to acute short term adjustment costs as I've seen in my mandate among textile producers and leather shoe manufacturers, not to mention Mauritian sugar growers and Caribbean banana producers. Whether the short term pain is balanced by a long term gain depends on many different factors such as the capacity of existing businesses to move up market or a region to integrate and establish new sources of comparative advantage. In ideal circumstances this leads to the creation of sustainable jobs which make use of more sustainable resources - but there is no economic law that guarantees this happy outcome.
On the other hand, third, the history of protectionist policies suggests that these policies are a dead end. Any short term advantages lead to an erosion of economic strength. Protectionism deepened the economic recession of the 1930s. There may be a case for transitional protections to help infant industries grow - but protectionism designed to give established industries time to adjust is rarely effective. It is understandable that producers should lobby for it - and it is difficult to moralise about their behaviour in countries with little or no social safety net - but when help is offered to producers it often comes at the expense of consumers, usually the poorest. It is hardly a sustainable policy.
Here in Europe we have been distracted in recent weeks by a debate about protectionism - as if Canute-like we can pretend to hold shut the doors of international commerce. This would not be in our interests. It would not be in the interests of our consumers or businesses and it would certainly not deliver new and lasting opportunities for our partners around the world to grow and prosper, from which we would benefit in time.
Fourth, even worse are autarchic strategies for forcing countries on the path of economic progress. These had a disastrous record in the twentieth century: from the damage Soviet collective farms did to agricultural production and Russia's natural environment; to the pollution of crude industrialisation that until the fall of Communism blighted treasures of the world like Prague; to the errors of Chairman Mao's Great Leap Forward; and to the disappointments of the Nehru road to socialism. I accept of course that it is perfectly legitimate to criticise free market capitalism for the damage it can cause to the environment. One has only to think of the destruction of rain forest in Indonesia or Brazil driven by powerful profit incentives and the unquenchable appetites of consumers in richer parts of the world. But in the early cases, the defilement of natural resources and the neglect of future generations was inherent in the Communist view of human progress. I feel in the later examples, that, for all the seriousness of the problems, the market can be made to work for sustainable development through changes in incentives. Europe is, I believe, tentatively showing the way, for example through our emissions trading scheme that has the potential to be a major benefit in tackling global warming.
So, fifth, my observation is under the right conditions of what I call progressive liberalisation, trade can make a huge difference to economic development. That means combining better opportunities to trade through lowering trade barriers with increasing capacities to trade as a result of good governance, assured property rights and a stable legal system, and modern efficient infrastructures.
Sixth observation, we must face up to the consequences of changing production and consumption patterns in the global economy. Of course people affected in Europe need help to adjust to these changes. But if we react positively rather then defensively, we win the chance to shape globalisation, rather than being passively shaped by it. We should also acknowledge that European businesses have significantly contributed to the process of change by relocating production to Asia or elsewhere in many sectors. I sincerely hope that their sense of corporate social responsibility means they carry with them European standards and our strong tradition of social justice. We have influence and leverage here and we should exercise it.
Seventh, - and, as Europeans, this is important to us - we should be committed multilateralists - and not just in pressing for market liberalization. We should be determined about our efforts to strengthen international cooperation and rule making on trade and environment and trade and social policy in international bodies such as the ILO (International Labour Organisation) and the WTO (World Trade Organisation). This should lead to a more lasting global consensus on core social and environmental standards.
So, those are some basic thoughts. It is more than welcome that this conference comes as the current multilateral trade round, the Doha Development Round, reaches its critical and final stage. Doha can and must make a contribution to development and to making poverty history.
A 1% increase in Africa's share of world trade would deliver more development every year than the continent currently receives all together in aid. Through progressive liberalisation that takes into account the appropriate level of liberalization that different developing countries can bear, effective trade related assistance and aid for trade packages can be turned from a hand out into a hand up. This is why Doha is still worth fighting for.
From the start of my time as European Trade Commissioner it has been clear that building an agreement in the trade talks means building a consensus - among WTO members of course, but more broadly by reaching out to civil society to show and explain the long-term benefits that such a deal will offer. Civil society and public opinion today play a more crucial role than in any previous multilateral negotiation. And I am happy that this is the case. I believe in transparent rule-making and accountability of trade negotiators to the general public.
So where do Sustainable Impact Assessments fit into this broader picture?
It has been a long road from the Rio World Summit in 1992 which first signalled sustainable development with its three aspects - economic, social, environmental - as a crucial element in sound policy-making. It was on the basis of the debate that started in Rio that back in 1999 my predecessor Pascal Lamy launched the first sustainability impact assessments - or SIAs.
At the time, in trade policy we were pace setters within the European Commission. It was only in summer 2001 that the Commission introduced a more generalised system to assess the economic, social and environmental impacts of its internal policies as part of the Union's overall strategy for sustainable development. Today, these ideas are commonplace. Back in 1999 they were ground-breaking.
By the end of the 1990s it became clear that trade negotiations could no longer be pursued by trade elites behind closed doors on the basis of a simple assumption that trade liberalisation was good for everyone.
We needed a fresh approach. One that reflects today's reality that what we decide in Geneva or Brussels affects the livelihoods of fishermen in West Africa, farmers in Europe, or women in Chinese and Vietnamese shoe factories.
So what have seven years of sustainability impact assessment delivered? I am convinced the SIAs carried out so far have done good work. We have looked at issues as diverse as EU-Chile trade or the agricultural sector in Senegal.
These reports have highlighted the many ways in which trade agreements impact on people's lives, but also the complexity of cause and effect. Today, as I have argued, we accept that economic and other long-term benefits of trade opening are not automatic. They depend on a wide variety of factors: the degree of regional integration, the interplay with domestic policies and institutional arrangements, market failures, and the extent to which rules are applied and enforced at home.
Second, we know much better how and where trade liberalisation leads to social adjustments and environmental costs. Very often it is the poorest and those with least social capital and support who are most affected. By having this knowledge, public authorities are well placed to pursue policies which can help particular sectors and regions adapt to change and mitigate social and environmental costs.
In Europe, this logic has just led the Commission to propose an adjustment fund to open new opportunities for those who are most exposed to the impact of global competition - those for whom shifts in trade can deliver shocks as well as opportunities. Worldwide, "aid for trade" commitments testify to our will to help all WTO Members take advantage of the fast - evolving trade landscape. As I did in the run-up to the Hong Kong Ministerial Conference last December, I will continue to strive for a strong "aid for trade" component in the Doha talks.
On the subject of the DDA, I want to draw your attention to a study published this month by the Carnegie Endowment study entitled "Winners and Losers: Impact of the Doha round on Developing Countries". This excellent study is essentially a warning. It cautions against seeing simple liberalisation in the Doha Round as a panacea for development.
The Carnegie research reminds us that the bulk of the benefits of agricultural liberalisation are limited to developed countries and a core group of highly competitive farm exporters - especially Brazil, Argentina and South Africa. The Carnegie research argues that for subsistence farmers, exemptions from tariff cuts, and policy space to support agricultural development and small scale farming, should be taken into account. So too should the impact of preference erosion in poorer developing countries when faced with steep farm tariff reductions in the developed world. In fact, for all these reasons, the Carnegie research suggests that the key gains for developing countries in the DDA lie not in agriculture but in trade in industrial goods, especially in labour intensive industries like shoes and textiles.
These are arguments that the EU has long accepted and that others - including some in the NGO community - would do well to absorb. The EU has always argued that a balanced Doha round must focus of the value of manufacturing trade for developing countries. The EU accepts that agriculture is important to the Doha Round but that farm liberalisation is not synonymous with development in the broadest sense.
This demonstrates why we need a strong and effective SIA (Sustainability Impact Assessments) system. We must be able to understand the consequences of our policy choices.
We could not have done what has been achieved so far without the commitment and engagement of civil society. We have worked very hard to ensure that our SIA process is built on open consultation. This is crucial for the quality and the credibility of our analysis.
We also recognised from early on the importance of working with other experts and organisations which are assessing Sustainability Impacts. Our collaboration with UN Environmental Programme (UNEP) is a good example, but there are plenty of others and I know that you will be looking at how we can continue and deepen this practice.
In the end we will be judged by results. If the SIA Programme is to make sense, it must be more than a pro forma exercise. Take for example the recent SIA study of the negotiations on forestry products in the Doha Round. It concludes that liberalisation in that sector brings opportunities, providing adequate regulation in introduced and change is tailored to what particular regions can bear. Without that, accelerated liberalisation and illegal logging bringing short term gains at the price of longer term deforestation, strains on the environment and social imbalance in certain regions. On the basis of this analysis, I cannot see us carving out the forestry sector for faster liberalisation in the Doha Round.
Beyond immediate negotiations, there is also a continuing challenge to ensure that SIA results are taken up in the work of the EU institutions and in the various EU and Member States bodies who control the policy and financial levers for flanking measures. This is the significance of the SIA Handbook which we unveil today. It is intended to serve as a toolbox for all those involved in assessing the impact of trade policy proposals.
In conclusion, let me say, you have an interesting series of debates ahead of you and I am grateful for your participation. I wish you every success, and hope that your work will contribute to helping us improve further the way we shape our policies and negotiating goals.
This is how we can achieve the outcome we seek: a Round which delivers development; a Round that will offer us a positive response to the challenges of globalisation; and a Round that offers new trading opportunities and therefore higher living standards for all.
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