European initiative links trade policy with sustainable development

The European Commission (EC) has pledged to assess the economic, social and environmental impacts of its trade policies. Its Sustainability Impact Assessment (SIA) programme is indicating that the economic benefits expected from the efficiency gains of trade liberalisation are small. Dynamic effects can be much larger, but the potential gains are strongly dependent on other policy measures.  Adverse impacts will occur unless effective parallel policies are implemented.

A review from the University of Manchester, in the UK, examines experience from Europe’s SIA process, with particular reference to studies on World Trade Organisation (WTO) negotiations and the Euro-Mediterranean Free Trade Area (EMFTA). The authors suggest how such studies could be more closely integrated into the formulation of policy for sustainable global and regional development.

The European Union does not see trade liberalisation as an end in itself, but as a tool contributing to sustainable development. The SIA process is intended to contribute to dialogue between policymakers, civil society and private interest lobbies and to educate the European public about the impact of trade.

The EC has undertaken over 20 SIAs to date - all externally commissioned - and has pledged to formally respond to their findings. However, civil society actors complain that the adverse impacts identified by SIAs have not influenced EU trade policies.

The SIA prepared to assess the impacts of the WTO’s Doha round – a currently stalled initiative to free up trade – confirmed many concerns expressed by civil society groups and developing country governments: 

• Adjustment costs can be severe – especially in developing countries where social protection is weak or absent.
• In the poorest African countries trade liberalisation can worsen poverty.
• Countries with high initial protection may experience a significant loss of tariff revenues, making it harder to sustain health and education services.
• Pressures for increased agricultural production in biologically sensitive areas, together with increased transport, can have negative environmental impacts.
• In regions already under environmental stress, water availability and air, water and soil quality and biodiversity will be reduced.

The creation of the EMFTA is a key component of the Euro-Mediterranean Partnership (EMP) between the European Union and ten partner countries in North Africa and the eastern Mediterranean. The EMFTA SIA – prepared with regional partners – has suggested measures to make it more likely that the theoretical developmental benefits of trade liberalisation are achieved without adverse social and environmental impacts.

Lessons from the first SIAs suggest that appropriately designed trade reforms do have potential to benefit developing countries but only if accompanied by parallel measures. The authors call for:

• stronger international policy-making mechanisms in non-trade areas
• assistance to enable developing countries and their trade negotiation teams to undertake their own integrated impact assessments of removal of trade barriers
• support for a consortium of UN agencies to develop wider multi-country SIA studies: these could add weight to the advocacy of concerned parliamentarians and global civil society as they attempt to participate in the Doha process
• development and refinement of regional partnerships within which economic and trade policies are made subordinate to wider poverty reduction and sustainable development goals.