United Nations
Commission on Sustainable Development

Background Paper


              UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT

           UNCTAD activities on trade, environment and development
                                1995-1996


                       Note by the UNCTAD secretariat
                               11 April 1996

                                Prepared for

             The fourth session of the United Nations Commission on
                          Sustainable Development

                        New York, 18 April to 3 May 1996


                                    CONTENTS

                                                       Paragraphs     Page

INTRODUCTION ....................................... . 1 -  2           3


I.   ACTIVITIES AT THE INTERGOVERNMENTAL LEVEL .....    3 - 12      3 - 5

     A.     Activities in 1995-1996 ...............     3 -  9      3 - 5
     B.     Preparing for UNCTAD IX ..............     10 - 12          5

II.  TECHNICAL ASSISTANCE ..........................   13 - 28      6 - 10

     A.     Trade, environment and development ......  13 - 22      6 -  8
     B.     Commodities, trade and environment ......  23 - 26      8 -  9
     C.     UNCTAD's Biotrade Initiative ............  27 - 28      9 - 10

III.   COOPERATION WITH OTHER INSTITUTIONS .........   29 - 34     10 - 11
       AND CIVIC SOCIETY

IV.  FOLLOW-UP TO THE COMMISSION'S DECISION ON .....   35 - 55     11 - 15
     TRADE, ENVIRONMENT AND SUSTAINABLE
     DEVELOPMENT AT ITS THIRD SESSION


Annex I     Intergovernmental meetings and other activities             16

Annex II    Recommendations of the Ad Hoc Working Group on Trade,       17
            Environment and Development for future UNCTAD activities

Annex III   Reports of the Ad Hoc Working Group on Trade,          18 - 19
            Environment and Development and documents prepared
            by the UNCTAD secretariat


                                  INTRODUCTION

1.    The Commission on Sustainable Development, at its second session,
recommended that UNCTAD provide annual reports to the Commission on its
activities concerning trade and environment. The present note, prepared by the
UNCTAD secretariat under its own responsibility, describes UNCTAD's activities
in the area of trade, environment and development carried out in the period
April 1995-March 1996. 

UNCTAD's mandate on trade and environment stems from the "Cartagena
Commitment", which embodies the results of UNCTAD VIII, and Agenda 21, and has
been endorsed by UNCTAD's Trade and Development Board 1/ and the General
Assembly. Recently, the General Assembly requested UNCTAD to continue its
special role in trade and environment, taking into account the need for
continued close cooperation and complementarity in the work of UNCTAD, UNEP
and the WTO (resolution 50/95 of 12 December 1995, paragraph 27). In
accordance with its mandate, UNCTAD plays a key role in bringing out the
development perspective of the trade and environment debate.

                  I. ACTIVITIES AT THE INTERGOVERNMENTAL LEVEL

                           A. Activities in 1995-1996

2.    Since the last report on UNCTAD's activities in the field of trade and
environment, submitted to the third session of the CSD in 1995 (CRP 7), UNCTAD
has continued to implement its intergovernmental work programme.

3.    The Ad Hoc Working Group on Trade, Environment and Development, which
was established by the Trade and Development Board in May 1994, held its
second session from 6 to 9 June 1995. The session discussed the
competitiveness effects of environmental policies, standards and regulations
and continued its deliberations on the trade, environmental and developmental
effects of eco-labelling. The Group's discussions on the first item focused on
three sets of issues: (a) environmental policies and competitiveness; (b)
trade and competitiveness effects of multilateral environmental agreements
(MEAs); and (c) future issues for research. The Group's deliberations on eco-
labelling focused on the following issues: (a) trade, environment, and
development effects of eco-labelling; (b) the use of criteria related to
process and production methods (PPMs); and (c) measures to take account of
developing countries' interests in determining eco-labelling criteria. The
discussions were aided by the reports "Trade, environment and competitiveness
aspects of establishing and operating eco-labelling programmes" (TD/B/WG.6/5)
and "Environmental policies, trade and competitiveness: conceptual and
empirical issues" (TD/B/WG.6/6), both prepared by the UNCTAD secretariat.

4.    The third and final session of the Working Group was held from 6 to 10
November 1995. Substantive discussions were held on two items: the trade and
competitiveness effects of environmental policies, standards and regulations;
and newly emerging environmental policy instruments with a possible trade
effect. Discussions focused in particular on the relationship between
environmental policies and export competitiveness, in particular for
developing countries. To aid the discussions, the UNCTAD secretariat prepared
a report on "The policy debate on trade, environment and development"
(TD/B/WG.6/10), which builds on its earlier report on "Environment, trade and
competitiveness: conceptual and empirical issues" (TD/B/WG.6/6), prepared for
the second session of the Working Group. In addition, the secretariat prepared
synthesis reports on empirical studies in Colombia, India, Zimbabwe, Brazil
and Poland as background papers for the discussion. With regard to the second
item, the report on "Newly emerging environmental policies with a possible
trade impact: A preliminary discussion" (TD/B/WG.6/9 and Add.1) provided an
analysis of the possible trade and development effects of different
instruments used in the framework of product policies.

5.    The Working Group paid special attention to sectoral and scale factors.
It noted that environmental requirements are emerging in sectors of special
export interest to developing countries, such as textiles, leather, footwear,
and furniture. It also analysed the special situation of small and medium-
sized enterprises (SMEs). The Working Group recommended that adverse
competitiveness effects of environmental policies can be alleviated by
policies at the national and international levels. In this context, it
analysed factors such as the openness of the economy, economic growth, the
capacity for technological innovation and the development infrastructure and
recommended that positive measures at the national and international level are
effective instruments to assist developing countries in achieving the
objectives of sustainable development. The Working Group also noted that due
account should be taken of the role of different environmental and
developmental conditions in environmental policy-making, particularly in
reconciling national with international concerns.

6.    An important part of the debate focused on the trade and development
aspects of multilateral environmental agreements (MEAs). The Working Group
noted that these effects are different for each agreement and may vary over
time.  The Group recognized that positive measures could be valuable in
assisting developing countries to meet the multilaterally agreed targets, in
keeping with the principle of common but differentiated responsibility (see
also chapter IV).

7.    The Ad Hoc Working Group completed its work with the adoption of its
Final Report, which contains: (a) findings and conclusions, principally on
environmental policies and competitiveness, trade and competitiveness effects
of multilateral environmental agreements, as well as on eco-labelling; (b)
recommendations at the national and international level; (c) a programme of
future work for UNCTAD (see annex II); and (d) recommendations for technical
assistance.

8.    The Standing Committee on Commodities, at its fourth session which was
held from 30 October to 1 November 1995, discussed "the manner in which prices
of natural products and their synthetic competitors could reflect
environmental costs, taking into account policies relating to the use and
management of natural resources and sustainable development". To aid these
discussions, the secretariat had prepared the report "Sustainable development
and the possibilities for the reflection of environmental costs in prices"
(TD/B/CN.1/29). During the deliberations, it was pointed out that the
elimination of distortions, such as subsidies, which caused market prices to
diverge from private marginal costs was a prerequisite for implementing
measures aiming to have prices reflect social costs. It was also emphasized
that in evaluating the costs and benefits of implementing internalization
measures, a broad view should be adopted that includes a multitude of socio-
economic concerns and goes beyond the narrow concept of the maintenance of
international market shares. Under the specific market structures of the
commodity sector and the overriding immediate developmental concerns of most
commodity-dependent countries, a cooperative approach was indispensable and
technical as well as financial participation of the consumers was necessary.
UNCTAD was called upon to enhance the exchange of experiences among developing
countries on the subject of environmental cost internalization, undertake
pilot projects for assisting interested developing countries in the design and
implementation of internalization policies, and to expand applied research on
the costs and benefits of implementing and not implementing such policies.

                          B. Preparing for UNCTAD IX 

9.    Trade and environment also figures on the agenda of UNCTAD IX, which
will be held in Midrand, South Africa, from 27 April to 9 May 1996.

10.   The Ad Hoc Working Group on Trade, Environment and Development, in its
Final Report, recommended a number of areas for future UNCTAD activities under
the theme "trade, environment and development" after UNCTAD IX. In addition,
the General Assembly requested UNCTAD "to address trade and environment
matters comprehensively" (resolution 50/95, paragraph 26). Further decisions
on priority activities and future intergovernmental work are expected to be
taken by UNCTAD IX.

11.   As part of the preparations for UNCTAD IX, the UNCTAD secretariat and
the Government of Finland organised a topical seminar on "Environment,
competitiveness and trade: A development perspective", in Helsinki, on 18 and
19 January. The objective of the seminar was to discuss trade, environment and
development linkages in order to advance consensus-building on these issues.
The seminar was attended by experts from capitals and from a number of
delegations in Geneva, representatives of the secretariats of the WTO, UNEP,
OECD, and the Basel Convention, and a number of participants from Finland, all
of whom participated in their individual capacity. At the seminar, four topics
were discussed; (1) competitiveness effects of environmental regulations and
taxes; (2) sectoral and scale issues and competitiveness; (3) trade and
competitiveness effects of multilateral environmental agreements (MEAs); and
(4) positive measures to mitigate adverse competitiveness impacts. The results
of the seminar are contained in report UNCTAD IX/Misc.2.

                            II. TECHNICAL ASSISTANCE

                      A. Trade, environment and development

12.   UNCTAD is undertaking a comprehensive technical cooperation programme on
trade and environment, with the following objectives: 2/ 

      (a)   To assist in increasing awareness and understanding of the complex
            linkages between trade, environment and development through
            policy-oriented studies, workshops and seminars; 

      (b)   To contribute to building institutional capacity in developing
            countries and countries in transition to examine the trade and
            environment interface; 

      (c)   To conduct analysis and to provide information to policy-makers;

      (d)   To support the effective participation of developing countries in
            deliberations in the relevant international forums; and 

      (e)   To support a dialogue between trade, environmental and
            developmental communities.

13.   Under the joint UNCTAD/UNDP project on "Reconciliation of environmental
and trade policies" (INT/92/207), research institutes in developing countries
are analysing country-specific experiences in order to better understand trade
and environment linkages. In addition, a number of country case studies are
being undertaken jointly with UNEP under the project "Capacity-building on
trade and environment" (INT/93/A48). UNCTAD's Ad Hoc Working Group on Trade,
Environment and Development, in its final report, encouraged the continuation
of these studies by UNCTAD in cooperation with UNDP and UNEP. The following
countries are presently participating in the programme:

      (a)   Africa: Cameroon, Egypt, South Africa, Uganda, and Zimbabwe.

      (b)   Asia: China, India, Indonesia, Malaysia, Philippines, Thailand and
            Viet Nam.

      (c)   Latin America: Argentina, Brazil, Chile, Colombia, Costa Rica and
            Jamaica.

      (d)   Other regions: Poland, Russian Federation and Turkey.

14.   A series of studies has now been completed. As mentioned above,
synthesis reports of the studies on Brazil, Colombia, India, Poland and
Zimbabwe, prepared by the UNCTAD secretariat, were made available to the third
session of the Ad Hoc Working Group on Trade, Environment and Development (see
annex III). Further synthesis reports, as well as other publications, are
under preparation. In response to requests made by Governments of a number of
developing countries, additional studies will be undertaken, within the
availability of funds.

15.   A project on eco-labelling and international trade, funded by the
International Development Research Centre (IDRC), has now been completed. The
results of this project will be published by MacMillan in the form of a book
which will be published towards the end of 1996.

Regional and national activities

16.   A number of regional and national workshops and seminars were held in
the reporting period (see annex I).

17.   A series of workshops on trade and environment was organised by the
ASEAN secretariat in Manila, Bangkok, Kuala Lumpur and Jakarta from 11 to 23
May 1995. The UNCTAD secretariat provided resource persons for these
workshops. 3/ Building on the UNCTAD/UNDP country case studies carried out
in ASEAN countries, the ASEAN secretariat has commissioned further country
studies to research institutes in the region. The ESCAP secretariat is also
undertaking additional research based on the UNCTAD/UNDP studies on Asian
countries.

18.   A joint regional UNCTAD/SELA meeting of experts on trade and
environment, hosted by SELA and supported by UNEP and UNDP, was held in
Caracas, Venezuela, on 25-26 July 1995. Experts from nine countries in the
Latin American and Caribbean region participated in the meeting. National
seminars on trade, environment and development were held in Havana, Cuba on
20-21 July and in Caracas on 27 July 1995, supported by UNDP and UNEP. A
representative of the WTO attended these seminars. The seminars in Caracas
were also attended by representatives of the OECD secretariat and the Office
of the United States Trade Representative (USTR). All of them participated in
their personal capacity.

19.   Trade and environment linkages of interest to Arab countries were
discussed, among other issues, in a Group of Arab experts meeting to consider
the implications of the Uruguay Round, particularly in the fields of
petrochemicals, environment and services (Bahrain, 16-18 March 1996), and a
Conference on the Gulf Co-operation Council external trade relations with
regard to the World Trade Organization (Bahrain, 19-20 March 1996). Following
the seminars, a series of activities on "trade, environment and development"
are being planned as part of a UNDP-funded regional project for Arab
Countries.

Other activities

20.   Other technical assistance activities were initiated under projects
funded by the Governments of Italy, the Netherlands and Norway, as well as
under the UNCTAD/UNEP project on "Capacity-building on trade and environment".
UNCTAD is cooperating with the secretariats of ASEAN and ESCAP in the
collection of information on emerging environmental policy instruments and
related activities. A number of workshops and seminars will be held in the
second half of 1996.

Plans for the future

21.   The Working Group on Trade, Environment and Development encouraged
UNCTAD to continue its technical assistance programme and to contribute to the
informed and effective participation of developing countries in international
deliberations on trade and environment. New projects will be initiated after
UNCTAD IX, including joint projects with UNDP and UNEP. UNCTAD and ITC have
also established close cooperation and are considering the possibility of
preparing joint awareness-building projects. Joint projects will also be
undertaken with the regional economic commissions of the United Nations, in
particular ESCAP.

                      B. Commodities, trade and environment

22.   UNCTAD's technical cooperation activities on environment-related issues
in the export-oriented commodity sector comprise the following three elements:

      (a)   The design and implementation of environmental and economic
            policies, in particular, the internalization of environmental
            costs;

      (b)   International trade in recyclable and reusable materials;

      (c)   The production and trade of environmentally preferable products.

23.   Concerning the design and implementation of environmental and economic
policies, in particular the internalization of environmental costs, the aim is
to assist developing countries in overcoming the domestic and external
obstacles that prevent them from taking the measures that they deem necessary
for ensuring the sustainability of their development process. Under a joint
UNCTAD/UNEP project, two expert group meetings were held in New York and
Geneva. Participants discussed the need to undertake measures that reconcile a
multitude of objectives, whether these economic, social and environmental
objectives were contradictory, and what the best approach would be when
contradictions were apparent. The meeting in Geneva also discussed three case
studies, on Egypt, South Africa and the Czech Republic, respectively. In the
same area of policy-making and implementation, the UNCTAD secretariat has
prepared a training course (GREENTRAIN) aimed at capacity-building for
decision-makers from both the private and public sectors of developing
countries, who are faced with the task of reconciling short-term economic and
social priorities with long-term sustainable development prospects. Training
activities will be organized upon request from Governments.

24.   Concerning the recycling/re-use of materials in order to bridge the
substantial gaps in information required for sustainable management of
secondary resources by developing countries, with the financial and technical
support of the International Council on Metals and the Environment (ICME)
UNCTAD conducted a statistical review of international trade in recoverable
metals and metallic compounds, with particular emphasis on trade between OECD
and developing countries, as well as trade among developing countries. The
paper was presented at the Global Workshop on the Applicability of Decision
II/12 of the Basel Convention in Dakar, Senegal, in March 1995. In the light
of the discussion in Dakar and the feedback on the review, UNCTAD revised the
paper, which was then circulated at the 3rd Conference of the Parties of the
Basel Convention in September 1995. Given the information gaps on trade in
waste and secondary material, ICME and the Canadian Government encouraged
UNCTAD to set up a data base on international trade in waste, scrap and
residues. UNCTAD therefore started work on shaping a self-contained data base
on international trade of recoverable metal scrap and residues.

25.   Activities relating to the production and trade of environmentally
preferable products (EPPs) have responded to growing needs among developed and
developing countries for more sustainable production and consumption patterns.
The aim is to assist developing countries to take better advantage of the
rising demand for environmentally preferable products, both domestically and
in international markets. This would help in the attainment of environmental
and economic objectives such as: (a) improvement of environmental conditions
in developing countries themselves; (b) increase in foreign exchange earnings
by expanding exports of environmentally preferable products; and (c) creation
of additional jobs in environmentally friendly sectors. In this context, case
studies have been or are being undertaken in several developing countries to
identify the supply potential and constraints to increased production and
trade in these products. A series of country studies is under way funded by
the Government of the Netherlands (project INT/92/A06), two of which
concerning Brazil and potential European Union demand for biofuels from
developing countries have already been finalized.

                         C. UNCTAD's Biotrade Initiative

26.   One of the main objectives in relation to the implementation of the
Convention on Biological Diversity is to contribute to the design and
implementation of policies and measures ensuring that developing countries
attain economic benefits from the full use of the Convention. UNCTAD's
BIOTRADE Initiative underlies this concern. The Initiative has been designed
as an integrated programme intended to increase the capabilities of developing
countries to compete in the emerging market for biological resources, while
also reducing transaction costs, increasing demand for biochemical resources,
and enhancing conservation incentives. The Initiative has been broadly defined
to include potential applications to the full diversity of biological
resources and markets.

27.   The BIOTRADE Initiative of UNCTAD proposes to achieve these goals
through: (i) the creation, in biodiversity-rich developing countries, of a
concrete export capacity in biological resources, including economic and
market research through the analysis of the size and structure of an emerging
market for biological resources, an international certification programme, and
the opportunities available to developing countries for sustainable
development of their biological resources; (ii) the building of competitive
bio-resource industries; (iii) the identification of the most suitable
mechanisms ensuring an equitable approach to the issue of rights over
biological resources, including the development of protocols for biochemical
prospecting contracts; (iv) enhancing conservation and sustainable development
opportunities through, among others, the analysis and implementation of the
most suitable economic tools for the internalization of environmental benefits
(positive externalities) from biodiversity, which could provide, in turn,
local residents with an economic stake in protecting biodiversity, as well as
more funds for conservation; (v) private sector collaboration, including the
setting-up of an ongoing private sector advisory group to the BIOTRADE
Initiative ; and finally (vi) training and capacity-building/host country
programmes covering (i), (ii), (iii) (iv) and (v) above.

           III. COOPERATION WITH OTHER INSTITUTIONS AND CIVIC SOCIETY

28.   The UNCTAD secretariat is cooperating closely with other international
organizations and other institutions. UNCTAD participates as an observer in
the WTO Committee on Trade and Environment and in the OECD Joint Session of
Trade and Environment Experts, and as a liaison organization in ISO Technical
Committee 207 on Environmental Labelling.

29.   UNCTAD and UNEP will continue the implementation of their joint
programme of work, in accordance with paragraph 59 of Chapter I of the report
of the CSD on its third session and paragraph 14 of General Assembly
resolution 50/95 of 20 December 1995. UNCTAD and UNEP are currently
cooperating on issues such as criteria for the use of trade measures in MEAs,
the concepts of equivalencies and mutual recognition in the context of eco-
labelling, and capacity-building. An UNCTAD/UNEP seminar will be held on 7 May
1996 in South Africa, as a parallel event of UNCTAD IX. This seminar will also
provide an opportunity to discuss the content and implementation of the joint
work programme with delegates to UNCTAD IX.

30.   New and expanded cooperation between UNCTAD and the WTO is under way in
the framework of the general arrangement for cooperation between the United
Nations and the WTO, as agreed by the executive heads of the two organizations
in September 1995. In particular, the Director-General of the WTO and the
Secretary-General of UNCTAD have agreed to improve the working relationship
between the two organizations at all levels, including in the area of trade
and environment. UNCTAD and WTO are also working for greater complementarity
in technical cooperation activities.

31.   UNCTAD is also cooperating with UNDP in the area of capacity-building.
So far, most activities have been carried out under the project on
"Reconciliation of Environmental and Trade Policies" and UNDP-sponsored
regional and national projects. New areas of cooperation are described in
chapter IV.

32.   As mentioned in chapter II, the UNCTAD secretariat is also cooperating
closely with the secretariats of ASEAN, ESCAP and SELA.

33.   The UNCTAD secretariat is also cooperating closely with civic society
and has participated in numerous activities of academic institutions and NGOs
in developed and developing countries. For example, the UNCTAD secretariat has
been participating in trade and environment activities of the "Policy
Dialogue", the "Global Environment and Trade Study (GETS)", the Quakers, the
Carl Duisberg Gesellschaft, the "Environment Forum" 4/ (Singapore) and -
jointly with UNDP - has set up a network of research institutions in
developing countries and countries with economies in transition.

        IV. FOLLOW-UP TO THE COMMISSION'S DECISION ON TRADE, ENVIRONMENT
                AND SUSTAINABLE DEVELOPMENT AT ITS THIRD SESSION

34.   The Commission, at its third session, invited UNCTAD to undertake work
in a large number of areas related to trade, environment and development.
Progress has been made in the implementation of different activities in
response to this invitation.  As indicated in chapter I, several of the issues
identified by the Commission have been addressed by the Ad Hoc Working Group
on Trade, Environment and Development. This chapter reviews progress in the
implementation of activities by UNCTAD related to the corresponding paragraphs
of chapter I of the Report of the Commission on Sustainable Development on its
third session. (Official records of the Economic and Social Council, 1995,
Supplement 12 (E/1995/32).

35.   It is further to be noted that the General Assembly  requested UNCTAD
"... to report, through the Commission on Sustainable Development, to the
Economic and Social Council and the General Assembly at its special session in
1997 on the concrete progress achieved on the issue of trade and environment"
(resolution 50/95, paragraph 26). On that occasion UNCTAD will report to the
Commission on the results of work that UNCTAD itself has been invited to
undertake.

Capacity-building

36.   The Commission underlined efforts to make trade and environment mutually
supportive through, inter alia, strengthening technical assistance for
capacity-building undertaken by UNCTAD, UNDP and UNEP, including in
integrating the consideration of all factors relevant to the formulation of
trade and sustainable development policies (paragraph 59 of the report
mentioned above). Progress in the implementation of UNCTAD's programme of
technical assistance and plans for future work have been reported in chapter
II. In addition, the UNCTAD secretariat has prepared a monograph on capacity-
building on sustainable development and trade for UNDP's Capacity-21 Programme
and is cooperating with UNDP in the design of a broad programme of technical
assistance for capacity-building, which may involve different UN agencies, in
accordance with the mandate and expertise of each agency.

Identifying gaps in research on trade, environment and sustainable development

37.   The Commission invited UNCTAD, in cooperation with UNEP, WTO, FAO, WHO,
DPCSD and other appropriate institutions, "to prepare a background paper for
the Commission that would review the growing volume of research on trade,
environment and sustainable development linkages carried out by international
organizations, as well as academic institutions and NGOs in developed and
developing countries, including within the framework of projects supported by
international and bilateral aid agencies with a view to identifying possible
gaps, including through the use of independent trade and environment expert
groups" (paragraph 60).

38.   In response to this invitation, the UNCTAD secretariat has prepared a
preliminary note, which is being made available to the Commission. The note is
based on a preliminary review of issues related to trade, environment and
sustainable development, drawing on research papers, documents and background
materials made available to UNCTAD by international organizations, academic
institutions and non-governmental organizations. The final version of this
paper will incorporate additional information and take into account comments
received on the note. The conclusions and recommendations will be submitted to
the Commission at its fifth session in 1997, after consultation with the
institutions mentioned above.

Positive measures

39.   The Commission invited UNCTAD, in cooperation with UNDP, FAO and UNEP
and other international bodies, programmes and organizations to undertake
further work on policies and measures which could support developing countries
and countries with economies in transition in their efforts to internalize
environmental costs (paragraph 61).

40.   Policies and measures aimed at supporting efforts of developing
countries and countries in transition to meet environmental requirements and
the objectives of sustainable development have been proposed in several
reports prepared by the UNCTAD secretariat, in particular report TD/B/WG.6/10.
The country case studies also contain recommendations in this regard. The
Working Group on Trade, Environment and Development recognized that "positive
measures such as improved market access, improved access to finance,
transition mechanisms, access to and transfer of technology, capacity-building
and special provisions for small firms and for some sectors, are effective
instruments in supporting developing countries and countries in transition in
their efforts to meet the objectives of sustainable development". 5/

41.   Possible positive measures were further discussed at the seminar on
"Environment, Competitiveness and Trade: A Development Perspective". At the
seminar, several suggestions for positive measures were made, including for
small and medium-sized enterprises. Many participants stressed that UNCTAD had
an important role to play in proposing positive measures at the national and
international levels. However, there is a need to further identify such
measures. 6/ 

Environmental protection and international competitiveness

42.   The Commission invited UNCTAD "to carry out an analytical study on the
relationship of environmental protection to international competitiveness, job
creation and development, with the input of governments, regional economic
integration organizations, the private sector and NGOs as well as other
relevant regional and international organizations" (paragraph 62).

43.   A separate note, setting out progress in the elaboration of this study,
is being made available to the Commission. It is envisaged that the final
version of this study, for which UNCTAD will seek inputs as indicated above,
will be submitted to the Commission at its fifth session in 1997.

Product policies

17.   Paragraph 63 invited UNCTAD and UNEP in cooperation with WTO, ISO, and
other relevant international organizations "to analyze how transparency and
international cooperation could be strengthened with respect to product-
specific policies, in particular to eco-labelling and certain packaging and
recycling requirements, so as to avoid or mitigate adverse trade effects,
including through the provision of technical assistance to developing
countries and countries with economies in transition and other measures aimed
at facilitating their exports". 

44.   The Ad Hoc Working Group on Trade, Environment and Development addressed
these issues under two different items of its terms of reference. At its first
and second session, it held extensive discussions on the trade, environmental
and development effects of eco-labelling 7/, aided by two reports prepared
by the UNCTAD secretariat (TD/B/WG.6/2 and TD/B/WG.6/5). Both reports make
recommendations on how to strengthen transparency and international
cooperation as well as on technical assistance.

45.   At its third session, the Working Group carried out a preliminary
analysis of emerging environmental policy instruments with possible trade
effects, aided by a report prepared by the UNCTAD secretariat (TD/B/WG.6/9).
The Working Group stressed the importance of transparency and the need to
establish appropriate transitional provisions to allow foreign producers to
adjust to newly emerging requirements. In its Final Report, the Working Group
recognized that "it is important to ensure appropriate transparency of newly
emerging environmental policy measures with possible trade effects, including
eco-labelling, inter alia by considering inputs from interested countries" and
invited eco-labelling organizations to take the fullest possible account of
developing countries' interests. The Working Group also invited national
Governments and standardization bodies to explore the scope for mutual
recognition and equivalencies at an appropriate level of environmental
protection.

Multilateral environmental agreements

46.   With regard to multilateral environmental agreements, the Commission
invited "UNCTAD and UNEP, in cooperation with UNDP, international financial
institutions (IFIs) and other international bodies, programmes and
organizations to examine the effects of trade measures in MEAs on the
achievement of environmental goals and on trade and competitiveness of
developing countries and countries with economies in transition and how
positive measures can assist those countries in meeting their obligations
under the agreements" (paragraph 65).

47.   The Ad Hoc Working Group on Trade, Environment and Development undertook
a preliminary analysis of the trade and competitiveness effects on developing
countries of the Montreal Protocol on Substances that Deplete the Ozone Layer,
the Basel Convention on the Control of Transboundary Movements of Hazardous
Wastes and their Disposal and the Convention on International Trade in
Endangered Species of Wild Fauna and Flora (CITES), aided by two reports
prepared by the UNCTAD secretariat (TD/B/WG.6 and TD/B/WG.10). 

48.   The trade and competitiveness effects of MEAs were further discussed at
the seminar on "Environment, Competitiveness and Trade: A Development
Perspective". A detailed analysis of the trade and development aspects of MEAs
is also contained in reports E/CN.17/1996/8 and Add.1.

49.   The costs of environmental standard implementation differ widely among
parties to an MEA, based on variables like the specificity of the standard,
the availability and adequacy of substitutes, the degree of patent protection
of specified technologies, administrative costs and other factors. Costs vary
in accordance with the levels of economic development and existing
environmental standards prior to the introduction of the international
standard. MEAs may impose relatively higher costs on developing countries. It
is therefore important to include the concept of common but differentiated
responsibility in MEAs.

50.   The Working Group recognized that the trade and competitiveness effects
of MEAs are different for each agreement and may change according to dynamic
factors such as the rate of economic growth, availability of environmentally
friendly technologies and substitutes, amendments to the agreements, and the
timely availability of finance.

51.   The Working Group further recognized that positive measures could be
valuable in assisting developing countries to meet the multilaterally agreed
targets in keeping with the principle of common but differentiated
responsibility. In this context, the Working Group discussed incentives that
encourage trade in environmentally-friendly substitutes, voluntary mechanisms
on foreign direct investment and technology transfer, and market-based
instruments.

52.   The Working Group also recommended further analytical and empirical work
on positive and negative trade and competitiveness effects of MEAs, taking due
account of the ongoing work of UNEP. It noted that this work should be carried
out in parallel with an analysis of facilitating mechanisms and incentives
under different MEAs.

53.   UNCTAD is cooperating with UNEP in a project, executed by the latter
agency, aimed at examining the contribution of different policy instruments,
including both trade measures and positive measures, to achieving the
environmental objectives of three MEAs. The project will draw from the
experience of selected developing countries with regard to specific MEAs (the
Montreal Protocol, the Basel Convention and CITES).

54.   As mentioned in chapter II above, UNCTAD has also developed a "Biotrade
Initiative", which proposes positive measures in support of the objectives of
the Convention on Biological Diversity. 


                                     Annex I

                           Intergovernmental meetings

6-9 June, 1995          Ad Hoc Working Group on Trade, Environment and
                        Development (second session)

30 October -            Standing Committee on Commodities, Fourth Session
3 November, 1995        

6-10 November, 1995     Ad Hoc Working Group on Trade, Environment and
                        Development (third session)

                                Other activities

10-11 April, 1995       UNEP/UNCTAD Expert Group Meeting on Internalization of
                        Environmental Costs (New York)

10-11 April, 1995       UNDP/UNCTAD Expert Round Table on Trade, Environment
                        and Development (New York)

11-23 May, 1995         ASEAN workshops on trade and environment (Manila,
                        Bangkok, Kuala Lumpur and Jakarta)

20-21 July, 1995        National seminar on trade, environment and development
                        (Havana)

25-26 July, 1995        UNCTAD/SELA regional meeting of experts on trade and
                        environment, supported by UNEP and UNDP (Caracas)

27 July, 1995           National seminar on trade, environment and development
                        (Caracas)

4-5 December, 1995      UNCTAD/UNEP Round Table Meeting on Internalization of
                        Environmental Costs and Benefits (Geneva)

18-19 January, 1996     Topical seminar "Environment, Competitiveness and
                        Trade: A Development Perspective" in preparation for
                        UNCTAD IX (Helsinki).

16-18 March, 1996       Group of Arab experts meeting on the implications of
                        the Uruguay Round, particularly in the fields of
                        petrochemicals, environment and services (Bahrain)

19-20 March, 1996       Conference on the Gulf Co-operation Council external
                        trade relations with regard to the World Trade
                        Organization (Bahrain)


                                    Annex II

        Recommendations of the Ad Hoc Working Group on Trade, Environment
                  and Development for future UNCTAD activities

The Ad Hoc Working Group on Trade, Environment and Development, in its Final
Report, recommended a number of areas for future UNCTAD activities within the
theme "trade, environment and development": 

      (a)   Competitiveness effects of environmental policies, standards and
            regulations (through country case studies as well as sectoral,
            cross-country studies).  Competitiveness effects of new and
            emerging environmental policies, standards and regulations in
            sectors of export interest to developing countries, including
            where removal of trade barriers has been negotiated in the Uruguay
            Round;
 
      (b)   Short and long term competitiveness effects of environmental
            policies on small and medium-sized firms, taking into account
            their importance in the exports of developing countries; 

      (c)   Positive and negative trade and competitiveness effects of MEAs in
            parallel with an analysis of facilitating mechanisms and
            incentives under different MEAs (taking due account of the ongoing
            work of UNEP);

      (d)   Exports of domestically prohibited goods (DPGs), to determine if
            the issue has been sufficiently dealt with from the perspective of
            the developing countries.
 
      (e)   Effects of the removal of environmentally harmful subsidies and of
            tariff escalation on the environment of developing countries.

      (f)   Transfer of environmentally sound technologies, including those
            necessary to meet external environmental measures and
            requirements;

      (g)   Equivalencies and mutual recognition (e.g. in the context of eco-
            labelling);

      (h)   Environmental management systems (EMS), in particular ISO-14000;
            analysis of factors affecting and means to improve the
            participation of developing countries in EMS standards,
            development and application.


                                    Annex III

                     Reports of the Ad hoc Working Group on 
                       Trade, Environment and Development
                and documents prepared by the UNCTAD Secretariat 

Reports of the Ad Hoc Working Group

-     Report of the Ad Hoc Working Group on Trade, Environment and Development
      on its first session (TD/B/41(2)/5 - TD/B/WG.6/3).
-     Report of the Ad Hoc Working Group on Trade, Environment and Development
      on its second session (TD/B/42(1)/6 - TD/B/WG.6/7).
-     Final report of the Ad Hoc Working Group on Trade, Environment and
      Development incorporating the report on its third session (TD/B/42(2)/9
      - TD/B/WG.6/11).

Reports prepared by the UNCTAD secretariat

-     Eco-labelling and market opportunities for environmentally friendly
      products (TD/B/WG.6/2, 6 October 1994).
-     Internalization of environmental damages in agriculture: effects on
      environmental and economic variables (UNCTAD/COM/Misc.67, January 1995).
-     Trade, environment and competitiveness aspects of establishing and
      operating eco-labelling programmes (TD/B/WG.6/5, 28 March 1995). 
-     Environmental policies, trade and competitiveness: conceptual and
      empirical issues (TD/B/WG.6/6, 29 March 1995). 
-     A statistical overview of selected eco-labelling schemes
      (TD/B/WG.6/Misc.5, 2 June 1995).
-     Newly emerging environmental policies with a possible trade impact: a
      preliminary discussion (TD/B/WG.6/9, 28 August 1995).
-     UNCTAD ad hoc expert group on internalization of environmental
      externalities: Report of the meeting (UNCTAD/COM/67, August 1995).
-     Examination of the manner in which prices of natural commodities and
      their synthetic competitors could reflect environmental costs, taking
      into account policies relating to the use and management of natural
      resources and sustainable development (TD/B/CN.1/29, August 1995).
-     The policy debate on trade, environment and development (TD/B/WG.6/10,
      12 September 1995).
-     The policy debate on trade, environment and development: A statistical
      annex (TD/B/WG.6/10/Add.1, October 1995)
-     Trade, environment and development, lessons from empirical studies: the
      case of Colombia (TD/B/WG.6/Misc. 6, 25 October 1995).
-     Trade, environment and development, lessons from empirical studies: the
      case of India (TD/B/WG.6/Misc. 7, 31 October 1995).
-     Trade, environment and development, lessons from empirical studies: the
      case of Zimbabwe (TD/B/WG.6/Misc. 8, 31 October 1995).
-     Environmental cost internalization in the South African coal mining
      industry (UNCTAD/COM/Misc.87, October 1995).
-     Environmental cost internalization in the commodity sector - A case
      study for the Czech Republic (UNCTAD/COM/Misc.88, October 1995).
-     Internalization of environmental costs (UNCTAD/COM/Misc.93, October
      1995).
-     Internalization of externalities associated with export commodities: the
      case of cotton and crude petroleum in Egypt (UNCTAD/COM/Misc.96, October
      1995).
-     Trade, environment and development, lessons from empirical studies: the
      case of Brazil (TD/B/WG.6/Misc. 9, 3 November 1995).
-     Trade, environment and development, lessons from empirical studies: the
      case of Poland (TD/B/WG.6/Misc. 10, 6 November 1995).
-     Newly emerging environmental policies with a possible trade impact: a
      preliminary discussion. A statistical annex (TD/B/WG.6/9/Add.1, 6
      November 1995).
-     UNCTAD's technical cooperation programme on trade and environment
      (TD/B/WG.6/Misc. 1, 21 November 1995).
-     Report on the workshop on eco-labelling and international trade,
      (TD/B/WG.6/Misc. 2, 21 November 1995). 
-     Environmentally preferable products (EPPs) as a trade opportunity for
      developing countries (UNCTAD/COM/70, December 1995).


                                      Notes

1/          The Trade and Development Board sharpened the description of
UNCTAD's role as follows: "UNCTAD's role in the field of trade and environment
lies in policy analysis and debate, conceptual work, the building of consensus
among member States on the interaction between environmental and trade
policies, the dissemination of information to policy-makers and the
encouragement and provision in capacity-building. Particular attention is
given to the problems and special circumstances of the developing countries".
See paragraph 3(a) of Trade and Development Board conclusions 407(XL) on the
first part of its fortieth session on sustainable development.

2/          See TD/B/WG.6/Misc.1.

3/          ASEAN Workshop Report. Trade and the Environment: Issues and
Opportunities. Manila, Bangkok, Kuala Lumpur, Jakarta 11-23 May 1995. ASEAN
Secretariat, October 1995.

4/          A joint programme of the Institute of Policy Studies and the
Faculty of Law, National University of Singapore.

5/          Final Report of the Ad Hoc Working Group on Trade, Environment and
Development incorporating the report on its third session (TD/B/WG.6/11).

6/          UNCTAD IX/Misc.2.

7/          Following an UNCTAD seminar held in June 1994, a book on "Eco-
labelling and International Trade" will be published by MacMillan, probably in
late 1996.  

 


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Date last posted: 3 December 1999 10:27:35
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