Trade, Sustainability and Development – October 2013

EU Singapore FTA sets new ‘green’ ground

The text of the EU and Singapore Free Trade Agreement (FTA), publicly released this month, contains a comprehensive chapter on ‘trade and sustainable development’. The text reflects longstanding EU policy to regulate trade on environmental grounds.

While Singapore already has an FTA with the US that includes commitments on trade and environment, several key aspects of the EU FTA, not typically included in other FTAs, stand out.

Other countries that are negotiating FTAs with the EU might take note.

The agreement:

  • Binds parties to regulate trade and environment consistent with Multilateral Environment Agreements and to enforce their own environmental laws. There is commitment to support efforts to develop a post 2020 international climate change agreement under the UNFCCC;
  • Links regulation of illegal timber trade (and other products) with sustainable forest management. Parties agree to address illegality, by for example, promoting trade in timber which is certified or verified as sustainably harvested and managed. The role of voluntary and private certification schemes is noted;
  • Recognises the precautionary principle as a factor for consideration in developing environmental regulation affecting trade, and;
  • Accords civil society a role in monitoring and implementing commitments under the Chapter, including environmental, social and economic NGOs. Disputes are settled inter-governmentally or through a panel of ‘experts’.

The full text of the EUSG FTA is available here.


EU and Indonesia ink forestry agreement

The European Union and Indonesia have finally signed an agreement on legal timber. The agreement was signed on September 30 after almost seven years of negotiating, but is yet to be ratified and not yet operational.

The Voluntary Partnership Agreement (VPA) is designed to verify the legality of timber exports from Indonesia to Europe. It does so through the implementation of a legality standard for Indonesian exporters combined with verification of documentation at both export and import points.

The agreement has been described as a ‘fast track’ for Indonesian timber exports that would otherwise have to go pass through the EU Timber Regulation (EUTR). The EUTR requires importers to undertake due diligence on the legality of their timber, requiring harvesters in exporting nations to implement new management systems to verify their legal status.

A number of groups such as CIFOR have already stated that the compliance costs for such schemes are likely to bankrupt community foresters in nations such as Cameroon, where costs for one community operation are equivalent the annual incomes of ten employees.

As has been noted by World Growth on previous occasions, the EU’s Forest Law Governance, Enforcement and Trade (FLEGT) program responsible for implementing the VPA agreements has been in operation for almost a decade. However, not a single agreement is operational with any of the 13 target countries.


Green Climate Fund in doubt in lead up to UNFCCC meeting

The UNFCCC Green Climate Fund appears to have its future in doubt after its most recent board meeting. According to the meeting’s minutes, the board was unable to agree on a timeline for raising an annual USD100 billion to assist developing countries manage the impacts of climate change.

The Fund was established at the UNFCCC meeting in Copenhagen in 2009. The fund – and the subsequent goal of raising USD100 billion annually – was seen as a sweetener for many developing countries to coax them into signing the Copenhagen Accords that emerged from the meeting.  The Fund was designed to invest in so-called low-carbon development in developing economies as well as assist in the cutting of emissions.

However, the Fund has made little, if any, progress since then. The Fund is yet finalise its structure and still has the World Bank in place as its interim trustee.

The most recent financial reports from the fund indicate that is has received just USD9 million in pledges and USD8 million in actual cash equivalents. By way of comparison, the World Bank’s annual budget is around USD30 billion.

News reports indicate that a major source of contention is precisely where the annual budget is to come from, with many industrialised country governments struggling with budgeting and revenues.

Both the US and Australian governments have suggested constructing the fund in such a way that it will appeal to private-sector investors. However, private sector carbon finance has already struggled attract investors.

Developing countries have expressed dismay at the lack of progress from the Fund, with finance often emerging as the deal-breaker in international climate change negotiations.


In Brief

Biofuels Reform in the European Union: Why New ILUC Rules will Reinforce the WTO Inconsistency of EU Biofuels Policy, ECIPE Occasional Paper No. 03/2013. Fredrik Erixon argues that EU biofuels policy reform will reinforce the incompatibility of EU biofuels policy with basic rules of the WTO.

WTO (in)consistency of biofuel ‘grading’ systems: will it be war? Trade Perspectives, Issue No. 17, 20 September 2013. Trade Lawyers in Brussels note the Commission’s proposal for biofuel grading raises issues of WTO inconsistency.

EU policy on climate change is right even if science was wrong, says Commissioner, Telegraph, 16 September 2013. The EU states it is pursuing the correct energy policies, regardless of whether or not scientists are wrong on global warming and even if they lead to higher prices.

US extends period for comments on new formaldehyde emission rules. ITTO Tropical Timber Market Report Volume 17 Number 16, 16th – 31st August 2013. US industry say proposed changes to rules for formaldehyde emissions from composite wood products will increase costs for furniture manufacturers, retailers and importers.

Researchers revise ‘overestimated’ biofuels subsidies, Euractive, August 26, 2013 and. Biodiesel Magazine, August 26, 2013. The IISD has corrected a large error it made in an April report regarding how much money the EU biofuel sector receives in excise tax exemptions from member states.

Congress and Fishy Business on Trade, WSJ Opinion, August 29, 2013. New regulations for catfish from China under the US Farm Bill could lead to new barriers against American exports.

Indonesia confident on APEC green listing for palm oil which would boost exports. Reuters, August 29, 2013. Indonesia is confident that an agreement can be reached with Asia-Pacific countries on listing crude palm oil as an “environmental good.”

Palm oil trade barriers a priority issue, My Palm Oil, September 4, 2013. Reducing barriers to palm oil trade is a priority issue in Malaysia’s negotiation of free trade agreements with developed nations.

EU Offers Aviation Emissions Concession in Push for ICAO Deal. ICTSD Bridges Weekly Trade Digest, Volume 17, Number 29, September 12, 2013. The EU has offered to modify the controversial aviation component of its Emissions Trading System in the hope of reaching a global deal.

Palm Oil Export Barriers To Be Addressed At Next TPP Meeting: MITI Sec-Gen. National News Agency of Malaysia, September 10, 2013. Barriers to palm oil exports among key points to be addressed by the Ministry of International Trade and Industry at the next Trans-Pacific Partnership Agreement meeting.

Coalition takes axe to climate programs, The Australian, September 11, 2013. The incoming Australian government plans to undertake a substantial rewrite of its administration of carbon abatement schemes.

EUTR and CPR driving changes in EU plywood market, ITTO Tropical Timber Market Report, Volume 17 Number 17, 1st – 15th September 2013. European buyers of Chinese plywood are focusing on a smaller number of exporters who are able to provide legality assurances required under the European Timber Regulation (EUTR).

China to slap anti-subsidy duties on U.S. solar material, Reuters, 16 September, 2013. China will impose preliminary anti-subsidy duties on some imports of U.S. solar-grade polysilicon, a move that could intensify trade tensions between the two economies.

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