II.17 International Trade and the 2030 Agenda for Sustainable Development

 

By Ranja Sengupta, Third World Network

The full value of the 2030 Agenda is its promise to deliver development outcomes beyond what national governments can do on their own. Here lies the importance of a global partnership, that is based on effective, transparent and fair global cooperation that more than matches national efforts. In the Millennium Development Goals (MDGs), this was captured in Goal 8 (MDG 8). In the 2030 Agenda it is embodied in Sustainable Development Goal (SDG) 17 on Means of Implementation (MOI) as well as the goal-specific means of implementation targets in each of the other goals. There are 19 MOI targets in Goal 17 as well as a total of 43 MOI targets spread throughout the other 16 goals.

The inclusion of a stand-alone goal on means of implementation together with goal-specific targets threaded throughout represents a huge advance in terms of global development agreements, giving significant importance to the issues of implementation and calling for a far more coherent approach to achieving the goals. Sadly, this most crucial component of the Agenda, which is essential if it is to be truly “transformative” and meet key sustainable development needs, remains the most contested and divided, still often on North-South lines. While developing countries have been asking developed ones to deliver on their commitments on the various components of MOI such as official development assistance (ODA), debt restructuring, fair rules of trade, technology sharing and transfer, policy coherence and systemic issues of global governance, developed countries have not done so. The failure of recent attempts (e.g., the Asia Pacific Forum on Sustainable Development and the first Financing for Development Forum in April 2016) to get more cooperation, clarity and accountability on MOI delivery mechanisms, makes it clear that this resistance is strong and proactive. As such, it creates serious obstacles to the ability of developing countries to meet the SDGs.

With regard to trade, for example, developing countries will not be able to meet development targets if they continue to face unfair and adverse rules of global, regional, plurilateral and bilateral trade agreements. These not only stop their governments from getting necessary revenues to fund development priorities, including those set out in the 2030 Agenda; they can actually obstruct and reverse the progress made through other means. The question is, does business-as-usual work or do trade rules need to be fundamentally re-shaped to serve sustainability goals? Difficult negotiations on the three targets on international trade in SDG 17 (Targets 17.10, 17.11 and 17.12), as well as those in several other goals, have meant that though some of these targets are good and well-intended, critical issues have not been addressed. Moreover, the collective scope of these targets, designed to be inter-related and interlinked remains limited and often bypasses the real issues that global trade and in particular, developing and least developed countries, face today.

Trade targets in the 2030 Agenda

The three targets on trade in SDG 17, along with two targets on technology that have a close connection to trade issues (Target 17.6 and Target 17.7)1 and various goal-specific targets linked to trade demonstrate these problems.

Target 17.10, to promote a universal, rules-based, open, non-discriminatory and equitable multilateral trading system, for example, locates such a system only under the WTO. Although this is agreed 1992 Rio Summit language, WTO proceedings make it difficult for developing and least developing countries (LDCs) to be “open” at all times, as they may need to protect their markets depending on their stage of development. This target also refers to “the conclusion of negotiations under its [the WTO’s] Doha Development Round.” This is currently contentious at the WTO, with developing countries fighting to keep it open until its development mandate is delivered while developed countries want to end it right away, without addressing the development dimension. Although both developed and developing countries want the conclusion of the Round, it will be meaningless for developing countries unless the development mandate is met.

Target 17.11, to significantly increase the exports of developing countries, in particular with a view to doubling the LDCs’ share of global exports by 2020, and Target 17.12 on timely implementation of duty-free and quota-free market access on a lasting basis for all LDCs, consistent with WTO decisions, are both good in principle. But as an UNCTAD report points out, exports of developing and least developed countries are blocked by non-tariff measures such as high standards, strict rules of origin, and so on which are much more difficult to pin down.2 Duty Free Quota Free access has been the target of long, drawn-out battles between developed countries and LDCs. The Bali WTO Ministerial of 2013 delivered merely some best endeavour3 provisions on this issue while the Nairobi Ministerial of December 2015 (held after the adoption of the 2030 Agenda) failed to include any language on this target.

The goal-specific trade means of implementation face challenges as well.

Under SDG 2, on hunger, food security, and sustainable agriculture, Target 2.b specifies the correction and prevention of trade restrictions and distortions in global agricultural markets. However, it highlights the elimination of export measures (including subsidies) as the primary instrument whereas in reality the importance of export promotion measures has declined, making it largely irrelevant in addressing global market distortions. In fact the Nairobi Ministerial delivered a binding outcome on this, however only after allowing the United States (US) extremely lenient terms.4 On the other hand, the elephant in the room, namely the high domestic agricultural subsidies of the OECD countries, mainly the US and the European Union (EU), remain untouched. These subsidies continue to distort agricultural markets and undercut producers in developing countries and LDCs.

Under SDG 3, on health and well-being, Target 3.b reaffirms the use of TRIPS flexibilities to provide access to affordable essential medicines and vaccines for diseases that affect developing countries. But due to the high degree of pressure exerted on countries which have tried to use these flexibilities, developing countries are forced to seek re-affirmation, even though the 2001 Doha TRIPS Declaration was itself a reaffirmation of rights in the TRIPS Agreement. Moreover, by referring only to “essential medicines,” a limitation that is neither in the TRIPS Agreement nor the Doha Declaration, the target in fact represents a regression.

Under SDG 10, on reducing inequality within and among countries, Target 10.a specifies the implementation of special and differential treatment (SDT) for developing and least developed countries. This has been the foundation of the Doha Development Round, even if framed in a rather flawed manner. As the Round faces threats of an early conclusion without fulfilling its development mandate, the SDT component risks being severely undermined. In Nairobi, negotiations on development failed to make much headway. If this target is to be met, the current approach to WTO negotiations must change significantly.

Under SDG 14, on marine resources, Target 14.6 seeks to eliminate certain forms of fisheries subsidies. Because, several developed countries grant large subsidies on fisheries that undercut developing country producers, this target could help in correcting that situation. However, in order to give due attention to the need of small-scale fishing sectors in developing countries for support, the target includes SDT for developing and least developed countries. In the WTO Nairobi Ministerial, however, several developed countries asked developing countries to remove fisheries subsidies, even those that support small-scale fishing and fisherfolk. The SDT treatment provision included in Target 14.6 was ignored.

Adverse trade orientation

While some targets on trade are well intended, most remain limited and incomplete and may sometimes do more harm than good. However, there are some provisions that could be clearly adverse. For example, under SDG 10, Target 10.b supports foreign direct investment (FDI) as an unqualified positive measure, and fails to point out the various problems related to FDI, especially in the current context, including restrictions on governments’ policy space, pressure to remove or dilute performance requirements on FDI,5 challenges to natural resource conservation and management, environmental degradation, and protection of human rights, especially rights of local communities and vulnerable sectors of the population.

The overall emphasis on trade liberalization as a blanket panacea is also problematic. Thus the inclusion in Paragraph 68 on MOI in the 2030 Agenda, of a commitment to pursue “meaningful trade liberalization”6 ignores the fact that the ability of trade liberalization to do blanket-good has been severely challenged even by trade advocates.

To sum up, the 2030 Agenda addressed trade issues in a highly limited way. It focuses only on the multilateral space of the WTO whereas the plethora of bilateral, regional and plurilateral FTAs are witnessing even more aggressive liberalization and creating impacts that makes the WTO (at least in its present form) almost benign by comparison.

Moreover, not only is the coverage limited, it is often damaging rather than constructive for sustainable development. The primary reason is that the 2030 Agenda’s trade provisions, as well as the reality of world trade, continue to favour the interests of corporations and the narrow interests of developed countries, also largely corporate-driven. This also poses an inherent conflict with the objectives of sustainable development laid out in other goals.

The current reality of global trade and the framework of the 2030 Agenda

The current trade agreements pose an inherent conflict with the whole framework of the 2030 Agenda and its SDGs.

The ongoing divide at the WTO on ending the Doha Round without having met its development objectives persists despite the adoption of the 2030 Agenda. This clearly indicates that even after agreeing to Target 17.10 (on the Doha Development Round) and Target 10.a (on special and differential treatment) several developed countries especially the US, Japan and the EU are asking for a premature termination of the Round.

Another anomaly, as pointed out earlier, is the increasing dominance of FTAs and bilateral investment agreements (BITS), as well as the emerging spectre of mega FTAs such as the Trans Pacific Partnership (TPP), the Regional Comprehensive Economic Partnership (RCEP) and the Trans-Atlantic Trade and Investment Partnership (TTIP) (see box). These include deeper liberalization of the trade in goods and services (e.g., higher tariff cuts on agricultural and industrial products and more open markets for services), higher standards of intellectual property rights (IPR) protection, as well as coverage of new areas such as investment, government procurement, competition policy, e-commerce, environmental goods and services, global value chains, and so on, all unsuccessfully pushed for by developed countries at the WTO in the 1990s. However, these countries are succeeding in getting these into the FTAs, following which can be seen the steady advance of these “new issues” at the WTO. Most of these areas represent considerable threat to governments’ space for policy regulation. This despite the fact that, Target 17.14 refers to “enhancing policy coherence for sustainable development” while Target 17.15 mandates “respect each country’s policy space and leadership to establish and implement policies for poverty eradication and sustainable development” (emphasis added).

The aggressive IPR provisions in these agreements, as for example the TPPA, can severely compromise governments’ policy space to ensure access to medicines, seeds and other important products for people at large. Even if the very limited Target 3.b on access to essential medicines is met, the FTA provisions on IPRs (and investment) are rapidly bypassing these flexibilities.

The BITS and investment chapters of FTAs are particularly damaging. Investment protection chapters include expansive definition of ‘investment’ and give very strong rights to the foreign investor, much above that of national investors and public interests. In particular, the dispute settlement mechanism in these agreements allow foreign investors to sue governments in secret private international arbitration cases through the Investor-State-Dispute-Settlement (ISDS) clause, for any “expropriation” or imposition on their investment and expected profits. The arbitration system is hazy and bypasses national legal systems.7 These investment agreements can challenge decisions not only of the executive or bureaucracy, but that of state/provincial governments, legislature and judiciary as well.

In spite of major efforts by global civil society, FTAs and BITs are not covered in the 2030 Agenda. The Addis Ababa Action Agenda (AAAA) from July 2015 at least has Paragraph 88 that says such agreements cannot constrain domestic policies and regulation in the public interest.8 However, public policy regulation for protection of public interest, environment, public health, human rights and natural resources are all being challenged in ISDS cases. There are 696 known cases globally with more than fifty per cent on natural resources, and the developing countries are losing most of theirs.

The 2030 Agenda and the AAAA expect governments to raise revenues domestically through taxes for development financing. But changes in tax policy are also challenged in several ISDS cases. Judicial and local government decisions are being challenged as well. As mentioned earlier, the strong role of the private sector in the 2030 Agenda and lack of language on regulation of private sector activities can potentially help to perpetuate such use of abusive investment agreements by large corporations.

The burden of ISDS has already led to Indonesia’s termination of 17 BITS in a review to assess the appropriateness of many BITS signed by former Governments in light of the current needs of the country. India has announced that it will renegotiate 47 BITS that have expired based on its new model BIT, and South Africa has already started its own review and terminated several BITs.9

Agriculture and food security is another area where global trade rules will be trampling on the SDGs. Target 2.3 under talks of doubling agricultural productivity and incomes of small-scale food producers, in particular women, indigenous peoples, family farmers, pastoralists and fishers, including through secure and equal access to land, other productive resources and inputs, knowledge, financial services, markets and opportunities for value addition and non-farm employment. However, at the WTO, the recent attack by the US, the EU and other developed countries of developing country subsidies to small farmers for supporting public food programmes, will challenge the meeting of goal 2 overall and this target in particular. Such subsidies by developing countries are a measure to support production for food programmes as well as that of livelihoods of farmers, without which long term food security of developing countries cannot be safeguarded. At the WTO, a permanent solution that asks for allowing such subsidies without limit is facing major challenges, while developed country subsidies are allowed to continue unfettered. The push in the FTAs to get agricultural import duties removed in developing countries, even for subsidised developed country products, will also challenge SDG 2 and several targets thereof.

On the other hand, Target 2.c on regulating food commodity markets and controlling food price volatility is a much welcomed measure but the WTO and FTAs have no mechanism to address this. In fact their operation actually encourages speculative trading in food commodity markets, for example by opening up developing countries to global markets and challenging public stockholding operations.

The WTO and FTAs are also challenging industrialisation and job creation prospects in developing and least developed countries by forcing them to reduce or eliminate import duties on industrial sectors even in the presence of infant industries. Preferential treatment for domestic industry, even small and medium sized enterprises (SMEs), is being barred. Further several FTAs, for example the EU FTAs, force developing countries to eliminate export duties on raw materials. Kenya’s leather industry was damaged as they were forced to remove export taxes on raw leather. Several others are fighting to retain minerals to be developed and used for local industrialisation. China lost a case at the WTO on its export taxes on minerals. The investment provisions including the pressure to remove performance requirements are challenging as well. These run counter to Target 9.b which asks for “ensuring a conducive policy environment for, inter alia, industrial diversification and value addition to commodities” in developing countries.

The Global Value Chains (GVCs) are being advanced as the solution for SMEs in developing countries to grow and contribute to job creation. Target 9.3 says “increase the access of small-scale industrial and other enterprises, in particular in developing countries, to financial services, including affordable credit, and their integration into value chains and markets”. While the emphasis on SMEs is good, the GVCs are based on a principle of exploitation of both natural and human resources in developing countries while locking them into very low ends of the value chains that blocks them (often through the control of technology) from moving up the chain.

Another example is the aggressive liberalisation of services trade through the FTAs which includes asking for market access and investment into sensitive and critical service areas such as water, health, education, energy and even food. By generating and accelerating rising user fees, increasing inequality across economic and geographical (rural-urban for example) status, and even loss in employment opportunities in associated segments,10 such liberalisation is resulting in severe loss of access to services for the people. The access to sustainable health, education, water and energy are embodied in SDGs 3, 4, 6 and 7 respectively but many of these goals and the specific targets will not be attainable unless trade rules and power asymetries in rule-making are changed.

To conclude, there are many other examples that can be given to show that the whole paradigm of the current commercially and corporation-driven trade agreements does not fit in with the overall approach of the SDGs. It is clear that a lot has to change in global trade rules if it has to cater to the SDGs. In many ways, the SDGs themselves make it easy for trade agreements to rule by allowing “the private sector” to dominate the development discourse and set its own standards for sustainable development, in effect also allowing weak or non-existent regulation of activities of the corporations which drive the trade and investment agreements.

Interestingly, in spite of the limited approach on trade issues, the 2030 Agenda and the SDGs have actually begun to have a bearing on global rule setting on trade, in probably an unplanned but not unexpected way. It is important to note that the SDGs have no legal status and are more useful in norm-setting whereas trade and investment agreements are legally binding. But we already see that the SDGs are being used, if selectively, by the developed countries to push for legally binding stipulations in trade agreements, for example, in the fisheries subsidies case mentioned above. Though this particular attempt failed, it is clear that the SDGs provide a potential instrument to advance a selective agenda through its selective use.

This makes it clear that negotiators of trade agreements, especially from developing countries, need to know not only of the provisions that are related to trade but the entire 2030 Agenda itself, if they are to make use of it themselves or block adverse use in legally binding trade agreements. As such the 2030 Agenda and the SDGs represent a limited and often, a regressive package on trade. But the bigger Agenda (especially other goals and targets) still offers opportunities for developing countries to fight for changes in the current global trade systems if they can use it effectively. But for this to happen, it must first be recognised by all that meaningful sustainable development spanning economic, social and environmental pillars, though not necessarily limited to the 2030 Agenda itself, represents top priority for developing countries. In particular, trade and investment agreements are subservient to that priority. That is the biggest reality that has to be changed.

  • 1. Target 17.6, on the setting up of the Technology Facilitation Mechanism (TFM) and (Target 17.7) on the promotion of the development, transfer, dissemination and diffusion of environmentally sound technologies to developing countries are useful, cf. box in chapter 3.16.
  • 2. Cf. UNCTAD (2016).
  • 3. “I will try my best” language, which is not binding on Member States.
  • 4. Cf. www.wto.org/english/thewto_e/minist_e/mc10_e/mindecision_e.htm
  • 5. Performance requirements generally impose conditions on inward FDI that helps a domestic economy; such as local content, local labour requirements, mandatory technology transfer, etc.
  • 6. Cf. United Nations (2015b), para. 68. 
  • 7. Cf., for example, Eberhardt/Olivet (2012).
  • 8. Cf. United Nations (2015a), para. 88.
  • 9. Cf. www.rh-arbitration.com/south-africa-terminates-bilateral-investment-treaties-with-germany-netherlan….
  • 10. For example retail liberalization in several countries have resulted in severe job losses and closure of small retail, thus compromising their incomes and access to basic services.
Literature

Eberhardt, Pia/Olivet, Cecilia (2012): Profiting from injustice: How law firms, arbitrators and financiers are fuelling an investment arbitration boom. Brussels: Corporate Europe Observatory/Transnational Institute.
http://corporateeurope.org/sites/default/files/publications/profiting-from-injustice.pdf

UNCTAD (2016): Trading into Sustainable Development: Trade, Market Access and the Sustainable Development Goals. Geneva.
http://unctad.org/en/PublicationsLibrary/ditctab2015d3_en.pdf

United Nations (2015a): Addis Ababa Action Agenda of the Third International Conference on Financing for Development. New York.
www.un.org/esa/ffd/wp-content/uploads/2015/08/AAAA_Outcome.pdf

United Nations (2015b): Transforming our world: the 2030 Agenda for Sustainable Development. New York (UN Doc. A/RES/70/1).
www.un.org/ga/search/view_doc.asp?symbol=A/RES/70/1&Lang=E