WORLD TRADE
ORGANIZATIONWT/CTE/W/157
13 July 2000
(00-2877)
Committee on Trade and Environment Original:  English
INTEGRATED ASSESSMENT OF TRADE-RELATED POLICIES
Submission by UNEP
I. INTRODUCTION
1. With the recent acceleration of global trade, countries throughout the world have benefited
from more investment, industrial development, empl oyment and income growth.  These benefits are
widely recognized;  however, they are developing unevenly across and within countries, and some
countries are finding that free trade has resulted in substantial environmental and developmental costs
that outweigh the economic benefits they have experienced.  Within these countries, globalization and
free trade are associated with growing national debt, poverty, natural resource depletion and
environmental degradation.
2. There is a growing awareness that, in order to benefit from trade liberalization, integrated
policy-making is needed.  Policies developed in a coherent manner could promote more uniform and
stable economic growth while conserving natural re sources, protecting the environment and providing
a more equitable access to the benefits of free trade to marginalized economies and impoverished
communities world-wide.
3. The need for a comprehensive approach to coordinated policy-making is not new.  It was
recognized by the international community at th e United Nations Conference on Environment and
Development (UNCED) in 1992, and the United Nations Commission for Sustainable Development
(CSD) continues to promote its further development.
4. Given international recognition of the links be tween environment and development, it would
have been expected that recent trends towards environmental degradation and deteriorating social
welfare should have been reversed, or at least slowed down, and economic activity shifted to a moresustainable pattern.  However, policy coordination necessary to achieve these objectives at the
national level as well as at the international level is still lacking.
5. There is now a growing recognition of the need to develop and apply an integrated assessment
methodology which provides a balanced approach to assessing the economic, environmental and
social effects pertaining to a particular policy.
6. UNEP’s work on integrated assessment benefits from its work in the area of environmental
assessment since the organization’s establishment in the early 1970s.  Throughout this period, UNEP
has worked and continues to work closely with govern ments to assist them in their efforts to enhance
their institutional and human capacities for integrat ing environmental considerations in development
planning and decision-making.
7. In 1992, the UNCED specifically requested UNEP to include in its work the “further
development and promotion of the widest possible us e of environmental impact  assessment, including
activities carried out under the auspices of the United Nations specialized agencies” .WT/CTE/W/157
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8. In 1999, based on demands for technical assistance from a number of developing countries to
initiate their own assessments of trade, UNEP established an international working group comprising
a multi-disciplinary team of environmental, social, economic, and trade experts to develop a
structured, yet flexible integrated assessment (IA) manual of trade-related policies.
9. The manual is intended to:
• Provide a general approach and framework for integrated (economic, environmental,
and social) assessments comprising a menu of options through which a user candevelop a methodological approach to integrated assessment which can be adapted to
national requirements and needs.
• Assist negotiators, policy makers and practitioners to assess trade and trade-related
policies against widely accepted sustainable development criteria.
II. CHALLENGES FOR THE DEVELOPMENT OF INTEGRATED ASSESSMENT
10. The IA development process must respond to many challenges before it can become a
practical tool in the trade-environment-development policy-making.  The key challenges facing the
development of an IA methodology are to operation alize the Rio principles.  In developing the
manual, the following challenges are specifically being addressed:
• Economic, environmental and social assessments continue to be undertaken in most
of the cases as parallel exercises without sufficient linkages between them.
Methodologies and techniques need to be developed to pool these assessments
together to provide a more balanced approach to assessments with different weights
given to the different dimensions based on countries' priorities and requirements for
sustainable development.  Agenda 21 recommends that governments “ensure the
integration of economic, social and environm ental considerations in decision-making
at all levels” .
• IA should support an equitable distribution of costs and benefits of trade
liberalization.  Globalization has been ch aracterized by distorted markets and trade
rules that do not sufficiently provide a level playing field for all subscribing nations.
Therefore, the benefits of globalization have not been shared equitably.  This is
resulting in a growing polarization between people and countries benefiting fromglobalization and others that are passive recipients of its negative trends – in
particular, growing income disparities, natural resource depletion, environmental
degradation and associated health hazards.  In order to help reverse these negative
trends, IA should assist policy-makers to identify the imbalances of current and
projected trade activity, both at the national and international levels.  Rio Principle 16recommends that costs associated with particular activities be compensated uniquely
by those responsible for their generation:  “the polluter should, in principle, bear the
cost of pollution”.
• Through a clarification of the relationships between trade, environment and
development, IA can provide an assessment of the trade-offs involved in policy-
making, and can thus help identify those policy options which can enhance thepositive, and avoid the negative, impacts of trade liberalization.
• IA should be used not only as a tool to identify the negative impacts of trade
liberalization, but more importantly, as a tool to promote the development and
implementation of mutually supportive trade and environment policies to achieve
sustainable development objectives.WT/CTE/W/157
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• IA results should lead to the identification of appropriate flanking policies, including
market-based instruments, to address and rectify negative environmental anddevelopmental implications of trade policies.  IA should therefore incorporate the
development of policy response packages to implement sustainable trade and
environment policies.
• The internalization of externalities is  an important step towards curbing
environmental degradation and related social problems for both developed and
developing countries.  IA should aim at internalizing environmental costs.  Rio
Principle 16 states that “National authorities should endeavour to promote the
internal ization  of environmental costs and the use of economic instruments.”
• Incorporating environmental and natural resource valuation in IA could provide a
useful input in the system of national accounts in order to provide a true picture to the
GDP.  In that sense, IA could thus be used to provide a true indicator of the overalleffect of a trade policy on sustainable economic growth as reflected in systems of
national accounts.  Agenda 21 highlights the need for countries to “expand existing
systems of national economic accounts to integrate environmental and social
dimensions in the accounting framework” .
• Progress in moving from isolated to integrated policy-making has been limited.  At
the national level in most countries, trade policy and environmental policy aredeveloped separately by distinct sets of policy regimes, and at the international level,
WTO trade agreements and MEAs are elaborated independently.  IA should bedesigned to enhance coordination between trade and environment ministries as well
as other sectoral ministries.
• It is essential to clearly define the scope of the assessment from the outset.  This
could include the specific sector to be assessed, a particular ecosystem, or geographicarea.  It could also include the type of policies being considered which may include
trade related policies such as macroeconomic policies, structural adjustmentprogrammes, and investment policies, as well as an analysis of cross sectoral
linkages.  The geographical scope of the assessment should be defined according to
the extent to which impacts are expected to extend, including transboundary as well
as international implications.  Rio Principle 2 states that:  “States have … the
sovereign right to exploit their own reso urces pursuant to their own environmental
and developmental policies, and the responsibility to ensure that activities within
their jurisdiction or control do not cause damage to the environment of other States
or of areas beyond the limits of national jurisdiction.”
• There is increasing recognition to the importance of ex ante  assessments.  Such
assessments allow relevant environmental and developmental issues to be brought
forward and considered in the formulation of trade policies and at an early stage ofnegotiations so that the implications of a trade agreement can be clearly identified
early in the process.  IA methodology should also allow concurrent as well as ex post
assessments of trade policies.  It should be emphasized that an assessment should be
considered as an ongoing process to allow for a continuous review and the
introduction of the necessary policy measures required to enhance positive outcomesand address negative implications.  Agenda 21 emphasizes the need for countries to
“shift time horizons in programme pl anning and implementation to permit an
enhancement of their ability to respond to  new longer-term challenges rather than
concentrating only on immediate problems” .
• IA should ensure stakeholder involvement  and a wide participatory approach.  This
does not only contribute to a better understanding of the potential impacts of a trade
agreement and to the identification of appropriate complementary policy measures orWT/CTE/W/157
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alternative options;  it also ensures transparency and national “ownership” of the
process and its outcome.  Moreover, bringing different stakeholders together
promotes coordinated policy development and integration.  An increase in
participatory involvement leads to a clearer recognition of stakeholder concerns
allowing policy-makers to address them.  As emphasized in Agenda 21, “One of the
fundamental prerequisites for the achievement of sustainable development is broad
public participation in decision-making.”
• Respecting indigenous knowledge and culture is an important element which should
be integrated in an assessment process.  This would clearly acknowledge theimportant role indigenous people and local communities play in achieving sustainable
development and will ensure the support and contribution of local communities in
environmental protection and conservation activities.  According to Rio Principle 22
“Indigenous people and their communities … have a vital role in environmental
management and development because of their knowledge and traditional practices .
States should recogn ize and duly support their identity, culture and interests and
enable their effective participation in the achievement of sustainable development” .
• Poverty and environmental degradation partially result from markets that externalize
the environmental and social costs of economic activities.  IA should help identify the
causal linkages between poverty and environmental variables and to derive betterestimates of the degree to which environmental protection can contribute to poverty
alleviation.
• IA should identify the special needs of developing countries in relation to the
expected outcome of the proposed trade agreement, thus facilitating the design ofspecific measures and provisions in a trade agreement in order to properly account
and provide for such needs.  Specifically, these needs include capacity building,preferential treatment under trade agreements, debt relief, investment, technology
transfer and development assistance.  Following the Rio Declaration, developed
countries have a major responsibility to help meet these needs, and trade negotiations
should reflect this.  Rio Principle 3 clearly refers to the responsibility nations have in
this regard: “ The right to development must be fulfilled so as to equitably meet
developmental and environmental needs of present and future generations”.  The
different responsibilities of countries are recognized in Rio Principle 7:  “States have
common but differentiated responsibilities .  The developed countries acknowledge the
responsibility that they bear in the international pursuit of sustainable development” .
Furthermore, Rio Principle 6 the different needs of countries, stressing that “The
special situation and needs of developing countries, particularly the least developed
and those most environmentally vulnerable, shall be given special priority” .
• IA should include monitoring and follow-up as part and parcel of the assessment
exercise.  Indeed, Agenda 21 emphasizes the importance of conducting activities atthe national level, recommending “monitoring and evaluating the development
process systematically, conducting regular reviews of the human resourcesdevelopment, economic and social conditions  and trends, the state of the environment
and natural resources” .
• At the national level, the capacities of governments, national research institutions,
industry, the private sector and NGOs needs to be further strengthened to undertake
IA.  In this regard UNEP jointly with UNCTAD have launched a Capacity Building
Task Force on Trade, Environment and Development, one of the main objectives of
which is to enhance countries' capacities to undertake IAs.WT/CTE/W/157
Page 5
III. FUTURE DIRECTIONS FOR IA:  THE ROLE OF UNEP
11. The expert group established to support the preparation of the manual reviewed the first draft
in December 1999 in Geneva and refined the outline during a second meeting in March 2000 in
Imbabura, Ecuador.  A briefing session was organized at the margins of CSD-8 in New York to
present an outline of the manual and receive feedback from governments and NGOs on its objectivesand content.  A revised version of the manual was reviewed by the expert group in June 2000 in
Geneva.  The manual is expected to be completed later this year.
12. The manual will be applied in the six country projects on the impacts of trade liberalization
on specific sectors recently initiated by UNEP in Argentina, China, Ecuador, Nigeria, Senegal and
Tanzania.  This second round of country projects follows those implemented in Bangladesh, Chile,
India, Romania and Uganda.  These projects were entirely country-driven – conceived, designed and
conducted by national teams of practitioners.  Project studies encompassed new solution-orientedresearch on unique trade-related environmental problems and their social and economic implications
in diverse sectors.
13. The projects involve multi-stakeholder particip ation to identify the dynamics involved in
environmental degradation, and to develop widely acceptable national response strategies.  Each
country project concludes by recommending a set of practical measures – comprising command-and-control regulations, voluntary initiatives and economic instruments designed to meet national
conditions – that significantly reduce trade-related environmental degradation while not negatively
affecting trade.  The projects do not just end with published studies;  their final component involves
pilot implementation of proposed measures undertaken by national authorities in collaboration with
each project's national team and with technical assistance from UNEP.
14. UNEP will draw lessons from the use of this manual in these projects to refine and revise the
methodology.  The manual should be considered as a living document.
15. UNEP is prepared to give a presentation to th e CTE in its October meeting, subject to the
interest of WTO Members, on the extent to which the manual has been applied in a selected number
of countries in Asia, Africa and Latin America.  The institutions in the countries undertaking the IAswould be invited, on behalf of UNEP, to present their practical experience with the manual.
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