Commission report to the Council pursuant to Article 7(2) of Council Regulations Nos 3281/94 and 1256/96 on the scheme of generalized preferences - Summary of work conducted within the OECD, ILO and WTO on the link between international trade and social standards
Date: 1997-06-02
Institutions: European Commission
Subjects: generalised preferences, international trade, report, social norm

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels,  02.06.1997 
COM(97) 260 final 

COMMISSION  REPORT TO THE COUNCIL PURSUANT TO ARTICLE 7 (2) 
OF COUNCIL REGULATIONS  NOS 3281/94 AND  1256/96 
ON THE SCHEME OF GENERALIZED  PREFERENCES 

Summary of work conducted within the OECD, ILO and WTO on the link 
between international  trade and social standards 

COMMISSION  REPORT TO THE COUNCIL PURSUANT TO ARTICLE 8 (2) 
OF COUNCIL REGULATIONS  NOS 3281/94 AND 1256/96 
ON THE SCHEME OF GENERALIZED  PREFERENCES 

Summary of work undertaken  within the ITTO, OECD and WTO on the 
relationship between international  trade and the environment 

COMMISSION REPORT TO THE COUNCIL PURSUANT TO ARTICLE 7 (2) 
OF COUNCIL REGULATIONS  NOS 3281/94 AND  1256/96 
ON THE SCHEME OF GENERALIZED  PREFERENCES 

Summary of work conducted within the OECD, ILO and WTO on the link 
between international trade and social  standards 

The increased  efficiency  offered  by the liberalization  of  trade  and  international  capital 
movements  along  with  technological  advances  opens  up  greater  possibilities  for 
economic growth, job  creation  and lower levels of poverty. But this  is no guarantee of 
a  more  equitable  world.  As  a  result,  the  EU,  following  the  line  it  developed  at  the 
Copenhagen  Summit,  is  lobbying  within  the  international  community  to  try  to  draw 
more  attention  to  the  social  aspects  of  globalization.  Since  the  end  of  the  Uruguay 
Round  in  1994,  debate  has  focused 
increasingly  on  the  social  dimension  of 
international  trade  and  ways of  making good  inadequacies  in core  social  standards  the 
world over. The EU is striving to make real progress towards this goal. 

The  introduction  of  an  incentive  social  clause  into  the  GSP  marked  a  step  in  the 
promotion  of  standards  for  international  trade. The  GSP  is  the  first  Community  legal 
instrument  to  contain  such  a clause. From  the  start  of  next  year,  Article  7 of  Council 
Regulations  (EC)  Nos  3281/94  of  19 December  1994  and  1256/96  of  20  June  1996 
will  open  the  way  for  extra  preferences  to  be  granted  on  request  to  those  countries 
which implement  the relevant ELO standards (Nos 87 and 98 on the right  of  association 
and collective  bargaining,  and  No  138 on  a minimum  working  age). However,  before 
the clause  actually  comes  into  force,  two  things  need  to  be  done.  They  are  set  out  in 
Article  7(2)  of  the  Regulations.  First,  the Council  must  examine  a Commission  report 
on work done by the various international  organizations  like the WTO, ILO and  OECD 
on the link  between  global  trade and  internationally  recognized  standards.  It must  also 
then  examine  a  Commission  proposal  on  the  force  of  special  incentive  arrangements 
and  how  to  implement  them.  The  present  paper  represents  the  requisite  Commission 
report. 

Since  the  Commission's  job  is  to  propose  implementation  of  a  mechanism  which 
already  exists  in  principle,  its  power  of  initiative  does  not  depend  on  the  Council 
taking  a favourable  view  of  its  report.  But  what  the  Council  has  to  say  on  the  matter 
will to some extent  inform  the eventual  Commission  proposal, which  will  therefore  not 
be drafted  until  afterwards.  Furthermore,  the proposal  should  be examined  in  the  light 
of an appraisal  of  whether the GSP's  impact - especially  the combination  of  graduation 
(including Article 6) and the special measures for the LDCs - is neutral  overall. 

OECD 

In  June  1994,  the  Secretariat  of  the  OECD  was  charged  with  conducting  a  study 
including 
into  trade,  employment  and  internationally 
basic  concepts, 
current 
mechanisms  for  promoting 

the  highest  labour  standards  worldwide. 

empirical  data  on 

labour  standards, 

flows,  and 

trade-  and 

recognized 

investment 

Discussions  were  held  at  joint  meetings  of  the  Trade  Committee  and  its  ELSA 
(Employment,  Labour  and  Social  Affairs)  counterpart  in  close  conjunction  with  other 
relevant  OECD  committees  and  directorates  and  international  organizations  such  as  the 
ELO.  The  highly  sensitive  and  political  nature  of  the  subjects  raised  led  to  very  long 
and  heated  debate  at  the  meetings.  The  study,  which  sets  out  to  investigate  the  links 
between  labour  standards  enshrining  basic  human  rights  and  trade/investment  flows 
and  policies^  also  assesses  possible  ways  of  promoting  social  standards  globally.  It  was 
finalized  last  year  and  consists  of  three  parts. 

I.  CORE  RIGHTS 

The  first  part  deals  with  labour  standards  in  OECD  and  certain  other  countries.  A 
distinction  is made  between  core  and  other  rights. The  core  rights  are: 

• 

freedom  of  association  and  collective  bargaining,  i.e.  the  rights  of 
workers  to  join  a  trade  union  of  their  choice  and  to  negotiate  their 
working  conditions  with  their employers  freely; 

• 

the  elimination  of  exploitative  child  labour,  debt  bondage  and  types  of 
work  which  endanger  the  health  and  safety  of  children; 

•  a  ban  on  forced 

labour);  non 
discrimination  in  the  workplace,  i.e.  the  right  of  all  workers  to  the 
same  respect  and  treatment. 

labour  (slavery  and  compulsory 

These  are  the  most  widely  ratified  of  the  ILO's  standards.  They  were  singled  out 
because  they  embody  principles  that  governments  of  all  countries,  whatever  their  level 
of  development,  may  be  expected  to  espouse.  They  can  directly  improve  working 
conditions  and  may  also  provide  the  bases  for  other  standards  which  make  a  marked 
contribution  to  social  development.  In  addition,  the  ILO  Conventions  make  frequent 
mention  of  these  standards.  Nos  87,  98,  29,  105  and  1  I 1 all  form  important  points  of 

reference  for  monitoring  of,  and  compliance  with,  core  labour  rights,  even  if  they  have 
not been  ratified  by  all  countries. 

is  also  to  a  large  extent  dependent  on  a  country's 

On  the  issue  of  child  labour,  one  important  change  is the  shift  away  from  an  all-out  ban 
towards  a  prohibition  on  exploitation  alone.  The  distinction  was  made  in  the  OECD 
study  to  bring  out  the  fact  that  the eradication  of  child  labour  is not  only  a  fundamental 
level  of 
human  right  but 
development.  As  ILO  Convention  138  refers  to  the  eventual  elimination  of  child 
labour,  it  was  felt  necessary  to  establish  a  more  immediately  applicable  standard.  The 
concept  of  exploitation  provides  a more  effective  weapon  in  the  fight  against  the  worst 
forms  of  child  labour,  irrespective  of  any  country's  level  of  development.  This  being 
so,  the  ELO  should  build  on  138  with  a  new  convention  to  deal  with  the  most 
exploitative  types  of  under-age  labour. 

II.  LINKS  BETWEEN  CORE  LABOUR  STANDARDS  AND  ECONOMIC 
FACTORS 

The  second  part  of  the  study  looks  at  the  links  between  core  labour  standards,  trade, 
investment,  economic  development  and  employment  in  an  attempt  to  answer  certain 
questions.  Is  there  a  link  between  basic  social  standards,  export  competitiveness  and 
trade  and 
international  specialization  ?  Could 
investment  along  with  economic  growth  lead  to  better  wages  and  social  standards  ? 
What  is the  impact  of  these  standards  on  investment  ? And  what  link  do  they  have  with 
employment  levels  ? 

the  opening  up  of 

international 

is  limited  and  deals  almost  exclusively  with 

The  factual  analysis 
the  right  of 
association  and  collective  bargaining.  This  is  due  to  a  lack  of  data  on  other  core 
standards  and  to  the  technical  difficulties  of  assessing  the  link  between  respect  for 
basic  standards  and  economic  factors. 

The  economic  analysis, on  the  other  hand,  comes  to the  following  conclusions: 

affect 

adversely 

1.  Developing  countries  have  no  reason  to fear  that  the  above  social  standards  could  in 
any  way 
international 
competitiveness.  There  is  nothing  to  suggest  that  countries  with  low  standards 
achieve  better  export  results  than  those  with  high  ones.  It  is  true  that  many 
governments  deliberately  bypass  core  standards  as  a  way  of  improving 
trade 
performance.  However,  the  study  reveals  that  any  attendant  short-term  benefits  of 
this  will  most  probably  be outweighed  by the economic  costs  of  ignoring  standards. 

economic  performance 

their 

or 

2.  Compliance  with  labour  standards  could  help  ease  protectionist  pressures  and  work 
in  favour  of  free  trade.  Allowing  freedom  of  association  and  collective  bargaining 

has never been  a barrier to trade liberalization. There is in fact  a direct  link  between 
it and the success and sustainability  of trade reforms. 

3.  Developing countries can  improve their social  standards without fear of  any  adverse 
effect  on  foreign  investment  flows.  The  figures  show  that,  in  1993, 73% of  direct 
foreign  investment  went  to  those  OECD  countries  which  generally  complied  with 
core  labour  standards  both  in  law  and  practice.  Such  standards  are  not  usually  a 
factor  in the investment decisions of OECD companies. 

4.  The  study  also  concludes  that  trading  with  developing  countries,  where  labour  is 
cheaper,  does  little  to  increase  either  unemployment  or  the  number  of  low-paid 
workers, in  the  OECD.  However,  researchers  differ  on just  how  much  trade  affects 
sectoral  employment  trends  compared  with  other  factors  such  as  technological 
progress  and  institutional  changes.  There  is  also  disagreement  about  how  much 
impact changes  in the structure of trade have on wage inequalities. 

III.  MECHANISMS  FOR  PROMOTING  WORLDWIDE  CORE  LABOUR 
STANDARDS 

The third part of the study is certainly the most controversial. Starting from  the premise 
that  market  forces  alone  cannot  automatically  improve  observance  of  core  labour 
standards,  it  looks  in detail  at the different  procedures  and  mechanisms  currently  used 
to  do  the  job.  These  include  multilateral  surveillance  and  persuasion,  technical 
cooperation,  conditionality  for  loans,  investment  guarantees  and  preferential  trade 
agreements, and the rules governing  multinationals. 

///./. A greater  role for  the ILO 

The  ILO could  oversee the formulation  of  a social  framework  for  world  trade  in  order 
to  achieve  wider  adoption  of  related  standards  in  all  countries. The  Organization  is  in 
an  ideal  position  to  foster  core  labour  standards  since  it  has  the  surveillance  tools  to 
ensure  international  conventions  are  actually  implemented.  It  also  has  its  own 
committee  on freedom  of association  to examine cases from  all  its member  states. The 
ILO's constitution  also includes  a complaints  procedure  to tackle non-compliance  with 
ratified  conventions. The OECD study outlines a whole range of activities which  could 
make the Organization  even  more effective,  viz.: 

• 

supporting  it in its dialogue and direct contacts  with governments; 

•  supporting compliance  with standards as an implicit  undertaking; 

• 

taking  a  more  targeted  approach  to  intolerable  forms  of  exploitative  child 
labour; 

improving the ratification  rate of conventions. 

111.2.  The contribution  of development cooperation  programmes 

Development  cooperation  programmes  do  a great  deal  to  promote  certain  core  labour 
standards, especially those connected  with child labour and union rights. 

III.3. Mechanisms proposed  within international fora 

HI.3.1. WTO disciplines 

WTO  mechanisms  are  designed  to  ensure  trading  policies  and  practice  are  complied 
with.  WTO  members  would  need  to  reach  agreement  on  whether  and  how  the 
organization's  procedures  could  be used  to ensure core  labour  standards  are  respected 
worldwide.  This  would  mean  major  institutional  changes:  articles  and  procedures 
would  have  to  be  amended,  reinterpreted  or  made  the  subject  of  understandings.  No 
such agreement has been reached. 

*&i 

III. 3.2. Conditional  loans from  international financial  institutions 

Another  proposal  in  the  study  is  to  make  international  financial  aid  for  borrower 
countries  subject  to observance of basic workers'  rights. This  is very controversial.  The 
first  problem  is  one  of  consistency:  what  of  rights  violations  in  those  countries  not 
requesting  multilateral  loans  ? Second,  might  such  a  move  not  hamper  the  economic 
development  of  applicant countries, thereby actually hindering an improvement  in core 
labour standards ? 

IÎI.4. Regional and unilateral government action 

III.4. J. The North American  Labour Cooperation Agreement 

NALCA  is  designed  to  improve  working  conditions  and  living  standards  in  the  US, 
Mexico  and Canada. It contains core  labour standards  and  rules on health  and safety  in 
the  workplace  and  protection  for  migrant  workers.  The  accord  links  each  country's 
labour  code  to  the  regional  trade  agreement  and  has  a  dispute  settlement  procedure, 
which can  lead to trade sanctions. 

III.4.2.  Trading preferences 

The Generalized  System  of Preferences  certainly  has a central  role to play in  improving 
core  labour  standards.  Under  the  US  scheme,  for  example,  preferences  depend  on  the 
country  in  question  according  workers  "internationally  recognized"  rights.  But  this 

system is clearly very punitive and works on a system of prior certification,  itself  based 
on  criteria  which  are  not  always  internationally  recognized.  This  leaves  the  US 
executive significant  powers of discretion  in applying the certification  system. 

The  study  also  analyses  the  Community  GSP  and  its two  clauses  on  social  standards: 
the incentive and withdrawal clauses. 

III.4.3. Links between  trade and workers'  rights in the  US 

The US has repeatedly attempted to legislate a ban on all imports produced by children, 
political  prisoners  or other detainees. In addition, under  section  301 of  the  1974 Trade 
Act, foreign  laws and practices thought to be'exploitative, unfair or discriminatory  may 
be  examined  and  negotiations  conducted  with  the  relevant  country  to  obtain 
compensation. It is, however,  very difficult  to assess the full  force of these  mechanisms 
as they have never been used directly. 

IH.5. International  standards for  business conduct 

111.5.1.  ILO  tripartite  declaration  of principles on multinational businesses  and social 
policy 

The  declaration  aims  to  encourage  multinationals,  governments,  employers  and 
workers  to  respect  human  rights  in  the  workplace.  There  are  also  plans  for  a  dispute 
settlement procedure although  this will be non-binding. 

111.5.2.  The OECD code of conduct 

In  1976,  the  OECD  drew  up  a  voluntary  code  of  conduct  in  its  Guidelines  for 
Multinational  Enterprises  with  a  range  of  recommendations,  which  member  states 
invite  firms  to  adopt.  The  aim  is twofold:  to encourage  the positive  contributions  that 
multinationals  can  make to economic  and social  progress  and to minimize  and  resolve 
the problems  that  their  business  might cause.  The code  is acknowledged  to have  a lot 
of  advantages.  First,  it  is  not  addressed  to  government  agencies  but  direct  to  firms. 
Second,  it does  not  impose  sanctions  but  rests  on  voluntary  undertakings  by  the  firms 
themselves.  Third,  each  government  is  involved  in  promoting  and  improving  the 
recommendations  contained  in the code. 

In  the  context  of  the  current  debate  on  the  social  aspects  of  international  trade,  the 
OECD's  aim  is  to  be  able  to  use  this  code  to  promote  the  social  clause  within  the 
multilateral  system  as a way of significantly  furthering  core labour standards. Once the 
code  comes  to  back  up  other  more  general  mechanisms,  its  effectiveness  will  be 
assured. 

III. 5.3. Codes of conduct for  the private sector 

Although  not  compulsory,  the ethical  standards  adopted  by the private  sector can  help 
ensure core  labour  standards  are respected. They can  improve  a company's  image and 
encourage  consumers  to  buy  its  products,  thereby  prompting  other  firms  to  adopt  the 
same  standards  so  as  not  to  lose  their  market  share.  In  this  way  influence  can  be 
brought to bear on supplier countries as well. 

III.6. Private sector mechanisms 

•  Moral  pressure:  consumers  need  to  be persuaded  not  to  buy  on  price  alone  but  to 
take  into  consideration  the  conditions  under  which  goods  are  made.  Boycott 
campaigns can have an effect  on the working conditions prevailing in some sectors. 

•  Labelling  of  consumer  goods.  One  example  of  this  is  the  "Rugmark"  initiative  to 
label  Indian  rugs  not  made  by children.  However,  the  way  the  initiative  is  policed 
has come under sharp fire. 

•  Investment  which is in the collective interest. 

CONCLUSION 

Despite  the  excellent  standard  of  the  research  work  done  by  the  OECD  Secretariat, 
differences  between  member  countries  prevented  adoption  of  the  study  and  meant  it 
was  submitted  in  the  name  of  the  Secretariat  itself.  However,  the  Committee  on 
Employment,  Labour and Social  Affairs  and the Committee on Trade  submitted  a joint 
report  which,  while  highlighting  disagreements  between  OECD  members  on  some 
issues,  also  pointed  to  some  of  the  positive  findings  of  the  study.  These  included  the 
particular  importance of certain  labour standards, the compatibility  between  respect  for 
trade,  and  an 
these  standards,  economic  development  and  the  expansion  of 
acknowledgement  of  the central  role  of  the  ILO. The  main  difference  was  whether  or 
not WTO mechanisms  should  be used to promote core labour standards. At its meeting 
last  November,  the  ILO  working  party  welcomed  the  quality  of  the  report,  which  in 
many  places  stresses  the  areas  where  the  OECD  and  ILO  do  agree.  The  report  also 
supports  the role, mandate  and  procedures  of  the ILO in  the promotion  of  basic  social 
rights. 

ILO 

The creation  of the International  Labour Organization  in  1919 testifies  to a willingness 
on the part of the international community to act together for the advancement  of  social 
justice  and  living  and  working  conditions  throughout  the  world.  The  180  conventions 
since  adopted  by  the  ILO  provide  the  fullest  set  of  international  labour  standards 
anywhere.  The  Organization's  brief  also  includes  using  the  means  at  its  disposal  to 
encourage exchanges of information  and experience and to provide technical  assistance 
and training systems. 

Within  the  working  party  on  the  social  dimension  of  international  trade  set  up  by  the 
Governing  Body  in  June  1994,  the  ELO launched  an  investigation  into  the  effects  of 
globalization  on core labour standards. 

The  promotion  of  international  standards  and  reform  of  the  Organization's  regulatory 
policy  are  other  issues  under  the  spotlight.  A campaign  was  launched  by  the  Director 
General  of the International  Labour Office,  Mr Hansenne, in  1995 to promote the seven 
international  labour  conventions  the  ILO  sees  as  fundamental  (Nos  29  and  105  on 
forced  labour,  87 and 98 on freedom  of  association  and collective  bargaining,  100 and 
111 on  non-discrimination  and  138 on the minimum  working  age). The  campaign  has 
already  led to 29 new ratifications.  The ILO has also managed  to get the ball rolling on 
the  specific  problem  of  child  labour,  which  should  lead  to  the  adoption  in  1999  of  a 
new convention  on the most exploitative  instances of this practice. 

Also on  the  Organization's  agenda  is the problem  of  how  to strengthen  the  system  for 
checking that international  labour standards are put into practice. 

I.  THE  EFFECTS  OF  ECONOMIC  GLOBALIZATION  ON  CORE  LABOUR 
STANDARDS  -  DELIBERATIONS  OF  THE  WORKING  PARTY  ON  THE 
SOCIAL DIMENSION  OF INTERNATIONAL  TRADE 

In June  1994, the Governing  Body of the International  Labour Office  decided  to set up 
a tripartite  working party (made up of employers, workers  and governments)  to look at 
all  the  relevant  social  aspects  in  the  liberalization  of  international  trade.  The  working 
party  is open to all members of the Governing Body. 

Given  this  rather  vague  mandate,  the  working  party  took  a  while  to  come  up  with  a 
framework  to  guide  its  future  deliberations.  However,  it  did  decide  not  to  continue 
dealing with  the issue of trade sanctions and to suspend further  discussion  on creating a 

link between  international  trade and social  standards  by means of a social  clause  and a 
sanctions  mechanism. 

The  working  party  seems  to  be  directing  its  attention  more  towards  the  social 
consequences  of globalization. A number of proposals have been put forward  and some 
of them have already been  implemented. It was also jointly agreed that the party should 
take  due  account  of  international  deadlines  and  the  work  done  by  other  international 
bodies such as the WTO and OECD. 

1.1  Questionnaire  on the  effects  of globalization 

This  questionnaire  on the effects  of globalization  and trade liberalization  on  the  ILO's 
social  objectives  was sent out to member  states at the International  Labour  Conference 
last June. Member  states  were asked to consult the most representative  employers'  and 
union  organizations  on the matter. By 30 October, the International  Labour  Office  had 
receive  136  replies  from  128  respondents  in  76  countries.  The  least  developed 
countries, especially  those in Africa,  returned fewest  questionnaires. 

The  initial  set  of  (partial)  responses  were  collated  into  a  report  which  the  Office 
prepared  for  the  working  party  meeting  in  November.  The  report  was  not  due  to  be 
examined, however, until March  1997. Below are the main findings  contained  in it. 

/././  Effect of globalization  and trade liberalization (1985-1995) 

Overall,  workers  are more  negative  than  employers  and governments,  especially  when 
it comes to the effect  of globalization  on jobs. The report shows, however, that the total 
number  of jobs  between  1985-95  increased  by  anything  from  a few  percentage  points 
in some countries to over  100% in Kenya. Nor does globalization  seem to have had any 
major  effect  on  the  freedom  of  association  or  the  level  of  workplace  accidents. 
Differences  of opinion  do emerge, though, over social security coverage. 

1.1.2 Attitudes  towards trade liberalization and globalization 

Disagreement  is  also  apparent  over  the  effects  of  globalization  on  national  laws 
(especially  those  to  do  with  export  promotion  and  inward  investment)  and  on 
governments'  room for manoeuvre. 

/. 1.3 International  action and cooperation 

60%  of  respondents  did  not  think  trade  liberalization  and  globalization  have  had  a 
major  effect  on  a  country's  ability  to  ratify  and  implement  the  ILO  conventions  on 
workers'  basic  rights  or  other  labour  standards.  Among  those  who  did,  however,  the 
reasons cited  included the constraints  imposed by structural  adjustment  policies and the 
need to attract  foreign  investment. 

84%  of  respondents  (including  nearly  all  workers)  wanted  basic  rights  for  workers  to 
be  universally  recognized  and  adopted.  As  for  how  to  achieve  this,  69% came  out  in 
favour  of action  within the ILO. Other desirable main players cited were the WTO and, 
to  a  lesser  extent,  the  OECD,  EU,  UN,  UNCTAD  and  other  financial  bodies  or 
regional  organizations  such  as  the  OAU.  Four  types  of  measure  were  cited  for 
promoting  compliance  with  international  labour  standards:  codes  of  conduct  for 
business  and  industry;  the  development  of  a  labelling  system;  import  boycotts 
organized  by  unions,  consumers  or  other  non-government  groups,  and 
the 
extraterritorial  enforcement  of national laws. 

1.2 Other  proposals 

Other proposals  along similar lines to those in the questionnaire were also tabled at last 
November's  meeting of the working party. These included a general examination  of the 
means at the ILO's disposal  to help member  states tackle the social dimension  of  trade 
liberalization  and  consideration  of  a  study  into  the  positive  economic  effects  of 
compliance with core labour standards. 

Another  idea was  to conduct  studies  on individual  volunteer countries  to  see how  they 
had managed  to protect their welfare  provision  in the face  of the good or bad effects  of 
globalization.  Six  countries  have  already  come  forward  although  the  practicalities  of 
carrying out such a study have yet to be worked out. 

II. MAKING THE ILO'S REGULATORY  ACTION MORE EFFECTIVE 

II. 1 Director  General's  campaign  to promote  core international  labour  conventions 

Within  the  ILO,  there  is  almost  total  agreement  on  the  "core"  nature  of  the  seven 
international  labour  conventions  cited  by  the  Copenhagen  Social  Summit.  These 
conventions  are Nos 29 and  105 on forced  labour, 87 and 98 on freedom  of  association 
and collective  bargaining,  100 and  111 on non-discrimination  and  138 on the minimum 
working age. 

Ratification  of these conventions  has, however,  been far  from  uniform.  As a result,  the 
Director  General  of  the International  Labour  Office  decided  in March  1995 to send  all 
member states a letter on the subject.  Every country which  had  not yet ratified  all seven 
conventions  was  asked  to  say  whether  it  was  planning  to do  so, and  if  so,  when,  or if 
not, why not. 

10 

The  effectiveness  of  this  campaign  is  now  regularly  examined  by  the  Governing 
Body's committee on legal  issues and international  labour standards. 

Despite  the  fact  that  not  all  member  states  have  yet  replied,  the  campaign  has  seen 
some  success,  with  29  new  ratifications.  It  has  also  highlighted  the  difficulties 
encountered  by  some  states' planning  to  ratify  the  conventions  and  the  important  role 
the Office's  technical  assistance could play in helping them. 

II.2  The problem  of child labour 

Convention  No  138 on the minimum  working age is one of the seven  core  conventions 
but  the  number  of  countries  which  have  ratified  it  is  quite  low.  This  relatively  poor 
performance  has  often  been  ascribed  to  its  complexity  and  unsuitability  for  some 
developing countries. 

In addition, the International  Labour Office  has recently published  a number of  reports 
showing  that  child  labour,  particularly  of  the  most  exploitative  kind,  is  again  on  the 
increase. 

As  a  result,  the  International  Labour  Office  has  decided  to  include  the  issue  on  the 
agenda of  the International  Labour  Conference  in June  1998 and June  1999 in  a bid  to 
get  a  new  convention  adopted  banning  the  most  extreme  forms  of  child  labour 
immediately  and unconditionally. The decision has received wide support. 

The  aim  is  not  simply  to  tackle  the  issue through  regulatory  measures  but  to  draw  on 
technical  cooperation  too, especially  the IPEC programme,  which  since  its creation  in 
1991 has  worked  on  the basis  of  voluntary contributions  from  member  states  (soon  to 
be joined by the European  Commission) to try to abolish child  labour. 

II.3 Better policing  of the conventions 

Current  ILO  monitoring  consists  mainly  in  examining  regular  reports  from  each 
member  state on  the conventions  it has ratified.  There  is also  a complaints  mechanism 
but this does not have power to impose real sanctions. 

To make the process more effective,  a number of proposals  are now  being  looked  at by 
the  ILO. One  is  to extend  the existing  procedure  for  freedom  of  association  to  all  the 
core  conventions.  Under  this  procedure,  it  is  possible  to  examine  complaints  against 
countries even  if they have not ratified  the relevant conventions. 

11 

CONCLUSION 

These  developments  show  that  the  ILO  is  taking  a  more  proactive  attitude  to  the 
furtherance  of international  labour standards. Now that the WTO ministerial  meeting in 
Singapore  has  confirmed  the  Organization's  role  in  setting  and  promoting  these 
standards, the pace of such developments could move up a gear. 

WTO 

Despite  pressure  from  some  members,  the  links  between  international  trade  and  its 
social  aspects,  including  internationally  recognized  social  standards,  have  not  been 
discussed  at any real  length  by the WTO since the Marrakesh  ministerial  conference  in 
April  1994. 

At the  informal  meeting  of EU trade ministers  in Dublin  on  18 and  19 September  last, 
the  Director  General  of  the  WTO  pointed  to  four  areas  of  convergence  on  social 
standards,  respect  for  core  labour  standards;  recognition  of  the  ILO's  driving  role  on 
issues  linked  to  labour  and  employment;  a  refusal  to  jeopardize  the  comparative 
advantages  of  low-wage  countries  and  an  assurance  that  trade  sanctions  would  not  be 
used  as  a  possible  weapon.  He  did  warn,  however,  that  the  number  of  differences 
between  delegations  and  particularly  the refusal  of  some to. have  social  issues  debated 
within  the WTO  meant  it would  be very difficult  to reach  agreement  in Singapore on a 
declaration  based on these four points. 

Subsequent  events  have  partially  borne  him  out. The  failure  to  set up  a working  party 
to examine the  link between  international  trade and social standards and look into areas 
where  the  WTO  might  join  with  other  international  bodies  to  help  promote  those 
standards  gives  little  immediate  hope of an overall  solution  being found  at WTO  level 
or even of any serious discussion  on the issue within the Organization.  However, as the 
following  paragraph  from  the Singapore ministerial  declaration  shows, it would  also be 
wrong to think  no progress had been made: 

core 

labour 

« We  renew  our  commitment  to  the  observance  of  internationally 
recognized 
International  Labour 
Organization  (ILO)  is  the  competent  body  to  set  and  deal  with  these 
standards,  and  we affirm  our support for  its work in promoting  them. We 
believe  that  economic  growth  and  development fostered  by  increased 
trade and further  trade liberalization contribute to the promotion  of these 

standards.  The 

12 

standards.  We  reject  the  use  of  labour  standards  for  protectionist 
purposes,  and  agree  that  the  comparative  advantage  of  countries, 
particularly  low-wage  developing  countries, must  in no  way be put  into 
question.  In  this regard, we note that the  WTO and ILO Secretariats will 
continue their existing cooperation. » 

The  wording  confirms  both  the  undertaking  by  each  WTO  member  to  respect 
internationally  recognized  labour  standards  and  support  for  the  ILO  as  the  logical 
choice for  setting them. Protectionism  is ruled out, leaving the way open for  a positive, 
incentive-based  approach  to the issue which could  include greater cooperation  between 
the WTO and ILO. 

Far from  condemning  the Community's  approach, particularly  with  respect  to its GSP, 
the Singapore conclusions can be seen as a nod of approval. 

13 

GENERAL CONCLUSIONS 

The  link  between  social  standards  and  international  trade has  been  much  debated  in  a 
number  of  fora,  leading  to  progress  on  certain  concepts  and  more  in-depth  analysis, 
though  not  on  the  nature  of  the  link,  mainly  because  of  fears  over  possible  trade 
sanctions. 

In  the  Commission's  view  two  conclusions  can  be  drawn  for  the  purposes  of  this 
report, which  is designed to enable the Council to review the context  in which  the GSP 
incentive clause will be activated. 

1. First,  the disagreements  that  have emerged  have to do with  means  rather  than  ends. 
No  one,  not  even  in  those  countries  which  are  wariest  of  the  whole  issue,  really 
contests  the  basic  objectives  as formulated  at the Copenhagen  Summit  and  elsewhere. 
But  many  countries  refuse  to  use  trade  as  a  way  of  achieving  these  goals  for  fear  of 
getting 
spiral  which  might,  however 
unintentionally,  endanger the natural comparative advantages of developing countries. 

into  an  uncontrollable  protectionist 

Such  fears  are unsurprising  in a debate which  is focused  primarily  on the  negative  and 
punitive  aspects  of  the  social  clause  and  which  has  done  little  to  cast  the  issue  in  a 
positive light. This is despite the fact  that the Community GSP is offering  incentives to 
developing  countries  in  an  approach  based  on  cooperation  rather  than  confrontation. 
Another  point  is  that  the  social  clause  has  been  mainly  discussed  either  in  terms  of 
economic  and  commercial  policy  (competitiveness)  or in terms  of  human  rights. Little 
room has been given to the development policy of which the GSP forms  part. 

There  is  therefore  nothing  in  the  international  debate  on  the  social  clause  that  should 
deter  the Community  from  pressing  ahead  with  the  incentives  provided  for  in/its  GSP 
scheme. 

2. To implement  its incentive system, the Community has a choice: it can opt either  for 
achieving  its  goals  on  the  ground  and  introducing  a genuinely  effective  clause,  or  for 
political  signalling  via  a  clause  which  is  simpler  to  implement  but  potentially  less 
effective  in practice. 

The social  concepts and criteria  in the ILO conventions  are clear-cut  enough  to warrant 
the  first  option.  For  a  real  improvement  in  the  social  policy  of  beneficiary  countries, 
the  extra  advantages  given  to exporters  would  have  to  be  attractive,  meaning  that  the 
additional  preferential  margin  would  have  to  be  substantial.  Controls  must  also  be 
possible. This means beneficiaries  must apply for the clause by lodging a declaration  in 
principle  requesting  entitlement  and  guaranteeing  in  return  that  every  exporter  or 
producer  will  comply  with  the  standards. The  resulting  knock-on  effect  would  lead  to 
all  other  exporters  and  producers  adopting  similar  practices. This  is  the  only  way  real 

14 

progress  could  be  made  on  the  ground.  Only  through  strict  control  and  cooperation 
procedures  applicable  to  exporters  can  any  headway  be  made  and  substantial 
concessions secured. 

15 

COMMISSION  REPORT TO THE COUNCIL PURSUANT TO ARTICLE 8 (2) 
OF COUNCIL REGULATIONS  NOS 3281/94 AND 1256/96 
ON THE SCHEME OF GENERALIZED  PREFERENCES 

Summary  of work undertaken within the ITTO, OECD and WTO on the 
relationship between international trade and the environment 

Sustainable  development  has  a  dual  role,  to  protect  the  environment  and  foster  social 
progress,  and  is  now  the  core  objective  of  national  development  strategies  and 
international  cooperation.  The Rio Conference  in June  1992 was a significant  step in this 
direction.  The  Conference  adopted  Agenda  21,  and  action  programme  committing 
national  governments  to  the  promotion  of  sustainable  development  at  national  level  and 
international  cooperation. 

It  is  against  this  background  that  the  international  community  has  come  to  realize  the 
importance  of  forest  resources,  which  are  vital  not  only  to  ecosystems  but  also  to  the 
human  race.  Their  overexploitation  is  a  threat  to  the  environment  and  hence  the 
development  of many timber-producing countries. 

The particular  problem  of tropical  forests  has been  resolutely  tackled  with  a whole  range 
of  initiatives  being  taken  in the relevant  international  forums,  where  significant  progress 
has  been  made  in  defining  environmental  criteria.  Their  objective  is  not  so  much  to 
restrict 
to  promote  sustainable 
management  of natural tropical forests. This underpins the objective  of the environmental 
criteria  for  a  Community  ecolabel  for  paper.  It  is  essential  that  preference  be  given  to 
tropical  woods from  forests  managed on a sustainable basis. 

logging  and  prevent  complete  deforestation  as 

The European  Union  has provided  large sums of  aid for  the protection  of  tropical  forests 
in order to promote their sustainable management.  Its policy  is based on incentives  rather 
than  coercion.  This  is  the  objective  of  the  Community  GSP.  The  purpose  of  the 
environmental  clause  provided  for 
in  Article  8  of  Regulations  No 3281/94  of 
19 December  1994 and No  1256/96 of 20 June  1996 is to promote the import  of  products 
whose characteristics  or production  methods  are  internationally  approved,  as a means of 
attaining the objectives  of international environmental  agreements. 

The  incentive  environmental  clause offers  additional  customs  preferences  to any  country 
which  applies  for  them  and  can  demonstrate  that  it  complies  with 
international 
environmental  standards,  in  particular  those  set  by  the  International  Tropical  Timber 
Organization  for  tropical  forest  management.  The  environmental  clause  exists  but  is  not 
yet  operational;  it  does  not  come  into  force  until  1  January  1998.  Before  it  does,  the 
Commission  is  required  to  draw  up  a  report  on  the  work  of  the  International  Tropical 
Timber  Organization,  the  Organization  for  European  Cooperation  and  Development  and 
the World Trade Organization  on the relationship between  trade and the environment. 

16 

The  report  which  is  hereby  submitted  focuses  on  the only  area  expressly  covered  at  this 
stage  by  Article 8  of  Regulation  No  3281/94,  i.e. the  definition  and  measurement  at 
international  level  of  sustainable forest  management,  and is based  on documents  relevant 
to  the  implementation  of  the  environmental  clause.  It  does  not,  however,  exclude  the 
eventual  extension  of  the  clause  to  other  international  environmental  standards.  Other 
international  conventions  such  as  the  Conventions  on  Biological  Diversity  (1992)  and 
Climatic  Change  (1992)  and  the  1989 Basle Convention  on  Hazardous  Waste  will  have 
to  be  borne  in  mind  even  though  none  of  them  provide  a  practical  basis  for 
implementation  of an environmental clause. 

The Commission  will  submit  a proposal  for  a decision  to the Council  on  the  intensity  of 
the  special  incentive  arrangements  and  the  detailed  procedures  for  their  implementation 
in the light of this report. 

Council  approval  of  the  Commission's  report  on  the work  of  international  organizations 
does  not  of  course  preclude  the  Commission  from  taking  its  own  initiative  in  this  area 
and  proposing  the  implementation  of  arrangements  which  already  exist  in  principle. 
However,  since  the  outcome  of  the  Council's  work  will  form  one  of  the  bases  of  the 
Commission  proposal  this will  not  be drawn  up until  the  report  has  been  discussed.  The 
Commission  proposal  will  also  have  to be examined  in  the  light  of  an  evaluation  of  the 
global  neutrality  of  the  GSP's  impact  and  the combined  effects  of  graduation  (including 
application  of Article 6) and the special measures for less-developed countries. 

>> 

WTO 

The  preamble  to  the  Agreement  establishing  the  World  Trade  Organization  recognizes 
the  need  to  preserve  the  environment  and  promote  sustainable  development.  One  of  the 
WTO's  fundamental  principles  discussed  during  the  Uruguay  Round  multilateral  trade 
negotiations  was  the  need  to  take  account  of  the  relationship  between  the  multilateral 
trading  system,  greater  environmental  protection  and  the  promotion  of  sustainable 
development.  Article  XX  of  GATT  1997  (points  (b)  and  (g))  authorizes  measures  to 
they  do  not  constitute  arbitrary 
conserve  exhaustible  natural 
discrimination  or  a disguised  restriction  on  trade. 

resources  provided 

The  WTO's  General  Council  set  up  a  Committee  on  Trade  and  Environment  in  early 
1995.  The  Committee  has  been  very  active  and  has  met  regularly  to  make  a  detailed 
assessment  of  the  relationship  between  the  liberalization  of  international  trade  and 
environmental  protection  and  to  consider  all  the  possible  ways  of  reconciling  their 
imperatives. 

Despite  its  two  years  of  work  the  Committee  was  unable  to  make  any  concrete  proposals 
to  the  Singapore  Ministerial  Conference  in  December  1996.  However,  in  its  conclusions 
trade  system  has  the  capacity  to  further 
the  Committee  recognized  that  "the  multilateral 
to  the promotion  of 
integrate  environmental  considerations  and  enhance  its  contribution 
the  sustainable 
-
character".  The  Committee  also  strongly  endorsed  a  multilateral 
discriminatory 
approach  based  on  international  cooperation  and  consensus  as  the  best  and  most  efficient 
way  for  governments  to tackle  environmental  problems  of  a transfrontier  or global  nature. 

development  without  undermining 

its  open,  equitable  and  non 

However,  its  report  does  not  make  any  recommendations  on  the  relationship  between 
international  trade  and  environmental  protection.  The  Singapore  Ministerial  Conference 
simply  refers  to  the  work  of  the  Committee  on  Trade  and  Environment,  underlining  the 
need  for  greater  coordination  at  national  level  on  trade  and  environmental  protection  but 
not  drawing  any  real  conclusion  other  than  that  the  Committee  should  continue  its  work. 
This  is reflected  in  the Ministerial  Declaration: 

«  The  Committee  on  Trade  and  Environment  has  made  an  important 
contribution 
towards  fulfilling 
its  Work  Programme.  The  Committee  has  been  examining  and  will 
continue 
between 
trade 
the  scope  of  the  complementarities 
liberalisation,  economic  development  and  environmental  protection.  Full 
implementation 
to  achieving  the  objectives 
of  the  WTO  Agreements  will  make  an  important  contribution 
of  sustainable  development.  The  work  of  the  Committee  has  underlined  the  importance  of 

to  examine, 

inter  alia, 

is 

policy  co-ordination  at  the  national  level  in  the  area  of  trade  and  environment.  In 
thisconnection,  the  work  of  the  Committee  has  been  enriched  by  the  participation  of 
environmental  as  well  as  trade  experts from  Member  governments  and  the  further 
participation  of  such  experts  in the  Committee's  deliberations  would be  welcomed.  The 
breadth  and  complexity  of  the  issues  covered  by  the  Committee's  Work  Programme 
shows  that further  work needs  to be undertaken on all  items of its agenda, as contained 
in its report.  We intend to build on the work accomplished thus far,  and therefore direct 
the  Committee to carry out its work, reporting to the General Council, under its existing 
terms of reference. » 

n 

OECD 

The  OECD  Council  adopted  a  recommendation  on  environmental 
indicators  and 
information  in  1991  calling  for  the  development  of  a  set  of  core  indicators  which  are 
reliable,  legible,  measurable  and  relevant  to  decision  making.  A  number  of  indicators 
were  drawn  up  by  the  OECD  Group  on  the  state  of  the  environment.  These  focus  on 
thirteen  areas  and  measure  environmental  performance  and 
integration  of 
environmental  matters into sectoral and economic policies. 

the 

The OECD's core indicators for forest  resources can be summarized  as follows: 

1. 
2. 
3. 
4. 

5. 

Ratio of logging to production capacity 
. Forest distribution  volume and area terms 
Proportion  of forests  which have changed or deteriorated within total forest  area 
Percentage  of forests  which  have been  successfully  regenerated  (including  natural 
regeneration) 
Percentage of protected forests  in total forest  area. 

The  OECD's  criteria  are useful  for  country  reports  on environmental  performance.  They 
may  also  be  used  to  make  a  global  assessment  of  forestry  resources  for  each  OECD 
country. 

At this stage the OECD's work is still primarily of an analytical  nature. 

c>Zo 

ITTO 

tropical 

The  International  Tropical  Timber  Organization  contributes  to  the  conservation  and 
prudent  exploitation  of 
their  sustainable  management. 
Sustainable  forest  management  is  "the  process  of  managing  permanent  forest  land  to 
achieve  one  or  more  clearly  specified  objectives  of  management  with  regard  to  the 
production  of  a continuous  flow  of  desired  forest  products  and  services  without  undue 
reduction  of  its  inherent  values  and  future  productivity  and  without  undue  undesirable 
effects  on the physical  and social  environment." 

through 

forests 

At  the  national  level,  a forest  policy  aiming  at  sustainability  is  "a  policy  that  guarantees 
the sustainability of all ecological  forest  types of a country  in a balanced  way and  divided 
over  a reasonably  sized  permanent  forest  estate."  Management  of  a forest  is  considered 
to be sustainable  when  it  "guarantees  the continuity  of  all  recognized  principal  functions 
of a particular forest  without undue effects  on the other  functions".1 

I.  THE YEAR 2000  OBJECTIVE 

The  ITTC adopted  the  Year  2000  Objective  at its  8th  session  in  Bali  in May  1990.  The 
ITTO's  member  countries  have  undertaken  to  trade  only  in  tropical  timber  from 
sustainably  managed  forests  by  the  year  2000.  At  the  ITTC s  20th  session  on  15  and 
23 May  1996 producers  and consumers  reached a consensus on the mid-term review to be 
undertaken.  Producer countries  are aware of the importance  of  sustainability  criteria  and 
accepted  a  decision  involving  the  reconstitution  of  a  panel  of  experts  to  examine  the 
estimated  costs  and  resources  required  to attain  the  Year  2000  Objective,  a  commitment 
to priority areas for their future  action and acceptance of the measures described above. 

II.  THE ITTO'S  GUIDELINES 

The  ITTO  has  drawn  up  guidelines  for  the  sustainable  management  of  natural  and 
artificial  tropical  forests  and  the  conservation  of  biodiversity  in  tropical  production 
forests.  These are based on the following  principles: 

ILL  National forest  policy 

The ITTO recommends that  national  forest  policy should form  an integral part of  national 
land use policy and ensure balanced exploitation of resources.  It should cover: 

The present area of forest  land 
The needs and aspirations of present and future  generations 
Forestry's  role in national economic  planning 
Forestry policy objectives  and their relative  importance 
Respective  importance of public and private  forests 
Programmes to assess the importance of biodiversity  in all areas. 

Definition  adopted  by  the  International  Tropical  Timber  Council  (ITTC)  in  1992,  Intergovernmental 
seminar on the criteria and  indicators  for sustainable management of  forests, August  1996, Helsinki. 

National  policies  should  be  underpinned  by  appropriate  legislation  which  itself  must  be 
compatible  with  that  applying  to other  sectors.  A mechanism  for  national  policy  review 
should  be  set  up  to deal  with  any  new  social, economic  and ecological  eventualities  and 
incorporate any new information  which becomes available. 

The  ITTO  underlines  the  need  for  studies  of  all  the  economic  benefits  of  managed 
forests,  the  siting  and  extent  of  any  replanting  which  is  required,  environmental 
protection  needs,  demand  for  forestry  products,  the  capacity  of  forest  estates,  and  the 
degree  of  dependence  and  demand  of  local  communities  in  the  light  of  the  economic, 
spiritual  and cultural  values of the land on which replanting is planned. 

II.2.  National forestry  inventory 

An  inventory  of  forest  resources  and  area should  determine  the  importance  of  all  forests 
irrespective  of  land ownership  and describe, quantify  and comment  on biodiversity  in all 
production  forests.  Such  inventories  must  be  able  to  incorporate  any  new  information 
which becomes  available. 

H.3.  Permanent forest estates 

Certain  types  of  land  have  to  be  maintained  under  permanent  forest  cover.  The  ITTO 
refers  in particular  here to protect  land, land designated  as a nature reserve, land used  for 
the  production  of  timber  and  other  forestry  products,  and  land  which  fulfils  more  than 
one  of  these  objectives.  The  many  categories  which  make  up  permanent  forest  estates 
must  be  identified,  explored  and  defined  with  the  local  communities  concerned  in  the 
light of their demands. 

The  ITTO  recommends  that  natural  forest  should  not  be  cleared  for  replanting  unless  a 
rational analysis can prove that this is necessary to maintain  land under forest  cover. 

Again  according  to the ITTO, areas requiring total  protection  in natural  forests  should  be 
defined  and  these  semi-wild  protected  forest  core  areas should  be demarcated  to  prevent 
encroachment  and  to  preserve  their  ecological  function.  Erosion  of  biodiversity  should 
also be kept to a minimum by ensuring continuity between undisturbed  forests. 

II.4.  Land  ownership 

The  ITTO's  principles  and  recommendations  apply  to  all  forests  irrespective  of  whether 
they  are under  national, private or common  ownership.  They can  be applied only  if local 
communities  accept the land use changes and the uses proposed. 

U.S.  National  forest  department 

There  should  be  a  national  forest  department  with  the  necessary  mandate  capability  to 
ensure that forests  are managed  in an integrated  way to preserve all their values  including 
biodiversity. 

°& 

11.6.  Feasibility  studies 

The  ITTO  recommends  that  feasibility  studies  be  made  of  the  ecological  impact, 
socio-economic 
investment 
opportunities,  industrial  development,  increased  income  but  also, 
impact  on  land 
ownership,  deterioration  of  natural  values,  etc.)  and  institutional  aspects  of  sustainable 
reforestation. 

implications  (better  access  to  resources,  job  creation, 

11.7.  Forest  management 

11.7.1.  Planning 

A management  plan  is essential  for  sustainable  forest  management  and  the  creation  and 
management  of  replanted  areas.  It should  form  the basis  of  all  management  practice  or 
forecasting.  Plans  should  cover  the  following  subjects:  areas  to  be  excluded  from 
reforestation  and  logging,  form  of  management,  regulation  of  output  and  achievable 
annual targets, layout of roads, hauling tracks and fire  strips, management  inventories  and 
maps,  methods  of 
land  preparation,  planting,  maintenance,  erosion  control,  soil 
compaction,  fire  protection  and control, biological  control  of  pests  and  spraying,  disease 
and  climatic  disaster  prevention,  development  of  marketing  outlets  and  a  logging  plan, 
measures  to  ensure  local  communities  benefit  from  all  the  benefits  of  forests  and 
recognition  of common  law rights. 

11.7.2.  Logging and extraction 

Logging  rules  are  essential  as  they  will  ensure  extraction  and  management  practices  are 
harmonized.  According  to  the  ITTO,  detailed  rules  should  be  laid  down  on  edging, 
marking  of  trees  to  be  felled  or  retained,  indications  of  felling  direction  and  skidding. 
The  size  of  openings  should  be  reduced  and  the  use  of  machinery  and  damage  to 
remaining  stands  kept to a minimum.  After  logging  an inventory  should  be drawn  up of 
any management  measures which need to be taken. 

11.7.3.  Protection 

forests  should  be  protected  against  activities  which  are 
Permanent  production 
incompatible  with  sustained  timber  production.  Forest  infrastructure  work  should  be 
carried  out  in  a way  which  reduces  as far  as possible  erosion  risks  and  other  damage  to 
habitats and the environment  in general.  A fire control  plan  should be drawn  up as fire  is 
a  serious  threat  to  productivity,  ecological  stability  and  the  quality  of  reforestation  and 
instructions  should be given on the handling and storage of chemicals. 

11.7.4.  Legal  provisions 

The  ITTO's  guidelines  contain  legal  provisions  on  concession  agreements,  cutting 
concessions  on 
law  ownership  and  reclamation 
concessions. 

lands  under  private  or  common 

11.7.5.  Research  and  monitoring 

The  objective  is  to  provide  information  on  the  compatibility  of  forest  management 
practices  with  the objectives  of sustainable timber production  and other forest  uses. 

£3 

II.8.  Socio-economic  aspects 

regulatory  authorities,  owners,  concession  holders  and 

At  the  socio-economic  and  financial  level  there  must  be  a fair  distribution  of  costs  and 
benefits  between 
local 
communities.  The  ITTO  underlines  that  the  success  of  forest  management  and 
reforestation  depends  on  the  relationships  established  with  the  local  population. 
Economic  viability  is essential.  The  ITTO  also plans  to exploit  the financial  benefits  to 
maintain  the  productive  capacity  of  forest  resources  and  to  review  forests  taxes  and 
charges. 

III.  THE ITTO'S CRITERIA AND INDICATORS1 

The ITTO defines  these criteria  as  instrumental  to the establishment  of  a basis  on  which 
to  assess  sustainable  forest  management.  An  indicator  is  a  qualitative,  quantitative  or 
descriptive  measurement  of  the  direction  of  change.  Criteria  and  indicators  will  help 
improve existing  forest  policies  or  lead  to the development  of  quite  new  policies.  They 
can be used  to aid  research  or to guide forest  practices  towards  sustainable  management. 
They can also be used to highlight threats and weaknesses. 

The ITTO has  defined  a number  of  criteria for  its Year 2000 Objective.  Their  purpose  is 
to  measure  sustainable  tropical  forest  management.  According  to  the  ITTO's  definition 
they  can  be  used  to  focus  on  present  management  weaknesses  and  to 
identify 
improvements  which  can  be  made  in  management  practices.  They  can  also  provide  a 
basis  for  a  standard  reporting  system  to  facilitate  comparison  and  discussion  for 
cooperation  and  assistance.  They  are another  demonstration  of  the ITTO's  commitment 
to achieve  sustainable  management  of  tropical  forests.  The criteria  have  been  identified 
to  help  producer  member  countries  of  the  ITTO  to  both  assess  and  report  on  their  own 
progress towards achieving tropical forest  management and the Year 2000  Objective. 

The ITTO has drawn  up five  criteria  and 27 indicators for use at national  level.  The  five 
criteria are: 

1. 
2. 
3. 
4. 
5. 

The forest  resource base 
The continuity  of flow 
The level of environmental  control 
Socio-economic  effects 
Institutional  frameworks. 

The possible indicators are: 

1. 

2. 
3. 

4. 
5. 

Comprehensive  land  use  planning  and  provision  for  the  Permanent  Forest  Estate 
(PFE). 
Present  area of the PFE in relation  to national  goals and targets. 
Plantation  establishment  targets, present age class distributions, and annual  planting 
regimes. 
Areas of Protection  Forests and Production  Forests within  the PFE. 
The  representativeness  of  the  protected  areas  network  and  the  current  or  planned 
reservation  programme. 

Criteria  for  the  measurement  of  sustainable  forest  management,  ITTO  -  Policy  Development  Series 
No  3,  March  1992 

£v 

National production  statistics of Forest Products over time. 

6. 
7.  Documentation  of logging (area) histories over time. 
8. 

Proposed  cutting  cycle  lengths  for  major  forest  types,  and  standard  concession 
lengths. 
Regulation  of  initial  harvesting  rates  in  relation  to  defined  cutting  cycles  and  net 
area of production  forest. 

9. 

10.  Regulation  of  subsequent  harvesting  in  relation  to  increment  data  and  the  net  area 

of production  forest. 

11.  Steps  taken  to  harmonize  the  first  and  subsequent  cutting  cycles  and  manage  the 

transition from  the first  to the second cutting cycle. 
12.  Wood production  targets over time for various sources. 
13.  The availability of silvicultural prescriptions for the major forest types. 
14.  Management prescriptions for other non-production components of the PFE. 
15.  The  availability  of  engineering,  watershed  protection  and  other  environmental 

Income generation  and distribution patterns. 

management  prescriptions for production  forests. 
16.  Availability  of environmental  assessment procedures. 
17.  Employment  patterns and trends. 
18. 
19.  National  revenue and expenditure budgets for forest  management. 
20.  Availability  of environmental  assessment procedures. 
21.  Existence of a national forest  policy. 
22.  The relationship of national policy to ITTO Guidelines. 
23.  Adequacy  of  the  legislative  framework  to  implement  national  forest  policies  and 

management plans. 

24 

25 

26 
27 

Adequacy  of  legislation  to  regulate-  harvesting  and  specific  agreements,  e.g. 

concession  agreements. 
Adequacy  of  human  and  financial  resources  to  meet  legislative  and  administrative 
responsibilities  in sustainable forest  management. 
Community  consultation. 
Existence of  management plans and provisions for their  implementation. 

Six other criteria have been defined  at forest  management unit level: 

&* 

1. 
2. 
3. 
4. 
5. 
6. 

Resource  security 
The continuity of timber production 
The conservation  of flora  and  fauna 
An acceptable level of environmental  impact 
Socio-economic  benefits 
Planning  and adjustment  to experience. 

There  are 23 indicators at forest  management unit level: 

The legal establishment of forest  areas or management units. 
Existence of a management plan. 
Clear demarcation  of boundaries  in the  field. 
The presence or absence of illegal exploitation  and encroachment. 
The duration  of concession  agreements. 
The presence of clear, official  harvesting rules. 
Long-term  soil  productivity. 
A pie-logging  stand  inventory. 
The number of trees and/or  volume of timber per hectare  harvested. 

1. 
2. 
3. 
4. 
5. 
6. 
7. 
8. 
9. 
10.  Provision  for  monitoring the residual growing stock after  logging. 

5r 

11.  Records of annual  product outputs over time. 
12.  Net productive area. 
13.  Records of annual  areas cut over time. 
14.  Protection  of eco-systems  in the concession  or management unit. 
15.  The extent of vegetation disturbance after  logging. 
16.  Extent of soil  disturbance. 
17.  Extent and spatial distribution  of riparian and other watershed protection  areas. 
18.  The extent  and severity of soil erosion. 
19.  Provision  for protection of bodies of water. 
20.  The number of people employed. 
21.  The nature and extent of benefits  from  forestry  activities. 
22.  Community  consultation. 
23.  Arrangements  for  Forest  Management  to  take  into  account  traditional  forest 

utilization. 

The ITTO has demonstration  areas  in a number of producer countries  where projects  are 
being  carried  out  to  test  and  define  sustainable  management  of  tropical  forests.  The 
criteria  adopted  are  not,  however,  binding  on  its  member  countries.  Their  purpose  is 
simply to help identify  improvements to management practices. 

These  criteria  and  indicators  are  extremely  valuable  instruments  which  can  be  used  to 
improve  the quality  of  forest  management  as an integral  part of  sustainable  development 
in the countries in which they are used. 

The criteria  have  not,  however,  won  universal  favour.  While  they can  be  used  to  assess 
the overall policy of a country or forest  management  body they do not measure the degree 
to  which  individual  loggers  comply  with  standards.  This  does  not  facilitate  the 
implementation  of  the  GSP  incentive  clause  as  no correlation  can  be  made  between  the 
products  exported  and  products  processed  according  to  sustainable  forest  management 
standards.  Without  a measurable  correlation  application  of environmental  standards  can 
be enforced  only  at the broadest country-by-country  level. 

IV.  CONCLUSIONS 

The ITTO  is one  of  the  international  leaders on trade and the environment.  Its  standards 
aimed  at  improving  national  environmental  policy  and  assessing  forest  management 
practices  are  probably  the  only  internationally  acceptable  ones  at  the  present  time.  Its 
criteria  are  not,  however,  designed  to  assess  practices  at  local  level.  They  cannot 
therefore  be used  for  product certification.  The problem  of certification  was discussed  at 
length  at  the  ITTO's  20th  session  in  May  1996.  The  ITTO  decided  to  examine  this 
matter in more detail and deferred  its discussion  to the ITTC s 23rd session  in November. 

Parallel  to the ITTO's  work  in this area, the Intergovernmental  Panel  on Forests  set up in 
1995  by  the  UN  Economic  and  Social  Council  on  the  recommendation  of  the 
Commission  on  Sustainable  Development  has  also  made  proposals  for  coordinated 
international  action  on  the  conservation  and  sustainable  management  of  forests.  These 
include  criteria  and  indicators  for  sustainable  forest  management  to  be  developed  at 
national  and regional  level. 

&£ 

GENERAL CONCLUSIONS 

A number of conclusions can  be drawn  from  the foregoing  on the direction  of the general 
debate and on the implementation  of the environmental clause in the GSP: 

1.  The development  of criteria  and  indicators  has brought  about  a number of changes  in 
forestry  practices aimed at sustainable management.  International  initiatives may provide 
a catalyst.  The  many contacts  established  between  countries  have promoted  espousal  of 
principles  of 
transparency,  participation  and 
consultation.  The  work  undertaken  under  these  initiatives  is evidence  of  a political  will 
to obtain  practical  results. The  development  of  criteria  and  indicators  has  had  a  positive 
impact at international  level which can be summarized as follows: 

interaction,  openness, 

information, 

•  greater participation  in international  dialogue on  forests 
•  greater  globalization  of  the  debate  without  any  dilution  of  national  sovereignty  over 

forest  resources 

•  promotion  of cooperation  and greater mutual  understanding 
•  gradual establishment  of clearly defined  objectives 
•  movement towards consensus 
•  promotion  of  information 
•  establishment  of a basic model for similar exercises. 

2.  The  work  which  has  been  done  on  this  issue  should  encourage .the  Community  to 
press  ahead  with  implementation  of  the clause.  There are, however,  still  some  problems 
in the technical  identification  of  internationally  approved  standards  which  might  be  used 
for  application  of  such  an  incentive  clause.  With  the  exception  of  the  work  of  non 
governmental  organizations,  which  cannot  be  used  as  an  objective  and  incontestable 
yardstick,  the relevant  international  bodies  and the ITTO  in particular  have not  produced 
standards  which  can  be used  to measure the environmental  progress  made by the  logging 
industry,  since  the  criteria  adopted  are  in  effect  guidelines  for  national  forest  policy  but 
do  not  lay  down  any  benchmark  against  which  to  assess  whether  they  are  actually 
applied. 

As  things  stand  it  would  therefore  be  impossible  to  implement  an  export-monitoring 
based  system.  This  means  that  either  the  Community  itself  must  impose  its  own 
interpretation  of  the application  of  ITTO guidelines,  which  is contrary  to Article  8 of  the 
GSP  Regulation,  or  it  must  recognize  the  differing  interpretations  of  each  beneficiary 
country,  and  this  would  be  unmanageable.  Consequently  the  option  proposed  is  for 
global  verification  at country  level  of  countries'  compliance  with  the  ITTO's  guidelines 
or  the  efforts  they  have  made  in  this  direction.  With  such  an  approach  the  emphasis 
would  be on dialogue  and  progress  towards  standardization  rather  than  strict  compliance 
with  standards.  Such  a scenario  of  course  allows  a very  simple  monitoring  mechanism. 
On  the  other  hand,  the  benefits  must  not  be  so  nebulous  that  beneficiaries  consider  the 
whole exercise  pointless.  Here, therefore,  in contrast  to the option  adopted  for  the  social 
clause, we are going  for a political  signal  rather than practical  impact on the ground. 

«?> 

3. One final  point.  For some time the Community  will  have to confine  itself  to  applying 
a  clause  limited  to  tropical  forest-based  products  only.  This  is  a  pity  as  needs, 
particularly  in  the  agriculture  sector,  are  huge.1  The  need  for  internationally  recognized 
criteria  to  apply  this  clause  must,  however,  be  born  in  mind.  Only  the  tropical  forests 
sector has made any progress  in this direction.  It is up to the Community  to promote  the 
definition  of criteria for other sectors within international  forums. 

The  possibility  of  using this clause  for  certain  products  (e.g., shrimps)  might  be considered  if they  arc 
farmed  under  conditions  consistent  with  the  principles  of  sustainable  management  of  mangrove-type 
forests. 

d£ 

ISSN 0254-1475 

COM(97) 260 final 

DOCUMENTS 

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Catalogue  number  :  CB-C0-97-248-EN-C 

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