Canada-IndonesiaTrade and Private Sector Assistance Project (TPSA)

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Presenter: Rita Lindayati, Senior Environment Specialist, TPSA ProjectConference Board of Canadalindayati@conferenceboard.ca

Tuesday, February 20th, 2018

Sustainable Development, Green Economy,

International Trade and Global Value Chains:

The Linkage

Setting the Context:

• Sustainable Development: Balancing Environmental, Social and

Economic Goals

• Towards Green Economy

• International Trade, Global Value Chains, (GVCs) and Environment: the

Linkages

• Understanding the Globalization of Environmental Impacts through

Lifecycle Assessments

• Is International Trade Good or Bad for the Environment ?

• Environmental Protection and International Trade: A Regulatory Interface

Overview

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs (WCED, 1987).

Sustainable Development

• In the last 50 years, humans had altered the world’s ecosystems more fundamentally

than at any period in human history

• Some 60% of the world’s ecosystem services are being degraded/used unsustainably

• The current rate of species extinction is 1000 times greater than typical historical rate

• Global CO2 emissions have quadrupled with increasing evidence that we are

approaching tipping points of catastrophic climate change

• Half of the world’s fish stocks are being fished at their biological limits, and another

quarter have been depleted

• If current trends continue, in 20 years three billion of people will be expected to live in

countries facing “water stress” (Millenium Ecosystem Assessment, 2005)

Environmental Pressures: Global Context

08)Environmental

problems

Economic cost Social cost

Water pollution &

inadequate water

supply

(mostly from

household &

industry)

$7.6 billion

or

2% of GDP

Sanitation-related

diseases (e.g., diarrhea), skin disease

due to the use of polluted water, fish

production, costs of flooding due to poor

drainage, lost of tourism opportunity,

etc..

Indoor & outdoor

pollution

(mostly industry

& transport)

$5.5 billion

or

1.3% GDP

Mortality & morbidity from cardio-

pulmonary disease in adults, lung

cancer, acute respiratory infections in

children.

Climate change Estimated to cost 2.5 –

7% of GDP by 2100

(Source: ADB, 2009)

More rainfall, flooding, reduced soil

fertility, declining rice yields, damage to

coastal areas (rising sea level, land

subsidence, more frequent storms)

Deforestation Estimated to have lost

around $150 billion worth

of forest between 1990

and 2007 (or nearly 5%

GDP each year)

Loss of livelihoods, way of life

Social and Economic Costs of Environmental Problems: Indonesia Context

(adapted from http://www.international.gc.ca/)

What is environmental sustainability?

Environmental sustainability: the

ability of plants, animals, micro-

organisms, and their non-living

surroundings (land, air, water) to

sustain themselves, and people,

now and in the future

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Towards Green Economy

Green Economy: a system of economic activities related to the production,

distribution and consumption of goods and services that result in improved

human wellbeing over the long term, while not exposing future generations to

significant environmental risks and ecological scarcities (UNEP, 2011).

Example:

• Increase in green investment

• Increase in jobs in green sectors

• Decrease in energy and resource

use per unit of production

• Decrease in waste and pollution

• Decrease in unsustainable

consumption

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• At a fundamental level, the production and exchange of goods and services which

underlies the international trade relies on the environment in the form of natural

resources

• Global Value Chains (GVCs) refer to the phenomena where the different stages of

the production process are located across different countries. The past decades

have witnessed increasingly fragmented and internationally dispersed value chain

activities (e.g., design, production, marketing, distribution, etc..)

• Greening GVC aims to minimize or eliminate adverse environmental impacts along

supply chain, from product design, material resourcing and selection,

manufacturing process, delivery of final product and end-of-life management of the

product (Thoo Ai Chin et al., 2015)

• A product lifecycle assessment provides a method to understanding the

environmental impacts of its global value chains

The Relationship between International Trade,

Global Value Chains and Environment

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Inputs Life-cycle stages Outputs

Atmospheric emission

Raw

Materials Waterborne waste

Solid waste

Energy

By-products

Other releases

Source: US-EPA

Environmental Aspects in A Product Life-cycle

Raw material

acquisition

Manufacturing

Use/maintenance

End of

life/recycle/waste

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• Life Cycle Assessment method provides a tool to assess

environmental impacts (i.e., resource consumption and emissions)

across the full life cycle of a product, from material acquisition to

manufacturing, use, and final disposal.

• Environmental “hotspots” refer to the activities that cause the highest

environmental impacts in a product’s lifecycle (e.g. dyeing process in

textile manufacturing).

• If environmental hotspots are known, efforts to reduced environmental

impacts can be focused.

• The environmental impacts of globally traded commodities are spread

between exporting and importing countries

Understanding A Product’s Environmental Impacts

through Lifecycle Analysis

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Example 1: coffee lifecycle

CO2e emissions of 1 kg coffee green bean produced in Costa Rica, consumed in

Europe (http://www.balas.org/BALAS_2013_proceedings_data/data/documents/p639212.pdf)

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Environmental Hotspots for CO2 emissions (http://www.balas.org/BALAS_2013_proceedings_data/data/documents/p639212.pdf)

((((http://www.balas.org/BALAS_2013_proceedings_data/data/documents/p639212.pdf)\

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Example 2:

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Example 3: A typical pair of running shoes generates 30 pounds of carbon dioxide emissions,

equivalent to keeping a 100-watt light bulb on for one week (MIT, 2013)

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Various business initiatives to make greener value chains

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Green measures in Nestle product lifecycle

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Increased trade economic growth higher income

more resources for environmental protection

Better access to cleaner technology and environmental

goods and services

Encourage technical innovation and more efficient allocation of

resources

Improved environmental standards (especially to meet the requirements

from the developed markets)

Increased trade increased economic activities could deplete

natural resources and worsen pollution

Weak environmental standards and law enforcement in many developing countries would attract polluting

industries

May undermine national governments’ policy space to environmental

management (e.g., restrict certain types of regulations, deregulation imposed by trading partners, pressures by industries

to improve their international competitiveness)

ProsCons

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Environmental Impacts of Trade

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Scale

Product

Structure

Technology

Environmental Policies/

Regulations

Environmental impacts:

• Land

• Water

• Air

• Flora & fauna

• Human health

• Etc.

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FTA Environmental Provisions: Historical Trends

• GATT General Exceptions Articles XX (b) and (g)

• Groups on Environmental Measures and International Trade/ EMIT (dormant)

• Sanitary and Phytosanitary (SPS) Measures

• Technical Barriers on Trade (TBT)

• Subsidies and Countervailing Measures (SCM)

• Trade-Related Aspects of Intellectual Property Rights (TRIPS)

• General Agreement on Trade in Services (GATS)

• Agreement on Agriculture (AoA)

GATT

(1947)

• Preamble of Marrakesh Agreement: Sustainable Development Objective

• GATT General Exceptions Articles XX (b) and (g)

• SPS, TBT, SCM, TRIPS, GATS, AoA

• Established the Committee on Trade and Environment (CTE) to advice General Council on Trade-Environment linkage

• Established Committee on Trade and Environment Special Sessions (CTESS) focusing on trade-environment negotiations: e.g., link between WTO & Multilateral Environmental Agreements (MEAs), fisheries subsidies, removing trade barriers on environmental goods and services

WTO

(1995)

Global Environmental Events

- 1972 UN Conference on the

Human Environment

(Stockholm Conference)

- 1987 Brundtland Report

- 1992 Rio Earth Summit

(Agenda 21)

- 2002 World Summit On

Sustainable Development

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GATT Article XX: General Exceptions

• Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:

(b) necessary to protect human, animal or plant life or health;

(g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption;

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The 1973 Convention of International Trade in Endangered Species of Wild Fauna and Flora (CITES) which

regulates trade in certain endangered species and their parts, including products made from such species.

The 1985 Vienna Convention for Protection of the Stratosphere and the 1987 Montreal Protocol on Substances

that Deplete the Stratospheric Ozone Layer: control the production and trade of ozone-depleting substances (i.e.,

certain industrial chemicals) as well as products containing such substances.

The 1992 Basel Convention on the Control of Trans-boundary Movement of Hazardous Wastes and their Disposal.

The 1992 Convention on Biological Diversity (CBD) and the 2000 Cartagena Protocol on Bio-safety. The Cartagena

Protocol, a part of the CBD, regulates international trade procedures of most forms of living genetically modified

organisms (LMOs).

The 1992 United Nations Framework Convention on Climate Change (UNFCC) and the Kyoto Protocol”: has

potential significant effects on the global economy and trade as it seeks to transform the world into greener and low

carbon economies

The 1998 Rotterdam Convention on the Prior Informed Consent (PIC) for Certain Hazardous Chemicals and

Pesticides in International Trade.

The 2004 Stockholm Convention on Persistent Organic Pollutants (POPs) which regulates certain substances

which persist in the environment and which are suspected to disrupt human and animals' hormonal functioning

(e.g., DDT).

Trade measures in Multilateral Environmental Agreement

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Next sessions:

How Environmental

Issues Affect

International Trade/

Global Value

Chains

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