Least Developed Countries and the transition to an Inclusive Green Economy

The current multilateral system of trade regulation can be traced back to post-World War II, with the implementation of the General Agreement on tariffs and trade in 1947. In the 1990s, the complex relation between trade and environment was realized and developed. The governance system was remarkably improved, with the Uruguay round of talks in 1994 – leading to the creation of the World Trade Organization (WTO) – which placed the purpose to expand the production and exchange of goods and services, while at the same time facilitating the optimum use of world resources in line with the mission of sustainable growth aiming both to conserve and preserve the environment.

Though the foundation of the modern international environmental law can be traced back to the Stockholm conference on the Human Environment, 1972, it was the Rio conference on Environment and Development, 1992, which incorporated the notion of sustainable development, and put the relation between trade and the environment on the agenda of negotiators and policymakers. The 2001 Doha Ministerial Declaration initiated the Doha Trade Negotiation Round and incorporated the idea of the Inclusive Green Economy (IGE) in the aftermath of the 2008 global economic crisis as a strategy that incorporates social growth, economic development and environmental protection. With the 2012 Rio Summit and the 2030 Agenda for Sustainable Development, trade became a core component of action plan strategies.

The focus of international activities has changed over the years from acceptance of the need to protect the environment, to resolution of environmental protection and socio-economic growth, to the development of effective environmental instruments, and to the enforcement of existing regulations. Conventional trends regarding growth and development have left an acute environmental footprint, such as immense marine pollution, substantial habitat losses, extreme air quality degradation in many major cities, and unpropitious global phenomenon, including ozone layer depletion and climate change. The growing environmental footprint could be in the form of increased utilization of natural resources, higher level of energy usage for manufacturing processes and transport, higher levels of emissions and waste from poor development and over-consumption processes. Trade may have major social implications, including impacts on job growth, working rights, mitigating poverty or discrimination. However, based on various parameters, the environmental and social footprint varies, including what is traded i.e., the kinds of products and services, how it is traded i.e., terms and processes, how traded goods and services are generated, how profits are allocated, and how waste is treated and managed.

Inclusive Green Economy

An Inclusive Green Economy is an economy which is low carbon, efficient and clean in production, but also comprehensive in consumption and outcomes, based upon sharing, circulating, collaboration, solidarity, resilience, opportunity, and interdependence. It is mainly focused on broader options and choices for national economies, using targeted and proper fiscal and social protection policies, and supported by strong institutions that are specifically determined to safeguard social and ecological basis.

The nucleus of trade and Green Economy

There are certain synergies between trade and the transition to an inclusive green economy. The most relevant feature of trade liberalization for the green economy is the expanded access to foreign markets. Shaping trade and environment nexus is exceedingly dependent on the governance system as well. Properly designed trade policies can contribute to sustainable global value chains and improve resource efficiency through the use of certain standards, such as ‘non-tariff barriers’ for products’ quality and safety. Standards embody certain social or environmental production requirements and thereby create valuable opportunities for producers.

Least-developed countries (LDCs) are highly vulnerable to climate change. This includes technical support in the planning and execution of National Adaptation Programmes of Action (NAPAs) and priority climate change adaptation initiatives. Enhanced market access prospects alone would not be adequate for LDCs to achieve a greater share of foreign trade with the help of Aid for Trade initiative and the Enhanced Integrated Framework (EIF). Financial and technical assistance is being provided to expand involvement in International trade through development and improving capacities. Targeted liberalization can promote customer access to renewable technology, at lower prices. LDCs generally have high tariffs on specific products, like electronic appliances. Targeted liberalization of tariffs can widen the customer access to energy-saving products which can eventually reduce the need for energy imports. Many LDCs adopt environmental taxes or reformed subsidy programmes to alter production and consumption patterns, which enables them to rise public spending from damaging and polluting activities, and reallocate revenues to social and green priorities. For example, in 2005, Ghana used the results of a Poverty and Social Impact Analysis, and found that oil subsidies go to higher income classes. Thus, while reducing oil subsidies, Ghana focused on social issues, for example ensuring extra funds for primary health care and rural electrification programmes.

To make certain green projects attractive to private investors, public-private partnerships (PPPs) are used in many countries. Sectors like organic agriculture and ecotourism mostly rely on support from the national government and private sources, to construct viable business models and attract foreign direct investment (FDI). For example, Uganda, being an LDC, has expanded its exports of organic products. In addition to improving food security, Uganda’s organic farmers are mostly connected to an organization or a corporation that exports their goods to the global organic market. This gives farmers a good raise in their incomes, relative to selling their products in local markets.

LDCs are more dependent on natural resources, thereby making habitat depletion, water shortage, and climate change impossible to bring an end to poverty. But the circumstances in LDCs provide a framework for a low-carbon and resource-efficient economic growth and development path, rooted in investment and policy reform aimed at improving the livelihoods of the vulnerable, generating job opportunities and reducing poverty. National development plans and strategies contribute to a policy on an inclusive basis to direct interventions by public agencies and private actors. To exemplify, the main forest management strategy in Nepal is community forest, a strategy that allows local citizens to engage directly in the management of the production and sale of forest products. This gives a prominent role to community forest management, and such a strategy creates employment and revenue.

On the other side, there could be some barriers as well. In early days of global environmental governance, due to environmental regulation, some concerns were articulated regarding protectionism. Environmental protection can affect employment, growth and development, for instance, it may have an effect on trade flows, whether by restricting access to markets for some specific goods or by supplying products with comparative advantages or disadvantages.  According to developing countries, green economy policies become a pretext for developed countries to penalize exports from developing countries, on grounds of environmental regulation. There is loss of competitiveness, with the way of utilizing trade policy in order to promote an IGE. While the distinction between goods and services on the basis of their respective environmental footprint is valid and provides the reason for reducing the tariffs applied to the ‘environmental goods and services’(EGS) from the point of view of the political economy, such differentiation will offer a competitive advantage for, especially, developing countries. EGS can be identified as an area to enhance the mutual supportiveness of trade and environment, spearheading trade liberalization, by eliminating tariff and non-tariff barriers to EGS. The agreement on identifying those goods and services fit for qualifying ‘environmental’ becomes a challenge when identification of certain goods and services checks with identifying those countries that will benefit the most from trade liberalization, or those countries that will face competition from imports.

International financial assistance is a key component for developing countries, in supporting green industries. It has various forms, such as loans, official development assistance or financial assistance. In the conference of Green Climate Fund, adopted by the UN Framework Convention on Climate Change (UNFCCC), in 2010, developed countries jointly agreed to fund US$ 100 billion per year by 2020 to developing countries. But with the withdrawal of the US from Paris agreement, funding slowed down. For instance, developed countries provided finance of US$78.9 billion in 2018. Though, climate finance rose by 11% in 2018 from US$ 71.2 billion in 2017.

Conclusion

States should collaborate to foster a supportive and open international trade system that would contribute to economic growth and sustainable development in all countries, to help resolve the problems of environmental destruction. There is also a requirement for effective programmes that are integrated in national development strategies. In addition, rural development and poverty-oriented structural transformation are essential for further progress. Inclusive Green Economy is a good opportunity for sustainable development with a stable financial system. Since it is necessary to prevent unilateral decisions to comply with environmental issues beyond the authority of the importing country, sustainability policies resolving transboundary or global environmental issues should be based on an international consensus.