ENVIRONMENTAL IMPACTS OF TRADE LIBERALISATION...

ENVIRONMENTAL IMPACTS OF TRADE LIBERALISATION:

CAPACITY BUILDING FOR DEVELOPING COUNTRIES

Department for Environment, Food and Rural Affairs

Stage II Final report submitted by GHK

March 2007

526 Fulham Road, London, SW6 5NR Tel: 020 7471 8000. Fax: 020 7736 0784

www.ghkint.com

Environmental impacts of trade liberalisation: Capacity building for developing countries/Stage II final report

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The authors gratefully acknowledge the contributions of the case study authors: for

Pakistan, Stella Cridge, GHK Associate and PhD candidate at the London School of

Economics; for Uganda, Alice Ruhwesa, consultant to the National Environmental

Management Agency, Uganda; for Brazil, Annie Dufey (IIED), Mario Ferreira Presser

(UNICAMP) and Luciana Togeiro de Alemida (UNIESP).

Document Control

Document Environmental impacts of trade liberalisation: Capacity building for

developing countries (Stage II Final report)

Job no 40251310

Prepared by Karin Tang

Checked by Fiona McCluney

Date February 2007


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CONTENTS

Abbreviations .............................................................................................................. 5

Executive summary .................................................................................................... 8

0.1 Literature review ............................................................................................. 8

0.2 Pakistan case study........................................................................................ 8

0.3 Uganda case study....................................................................................... 10

0.4 Brazil case study........................................................................................... 11

0.5 Lessons from the case studies ..................................................................... 13

0.6 Conclusions and recommendations ............................................................. 14

1 Introduction ........................................................................................................ 20

1.1 Capacity building types and approaches...................................................... 20

1.2 Organisation of report ................................................................................... 21

2 Literature review ................................................................................................ 23

2.1 Capacity building: A strategic policy view..................................................... 23

2.2 Effective capacity building ............................................................................ 26

2.3 Limited gains: Trade-related technical assistance and capacity building..... 27

2.4 Limited gains: Environment-related trade capacity building......................... 33

2.5 Conclusions .................................................................................................. 35

3 CASE STUDIES .................................................................................................. 37

4 Pakistan .............................................................................................................. 39

4.1 Trade liberalisation in Pakistan: Main currents and issues .......................... 39

4.2 Environmental issues ................................................................................... 40

4.3 Environmental impacts of trade liberalisation to date................................... 41

4.4 Environment-related capacity building trends and priority needs................. 44

4.5 Relevance and impact .................................................................................. 48

4.6 Relevance of select capacity building activities for country needs............... 52

4.7 Issues for future consideration and recommendations................................. 54

5 Uganda................................................................................................................ 56

5.1 Trade liberalisation in Uganda: Main currents and issues ........................... 56


5.3 Environmental impacts of trade liberalisation to date................................... 60

5.4 Capacity building in Uganda......................................................................... 63

5.5 Environment-related capacity building.......................................................... 65

5.6 Relevance of CB&TA for country needs....................................................... 69

5.7 Summary of donor support key impacts....................................................... 76


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5.8 The way forward: Suggestions for more effective capacity building ............ 77

6 Brazil ................................................................................................................... 79

6.1 The sugar and bioethanol sector in Brazil: Key features.............................. 79

6.2 Trade liberalisation: Main currents and issues for the sector....................... 84


6.4 Environment-related capacity building.......................................................... 93

6.5 Relevance and impact ................................................................................ 103

6.6 Conclusions and recommendations ........................................................... 108

7 Lessons from the case studies ...................................................................... 110

7.1 Are priority needs being met?..................................................................... 110

7.2 Where priority needs are not being met ..................................................... 113

7.3 Are flanking measures being mainstreamed? ............................................ 115

7.4 Institutional framework and the role of different stakeholders.................... 117

8 Conclusions and recommendations.............................................................. 119

8.1 Relevance of capacity building ................................................................... 123

8.2 Effectiveness of capacity building............................................................... 124

8.3 Areas for future research and action .......................................................... 124

8.4 Recommendations...................................................................................... 126

9 References........................................................................................................ 133

ANNEXES................................................................................................................. 138

1 CB&TA on trade and environment in Pakistan............................................. 139

2 CB&TA on trade and environment in Uganda .............................................. 141

3 CB&TA in the sugar/bioethanol industry in Brazil ....................................... 149

4 Uganda: Trade and environment related policy actions and integration in

national policy making .................................................................................... 151

5 Uganda: Workshop information ..................................................................... 154

5.1 Workshop brief and programme................................................................. 154

5.2 Questionnaire discussed at the workshop.................................................. 155

5.3 Reference document provided to participants............................................ 156

5.4 Participant list ............................................................................................. 158

6 Pakistan: Key informants................................................................................ 159


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ABBREVIATIONS

ACP African, Caribbean and Pacific

ACWL Advisory Centre on WTO Law

AEIN Africa Environment Information Network

AEO Africa Environment Outlook

AITIC Agency for International Trade and Cooperation

BIG-GT Biomass integrated gasification-gas turbine

BOD Biological oxygen demand

BSI Better Sugar Initiative

CAP Common Agricultural Policy

CAFTA Central American Free Trade Agreement

CBTF Capacity Building Task Force

CDM Clean Development Mechanism

CEO Chief executive officer

CETESB Companhia de Tecnologia de Saneamento Ambiental

CIDA Canadian International Development Agency

CMO Common market organisation

COD Chemical oxygen demand

COMESA Common Market for Eastern and Southern Africa

CPI Cleaner Production Institute

CSO Civil society organisation

CSR Corporate social responsibility

CTC Centro de Tecnologia Copersucar, subsequently Centro de Tecnologia Canavieira

Defra Department for Environment, Food and Rural Affairs

DfID Department for International Development

DSM Dispute settlement mechanism

EAC Environmental Audit Committee

EBA Everything But Arms

EC European Commission

EGS Environmental goods and services

EIA Environmental Impact Assessment

ENR Environment and natural resources

EPA Environmental Protection Agency

ERM Environmental Resources Management

EU European Union

EUR euro

FIELD Foundation for International Environmental Law and Development

FSC Forest Stewardship Council

GDP Gross domestic product

GHG Greenhouse gases

GMO Genetically modified organism

GoP Government of Pakistan

IA Integrated assessment

IBGE Brazilian Institute of Geography and Statistics


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IEEP Institute for European Environmental Policy

IF Integrated Framework for Trade-Related Technical Assistance to least-developed countries

IMAFLORA Instituto de Manejo e Certificação Florestal e Agrícola (Institute for Agriculture and Forest Management and Certification)

IMF International Monetary Fund

IOB Operations Evaluation Department

ISO International Standards Organization

IUCN World Conservation Union

JITAP Joint Integrated Technical Assistance Programme

LDC Least developed country

MDG Millennium Development Goal

MEA Multilateral environmental agreement

Mercosur Mercado Común del Sur (South Common Market)

MFA Multi-Fibre Agreement

MFN Most favoured nation

MTCS Medium Term Competitiveness Strategy

MTTI Ministry of Tourism, Trade and Industry

NEMA National Environmental Management Agency

NGO Non-governmental organisation

NOVIB Dutch Organisation for International Development Cooperation

OECD Organisation for Economic Co-operation and Development

PAMSU Protected Area Management and Sustainable Use

PCA Agriculture Certification Program

PEAP Poverty Eradication Action Plan

PMA Plan for Modernisation of Agriculture

PPM Production and process method

ProÁlcool Programa Brasileiro de Álcool

PRSP Poverty Reduction Strategy Paper

RDE Royal Dutch Embassy

SDT Special and differential treatment

SAN Sustainable Agriculture Network

SAP Structural adjustment programme

SEA Strategic environmental assessment

SEP Strategic Export Programme

SIDA Swedish International Development Agency

SISEI Environmental Information Circulation and Monitoring System on the Internet

SLIMF Small and Low Intensity Managed Forests

SOC Soil organic carbon

SQA Secretaria de Qualidade Ambiental

SWG Sector working group

TA Technical assistance

TA&CB Technical assistance and capacity building

tC Tons of carbon

TCB Trade capacity building

TCBDB Trade Capacity Building Database


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TIHP Trade Initiatives from Human Development Perspective

TRCB Trade-related capacity building

TRIPs Trade-related aspects of international property rights

UNCTAD United Nations Conference on Trade and Development

UNDP United Nations Development Programme

UNEP United Nations Environment Programme

UNICA União da Indústria Canavieira de São Paulo (São Paulo Sugar Cane Agroindustry Union)

UNIDO United Nations Industrial Development Organization

USAID United States Agency for International Development

WB World Bank

WBI World Bank Institute

WSSD World Summit on Sustainable Development

WTO World Trade Organization

WWF World Wildlife Fund


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EXECUTIVE SUMMARY

GHK Consulting Ltd has been commissioned by the Department for the Environment, Food and Rural Affairs (Defra) to investigate capacity building to help developing countries deal with the environmental impacts arising from trade liberalisation.

The study is organised into two stages:

� The Stage I report, completed in May 2006, provided an overview of the type and scale of capacity building programmes around trade and environment currently under way.

� This Stage II report considers whether the priority needs of developing countries are being met with reference to a number of individual case studies.

Stage I of this research (GHK 2006) provided a broad overview of capacity building activities in the field of trade and the environment, and sought to classify these according to the most frequently occurring types of activity appearing in the World Trade Organization/Organisation for Economic Co-operation and Development (WTO/OECD) Trade Capacity Building Database (TCBDB).

This Stage II report presents the consultant’s findings from a literature review and individual case studies from three developing countries: Pakistan, Uganda and Brazil. In drawing together the lessons from the literature review and the case studies, the report considers whether the priority needs of developing countries are being met and whether flanking measures are being mainstreamed in development policies such as Poverty Reduction Strategy Papers (PRSPs). The lessons form the basis of a set of recommendations on how Defra and the UK government might assist developing countries in constructing and implementing flanking measures to deal with environmental impacts arising from trade liberalisation, and how the UK can add value by working in partnership with organisations at the multilateral level, at the level of the beneficiary country, and at the UK level.

0.1 Literature review

This literature review highlights the state of trade capacity building and technical assistance, and specifically environment-related trade capacity building (TCB), by key multilateral and bilateral donors. Despite the increased volume of TCB funding over the 2001-06 period, and the level of political attention given to trade-related capacity building by the international community, delivery of TCB has been found to be unstrategic, uncoordinated, supply-driven and under-funded. Despite explicit aims to tie TCB into national planning processes, this has been achieved to a limited degree only. The challenge has been greater for environment-related TCB, where interventions have not been sufficiently participatory to ensure an accurate articulation of country needs and preferences, and environmental considerations have tended to be compromised by trade and bargaining considerations.

The literature has highlighted shortcomings on all fronts targeted by the Paris Declaration on Aid Effectiveness: ownership, alignment, harmonisation, managing for results and mutual accountability.

0.2 Pakistan case study

In Pakistan, strongly positive environmental impacts were noted from trade liberalisation in specific sectors. This was a result of foreign investment and the introduction of environmental policy standards by multinational companies.


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Competition has spurred similar measures by local companies. In other areas, however, where the incentive of overseas sales is absent, industries continue to be heavy polluters.

Pakistan had made some efforts to mainstream environment into its PRSP process. In 2003, the PRSP Secretariat requested assistance from the Department for International Development (DfID) to facilitate a process to better integrate environmental sustainability into the strategy. This resulted in the ‘Mainstreaming Environment into the Government of Pakistan’s Poverty Reduction Strategy Paper’ (GHK 2003). This, together with the increased salience of the environment on the political agenda, has stimulated more in-depth consideration of environmental issues in the preparation of the second PRSP.

In general, interviews with key informants indicated that capacity building activities have had some positive impacts in terms of building government negotiation capacity and the capacity of non-governmental organisations (NGOs). Interviewees also felt that donor support had been a driving force in putting environment on the agenda of businesses. However, within government, there continues to be limited perception of the linkages between trade liberalisation and environmental impacts and little integrated planning for these impacts during trade negotiations. The government is considered closed at times when it comes to trade policy dialogue. Further, it was felt that the Environmental Protection Agency is weak and unable to implement what is otherwise viewed as appropriate and well designed legislation.

To summarise, to date both donor support and capacity building by the Government of Pakistan has had a medium level of effectiveness in addressing the environmental impacts of trade liberalisation. Their strengths have come from targeting the most polluting industries, using market-based models to engage industries and strengthening non-governmental organisations to engage with government. However, the weakness has been the failure to spur inclusion of environmental issues into the planning processes associated with trade liberalisation. The most obvious example of this is a lack of preparation to address the rise in negative environment impacts resulting from trade liberalisation in the textile industry.


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Table 1: Donor support in Pakistan – summary of key impacts

Effective Limitations

� Raised awareness of environment within government

� Increased dialogue has been taking place between stakeholders and government

� NGOs themselves have learned how to operate more effectively

� Addressed the most polluting industries � Strengthened private sector led

associations to operate without donor support and impartially

� Knowledge of actors in trade negotiations increased

� Raised local support for initiatives � Focused on strengthening EPA

� Lack of impact on the ground, too much of a focus on urban issues in the ‘international environment agenda’, local community issues often neglected

� Government still closed to dialogue in many instances

� NGOs remain weak and lack focus on trade and environment together, too many partners often engaged in competition with one another

� Some areas of trade liberalisation left unaddressed such as the service sector

� Small businesses and those oriented towards the local market untouched

� Lack of attention placed on environment during the trade negotiations and to ‘flanking measures

� High turnover of staff after receiving training

� Some donors lack engagement with industry

� Little improvement of performance of EPA

� No focus on environmental instruments

0.3 Uganda case study

In Uganda, the environmental impacts of trade liberalisation are concentrated in the agriculture, fisheries, forestry, mining and tourism sectors and are highly negative, with declining wild plant and animal biodiversity. The growth in Uganda fish exports has led to a variety of concerns including over-fishing and resource depletion; effluent pollution from fish processing and other industries; the degradation of coastal ecosystems. In forestry, the key negative impact is deforestation due to conversion of forest into agricultural and grazing land; and over harvesting (mining of the resource) for fuel wood, timber, non-timber forest products and charcoal. In mining, environmental damage is reported at most sites of artisanal workings and heavy metal pollution of lakes arises from the mining and processing of sulphide ores at nearby mines.

In tourism, the impacts are more mixed as Uganda is promoting low-impact, ecological tourism. However, there are issues relating to competition of ecotourism with other land use practices (particularly agriculture); inadequate community involvement in protected area management, and thus inadequate sharing of profits from tourism with the communities that help manage them; inadequate service industry to support the growing number of tourists.

Environmental trade capacity building has been delivered in the form of research and research support, facilitating and supporting institution building, information gathering and dissemination, meetings and conferences/training seminars and workshops, partnership funding for non-governmental organisations (NGOs) and assistance to rural communities. However, the case study found that in most cases respondents felt that capacity building does not directly address national priorities relating to poverty


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reduction. Capacity building activities were considered to be addressing the priority issues of selected ministries/sectors, however there was a strong feeling that capacity building always stopped short of supporting actual implementation of recommendations. For example, most of the funds for sector studies and workshops, which are useful in identifying cause-effect relationships and providing recommendations, did not provide funding for implementation. The government or sectors are often expected to find funds for implementation from other sources, which is difficult. As a result, the studies remain on shelves and gather dust. An example of this was the studies funded by the United Nations Environment Programme (UNEP) to assess the environmental impacts of liberalisation in the fisheries sector. The studies have been very useful in recommending various actions to support the fisheries sector, but there is no funding provided for implementing these actions.

In terms of integrating the environment into national development policies and the PRSP, a brief review of Uganda’s major policies and programmes such as the Poverty Eradication Action Plan (PEAP), the Plan for Modernisation of Agriculture (PMA), the Medium Term Competitiveness Strategy (MTCS), the Strategic Export Programme (SEP) and the National Environment Management Policy suggests that, to some extent, environmental considerations have been integrated into mainstream policies. Over time Uganda’s PEAP/PRSP, now in its third revision, has become an important vehicle for policy coherence. However, integrated planning does not always result in integrated implementation. There is need to ensure that these issues do not stop at the level of policy documents, but that there is actual funding available to implement them.

Table 2: Donor support in Uganda – summary of key impacts


� Some evidence that capacity building is designed in partnership between donors and government, and is demand driven

� Studies have been very useful in identifying issues and recommending actions

� Some capacity building has supported institution building

� There is a good level of mainstreaming of environmental issues in national policymaking

� Not aligned to national economic development priorities relating to poverty reduction

� Capacity building has limited its focus to analysis and research, and stops short of providing support to implementation of recommendations

� Institutional strengthening activities have been limited in scope

� Integrated planning has not always resulted in integrated implementation

0.4 Brazil case study

Brazil is the largest sugar producing and exporting country, and the second largest bioethanol producer and the main global exporter. The external market has been a key driver for the expansion in the sugar industry that has taken place over the last two decades. Further trade liberalisation, notably under the EU CAP reform on sugar but particularly relating to expansion of the global biofuels market, will be the key factor driving the new expansion phase of the sector.

The expected increase in sugarcane monoculture, sugar and bioethanol production is likely to place considerable added environmental pressure on the ecosystem. Key environmental issues of concern in the sugar/bioethanol sector include: land clearance and biodiversity impacts due to expansion of the agricultural frontier; impacts on air


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quality; impacts on global climate; impacts on water supply and availability; impacts on soil quality; increases in the use of agrochemicals and a rise in the use of GMOs.

Although environmental legislation addressing many of the aforementioned issues has been passed in Brazil, its implementation and enforcement is weak and this therefore arises as one of the key challenges confronting the sector in order to improve its environmental footprint.

Capacity building in trade and environment in the sugar/bioethanol sector in Brazil can be grouped into: technical and financial assistance for R&D; information dissemination and awareness raising campaigns; support for the development of standards and certification systems; and support for implementation and enforcement of environmental legislation. The agencies that have participated in the financing of these programmes include international organisations such as the World Bank and the GEF, the private sector, the public sector and international NGOs. International cooperation (both from international institutions and third country governments) for capacity building in the sector is poor because the sector has not been a priority for international donors. As a result, capacity building in the sector has been primarily endogenous. However, international cooperation in the sector may increase as the sector is becoming more and more relevant for international donors.

The majority of the identified capacity building programmes were found relevant in terms of the intended environmental issue they were addressing. However, there are important differences in terms of the scope of the programmes and the type of environmental issue they were targeting. While some programmes address one specific issue, others simultaneously target several of the environmental issues confronting the sector. While the majority of the programmes were designed to specifically target environmental goals, in a few cases the associated environmental impacts came as an indirect result. Moreover, the lack of available information regarding many of these programmes was an obstacle for assessing the programmes’ relevance.

Key lessons emerging from the analysis include.

� Certain aspects of the sugar/bioethanol trade-environment debate are not being properly covered. More capacity building efforts are need in terms of: the coverage of environmental impacts (including ‘global’ issues such as expansion of agricultural frontier and impacts on global climate, biodiversity and GHG emissions; indirect impacts related to sector expansion; GMOs; and implementation and enforcement of environmental regulation). There is also a need to address the trade aspects linked to the sector.

� Social issues have been highlighted as the most important challenge facing the sector.

� Ownership of the programmes, confidence among different stakeholders and public support has been highlighted as key factors for improving the relevance and effectiveness of the programmes.


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Table 3: Donor support in Brazil – summary of key impacts


� Capacity building has generally been found relevant in ‘issue-specific’ areas

� The CTC experience has been considered to be highly effective, demonstrating continuous innovation and high ownership

� Some holistic approaches, relating to organic production and CSR, have been tried

� Support to enforcement of environmental legislation has been welcomed (although considerable challenges lie ahead)

� The sector has not been a priority for international donors, and international cooperation has been consequently poor

� Environmental improvements have sometimes come about as an indirect consequence of capacity building

� Focus has been on impacts in situ, rather than on global impacts

� There has been a lack of industry support for certain initiatives, especially certification

� Capacity building has been undermined by low levels of trust among stakeholders

0.5 Lessons from the case studies

Are priority needs being met?

The case studies indicate that, to a limited degree, and in some sectors, priority needs are being met. It has not, however, been possible to reach a definitive conclusion due to the insufficient information about environmental impacts. The environmental impacts of trade, or indeed environmental issues per se, have not in themselves been a national priority for research or capacity building.

The case studies have shown that there are examples where capacity building has been relevant and targeted; the textile sector in Pakistan, fisheries in Uganda and in some instances in the sugar/bioethanol sector in Brazil. Capacity building programmes have helped firms and natural resource communities to change their practices, thereby improving access to export markets and introducing better environmental management. Capacity building to address the environmental requirements of trade and support firms in accessing export markets was perceived as a high priority.

The case studies also illustrate that the impacts of trade liberalisation are not widely researched. While there has, increasingly, been substantial analysis of the environmental impacts of trade agreements (eg Sustainability Impact Assessments), these remain at a certain level of generality. Analysis of the positive and negative environmental impacts of Pakistan’s largest industries (textile products, agriculture, leather, etc) relied on perceptions amongst the policy and private sector community, as no research existed documenting the impacts. Little systematic research has been undertaken into the impacts of liberalisation in Uganda in the agriculture sector, where the focus has been largely on meeting the environmental requirements for trade with the European Union (EU) or on areas associated with industrial development, mining or the importation of hazardous chemicals. In Brazil, where more research and analysis of environmental impacts has been undertaken, debate over the environmental and social impacts of sugar/bioethanol production have recently been characterised by heated controversy.

Other reasons why priority needs are not being met may include:


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� Capacity building on trade and environment may not be a priority, especially in a poor developing country where priorities revolve around economic growth and poverty reduction.

� Programmes reflect donor priorities and delivery conditions.

� Capacity building stops short of implementation.

� Approach to capacity building is ad hoc and partial.

Are flanking measures being mainstreamed?

The Ugandan case study notes positively the areas where flanking measures, or policies or programmes designed to mitigate the environmental impacts of trade liberalisation, have been integrated into national strategy documents such as the PEAP. There are reservations expressed about implementation, but specific studies, such as those in the fisheries sector and tools such as the integrated assessment, strategic environmental assessments and environmental impact assessments, were seen as helping to integrate environmental concerns into policies, plans and programmes at different levels of government.

In Pakistan, the more acute focus on trade issues following the ending of the Multi-Fibre Agreement (MFA) has resulted in a largely sectoral approach to mitigating the environmental impacts of trade liberalisation. Even within sectors as prominent as Pakistan’s textiles industry, flanking measures have been implemented largely at the will of individual companies, and with varying degrees of effectiveness. Furthermore, flanking measures have targeted very specific, circumscribed impacts while larger impacts relating to, for instance, increasing water and energy use have been neglected. Nevertheless, a rapid market selection process is driving a gradual, bottom-up improvement in environmental standards in specific, competitive industries.

However, delivery of environment-related trade capacity building has been insufficiently strategic for significant mainstreaming effects to have taken place. This has been one of the consequences of a ‘grow first, clean up later’ stance, institutional and systemic weaknesses, and the failure to monitor proposals for mainstreaming the environment into the PRSP process, and through that process into wider policy making processes.

In Brazil, where national environmental management is generally good, there has been little evidence that a mainstreamed approach to mitigating the negative impacts of trade liberalisation has significantly penetrated the sugar/bioethanol sector. While the case study has shown a high level of concern over environmental impacts, initiatives to counter those impacts have largely been driven by competitiveness and productivity concerns. Often, positive environmental impacts have come about as an indirect, spillover effect. Support to enforcement of environmental legislation has been recognised as an important contribution to mainstreaming environmental flanking measures. However, as the case study notes, significant challenges still lie ahead.

0.6 Conclusions and recommendations

The findings of the literature review and the case studies might be summarised in conclusion with reference to the Paris Declaration of Aid Effectiveness, and its dimensions of ownership, alignment, harmonisation, managing for results and mutual accountability (Table 4).


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Table 4: Summary of TCB performance against Aid Effectiveness dimensions

Paris Declaration Summary of literature review Pakistan Uganda Brazil

Ownership –Partner countries set the agenda

Low levels of local ownership Delivery of TCB has often been determined by the donors. This indicates a failure to respect country leadership and a missed opportunity to help strengthen capacity to exercise it.

Some ownership There is some evidence of country ownership in Pakistan, with donors such as DfID responding to government requests for trade and environment related support.

Some ownership Project-specific literature suggests that capacity building support is demand driven.

Largely owned Capacity building has been largely endogenous. Where capacity building has been delivered by foreign industry there has been some mistrust. Some capacity building has not been matched by demand for its outputs.

Alignment Donors align with partner countries’ own priorities and rely on their systems

Poor alignment Low country ownership has undermined alignment of aid flows with national priorities. Support for capacity building has been weakly coordinated. Funding has not been predictable.

Some alignment on environment not trade Some effort to incorporate environmental issues into the PRSP. However, TCB has not encouraged inclusion of environmental issues in planning processes associated with trade liberalisation.

Increasing alignment on environment not trade Mainstreaming environmental concerns into development policy is an ongoing process and has improved over subsequent reviews. However, alignment with poverty reduction objectives is considered poor.

Little alignment Capacity building has tended to be ‘issue-specific’ and focused on technical solutions to local problems. There has been little evidence of alignment, at a sectoral level, with national priorities.

Harmonisation Donors establish common arrangements, simplify procedures and share information

Some progress through IF Some progress has been made through the IF to share analysis, however there is little evidence that common arrangements or procedures have been in use.

Little donor harmonisation There is little evidence that donors have provided TCB through coordinated mechanisms.

Donor duplication The wealth of research and informational support, compared with a lack of funding for implementation, suggests a high degree of duplication between donors.

To date weak donor interest International cooperation for capacity building in the sugar/ bioethanol sector has been poor because the sector has not been a priority for donors. This may change as bioethanol becomes a more important export.

Managing for results Donors support partner countries’ results oriented systems.

No progress Recommendations that the IF incorporate results-based management have not been incorporated.

No evidence There has been little evidence of transparent and monitorable performance assessment frameworks to assess TCB performance against national development strategies and sector programmes.

Mutual accountability Commitment by donors and partners to accountable use of resources.

Weak evaluation Evaluation of trade capacity building is weak. Mutual assessment reviews have not been implemented.

Limited Evaluation of TCB has been limited, and there is no evidence of mutual assessment reviews.

Not applicable The low number of international donors providing TCB in the sector means the scope for mutual accountability is limited.


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The summary provides an overview of some of the key issues raised by the literature and the case studies. The capacity building programmes reviewed have, in general, been found inadequate in addressing the problems they were designed for. This has been a consequence of the fact that approaches to capacity building to address the environmental impacts of trade liberalisation have been poorly – or not at all – conceptualised. In many cases, capacity building has been inadequately linked to environmental impacts, undermining their function as ‘flanking measures’. Capacity building and environmental protection objectives have been clouded by a range of shortcomings, including poor coordination by donors, low local ownership, other conflicting agendas, and the context of trade negotiations where capacity building is used as a bargaining chip which developed countries may use to ‘sell’ trade agreements, and which developing countries may trade off against other demands.

The lessons from the case studies and the literature review point to five distinct conclusions:

� Current capacity building to address the environmental impacts of trade liberalisation is barely adequate to meet growing and often little understood challenges to sustainability.

� There is a need for a more focused and coherent strategy on the part of donors. This is currently hindered by:

- Availability and quality of the evidence base,

- Poor identification of priorities by donors and developing countries,

- Inadequate cross-ministry cooperation.

� There is a need for capacity building to follow through on analysis and diagnosis with funding support for implementation of recommendations.

� Addressing the environmental impacts of trade liberalisation requires more than ‘flanking measures’. It requires the proper integration of environmental protection principles into trade negotiation processes and outcomes.

� There is a need for capacity building to support developing countries in taking account of environmental impacts beyond the local level, at the national, regional and global levels.

Relevance of capacity building

The challenge of making environment-related trade capacity building relevant to developing countries’ priority needs when an adequate information and evidence base is absent has already been highlighted. Without being able to properly identify and quantify the impacts, and establish clear lines of causality, capacity building initiatives can only be approximately relevant to country needs and priorities.

Relevance is further undermined by two key factors identified in both the literature review and the case studies: low ownership of the capacity building agenda by beneficiary countries and, within governments, key ministries; and systemic institutional weaknesses which put at risk the advocacy and enforcement capacity of key agencies.

Effectiveness of capacity building

Given the limited availability of documented evidence, it is difficult to assess whether capacity building has been effective. The case study participants suggested that


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capacity building had been effective to a degree, but that substantial gaps remain. These relate to a lack of impact on the ground, a bias towards an international rather than a domestic environmental agenda, unstrategic and short-term planning, and little or no impact in terms of poverty reduction.

A number of the priorities for aid effectiveness as defined by the Paris Declaration are not met. Country ownership is weak, undermining alignment of aid flows to national priorities (relevance). Efforts to harmonise donor activities (eg the IF) have been severely criticised, and accountability is undermined by the scarcity and inconsistency of evaluations and assessments.

Areas for future research and action

The three case studies identified specific areas for future research and action. These point to a number of areas where future research might be of relevance for developing countries generally:

� Direct and indirect environmental impacts from key trends relating to trade liberalisation, eg development of large industries, expansion of the agricultural frontier.

� Design and application of economic incentive structures for environmental protection such as eco-systems payment, emission reduction purchase agreements, polluter-pays methods.

� Technical trade issues such as inventory of environmental goods and services, the trade implications of environmental/social certification, lifecycle analysis and production and process methods.

� The scope for participatory strategic planning of capacity building to enable local producers to meet the environmental requirements of new trading partners.

Recommendations

The documents reviewed and informants interviewed offer many recommendations for making environment-related trade capacity building more relevant for developing country needs, and more effective in its delivery. Of these, the more strategic and encompassing recommendations for action by the UK are presented for the multilateral, partner country and UK level.

At the multilateral level

� Advocacy for differential treatment for developing countries The principle of SDT is an important catalyst for the provision of technical assistance to developing country members of the WTO. The SIA for the Doha Development Agenda notes that if the ongoing work programme on SDT fully meets the Doha commitment for all developing countries, there are likely to be significant beneficial impacts in terms of sustainable development. The UK government needs to work within the WTO to ensure that SDT provisions are not eroded, and that proposals relating to technical assistance maximise opportunities to address environmental impacts.

� Decoupling aid from WTO processes A coherent approach to capacity building to address the environmental impacts of trade liberalisation requires that donor countries formulate their capacity building support with a broader and more holistic view of issues concerning trade and the environment than prevails


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within the WTO. This implies assisting more countries, on a much broader range of issues.

� Supporting continued strengthening of the IF through creation of a Trust

Fund for implementation of recommendations The UK government, as one of 15 bilateral donors to the IF, is in a position not only to support but to fund proposals for a Trust Fund to support multi-year programmes of capacity building that would lead to more effective incorporation of trade into PRSPs, strengthen in-country capacity for implementation, and provide resources to finance project preparation to accelerate implementation of priority actions.

� Support for an independent data, monitoring and evaluation framework

There is significant support and momentum for the creation of a reliable, consistent data, monitoring and evaluation framework for trade capacity building. The UK government can catalyse progress on this front, starting with an in-depth, comprehensive review of the scope and consistency of the TCBDB, an assessment of the robustness of its methodology, and a verdict on its usefulness.

� Seeking opportunities for capacity building to address regional and cross-

border impacts Specifically, the UK can focus its capacity building for developing countries on building in-country capacity and expertise to contribute to regional and global fora to protect its domestic environment and to reduce environmental impacts from neighbouring countries, as well as in the interests of global stewardship of the environment.

� Funding support to multilateral capacity building initiatives There are several multilateral avenues for providing funding support to capacity building initiatives. UNEP is one of the most relevant for environmental capacity building, as it has a key role in supporting improved environmental governance. UNEP would welcome UK government support and partnership in: supporting regional centres of excellence on trade and environment; supporting efforts to consolidate analytical approaches in a way that is relevant to the realities of policy making in developing countries; supporting implementation of the ‘Integrated Assessment of Trade-Related Policies and Biological Diversity in the Agricultural Sector’.

At the country level

� Linking support for research and analytical work directly to clear,

concrete outputs addressing environmental impacts Donors such as the UK can help to more deeply embed the lessons learned from research by packaging capacity building support so that research and analytical work is coupled with funding support for operationalising and building on the lessons.

� Extending and deepening trade expertise and engagement with trade

ministries Supporting the extension and deepening of trade expertise in parallel ministries creates shared knowledge that allows a better understanding and ability to address trade and environment related issues.

� Building ownership by government, the private sector and civil society

The UK can play a role in building local ownership by facilitating in-country, tripartite discussions in which the public and private sectors and civil society can work towards a consensus on national priorities, which feed back to the


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providers of capacity building; and, where trust is lacking, begin to build a platform for productive cooperation.

� Considering direct budgetary support as a channel for capacity building

The UK government, through DfID, can explore opportunities, when working alongside partner countries, to develop a longer-term framework for capacity building around trade and environment associated with goals and objectives of the national plans and PRSPs.

� Ensuring the integration of aid for trade commitments into development

strategy and planning In order to ensure that the content of aid for trade support to developing countries is strategically and tightly integrated with national planning and development processes, aid for trade needs to include institutional capacity building which trains and equips local partners to monitor and safeguard alignment and usefulness for national priorities.

� Support to domestic capacity for environmental and economic regulation

The ability to enforce environmental management practices is critical for moving from a static level of understanding environmental impacts and being able to frame solutions, to a dynamic level at which changes in behaviour result in positive environmental outcomes. Support is needed to improve domestic capacity to regulate and overcome limitations that some organisations may face in the form of, for instance, distorted incentive structures.

In the UK

� Strengthening inter-ministerial coordination between trade, development

and environment There may be scope for building trade expertise within DfID and Defra, and for engaging the DTI and the EU Trade directorate more deeply with environment and development agendas. This may not be a matter of staffing and resources, but a more structural issue of incorporating an understanding and appreciation of trade dynamics more fundamentally throughout the organisation.

� Continuing support to UK-based NGOs through partnership agreements

NGOs have been shown to provide an effective means of delivering capacity building projects and programmes – as long as the capacity of the NGO itself is adequate. In particular, they can offer specialist, niche consultancy advice and services (delivered on an as-required basis) in areas where there may be a conflict of interest on the part of the donor.


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1 INTRODUCTION

GHK Consulting Ltd has been commissioned by the Department for the Environment, Food and Rural Affairs (Defra) to investigate capacity building to help developing countries deal with the environmental impacts arising from trade liberalisation.

The study is organised into two stages:

� The Stage I report, completed in May 2006, provided an overview of the type and scale of capacity building programmes around trade and environment currently under way.

� This Stage II report considers whether the priority needs of developing countries are being met with reference to a number of individual case studies.

This report presents the consultant’s findings from a literature review and individual case studies from three developing countries. These analyses consider the current scope of environmental capacity building and technical assistance, and whether the priority needs of developing countries are being met – and if not, why. They ask whether flanking measures are being mainstreamed in development policies such as Poverty Reduction Strategy Papers (PRSPs). The lessons drawn from these analyses form the basis of a set of recommendations on how Defra and the UK government might assist developing countries in constructing and implementing flanking measures to deal with environmental impacts arising from trade liberalisation, and how the UK can add value by working in partnership with organisations at the multilateral, country and UK level.

1.1 Capacity building types and approaches

Stage I of this research (GHK 2006) provided a broad overview of capacity building activities in the field of trade and the environment, and sought to classify these according to the most frequently occurring types of activity appearing in the World Trade Organization/Organisation for Economic Co-operation and Development (WTO/OECD) Trade Capacity Building Database (TCBDB). Activities fell into the following general types:

� Meetings and conferences

� Training seminars and workshops

� Research and research support

� Support to domestic institutions

� Information gathering and dissemination

� Partnership funding for NGOs

� Support for impact assessments

� Standards and certification

� Assistance to rural communities

For the purposes of this Stage II report (in particular, the literature review in Chapter 2), capacity building activities are analysed according to approach rather than type. While type refers to the content of the capacity building, approach indicates rather the broad strategic aim of the capacity building which to a certain extent informs the content. The Stage I report highlighted the high proportion of capacity building programmes and


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projects which address environmental activities within the context of the trade liberalisation agenda, ie with a primary objective of increasing trade. This agenda is enshrined within the OECD (2001b) definition of trade capacity building (TCB) as:

a coherent set of activities by donors and partner countries designed to

enhance the ability of policy-makers, enterprises and civil society actors in-

country to improve trade performance through policy and institutional

strengthening as part of a comprehensive approach to achieve a country’s

overall development goals and poverty reduction strategies.

This includes the ability to:

� collaborate in formulating and implementing a trade development strategy that is embedded within a broader national development strategy;

� strengthen trade policy and institutions as the basis for reforming import regimes, increasing the volume and value-added of exports, diversifying export products and markets and increasing foreign investment to generate jobs and exports; and

� participate in and benefit from the institutions, negotiations and processes that shape national trade policy and the rules and practices of international commerce.

The effect of this is to focus capacity building activities on narrow issue areas (such as eco-labelling, trade in environmental goods and services, or Multilateral Environmental Agreements, MEAs) which are closely tied to WTO processes. It has also meant that, while there has been some progress in recent years in mainstreaming trade into the development process, there has not been commensurate progress in mainstreaming sustainable development into the practice of trade policy (Sauvé 2004).

There has been much less work done to comprehensively document trade-environment capacity building activities outside the WTO agenda in areas where the primary objective is environmental protection rather than increased trade. Even fewer in number are the interventions which privilege neither trade nor environment, but seek to find some balance between the two.

The consequence is that there is a large self-selecting bias in the documents reviewed for this report in that many relate primarily to the broad TCB agenda within which environmental impacts are one of many considerations.

1.2 Organisation of report

The report begins in Section 2 with a literature review which builds on the review in the Stage I report focusing on available evaluations of environment and trade capacity building. Here, we expand upon this to include academic reports, donor commissioned working papers and more general evaluations which provide an overview of current thinking of the trade capacity building agenda, its relevance and effectiveness in general, and of environmental trade capacity building in particular.

The case studies which follow in Sections 4, 5 and 6 consider the extent to which the findings of the literature review are replicated at the country level. The case studies complement the literature review in seeking to provide bottom-up evidence of how effectively capacity building is being implemented, and to what extent it meets country needs. Chosen to represent the range of issues across the developing world, the case studies come from Pakistan, Uganda and Brazil.


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Section 7 draws together the main lessons from both the literature review and the case studies, with a focus on answering the core questions: are the priority needs of developing countries being addressed, and to what extent are flanking measures being mainstreamed? This section also suggests areas for future research and action.

Section 8 presents our conclusions and recommendations. The recommendations focus specifically on areas where Defra or the UK government might add value in supporting capacity building activities in developing countries, reflecting either a UK comparative advantage or areas for support specifically identified by key agency, UNEP.


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2 LITERATURE REVIEW

2.1 Capacity building: A strategic policy view

The extent to which trade has, since the formation of the WTO, been increasingly linked to other cross-cutting issues – among them, development, poverty and gender as well as environment – parallels the emergence of a strategic emphasis on a comprehensive and coordinated approach to capacity building. This is, in large part, attributable to the adoption of a capacity building agenda by the WTO, most equivocally in the text of the Doha Declaration, but also in earlier texts such as the Rio Declaration (Principle 9) and Agenda 21.

Some argue that capacity building today acts as a kind of substitute for ‘Washington Consensus’ practices of conditionality which have fallen out of favour. They argue that some providers of capacity building may be using it as a form of loan conditionality rather than for the purpose of enabling developing countries to compete within the international trading regime (see, for instance, Powell 2002).

Aid for trade

The stated objectives of the providers of trade capacity building, however, focus on ‘aid for trade’ principles for the provision of trade-related technical assistance to build capacity to:

� formulate a locally owned trade policy;

� participate in trade negotiations;

� implement trade agreements;

as well as including assistance to build supply side capacities, including trade related infrastructure, to benefit from WTO agreements (OECD 2006).

The aid for trade agenda gathered momentum over the course of 2005 in discussions of the G8 Summit at Gleneagles in July, of the OECD Development Assistance Committee in September and in the run up to and at the Hong Kong WTO Ministerial in December. The Hong Kong Ministerial saw the creation of a Task Force to provide recommendations on how to operationalise aid for trade, and on how aid for trade might contribute most effectively to the development dimension of the Doha Development Agenda. The Task Force recommendations were published in 20061 and identified the following gaps in trade-related assistance currently:

� Low attention to trade as a tool of development in recipient countries and in donor agencies.

� Insufficient trade mainstreaming in national development strategies and PRSPs.

� Lack of private-sector involvement in identifying trade needs.

� Limited absorptive capacity in recipient countries.

� Inadequate linking mechanisms and lack of predictability in donor response to trade priorities identified at the national and regional levels.

1 WT/AFT/1


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� Lack of coordination and coherence in donors' trade-related response.

� Slow, duplicative and bureaucratic processes in the assessment and delivery of trade assistance, including burdensome parallel structures within recipient countries.

� Lack of data on, and analysis of, trade polices and their impact on development, lack of easily-available information on existing Aid-for-Trade instruments.

� Ineffective monitoring of trade-related country policies and donor activities; absence of rigorous, independent project and programme evaluation and impact assessment.

� Limited support for regional, sub-regional and cross-border trade-related programmes and projects.

� Inadequate support to address the adjustment costs of trade liberalisation.

� Insufficient resources for infrastructure and productive capacity building.

� Uneven country coverage.

The Task Force’s recommendations for addressing these gaps highlighted the need for projects and programmes to be considered as aid for trade if they have been identified as development priorities in recipient countries’ national development strategies. They noted that, while PRSPs reflect national development priorities for some countries, other development strategies may be equally important. The recommendations also highlighted the need for clear and agreed benchmarks for reliable global monitoring of aid for trade efforts for accurate accounting and to assess ‘additionality’.

The recommendations focused on the need for action in the following areas:

� Financing The requirement for additional, predictable, sustainable and effective financing.

� Strengthening the ‘demand’ side through an enhanced Integrated Framework for Trade-Related Technical Assistance to least-developed countries (IF), extending support to non-LDC developing countries, and addressing cross-border, regional needs.

� Strengthening donor ‘response’ by focusing donor policies more on trade, improving donor agency coordination and harmonisation for greater coherence, and framing a donor response which is guided by priorities identified by developing countries.

� Strengthening the bridge between ‘demand’ and ‘response’

- At the country level by matching in-country structures through improved links to donor financing (eg through a National Aid-For-Trade Committee); mainstreaming trade into development and national strategies; implementing ‘triangular’ schemes of cooperation which foster technical cooperation among developing countries; and engaging the private sector.

- At the regional level by strengthening ability to identify cross-border and regional needs, and improving donor and agency ability to respond.

- At the global level by improving data collection, knowledge creation and sharing; channelling donor funding through multilateral platforms; and a


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global clearing-house function to match specific themes and groups of countries to donors and trade-related assistance.

� Strengthening monitoring and evaluation by monitoring mainstreaming of trade in national strategies and committing to rigorous aid for trade programme evaluation.

At the end of 2006, a year after the conclusion of the Hong Kong Ministerial, the Director-General Pascal Lamy reported on progress in implementing the Aid for Trade agenda in:

� Financing Key donors had confirmed that they remained committed to following through with their Hong Kong pledges. Donors, both developed and developing, had signalled their willingness to be part of this process.

� Monitoring and evaluation The DG had circulated a concept paper which laid out multiple forms of monitoring, at the global and country level, assessing global flows; progress reports from agencies and organisations and in-country assessments. National Aid-for-Trade Committees were envisaged where needed. A general assessment of aid for trade would be included in future Trade Policy Reviews and the first periodic review. An ad hoc consultative group, comprising a network of donors, recipients and private sector representatives would serve as a resource and sounding board in preparing periodic reviews.

Trade SIA of Doha Development Agenda

The conclusion of the Hong Kong Ministerial was also the catalyst for a European Commission Sustainability Impact Assessment (SIA) of the proposed WTO negotiations and the Doha Development Agenda (Kirkpatrick et al 2006). The SIA aims to inform trade negotiators and other interested parties on the potential economic, social and environmental impacts of the WTO negotiations and the Doha Development Agenda; and to identify and assess potential preventive actions as well as flanking measures that can be implemented to enhance positive impacts, mitigate negative impacts, and more fully integrate the trade reforms with wider actions to promote sustainable development.

The SIA concludes that the global environmental impacts of increasing volumes of international trade will be negative, with overall adverse effects on climate change and global biodiversity through increased transport and pressures for increased agricultural production in biologically sensitive areas. Critically, it points out that while there may be aggregate economic welfare gains from the Doha Development Agenda, these will not be shared by all countries and all socio-economic groups within these countries. Least Developed Countries (LDCs), in particular, are expected to suffer economic, environmental and social costs. And while adverse environmental effects can, in principle, be countered by technology or regulatory measures, the assessment finds that in many developing countries environmental regulation is insufficiently strong to counter these effects.

The assessment proposes potential preventive actions and/or flanking measures which include the following key actions:

� Enhancing the Integrated Framework,

� Integrating aid for trade with broader development strategy and planning,


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� Establishing a credible mechanism for ensuring donor commitments are forthcoming,

� Establishing an independent mechanism for monitoring aid for trade processes and outcomes.

2.2 Effective capacity building

As highlighted in the Stage I report, the entries in the TCBDB reveal a wide interpretation of the concept of ‘capacity building’. Indeed, the database reports on trade-related technical assistance and capacity building (TA&CB), allowing for a very broad range of interventions from the ad hoc ‘hit-and-run’ interventions that are more characteristic of early development work (in the 1950s) to contemporary capacity building or ‘capacity development’ interventions which are developed from the broader perspective of sustainable development.

Kostecki, in his 2001 analysis of capacity building in the WTO, outlines the features of capacity building which, in the 21st century, are deemed to contribute to overall efficacy and effectiveness of capacity building interventions:

The approach is based on the assumption that technical assistance should be

performed by networks involving a variety of actors, all of whom contribute skills

and resources to the process, which relies on partnership with the beneficiaries

and shared experience rather than ‘transferring solutions’. Beneficiary-

orientation and long-term programmes are given higher priority. Quality is of

concern to TA providers, beneficiaries and donors.

The most important of these features is ownership by the beneficiary. This depends on a partnership approach in which earlier vertical delivery processes, designed for control, are replaced by horizontal interaction and the creation of networks.

Local ownership is also among the seven principles identified by Blouin & Weston (2005), drawing on the Canadian International Development Agency’s (CIDA’s) trade capacity building strategy:

� Mainstream poverty reduction

� Gender equality

� Local ownership

� Donor coordination

� Institutional capacity building

� Pluralism in trade policy

� Environmental sustainability

Each of these principles serves to embed trade-related capacity building within a set of structural and institutional processes which together determine the development trajectory of a country. These are the broad principles on the basis of which much of the literature on trade capacity building has assessed the efficacy and effectiveness of TA&CB activities.

A further benchmark is provided by Prowse (2002) who identifies two distinct areas which between them determine the effective delivery of trade-related capacity building: firstly, in-country, to help formulate appropriate trade positions as well as to place trade reform in the context of an overall development strategy that will promote a supply


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response and facilitate pro-poor growth; and secondly, within the global rule-making process, to ensure that implementation of WTO rules and efforts to negotiate and implement future disciplines makes sense from a development perspective and that assistance is considered in the context of other competing development needs.

Understanding the elements of successful capacity development has also been a recent focus within the Department for International Development (DfID), particularly in the light of commitments to increase aid substantially to Africa following the Commission for Africa report2 and concerns that countries lack the absorptive capacity to effectively meet the new demands which accompany increasing aid. One focus has been on the operational dimensions that underpin successful capacity development initiatives, including careful definition of the capacity building challenge (capacity for what?) and a clear break-down of the specifics of the task for which capacity is to be developed. These ideas suggest that the more clearly the capacity development task is defined, with readily monitorable outputs, the more likely it is to be successfully accomplished. A 2005 internal paper3 concludes with five operational imperatives that should inform the design stage of any capacity development initiative:

� Define precisely the challenge Understand precisely the nature of the agency whose capacity is to be built. Also be clear about the nature of the mix of organisational development and institutional development initiatives that will be undertaken in the programme.

� Choose the organisation carefully Choose those organisations whose activities are of high political priority. It is easier to design and implement capacity development initiatives in organisations that address issues that are high on the political agenda.

� Understand the range of interests involved Understand the structure and patterning of political interests and incentives.

� Understand the notion of ‘specificity’ The more specific, monitorable and limited the task to be performed, the easier it will be to develop organisational capacity to do it. The key idea is ‘specificity’: the ability to monitor an output.

� Define the capacity task Capacity development initiatives need to not only specify capacity for what, but also list what activities will be undertaken.

2.3 Limited gains: Trade-related technical assistance and capacity building

The Stage I report has pointed to the scant availability of any systematic evaluation of the results of environment-related trade capacity building. Until recently, this was also the case for the wider category of trade capacity building (Sauvé 2004). Although there is still no unified framework for evaluating trade-related TA&CB, a number of bilateral and multilateral donors have, in the last couple of years, embarked upon comprehensive reviews of trade capacity building projects and programmes.

With a high degree of consensus, the literature has found a clear failure to integrate trade capacity building, inadequate methodologies, partial targeting of interventions and limited gains (Matambalya 2006). Until very recently, trade capacity building was

2 Commission for Africa (2005) Our Common Future 3 ‘Capacity development and state building: Issues, evidence and implications for DfID’, Policy Division, Governance and Social Development Group, October 2005


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delivered in a random, indiscriminate manner (Saez 2004), and often outside a coherent framework for economic development and poverty alleviation (Sauvé 2004). Prowse (2002) similarly reports that trade-related assistance has been delivered indiscriminately, and that there has been a ‘vertical multiplicity’ of trade-related assistance initiatives and an absence of horizontal coordination. Capacity building has frequently been delivered on a stand-alone basis, and support earmarked for selective issue areas, with highly distortionary results. Prowse finds, in common with the Stage I findings from the TCBDB, that initiatives aim primarily to help developing countries meet their trade obligations, within the WTO or other (often regional) agreements, and that a high proportion of such assistance takes the form of seminars or other training for a limited number of trade officials. Critically, assistance is supply-driven and conceived by the provider, with little consultation of beneficiaries as to their needs. Consequently, she writes, such assistance does little to help in-country capacity to formulate trade policy.

This section goes on to unpack some of these criticisms at a more detailed level, starting with a review of the literature relating to multilateral trade capacity building, with a particular focus on the Integrated Framework. This is followed by a review of bilateral trade capacity building through evaluations conducted for the US and the UK, and a rare review of NGO work in the field.

2.3.1 Multilateral trade capacity building

While the WTO has, over the period covered by the TCBDB, funded relatively little in the way of trade capacity building out of its own budget, it plays a larger part in the delivery of trade capacity building through other resources including trust funds4 and, in particular, the Doha Development Agenda Global Trust Fund for technical assistance. In 2006, its estimated budget was CHF 24 million (about US$19 million).

Kostecki’s 2001 survey of some 30 specialists in the field of trade capacity building found that the technical assistance (TA) activities of the WTO Secretariat were overstretched and underfunded, resulting in a ‘hit-and-run’ approach with too much emphasis on ad hoc training seminars and not enough effort to ensure the sustainability of capacity. Although the quality of programme staff was reported to be high, there were weaknesses in terms of participation (beneficiary countries found it difficult to find willing participation in TA events) and a traditional approach to delivery of training which was only beginning to replace didactic methods with more interactive ones. It was felt that the WTO’s TA services would benefit from greater autonomy from the organisation’s bureaucratic constraints, and stronger capacity building – as opposed to technical cooperation – expertise.

Much of the criticism levelled at the WTO in the field of trade capacity building, however, revolves around the IF, a multi-agency, multi-donor programme inaugurated in 1997 at the WTO High Level Meeting on Integrated Initiatives for Least-Developed Countries' Trade Development. The IF was an attempt to coordinate the TA&CB activities of its six participating agencies5 as well as to enable these agencies to work more closely with bilateral donors to achieve a more efficient and coherent delivery of assistance.

4 Such as those which finance the Joint International Technical Assistance Programme for Least Developed and other African Countries (JITAP) and International Trade Centre (ITC) activities 5 The IMF, ITC, UNCTAD, UNDP, World Bank and the WTO


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The IF has been marked by a number of failures which have been documented through evaluations by Rajapatirana et al (2000), Capra (2003), Agarwal & Cultura (2004), as well as by Kostecki (2001), Prowse (2002) and Powell (2002) among others. In its first three years, the IF was found to have failed at three levels (Prowse 2002):

� At the country level Beneficiary needs were identified by trade ministries with little wider consultation, resulting in failure to integrate trade capacity building into the country’s overall development process.

� At the agency level Trade capacity building remained a low priority for lending agencies, with the result that adequate funding was unavailable.

� At the donor level Interaction between trade and development communities was weak. The IF mandate was agreed mostly by trade ministers, with little consultation with development agencies.

The low degree of consultation with the beneficiary countries resulted in a divergence of expectations, with LDCs contesting the rationale of trade mainstreaming. The limited available funding was channelled into integration studies, with no funds available for implementing follow-up projects. Some LDCs found follow-up funding very hard to come by, while others benefited from earmarked funds for countries or projects that fitted with donor priorities (Powell 2002). The original World Bank Operations Evaluation Department evaluation (Rajapatirana et al 2000) found that the IF suffered from a lack of clear priorities, an ill-defined governance structure and inadequate funding.

The extent of these failures was acknowledged by a decision to revamp the IF under a pilot scheme which began in 2001 and aims to embed the trade agenda into a country’s development strategy (via the Poverty Reduction Strategy Paper, PRSP). The revamped IF, however, has been found to be equally flawed. The 2003 Capra report found its performance across countries ‘highly variable’, and noted the continued expectation of beneficiary countries that the IF should act as a funding mechanism. Developing country ownership was still limited.

In 2004, a comprehensive review by the World Bank’s Operations Evaluation Department found that the IF was beginning to mainstream trade into country-level development strategies, but that a number of shortcomings remained. These included insufficient focus on improved trade outcomes rather than on the process alone, and a shortage of resources (with contributions declining) in the face of high real and transaction costs. The country-by-country approach was found to be a constraint on the set of outcomes that might be achieved. The divergence of expectations also persisted, accompanied by insufficient ownership by beneficiary countries. Awareness of trade issues in key ministries of client countries was still limited, and linkages between the IF and country-level processes poorly established. Ultimately, developing countries viewed the IF as a mechanism for enhancing donor and international agency partnerships rather than mainstreaming trade and delivering trade-related TA.

The performance of the IF feeds into an evaluation of the European Commission of ‘Coordination of Trade Capacity Building in Partner Countries’. The scope of this evaluation ranges from multilateral initiatives such as the IF to field level, bilateral activities. The evaluation was conducted in February 2006 as part of the European Commission’s (EC’s) ‘3Cs (coordination, complementarity, coherence) Initiative’.


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The evaluation finds that, while the design of various coordination mechanisms has been adequate, in practice coordination has not led to the expected benefits or results. There has been improved information sharing and avoidance of duplication, but awareness of trade capacity building issues and the ability to address their complexity remained limited. Moreover, coordination had not brought about an allocation of activities which reflected the different expertise of the EU donors in a strategic response to the needs of beneficiaries. It also found a frequent absence of focus on mainstreaming TCB in national development plans. The IF had not met the expectations of donors or beneficiaries, and the diagnostic studies have not been a starting point for funding and implementation of strategic TCB interventions.

The main recommendations of the evaluation relate to improving the integration of TCB into poverty reduction strategies. They include recommendations that the Commission and member states should:

� spearhead efforts to increase awareness of TCB as a multi-sectoral issue in their own development and trade agencies;

� systematically integrate TCB into their institutions’ guidelines, whether for programming, monitoring or evaluation;

� pursue the existing efforts already being undertaken to address complex trade and development issues and disseminate the results of their work and conclusions more widely, including to other EU donors;

� increase coordination in the preparation of programming, monitoring or evaluation guidelines;

� increase their lobbying for the integration of TCB in PRSPs;

� ensure that a coordination forum for TCB exists in-country and in the regions where significant TCB takes place;

� ensure that coordination mechanisms produce value added for the partner, other donors and themselves;

� propose setting up financial instruments for TCB programmes such as contribution agreements open to member states and other donor participation.

A more recent assessment of the EU’s trade-related assistance was published in February 2006 (te Velde et al) in the context of EC President Barroso’s pledge at the Gleneagles Summit in July 2005 to increase EC aid for trade to EUR1 billion per year (from around EUR800 million annually). This increased visibility for trade-related assistance poses a number of problems given that trade-related assistance is not separately accounted for in the EC budget, but is hidden within existing budget lines. This makes it impossible to budget for trade-related assistance ex ante, placing the Barroso pledge at risk.

In terms of delivery of trade-related assistance, the assessment identifies problems including a lack of ownership of needs assessments by developing countries, negligible allocation of funding to mainstreaming in PRSPs, a sectoral focus which reflects an ideal output mix rather than actual needs (greater need around trade in services is identified), and the absence of quantitative measures by which to assess the effectiveness of technical assistance. It further questions the role of the EC in building trade negotiation capacity given a perceived conflict of interest where the EC


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is a partner to trade negotiations. Instead, use of other multilateral organisations is suggested as a buffer between potentially conflicting interests.

2.3.2 Bilateral trade capacity building

The most available evaluation of a country’s own bilateral trade capacity building activities has been conducted by the United States Agency for International Development (USAID). Although Canada’s CIDA has developed, at some length, strategic guidelines for trade capacity building, it has not made any evaluations of its trade capacity building programme available publicly. The Stage I report also made reference to an evaluation of trade capacity building activities carried out by DfID in the UK, which we review more fully here.

In its 2000 White Paper, ‘Eliminating World Poverty: Making Globalisation Work for the Poor’, the UK committed to doubling its support for trade-related capacity building to £30 million for the 2001-04 period. (Activities reported to the TCBDB for the UK amount to £84 million for 2002-04.) It has since promised to more than double aid for trade, by £100 million, by 2010. DfID’s strategic focus has been on mainstreaming trade into national development strategies and supporting better practice, with funding going to the IF, Joint Integrated Technical Assistance Programme (JITAP), the OECD as well as the Advisory Centre on WTO Law (ACWL) and Agency for International Trade and Cooperation (AITIC) (see below)6.

The evaluation (Weston et al 2005) seeks to assess the effectiveness and efficiency of UK trade-related capacity building (TRCB), and to identify good practices, through case studies of TRCB activities in four countries and the Caribbean. It finds that DfID’s TRCB activities generally performed well, and were consistent with the strategic direction set out in the 2000 White Paper to support an open and rules-based international trading system, an effective voice for development countries and improvements in their capacity to take advantage of new trade opportunities. Projects have helped build knowledge within governments about WTO and other trade issues, supported a more integrated approach to trade policymaking, built a more inclusive trade policy dialogue with stakeholders outside government, and strengthened linkages between trade and poverty reduction in discussions of trade policy and practice.

A considerable proportion of the initiatives reviewed consist of studies on trade-related issues both in the UK and in partner countries, and the evaluation finds that the usefulness of these studies varied. It recommends a study to look at the role of trade ministries, particularly in supporting the mainstreaming agenda. In addition to workshops and courses, DfID has funded experiential learning – participation in trade negotiation processes, study tours and internships – which is deemed to be essential for integrating LDCs into the multilateral trading system.

Project design is considered to be generally flexible, but could benefit from greater participation involving stakeholders outside trade ministries and DfID country offices. The evaluation suggests that building TRCB components into broader projects may be an effective way of mainstreaming trade in partner countries.

The evaluation’s recommendations are to:

� focus on core TRCB issues (trade policy analysis and negotiating skills);

6 http://www.dfid.gov.uk/pubs/files/tradebrief-buildingcapacity.pdf


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� build stronger linkages between TRCB and poverty reduction, and gender equality;

� improve integration of regional trading issues in TRCB;

� move beyond technical assistance to long-term capacity building;

� maintain a diversity of approaches (bilateral and multilateral funding);

� strengthen TRCB management and coordination;

� consider direct budgetary support as a new opportunity for TRCB.

USAID’s Bureau for Policy and Program Coordination has evaluated its trade capacity building programmes in two key documents published in 2004, ‘An Evaluation of Trade Capacity Building Programs: Overview’ and ‘USAID Behind-the-Border Trade Capacity Building’7. These evaluations focus on the inadequacy of reporting and the resultant inability to make a full assessment. They conclude that, over the 1990s, trade has been neglected. The evaluators find that much TCB spending has been of little value given that USAID has committed much of its TCB resources to countries with poor policy environments, despite evidence that little can be achieved without a favourable policy environment. Furthermore, USAID capacity is judged to be weak and limited, both in the field and at headquarters, having experienced a decline over the preceding decade – despite an increase in funding over the three years to 2004.

Recommendations are put forward in three areas:

� Strengthened supply-side activities to promote developing country activities. This is identified as an area where USAID potentially has the greatest comparative advantage in the form of grant funding, on-the-ground management and private sector orientation. This will require more financial and human resources.

� More and better trade data USAID needs to establish a data gathering system to monitor trade trends in countries where it has provided support for export promotion. This will enable USAID to focus resources on countries where they have the highest payoff.

� More analysis of major past projects in Africa Neither of the two major USAID supply-side TCB programmes in Africa – in Ghana and Uganda – had been adequately studied for lessons. Since the great majority of LDCs are in Africa, more effort is recommended to draw the lessons from these major efforts.

2.3.3 NGO trade capacity building

Uniquely, the Dutch Ministry of Foreign Affairs’ Policy and Operations Evaluation Department (IOB) has conducted an evaluation (Plaisier & Wijmenga 2004) of the trade capacity building activities of three Geneva-based NGOs: the ACWL, the AITIC and the Quakers United Nations Office, all of which have received financial support from the Netherlands. The ACWL provides support to developing countries in accessing and negotiating the dispute settlement mechanism (DSM). The AITIC was set up by the Swiss government to strengthen the capacity of less-advantaged

7 Two other relevant documents are: ‘USAID Support for WTO/FTA Accession’ and ‘Regional Trade Agreements: A Tool for Development’


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countries to engage in more effective trade diplomacy. And the Quakers United Nations Office operates a TRIPs programme8 which supports developing country negotiation capacity around issues relating to biodiversity, genetic resources and patents within the TRIPs framework.

The evaluation of the three NGOs includes considerations of administrative and management capacity and offers little in the way of concrete recommendations for the delivery of trade capacity building. However, they indicate a clear demand for the technical knowledge, procedural support and specialist expertise provided by the NGOs (as opposed to the poor demand for WTO seminars and workshops) in relatively niche areas. Flexibility and a demand orientation were valued features of the capacity building, with an emphasis on delivery in-country, rather than in Geneva.

2.4 Limited gains: Environment-related trade capacity building

The shortcomings identified for trade capacity building also apply to specifically environment-related trade capacity building. While the extent to which environment-related TCB has been assessed is more limited, the overarching concerns remain the same. The United Nations Environment Programme (UNEP 2002) finds that, despite the volume of funding dedicated to environment-related TCB, ‘efforts have neither been adequate nor yielded desired outcomes’. It cites misconceptions between capacity building providers and beneficiaries as to what useful and effective capacity building consists of; the lack of a common understanding of capacity building requirements for environment, trade and development; poor coordination of programmes; inadequate consideration of beneficiary needs and conditions; inadequate participation by beneficiaries; the ad hoc, compartmentalised delivery of services and absence of linkages and related follow-up; and the unpredictable nature of funding.

The specific considerations introduced by environment and development concerns relate to consistency, sustainability over the long term, widening stakeholder participation in beneficiary countries and integrating regional, sub-regional and national institutions into trade capacity building processes and activities. The report highlights the complex, cross-cutting relationships between environment, trade and development which call for multi-disciplinary capacity building and the coordination of activities between ministries and other decision-making bodies at the national level, and between countries and international organisations at the international level. It calls for:

the development of coordinated, long-term capacity building programmes of a

broader scope to enhance national institutional and human capacities for:

integrated assessment of trade policies; the development and implementation of

national policies to maximise the net development gains of trade; and the

adaptation and use of environmentally sound technologies to promote

sustainable development and enhance market access and opportunities.

This will require new delivery options based on active collaboration between multilateral, regional, sub-regional and national institutions, and programmes based on national needs assessments engaging the full range of stakeholders, in and outside of government as well as across ministries.

8 Trade-Related Aspects of Intellectual Property Rights


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A 2003 analysis of linkages between US trade policy and environmental capacity building (Audley & Ulmer) touches in more detail on the environment-specific dimensions of trade capacity building, although its focus is more narrowly on capacity building delivered in the context of negotiations on trade agreements. It acknowledges the commitment made by the US government to trade capacity building, as articulated in its ‘USAID Strategy: Building Trade Capacity in the Development World’. This document outlines a strategy to help countries benefit from the global trading system through increased and improved participation, implementation and economic

responsiveness. Environmental concerns are embedded into such commitments through, for instance, the Trade Act of 2002 which contains environmental commitments and capacity building instructions.

This report finds that the US government has taken some important steps in supporting a demand-driven, coordinated process of TCB delivery in its case study of the negotiations around the Central American Free Trade Agreement (CAFTA). It finds that the US has responded to some of an unprecedented number of opportunities for environmental concerns to influence trade policy. However, more concerted technical assistance and capacity building is required to strengthen capacity to enforce environmental laws, particularly where they are linked to trade liberalisation. This weakness is compounded by the scarcity of public evidence regarding progress in the area of trade-related environmental capacity building in Central American countries. This is attributable in part to the limited attention given to environmental considerations by the partner countries, and consequently limited demands for environmental TCB.

In contrast to the low level of government demand, there is considerable public demand by civil society groups in Central America for linkages between trade and environment policies. This suggests a missed opportunity for the CAFTA countries to engage all relevant government ministries, including environment and development ministries, as well as the broader public, in developing their TCB priorities. There is also a suggestion that the failure to incorporate indigenous expertise into a TCB needs assessment process, and the reluctance to articulate environmental TCB needs, is attributable to suspicion on the part of Central American countries that TCB counts as a bargaining chip, and that demands for environmental TCB entail reduced bargaining power on other fronts.

More broadly, and outside the CAFTA negotiations, the authors find that cultural and organisational differences between the key agencies the US Trade Representative on the one hand and USAID and the Environmental Protection Agency (EPA) on the other militate against the streamlined delivery of environmental TCB. The US Trade Representative is described as a lean, highly centralised agency with a culture steeped in bargaining, which usually operates under pressurised time constraints. Development assistance, on the other hand, is a relatively decentralised, long-term process where needs are identified by target countries and feed up from the field over time. The effect of trade negotiations is to compress identification of such needs so as to fit into the negotiation timetable. This heightens the risk that TCB becomes a bargaining chip in trade talks, and that government officials will accept a modified outcome that does not deliver real technical assistance. Consequently, USAID trade-related training has not effectively integrated environment and development issues, emphasising commercial concerns and implementation of trade commitments over sustainable development objectives.


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The report also reiterates USAID acknowledged shortcomings in terms of funding, mechanisms for rapid TCB delivery, the trade-related knowledge of field staff, the trade focus of field programmes and the availability of technical leadership in areas of best practice. Staff education, analytical research and the availability of incremental resources to support trade-related environmental capacity building are all found to be inadequate, and the US-based firms contracted to implement quick-disbursing TCB contracts have not had the expertise to respond to environment-related TCB needs. Meanwhile, those countries with the highest TA needs, the LDCs, have least access to the discretionary Economic Growth budget which funds most TCB.

The report’s critical recommendations are to:

� raise awareness among partner countries of the benefits and possible scope of trade-related environmental capacity building;

� fully integrate trade-related aspects of environment and development into US capacity building initiatives;

� empower low-income countries to learn by doing by involving local experts;

� ensure adequate, timely and regular funding, and coordinate assistance with other donors;

� make technical assistance and capacity building deliberations more transparent;

� slow trade negotiations down.

2.5 Conclusions

This literature review has highlighted the state of trade capacity building and technical assistance, and specifically environment-related TCB, by key multilateral and bilateral donors. Despite the increased volume of TCB funding over the 2001-06 period, and the level of political attention given to trade-related capacity building by the international community, delivery of TCB has been found to be unstrategic, uncoordinated, supply-driven and under-funded. Despite explicit aims to tie TCB into national planning processes, this has been achieved to a limited degree only. The challenge has been greater for environment-related TCB, where interventions have not been sufficiently participatory to ensure an accurate articulation of country needs and preferences, and environmental considerations have tended to be compromised by trade and bargaining considerations.

The literature has highlighted shortcomings on all fronts targeted by the Paris Declaration on Aid Effectiveness: ownership, alignment, harmonisation, managing for results and mutual accountability.

� Ownership Delivery of TCB has often been determined by the donors. This indicates a failure to respect country leadership and a missed opportunity to help strengthen capacity to exercise it.

� Alignment Low country ownership has undermined alignment of aid flows to national priorities. Support for capacity building has been weakly coordinated. Funding has not been predictable.

� Harmonisation Some progress has been made through the IF to share analysis, however there is little evidence that common arrangements or procedures have been in use.


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� Managing for results Recommendations that the IF incorporate results-based management have not been incorporated.

� Mutual accountability Evaluation of trade capacity building is weak. Mutual assessment reviews have not been implemented.

The extent to which these weaknesses apply at the country level is considered in the case studies which follow. The case studies complement the literature review in seeking to provide bottom-up evidence of how effectively capacity building is being implemented, and to what extent it meets country needs.


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3 CASE STUDIES

A more nuanced view of how capacity building efforts are delivered and received, and the extent to which they meet the needs of recipient countries, is provided in the case studies which follow. These not only complement and expand on the findings of the literature review above, but also the Stage I findings of the analysis of the Trade Capacity Building Database, which was noted in the report to be partial and insufficiently defined.

The selection of countries for case study analysis sought to focus on countries which are:

� Poor developing countries, and therefore a focus for UK government support.

� Countries which together provide a global view.

� Countries which have experienced impacts of trade liberalisation as a result of different trade agreements (the ending of the Multi-Fibre Agreement in the case of Pakistan; bilateral agreements with the EU and other regional partners in the case of Uganda; and EU CAP reform on sugar in the case of Brazil).

� Locations where the case study authors either have specialist knowledge of a particular sector, or have links with key government officials.

In each country, the case study authors spent 7-10 days reviewing documents, interviewing key informants and, in the case of Uganda, conducting a questionnaire survey and holding a workshop with officials from different government departments. The case studies provide a snapshot of the authors’ and their respondents’ views on capacity building support, its strengths and weaknesses, and how far recommendations on trade and environment are integrated into national development planning processes.

To a considerable extent, the case study findings reflect the findings of the literature review. A number of the key themes emerging from the case studies corroborate the larger themes identified by the literature, namely:

� The need for greater ‘demand-side’ ownership;

� The need to more closely engage trade ministries;

� The need for greater integration of trade and environment agenda into national planning processes, and particularly alignment with national, potentially competing priorities such as poverty reduction;

� The need for donor support to move beyond diagnosis and analysis, and fund (through grants rather than loans) implementation of diagnostic findings;

� The need to involve non-government actors: civil society and the private sector;

� The need for a long-term, sustainable approach to capacity building.

Uganda was notable for the extent to which it has increasingly been possible, over the years, to integrate environmental issues into national planning exercises, reflecting the large part played by environmental and natural resources in the country’s economy. At the same time, the importance of Uganda’s natural resources makes it imperative that the mainstreaming of environmental issues continues, with an enhanced focus on their relationship to poverty and the impact of environmental degradation on poverty reduction and economic growth.


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The case studies have also provided a general picture of a poorly coordinated, ad hoc approach by donor agencies, with the bulk of support focusing on diagnostic and analytical exercises and a gap in grant funding for operationalising study findings. And despite the volume of funding for analytical work, there continues to be a demand for support to build robust data gathering, management and analytical frameworks. This suggests a need for a globally more coordinated approach to data and analysis, which will yield comprehensive and comparable results in support of generalisable rather than contextually-specific conclusions.


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4 PAKISTAN

4.1 Trade liberalisation in Pakistan: Main currents and issues

Trade liberalisation was defined in the Stage I report as the removal over time of quotas, tariffs, subsidies and other trade barriers so as to allow the free flow of goods and services between countries. Over the past decade, Pakistan has adopted an open economic policy which has included several far-ranging reforms of import and export policy. This provides a context for considering the environmental impacts of trade liberalisation.

Firstly, the recent reforms of import policy in Pakistan are viewed as having been substantial. Pakistan is now considered one of the most open trade regimes in South Asia, having reduced the number of tariff bands to four and the rate on its highest tariff band to 25 per cent. According to a World Bank report (Schuler 2004), Pakistan now has the lowest applied average tariff rates of the three large South Asian economies (Bangladesh, India, and Pakistan) and ‘unlike Sri Lanka and Bangladesh, and indeed most countries around the world, Pakistan has not shied away from opening its agriculture sector’. Industries particularly affected by this liberalisation are pharmaceuticals, light engineering, textiles and automobiles (according to WTO Cell, Government of Pakistan).

Secondly, Pakistan has made efforts to increase its market access abroad. The Government of Pakistan acceded to the WTO in 1995 and established its WTO Cell within the Ministry of Commerce in 2001 to engage proactively in trade negotiations and provide policy analysis. It is currently engaged in negotiations on issues including liberalisation of services, agricultural trade liberalisation, non-agricultural market access and trade facilitation, and intellectual property rights.

The government has also been pursuing a number of bilateral trade agreements. Free trade agreements with Sri Lanka and China commenced in June 2005 and November 2006, and bilateral agreements are being negotiated with Malaysia, Singapore, Indonesia, Turkey, Kazakhstan, Tajikistan, Morocco and Mauritius (GoP 2006). Pakistan continues to negotiate on industries of key concern such as access for its textile products to the United States. Further, Pakistan is a signatory to the South Asian Free Trade Agreement and while there has been a great deal of uncertainty surrounding the introduction of this agreement, the first tariff reductions entered into force on 1 July 20069.

Case study: The textile industry in Pakistan

One of the largest impacts of trade liberalisation in Pakistan has been the ending of the Multi-Fibre Agreement (MFA) in the textiles and clothing sector. The textile industry is Pakistan’s largest, making up 59.4 per cent of the country’s exports in 2005 (Table 5)10.

9 Comment made by Syed Javed Ali Shah Jillani, Parliamentary Secretary, Ministry of Industries, Production and Special Initiatives, UNDP-TIHP Trade Dialogue, Islamabad, 18 May 2006 10 Author’s own calculations based on data from Pakistan Federal Bureau of Statistics


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Table 5: Pakistan’s largest exports, 2005

Product Share of total exports (%)

Textile products (yarn, cloth, bedwear, garments) 59.45

Agriculture (raw cotton, fish, fruits, vegetables) 9.23

Leather (tanned and leather manufactures) 5.28

Petroleum products 3.13

Chemicals and pharmaceutical products 2.47

Sports goods 1.97

Carpets, rugs and mats 1.70

Surgical instruments 0.98

The MFA was in place from 1974 until the end of 2004 and regulated global trade in textiles and clothing through a system of bilateral quotas. This agreement was phased out over 10 years, coming to an end in December 2004. The most important quotas were retained until the end of the phase-out period, leading to what has been called ‘the big bang’ of the textiles industry11.

Under the quota system exports of certain products from Pakistan were restricted, particularly in home textiles (which includes bedwear, tablecloths, and so on). For reasons which relate to the historical strength of the basic textiles sector in Pakistan (yarn and cloth), the supply of indigenous raw cotton and increased demand from the global housing boom, Pakistan has gained status as a leading exporter of home textile products in recent years. Despite a degree of uncertainty leading up to the ending of the MFA, it was expected that Pakistan would see growth in restricted categories (Martin 2004).

In the first year following the ending of the quotas Pakistan’s exports have grown in several categories (Table 6), while knitwear alone has declined.

Table 6: Growth of textile exports by category, 2004-05

Textile product Growth rate (%, nominal)

All exports 24

All textiles 20

Cotton yarn 22

Cotton cloth 32

Knitting -0.4

Bedwear 42

Towels 13

Ready-made garments 47

Source: Author’s own calculations based on data from Pakistan Federal Bureau of Statistics

4.2 Environmental issues

The extent of environmental degradation in Pakistan has been outlined in a briefing note prepared by The World Conservation Union for the ‘Mainstreaming environment into the Government of Pakistan’s Poverty Reduction Strategy Paper’ (GHK 2003) document produced by the World Conservation Union (IUCN), Environmental

11 ‘India awaits textiles boom’, BBC News Online, 22 December, 2004


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Resources Management (ERM) and GHK International. Key areas of sensitivity include the following:

� 38 per cent of irrigated land is waterlogged and 14 per cent saline.

� The application of agricultural chemicals has increased by almost a factor of 10 since 1980.

� Water quality has similarly deteriorated because of increasing pollution from industrial, municipal and agricultural sources.

� Air pollution, mainly from suspended particulates, has become ubiquitous, and exceeds World Health Organization guideline values in virtually every sample collected by provincial environment departments.

� 35-40 per cent of Pakistan’s population who live in rural areas where they depend on agriculture and natural resources live below the poverty line and only 63 per cent of the population has access to safe drinking water.

Within this context the Government of Pakistan published its National Environmental Policy in July 200512. The main objectives of the policy were identified as:

� Conservation, restoration and efficient management of environmental resources;

� Integration of environmental considerations in policy making and planning processes;

� Capacity building of government agencies and other stakeholders;

� Meeting international obligations effectively;

� Creation of demand for environment through mass awareness and community mobilisation.

Within this policy priority issues are water supply and management, air quality and noise, waste management, forestry, biodiversity, climate change, energy efficiency and agriculture. Among the two largest environmental NGOs in Pakistan, IUCN and the World Wildlife Fund (WWF) Pakistan, similar issues have been selected: biodiversity, coastal ecosystems, environmental assessment, environmental education and environmental law13 and forests, freshwater, species, and toxics14.

4.3 Environmental impacts of trade liberalisation to date

One of the weaknesses identified in the interviews was the lack of research studies on the environmental impacts of Pakistan’s largest industries. This has made it difficult to identify and quantify the positive and negative environmental impacts of trade liberalisation. Instead, perceptions amongst the policy and private sector community are used to assess this impact.

Taking the industries perceived as having been most affected by trade liberalisation as cited by the WTO Cell (automobiles, pharmaceuticals and light engineering), according to the Cleaner Production Institute (CPI) the environmental effect of trade liberalisation

12 www.environment.gov.pk/nep/policy.pdf 13 http://www.iucn.org/places/pakistan/prog.htm 14 http://www.wwfpak.org


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has been strongly positive. The pharmaceutical and automobile industry, in which foreign companies have been able to invest in Pakistan, have all introduced environmental policy standards due to policies at the most senior levels of the multinational companies. This practice has spread to local plants, and CPI states that now all automobile units have water treatment plants. It is only in light engineering, where the units operate on small industrial estates, that they are not compliant with environmental legislation.

From the perspective of Pakistan’s Environmental Protection Agency (EPA), it is the export-oriented industries which are most compliant with environmental standards. Many of these industries, such as surgical instruments and sports goods, have addressed these issues independently out of fear of losing international buyers. They are now almost 100 per cent compliant with national legislation in Pakistan. Another driver of compliance during trade reforms cited by the EPA was the removal of duty on pollution abatement equipment. The initiative came from the industries themselves, and led to the reduction of duty by the Central Board of Revenue from 45 per cent to zero for this equipment.

However, the EPA felt that many industries still had a lot of progress to make. The example of light engineering was given in which the use of scrap metal leads to open pit burning. There has also been little interest by business so far in ISO1400015, although laboratories have been accredited. Many donors and NGOs felt that industries such as tanneries and textiles dyeing houses that manufacture for the local market lack the incentive of overseas sales and are continuing to be heavy polluters.

With reference to the agriculture sector, the WTO Cell of the Ministry of Agriculture commented that the impact of liberalisation has been mixed. For example, during the Green Revolution of the 1940s to 1960s, which brought about significant increases in agricultural production as a result of agricultural research, extension and infrastructural development, access to new varieties and increased irrigation led to the excessive mining of natural resources. This created water logging and salinity and often out-migration of farmers, leaving no one to look after the land left behind. While the rice sector has grown in Pakistan to become the third largest export product by value, the negative impact of intense water use can be seen in areas such as Gujrat and Sialkot.

The service sector is also of concern regarding its environmental impacts. The CPI cited the example of road construction. At present this can be a cause of much noise and air pollution and is a hazard for civilians. The closure of such a service sector to international competition effectively creates a monopoly for local industry, and no pressure to engage in good environmental practice.

Case study: Environmental impacts in Pakistan’s textile industry

The impact of trade liberalisation on Pakistan’s textile industry gives a clear illustration of the nexus between trade liberalisation and the environment. The textile industry is heavily reliant on resources which have a significant impact on the environment. Within the spinning industry, for example, energy contributes 7-13 per cent of production costs (Table 7).

15 The ISO14000 series relates to environmental management systems.


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Table 7: Production cost of textile spinning, 2005

Production inputs Average share of production cost (%)

Raw materials 71-77

Salaries 4-8

Fuel, power 7-13

Packaging 1-2

Stores, spares, parts 1-3

Insurance 0-1

Depreciation 3-8

Source: Author’s own calculations based on annual report data of 13 spinning firms listed on the Karachi Stock Exchange

The processing industry which is required to produce dyed and printed cloth for garments and home textiles is highly water, energy and chemical intensive. According to the CPI, ‘[t]he extensive use of chemicals, coupled with the huge amount of water used, results in generation of large quantities of highly polluted wastewater. Condensate recovery and reuse system is not efficient in some, and practically nonexistent in many of the cases, causing major energy losses’ (Environmental Technology Program for Industry 1998). Further, the addition to water systems of effluent with non-neutral pH can change the pH of the receiving body to a point which may drastically alter habitats – the dominance of some species and extinction of others. The use of heavy metals in the dyeing process can also lead to chromium moving up the food chain.

Trade liberalisation in the textile industry in Pakistan has had both positive and negative environmental impacts. During trade liberalisation, the degree of competition increases. This induces a rapid selection effect in an industry in which the most efficient firms (and those offering increased quality) gain a larger market share. In this process it is then likely that the most efficient firms will use electricity more efficiently. Whereas poorly managed firms tend to have high reprocessing costs (when the fabric has to be dyed again due to failure to colour the fabric uniformly on the first attempt), more efficient processing firms will reduce these errors and be more efficient in their use of water and chemicals.

However, the 42 per cent rise in bedwear exports in 2005 will have required up to 42 per cent more consumption of water for fabric processing16. Growth of 20 per cent in the spinning industry would require greater energy inputs. Within Pakistan, where water supply, sanitation and energy provision is currently at the top of the political agenda, the impact of this growth on water quality cannot be understated.

Some firms have adopted measures to address these impacts. Crescent Textile Mills Limited, a large manufacturer of yarn, cloth and towels in Faisalabad, was a pilot project of Pakistan’s Cleaner Production Programme and in 2003 installed the city’s first water treatment plant17. Samin Textiles Limited, which produces fabrics for work

16 Given that inflation in Pakistan in 2005 was 7.4 per cent according the Asian Development Bank, increase in sales is likely to be 39 per cent in real terms. http://www.adb.org/documents/books/ado/2005/pak.asp 17 http://www.crescenttextile.com/siteindex.htm


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wear, apparel and garments, home textile fabric and industrial fabrics close to Lahore has obtained Oeko-Tex 100 certification and ISO14000 Certification18.

Motivations to do so are most often driven by buyer demands. Chenab Limited, for instance, a Faisalabad-based manufacturer of home textiles and garments, states that ‘Chenab’s management acquired ISO14001 as a response to the changing face of environmental legislation that is causing serious problems for many industries… Ecology is a new parameter that today increasingly appears in the catalogue of requirements’. The CPI estimates that 80 per cent of the processing sector will be environmentally compliant (in terms of ISO standards) in five years’ time as a result of such pressure.

However, from the annual reports of 150 textile companies listed on the Karachi Stock Exchange, only 7.5 per cent state that they have ISO14000 certification or any eco-label for their products. Few firms recognise that poor water facilities are directly linked to a decline in work productivity due to school and work absenteeism which is directly linked to poor water facilities. An exception is Amtex (a manufacturer of cloth, home textiles and garments), which has installed a water purification plant to avoid these problems in its site area19. Further, when some buyers, particularly for the US market, do not require such strict environmental standards the suppliers are less likely to be ISO compliant.

4.4 Environment-related capacity building trends and priority needs

In order to put the role of donor support in addressing the environmental impacts of trade liberalisation in context, and the extent to which support either enhances the positive impacts or addresses the negative, this section examines the role of relevant government ministries and NGOs in the negotiations process and identifies priority needs.

WTO Cell: Ministry of Food, Agriculture and Livestock

The WTO Cell in the Ministry of Food, Agriculture and Livestock was founded in 1999 as a project funded initially for three years by the Government of Pakistan. Initially working from the Pakistan Agriculture Research Council, the cell moved to the Ministry of Agriculture in 2005. Since its inception it has acted as a focal point on agriculture in trade negotiations and has worked directly with civil society organisations such as WWF and Action Aid. It is one of the sections of the Government of Pakistan which has been very proactive regarding the environmental impacts of trade liberalisation.

The level of knowledge within the cell is very high, recognising the main environmental impacts on the agriculture sector to date and the root causes. It has proactively worked across ministerial boundaries to establish a consultative group which includes representatives from the Ministry of Commerce, small and large farmers, researchers and academics. This group informs the negotiating stance during trade discussions. The Government of Pakistan is now setting up a WTO Cell within the Ministry of Industries along the model of the existing agricultural cell.

The head of the cell identified key needs as the urgency to integrate environment into the overall negotiating stance and into the agenda of other ministries. The cell would

18 http://www.samintextiles.com 19 http://www.amtextile.com


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like to be able to be cognisant of the impacts of the WTO on agriculture and develop coping strategies. An early warning system of the impacts on health and biodiversity was singled out. Education and advocacy is also a priority, both within government but also in the provision of agricultural extension services for farmers whose knowledge of good management practices is low.

WTO Cell: Ministry of Commerce

The WTO Cell within the Ministry of Commerce had its roots in a project in 1999 but was interrupted due to the change of government. The cell itself was created formally in 2001 by the Government of Pakistan, and consisted of six working groups focusing on different WTO agreements. ‘Capacity Building on WTO and Trade Negotiations’ is currently one of the eight ‘areas of tactical focus’ for the ministry. The cell has a separate mission in Geneva with a team of five people, with another five or six in Islamabad, and both sections coordinate responses to trade policy proposals. The cell is not responsible for the impact of trade policy on industries and relies on feedback from other departments such as the WTO Cell in the Ministry of Agriculture.

There have been several donor funded capacity building programmes to date. These have included training seminars in Pakistan and abroad, interaction with other stakeholders such as provincial departments and farmers’ associations, and technical assistance in the form of consultants. The Asian Development Bank and World Bank, for instance, funded a Trade Facilitation Project which was focused on reducing red tape associated with doing business. In relation to environmental issues, staff in the cell have participated in a seminar on trade and multilateral environmental agreements. A document on trade and environment was produced by a consultant but could not be located upon request.

Level of knowledge of environmental impacts is moderate. Key positive impacts on the environment were identified as the reduction in environmental pressures resulting from poverty reduction and greater efficiencies as unit costs are reduced. However, negative impacts are increases in the volume of energy demanded from industry expansion and greater use of fertilisers and pesticides in agricultural production. To date, most work within the Ministry of Commerce has been directed towards interaction with the export-oriented sectors to identify their difficulties in relation to non-tariff barriers20.

The cell considers that capacity building both by the government and donors has enabled it to become more sophisticated. International training was identified as the most effective because individuals are able to gain a lot of knowledge within a few weeks in comparison to a longer period of training in Pakistan. The cell can now function effectively in negotiations, and is also a provider of training and seminars to Chambers of Commerce, government departments and the private sector.

However, turnover of staff was identified as a difficulty in retaining knowledge within the cell due to poor incentives within the government. Nevertheless a positive aspect of this turnover emerged in the presence of WTO-educated individuals distributed across other departments which thus assists inter-ministerial coordination.

20 Note that this was considered by all stakeholders consulted as an appropriate trade policy priority.


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Needs identified by the WTO Cell itself were continual capacity building to keep the unit’s knowledge up to date. The service sector was singled out as an area requiring the most support because there is a lack of data on services in Pakistan which makes it difficult to develop adequate policy responses to negotiations. There is also poor inter-ministerial coordination on the service sector. In relation to environmental impacts, it was indicated that the introduction of any ‘flanking measure’ would have to be considered in more depth in order to see how it could best be implemented.

Ministry of Environment: Environmental Protection Agency

The EPA sits within the Ministry of Environment and is responsible for implementing the Pakistan Environmental Protection Act (1997). The EPA also gives input on policy development when required. It has received donor support from agencies such as the Japanese International Cooperation Agency, particularly in the area of technical assistance.

The EPA has worked very closely with industry over the past decade and its knowledge of the environmental impacts of trade was very high. It has been responsible for the certification of laboratories and the promotion of ISO14001 series as outlined in the National Environmental Policy of the Ministry of Environment. It believes that it has successfully been able to raise awareness of environmental issues and has recently introduced a self assessment procedure for business (the SMART programme) in which each firm submits a self-assessment to EPA. It also engages regularly and effectively with civil society organisations.

However, the EPA admitted that its monitoring mechanisms were weak, due to institutional weaknesses in the legal system which mean violators cannot be prosecuted. It was also felt that the unorganised sector had not been addressed sufficiently. Capacity building needs within the EPA were identified as education to understand and prepare for the impacts of trade liberalisation. It also needs to continue to build its own capacity to monitor effectively. It was felt that donors have to design solutions which the industries will accept and involve them in the decision making process. A suggestion was given that a cell addressing environmental issues within the Ministry of Commerce could be effective.

Ministry of Textile Industry

The Ministry of Textile Industry was created in 2004 as a focal point for issues of concern to the country’s largest industry. It was created at the latter end of the MFA period, but there were some preparations formulated within wider government to address the environmental impacts of the industry. In the Trade Policy of 2003-04 and 2004-05, for example, the Ministry of Commerce proposed the setting up of special Textile Cities and Garment Cities with combined effluent treatment plants which are now being implemented by the Ministry of Textile Industry.

The level of knowledge of the environmental issues associated with the sector was medium. Staff in the ministry were aware of the requirements of buyers, the degree of compliance in the industry towards standards such as ISO14001 and the dumping of waste from dyeing houses into canals and streams. However, there was a lack of awareness of existing initiatives such as those being administered by civil society organisations.

The capacity building needs identified by the ministry were the ability to address the poor environmental health and safety standards in the workplace, with concerns over


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workplace dust within units such as spinning. In addition, as the capacity of the research and development cell of the ministry develops, it would be in a position to host seminars on the issue to companies, trade associations, trade unions and the labour class.

Poverty Reduction Strategy Paper: A case study in mainstreaming environment

The Poverty Reduction Strategy Paper (PRSP), first prepared in 2003, is a document formed from contributions of all relevant ministries. The first PRSP drew attention to the ‘environment-poverty nexus’ and in particular the linkages between environment and livelihoods, health and vulnerability. In 2003, the PRSP Secretariat requested assistance from DfID to facilitate a process to better integrate environmental sustainability into the strategy. This resulted in the ‘Mainstreaming Environment into the Government of Pakistan’s Poverty Reduction Strategy Paper’ (GHK 2003).

Since the publication of this document, two relevant questions regarding capacity building and the effectiveness of donor support in the PRSP process have emerged. Firstly, to what extent did this exercise result in environment becoming a greater focus of the PRSP? And, secondly, to what extent has the focus on environment within the PRSP helped ‘mainstream’ environmental issues into other government departments?

The PRSP Secretariat admits that the first strategy document did not treat environmental issues comprehensively. As a result, the Secretariat is in the process of preparing the second PRSP document in which it intends to address environmental issues in more depth. The reasons given for this shift were subsequent developments within government which have raised environmental issues on the political agenda in general (such as the publication of the National Environmental Policy in 2005 by the Ministry of Environment) and an increasing number of studies on environment produced by various actors.

In order to assess the weaknesses of the first strategy paper, the PRSP Secretariat held a series of workshops to get feedback from organisations such as IUCN and consultants. The results of this process shed light on the degree to which environment has been adopted by other ministries.

Positive impacts of the PRSP were cited as follows:

� The PRSP has influenced subsequent key national initiatives, such as the Mid Term Development Framework and the National Environmental Policy.

� Resource allocation for environment has increased.

However a number of gaps in the strategy were also identified:

� Capacities remain weak due to generic and systemic issues.

� Monitoring of environment-related PRSP results is lacking.

� There has been a failure to streamline environment into the main development programme, instead having the strategy of ‘grow first clean up later’.

� There has been a failure to align goals with global initiatives such as the World Summit on Sustainable Development (WSSD) and MEAs to address eco-tourism and to link environment with economic growth.

Although the ‘Mainstreaming Environment’ report appeared before the current post holder was installed, it could be said that the report was part of this momentum although it required the broader commitment of the government to raise the profile of


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environmental issues. It seems, however, that the PRSP has had limited impact in raising the profile of environmental issues in mainstream policy.

Perspectives from civil society

While several government departments have made efforts to address trade and environmental issues, the general perspective both from outside and from some inside government is that these actions have had little positive impact on the environment. Reasons given include the urgency of issues such as poverty and health and a failure to prioritise environment as an issue, but others point to broad institutional weaknesses which prevent the introduction of management systems and the lack of legitimacy of the legal system.

In particular, the EPA was singled out as an organisation which ‘can pinch but not bite’. The lack of inter-ministerial coordination was also cited as an obstacle to addressing cross-cutting issues such as trade and environment. The failure to link trade liberalisation with environment and planning processes has resulted in the absence or lack of coordination of flanking measures in the trade negotiation process. For instance, the planned Textile City near Karachi is unlikely to be completed before July 2007 at the earliest, meaning that measures to address environmental issues will not have been implemented until well after the construction of processing plants by businesses which took place from 2001-0521.

4.5 Relevance and impact

Trade capacity building: Volume and relative trends

The TCBDB reports that there have been 229 projects funded in Pakistan by donor agencies for trade capacity building between 2002 and May 2006. The peak of the funding in volume terms was allocated in 2003 (US$5.9 million), covering 55.5 per cent of total expenditure over the period (US$10.6 million). The peak in the number of projects was in 2003 and 2004, with 39 projects funded in 2003 and 40 in 2004.

By far the largest donor was the European Commission Trade Related Technical Assistance project, making up 53 per cent of the total (US$5.6 million). The next largest donor, the United Nations Industrial Development Organization (UNIDO), provided 30.5 per cent (US$3.2 million). 227 other projects constitute the remaining 16 per cent of the funding. Smaller projects include ‘International Trade & WTO Agreement Implementation for Asian Countries’ from the Republic of Korea (US$1,000) and an education project entitled ‘Trade And Investment Insurance’ by Japan (US$3,000).

This data, however, overlooks many donor-supported projects which have targeted environmental issues in Pakistan which relate to trade.

Environment-related trade capacity building

There are several donor funded projects which have addressed the environmental impacts of trade. None have addressed the link between trade liberalisation and the environment explicitly, but the projects indicate the degree of sophistication in managing these impacts. Four projects have been evaluated in detail to gauge their effectiveness (summarised in Annex I).

21 Author discussion with Chief Engineer of Karachi Textile City site in March 2006 and observations with approximately 30 textile firms


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Case study: European Union Small Grants Project and WWF Pakistan’s

Promoting better environmental practices in textile processing sector

WWF Pakistan introduced an initiative called ‘Promoting better environmental practices in textile processing sector’ in 2005-06. The project ‘aims to prepare Pakistan’s textile processing industry to meet the environmental challenges in the emerging global trade regime’22 and is therefore the only project to directly address the environmental impacts of trade liberalisation. 86 per cent of the project costs was funded by the European Union Small Project Facility (EUR88,685). The programme built on WWF’s previous experience in conducting pollution abatement programmes with industries and in this case it entered into partnership in the project with National Environmental Consulting (Pvt) Limited and the All Pakistan Textile Mills Association.

WWF first conducted a needs assessment to identify the training requirements of firms and the gaps between practices currently implemented by companies and those required by international buyers. WWF then developed a series of workshops to raise awareness of the three priority issues with the firms: eco labelling/environmental management systems, energy and water conservation methods, and a cost/benefit analysis of introduction of cleaner production techniques. Approximately 80 per cent of the attendees were exporters already oriented to the international market and compliance requirements, while 15-20 per cent were firms attempting to gain a competitive edge in the market by introducing environmental measures.

Strengths of the project as articulated by the participants include appreciation of the first seminar ever conducted on eco labelling in Pakistan. Senior management also showed a lot of interest in the cost/benefit analysis – again the first time such an exercise had been conducted in Pakistan. 120 companies attended the series of workshops and each received a very technical in-depth handbook highlighting good environmental practices in processing.

However, there was a failure to adequately bring into the process the chief executive officers (CEOs) who hold the decision making power in the firms. Further, WWF went through a learning process in understanding who the most effective private sector partners were in terms of disseminating the programme and hence engaging CEOs. However, this can be seen as a positive impact on WWF in that it is now able to effectively gauge the private sector partners with whom it can work most effectively.

Case study: Royal Dutch Embassy/Cleaner Production Programme

The Royal Dutch Embassy (RDE) in Pakistan has a track record of financing industrial environment programmes since 1987. RDE aims to build the capacity of local institutions to deliver environmental solutions to industrial pollution.

The RDE funding process is the most sophisticated of all the donors operating in this policy area in Pakistan. The unique dimension of its funding approach is that it first conducts an institutional appraisal of the organisation to ensure that it can deliver the project effectively. The characteristics RDE looks for when choosing a host organisation include the degree of professionalism of management and whether the organisation is proactive. Further, it funds those projects which include a significant amount of private sector funding and provides the finance only when the objectives have been achieved, through an output based payment schedule. This means that the

22 http://www.wwfpak.org/toxics_bettertextileprocessing.php


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recipient organisations know that they will not receive the funding until the projects meet their objectives, raising the incentive for them to complete the project on time and to the donor’s satisfaction.

The RDE’s first original project in 1987, the Environment Technology Production Initiative, was delivered in Karachi by the Pakistan Federal Chambers of Commerce and Industry. The project invited a number of different industries to undergo pilot projects in order to assess their impact on the environment and implement solutions. An institutional audit was conducted confidentially in 12 different units in order to assess what equipment would be appropriate. The learning from this project was then opened up to other units.

A focus of RDE has been the production of leather in tanneries, Pakistan’s second largest export sector. This project was implemented by the Pakistan Tanners Association with the aim of supporting industries to comply with National Environmental Quality Standards and help to achieve ISO14000 certification. Finance allocated to the programme from 2002-08 totalled US$2.7 million.

Environmental audits were conducted in the participating factories and action plans for each plant were developed. Training was then conducted with workers and owners using consultants. The drivers of involvement by firms in the projects were always buyer requirements.

Among its achievements, the RDE-funded programme has resulted in the 15 largest tanneries in Pakistan having implemented effluent treatment plants on their own sites. Further, a Cleaner Production Institute was created in 2004 as an outcome of this programme, again funded by RDE. The CPI was created to address needs in individual units, to have an institution that could pursue these issues independently, and to ‘consolidate and replicate the successes of cleaner technologies implementation experience in Pakistan’23.

A key aspect of the success of the project was that the CPI has been able to build up trust with businesses which are often reluctant to expose their weaknesses. Another lesson is the importance of creating a neutral institution such as the CPI to meet the needs of industry in a way which avoids conflicts of interest over environmental policy that existing business institutions may hold.

However, the leather tanning sector is one example where smaller manufacturers selling to the local market have failed to take any measures to deal with their environmental impact. Firms cite financial and space constraints as the reason why they have not done so. Further, at present the key environmental problem in Pakistan is seen to be the poor implementation of existing policy. Strengthening of monitoring institutions is thus considered a priority area for future work and is being addressed by RDE and other agencies through the ‘Pakistan Environment Programme’ which aims to strengthen the EPAs.

Canadian International Development Agency: Pakistan Environment Program

CIDA funded a two-year programme in 2000-02 as part of the Pakistan Environment Program. The programme, founded in 1994, aims to build capacity of partner organisations as the key institutions for sustaining the environment agenda in Pakistan. Partners include the Ministry of Environment, the Planning and Development Division,

23 http://www.cpp.org.pk


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the Sustainable Development Policy Institute, and the Pakistan EPA. The project is managed by IUCN.

The two-year Linkage Project between Environment Canada (a federal department) and the EPA focused on capacity building for the implementation of National Environmental Quality Standards. The programme included an Environmental Laboratories Accreditation Program, workshops and training. NGO partners were chosen for their track record in working on environmental issues in Pakistan. The project budget totalled US$2.6 million.

The motivation for the project was to strengthen NGOs working on environment, but also to match them with a strengthened government body. The outcomes of this project were identified as the requirement of the government to now conduct environmental impact assessments in implementing development projects. Significant training of government staff has taken place and there is greater awareness of environmental issues in government.

However, it was felt that the results were not being seen in practice. For example, there have been no cases to date of a development project being threatened with closure if it fails to meet environmental criteria. Further, there has been an overemphasis on urban environmental issues, to the detriment of micro, community level issues such as water and sanitation. It was also suggested that the donors had failed to contribute significantly to environment work within Pakistan: several donors have conducted small projects, but donors have failed to come together to put environment on the development agenda.

There were a number of lessons which came out of administering the project. Firstly, there were too many partners within the programme and there were often several contact points within the partner organisations. This made administration and reporting procedures very cumbersome and hindered the ability of the partners to engage in project activities effectively. Further, an unequal distribution of finance led to some bad feeling amongst recipients. In future, any programme would consider the selection of partners carefully and pay more attention to how the project is administered.

Case study: UNDP’s Trade Initiatives from a Human Development Perspective

The United Nations Development Programme (UNDP) has been engaged in the project ‘Trade Initiatives from a Human Development Perspective (TIHP)’ from 2003-06. The aim of the project was to ‘provide support to the Government of Pakistan and other stakeholders including private sector and workers in ensuring that the country can strategically seize the opportunities of global economic and trade integration for advancing national progress in human development and poverty eradication’.

Specifically, the project aims to provide technical support to the government to assist domestic policy formulation on WTO issues, and to build the capacity of the government, academic institutions and research organisations on trade related issues. The implementing agency is the Ministry of Commerce, and the project budget was US$2 million. US$1 million was provided by DfID, and the rest came from UNDP resources. DfID also provided US$93,000 in 2005 for a two-year Trade Policy Adviser post which aimed to provide support to government and other stakeholders including private sector and workers within the context of the project.

The project’s activities to date in commissioning a series of 20 sector studies on topics such as Trade in Environmental Services and Logistic Security Assessment have


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strengthened the knowledge base of how human development issues related to trade. The project has conducted a series of seminars to disseminate the results of these sector studies, as well as training workshops for the media and a number of trade policy dialogues between government representatives and stakeholders. The Trade Policy Advisor post successfully drew attention to supply side constraints with a focus on the obstacles holding back domestic commerce. This resulted in a policy paper, ‘Domestic commerce: The missing link’. A further gain from the project was engaging the Ministry of Commerce on these issues.

However, inter-ministerial coordination was cited as being in need of strengthening. There is an imperative for the government to engage more with stakeholders when forming trade policy. Further, the Trade Policy Advisor post holder stayed in place for only 10 months.

4.6 Relevance of select capacity building activities for country needs

The perception of interviewees was that the capacity of government in trade negotiations has been strengthened since 2000. Government support of internal capacity building is a likely factor in its success, but donor support has also contributed, particularly in training of staff. However, it has been argued that there is still room for improvement in relation to other countries at the same level of development. It was suggested that the trade cell within the government requires more staff to prevent overloading of trade topics on one staff member. Turnover of staff after they receive training was also a concern of many interviewees; one interviewee felt in particular that donor finance was being badly spent on such training because the overall gain was negative due to staff losses, and that a focus on infrastructure or incentives for adoption of cleaner technology would be more effective.

The Government of Pakistan as a whole has been partly addressing the environmental dimensions of trade across its ministries. The 2005 National Environmental Strategy produced by the Ministry of the Environment acknowledges the linkage between trade and environment and the need for effective research and certification. However, with the exception of the issues surrounding social and environmental standards in trade, there is limited perception of the linkages between trade liberalisation and environmental impacts and little integrated planning for these impacts during trade negotiations. The government is considered closed at times when it comes to trade policy dialogue. Further, the Environmental Protection Agency is also considered weak and unable to implement what is otherwise considered appropriate and well designed legislation.

NGOs have also been strengthened since 2000. This has been in response to global media from Seattle and Cancun and increased international communication, but also to donor support. NGOs in Pakistan are themselves providing capacity building to raise awareness of trade and environment issues and engage more actors in dialogue with government. Action Aid Pakistan, for example, brought universities together to assess how WTO issues affect agriculture, and funded a university scholarship to encourage thesis writing on WTO issues. Farmers have formed a National Confederation of Farmers and are now able to talk to the media. However, many NGOs – particularly smaller, local ones – remain weak with poorly implemented systems. There is a concern that some NGOs might fold after receiving funding, or that others are too donor-dependent.


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In relation to environment and trade liberalisation with industries, it is clear that donor support has been a driving force in putting environment on the agenda of businesses. The most polluting industries – tanneries and textiles – have been targeted with significant business support and funding. One comment suggested that domestic support for such initiatives would ‘never have come about without the intervention of donors’. However, it is necessary to bear in mind that it is the export orientation that has driven firms’ eventual implementation of environmental measures, and many smaller firms and those oriented to the local market remain untouched.

In this way, the missing link is enforcement of environmental legislation and donors such as CIDA and RDE have focused on this. A textile plant may have installed a water treatment plant but it may not be in operation all the time – low salaries at the local enforcement level can mean that corruption can hinder compliance with legislation. This remains a challenge for the donor community.

To summarise, to date both donor support and government-led capacity building has had a medium level of effectiveness in addressing the environmental impacts of trade liberalisation. Their strengths have come from targeting the most polluting industries, using market-based models to engage industries and strengthening non-governmental organisations to engage with government. However, the weakness has been the failure to spur inclusion of environmental issues into the planning processes associated with trade liberalisation. The most obvious example of this is a lack of preparation to address the rise in environment impacts resulting from trade liberalisation in the textile industry.

Strengths and weaknesses of donor intervention to date are summarised in Table 8.

Table 8: Donor support – summary of key impacts


� Raised awareness of environment within government

� Increased dialogue has been taking place between stakeholders and government

� NGOs themselves have learned how to operate more effectively

� Addressed the most polluting industries � Strengthened private sector led

associations to operate without donor support and impartially

� Knowledge of actors in trade negotiations increased

� Raised local support for initiatives � Focused on strengthening EPA

� Lack of impact on the ground, too much of a focus on urban issues in the ‘international environment agenda’, local community issues often neglected

� Government still closed to dialogue in many instances

� NGOs remain weak and lack focus on trade and environment together, too many partners often engaged in competition with one another

� Some areas of trade liberalisation left unaddressed such as the service sector

� Small businesses and those oriented towards the local market untouched

� Lack of attention placed on environment during the trade negotiations and to ‘flanking measures

� High turnover of staff after receiving training

� Some donors lack engagement with industry

� Little improvement of performance of EPA

� No focus on environmental instruments


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4.7 Issues for future consideration and recommendations

It is likely that several trade liberalisations will affect Pakistan in the coming years. The most important sectors for Pakistan will be services and agriculture. Industries like textiles and leather are likely to continue growing and will continue to require resources, although other sectors which have made less progress may become the necessary focus of interventions. This report primarily suggests that there is a need to introduce a planning element to trade policy making so as to manage environment impacts across industries. This involves the mainstreaming of environmental considerations into policy making processes through, for instance, environmental impact assessments and clear operational procedures for following through with the design and implementation of appropriate mitigation or flanking measures.

It is proposed that donor efforts would best be placed in supporting actors within government who are committed to raising the impacts of trade liberalisation on the environment and have the ability to draw all the relevant ministries together on the issues.

It is also suggested that the projects across all actors are most effective when they are able to generate local financial support, be it inside a government department or in partnership with industry.

Support should be continued to NGOs and the private sector who are effectively raising this agenda within government and industry, although an approach which analyses the capacity of these institutions to evolve, and support them in doing so with financial incentives as they develop, could bring more effective intervention.

Several areas of need are summarised in Table 9.


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Table 9: Potential future areas of donor intervention

Area of focus Suggested interventions

Trade negotiations

Provide specific support to negotiations concerning the services sector and other underrepresented industries Consider role of flanking measure, following consultation with relevant ministries Consideration of how a flanking measure could be introduced Continued training focused on knowledge upgrading Exploration of environmental management instruments

Government Introduce trade liberalisation as a planning process Building on momentum in departments such as the WTO Cell in the Ministry of Agriculture Include engagement with stakeholders as a requirement during projects Promote projects that can encourage inter-ministerial coordination eg concerning service industries

Civil society Funding of NGOs with a good a track record so that they, in turn, can fund those smaller NGOs to strengthen their capacity Better assessment of capabilities of recipient institutions and incentives for their performance Fund a leading NGO to link environment and trade work Offer gradual funding to NGOs with no track record, increase if they perform well.

Private sector Continued support for market driven projects Strengthen other industry trade associations to reduce the focus on textiles within trade negotiations and government policy in general Formation of WTO Cells within industry associations Need to communicate the business case for environmental measures to SMEs Joint ventures with foreign firms to encourage knowledge transfer in services and industry

Academia/think tanks

Investment in indigenous research on the environmental impacts of different sectors – currently lacking – which can then be used to raise awareness of industries about their impacts Funding to provide research and background support to government


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5 UGANDA

5.1 Trade liberalisation in Uganda: Main currents and issues

Uganda has substantial natural resources, including fertile soils, regular rainfall and sizable deposits of copper and cobalt. Agriculture is the most important sector of the economy employing more than 80 per cent of the workforce, some 4.2 million smallholders, and constituting more than 42 per cent of gross domestic product (GDP). Coffee accounts for the bulk of export revenues.

Uganda is an original member of the WTO, and grants at least Most Favoured Nation (MFN) treatment to all its trading partners. The European Union is Uganda’s main trading partner. As a result of regional integration such as the Common Market for Eastern and Southern Africa (COMESA), Uganda’s trade with the other sub-Saharan African countries has increased. Kenya is the largest single supplier.

In 1987, the Government of Uganda adopted an ‘Economic Recovery Programme’ supported by the International Monetary Fund (IMF) and World Bank. This included privatisation of state owned enterprises, liberalisation of prices and interest rates, and reduction of trade barriers (trade liberalisation). The aim of the Economic Recovery Programme was to increase both the value of exports and to diversify the export portfolio. The government is committed to continuing its efforts to streamline and liberalise its trade regime, with a strong emphasis on private sector development as a major engine for economic growth.

Economic diversification strategies have resulted in considerable structural changes in Uganda’s export sector over the last 15 years with the emergence and growth of non-traditional exports such as fish/fish products, floriculture, horticulture, spices, hides and skins and honey overtaking traditional exports such as coffee, cotton, tobacco and tea in value.

The fisheries sector has evolved as a major industrial sector in Uganda’s economy during the last decade. Fish processing for export in Uganda is one of the industries that have experienced rapid growth as a result of these new investment and trade policies. More than one million workers are directly engaged in the harvesting, transport, processing, distribution and marketing of fish. As a source of national employment and export revenue, the fisheries industry has become one of Uganda’s most important industrial sectors representing its main foreign exchange earner in the non-traditional agricultural export sector.

Uganda’s tourism industry has successfully recovered from the political instability that dogged the country in the 1990s to become the second highest foreign exchange earner, generating US$210.7 million in 2004-05 (Uganda Bureau of Statistics).

The mining and quarrying sector is considered underdeveloped but promising. Over the last 30 years the contribution by the mining sector to Uganda's GDP has diminished from some 6 per cent to less than 1 per cent24. The government has instituted a series of mineral sector reforms to render the sector attractive to foreign

24 Sectoral Environmental and Social Assessment (SESA) for the Mineral Sector Development Technical Assistance Project, April 2003


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and domestic private investment and there remains potential for new mining discoveries in Uganda.

Uganda’s value of exports is still very low. In order to achieve its goal to reduce headcount poverty to 10 per cent by the year 201725, some of the increases in exports are likely to come from greater production through area expansion or intensification (of agriculture). Others will come from value addition through processing. Both increased production and value addition to satisfy trade policy objectives will have positive and negative environmental and social impacts.


Uganda is a landlocked country with many lakes and rivers. Current environmental issues include the draining of wetlands for agricultural use, deforestation, overgrazing, soil erosion, water hyacinth infestation in Lake Victoria and poaching which is widespread26.

5.2.1 Environment and trade

Environmental requirements of trade

The environmental requirements of trade have dominated much of the environment and trade related debate in Uganda. International trade in non-traditional exports in Uganda is governed by increasingly stringent and changing buyer environmental requirements (including food safety/health requirements). Most of the agricultural farms use traditional production methods. There are a few modern farms especially in tea, sugarcane, flowers, and fruits. The predominance of smallholder farms and the traditional production techniques used have significant implications for meeting trade volume demands and complying with international environmental requirements.

Environmental requirements (standards and technical regulations) can raise or lower economic efficiency, promote or block competitiveness, facilitate or constrain international trade, and enable or exclude the participation of the poor from export-oriented economic activities. For example, the ban on Uganda’s fish exports by the European Union from April to August 1999, based on a concern that some fisherman might have been catching fish using pesticides, resulted in huge losses in export earnings and loss of employment (Table 10)

Table 10: The impact of the EU fish ban on Uganda’s exports

Effect Group Loss

Export earnings US$36.9m

Income of fishing community due to reduced prices and fish activities US$4.25m

Factories that closed down 3 out of 11

Factories that reduced their labour force (2/3) 8 out of 11

Jobs lost in fish factories (1/3) 2,000

Jobs lost in fishing activities (1/3) 32,000

Persons that lost 2/3 of their income 68,000

Affected family members and relatives living on the same income 300,000

Source: UNIDO

25 Poverty Eradication Action Plan (1997, 2001) 26 http://www.worldservicesgroup.com/countries


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As Uganda continues to seek export-led growth by further increasing and diversifying food and agricultural exports, exporters will increasingly encounter these stringent environmental requirements. Compliance with the requirements, therefore, is an important prerequisite for Uganda’s export competitiveness. The biggest challenge facing Uganda is lack of capacity both in the public and private sectors to comply with these requirements and to undertake the necessary conformity checks in order to ensure that compliance has been achieved. This is further exacerbated by lack of awareness, little or no participation in the process of setting environmental requirements of key exports, and lack of coordination amongst the relevant institutions.

5.2.2 Integration in national planning processes

Poverty reduction is Uganda’s overarching goal. There are several arguments around whether poverty is the cause of environmental degradation or whether environmental degradation is what causes poverty. Either way, the issues have to be addressed.

The government has developed a Poverty Eradication Action Plan (which is also its PRSP). The PEAP aims to reduce the levels of absolute poverty from 44 per cent in 1997 to below 10 per cent by 2017. It is a comprehensive medium-term planning framework. Development strategies, sector plans and investment programmes have been developed in the context of the country’s PEAP. A more recent development is Uganda’s Joint Assistance Strategy which has been designed collaboratively by seven development partners. The strategy’s objective is to articulate a harmonised development financing response to the country’s third Poverty Eradication Action Plan (PEAP 2005-09)

Mainstreaming environmental concerns into development policy, plans and programmes is an on-going process in Uganda and has improved over the subsequent PEAP reviews (Table 11).

Table 11: Integration of environmental concerns into PEAP processes

First PEAP (1997) Overlooked poverty-environment linkages. Lacked environmental sustainability dimensions. Budget allocations did not respond to environmental concerns. Very little civil society involvement. Environmental issues overlooked or dealt with in ad hoc manner.

Interim efforts to enhance the visibility of environment and natural resources (ENR) in the PEAP

The Sector-Wide Approach is the principle model for the planning of activities in central line (sectoral) ministries. The ENR Sector Working Group (SWG) is comprised of the ENR sub-sectors in line ministries, the CSOs and NGOs, the private sector and development partners. It is the principle institutional arrangement for projecting the poverty-environment linkage in national policies, plans, programmes, and in budgeting and resource allocation. Participatory Poverty Assessment considered rural people’s definition of poverty and the significance of the environment for their livelihood.

Second PEAP (2000)

Some recognition of environmental issues and long-term sustainability. Environment was treated as a cross-cutting issue without articulating priority policy actions for addressing it in its own right, leading to its disappearance. The link between environment, natural resource assets, economic productivity and poverty reduction did not emerge. PPAs contributed poor people’s perspectives. There was some NGO involvement.


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Interim efforts to enhance the visibility of ENR in the PEAP

The PEAP Revision Process carried out in a participatory and iterative manner. A PEAP revision sub-committee that spearheaded the consultative process was formed by the ENR SWG. Demonstration of the contribution of the ENR sector to economic growth and poverty reduction in monetary terms was used to get the attention of policy makers. Resource valuation and other technical studies carried out.

Third PEAP (2004-05 to 2007-08)

Great improvement with regard to addressing ENR concerns as compared with earlier PEAPs. Environment has its own chapter. Fairly articulates and discusses the priority actions and key policy issues pertinent to the realisation of key ENR outcomes. It is now generally agreed that sound environment and natural resources management is crucial both to sustained economic growth and poverty eradication

Sources: Kaggwa & Byaruhanga 200g; Waldman et al 2005

The evolution of the PEAP process has highlighted a number of lessons and challenges related to integrating environmental considerations into national planning processes. Ultimately, Uganda remains an environment and natural resources (ENR) based economy in which the sustainable use of its rich ENR base is key to ensuring sustainable economic growth and poverty reduction. Although much has been achieved through the evolution of the PEAP process, more needs to be done in terms of projecting poverty-environment linkages at all levels of policy and decision making, and mobilising commitment to priority actions and corresponding budget allocation for implementation.

Furthermore, greater inclusion of environmental issues in the PEAP process does mean they will be included in other spheres or stages of the policy making process. Given increased pressure on ecosystem functions, growing demand for water and the environmental threats of urbanisation and industrialisation, the environment needs to be mainstreamed more widely if the current risks are to be mitigated. A current crisis in conservation finance (US$27-30 billion is needed annually for existing protected areas) means that government needs to look more widely for sources of finance, including private sector investment.

This calls for strong and well-connected government institutions with capacity to engage effectively in trade and development processes. This includes effective coordination, lobbying and establishing an open dialogue between key top policy and decision makers from the Ministry of Finance, Planning and Economic Development and other ministries. The PEAP experience has shown how the ENR sector working group (SWG) was able to provide the necessary voice and coordination efforts to embed the environment into the broader process.

More work needs to be done on understanding and raising awareness of the impact of environmental degradation on poverty reduction and economic growth. This requires working through strategic partnerships, focused entry points and with a sector’s comparative advantages.

The remaining challenges for Uganda are:


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� Ensuring the reflection of poverty-environmental issues in the PEAP implementation process, particularly through the Budget Framework Paper process to ensure resources are allocated to environment-related activities;

� Maintaining/sustaining political commitment and support for environmental sustainability;

� Ensuring good governance and particularly environmental governance;

� Identifying the best and optimal combination of entry points and exploiting them. Should it be at policy formulation, implementation, monitoring, or legislation?

� Development of useful and realistic costs and targets for achieving expected environmental outcomes especially those pertinent to achieving the Millennium Development Goals (MDGs) and targets;

� Relatively low applicability of such tools as Strategic Environmental Assessments (SEAs), Integrated Assessments (IAs);

� Inadequate statistical data to operationalise poverty-monitoring indicators in the national poverty monitoring system.

5.3 Environmental impacts of trade liberalisation to date

Studies in different sectors of the economy have highlighted some of the environmental impacts of trade liberalisation.

5.3.1 Specific issues in agriculture

Efforts to meet growing domestic and international trade demands for food, timber, fibre, fish and fuel – both those produced by agriculture (domesticated crops, livestock, trees and fish) and harvested from natural systems (forests, grasslands, and fisheries) – have resulted in highly negative impacts on wild plant and animal biodiversity (directly and through loss of habitat), and on ecosystem services critical to human well-being, such as regular water supply and quality, control of pests and diseases, pollination of useful plants, and sequestration and storage of carbon. More land has been converted to cropland since 1945 than during the whole of the 18th and 19th centuries combined27. These losses have direct and indirect economic and environmental impacts.

Some of the demands have resulted in: substitution between different forms of agricultural land use and between crops (eg bean staples and vanilla); changes in production systems (moves towards large plantation farming for cut flowers); and loss of agricultural habitats that provide certain environmental benefits. (Most wetlands in Uganda have been degraded and some forest reserves are being degazetted [removed from legal protection] to meet the demands for large plantation farming).

Most of the negative environmental ‘externalities’ are not internalised as business costs and there is little financial reward to the farmer for producing positive environmental externalities. In a few instances, however, some efforts have been directed at providing incentives for implementing measures which have the potential to reduce pressure on the environment such as payments/market-based incentives for environmental services. For instance:

27 The Millennium Ecosystem Assessment, 2005


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� Markets for ‘green’ products, using a variety of certification systems (certified organic; certified biodiversity-friendly, Forest Stewardship Certification, etc);

� Payments to farmers to maintain protected areas for important species or ecosystem functions; maintaining biodiversity/water catchments etc;

� Payments to farmers for management systems that conserve important species or ecosystem functions;

� Payments to farmers or forest owners for bio prospecting rights.

However, these payments/incentives for improving environmental performance may not sufficiently reduce environmental harm where markets are lacking or incomplete and where property rights are not clearly defined, which is the case in Uganda. Defining who pays and who is paid for the desired level of environmental performance has important implications for the distribution of income and wealth.

5.3.2 Specific issues in the fisheries sector

The tremendous growth in Uganda fish exports has led to a variety of concerns including:

� over-fishing and resource depletion;

� the loss of biodiversity associated with the introduction of exotic species and unsustainable fishing methods;

� effluent pollution from fish processing and other industries;

� the degradation of coastal ecosystems and environmental health conditions associated with rapid development of the industry;

� resource mismanagement due to un-harmonised national environmental standards among the riparian (ie river bank) parties of Lake Victoria (Uganda, Kenya, and Tanzania);

� use of destructive fishing gear and methods;

� eutrophication of the lakes.

5.3.3 Specific issues in the forestry sector

Forests provide a wealth of indirect environmental benefits as well as direct use benefits for many of the people surrounding them. The loss of forested areas upsets soil-water relations, creates erosion, and lowers water quality that, in turn, has an associated effect on human health. In addition, many people are dependent on forests for medicinal plants, fuel wood and food to support their livelihoods. The loss of these habitats leads to a lower quality of life. The importance of these ecosystems in the conservation of biodiversity also has an international dimension: many species are of global value and they provide global public goods such as carbon sequestration and global public services such as climate change mitigation.

Tropical high forests are particularly important as they provide disproportionately high values of natural product based environmental services and support high levels of biodiversity. In Uganda, well over 30 per cent of the tropical high forest is now degraded, with private forests shrinking more rapidly than forests managed by the government (Forest Department Map of Uganda’s Land Cover). Two key factors may be seen as the major causes of deforestation in the last century in Uganda:


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� Conversion of forest into agricultural and grazing land, due to population expansion and extensive pastoral systems;

� Over harvesting (mining of the resource) for fuel wood, timber, non-timber forest products and charcoal due to high dependence by predominantly rural populations to maintain their livelihoods.

The importance of forests to local people and in particular the role that forests play in livelihood security and poverty alleviation, and the broader economic benefits provided by forests in terms of stabilising the environment both locally, nationally and internationally are slowly being realised. However, the environmental economic values are currently undervalued or not valued at all in Uganda’s national budgetary and planning processes. To date quantitative work on environmental economics has focused mainly on macro level estimates and there has been a lack of quantitative disaggregated data on livelihoods issues pertaining to forests, upon which macro level estimates can be more accurately made. Unless monetary values of forests are measured and quantified it is difficult for policy makers to rationalise the need for public financing to maintain them.

5.3.4 Specific issues in the tourism sector

With diverse, yet endangered natural resources, Uganda is promoting low-impact, ecological tourism. Since the sustainability of the ecotourism industry is dependent upon the preservation of environmental quality and biodiversity, it is believed that ecotourism can bolster conservation efforts. Ecotourism is also appealing to tourists, environmentalists, businesses, and governments alike. Uganda has received generous funding to support these efforts from international NGOs and financial institutions.

Some of the main issues related to tourism/ecotourism are:

� poaching (both national and international) outside protected areas;

� ecotourism competes with other land use practices (agriculture);

� inadequate community involvement in protected area management, and thus inadequate sharing of profits from tourism with the communities that help manage them;

� inadequate service industry to support the growing number of tourists;

� behavioural impacts – no studies have been done on, for instance, the long-term impacts of gorilla viewing on their behaviour.

5.3.5 Specific issues in the mining sector

One issue of significance is the marked overlap of Uganda's most critical environmental assets (protected areas) with the areas of mining interest. This emphasises the importance of having sound environmental legislation and implementing it effectively. Other key issues are the poor mining practices and environmental damage at most sites of artisanal workings; heavy metal pollution of lakes arising from the mining and processing of sulphide ores at nearby mines; and lack of funds to undertake the appropriate remedial work.

5.3.6 Initiatives to counter the environmental effects of trade liberalisation

In order to counter the environmental effects of trade liberalisation, the Government of Uganda has implemented various initiatives aimed at integrating environment into development plans and policies and promoting sound environmental practices.


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Examples include the establishment of the National Environmental Management Agency (NEMA); various environmental regulations and guidelines for the integration of environmental considerations into sectoral planning, project and policy formulation in Uganda; District Environment Action Plans which are subsequently integrated into the District Development Plans (DDPs); and environment impact assessment regulations which ensure that major projects/investments undergo an environmental impact assessment before they are effected. Uganda has also been a beneficiary of various capacity building and technical assistance aimed at addressing impacts of trade liberalisation (Annex 2).

Last but not least, NEMA has produced draft SEA Guidelines. The SEA Guidelines are particularly relevant for integrating environmental issues into sectoral policies. Sectoral lead agencies such as the Ministry of Tourism, Trade and Industry (MTTI) are expected to identify, advise and integrate environmental considerations into the policies, activities and programmes in their sectors.

5.4 Capacity building in Uganda

Capacity building in Uganda mainly encompasses the following:

� The development of legal and regulatory frameworks with appropriate policies and laws. Usually this involves making legal and regulatory changes to enable organisations/institutions at all levels and in all sectors to enhance their capacities.

� Comprehensive human resource development This refers to a process of equipping individuals with the knowledge, skills and access to information in order to enable them to perform their tasks more effectively. This process is usually realised through education (formal and informal) and training.

� Comprehensive institutional (or organisational) development This involves the design/elaboration of management structures, processes and procedures within organisations, and relationship management (eg, the management of relationships between the different organisations and stakeholders).

� The development of information systems.

Areas of focus include government policies and policy makers related to trade (negotiations and facilitation), environment, and around quality management issues where environmental impacts are considered to be most acutely felt, such as in agrotrade in sectors including flowers, horticulture, livestock, organic products, wood products/packaging, fisheries and biotrade (trade in biological resources such as natural ingredients, wildlife).

5.4.1 Trade capacity building

The TCBDB reports that there have been 243 projects funded in Uganda by donor agencies for trade capacity building between 2001 and 2006. The peak of the funding in volume terms was allocated in 2003 (US$67.7 million), covering 47 per cent of total expenditure over the period (US$143.3 million). The peak in the number of projects was captured in 2001 and 2003, with 72 projects funded in 2001 and 73 in 2003.

By far the largest donor was the European Commission with its APEX Private Enterprises IV project making up 24 per cent of the total (US$37 million). The next largest donor, the US, provided 19 per cent (US$27 million) with its largest programme, ‘Investment in Developing Export Agriculture’ accounting for US$3.2 million.


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Environment-related TCB to Uganda, however, is dominated by Denmark, which funded 38 out of 39 projects and 99 per cent of nearly US$6 million in funding. Most of these projects (the largest of which is US$0.5 million) are categorised in the TCBDB as business support services, and relate to the provision of training, technical assistance and environmental improvement in various sectors (including electricals and electronics, beef production, saw milling, dairy processing, etc).

The main causes of trade capacity problems in Uganda have been:

� Lack of capacity to negotiate effectively on trade issues of interest to the country. For example, trade officials are not familiar with some of the issues discussed in the negotiations (especially those to do with environment) which makes it very difficult for them to be effective participants in the process. Added to this general lack of awareness, or understanding of trade negotiation, is the lack of timely access to information and resources on trade issues.

� Lack of the capacity to influence and set the agenda or pace of negotiations. Countries like Uganda are small both in economic size and political power. Consequently, they are typically not in a position to determine which issues should or should not be on the negotiation agenda.

� Lack of the capacity to formulate effective trade policies. The use of international trade as an effective instrument for development in any economy requires the adoption of an efficient trade policy process. This requires the identification of a country’s trade interests and making sure that they are consistent with its key development priorities.

� Lack of the capacity to deal with external shocks. Trade liberalisation exposes smaller countries like Uganda to trade shocks thereby increasing their vulnerability to the external environment. This vulnerability stems largely from the fact that Uganda for a long time did not have a diversified production and export structure. Consequently, it relied on the export of a few commodities for foreign exchange.

� Lack of the capacity to exploit trading opportunities. Taking advantage of the opportunities created by preferences such as under the African Growth and Opportunity Act, EU-Everything but Arms, EU/ACP (Africa, Caribbean and Pacific) Cotonou Agreement under discussions etc.

In the recent past, Uganda has notably benefited from programmes from such institutions as the United Nations Conference on Trade and Development (UNCTAD), the International Trade Center, and Institute for Training and Technical Cooperation of the WTO (Annex 2).

Measures in this category are funded through both multilateral and bilateral resources, and often delivered by consultants. Typically, they attract most of the resources that an average developing country receives for trade and investment related human resources development.

A large share of CB&TA activities in trade take the form of short-term training sessions and workshops offered to government officials dealing with trade policy. This form of assistance can be useful, in that it improves the knowledge of the individuals involved. However, such activities often fall short in terms of institutional capacity building.


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Many CB&TA activities are donor-driven, designed and implemented by the WTO and other agencies based in developed countries in collaboration with national counterparts. This is sometimes understandable since Uganda does not have a dedicated WTO training school, or courses on international diplomacy (as in Tanzania and Kenya). However, in order to ensure most effective use of resources, it is important to have local ownership. The deficit in Uganda’s human resource base is also evidenced by the lack of in-house and in-country specialist expertise, and an over-reliance on foreign facilitators.

It is also particularly important in the area of trade negotiations/policy making to reduce the possibility of undue influence by donors in areas under negotiation with recipients. For example the EU/ACP negotiations have been cited as an example where there is a possible conflict of interest since the country negotiators and the studies for the negotiations are funded by the EU.

There are issues with funding modalities for CB&TA that should be noted such as lack of budgetary allocations by the government towards trade capacity building and complications associated with donor support. One of the most common problems with donor support is protracted delay in the disbursement of funds. The challenge is exacerbated by the fact that donor funds are usually managed by consultants (eg, trade policy advisors). Finally, a common problem with donor funded programmes is lack of clarity of the mandates of the stakeholders.

CB&TA has continued to increase in scope and volume, in both trade policy and environment policy, therefore donor coordination is critical to reduce the management and administrative burden placed on the scarce personnel in trade ministries and other agencies involved at the national level, or in regional organisations. The IF, sector-wide approaches and direct budgetary support with trade programming forming part of national PRSPs are all ways to improve on this but they also have limitations.

There is a growing body of work looking at the complex linkages between trade policy and gender equality. The literature stresses that the liberalisation of imports of agricultural products tends to disadvantage women producing subsistence food; this is especially a problem in sub-Saharan Africa (UNCTAD 2004a; UNCTAD 2004b). Despite this growing recognition that trade policies have a wide range of gender differentiated impacts, there remain significant parts of trade capacity building work which does not look at these differentiated impacts.

5.5 Environment-related capacity building

The following section provides an overview of the environment related trade capacity building programmes. The overview considers programmes that cover research and research support, facilitating and institutional support, information gathering and dissemination, standards and certification and meetings and conferences.

5.5.1 Research and research support

Most of the analysis of environmental impacts of trade liberalisation in Uganda has been carried out with the support of UNEP’s Capacity Building on Integrated Assessment and Planning Initiatives28. Integrated Assessment aims to build the capacity of policy makers to integrate environment, economic and social considerations in new or existing planning processes at various stages. The studies 28 www.unep.ch/etb


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generally observed that ‘prevailing systems for decision-making in Uganda tend to separate economic, social and environmental factors at the policy, planning and management levels’. They therefore recommend the improvement or restructuring of the decision-making process of a country so that consideration of socio-economic and environmental issues is fully integrated and a broader range of public participation assured as recommended by Agenda 21.

Most of the capacity building that Uganda has received from UNEP has been in the form of studies and discussion papers. It includes the following:

� A study on Integrated Assessment of Uganda’s Draft National Trade

Policy for Adequacy of Coverage of Environmental and Health Concerns (Yakobo Olima Moyini & Associates 2005). The principal objective of the study was to guide and inform the designing of an integrated National Trade Policy and National Trade Strategic Plan that takes into account environmental impacts of trade liberalisation.

� A study to examine positive and negative impacts of structural adjustment

programmes (SAPs) on economic, social and environmental systems in

Uganda’s Fisheries Industry (Economic Policy Research Centre 1999)29. The study identifies an array of policy mechanisms, including economic instruments, that can be implemented to maintain sustainability of fisheries’ resources and ensure their continued economic exploitation. In particular, it finds that there is need with over-fishing, pollution of the water bodies, social problems that threaten the fishing industry and quality deficiencies that restrict Uganda's export markets. The study further identifies the need for a regional environmental cooperation and harmonisation of relevant national policies to manage the Lake Victoria fisheries.

� A discussion paper on Fisheries Subsidies and Over-fishing aims to help meet the need for further analysis on the interaction between subsidies, over-capacity and over-fishing, to guide progress towards a potential reform of fisheries policies worldwide. It creates a better understanding, quantification and classification of the economic, environmental and related social effects of subsidies to the fisheries sector and explores a variety of approaches to develop policy reforms for the sustainable management of fisheries.

� A Country Study on the environmental impacts of trade liberalisation in

the fisheries sector. The study identified significant linkages between recent trade reforms on increased trade activity and environmental degradation. The study also proposed policy instruments that promise to effectively halt trade-related environmental degradation and ensure that Uganda’s trade remains sustainable over the long term. The key recommendation of the study was a need to assist national institutions to implement the recommended instruments and the need for a project to mobilise national teams to select and implement policy options identified in the study. As a result, UNEP agreed to finance a project to the Government of Uganda (through the Ministry of Agriculture,

29 This report on the Ugandan fisheries sector is one in a series of UNEP publications presenting country studies implemented under a first phase of ‘Capacity Building for Integrating Environmental Considerations into Development Planning and Decision-making’ projects funded by the Ministry of Foreign Affairs of the Government of the Netherlands and the European Commission.


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Animal Industry and Fisheries) under the Department of Fisheries Resources to implement policy options identified in the study.

� Studies to Support Mainstreaming Environmental Issues in the PEAP The Governments of Belgium, the Netherlands, UK (DfID) and the World Bank through their PRSP benchmarks provided both financial and technical support to the Government of Uganda in the form of studies aimed at making the case for integrating environmental concerns into the PEAP. The studies generated a lot of information hitherto unknown on the role and contribution of the ENR sector and covered a broad range of issues. Examples illustrating the range of subjects covered include: economic and social values of weather climate information, the potential for ENR-based enterprises to eradicate poverty, the contribution of wetlands to household incomes, and land and poverty eradication issues. Some compelling facts became widely know, for instance the cost of soil degradation to the economy was found to be US$625 million. The studies also assisted in lobbying key players involved in the PEAP revision process to include environmental issues in the PEAP. Through this process, a dialogue with the Ministry of Finance, Planning and Economic Development was established with a view to enhancing the ministry’s appreciation of sustainability issues.

5.5.2 Facilitating and supporting institution building

Uganda has also benefited from capacity building aimed at strengthening institutions to enable them to deal with the environmental impacts of trade liberalisation. These have been mostly provided with World Bank support. Examples include:

� National Environment Management Authority The Environment Management Capacity Building Project aimed at building and strengthening institutional and human capacity in environment and natural resource management for the continued response to emerging demands and challenges. The programme contains five major areas: institutional capacity building; environmental education and public awareness; integration of environmental considerations into planning at all levels; enhancing resource productivity; pollution management and environment.

� Department of Geological Surveys and Mines The Sustainable Management of Mineral Resources Project (SMMRP) supports: a) framework reform, investment promotion and capacity building; b) development of geologic infrastructure; c) sustainability of small scale and artisanal mining; d) environmental and social management; e) project coordination and management.

� Uganda Wildlife Authority The Protected Area Management and Sustainable Use (PAMSU) project aimed at improving management of national systems of protected areas and to revitalise ecotourism industry; rehabilitation and management of protected areas; revitalisation of the tourism industry; and empowerment of local governments and communities to manage and benefit from the sustainable use of natural resources.

Other institutions financed by other donors include:

� The Uganda Cleaner Production Center (UNIDO with funding from the Austrian Government) The Uganda Cleaner Production Center helps firms to


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become more competitive and to improve environmental management by making more efficient use of raw materials and resources. It aims to foster dialogue between industry and government and facilitate investments in environmentally sound technologies. Firms are taught to use water and energy more efficiently and to implement better waste management to reduce operational costs. The Uganda Cleaner Production Center also helps companies to achieve ISO900030 and 14000 certification.

� Uganda Biotrade Programme (UNCTAD) The programme aims to diversify the export base through the introduction and development of high value non-traditional exports based on Uganda’s rich biodiversity. Four product groups have been selected for intervention: natural ingredients (for food, cosmetic and pharmaceutical industries), wildlife, eco-tourism and carbon trade.

5.5.3 Information gathering and dissemination

� Africa Environment Information Network (UNEP funded) A multi-stakeholder capacity building process that aims to strengthen the capacity of African countries to use good quality information on environmental assets to make informed investment choices at sub-national and national levels, and manage these assets on a sustainable basis. As an outcome of this capacity building activity, the Africa Environment Information Network (AEIN) will provide data and information support to the Africa Environment Outlook (AEO) process. AEIN will thus directly support the AEO production process, and will provide regular support to the implementation of the African Ministerial Conference on the Environment’s programmes. In Uganda, NEMA is the coordinating centre.

� The Environmental Information Circulation and Monitoring System on the

Internet (SISEI) is a capacity building programme for the implementation of environmental information management tools to assist in implementing legal instruments relating to the environment in Africa (desertification, biodiversity, climate change, wetlands) and is based on new information and communication technologies.

� Natural Resource Accounting Programme for Eastern and Southern Africa This project, funded by the Swedish International Development Agency (SIDA) and coordinated by NEMA, is building national capacity to capture, process and report environment and natural resource data as part of the system of national accounts. The pilot phase of this project is concentrating on the fisheries and forestry sub-sectors. This exercise will be useful in informing policy makers on, among other things, which and how much forestry and fisheries products should be exported and consequently be earmarked for inclusion in Uganda’s Strategic Export Programme envisaged under Pillar 2 of the PEAP.

5.5.4 Development of standards and certification

� Export Promotion for Organic Products from Africa is a programme created by SIDA with projects in Uganda Tanzania and Zambia which aims to give African smallholder farmers a better livelihood through developing local and international organic markets. The programme is also developing flanking activities like setting up of domestic certification bodies, providing training to a

30 ISO 9000 relates to quality management requirements in business-to-business dealings.


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wider public, and linking up with national networks so as to provide a solid basis for the organic sectors in the countries.

� Promoting Production and Trading Opportunities for Organic Agricultural

Products (UNEP/Capacity Building Task Force [CBTF] funded) The project activities include studies on: the current state of organic agriculture in East Africa and opportunities for regional harmonisation and certification; best practices and lessons learnt, particularly regarding effective and efficient government policies and actions in promoting production of and trade in organic agricultural products; the supply situation of organic products from East Africa and export potential; the demand for organic products from East Africa

5.5.5 Meetings and conferences/training seminars and workshops

� Uganda Programme for Trade Opportunities and Policy (EU funded) Support has been provided to Ministry of Trade staff and other related departments to enable them to attend regional and international meetings and thereby engage with the global trading regime from which they would otherwise be excluded.

5.5.6 Partnership funding for NGOS/assistance to rural communities

� UNEP/UNDP Poverty and Environment Initiative to enable international and local NGOs to undertake activities including research and project implementation to overcome threats to the livelihoods of rural populations. This is based on the understanding that rural livelihoods depend to a disproportionate extent on natural resources, and are therefore likely to be most vulnerable to negative environmental impacts arising from greater trade liberalisation.

� The World Bank/Global Environment Facility Ecotourism Project A US$4 million ecotourism project in Uganda aimed at conservation of Bwindi Impenetrable National Park and Mgahinga Gorilla National Park as one of a planned series of actions to strengthen the implementation of the National Environment Action Plan and gain investments to help do so. The GEF-funded projects in Mgahinga and Bwindi contain elements which help the implementation of conservation agreements. Within the GEF-funded project are mechanisms to provide funding for more efficient patrolling, and to provide economic opportunities to the poor farmers of surrounding communities who are most likely to disregard strict deforestation and harvesting laws.

5.6 Relevance of CB&TA for country needs

A workshop with key policy makers from the Ministries of Agriculture, Fisheries, Forestry, Tourism, Wildlife, Mining, Trade and Environment was held on 12 May 2006. (A participant list is attached in Annex 5.)

The aim of the workshop was to interact with recipients of CB&TA and gather their views on whether or not the CB&TA has met government priorities; whether or not any of the recommendations as a result of the CB&TA have been mainstreamed into policy; and gaps and recommendations for more effective capacity building.

Participants were provided with a questionnaire and a brief beforehand. The brief explained the workshop objectives and also listed some of the most of the common environmental impacts of trade liberalisation in their sectors in order to guide the


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discussion. Participants, therefore, did not dwell on the impacts but rather focused the discussions on assessment of capacity building activities and their success in meeting country needs. (A copy of the questionnaire and workshop programme are attached in Annex 5.) Table 12 summarises the results of the survey by sector.


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Table 12: Environmental challenges, capacity building gaps and recommendations, as identified in Uganda workshop

Sector and environmental impacts

Programmes to address challenges

Capacity building support Gaps and recommendations

Forestry

� Conversion to agricultural land � Degradation from commercial

and domestic use � Fires � Loss of plant and endangered

species

� Application of sustainable

forest management principles and certification

� Definition of annual allowable cut quotas

� Legal and administrative measures to regulate timber products

� Development of carbon and eco-systems payment portfolios

GAP 1 Certification and standards systems not

yet in place. Should be applied internally and implemented in phases

GAP 2 Negotiations on forest related trade issues – ecosystem payments, emission reduction purchase agreements, bio-prospecting and bio-patent agreements. Should continue to be pursued in partnership with brokerage companies

GAP 3 No research on forest quarantine GAP 4 Inventory of bio trade products required.

Requires external resources and likely to be done in ad hoc manner as the market for products develops e.g. Arabic gum tree.

GAP 5 Issues around invasive species assessment and containment. Requires external funding building on current single species approach with FORRI

Fisheries

� Over-fishing, resource depletion, loss of biodiversity

� Mismanagement � No effluent treatment � Eutrophication of lakes � Degradation of coastal

eco-systems

EU/Netherlands Study – Trade liberalisation

and policies for sustainable management UNEP Country study on environmental impacts

of liberalisation on the fisheries sector Discussion Paper Fisheries subsidies and

over-fishing: towards a structured discussion. EU Strengthening Fishery Products

Capacity building has been successful in introducing new legislation and upgrading landing sites.

GAP 1 Absence of economic instruments in fisheries management. Explore application of economic instruments


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Agriculture

� Conversion of crop land � Overuse of chemicals � Limited capacity to meet

environmental requirements of trade in flowers, fresh fruit and vegetables, live animals and livestock, sesame seeds and spices

� Meeting environmental

standards for export � Raising the capacity of

Ugandan producers to comply with requirements

EU Pesticides Initiatives Agricultural Sector Productivity Support UNEP Integrated Assessment of trade-related

policies and biological diversity in the agricultural sector

GAP 1 Lack of Information GAP 2 Lack on co-ordination among initiatives GAP 3 Inadequate participation of

stakeholders. No outreach to the private sector

GAP 4 Weak institutional capacity GAP 5 Enforcement of environmental

regulations – ‘command and control’ is not strategic in addressing new market opportunities

Recommendations

� Longer term thinking and timeframes for capacity building, flexible programmes with multiple phases

� Include broad range of stakeholders and human resource development

� Undertake studies with strong dissemination strategies

� Use experiential learning including participation in actual negotiations

� Build international networks (north and south)

Mining

� Pollution � Overlap between natural

assets and areas of mining interest

� Poor practices create irreversible environmental damage

� No remedial work

� Sustainable management

practices

WB, AFD, Nordic Development Fund

Institution building – training and new laboratories

GAP 1 Capacity building programmes currently use external experts – depriving local people from learning. Use national or regional expertise


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Tourism/wildlife

� Competing land uses � Poaching

GAP 1 Pressures on protected areas GAP 2 Weaknesses in community

management of protected areas


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Does capacity building address government priorities?

Participants identified the main priority of government as poverty reduction, indicating any CB&TA has to have a poverty dimension to it. Participants felt that in most cases poverty reduction is not directly addressed, only indirectly.

In terms of the priorities of respective ministries/sectors, participants felt that most of the CB&TA programmes addressed the priority issues and that some had been designed in partnership between donors and the government. However, participants expressed concerns that the CB&TA always stopped short of supporting actual implementation of the recommendations. For example, most of the funds for sector studies and workshops, which are useful in identifying cause-effect relationships and providing recommendations, did not provide funding for implementation. The government or sectors are often expected to find funds for implementation from other sources, which is difficult. As a result, the studies remain on shelves and gather dust. An example of this was the studies funded by UNEP to assess the environmental impacts of liberalisation in the fisheries sector. The studies have been very useful in recommending various actions to support the fisheries sector, but there is no funding provided for implementing these actions.

Participants recommend that future CB&TA should be in two phases: phase one to identify the problem and ways of addressing it; and phase two to support the implementation of programmes to address the issues. Most of the current CB&TA does not cover phase two.

There was some CB&TA cited as having been more tangible and having gone further in addressing institution building, for example the World Bank support for NEMA, the Uganda Wildlife Authority, and the EU and Norwegian support for the National Forest Authority (NFA). However, participants from the above institutions said that even for this kind of capacity building there are limitations in scope, mostly driven by donor interests. For example, NEMA would have preferred to have strengthened the capacity of the lead agencies which implement environmental management activities by providing more technical and analytical equipment such as noise meters, dust meters, vehicles for inspections in order to help them carry out their work more effectively. However, the funding only enabled NEMA to provide training in environmental concepts. For some of these agencies, therefore, this only gives them knowledge and no wherewithal to use the knowledge.

In the fisheries sector it was also pointed out that both the African Development Bank and the EU had given tangible funding to the sector in form of upgrading and strengthening hygiene and health conditions at the landing sites.

Project-specific literature suggests that capacity building support is demand driven. For example:

� The SISEI programme states that the concept responds to the needs expressed by a large number of decision-makers responsible for environmental matters in developing countries31.

� The AEIN programme states that it is a response to political and technical needs expressed by African Ministers of Environment, who endorsed the AEO process at the 9th Session of theAfrican Ministerial Conference on the

31 See www.nema.go.ke/sisei.htm


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Environment in 2002. The ministers called for the establishment of the AEIN ‘to promote access to, and harmonisation of data in the Africa region, and act as a basis for tracking environmental changes using quantitative indicators focusing on national needs’32.

Other project literature cites domestic developments already in place in which the projects would fit therefore giving an impression that the projects meet government priorities. For example:

� NEMA Environmental Management Capacity Building Project II rationale highlights how the project fits within existing government legislation and policies33.

� The PAMSU project recognises that the Uganda government has already undertaken important policy and institutional reforms and that the project is needed to establish effective institutional capacity within the wildlife and tourism sectors for strategic planning, programme development, and implementation and to promote long-term sustainability34.

5.6.1 Integration into national development policies and the PRSP

A brief review of Uganda’s major policies and programmes such as the PEAP, the PMA, the Medium Term Competitiveness Strategy (MTCS), the SEP and the National Environment Management Policy suggests that, to some extent, recommendations from the CB&TA have been integrated into mainstream policies. It is worth noting that many studies looking at the interdependencies between social, economic and environmental issues have contributed to various PEAP revisions in Uganda and Uganda’s PEAP/PRSP, now in its third revision, has become an important vehicle for policy coherence. (Annex 3 has a matrix showing a few examples of impacts and responses through government legislation/new policies or capacity building/technical assistance.)

Discussions with various sector managers at the workshop and interviews with other policy makers shed some light on whether or not measures integrated into the PEAP and other major policies and programmes are a result of specific projects addressing environmental impacts of trade liberalisation, or simply wider policy responses. The discussions also shed light on whether all policy actions have been implemented or reflected in budget framework papers of the relevant sectors, in order to ensure that resources to implement the policy actions are made available.

� The majority of participants agreed that most of the recommendations from studies (especially those done pre-policy, or done to feed into the PEAP, had in fact been integrated in either the PEAP or other sectoral policies).

� In the fisheries sector, there is evidence that the work supported by UNEP on environmental effects of trade liberalisation in 1999 and 2002 clearly influenced the design and contents of the new fisheries policy in 2004.

32 See www.unep.org/DEWA/africa/aeoprocess/aein/aein.asp 33 See www-wds.worldbank.org/IW3P/IB/2001 34 www.gefweb.org/Outreach/outreach-PUblications/Project_factsheet/Uganda-prot-3-bd-wb-eng-ld.pdf


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� The PEAP Secretariat staff confirmed that studies carried out to support mainstreaming environment into the PEAP had played a large part in ensuring the latest PEAP had its own chapter on environment.

� The studies on valuation and natural resource accounting have also been reflected in the draft sector investment plan of the ENR sector.

� With regard to flanking measures, participants observed that wherever an environment impact assessment was recommended, it was carried out and mitigation measures were recommended. NEMA carries out post-Environmental Impact Assessment (EIA) monitoring to ensure that mitigation measures are implemented. Participants from NEMA said that the results from the monitoring were mixed with only some developments/investments complying. NEMA is working with companies to address the issues.

� However, participants also noted that integrated planning did not always result in integrated implementation. There is need to ensure that these issues do not stop at the level of policy documents, but that there is actual funding available to implement them.

5.6.2 Value for money

The workshop participants were asked a number of questions to explore issues of the value for money achieved through environment-related trade CB&TA.

Most participants said they would have had to significantly scale down their activities if they were limited to the ‘little government funding’ that they receive to address these challenges.

Most participants felt that the funding had ‘enabled them to have more workshops, and reach more districts’ than they would have without it. However, they stressed again the lack of tangible implementation programmes.

Most participants were aware of other funding and programmes in their sectors that might be available to address CB&TA challenges but few felt that they would have been able to attract funding from other donors if the current funding had not come forward. Allocations were also governed by the Medium Term Expenditure Framework budget ceilings which limit how much money goes to each sector.

Several examples were given at the workshop of cases where CB&TA catalysed funding from other sources. The Kawanda Agricultural Institute, for example, cited a case where the Environment Information Network initially funded by UNEP had resulted in other funding from the Rockefeller Foundation and the Belgian government which enabled them to hire more staff and increase the scope of their work.

NEMA also cited several cases where UNEP has come in and funded several projects, especially on environmental information awareness, economic instruments and integrated assessment of policies; which complement the funding from the World Bank.

5.7 Summary of donor support key impacts

Strengths and weaknesses of donor intervention to date are summarised in Table 13.


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� Some evidence that capacity building is designed in partnership between donors and government, and is demand driven

� Studies have been very useful in identifying issues and recommending actions

� Some capacity building has supported institution building

� There is a good level of mainstreaming of environmental issues in national policymaking

� Not aligned to national economic development priorities relating to poverty reduction

� Capacity building has limited its focus to analysis and research, and stops short of providing support to implementation of recommendations

� Institutional strengthening activities have been limited in scope

� Integrated planning has not always resulted in integrated implementation

5.8 The way forward: Suggestions for more effective capacity building

Participants made the following suggestions for more effective capacity building:

� Negotiate for long-term funding and more diverse sources of financing which can be achieved through appropriate advocacy and institutional networking with local, foreign and international development partners.

� Develop expertise in international trade and environment issues by setting up courses/programmes at bachelors, masters and even PhD levels and ensuring appropriate institutions and anchoring of the programmes in such institutions.

� Development partners should mainstream universities and other institutions in capacity building initiatives by forming and consolidating partnerships with universities and other institutions of higher learning. Unfortunately, only a small part of resources from development partners is currently allocated to university-based capacity building programmes.

� Create a critical mass of trade and environment experts capable of teaching programmes of this calibre. Promote appropriate institutional frameworks and integration of more institutions in the process. The involvement of more institutions creates opportunities for complementarities and synergies.

� Integrate NGOs, the private sector and civil society in the capacity building efforts by involving them in the design and implementation of capacity building programmes. The Private Sector Foundation in Uganda has started to implement training programmes with support from the EU.

� Broaden the beneficiaries by also targeting trade development organisations, environmental advocacy NGOs, researchers, consultants, etc. This is advantageous because of the implicit synergies and complementarities.

CB&TA activities are more likely to support the development of a trade policy framework if they are designed with the following features:

� longer timeframes, multiple phases;

� flexibility to respond to emerging needs;

� use of national or regional expertise;


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� include a broad range of stakeholders: different ministries and regulatory agencies such as standards and customs agencies, academics, the private sector, unions, organisations working with the informal sector, women’s groups, think-tanks and other civil society organisations;

� evidence based, building on relevant studies with strong dissemination strategies;

� adopt experiential learning approaches rather than taught course, an example of which is participation in actual negotiations.

Table 14 summarises specific suggestions for donor intervention.

Table 14: Potential future areas of donor intervention

Area of focus Suggested interventions

Trade negotiations

Support to strengthen negotiation capacity on forest related trade issues – ecosystem payments, emission reduction purchase agreements, bio-prospecting and bio-patent agreements Develop experiential learning programmes to include participation in actual negotiations

Government Diversify focus across different ministries, regulatory agencies, ensuring their interaction, as well as interaction with civil society and private sector

Civil society Support the development of international (north-south) networks

Private sector Partner with NGOs, private sector and civil society in design & implementation of capacity building

Academia/think tanks

Support to tertiary sector industries to improve outreach to private sector


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6 BRAZIL

Brazil is the world’s largest sugar producer and exporter, as well as one of the lower cost producers. It has demonstrated rapid production and export growth in recent decades, despite lower world prices. Brazil is also the world’s largest producer of bioethanol, and is considered the only supplier capable of meeting the huge rise in import demand for bioethanol expected in the near future.

Trade liberalisation, both under the EU Common Agricultural Policy (CAP) reform on sugar and under the auspices of the Doha Round, will lead to increased production in the most efficient sugar producing countries, with the largest increases expected to take place in Brazil. The dramatic current expansion in the international bioethanol market is a factor that is also driving increased sugarcane production and bioethanol trade in Brazil. At present very little bioethanol enters international markets since the bulk of it is consumed domestically. However, trade is expected to expand dramatically as many countries such as those in the EU and Japan will not have the domestic capacity to meet internal demand.

This case study analyses what have been, what are and what are likely to be the priority needs in terms of capacity building in trade and environment in the sugar and bioethanol sector in Brazil; and considers whether existing or past programmes in trade and environment have met past and present needs, or will be able to meet future needs. Section 6.1 provides an overview of the key features of the sugar and bioethanol industry in Brazil, its production and trade patterns and future prospects. Section 6.3 identifies the key environmental issues associated with the sugar and bioethanol industry in Brazil and how these might be affected by further export-led expansion. Section 6.4 identifies and describes the most important capacity building programmes in the field of trade and environment in the sugar/bioethanol sector. Section 6.5 analyses and assesses those programmes in terms of their capacity to meet the environmental needs of the sector and identifies key lessons learned and future needs. Section 6.6 concludes.

6.1 The sugar and bioethanol sector in Brazil: Key features

Brazil is the largest sugar producing and exporting country. Sugarcane production in Brazil has expanded by more than 120 per cent since 1982, reaching its peak in 2004 with 411 billion Mt. In 2003, Brazil produced 26.4 billion Mt and exported 13.3 billion Mt of sugar, corresponding to 19 per cent and 32 per cent of global sugar production and exports, respectively. Brazil is the main global exporter of bioethanol and the second largest producer after the US, supplying about 35 per cent of world bioethanol production in 2005.

Brazil produces sugar and bioethanol from sugarcane. Sugarcane occupies 2.4 per cent of cultivatable land in Brazil, amounting to nearly 5.6 million hectares (UNICA 2004). Brazil’s sugar exports made up 10 per cent of total agricultural exports and nearly 3 per cent of total Brazilian exports in 200335. By producing sugar and bioethanol, Brazil saves around US$4.2 billion per year in foreign currency, US$2 billion of which come from sugar exports and US$2.2 billion from not importing the oil equivalent to the gasoline production (UNICA 2004). The production of both sugar and bioethanol gives Brazilian industry flexibility in responding to the changing

35 Estimated from FAOSTAT and Ministerio do Desenvolvimento, Industria e Comercio Exterior


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profitability of sugar and bioethanol production. In most cases, sugar and ethanol are produced in the same mills (Bolling & Suarez 2001). Almost 45 per cent of Brazil's sugarcane is ground for sugar and 55 per cent is used for bioethanol production.

In terms of employment, Brazil’s sugar and bioethanol agribusiness creates around one million direct jobs and shelters 60,000 growers who supply sugarcane. This activity has a strong presence in the economies of over 960 municipalities (around 17 per cent of municipalities in the country) in a permanent, decentralised job creation and income generation process (UNICA 2004).

Figure 1: Brazil’s sugar production and global share

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Source: Dufey et al 2005

Expansion in the sugar sector lies not only in an increase in cultivated land area – which increased from 2.6 million ha in the early 1980s to 5.6 million ha in 2003 – but also in improved productivity, which rose from 57,000 kg/ha to 74,000 kg/ha over the same period36. Sugarcane productivity has risen steadily, with yields now over 80 tons/hectare (Martines-Filhi et al 2006).

The Programa Brasileiro de Álcool (ProÁlcool), a powerful bioethanol intervention programme implemented in 1975, has been another key factor behind the development of the sugar sector in Brazil. The ProÁlcool regulated sugar and bioethanol production and exports by implementing a production quota and fixed purchasing price for bioethanol. In addition, it created huge domestic demand for its sugar market.

After years of relatively poor growth during the 1980s, sugar production has soared since the 1990s, expanding by more than 200 per cent since 1982 and reaching a total of 28.4 billion Mt in 2004. Bioethanol production, on the other hand, showed a positive trend during the 1980s and mid-1990s and then started to decline, expanding by 80 per cent overall between 1982 and 2002. The decline of the late 1990s was mainly due to liberalisation of the bioethanol sector. As guaranteed prices and direct subsidies were phased out in the late 1990s, there was a significant shift from bioethanol to sugar production and exports. However, over the last five years bioethanol production has started to recover, due to both renewed domestic demand following the 36 FAOSTAT


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introduction of flex cars in Brazil and an expanding external biofuels market. In 2004, bioethanol production in Brazil reached 8.9 billion Mt (Dufey et al 2005). The industry currently crushes 310 million Mt of sugarcane, from which 20 million Mt of sugar and 12.5 billion litres of alcohol are produced (Pereira de Carvalho 2005).

Figure 2: Sugarcane, sugar and bioethanol production growth, 1982-2004

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Brazil has two distinct sugar-producing regions (Figure 3): the north eastern region, the traditional sugar producer, and the central southern region, which has been gaining a prominent position since the launch of the ProÁlcool programme. The central southern region is dominated by the State of São Paulo, which now accounts for 60 per cent of Brazil's sugarcane production. In 2005 the central southern region as a whole supplied 85 per cent of the country’s sugarcane, 83 per cent of its sugar output, and 88 per cent of its bioethanol37.

In 2005, the north eastern region accounted for about 15 percent of sugarcane production, about 17 per cent of sugar output, and about 12 per cent of bioethanol output (Dufey et al 2005). The states of Pernambuco and Alagoas dominate production, accounting for 80 per cent of regional sugar and bioethanol production. Soil shows lower quality, topography is less suitable and production is less mechanised than in the central southern region. All this means that yields and costs are higher than in the central southern region, and the region is suffering a sustained reduction in its participation in the country’s sugarcane production (it accounted for 23 per cent of the country’s sugarcane production in 1990), although the cost differential between the two regions has narrowed considerably.

Production costs in the central southern region are also low in comparison to other countries, reflecting efforts to improve efficiency in all phases of the production process (Bolling & Suarez 2001).

37 UNICA 2006


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Figure 3: Geography of sugarcane production in Brazil

Source: IBGE Brazil

6.1.1 Sugar and bioethanol trade

Brazil has traditionally been a significant sugar exporter, accounting for 32 per cent of global exports in 2003. Sugar exports in Brazil have soared, particularly during the 1990s, in line with production increases (Figure 4). Sugar exports have increased almost four-fold over the last 20 years (375 per cent between 1982 and 2003) reaching unprecedented levels in 2003 (13 billion Mt). This export increase can largely be explained by the liberalisation of the bioethanol sector, which encouraged a shift from bioethanol to sugar production and exports.


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Figure 4: Sugar exports, 1982-2003, volume and as % of global exports

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Brazilian sugar exports are well diversified. In 2002 they were sent to almost 100 different countries. Russia is the main market for Brazilian sugar exports (17.7 per cent of total sugar exports in 2002), followed by Egypt (7.7 per cent), Romania (6.7 per cent), the United Arab Emirates (6.1 per cent), Iran (4.5 per cent), Canada (4.5 per cent) and Nigeria (4.3 per cent). The EU25 receives less than 3 per cent of Brazil’s sugar exports (Figure 5).

Figure 5: Top 10 destinations of Brazilian sugar exports, 2002

Russia, 17.7%

Egypt, 7.7%

Romania, 6.7%

Iran, 4.5%

Canada, 4.5%

Nigeria, 4.3%Senegal, 3.2%

Nigeria, 3.2%

Morocco, 3.0%

Others, 39.2%

United Arab Emirates, 6.1%


The increase in production in the sugar industry over the last few decades has been mainly export-led. While about 15-20 per cent of overall sugar production was exported in the late 1980s, this figure has risen to about 55 per cent in recent years.

In the bioethanol sector, Brazil produced 14.5 billion litres in 2005, of which more than 2 billion litres were exported (Rodrigues & Ortiz 2006). This makes Brazil the leading bioethanol exporter. Although bioethanol exports were insignificant until the second


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half of the 1990s, they have soared over the last five years or so, supplying at present about 50 per cent of international bioethanol demand (Figure 6). The high oil prices, the ratification of the Kyoto Protocol and the increasing number of countries introducing biofuels into the blend of transportation fuels are among the main reasons for higher international demand (Dufey 2006).

Figure 6: Bioethanol exports, 1982-2004

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6.2 Trade liberalisation: Main currents and issues for the sector

Sugar and bioethanol production and exports in Brazil will continue expanding in coming years. Key issues driving future Brazilian exports of sugar and bioethanol include:

6.2.1 Multilateral liberalisation of the sugar sector

Sugar is one of the most distorted markets globally. About 80 per cent of world production and 60 per cent of world trade in sugar is at subsidised or protected prices (Dufey et al 2005). Although both industrialised and developing countries protect their sugar industries, OECD countries such as the EU, Japan and the US have the most distorting policies to insulate domestic producers from foreign competition. Only three major producers — Australia, Brazil, and Cuba — now operate at world market prices (WWF 2004).

Commitments achieved under the Uruguay Round of the WTO and other trade agreements are forcing many countries to reform their sugar programmes. Additional pressure to liberalise this market comes from the 2005 WTO ruling that declared that the EU has been illegally exporting too much subsidised sugar. The ruling came after a complaint to the WTO in September 2002 by Brazil, Australia and Thailand, supported by 20 other countries, regarding the EU’s sugar export subsidies (Early & Early 2006).

Several studies have attempted to quantify the impacts of liberalisation in the sugar sector. One of the most recent studies comes from Iowa State University (Elobeid & Beghin 2005). The study predicts that the removal of trade distortions and domestic policies affecting production will bring about a 3 per cent average decline in global sugar production by 2011-12. While the most protected countries are likely to experience import expansion or export reduction, the most competitive producers such as Brazil, Australia and Cuba are expected to see an increase in their export levels and


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share of global exports. For Brazil, production and exports are forecast to increase by an average of between 17 per cent and 42 per cent by 2011-12. Assuming that about 2.8 million hectares are now being harvested for sugar in Brazil (50 per cent of sugarcane hectares), a 17 per cent increase in production for sugar would require about 475,000 additional hectares (Early & Early 2006).

6.2.2 EU Common Agricultural Policy reform

Linked to the above point, but of particular interest due to its impacts on the global sugar market, is the EU CAP reform. The commitments achieved during the Uruguay Round, the 2005 WTO ruling against the EU sugar regime and the Everything But Arms (EBA) agreement have, among other factors, been putting strong pressure on the EU to reform its sugar regime. Indeed, since its implementation in 1968, the sugar common market organisation (CMO) has allowed the EU to become the second largest producer and exporter of sugar.

In late 2005, the EU announced a final reform to the sugar regime that will take effect with the 2006-07 crop season. As a consequence of the restructuring, EU sugar output is expected to decline from 19 million tons in 2005 to 13 million tons in 2010 (Early & Early 2006). As noted earlier, the most efficient sugar producing countries – Brazil and Australia – are expected to benefit most from the reform.

6.2.3 Emergence of global biofuel markets

The renewed global interest in biofuels has translated into an extremely rapid expansion of biofuel markets. An increasing number of industrialised and developing countries are introducing policies to increase the proportion of biofuels within their energy portfolios. With the Kyoto Protocol’s entry into force and the implementation of ambitious national targets for biofuels in many different countries, global biofuel production is expected to quadruple in the next 20 years, accounting for about 10 per cent of world motor fuel (IEA 2004).

International trade in bioethanol is still small (less than 10 per cent of global production), and Brazil supplies about 50 per cent of the international demand. The strategic nature of the product and the existence of different policy goals associated with it imply that some degree of protectionism will prevail. However, trade is expected to increase dramatically38 as several countries will not have the domestic capacity to supply their internal demand. Brazil is seen as one of the only suppliers capable of meeting the huge rise in import demand for bioethanol in the near future (Early & Early 2006).

Different studies predict increases in sugar and bioethanol production and trade in Brazil. The most relevant studies include:

� The Sao Paulo Cane Industry Union forecasts that bioethanol production in Brazil will increase by 8-10 billion litres by 2012 to keep pace with domestic and international demand (Reuters 2005). About US$100 billion is expected to be invested in about 100 new mills by 2012 (Ferreira Lenilson 2006). At that point total sugarcane milled would exceed 600 million tons (17 billion litres of bioethanol (Ferreira Lenilson 2006)), which means a 40-50 per cent increase in the area planted or, alternatively, an additional 2.5-3.0 million hectares. The

38 According to Ferreira Lenilson (2006), local analysts estimate global bioethanol trade will expand by 600 per cent by 2015.


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effects of trade liberalisation should be encompassed in that estimate. This is about 5-6 times the additional 475,000 hectares needed to accommodate the increased production driven by trade liberalisation in the sector (Early & Early 2006).

� Smeets et al (2006) indicate the required land expansion for bioethanol production to be in the order of 3.5-4.0 million hectares by 2015, or 35 million litres of bioethanol.

� Pereira de Carvalho (2005) forecasts that by 2010-11, the demand for the sugar/bioethanol industry will require 560 million tons of sugarcane. This will be used as follows:

- Total bioethanol demand will equate 27.6 million litres where 80 per cent (22.1 million litres) will go to the domestic market and 20 per cent (5.2 million litres) to exports.

- Total demand for sugar will equate 35 million tons, where 31 per cent (11 million tons) will be destined for the domestic market and 69 per cent (24 million tons) for the export market.

� According to the ‘Brazilian Agroenergy Plan 2006-2011’ of the Government of Brazil (EMBRAPA 2006), over the next eight years the additional demand for Brazilian sugar and bioethanol will total almost 200 million tons of sugarcane, or more than 50 per cent of current annual production. About 100 million tones (45 per cent) would be for domestic demand and 120 million tones (55 per cent) for the international market. The additional demand could be met by enlarging some units and setting up at least 60 new medium-sized plants.

All the estimates agree that the bulk of the expansion is expected to take place in the central southern region of Brazil. The increased production would require taking land away from other crops as well as bringing new land into cultivation (Early & Early 2006).

In sum, an important domestic and export-led expansion in the Brazilian sugar industry is expected to take place over coming years. Both international and national demand for bioethanol, together with better market conditions for sugar trade, are likely to be the main drivers of expansion, better market conditions for sugar trade will also contribute considerably to this expansion. The growth in trade is likely to significantly increase environmental pressure on the ecosystem.


6.3.1 Environmental impacts of trade liberalisation

Brazil is an important user and exporter of sugar and bioethanol. A marked expansion is expected in coming years in the production and export of both, but especially for bioethanol. The resulting increase in sugarcane monoculture and sugar and bioethanol production will therefore have numerous effects on the environment. The main environmental issues of concern include: agriculture frontier expansion and impacts on biodiversity due to changes in land use; impacts on air quality; impacts on global climate; impacts on water, soil quality and use of agrochemicals; and a rise in the use of GMOs. Each of these issues is outlined below39.

39 Unless otherwise specified, this section draws on Macedo 2005.


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Changes in land use: cultivated area expansion and impacts on biodiversity

There are different views on the impacts on expanding cultivated areas and on biodiversity related to the new expansion phase in the sugarcane sector. Differences persist not only among the Brazilian government/industry and the environmental community, but also within different ministries of the Brazilian government.

According to Macedo (2005), the area currently occupied by sugarcane crops represents about 0.6 per cent of national territory and 2.4 per cent (UNICA 2004) of total cultivatable land. At least a further 12 per cent of national territory is currently considered suitable and available to support projected sugarcane expansion. The bulk of the expansion in sugarcane crops in the last 30 years has been concentrated in the central southern region of the country. Between 1992 and 2003, 94 per cent of sugarcane expansion in this region occurred in existing areas of agriculture or pastureland so only a small proportion of new agricultural borders were involved (Macedo 2005). In the São Paulo region, which accounts for 60 per cent of sugarcane production, the sugarcane crop has replaced cattle grazing and other agricultural activities (eg citrus crops). As a consequence, cattle production is moving to the central region of Brazil where land is cheaper (Faaij 2006). Land converted to agriculture in the sensitive area of the cerrado savanna (which accounts for 25 per cent of national territory) has been used for cattle grazing and/or planted to soya, with only a small proportion for sugarcane.

By 2013-15 Brazil will need to increase sugarcane cultivation by something between 2.0 and 4.0 million hectares (from the 5.6 million hectares currently under cultivation) in order to meet the dramatic increase in domestic and foreign demand for bioethanol and sugar. The Brazilian Government (Ministry of Agriculture) and the sugarcane industry hold the view that there is sufficient unused agricultural land for the proposed increase in production (up to 90 million hectares of unused agricultural land in the cerrados) (Costa 2006). This means the expanded production would require something between 3 per cent and 4 per cent of this available agricultural land. The bulk of the growth in sugarcane in the next years is expected to be concentrated in the western São Paulo region, the borders with Mato Grosso and in some areas within the state of Goiás (Macedo 2005).

Others hold a different view. Pereira (2006) (cited by Rodrigues & Ortiz 2006) shows that the accelerated expansion of the sector has been a warning signal for government environmental departments who now demand serious environmental impact studies and take more than two years to grant environmental licences to new distilleries. The main concern of environmental departments is the creation of plantations, principally in the state of São Paulo where 40 new licence requests were registered by August 2006. Moreover, the integrated use of spatial data and information (geo-referenced data) to show sugarcane growing expansion areas by the institutions/researchers associated with the sugarcane sector does not take into account the same concepts used in the maps of ‘ecological and economic zones’ developed by the Ministry of Environment in a joint project with the Brazilian Institute of Geography and Statistics (IBGE). Thus, the claim that the expansion of sugarcane monoculture has taken place mostly in degraded pasture areas and campos sujo is disputed40.

40 Personal interview with the ‘Working Group on Energy and Climate Change of the Secretaria de Qualidade Ambiental (SQA) of the Brazilian Ministry of Environment’ January 2007


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The Ministry of Environment has detected conflicts between areas suitable for sugarcane crops (as defined by the Ministry of Agriculture) and areas and biomes that should be protected according to the Ministry of Environment. The expansion in the cerrados and the lands closer to the Pantanal (highly suited to sugarcane plantations) are the main conflicting issues. Because it is a grass, sugarcane can also be grown in more fragile or marginal areas where other conventional crops are likely to fail or are too difficult to farm – such as steep slopes or in riparian areas or wetlands. These areas often possess a higher concentration of biodiversity (Early & Early 2006).

From the point of view of the Ministry of Environment, the sugarcane sector already has a historical debt to pay in terms of environmental preservation, and the sector’s current activities in legally-protected areas show no substantial concern for protecting the other biomes or restoring the Atlantic Forest41. The cerrados is a very sensitive area whose biome is highly threatened and could extend to the borders of the Amazon rainforest. Bioethanol production in Maranhão is also worrying because part of the territory of this state is Amazon rainforest (Rodrigues & Ortiz 2006).

Overall, given the new phase of expansion that the sector is currently experiencing, new areas are expected to be turned over to sugarcane, including the cerrado of Mato Grosso do Sul, Goiás and Minas Gerais. This could further increase the pressure on biodiversity.

Moreover, a substitution effect, whereby sugarcane takes over existing pastureland or other crops, pushes the agricultural frontier to the northern lands. The shift of agricultural land into energy production and bio-based products has consequences on other crops and the livestock industry (impinging on issues of food security) which are not well studied. Thus, biodiversity impacts may come indirectly through the displacement of other crops that become less profitable and, in turn, advance into protected areas. The representatives of the sugarcane sector do not address these issues42. The substitution effect related impacts are considered more significant than the direct effects of sugarcane expansion.

Related impacts from infrastructure development also need to be taken into account. Petrobrás, for instance, has an ambitious infrastructure expansion plan to support increased bioethanol production in the states of São Paulo, Goiás and Mato Grosso do Sul for exportation. Project infrastructure comprises bioethanol pipes, whose construction impact is generally localised, but the implementation of this logistic matrix tends to accelerate the pressure to occupy lands located in natural habitats in the cerrado (Rodrigues & Ortiz 2006).

Although Brazilian environmental legislation is well advanced in terms of protection of sensitive areas (eg the Brazilian Forest Code includes effective legal reserve requirements for rural properties in 80 per cent of the Amazon region, 35 per cent the savannas of the Amazonian cerrado and 20 per cent in all other regions), poor enforcement is a widespread problem. Enforcement of national environmental legislation is a task that falls upon individual states, where regional governments are under pressure from powerful agribusiness lobbies not to implement legislation fully.

41 Personal interview with the ‘Working Group on Energy and Climate Change of the Secretaria de Qualidade Ambiental (SQA) of the Brazilian Ministry of Environment’ January 2007 42 Personal interview with the ‘Working Group on Energy and Climate Change of the Secretaria de Qualidade Ambiental (SQA) of the Brazilian Ministry of Environment’ January 2007


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Corruption is also an issue in some states. In practice, there is a permanent danger of a ‘race to the bottom’ among producer regions43.

Impacts on local air quality

The relationship between sector expansion and air quality is twofold. On the one hand, cane-burning and processing activity is likely to have a negative impact. The burning of sugarcane leaves and stalks is widely used to make harvesting easier, thus reducing the costs of manual harvesting and transportation.

Sugarcane burning emits several gases including carbon monoxide, methane, ozone, non-methane organic compounds and particle matter that are potentially damaging for human health. Several studies were conducted in Brazil during the 1980s and 1990s to identify the impacts of sugarcane burning on human health. While the study conducted by Macedo (2005) argues that there is no direct link, several other studies found significant links with human health problems (see, for example, Smeets et al 2006) Health problems have also been confirmed by nearly all the stakeholders interviewed in the context of this research.

In São Paulo state, legislation has been passed to gradually prohibit cane-burning, with a schedule that takes both available technologies and prospective unemployment into account, including immediate prohibition in risk areas. As a result, burning has gradually been reduced in São Paulo, from 82 per cent of the harvested area in 1997 to 63 per cent in 2004, but activity is still significant. Sugarcane burning is projected to be completely phased out by 2031 (Smeets et al 2006). Challenges to effective implementation of the legislation include the risks to rural employment. Elimination of sugarcane burning involves mechanisation and an associated reduction in employment – notably among lower-skilled workers. In addition, there is an urgent need to expand coverage of the legislation to include other geographical areas as, at present, it encourages companies to relocate in those states in which cane burning is still allowed.

On the other hand, a positive impact on air quality can be expected from domestic use of bioethanol since bioethanol replaces fuels that contribute more to air quality degradation and carbon emissions.

Overall, the impacts of increased sugarcane plantation on air quality depend on the proportion of harvesting which continues to use burning. Although a gradual decrease in the practice is expected over coming years, it will still have a significant impact, at least in the short term (Smeets et al 2006).

Impacts on global climate

At a global level, one of the main drivers of the development of the bioethanol market for international trade is its potential to reduce emissions of greenhouse gases (GHG) when compared with fossil fuels. The link between sugar/bioethanol production and trade and GHG emissions is twofold: there are those GHG emissions linked to sugar-bioethanol production/trade and those linked to changes in land use.

The use of sugarcane bioethanol, associated with the bagasse, has been the first initiative to bring positive results on a large scale (Macedo 2005). Compared with both



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fossil fuels and other commercially available biofuels, sugarcane-based bioethanol produced in Brazil has the greatest GHG balance. The IEA (2004) estimates that GHG emissions from sugarcane-based bioethanol in Brazil are 92 per cent lower than standard fuel, while wheat-based bioethanol has brought about reductions ranging from 19 per cent to 47 percent and reductions from sugar beet-based bioethanol vary between 35 per cent and 53 per cent. Not only does the bagasse supply energy (thermal and electrical) for bioethanol production, it is also used in sugar production (replacing the fossil fuel that would be used in alternative production from sugar beets, or starch) and other industrial sectors (such as orange processing) (Macedo 2005). In 2003, Brazil saved 5.7 million tonnes of CO2 (carbon dioxide) equivalent due to the use of bagasse in sugar production (Macedo 2005).

New developments in the sector, such as the commercial application of lignocelulosic technology that will allow the use of bagasse for bioethanol production and the increased generation of electricity from bagasse, will improve Brazil’s GHG balance.

Analysis of projected emissions by 2010 by Macedo (2004) points out that the emissions avoided by the use of bioethanol would amount to 46.7 Mt CO2 equivalent. Therefore, the additional decrease in emissions thanks to bioethanol use would amount to19.2 Mt CO2 equivalent at 12.6 kg CO2 eq/ton of sugarcane. The net result is that emissions avoided by the substitution of bioethanol for gasoline, and of surplus bagasse for fuel oil, minus the foregoing values, amount to 2.6 tons CO2 eq/m3 of anhydrous bioethanol and 1.7 tons CO2 eq/m3 of hydrous bioethanol (for mean values) (Macedo 2004).

On the other hand, GHG impacts from the change in land use induced by increased sugarcane plantations could also be significant and therefore requires further attention. Indeed, the evaluation of the emission of GHGs from Brazil for the 1990-94 period indicates that changes in land and forest use account for most emissions (75 per cent) (Macedo 2005). The conversion of land from pasture to crops leads to a significant loss of soil organic carbon (SOC). The implication is that if the additional land-use for sugarcane production leads (directly or indirectly) to conversion of pasture, GHG emissions may be severe and could have a major impact on the overall GHG balance (Smeets et al 2006).

The burning of sugarcane to facilitate harvesting also contributes directly to GHG emissions. This practice, as noted above, is expected to be substantially reduced in the future.

Impacts on water use

Brazil has one of the highest levels of water availability in the world (14 per cent of surface waters and the equivalent of annual flow in underground aquifers) and the use of crop irrigation is very small (3.3 million hectares versus 227 million hectares in the world). Although sugarcane crops are mainly rain fed, the use of supplementary irrigation is increasing (Smeets et al 2006). Efficient methods (subsurface dripping and others) are being evaluated.

The processing of sugarcane and particularly the conversion of sugarcane to bioethanol also utilises water. Levels of water extraction and release by industry have substantially fallen over the last decade, from 5m3/ton of sugarcane collected in 1990 and 1997 to 1.83m3/ton in 2004 (sampling in São Paulo) (Macedo 2005). The level of water reuse is high and can be notably improved by optimising both the reuse and use


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of wastewater in ferti-irrigation. The fall in water use in recent years is due to both technical improvements and the implementation of legislation on water use.

The Ministry of the Environment acknowledges that significant progress has been made in water consumption and reuse by the sugarcane industry, but points out that this is not general practice even in São Paulo state. The ministry supports a ‘right price’ for water to encourage resource conservation and more rational and cautious water use, especially for water bodies. The ministry highlights that other states are well behind São Paulo’s practices. There is particular concern about preserving the Guaraní Aquifer whose recharge is located in the north of the state of São Paulo44.

Impacts on water quality

Water pollution in the central southern region of Brazil is significant, especially where different water polluting sectors are present (Faaij et al 2006). In the case of sugarcane, the two most significant types are organic pollutants from bioethanol production, and agrochemicals from sugarcane production. In the cycle of bioethanol industrial production, beginning with the cane itself, the principal effluent liquids that may sometimes be launched into water bodies are (CETESB 2002):

� vinasse, a black residue from the distillation of cane syrup, fermented to extract bioethanol, which has high biological oxygen demand (BOD) and chemical oxygen demand (COD);

� water from the cleaning of the fermentation vats, with a composition similar to vinasse but more diluted (around 20 per cent of the consistency of vinasse);

� the water used for the cleaning of the cane before it is ground which contains high proportions of sucrose, principally in the case of burned sugarcane and mineral vegetable material (adhered earth and rubble);

� water derived from barometric condensers and evaporators which contains sugars carried by tiny droplets;

� water from the removal of chemical encrustations (with soda or a solution of chloride acid) whose composition varies significantly but presents greater quantities of phosphates, silica, sulphates, carbonates and oxalates.

Of these, the most important volume to negatively affect the environment is vinasse because of its high rates of BOD and COD and the volume produced, around 11 to 14 litres per litre of bioethanol (Rodrigues & Ortiz 2006). Vinasse is hot and therefore requires cooling. In the mountainous areas of north eastern Brazil, the pumping cost and the cost of land to store vinasse were prohibitive, and it was therefore released into rivers, resulting in the pollution of rivers (and fish kills) during each harvest. Currently, vinasse is used for ferti-irrigation of cane crops, together with wastewaters (from floor washing, closed circuit purging and condensate remainders) (Faaij et al 2006). In the past, fertilisation with vinasse has been associated with eutrofication problems when it runs off the fields and into the surrounding rivers.

Although the use of vinasse as fertiliser has been an important source of environmental degradation in the past (in terms of both water use and pollution), legislation has recently been implemented to avoid the negative impacts of vinasse



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applications. However, as bioethanol production expands, the issue may require closer attention as the legislation does not require the maintenance of a complete nutrient balance, and enforcement of the legislation is rather weak (Faaij et al 2006).

Impacts on soil quality

Erosion is the leading cause of agricultural soil degradation. The extent of soil loss through erosion depends on the kind of crop, agricultural practices, soil type and rainfall pattern. Sugarcane in Brazil is recognised as having a limited impact on soil erosion compared with other crops. While the mean rate of soil loss for grains in Brazil is 24.5 ton/ha a year, sugarcane has a rate of 12.4 ton/ha a year (Donzelli 2005). An assessment conducted over 11 years in the São Paulo region showed that sugarcane production had not significantly affected the thickness or the physicochemical composition of soil in the area (Donzelli 2005).

Ferti-irrigation adheres to a technical standard in São Paulo state, but the process covers just the crop areas closer to the mills (it covers around 30 per cent of crop area in the central southern region). The preservation and recovery of riverside woods, combined with appropriate soil preservation and handling, are essential to ensuring adequate water supply45.

Sugarcane burning further contributes to soil erosion, and the introduction of mechanical harvesting therefore helps control soil erosion. This technical improvement has enabled the harvesting without burning in some areas. It also leaves considerable amounts of waste (organic matter) in the soil, which in turn reduces the need for soil preparation practices during the re-planting of the sugarcane sector. The use of this technique is expected to increase in the future.

Use of agrochemicals

In Brazil, the level of consumption of insecticides, fungicides, acaricides and other pesticides for sugarcane crops is lower than for citrus fruits, corn, coffee and soybean crops and is also modest compared with other countries (Macedo 2005). However, there is some concern over their use in light of the significant scale of sugarcane production in, for instance, São Paulo (Faaij et al 2006). The use of mineral fertilisers is supplemented by the use of nutrient rich wastes from sugar and bioethanol production, including vinasse and filter cake. Vinasse is rich in organic matter and potassium and relatively poor in nitrogen, calcium, phosphorus and magnesium. The use of vinasse as a fertiliser presents advantages and disadvantages. Among the advantages are a reduced need for mineral fertilisers, a rise in pH, an increased cation exchange capacity, increased availability of nutrients, improved soil structure, increased water retention and the development of soil micro-flora and fauna. Disadvantages include the risk of salinisation and nutrient leaching, although with no apparent negative impact on the soil or groundwater at doses lower than 300m3/ha (Macedo 2005). As noted above, more analysis is needed to evaluate the environmental impacts of vinasse use.

Sugarcane still uses more herbicides than coffee and corn, although fewer than citrus fruits and the same amount as soya beans. The consumption of fungicide is virtually nil, while that of insecticides is relatively low. At present it is not possible to completely



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eliminate herbicides especially because of the rising number of unusual pests (Macedo 2005).

Use of Genetically Modified Organisms (GMOs)

Significant developments in sugarcane biotechnology have been taking place since 1997 in Brazil. The Sugarcane Technology Center (CTC) pioneered the creation of transgenic sugarcane varieties in 1997 and has been very active in experimental planting of its findings. The Government of Brazil granted a biosafety quality certificate to CTC the same year, enabling it to grow, in a restricted experimental area, varieties featuring resistance to herbicides, pests, diseases and flowering obtained through modern biotechnology techniques. Moreover, the CTC recently decoded the sugar DNA, which helped to select varieties that were more resistant to drought and pests and yielded greater sugar content (Lunhow & Samor 2006). The genetic manipulation of sugarcane has guaranteed resistance to plagues with the substitution of the species adapted in cycles of 10 to 15 years, and the use of GMOs could reduce these deadlines. Stakeholders linked to the industry argue this is the time to introduce new varieties into the market.

To date, genetic modifications have only been planted at the field test site stage, and the government has not issued any commercial authorisations. However, the sugarcane industry may soon seek authorisation for commercial planting of transgenic varieties (Macedo 2005).

The biofuels market is expected to act as a key driver for GMO development. Given the need to improve both the economic and the energy efficiency of biofuels, biotechnologies are expected to play a key role in the development of the biofuel industry. Genetic improvement has been highlighted as key to increased yields and environmental benefits of energy crops, while at the same time reducing agricultural inputs. While genetic improvements of some feedstock (such as soya and corn) are more advanced, there has been less development for other energy crops such as sugarcane.

There is little available information on the environmental impacts of GMOs in the sugarcane industry, and the spread of GMOs in sugarcane is likely to have advantages and disadvantages which require further investigation. Experience from other sectors suggests it is a very sensitive issue. The main arguments against GM technologies relate to food safety concerns, and their impacts on biodiversity and on farmers’ livelihoods. In Brazil genetically modified soy is already widespread in the south. In export markets such as the EU, expansion of GMOs is heavily regulated and only 20 GM varieties – mostly corn and soya – have been approved for planting. GM crops for food and feed purposes that have been grown or imported must be labelled, but this is not the case for crops grown for energy production (Dufey 2006).

6.4 Environment-related capacity building

According to the WTO Trade Capacity Building Database, Brazil received a total of US$193 million for capacity building in trade involving a total of 186 projects between 2001 and 2006. This makes Brazil the 10th largest recipient of capacity building support related to trade (GHK 2006). Only four of these projects (US$2.4 million) were classified under the ‘Trade and Environment’ category, however none of these is directly concerned with the sugar/bioethanol sector. The database does not include a number of trade and environment capacity building programmes funded by multilateral


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donors such as the World Bank and UNDP, the public and private sector, and international NGOs.

Key programmes have included: technical and financial assistance for the development of bioethanol and biomass energy and programmes targeting a reduction of emissions and effluents; support for research and development, eg into the development of sugar varieties, technological improvements and for the reduction of sugarcane burning and wastes; programmes aimed at information dissemination and awareness raising; support for the development of organic or environmental-social standards and certification/labelling initiatives; and support in the implementation of environmental legislation. The key programmes (summarised in Annex III) are described below.

Alcohol and Biomass Energy Development Project (World Bank)

This project is the most quoted Technical Assistance project in the sugarcane industry in Brazil. The project was approved in May 1981 and closed in March 1987, with World Bank financing for US$250 million. It aimed to increase annual bioethanol production in Brazil to about 10.7 billion litres by the end of 1985, equivalent to 148,000 barrels per day of petroleum. Of this, 9.2 billion litres would be used to replace 45 per cent of Brazil’s projected 1985 gasoline consumption, and the remainder would be used for chemical feedstock. The project consisted of three components:

� A production component comprising about 250 bioethanol units (distilleries and related agricultural facilities) expected to be approved by the Brazilian Government during 1981-83 and coming on-stream during 1983-85. These units would provide additional production capacity of about 5.6 billion litres, of which 95 per cent was expected to be sugarcane-based and 5 per cent cassava-based. This component would also include units to demonstrate the feasibility of new technology, such as bioethanol production from wood.

� A technology development component to support basic and applied agricultural and industrial research related to the production and use of biomass energy.

� A monitoring and evaluation system to analyse the impact of the ProÁlcool programme on the agricultural, transport and industrial sectors, rural employment and the environment in order to identify any necessary corrective measures and facilitate planning.

Unfortunately, little documentation is available from the World Bank on this project, and interviews conducted with representatives from the Brazilian government and other key stakeholders show there is no ready institutional memory of the impacts of the project.

Biomass Power Generation: Sugarcane Bagasse and Trash UNDP Environmental

Project BRA/96/G3146

The objective of this project was to investigate the possibility of promoting a significant reduction in atmospheric CO2 accumulation by performing technical and economic analyses of the feasibility of the utilisation of biomass integrated gasification-gas turbine (BIG-GT) technology for power generation using bagasse and sugar cane trash as primary fuels. The project received GEF funding of US$3.75 million, and ran from

46 For detailed information on the project see Hassuani et al 2005.


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January 2002 to June 200447, managed by UNDP in partnership with the Ministry of Science and Technology and the Centro de Tecnologia Copersucar, a cooperative of 36 sugar mill owners, responsible for 27 per cent of the Brazilian sugar and bioethanol production, and a large R&D organisation for sugarcane production and processing.

The project’s main objective was to evaluate and develop the technology to use sugarcane residues, bagasse and trash as fuel for advanced cogeneration systems, integrated with sugar/bioethanol mills. The project’s immediate objectives were:

� Evaluation of sugarcane trash availability and quality;

� Evaluation of agronomic routes of unburned cane harvesting with trash recovery;

� Bagasse and trash atmospheric fluidised bed gasification tests;

� Integration of BIG-GT system with a typical mill;

� Identification and evaluation of environmental impacts;

� Project information dissemination.

Several environmental benefits were expected from the project, based on studies which indicated a significant margin for improvement in the use of renewable energies (bioethanol or surplus bagasse) in electricity generation and in the overall balance of CO2 emission-absorption by the sugarcane agroindustry in Brazil. The project is expected to save an estimated 38 million tons of CO2 emissions equivalent per year48.

The initial focus of the project was at an institutional level, aiming to supplement existing know-how in CTC in the areas of sugarcane harvesting and other agricultural practices, transportation, sugarcane processing and conventional power generation, and by adding to knowledge on trash availability, quality and recovery, gasification technology and the environmental impacts of the sugarcane agro-industry and power generation. During project implementation the system level became predominant due to frequent and positive interface with policy makers and public meetings on cane burning and trash use issues. Interaction with several universities and research centres resulted in the development of research programmes related to the theme of generating energy from cane.

Dissemination of information to the mills has created a favourable environment for starting to recover and use trash in conventional systems. Eight newsletters were prepared and distributed (Portuguese and English versions), technical articles were published in journals, and presentations delivered at national and international congresses, seminars and workshops. The aim was to increase awareness in the world sugarcane and power generation sectors of the potential of sugarcane residues and advanced power generation technologies to provide significant amounts of renewable energy in technically and economically feasible conditions.

47 See http://www.pnud.org.br/projetos/meio_ambiente/visualiza.php?id07=97 48 Based on 315 million tons of cane per year, of which 250 million tons are harvested unburned with part of the trash recovered and used for power generation using BIG-GT technology; the remaining 65 million tons harvested, burned and power generated by conventional systems such as bagasse fired boilers and steam turbine generators; and power generated using sugarcane residues displaces generation from natural gas fired plans with 502g CO2 /kWh.


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Those involved in the project felt the initial project objectives and results were achieved and that the project had fulfilled the expectations of those who had planned and executed it. The potential of the use of advanced co-generation systems and the recovery and use of sugarcane trash, as a supplementary fuel to bagasse, are now well established and widely discussed – as well as the remaining challenges. The level of private sector involvement in the project was also considered remarkable, with sugar/bioethanol mills and equipment manufacturers being included as well as the CTC.

Other CTC capacity building

The Centro de Tecnologia Canavieira, which succeeded the Copersucar Technology Center in 200449, is one of the main research and development institutions on sugarcane agro-industrial technology in the world. Substantial resources have been invested in sugarcane, sugar and alcohol technology research and development. According to CTC, its R&D programmes have been instrumental in improvements resulting from new variety development, biological pest control introduction, improved management, and greater soil selectivity. These programmes include:

� Technology improvements for the use of healthy seedlings in order to control diseases and increase sugarcane plantation life spans;

� The use of minimum tillage techniques;

� The utilisation of liquid fertilisers and stillage/filter cake production process residues;

� Weed control and biological elimination of pests.

CTC’s research efforts have also enabled the development of agricultural operation management systems, with the aid of computational resources such as Agronomic Technical Control, Integrated Production Control and Mechanized Fleet Control. These help optimise the selection of the sugarcane variety, the machines and the mechanical operations for each area. The CTC also decoded the sugar DNA, which helped to select varieties more resistant to drought and pests, with higher sugar content yields. Over the past 20 years the centre has developed some 140 varieties of sugar, which has helped lower growing costs by more than 1 per cent a year (Lunhow & Samor 2006). Sugarcane varieties developed by CTC are cultivated in more than 50 per cent of Brazilian sugarcane areas, and are reported to be increasing agricultural productivity and bringing about an effective process of technology transfer and absorption. New sugarcane varieties developed by CTC have also had positive environmental impacts such as increased productivity and new techniques suited to the central southern region lands, which has helped avoid further pressures on the agricultural frontier50.

The technology developed by CTC produces yields up to 13 per cent higher than existing average yields. Improvements in equipment efficiency and operational procedures by CTC in the energy sector have led to self-sufficiency in electric power and the organisation of a bagasse surplus market. In 1990-91 Copersucar, in a joint programme with Eletrobrás, investigated possibilities for increasing power production at the Brazilian sugar mills.

49 http://www.ctc.com.br/php/pagina.php?doc=home 50 Personal interview with Isaias Macedo, former Director of CTC, December 2006


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Conventional bagasse-based co-generation systems at sugar mills in Brazil have been improved, leading from 60 per cent self-sufficiency in electricity in 1980 to 96 per cent in 1995; a high-pressure, high efficiency system is operating in a (commercial) demonstration unit, including environmental control (noise, particulate emission, odour).

Other environmental issues that have received attention from CTC programmes have been the control of emissions from sugarcane burning (which led to the introduction of new environmental legislation) and the development of a programme of nutrient recycling through the application of industrial wastes (ie waste reduction) as vinasse and filtercake51.

Corporate Social Responsibility Programme for the Sugar and Bioethanol

Industry in São Paulo (UNICA and World Bank)

The São Paulo Sugar Cane Agro-industry Union (União da Indústria Canavieira de

São Paulo, UNICA) represents sugarcane, sugar and alcohol businesses in the state of São Paulo, with more than 100 mills affiliated as members. UNICA has played a key role in the development of the sugarcane industry and was an important player in the WTO case against the EU sugar subsidies.

In partnership with the Business, Competitiveness and Development (BCD) Programme of the World Bank Institute (WBI), UNICA has sought to develop the capacity of local Brazilian businesses and their associations in order to enhance firm-level competitiveness, and thereby lesson the custo Brazil (the cost of production in Brazil). This programme52 involved a series of training sessions, complemented by an online course on Corporate Social Responsibility (CSR). The training sessions introduced the concept of CSR and the various issues relating to CSR, focused on a set of local case studies, and discussed the challenges – relating to HR, finance and technology as well as CSR and sustainable competitiveness – in implementing socially responsible corporate strategies.

The programme trained approximately 2,500 participants over a period of eight months. Participants included directors, managers and supervisors from various divisions, such as human resources, finance, production, technical, agricultural, marketing, accounting/auditing, commercial and legal departments. Recently, InWent and the German Chamber of Commerce in São Paulo joined the alliance, with the purpose of broadening the reach of the programme. Over the next three years the partners will deliver the programme to several Mercosur countries, starting with Brazil and Argentina. The UNICA-WBI partnership stresses the vital role of the private sector, and the potential of public-private partnerships.

In order to assess the effectiveness and quality of their efforts, both UNICA and WBI administered questionnaires for their respective components of the programme. This feedback will be used to shape future capacity building programmes.

While the interviews conducted for this research highlighted this programme as one of the relevant sustainable development programmes for the industry, the programme focuses only on economic and social aspects of sustainable development and does not address the environmental challenges associated with the sector.

51 Personal interview with Isaias Macedo, former Director of CTC, December 2006 52 IBRD 2006


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Social-environmental certification for the sugar and bioethanol sectors in Brazil

(IMAFLORA)

The Instituto de Manejo e Certificação Florestal e Agrícola (Institute for Agriculture and Forest Management and Certification, IMAFLORA) is a non-profit, non-governmental organisation whose mission is to contribute to sustainable development by promoting agriculture and forest management that is environmentally appropriate, socially beneficial and economically viable. Its main tools in support of this are certification, training and capacity building, and support to the development of public policies. IMAFLORA started its activities in 1995, during the intense debates concerning the protection of tropical forests, two years after the foundation of the Forest Stewardship Council (FSC), which deals with forest management certification.

IMAFLORA is a pioneer in a number of fields: it was the first certification body to certify a non-timber forest product within the Atlantic Forest region and the first to carry out certification of Community Forest Management. Although the bulk of IMAFLORA’s work concentrates on forest management, some of its activities are also relevant to the sugar and bioethanol sector – notably, the work carried out by its Agriculture Certification Program (PCA) constitutes one of the first attempts to introduce sustainability criteria in the sugarcane sector. The PCA is part of the Sustainable Agriculture Network (SAN) established under the umbrella of the Rainforest Alliance (IMAFLORA is its representative and partner in Brazil). Through the social and environmental certification of agricultural practices, the PCA seeks to promote the conservation of natural ecosystems and their biodiversity, as well as the social well-being of rural workers, producers and their families.

Sugarcane was selected as a focus for this programme, due to its strategic importance both for sugar and fuel production and also due to concerns about the associated social and environmental impacts. The ‘Sugarcane Environmental and Social Certification’ project has the following goals:

� To define guidelines for environmental and social assessment, monitoring and certification.

� To define and implement an environmental and social certification system and create the institutional infrastructure and regulation for the operation of the system.

� To seek compatibility of the system with the main international initiatives in the agricultural system.

The first phase of the pilot project, financed by the Dutch Organisation for International Development Cooperation (NOVIB), was spent building a consensus among key stakeholders around the key issues to be addressed, and developing the guidelines. Activities included workshops for the development of guidelines, creation of working groups, field tests and public consultations and consultation with key stakeholders (Guedes Pinto 1999).

A total of 105 individuals and organisations representing industry, producers, workers, civil society, academia and government participated in the process. After four years of work, consensus regarding the guidelines was reached among the stakeholders, which


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was validated in a General Assembly in 1998. The result of the work was a methodology that was summarised and published53.

A second phase of the project consisted of an ‘operational phase’ in which a ‘Certification Committee’ was created. The goal of the committee was to attract the interest of companies and foster demand for the adoption of the standard. This has not yet been implemented. A key drawback has been a lack of public sector support and a lack of interest from the industry. However, the document and other materials produced have been used in stakeholder discussions and academic research54.

Although the parameters developed under the programme for the certification of the sugar/bioethanol industry have not yet been implemented, there is optimism that the low demand for this type of certification will be reversed in the next few years, driven by external demand and the application of economic incentives55.

CSR seminars (Ethical Sugar)

The aim of the French NGO Ethical Sugar is to bring together trade unions, manufacturers and civil society in a sustainable development process to improve the social and environmental conditions of the sugar sector within the framework of a globalised economy56. The main aim of these meetings must be sustainable development, including respect for the environment and the social responsibility of companies, consumers and workers within the framework of a market regulated by democratic institutions. Ethical Sugar’s basic standpoints on trade and environment are found in its communication to the WTO, Ethical Sugar’s Position and Position

Concerning the Sugar Reform.

Ethical Sugar’s initiatives on trade and environment in the sugar industry in Brazil consist of two seminars:

‘Economic Globalisation versus Globalisation of Social and Environmental Rights’

(June 2004)

The goal of this meeting was to discuss the social, economic and environmental issues of the Brazilian sugar and alcohol market in the context of globalisation and to create synergies between the different actors that play a part in this rapidly growing sector. The meeting was attended by some 45 stakeholders from civil society and academia. The meeting covered issues relating to:

� Perspectives on the global sugar market including effects of the EU Sugar CAP reform in developing countries;

� General environmental and social impacts associated with sugar and bioethanol production in Brazil.

53 http://www.sucre-ethique.org/Sao-Paulo-Issues-and-challenges 54 http://www.sucre-ethique.org/Sao-Paulo-Issues-and-challenges 55 Personal interview with Luis Fernando Guedes Pinto from IMAFLORA, February 2007 56 http://www.sucre-ethique.org/


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‘Issues and Challenges Facing the Brazilian Sugar & Ethanol Industry of the 21st

Century within a Globalised Sector’ (May 2006)

In view of the marked expansion that the sugarcane sector experienced over recent years due to increased production and exports of sugar and bioethanol, the attraction of several transnational companies (such as Cargill) to the country, and the opening up of a new cane area, Ethical Sugar hosted this seminar as a platform for thinking about sector growth in a sustainable and responsible way. Key issues were:

� Brazilian sugarcane perspectives in a globalised sector (analysis of domestic and external markets, regulation, investments; land regulation and labour regulation);

� Social impacts of sugar and bioethanol production;

� Environmental impacts (sugarcane burning; sugarcane general environmental impacts; monoculture impacts on water discharge, land use and biodiversity; and water issues – pollution and improper use);

� Better management practices: (Ethos Institute’s indicators of Corporate Social Responsibility57 and specific action for the sugarcane sector; Socio-environmental Certification and Labelling; the Better Sugarcane Initiative (BSI)58).

Approximately 180 groups attended the second conference, from the private sector (consultants, banks, communication agencies, millers, sugar and alimentary groups‚ representatives); trade unions; NGOs (WWF, Friends of the Earth, Oxfam); social rights advocates (Reporter Brazil, Social Observatory); organic associations; universities; government representatives (Agriculture and Environment); public and private foundations; and the media.

The seminar was sought to promote dialogue between academic researchers and financial companies and decision makers, in a context characterised by debate and conflict over the social and environmental impacts of the sugarcane industry59, as a means of developing a balanced diagnostic for the design and implementation of CSR practices. Trade unions were also an important participant in the discussions given their traditional role as promoters of social dialogue.

Organic sugar (São Francisco Sugar Mill)

In 1986, São Francisco Sugar Mill (Usina São Francisco) set up Green Cane Project, mainly aimed at developing a self-sustaining sugarcane production system, based on the ecological and conservation potential of this culture. The project sought to take

57 According to Mariana Kohler Pereira, Head of UniEthos, the research and capacity building branch of Institute Ethos, 28 mills associated with UNICA (it has more than 100 mills affiliated as members) have applied the Ethos Social Responsibility Indicators in 2006. It was the first agribusiness sector to apply Ethos methodology on CSR. The results of this exercise are confidential. 58 See Section 6.4 59 UNICA’s publication, edited by Isaias Macedo, of Sugarcane’s Energy, was criticised by other Brazilian partners for only partially analysing the socio-environmental impacts and ignoring social impacts relating to health and occupational safety. The book also argues that sugarcane burning has no impact on health of atmospheric pollution.


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advantage of advanced technologies while still relying on traditional techniques of natural harvest. In October 1997 São Francisco Sugar Mill was awarded the organic producer certificate.

The project overcame several obstacles that potentially complicated the large-scale implementation of this kind of agriculture. São Francisco Sugar Mill needed to apply techniques which ensured environmentally secure production procedures that are compatible with the preservation of neighbouring ecosystems. Native vegetation has increased from 5 per cent to 14 per cent since the project’s implementation thanks to a native forest reforestation programme running since 198660. In addition, the project works towards the protection of wildlife, which means that hunting and fishing are forbidden. There is a fire prevention programme for native forest and the reforested areas61. São Francisco Sugar Mill has not burnt sugarcane since 199562.

While there has been a market demand for organic certification and the benefits of improved technological and environmental impacts in terms of agricultural soil, water use, air quality and biodiversity, and the project played a pioneering role in introducing new ideas and concepts, organic production remains limited, and NGOs remain unimpressed by the fact that certification has contributed little to improving social circumstances or systemic regulatory issues63.

Better Sugar Initiative (World Wildlife Fund)

Through its Sustainable Sugar Initiative, the World Wildlife Fund is developing techniques and practices to reduce the environmental impact of sugar farming and helping sugar farmers to implement these in the field.

The Better Sugarcane Initiative is a multi-stakeholder collaboration whose mission is to promote measurable improvements in the key environmental and social impacts of sugarcane production and primary processing. The BSI involves progressive sugarcane retailers, investors, traders, producers and NGOs who are committed to developing internationally-applicable baselines that define sustainable sugarcane. Stakeholders include representatives from Ethical Sugar and UNICA64.

The initiative initially focused on the most significant issues in sugarcane production and primary processing in Brazil: soil degradation; water use; effluents (in water, air and soil); and habitat loss and degradation65. Its aim is to engage stakeholders in a constructive dialogue to define, develop and encourage the adoption and

60 Planeta Organico ‘Planeta Organic Visita’ Interview with Daniel Bertoli. http://www.planetaorganico.com.br/native1.htm 61 Planeta Organico ‘Planeta Organic Visita’ Interview with Daniel Bertoli. http://www.planetaorganico.com.br/native1.htm 62 Personal interview with Daniel Bertoli Gonçalves, consultant to Fasolim Consultancy, February 2007 63 Personal interview with Luis Fernando Guedes Pinto from IMAFLORA, February 2007 64 Richard Perkins, Agriculture and Rural Development Freshwater Team WWF-UK, personal communication, February 2007 65 Richard Perkins, Agriculture and Rural Development FreshwaterTeam WWF-UK, personal communication, February 2007


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implementation of practical and verifiable performance-based measures and baselines for sugarcane production and primary processing on a global scale.

The end result will be a set of standards which can be used by companies and investors across the globe as sourcing and investment screens, and by producers to enhance the long-term sustainability of production. Implementation has only recently started in Brazil, where the BSI is currently drafting the principles of consultation66.

Enforcing Environmental Legislation: Environmental Chambers of the Sugar

Cane and Alcohol Sector of CETESB

The Companhia de Tecnologia de Saneamento Ambiental (CETESB) is a public agency in charge of controlling, enforcing, monitoring and evaluating all human activities that might pollute soil, water and air in the state of São Paulo67. Its main aim is to preserve and improve the quality of these resources.

The Environmental Chambers (there are six of them) are collegiate bodies that act as a regular forum to bring together the productive sector and the public bodies in charge of environmental regulation. One of these chambers is the Environmental Chamber for Sugar Cane and Alcohol, created in 2002 and based in São Paulo. The Chairman is the Chairman of UNICA. The members are representatives from industry, labour groups, consultants, universities and other research centres and state government.

The objectives of the Environmental Chamber for Sugar Cane and Alcohol are:

� to implement and improve strategic instruments for environmental management;

� to collect information from the public and private sector pointing towards the sustainable development of the state of São Paulo;

� to promote partnerships with the private sector to implement public policies towards environmental management; and

� to support CETESB's strategic planning.

Key activities of the Environmental Chamber for Sugar Cane and Alcohol include:

� to assess and propose innovations and improvements in standards, procedures and environmental regulations;

� to elaborate sectoral management plans aiming at the rational and economic use of natural resources; environmentally-friendly production methods; prevention and control of accidents; improvement of health and safety conditions for workers; motivation and capacity building of human resources; and to enhance communication with the external public.

At present there are three Working Groups focusing on:

� the environmental impacts of agro-industry activities on ground water;

� Cleaner Production and technological change;

� regulatory, socio-economic and environmental impacts of sugarcane burning.

66 Richard Perkins, Agriculture and Rural Development FreshwaterTeam WWF-UK, personal communication, February 2007 67 http://www.cetesb.sp.gov.br/


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The Chamber has reported progress on environmental issues related to:

� Resolution SMA 14/2005: Criteria and procedures for previous dnvironmental permits of sugar and ethanol mills and sugar mills;

� Technical Standard P4.231/2005: Criteria and Technical Procedures for Applying Vinasse on Agriculture Soil (still under consideration for further improvements68)

� Guidelines for the implementation of regulation 11.241 on the gradual banishment of sugarcane burning in the state of São Paulo, regulated by the Decree 47700/2003. At present this regulation has been implemented by the private sector and enforced by the public Environmental Office in charge of its control and supervision in the state of São Paulo, although it remains a controversial issue69.

6.5 Relevance and impact

Donor effectiveness

A wide range of stakeholders has participated in financing programmes on capacity building in trade and environment in the sugar/bioethanol sector in Brazil. These range from international organisations such as the World Bank and the GEF, to the private sector – notably the sugarcane industry, international NGOs and the Government of Brazil.

In general, international cooperation for capacity building in the sugar/bioethanol sector has been poor because the sector has not been a priority for international donors. As a result, capacity building in the sector has been primarily endogenous70. However, international cooperation in the sector may increase as the sector becomes more and more important for international donors. Key issues currently attracting attention from international donors include: the long experience of Brazil with bioethanol production and the novelty of this market at the international level; the environmental and social effects of bioethanol production both locally and globally, and the potential for South-South cooperation.

Implementing agency effectiveness

The implementing agencies of the programmes have been, to a large extent, national entities including R&D institutions linked to the industry such as CTC, as well as Brazilian universities. There are also cases of partnerships between Brazilian and international/foreign institutions (eg CTC-UNDP and WB-UNICA) as well as private-public partnerships (CETESB’s Environmental Chamber). In other cases (the seminars conducted by Ethical Sugar and the ongoing Better Sugar Initiative) the programmes have primarily been led by foreign institutions.

68 Interview with Marco Antonio Sanchez Artuzo representative of CETESB at the Environmental Chamber of the Sugar Cane, Alcohol Sector in São Paulo. 69 Interview with Marco Antonio Sanchez Artuzo representative of CETESB at the Environmental Chamber of the Sugar Cane, Alcohol Sector in São Paulo. 70 Interview with Angelo Bressan, Director of the Department of Sugarcane and Agroenergy, DCAA/SPAE of the Brazilian Ministry of Agriculture, Livestock and Food Supply, February 2007


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Relevance of capacity building in meeting environmental priorities in the sector

Capacity building programmes have generally been found relevant in terms of the environmental issue they were targeting, although stakeholders’ perspectives on the relevance of the programmes vary, with significant differences regarding the scope of the programmes.

Programmes led by the R&D institution, CTC, have tended to be ‘issue-specific’ in the sense that they have focused on environmental aspects narrowly associated with sugar/bioethanol. For instance they concentrate on technical support for CO2 reductions in the use of bagasse and sugarcane waste for power generation; reductions in sugarcane burning or in the generation of waste and effluents. In some cases the programmes were not targeting environmental improvement (they were targeting increases in productivity) but the overall impact of the programme led to an indirect environmental benefit (eg increase in yields which may reduce pressure on the agricultural frontier). Overall, stakeholders considered the CTC experience to be highly effective. They highlighted the continuous technological innovation and the ownership of the CTC programmes as the key factor of success in capacity building in Brazil. Important agglomeration economies for the sugarcane agribusiness in São Paulo state (positive externalities) have been recognised as another crucial factor behind the success of the programmes, since they have allowed technological knowledge spillover beyond CTC’s boundaries. Other institutions are recognised for having had an important role in this spillover, notably the network of institutions including the state universities (especially the Escola Superior de Agricultura ‘Luiz de Queiroz’ in Piracicaba71, the state agricultural institutes and laboratories (especially the Instituto

Agronomico de Campinas)72, and other private organisations (eg, IDEA de Ribeirão Preto)73, thus creating a solid network of specialised knowledge in sugarcane agribusiness activities.

Capacity building programmes relating to standards and certification processes (the São Francisco Mill organic scheme or environmental-social certification standards linked to IMAFLORA) are more holistic in their approach as they are simultaneously targeting several of the key environmental challenges faced by the sector. However, the focus of these programmes is on the impacts in situ (local impacts) and therefore they fall short of addressing global issues such as the expansion of the agricultural frontier. Other issues hindering the effectiveness of these programmes have been the lack of industry support (eg for the certification criteria led by IMAFLORA) and the low level of trust among stakeholders: The relationship between agribusiness and the NGOs has not benefited much from the certification processes so far and mutual trust remains to be built74.

In this context, it is also worth mentioning that, at present, there are several initiatives for the development of environmental/social certification of biofuels. These are mainly driven by northern institutions, notably country governments (eg EU, Netherlands, UK) or by international NGOs worried about the sustainable development impacts of

71 http://www.esalq.usp.br/english/history.html 72 http://www.iac.sp.gov.br/ 73 http://www.ideaonline.com.br/home/ 74 Guedes Pinto, Executive Secretary of Imaflora


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international trade in biofuels. There is particular interest in biofuels/feedstock from countries such as Brazil and Indonesia/Malaysia. A key certification criterion to be included in these initiatives is the carbon balance of the biofuels. The position of the Government of Brazil vis-à-vis these initiatives is reflected in its response to the EU Review of the Biofuels Directive, which acknowledges the need to include local impacts within the certification criteria but also highlights the importance of the carbon balance of the products as a way of challenging the sustainability of biofuels produced in industrialised countries: ‘Climate change is arguably the greatest and most urgent

environmental challenge facing mankind today. Therefore, any environmental

certification scheme should address not only local environmental impacts but also the

net contribution of any specific biofuel to greenhouse gas emission reduction. A set of

requirements that only assesses local environmental impacts … could lead to the

absurd situation that biofuels with very low or even negative carbon balance may

qualify as environmentally sound’75.

Generally speaking, several concerns have been raised regarding certification programmes when they are led by the interest of foreign institutions without meaningful participation of a Brazilian counterpart. Concerns prevail over whether these constitute unnecessary barriers to trade; there are questions about the relevance of the programmes to deal with the local environmental conditions, and there are concerns regarding the ownership and content of these programmes. Several stakeholders linked to industry, academia and government in the sugar/bioethanol sector have shown themselves openly hostile to any standards/certification processes that do not have ownership from Brazilian counterparts. They have pointed out the importance of national expertise and previous experience in the formulation of parameters for the certification of the sugar/bioethanol industry (linked to IMAFLORA, for instance) even though they have not yet been used. Given that environmental/social schemes are mainly driven by external demand, some stakeholders see international cooperation on these issues as inevitable. However, they also highlight the relevance of including a Brazilian counterpart.

The seminars promoted by French NGO Ethical Sugar are another example of programmes that show a more holistic approach in terms of the trade-environment issues they are covering. Indeed, the seminars’ agendas included all the general issues concerning sugar/bioethanol global trade, market information and environmental consequences. However, it is difficult to measure how these impacts are being addressed by the programmes as these are only ‘one shot’ initiatives aimed at creating awareness on the issues. Some stakeholders showed caution towards programmes led by foreign institutions as they are viewed as being strongly associated with protectionist sugar/ethanol interests in their countries of origin. Thus, building mutual confidence has been highlighted an urgent task in this field.

The UNICA/World Bank CSR Programme for the Sugar and Bioethanol Industry, on the other hand, only focuses on economic and social aspects of CSR and therefore does not address any of the environmental impacts of the sector.

The World Bank programme on Alcohol and Biomass Energy Development was one of the most quoted technical assistance projects by the sugarcane producers. One of the

75 Official position of the Government of Brazil on environmental certification in the ‘Review of the EU Biofuels Directive – Public Consultation Exercise (Responses and comments by the Brazilian Government)’ Brussels, 10 July 2006


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programme’s intended activities was the implementation of a monitoring and evaluation system for the agricultural, transport and industry, employment and the environmental impacts of the ProÁlcool programme. However, very little is known about the actual environmental implications of the programme as there is no available information on the programme at the World Bank and there is no readily available institutional memory from the Brazilian side. Indeed, the lack of available information for assessing the relevance of programmes has been a drawback that has appeared in the context of almost all the selected programmes.

The programme linked to the CETESB public-private Environmental Chamber aims to improve implementation and enforcement of environmental legislation. The different activities of the Working Group also constitute an example of a capacity building programme that is simultaneously targeting several of the key environmental challenges confronting the sector. Actors involved in the programme acknowledge there have been improvements linked to the work of the Environmental Chamber (notably on implementation of the regulation for applying vinasse and on sugarcane burning) but there are also considerable challenges ahead.



� Capacity building has generally been found relevant in ‘issue-specific’ areas

� The CTC experience has been considered to be highly effective, demonstrating continuous innovation and high ownership

� Some holistic approaches, relating to organic production and CSR, have been tried

� Support to enforcement of environmental legislation has been welcomed (although considerable challenges lie ahead)

� The sector has not been a priority for international donors, and international cooperation has been consequently poor

� Environmental improvements have sometimes come about as an indirect consequence of capacity building

� Focus has been on impacts in situ, rather than on global impacts

� There has been a lack of industry support for certain initiatives, especially certification

� Capacity building has been undermined by low levels of trust among stakeholders

Key limitations of capacity building programmes and future needs

The programmes present several limitations. These mainly relate to issues to do with the sugar/bioethanol trade-environment debate that are not being covered by the programmes, as well as issues of ownership and confidence among the stakeholders. More specifically these include:

� Expansion of cultivated area and with the systematic impact in terms of

biodiversity and GHG emissions The expansion of the cultivated area and its related impacts on biodiversity and GHG emissions has only been addressed marginally and indirectly by some of the programmes, for instance when they aim at increasing the productivity of the sector. Indeed, none of the programmes reviewed has been specially designed to target the issue. Section 6.3 identifies the expansion of the cultivated area as one of the key environmental issues confronting the sector and therefore more capacity building on the issue is needed.


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� Indirect impacts The current focus of the selected programmes is on those environmental impacts that are directly linked with increased sugar/bioethanol production. However, the new phase of expansion facing the sugar/bioethanol sector is predicted to lead to a displacement of those agricultural activities that will become less profitable. The relocation of these activities might take place in environmentally sensitive areas and therefore the related environmental impacts need to be monitored and addressed.

� The trade link The vast majority of the selected programmes focus on the production side of the trade-environment equation, ie on those environmental impacts associated with the production process. Very little effort has been made to address the trade aspects of the relationship. Effort has been made to provide capacity building on issues such as the challenging of the EU sugar regime at the WTO (notably by the sugarcane industry) and there is also considerable focus on market intelligence in the biofuels sector. Efforts are also being made to increase the use of the Kyoto Protocol's Clean Development Mechanism76. However, there are other trade issues in which the environmental dimension is very relevant and there is a gap in terms of capacity building. One of these aspects is, for example, negotiations on environmental goods and services (EGS) which are currently under way at the WTO. Issues such as a better understanding of the sustainable development implications of including organic sugar or bioethanol within a list of EGS for trade liberalisation are crucial. EGS has been an important topic under the current Doha Round and it is likely to become an even more prominent topic as long as the biofuels issue permeates the WTO debate. Another topic deserving more capacity building efforts relates to the trade implications of environmental/social certification, lifecycle analysis and production and process methods (PPMs). This topic was already a sticking point in the debate before the creation of the WTO in 1995, and very little progress has been made since then. Developing countries have strong views on this topic as they regard it as a means of discriminating against their exports.

� GMOs Stakeholders linked to the industry side argue that more capacity building efforts for the development of GM varieties in the sector are needed (at present only CTC is conducting research on this and they are in an experimental phase). However, as Section 6.3 highlighted, GMO is a very sensitive issue and therefore capacity building is also needed to understand the different environmental (and social) implications associated with the introduction of GMO varieties in the sugarcane sector. The trade implications of the introduction of GMOs are also relevant and would need to be covered. These include addressing market access issues, as some markets (notably the EU) are opposed to the use of GMOs. Moreover it requires understanding of regulatory aspects of international trade of GMOs, for example the linkages

76 According to UNICA the private sector's efforts will be aimed at: breaking down protectionist barriers for sugar and alcohol in the international market, increasing production and sales of alcohol vehicles in the domestic market, and increasing the participation of fuel alcohol and electric energy co-generation from sugarcane bagasse in the Brazilian energy matrix. Concrete actions include: actions at the WTO against the EU, use of the Kyoto Protocol's Clean Development Mechanism (CDM) resources, among others. See http://www.unica.com.br/i_pages/artigos_palavra.asp


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between MEAs (notably the Cartagena Protocol on Biosafety adopted under the framework of the Convention of Biological Diversity which regulates trade of GMOs) and the WTO rules. The relationship between MEAs and WTO trade provision is one of the aspects being covered by the current Doha Round at the WTO (WTO 2001).

� Environmental legislation Section 6.3 highlights the issue that poor implementation and lack of enforcement of environmental regulation is one of the key challenges to be overcome by the sector in order to improve many of the environmental problems confronted by the sugar/bioethanol sector in Brazil. At present, only the CETESB programme has targeted this issue. All the stakeholders interviewed in the context of this research mentioned the need for better enforcement of environmental regulation as a high priority. Given its importance and the sheer scale of the challenge, therefore, more capacity building efforts in this field are urgently needed.

� Social issues The vast majority of stakeholders interviewed in the context of this research mentioned the social aspects linked to the sugar/bioethanol industry as the most significant challenge facing the sector. One social aspect likely to become more and more prominent is the rural unemployment resulting from the mechanisation of sugarcane harvesting (linked to the planned reductions in sugarcane burning). Thus, important capacity building efforts have been identified in the training and relocation of the non-skilled labour force employed in the sector. The business model, with enormous concentration of land and capital, highlights the need for better inclusion of small-scale producers.

� Ownership of programmes Stakeholders have stressed the importance of ownership as a key factor behind the success of the capacity building programmes. While ownership has been identified in the context of the industry-led capacity building programmes (notably CTC), lack of ownership or poor levels of ownership were mentioned in the context of some of the programmes linked to foreign institutions.

� Confidence and support among stakeholders The need to build mutual trust/confidence and support among the stakeholders has also been highlighted as a key factor in increasing the effectiveness of the capacity building programmes. More specifically, this implies both the need for increased confidence between the industry and civil society sector and increased public support for some of the initiatives.

6.6 Conclusions and recommendations

Brazil is the largest sugar producing and exporting country. Brazil is also the second largest bioethanol producer and the main global exporter. The external market has been a key driver for the expansion in the sugar industry that has taken place over the last two decades. Further trade liberalisation, notably under the EU CAP reform on sugar but particularly relating to expansion of the global biofuels market, will be the key factor driving the new expansion phase of the sector.

The expected increase in sugarcane monoculture, sugar and bioethanol production is likely to place considerable added environmental pressure on the ecosystem. Key environmental issues of concern in the sugar/bioethanol sector include: land clearance and biodiversity impacts due to expansion of the cultivated area; impacts on air quality;


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impacts on global climate; impacts on water supply and availability; impacts on soil quality; increases in the use of agrochemicals and a rise in the use of GMOs.

Although environmental legislation addressing many of the aforementioned issues has been passed in Brazil, its implementation and enforcement is weak and this therefore arises as one of the key challenges confronting the sector in order to improve its environmental footprint.

Capacity building in trade and environment in the sugar/bioethanol sector in Brazil can be grouped into: technical and financial assistance for R&D; information dissemination and awareness raising campaigns; support for the development of standards and certification systems; and support for implementation and enforcement of environmental legislation; and South-South cooperation. The agencies that have participated in the financing of these programmes include international organisations such as the World Bank and the GEF, the private sector, the public sector and international NGOs. International cooperation (both from international institutions and third country governments) for capacity building in the sector is poor because the sector has not been a priority for international donors. As a result, capacity building in the sector has been primarily endogenous. However, international cooperation in the sector may increase as the sector is becoming more and more relevant for international donors.

The majority of the identified capacity building programmes were found relevant in terms of the intended environmental issue they were addressing. However, there are important differences in terms of the scope of the programmes and the type of environmental issue they were targeting. While some programmes address one specific issue, others simultaneously target several of the environmental issues confronting the sector. While the majority of the programmes were designed to specifically target environmental goals, in a few cases the associated environmental impacts came as an indirect result. Moreover, the lack of available information regarding many of these programmes was an obstacle for assessing the programmes’ relevance.

Key lessons emerging from the analysis include.

� Certain aspects of the sugar/bioethanol trade-environment debate are not being properly covered. More capacity building efforts are need in terms of: the coverage of environmental impacts (including ‘global’ issues such as expansion of agricultural frontier and impacts on global climate, biodiversity and GHG emissions; indirect impacts related to sector expansion; GMOs; and implementation and enforcement of environmental regulation). There is also a need to address the trade aspects linked to the sector.

� Social issues have been highlighted as the most important challenge facing the sector.

� Ownership of the programmes, confidence among different stakeholders and public support has been highlighted as key factors for improving the relevance and effectiveness of the programmes.


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7 LESSONS FROM THE CASE STUDIES

The case studies presented above give an overview for Pakistan, Uganda and Brazil of the main trends and issues around trade liberalisation and managing the environmental impacts. This section draws out some of the lessons from the case studies. It is structured to discuss in turn: firstly, the relevance of capacity building programmes and whether priority needs are being met; secondly, where priority needs are not being met, to understand why; thirdly, whether flanking measures are integrated into mainstream policy; and, finally, areas for further research or action highlighted by the case studies.

This section also considers the role of different stakeholders. The case studies show that over time the role of government, the private sector and NGOs in capacity building has changed, with the private sector and NGOs becoming increasingly important in policy dialogue, information dissemination and delivery of training.

7.1 Are priority needs being met?

‘Win-win’ outcomes – liberalisation with improved environmental protection – are

possible

The case studies are striking in that they clearly demonstrate circumstances where liberalisation and increased trade have resulted in positive environmental improvements. This has occurred in the textile sector in Pakistan, the fisheries sector in Uganda and the sugar/bioethanol sector in Brazil.

In Pakistan, phasing out of the MFA over the 10 years to 2004 has increased the degree of competition that textile firms operate under and induced a rapid selection effect in the industry. The most efficient firms (and those offering increased quality) have gained a larger market share. These firms are more efficient in their use of resources – namely water and chemicals – contributing to a reduction in their water requirements and the quantity and level of pollutants they discharge in effluent. Buyer demands have also motivated firms to introduce water treatment plants and apply higher standards required of certification processes such as ISO14000. The CPI estimates that 80 per cent of the processing sector will be compliant with national environmental standards in five years’ time as a result of this pressure.

The benefits of these relative improvements, however, continue to be offset by negative absolute impacts. While increased trade has been accompanied by increased environmental protection, the introduction of pollution control measures has not kept pace with the scale of environmental impacts that might be anticipated from increases in demand for resources. As the case study notes, a 42 per cent rise in bedwear exports in 2005 will require up to 42 per cent more processing of fabric water consumption and growth of 20 per cent in the spinning industry would require correspondingly higher energy inputs. The textile industry is the largest in Pakistan, making up 59.4 per cent of the country’s exports in 2005. Within Pakistan, where water supply, sanitation and energy provision are top of the political agenda, the impact of this growth cannot be understated.

The fisheries sector in Uganda also demonstrates how trade related standards, and capacity building measures to support their implementation, can catalyse environmental improvement. In 1999, a ban was imposed on fish exports to the EU because exporters failed to meet new EU Hygiene and Processing standards due to potential threats from chemicals used to fight Water Hyacinth weed in Lake Victoria


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and other reported incidents of fish poisoning and pesticide residue. A range of mitigation measures was identified including improvements to inspection services, implementation of pesticide regulation, campaigns with target communities and introduction of wastewater treatment facilities. These measures all contributed to environmental improvement within fishing communities. Uganda now exports widely to the EU and more recently the US.

In Brazil, growing momentum in the sugar/bioethanol sector, partly as a result of trade liberalisation, have spurred industry efforts to research and apply innovative technologies in the production of biomass energy. As well as promoting the substitution of biomass for fossil fuels, these technologies have sought to reduce CO2 emissions from the production process, and to minimise environmental damage at various stages of the production cycle, from tillage and application of fertilisers to the burning of sugarcane. These technologies have also, in part, sought to address changes in land use which place additional pressure on the agricultural frontier.

In all examples, identifying the drivers of changing practice is complex. Capacity building is only one dimension. In the case of the textile industry, international competition and supply chain requirements are changing the behaviour of firms. Capacity building support from the Cleaner Production Institute has contributed, but independent of other drivers is unlikely to have changed the behaviour of firms. The selection impact of new market conditions has led to the closure of less efficient polluting firms. In the Ugandan example, the dramatic impact of the ban on exports of fish from Uganda to the EU was the catalyst for introducing sounder environmental practices. Capacity building with fishing and agricultural communities to introduce compliant practices and to limit pesticide run off in Lake Victoria was one intervention in a package of measures targeted at improving the quality of fish for export. Brazil’s technical innovations were in large part catalysed by the government ProÁlcool programme, which provided a huge stimulus to the production and consumption of bioethanol. More recent efforts have been driven by a combination of competitiveness pressures within a relatively developed environmental protection framework, as the sugar/bioethanol sector in Brazil seeks to position itself for future demand growth.

Capacity building focuses on export-oriented sectors and environmental requirements

for trade

In the Pakistan and Uganda case studies, the focus of capacity building has been on working with exporters or potential exporters to help them meet the environmental requirements of trade. In Uganda, examples of capacity building programmes include: the EU Pesticides Initiative Programme to help ACP countries comply with European food safety and traceability requirements; the EU Strengthening Fisheries Products and Health Conditions Programme to improve access to world fish markets; the UNEP/UNCTAD programme on trading opportunities for organic agriculture; the UNCTAD/UNDP Biotrade Programme promoting trade in biodiversity based products. Some of these programmes are a response to local demand. For example, 18 companies applied for support under the EU Pesticides Initiatives Programme to implement a traceability system for fruit and vegetables.

In Pakistan discussions with the WTO Cell in the Ministry of Commerce also confirmed that most of their work and capacity building initiatives is focused on export-oriented sectors in relation to non-tariff barriers, such as meeting environmental requirements to access export markets.


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This emphasis confirms the findings of the Stage 1 Report, based on analysis of the TCBDB, that environmental capacity building is directed primarily at facilitating trade and the needs of trading countries, and is not necessarily linked to the environmental impacts of increased trade. This rather narrow focus means that the priority needs of developing countries, in terms of mitigating the environmental impacts of trade liberalisation, is effectively bypassed.

Although capacity building in Brazil has also been substantially driven by export-competitiveness, and the need for Brazil to position itself to take advantage of the projected surge in global demand for its sugar/bioethanol products, the environmental capacity building agenda in the sector has been less closely tied to WTO processes. This is perhaps a reflection of the fact that capacity building in Brazil has been primarily endogenous, resulting in a focus more oriented to identifying and applying specific technical solutions.

Environmental impacts of trade liberalisation are often not known

The case studies also illustrate that in many sectors there is not sufficient understanding of the environmental impacts of liberalisation. While there has, increasingly, been substantial analysis of the environmental impacts of trade agreements (eg Sustainability Impact Assessments), these remain at a certain level of generality. For instance, the fisheries sector in Uganda is well studied but impacts related to agricultural production and forestry are less well known. Similarly, in Pakistan the case study highlights the lack of research studies on the environmental impacts of the country’s largest industries, which it concludes makes it difficult to quantify the positive and negative impacts of trade liberalisation. In Brazil, where more research and analysis of environmental impacts has been undertaken, debate over the environmental and social impacts of sugar/bioethanol production have recently been characterised by heated controversy.

Participants in Uganda workshop felt programmes did address priority issues

In Uganda, the study included a half-day workshop with officials from various relevant government ministries, members of relevant project implementation units and a representative researcher and NGO staff member. The workshop discussion focused on a questionnaire received and completed in advance. Representatives from each ministry considered the environmental challenges in their sector and whether capacity building programmes were in place to address them. Most participants felt that the CB&TA programmes addressed the priority issues in their sector with the exception of a number of specific gaps as highlighted in Table 12 which summarises the questionnaire and workshop findings.

7.1.1 Conclusion

Are priority needs are being met? The case studies show that, to a limited degree, in some sectors, capacity building is addressing relevant issues, with some degree of effectiveness. In other sectors, there is currently not sufficient information about environmental impacts to be able to reach a conclusion; and the environmental impacts of trade or indeed environmental issues per se are not in themselves a national priority for research or capacity building. In all cases, priorities at the global level were eclipsed by national-level concerns.

The case studies have shown that there are examples, such as the textile sector in Pakistan and fisheries in Uganda, where capacity building has been relevant and


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targeted. Capacity building programmes have helped firms and natural resource communities to change their practices, thereby improving access to export markets and introducing better environmental management. Capacity building to address the environmental requirements of trade and support firms in accessing export markets was perceived as a high priority.

The case studies also illustrate that the impacts of trade liberalisation are not widely researched. Analysis of the positive and negative environmental impacts of Pakistan’s largest industries (textile products, agriculture, leather, etc) relied on perceptions amongst the policy and private sector community, as no research existed documenting the impacts. Little systematic research has been undertaken into the impacts of liberalisation in Uganda in the agriculture sector, where the focus has been largely on meeting the environmental requirements for trade with the EU or on areas associated with industrial development, mining or the importation of hazardous chemicals. And even in Brazil, where the environmental agenda is relatively mature, stark disagreements persist over the type and scale of environmental impacts.

In all three cases, capacity building has focused predominantly on environmental impacts at the national level. This is particularly surprising in the case of Brazil, where the global environment has been on the political agenda for several decades, and where the global impacts of sugar/bioethanol production, in terms of pressure on the agricultural frontier and Amazonian rainforest, are potentially significant.

7.2 Where priority needs are not being met

The case studies also illustrate circumstances where capacity building may not be addressing priority needs, either in the area of intervention or the form of delivery. The first and perhaps obvious reason is where capacity building on trade and environmental issues are not themselves government priorities.

Capacity building on trade and environment may not be a priority

The priority in a poor developing country such as Uganda is economic growth and poverty reduction. The Uganda PEAP (the country equivalent of the PRSP) clearly illustrates this with the focus it places on economic growth through structural transformation of the economy, modernisation of agriculture and development of industries, and poverty eradication through investments in health and education. Active enforcement of environmental standards is of secondary importance and often perceived as a potential brake on economic growth. Research and lobbying around the poverty environment nexus, and particularly the connection between poor environmental management and poverty, have helped to mainstream environment into national planning processes.

Donor led exercises in Uganda such as the World Bank’s ongoing support to the National Environmental Management Agency and DfID funded research around stakeholders and the environment in the PEAP have created an impetus for more integrated consideration of environmental issues in national policy and planning. The Uganda case study illustrates the gradual mainstreaming of environment and natural resource issues into the PEAP over a 10-year period, with the Third PEAP (2004-05 to 2007-08) addressing environment directly in a separate chapter, identifying priority actions and key policy issues and noting that sound environmental and natural resource management underpins sustained economic growth and poverty eradication. Trade and environment issues are included as one of many national resource concerns, but do not attract specific focus.


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Progress in integrating environment into mainstream policy making in Pakistan has been slower. In 2003, the PRSP Secretariat requested assistance from DfID to facilitate a process to better integrate environmental sustainability into its first PRSP77. PRSP Secretariat staff interviewed for the case study recognised that the first strategy document did not treat environmental issues comprehensively, and intended to address them in more depth during the PRSP process currently under way (as of March 2007). The case study also notes that the general perspective from outside and from some inside government is that efforts to address trade and environment issues have had little positive impact. Reasons given include the urgency of poverty and health issues, a failure to prioritise environment and broader institutional weaknesses that prevent the introduction of management systems. The EPA is described as an organisation that ‘can pinch but not bite’ and the lack of inter-ministerial coordination is citied as an obstacle to addressing cross-cutting issues such as trade and environment.

In Brazil, there was little linkage between the capacity building initiatives analysed and government policy on either trade, the environment or development. Only the work of CETESB, a niche agency for the implementation and enforcement of environmental standards in São Paolo state, reflects priorities defined by (state) government. Instead, capacity building initiatives were primarily targeted at increasing productivity, with positive environmental spillovers. Non-technical interventions, centring on the absorption and application of CSR principles, were targeted at economic and social benefits, to the exclusion of environmental concerns.

Programmes reflect donor priorities and delivery conditions

In the Uganda case study, the workshop participants also reported capacity building and technical assistance gaps (Table 12). These included areas that needed specific further external support such as the preparation of an inventory of bio-trade products, assistance in assessment and containment of invasive species, and application of economic instruments. Other gaps related to the approach to or delivery of capacity building programmes. There was a lack of:

� a strategic long-term approach to capacity building,

� information or coordination among initiatives,

� sufficiently flexible or phased programmes that can respond to changing needs,

� adequate participation of stakeholders, particularly from the private sector.

In relation to the delivery, there was a request that intended recipients be brought in at the project conceptualisation and design stage to ensure their ‘buy-in’ throughout the process. The use of external consultants was questioned, particularly in the mining sector where it was felt that this deprived local people of a learning opportunity. In other commentary on trade capacity building programmes, the delays in the disbursement of funds via donors and external consultants was identified as a limitation to the delivery of programmes, and the continued delivery of short, one-off workshops or taught courses was considered to have less sustainable or long-term impact that more experiential or ‘learning by doing’ approaches.

77 This resulted in the Mainstreaming Environment into the Government of Pakistan’s Poverty Reduction Strategy Paper (GHK 2003)


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Similarly in Brazil, capacity building was in some instances overly supply-driven, with little or no assessment of the demand for environmental flanking measures. While French NGO Ethical Sugar’s CSR seminars may have attracted an impressive range of stakeholders, the seminar report indicates that representation was lacking in precisely those areas that perhaps mattered most: there was no representative from the north east and the new sugar areas were under-represented; and there were few representatives from factories or sugar groups78. The case study indicated that there may be a level of mistrust locally regarding Ethical Sugar’s commercial objectives in facilitating the seminars. IMAFLORA and Dutch NGO NOVIB completed a first, four-year phase of their social and environmental certification programme before finding that there was no demand, either from the public sector or from industry, for its standard.

Capacity building stops short of implementation

A theme that runs through the Uganda case study is the disconnection that arises when capacity building funds sector studies and workshops to identify the causes of a particular impact, but stops short of supporting actual implementation. Participants recommended two phase capacity building and technical assistance programmes: phase one to identify the problem and recommend actions to address it, and phase two to support implementation. The fisheries sector was cited as an example in which the African Development Bank and the EU provided funding to upgrade landing sites in parallel with capacity building programmes targeted at the fisheries community and improved practices.

Approach to capacity building is ad hoc and partial

The Ugandan respondent from the environment ministry recommends a more comprehensive approach to capacity building, one that prioritises the environmental impacts of liberalisation and plans a realistic capacity building programme around a comprehensive needs assessment. Too often the focus is on programmes for government officials. A broader constituency of interests should be included in capacity building programmes, particularly the private sector but also NGOs, unions, organisations working with the informal sector, women’s groups and other civil society organisations.

7.3 Are flanking measures being mainstreamed?

The Ugandan case study notes positively the areas where flanking measures, or policies or programmes designed to mitigate the environmental impacts of trade liberalisation, have been integrated into national strategy documents such as the PEAP. There are reservations expressed about implementation, with the observation that ‘integrated planning did not always result in integrated implementation’ but specific studies, such as those in the fisheries sector and tools such as the integrated assessment, strategic environmental assessments and environmental impact assessments, were seen as helping to integrate environmental concerns into policies, plans and programmes at different levels of government. The level of knowledge and understanding about the links between trade and environmental impacts is quite high. Donor initiatives such as the UNEP/Government of Uganda Integrated Assessment for Planning for Sustainable Development in 2005 have no doubt through their case 78 http://www.sucre-ethique.org/IMG/pdf/Resume_of_the_Brazilian_seminar_-_Sao_Paulo_-_30_31_May_2006.pdf


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studies and application of SEA approaches to the trade sector helped to raise awareness about the links between environment and trade.

That said, the case study and the workshop participant responses seem to conflate sector policies generally with policies to address changes occurring due to liberalisation. It is only in sectors where the specific impacts of liberalisation have been studied, such as fisheries, where it is clearly ‘flanking measures’ that have been included in national strategies.

In Pakistan, the more acute focus on trade issues following the ending of the MFA has resulted in a largely sectoral approach to mitigating the environmental impacts of trade liberalisation. Even within sectors as prominent as Pakistan’s textiles industry, flanking measures have been implemented largely at the will of individual companies, and with varying degrees of effectiveness. Furthermore, flanking measures have targeted very specific, circumscribed impacts while larger impacts relating to, for instance, increasing water and energy use have been neglected. Nevertheless, a rapid market selection process is driving a gradual, bottom-up improvement in environmental standards in specific, competitive industries.

However, delivery of environment-related trade capacity building has been insufficiently strategic for significant mainstreaming effects to have taken place. This has been one of the consequences of a ‘grow first, clean up later’ stance, institutional and systemic weaknesses, and the failure to monitor proposals for mainstreaming the environment into the PRSP process, and through that process into wider policy making processes.

To a considerable extent, it has been weak institutional capacity which has undermined potential for mainstreaming environmental issues into trade policy. The Environmental Protection Agency, in particular, is singled out as an organisation which ‘can pinch but not bite’ as its mission is undermined by its inability to enforce environmental standards or regulations. This echoes similar concerns about the enforceability of environmental covenants accompanying the CAFTA (see Section 2 above), and explains the marked preference for small-scale, targeted interventions where the institutional capacity of partner organisations is known in advance, or can be assessed as with the example of the Royal Dutch Embassy (see Section 4.5).

This indicates that, in both Uganda and Pakistan, the challenge of mainstreaming flanking measures has yet to be adequately tackled. While process-based tools such as integrated assessments, strategic environmental assessments and environmental impact assessments do serve a clear mitigation purpose, their impact may be undermined by weak capacity and/or restricted scope.

In Brazil, the issue-specific focus of much of the capacity building provided, and the extent to which capacity building is delivered by non-governmental actors and the private sector, has effectively constrained the scope for initiatives to contribute to mainstreaming of flanking measures in the sugar/bioethanol sector. While the case study shows a lack of integration between capacity building within the sector and national level policymaking, Brazil’s generally high level of environmental awareness and relatively good environmental protection framework (see Stage I report) suggests that environmental issues are relatively well integrated at the national level.


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7.4 Institutional framework and the role of different stakeholders

Across the three case studies, there are marked differences in institutional focus for trade and environment issues. In Pakistan, the positioning of a WTO Cell within sectoral departments was an important focus not only for liberalisation initiatives but also for expertise on environmental impacts and their root causes. The level of knowledge in, for example, the WTO Cell of the Ministry of Food, Agriculture and Livestock was judged as high. The cell operates quite flexibly, working across ministries and with a consultative group with wide representation including small and large farmers, academics and researchers. Internal capacity building and training of staff has been important in building expertise within these units.

In Uganda, by comparison, the institutional structure for dealing with trade issues is fragmented between different departments and organisations. The MTTI is responsible for trade policy but the National Forestry Authority, the Department of Fisheries Resources and other institutions set up or supported by various donor initiatives, such as the African Environmental Information Network and the National Environmental Management Agency all have some role in environment and trade matters.

In Brazil, the institutional framework for dealing with trade-environment issues in the sugar/bioethanol sector is more fragmented again, partly as a result of the many non-governmental and endogenous channels through which capacity building has been delivered. There is little evidence in the case study that trade and environment issues in the sector are encompassed within broader institutional frameworks for trade or environment generally. The often localised nature (in terms of issues as well as geography) of the problems addressed through the capacity building programmes reviewed is reflected in the largely localised policy response, and a corresponding absence of a clearly defined institutional framework for trade and environment issues in the sector.

The Brazil and Pakistan case studies, however, also highlighted the important role of the private sector and market competition in catalysing a gradual increase in environmental standards. In Pakistan, this has come about in a context where a broad liberalisation agenda, combined with the ending of the MFA, has intensified competition at both the national and the international level, and has required little in the way of donor support. In Brazil, it has been trade liberalisation accompanied by the projected growth in demand for biomass energy products that has stimulated private sector initiatives. The localised and ad hoc nature of these initiatives, particularly in Brazil, suggests that there is scope for donors to play a supportive role, potentially through budgetary support, both in countries where competition is intensifying as well as in countries where the competitive environment functions less as a driver of improved environmental protection.

All three case studies also touched on the increasingly important role of NGOs in delivering capacity building for addressing the environmental impacts of trade liberalisation, although issues of NGO capacity – especially for local NGOs – remain. As illustrated through the work of the IOB evaluated NGOs (Section 2.3.3), NGOs have a comparative advantage in offering niche technical and consultancy services which may provide a cost-effective means of providing follow-on support to the wealth of analytic and advisory work that is currently being done by the likes of the Integrated Framework. In Brazil, where the NGO sector is relatively more developed, local branches of international NGOs such as WWF and Greenpeace, have been important


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in providing technical assistance and capacity building, as well as advocacy, and often work in close cooperation with specialist local NGOs (eg Pro-Natura and Vitae Civilis).

All of these lessons point to the necessity of an integrated strategy which seeks to maximise the impact of capacity building by focusing on the relative strengths of a set of different stakeholders and partners.


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8 CONCLUSIONS AND RECOMMENDATIONS

The case studies, together with the literature review, have sought to identify and assess capacity building to address the environmental impacts of trade liberalisation, considering the relevance and effectiveness of capacity building initiatives in terms of meeting the priority needs of developing countries.

This assessment has been made using an evidence base which has been found wanting in many respects. It has been complicated by the fact that capacity building has been differently and often poorly defined, even within the same source. This has been clearest in the entries to the OECD/WTO TCBDB, which encompasses a very broad range of activities, depending on the interpretation of the reporting agency. And despite this breadth, the case studies have identified a number of relevant capacity building programmes which are not captured in the database.

There has been little attention to capacity building to address specifically the environmental impacts of trade liberalisation. A narrow interpretation might focus only on impact assessments conducted as an appendage to trade negotiations. These assessments do not, in themselves, constitute capacity building, but support to developing countries in strengthening their trade and environmental expertise and analytical capacity, as well as their ability to frame solutions to problems identified by impact assessments, would be included.

Those capacity building programmes reviewed by the literature and in the case studies have, in general, been found inadequate in addressing the problems they were designed for. This has been a consequence of the fact that approaches to capacity building to address the environmental impacts of trade liberalisation have been poorly – or not at all – conceptualised. In many cases, capacity building has been inadequately linked to environmental impacts, undermining their function as ‘flanking measures’. Capacity building and environmental protection objectives have been clouded by a range of shortcomings, including poor coordination by donors, low local ownership, other conflicting agendas, and the context of trade negotiations where capacity building is used as a bargaining chip which developed countries may use to ‘sell’ trade agreements, and which developing countries may trade off against other demands.

The lessons from the case studies and the literature review point to five distinct conclusions:

Current capacity building to address the environmental impacts of trade

liberalisation is barely adequate to meet growing and often little understood

challenges to sustainability.

Of the wide range of capacity building interventions reported to the TCBDB, as well as those reviewed in the case studies, only a handful can be described as being directly targeted at addressing the environmental impacts of trade liberalisation. Many may have positive indirect impacts, but it has been difficult to identify programmes which have successfully helped developing countries to prevent negative environmental outcomes of trade liberalisation processes. This is a consequence of the fact that capacity building and its objectives are often poorly – if at all – conceptualised, environmental impacts are inadequately understood (see below), and linkages between capacity building, trade and environmental impacts have been weak.


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The poor conceptualisation of capacity building to address the environmental impacts of trade liberalisation points to a structural obstacle, namely the low (although increasing) political salience of environmental protection vis-à-vis increased trade for both developed and developing country governments.

There is a need for a more focused and coherent strategy on the part of donors.

Relevant and effective capacity building will only come about where there is a focused and coherent strategy on the part of donors to address the environmental impacts of trade liberalisation. This is currently hindered by a number of factors:

Availability and quality of the evidence base

There is very limited understanding of the broad impacts of increased trade liberalisation on the environment, with the result that there is little consensus as to whether the net impact is positive or negative. Previous work for Defra (GHK & IEEP 2005) has taken a fairly rigorous approach to assessing the effects of trade liberalisation in a number of production areas, including dairy, sugar, vegetables, poultry, cotton, textiles, energy services and transport. However, the analysis focused mostly on impacts in EU and OECD countries, and recommended flanking measures appropriate to the institutional and regulatory capacity and tools available in the developed rather than the developing world. Other available assessments have similarly focused on narrow sectors or the policy and regulatory environment, usually within specific country contexts. Sectoral approaches trace direct, usually negative impacts, but often overlook the potential for indirect, secondary impacts (eg those which accompany growth and more competitive markets). Attempts to capture and measure the indirect, secondary impacts remain at a level of generality that allow for ongoing dispute, and provide little practical direction for entry points for organisational or institutional capacity building.

This has direct implications for donors and the capacity building agenda. The better understanding of direct, sector- and country-specific impacts provides clear entry points for more strictly technical assistance interventions with outcomes which can be concretely defined and measured (eg, lower factory emissions, less intensive energy/water use). Capacity building interventions, on the other hand, which target outcomes at the organisational and institutional level, are more suited to addressing the broader, more indirect impacts. As long as these remain unclear, designing capacity building which is specific, relevant and effective in meeting developing country needs will remain a challenge.

In terms of assessing capacity building, currently the scope and volume of capacity building are not sufficiently known. The Stage I report noted a number of methodological shortcomings of the main source of data on environment-related trade capacity building, the WTO-OECD TCBDB. In particular, the database is compiled through a system of self-reporting by WTO member countries, resulting in certain inconsistencies in terms of categorisation and definition. This has resulted in a lack of comprehensiveness, as highlighted by our Stage I review of donor activities and our case studies. This lack of comprehensiveness is reflected in the EC’s ‘Joint Evaluation of Coordination of Trade Capacity Building in Partner Countries’ (2006), which notes the failure of a number of donors to keep up to date with their various programmes. The evaluation also highlights the insufficiently precise information within the database and the high number of activities recorded as unspecified. The lack of precision


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extends to the understanding of capacity building, and the conflation of capacity building with technical assistance activities.

Furthermore, evaluation of environment-related TCB has not been a priority. The Stage I report also noted the lack of systematic evaluation and assessment of trade capacity building programmes, especially those relating to the environment. This patchiness has also been reflected in the literature review in Section 2. Of those evaluations which are publicly available, there are a variety of formats and measures against which projects and programmes are evaluated, and not all are of high quality or answer questions which are relevant to this report. Indeed, at least one of the evaluations focused almost entirely on the lack of reporting and assessment of trade capacity building.

Identifying best practice will depend on a much improved evidence base, in terms of both data and evaluation. This is needed to be able to systematically identify best practice in environment-related trade capacity building, especially in identified areas of need such as:

� Building trade policy formulation capacity;

� Improving post-negotiation and accession implementation capacity;

� Evaluating trade-related TA&CB projects;

� Multi-stakeholder consultations, integrating a range of partners;

� Intra-governmental coordination.

Poor identification of priorities by donors and developing countries

The case studies and the literature review indicate inadequate and imperfect consultation between donors and developing countries to identify priorities for capacity building. Priorities are often distorted by contingent interests which are determined by countries’ relative trade and bargaining positions. On both sides, for instance, the emphasis may be on the environmental requirements of trade rather than the environmental impacts of trading. The case studies confirm the finding of the Stage I report that the primary objective of much of the capacity building and technical assistance to developing countries is increased trade, rather than environmental protection. This is manifested in an emphasis on issues relating to the environmental requirements of trade and environmental barriers to trade, rather than the environmental impacts of trading. Consequently, mitigation measures – and capacity building around such mitigation – are framed in line with issues that are defined within the trade negotiation agenda (eg, eco-labelling, environmental goods and services, TRIPs), rather than those defined within the environment protection area (eg, climate change, air quality, land degradation).

This trend risks a rather partial approach to environmental mitigation, and highlights a potential missed opportunity to the extent that it focuses on neutralising the negative impacts at the expense of enhancing the positive potential of increased trade. This partiality underpins the limited extent to which environmental considerations have been integrated into mainstream policy decision-making, including formulation of PRSPs. The challenge remains to incorporate environmental issues across the policymaking spectrum as a cross-cutting issue, rather than as a discrete, single sector which can be bolted on.

It is important, therefore, that capacity building needs are determined through a proper consultative process between donor and beneficiary country, which can be ringfenced


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from the political interests and the differential bargaining power that characterises the trade negotiation process. In addition, developing countries need to formulate their priorities in consultation with key stakeholders at the grassroots level in trade and environment: the private sector and advocacy NGOs for the environment. For this kind of tripartite consultation to take place and be effective, however, current levels of mistrust – as seen in the Brazil case study – between industry, civil society and the public sector need to be tackled.

Low political salience for donors

Commitment by rich countries to addressing the environmental impacts of trade has been variable, at best. While concerns for the global environment appear currently to be gaining salience, issues relating to the environmental impacts of trade continue to be clouded by the limited and/or disputed evidence of environmental impacts, as well as the political currents and competing interests of the global trading regime. A focused and coherent capacity building strategy to address the environmental impacts of trade liberalisation depends on securing the buy-in of the most powerful countries which determine the relative importance of environment within the trade agenda.

Cross-ministry cooperation

In both donor and developing countries, the environmental impacts of trade liberalisation have been poorly integrated in national policymaking frameworks, with inadequate coverage by development, trade or environment ministries. Ownership of the issues tends to fall between these ministries, and tend to be marginalised by development and particularly trade ministries. Notwithstanding the increased salience of the aid for trade agenda, the UK’s Environmental Audit Committee (EAC) recently found that the Department of Trade and Industry has ‘failed to get to grips with sustainability issues in trade’ (2006c). The EAC has called for DfID to take a lead role on how it, and other agencies including the DTI and Defra, approach development and the environment, although its report, Trade, Development and Environment: The Role

of DFID, focuses almost exclusively on development and the environment, and is silent on the more complex interrelationships between trade, development and the environment (2006a). Similarly, the EAC’s November 2006 report, Outflanked: The

World Trade Organisation, International Trade and Sustainable Development, calls for a ‘much tighter linkage between trade policy and sustainable development’ (2006c).

There is a need for capacity building to follow through on analysis and diagnosis

with funding support for implementation of recommendations.

The case studies and literature review found that there has been substantial work to undertake studies and analysis on issues relating to trade and environment. While this has contributed to the acknowledged need to build a knowledge base, there is frustration on the part of developing countries that capacity building and technical assistance stops short of funding the implementation of recommendations. There is a need here to tie analytical and diagnostic work more closely to concrete actions to build on the findings in developing solutions and implementing them.

Addressing the environmental impacts of trade liberalisation requires more than

‘flanking measures’.

Flanking measures tend to be conceived as bolt-on components to programmes which remain otherwise unaffected by environmental considerations. It requires the proper


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integration of environmental protection principles into trade negotiation processes and outcomes.

There is a need for capacity building to support developing countries in taking

account of environmental impacts beyond the local level, at the national,

regional and global levels.

To the extent that capacity building has been locally determined, it has focused on narrow and niche technological solutions targeting local impacts. The benefits have therefore been contained at a local level, at the expense of global and even national/regional impacts. Bilateral and especially multilateral donors are in a position to work with developing countries to identify impacts at both the local and the global level, and to design and deliver capacity building which appropriately prioritises and addresses these risks, as well as to understand and respond to the interactions between local and global impacts. This requires providers of capacity building, including donor trade and development ministries, to be able to measure environmental impacts against targets that allow a clear assessment of their effectiveness in strategically integrating the environment into their work.

8.1 Relevance of capacity building

The challenge of making environment-related trade capacity building relevant to developing countries’ priority needs when an adequate information and evidence base is absent has been highlighted above. Without being able to properly identify and quantify the impacts, and establish clear lines of causality, capacity building initiatives can only be approximately relevant to country needs and priorities.

Relevance is further undermined by two key factors identified in both the literature review and the case studies: low ownership of the capacity building agenda by beneficiary countries and, within governments, key ministries; and systemic institutional weaknesses which put at risk the advocacy and enforcement capacity of key agencies.

Country ownership has been highlighted as an essential criterion for effective donor aid, yet the evaluations and case studies have repeatedly cited low country ownership as a factor undermining both the relevance and the effectiveness of capacity building. Ownership has been undermined not only by limited consultation on the part of donors, but also by poor inter-governmental coordination which often means that relevant ministries are not party to the discussions between the donor and the government. The limited opportunity for governments and ministries to shape the content and delivery of capacity building is compounded by the reluctance of some developing countries to make capacity building demands in the course of trade negotiations, for fear that they may diminish bargaining power on other fronts.

A further finding from the case studies is that ownership is not determined only by the active participation of government. Ownership is deepened where government agendas find legitimacy from the participation and contribution of NGOs and the private sector. This points to the need for donors to consider ways to build partnerships with beneficiary countries which are inclusive and reflect the balance of interests between the public, private and ‘third’ sectors.

The case studies also highlight risks to relevance where donors work with organisations or institutions which are undermined by systemic weaknesses. In Pakistan, for instance, delivery of capacity building in the form of training was found to


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bring limited institutional gains given the high rate of transfers within the civil service, as well as the propensity of newly trained individuals to take their upgraded skills and qualifications to better paid jobs elsewhere. NGOs were also considered to be weak. Broader institutional weaknesses were also blamed for the failure of the evaluated USAID trade capacity building programme (see literature review in Section 2 above), and the recommendation was made that USAID should provide assistance only to countries where there is a minimum level of institutional and governance capacity. This has been put into practice on a smaller scale by the Royal Dutch Embassy in Pakistan, which routinely conducts an institutional appraisal of partners aimed at gauging whether they can effectively deliver the project.

8.2 Effectiveness of capacity building

Given the limited availability of documented evidence, it is difficult to assess whether capacity building has been effective. The case study participants suggested that capacity building had been effective to a degree, but that substantial gaps remain. These relate to a lack of impact on the ground, a bias towards an international rather than a domestic environmental agenda, unstrategic and short-term planning, and little or no impact in terms of poverty reduction.

A frequent criticism was that a large share of funding is dedicated to analytical exercises, without follow-on funding for the usually more expensive task of implementing the recommendations of the analyses. This was a key criticism of the IF, and was also a prominent criticism in the Uganda workshop. This extends to the recommendations of safeguard procedures such as Environmental Assessment (World Bank), SEA and EIA (both EC), and IA (UNEP), which are not always mandatory – especially when used by other organisations (eg private sector organisations) – or the recommendations bring with them cost implications which are not factored into original project financials.

Similarly, a large number of projects involved low-cost workshops, seminars and other classroom-based training. While case study participants felt these had generally been useful and informative, there was a sense of being overwhelmed by their volume, to the extent that it is sometimes difficult to find willing participants. This points to a need for a better balance between experiential and didactic learning (something which DfID was commended for in one of the evaluations).

In short, a number of the priorities for aid effectiveness as defined by the Paris Declaration are not met. Country ownership is weak, undermining alignment of aid flows to national priorities (relevance). Efforts to harmonise donor activities (eg the IF) have been severely criticised, and accountability is undermined by the scarcity and inconsistency of evaluations and assessments.

8.3 Areas for future research and action

The Pakistan case study identified as a significant weakness the lack of research studies on the environmental impacts of Pakistan’s largest industries. The case study conclusions rely on the perceptions of key stakeholders of not only the actual environmental impacts of liberalisation in certain sectors but also the effectiveness of capacity building programmes to address these issues. The CPI presents a very positive picture of environmental improvement in the key export-oriented sectors associated with liberalisation, due to pressures to conform to export market standards. The EPA view is much less optimistic, highlighting ongoing practices in firms serving local markets, and the poor levels of overall compliance with standards. While the


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understanding of linkages between trade and environmental impacts in some quarters, such as the WTO Cell in the Ministry of Food, Agriculture and Livestock, was described as high overall, more and better research into trade and environment issues across sectors would provide the basis for improved policy making and a common view of the potential areas for intervention.

In Uganda, the workshop respondents highlighted some specific areas requiring further research and action. These included:

� forest trade related issues including introduction of eco-systems payment, emission reduction purchase agreements and bio-prospecting and bio-patent agreements;

� research on forest quarantine, inventory of bio-trade productions, and issues around invasive species assessment and containment;

� application of economic instruments in the fisheries sector;

� capacity building in the mining sector to address pollution and remedial works focused on using national and regional expertise;

� more examination of the potential for tourism/wildlife to consider the impact on protected areas and species;

� preparation of a participatory strategic plan for capacity building in various agricultural sectors mainly to upskill local firms to meet the environmental requirements of new trading partners;

� action research on implementation of the polluter pays principle;

In addition, the case study highlights more generic areas for capacity development. These include developing trade and environment expertise in local universities and other institutions of higher learning, developing the role of the private sector and focusing on comprehensive needs assessment and participatory strategic planning to design phased programmes for capacity support in key sectors, particularly agriculture.

The Brazil case study highlighted clear areas where current capacity building is inadequate and where future action would be best placed. These are:

� Impacts in terms of the expansion of the agricultural frontier and its links with biodiversity and GHG emissions

� Indirect impacts as a consequence of displacement of agricultural activities that will become less profitable.

� Trade, rather than production, issues such as negotiations on environmental goods and services (EGS) and the trade implications of environmental/social certification, lifecycle analysis and production and process methods (PPMs).

� GMOs and understanding the different trade, environmental and social implications associated with the introduction of GMO varieties in the sugarcane sector.

� Poor implementation and lack of enforcement of environmental regulation.

� Social issues, especially rural unemployment and better inclusion of small-scale producers.

� Ownership of programmes linked to foreign institutions.


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� The need to build mutual trust and confidence among stakeholders: to increase confidence between industry and civil society, and increased public support for initiatives.

8.4 Recommendations

The documents reviewed and informants interviewed offer many recommendations for making environment-related trade capacity building more relevant for developing country needs, and more effective in its delivery. Of these, the more strategic and encompassing recommendations for action by the UK are presented for the multilateral, partner country and UK level.

8.4.1 At the multilateral level

Recommendations for UK action at the multilateral level focus on:

� Advocacy for differential treatment for developing countries

� Decoupling aid from WTO processes

� Supporting continued strengthening of the IF through creation of a Trust Fund for implementation of recommendations

� Support for an independent data, monitoring and evaluation framework

� Seeking opportunities for capacity building to address regional and cross-border impacts

� Funding support to multilateral capacity building initiatives

Advocacy for differential treatment for developing countries

Notwithstanding the text of the Doha Ministerial Declaration, which agreed that ‘special and differential treatment for developing countries shall be an integral part of all elements of the negotiations’, substantial work remains to be done to agree a package of special and differential treatment (SDT) which addresses the needs of developing countries. The principle of SDT is that developing countries have the right to protect themselves from potential adverse economic or social shocks as a result of WTO trade liberalisation. It is based on the assumption that developing countries sometimes require a longer transition period than developed economies but that they will, eventually, conform to the same levels of openness.

The principle of SDT is an important catalyst for the provision of technical assistance to developing country members of the WTO. However, progress has been slow since the Hong Kong Ministerial in 2005 and the issue continues to be the subject of considerable disagreement between developed and developing country members. The SIA for the Doha Development Agenda notes that if the ongoing work programme on SDT fully meets the Doha commitment for all developing countries, there are likely to be significant beneficial impacts in terms of sustainable development. The UK government needs to work within the WTO to ensure that SDT provisions are not eroded, and that proposals relating to technical assistance maximise opportunities to address environmental impacts.

Decoupling aid from WTO processes

A coherent approach to capacity building to address the environmental impacts of trade liberalisation requires that donor countries formulate their capacity building support with a broader and more holistic view of issues concerning trade and the


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environment than prevails within the WTO. This implies assisting more countries, on a much broader range of issues. For instance, the UK government is in a position to support the recommendation of the WTO Task Force on Aid for Trade for establishing (or improving) national coordination processes for identifying the particular challenges in the trade sector. And by broadening the range of issues it is prepared to support through TCB, the UK can create policy space for priorities to be more closely aligned to developing country needs, and thereby for greater developing country ownership.

Supporting continued strengthening of the IF through creation of a Trust Fund for

implementation of recommendations

The World Bank (2006), in its response to the recommendations of the Task Force on Aid for Trade, has recommended enhancing the Integrated Framework with a Trust Fund to support multi-year programmes of capacity building that would lead to more effective incorporation of trade into PRSPs, strengthen in-country capacity for implementation, and provide resources to finance project preparation to accelerate implementation of priority actions. The UK government, as one of 15 bilateral donors to the IF, is in a position not only to support but to fund this proposal.

It should be noted that, while this addresses the issue of following through on analytical work with funding for implementation, it does not in itself address the issue of the environmental impacts of trade. Environmental considerations are not currently included in the terms of reference for diagnostic studies, as a result of which capacity building on the environmental impacts of trade liberalisation may (and appears to be) marginalised. The UK government should consider its view on the relative importance of environmental considerations in the diagnostic study, and the risks posed by their omission.

Support for an independent data, monitoring and evaluation framework

There is significant support and momentum for the creation of a reliable, consistent data, monitoring and evaluation framework for trade capacity building. The brief overview of the OECD/WTO TCBDB in the Stage I report has indicated some of the methodological problems and limitations with the database. Nevertheless, it is a substantial database which may serve as a starting point for developing a more robust means of assessing trade capacity building globally. The UK government can catalyse progress on this front, starting with an in-depth, comprehensive review of the scope and consistency of the TCBDB, an assessment of the robustness of its methodology, and a verdict on its usefulness. The review should also consider whether this function should be carried out by the WTO, or whether it should be assigned to an institution with greater independence from the trade agenda.

Seeking opportunities for capacity building to address regional and cross-border

impacts

Trade related environmental impacts are rarely confined to country borders or boundaries. A pollution impact such as air or water pollution, soil erosion or ground water contamination will often be physically demarcated by geographical features such as a water catchment area or river basin. Capacity building initiatives need to address regional or cross-border environmental impacts of trade and may be targeted at existing institutions responsible for wider environmental management issues, such as river authorities or through coordinated programmes led by regional agencies, that are able to take an overview of environmental impacts associated with regional trade negotiations and compacts. Specifically, the UK can focus its capacity building for


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developing countries on building in-country capacity and expertise to contribute to regional and global fora to protect its domestic environment and to reduce environmental impacts from neighbouring countries, as well as in the interests of global stewardship of the environment.

Funding support to multilateral capacity building initiatives

There are several multilateral avenues for providing funding support to capacity building initiatives. UNEP is one of the most relevant for environmental capacity building, as it has a key role in supporting improved environmental governance. It not only supports countries in meeting their MEA obligations, it is also one of two global organisations with a dedicated capacity in industry, trade and environment, the other being UNCTAD with whom it works closely. UNEP has recently gone through a process of making sure that its various programmes are aligned with the Bali Strategic Plan, which focuses on capacity building and technology transfer. Officers in the Division of Technology, Industry and Economics have identified three current capacity building initiatives on trade and environment which directly support the Bali Strategic Plan, and where UNEP would welcome UK government support and partnership. These are:

� Supporting the development of regional centres of excellence on trade and environment within existing reputable institutions or, where limited capacity exists, supporting the development of institutions themselves through engaging in a programme of long-term capacity development. The goal is to create a critical mass of professionals to champion the course of trade and environment. UNEP is exploring with the Government of Singapore opportunities to establish such a mechanism for the Asia Pacific Region focusing on ‘environment-inclusive policy making’. Similar mechanisms may be supported in other regions of the world. In this effort, and following the Bali Strategic Plan, UNEP's DTIE will work closely with UNEP Regional Offices, UNDP's Bureau for Development Policy and country programmes, UN Regional Economic Commissions, World Bank, regional development banks, WTO, UNCTAD and NGOs.

� Support UNEP efforts to consolidate analytical approaches to integrating trade and environment that are relevant to the realities of policy making in developing countries. UNEP argues that many approaches exist to analyse the impact of a policy direction, course of action or event (eg a trade liberalisation) on the environment or sustainable development. These include Sustainability Impact Assessments (SIAs), IAs and SEAs. However, most assume ‘open’ and ‘rational’ policy making processes that exist in few developing countries. Without practical approaches for integrated policymaking, capacity building will have no substance. UNEP is looking to develop a more realistic and flexible framework for analysis that can be used more widely in developing countries. Presently, UNEP is collaborating with the Lee Kuan Yew School of Public Policy to prepare an operational manual on integrated policymaking focused on problem-solving. It has been involving UNDP, OECD, the EC, World Bank, several governments, and NGOs in related discussions. Recognising the political dynamics of policymaking and finding entry points for change in national development planning is an area of ongoing interest to DfID, evidenced by its interest in promoting the Drivers of Change approach and recent research on Politically Conscious Public Administrative Reform (GHK 2005). There appear to be synergies between DfID’s approach and UNEP interest in


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developing a realistic and flexible framework for assessment ‘focused on problem-solving’.

� ‘Integrated Assessment of Trade-Related Policies and Biological Diversity in the Agricultural Sector’ is an existing initiative by UNEP to enhance institutional and governmental capacities in ACP countries to assess the opportunities and impacts of trade liberalisation in the agricultural sector with a focus on biodiversity. A Reference Manual on Trade and Biodiversity was prepared jointly with the World Conservation Monitoring Centre. UNEP is in the process of implementing the next phase which involves the selection of six ACP countries to receive technical and financial support to conduct an integrated assessment of a trade policy or negotiation affecting the agricultural sector and biodiversity.

At the country level

Recommendations for UK action, in its role as a donor working alongside other development agencies with partner developing countries, include:

� Linking support for research and analytical work directly to clear, concrete outputs addressing environmental impacts

� Extending and deepening trade expertise and engagement with trade ministries

� Building ownership by government, the private sector and civil society

� Considering direct budgetary support as a channel for capacity building

� Ensuring the integration of aid for trade commitments into development strategy and planning

� Support to domestic capacity for environmental and economic regulation

Linking support for research and analytical work directly to clear, concrete outputs

addressing environmental impacts

While the need for a broader assessment of environmental impacts, including both indirect as well as direct impacts, is recognised above, our Pakistan case study highlights the need for ongoing, sector-related analysis to better inform not just policy makers but also – and increasingly – the private sector. Improving the capacity to manage environmental impacts rests first on building the in-country skills, resources and institutions capable of researching and analysing processes of change, and documenting the impacts for policy makers to consider and assessing different potential strategies and actions to address negative impacts. Donors such as the UK can help to more deeply embed the lessons learned from such research by packaging capacity building support so that research and analytical work is coupled with funding support for operationalising and building on the lessons. This kind of programming needs to be framed so as to ensure robust monitoring of outputs. Developing in-country capacity also supports a virtuous circle whereby greater analytical capacity can bolster local ownership and influence over capacity building priorities and delivery.

Extending and deepening trade expertise and engagement with trade ministries

Trade expertise, built up within core ministries of trade and commerce, is usually focused on strengthening the role of the country in negotiations. Better links and understanding of the longer-term impacts of changes in trade regimes, such as those on environment, was identified where ‘trade’ expertise existed across departments,


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such as in the WTO Cell in the Ministry of Food, Agriculture and Livestock in Pakistan. Supporting the extension and deepening of trade expertise in parallel ministries creates shared knowledge that allows a better understanding and ability to address trade and environment related issues.

Building ownership by government, the private sector and civil society

Building ownership is also important. It is a cross-cutting recommendation covering at its broadest awareness raising with government to increase ownership of issues around environmental impacts of trade, integrating TCB with national development priorities, and prioritising and designing capacity building in consultation with government. But it is also about promoting the important role of the private sector (and market competition) in driving a gradual increase in environmental standards, and the increasingly important role of civil society and NGOs (see Section 7.4). The UK can play a role in this by facilitating in-country, tripartite discussions in which the public and private sectors and civil society can work towards a consensus on national priorities, which feed back to the providers of capacity building; and, where trust is lacking, begin to build a platform for productive cooperation.

Considering direct budgetary support as a channel for capacity building

The UK government distributes an increasing proportion of its financial aid to developing countries in the form of direct budgetary support. This channel seeks to build partner countries’ own systems for planning and managing service delivery and provide capacity building support to do so. The UK government, through DfID, can explore opportunities, when working alongside partner countries, to develop a longer-term framework for capacity building around trade and environment associated with goals and objectives of the national plans and PRSPs. Where Strategic Environmental Assessments are undertaken as part of the planning process, this may provide an entry to address trade and environment issues both systematically and through a longer-term programme.

Ensuring the integration of aid for trade commitments into development strategy and

planning

The recommendations of the Task Force on Aid for Trade note that projects and programmes should be considered as aid for trade if these activities have been identified as trade-related development priorities in the recipient country's national development strategies. While PRSPs reflect national development priorities for some countries, other development strategies are equally important and will need aid for trade financing. DfID has committed to providing aid for trade assistance in four areas:

� Specifically trade-related capacity for example, tax reforms, improving import/export processes, developing the right export industries, meeting international health and safety standards, and encouraging private sector/business development and investment

� Wider (not-trade specific) economic infrastructure for example, transport, roads, energy, and communications

� Capacity to develop and implement trade policies for example, undertake cross government and stakeholder consultation (including with the private sector) on what the priorities and objectives should be, include those priorities and objectives in national development plans, and design, finance and


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implement supporting programmes and interventions in partnership with donors and other stakeholders

� Adjustment costs: preference erosion – sugar, textiles and so on, loss of tariff revenue and higher cost of food imports.

In order to ensure that the content of aid for trade support to developing countries is strategically and tightly integrated with national planning and development processes, aid for trade needs to include institutional capacity building which trains and equips local partners to monitor and safeguard alignment and usefulness for national priorities.

Support to domestic capacity for environmental and economic regulation

The lack of domestic capacity to monitor and enforce environmental regulation was highlighted in the Pakistan and Brazil case studies. Brazil and, to a lesser extent, Pakistan do have environmental management frameworks in place which, however, are undermined either by inadequate enforcement authority (Pakistan) or inadequate enforcement capacity (Brazil). The ability to enforce environmental management practices is critical for moving from a static level of understanding environmental impacts and being able to frame solutions, to a dynamic level at which changes in behaviour result in positive environmental outcomes. Regulation is a key dimension of a well managed environment and economy. Enforcement of emission and effluent standards or land use controls is the responsibility of environment agencies, planning and local government departments. Support is needed to improve domestic capacity to regulate and overcome limitations that some organisations may face in the form of, for instance, distorted incentive structures.

In the UK

Recommendations for UK action within the UK focus on:

� Strengthening inter-ministerial coordination between trade, development and environment

� Continued support to UK-based NGOs

Strengthening inter-ministerial coordination between trade, development and

environment

A recent report by the Environmental Audit Committee (2006), Trade, Development

and Environment: The Role of DFID, notably omitted any discussion of specific trade issues, and their relationship to environmental and development concerns. There was no contribution from trade representatives or experts to either the oral or the written evidence presented to the committee (although the Department for Trade and Industry would have been consulted on the report).

This omission illustrates the limited extent to which a cross-cutting debate, fully and evenly representing trade, development and environmental concerns, exists in the UK. The literature review identified a need for donors to strengthen trade expertise within their international and development ministries, and to bridge a cultural divergence in approach between these ministries and trade ministries as exemplified by the US Trade Representative. In the UK, exposure within these ministries to acute negotiation-related demands and pressures is mediated by the fact that the UK’s trade position is negotiated through the EU. The relative power of trade negotiators has meant that


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environmental flanking measures are incorporated in trade negotiations as ‘bolt-on’ measures, with unclear procedures for follow-up and enforcement.

There may therefore be scope for building trade expertise within DfID and Defra, and for engaging the DTI and the EU Trade directorate more deeply with environment and development agendas. This may not be a matter of staffing and resources, but a more structural issue of incorporating an understanding and appreciation of trade dynamics more fundamentally throughout the organisation.

Continuing support to UK-based NGOs through partnership agreements

NGOs have been shown to provide an effective means of delivering capacity building projects and programmes – as long as the capacity of the NGO itself is adequate. In particular, they can offer specialist, niche consultancy advice and services (delivered on an as-required basis) in areas where there may be a conflict of interest on the part of the donor, such as where a country or the EU is providing capacity building to another country with which it is negotiating a trade agreement. This serves to introduce an arm’s length relationship in the delivery of capacity building which, by removing the conflict of interest, also encourages beneficiary countries to articulate their capacity building needs and priorities.


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Bolling C. & Suarez N. (2001), ‘The Brazilian sugar industry: recent developments’, in Sugar and Sweetener Situation & Outlook /SSS-232/September

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Costa I. (2006) ‘Bioenergy – The Brazilian Success Experience’ Power point presentation

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Dufey (2006), ‘Biofuels production, trade and sustainable development: emerging issues’ International Institute for Environment and Development (IIED), London, September

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Economic Policy Research Centre (1999), ‘Environmental Impacts of Trade Liberalization and Policies for the Sustainable Management of Natural Resources: A Case Study on Uganda’s Fisheries Sector’, Kampala, Uganda

Elobeid, A. & J. Beghin (2005), ‘Multilateral Trade and Agricultural Policy Reforms in Sugar Markets’ Working Paper 04-WP 356 September 2005 (Revised), Center for Agricultural and Rural Development, IOWA State University

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GHK International (2003), ‘Mainstreaming Environment into the Government of Pakistan's Poverty Reduction Strategy Paper’, report to the Ministry of Environment, Government of Pakistan

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Hassuani, S., M. Lima Verde Leal & I. Macedo (2005), ‘Biomass power generation Sugar cane bagasse and trash’ 1st edition Programa das Nações Unidas para o Desenvolvimento Centro de Tecnologia Canavieira, Piracicaba, Brazil

IBRD (2006), ‘Corporate Social Responsibility Program for the Sugar and Ethanol Industry in São Paulo, Brazil – Activity Report’ The International Bank for Reconstruction and Development, Washington DC

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International Monetary Fund and The World Bank (2005), ‘Doha Development Agenda and Aid for Trade’, prepared by the staffs of the IMF and World Bank, 9 September

Kaggwa, R. & J. Byaruhanga (2005), ‘Mainstreaming Environment into the PEAP’

Kirkpatrick, C., C. George, S. Scrieciu (2006), Sustainability Impact Assessment of

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Development Agenda, Final Report, Impact Assessment Research Centre, Institute for Development Policy and Management, University of Manchester

Kostecki, M. (2001) ‘Technical Assistance Services in Trade-Policy: A contribution to the discussion on capacity building in the WTO’, ICTSD Resource Paper No 2, International Centre for Trade and Sustainable Development

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Macedo, I.C. (2004), ’Estimativa da redução adicional de emissões de gases de efeito estufa (GEE) com o aumento da produção de cana e derivados no Brasil; 2010’, internal report, UNICA, São Paulo

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cana-de-açúcar no Brasil e a sua sustentabilidade UNICA

Martin, W. (2004) ‘Textile and Clothing Policy Note: Implications for Pakistan of Abolishing Textile and Clothing Export Quotas’, World Bank

Martines-Filhi, J., H. Burnquist & C. Vian (2006), ‘Bioenergy and the Rise of Sugarcane-based Ethanol in Brazil’, Choices 2nd quarter 2006: 21(2)

Matambalya, F. (2006) ‘Improving Trade Related Capacity Building in LDCs: Lessons from a Survey of Initiatives in Tanzania and Eastern Africa’, Discussion Paper prepared for the fourth meeting of the advisory group on the strengthening of UNCTAD Training Capacities and Human Resources Development Geneva, 22-23 March

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Transition Economies: A Practical Guide to Planning Technical Cooperation

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Pereira de Carvalho, E. (2005) ‘Industrial perspective on expansion of ethanol production capacity for export in Brazil’ UNICA Presentation at the Workshop & Business Forum on sustainable biomass production for the world market, Campinas, Brazil, 1 December, available at: http://www.bioenergytrade.org/downloads/carvalhonovdec05.pdf

Plaisier, N. & P. Wijmenga (2004), ‘Evaluation of trade-related technical assistance: Three Geneva-based organisations’, IOB Working Document

Powell, J. (2002) ‘Cornering the market: The World Bank & trade capacity building’, London: Bretton Woods Project

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Saez, S. (2004), ‘Notes for Remarks at APEC WTO Capacity Building Workshop, Santiago, Chile, 25 February

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ANNEXES

Environmental impacts of trade liberalisation: Capacity building for developing countries/Stage II report

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1 CB&TA ON TRADE AND ENVIRONMENT IN PAKISTAN

DONOR & PROJECT/ INITIATIVE TYPE DESCRIPTION RESULTS so far

Environment Canada: Pakistan Environment Program, Linkage Project between EC and PEPA (US$258,331)

Environmental management instruments: Support to domestic institutions

This two year project focused on capacity building for the implementation of National Environmental Quality Standards and included Environmental Laboratories Accreditation Program workshops and training. The outcomes of this project were identified as the requirement of the government to now conduct environmental impact assessments in implementing development projects.

Significant training of government staff has taken place and there is greater awareness of environmental issues in government. However, it was felt that the results were not being seen in practice. For example, there have been no cases to date of a development project being threatened with closure if it fails to meet environmental criteria, and there has been an overemphasis on urban environmental issues, to the detriment of micro, community level issues such as water and sanitation. It was also suggested that the donors had failed to contribute significantly to environment work within Pakistan: several donors have conducted small projects, but donors have failed to come together to put environment on the development agenda.

Netherlands: ISL ICPT in Korangi Tan.Clust (US$2.7 million)

Environmental management instruments: Standards & certification

Compliance of National Environmental Quality Standards (NEQs) and Environmental Management Systems of ISO 14000 by representative number of tanneries in Korangi under Cleaner Production Approach

The programme has resulted in the 15 largest tanneries in Pakistan having implemented effluent treatment plants on their own sites. Further, a Cleaner Production Institute was created in 2004. A key aspect of the success of the project was that the CPI has been able to build up trust with businesses which are often reluctant to expose their weaknesses. Another lesson is the importance of creating a neutral. However, firms selling to the local market have failed to take any measures to deal with their environmental impact. The firms cite financial and space constraints as the reason why they have not done so.

EU/WWF Pakistan: Promoting better environmental practices in textile processing sector (EUR103,000)

Institution building: Training seminars & workshops

The project ‘aims to prepare Pakistan’s textile processing industry to meet the environmental challenges in the emerging global trade regime’. It consists of needs assessments for local companies followed by awareness raising workshops on: eco labelling/environmental management systems, energy and water conservation methods, and a cost/benefit analysis

The project organised the first seminar ever conducted on eco labelling in Pakistan, and senior management showed a lot of interest in the cost/benefit analysis – again the first time such an exercise had been conducted in Pakistan. 120 companies attended the series of workshops and each received a very technical in-depth handbook highlighting good environmental practices in


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DONOR & PROJECT/ INITIATIVE TYPE DESCRIPTION RESULTS so far

of introduction of cleaner production techniques. processing. However, there was a failure to adequately bring into the process the CEOs who hold the decision making power in the firms. Further, WWF went through a learning process in understanding who the most effective private sector partners were in terms of disseminating the programme and hence engaging CEOs.

Royal Dutch Embassy: Environment Technology Production Initiative

Institution building: Impact assessment

The project invited a number of different industries to undergo pilot projects in order to assess their impact on the environment and implement solutions. An institutional audit was conducted confidentially in 12 different units in order to assess what equipment would be appropriate. The learning from this project was then opened up to other units.

UNDP: Trade Initiatives from a Human Development Perspective

Institution building: Support to domestic institutions

The project aims to provide technical support to the government to assist domestic policy formulation on WTO issues, and to build the capacity of the government, academic institutions and research organisations on trade related issues. DfID funded a two-year Trade Policy Adviser post which aimed to provide support to government and other stakeholders including private sector and workers within the context of the project.

The project’s activities to date in commissioning a series of 20 sector studies on topics such as Trade in Environmental Services and Logistic Security Assessment have strengthened the knowledge base of how human development issues related to trade. The project has conducted a series of training workshops for the media and a number of trade policy dialogues between government representatives and stakeholders. The Trade Policy Advisor post successfully drew attention to supply side constraints with a focus on the obstacles holding back domestic commerce. This resulted in a policy paper, ‘Domestic commerce: The missing link’. A further gain from the project was engaging the Ministry of Commerce on these issues. However, inter-ministerial coordination was cited as being in need of strengthening. There is an imperative for the government to engage more with stakeholders when forming trade policy. Further, the Trade Policy Advisor post holder stayed in place for only 10 months and the position is currently unfilled.


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2 CB&TA ON TRADE AND ENVIRONMENT IN UGANDA

DONOR- PROJECT/ INITIATIVE TYPE RECOMMENDATIONS/POLICY MEASURES RESULTS so far

UNEP/GOU- Integrated

Assessment and Planning for

Sustainable Development (IAP)

Study - Integrated Assessment of

Uganda’s Draft National Trade

Policy for Adequacy of Coverage of

Environmental and Health

Concerns in June 2005

• Domesticate the T21 model to suit Ugandan conditions. • Develop SEA guidelines for the trade sector and apply

them. • Conduct case studies to illustrate the applicability and

usefulness of quantitative, qualitative and participatory tools and assessment approaches commonly used in the IAP process using the trade sector as an example.

• Identify an appropriate institutional framework for the IAP process.

• Solicit for development partner support for additional financial resources to promote the IAP process in Uganda

• Network with international organisations, which have extensive IAP experience for technical assistance.

The MTTI has broadened its consultation base and considers the approach taken by other government ministries.

NEMA and UNEP have carried out an integrated assessment of the Trade Policy after the Government’s position had been further articulated. Trade is now considered the engine of economic growth hence conducting a full integrated assessment on a more developed policy in the future will be of considerable benefit to policymakers and stakeholders.

Economy-wide policy assessment studies have been conducted to identify the societal sectors and groups, natural resource sites and the environments most likely to bear the brunt of trade policy proposals. From these assessments, alternative measures have been proposed that will not only help direct the review of Uganda’s Trade Policy but also guide the country’s position at WTO and other multilateral and bilateral trade negotiations.

The most recognizable interrelationship mentioned in the Draft Trade Policy in relation to the environment concerned the NTBs (dumping and countervailing measures).

Capacity Building for Integrating

Environmental Considerations into

Development Planning and

Decision-making” projects funded

by the Ministry of Foreign Affairs of

the Government of the Netherlands

and the European Commission

Study - Environmental Impacts of

Trade Liberalization and Policies

for the Sustainable Management of

Natural Resources: A Case Study

on Uganda’s Fisheries Sector,

• Establish the level of fish stocks and setting an appropriate MSY for each of Uganda’s major water bodies;

• Implement an MSY constrained ITQ system; limiting the number of fish processing firms and monitoring the activities of licensed ones;

• Revise the Fish Act so that it is attuned to current economic conditions, recognizes technological change in the fisheries sector and protects the environment;

• Involve fishing communities in fisheries resource management by setting up community based sensitisation and awareness campaigns, in conjunction with the Uganda Fisheries and Fish Conservation Association (UFFCA) and local governments;

• Strengthen the capacity of the National Fisheries Department to effectively carry out its regulatory role;

• Use subsidies to promote and support fish farming so that fish harvests from natural water bodies can be

Enacted Government legislations to address the issues. These include;

• The Fisheries Policy (2004) supports the enforcement of pollution guidelines and proposes the use of economic instruments. Regulations and fines put in place will be sufficient to control the dangers described above

• National Environment Act - water quality standards, standards for discharge of effluents into water, soil quality standards,

• Environmental Impact Assessment Regulations - every project must undergo an assessment of its impact on the environment

• Uganda Investment Code – every project must undergo an EIA

• Use of economic instruments – fisheries user levy. As proposed in the National Fisheries Policy and the provisional fisheries sector Strategic Plan, there is need to provide micro-


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supplemented. • Develop guidelines for Environmental Impact

Assessment for Aquaculture: so as to precede the anticipated rapid growth of cage farming on the water bodies.

finance to small-scale fish processors and aquaculture start-ups. There is also a need to train and retool fishers so that they can move into the non-fish sectors and diversify their incomes so that they are not solely dependent on capture fisheries. It is also hoped that the BMUs will be good institutions to start with to encourage fishers to look beyond just fisheries. The Government also hopes that education and increasing the literacy rate and level of professional skills in fishing communities will enable them to search for opportunities elsewhere.

From the above, it is clear that implementation of Uganda’s Fisheries Policy will be a significant improvement on the pre-Policy. However, a number of possible constraints may come along with the successful implementation of the Policy.

The National Fisheries Policy gave recognition to the abovementioned weaknesses in the laws and regulations and has advocated promulgation of a new principal law for effective fisheries management and utilisation and better institutional structure (MAAIF, 2004).

UNEP - A country study on the

environmental impacts of trade

liberalisation in the fisheries sector

Study • Apply the quota system to fish processing plants • Strengthen MCS & harmonize with other countries for

shared waters • Develop a mechanism for ensuring compliance to

regionally agreed decisions • Sensitize resource users on responsible fisheries • Control of fishing effort - • Promote integrated aquaculture - • Promote culture of Nile perch • Promote production of feeds for fish farming- • Develop mechanisms for involving communities in data

collection. Harmonize data collection and reporting nationally

• Establish a reliable information and database system. • Expedite the update of the Fisheries (Act) and

development of the associated ordinances and bylaws. • Sensitize stakeholders on hygienic handling of fish. • Provide cold storage facility on boats, landing sites and

transport facilities. • Extend electricity and safe water to key landing sites. • Improve roads to landing sites

UNEP agreed to finance a project to the Government of Uganda (through the Ministry of Agriculture, Animal Industry and Fisheries) under the Department of Fisheries Resources to implement policy options identified in the study. In June 2002 an MoU was signed between MAAIF and UNEP with EPRC and NEMA as corroborators to this effect

Project Objectives

• Enhance co-ordination and co-operation between relevant national organisations working on fisheries related activities.

• Enhance awareness and capacity of policy-makers and private sector to implement strategic management responses – particularly Economic Instruments to promote sustainable management of fisheries in three selected districts:

• Increase understanding of the constraints and impediments to the successful implementation of economic instruments and identification of ways to achieve better results.

• Raise consensus among national stakeholders on approaches to address the sustainable management of


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• Lobby for reduction of freight charges on fish exports. • Ensure effective monitoring of effluent discharge

standards • The polluter pays principle should be applied. • Provide technologies for treatment of water and sewage

at landing sites. • Eco-labeling • Value addition • Promotion

fisheries • National stakeholder workshop to outline programme of

work and strategy for implementation, • Review policy recommendations from the study in order to

identify those that can be implemented. • Identify ways to proceed and plan of action for implementing

the selected policy package: including entity(ies) responsible for the implementation of each policy measure

• Implementation of the selected policy packages • To develop a strategy for implementation of

"Implementation of Policy Response Packages to Promote Sustainable Management of Fisheries in Uganda" project.

• Review policy recommendations arising from the country study in order to identify those that can be implemented,

• Develop a plan of action for implementing the selected policy packages.

Fisheries Subsidies and Over-

fishing: Towards a Structured

Discussion,

Discussion Paper Regulation of resource access for small-scale fishing, the involvement of local councils, improved enforcement of existing regulations and greater involvement of local stakeholders in the implementation of resource access rights.

propose a whole series of economic instruments for sustainable management that can be implemented in order to benefit from trade not only in the fisheries sector but other sectors as well

EU-Pesticides Initiative

Programme (Quality and

Conformity for Fruit and Vegetable

Initiative)

TECHNICAL ASSISTANCE - To enable ACP countries to comply with European food safety and traceability requirements and to consolidate the position of small scale producers in the ACP horticultural export sector

On-going Since the launch of the PIP programme in 2001, 18 Ugandan companies have applied for support and 14 memorandums of agreement have been signed to date.

On the capacity-building side, several applications from producer organisations and service providers are currently being reviewed.

A memorandum of agreement has been signed with one laboratory and a national task force was set up during the summer of 2004.

In the run-up to the January 2005 deadline, all company beneficiaries have applied to the PIP for support to implement a traceability system. To ensure effectiveness, the PIP has put together a comprehensive strategy for the implementation of a system adapted to the structure of these Ugandan firms, all of


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which work with a large number of small farms. This strategy relies in large part on local consultants who will be trained to supervise and transfer knowledge to companies. Given the very limited access to computer infrastructures, and the size and particular type of companies concerned, the traceability system set up by the PIP is initially based on “paper” registers.

EU- Strengthening Fishery

Products and Health Conditions

TECHNICAL ASSISTANCE – Aimed at improving access to world markets for fisheries products from East Africa. This is to be achieved by strengthening health controls on exports and improving production conditions. This EU funded project aims to improve access to world markets for fisheries products from Kenya, Uganda and Tanzania by strengthening the capacity of competent authorities in the three countries in monitoring the upstream supply chain, carry out health controls on exports and improve production conditions. Currently, control activities only begin when the raw material arrives at the processing plant. Controls are seldom carried out on fishing boats or landing sites. To remedy the situation the project is planning specific training actions for inspectors as well as installing appropriate equipment and material.Expected outputs include improved national capacity for health inspection of fishery products, testing laboratories and technical support institutions running autonomously; improved compliance with health conditions for exports by fishing vessels and processing units and improved

On-going


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handling and infrastructure.

Mineral Sector Development

Technical Assistance Project a

World Bank supported initiative to

build capacity in the minerals sector

.

Project

A. Framework Reform, Investment

Promotion and Capacity Building.

B. Development of Geologic

Infrastructure.

C. Sustainability of Small Scale and

Artisanal Mining.

D. Environmental and Social

Management.

E. Project Co-ordination and

Management

The EIA provided the following rrecommendations

• Establish a “Mining Industry Consultative Forum” to improve on environmental and social decision-making;

• Create a “roadmap” to guide mining investors through the regulatory process;

• Build a “toolkit’ to improve mining, environmental and safety factors among small miners and artisanal workers; and

• Design a mechanism for funding environmental and social Programs for closed and abandoned mines.

Still On-going

UNEP/GOU- The Africa

Environment Information Network

(AEIN)

Enhancing the capability of key data producers to collect, maintain and exchange environmental data and information in compatible formats at minimum time and cost.

On-going

USAID – Regional Hubs for Global

Competitiveness

Strengthen the capacity of COMESA countries to participate more effectively in the multilateral trading system, including the WTO Doha Development negotiations; Promoting development in an environmentally sustainable fashion; Developing a strategy for Evaluating Environmental Implications of Trade Negotiations

Background paper and strategy developed


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DANIDA – Agricultural Sector

Productivity Support (ASPS)

Regulating use of pesticides.

UNCTAD/UNDP- Uganda Biotrade

Program/initiative

Promotes trade and investment in bio-diversity based products and services in developing countries to further sustainable development.

On - going -Developed Sector strategies for the 4 selected products

-Carrying out species resource assessments on flora and fauna.

- Quality management/assurance, testing and laboratory functions; enterprise management skills enhancement.

SIDA - Natural Resource

Accounting Programme

Building national capacity to capture, process and report environment and natural resource data as part of the system of national accounts.

NRA pilot studies in fisheries and forestry are on-going

The UNEP/UNCTAD Capacity

Building Task force on Trade,

Environment and development

(CBTF)

To strengthen the capacities of countries, particularly developing countries and countries with economies in transition, to effectively address trade-environment-development issues.

UNEP/UNCTAD - Promoting

Production and Trading

Opportunities for Organic

Agricultural Products

Carry out studies on the current state of organic agriculture in East Africa and Opportunities for regional harmonization

An integrated assessment of Uganda’s organic agriculture policy is on-going

Studies on The Current State Of Organic Agriculture In East

Africa and Opportunities For Regional Harmonization; Best

Practices And Lessons Learnt, particularly regarding Effective

and Efficient Government Policies and Actions, in Promoting

Production of and Trade in Organic Agricultural Products; The

Supply Situation Of Organic Products from East Africa and

Export Potential, as well as the Demand For Organic Products

From East Africa.

WB/FIELD - Building Capacity for

improved Policy Making and

Negotiation on Key Trade and

Environment Issues

To identify and document laws, policies, procedures and the institutional frameworks in place for policy making and negotiations on key trade and environmental issues - With respect to key trade and environment issues (i.e. market access, biosafety and biodiversity),

(i) Information gathering • Prepare a list/database of principal exports and

corresponding environmental and health requirements in export markets.

• Prepare list of ‘environmental goods and services’. (ii) Information dissemination and training • Inform and train farmers on compliance with

environmental and health requirements in export markets.

• Establish information centers and communication channels between those centers and producers/farmers.

(iii) Intra-governmental co-ordination between relevant ministries, departments and agencies

The immediate impacts of the project at the governmental and non-governmental level in the three countries are encouraging. At the government level, the knowledge acquired by the policy-makers has been acknowledged by their respective departments through further training opportunities and other related initiatives. For instance, following the workshop in Uganda, NEMA formed a Task Force on Trade and Environment. This task force will look at trade issues in MEAs, especially those for which NEMA is the focal point, for example, the CBD, the Montreal Protocol, the Stockholm POP Convention and the Rotterdam PIC Convention. NEMA (Uganda) also sponsored one member of the Task Force to participate in the


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• Reinstate or make more regular existing inter-ministerial committee meetings comprised of trade, environment and other government civil servants.

• Create an organogram of Ministry of Trade, Ministry of Environment and their links with other related government ministries or agencies including Member of Parliament and non-state actors, and map inter-departmental co-ordination on trade and environment.

• Organise regular briefings by a range of experts on trade and environment developments to national co-coordinating committee on trade and environment.

• Ensure allocation of budget by national government for intra-governmental co-ordination, emphasising importance of ‘self-funding’ to ensure sustainability.

(iv) Stakeholder participation in policy-making on trade and environment issues • Fund participation of stakeholders in inter-ministerial

committee meetings. • (v) Development and implementation of laws and

policies relevant to trade and environment issues • Laws formally establishing inter-ministerial committees

to co-ordinate policies on a range of issues, including trade and environment.

• Assess need to develop national regulations or requirements for environmental and health protection equivalent to export requirements, including consumer protection laws.

• Entry into force of biosafety policies and laws. • Create formal mechanism for co-ordination of relevant

government departments and agencies dealing with IPR issues.

At the WTO negotiations and discussions • Increase the number of staff in the relevant Ministry and

in Geneva and Brussels missions (e.g. to support existing staff) and strengthen their capacity.

• Strengthen co-ordination with regional negotiating groups to ensure national interests are represented in the WTO, and in regional negotiations.

• Assess options for improving participation and representation in international standard setting bodies.

• Enhance regional integration through regional level meetings of the national co-coordinating committees in Kenya, Uganda and Tanzania on trade and environment.

• Assess options for improving and sustaining participation and representation in other international

Kenya and Tanzania workshops in order to gain an understanding about the situation in the East African region. Recently, the Ministry of Trade (Uganda) invited NEMA to participate in the National Trade Sector Review Conference (June 2005) and provide input to the Draft National Trade Policy (2005) which is currently under preparation.

The project also generated tremendous interest among non-

governmental and development partners. Following the national workshop in Uganda (December 04), two NGOs (Environmental Alert & ACODE) have organised workshops on the impact of environmental requirements on Uganda’s Exports.

There is increased interaction between trade and environment institutions

Follow up project activities under development


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bodies e.g. WIPO, through co-ordination with Africa, East Africa and other countries with similar interests.

WB - Bridging the Standards Divide To build awareness of the range, importance and impact of international standards and technical regulations on the current and prospective trade of selected African countries.

CAFOD - Village Based

Development Programme

(VIBADEP

Promotes eco-friendly and organic farming techniques and provides agricultural inputs and trains farmers in soil and water conservation practices. Helps farmers market their produce and improve their income

WWF- Trade Liberalization, Rural

Poverty and Environment project

To build analytic foundations and public constituency for sustainable approaches to trade liberalization. The project will build on established analysis in the areas of trade and poverty, trade and environment and many others with a view to engage governments, civil society organizations, researchers, and research organizations in a collaborative effort to understand those situations and to fashion policy and implementation activities in response

three continents [including Africa (East Africa)]

DANIDA Business Support

Services and Institutions

Establishment of market potential and environmental analysis for Briquette marking plan, saw mill plan, castor oil production, printing sector, concrete products, cattle ranch, dairy processing, motor vehicle, body care creams, hot galvanising dip, organic sun dried fruits, flour mill, electricals and electronics.

Uganda Business


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3 CB&TA IN THE SUGAR/BIOETHANOL INDUSTRY IN BRAZIL

Programme/

Environmental Issue

Air Quality Water Quality/ Use

Waste Reduction

Soil quality GMOs Biodiversity Agricultural frontier

GHG Emissions

Environmental regulation enforcement

Comments

Alcohol and Biomass Energy Development Project (World Bank)

Less pressure (indirect impact)

Overall aim of the project was to scale up bioethanol production in Brazil

Environmental Project BRA/96/G31 (UNDP)

Disposal reduction of bagasse and Sugarcane Trash

CO2 reductions

Aimed at electricity Generation

CTC Programmes Reduction of sugarcane burning

Reduction of vinasse disposition

Reduction of bagasse disposal

Starting research in the use of GMOs

Less pressure through increased yields (indirect impact)

CO2 reduction

Issues being addressed through R&D programmes

CSR in the Sugar/bioethanol Industry: UNICA and World Bank

The aim of the project was addressing general SD/CSR issues but only focuses on econ. & social ones.

CSR: IMAFLORA social-environmental certification for sugar/bioethnanol

Formulation of general parameters for environmental and social certification in the sugar/bioethanol industry


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Programme/

Environmental Issue

Air Quality Water Quality/ Use

Waste Reduction

Soil quality GMOs Biodiversity Agricultural frontier

GHG Emissions

Environmental regulation enforcement

Comments

CSR: Ethical Sugar Seminars

Topic included in the seminars





Initiatives aimed at raising awareness on general issues related to sugar/bioethanol trade and associated environmental, social and economic impacts

Organic Sugar –Sao Francisco Mill

Eliminated sugarcane burning since 1995

Increased water availability

Cogeneration??

Reduced use of agrochemical because organic

GMO forbidden in organic production

Improved biodiversity

Reduced CO2 due to cogeneration??

Better Sugar Initiative

Among the key issues to be addressed it its early phase

Among the key issues to be addressed in its early phase




Initiative still in its earliest phases

Several seminars on Bioethanol

To raise awareness on general env., social and economic issues of increased production and trade of sugar/bioethanol


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4 UGANDA: TRADE AND ENVIRONMENT RELATED POLICY ACTIONS AND INTEGRATION IN NATIONAL

POLICY MAKING

Strategic Objectives Challenges/ Constraints to be Addressed Policy Actions

THE POVERTY ERADICATION ACTION PLAN (PRSP)

1 Macroeconomic Stability consistent with rapid private sector led growth

External debt ratio still high, despite recent debt relief

Implement programmes to boost export performance

2 Increased and more efficient private sector production

Maintain liberal trade policy;

Minimize domestic & international barriers to trade

Harmonize activities under SEP with PMA & MTCS programs

3 Increased and more efficient

Agricultural production

Tariff and non tariff barriers to Uganda’s exports

Harmonize current SEP with the PMA and MTCS programs and activities

Focus SEP activities along the commodity value chain.

4 Increased and Sustainable fisheries production Resource depletion, social wellbeing of fishermen and vulnerable groups; nutritional issues, quality issues

Implement the 2003 Fisheries Sector Strategic Plan, which includes inter alia Development of quality guarantees for fish exports

THE PLAN FOR MODERNISATION OF AGRICULTURE

1 Improved market access Supply side constraints, quality and volume issues

Facilitate increased supply of requisite inputs to ensure increased and sustainable supply of and demand for competitive processed and non-processed agro-products on domestic, regional and international markets

2 Farmer empowerment through national agriculture advisory programmes

Lack of information about markets, good agricultural practices, etc

Increased access to information, knowledge and technology through effective, efficient, sustainable and decentralised advisory services with increasing private sector involvement.

3 Quality issues in Marketing and agro-processing Poor infrastructure, lack of information and facilitating services, and weak compliance to international trade rules

Ensure key players in the marketing chain, including farmers, processors, inputs suppliers and other service providers have sufficient information and the physical and financial as well as social means to purchase inputs and sell agricultural produce on favourable terms.

Ensure improved quality of products across the entire production, processing and marketing chain.


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THE NATIONAL ENVIRONMENT MANAGEMENT POLICY

1 (a) enhance health and quality of life (b) integrate environmental concerns in all development oriented policies, planning and activities at national, district and local levels; (c) optimise resource use and achieve a sustainable level of resource consumption; (d) raise public awareness and appreciation of the link between environment and development

Area expansion-environmental degradation, deforestation, soil erosion, resource depletion

Ensure a clean and healthy environment through, promotion of sound environmental practices, the development of national environment management standards; and sustainable use of resources in order to maximise benefits from sustainable trade,

THE MEDIUM TERM COMPETITIVENESS STRATEGY

1 Address constraints to private sector competitiveness in regional and world markets.

Supply side constraints – quality issues Increase the ability of enterprises to be profitable and increase their share of the market, both domestic and external programmes

THE STRATEGIC EXPORTS PROGRAMME

1 Identifies nine sectors and commodities, as strategic exports.

Supply side constraints – quality issues promoting the production, processing and marketing of these strategic exports

THE DECENTRALISATION POLICY

Bringing the decision-making with regard to service delivery closer to the actual users of those services.

National cake and benefits not trickling down to the lower levels; involvement of all stakeholders in planning process

Build capacity of district authorities and technical staff (including agriculture, trade, fisheries and environment officers) to handle trade and environment issues.

THE COMMERCIAL LAW REFORM PROGRAMME

Bring all trade related laws, regulations and procedures in conformity with WTO requirements

Policy incoherence; domestication of international obligations

Uganda Law Reform Commission to undertake reforms of all its commercial laws to bring all its trade-related laws, regulations and procedures into conformity with WTO requirements. A WTO Implementation Bill to provide the legal basis to fulfil Uganda’s commitments in the WTO is before parliament

THE GENDER POLICY

Mainstream gender issues and concerns into the national development process.

Marginalization of vulnerable groups Improve the social, legal, political, economic and cultural conditions of women through involving them in all


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THE NATIONAL FISHERIES POLICY

To ensure increased and sustainable fish production and utilisation by properly managing capture fisheries, promoting aquaculture and reducing post-harvest losses’

Resource depletion, post harvest losses, nutrition levels,

Sustainable management and development of fisheries Decentralisation and community involvement in fisheries management District, sub-county and community cooperation in fisheries management Institutions and funding mechanisms Investment in fisheries Planning and policymaking Information The environment and fisheries Aquaculture Post-harvest fish quality and added value Fish marketing and trade Human resource development Research


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5 UGANDA: WORKSHOP INFORMATION

Environmental Impacts of Trade Liberalisation

Are Capacity Building/Technical Assistance (CB/TA) Initiatives meeting Government Priorities?

Have any of the recommendations or flanking measures as a result of CB/TA been integrated into mainstream policy – PRSP/PMA/ etc?

Uganda – Case Study

Half Day consultative workshop with key policy makers/stakeholders

Friday May 12th, Emin Pasha Hotel

5.1 Workshop brief and programme

The Department of Policy and Planning of the National Environment Management Authority (NEMA) is collaborating on a study that aims to examine the extent to

which capacity building and technical assistance undertaken in various sectors

to address the environmental impacts of trade liberalization has met

Government’s priorities and whether the recommendations or flanking measures

as a result of the CB/TA have been integrated into mainstream Government

policy (PEAP/PRSP or other policies).

Uganda has implemented both external and domestic trade liberalization since 1987. Economic diversification strategies as a result of the trade liberalisation have resulted in considerable structural changes in Uganda’s export sector over the last fifteen years with the emergence and growth of non-traditional exports such as fish/fish products, floriculture, horticulture, spices, hides and skins, honey overtaking traditional exports such as coffee, cotton, tobacco and tea in value. Accordingly, Uganda is most

vulnerable to natural resource depletion and worsening terms of trade. For instance, international trade in most of the non-traditional exports is governed by

very stringent and ever changing buyer environmental requirements (including

food safety/health requirements).

Uganda has also benefited from various Capacity building and technical assistance programmes which aimed at addressing the above problems. The purpose of this workshop, therefore is to determine the extent to which capacity building and technical assistance undertaken in various sectors has met Government’s priorities and whether the recommendations or flanking measures as a result of the CB/TA have been integrated into mainstream Government policy (PEAP/PRSP or other policies).

The workshop programme is attached below, together with a questionnaire to guide the discussion and a matrix of some of CB/TA activities undertaken in Uganda


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TIME TOPIC/ACTIVITY RESPONSIBLE OFFICER

9.00-9.15 a.m Introductions All

9.15- 9.45 a.m Overview of the case study, workshop, goals and objectives

Alice Ruhweza (NEMA)

9.45 – 10.00 Question and Answer Discussion

10.00-10.30am T E A B R E A K

10.30 – 12.00 Discussion of questionnaire/MATRIX All

12.00-1.00 pm Identification of consensus key issues for further analysis, and follow-up steps

All

1.00 - 2.15pm LUNCH

END OF WORKSHOP

5.2 Questionnaire discussed at the workshop

This questionnaire is intended to answer two key questions:

1. The extent to which capacity building and technical assistance undertaken regarding the environmental impacts of trade liberalisation has met your priorities and if not, what recommendations or suggestions could be made to improve its effectiveness; and

2. If flanking measures were recommended as part of an assessment of trade related impacts on environment, how were these recommendations being integrated mainstream policy/PRSP

A. Background Information

Which of the following best describes you and the sector in which you work?

(Tick one box in each column)

Ngo Fisheries

Private Sector Forestry

Trade Official Agriculture

Development Aid Official Mining

Domestic Policy Official Tourism

Academic Or Other Expert Trade

Other (Please Specify)

Other (Please Specify)

What are the main ECONOMIC challenges faced by your sector? (If you do not work in a particular sector, you may talk about the challenges in the country generally)

What are the main ENVIRONMENTAL challenges faced by the sector? (If you do not work in a particular sector, you may talk about the environmental challenges in the country generally)

Are any of the challenges mentioned above directly or indirectly a result of

TRADE LIBERALISATION? If so, which ones?


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B. Capacity Building and Technical Assistance (CB and TA)

What capacity building or technical assistance has been undertaken to address the environmental challenges caused by trade liberalisation? Please list programmes or activities. These may be focused on environmental institution building, introduction of

environmental standards/instruments/regulations or promoting public participation. See Annex 1 for details.

C. Did these CB and TA meet Government priorities?

Were any of these programs specifically requested by your Department/Sector? Were they developed and implemented by your department (jointly with donors?) – Please specify in each case.

How, and to what extent, have these programs been able to address the challenges (please specify which one and briefly describe how)

1. How, and to what extent, would you have been able to address these challenges without funding for the CB and TA programs?

2. Has provision of funding altered the way in which you would have addressed these challenges – if so, please describe how?

3. Are you aware of any alternative sources of funding and programmes which could have been used to address these challenges (please describe)? If so, to what extent would they have addressed the challenges?

4. Did the CB and TA programs leverage in other sources of funding to address those challenges? If so, please state what sources.

Which of the programs did NOT address the challenges and why? What are the remaining gaps?

How can these gaps be addressed in future?

D. Have any flanking measures recommended been integrated in policy

For those projects that have already ended or are still on-going, Have any of the recommendations from the programs/studies/projects influenced Government decisions/policies? For example, have any of the recommendations from the studies/projects/programs etc been integrated in the PEAP/PMA/Budget Framework papers, etc– please specify what actions/policy actions have resulted from these programs.

Any other comments on what makes ‘effective’ capacity building and/or

suggestions for further work

5.3 Reference document provided to participants

Possible focus of Capacity Building and channels for implementation

Facilitating and supporting environmental institution building by governments at regional, sub-regional, national and local levels, in order to:

� Create standards-based and legal frameworks

� Introduce Environmentally sensitive trade strategies and policies

� Undertaken Scientific and socio-economic research


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Developing and testing environmental management instruments in collaboration with governmental and non-governmental partners, United Nations entities and major groups such as

� Transfer of cleaner technologies

� Application of ‘polluter pays’ principles

� Use of assessment tools (Strategic environmental assessments, Sustainable Impact Assessments, Integrated Assessments)

Promoting public participation in environmental management and enhancing access to information on environmental matters, through

� Public outreach

� Access to information

� Public accountability

� Consensus building

Implementation of capacity building is through a variety of channels, of which the most frequently occurring are:

� Meetings and conferences, often relating to international, regional or bilateral trade negotiations. Most frequently, support is provided to developing nations to enable them to attend meetings and thereby engage with the global trading regime from which they would otherwise be excluded.

� Training seminars and workshops relating to the rules and obligations of WTO membership or other international conventions, understanding the links between trade and environment, technical issues, principles of environmental sustainability, etc.

� Research and research support Directly commissioned research, or support for research activities undertaken by developing nations/NGOs to better understand environment-trade linkages, the evolution of international law on trade and the environment, best-practice environmental management, etc, as well as country or sector-based studies.

� Support to domestic institutions to implement environmental policy, draw up and implement legislation and regulation, strengthen environmental institutions, apply environmental management techniques, engage in bilateral and multilateral negotiation, etc.

� Information gathering and dissemination to: build base-case scenarios for robust ongoing monitoring of changes in the environment, including the impacts on the environment of increased trade liberalisation; building inventories of animal, mineral, plant and genetic stocks; developing indicators of sustainability, biodiversity, climate change, air and water quality, ozone depletion, waste generation, resource availability, etc.

� Partnership funding for NGOs to enable international and local NGOs to undertake activities including research and project implementation.

� Support in the development and application of impact assessment methodologies. The EU, for instance, has allocated US$660,000 in support of Sustainable Impact Assessment studies as an ex-ante exercise for identifying


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the economic, social and environmental impacts of specific trade negotiations. UNEP, meanwhile, has developed an Integrated Assessment methodology which has been piloted in a select number of sectors79 and is being rolled out in a number of countries. Bilateral donors such as the US have also supported the development of impact assessment frameworks for application to regional and bilateral trade negotiations.

� Development of standards and certification, predominantly for the purpose of enforcement of international law and bilateral agreements on trade and environment, as well as support for forest certification, ISO qualification, etc.

� Assistance to rural communities to overcome threats to their livelihoods. This is based on the understanding that rural livelihoods depend to a disproportionate extent on natural resources, and are therefore likely to be most vulnerable to negative environmental impacts arising from greater trade liberalisation.

5.4 Participant list

NAME INSTITUTION

Mr. Boaz Keizire Department of Fisheries Resources (Ministry of Agriculture, Animal Industry and Fisheries)

Dr. Wilson Mwanja Department of Fisheries Resources (Ministry of Agriculture, Animal Industry and Fisheries)

Mr. Xavier Mugumya National Forestry Authority

Mr. Gaster Kiyingi National Forestry Authority

Mr. Chris Kukugiza Department of Geological Surveys and Mines

Ms. Angella Rwabutomize Ministry of Finance (Environment Desk)

Mr. Richard Ssewakiryanga Ministry of Finance (Participatory Poverty Assessment)

Mr. Emmanuel Mutahunga Ministry of Trade, Tourism and Industry

Mr. Kirk Haywood Ministry of Trade (Hub and Spokes Programme)

Dr. Nick Rudaheranwa Economic Policy Research Center

Dr. Agaba Friday Ministry of Health (Agro-chemicals Control Board)

Ms. Lynda Biribonwa NEMA-Senior Environmental Inspector

Waiswa Arnold NEMA – Environmental Impact Assessment Coordinator

Kaggwa Ronald NEMA – Environmental Policy and Planning

Mr. Tom Mugisa Plan for Modernisation of Agriculture

Mr. Geresom Oketcho National Agriculture Advisory Services

Mr. Wilber Wejuli Africa Environment Information Network

Ms. Florence Mawejje Uganda Wildlife Authority – PAMSU Programme

Mr. Robert Mawanda Uganda Manufacturers Association

Ms. Mary Karooro Uganda Cleaner Production Center

Mr. Ssengendo Richard Researcher

Ms. Alice Ruhweza Consultant

79 See IIEP & GHK Consulting (2005) ‘The environmental impacts of trade liberalisation and potential flanking measures’, report commission by Defra


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6 PAKISTAN: KEY INFORMANTS

NAMES AFFILIATION

Aftab Alam Khan, Mustafa Talpur Action Aid Pakistan

Ahmed Saeed IUCN

Attendees at Sustainable Development Policy Institute Conference on Integrated Impact Assessment, 16 May 2006

Attiya Hidayat Canadian International Development Agency, Programme Support Unit

Azher Uddin Khan Cleaner Production Institute/National Environmental Consulting Pvt

Babur Aziz Beg PRSP Secretariat

Hania Aslam WWF Pakistan

Mahmood Jilani and Haroon-ur-Rashid Rana

JICA

Qasim Niaz Joint Secretary, WTO Cell, Ministry of Commerce

Sajid Mehmood Qazi Deputy Secretary, Ministry of Textile Industry

Syed Masood Alam Rizvi Secretary, Ministry of Textile Industry

Dr. Wajid H. Pirzada Chief WTO Unit, Ministry of Food, Agriculture and Livestock, Islamabad

Yasmin Jawed Khan Royal Netherlands Embassy (Development Section)

Zia-ul-Islam Director, Pakistan Environmental Protection Agency

Zubair Faisal Abbasi UNDP-Trade Initiatives from a Human Development Perspective

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