DRAFT DRAFT DRAFT DRAFT DRAFT

Handbook for Sustainability Impact AssessmentPrefaceExecutive Summary To be drafted

List of Abbreviations/acronyms

ACP: Africa Caribbean and Pacific countriesCARICOM: Caribbean CommunityCCA: Causal Chain Analysis CGE: Computable General Equilibrium CPDC: Caribbean Policy Development Centre CS: Civil societyCSD: Commission on Sustainable DevelopmentCTA: Technical Centre for Agricultural and Rural Cooperation ACP-EU DCs: Developing CountriesDGs: Directorate Generals of the European CommissionEBA: Everything But Arms ER: Environmental Reviews EU: European UnionFAO: Food and Agriculture Organization of the United NationsFLEGT: EU Action Plan for Forest Law Enforcement, Governance and Trade FTA: Free Trade AreaGCC: Gulf Cooperation CouncilGDP: Gross Domestic ProductGSP: Generalised System of Preferences HIPC: Heavily Indebted Poor CountriesIA: Impact AssessmentISC: International Steering CommitteeILO: International Labour OrganisationNGOs: Non-Governmental OrganisationsLDCs: Least Developed CountriesMDGs: Millennium Development GoalsM&E: Mitigation and enhancement measuresNAFTA: North America Free Trade AgreementNTM: Non-Tariff Measures ODA: Official Development AssistanceOECD: Organisation for Economic Co-operation and DevelopmentR&D: Research and DevelopmentRTA: Regional Trade AgreementSIA: Sustainability Impact AssessmentSMEs: Small and Medium EnterprisesSPWPs: Secondary Processed Wood ProductsTOR: Terms of ReferenceTRIPS: Trade-related aspects of Intellectual Property rightsTRTA: Trade-Related Technical AssistanceUNDP: United Nations Development ProgrammeUNEP : United Nations Environmental ProgrammeUNCTAD: United Nations Conference on Trade and DevelopmentUSTR: United States Trade RepresentativeWB: World BankWHO: World Health OrganisationWTO: World Trade OrganisationWSSD: World Summit on Sustainable Development

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Table of contents

Preface………………………………………………………………………………….i

Executive Summary.......................................................................................................ii

To be draftedList of Abbreviations/acronyms...............................................................ii

List of Abbreviations/acronyms....................................................................................iii

CHAPTER 1 - Introduction........................................................................................1

1.1 What is this handbook for?....................................................................................1

1.2 Trade policy should promote sustainable development........................................2

1.3 SIA as a tool for sustainable development and better governance........................2

CHAPTER 2 - Assessments: the three phase framework........................................2

2.1 Using sustainability assessments in trade negotiations.........................................3

2.2. Main steps and objectives....................................................................................3

2.2.1. Phase 1: Impact Assessment.......................................................................4

2.2.2. Phase 2: the Trade Sustainability Impact Assessment (Trade SIA)............5

2.2.3. Phase 3: the integration of Trade SIA results into policy making..............7

CHAPTER 3 - Real time Trade SIA.........................................................................10

3.1. Implementation principles..................................................................................10

3.1.1. Working method........................................................................................10

3.1.2. The complementary roles of assessment and consultation........................11

3.1.3. Proportionate analysis, prioritisation and key issues................................11

3.1.4. Identification of risks................................................................................11

3.1.5. Learning-by-doing and methodological improvement..............................12

3.2. Assessment steps................................................................................................13

3.2.1. Preliminary Assessment............................................................................13

3.2.2. Detailed SIAs............................................................................................16

3.2.3. Full SIA package.......................................................................................18

3.2.4. Mitigating and enhancing measures..........................................................18

3.2.5. Ex Post Monitoring and evaluation...........................................................19

3.3. SIA consultation process....................................................................................21

3.3.1. Who are the main SIA players?.................................................................21

3.3.2. Internal consultation process and international dialogue..........................21

3.3.3. External consultation process....................................................................22

3.4. SIA tools checklist.............................................................................................25

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3.4.1. Scenarios...................................................................................................25

3.4.2. Themes and indicators of sustainable development..................................26

3.4.3. Data...........................................................................................................29

3.4.4. Significance criteria...................................................................................29

3.4.5 Country groupings......................................................................................31

3.4.6. Assessment tools.......................................................................................32

3.4.7. Risk Assessment and Uncertainty.............................................................35

CHAPTER 4 - How to assess whether an SIA fulfils its objectives: performance

benchmarks.................................................................................................................37

CHAPTER 5 - Research Agenda. Next steps and future developments in trade

policy…………………………………………………………………………………38

5.1. Quality of SIAs should be upgraded..................................................................38

5.2. Consultation process has to be further improved...............................................38

5.3. Improving the integration of results into the policy-making process.................39

5.4. The use of SIA as a forum for policy dialogue..................................................40

CHAPTER 6 - Annexes..............................................................................................42

6.1. Glossary..............................................................................................................42

6.2. References..........................................................................................................44

6.3. Summary of SIA experiences.............................................................................47

6.4. Standard Guidelines for Consultation of Civil society.......................................50

6.5. List of indicators/data.........................................................................................54

6.6. List of studies and reports and key websites and contacts.................................59

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CHAPTER 1 - Introduction

1.1 What is this handbook for?

Agenda 21 and the Rio declaration required mechanisms to be set up allowing environmental and social concerns to be mainstreamed into policies with a view to promoting sustainable development. Since the 1990s, the Commission has developed various tools to implement precautionary approaches enabling it to better understand the benefits and costs of its policies and to manage risk, including ex-ante assessment of policies (i.e. assessment in advance of implementation).

In this context and also because of growing civil society demand since Seattle for more debate on trade policy, DG Trade decided in 1999 to perform ex-ante assessment of trade negotiations by developing Sustainability Impact Assessments (SIA). Ever since, DG Trade has devoted increasing resources to designing and implementing a methodological framework for assessing the impact of trade policy on sustainable development.

What other institutional or non-institutional initiatives for impact assessment of trade negotiations are there?

Whereas the EU is the only “national” institution, which assesses the impact of trade negotiations on all three pillars of sustainability at a strategic level and outside its frontiers, a number of methodologies aimed at assessing impact of trade policy on the environment/sustainability have been developed outside the EU over the past decade.

National Environmental Reviews (ERs), are carried out in particular by the US, Canada and Norway. These ERs focus on environmental impacts inside the country (even if for some trade measures, in particular rules, some impacts may be assessed in the trade partner country) and are carried out internally by national agencies. ERs entail internal consultation processes between concerned agencies, as well as formal external consultations, by means of official calls for comments at the beginning and at the end of each study.

Other international organisations i.e. UNEP or NGOs i.e. WWF, have developed impact assessment methodologies based on a case study approach, carried out mainly at national level, working closely with national bodies, universities and agencies. These assessments address the impacts on the three pillars of sustainability and are usually country-driven in order to enhance awareness and ownership of the assessment process. Impacts are assessed in an ex-post mode (after the event). A consultation process, which includes consultation and regional workshops, is set up as part of these studies.

The experience gained so far during the implementation of SIA projects has highlighted the need to further improve the SIA methodological framework. As a result, the Commission launched a process of methodological revision in February 2003 starting with a seminar in Brussels which brought together a wide array of actors from all over the world. The aim was to take stock of developments and to develop priorities for improving SIAs with the help and input of both governments and civil society, in Europe and elsewhere. SIA methodology is now being revised and improved taking account of the seminar outcomes and of DG Trade’s own experience. Publishing a Sustainability Impact Assessment handbook is seen as a contribution to updating the methodological framework. The resulting handbook seeks both to provide a comprehensive description of how the SIA currently works and to lay out some of the key issues and principles that require particular attention for SIA practitioners as well as policy makers involved in SIA projects. This first edition presents DG Trade’s view of the state of play for the methodology after the first five years experience. However, the handbook will be further updated in light of developments, so that from now on there is a single, accessible manual available to all potential actors involved, explaining what role they can play, and how.

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1.2 Trade policy should promote sustainable development

Trade policy is a key policy area in which decision makers are expected to deal with complex clusters of issues, sometimes with conflicting objectives. International bodies such as the United Nations (which adopted the Millennium Development Goals at the 55 th session of its General Assembly held in New York from 6-8 September, known as the Millennium Summit), or the WTO (whose 4th Ministerial Conference in Doha in November 2001 launched the current round of trade negotiations, known as the Doha Development Agenda) seek to ensure that trade contributes to growth in ways that dovetail with the requirements of good governance and sustainable development principles.

EU trade policy makers recognise that trade policy affects sustainable development in many different ways and that circumstances of timing and framing can determine whether these are positive or not:

i. trade liberalisation can create positive opportunities - for economic growth, social development (e.g., promotion of female activity) or the environment (e.g., better use of environmental resources) - but can also reinforce negative environmental trends (e.g., scale effects and impacts from exploitation of certain natural resources, cf. Towards a Thematic Strategy on the Sustainable Use of Natural Resources COM(2003) 572 final).

ii. the economic and other long-term benefits of trade opening are not automatic but depend on a high number of factors: regional integration, coordination with domestic and institutional framework, avoidance of market failures (when the market fails to function properly, for example, because of inadequate or insufficient competition) and information asymmetry (when some relevant information is known to some but not all parties involved) and good domestic law enforcement;

iii. liberalisation can generate environmental and social adjustment costs and these often affect the poorest section of society worst. Experience shows that these costs can be mitigated if addressed by relevant policy measures.

1.3 SIA as a tool for sustainable development and better governance

Improving governance at all levels has been identified by the European Commission as a strategic objective. Since 1999, SIA has been contributing to international, EU and national governance by ensuring greater coherence of EU policies, giving an overview of problems, ensuring greater reliability through transparency and consultation and ensuring openness of the policy-making process by associating stakeholders and third countries with EU policy analysis.The use of SIA has been generalised and is now enshrined in a broader Commission commitment to Impact Assessment endorsed by the Gothenburg European Council in 2001. The Commission Communication on Impact Assessment (COM/2002/0276 final) introduced a comprehensive regulatory and assessment framework for all policy areas, including trade. Complementarities and synergies between SIA and IA will be further developed by methodological improvements. Thus, SIA is seen as a tool that helps policy makers to design trade policy in a way that meets the requirements of good governance.

CHAPTER 2 - Assessments: the three phase framework

Each SIA contains three well-distinguished (SIA consultation process, and SIA exercise and SIA project) steps in an overall framework.

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2.1 Using sustainability assessments in trade negotiations

The SIA framework is the set of arrangements within which the SIA itself takes place. It shares the objective of the SIA to assist negotiators and other interested policy makers in conducting trade negotiations in a way that optimises the contribution of a trade agreement to sustainable development.

The key characteristics of a reliable assessment framework are:

1. that it provides a continuous assessment, as from the early stage of the mandate’s design to the agreement completion, of the impacts of any new major trade agreement on the three pillars of sustainable development;

2. that it identifies and develops trade and other policy measures which can mitigate identified negative effects of trade opening and enhance positive ones;

3. that it establishes a credible consultation process allowing interested stakeholders (civil society, third countries’ representatives) to feed their analysis and contributions into the SIA process.

2.2. Main steps and objectives

The following figure aims to provide a clear picture of the main elements of the three phase assessment framework including the phases before and after the SIA itself (phase 2):

In a first phase and before the negotiations on a new trade agreement start, an Impact Assessment of the negotiation mandate is undertaken as is always the case for any new Commission regulation proposal. In a second phase, an SIA project is undertaken once the negotiations have started. In a third and final phase, the SIA results are integrated into the Commission’s policy making process.

After discussing some of the main characteristics of the first and third phase, this handbook will focus on the second phase, i.e., how to perform an SIA exercise effectively.

1 NEGOTIATION MANDATE/ IMPACT ASSESSMENT

Consultation METHODOLOGY 1st final report

Consultation SCENARIOS Scenario proposals

2 Consultation OVERVIEW SIA AND

SCREENING/SCOPING 2nd final report

Consultation DETAILED SIAs Sector/case studies reports

Consultation CONCLUSIONS Recommendations

Consultation NEGOTIATIONS AND

3 POLICY-MAKING Position paper

Phase Input Process Output

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2.2.1. Phase 1: Impact Assessment

Since 2002 each major policy proposal of the Commission work programme has needed to be analysed by an Impact Assessment (IA), in line with the Better Regulation Package and the European Sustainable Development Strategy. In the case of major trade agreements, the Commission undertakes the IA in-house at the same time as proposing a negotiation mandate for the Council’s endorsement. The Council makes a final decision on the basis of both documents. IAs are carried out in accordance with the guidelines given by the Communication on Impact Assessment mentioned above. . The proposal for a negotiating mandate is the opportunity to identify preliminary economic social and environmental impacts of the agreement under consideration, to specify in each case what degree of SIA activity is envisaged, and to establish a network of interested parties, even before SIA project contracts are considered.At this stage, the Commission prepares a brief (no more than 3 page) initial assessment identifying and assessing the problem at stake and the objectives pursued by the policy proposal. Whenever possible, this document outlines the main options for achieving these objectives as well as their likely impacts in the economic, environmental and social fields,. It also highlights the advantages and disadvantages of each option as well as synergies and trade-offs.

Note that IA is an aid to political decision, not a substitute for it. It informs decision-makers of the likely impacts of proposals, but it leaves it up to them to take the decisions.The different aspects or checklist of features to take into account when performing an IA are summarised in the following table:

IA as an accountability and credibility

process

IA as an analytical process

States goals of regulation, and winners and losers.

Sets a basis for ex post (i.e. after the event) evaluations of policy performance.

Improves policy performance. Reduces the risk of costly policy

failures.

Strengthens empirical/rational basis for decisions, to supplement political and consensus decision processes.

Identifies how to boost policy performance and reduce static and dynamic compliance costs.

Explores often ignored trade-offs. Results-oriented – focuses on how

to get results on the ground, and what these will be.

IA as a learning process IA as a communication process Asks the right questions. Expands the framework of

thinking beyond narrow mission – enhances horizontal thinking.

Focuses attention on innovative policy instruments.

Improves quality of information available to stakeholders.

Involves a wider range of interests and fosters public dialogue on goals and means of public action.

In the context of trade policy, the IA has two particular functions:

o To begin the assessment process and to start involving the relevant services of the Commission.

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o To make a preliminary identification of the economic, social and environmental impacts of the trade negotiation under scrutiny.

For the sake of continuity (see 2.1) a smooth transition between IA and SIA is needed both in process and substance:

o In terms of process, an inter service consultation group should be set up from the start of the IA and ensure a good articulation between the IA and SIA phase.

o In terms of substance, analytical results of the IA should be used as an important input in the preliminary SIA as background information and starting point of the analysis. In particular, IA should highlight the aspects on which the external consultants may wish to concentrate their research within the SIA.

The IA tools and methodology will not be further developed in this handbook as they constitute a self standing regulatory requirement of the Commission described in detail in below references.

Useful documentation on IA implementation is available on the web on http://europa.eu.int/comm/secretariat_general/impact/key.htm. It includes:

Communication COM(2002)276 of 5 June 2002 on Impact Assessment.

Commission report on Impact Assessment: Next steps - In support of competitiveness and sustainable development SEC (2004)1377 of 21 October 2004.

Commission Guidelines on Impact Assessment

1. An operational guide containing procedural arrangements and basic information on how to conduct and report on an impact assessmentGuidelines

2. A handbook with more detailed guidance on how to do an impact assessment Handbook

3. Technical annexes to the handbook Technical annexes

2.2.2. Phase 2: the Trade Sustainability Impact Assessment (Trade

SIA)

This second phase aims at reaching the following objectives:

o providing an in-depth assessment of likely changes induced by the trade agreement on economies, social development and the environment in any geographical area potentially impacted;

o providing inputs to the clarification of trade-offs derived from trade liberalisation and to the definition of trade negotiating positions and a full package of policies (not trade-restricted);

o building an open process of consultation around trade policy creating a basis for a rational and informed discussion with a broad range of stakeholders from civil society, and international organisations so that negative perceptions of trade policy can be forestalled, and thereby to improve the chances of all-round beneficial effects, including on sustainable development;

o improving the authority of the EU in its institutional and political dialogue with its trading partners on sustainable development;

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o shedding light on how trade policy contributes to internationally agreed processes on sustainable development and notably the Millennium Development and Johannesburg goals;

o Proposing ex-post (after the event) monitoring measures which will have to be put into practice during the agreement’s implementation;

Figure: input, process and output of an SIA:

Inception phase Briefing meeting Collecting and reviewing documents Development of methodological and conceptual framework Preliminary screening and scoping, CCA Preliminary identification of priority issues Stakeholder analysis Identification of case study countries and groups

Analysis and Case study phase Further data and report collection and review Country case studies Further screening and scoping, CCA Development of baseline scenarios; production, consumption and trade flows Determination of priority trade scenarios Preliminary impact assessment, CCA Identification of main sustainability impacts Development of M&E measures

Consultations Working meetings with Commission officials Possible stakeholders workshops/public meetings Discussions with civil society

INPUT PROCESS OUTPUT

INCEPTION REPORT/1st FINAL

REPORT

MID-TERM REPORT/SECTOR

REPORTS

Synthesis of feedback from Commission Synthesis of feedback from various stakeholders and civil society Documenting consultations

Final phase Quantitative (CGE) and qualitative assessment of impacts under various scenarios Analysis of cross-sectoral effects Possible additional case studies Assessment and selection of flanking (M&E) measures Finalisation of M&E proposals and policy recommendations Identification of further analysis needs Synthesising and consolidating all the analytical work

FINAL REPORT /

RECOMMENDATIONS

Evaluation by the Commission Stakeholder workshop/public meetings Discussions with civil society Possible revisions

Adapted from Indufor (2004). SIA sustainability impact assessment of proposed WTO negotiations. Inception report for the forest sector study

Box 1: The practical application of the SIA methodology to the post-Doha agenda Starting April 2002, this exercise involved the assessment of:

the likely impacts of a number of the individual agreements to be negotiated (market access, services, trade facilitation, trade and environment etc…) and, in due course, of the New Round as a whole;

the impacts for different groups of countries – the European Union, developing countries, least developed countries and the rest of the world – and, in particular cases, for selected individual countries;

the likely economic, social and environmental impacts using nine core target indicators and a greater number of ‘second tier’ target indicators, together with several process indicators;

these impacts assuming a range of different negotiated outcomes to establish in what ways these might vary;

both positive and negative outcomes and the broad scale of significance of these;

how different kinds of flanking and other supporting measures might enhance the positive impacts and mitigate the negative impacts;

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2.2.3. Phase 3: the integration of Trade SIA results into policy

making

SIA projects should lead to concrete and specific policy measures to mitigate potential negative impacts. It is therefore key to establish how to integrate SIA results into policy making.This is done by a process of analysis and consultation both internally in the Commission and with the Member States, and externally with civil society. The Commission’s services draw up an official Commission position paper which takes this work into account. The position paper should specify how the Commission intends to integrate SIA results into the policymaking process: this may highlight points of agreement and explain any disagreements. It may also add complementary analysis, flag lessons to be learnt or ideas for technical assistance, or propose monitoring in association committee. For each SIA final report provided by the consultants, a position paper1 is drafted and discussed with Member States within the trade committee known as the133 Committee.

Monitoring activities to follow the implementation of decisions taken within the position paper should also be set up.

SIA of WTO negotiations – Textile and Clothing –complementary measures proposed by the Commission for Least Developed Countries (LDCs) and non-competing Developing Countries (DCs)

From the Commission’s perspective, the two main avenues for mitigating negative economic effects on LDCs and on non-competitive DCs are:

(i) putting the emphasis on the role of trade policy in promoting diversification and targeting market access preferences (notably with a link to the T&C communication, COM(2003)649final of 29 October 2003) for non-competitive DCs and LDCs whose economy relies heavily on this sector; and

(ii) intensifying Trade-Related Technical Assistance (TRTA) and Capacity Building on the basis of success stories and best practices.

Trade policy

The Commission agrees with the analysis, which shows that only a few DCs stand to gain a large share of textile and clothing trade growth. This supports the need to enhance access to the EU market for uncompetitive DCs and to support diversification in such countries in order for them to find alternative productions for trade. Differentiation and exploitation of niche markets (environmentally and socially friendly products) could also provide complementary solutions.

In this context, trade policy can play a key role, notably through the following specific actions:

(i) Special and differential treatment (with lower levels of commitment during a transition period) can offer flexibility for less competitive DCs within WTO and FTA negotiations.

(ii) Further use of trade preferences with a view to increasing access to the EU market and promoting diversification in these countries:

The reform of the Generalised System of Preferences (GSP) provides opportunities for more specific targeting of the weakest DC and LDC economies and for helping them during their transition periods. These preferences should be more clearly limited to countries which need it the most and not allow the most advanced DCs – which are competitive – to benefit from additional special and differential treatment.

1 Position papers are available on http://europa.eu.int/comm/trade/issues/global/sia/news.htm

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The GSP reform should also be simpler and more flexible, notably as regard rules of origin and cummulation rules.

Specifically for LDCs, the Everything But Arms (EBA) initiative should facilitate better access to the EU market for textiles/clothing produced by LDCs and give these countries specific preference for diversification products.

(iii) Promotion of South-South integration should be further intensified in our bilateral relations with these countries.

(iv) Specific trade measures aimed at enhancing access to the EU market of environmentally and socially friendly goods should be generalised in regional and WTO negotiations, as appropriate.

(v) Supporting international organisations’ initiatives and reinforcing partnerships with UNEP or ILO, focusing on trade and sustainable development issues.

Cooperation and Trade-Related Technical Assistance

According to individual country demands and priorities, country-specific TRTA activities could be undertaken in order to:

(i) improve the competitiveness of Textiles and Clothing industries, further foster diversification in LDC economies and support reconversion activities;

(ii) develop a transformation industry of raw materials (for instance, Western Africa for cotton) and develop niche market opportunities;

(iii) ensure the promotion of an environment supportive of private sector development and provide infrastructure and training, in particular for Small and Medium Enterprises (SMEs);

(iv) foster exchanges of experiences on the basis of success stories and best practices (such as workshops).

The Commission textile programme in Western Africa funded by the EU and currently under implementation (2003-2005) ,is devoting a large amount of resources including studies and capacity building assistance to companies and will continue to make an important contribution to this effort.

The Trade SIA also confirms the usefulness of a Textile Facility to ease the transition period for ACP countries after the MFA that is currently under discussion.

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SIA diagram

Phase Steps WhenHow

WhoAnalysis Consultation

1. Impact Assessment (IA)

IA

Extended IA

Before proposing a negotiation

mandate to the Council

Preliminary in house analysis

Internal and external consultation

European Commission

under DG Trade lead

2. Real Time Trade

Sustainability Impact

Assessment (SIA)

Preliminary Assessment

During the negotiations

Detailed analysis including:

1. Screening

2. Scoping

3. Assessments (qualitative & quantitative)

4. Flanking measures

5. Ex-post and monitoring

1. Meetings for inception, midterm and final phases of each study

2. Possibly local workshops

3. Direct communication with the consultant

External Consultant financed by DG

Trade

Sector studies

Final SIA

3. Integration of SIA results into policy making

Position papers During / after negotiations

Synthesis of results and flanking measures endorsed

by the Commission

Meetings to discuss draft position papers

European Commission

under DG Trade lead

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CHAPTER 3 - Real time Trade SIA

The SIA as such is carried out in real time – i.e. over some of the same time that the trade negotiations take place - by an external consultant carefully selected by the Commission following a call for tender/proposal. The Commission establishes the exact tasks to be carried out by the consultant as well as the dates for the delivery of reports.

What is the consultant expected to do?

1- to refine the specific methodological framework for each SIA with a clear indication of the analytical and quantitative tools which will be used and with a view to improving the methodological framework used for the preliminary assessment;

2- to deliver a comprehensive economic analysis of the targeted outcome of the negotiation underway, including on services and rules issues. This analysis should include impacts on trade, welfare, GDP and employment;

3- to carry out a preliminary assessment, in the light of these anticipated changes in trade and the economy, presenting an overview of sustainable development issues impacted by the negotiation outcome and an indication of any further sector studies which appear to be called for. A key element of this assessment will consist of the identification of areas of stress or potential stress within the social and environmental circumstances of the regions being studied;

4- to carry out the detailed sector studies emerging from the preliminary overview. These studies should analyse the expected magnitude of impacts and make use of both qualitative and quantitative techniques, as appropriate;

5- to provide a final SIA synthesis including identification of complementary policy measures (in the EU or in partner regions) or other adjustments that would prove effective in tackling any adverse impacts of liberalisation, and/or in promoting its positive impacts. Conclusions should be concrete, detailed and relevant for negotiators and policy-makers.

3.1. Implementation principles

3.1.1. Working method

Principles and working methods adopted by DG Trade for carrying out the SIA are as follows:

SIAs should be carried out for all major multilateral and bilateral trade negotiations.

The external consultant should carry out analytical assessments in full transparency.

The SIA should address all three pillars of sustainability (economic, social, environment).

The SIA should assess all trade measures of a trade negotiation (tariff measures as well as services, trade regulations (trade in investment, public procurement, intellectual property…).

The SIA should analyse and assess not only sustainability impacts on the EU and the trading partner concerned but also impacts on any third party countries.

The EU is committed to conducting SIA in co-operation with affected partners.

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Processes should permit all stakeholders to participate in the analysis of issues and impacts.

In order to build a credible process, there should be immediate and complete public availability of the results of the SIAs.

In order to ensure the relevance of the SIA process, all agencies and negotiators concerned should participate in an internal steering process. There should also be co-ordination with Member States and MEPs.

SIA results should be fully taken into account into Commission’s policies.

3.1.2. The complementary roles of assessment and consultation

The assessment stage includes two complementary elements: the analytical assessments and the consultation process.First, economic, environmental and social assessments are performed using analytical tools and rational causal chain analysis. The quality of the assessment determines the credibility and the relevance of the SIA results as input for the negotiation process. It is therefore vital that this element is undertaken in a clear, scientific and objective manner.

Second, a wide consultation process takes place in which both consultation and dissemination of results among stakeholders and trading partners are undertaken. The quality of this process is key to ensuring ownership of the process by civil society in Europe and third countries, legitimacy in the use of SIA results, and usefulness for checking the quality of the assessment results.

The two elements - assessment and consultation - are equally important and are mutually supportive for ensuring quality, credibility and legitimacy of the SIA.

3.1.3. Proportionate analysis, prioritisation and key issues

Experience shows that a major difficulty of SIAs lies in the management of the very large scope of issues at stake and data abundance or gaps.

In order to obtain relevant and detailed results, SIA should be based on proportionate analysis i.e. adapting the level of depth and detail of the analysis to the significance of the likely impacts of the trade measures. This variable focus should be achieved by an iterative process of prioritisation associating assessments with consultations thus:

(i) an assessment phase (using relevant assessment tools) which should isolate a limited number of issues, social groups and/or geographical areas which appear to be key in terms of the gravity of the impacts expected;

(ii) confirmation of the relevance of these key issues in potentially affected geographical areas through the consultation of stakeholders and trading partners

3.1.4. Identification of risks

An important role of SIA is to identify risks arising from trade policy as well as to propose ways of managing them.A risk is commonly defined as the likelihood of an undesirable or negative outcome. Risk is assessed according to the greater or lesser probability of the event occurring and the greater or lesser resulting impact if it does occur. These two variables combine when considering the gravity of a particular risk exposure to constitute a risk analysis. The basic goal of risk analysis is to analyze potentially hazardous factors such as changes in technology, human activities, or environmental changes in as thorough and accurate a manner as

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possible, drawing upon the state of scientific knowledge and the knowledge of affected people, characterizing what is known and not known, pinpointing what the major uncertainties are, identifying the risk implications for people and places affected, and assessing decision options.

The so-called vulnerability analysis is an important component of risk analysis, delineating the places, human groups, and ecosystems that are at highest risk, the sources of such vulnerability, and how it can be ameliorated or eliminated. Such analyses need to proceed in an open and transparent way and to communicate knowledge to decision makers so that those responsible for managing risks can make informed decisions.

Any SIA report should provide a fully fledged analysis of risks associated to trade negotiations and provide proposals to manage them.

3.1.5. Learning-by-doing and methodological improvement

SIA should be continuously improved through actors learning by doing from one SIA project to the next. The work completed in previous SIAs should be used as a starting point for each subsequent SIA so that the methodological framework of SIAs is continuously improved. The very first step for each consultant is to reflect on how to contribute to the existing framework and to tailor it for the specific SIAs to be undertaken.

The methodological framework put forward for quantitative and qualitative assessments should also be based on an analysis of the current state of the art in these analyses and on an updated literature review on existing and available quantitative and qualitative methodologies. This literature review should focus on recent developments in quantitative techniques concerning the impacts of trade liberalisation in goods, services and in “rules” aspects, such as investment and competition on the three elements of sustainable development. The analysis should be based on the most up to date economic / social / environmental indicators and databases available and should take into account the latest technical and political developments (including ensuring that they cover the enlarged EU).

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3.2. Assessment steps

3.2.1. Preliminary Assessment

The purpose of this exercise is essentially to help Commission experts to identify early in the process any potential negative and positive impacts of outcome scenarios, so as to incorporate them into their negotiating approach.

In this context, the preliminary assessment should present an overview of sustainable development issues (economic, social and environmental) at stake in the trade negotiations under scrutiny.

This preliminary assessment should rely on:

1) scenarios and findings delivered by the Impact Assessment undertaken previously;

2) an analysis of the underlying sustainability context (economic, social and environmental) in EU and third countries, including the identification of areas of stress or potential stress likely to be impacted by increased trade or services activity;

3) an analysis of the mechanisms through which the different scenarios of the agreement will affect social, economic and environmental areas.

This analysis should cover all concerned trade sectors including market access (goods and services) and other trade-related aspects, highlighting the potential positive and negative effects on sustainability as well as preliminary reflections on possible complementary measures which such effects require.

The preliminary assessment should provide an analysis of the EU and potentially affected countries at a regional/national and if appropriate sub national (regional) level with:

o a quantitative and qualitative assessment of possible economic impacts of trade negotiations. Possible examples for the quantitative assessments (cf. section below on “assessment tools”) include the use of gravity models, computable general equilibrium (CGE) models and/or a number of specific sectoral or transversal issues studies; or a combination of these different technical approaches taking into account the possible limited availability of data.

o the social, and environmental impacts of the agreement with an in depth analysis of the causal chains which identify the significant cause-effect link between a proposed change in trade policy and its social (including gender and poverty), environmental (including all media) and economic impacts. This analysis should as far as possible combine qualitative and quantitative approaches and a wider range of indicators.

an assessment of those areas where the consultant considers that more detailed assessments should be carried out i.e. a list of further sector studies ranked by priority and a first identification of key sustainability issues and the potentially most affected social groups and geographical areas related to the trade agreement. The following table is a good example of how to make recommendations for detailed sector studies taken from the SIA of the WTO negotiations:

Sector Significance Comments

Sust

aina

bilit

y im

pact

s

Tra

de

volu

me

Agriculture.

xx xx

An SIA of the entire agriculture sector should be considered, with particular emphasis on grains (other than wheat), livestock, multifunctional issues and food security. The detailed SIA that has already been carried out for wheat and edible oil crops showed that in many countries the impacts interact strongly with those for other grains, particularly rice. There are also strong interactions between the grains and the livestock subsectors, while multifunctional and food security issues have potentially important sustainability impacts in both developed and developing countries, with interactions throughout much of the sector.

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Automobiles, automotive products and other transport equipment.

x xx

This is a large sub-sector in trade volume, with relatively high trade barriers in developed as well as developing countries. It has a potentially high beneficial impact on sustainable development through its contribution to the industrialisation of developing countries.

Leather goods and footwear.

x x

These products still have high market access restrictions, and provide important export markets for many developing countries. The industry can also be a highly polluting one.

Energy services. x x

These services have potential impacts which in some respects are similar to those for environmental services, for which a detailed SIA has already been carried out. The economic significance of the sector is however different, with potentially large impacts in all three sustainable development spheres.

Financial services. xx

While relatively small in trade volume and already subject to a degree of liberalisation, financial services have particularly strong potential for contributing to development, while being highly susceptible to adverse effects if not properly regulated.

Distribution services.

x xThe opportunities for liberalisation are large, and the sector has potentially significant social impacts.

Tourism and travel services.

xx

This is a large sector with significant potential for further liberalisation. Significant sustainability impacts are associated with the sector, although they tend to derive from development of the industry, rather than from trade liberalisation as such.

Trade and Investment.

xx

This area has high potential for contributing to development. There are important interactions with WTO Rules and market access for industrial products, and also competition policy (for which a detailed SIA has already been carried out). An SIA in this area would need to consider all these interactions.

Trade and Environment.

xx

The negotiations and related WTO initiatives in this area have particular significance for cross-cutting issues and the impact of the Doha agenda as a whole.

TRIPs and public health.

x

While the trade volumes associated with the TRIPs negotiations are small, the potential impacts on public health are significant and controversial.

xx:high significance x:medium significance. From C. George and C. Kirkpatrick, IDPM 2003

Scene setting of the analysis

The preliminary assessment phase is fundamental in an SIA as it is the source of legitimacy for the more detailed studies. Experience shows that the initial focus on trade context and good coordination between the consultant and negotiators is essential during screening and scoping. An ex-ante SIA analysis should be based on a detailed, comprehensive and relevant description of trade context underlying current negotiations on the basis of scenarios. This should in particular entail an analysis of:

o trade flows (goods, services (with modes/sectors features), investment, and public procurement);

o current trade barriers (tariff and non tariff);

o sensitivity of sectors involved, including services and rules issues;

o a detailed characterisation of each trade measure to be negotiated (for tariff and rules related measures) for each scenario.

For all transversal issues (such as public procurement, investment), a detailed characterisation is needed of main sectors involved (main type of goods and services traded or affected by these transversal sectors).

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Screening

The first stage is a screening exercise to identify which trade measures (tariff reduction, improved access in a service sector, etc) require SIA because they are likely to have significant impacts inside and outside the EU. The screening exercise analyses the trade negotiation mandate with the help of four criteria:

1) Whether the affected areas already under economic, social or environmental stress.

2) Whether significant economic, social or environmental impacts are likely to be linked to trade measures.

3) Whether the contribution to cumulative impacts is likely to be significant.

4) Whether the existing regulatory framework is sufficient to implement appropriate mitigating and enhancement measures.

Scoping

The next stage is scoping to establish the appropriate coverage of each SIA, taking each of the measures identified in the screening exercise and identifying which components of those measures are likely to give rise to significant impacts. Ideally, this is carried out through a preliminary SIA to identify potential significant effects, both positive and negative, on sustainable development. The scoping phase also analyses trade liberalisation scenarios and target country groups according to core indicators and using simplified Causal Chain Analysis (CCA). Identifying key priority issues during the scoping phase is essential if the SIA is to focus on key issues and optimise the allocation of time/money to these issues early in the process.

Example of screening and scoping matrix - SIA of WTO - Trade and Investment - potential impacts of further liberalisation scenario

ImpactType of country

affected Causal factors Factors affecting significance

Economicincome developed return on investment

developing, mainly Asia

economic activity return on investment

developing, other cost of incentives, balance of payments, legal costs

investment policy

employment developed domestic closures, short termlong term

developing employment opportunities

nature of investment

labour productivitycapital stock developing, mainly

Asiagreenfield rather than merger/acquisition

investment policy

Socialequity (including gender)

developed employment domestic investment

developing employment, labour productivity

nature of investment, social policy

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ImpactType of country

affected Causal factors Factors affecting significance

Environmentalpollution, resource depletion

developing increased production effectiveness of regulation

Processdevelopment strategy developing limits on development

interventionmarket size, existing technology capacity

3.2.2. Detailed SIAs

Subsequently, a detailed SIA is carried out for each individual trade measure. A detailed SIA revisits the subject matter of the preliminary assessment in greater detail by:

1) Analysing separate components of the trade measure and their cumulative impact.

2) Using detailed causal chain analysis.

3) Fine tuning the indicators (or themes).

4) Coping with variations within country groupings (or single countries) by selecting contrasting countries (regions).The preliminary overview may suggest the need to undertake a detailed sector analysis, which would include:

- Quantitative and qualitative assessments of the impact of potential outcomes in the sector concerned. This work should be undertaken on the basis of case studies and economic, social and environmental analysis (including environmental impact assessments), using appropriate methodology, measures and indicators, and making use of both qualitative and quantitative techniques as appropriate. Impacts should be differentiated as far as possible as between EU regions.

- Suggest possible amendments or adaptations (including phasing in) of the assessed trade measures or new rules whose potential sustainability impacts are expected to be important, taking into account the existing regulatory frameworks and domestic policies.

- Based on the existing regulatory frameworks and domestic policies of the countries/regions under review, suggestions on what complementary measures might be introduced to address the negative impacts and best maximise the positive impact of further liberalisation / changes in rule-making. This should include an assessment of the various options for mitigating and enhancing measures, including those which could be introduced on a domestic or regional level, in international fora, or in other areas of the ongoing negotiation processes. Identify inherent trade-offs where they exist and specify on which basis and principles the choices of measures have to be made (e.g. precaution, prevention, cost-effectiveness, internalisation of external environmental costs, treaty obligations of a high level of environmental protection).

- Suggestions on what complementary measures might be introduced to best maximise the positive impact of further liberalisation / changes in rule making. This should include an assessment of the various options for mitigating and enhancing measures, including those which could be introduced on a domestic or regional level, in international fora, or in other areas of the ongoing negotiation processes.

The assessment should be carried out on the basis of a number of refined scenarios and global coherence between general and sector studies should be improved and looked at carefully.

Results of the EU-Chile SIA (Planistat 2002)

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An SIA of the EU-Chile negotiations was carried out in 2002. The final report of this study is available on http://europa.eu.int/comm/trade/issues/global/sia/reports.htm. Some results of the study are listed below.

Economic impacts are very limited both in the EU and in Chile but positive in both.

In the case of the EU, no noticeable social and environmental impacts were identified because of a higher dispersion of these impacts.

In Chile, potential social impacts were expected to be positive overall (e.g. improvement in urban living standards), even if some negative impacts linked to pre-existing social problems were foreseen.

Potential environmental impacts were identified for some specific Chilean sectors (mining, metals, chemicals, and fisheries).

The SIA stressed the role of domestic regulation and of the involvement of private operators (Corporate Social Responsibility) for mitigating negative social and environmental impacts.

the SIA is likely to underestimate the absolute value of impacts, in particular economic impacts. This can be partly explained by gaps in the assessment of the services and investment sectors due to methodological limitations.

An example of SIA results: summary of sustainability impacts for Chile (Planistat 2002)Dimensions / Significance Criteria

Overall Direction

magnitude

Existing conditions Equity Reversibility Capacity to

change

I Economic

1. Real income △ △ ▽2. Net fixed capital formation △ △3. Employment △ ▽ △3.1 Self-employment, informal employment ↕ ▽ ▽ ▽ △4. Consumer effects △ △II Social

5. Poverty △ ↕ ▽ △6. Health and education ↕ ▽ △III Environmental

7. Environmental quality ▽ ▽ △7.1 Air quality indicators ▽ ▽ △7.2 Water quality indicators ▽ ▽ △7.3 Land quality indicators ▽ ▽ △8. Biological diversity ○8.1 Designated eco-systems ○ ▽8.2 Endangered species ○9. Other natural resource stocks ▽ ▼ ? △

Symbols:○ non-significant impact compared with the base situation△ positive lesser significant impact (marginally significant, by itself, to the negotiation decision)▽ negative lesser significant impact.  (marginally significant, by itself, to the negotiation decision

but a potential candidate for mitigation)▲ positive greater significant impact (likely to be significant, by itself, to the negotiation decision)▼ negative greater significant impact.  (likely to be significant, by itself, to the negotiation

decision.  Merits serious consideration for mitigation)↕ positive and negative impacts likely to be experienced according to context? net effect is uncertain

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3.2.3. Full SIA package

The consultant will provide a final SIA covering the full package of agreements before their adoption. Timing and contents will be determined in co-operation with the Commission.

The final SIA assessment will build on previous analysis and give a final and comprehensive assessment of the whole outcome negotiated. This analysis should be presented in such a way as to give a concrete input for negotiators and other relevant Commission services in their search for a balanced set of policies.

This will include trade policy recommendations including on trade negotiation position and any necessary complementary measures (trade and non-trade policy measures dedicated to mitigate negative impacts on sustainable development and to enhance positive impacts on sustainable development)

3.2.4. Mitigating and enhancing measures

As well as a full synthesis of impacts assessed in previous phases, the methodology should include a mitigation and enhancement analysis to suggest types of improvements or flanking measures that may enhance the proposal’s overall impact on sustainable development. The flanking measures suggested should make it possible to maximise the positive impacts and to reduce any negative impacts of the trade negotiations in question. The sphere of activity of flanking measures can extend beyond the commercial field (internal policy, capacity building, and international regulation). This stage of the SIA is particularly important in relation to developing and least developed countries. In the design of such policy measures, the consultant should clearly distinguish between measures that are under EU’s own control and those which depend on actions taken by another country’s government or international bodies.All SIAs should provide various policy recommendations and flanking measures such as market-based instruments, voluntary measures and institutional measures in order to deal with possible consequences of trade agreements. This can include the recommendation to2:1. Modify some aspects of the trade agreement to allow the inclusion of environmental or social safeguards.2. Design and implement policies and instruments to enhance positive effects and mitigate negative impacts to compensate losers. This could include measures by national governments to remedy market imperfections, regulatory failures, and social inequalities. Economic and social costs of such policy measures as well as their likely effectiveness should be assessed.3. Implement complementary review mechanisms to accompany trade agreements.

Proposed complementary measures –SIA of WTO negotiations – pharmaceutical productso Promoting South-South integration through trade policy;o Helping DCs to build effective health care systems to ensure that the poor can take advantage of cheaper drugs and to provide sufficient funding for these health care systems;o Supporting the development of local production capacity, transfer of technology, as well as Research and Development capacity in DCs;o Helping DCs to set up social safety nets to mitigate any losses in income related to reduced production;o Using dialogue and technical assistance, according to individual country demands and priorities, to help improve environmental regulation, in particular in the field of waste management, in order to increase environmental protection in producing countries.

2 Source: OECD, (1994). Methodologies for Environmental and Trade Reviews. Paris, OECD/GC(94)103. 3

Consultation is defined by the COM (2002)704 as a process intended to provide opportunities for input from representatives of regional and local authorities, civil society organisations, undertakings and associations of undertakings, the individual citizens concerned, academics and technical experts, and interested parties in third countries.

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SIA of WTO negotiation – food crops – Senegal Case studies

Policy responses in the Senegal case should focus on food security, and establishment of economically viable and environmentally sustainable agricultural practices. Addressing food security demands: both international and domestic policy responses. better implementation of the Marrakesh Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net-Food Importing Developing Countries. use the special safeguard (SSG) provisions under the Uruguay Round Agricultural Agreement.

Policies intended to impact directly on Senegal’s domestic circumstances should address the disproportionate impacts on women due to high levels of female employment occurring in the sector and their vulnerability to food security impacts. Creating better incentives for more sustainable agricultural practices is crucial to the long-term viability of the groundnut sector. In particular, there may be a need to subsidise fertilizer use to prevent soil mining and improve productivity as one policy option.

3.2.5. Ex Post Monitoring and evaluation

The SIA methodology includes the setting up of ex-post monitoring activities for ensuring a better implementation of the agreement under scrutiny and a better quality check on the SIA: ex-post monitoring should allow recommendations to be made for better implementation, additional M&E measures and improved research methodology.

These ex-post proposals can include: 1) Monitoring activities undertaken during the implementation of the agreement including an assessment of the state of play of the implementation of the provisions of the trade agreement.

2) Activities to monitor impacts of the agreement on sustainable development.

3) Evaluation and actualisation of studies comparing ex-ante assessment with ex-post facts. o the undertaking of an ex-post evaluation of the sustainability impacts of the agreement as

implemented. Using the same approach presented for the ex-ante SIA including preliminary analysis/sector studies and causal chain analysis;

o the undertaking of a post-evaluation of the ex-ante SIA study i.e. comparing their predictions with actual outcomes and explaining any significant differences between them.

o the undertaking of a complementary analysis which could usefully be carried out in order to have an even better understanding of the relationships between the trade agreement implementation and sustainable development;

o the proposal of recommendations relating to: any implementation problems which have been encountered; additional mitigation and enhancement measures which may be needed to address any significant, unanticipated or unresolved sustainability impacts; strengthening existing ex-ante and ex-post SIA methodologies and their use in practice;

o The ex-post assessment should also identify the eventual need for complementary analysis which could usefully be undertaken to complete the monitoring process.

Examples of possible monitoring initiatives:1. Commission, think-tanks or academics to monitor closely a set of indicators to shred light on possible adverse economic, social and environmental impacts. 2. There could also be an initiative to report systematically every year on an agreed list of indicators to provide regular evaluations.3. An independent commission of specialists and stakeholders to report on the impacts of trade policies with budget for studies and ex-post analysis.

These ex-post activities should be seen as a continuous process which should feed the bilateral dialogue on SD between both trading partners during the implementation.

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3.3. SIA consultation process

3.3.1. Who are the main SIA players?

The SIA process is characterised by the participation of various players with different points of view, expectations and ability to participate. While the process is enriched by this diversity, it makes consultation much more complex and requires careful steering in order to maintain a balanced approach among stakeholders.

The main players in the SIA process are:

European Commission: DG Trade (as leader) and other services participate in the inter-service steering committee (see below) which ensures that the consultant respects the terms of reference of the SIA. Member States’ experts are drawn, like the Commission inter-service group, from different fields. The European Parliament is also regularly consulted during the course of an SIA.

Third country governments, which are very sensitive to the sovereignty issue of a study which assesses impacts outside the EU. They often fear protectionist motives on the part of the Commission and expect clear messages from the Commission on SIA use and goals. They have to be associated from the beginning of the SIA process as key players facilitating the consultation process abroad. Debate on SIAs should also involve legislators of third countries.

Consultants: they are responsible for the quality of the analysis and have to cope with the complexity of the assessment and consultation process included in SIA. Their independent position is reinforced by the international steering committee (ISC) which should be set up by the consultant in cooperation with the European Commission. Members of the IAC should be high level international experts (including members of international organisations such as ILO, UNEP, and UNDP), trade, environment and development government representatives and civil society representatives (NGOs, business organisations). The role of the ISC is to provide overall guidance on substance and process to the consultant team and to involve international experts closely. The ISC should be involved in all the main stages of the SIA.

Civil society, including business and academics, and not just lobbying NGOs from within the EU and outside. Their inherent diversity in terms of views, expectations and capacity of interacting with the SIA process is a key parameter of the consultation process, as the SIA project seeks a balanced approach between views and expectations.

3.3.2. Internal consultation process and international dialogue

For each SIA, an inter-service steering committee is set up in order to involve all interested Directorate Generals (DGs) in the SIA process. This steering committee meets regularly (3 to 4 times a year) to comment on reports or pass its views to the consultant. From these regular meetings, the different DGs involved have an opportunity to revise the work done by the consultants and provide comments on how to address certain aspects better.

Late in 2003 an expert group of Member States was established to ensure a better involvement of Member States’ expertise.

The main activity of these groups is to comment on reports and to give the consultant the benefit of expertise and experience of EU and Member States officials and agencies.

At the international level there must also be constant exchanges of experience and information among country governments and all relevant departments or agencies both at the national and regional level. This includes the need to cooperate further while pooling resources to carry out SIAs.

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3.3.3. External consultation process

The external dimension of the consultation process plays the essential role of providing input in each of the main stages of the SIA methodology. The objective of the consultation process is not only to ensure a greater understanding and awareness among stakeholders of the SIA methodology but also to increase transparency and accountability. Consultants have therefore to make a major effort to engage fully in a credible consultation exercise.

Consultation has to become an everyday activity for the consultant and must be based on certain guiding principles such as the need to keep a balanced approach between all of the stakeholders. To this end, a thorough stakeholder analysis should be carried out in order to provide a clear picture of all parties engaged in conducting the research, those who make or implement policy, and the intermediaries between them. The main categories of stakeholders are summarised in the following table:

Private sector Public sector Civil society

Corporations and businesses

Business associationsProfessional bodiesIndividual business

leadersFinancial institutions

Think tanks

Ministers and advisors (executive)Civil servants and departments

(bureaucracy)Elected representatives (legislative)

Courts (judiciary)Political parties

Local governments/councilsMilitary

International bodies (Bretton Woods, UN, etc.)

MediaChurches/religious groupsSchools and universitiesSocial movements and

advocacy groupsTrade unions

National NGOsInternational NGOs

The consultants should ensure adequate and balanced coverage of these parties in a consultation process. This entails distinguishing between those affected by the trade negotiations and its consequences, those who will be involved in implementation of the trade liberalisation measures and proposals, and those organisations that have stated objectives giving them a direct interest in the process. Once the stakeholders have been identified, a database should be created and a questionnaire designed to find out about their specific objectives, experience, expertise or technical knowledge. This would allow for a clear track record of participants in previous and future consultations.

This graph summarises the main contribution and involvement of stakeholders in an SIA process:

Figure 1. Stakeholder involvement

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Consultation3 requires the input and contributions of the stakeholders, both experts as well the general public but they do not play a role in the policy development even if their views are sometimes taken into account. On the contrary, participation is a process where stakeholders have a substantial involvement in shaping and implementing trade policies. Thus, a far-reaching, well-structured consultation process is an essential ingredient of any successful participatory process recipe.

As the story of DG Trade civil society dialogue shows, private sector participation is essential for the SIA processes so that a broad array of stakeholders do have a say in the decision-making process. However, it remains still a challenge how to better involve minority groups from third countries such as indigenous people, local NGOs or youth and women group.

The identification of a Contact Group of stakeholders will help also in establishing clear guidance for the consultation process. The Contact Group should function as a facilitator and sounding board for DG Trade and the consultants ensuring that its composition should reasonably reflect the major interests of civil society stakeholders. Among its tasks, there should be the need to contribute to transparency in both directions, and to help with the circulation of information to the wider group of their constituencies. It may also propose topics for further discussion, and provide advice on certain technical and organisation matters. A balance between social and economic bodies, large and small organisations as well as organisations in the European Union and those in non-member countries (e.g. in the candidate or developing countries or in countries that are major trading partners of the European Union) must be preserved.

It still remains a challenge for many consultants to better integrate the contributions received by stakeholders. In every report, there has to be a section on the amount of contributions received, their quality and how they have been taken into account in the SIA process. The consultants should make sure that they provide feedback on the main issues raised by the participants in the consultation process at every step of the SIAs.

If stakeholders are to feel and remain engaged in the process, information such as results of research and negotiations must be disseminated promptly. Access to relevant information well before the SIA process starts is also important. Whenever possible, the terms of reference for the assessment, methodology, a proposed timeframe for meetings and consultations, summaries of any other previous meeting or workshop should be available for civil society in advance.

Another aspect that many stakeholders have severely criticized in recent SIAs is the length of the reports. The consultants must do their utmost to provide concise reports avoiding, for example, long

3

EuropeanCommissionNGOs, consumer

groups, academics

Industry and trade associations Non-EU Countries

GeneralPublicConsultants

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lists of studies or complex descriptions in the case studies undertaken. The main findings and recommendations should be clearly identified.

In order to provide a useful SIA analysis including relevant policy alternatives, there is an increasing need for capacity, among civil society members, especially in developing countries, in terms of research and networking facilities, advocacy as well as human and financial resources. There is also need for access to information, collection of reliable data, improving the assessment tools, orienting the research towards practical solutions and publishing and disseminating results. Enough resources have to be devoted to ensure these aspects are properly tackled.

Here is a non-exhaustive list of measures which have been implemented during previous SIAs: Dialogue between the consultant and stakeholders with interests in individual sectors or in the

negotiations as a whole. Use of an international network of experts to comment on the project reports (international

steering committees) Publication of project reports on a dedicated website with facilities for comment. Meetings with civil society organised by the European Commission and Member States, to

discuss project reports (three times a year, attendance around 60-80 people). Engagement with the wider debate on the policy and practice of impact assessment of trade

issues, through policy dialogue and conference participation.

The experience so far points to consultants relying heavily on the internet as a main way to disseminate information although some newsletters have also been circulated in the various meetings held. The latter provide a great opportunity to exchange views but are costly to organise and will always be restricted to limited participation. On the other hand, written submissions allow for greater scope and time to provide input. The internet has become a new avenue for dissemination of information available. However, in many developing countries, access to information technology is quite restricted thus undermining the capacity of civil society in these countries to have access to the consultation processes. Therefore, local workshops, whenever possible, have to be organised as part of the consultation process as the best way to gather a substantive amount of input from all different stakeholders. This could be done in coordination with local stakeholders and third countries’ governments.

Example of consultation and stakeholder involvement

The Food-crops SIA, as well as the EU-Chile SIA, pointed at the need to involve civil society and representatives from third countries with a view to improving the quality of analysis and reinforcing the legitimacy of results.

Early in 2003, an SIA seminar held in Brussels put a strong emphasis on external consultation including the need to organise extensive consultations outside the EU, notably via local workshops. Local workshops were organised alongside the ACP SIA and are planned in the future EU-Mercosur SIA and ex-post EU-Chile SIA. A good example of this kind of regional consultation workshop took place from 11 to13 November in Port-of-Spain, Trinidad to discuss the EU-CARICOM negotiations in the framework of the EU-ACP SIA. The workshop was organised by the consultant in partnership with the Caribbean Policy Development Centre (CPDC) a regional civil society network of more than 50 national and regional NGOs and research centres with the financial and technical support of the European Commission and the Technical Centre for Agricultural and Rural Cooperation ACP-EU (CTA). The conclusions highlighted the need to provide further comprehensive literature review as well as to concentrate on three main case studies as well as to identify appropriate models for future work such as field-surveys and other qualitative work. A similar exercise in the form of workshop was also held in Dakar, Senegal from a West-African perspective.

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The annex provides clear guidelines and reporting requirements for the consultant in order to ensure a better consultation process by consultants. These have been drafted by DG Trade for its own consultation processes.. The Communication COM(2002)704 adopted on 11 December 2002, on ‘General principles and minimum standards for consultation of interested parties by the Commission’ also provides some valuable guidance..

In any case, the consultants will have to pay particular attention to the consultation process and to draw up a roadmap for consultation based on the following key elements:

o Clarifying the aim of the consultation: comments on reports, methodological suggestions, and concrete analytical inputs.

o Setting up the international advisory committee (cf. section 3.1).

o Undertaking a fully-fledged stakeholder analysis: who should be consulted?

o Describing the consultation process as such: operating mode (meetings, email…), timeline, nature of the documentation, explanation of the role of consultation to stakeholders., analysis of the different positions of actors involved and their expectations and attitudes towards risk and uncertainty thus establishing a clear link with the significance criteria.

o Integrating comments in a transparent process (including feedback on the way comments were integrated).

The consultant should report on the way the proposed roadmap has been implemented

3.4. SIA tools checklist

3.4.1. Scenarios

Scenarios define the scope of the evaluation and reflect the likely range of realistic outcomes in any given negotiation. In the case of the SIA food crops, the scenarios were based on different assumptions on tariff reductions:

Original scenarios for trade measures in agriculture used in the SIA food crops (SEI, 2002)Baseline UR Scenario 1 Scenario 2 Scenario 3

Tariff reduction -36% -10 % -30% -50%De minimis(market) access 5% +2.5% +5% +7.5%

Domestic support (AMS) -20% -10% -20% -30%

Export support -21% volume -10% -20% -30 %-+/- % changes are related to the final UR agreement

While the SIA methodology reckoned to dovetail analyses within three hypothetical scenarios (baseline, liberalisation, further liberalisation), the experience so far has shown that in practice only two scenarios can be assessed because of a lack of data and of assessment tools. The baseline scenario reflects a future in which all past agreement are implemented. In general, past studies have not always provided scenarios that were sufficiently precise and detailed. This leads sometimes to a lack of differentiation among impacts: those which are specific to trade measures under negotiation (confusion between liberalisation/privatisation for instance) and those which are a consequence of external factors.

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3.4.2. Themes and indicators of sustainable development

The available literature offers a large number of indicators under all pillars of sustainable development. Rather than proposing lists of indicators, the SIA methodology relies primarily on the selection of relevant sustainable development themes* and indicators*. Appropriate choices can help structure the assessment and focus it on relevant dimensions of sustainable development, taking into account baseline conditions and changes which might occur due to trade measures:

In the light of past experience, main conclusions that can be drawn are as follows:

(i) the value of indicators is not so much in quantifying impacts (notably in a context of scarcity of data and measures) but rather in pointing to key issues to be considered.

(ii) selection of a detailed list of indicators should occur after an initial preliminary assessment in order to better focus on specific and key sustainability issues

(iii) methodological guidelines should ensure:o coherence and consistency between general indicators used in overall assessment (preliminary

analysis) and specific indicators used during sector studies.o linkages with other general policy objectives (how to define indicators that allow the

contribution of the trade agreement to Millennium Development Goals to be assessed).o coherence between European choices for determining criteria for sustainable development and

those of third countries which can make different choices regarding indicators and have different collective preferences.

Different types of indicators can be considered, using whatever conceptual framework is appropriate (Pressure-State-Response developed by the OECD or the Driving Force-pressure-State Impact-State-Response framework developed by Eurostat and the European Environment Agency):

The DPSIR (Driving force-Pressure-State-Impact-Response) framework, is an extension of the PSR (Pressure-State-Response) framework developed by OECD and Statistics Canada. This framework shows the connections between the causes of environmental problems, their impacts and society’s responses to them and highlights the non-linear reflexive nature of the linkages between policies and impacts.Driving forces are everyday human and economic activities, such as travel and industrial production. They lead to Pressures on people and the environment such as emissions, noise, and land take for infrastructure. As a result of the pressures, theState of the environment is affected. Changes in air quality and noise levels and increased fragmentation of habitats are examples relevant for transport. These changes in state may than lead toImpacts such as illness and death, and loss of biodiversity. These impacts often provoke societalResponses, such as emission or safety standards for vehicles, speed limits, taxes and charges, investment in public transport, etc which impact finally on Driving forces

Regarding the selection of themes, a first set should be defined ‘a priori’ before the screening to set the scene in which the SIA takes place. The themes identified should give an overall picture of the most relevant issues in terms of Sustainable Development as well as providing an overview of the most relevant international commitments such as the Millennium Development Goals.

This initial selection of the themes should be based on the following criteria:o coverage: in aggregate the set of themes should cover comprehensively the relevant SD issueso exclusivity: themes should not overlapo number of themes/sub themes should be limited

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o maintain a balance between SD pillarsAs an example of this initial selection, the table below is provided which includes the nine key sustainability themes originally identified in the SIA methodology in 1999; it is important to bear in mind however that this list should be completed by any other eventual supplementary themes if required by the specific circumstances of each SIA. If necessary, sub-themes could be identified to provide a more detailed analysis (see below).

Pillar Economic Social Environment

Themes

Real income

Fixed capital formation

Employment

Poverty

Health and education

Equity

Biodiversity

Environmental quality

Natural resource stocks

Key sustainability issues in the agricultural sector in Senegal

Economic performance of the groundnut sector Poverty and rural livelihoods Food security (relating to wheat imports and cultivation of groundnut as a cash crop) Gender issues Soil fertility, water pollution, and salinization

Negative impacts are predicted for the economic and social aspects due to rising wheat prices and food security impacts (Senegal is a net food importer).

The negative food security impacts will be mitigated to some degree by projections of rising world prices and demand for oil crops.

In addition, some structural problems, especially domestic problems, in the groundnut sector will tend to limit growth in the sub-sector despite liberalisation efforts.

Negative environmental impacts are predicted due to predictions of expansion of unsustainable agricultural practices (soil mining) in the groundnut sector.

Once the themes have been identified, a selection of a detailed list of indicators should be carried out within the following framework:

(i) this selection should take place after the initial preliminary assessment (screening) in order better to focus on specific and key sustainability issues and on the main potential changes. For each theme and sub-theme for which potential effect of the trade agreement has been identified by the screening, indicators have to be selected.

(ii) relevant stakeholders should be given the opportunity to provide input for the selection of indicators.

In practice, the selection should use the following criteria:o Coherence and consistency should be found between general indicators used in overall

assessment (preliminary analysis) and specific indicators used during sector studies or at different geographical level (regional, national, local).

o Relevance for other general policy objectives are enabled (i.e. contribution of the trade agreement to Millennium Development Goals, WSSD Plan of Implementation).

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o Coherence between different possible approaches in sustainable development, i.e., European choices for determining dimensions of sustainable development can differ from third countries choices.

o Indicators should reflect the full range of sustainability issues and a similar coverage of all pillars of sustainable development.

o Indicator should be specific and reliable.

o Credibility of indicators and transparency of the selection (in close conjunction with consultation process).

o Indicators should be measurable (data availability), time dependant and shed light on trends.

It should be recognised that the detailed specification and form of the various indicators whether quantitative or qualitative may vary to reflect the type of measure, the country group characteristics and/or the data availability.

Some examples of indicators, including economic sub-themes are presented in the following table.

Example of themes, sub themes and indicators for the economic pillarECONOMIC

Theme Sub-theme Indicators

Economic Structure

Economic Performance

GDP per capitaInvestment share in GDPForeign Direct InvestmentGross fixed Capital formation

TradeBalance of trade in goods and servicesVolume of Exports in goods and servicesVolume of trade in goods and services

Financial Status Debt to GNP Ratio

Material consumption Intensity of material use

Consumption and Productions

Patterns

Energy Use Energy consumption per capitaIntensity of consumption use

Waste Generation and Management

Generation of industrial wasteGeneration of hazardous wasteManagement of wasteWaste Recycling and Reuse

Transportation Distance travelled per capita by mode of transport

National accountsDerived national accounts Agriculture value added

Household final consumption

Dependency on overseas aid Net current transfer from abroadODA value

Government Finance

Government resources Net tax on products

External Debt Present value of debtIBRD loans and IDA

Balance of Payments Current account balanceChange in net reserves

Source: World Bank Development Indicators and CSD Theme Indicator Framework

In terms of reporting requirements, the entire process should be transparent and the consultant should always make clear why certain choices were made. Any preliminary assessment should include, at least, the following:

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(i) an overall list of themes including brief description of the selection procedure.(ii) a list of indicators selected. For each indicator the following information is requested:

o Name and brief description. o Policy relevance (relevance to theme/sub theme, linkages with trade effect, with

international targets).o Reliability in measuring the needed parameters.o Credibility including results of consultations.o Measurement method: type of measure, unit.o Country coverage.o Data availability and origin.o Documentation and references.

An example of short description of indicators: Definition: Real income is defined as gross national product minus the depreciation on man- made capital and the depreciation of environmental assets, and is the sum of final uses of goods and services measured in producer prices, less the value of imported 25 goods and services. (It can also be estimated as the sum of primary income distributed by resident producer units).Measure: GDP is generally used as measure of real income. The UN System of National Accounts provides international standards for national estimates of GDP. GDP per capita gives a measure of average real income.Data Sources: UN (2001) pp. 212-214. GDP per capita statistics are published in UN National Accounts Statistics: Main Aggregates and Detailed Tables(annual).Source: from Kirckpatrick and al 2002

3.4.3. Data

SIA authors are confronted with a general lack of reliable and homogenous data. It is exceptional for coherent data to be available. This is a major shortcoming that is difficult to address and makes quantitative analysis extremely difficult in most cases.

For developing countries data gaps affect almost all sustainability fields (from economic to social and environment). Even in the economic field, when some data are available they are often unreliable because of the importance of the informal production sector.

Even for developed countries data gaps exist or data are not reliable in some cases: Trade/economic data: trade flows in services, foreign direct investment, public procurement social data : data with gender differentiation Environment data : biodiversity, land use and forest coverage

At the least, the consultant should provide an assessment of all possible sources of data by contacting some of the major international institutions (WTO, OECD, UN, World Bank, etc.) and national statistical offices and whenever possible by building databases through the gathering of disseminated information. When this is not possible, the consultant should at least find ways to point at feasible solutions such as the use of IT technologies to create custom databases or the design of questionnaires.

Even in a context of scarce data, the consultant can draw meaningful conclusions, provided that uncertainties are acknowledged and allowed for.

3.4.4. Significance criteria

The significance criteria are used to characterise the significance of a given impact/change and its relevance for policy makers: it is linked to the impact in itself (magnitude, reversibility) as well as the

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context in which it occurs (existing stress, regulatory capacity for mitigating changes). Factors which have to be taken into account when evaluating significance of an impact are proposed below. In interpreting these factors, the consultant will judge against the baseline situation.

The significance criteria that should be taken into consideration in any SIA are presented in the table below.

Significance criteria

Description Scoring Comment on scoring

Magnitude and direction of

changes

Value of the impact size (--,-,0,+,++)++: greater significant

positive impact--: greater significant

negative impact

Existing conditions

Relates to existing economic, social and environmental conditions and

stress

(--,-,0,+,++)--: important existing

stress++: absence of existing

stress

Distribution of the impacts

Characterise the diffuse vs. localised nature of the impact. (--,-,0,+,++)

--; highly localised on specific social groups or

geographical areas++; highly diffuse

Reversibility

Characterise the reversible/irreversible nature of the impact (mostly environmental or

social)

Yes / noPotential species

extinction, irreversible social effect

Risk Inform about the probability of occurrence of the impact (L,M,H)

L: low riskM: medium risk

H: high risk

Capacity to change

Institutional and regulatory capacity of the country in which the effect is

expected to implement flanking measures

(L,M,H)L: low risk

M: medium riskH: high risk

Other scoring indications:0 = non-significant impact compared with the base situation = positive and negative impacts likely to be experienced – net effect is uncertain and/or varies according to context-/+ = negative over an initial (specified) period of time but expected to become positive in the longer term. The length of short and long time periods should be specified (and, where appropriate, standardised) for this purpose.? = uncertain effect

Common features of the scoring of impact significance: o The scoring notation to be used should be as quantitative as possible. Nevertheless, it is likely

that for some SD indicators and some scenarios, quantification is not possible. In this case the scoring system presented below should be used to characterise impacts for each indicator and significance criteria.

o For each significance criteria information should also include the time scale in which impacts are expected (short term and long term effects).

o All impacts are relative to the baseline conditions.

Table 1: Summary Presentation of Sustainability impacts

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SD dimensions Significance of impacts

SD pillar SD Theme Indicator

Overall Direction

Magnitude(--,-,0,+,++)

ExistingConditions(--,-,0,+,++)

Distribution(--,-,0,+,++)

Reversibility(yes,no)

Risk analysis(L,M,H)

Capacity toChange

(L,M,H,)

Economic++

Social

Environmental

Land / Agriculture

Fertiliser release -/-- ? -- yes H M

Institutional

3.4.5 Country groupings

SIA is not restricted to specific geographical areas: impacts should be analysed wherever they occur. Country groupings aim at aggregating information at an appropriate level. This level should be determined by conciliating two opposite constraints: (i) facilitation of the analysis by limiting the number of groups and by analysing global effects i.e. climate change (ii) need to avoid hiding important variations within groups.

Four target groups were identified in the methodological framework developed in 1999 and refined in 2002 for WTO negotiations. These are

1) European Union,

2) Non-EU developed countries

3) Developing countries

4) Least developed countries.

The use of these groups enables us to maintain a unified framework for all SIA studies, keeping in mind that sub groups should be defined for specific sector studies.

Nevertheless, choice of sub-groups of countries should be operated on a case by case basis, depending on the type of trade negotiation, the trade measures involved, trade patterns and key sustainability issues. Sub-groups should be notably defined according to characteristics which are particularly relevant to policy making for the trade measure being analysed (i.e. net food importers LDCs, net food exporter LDCs in the case of agriculture negotiations). Criteria which are used to build these sub-groups should be clearly described by the Consultant.

Country groups developed in the SIA on Forestry (WTO negotiations) • Major developed forest product importer: EU, the United States, Japan• Major developed country forest product exporter: e.g. the United States, Canada, Austria, Finland,Sweden, Norway, New Zealand• Developing country exporter/producer: Indonesia, Malaysia, China (also a major importer), Brazil,Cameroon, Democratic Republic of Congo• Developing countries with poorly developed forest sector (very limited exports): Sudan, Ethiopia,Somalia, Tanzania, North African or Middle Eastern countries.

From Indufor (2004)

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3.4.6. Assessment tools

The SIA methodology indicates that there is no “one-size-fits-all” approach to sustainability impact assessment, and argues for the use of a range of quantitative and qualitative assessment tools, including case studies, modelling, statistical estimation and expert opinion. The benefits of incorporating a mix of qualitative and quantitative methods have been confirmed by experience and by other organisations that have undertaken SIA studies of trade liberalisation agreements.

3.4.6.a. Causal chain analyses

Causal chain analysis aims at identifying the significant cause–effect links between the proposed change (scenario) in the trade measure and its eventual economic, social and environmental impacts. For example, a change in tariff levels will directly alter the pattern of prices facing producers and consumers. Similarly, a rules change in, for example, competition policy, alters the market conditions for producers and consumers, although the impact on prices will be indirect. The new structure of incentives and market opportunities will induce a change in the economic behaviour of producers, consumers and intermediaries. Changes in behaviour will affect the production system, inducing changes in the scale, composition, and technology of production (from Kirkpatrick et al, IDPM 2002- further development of the methodology).

SIA studies can draw on a very wide body of literature on the effect of trade on the environment (cf. synthesis work of OECD, WTO (1999)) which has been developed over the two last decades (scale, technology, composition structural effects).

Methodological framework developed within the SIA EU-Chile (Planistat 2002)

The experience gained so far shows that the causal chain analyses (CCA) so far developed would be clearly improved by further development of analytical tools notably with a view to ensure a better reliability of the identification of trade-related impacts. CCA of social and environmental impacts, which are often indirect, should in particular be given a specific focus.General Causal Chains and Economic Impacts in the forest sector – SIA of WTO negotiationThe net economic impacts of trade liberalisation in the forest sector are beneficial, as a whole, both according to the economic theory (based on comparative advantage and specialisation), empirical evidence, and economic

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modelling (e.g. Sedjo & Simpson 1999). However, the theory does not say much about distribution of positive and negative impacts or about social and environmental impacts (Tomberlin et al. 1998, Rice et al. 2000). Even in economic terms, there will be both winners and losers. For most countries and the world, the welfare gain of consumers would exceed the welfare loss of producers due to trade liberalisation. The question is: are there specific disadvantaged or vulnerable countries, groups or industrial sectors, which would suffer? The CCA and the case studies are used to identify the probable distribution of gains and losses associated with the predicted economic, social and environmental impacts.The basic assumption is that trade liberalisation increases consumption and trade in forest products, but the question is by how much. The adoption of new trade measures is expected to change the economic incentives and opportunities available to wood producers, forest-based product manufacturers, and consumers and intermediaries, including forest product trading companies. This will take place mainly through changes in the relative forest product prices, which can affect the terms of trade between countries or, for example, changes in the relative profitability of land-uses within countries. Prices will decline in those consumer markets, which have been protected by tariffs, increasing thus demand for forest products, depending on the price elasticity of demand. In export oriented countries with a comparative advantage, prices are expected to rise. When producers adjust to new prices, there will be changes in the production system, and the levels and directions of forest product trade flows.Comparative advantage will drive countries to specialise in forest products that they produce more efficiently than other countries because of the comparative advantage in technology, resource endowments, and input costs. Under a free global trade regime, those who produce the best products at the lowest relative costs will benefit from expanding markets resulting from trade liberalisation (Repetto 1994, Tomberlin et al. 1998). New export opportunities will emerge in those producer countries, where the overall demand and forest product prices have been suppressed because of trade impediments. On the other hand, less-efficient producers will suffer at least in the short term until the economy has adjusted.Changes in the production system and also in the volume of trade flows will have environmental and social impacts, which can be both positive and negative and vary between stakeholder groups. Because tariffs are higher for processed products than for roundwood and sawnwood (which face practically zero tariffs in most markets), it is envisaged that trade liberalisation will increase export of value added products, including SPWPs. Increased net export of forest products will increase the demand for roundwood and increase the stumpage price. How large the price impacts will be, will depend on the share of exports in relation to domestic demand, and the competitiveness of the market. The increased forest product prices are often only partly passed to wood suppliers, because industry wants to increase its profitability. Commercial logging is driven by the profit-maximisation behaviour of the both private and public sector operators in forestry. When international forest product prices increase, stumpage values are likely to rise in major export-oriented producer countries. Higher prices will stimulate wood supply, when forest managers increase production from the existing forest lands as a short-term response. The wood supply response will depend on the price elasticity of supply. In the longer term, more funds will be invested in intensifying forest management (aiming at shorter rotations and higher yields) and establishment of forest plantations.

Source: Indufor (2004), SIA of WTO negotiations Because of the complexity and the importance of the implementation of the causal chain analysis, consultants should report clearly and transparently on CCA . By doing so, they should demonstrate in particular that CCA is robust and mention the sources of analysis (computer models, qualitative analysis, case studies, expert opinion) which are used for this purpose.

3.4.6.b. Case studies

Case studies are used to shed light on sustainability issues and impacts in specific cases, in order to obtain more detailed results.

The SIA methodology and experience so far on case studies show that: Use of case studies e.g. in the “food crops” SIA (Argentina, Egypt, Australia, Indonesia, EU,

US, Malaysia, Senegal) enable the scope of studies to be reduced and more detailed and usable results to be obtained. SIAs should draw lessons from a country case study that is relevant to all countries demonstrating the same characteristics i.e. which belong to the same sub-group.

Use of sector studies should not induce a bias whereby negative impacts will be overestimated in relation to positive impacts (this frequently occurring characteristic of sector studies is likely to be amplified in the specific case of trade policy, where the positive impacts are global and diffuse, while negative impacts affect limited local areas or specific social groups.

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When using case studies, the consultant should clearly mention the criteria used to select them as well as their parameters. Examples of parameters which could be used for this purpose:

Trade pattern as producer, importer and exporter Region where the country belongs Representativeness of the country vis-à-vis country groups Sustainability trends and issues Assessment constraints (availability of data, feasibility of assessment) Relevance, quality of information and analysis

SIA of WTO negotiations – Agriculture – choice of case studies for DCs

For developing countries, four types are distinguished, for each of which one country has been selected for an illustrative case study, determined on the basis of how representative they are of the issues and crops we concentrate on. The aim is to highlight two specific distinctions. The first is that between developing countries that are net exporters of products likely to be affected by liberalisation and those that are net importers (even if they export some of the products) and/or have high initial tariffs (so that reforms significantly increase competition from imports). The second distinction refers to such countries: those that are developing are expected to reduce tariffs, whereas those that are LDCs are not required to liberalise, but will face reduced preference margins in many markets.

Developing countries that are significant net exporters for a wide range of products. Their main concerns will be increased access to foreign markets, and they are unambiguous beneficiaries from liberalisation. Brazil is taken as the example.

Developing countries with a relatively protected agricultural sector, exporting some products but importing others. These countries can benefit from liberalisation in some products, but lose in others (where they reduce protection), and thus face mixed impacts. India is the example. The study carried out here expands on that previously undertaken for major food crops (Maltais et al 2002).

Least developed countries, which currently benefit from the most preferential treatment. They typically export cash crops and import food grain (although many have constrained but significant domestic production capacity). These countries could benefit from liberalisation if they can increase exports or if higher import prices provide a stimulus to domestic producers. Tanzania is taken for the case study.

Low-income developing countries that are not classified as least developed but are quite similar in terms of the pattern and efficiency of their agricultural sector. These countries are expected to reduce tariffs and compete with the more preferentially treated least developed countries in their export markets. Ghana has been taken as an example.

From O. Morissey et al. (2005) Midterm report for the Agriculture sector study

3.4.6.c. Modelling

Mainly economic modelling is used in SIA to assess quantitative impacts of trade liberalisation. Various models such as Computable General Equilibrium (CGE), econometric, input-output, gravity models can be used depending on the purpose (general overview, sector analysis, regional analysis). All of these models try to assess the likely consequences of policy changes on variables such a prices, income or welfare via resource allocation. In particular, the most refined CGE models can provide a fully fledged analysis of possible direct effects of trade agreements over time including various feedback effects across several sectors and countries.

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The main advantage of modelling results is to offer quantitative information which relies on clear and transparent hypotheses (as, for instance, in the cases of the EU-Chile and EU-GCC SIAs). In particular they are very useful at the stage of screening to identify key economic trends and related sustainability issues so that the best-suited policy action can be designed to achieve a certain final objective.

Nevertheless, the main shortcomings are that they shed light only on a part of the negotiations (mainly tariff related) on a static basis (dynamic effects are more difficult to assess). Modelling ignores a huge part of the trade agenda (trade in services, trade rules, investments). A wide range of quantitative approaches has therefore to be used for a comprehensive SIA: a package or combination of models to help assess the causal chains between a proposed trade negotiation and its potential economic, environmental and social impacts. The selection of models will depend on the policy measure to be assessed and, above all, the quality and quantity of data available.

3.4.6.d. Networking

To some extent, assessments rely also on expert opinion. For this purpose, each consultant has to develop their own international expert network.The SIA seminar held in Brussels4 (6-7 February 2003) identified the need to establish polycentric networks of expertise (experts at international, regional, national and local level). The functioning of these world-wide experts networks needs to be improved.

Transparency about the role of SIA consultants as input in the analysis also needs to be improved, and consultants should publish the composition of their network.

3.4.7. Risk Assessment and Uncertainty

The effects of trade liberalisation are rarely known in advance with certainty. In order to take account of uncertainties in the estimates, it is important to convey the possibility of completely unexpected outcomes or extremely unlikely “worst case scenarios”. This helps decision-makers to understand the degree of uncertainty and the reliability or otherwise of estimates of impacts.Uncertainties can be significant, for example because of difficulty in forecasting exactly how markets will adjust to new regulation, or potential effects on the pace of technical innovation. All of these uncertainties should be incorporated in the analysis whenever possible. Overall risk assessments cannot be more precise than their most uncertain component. Thus, risk assessments should be reported in a way that reflects the degree of uncertainty present and does not create a false sense of precision. If there is scientific uncertainty about the nature and scale of risks, it may be appropriate to invoke the precautionary principle as described in the communication (COM (2000) 1 final).

Risk assessment is often highly subjective. The risk assessment should however generate a credible, objective, realistic, and scientifically balanced analysis and explain the confidence in each assessment by clearly setting out strengths, probabilities, and assumptions, along with the impacts of these factors on the overall assessment. The SIA risk assessment should include three main steps:

1. risk identification: description and list of all possible relevant risks.2. risk analysis: Establishment of the linkages between the causes/sources of risks and the

possible damage. This is often not possible due to the lack of reliable data sets although the use of benefits transfer techniques or the Delphi technique to allocate the probabilities of different events occurring based on experience or expert advice can provide ways to overcome the difficulties of the analysis.

3. risk management proposals: assessment of the options to address risks to health, safety and the environment. This should be conducted so that it can be used in a more general cost-benefit framework, allowing the analysis to combine the results of the risk assessment with the costs

4 SIA seminar 6-7 February 2003 http://trade-info.cec.eu.int/civil_soc/docconsult.php?action=list

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and benefits of a given proposal. It can be used when probabilities of different possible outcomes can be estimated.

Techniques commonly used to assess riskare:

o Sensitivity analysis explores the impact of uncertainty in particular assumptions or parameters, in terms of their relative importance in influencing the results. It shows how changes in particular values affect the outcomes of the various options being considered. In many assessments, this is the best way to handle the analysis of uncertainties.

o Scenario analysis can be used to examine the impact of a policy initiative under alternative conditions or else as a more complex form of sensitivity analysis. It can be used when the level of uncertainty is so large that a risk assessment can only present discrete alternative scenarios with or without a quantitative assessment of their relative likelihood.

The risk assessment should however generate a credible, objective, realistic, and scientifically balanced analysis and explain the confidence in each assessment by clearly setting out strengths, probabilities, and assumptions, along with the impacts of these factors on the overall assessment. Even when it is not possible to do a rigorous and detailed risk assessment of a proposal, it is important to try to make some assessment of the possible over or under-estimation of the assessed impacts and to report the findings of the risk identification and analysis.

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CHAPTER 4 - How to assess whether an SIA fulfils its objectives: performance benchmarksFor each SIA, an internal process should be setup to evaluate and monitor the SIA project and its implementation. The table below is proposed to help monitor and evaluate the SIA project and make sure that it fulfils its objectives. Obviously, this evaluation should be undertaken so as to gather not only the Commission’s views but also comments from civil society and trading partners.

Table 1 – Performance criteria for a Sustainability Impact Assessment

It is integrated

It develops alternative scenarios, visions and options for trade policy in a participative way

It deals with the interplay between environmental, social and economic aspects It takes into consideration connections with various sector policies and local,

regional, national and international factors

Its objective is sustainability

It seeks to integrate the concept of sustainability at an early stage into the objectives and results of trade policy

It facilitates the identification of alternative more sustainable development options and proposals.

It identifies opportunities and limitations that the environment imposes on the development of trade policy

It includes the concepts of precaution and continuous improvement in particular during the implementation of agreements (ex-post monitoring)

It is specific

It provides robust, reliable and useful information for sound development decisions and, where practicable, quantitative information

It focuses on the key issues of sustainable development and differentiates static, dynamic, and long term cumulative effects

It is tailor-made for the characteristics of the decision-making process in question. It is cost-effective and time-effective

It is accountable

It is carried out with professionalism, rigour, justice, impartiality and equity It makes explicit data sources used, assumptions and approximations made, and

their level of uncertainty It undergoes independent verifications and reviews It documents and justifies how sustainability issues are considered in the decision-

making process

It is participative

The participative processes are adapted to the social and political context It informs and involves the diverse stakeholders and government bodies throughout

the decision-making process It ensure that all key stakeholders’ perspectives are identified, understood and taken

into account and that the empirical evidence for effects identified by stakeholders is critically examined

It has clear and easily comprehensible information requisites, and ensures access to relevant information

It is interactive and flexible

It provides enough information on the real impacts of implementing a strategic decision to judge whether the decision should be modified

It ensures results of the assessment will be available early enough to influence the decision making process and inspire future decisions

It has an impact on policies

It is easily integrated into existing processes for the formulation of policies, plans and programmes and their implementation

It acts over and above strategic decision levels so as to provide a context for lower decision levels (e.g. specific projects such as technical assistance, targeted capacity building)

It defines the criteria to establish environmentally and socially acceptable limits to changes in environmental quality.

It evaluates the effectiveness of mitigating measures and the capacity of the existing policy making and regulatory framework to respond to predicted changes

Adapted from Hernan Blanco, Rides “Sustainability Assessment of trade policy and its application in the context of Latin America”, background paper to the seminar on SIA, 11&12 November 2003, CHILE

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CHAPTER 5 - Research Agenda. Next steps and future developments in

trade policySIA should be continuously improved. This means that every actor continues to learn by doing. Accordingly, the methodological framework of SIA should be continuously improved so that work completed in previous SIAs can be used as a starting point for each new SIA.

5.1. Quality of SIAs should be upgraded

The quality of assessments should be improved, because integrating SIA results into trade policy requires detailed and relevant SIA results. Special attention should be given to following challenges:

The need to improve the collection, reliability and availability of data and to develop a real long-term policy of research and development for assessment tools and models for trade policy: in particular environmental and social assessment methodologies have to be improved (notably by improving assessment methodologies and tools under the 6th Framework Programme of the Research Directorate). Cooperation with Eurostat and third countries’ statistical offices should also be improved so that reliable data can be collected in due time by the consultants.

An example of project led the Directorate General for Research on SIA methodology:

A workshop was organised in the context of the 5 th Framework programme for research and innovation. Proceedings of the workshop were published in N°99 of Economie International.The workshop discussed and described various types of tools available or likely to be developed for quantitative SIA analysis.The CEPII paper gives an overview of the potential offered by existing ex-ante quantitative tools i.e. Computer General Equilibrium (CGE) which are commonly used to assess the effect of policy shocks on the economy i.e. effect on price, on incomes sharing, on wages and on employment. Concrete examples of the potential offered by CGE are proposed: the assessment of the gender impacts of trade policy in the case of Bangladesh and Zambia; the assessment of social and structural changes induced by trade liberalisation; and the assessment of environmental effects using a tool developed for measuring the cost of reduction of green gas emissions.Three main conclusions can be drawn from issue:- CGE models offer interesting prospects to improve SIA analyses. They can provide quantitative and robust results and are flexible enough to integrate new indicators and expand their scope to environmental and social areas;- Research efforts should be strengthened to adapt existing tools to SIA requirements and in particular to develop new modules on social and environmental issues;- Data banks should be improved with desegregated data enabling the analysis of new dimensions i.e. gender, regional and local impacts. The need to mobilise academics in order to improve our understanding of causal links between

trade measures and impacts on the three pillars of sustainable development. The robustness of this causal link analysis is a key determinant of the credibility of SIA results and their ultimate use in the policy making process.

Better assessment of intra-EU policies: SIA should better identify impacts of liberalisation on the weakest regions in Europe and help policy makers integrate these impacts when setting policy priorities for regional policy. This use of SIA of trade liberalisation in regional policy has emerged in the last EU Cohesion report and in the Financial Perspectives endorsed by the Commission.

Long-term research and development is needed to enable a better understanding of the impacts of trade opening on sustainable development. Moreover, tomorrow’s world will entail multiple layers of international and regional free trade areas which will interact with each other. Policy makers need a better understanding of the impacts of rules-based trade opening, of the interactions

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between trade agreements and of linkages between trade and development if they are to shape the right policies and to play a full part in the broader debate about what sort of trade policy we want. To move forward, it is important to rally the scientific, research and academic world to this important and urgent cause.

5.2. Consultation process has to be further improved

Consultation is crucial but tricky: past studies have faced difficulties in establishing effective networks and in bringing together interested parties from different origins, such as developing countries’ representatives and stakeholders, NGOs, and technical experts. Consultation processes within and outside the EU should in particular integrate the lack of capacity of most of the stakeholders to follow the different simultaneous SIA processes. A key element of good consultation concerns the report (size, readability), consultation process (time available to comment) as well as transparency of the integration of inputs. In this context, the consultation guidelines which are mandatory for the consultant to implement within an SIA should be reinforced.

The European Commission needs to upgrade its political dialogue with its trading partners on SIA and sustainable development to facilitate the involvement of their civil society and improve mutual understanding on these policy areas. This upgrade can be achieved in several ways: within dialogue on the implementation of past agreements (cf. ex-post monitoring of EU-Chile agreement) or within current negotiations (cf. discussion on sustainable development within the EU-Mercosur negotiations)

The role of EC delegations is crucial in extending the consultation process to developing countries. There should be an SIA official in each delegation who will serve as liaison with civil society and academics.

International experts and organisation should be better involved. The creation of an International Advisory Committee in partnership with other international organisations will probably provide further input for the refinement of the methodology. This could take the form of a permanent forum including civil society members in charge or reviewing the SIA process, in contact with the consultants carrying out the SIA analysis to ensure that the assessment is effective and reach the expected objectives. The creation of a stakeholder forum or “observatoire” will also enhance the consultation process to a greater extent. This may require further community development and Commission’s support for organisations.

There should be also a clear mechanism to provide feedback to participants as well as a follow-up process on the various contributions. A mere summary of responses posted online should not be enough.

Specialized interviews or questionnaires distributed to key individuals such experts in different sectors could also be a good way to ensure their input into the SIA process.

One of the main objectives of the SIA analysis is to increase transparency by developing a basis for discussion with European and third countries stakeholders about potential sustainability implications of trade negotiations. Thus, there has to be a stronger emphasis on information dissemination to raise awareness and improve the results and their inclusion in the negotiation process.

In order to improve the internal consultation process within the Commission, one of the main aspects where there is room for improvement is in the coherence and cooperation among the three intertwined policy areas that are involved in an impact assessment, namely, trade, environment and development. Other departments should be also consulted in certain aspects and contributions should create an enhanced, more integrated policy-making and policy analysing process.

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5.3. Improving the integration of results into the policy-making process

After the independent assessment of the potential impacts of the agreement on sustainable development (including analysis and a consultation process), the integration of SIAs results into EC policy making falls to the Commission. This commitment to link SIAs with policy making is at the core of the SIA process. SIAs provide information and the credibility of the Community in pursuing its sustainable development goals depends greatly on the use of this information to influence trade policy making and trade negotiations.

On the basis of the conclusions of the final reports, an internal analysis will present the way the Commission intends to integrate the results. These include a very wide array of forms such as the demand of additional analyses, list of possible points of agreement and disagreement, lessons to be learned, policies and actions towards third countries, ideas for technical support to the negotiations or the direct integration of the results in the negotiation positions.

This analysis will be followed by a strategy of publication of the internal and public elements with the drafting of:

- an internal report to the Trade Commissioner and the negotiators.

- a public position paper.

The integration process set up recently throughout position papers should be systematically implemented and improved. Position papers should be posted on the web as soon as they are endorsed by the Commission.

5.4. The use of SIA as a forum for policy dialogue

SIA should be used more often and in greater measure to

give a better basis for reconciling the different views of trade/sustainability trade-offs around the negotiating table between trading partners

shed light on how trade policy contributes to internationally agreed processes on sustainable development and notably the Millennium Development and Johannesburg Goals

help identify and shed light on the collective preferences of negotiating trading partners

link private sector initiatives aimed at sustainable development, notably CSR activities with public policies

help in developing policy coherence5 and cooperation between the European Commission and international organisations (ILO, WTO, UNEP, UNCTAD, FAO, WB) in charge of international Sustainable Development initiatives.

Even if the concept of sustainable development has been broadly agreed upon since the Rio Summit, SIAs inevitably reflect European collective preferences (gender issues, animal welfare, equity concerns, etc), but the degree to which this leads us to miss results of importance to other regions, or to overstate certain issues, is not made explicit. As the SIA process is integrated within the EU’s dialogue with trading partners, solutions must be defined to ensure that the concerns of our trading partners are also reflected in the SIA studies. This evolution of the SIA process is key for improving SIAs policy usefulness and political legitimacy.

Possible pathways to achieve this are twofold:

Strategic-level impact assessment involves high levels of uncertainty, which can only be dealt with by monitoring actual impacts, combined with adaptive, flexible decision-making processes

5 Final report of the World Commission on social dimension of globalisation which ask for more policy coherence, released on 24 February 2004: http://www.ilo.org/public/english/wcsdg/docs/report.pdf

39

First, a dialogue on SIAs and, more generally, a dialogue on sustainable development should be established and integrated into each trade negotiation launched by the EU. The EU together with its trade partners should aim to enhance their common understanding of trade and sustainable development issues and at shaping trade policy so as to make it mutually supportive of sustainable development. Any future trade agreement should reflect the results of these discussions in its substance and in its implementation throughout the creation of monitoring structures. For each trade agreement, there should be trade and sustainable development committees in charge of such this monitoring process.

International organisations should be more involved. In the light of Capacity Building Task Force (joint UNEP-UNCTAD project) experience, a joint initiative involving international organisations, such as UNEP, UNCTAD, ILO, WTO, UNDP and the World Bank could, for instance, develop an international framework for conducting sustainability impact assessment. Such international cooperation should seek to adopt a flexible approach with a mix of country/region driven case studies, methodological developments and broad scope analysis. Links with capacity-building and development programmes would contribute to improve coherence between analysis and development activities.

Reinforcing civil society dialogue around SIAs by progressively integrating the substance of the issues raised by civil society in its debate and in its analysis. Not all NGOs have so far shown willingness to take part in a constructive political debate with the European Commission. The challenge is thus to offer new, imaginative forms of dialogue and to demonstrate that this dialogue can have an impact on policy making.

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CHAPTER 6 - Annexes

6.1. Glossary

Flanking measure (mitigation and enhancement measures):

Policy measures proposed in the framework of an SIA to mitigate potential negative impacts or enhance positive ones. These measures are not restricted to trade policy but can encompass cooperation, social, environmental or development policies.

Indicator:

A variable which is taken as a proxy for an outcome, in this case the effects of a particular trade agreement and its consequences for aspects of sustainable development.Indicators are used to characterise the dimensions of sustainable development in which changes induced by trade measures are assessed. Generally speaking, an indicator is a parameter that provides information about a phenomenon or about an underlying situation. The significance of an indicator goes beyond the strict measure and is used as an approximation of the impact of a change on the sustainable development area under scrutiny.

Inter-service consultation:

Consultation of all interested Directorate Generals of the European Commission. In the specific case of SIAs, interservice consultations are undertaken before the Commission issues its comments on SIA results or to prepare a Commission position paper.

Negotiation mandate:

Negotiation instructions given by the Council to the Commission. The mandate constitutes the framework which should be respected by the Commission when negotiating in the name of the EC.

Position paper:

A position paper is a paper endorsed by the Commission which describes the official position of the Commission. A position paper on SIA results should highlight points of agreement/disagreement and concrete flanking measures which will be implemented on the basis of the results

Sustainable development pillars:

The three pillars of sustainable development which the SIA examines are: social, environmental, economic. In addition it also considers the institutional dimension as a horizontal requirement.

Theme:

A sustainability theme is a certain aspect (or subcomponent) of each SD pillar which requires particular attention in the SIA. Sustainability themes help to structure the analysis by pointing to key issues to be considered during the SIA. If needed, sub themes can be defined for each category of themes.

Trade negotiation:

41

Negotiation undertaken between two or more countries or regions with a view to changing the rules and/or conditions governing trade between them. Trade negotiations can include negotiations on tariffs for goods, services, public procurement, investment, intellectual property, technical barrier to trade, rules of origin…

133Committee:

The 133 Committee takes its name from Article 133 of the Treaty of Amsterdam. That article provides for the establishment of a special committee appointed by the Council to assist the European Commission for trade policy matters.The 133 Committee constitutes the link between the European Commission and the Council. Each Member State has one full and one substitute member to represent it on that committee.

Scenario:

A scenario is a strategic and hypothetical anticipation of the future which serves as a basis for assessing changes. A scenario can be described as a coherent picture of a plausible future. In SIAs, scenarios define the scope of the evaluation and reflect the likely range of realistic outcomes in any given negotiation.

42

6.2. References

Indicators

Anker, R. Chernyshev, I. Egger, P. Mehran, F and Ritter, J. (2002) Measuring Decent Work with Statistical Indicators, ILO Working Paper 2, Policy Integration Department, Development and Analysis Group, International Labour Organisation, Geneva, Switzerland.

European Environmental Agency, United Nations Statistics Division and World Bank (2004). World Development Indicators, World Bank, Washington D.C., USA.

ESTAT (2003) Update of the Statistical Annex (annex 1) to the 2004 Report from the Commission to the Spring European Council Structural Indicators, Lisbon Strategy, European Union.

DiSano, J. Indicators of Sustainable Development: Guidelines and Methodologies, Commission for Sustainable Development, United Nations, New York, USA.

George C and Kirkpatrick C. (2003) Sustainability Impact Assessment of Proposed WTO Negotiations: Preliminary Overview of Potential Impacts of the Doha Agenda Final Report, Institute for Development Policy and Management, University of Manchester

George C and Kirkpatrick C (2004), Sustainability Impact Assessment of Proposed WTO Negotiations: Overall Project Mid-Term Report for Sector Studies, Distribution Services and Forests, Institute for Development Policy and Management, University of Manchester

Hernan Blanco, Rides “Sustainability Assessment of trade policy and its application in the context of Latin America”, background paper to the seminar on SIA, 11&12 November 2003, CHILE.

Indufor (2004). SIA sustainability impact assessment of proposed WTO negotiations. Inception report for the forest sector study.

Kirkpatrick C and George C (2003) Sustainability Impact Assessment of Proposed WTO Negotiations: Sector Studies for Market Access, Environmental Services and Competition: Final Report, Institute for Development Policy and Management, University of Manchester

Kirkpatrick C and Lee N (2002). Further Development of the Methodology for a Sustainability Impact

Assessment of Proposed WTO Negotiations (Final Report). IDPM University of Manchester

Kirkpatrick, C., Lee, N. and Morrissey, O. (1999) WTO New Round: Sustainability Impact Assessment

Study (Phase One Report), IDPM, University of Manchester.

Lowell F., Assistant Director (UN Division for SD) at the conference Sustainable Development of Coastal Zones and Instruments for its Evaluation, Germany, 23-26 Oct, 2000

Muschett, F. D. (2000). Sustainability impact assessments: a new comprehensive framework for raising the bar beyond existing environmental assessments. International Journal of Sustainable Development (IJSD), Vol. 3, No. 3.

Organisation for Economic Co-operation and Development (2001), Environmental Outlook, OECD, Paris, France.

Planistat (2002) Sustainability Impact Assessment (SIA) of the trade aspects of negotiations for an Association Agreement between the European Commission and Chile, Final Report, Planistat,

43

Luxembourg

Price Waterhouse Coopers (2004a) Sustainability Impact Assessment (SIA) of the negotiations of thetrade agreement between the European Community and the Countries of the Cooperation Council forthe Arab States of the Gulf (GCC): Methodology Price Waterhouse Coopers, Brussels

Price Waterhouse Coopers (2004b) Sustainability Impact Assessment (SIA) of the negotiations of thetrade agreement between the European Community and the Countries of the Cooperation Council forthe Arab States of the Gulf (GCC) Draft Report for Consultation Public Society, Price WaterhouseCoopers, Brussels

Price Waterhouse Coopers (2004c) Sustainability Impact Assessment (SIA) of trade negotiations of theEU-ACP Economic Partnership Agreements: Mid-term Report Price Waterhouse Coopers, Paris

Rice, Tim, Saskia Ozinga and Chantal Marijnissen. (2000). Trade Liberalisation and Its Impacts onForests: An Overview of the Most Relevant Issues. FERN.

Schaible, W. (2000) Methods for producing world and regional estimates for selected key indicators of the labour market, Employment Paper 2000/6, Employment Sector, International Labour Organisation, Geneva, Switzerland

Sedjo, Roger A. and R. David Simpson. 1999. Tariff Liberalization, Wood Trade Flows, and GlobalForests.

United Nations Environmental Programme (2002). Global Environmental Outlook 3, UNEP, Nairobi, Kenya

UNDP (2003) Human Development Report 2003 Oxford University Press, New York.

UNEP (2001). ‘Reference Manual for the Integrated Assessment of Trade-Related Policies’.

United Nations Commission for Sustainable Development (1996) Indicators of Sustainable Development: Framework and Methodologies UNCSD, New York

WIDE (2002) Joint NGO statement on Sustainability Impact Assessments of EU Trade Policy, WIDE,Brussels

World Bank (2003) World Development Report 2003, Oxford University Press, New York

World Commission on social dimension of globalisation (2004). Final report http://www.ilo.org/public/english/wcsdg/docs/report.pdf

World Wide Fund for Nature (1998) Developing a Methodology for Environmental Assessment of Trade Liberalisation Agreements, Gland.

World Wide Fund for Nature (1999) Initiating an Environmental Assessment of Trade Liberalisationin the WTO, Gland.

Other documents of interest:

Joint NGO-Statement on SIAs, July 2002 http://www.eurosur.org/wide/EU/Trade/Statement_SIA.htm

Methodological Tools for SIA Report of the CEPII Workshop held on 7-8 November 2002 in Brusselshttp://www.cepii.fr/anglaisgraph/workpap/pdf/2003/wp03-19.pdf

European Commission Official Documents:

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Commission Communication on Impact Assessment (COM/2002/0276 final)

Communication Action plan "Simplifying and improving the regulatory environment" known as Better Regulation Package, COM(2002) 278 final.

Better Regulation Package. Work Area n° 2 of the White Paper on European Governance 2001http://europa.eu.int/comm/governance/areas/group5/report_en.pdf

Communication on A Sustainable Europe for a Better World: A European Union Strategy for Sustainable Development Brussels, COM(2001)264 final. http://europa.eu.int/comm/environment/eussd/

Communication on Impact Assessment COM(2002)276 http://europa.eu.int/comm/secretariat_general/impact/key.htm.

Communication Towards a Thematic Strategy on the Sustainable Use of Natural Resources COM(2003) 572 final

Communication on Consultation document: Towards a reinforced culture of consultation and dialogue - Proposal for general principles and minimum standards for consultation of interested parties by the Commission COM(2002) 277 final

Communication on the precautionary principle COM(2000) 1 final

Commission report on Impact Assessment: Next steps - In support of competitiveness and sustainable development SEC(2004)1377 of 21 October 2004.

Modelling tools and SIA

Economie Internationale 99 (2004), ‘Assessing the sustainability impact assessment of trade liberalisations’, CEPII

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6.3. Summary of SIA experiences

Negotiation SIA Time

scheduleBudget

(€) Experience gained Example of conclusions Example of flanking measures

WTO/ Seattle agenda

Phase I 1999 128,000 First SIA Level of detail should be improved

WTO or RTA

Further development of

the methodology2001 40,000

Methodological improvements.Central role of causal chain analysis. More detailed tool box, indicators.Consultation of developing countries.Development of ex-post assessments.

Methodological proposals to be implemented in subsequent SIAs

WTO

Food crops 2001 40,000

First sectoral SIA.Use of case studies, literature review including CGE.Need to intensify developing countries’ consultation.Need to develop specific indicators.Linkages between macro policies and micro and highly localised impacts.

Highly localised environmental and social impacts on geographical hot spots and weak social groups.Negative economic, social and environmental impacts for LDCs net food importers. Women may suffer.Potential negative impacts on deforestation in Indonesia, and on the environment in Australia.

Implementation of the Marrakech declaration of WTO for LDCs.Development of food security programmes for net food importer LDCs.Development and implementation of forest regulation in DCs

Preliminary 2002-2004 125,000 Preliminary assessment of the whole DDA negotiation.High level of generality.Weakness of consultant expertise in some trade issues.

Proposed sectors to be further studied: agriculture, services, forest, FDI, impact on biodiversity

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sectoral SIAs:

market access textiles,

pharmaceutical non-ferrous metals

competition, environmental

services

2002-2004 125,000

Lack of data and tools available for services.Lack of credibility of results linked to some expertise weakness (services).Market access: analysis and consultation succeeded in building consensus in the case of market access. Academic result in the difficult case of competition

Non-ferrous metals: increase in transport leads to environmental risksTextiles: Negative impacts in DCs and LDCs which are not able to compete with China and India, negative impacts on the environment in China. Some social negative impacts in the EU due to adjustment costs

Textiles: grant trade preferences to non-competitive DCs.Cooperation for improving labour conditions in competing countries.Fine tune intra EU impacts (social, economic) and develop adjustment programmes with the support of structural funds, develop monitoring systems

sectoral SIAs: agriculture,

forest, distribution

2004-2005 250,000

Upgrade of quality standards linked to the involvement of complementary sector experts (forest, services) in the consultant team.Need to develop: coordination between negotiators and consultants for improving quality control.Results benefit from a high level of detail thanks to the use of mixed tools (case studies, modelling).

Forest: limited impact of tariff reduction in general, important role of Non Tariff Measures (NTM), positive economic impact of south-south liberalisation, negative impact of a unilateral ban to fight illegal logging, importance of domestic regulation (studied in detail in some countries (Ecuador, Mexico, Indonesia, Brazil)

Develop cooperation to help countries to develop local governance and manage their forests, negotiate NTM with a view to reducing export restrictions, encourage South-South liberalisation in the DDA, implement the FLEGT action plan

Chile Chile 2002 60,000

Use of economic modelling and sector studies.Need to involve third countries as soon as possible in the SIA process.Association with local experts is highly positive.Disappointing results for FDI and services (lack of data, expertise and tools).

Overall positive but limited positive economic impacts both for Chile and EU.Environmental risks in sectors such as mining, chemicals, forest, transport, tourism.Overall social benefits but adjustment costs identified in some geographical areas (Mapuche tribes) and some sectors (fisheries)

Monitoring the agreement’s implementationDevelop cooperation on sustainable developmentEnsure effective enforcement of fishery rightsPromotion of Corporate Social Responsibility

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GCC GCC 2002-2003 250,000

Use of economic modelling and case studies (petrochemicals, aluminium).Weak part on services (lack of data) and investments.Integration of recommendations for developing a sustainable development agenda within the negotiations.Very limited consultation process (no workshops, weak NGO involvement) detrimental to the study’s legitimacy

Overall positive effect of the negotiation on both the EU and GCCEffects on the business environment will depend on domestic reforms (institutional and regulatory framework) and regional integration. Investment decisions of economic operators are particularly sensitive in some sectors, such as environmental services – waste and waste water management.

Need to develop a sustainable development agenda in the negotiations Monitoring activities during the implementation of the agreement.Action to protect coasts and water resources

ACP

phase I

ACP

phase I2002-2003 250,000

Preliminary assessment and regional SIA (West Africa and Caribbean).Consultation at a political level.Organisation of local workshops (Senegal, Caribbean).Insufficient linkage with the EPA negotiations because of a lack of visibility of negotiation outcomes

Identification of key trade-related sustainable development issues (standards, trade facilitation, lack of local processing, gender issue and role of informal sector)Selection of key sectors:agro-industry in West Africa, fisheries in Pacific, tourism in Caribbean

Promote horizontal diversification, trade facilitation, cooperation in the area of SPS standards, Promote South-South integration

ACP

phase II

ACP

phase II2004-2005 250,000 Use of economic modelling for services, case

studies, local expertsOn going

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6.4. Standard Guidelines for Consultation of Civil society

A. CLARITY OF THE SIA PROCESS AND RELATED CONSULTATIONS

All communications by the consultants relating to the SIA process in general and consultation of the civil society (CS) in particular should be clear and concise, and should include all necessary information to facilitate responses.

The information in consultation documents given by the consultants should include:

A summary of the context, scope and objectives of consultation, including a description of the specific issues open for discussion or questions with particular importance for the consultants

Details of any upcoming hearings, meetings or conferences, where relevant Consultants’ contact details and deadlines for submissions Explanation of the consultants’ processes for dealing with contributions, what feed-

back to expect, and details of the next stages involved in the SIA If not enclosed, reference to related documentation (including, where applicable,

supporting documents).

For this general purpose, the consultants have to send the edited version of each of their own interim reports (or executive summary: max. twenty pages) to the civil society representatives. Civil society representatives then have at least ten working days to submit their comments. The complete report should also be published on a dedicated website.

B. CIVIL SOCIETY GROUPS TARGETED FOR CONSULTATION

When defining the civil society groups targeted for a consultation during the SIA, the consultants should ensure that relevant parties have an opportunity to express their opinions.

For consultation to be equitable, the consultants should ensure adequate coverage of:

those affected by the negotiations those who will be involved in implementation of the negotiation results, or bodies that have stated objectives giving them a direct interest in the negotiation

results.

In determining the relevant parties for consultation, the consultants should, if possible, select civil society representatives out of each of the following constituencies :

Consumers Development Health Environment Trade Unions Women Groups Indigenous People Education and Research

Agricultural Producers Commerce Employers Industries

The recommendations described in section 3.3 should also be borne in mind.

Apart from civil society representatives, government experts of the respective countries should also be part of consulted experts

For studies which have a broad country coverage the consultant should ensure the best civil society coverage (origins and levels) possible.

The consultants should ensure for country specific case studies, that each of the above-mentioned civil society constituencies is represented on an international, regional, national and local level. Where representation at each level is not possible, the consultants must provide the Commission with a written explanation as to why this is the case.

One organisation or individual should not be assigned to more than one civil society constituency at the same time.

If a civil society representative cannot be identified on one geographic level, the consultants should make efforts to find another one that is competent and willing to represent the respective constituency on a different level.

The consultants should localise one key representative per civil society constituency at each geographic level. The task of these key representatives is to facilitate communication between the consultants, the Commission and civil society groups in general and to help structure civil society input in particular. Furthermore, the consultants should sound out the key representatives for new relevant civil society groups in their constituency on a monthly basis.

The consultants should publish a list containing the key representatives of the consultation network on a dedicated website. This list should be included in interim reports.

C. PUBLICATION OF CONSULTATION COMMUNICATION

The consultants should contribute to furthering public awareness about the SIA. Open public consultations should be published on the website as described

Consultants have to operate an SIA-related website, which has to contain a section where questions are posted from the consultants to the civil society representatives consulted. In order to give other interested stakeholders the opportunity to send comments to the consultants, these questions must be online ten working days in advance of the respective consultation interview.

In order to facilitate the information of civil society representatives about the consultation process in particular and the SIA in general, a “Questions and Answers”

list has to be placed on the website. This list must be updated by the consultants regularly.

Where appropriate and feasible, the consultants should provide consultation documents in alternative formats so as to make them more accessible to the disabled.

D. TIME LIMITS AND GENERAL CONDITIONS FOR PARTICIPATION

The main rule is to give those participating in SIA-related consultations sufficient time for preparation and planning.

For this purpose, the following guidelines should be followed by the consultants:

The consultants must take into account the main or official language in their entire communication and documentation of the civil society consultation process.

Civil society representatives the consultants want to consult must be informed by telephone at least ten working days in advance of the interview. They must be notified of the precise questions on this occasion either by e-mail or by fax.

Where the consultants and a civil society representative agree to hold a telephone interview, the consultant must agree in advance with civil society representatives a precise time and day for the interview to take place.

If the consultants require a written report from the civil society representatives on a specific topic, the latter should have at least twenty working days to produce it.

In any case, the maximum size of such a report by civil society representatives should not exceed twenty pages (Standard configuration: Times New Roman, Font size 12, 1,5 lines spacing). The consultants have to take this into account when requesting the report.

Contributions submitted by civil society representatives after the expiration of deadlines shall be published the same way. The consultants should make reasonable efforts to take these comments into consideration.

Besides individual consultation requests made by the consultants, general round-table meetings (or videoconferences) with civil society representatives should be organised on a regular basis in order to facilitate information exchange between the consultants and interested parties. Relevant dates for these events should be announced on the dedicated website.

E. ACKNOWLEDGEMENT AND FEEDBACK

Receipt of contributions should be acknowledged. Results of open public consultation should be displayed on the dedicated website.

Depending on the number of comments received and the resources available, acknowledgement can take the form of:

an individual response (by e-mail or acknowledgement slip), or a collective response (by e-mail or on the website)

Contributions should be analysed carefully by the consultants to see whether, and to what extent, the views expressed can be accommodated in the SIA findings. This feedback analysis should distinguish clearly between issues where consensus was

reached and those where different opinions persisted. Furthermore, this analysis should differentiate between technical questions regarding the assessment and topics related more specifically to political integration issues.

Contributions to open public consultations will be made public on the website, and results of other forms of consultation will also, as far as possible, be subject to public scrutiny. Constituency representatives should be informed in advance that their correspondence will be published.

6.5. List of indicators/data

There are various themes that can be used in an SIA study. The following section of the template lists the most probable themes that can be found and used in an SIA study. Other themes can be added on a case-by-case basis.

Proposed themes of Sustainable Development and related internationally agreed objectives:

ECONOMICTheme Sub-theme Goals, Targets and Standards

Economic Structure

Economic Performance

Trade

Financial Status

i) Total ODA from developed countries should be at least 0.7% of GNP (United Nations)ii) Deal comprehensively with the debt problems of developing countries through national and international measures in order to make debt sustainable in the long term (Millennium Developments Goals)

Material consumption

Consumption and Productions

Patterns

Energy Use

Waste Generation and Management

i) National targets may apply for solid waste reduction and recyclingii) Prevent and minimize the generation of hazardous wastes (Agenda 21)

Transportation

National accounts

Derived national accounts

Dependency on overseas aid

Government Finance

Government resources

External Debt

Balance of PaymentsSource: World Bank Development Indicators and CSD Theme Indicator Framework

SOCIALTheme Sub-theme Goals, Targets, and StandardsEquity Poverty i) Reduce proportion of people living in extreme poverty

in developing countries by at least one-half by 2015 compared to 1990 (Copenhagen 95)ii) Universal access to paid employment (Copenhagen 95)iii) Halve, between 1990 and 2015, the proportion of people whose income is less than one dollar a day (Millennium Development Goals)iv) By 2020, to have achieved a significant improvement in the lives of at least 100 million slum dwellers (Millennium Development Goals)

Gender Equality

i) Eliminate discriminatory practices in employment (Beijing)ii) Eliminate gender disparity in primary and secondary education, preferably by 2005, and in all levels of education no later than 2015 (Millennium Development Goals)

Access to services of general interest

Health

Nutrition Status

i) Reduce severe and moderate malnutrition among under 5 year old children by 50% from 1990 to 2000 (New York 90, Copenhagen 95, Beijing 95, Rome 96)ii) Halve, between 1990 and 2015, the proportion of people who suffer from hunger (Millennium Development Goals)

Mortality

i) Reduce mortality rate for children under 5 years old by two-thirds of 1990 levels by 2015 (Cairo 94, New York 90)ii) Reduce by two thirds, between 1990 and 2015, the under-five mortality rate (Millennium Development Goals)iii) Reduce by three quarters, between 1990 and 2015, the maternal mortality ratio (Millennium Development Goals)

Sanitation Universal access to sanitary waste disposal (Rio de Janeiro 92, Copenhagen 95, Beijing 95)

Drinking Water Universal access to safe drinking water supply by 2025 (Rio de Janeiro 92, Copenhagen 95, Beijing 95)

HIV/AIDS, Malaria and other diseases

i) Have halted by 2015 and begun to reverse the spread of HIV/AIDS (Millennium Development Goals)ii) Have halted by 2015 and begun to reverse the incidence of malaria and other major diseases (Millennium Development Goals)

Healthcare Delivery

i) Universal access to primary health care and reproductive health services by 2015 (Cairo 94, Copenhagen 95, Beijing 95)ii) Universal immunization against measles (New York 90)iii) Universal access to safe and reliable contraceptive methods (Cairo 94)iv) In cooperation with pharmaceutical companies, provide access to affordable essential drugs in developing countries (Millennium Development Goals)

Education

Education Level

i) Universal access, and completion of primary education by 2015 (Jomtien 90, Cairo 94, Beijing 95)ii) Ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling (Millennium Development Goals)

Literacy Adult literacy reduced by half of the 1990 level by 2000 (Jomtien 90, Copenhagen 95, Beijing 95)

Housing Living Conditions Provision of sufficient living space and avoidance of overcrowding (Habitat II)

Human settlementSecurity Crime Significantly reduce violence and crime (Cairo 95)

PopulationPopulation Change Stabilize world population (Cairo 94)

Youth & Elderly PopulationsChild Bearing age

Labour Unemployment

In cooperation with developing countries, develop and implement strategies for decent and productive work for

youth (Millennium Development Goals)

Income Distribution

Employment Opportunities

Unacceptable Work

Adequate Earnings and Productive Work

Decent Hours

Stability & Security of Work

Balancing work and family life

Fair treatment in employment

Safe Work

Socio Economic Context

Social Dialogue and Workplace Relations

Social protection Social protectionSources: CSD Theme Indicator Framework, UN Statistics Division- Social Indicators, ILO- Measuring Decent Work with Statistical Indicators

ENVIRONMENTALTheme Sub-theme Goals, Targets, and Standards

Atmosphere

Climate Change

i) Reduce overall developed country emissions of CO2 equivalents by 5% of 1990 levels by 2008-2012 (Kyoto 97)ii) Stabilize GHG concentrations in the atmosphere at a level that prevents dangerous anthropogenic interference with the climate system (FCCC)

Ozone Layer Depletion

ODS consumption elimination schedule: halons by 1994; CFC, carbon tetrachloride, HBFC, and methyl chloroform by 1996; methyl bromide by 2010; and HCFC by 2030 (Montreal Protocol and Amendments and Adjustments)

Air Quality National air quality standards based on WHO air quality guidelines

Land

Agriculture Reduce the number of undernourished people to half their present level no later than 2015 (Rome96)

Foresti) All tropical timber products traded internationally shall originate from sustainable managed forest by 2000 (International Tropical Timber Organization)ii) National targets set under the sustained yield principle

Desertification

UrbanizationOceans, Seas and Coasts

Coastal Zone

Fisheries

Fresh Water

Water Use Quantity Withdrawal limits may apply to specific international treaties between countries

Water Quality

i) National water quality standards based on WHO guidelines for drinking water qualityii) Halve, by 2015, the proportion of people without sustainable access to safe drinking water and sanitation (Millennium Development Goals)

Water Supply

Biodiversity

Ecosystem

Protected areas 10% protected area for each major ecosystem type by 2000 (caracas92)

Species

Mode of productions and

consumption

Urban areas

Energy resources

Waste

TransportSource: European Environmental Agency, UNEP & CSD Theme Indicator Framework

INSTITUTIONALTheme Sub-theme Goals, Targets and Standards

Process

Implementation of Sustainable Development

principlesContribution to international

commitmentsInstitutional Framework

Strategic Implementation of Sustainable development objectives

i) National Sustainable Development strategies that reflect all interests formulated by all countries by 2002 (United Nations General Assembly97)ii) Integrate the principles of sustainable development into country policies and programmes and reverse the loss of environmental resources (Millennium Development Goals)

International Cooperation

i) Develop further an open, rule-based, predictable, non-discriminatory trading and financial system.Includes a commitment to good governance, development and poverty reduction - both nationally and internationally (Millennium Development Goals)ii) Address the special needs of the least developed countries.Includes: tariff and quota-free access for least developed countries' exports; enhanced programme of debt relief for heavily indebted poor countries (HIPC) and cancellation of official bilateral debt; and more generous ODA for countries committed to poverty reduction (Millennium Development Goals)iii) Address the special needs of landlocked developing countries and small island developing States (through the Programme of Action for the Sustainable Development of Small Island Developing States and the outcome of the twenty-second special session of the General Assembly) (Millennium Development Goals)

Institutional Capacity

Information AccessCommunications Infrastructure

Science and Technology

i) One researcher engaged in R&D per 1000 population [for Africa] (UNESCO95)ii) In cooperation with the private sector, make available the benefits of new technologies, especially information and communications (Millennium Development Goals)

Disaster Preparedness and Response

Improve the capacity of each country to mitigate the effects of natural disasters expeditiously and effectively (United Nations General Assembly89)

Governance

Recognition and enforcement of citizens rights

Balance of power and resources between/for

national, regional and local authorities

Representation of civil, social and economic actors

and organisations

International governance

Source: CSD Theme Indicator Framework

6.6. List of studies and reports and key websites and contacts

Studies and Reports

Negotiations Year Name Related Documents

WTO/Seattle 1999 Phase II SeattleTOR (http://trade-info.cec.eu.int/doclib/docs/2003/april/tradoc_112053.pdf)

Final Report http://trade-info.cec.eu.int/doclib/docs/2003/april/tradoc_111192.pdf)

WTO/DDA

2002 Food crops

TOR http://trade-info.cec.eu.int/doclib/docs/2003/april/tradoc_112354.pdfFinal report

(http://trade-info.cec.eu.int/doclib/docs/2003/april/tradoc_112356.pdf)

2002 Call for tender TOR http://trade-info.cec.eu.int/doclib/docs/2003/april/tradoc_112351.pdf

2002-2003

Preliminary DDA Final report (http://www.sia-trade.org/wto/Phase3A/OverviewFinal2.pdf)

Market Access (textiles, pharmaceuticals, non ferrous

metals

Final report (http://www.sia-trade.org/wto/Phase3A/MarketFinal.pdf)Position paper

http://trade-info.cec.eu.int/doclib/docs/2003/september/tradoc_113697.pdf http://trade-info.cec.eu.int/doclib/docs/2003/september/tradoc_113699.pdf http://trade-info.cec.eu.int/doclib/docs/2003/september/tradoc_113696.pdf

Competition

Final report (http://www.sia-trade.org/wto/Phase3A/CompetitionFinal.pdf)Position paper

http://trade-info.cec.eu.int/doclib/docs/2003/september/tradoc_113695.pdf

Environmental servicesFinal report (http://www.sia-trade.org/wto/Phase3A/EnvironFinal.pdf)

Position paper http://trade-info.cec.eu.int/doclib/docs/2003/september/tradoc_113698.pdf

2003-2004 Agriculture Midterm report (January 2005)

Forest Midterm report (http://www.sia-trade.org/wto/RevisedMTRForestNov04.pdf)Distribution Midterm report (http://www.sia-trade.org/wto/DraftMTRDist30July.pdf)

Chile 2002

Full SIA –including some sectoral studies

(agriculture, forestry, processed food, chemicals,

fisheries, electricity, tourism

TOR (http://trade-info.cec.eu.int/doclib/docs/2003/april/tradoc_112360.pdf)Final report

(http://trade-info.cec.eu.int/doclib/docs/2003/april/tradoc_112362.pdf)

GCC 2002-2003Full SIA – including sectoral studies on petrochemicals and

aluminium

TOR http://www.sia-gcc.org/gcc/download/020358.pdfFinal report http://www.sia-gcc.org/gcc/download/sia_fta-

gcc_final_reportmay2004.pdfPosition paper to be delivered

ACP

Call for tender TOR (http://trade-info.cec.eu.int/doclib/docs/2003/april/tradoc_112363.pdf

2002-2003

Preliminary SIA Final report (http://www.sia-gcc.org/acp/download/acp_eu_sia_all_2004.pdf)

Regional study: West AfricaFinal report (http://www.sia-gcc.org/acp/download/acp_eu_sia_w-

africa_2004_long.pdf)

Regional study: Caribbean Final report (http://www.sia-gcc.org/acp/download/acp_eu_sia_caribbean_2004_long.pdf)

2003-2004

Agro-food and cotton in West Africa Midterm report

Tourism in Caribbean Midterm reportFisheries in Pacific Midterm report

Methodology 1999 Phase I TOR Final report

(http://trade-info.cec.eu.int/doclib/docs/2003/april/tradoc_112366.pdf

2002 Further refinement

TOR http://trade-info.cec.eu.int/doclib/docs/2003/april/tradoc_112351.pdfFinal report

http://trade-info.cec.eu.int/doclib/docs/2003/april/tradoc_112353.pdf)

Other EC websites

Göteborg Council conclusions

DG Environment website

Sustainable development   website

Impact Assessment website

European Environment Agency

DG Research

 SIA Consultants

IDPM Manchester Sustainability Impact Assessment of Proposed WTO Multilateral negotiations

Stockholm Environment Institute Midterm Report Sustainability Impact Assessment of WTO negotiations on the major food crops

Pricewaterhousecoopers Sustainability Impact Assessment (SIA) of the negotiations of the trade agreement between the European Community and the Countries of the Cooperation Council for the Arab States of the Gulf (GCC)

Pricewaterhousecoopers ACP-EU SIA report (August 2004)

National Governments

Canada - DFAIT Sustainable Development website

United States

Section on environmental assessment of Trade agreements

USTR - Environmental assessment of Trade agreements guidelines

Japan

Academic Institutions

Global Trade Analysis Project, Purdue University

Centre d’études prospectives et d’informations internationales  

International Institutions

Commission for Environmental Cooperation of the NAFTA

International Association for Impact Assessment

Organisation of American States

Organisation for Economic Cooperation and Development

United Nations Environment Programme

World Bank

World Trade Organisation

Civil Society – Impact assessment projects

Ecologic

WWF Balanced trade

International Institute for Sustainable Development

Unisfera

Civil Society organisations

Action Aid

Centre for International Environmental Law

Consumers International

Foundation for International Environmental Law and Development (FIELD)

Friends of the Earth International

Global Environment and Trade Study

Human Rights Watch

Institute for Agriculture and Trade Policy—United States

International Centre for Trade and Sustainable Development

International Food Policy Research Institute

International Gender and Trade Network

International Institute for Environment and Development

Oxfam International

Oxfam UK

Overseas Development Institute

WTO Watch