INTERNATIONAL TRADE AND THE ENVIRONMENT


Address by the Hon Tim Fischer, MP, Deputy Prime Minister and Minister for Trade to the Minerals Council of Australia's International Council on Metal and the Environment, Thursday 30 May 1996

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Today it is my great pleasure to talk to you about some of the central issues on the international trade and environment agenda and their relevance to Australia.

Debates about trade and the environment are becoming both more complex and more prominent. This is in part because of the huge growth in world trade which has increased the extent of economic interdependence between countries.

Australia cannot avoid this debate as our exporters are dependent upon fair rules in international trade and we are also experiencing the effects of the globalisation of trade. In 1970, for example, exports accounted for 12.5 per cent of our GDP. By 1995 we were exporting 22 per cent of our GDP. And we can expect that growth to continue into the future if we create the right frameworks, both domestically and internationally.

Over the past two decades, environmental issues have also assumed a new prominence in world affairs. They have become an important, permanent and growing element of today's international landscape.

Action on environmental issues is occurring at the global level, through the development of new international treaties. It is also taking place at the national level, where environmental concerns have become a greater part of governments' consideration of economic and social policies.

In recent years, debates about the inter-relationship between trade and the environment have taken on a new complexity. This is because we are now moving into the more difficult tasks associated with ensuring adequate environmental protection. The implementation of environmental policies now involves major choices affecting economic and living standards.

Government, business, and a range of other social groupings are now making decisions about the most effective and efficient approaches to environmental management. They are also being expected to balance equity considerations with the obligation to secure sound environmental outcomes.

In all areas of the trade and environment debate the most important priority must be to get the balance right. We must strive to obtain the best outcomes for the environment as well as the economy.

It is not good enough for countries to give in to international and domestic pressure to adopt policies that have a superficial public appeal. The temptation to go for easy fixes to complex problems is not helpful and we must all be prepared to make difficult decisions.

International environmental treaties are capable of producing significant results. But the long term effectiveness and sustainability of these agreements will be dependent on international agreement, cooperation and action by all countries.

From the Australian Government's perspective, commitments made under international treaties must be effective, implementable and equitable. There must be a fair distribution and a sharing of responsibility globally. And there must be freedom for countries to pursue their own priorities.

Australian Interests

The Australian Government is actively and constantly assessing Australia's trade and environmental interests. However, we cannot help but conclude that Australia's national circumstances, priorities and objectives on trade and environmental issues differ markedly from those of other developed countries.

For a start, Australia is part of the Asia Pacific region, and many of our interests coincide with those of our Asian neighbours, many of whom are still undergoing rapid development. Unlike, for example, the European Union, Australia exports about 60 per cent of our goods into Asia, and almost half of our trade is with non-OECD countries.

Australia's fuel and mineral resources comprise some of the fundamentals of our trade and our comparative trade advantage. We are all well aware that Australia is the world's largest coal exporter, the third largest aluminium exporter, and the third largest energy exporter among OECD countries.

In contrast to most other developed countries, which tend to be net importers of carbon-intensive goods, Australia's export profile is characterised by energy-intensive primary processed products. About 85 per cent of our current exports are carbon-intensive goods, such as petroleum products, basic metals, and agriculture and food goods. At the same time, about 70 per cent of our imports are low carbon-intensive goods.

Australia's energy competitiveness and resource endowment means that our carbon intensive industries are likely to expand in the future rather than contract.

Beyond this, of course, Australia's export base has broadened considerably over the past five years. Exports of manufactures have grown at an average rate of about 13 per cent over that period. And many of these elaborately transformed manufactures feature further processing using energy intensive inputs.

Australia, therefore, brings a set of unique perspectives and interests into the international arena. The key implication is that Australia needs to work hard to ensure that international negotiations on trade and environmental issues are directed at gaining outcomes which adequately reflect those interests.

Let me now move on to describe how the Australian Government is pursuing Australia's interests in international forums which consider trade and environment issues.

Chemicals Management

The area of international chemicals management is no doubt of particular interest to many of you here today.

International negotiations for chemicals management treaties have reached a stage where governments are being asked to consider options which have the potential to seriously impact on national economies and their industries' access to chemicals.

Australia recognises the environmental and economic benefits which may be gained from the sound management of chemicals. But the Australian Government is against attempts by northern hemisphere countries - particularly the European Union - to ratchet up environmental standards in ways that suit their interests, without regard for regional and national differences and priorities.

One example that most of you will be familiar with is lead.

Australia was at the centre of efforts to oppose the creation of a treaty which would have enshrined an impractical approach to the industrial use of lead. The treaty would have benefitted the economic, environmental and trade interests of only a minority of OECD members, rather than the world community as a whole and Australia in particular.

As a result of active negotiation, OECD countries finally agreed to a Ministerial Declaration on Lead rather than a legally-binding Council Act.

The Declaration recognises that each country has a different set of environmental and other conditions with which to deal. It therefore acknowledged that national approaches to risk reduction are likely to be more effective than the binding commitments on lead use reduction which were envisaged in the proposed Act.

Basel Convention

The Basel Convention negotiations are another area where Australia has been particularly active. The Basel Convention regulates the movement of hazardous wastes and their disposal.

The development of this treaty and the issue of the transboundary movements of chemical wastes was influenced mainly by the perspectives and industrial processes of developed northern hemisphere countries.

These countries assumed that all hazardous wastes were produced by developed countries and dumped in developing countries. And what substances were to be deemed 'hazardous' remained undefined.

As a consequence, in its current format, the Basel Convention does not account for properly managed trade in waste materials between developing countries. Nor does it recognise the possibility that one economy's waste may be another economy's commodity.

Usually we call this "recycling" and applaud efforts to do more of it!

The approach adopted by the Basel Convention works on the assumption that developing countries are a fixed and uniform grouping or category. And, of course, such an artificial and rigid categorisation flies in the face of the variation, dynamism and rapid growth of developing countries in our own region.

Climate Change

The Climate Change Convention is an area where Australia's interests are especially distinct.

While Australia supports the need for effective global action on climate change, the potential outcome of the ongoing treaty negotiations has significant trade and economic implications for Australia.

The potential treaty obligations of a strengthened Climate Change Convention would have a very clear negative impact on many of Australia's exports, especially commodities such as coal, alumina and aluminium. They would also have a significant negative impact on Australia's manufactures trade.

For example, a number of proposals are currently on the table which suggest that all OECD countries should be subject to a uniform target for the reduction of greenhouse gas emissions. Given Australia's fossil fuel dependence and the composition of our export industries, these would impose higher costs on Australia than on other developed countries.

The implications for Australian trade arising from a strengthened Climate Change Convention are therefore, in short, more significant than for most other countries.

For this reason, Australia has advanced an alternative "equitable burden sharing" approach. This is aimed at assessing national performance against factors such as cost-effectiveness, capacity to pay, population growth and the level of emissions embodied in trade.

We are seeking to have all OECD countries bear similar costs in reducing emissions. And we believe that such an approach is important to ensure the Convention's long term viability.

This "equity" approach should also provide a basis for developing countries to commit themselves to solutions to global warming - solutions which will take better account of their developmental problems.

This is important because the obligations for taking steps to stabilise global levels of greenhouse gases are presently confined to developed countries and some economies in transition.

Developing countries presently argue that it is unfair they be asked to pay for a problem which has been caused largely as a side product of northern hemisphere industrialisation. They also point out that action by them to stabilise their emissions would be likely to have a far more drastic effect on the welfare of their populations given the poverty that already exists.

It would be unrealistic, however, to ignore the rapid change underway in the pattern of world production and greenhouse emissions.

With respect to climate change for example, evidence indicates that at present the OECD countries contribute just less than half of global CO2 emissions. By about 2020, however, this fraction will have fallen to about 30 per cent.

India and China, on the other hand, are likely to account for a larger amount of the increase in emissions over the next 15 years than will all OECD countries combined.

In the longer term, developing countries will inevitably need to find ways to contribute to reducing greenhouse gas emissions. The Berlin Mandate negotiations should keep the door open for this.

The Australian Government will insist that Australia's economic and trade interests are safeguarded and its specific national circumstances are taken into account in implementing the Convention.

Building New Coalitions

The examples I've just outlined all indicate that Australia will have to be active in advancing and defending our particular interests in international environmental and trade forums.

To do this means not only assessing environmental agreements at each step of the way for their ability to produce tangible environmental benefits. It also means we have to be actively involved in broader trade and environment debates. And it means building coalitions among those other nations with similar interests to Australia.

The Australian Government has, for example, recently initiated the Valdivia Group. This new coalition of temperate southern hemisphere countries includes South Africa, New Zealand, Chile, Argentina and Uruguay. The grouping is looking at environment issues of common concern such as ozone depletion.

Increasing links between Japan, the United States, Canada, Australia and New Zealand are another example of where the non-European Union countries of the OECD with similar interests have teamed up to argue alternative positions.

APEC also has potential to put a fresh perspective on environment issues. Work has already commenced within APEC to examine some of the broader issues at stake.

The World Trade Organisation (WTO)

The Australian Government will also take part in current, ongoing trade and environment debates within the World Trade Organisation.

The WTO Committee on Trade and Environment set up at the Marrakesh meeting in 1994 is the key body examining the WTO rules to ensure that they enhance productive interaction between trade and environmental measures and contribute to sustainable development, while avoiding protectionist trade measures.

One area which has attracted considerable attention is the relationship between the WTO rules and the use of trade measures in multilateral environment agreements.

A number of proposals for change in this area have been made. Australia and other countries have expressed the need for caution in examining these proposals. We are well aware of the importance of not weakening the multilateral trade rules which have served the international community so well since the 1940s.

A number of important messages are emerging from the WTO work on trade and the environment.

One is that trade liberalisation should not be seen as being in conflict with the promotion of environmental quality.

Commodity subsidies, especially on agricultural and coal, other access barriers, and high tariffs on processed products are important areas for attention.

Australia has called on the Committee to recommend to Ministers that a central part of its future work should be to identify double dividend reforms. That is, it should be concerned to identify issues and areas where the environment and the economy should both win out.

This work could feed into future rounds of trade liberalization.

The WTO must be vigorous in drawing attention to the contribution which a strong, equitable and non-discriminatory multilateral trading system can make to sustainable development.

Australia is seeking a report to the Meeting of Ministers, to be held in Singapore in December, that will play a major role in encouraging a constructive and sensible debate about the relationship between trade and the environment. The Australian Government has, in particular, emphasised the scope for "win-win" reforms which would lead to environmentally damaging and trade-distorting policies being dismantled.

Conclusion

It is obvious that a complex, multilayered approach is needed to address the challenges of trade and the environment nationally and internationally.

The implementation of treaties agreed internationally must be achievable in the Australian context. Our unique national circumstances need to be recognised and Australia needs outcomes which are accepted by business and the broader community.

We see consultations with non-government sectors - including industry - as vitally important to ensure both good policy formulation and acceptable outcomes in this area.

The Government is currently improving the overall arrangements for treaty consultations. We are also committed to consulting with a variety of NGOs on trade and environment issues. I know that the Minerals Council of Australia, for one, has very good channels of communication with the Government on these issues.

The Coalition Government takes its responsibilities very seriously. We intend to avoid making false choices between environment, trade and industry positions. Instead we will explore policy settings that help to promote sustained economic growth combined with world best practices for environment management. This, after all, is the spirit of sustainable development.

The challenge therefore is to identify the optimal path. One that is both implementable, and able to take account of the real costs and benefits of different choices both now and in the future.