Promoting sustainable trade in the Commonwealth Small States

The Project at A Glance

Sustainable development has been defined as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (Brundtland Commission, 1987). Sustainability pertains to three main areas of development, namely social, economic, and environmental considerations. Trade can be a double-edged sword for sustainable development. While it can spur economic growth and alleviate poverty, left poorly regulated, it can also have harmful impacts on society and the environment. Therefore, it is in the best interest of countries to ensure that trade contributes to sustainable development.
International Economic Consulting Ltd., with funding from the Commonwealth Secretariat, conducted a study to assess the sustainability of production and trade practices in Commonwealth small states and delivered a set of targeted recommendations for mainstreaming sustainability across trade agreements.

What We Found

As part of this study, the IEC team analysed 23 free trade agreements on the basis of their coverage of trade and sustainable provisions. The key dimensions considered include the environment, labour rights, SMEs, transparency, development cooperation, gender, health, anti-corruption, and responsible business practices. Each FTA was scanned to assess the chapters pertaining to sustainability and any general references made in other chapters such as the preamble.
It was found that trade and sustainable development concerns were predominantly limited to labour rights and environmental areas. Few trade agreements included provisions relating to gender, health, SME participation and transparency. Even if these provisions did exist, they were generally not legally binding. As for provisions on labour and the environment, there are generally more substantive commitments. In certain instances, the trade agreements also allowed trading partners to have recourse to dispute settlement mechanisms, sanctions, and remedies.
The COVID-19 pandemic has further accentuated the need for sustainability in trade and development. As countries build back from the pandemic, it provides Governments with an opportunity to put the link between trade and sustainability at the centre of recovery.

Our Strategy and Impact

Taking into consideration the current efforts by the Commonwealth Member States, we made a series of practical recommendations for countries to use trade and trade practices for the achievement of sustainable development, including through the negotiation of trade agreements.
Our first recommendation is the creation of harmonised frameworks in FTAs to address the link between trade and sustainable development. As observed in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), it is advisable for FTAs to include dedicated chapters with comprehensive frameworks and guidelines for cooperation, review, monitoring, and dispute resolution for each element pertaining to sustainability. Such an approach promotes corporation between countries while also allowing countries to regulate their own issues domestically.
Another approach that can be undertaken in FTAs is positive discrimination i.e. preferential market access granted on the basis of trading partners complying with standards and norms that promote and ensure sustainability. This is an approach that has been put into practice by the European Union.
Moreover, countries should also undertake more efforts to improve and facilitate trade and environmental goods and services. This may include the reduction of tariff and non-tariff measures that act as a barrier to trade; improving market access to businesses with high carbon efficiency; and encouraging the digitalization of trade processes.
Additional steps should also include enhancing and facilitating trade in environmental goods and services, through a reduction in tariff and non-tariff measures that act as barriers to trade; providing businesses with high carbon efficiency to better market access, through the use of environmental goods and services; improving digitalisation of trade processes.

Our Core Solutions

Understanding the sustainability provisions in FTAs is important for businesses as they seek to import or export from certain markets. At IEC, we provide our clients with a detailed analysis of the key impacts of new trade agreements on their operations and competitiveness through an assessment of tariff, and non-tariff tariff barriers, provisions on rules of origin, customs efficiency, the effectiveness of transport networks, and sustainability provisions, among others. We can help assess the opportunities in different markets, determine the feasibility and viability of projects, and benchmark the wider ecosystem to support business growth.

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