Seminar on Environmental Subsidy Reform – How to Tackle
Harmful Subsidies
Prague, November 21, 2003
Organized by the European Environment Bureau (EEB)
The Seminar on Environmental Subsidy Reform – How to Tackle Harmful Subsidies aims, among other things, at promoting “subsidy reform as an instrument to move towards greater sustainability in a cost-effective way”. It will also discuss “a NGO methodology for acting against environmentally adverse subsidies”.
Evidently, subsidy reform has to be done at the national level. Civil society involvement and campaigning at the national and sub-national level will be essential to move towards sustainable subsidy reform and to overcome political obstacles to such reform. However, domestic subsidies reform can also be driven by international arrangements, and NGOs may wish to explore relevant actions at the international level. As a first step, civil society should identify undertakings at the international and regional levels that deal with subsidy reform and investigate whether they can be used as a tool to reduce environmentally harmful subsidies at the national level.
One important organization which has traditionally dealt with subsidies is the Organization for Economic Co-operation and Development (OECD). For years, the OECD has collected data and conducted research on the use of subsidies in certain sectors. However, regrettably, not all of the information is publicly available on the OECD web-site. This is particularly unfortunate because access to subsidy-related information is the starting point for an effective campaign to abolish subsidies, and to identify accurately subsidies which are environmentally harmful. Civil society should pressure the OECD to make such information more easily accessible.
In addition to its general subsidy work, the OECD, in 2002 initiated work specifically on environmentally harmful subsidies, and conducted a number of activities, including the conduct of two workshops. One of the major outcomes was the development of a “checklist” framework to assist countries in identifying and assessing environmentally harmful subsidies. However, the OECD work on this topic may be discontinued, as some countries are reluctant give the OECD Secretariat the mandate to make additional efforts to address environmentally harmful subsidies. In such case, much of the value-added of the checklist approach would unfortunately be lost.
The United Nations Environment Programme (UNEP) together with the International Energy Agency (IEA) has produced a report with background and policy recommendations relating to energy subsidies. Also, UNEP and the Food and Agriculture Organization (FAO) are each working on fisheries subsidies. While such efforts are important and promote understanding of subsidy-related environmental problems, they do not attempt to set up an international framework or strategy to reduce and eliminate environmentally harmful subsidies, or subsidies more generally, nor do they systematically gather subsidy-related information. Currently, only the trade agreements provide such frameworks, providing not only discussion forums at the international level, but actually providing binding rules and dispute settlement mechanisms relating to subsidies.
Such agreements include, for example, the World Trade Organization (WTO) or the North American Free Trade Agreement (NAFTA). Both have put in place frameworks and rules for the reduction or elimination of subsidies and for making subsidies more transparent. Other regional agreements, such as the currently negotiated Free Trade Area of the Americas (FTAA) or some bilateral trade agreements also deal with subsidies. However, given that such trade reforms are often designed by finance or trade ministries, it is not self-evident that they will be useful for eliminating or reducing subsidies that are environmentally harmful.
At first glance, trade rules seem to be the perfect means to reduce and eliminate environmentally harmful subsidies. But the trade rules are crafted primarily to avoid trade distortion and adverse effects on trading partners, rather than focusing on environmental goals. In-depth analysis of whether trade rules offer adequate tools to eliminate environmentally harmful subsidies will be essential for the design of an international campaign on the same issue. If the trade rules represent adequate tools as they stand, ways should be explored how they can best be used and applied to promote environmental benefits. If the rules are inadequate, policy makers and campaigners should decide whether trade rules relating to subsidies could be reformed in a way that addresses problems raised by environmentally harmful subsidies. Alternatively, policy-makers and campaigners might come to the conclusion that a separate system should be developed to address such subsidies. For any reform, a decision will have to be taken whether environmentally harmful subsidies should be treated as a group or sub-divided into sectors.
In the context of more general research on water and international economiclaw, CIEL lawyers have conducted a preliminary analysis on how the rules of the WTO on subsidies relate to agricultural water-related subsidies.
The research showed that for this particular category of subsidies, the subsidy rules of the WTO do not adequately deal with the issue. Similar results have also been found by Gareth Porter relating to fishing subsidies. Under pressure of civil society, WTO Members are currently attempting to address deficiencies of the WTO rules to reduce fishing subsidies and eliminate them within the WTO system.
Using the example of water-related subsidies, CIEL’s presentation at the Seminar on Environmental Subsidy Reform will attempt to explain why the WTO’s disciplines on subsidies, as they stand today, may not be sufficiently effective for the elimination of (some) environmentally harmful subsidies. At the same time, the presentation will also stress that WTO trade disciplines could be useful nevertheless – not so much for disciplining the use of subsidies but for making their use more transparent through
notification requirements and country trade policy reviews. While much remains to be done to make notification requirements more user-friendly, it is still noteworthy that all notifications are publicly accessible on the web. Perhaps it would be worthwhile for civil society to pressure WTO Members to build on and clarify these requirements.