DRAFT DRAFT DRAFT DRAFT DRAFT
Handbook for Sustainability Impact Assessment
Preface
Executive Summary
To be draftedList of Abbreviations/acronyms
ACP: Africa Caribbean and Pacific countries
CARICOM: Caribbean Community
CCA: Causal Chain Analysis
CGE: Computable General Equilibrium
CPDC: Caribbean Policy Development Centre
CS: Civil society
CSD: Commission on Sustainable Development
CTA: Technical Centre for Agricultural and Rural Cooperation ACP-EU
DCs: Developing Countries
DGs: Directorate Generals of the European Commission
EBA: Everything But Arms
ER: Environmental Reviews
EU: European Union
FAO: Food and Agriculture Organization of the United Nations
FLEGT: EU Action Plan for Forest Law Enforcement, Governance and Trade
FTA: Free Trade Area
GCC: Gulf Cooperation Council
GDP: Gross Domestic Product
GSP: Generalised System of Preferences
HIPC: Heavily Indebted Poor Countries
IA: Impact Assessment
ISC: International Steering Committee
ILO: International Labour Organisation
NGOs: Non-Governmental Organisations
LDCs: Least Developed Countries
MDGs: Millennium Development Goals
M&E: Mitigation and enhancement measures
NAFTA: North America Free Trade Agreement
NTM: Non-Tariff Measures
ODA: Official Development Assistance
OECD: Organisation for Economic Co-operation and Development
R&D: Research and Development
RTA: Regional Trade Agreement
SIA: Sustainability Impact Assessment
SMEs: Small and Medium Enterprises
SPWPs: Secondary Processed Wood Products
TOR: Terms of Reference
TRIPS: Trade-related aspects of Intellectual Property rights
TRTA: Trade-Related Technical Assistance
UNDP: United Nations Development Programme
UNEP : United Nations Environmental Programme
UNCTAD: United Nations Conference on Trade and Development
USTR: United States Trade Representative
WB: World Bank
WHO: World Health Organisation
WTO: World Trade Organisation
WSSD: World Summit on Sustainable Development
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
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
34
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.
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 55th 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.
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.
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: