News and Analysis • Volume 11 • Number 5 • August 2007
Indicators for Trade and Sustainable Development
The Marrakesh Agreement establishing the World Trading Organisation recognises that trade and economic relations between Members “should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand […] while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development.”
The conceptual construct of sustainable development highlights equity aspirations as determined by allocation of resources and the dynamics of wealth formation, in at least three dimensions: intergenerational equity, intra-generational equity within nations and intra-generational equity between nations. The adoption of sustainable development as a public policy objective of trade policy requires articulation of the many environmental, social and growth policy agendas pursued by individual societies and an enabling global economic governance structure.
The multilateral trading system traditionally – and, rather unsuccessfully – addresses underlying factors of inequality between trading partners through ‘special and differential treatment’ (STD) provisions based on simplistic expressions of differentiation, such as national income. Today’s complex web of international trade regulatory frameworks, including the WTO in its current Doha negotiations, is seeking more effective ways to address the equity imperative. In this context, it has become clearer that to anchor responses and interventions firmly in sustainable development, a broader set of indicators and thresholds than a Member’s gross domestic product (GDP) is needed to determine whether a country’s public policy objectives require particular modulation or flexibilities in trade rules, or call for adjustment assistance.
To address specific constraints, comprehensive, targeted and holistic indicators are imperative. This means that most of the currently available raw data on production, consumption, health, employment, exports and imports, as well as many other areas, should be translated into information that captures sustainable development trends. It also involves linking, in a comprehensive manner, primary data and secondary indicators. Facts such as the knowledge, or natural resource, content of exports become more revealing of actual competitive conditions and, therefore, more relevant in defining rules of engagement in an equity-concerned trading system.
The treatment of small and vulnerable economies in the multilateral trading system provides another example. Such economies suffer from a combination of characteristics that impede their ability to integrate into the global economy, including natural resource endowment, absorptive capacity, ecosystems resilience, smallness, geographical isolation from markets, dispersion of small pockets of population, and characteristic of human development. There is, however, no single and recognised criterion to define smallness, vulnerability and remoteness. Therefore, indicators would have to be a combination of factors adapted to addressing issues such as vulnerability. This in turn requires a more comprehensive measurement to target flexibilities in line with the heterogeneity of developing countries.
In order to understand the different development situations of and within countries, ICTSD is developing a computational tool with over 139 indicators, collated from a number of UN agencies and other research organisations, that could be used to construct multiple combinations of criteria and thresholds to simulate every conceivable competitive situation. This information is crucial to support strategic analysis and policy-oriented research. It could, for instance, be used to produce trade and sustainable development assessments and country profiles that would assist political decision-makers in prioritising their needs and areas to negotiate. The data could also provide a broader basis for anchoring effective sustainable development responses in the multilateral trading system.