Carol Chouchani Cherfane

Coordinator, METAP MedPolicies Initiative

Economic and Social Commission for Western Asia

United Nations

Environmental Requirements and

Competitiveness in the

Middle East and North Africa

UNCTAD Expert Meeting on Environmental Requirements and International Trade

Regional Trade & EnvironmentPartnerships in MENA Region

Region engaged in T&E examination and capacity building since 1997

Mediterranean Environmental Technical Assistance Program (METAP) via World Bank has sponsored MedPolicies Initiative since 1997, implemented by ESCWA since 2000.

ESCWA T&E work program underway since 1998.

Mediterranean Commission for Sustainable Development (MCSD) fosters consultation through Trade & Environment Task Force since 1998, supported by Blue Plan/MAP, working with ESCWA on SMEs.

League of Arab States support National T&E Committees in 2000.

UNCTAD & UNEP Task Force & training activities at global & regional levels have benefited region – supporting cooperative efforts with ESCWA.

UN-ESCWA

Examining the Impact of Environmental Requirements on

Exports In Destination Markets: ESCWA prepared study in 2001

entitled: The Impact of Environmental Regulations on Production and Exports in the Food Processing, Garments and Pharmaceuticals Industries in Selected ESCWA Member Countries.

In Destination Markets and Domestic Markets: METAP MedPolicies Initiative has prepared several case studies examining cost impacts of more stringent environmental regulations on agricultural & agro-food sector outputs and exports. Publication by HIID/METAP (2000); ESCWA currently preparing policy notes

based on application of Larson Model.

UN-ESCWA

Agricultural Products:Relevant Industries

Raw Agricultural Products Fresh fruits, vegetables

Packaged Agricultural Products Dates, sugar, rice

Processed Agricultural Products (packaged) Canned or packaged fruits and vegetables Dairy products, fish products, meats (involve different issues) Other Processed foods

Agro-industries that support Agro-food sector Fertilizer industry, seed suppliers Cooperatives, distributors

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Conceptual Framework

Major Categories of Requirements:

Product Requirements – involve testing Production & Process Methods (PPM) – involve certification Conformity Assessment – requires accreditation to conduct

testing and certification

Requirements may be: Regulatory - Required by governments and enforced

by customs administrations/ministries Voluntary - Required by importers or preferred

by end consumers

Dispute Resolution: Public International Law - Between Governments, WTO Private Contract Law - Between Companies

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Sample Issues for Agricultural Products Sector

Product Requirements (strong link to food safety & consumer awareness)

Process Requirements

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Regulatory Voluntary

• Pesticide residues• Fertilizer residues• Colorants and additives• Labeling• Packaging (e.g., low acid cans, liners)

Industry standards (FAO/Codex Alimentarius) Industry standards (regional/associations) Eco-labeling Recyclable packaging (cartons, plastic crates)

Regulatory Voluntary

Sterilization Sanitation (trade-offs) GMOs

Hazard Analysis & Critical Control Point (HAACP)

ISO Eco-labeling; organic inputs Lavatories, drinking water for employees

Implications for ESCWA Region: Data Sources

• Survey of a sample of firms in Egypt, Jordan, Lebanon, Syria to identify some of the major environmental regulatory constraints faced by private sector exports in the region.

• Review and compilation of USFDA detentions of agro-food exports from ESCWA member countries, which were posted on the USFDA “Operation and Administration System for Import Support” (OASIS) see http://www.fed.gov.oasis several EU Member States maintain similar databases

• Interviews with chambers of commerce and ministries since info on trade detentions and delays to/from Arab countries poorly documented.

UN-ESCWA

UN-ESCWA

Reasons for USFDA Detentions from Egypt, Jordan, Lebanon & Syria

(Jan-June 2001)

Labeling58%

Pesticide Residues

1%

Low Acid Cans9%

Filth4%

Microbiological Contamination

10%

Other15%

Food Additives

3%

FINDINGS

Most Troublesome REGULATORY Environmental Requirements faced

by ESCWA Agro-Food Exporters

Product Requirements

Process Requirements

Conformity Assessment

Dispute

Resolution

• Expiration date

• Additives

• Labeling

• Packaging

• Bacteria

• Filth

• Pesticides

residues

• Sterilization

• Sanitation

• GMO

certification

• Cost of product testing since tests sent abroad

• Limited number of accredited labs (public or private) providing testing in region

• Poor communication links between private sector and trade ministries

• Politicization of inter-gov’t dispute settlement

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Product Requirements

Process Requirements

Conformity Assessment

Dispute

Resolution

• Eco-labeling

• Packaging

(recycled

content)

• ISO

• HACCP

• Sanitation

• Eco-labeling

• Inspection of

production facility by importer

• Cost of testing/ sent abroad*

• Cost of maintaining conformity with eco-label

• Ag. exporter usually bares cost of delayed shipments & storage so as not to threaten future contracts

• Time/cost needed to enforce contracts UN-ESCWA

FINDINGS

Most Troublesome VOLUNTARY Environmental Requirements faced

by ESCWA Agro-Food Exports

* Note: Egypt Center for Measuring Organic Products - accredited by EU

Additional Findings

Exporters in ESCWA-MC often find environmental requirements & customs procedures more troublesome in Arab countries than in EU & US markets. Lack of access to full, accurate and timely information regarding

reason for detention or return of shipment major complaint by regional agro-food exporters to Arab markets; also concerns regarding TBTs.

Question non-discrimination of regulatory enforcement between imports and domestically produced products – WTO dispute potential.

Agro-food exporters feel threatened by informal sector and cottage industries producing for domestic market only, since do not need to comply with environmental requirements in foreign destination markets Linkage of compliance and enforcement to competitiveness; exporters

must be registered and are more regulated, while firms producing only for domestic market not necessarily registered or regulated.

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Measuring the Cost of Compliance with Environmental

Requirements Once the environmental requirements most troublesome for

producers/exporters/SMEs identified, question remains:

How do we assess the cost of complying with this new environmental requirement?

METAP MedPolicies Initiative: The Larson Model Simple (5 variables) Empirically tractable (tested model and peer reviewed) Economic forecasting policy tool Estimates the percentage change in output, exports and imports

from compliance with an environmental requirement Environmental requirement may be in a destination market or a

domestic environmental regulation Training on Larson Model in Beirut (Oct 2002) & Rabat (Nov 2002)UN-ESCWA

METAP

METAP MedPolicies Initiative:Sample Findings on increase in water

costs Tunisia: Increase in cost of irrigated water

Impact of 50% increase in irrigated water costs for the citrus sector yields:

• Loss of output by - 2.2% to - 2.6%• Loss of exports by- 3.0% to - 4.9%

Tunisia: Increase in cost of irrigated water Impact of 50% increase in irrigated water costs for the

dates sector yields:• Loss of output by - 9.0% to - 12%• Loss of exports by- 14% to - 26%

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Cyprus: Increase in fertilizer prices Impact of 40% increase in fertilizer prices on the

potato sector yields:• Loss of output by - 0.3% to - 0.1%• Loss of exports by- 0.4% to - 0.2%

Jordan: Decrease of cadmium content in P2O5 Impact of 2.5-10% increase in price of P2O5 phosphate

fertilizer exports due to cadmium removal costs yields:• Loss of output by - 0.3% to - 7.5%• Loss of exports by- 0.3% to - 7.5%

(same, all exported)UN-ESCWA

METAP MedPolicies Initiative:Sample Findings on increase in fertilizer

costs

Recommendations

SMEs and private sector in developing countries need more information regarding environmental requirements in destination markets prior to contracting & shipment.

Ministries of trade, health and customs administrations need technical and institutional capacity building to be better able to ensure conformity with environmental requirements: requires pursuit of accreditation and improvements in testing and certification.

Better communication is needed between government trade officials and private sector exporter to inform each other of problems and to improve dispute settlement.

Developing countries need to gain better capacity in evaluating and assessing the impact of compliance with environmental requirements – which could be achieved by applying Larson Model. UN-ESCWA

Recommended Resources

United Nations Economic and Social Commission for Western Asia (ESCWA), The Impact of Environmental Regulations on Production and Exports in the Food Processing, Garment and Pharmaceutical Industries in Selected ESCWA Member Countries, E/ESCWA/ED/2001/14, 25 October 2001.

Bruce Larson, Eri Nicolaides, Bashir Al-Zu’bi, Nabil Sukkar, Karim Laraki, Mohammed Salah Matoussi, Katalin Zaim and Carol Chouchani, “The Impact of Environmental Regulations on Exports: Case Study Results from Cyprus, Jordan, Morocco, Syria, Tunisia, and Turkey,” World Development, Vol. 30, No. 6, pp. 1057-1072, 2002.

Bruce Larson, “Evaluating the Impact of Specific Environmental Regulations on Exports,” Land Economics, 76, pp. 534-549, 2001.

Mediterranean Environmental Technical Assistance Program (METAP) and Harvard Institute for International Development (HIID), Trade and Environment and International Competitiveness in the Mediterranean Region: Selected Case Studies, Cambridge, MA and Beirut: Harvard Institute for International Development, 2000.

UN-ESCWA

Thank you.

Economic and Social Commission for Western Asia United Nations P.O. Box 11-8575 United Nations House – Beirut – Lebanon Tel: 961.1.981.301 Fax: 961.1.981.510 Web: http://www.escwa.org.lb E-mail: cchouchani@escwa.org.lb