The purpose of this paper is to look at current international trade trends, then fit these within the context of APEC, and finally suggest actions for government and NGOs to take in an effort to stem the growth in environment degradation.
1. Current financial trends
The Inter-Linked Economy (ILE)
Today we are witnessing an extraordinary globalisation of the world’s economy. In a book called the Borderless World the author Kenichi Ohmae (1991) defines this concept as the inter-linked economy (ILE). It works on the principle of a free flow of information, money, goods and services. It is a market driven process whereby consumers choose products in an international market. based on quality, price, design, value and appeal. Products are no longer made in just one country. Components may be put together in a variety of countries. Nothing is overseas any more.
Some commentators have described the ILE as a huge social experiment gone wrong. But I would argue that it is no longer an experiment. It is clearly an economic process out of control.
The economic elite
Omhae defines the major participants of this ILE as people earning a GNP in excess of US$10,000. These are the economic elite. At the time of writing the book in 1991 these economically elite numbered 1 billion. The economic elite are not only found in industrialised countries, they are participating in the ILE in all corners of the world. For this reason we must be careful not to fall into the trap of defining this current globalisation of the worlds economy as a North-South issue. It is an economically elite – non economically elite divide that doesn’t recognise national boundaries.
Governments becoming less relevant
The fact that the divide doesn’t recognise national boundaries means that nations and their governments are become less relevant. In fact, Ohmae suggests that governments are a major hindrance to globalisation and efforts must be made to bypass this hindrance. He says that some governments are slow to grasp the fact that their role has changed from protecting their people and their natural resource base from outside economic threats. They should be ensuring that people have the widest range of choice among the best and cheapest goods and services from around the world.
He goes on to say that traditional instruments of central government bankers, such as interest rates and money supply, are obsolete. International financial markets and foreign exchanges can virtually blow away government tampering with financial processes. For instance, if governments tighten money supply, loans gush in from abroad and make the nations monetary policy meaningless. This is the power of the ILE.
The major premise of the ILE is that with a free international market everybody will benefit. When governments step in to intervene to protect resources, markets, industries and jobs, it creates a cost to the consumer. Hence the premise suggests that governments discourage investment and impoverish their people.
It has been argued that a global economy creates international security by the fact that nations need to cooperate into order to trade with each other. Furthermore, because the ILE does not need to recognise national boundaries the need to protect these boundaries is unnecessary and counterproductive.
2. The role of APEC
APEC the anomaly
Within this realm of economic globalisation we have APEC. To global economists, APEC is an anomaly. No region should be signalled out for special attention. But in reality the region covered by APEC is special. It commands 56 per cent of global output and 46 per cent of world trade and this is expanding at a rapid rate. Within the region there is fierce competition for investment and hence governments are trying to formulate a regional approach to this massive growth.
In the minds of some, APEC is seen as a means of accelerating the commitments made during the Uruguay Round of GATT. The US and Australia see APEC as a forum for facilitating an accelerated agenda for freeing up investment and reducing tariffs and non-tariff barriers. They hope that these accelerated commitments will pre-empt a sub-regional response by ASEAN. This was clearly the agenda pushed by the US at the Bogor meeting of APEC and then followed up by commitment made by governments to Individual Action Plans in the Osaka meeting. Effectively the strong corporate interests of the US are trying to clear all blockages to a free trade agenda. This is evidenced by the statement made by Joan Spero Under Secretary of State when she said that APEC is not for governments, it is for business. Through APEC we aim to get action to get government out of the way, opening the way of business to do business (Bello, 1996a).
Japan’s interest in the APEC process is not so clear cut. So-called Japanese companies are investing furiously in the region, yet the Japanese government still sees room for protectionist policies, particularly in relation to agricultural products. Exempting agriculture appears to be supported by South Korea, China, Taiwan and to some extend Malaysia (Bello, 1996b).
Despite these various agendas, APEC still remains somewhat of an anomaly. Clearly some countries believe that unfettered trade is in their best interest while others see that a certain level of protectionism is required to allow the development of their own industries. Malaysia and now Indonesia, for instance, have used various protection measures to develop their own car manufacturing industry.
APEC working groups
APEC has also attempted to look at other agendas not directly related to trade. It has established a number of working groups based on important social and environmental themes. Within the context of environmental issues, the working groups that warrant particular note include energy, marine, fisheries, clean production and sustainable cities. APEC government officials have already held a number of meeting on these themes.
Australia has quickly swept upon the Energy Working Group and taken over the administration of this group to ensure that its secures a strong regional market for it fraudulently called clean coal. Needless to say, Australia is not very popular with a number of Pacific Island states who have most to fear from sea level rises and an increase in severe weather events as a result of global warming.
APEC has also instigated ministerial meetings on sustainable development, but for the main players in the ILE, these processes may be little more than distractions from the main game of freeing up trade and investment in the region.
3. Is an interlinked economy good for the environment?
Productivity and poverty
Despite the optimism and zeal of international economists there is a very real down-side to the ILE. The major premise that all will benefit is unequivocally wrong. For some to win others must lose. Nowhere is there a nation whose entire population is benefiting from a global economy. In fact, there are good examples to suggest that high productivity can co-exist with widespread poverty. Even countries within this region who are often defined as the Asian Tigers have well developed poverty within their national boundaries.
But if we follow the premise of a borderless world then we must accept that poverty and environmental degradation may be an international artefact of the global economy. That is, the ILE is creating strategic international ghettos and environmental disaster zones. International economic forces will move industries to low income areas and areas where environmental regulations are low. The new industrial zones located just within Mexico are clear examples of pollution havens that have been created as a result of the North America Free Trade Agreement.
In this region, governments compete with each other to provide planning and environmental impact exemptions and substantial economic incentives to encourage companies to locate their businesses in their country. As a result, APEC pollution havens are springing up all over the place.
Exploiting traditional resource rights
Furthermore, the ILE looks for locations where there are few restrictions on land use, water rights and human rights. Within this region, Malaysian logging companies, Australian and Canadian mining companies, Taiwanese, Japanese and Korean fishing companies have all exploited regions where traditional resources rights are poorly defined or policed.
The other major premise of the ILE is that the world has an unlimited supply of resources to feed an unfettered growth in consumerism in all countries or regions of the world. This is simply not the case. Already we have witnessed a plateau in fishing, while freshwater resources are declining. Energy consumption using fossil and nuclear fuels is clearly unsustainable. The future costs of the greenhouse effect and nuclear waste problems have not been factored into the international economic model. Economists would argue that environmental policies dampen economic growth.
The argument that international trade promotes international security is also a flawed concept. Recently Indonesia’s Foreign Minister, Ali Alatas has claimed that the magnitude of capital flows across borders and the growth of vast capital markets could exert a destabilising influence on national economies in the region.
Without doubt, governments are spending more and more money on armaments. Could it be that government defence strategists are gearing up for an anticipated conflict over the world’s diminishing resources?
While there is a strong outcry within GATT and among some members of APEC to reduce tariffs and other forms of barriers to trade, the ILE is being enormously subsidised by not having to account for the environmental costs it is creating. This is a massive environmental subsidy which is being paid by citizens now and into the future.
Following the principle of environmental subsidies, the ILE is also being granted an enormous social subsidy. Child labour, indentured labour, sweatshops, unsafe working conditions are all components of this social subsidy. Often these subsidies are underwritten by governments as part of their foreign policy. For example, Australia’s lack of response to the Dili Massacre in East Timor is founded in a desire to share oil resources and enhance it trade relations with Indonesia. Meanwhile, human rights abuses in Burma are being ignored within ASEAN.
Government officials and industry de-regulation
Without doubt, many government officials are card-carrying members of the ILE. Through various means they receive personal income from the ILE and hence become members of the economic elite. This form of institutional corruption is rife throughout the global economic system. Linked with this process of corruption is the increasing trend by governments to deregulate industry. Industry often argues that they can develop their own codes of conduct — codes that will be later ignored by both companies and governments.
Invariably, governments in developing countries are singled out as being the most corrupt. But, in relative terms corruption in the developing world is a pittance. The recent presidential election campaigns in the United States was reported to have cost in excess of US$800 million. This extraordinary amount of money that has come primarily from corporate donations. Needless to say these corporations expect something in return. This path of corruption may not be as direct as a paper bag full of cash, but it is corruption nonetheless. Needless to say US Government policy is dominated by the need to protect the interests of its corporate constituency.
Loss of democracy
In Australia, both the major parties, receive substantial donations from the corporate sector, often hidden from public scrutiny by shelf companies set up by the political party to act as a go between. As the cost of elections rise, so too must the level of corporate sponsorship and hence the representation of public interests will decline. The growth in corporate sponsored corruption is a significant countervailing force to the often-touted democratic forces of free international trade.
Code for hazardous waste
The hazardous waste trade industry was a classic example where industry claimed that it could develop responsible codes of conduct and be self-regulating. But in a highly competitive ILE there was no real incentive to adhere to these codes. Unscrupulous trade in hazardous waste continued unabated. Governments finally realised that they had to respond. This response lead to the development of the Basel Convention. Needless to say, industry is working very hard to limit the effects of this treaty.
4. Mechanisms for Integrating Trade with the Environmental Protection
Trade is inevitable and cannot be ignored. Nor can we ignore the environmental and social effects of the ILE. We need to challenge the basic premises under which the ILE operates and make it more accountable and environmentally and socially responsible. The currently loose framework of APEC gives us some opportunity to push for mechanisms to challenge the basic premises of the ILE. But we must work fast, for the ILE will not wait for us, nor will it wait for APEC.
Regulate for accountability
Ohmae said it that was regulators that the ILE had most to fear. Hence, we must find every opportunity to create this fear if we are going to have any form of control over the ILE. The corporate world cannot be trusted to be self-regulatory and it certainly cannot be trusted to protect the environment. The corporate world has a vested interest in providing financial returns to its shareholders. Most have no mandate to protect the environment. So where their actions adversely impact upon the environment, they must be regulated.
Ratify existing environmental treaties
In order to establish international standards for environmental protection all member governments of APEC should commit themselves to ratifying existing environmental conventions. Some key APEC members, notably the United States have not ratified important environmental treaties, like, the Convention on Biological Diversity and the Basel Convention on Hazardous Waste. etc. It is ironic that the United States is a strong advocate for international cooperation, yet it is not willing to participate in these crucial environmental treaties.
APEC regional environmental treaties
Within the context of APEC, work should begin to develop regional treaties to put in train the processes for attaining environmental protection and social responsibility. These regional treaties should reinforce and strengthen existing international treaties. Only with this level of regulation and control will the rights of citizens be upheld against the ILE. Treaties are basically the only legal mechanism we have available to us to transcend the borderless world created by the ILE.
Some of these treaties should guarantee all citizens at least rights to: fresh water and fresh air; sanitation; sustainable energy; protection from hazardous chemicals, protection of the natural environment and so on. But environmental protection and social responsibility doesn’t just relate to environmental measures, it should also refer to basic human rights as well. Treaties should also be developed to guarantee all citizens basic human rights like: food security; clothing; shelter; rights to land/sea; education; freedom from discrimination, rights of indigenous peoples.
Regional freshwater treaty : an example
An example of a regional treaty under the auspices of APEC might relate to the basic right of access to freshwater. Such an instrument would facilitate cooperation among nations to ensure that shared water resources were fairly allocated and that upstream nations did not adversely affect the quality of water of downstream users. It would provide for the sharing of knowledge in the management of freshwater. Governments would need to develop national legal measures to ensure that all citizens have access to freshwater.
Trade related environmental measures (TREMs)
In order to capture the ILE within the net of regulation, regional APEC treaties should also incorporate trade related environmental measures (TREMs). Products traded within and across the region should be discriminated against if they have created environmental or social harm in their production. If the product, for example, has polluted water in its production process then it should be discriminated against. This discrimination may be in the from of an environmental tariff or if it is a severe violation, a ban. As some countries require health warnings on cigarettes, maybe we need to apply environmental warnings on products. For instance, Environmentally harmful chemicals were used in the production of this product.
Sanctioning environmental protectionism?
It is often argued that TREMs are applied as a form of environmental protectionism. A number of countries in Asia have made this claim with varying degrees of validity. The famed GATT dispute over dolphins and tuna may well be such an instance, where the US used the guise of environmental concern to protect its own tuna industry. Sanctions against rapacious tropical forest logging nevertheless, may be valid, so long as rapacious logging operations in temperate forests are given similar treatment.
The environmental protection debate is often characterised as a North-South issue, whereby the North applies sanctions against the South. But this has more to do with a power imbalance rather than the North being more sustainable in its production processes. It is reasonable to argue that the converse is actual more correct. Production processes in the North are highly energy consumptive and polluting. Even agricultural practices are far from environmentally friendly. The beef cattle industry in Australia, for example is far from sustainable. It infringes the rights of indigenous peoples, it requires major input of fertilisers and pesticides, it needs high levels of fossil fuel input and results in soil erosion and the pollution of rivers. Increasingly the industry is turning to feedlots which are even less sustainable.
TREMs are not a complete safety net
TREMs will not entirely protect us from the environmental costs of regional free trade, but they will at least guarantee some form of standards and regulation. We should not be hung up on the rhetoric of some governments and corporate interests who cry foul when TREMs are employed. It is a form of protectionism. It is protecting the rights of all citizens to a clean and safe environment.
Regional TREMS dispute tribunal
In order to ensure that TREMs are applied on a non-discriminatory manner, a regional dispute tribunal should be developed. It should be presided over by lawyers with appropriate understandings of environmental and social protection. NGOs should also be represented on the tribunal. While this Tribunal will be necessary, it should no be used a means of slowing down action under TREMs.
Regional liability agreement
In order to ensure that the polluter pays, APEC should develop a strong regional liability agreement. Such a legally binding agreement would place strict and unlimited liability provisions on perpetrators of environmental damage within the region, whether or not they are members of APEC.
Institute for environmental and social protection
A regional institute for environmental and social protection should be established with the explicit purpose of providing training for potential members of the regional dispute tribunal. Such an institute could also provide other important training tasks for NGOs, government officials and corporate leaders. We must be careful that such an Institute serves is purpose of connecting with the dispute tribunal. If it stands on its own, it may well become an institution low in productivity and high in public relations value for government and corporate interests.
Regional corruption commission
There has been some discussion within the context of developing a multilateral investment agreement, to the effect that corruption would also need to be addressed. This has been opposed by ASEAN countries. Presumably these countries fear that corruption within their own governments may be easier to identify than corruption in other participating APEC nations. Needless to say, the United States would deny that their election funding process was a of corruption.
It would be desirable to establish an APEC corruption commission, which would investigate the broad spectrum of corrupt activities association with regional cooperation. This commission would need to have significant powers of investigation and would report its findings to an annual meeting of APEC Ministers.
Reducing costs of elections
Within the framework of achieving a just and representative society, governments would need to make a commitment to reducing the costs of elections and make a commitment to revealing the full source of election funds. Only then would countries be relatively free of the scourge of political interference from corporate interests.
Commitment to arms reduction
Following the sentiment of cooperation among member governments of APEC, governments should make a commitment to arms reduction of all forms of weapons. Governments should build on existing arms treaties, such as the Comprehensive Test Ban Treaty. Regional stability cannot be ensured while the huge sale in arms is allowed to continue. Countries would be far better off if they were to redirect arms expenditure to programs for education, primary health care and environmental protection.
Governments should be encouraged to produce measures to assess their real Gross National Product using green accounting methods, so that environmental indicators like soil erosion, water and air quality, pesticide use and so on are all factored as costs.
Charter for democracy
As part of a general APEC Agreement, it would be useful if governments made a commitment to democratic processes in the form of a charter for democracy. This would spell out basic principles of democracy and would commit governments to setting timeframes for achieving these commitments. This charter must be carefully crafted. It must be able to be adapted to suit cultural difference but be sufficiently prescriptive not to allow the continuance of unrepresentative regimes. While individual rights must be upheld, it must also recognise the importance of collective cooperation within and between nations for the purpose of environmental and social protection.
Permanent agenda of APEC
Obviously the idea of a charter for democracy is a very ambitious agenda for APEC. A number of less than democratic governments within this region would claim that such a commitment would create substantial political instability. Similarly a number of so-called democratic governments would argue that they have achieved full and open government and such a charter would be superfluous. Nevertheless, it should be a permanent item on the agenda of APEC.
5. The role of non-government organisations
NGOs have a vital role to play in the APEC process, particularly as governments become less inclined to represent the interests of their citizens under the ILE. While there is some validity in suggesting that APEC is a totally flawed process, it is a simple fact that it cannot be ignored. It will carry on whether NGOs approve of it or not. It’s up to NGOs to find ways to apply pressure to the ILE. To do this, there are some strategic actions that need to be taken:
Developing APEC campaigners
Following from the work of this Forum, NGOs should endeavour to identify at least one person who can work on APEC issues. Even if the NGO is involved in local issues or grassroots campaigns, it should try to have at least one person focusing on the big picture. Even a local land use or local pollution issue may be related to an APEC activity. For example, governments may reduce pollution standards to encourage industrial development. Traditional land use practices may be overthrown to make way for cash cropping, industrial development, mining operation, road construction, dam construction all in the name of creating internationally competitive products.
Furthermore, the more NGOs focusing on APEC the more effective we can be. We don’t all have to agree on our approach. Diversity makes us less predictable.
Become APEC and ILE literate
The APEC and ILE processes are complex. If we are going to be effective in counteracting their negative impacts, we need to be extremely literate in these processes. We need to develop training programs and workshops to help us become literate in APEC, GATT and the ILE. While it might be heresy to suggest it, we really must become more corporate in our thinking. Without compromising our own ideals, we must become more knowledgeable about how the ILE works.
Observer status at APEC
To be conversant with the machinations of APEC, NGOs must try to get participatory status in all APEC forums. The Rio Earth Summit in 1992 established a standard for NGO participation. We must call on all governments to uphold this standard. We should work towards this goal for the next APEC meeting in Canada.
Corporate and government watchdogs
We should establish corporate and government watchdog groups to monitor and report on the behaviour of these entities. Already NGOs have set up watch dogs organisations to monitor multi-national companies, the mining industry and forestry companies, to name a few. We should set up processes to monitor industry magazines and newspapers, do company searches and monitor stock exchanges to track the operations of companies and their subsidiaries. We must untangle the corporate web of subsidiary companies and expose their financial operations.
We should develop a list of key companies who are causing environmental and social harm in the region, then hold annual events to publicise this list. We should attend annual general meetings of these dirty companies and inform shareholders of the company’s activities. We may even chose to buy shares in certain companies in order to actually enter annual general meetings and question the company officials.
Adopt an official
An NGO in Mexico has established an adopt-an-official program where members of the NGO select a politician or senior government official to shadow. They carefully scrutinise his/her activities and expose public any corrupt activities. This is an excellent idea if done carefully and properly. We should expand this to all cover all APEC countries. Image the effect if all APEC politicians and senior government officials were adopted by NGOs.
We must pressure insurance companies to be more responsible for protecting their liabilities. They are generally the ones who have to pick up the cost of environmental catastrophes. We should be encouraging them to form a lobby group to call for stricter environmental standards in order to minimise their liabilities. We should also be encouraging them to invest their assets in environmentally friendly industries. Renewable energy technologies should be one industry that we should steer insurance companies towards. It would be in their long term interest to do so, particularly if they insure property that may be affected by severe weather events as a result of global warming.
Set up own dispute tribunals and corruption commissions
If governments are reluctant to establish dispute tribunals and corruption commissions then we should do it ourselves. While we may not have the power to legally enforce decisions, but we can use the power of the media to shame governments and unscrupulous corporate bodies by revealing improper trading practices and corrupt behaviour.
Develop consumer awareness programs
GATT generally does not allow governments to discriminate against products whose production processes are environmentally unsound. If governments can’t do it, then we should do it ourselves. Numerous consumer awareness groups already exist and we should endeavour to strengthen their work.
Needless to say, we should not accept that governments have no power to discriminate against products based on environmentally unsound production processes. We should challenge this in the World Trade Organisation and within APEC fora. In doing this, we must be vigilant in ensuring that our analysis is thorough so that we cannot be accused of applying unfair environmental protection standards.
If we find products that are environmentally friendly, then we should reward them. We should encourage the development and marketing of product certificates schemes. The Forest Stewardship Council process for eco-timber labelling appears to be a good example of such a system.
Become media literate and form Media outlets
Clearly we must become more effective in publicising our concerns. We must become more effective in how we use the media, particularly in this age of satellite communications. With media ownership becoming more and more concentrated, we need to explore innovative and effective ways of getting our stories into the public arena. Forming our own media outlets or news service is one avenue to pursue this. For instance, the Third World Network has established a very effective e-mail news service to monitor the GATT and other North-South issues.
Lifting our game
The ILE is moving ahead at an increasingly rapid rate and so we too must lift our game so that we can respond to this accelerated change. With the ever increasing nexus between government and industry it is up to us NGOs to represent the interest of the majority of the world’s population. This is a heavy burden to carry, but if we pool our efforts we can keep pressuring the ILE until it comes knocking on our doors for help. For the sake of future generations, lets hope they knock soon.
* Ian Fry is the regional policy adviser to Greenpeace Pacific
Bello, W. 1996a, Comment, FOCUS, No 7, Sept.
Bello, W, 1996b, Overview of what is APEC, FOCUS, No 7, Sept
Ohmae, K. 1991, The Borderless World: Power and Strategy in the Interlinked Economy, Fontana, USA