Sustainable trade: market place realities for developing countries

1. Sustainable trade: market place realities for developing countries Presentation Prepared for UNCTAD Expert Meeting 2-4 October 2002 Ritu Kumar

2. Presentation • The sustainable trade trajectory • Pressures for change • Case Study: Manufacturing - Clothing • Way Forward • The Sustainable Trade and Innovation Centre

3. 1. The sustainable trade trajectory • The integration of trade, environment and development factors is a structural trend • Critical to go beyond “green protectionism” and “green trade opportunities” stereotypes • Market initiatives moving further, faster than regulation • Time for the South to ‘take control’ of the agenda

4. Business voices from the South: 1 • “The goals of rapid economic progress and high social and environmental standards can and must be achieved simultaneously.” Syed Naved Hussain, CEO, Beximco Textiles, Bangladesh

5. Business voices from the South: 2 • “In five years from now, there will be no access to international markets for companies that do not show respect for the environment. It is becoming fundamental to international trade” Rafael Wong, Executive Vice President, Favorita Fruit Company, Ecuador

6. 2. Pressures for change • Regulatory (eg azo dyes, take-back legislation) • Civil Society (eg bans, boycotts) • Consumer demand (eg organic food & cotton) • Supply chain management (eg codes of conduct) • Pioneering producers (eg Beximco, Kuapa Kokoo, Skaaprivier Plaas)

7. The Sustainable Trade Iceberg Regulation Ecolabels Certification Codes

8. Market realities • A profound shift is underway in terms of how trade and environment are becoming linked • Sustainability factors are being mainstreamed in key international supply chains • Brand reputation rather than consumer demand or regulation is the major driving force • Dynamics differ between sectors and markets • Producers are price and standard-takers, but a more proactive approach is emerging

9. Problems faced by SMEs • Lack of basic information on changing requirements in export markets • Limited management and innovation capacity • High costs of labelling and certification • High compliance costs • No broad based/common platform for dialogue

10. 3. Clothing • Convergence of trade reform and business outsourcing generating savage price deflation • Rapid expansion producing environmental ‘hot spots’ (Tirupur…) • Health, social and environmental conditions becoming a basic ‘entry ticket’ to EU/US • Driven by risk and reputation not consumer demand -- so few price premia • MFA phase out will bring new competitive challenges

11. Bangladesh • Rapid growth in ready-made garments • Core of Bangladesh’s export strategy • Important socio-economic/gender implications • Rising concern about sustainability due to social pressures and trade reform

12. Beximco Textiles • Part of leading industrial corporation • Green-field technology partnership • Early integration of sustainability into innovation and corporate strategy • Vertical integration brings marketbenefits

13. Lessons • Value added requires a dedication to innovation and connection to market trends • Globally excellent companies are emerging as market leaders • But industry wide initiatives are critical for Bangladeshi exporters • Dialogue with buyers to implement sustainability measures is essential

14. …….Lessons • Industry identified a producer driven code of conduct as a key tool for change • Implementation of the Code would require: • Capacity and skills enhancement at three levels • Information systems • Financial mechanisms to facilitate change • Strengthening of cluster based approach for SMEs

15. 4. Way Forward • Responding to information needs • Improving skills and capacity • Applying a wide range of tools to improve environmental performance • Forging new partnerships • Financing change

16. The Sustainable Trade and Innovation Centre (STIC):Need • Lack of trust between North and South • Fears of green protectionism in the South • Developing countries excluded from the process of standard setting (voluntary and mandatory) • Inadequate understanding of Southern capacities in the developed world

17. STIC… • STIC will promote exports of sustainable goods and services from developing countries • It must respect key principles of transparency, equity and innovation • It must be useful for and attractive to producers (SMEs) in the South

18. Objectives • Goal: promotion of trade and market access in sustainable goods and services between North and South • Objectives: 1.Encourage local awareness and create demand in export markets through information exchange 2.Build capacity of entrepreneurs and traders to innovate 3. Harmonise and co-evolve voluntary codes of conduct: forge partnerships

19. Objectives – i. Create Awareness • Market information on standards, supply chains, procedures, product descriptions, certification etc. • Sectoral market information boards on regional/country basis • Promote good practice • Facilitate imports of sustainable goods & services from developing countries • Link with other info systems and electronic networks

20. Objectives – ii: Promote Innovation • Assist producers to innovate in product design, managerial practices:eco-design • Assist in foresighting and visioning • Provide training on innovation tools and techniques • Strengthen enforcement of local legislation • Champion market leaders

21. Objectives– iii: Co-evolution • Voice Southern concerns • Facilitate dialogue on voluntary codes of practice between different stakeholder groups, along sectoral/geographical lines • Explore possibilities of mutual recognition and requirements for implementing jointly designed codes • Work with existing institutions

22. Structure • Network of Southern and Northern stakeholders • Core Secretariat • Phased approach

23. STIC network partners Core Secretariat Information exchange/awareness creation Objectives Co-evolution of Voluntary Codes Innovation & Skills Development Producers in developing countries, buyers/importers, government agencies, NGOs Producers in developing countries, Scientific and Industrial Research Institutes, Companies of Developed and Developing Countries 1) Producers, traders,official agencies, NGOs in developing countries 2) Retailers, importers, official agencies in industrialised countries Beneficiaries Target Audience STICPossible products and services R&D B2BB2G Facilitation Facilitate Certificationfor SMEs - Textile- Electronics- Food- Forestry- Tourism SME’s access to New Financial Tools

24. Phased Approach • Phase 1: ( 2 years) • 5 regional consultations • 5 pilot projects • Information dissemination to generate interest and support • Phase 2: • Implementation of regional guidelines • Roll out of pilots • Regular information updates to sustain interest

25. Next Steps • Formalise relationships with network partners • Initiate pilots together with network partners • Initiate regional consultations • Funding • Launch