The real clash in Cancun

Nick Robins argues that it’s time to integrate social and environmental factors into international trade liberalisation – or face further clashes of the sort seen in Cancun

The collapse of the Cancun summit has many causes and consequences. But underlying the battles over subsidies, patents and investment lies a much deeper and more profound ‘clash of liberalisations’: between a narrow, single-minded focus on the removal of trade barriers, and a more integrated approach – what could be called ‘sustainable liberalisation’ – that seeks commercial success by bringing together social, environmental and economic factors.

To date, the investment community has kept well away from the trade talks. But, in the wake of Cancun, socially responsible investors (SRIs) cannot afford to ignore the World Trade Organisation (WTO). What is decided in the current Doha Development Round of trade negotiations could, to a large extent, determine the future shape of the corporate social responsibility (CSR) agenda.

Conflict in Cancun – but without a more sustainable approach to international trade, more clashes are inevitable

The Marrakech agreement establishing the WTO in 1995 can perhaps be seen as the last treaty of the pre-sustainability age. Although the Uruguay Round of trade negotiations took place simultaneously with the rise of the global environmental and human rights agenda in the late 1980s and early 1990s, the WTO agreement contains only a passing reference to sustainable development. While heads of state were piously exhorting the integration of social, environmental and economic factors into decision-making at the 1992 Rio Earth Summit, their trade ministers were ensuring that the traditional minimalist approach held sway at the WTO.

The story of the subsequent decade is one of discovering that the world trade system suffers from a profound ‘responsibility deficit’. High-profile trade wars over tuna, bananas and GM crops have served to undermine trust in the WTO as an institution that can deliver balanced outcomes. Most recently, intense public pressure has yielded a deal on access to essential medicines in poor countries to remedy the failure of the WTO to match economic rights with social responsibilities in this area.

Many of today’s high-profile environmental and social responsibility initiatives have their origins in this inability to deliver sustainable liberalisation. The forest certification movement and the introduction of codes of conduct to respect human rights in global supply chains, for example, were both introduced to plug gaps in international trade policy-making.

Despite their rhetorical commitments to sustainability and social responsibility, few governments – and hardly any business associations – have integrated these into their negotiating positions in the new trade round. Equally, there is little evidence that individual companies are ensuring a consistency between their internal CSR policies and the negotiating strategies of their associations.

This lack of joined-up trade policy poses a direct challenge for the SRI community. Compliance with trade-related responsibility standards, such as human rights in supply chains, is now a basic feature of the assessment of companies for inclusion in many SRI funds. Engagement with companies on these issues also looms large in the rising tide of shareholder activism.

To date, however, few funds have sought to ensure that the companies they own are also promoting trade and investment policies that reward responsible behaviour. Yet, as institutional investors are finding in other parts of the SRI agenda – notably climate change – promoting effective policy frameworks is becoming a necessary part of a successful strategy for responsible investing.

Doing the same in the trade arena is now becoming urgent, as there are risks that negotiations in the WTO could constrain, rather than accelerate, the transition to more responsible practices. From agriculture through to public procurement, the CSR dimension of the WTO agenda is broad and complex. Special concerns have been raised over the push from European and US lobbies to extend the liberalisation of services, without corresponding attention either on standards to guarantee access to essential services (notably water) or on measures to ensure that market opening does not simply lead to greater concentration among a small number of already dominant Western companies.

But it is the insistence of both European business groups and the EU on a WTO agreement on global investment rules that ultimately led to failure at Cancun. Many agree there is a pressing need for such rules, but it is by no means clear that the WTO is the appropriate forum to negotiate such an agreement. Furthermore, these pressures to promote investor rights have once again not been integrated with parallel measures to ensure investor responsibilities.This is particularly sensitive territory given the debacle of the OECD’s failed attempt in 1998 to negotiate a multilateral agreement on investment.

In the wake of the bad blood on show in Cancun, the imperative is to rebalance the trade negotiations so that liberalisation is both sustainable and responsible. Dropping investment, competition, procurement and trade facilitation to focus purely on trade in goods and services would be an obvious first step.

Alongside this, the promotion of human rights and environmental sustainability could be included as core objectives of the overall trade round, as well as any subsidiary agreements. These high-level commitments could then be fleshed out in binding side-agreements, most sensibly via links to the UN Commission on Human Rights’ recent publication of draft norms on the responsibilities of transnational corporations.

The European Union’s sustainability impact assessment process could also help to identify ‘flanking measures’ needed to address the social and environmental dimensions of the current round.

The inevitable delay in negotiations following Cancun also offers the SRI community an opportunity to support this positive agenda for trade. A good starting point would be to engage with corporate responsibility leaders and assess the consistency between their internal strategies and the approaches being taken by their business associations in the trade talks on their behalf. Joining up trade policy with CSR is no longer an optional, voluntary extra – without it, the future of the world trade system is in doubt.

Nick Robins is head of SRI research at Henderson Global Investors in London.
E-mail: nick.robins@henderson.com