Carol Chouchani Cherfane Coordinator, METAP MedPolicies Initiative Economic and Social Commission for Western Asia

1. Environmental Requirements and Competitiveness in the Middle East and North Africa Carol Chouchani Cherfane Coordinator, METAP MedPolicies Initiative Economic and Social Commission for Western Asia United Nations UNCTAD Expert Meeting on Environmental Requirements and International Trade

2. 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 Bankhas sponsored MedPolicies Initiative since 1997, implemented by ESCWA since 2000. • ESCWAT&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 & UNEPTask Force & training activities at global & regional levels have benefited region – supporting cooperative efforts with ESCWA. UN-ESCWA

3. 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

4. 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 UN-ESCWA

5. 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 UN-ESCWA

6. Sample Issues for Agricultural Products Sector • Product Requirements(strong link to food safety & consumer awareness) • Process Requirements UN-ESCWA

7. Implications for ESCWA Region: Data Sources • Surveyof 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

8. UN-ESCWA

9. FINDINGSMost Troublesome REGULATORY Environmental Requirements faced by ESCWA Agro-Food Exporters UN-ESCWA

10. FINDINGSMost Troublesome VOLUNTARY Environmental Requirements faced by ESCWA Agro-Food Exports UN-ESCWA * Note: Egypt Center for Measuring Organic Products - accredited by EU

11. 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. UN-ESCWA

12. 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) METAP UN-ESCWA

13. 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% UN-ESCWA

14. METAP MedPolicies Initiative:Sample Findings on increase in fertilizer costs • 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

15. 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

16. 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

17. 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