Address on Policy Issues on Trade and Sustainable Development

By

Dr.Surakiart Sathirathai
Visiting Scholar, Harvard Law School
Senior Fellow, John F. Kennedy School of Government, Harvard University

National Workshop on
The Challenges Ahead for Sustainable Development
A Rapid Trade and Environment Assessment of Thailand

Organized by
International Institute for Sustainable Development (IISD)
International Institute for Trade and Development (ITD)
Good Governance for Social Development
and the Environment Institute (GSEI)
Stockholm Environment Institute (SEI)
Tuesday 19 June, 2007
At
International Institute for Trade and Development (ITD),
Chulalongkorn University
Vidhayabhathana Building, 8thFloor
Bangkok, Thailand

Dr.Sorajak Kasemsuvan, Executive Director, International institute for Trade and Development (ITD)
Mr.Christen Holtsberg, Director, Swedish Environmental Secretariat for Asia
Ms.Sabrina Shaw, Associate, IISD
Excellencies,
Distinguished participants,
Ladies and Gentlemen.

Thank you for the kind words of introduction.
When Dr.Sorajak Kasemsuvan, the Executive Director of ITD approached me to give a keynote address to this National Workshop, he probably had the memory while we were together as academics at the Faculty of Law, Chulalongkorn University where I taught international economic law, specializing in GATT, WTO, IMF and so forth. But five and a half years between 2001 to 2006, with a foreign minister portfolio for most of those years and later as deputy prime minister overseeing foreign affairs, turned me completely into a "Professional Generalist". Therefore, I am not certain whether today he and the workshop's organizers have invited me as a specialist or a generalist or both… or neither!

But whatever, I consider it a great honor to be invited to speak to you at this occasion. I hope to be able to share with you some of my thoughts on trade and sustainable development especially environment. These are the thoughts that I have felt quite strongly when I was in the government and they were the thoughts that I had the opportunity to share with several colleagues of mine at both the Kennedy School of Government and the Harvard Law School as Senior Fellow and Visiting Scholar in the past recent months. In this regard, I wish to thank, in particular, Professor Dani Rodrik of KSG and Professor David Kennedy at HLS for the fruitful discussions.

The first point I wish to touch upon in the trade and economic policy is what is called "policy space". In the world of globalization and trade liberalization, the global trade regime seems to be under siege by rules and regulations that put many countries in straitjackets. "policy space" is therefore needed for developed and especially developing countries in their trade negotiation in order to enable them to pursue a path to sustainable development.

Instead of focusing on the question of trade liberalization or protection, countries should focus on what is needed in each particular country and how trade negotiation can accommodate it. For example a developing country may wish to increase competitiveness of the retail sector while maintaining traditional local retail business. Instead of pressuring on the opening up of a retail sector, a focus should be on how to work with that country to ensure that the retail sector can be gradually opened up without jeopardising income and jobs of people in the traditional retail business. The "space" will be to allow a country to have the ability to come up with a policy package to strengthen the retail sector to be more competitive and that the local retail business can continue to operate. In this way the negotiation is on the "space" which is acceptable to both countries that are negotiating trade.

Applying this approach to the environment, the question to be asked is how a developing country can be allowed to have a "policy space" to protect the environment while opening up its trade regime. For example, how can an electronic industry be liberalized (i.e. inviting foreign companies to invest and expand) while a country can issue policies to cope with environmental impact from electronic industry. If I may extend this approach a little further, one can also ask how a developed country can help a developing country where it wants to invest to expand electronic industry while at the same time to provide technology to reduce hazardous waste and to improve environmental condition which might have been affected in the past by such industry. In this way, you can see that we create a new face of negotiation, i.e. the negotiation on the policy space. Such negotiation can in fact be a mutual effort to find a common solution. Such negotiation can lead to cooperation and accordingly a win-win situation. In this example, developed country also has its own policy space. Its own need to invest to diversify supply bases is also safeguarded. Negotiation should be on policy space of both countries instead of on the opening up or protecting any particular sector which often leads to an impasse and rarely leads to cooperation or win-win situation.

What are the pre-requisites for countries to negotiate a policy space? For developing countries this is more of a question as to what the space to be negotiated should look like. From my experiences, more often than not, a developing country does not know in a meaningful and constructive way as to what the "spaces" should be. In the case of electronic industry above, things like the environmental impact or alternative ways to eliminate or reduce waste may not be well studied. Many developing countries still rely on imported technology and have little incentives for local technologist to invent and invest in such invention. This lack of ability for local technological invention and reliance on imported technology eventually retards the ability to come up with a package of policy space to be negotiated.

In order that the policy space approach, if accepted, can lead to more meaningful results of trade negotiation, developing countries must have sufficient knowledge to design for the "space". This is perhaps something that all the institutions that are co-organizers of the conference can play a key role.

Once a country knows what space should look like, another pre-requisite for having a policy space is the ability to negotiate for the acceptance of such space. It is often the case that trade negotiation agenda is set without any room to discuss space. For example, when a developing country enters into a free trade talk or agenda for trade liberalization, the agenda is set to negotiate which sector to be opened, how open and when it will be opened. Thus, policy space negotiation must begin with the agenda setting.

The next pre-requisite is the bargaining power of a developing country to initiate the negotiation on policy space. This power hinges upon three elements, one is the knowledge of what the "space" should look like. The second is the ability to implement the content of the policy space. In the example of technology case, if a developing country has an option for its own local technology, its bargaining power to have the policy space increases. The last element is the ability of developing countries to work together to come up with a common position to negotiate policy space, especially in a multilateral negotiation context.

The last pre-requisite is the emphasis on "Corporate Social Responsibility (CSR)" with a consent of members of the society. The more the corporations are embedded with their civic-mindedness as a social duty to contribute to the society in which they operate, the more countries are receptive to the existence of policy space in trade negotiation. It is a known fact that in our democratic liberal economy society, corporations, large and small, play a significant role in shaping policy formulation of both developed and developing countries which are negotiating trade policies.

Distinguished Participants,
Ladies and Gentlemen,

Let me proceed on to my second point.

Based on Thailand experiences, I would like to offer a conceptual framework for thinking about policy space as related to trade liberalization, sustainable development and environment. His Majesty the King of Thailand has, for decades, advised the Thai people to adopt "sufficiency economy" philosophy to apply to our way of life. Here, I would like to offer examples of how sufficiency economy philosophy can be a framework to think about policy space.

The sufficiency economy philosophy is based on three pillars i.e. moderation, (or appropriateness), reasonableness and immunity to protect oneself against mishaps. Apply this philosophy to trade and environment policy, one should open up trade, not too little and not too much, based on good rationales and reasons and having enough protection if something goes wrong.

If a country opens up an electronic sector, it should thus do it in such a way that a balance is struck between increase in investment and competitiveness and control of hazardous waste harmful to the safety of the people. A country can have foreign investors invest and expand in electronic industry for domestic consumption and export, which should create jobs and income to workers and to the economy. At the same time, there must be effective control of hazardous waste, making sure that there will be no leaking into underground water, for instance. The workers' working condition has to be at a level where there is no exposure to chemicals that may cause cancer, or endanger pregnancy, retarding mentally and physically the new born babies. These are examples of moderation, reasonableness, and immunity to protect against impacts on society and people's health.

In this way, trade is negotiated with good rationales and reasonableness, always mindful of its consequences, thus finding a way to prevent the negative impact from happening as much as one can and in this case, the impact on environment. Accordingly, the society has enough immunity against negative impact of the opening up of the electronic sector. The sufficiency economy philosophy therefore, does not lead to protectionism at all. Rather, it supports opening up of trade, but to a proper or appropriate degree of openness while being conscious of negative impact on society.

This philosophy also places emphasis on self-reliance while supporting globalization. The philosophy attaches great importance to the ability to rely on oneself as much as possible. Therefore, while being receptive to foreign capitals and technology, a country should build upon or strengthen domestic capital market and local technology as well. It is always my belief that in development, self-help is the first step to success. A country must help herself first before seeking help from others.

Distinguished Participants,

Perhaps sufficiency economy philosophy can serve as a framework to think about policy space in trade and environment policy formulation in order to create a realistic sustainable development. Whatever the policy content in the "space" should be for any country, it should be guided by principles of appropriateness (of policies and actions), reasonableness (in designing the policies) and immunity against possible negative impact. The content of the policy in the policy space must be balanced, so that once policy space is negotiated and agreed, the implementation of such policy will be well- received by the people of that country.

Ladies and Gentlemen,

Let me move to my third and last point of my address today. I believe in South-South Cooperation as an approach to successful development. There are a lot of lessons that developing countries can learn from each other, especially the successful cases. I am proud to say that Thailand has been in the forefront of South-South Cooperation since 2001, and that policy continues until today. Thailand has initiated many programs for our friends from Asia, Africa, the Pacific and the Caribbean countries to have a study tour of many development projects in Thailand. I am sure that there are also a lot that we can learn from our friends in other developing countries near and far. This does not mean that countries in the South should exclude cooperation with the North. Indeed there is a lot to learn from developed countries. However, from my experiences, lessons from developing countries can be more pertinent to the developmental stage of a developing country.

The question is how can a developing country learn more of the content of policy space of one another? How can a developing country learn how sufficiency economy philosophy can guide content of policy space? This is where South-South Cooperation comes in. Developing countries need to work together more closely in sharing experiences and best practices in policy space in trade and environment policies. They should also learn how policy space can be best negotiated so that trade negotiation can continue and in such a way that it does not create animosity or impasse as we have experienced in many instances.

South - South Cooperation also will bring developing countries together to have a better collective bargaining power to ensure that policy space is accepted as a topic for negotiation. By acting together, developing countries can modify trade negotiation agenda from the agenda of open trade or trade liberalization only to become trade and policy space negotiation. This new agenda will avoid unnecessary confrontation and impasse and will lead to trade policy negotiation with sustainable development. The new agenda will be conducive to taking care of concern of sustainable issues such as environment protection and human safety.

Distinguished Participants,
Ladies and Gentlemen,

I have referred to these three main points as I believe they are points worth noting relating to policies on trade and sustainable development, especially in this workshop which looks at new approaches to meet the challenges in sustainable development. Of course, they are only fruit for thoughts and there remain a lot more work to be done to develop those ideas further. I hope these points could contribute to the discussion in this conference and all agencies that co-organize this workshop would further help to define and refine these points and the policy space approach to provide greater impacts to sustainable development.

According to Amartya Sen, prosperity is more than economic performance, it is also a matter of human flourishing and the possibilities for human freedom. Economic growth must enhance respect for our environment, for human dignity and human rights. Health and education are not only important for development - their achievement defines development.

I could not agree more.

Thank you for your kind attention and I wish the conference a great success.