IV. CONSIDERATION OF MULTILATERAL TRADE AND ENVIRONMENTAL AGREEMENTS IN DOMESTIC POLICY FORMULATION

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C. Constraints on effective integration

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3. Effects of competitiveness

The use of trade measures in the framework of multilateral environmental agreements has become prevalent. Those obligations, however, carry with them competitiveness effects. Developing countries, in particular, fear that adherence to multilateral agreements is likely to affect competitiveness, given the relative difficulty in accessing, among other things: information, inputs and technology: finance; and their inherent lack of the required economic and physical infrastructure. The presence of those factors substantiates the need for in-depth and systematic reviews that can permit formulation of cost-effective environmental measures to reduce adverse effects of competitiveness.

A study on the GATT-World Trade Organization (WTO) and the Philippine Environment, entitled "Policy Safeguards to Ensure an Environmentally-Friendly Competitiveness in World Trade", was undertaken through the initiative of PCSD and with financial assistance from the Environment and Resource Management Project of the Canadian International Development Agency. The study examined trade-environment issues, particularly the effects of trade on the environment and the effect of environmental regulations on trade. The study also provided a framework for assisting the Philippines in positioning for future negotiations and debates on GATT-WTO.

With regard to the effects of competitiveness of domestic environmental regulations, the study maintains that environmental regulations may: (a) ease or raise the costs of producing exports, and restrict or facilitate the entry of environmentally-threatening or beneficial products into the domestic market; (b) force producers to utilize cleaner production technologies and internalize environmental costs of their activities; and (c) impose costly requirements on products and processes. However, if those effects are evened out by increased incomes as a result of higher consumer preference for green products and clean processes, the regulations are expected to improve competitiveness.

The effect of international environmental measures on industries in the Philippine is the subject of another study undertaken as part of the discussions on trade and environment. The potential and actual responses of the various industries affected, either directly or indirectly, by such measures were presented. A higher level of compliance with foreign environmental regulations has been reported for export-oriented multinational companies through investments in environment-friendly technologies. Small and medium-sized enterprises, on the other hand, appear to have lower compliance which may result from a financing problem. Skewed distribution of funds and access to credit in favour of large firms has been noted. That type of predicament makes compliance with environmental regulations difficult. A similar difficulty could arise from economies of scale in waste management and the capability of small and medium-sized enterprises to adapt to alternative technologies (Sanchez, 1996). Thus it is imperative to find financial assistance for facilitating the transfer of technology and capital to developing countries to achieve environmental objectives.

The government has recognized the important role that business plays in ensuring compliance by the Philippines with international agreements. Several initiatives are being undertaken by the government to counter the potentially negative effects that private firms may face from environmental regulations. Some of those initiatives are:

Tax exemptions. BOI provides tax exemptions for firms which import new equipment and utilize industrial waste treatment systems. Incentives are granted for the installation of pollution control equipment, whether locally manufactured or imported;

Incentives. The Omnibus Investments Code, under the supervision of the Department of Finance, provides for granting incentives to companies using anti-pollution devices. However, Department of Environment and Natural Resources certification is needed prior to being granted such incentives;

Department of Environment and Natural Resources assistance. Several projects are being implemented by the Department of Environment and Natural Resources to assist private firms to become environmentally competitive. IEMP, which is a joint undertaking by EMB and USAID, encourages sustainable economic growth in the industrial sector of the Philippines while reducing pollution from industrial activities and improving human health and the environment. It also conducts periodical pollution management appraisals in order to assess waste minimization opportunities and improve production processes and methods. The Department of Environment and Natural Resources also implements the Metropolitan Environmental Improvement Programme under which a Plan of Action has been developed that seeks to address the growing threat of air pollution.

Private sector support

The foregoing discussion on competitiveness underscores the importance of the private sector in the overall endeavour on sustainable development. Recognizing that importance, PCSD has institutionalized the participation of the business sector in the Council. The recently formed PCSD alliance with the business sector is expected, among other benefits, to strengthen cooperation between the government and industry in setting environmental regulations, ensuring private sector compliance and the monitoring of private sector initiatives in support of the environmental objectives of the country.

Collaboration with industry further institutionalizes the mechanism for consultations and dialogues during which the concerns of industry may be effectively communicated and taken into account in formulating environmental regulations.

There are positive signs that full private sector support for the environmental objectives of the country will be realized, as exemplified by the number of significant industry initiatives undertaken thus far, such as PBE. Those initiatives are also expected to increase competitiveness as well as the capacity of private firms to comply with domestic and international environmental regulations. An increasing number of private firms are subscribing to PBCSD. Some of the initiatives include: (a) the implementation of a pollution control programme by Hi-Cement (a cement plant) which includes the installation of a device to control the release of dust and other particulate matter into the atmosphere; (b) the initiative by the Asian Institute of Management to introduce a three-year environment, development and management programme with grant assistance from the MacArthur Foundation. The programme aims to make sustainable development a strategic concern in the training of Asian development and enterprising managers.

PBE is also one of the four organizations which initiated a survey of the top 1,000 companies in the Philippines to benchmark existing environmental practices of the listed companies and identify areas where businesses could collectively work to improve local environmental initiatives. The survey was undertaken to consolidate the contributions by the business sector to the Philippine Agenda 21 (1997b). The findings of the survey revealed that private firms were increasingly adopting voluntary environmental guidelines such as PBCSD, Responsible Care or ISO 14000, as well as standards set by the Department of Environment and Natural Resources. An increase was also observed in environmentally-related investments and savings over the previous three years.

PBE serves as host to the Information Centre for Clean Technology and Environmental Management, which derives funding support from the United States-Asia Environmental Partnership (US-AEP). Its objectives include: (a) the promotion of clean technology and environmental management to improve efficiency and reduce pollution; and (b) the provision of access to relevant information on specific industrial technologies and management needs to enable businesses to achieve a competitive environmental advantage, reduce costs and increase productivity. US-AEP has been an active partner of the private sector in facilitating the transfer of environmental technology. The local US-AEP Technology Cooperation Office sends local suppliers to environmental trade exhibits abroad where the opportunity to forge distributorship agreements with foreign counterparts are explored. A number of distributorship agreements have already been successfully negotiated through US-AEP.

The Chemical Industries Association of the Philippines recently adopted the Responsible Care Programme as a means of minimizing the risks and potentially adverse effects associated with their operations. Also known as Samahan sa Pilipinas ng mga Industriyang Kimikal (SPIK), the initiative by the Chemical Industries Association of the Philippines is a commitment to continually improve the performance of the member companies in the health, safety and environmental aspects of their operations.

The business sector also spearheaded the creation of the Philippine Environmental Industry Association to develop needed local capabilities of companies in ensuring the sustainability of environmental management efforts.

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