In 1993 the OECD Ministerial Council recommended that “governments should examine or review trade and environmental policies and agreements with potentially significant effects on the other policy area early in their development to assess the implications for the other policy area and to identify alternative policy options for addressing concerns.” Currently, such impact assessments are mandated for all agreements signed by Canada, the EU and the United States. As well, the Economic Commission for Latin America and the Caribbean has carried out a number of impact studies of integration agreements for Latin American governments.
Typically EIAs assess potential impacts along the lines of the classic fields of trade–environment impacts:
- Scale effects, or changes in the amount of economic activity
- Composition effects, or changes in national-level mix of economic activity
- Technology effects, or the impacts of the flow of new technologies (e.g., more efficient goods)
- Regulatory effects, or the impacts of legal and policy changes stemming from the agreement
Public participation is a crucial element of successful impact assessment, and many assessment exercises actively seek out public opinion in meetings, workshops, hearings, etc. All potentially affected sectors of society should have the opportunity to contribute.
There are a number of options to consider when designing the assessment:
- Timing: ex post or ex ante (or both)
- Geographical scope: domestic impacts or international
- Thematic scope: what sorts of impacts will be considered?
- Analyst: conducted by government or by consultants?
Option 1:Timing: ex post or ex ante assessment?
Recommended to do both, though ex post is almost never done. Ex ante should be timed early enough to feed into negotiating mandate, though difficult to know what to assess at that point; final outcome of negotiations not clear.
Examples
Ex ante assessments:
The U.S., Canada and the EU commission ex ante assessments of all trade agreements (but not stand-alone investment agreements) negotiated:
- EU’s sustainability impact assessments
- Canada’s environmental assessments
- U.S.’s environmental reviews
Ex post assessments:
In 2011 the EU commissioned an assessment of the impacts of the trade pillar of the 2002 EU-Chile Association Agreement.
Option 2:Geographical scope: only impacts within the parties, or also international impacts?
Recommended to cover significant international impacts as well as domestic impacts. Some environmental impacts (e.g., climate change) are inherently international in character. And impacts on third countries may be important.
Examples
The EU’s assessments cover the impacts of the agreement in both the EU and in the partner country(s).
The U.S. and Canadian assessments only cover impacts in their own territory (including where third-party impacts have effects in the U.S. and Canada).
Option 3:Thematic scope: what sorts of impacts will be considered?
The more comprehensive the scope of analysis, the more chance to identify and address important impacts of trade and investment agreements.
Examples
The EU’s assessments cover environmental, social and economic impacts, with a particular focus on development in less developed partners. The U.S. and Canadian assessments focus exclusively on environmental impacts.
Cumulative and long-term impacts: most EIAs of trade agreements consider neither, but so-called strategic environmental assessment—the most comprehensive technique—considers both.
Covering regulatory impacts allows the assessment to consider potential for regulatory chill as a result of investment provisions.
Examples
Regulatory impacts: The U.S. and Canadian assessments consider the environmental impacts of changes in trade flows, but not the impact of the agreements’ provisions on environmental regulation. The EU’s assessments may consider such impacts if they are identified as important during the screening process, but have not to date done so.
Option 4:Analyst: conducted by government or by consultants?
Analysis conducted by a consultant may carry more weight as an objective assessment, but may be weaker at ensuring ministry buy-in of the results.
Examples
The EU’s assessments are contracted to consultants, while the U.S. and Canadian governments conduct their analyses in-house.
In recent years, the field of EIAs has moved toward strategic environmental assessment as best practice. Strategic environmental assessment differs from IEA in a number of ways, but the most relevant to the trade context is the consideration of alternative actions when potential problems are identified. The EU’s sustainability impact assessments carry out this sort of extended analysis.
A key ingredient in the success of the assessment exercise is ensuring that the results have meaningful impact. This is hard to guarantee, but it helps to time the exercise such that change is still possible, as noted above. It might also be helpful to elaborate the process by which the results will be considered and taken on board. The lack of this sort of follow up has been a concern with the current practice of EIAs of trade agreements.
Some of the most significant changes that will occur in economies as a result of RTIAs will come through the long-term dynamic effects of the agreement, often in combination with a suite of other simultaneous policy reforms. The models used in typical EIAs of trade agreements are not capable of capturing those sorts of changes and, if they are covered at all, they must be described in qualitative and speculative terms. This challenge highlights the importance of ex post assessment.
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