Trade versus environment: Is trade winning out? Balancing environmental protection and sustainable development with exports and jobs is rarely an easy venture, but two recent reports by coalitions of environmental groups charge that some of the world's largest public financial institutions are tipping the balance in favor of trade. And in the process, environmental concerns are being pushed by the wayside. One of the more notorious examples of environmentally destructive projects highlighted in A Race to the Bottom: Creating Risk, Generating Debt, and Guaranteeing Environmental Destruction is the proposed Ilisu Dam in Turkey. The highly controversial hydroelectric project is likely to reduce the Tigris River's capacity to flush out untreated industrial and municipal wastewater discharges; forcibly displace an estimated 15,000 people; and flood valuable arable land, as well as archaeological and cultural sites, according to the report. The export credit agencies and investment insurance organizations funding projects such as the Ilisu Dam generally follow governmental mandates to support their country's exporters and investors, but most of these agencies have few, if any, environmental guidelines and safeguards in their statutes, said Bruce Rich, an international program manager with the Environmental Defense Fund who coauthored the report. Although these lenders together subsidize more than 10% of total world exports, Rich listed only two, the U.S. Export-Import (Ex-Im) Bank and Overseas Private Investment Corp. (OPIC), as having any kind environmental assessment procedures in place at all. But whether these environmental guidelines actually are being implemented is another matter. The second report, OPIC, Ex-Im, & Climate Change: Business as Usual?, found that the two federally chartered U.S. institutions are involved in a "vast number" of projects involving largescale coal-fired power plants and coal, oil, and gas mining and
Export credit agencies and investment insurance organizations subsidize more than 10% of total world exports, but only two have environmental assessment procedures in place.
drilling in developing countries. Ironically, the Clinton administration and Congress are asking for meaningful participation from these same countries in solving climate change problems before the United States agrees to implement the Kyoto Protocol. "Every environmentally sensitive project that OPIC and Ex-Im have invested in would be in noncompliance with U.S. standards" under the National Environmental Policy Act, said Ion Sohn, an international policy analyst for Friends of the Earth and a coauthor of the report. "The laundry list of projects that they're funding in fragile ecosystems around the world has nothing to do with solving the climate change problem and sustainable development," Sohn added. Voicing frustration with the report, Larry Spinelli, OPIC's director of communications, said that its methodology for determining total greenhouse gas emissions projected to occur as a result of OPIC and Ex-Im supported projects from 1992 to 1998 was "fundamentally flawed." In addition, many of the examples cited in the report were riddled with inaccuracies, he said. For example, the report alleges that from 1992 to 1998, OPIC assisted 86 oil, gas, and coal-fired power plants and related production and transport facilities, when in actuality, only 51 received OPIC support, Spinelli said. An Ex-Im spokesperson offered similar concerns.
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But Sohn responded with a complaint commonly voiced by environmentalists—that the dealings of export credit agencies lack the transparency and public disclosure requirements that other institutions like the World Bank must follow, making it difficult to track a project's progress. In Germany, for instance, the interministerial committee overseeing the Hermes Kreditversicherungs-AG says that it takes environmental concerns into account and in some cases requests environmental impact statements to be conducted, said Heike Drillisch, a campaigner for World Economy, Ecology, and Development, an environmental organization in Bonn. But the process is unclear. Some of the projects being approved raise serious doubts that environmental and social concerns are being taken into account, Drillisch said. While OPIC's and Ex-Im's standards are higher than others, even their spokespeople acknowledged the need for international guidelines, if only to level the playing field. U.S. businesses often find themselves at a competitive disadvantage when they undertake projects with OPIC or Ex-Im support, Spinelli said. "They find themselves having to adhere to stringent environmental guidelines, which affect the cost of a project, while a rival from another country may not face the same standards." —KRIS CHRISTEN
