ESG Practices: A New Way to Block Trade
Environmental, social, and governance (ESG) criteria are often presented as a way to measure and improve the sustainability and ethical impact of businesses. However, behind this noble facade, ESG practices can also serve as a new form of protectionism by the developed countries, who use them as non-tariff barriers (NTBs) to discourage the inflow of goods from developing countries and harm their local industries.
ESG practices are not uniform or transparent across countries and regions. They are often based on arbitrary and subjective standards that reflect the preferences and values of the developed countries, rather than the realities and needs of the developing countries. For example, some ESG regulations impose stringent environmental requirements on the production processes of goods, without considering the different levels of development, resources, and capabilities of the producers. This creates an unfair advantage for the developed countries, who can afford to comply with these requirements, while imposing additional costs and burdens on the developing countries, who struggle to meet them.
ESG practices are also used as a tool to influence the consumer behavior and preferences of the developed countries, who are the main market for the exports of the developing countries. By labeling and certifying products based on ESG criteria, the developed countries create a perception of quality and trust among their consumers, who are then more likely to buy products that meet these criteria. This creates a demand gap for the products of the developing countries, who are either excluded from the ESG certification schemes or face difficulties in obtaining them. As a result, the developing countries lose their market share and competitiveness in the global trade.
ESG practices are not only detrimental to the economic interests of the developing countries, but also to their social and governance interests. By imposing ESG standards on the developing countries, the developed countries interfere with their sovereignty and policy space, and undermine their right to pursue their own development paths and priorities. Moreover, by focusing on ESG issues that are relevant for the developed countries, the developed countries neglect or ignore the more pressing and urgent issues that affect the developing countries, such as poverty, inequality, health, education, and human rights.
The future of governance in the age of ESG practices as NTBs will depend on how the developing countries can resist and challenge the protectionist agenda of the developed countries, and how they can assert their voice and interests in the global trade arena. Some possible ways to achieve this are:
Exposing and denouncing the hidden motives and impacts of ESG practices as NTBs, and raising awareness among the public and the media about the unfair and unjust trade practices of the developed countries.
Seeking legal recourse and dispute settlement mechanisms at the World Trade Organization (WTO) or other regional or bilateral trade agreements, to challenge the validity and compatibility of ESG practices with the international trade rules and principles.
Developing and implementing their own ESG standards and frameworks, that are tailored to their specific contexts and needs, and that reflect their values and aspirations.
Enhancing their cooperation and solidarity with other developing countries, and forming alliances and coalitions to advocate for their common interests and concerns in the global trade negotiations and discussions.
ESG practices are not inherently bad or good, but they can have different implications and consequences depending on how they are designed and implemented. Therefore, it is important for the developing countries to be vigilant and proactive in defending their rights and interests, and in ensuring that ESG practices are not used as a new form of protectionism by the developed countries.
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