U.S., Allies Set Environment Pact; Boon Is Seen to Overseas Business

By MICHAEL M. PHILLIPS

Staff Reporter of THE WALL STREET JOURNAL

WASHINGTON -- After lengthy negotiations, the U.S. and its major allies have agreed on voluntary environmental guidelines for dams, power plants and other projects in the developing world financed by government export-credit agencies in the developed world.

The Bush administration is touting the accord, which could be announced in Paris as early as Thursday, as a major environmental and diplomatic victory that will also help American companies win overseas contracts.

American companies have complained for years that while they must meet strict environmental standards to secure export financing from the U.S. government's Export-Import Bank, German, Spanish, Japanese and other firms can win loans and guarantees from their governments without employing costly environmental safeguards.

"The primary thing it does is move to level the playing field so that our exporters can compete on quality and price, rather than on which environmental standards will beapplied," said Peter Saba, Ex-Im Bank's general counsel. In one oft-cited case from the mid-1990s, Ex-Im Bank didn't act on a request from Caterpillar Inc. to help fund equipment sales for China's controversial Three Gorges Dam, only to see European export-credit agencies finance sales by their companies instead.

The 30 members of the Organization for Economic Cooperation and Development, a forum of industrialized nations, are expected to sign an agreement outlining the guidelines.

 While many U.S. exporters would have liked to have extracted even stronger environmental commitments from the Europeans and Japanese, they consider the new agreement "decidedly better" than one that the U.S. refused to sign in 2001 on the grounds that it was too weak, said Edmund Rice, president of the Coalition for Employment through Exports, a trade group 7 of Halliburton Co., General Electric Co. and other U.S. companies that sell equipment for infrastructure projects abroad.

The stakes are very high for businesses. Export-credit agencies from the OECD nations offered more than $60 billion in medium- and long-term financing for as many as 10,640 separate deals in 2001, the most recent data available.

Rather than laying out specific rules about pollution levels, deforestation and the like, the draft agreement saysexport-credit agencies "should" meet the existing standards set by the World Bank, Inter-American Development Bank, European Community or other international entities, as well as by the country where the project is being built.

Currently, export-credit agencies are only bound by their own national laws.

Environmental groups are taking a skeptical view of the new pact, which recommends -- but does not mandate -- that the lenders adopt the strictest standards and release the results of environment-impact assessments to create public pressure for more environmentally sensitive practices. The accord also provides a loophole allowing government lenders to adhere to lesser standards, as long as they explain their reasoning to other OECD members.

"Given the fact that they've been negotiating this since 1995, it's a disgrace," said Bruce Rich, director of the international program at Environmental Defense, a nonpartisan U.S. environmental research and advocacy organization involved in the discussions. Mr. Rich and other environmentalists point out that just this year, 19 of the world's biggest commercial banks volunteered to meet much higher environmental standards when they finance developing-world infrastructure projects. Private banks, Mr. Rich said, are more environmentally minded than are government banks.

"The export-credit agencies are really the bottom of the barrel," he said.

But the environmental groups give the U.S. and British governments points for pressing the issue in the face of Japanese and continental European resistance that apparently stemmed from concern that higher standards would cost their companies business. And U.S. officials credit environmental activists in Germany, Japan and elsewhere for helping break the impasse by pressuring their own governments.

"It was somewhat hypocritical for certain countries to claim strong stewardship of the environment and yet have this tremendous loophole" for export-credit agency financing, said John F. Turner, assistant secretary of state for Oceans and International Environmental and Scientific Affairs.

A German Foreign Ministry spokeswoman said Berlin had favored uniform standards all along, but gave no further details.

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BNA

U.S. Officials Laud OECD Agreement On Environment for Export Credit Agencies

December 12, 2002

By Christopher S. Rugaber

U.S. officials Dec. 11 hailed an agreement on environmental standards for export credit agencies (ECAs) in industrialized countries as a major victory for U.S. exporters and the environment, as well as a substantial improvement from an earlier version rejected by the United States two years ago.

Alan P. Larson, Undersecretary of State for economic, business and agricultural affairs, said the agreement--reached among the 30 developed countries in the Organization for Economic Cooperation and Development (OECD)--has been in the works since 1998 and is the result of extensive efforts by several U.S. agencies, including the State and Treasury departments and the Export-Import Bank. Larson and several other officials spoke to reporters during a briefing at the State Department.

Environmental groups blasted the agreement, however, arguing that it includes significant loopholes and does not actually require ECAs to use a specific minimum standard for evaluating the environmental impact of large infrastructure projects in developing countries.

"The loopholes in this agreement are so huge the ECAs can drive a truck through them," Jon Sohn, senior policy analyst at Friends of the Earth, said in a prepared statement. "The Bush administration ...should not sign an environmental accord that perpetuates the ECAs' race to the bottom."

ECAs such as the U.S. Export-Import Bank provide approximately $60 billion in financing annually, Larson said, much of which supports large infrastructure projects in developing countries. The projects, which in the past have included dams and oil pipelines, can have significant environmental impacts.

The United States has maintained relatively rigorous environmental guidelines for the Ex-Im Bank since 1995, and has pressed through the OECD for other ECAs to implement similar standards in order to "level the playing field" for U.S. companies.

"Our companies have been at a disadvantage in these large infrastructure projects," Edmund Rice, the president of the Coalition for Employment Through Exports (CEE), said Dec. 11. CEE represents large

U.S. exporters, such as General Electric and Halliburton. Rice said he also represented the National Foreign Trade Council at the briefing.

Agreement Levels Playing Field

But Peter Saba, chief operating officer and general counsel at the Export-Import Bank, said the OECD "Common Approaches" agreement sets high environmental standards for ECAs in OECD countries and

levels the playing field for U.S. exporters.

Under the agreement, projects funded by export credit agencies "are required to comply with the most stringent" of either the host country's standards or those maintained by a "relevant" multilateral lending institution, such as the World Bank or a regional development bank, Saba said.

In addition, the agreement includes transparency and monitoring measures intended to help ensure compliance, he added.

Larson said the "high standards" and the transparency provisions are the two most important improvements over an earlier OECD pact that the United States rejected in November 2001.

As an example of improved transparency, Saba said the agreement requires that "environmental information" be made publicly available by governments 30 days before the final approval of a project, though he acknowledged that governments can opt out of the requirement if they are prohibited from doing so under their domestic laws.

However, in that case the government would have to report the reasons for such a decision to the OECD, Saba said. Governments will also be required to report to the OECD which environmental standards they use to evaluate specific projects, or if they decide not to perform such evaluations at all, he said.

This information can then be used by other governments to pressure their counterparts if they disagree with their decisions, Saba added. Reports by OECD members on their ECA environmental decisions will be made public in an annual report each year, he said.

Technical Delays

The OECD has not yet formally approved the agreement, Larson noted, but he told reporters it was within an "eyelash" of doing so. All OECD countries have offered their "political acceptance" of the deal, he said.

European Union countries are currently hashing out details of what role the European Commission will play in their compliance with the pact, Larson said. The OECD could formally approve the agreement as soon as Dec. 12 or the week of Dec. 15. Formal OECD approval would come shortly after.

The agreement will not be legally binding on the signatories, Larson said, but he said that OECD members would take the commitments seriously. If a country is considered to be in violation, the United States and other OECD members can "subject them to the sunlight of public scrutiny ... and we will," he added.

Ex-Im to Revise Procedures

Saba, meanwhile, said the Export-Import Bank will revise its own environmental guidelines to comply with the OECD pact. The bank will consult with exporters and nongovernmental organizations (NGOs) and hopes to complete the revision by March, he said.

Sohn told BNA that the bank could weaken its standards in light of the OECD agreement, which he said set a lower standard than Ex-Im's current environmental guidelines.

Saba denied that the changes would lead to a "weakening" of Ex-Im's standards. Instead, it would likely lead to a broader application of the standards, he said.

But he also said that Ex-Im would use the revision, in conjunction with the OECD agreement, to move Ex-Im's standards closer to those in other OECD countries.