As green initiatives in the European Union accelerate, developing countries should also ramp up awareness and move swiftly to ensure their exporters, particularly micro, small and medium companies (MSMEs), will continue to have access to the EU market, according to international trade experts.
Jean-Sebastien Roure, head of trade policy at the International Trade Centre (ITC), said developing economies need to establish trade policies that support MSMEs so that these enterprises can “position themselves within the green transition and seize opportunities and not be left behind.”
Roure noted that MSMEs perceive the green transition as presenting challenges to market access and broader trade opportunities and fear being left behind.
“However, with environmental sustainability and climate resilience becoming key determinants of enterprise competitiveness, it is increasingly important for MSMEs to understand, adapt to, and leverage opportunities in green trade,” Roure said in his opening remarks at a recent webinar on the EU’s green initiatives.
Thus, governments in developing nations should support their MSMEs to adapt to the inevitable transition and put in place the regulatory policies and institutional frameworks needed for a conducive business environment that will foster competitive, resilient and environmentally sustainable MSMEs, the executive said.
With the EU stepping up its green initiatives, Roure said this means developing countries must educate themselves on the impact of such measures on trade and, most importantly, on MSMEs.
“The European Union has made several preliminary steps towards facilitating this growing transition and has been at the forefront of using trade as a tool to bring about this change. These measures are being reviewed by all the jurisdictions as benchmarks from which to develop their own green policy frameworks,” Roure said.
At the same time, the EU is also still developing, reevaluating and refining its green policies, he said. “So by raising awareness and educating SMEs and policy officials in developing countries, the hope is to empower the developing countries to be able to be part of the negotiating table and contribute to policy formulation on these issues.”
ITC expert Paolo Vergano agreed, stressing the strong relevance of the EU green initiatives to developing states.
“To understand and know and be aware of the legislative and regulatory developments is fundamental because these initiatives will have—already have—direct impact on trade and on their ability to access the European market.”
Vergano explained that EU green initiatives have a direct impact on trade and traded goods and lead to specific market access requirements that developing countries must factor in when developing related trade strategies.
In his talk, he mentioned some of these schemes with major impacts on the EU’s trading partners. The Timber Regulation and the Forest Law Enforcement, Governance and Trade Scheme, for example, have resulted in the prohibition on imports of illegally harvested timber and placed due diligence obligations on operators that place timber and timber products on the EU market.
Similarly, the trade impacts of Directive (EU) 2019/904, which regulates certain plastic products, are notable, including product design and composition requirements, new labeling requirements, introduction of waste management and cleanup obligations for producers, and market ban on single-use plastic products where sustainable alternatives are easily available.
EU is increasingly focusing on passing legislation aimed at ensuring that products are:
Produced or sourced sustainably
Do not have a negative impact on the environment
Do not contribute to climate change
Vergano said it is important that trading partners comply with the green initiatives, as compliance would allow continued access to the lucrative EU market.
“Fast movers—those that are quickly off the blocks with ingenuity, with creativity—sometimes may also draw comparative advantages vis-a-vis their competitors, other exporters to the EU which are not yet able to comply,” he further said.
He added that “concerted actions between developing countries’ policy makers and private sector operators can contribute to achieve such comparative advantages.”
Aside from these existing measures, the EU has in recent years rolled out a number of broader initiatives that are seen to lead to significant legislative and regulatory activity.
These include the European Green Deal, a set of policy initiatives with the overarching aim of making the EU’s economy sustainable and more circular and climate neutral by 2050. Another is the Farm to Fork Strategy, which consists of policy initiatives towards a fair, healthy and environmentally friendly food system. Meanwhile, the Fit for 55 Package builds on policies and legislation already in place toward reducing emissions by at least 55% by 2030 and achieving climate neutrality by 2050.