Enviros Praise Bush For Promoting Global Lending Rules

by Danielle Knight

"The administration should be applauded," said Brent Blackwelder, president of the environmental group Friends of the Earth-U.S.

Bush notified industrialized nations July 10 that he was rejecting their proposed guidelines for government agencies that provide loans, guarantees and insurance to help home-based companies compete for business abroad. Human rights and environmental groups had denounced the Organization for Economic Cooperation and Development (OECD) for proposing what they saw as weak safeguard rules.

The U.S. Export-Import Bank (Ex-Im) criticized several elements of the proposal, arguing it did not explicitly require projects supported by export credit agencies (ECAs) to comply with the same standards as apply to multilateral development lenders such as the World Bank.

The U.S. ECA demanded that the proposal be rewritten to contain provisions for the public release of environmental information on projects. Advocacy groups have complained that if they do not have access to such information, it is virtually impossible to hold ECAs accountable for environmental damage resulting from their activities.

"The ambiguous and weak language contained in the proposed OECD agreement would legitimize the application of differing environmental criteria to projects by the various ECAs in order to meet their trade objectives," Ex-Im said in a statement.

This would lead to a "non-level playing field among exporters from different countries" and signal "to the world that it's 'business as usual' with respect to the environment," it said.

Even as environmentalists praised the administration for taking a stand on the ECA guidelines, however, they assailed Ex-Im's support of oil, gas, and coal projects that emit heat-trapping greenhouse gases.

"Unless Ex-Im stops supporting dirty fossil fuel projects around the world and starts investing in clean energy, the United States will not truly be a leader when it comes to ECA reform," said Blackwelder.

According to a report from the World Resources Institute (WRI), from 1994 through the first quarter of 1999, three-fifths of financial backing from ECAs in Europe, Japan, Canada and the United States -- or $216.6 billion out of $376 billion -- went to fossil-fuel power generation, oil and gas development, and energy-intensive manufacturing like petrochemicals.

The leading destinations for this type of ECA financing include some of the largest emitters of greenhouse gases among developing nations: Brazil, China, India, Indonesia and Mexico, said Crescencia Maurer, a research associate at WRI.

These investments, she added, are not balanced by financing for renewable energy or energy-efficient technologies.

In recent years, ECAs like Ex-Im, the Japanese Export-Import Bank, Germany's Hermes Guarantee, France's COFACE, and Italy's SACE have subsidized about 10 percent of world trade, according to the International Monetary Fund (IMF).

Despite their vast reach, these agencies lack common human rights and environmental standards that would prevent them from competing to finance socially and environmentally destructive projects in developing countries -- a process environmental groups and the U.S. government call a "race to the bottom."

The U.S. administration wants common standards because Ex-Im and domestic firms are bound by higher standards -- including mandatory environmental assessments -- that put them at a disadvantage compared to leading competitors. Besides the United States, only Australia and Britain have environmental guidelines for their ECAs.

For the past four years, the United States has pursued negotiations at the OECD to adopt common environmental guidelines applicable to the projects they support.

European nations, particularly Germany and Austria, however, have resisted the development of common guidelines despite a Group of Seven (G-7) mandate that ECAs adopt World Bank Group standards or write their own, more stringent rules. The world's leading economic powers are due to meet in Genoa next week to seek agreement.

Environmental groups said that without common guidelines, the impacts of ECA-supported projects in Africa, Asia and Latin America will continue to be environmentally and socially destructive.

"The ECAs' lack of minimal standards can turn major infrastructure projects in developing countries into ecological and social time bombs," said Korinna Horta, a senior economist with Environmental Defense, a Washington-based non-governmental organization.

Turkey's Ilisu hydroelectric dam is a case in point, according to critics. As many as seven export credit agencies are considering extending their backing for the country's largest dam, at a cost of about $1 billion.

The scheme would dam the Tigris River near Turkey's border with Iraq and Syria, enabling Turkey to block the river's flow to Iraq. It would force the resettlement of at least 15,000 Kurds, who strongly oppose the dam, and inundate some revered archeological sites.

Friends of the Earth said the project violates five World Bank policy guidelines as well as core provisions of the United Nations Convention on the Non-Navigational Uses of Transboundary Watercourses.

ECAs, environmentalists charged, often finance projects that are rejected by the World Bank and other bilateral and multilateral public agencies, not just on social and environmental grounds but also on economic grounds.

The most famous example of this is China's Three Gorges Dam. Dubbed by some of its critics the "Chernobyl of hydropower," the hydroelectric dam will flood thousands of acres of farmland and archeological sites and displace as many as two million people. In 1996, the German, Swiss, Canadian and Japanese ECAs competed with one another to help finance the project, while the World Bank and Ex-Im refused, citing potential environmental problems, political risks, and the project's questionable financial soundness.