Eco-labelling: Legal and Institutional Issues Beatrice Chaytor FIELD FIELD/UNCTAD Project on Building Capacity for Improved Policy Making and Negotiation on Key Trade and Environment Issues funded by DFID African Regional Consultative Meeting, Nairobi November 2002

Definition “ the use of labels to inform consumers that a product is more environmentally friendly relative to other products in the same category ” (UNEP) “ the use of labels to inform consumers that a product is more environmentally friendly relative to other products in the same category ” (UNEP) Example: non use of pesticides in agricultural product (coffee, tea, cotton) or whole life cycle description of product Example: non use of pesticides in agricultural product (coffee, tea, cotton) or whole life cycle description of product

Scope Environmental labels: focus on consumption not production of product (recyclable material) Environmental labels: focus on consumption not production of product (recyclable material) Eco-label: reduce environmental impacts over entire life cycle of product without specifying the production practices Eco-label: reduce environmental impacts over entire life cycle of product without specifying the production practices Organic labels: specify production method without requiring proof of environmental improvement Organic labels: specify production method without requiring proof of environmental improvement

International Organisation for Standardisation (ISO) Type I: voluntary, multiple criteria based third- party practitioner programmes that award labels based on life cycle considerations (Germany’s Blue Angel, Nordic White Swan) Type I: voluntary, multiple criteria based third- party practitioner programmes that award labels based on life cycle considerations (Germany’s Blue Angel, Nordic White Swan) Type II: informative environmental self declaration claims (‘organically-grown’, ‘energy- efficient’, ‘ozone-friendly’) Type II: informative environmental self declaration claims (‘organically-grown’, ‘energy- efficient’, ‘ozone-friendly’) Type III: quantified product information labels based on independent verification using preset indices (‘eco-toxic’, ‘biodegradable’) Type III: quantified product information labels based on independent verification using preset indices (‘eco-toxic’, ‘biodegradable’)

Features of Eco-labelling Sequence of procedures on standard/criteria setting, testing, monitoring and certifying Sequence of procedures on standard/criteria setting, testing, monitoring and certifying Focus on one stage of product’s life cycle, (use or disposal); one particular environmental aspect Focus on one stage of product’s life cycle, (use or disposal); one particular environmental aspect Increasing trend: reflect more holistic multi- criteria and life cycle approach/assessment Increasing trend: reflect more holistic multi- criteria and life cycle approach/assessment Usually voluntary but may be administered by government agency Usually voluntary but may be administered by government agency Criteria differs in terms of scope and stringency Criteria differs in terms of scope and stringency

Life Cycle Assessment (LCA) Separate product stages (raw material extraction, production of intermediaries, product manufacturing, use and disposal) Separate product stages (raw material extraction, production of intermediaries, product manufacturing, use and disposal) Categories of environmental aspects (resource use, energy, emissions, nuisance, waste, reusability, reparability, life span) Categories of environmental aspects (resource use, energy, emissions, nuisance, waste, reusability, reparability, life span)

Challenges in Design of Eco-labels Processes and procedures not open to foreign producers Processes and procedures not open to foreign producers Criteria set without consultation with foreign producers Criteria set without consultation with foreign producers Criteria for labels not important in foreign producers’ country Criteria for labels not important in foreign producers’ country Foreign producers have little or no access to technology critical for compliance Foreign producers have little or no access to technology critical for compliance Costs prohibitive for foreign producers Costs prohibitive for foreign producers

Challenges in Implementation of Eco-labels Voluntary eco-labels may turn into mandatory standards Voluntary eco-labels may turn into mandatory standards UNCTAD: “when eco-labelling is an important factor in the market place its effects may be similar to those of regulatory measures” UNCTAD: “when eco-labelling is an important factor in the market place its effects may be similar to those of regulatory measures” Example: forestry – impact of European furniture industry – ‘sustainably managed forests’ Example: forestry – impact of European furniture industry – ‘sustainably managed forests’

Further Challenges Multiplication of labels, programmes: e.g. bananas (Fair trade, Eco-OK, ISO 14001, organic) Multiplication of labels, programmes: e.g. bananas (Fair trade, Eco-OK, ISO 14001, organic) Differences in approach/criteria (social, environmental) Differences in approach/criteria (social, environmental) Multiple inspections/certifications lead to additional costs in compliance Multiple inspections/certifications lead to additional costs in compliance Confused consumers Confused consumers

Interaction of Eco-labels with WTO Rules Eco-labels administered and enforced through processes that have governmental authority (e.g. EU eco-labelling scheme) Eco-labels administered and enforced through processes that have governmental authority (e.g. EU eco-labelling scheme) Eco-labels that are entirely non- governmental (e.g. Forest Stewardship Council) Eco-labels that are entirely non- governmental (e.g. Forest Stewardship Council) Challenge traditional distinctions between ‘private’ and ‘public’ spheres Challenge traditional distinctions between ‘private’ and ‘public’ spheres

Agreement on Technical Barriers to Trade (TBT) Disciplines Disciplines –Technical regulations: compliance is mandatory –Standards: compliance is voluntary Eco-labels: provisions on standards Eco-labels: provisions on standards

Definition of Standard Annex I: “Document approved by a recognised body, that provides, for common and repeated use, rules, guidelines or characteristics for products or related processes and production methods, with which compliance is not mandatory. It may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method.” Annex I: “Document approved by a recognised body, that provides, for common and repeated use, rules, guidelines or characteristics for products or related processes and production methods, with which compliance is not mandatory. It may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method.”

‘Recognised Body’ TBT Agreement does not define TBT Agreement does not define Standardising body: “a body that has recognised activities in standardisation” (incorporation of ISO language in TBT) Standardising body: “a body that has recognised activities in standardisation” (incorporation of ISO language in TBT) NGOs administering fair trade label might not qualify as ‘recognised body’ – within scope of TBT Agreement? NGOs administering fair trade label might not qualify as ‘recognised body’ – within scope of TBT Agreement?

Coverage of Process and Production Methods “Rules, guidelines or characteristics on products or related process and production methods” “Rules, guidelines or characteristics on products or related process and production methods” Prima facie would exclude pure process based criteria for eco-labels Prima facie would exclude pure process based criteria for eco-labels However: standard may “also” deal with “labelling requirements as they apply to a process or production method”. However: standard may “also” deal with “labelling requirements as they apply to a process or production method”.

Non Product Related PPMs How is “also” to be interpreted? How is “also” to be interpreted? –Does it extend the definition in first sentence (process and production methods) only in so far as “related to” products? –Should it be read subject to first sentence – simply points out that labelling requirements are included within scope of first sentence? Possible interpretation: second sentence clarifies the application of the TBT agreement to labelling standards in their entirety (whether or not based on pure process criteria) Possible interpretation: second sentence clarifies the application of the TBT agreement to labelling standards in their entirety (whether or not based on pure process criteria)

Substantive Obligations on Voluntary Eco-labels Art. 4 TBT Agreement Art. 4 TBT Agreement –Provisions on Preparation, Adoption and Application of Standards –Establishes graduated requirements to comply with a Code of Good Practice for the Preparation, Adoption and Application of Standards

TBT Code of Good Practice Central government standardising bodies: mandatory compliance Central government standardising bodies: mandatory compliance NGO and local government standardising bodies: “take such reasonable measures as may be available to them” to ensure compliance NGO and local government standardising bodies: “take such reasonable measures as may be available to them” to ensure compliance Non compliance of Code by voluntary NGO administered labelling schemes – limited scope for WTO censure Non compliance of Code by voluntary NGO administered labelling schemes – limited scope for WTO censure

Code of Good Practice 2 Section D: “In respect of standards, the standardising body shall accord treatment to products originating in the territory of any other Member of the WTO no less favourable than that accorded to like products of national origin and to like products originating in any other country.” Section D: “In respect of standards, the standardising body shall accord treatment to products originating in the territory of any other Member of the WTO no less favourable than that accorded to like products of national origin and to like products originating in any other country.” Definition of ‘like products’ : LCA based criteria incorporating non product related PPMs? Definition of ‘like products’ : LCA based criteria incorporating non product related PPMs?

Code of Good Practice 3 Section E: “The standardising body shall ensure that standards are not prepared, adopted or applied with a view to, or with the effect of creating unnecessary obstacles to international trade.” Section E: “The standardising body shall ensure that standards are not prepared, adopted or applied with a view to, or with the effect of creating unnecessary obstacles to international trade.” GATT/WTO practice on interpretation of term “necessary” (Art. XX (b)) relevant. GATT/WTO practice on interpretation of term “necessary” (Art. XX (b)) relevant.

CGP Provisions on Harmonisation Section F: “Where international standards exist or their completion is imminent, the standardising body shall use them, or the relevant parts of them, as a basis for the standards it develops, except where such international standards or relevant parts would be ineffective or inappropriate, for instance, because of an insufficient level of protection or fundamental climatic or geographical factors or fundamental technological problems.” Section F: “Where international standards exist or their completion is imminent, the standardising body shall use them, or the relevant parts of them, as a basis for the standards it develops, except where such international standards or relevant parts would be ineffective or inappropriate, for instance, because of an insufficient level of protection or fundamental climatic or geographical factors or fundamental technological problems.”

Provisions on Harmonisation 2 Section G: “With a view to harmonising standards on as wide a basis as possible, the standardising body shall, in an appropriate way, play a full part, within the limits of its resources, in the preparation of relevant international standardising bodies of international standards regarding subject matter for which it either has adopted, or expects to adopt, standards…” Section G: “With a view to harmonising standards on as wide a basis as possible, the standardising body shall, in an appropriate way, play a full part, within the limits of its resources, in the preparation of relevant international standardising bodies of international standards regarding subject matter for which it either has adopted, or expects to adopt, standards…”

International Harmonisation Organic foods: Organic foods: –Codex Alimentarius Commission: Guidelines for the Production, Processing, Labelling and Marketing of Organically Produced Foods –Common basis for rules at international level of organic production –Some countries working on national legislation based on Guidelines: e.g. PRC, India, Philippines, Thailand and Malaysia

International Harmonisation IFOAM developed Accreditation Programme to recognise equivalence of organic products from different countries 1992 IFOAM developed Accreditation Programme to recognise equivalence of organic products from different countries EU: regulations EEC 2092/91, EEC 1804/99 – guidelines on organic production of agricultural products EU: regulations EEC 2092/91, EEC 1804/99 – guidelines on organic production of agricultural products

Mutual Recognition and Equivalency TBT Agreement on technical regulations: “Members shall give positive consideration to accepting as equivalent technical regulations of other Members, even if those regulations differ from their own, provided they are satisfied that these regulations adequately fulfil the obligations of their own regulations.” TBT Agreement on technical regulations: “Members shall give positive consideration to accepting as equivalent technical regulations of other Members, even if those regulations differ from their own, provided they are satisfied that these regulations adequately fulfil the obligations of their own regulations.” No equivalent provision on standards No equivalent provision on standards

Progress within the WTO CTE: within its current terms of reference to give attention to labelling requirements for environmental purposes. CTE: within its current terms of reference to give attention to labelling requirements for environmental purposes. To Report to 5 th WTO Ministerial in Cancun (September 2003) To Report to 5 th WTO Ministerial in Cancun (September 2003) Doha Declaration: work on issue should include identification of any need to clarify relevant WTO rules. Doha Declaration: work on issue should include identification of any need to clarify relevant WTO rules.

Progress in the Project Identification of specific products impacted by eco-labelling Identification of specific products impacted by eco-labelling Elements for national legislation on organic products of specific export interest (Codex guidelines) Elements for national legislation on organic products of specific export interest (Codex guidelines) Principles on mutual recognition and equivalency Principles on mutual recognition and equivalency Effective participation in Codex, ISO, CTE, TBT Committee Effective participation in Codex, ISO, CTE, TBT Committee