UNICE Eco-Label Information Day, 24 June 2002 Trade implications of eco-labelling schemes 1 Contents I.Introduction II.Eco-labelling and the WTO III.Potential trade distortions IV.Possible approaches to minimise trade distortive effects V.Conclusion

UNICE Eco-Label Information Day, 24 June 2002 Trade implications of eco-labelling schemes 2 I. Introduction Eco-labelling schemes  are market based and rely on consumer‘s choice  are usually voluntary  are often based on life cycle analysis and therefore awarded on the basis of non-product related Process and Production Methods (PPMs)  do not establish direct restrictions at the border  can, however, lead to trade distortions caused by the way the criteria for awarding a label are determined

UNICE Eco-Label Information Day, 24 June 2002 Trade implications of eco-labelling schemes 3 II. Eco-labelling and the WTO  Controversy if rules of Agreement on Technical Barriers to Trade (TBT) or General Agreement on Tariffs and Trade (GATT) do apply for eco-labelling schemes based on a life cycle analysis  Application of WTO rules: ensure that the criteria for obtaining an eco-label are non-discriminatory and transparent and that eco- labelling schemes do not create unnecessary barriers to trade  Eco-Labelling Schemes must comply with non-discrimination principle i.e. a product with an eco-label must be treated in the same way like a product without eco-label (no different taxation!!). Products remain like products according to the traditional GATT like-product principle.

UNICE Eco-Label Information Day, 24 June 2002 Trade implications of eco-labelling schemes 4 II. Eco-labelling and the WTO Doha Development Agenda (DDA):  The ministers „instruct the Committee on Trade and Environment...to give particular attention to labelling requirements for environmental purposes.“  Work includes the identification of any need to clarify relevant WTO rules CLARIFICATION is necessary because labelling activities by developed countries increase unsatisfactory legal situation in WTO / no case law yet

UNICE Eco-Label Information Day, 24 June 2002 Trade implications of eco-labelling schemes 5 III. Potential trade distortions Eco-labelling schemes can establish non-tariff barriers to trade!  Direct discrimination Foreign companies are ignored when the eco-labelling scheme is set up Unequal access to information for domestic and foreign firms  Indirect discrimination Criteria for awarding the label are based on domestic environmental conditions and preferences without consideration of differing regional conditions Eco-labelling schemes are often biased toward domestic industry and production standards  Special problems for developing countries Limited ability to compete with technological more advanced PPMs used in developed countries Costs for certification and compliance are especially burdensome for developing countries

UNICE Eco-Label Information Day, 24 June 2002 Trade implications of eco-labelling schemes 6 IV. Possible approaches to minimise trade distortive effects  All companies (foreign and domestic) must have equal access to information on labelling programmes and procedures  Transparency and consultation during eco-labelling process  Notification of eco-labelling schemes under TBT-Agreement (including schemes based on life cycle analysis)  International harmonisation of criteria for awarding eco-labels  Standards on standard setting (ISO series)  Criteria of ecological equivalence: e.g. recognition of exporters’ compliance with their domestic environmental standards  Mutual recognition of eco-labelling schemes among WTO members  Capacity building and technical assistance for developing countries  Clarification of eco-labelling with WTO rules

UNICE Eco-Label Information Day, 24 June 2002 Trade implications of eco-labelling schemes 7 V. Conclusion Eco-labelling schemes can be crucial in solving the PPM problem provided that they meet the following criteria:  Openness  Transparency  Ecological Equivalence  No different treatment of identical products which carry an eco-label and which do not carry an eco-label