Eco-labelling: Legal and Institutional Issues

1. African Regional Consultative Meeting, Nairobi 18-20 November 2002 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

2. Definition • “ 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

3. Scope • 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 • Organic labels: specify production method without requiring proof of environmental improvement

4. 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 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’)

5. Features of Eco-labelling • 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 • Increasing trend: reflect more holistic multi-criteria and life cycle approach/assessment • Usually voluntary but may be administered by government agency • Criteria differs in terms of scope and stringency

6. Life Cycle Assessment (LCA) • 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)

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

8. Challenges in Implementation of Eco-labels • 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” • Example: forestry – impact of European furniture industry – ‘sustainably managed forests’

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

10. 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 that are entirely non-governmental (e.g. Forest Stewardship Council) • Challenge traditional distinctions between ‘private’ and ‘public’ spheres

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

12. 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.”

13. ‘Recognised Body’ • TBT Agreement does not define • 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?

14. Coverage of 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 • However: standard may “also” deal with “labelling requirements as they apply to a process or production method”.

15. Non Product Related PPMs • 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)

16. Substantive Obligations on Voluntary Eco-labels • 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

17. TBT Code of Good Practice • 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 • Non compliance of Code by voluntary NGO administered labelling schemes – limited scope for WTO censure

18. 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.” • Definition of ‘like products’ : LCA based criteria incorporating non product related PPMs?

19. 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.” • GATT/WTO practice on interpretation of term “necessary” (Art. XX (b)) relevant.

20. 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.”

21. 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…”

22. International Harmonisation • 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

23. International Harmonisation 2 • 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

24. 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.” • No equivalent provision on standards

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

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