08 Autom

ne

M y C o u r s e s e r i e s

OBJECTIVES

Part one deals with environmental requirements and market access.

It gives an overview of environment requirements and provides a

general summary of relevant work in the Committee on Trade and

Environment (CTE) and the Committee on Technical Barriers to Trade

(TBT).

Part two focuses on labelling for environmental purposes. It gives an

overview of environmental labelling; provides a general summary of

relevant work in the CTE; describes relevant disciplines in the TBT

Agreement; and explains market access issues faced by developing

countries.

WTO E-LEARNING COPYRIGHT © 13

Detailed Presentation of Environmental Requirements and Market Access, including Labelling for Environmental Purposes

2

I. ENVIRONMENTAL REQUIREMENTS AND

MARKET ACCESS

IN BRIEF

Environmental requirements and market access: preventing ‘green protectionism’

Environmental requirements are requirements adopted to achieve environmental objectives. There is a risk

that these requirements impede trade and even be used as an excuse for protectionism. The answer is not to

weaken environmental standards, but to set appropriate standards and enable exporters to meet them.

IN DETAIL

I.A. ENVIRONMENTAL REQUIREMENTS

I.A.1. WHAT ARE ENVIRONMENTAL REQUIREMENTS?

Policies adopted to achieve environmental objectives take the form of environmental requirements. They may

include bans and restrictions; product-content and product- process- requirements; product performance

requirements; packaging, waste management and recycling requirements; charges and taxes; labelling

requirements; testing, inspection and certification; amongst others.

Examples of environmental requirements...

Requirements on products or processes: Requirements specifying certain product characteristics,

performance or production methods in the pursuit of environmental objectives are often elaborated in

(mandatory) technical regulations, or in (voluntary) standards. These requirements can be product-content

requirements (e.g., a ban on use of characterizing flavours in tobacco products or on the use of fur/skin of

endangered animal species in the production of garments) or maximum residue limits (e.g., bans and

restrictions on the use of certain hazardous pesticides). They can also be minimum product performance

standards (e.g., energy efficiency requirements on electronic and electrical appliances, or maximum emissions

standards on vehicles).

Labelling requirements: Environmental-labels inform consumers and raise their awareness about the

environmental characteristics of a product. Frequently, they aim at changing both consumers' and producers'

behaviour in favour of environmentally-friendly production, products, technologies and consumption. They may

be set out as (voluntary) standards and also as (mandatory) technical regulations, and may lead to the award

of eco-labels.

Packaging and disposal requirements: These requirements aim at reducing the quantity of packaging

waste, facilitating its recovery, reuse, recycling or disposal, obliging producers and consumers to take more

direct responsibility for tackling the environmental problems they create. They are applied to alter the

3

characteristics of packaging, for instance, its recyclability, recycled content and bans on certain types of

packaging material or substances, as well as how packaging is disposed of, for instance, handling

requirements, take-back obligations and deposit-refund schemes.

I.A.2. RECENT TRENDS[1]

Proliferation and growing complexity

Consumers, producers, regulators and other stakeholders are becoming increasingly aware of environmental

and health issues, and are looking for versatile tools to address these effectively. As a result, environmental

requirements have proliferated, in particular in developed countries, as well as in some developing countries.

They are becoming more complex, aimed at fulfilling not only environmental objectives but often also other

public policy objectives, connecting to health, food safety, environmental and occupational safety concerns.

These requirements may be stringent, have broad impacts and be subject to frequent changes. They often

differ from market to market. Since they are multidimensional, involving various groups of stakeholders, they

are more difficult to harmonize across markets.

In recent years, there has been an increasing number of eco-labelling schemes relying on life cycle

assessment (LCA) in order to assess and quantify the environmental impacts of a given product throughout its

lifecycle, from production, processing, transportation, sale, use until disposal. For instance, concerns about

climate change have witnessed the emergence of new carbon footprint labelling schemes, whose objective is to

quantify the total amount of greenhouse gases emitted during the different stages in the life cycle of goods.

The growing number of carbon footprint schemes at the private but also national level over the last five years

has raised some concerns in the trade community about the potential impact of the proliferation of these

carbon footprint schemes in terms of market access.

Rise in private sector voluntary initiatives

In addition to those set out in (mandatory) technical regulations and (voluntary) standards, environmental

requirements are increasingly prevalent in so-called 'private standards', set by companies or non-governmental

organizations (NGOs). The importance of private standards is on the rise, for instance, in food and beverage,

fisheries and forestry sectors. Private standards may include more stringent specifications than those

contained in government technical regulations or standards, and are evolving fast. Although private standards

are by definition voluntary, in many cases, they may have to be met to effectively gain market access, and

become commercial imperatives for certain markets. In such cases, a clear separation between mandatory

and voluntary requirements is not clearly discerned at the level of the producer and exporter.

Increase in global supply-chain driven requirements

With a globalized production system, producers and exporters are obliged to meet specifications required by

multinational companies, including those set out in private standards. For example, there is an increase in

environmental requirements imposed by big retailers along the global supply chain. Producers, including small

and medium-sized enterprises (SMEs) have to abide by requirements set by global supply chains or risk being

phased out as input providers. For instance, in the food sector, one of the global purchasing standards is the

Good Agricultural Practice (GlobalGAP) launched by the Euro Retailer Produce Working Group, which includes

1 Based on OECD Trade Policy Studies 2005 and the UNCTAD Trade and Environment Review 2006

(WT/CTE/W/244).

4

the leading supermarkets in Europe.[2] GlobalGAP includes environment-related standards for "green coffee",

which covers issues such as waste and pollution management, recycling and re-use as well as environment and

conservation.

EXERCISES:

1. What are environmental requirements, give three examples?

2. What are the recent trends in environmental requirements?

2 GLOBALGAP is a global partnership of voluntary members, bringing together like-minded parties with the shared vision of harmonising Good Agricultural Practice (G.A.P.) world-wide. The partnership is open to any organization agreeing to the Terms of Reference committed to responding to consumer concerns on food safety, animal welfare, environmental protection and worker welfare.

5

I.B. RELEVANT WORK IN THE CTE COMMITTEE

IN BRIEF

The effect of environmental measures on market access, especially for developing countries and in particular

to least developed countries (LDCs), is one of the items of work of the Committee. In 2001, the Doha

Ministerial Declaration instructed the CTE to give particular attention to this subject.

IN DETAIL

I.B.1. CTE WORK PROGRAMME

The effect of environmental measures on market access is one of the items (Item 6) on the Committee’s work

programme established in the 1994 Marrakesh Ministerial Decision on Trade and Environment. In 2001, the

Doha Ministerial Declaration instructed the Committee to give particular attention to this subject.

Marrakesh Ministerial Decision on Trade and Environment - Item 6 - (First Part)

The effect of environmental measures on market access, especially in relation to developing countries, in

particular to the least developed among them

Doha Declaration - Paragraph 32(i) (First Part)

We instruct the Committee on Trade and Environment, in pursuing work on all items on its agenda within its

current terms of reference, to give particular attention to: (…) (i) the effect of environmental measures on

market access, especially in relation to developing countries, in particular the least developed among them (…).

I.B.2. GENERAL DISCUSSION SINCE 1995

Environmental requirements and market access is a main area of work of the CTE. It is particularly important

as it holds the key to the complementarities that exist between sound trade and environmental policy-making.

Moreover, improved market access for developing countries' products is key to the goal of achieving

sustainable development. Since the establishment of the CTE, discussions under this work item have covered

a large number of issues that aim generally at overcoming market access challenges while pursuing legitimate

environmental policy objectives.

In the early years, discussions started in the context of a number of general principles contained in the 1992

Rio Declaration on Environment and Development (e.g. the principle of common but differentiated

responsibility; the understanding that poverty is a basic cause for environmental degradation; the polluter

pays principle; and the importance of multilateral cooperation).

Further discussions highlighted a list of issues that could be useful to overcome market access challenges due

to environmental requirements: transparency; notification; early warning; impact assessment; consultation

6

and taking into account comments on draft measures; technical assistance and capacity building to assist

compliance; and coordination within exporting countries.

I.B.3. KEY ASPECTS OF THE DISCUSSIONS

WTO Member governments consider that the protection of the environment and health are legitimate policy

objectives. But they also acknowledge that measures designed to meet these objectives could hinder exports.

And they agree that sustainable development depends on improved market access for developing countries’

products. Key aspects of the CTE discussions on environmental requirements and market access are: (i)

positive potential of environmental requirements for sustainable trade; (ii) key concerns and developing

countries' specific conditions; and (iii) ways to enable compliance with environmental requirements.

Positive potential of environmental requirements for sustainable trade

The positive potential of environmental requirements for sustainable trade has been highlighted on a number

of occasions in the CTE: they are seen as capable of creating market opportunities and offering developing

countries the possibility to use their comparative advantage in exporting their products to markets where

environmental protection is an important consideration. To recall, the World Summit on Sustainable

Development (WSSD) in 2002 reiterated the need to support WTO compatible voluntary market-based

initiatives for the creation and expansion of domestic and international markets for environmentally friendly

goods. In the discussion, some Members have mentioned concrete examples where environment-related trade

measures, sometimes even in the form of bans, resulted in a positive environmental outcome. For instance,

Malaysia's export controls on unprocessed logs were levied to meet sustainable developmental objectives and had

helped to reduce the rate of deforestation. Another example is the German ban imposed on carcinogenic

Azo dyes for public health reasons, which resulted in a dangerous substance being removed more quickly.

Key concerns and developing countries' specific conditions

The fact that environmental requirements could adversely affect exports has been acknowledged on several

occasions. Principle 11 of the 1992 Rio Declaration on Environment and Development says that standards,

objectives and priorities do need to reflect the particular environmental and developmental context to which

they apply. [3] In other words, environmental standards applied in some countries could be inappropriate in

others. They could cause unwarranted economic and social cost to others, particularly developing countries, by

hindering exports. SMEs are especially vulnerable.

Developing countries face particular difficulties in adjusting to the increasing number of environmental

requirements in their export markets and some environmental measures require prohibitive compliance costs.

A study presented by India[4] in October 2000 highlighted various reasons for the vulnerability of developing

countries when environmental measures were introduced in developed countries, including inadequate access

to information and technology as well as lack of necessary skills and capital. Colombia also presented a study

on the negative market access implications of private environmental requirements.[5] One particular concern

raised by developing country Members was the difficulties encountered by their SMEs to comply with certain

3 Principle 11 says "States shall enact effective environmental legislation. Environmental standards, management objectives and priorities should reflect the environmental and development context to which they apply. Standards applied by some countries may be inappropriate and of unwarranted economic and social cost to other countries, in particular developing countries."

4 WT/CTE/W/177 (October 2000).

5 WT/CTE/W/76 (9 March 1998).

7

environmental measures. Developing country Members also expressed concerns that environmental

requirements adopted by developed countries did not take into account the country-specific natural and socio-

economic conditions of developing countries.

Enabling compliance to environmental requirements

Members consider that a balance is needed between safeguarding market access and protecting the

environment. WTO Agreements help ensure that environmental measures do not unnecessarily restrict trade.

Examples of such Agreements include the SPS Agreement — which deals with food safety and animal and plant

health — and, in particular, the TBT Agreement — which deals with technical regulations, product standards

and labelling.

Furthermore, WTO Member governments agree that there is a need to examine how environmental measures

could be designed so that they are consistent with WTO rules and inclusive, while taking into account the

capabilities of developing countries and meeting the legitimate objectives of the importing country. The

objective is not to weaken environmental standards, but to enable exporters to meet them.

Most environmental requirements are in the form of (mandatory) technical regulations or (voluntary)

standards, and some of them are based on international standards. The importance of improving the effective

participation of developing countries in international standard setting activities has been highlighted on a

number of occasions, in particular as a way of mitigating negative trade effects. Moreover, flexibility in the

application of environmental measures was seen as key, including through longer time-frames. Also, several

Members emphasized the principles of equivalence and mutual recognition. In order to enable exporters to

meet environmental requirements, technical assistance, capacity building and technology transfer, as well as

investment in domestic infrastructure were emphasized. It has also been proposed to use the Enhanced

Integrated Framework (EIF)[6] to mainstream capacity building and technical assistance to enable developing

countries to respond to environment-related challenges that impacted on trade. In this regard, Aid for Trade is

also a conduit mentioned in general but not taken up in the CTE context.

I.B.4. RECENT DISCUSSIONS

Recently, CTE discussions focused on some specific areas, such as private voluntary standards and organic

agricultural products.

Private voluntary standards

The issue of private (voluntary) standards as such was taken up for the first time in the CTE in 2009.[7] To

recall, private standards usually refer to standards set by companies or NGOs, for example, as often applied in

retail supply chains. Members, including developed and developing countries, raised concerns on: the de facto

mandatory nature of these requirements; the difficulties in keeping up with rapid proliferation of private

schemes; their effect on market access, in particular for SMEs in developing countries; the lack of

transparency of some of the schemes; and the difficulties faced by producers to participate in standards

development. The need for more transparency and harmonization in this area has generally been emphasized.

Argentina and a number of delegations also raised concerns on the non-product related processes and production

methods (npr-PPMs) content of some private standards. Some emphasized that these requirements should not

become a condition for market access, and should conform to the rules of the Code of Good Practice for the

6 Set up in 1997 in the WTO, and subsequently reviewed in 2005, the EIF is a "multi-donor programme, which supports LDCs to be more active players in the global trading system by helping them tackle supply-side constraints to trade."

7 WT/CTE/M/47 (July 2009) and WT/CTE/M/48 (November 2009).

8

Preparation, Adoption and Application of Standards under the TBT Agreement. Other concerns related to the lack

of scientific basis in standards development; insufficient data; the large variety of methodologies used; and the

need for disciplines governing the development and implementation of standards that go beyond transparency

disciplines. The European Communities and the United States have expressed caution in this debate, highlighting

the need to reflect on the right format and approach for discussions on standards prepared by private entities.

In July 2009, the WTO Secretariat organized a Workshop on Environment-related Private Standards, Certification

and Labelling Requirements. A variety of environment-related private standards, certification and labelling

schemes in the fisheries, coffee, horticulture and forestry sectors were presented. Information was provided in

areas such as standard-setting process; suitability of standards to producers; conformity assessment procedures;

distribution of costs and benefits; and relationship between government regulations and private standards. It

was explained that private standards responded greatly to the concerns of NGOs and consumer organizations, but

were also influenced by big retailers in developed countries that wanted to differentiate products. The general

issues that were discussed related to proliferation and harmonization, transparency and standard development

processes, environmental impact and effectiveness, and capacity building. Opportunities and challenges faced, in

particular by producers and exporters in developing countries, were also addressed. On transparency and

standard development processes, a recurring theme throughout the event was the recognition of the existence of

key principles and best practice guidelines available to standard setters, for example, the TBT Agreement, ISO

Guides, the FAO Code and the various ISEAL Codes.[8]

Organic agricultural products

In 2007-2008, a number of developing countries (Uganda, Kenya, India, China and Egypt) shared their national

and regional experiences in exporting organic agricultural products. Growing consumer demand for these

products could provide new market opportunities for farmers, in particular small holders, in developing countries.

The development of this sector could have positive effects not only on income generation, but also on the

conservation of natural resources and social development. While highlighting the possible contribution of organic

production to creating a win-win-win situation for trade, the environment and development, Members also raised

concerns on the difficulties faced by producers due to the proliferation of both different government regulations

and private voluntary standards, the lack of international standards, as well as the high cost of multiple

inspection, certification and accreditation requirements. The importance of providing the possibility for small

holder group certification, as well as the need for a multilateral solution on harmonization, equivalency and

mutual recognition was emphasized.[9]

EXERCISES:

3. Why are private voluntary standards in the environmental realm a growing area of concern for some

WTO Members?

4. How has the work of the CTE in the area of environmental requirements and market access helped

promote coherence between trade and environment policy making?

8 See report of the workshop in JOB(09)/136.

9 WT/CTE/M/46.

9

I.C. WORK IN OTHER RELEVANT WTO COMMITTEES

IN BRIEF

The TBT and SPS Committees provide a unique framework for work on environmental requirements through

notifications and debates at committee meetings.[10]

IN DETAIL

I.C.1. NOTIFICATIONS

WTO Members regularly notify their environmental measures to the WTO, as per the transparency provisions

contained in the TBT and SPS Agreements, amongst others. In fulfilment of the recommendation in the 1996

Report of the Committee on Trade and Environment (CTE) to the Singapore Ministerial Conference, the

Secretariat compiles and updates annually all environment-related measures that were notified to the WTO.

This environmental database (WT/CTE/EDB) also includes environment-related measures, provisions or

programmes noted in Trade Policy Reviews.

TBT notifications

The TBT Agreement covers technical regulations, standards and conformity assessment procedures applying

to agricultural and industrial goods.

Technical regulations: measures which lay down product characteristics or their related processes

and production methods, with which compliance is mandatory.

Standards: measures approved by a Recognised Body that provide, for common and repeated use,

rules, guidelines or characteristics for products or related processes and production methods, with

which compliance is voluntary.

Conformity assessment procedures: procedures used, directly or indirectly, to determine the

fulfilment of relevant requirements contained in technical regulations or standards.

One of the objectives of the TBT Agreement is to ensure that these technical regulations, standards and

conformity assessment procedures do not constitute unnecessary barriers to international trade while

recognizing the right of Members to take regulatory measures to achieve their legitimate objectives such as

the protection of animal or plant life or health, or protection of the environment.

Over the past years, the number of such notifications has steadily increased, in particular those under the TBT

Agreement. Recently, on average, around 13 per cent of all proposed regulations notified under the TBT

Agreement indicate environmental protection as the objective, covering a wide range of sectors and measures.

10 In 2006, the Secretariat prepared a note considering the work in these two committees on environment-related information which Members have notified and specific trade concerns (STCs) which they have raised (document JOB(06)263).

10

10% 9% 9% 7% 6% 5%11%

15% 12%16%

12%20%

13%17% 16% 18% 16% 19% 18% 19% 22%

35 3642

3525 25

8998

8397

67

114100

107121

155 168

238

274 270 268

Share of environment-related TBT notifications

Number of environment-related TBT notifications

Figure 1: Environment-related TBT Notifications (1991-2011)

The notified TBT environment-related measures addressed, among others, chemicals, ozone depleting

substances, volatile organic compound, waste, toxic and hazardous substances, fertilisers and pesticides, gas,

biofuels, other liquid fuels and petroleum products, electronic and electrical appliances, vehicles, vessels,

engines and motors, buildings, batteries, tyres, drugs, wood, food and agricultural products.

These measures included general environmental requirements, ban and prohibition, performance and efficiency

standards, technical or quality specifications, safety specifications, eco-design requirements, classification,

harmonization, labelling and packages requirements, handling, transportation, storage and distribution

requirements, testing, certification and other conformity assessment procedures.

The environment-related notified measures aimed at environmental protection in areas such as increased

energy/fuel efficiency, energy/resources conservation, GHG emission reduction (including meeting national

emission or renewable energy targets), pollution reduction, waste, radioactive waste, chemicals and toxic

substances management, recycling and recovery, protection of animal and plant health, biodiversity, promotion

of sustainable production and consumption, compliance with multilateral environmental agreements (e.g.

Kyoto Protocol and Montreal Protocol), and contribution to mitigation of climate change. Among the above,

measures related to energy conservation and efficiency were the most frequently notified.

11

SPS notifications

The SPS Agreement covers measures that are taken by countries to ensure the safety of foods, beverages

and foodstuffs from additives, toxins or contaminants, or for the protection of countries from the spread of

pests or diseases. It recognizes the right of Members to adopt SPS measures but stipulates that they should

follow international standards and must be based on a risk assessment, should be applied only to the extent

necessary to protect human, animal or plant life or health, and should not arbitrarily or unjustifiably

discriminate between countries where similar conditions prevail.

Article 5.7 of the SPS Agreement allows Members to take SPS measures in cases where the scientific

evidence is insufficient, provided that these measures are only provisional, and that a more objective

assessment of risk is being conducted. In general, the TBT and SPS Agreements are designed to complement

one another, although the application of these Agreements is mutually exclusive. Article 1.5 of the TBT

Agreement excludes SPS measures from the scope of the TBT Agreement. Likewise, Article 1.4 of the SPS

Agreement provides that nothing (in the SPS Agreement) shall affect rights of Members under the TBT

Agreement with respect to measures not within the scope of the SPS Agreement. So, in short: a

TBT measure cannot be an SPS measure and vice-versa. Notwithstanding such distinctions, governments

may, and indeed do, draft and implement regulations that are broad in scope, where some requirements

within the regulation are covered by the TBT Agreement and others by the SPS Agreement.

The share of environment-related SPS notifications with respect to all proposed regulations notified under the

SPS agreement has been, on average, around 8 per cent.

3% 7% 3% 6% 4% 8% 7% 9% 8%

16%12% 9% 11%

8% 8%

286 296

402 402

621 610

687

612

1298

901 849889

737

10511007

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Share of environment-related SPS notifications Total number of SPS notifications

Figure 2: Environment-related SPS Notifications (1991-2011)

12

Frequently, the SPS environment-related notifications addressed, among others, sanitary and phytosanitary

requirements for the importation of nursery stocks of forest and plant species; fruits and seeds; wild birds

and eggs; live fish, live animals and animal products; animal feed and veterinary products; fertilizers and

pesticides; toxic chemicals and bio-chemical products. Some other measures related to wood packaging

material; quarantine requirements; import risk analysis (IRA); environmental and toxicological evaluation

procedures. They aimed solely or partly at protecting animal health, plants from animal/plant pests or

diseases, and the territory from other damage from pests (e.g. protection against the outbreak of Avian

Influenza).

I.C.2. SPECIFIC TRADE CONCERNS

WTO Members regularly use the TBT and SPS committee meetings to raise specific concerns on potential

adverse trade effects, or any perceived non-compliance with the obligations of the Agreements, of other

Members' measures. These specific trade concerns (STCs) relate to existing measures or draft measures

notified to the Committees. In the case of the TBT Committee, in the period 1995-2011, 330 STCs have been

raised,[11] of which approximately 25 per cent were environment-related.[12]

0 0 0 3 3 3 3

64 5

3

108 9 9 10

124

6

1113

5

1315

20

1514

12

24

27

32

46

29

44

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Environment-related STCs Total STCs

Figure 3: Environment-related TBT STCs (1991-2011)

Most frequently, these environment-related STCs involve the following product groups: chemicals, electrical

and electronic equipment, fertilizers and other industrial goods. These include environmental concerns related

to the control of hazardous substances, emissions reduction and resource and waste management. They cover

measures such as bans and restrictions, production rules, labelling (e.g. energy efficiency labelling schemes),

11 326 STCs have been raised in the SPS Committee, around 8 per cent of which were environment-related.

12 This number may not necessarily represent the full range of TBT trade concerns that exist among Members. Many trade concerns are dealt with bilaterally, and not raised at the Committee level.

13

eco-design, fuel economy and emission standards, pollution control requirements, collection, treatment,

recycling and recovery, certification and registration, risk assessment and sustainable management

schemes.[13]

12 2 2

4 45

9

1315

18

30

Nu

mb

er o

f S

TC

s

Figure 4: Environment-related objective of TBT STCs (1991-2011)

Among the environment-related STCs, the most frequently invoked concern is to avoid unnecessary barriers to

trade. Others, for example, relate to the need for more information or clarification, including with respect to

the rationale of the measure or the use of international standards.

13 For more information, TBT STCs can be found in document G/TBT/GEN/74/*.

14

3

10

14

18 18

24

33 34

57

Nu

mb

er o

f S

TC

s

Figure 5: Type of concern of environment-related TBT STCs (1991-2011)

Environmental

Concerns

Products affected Type of measures

Control of

hazardous

substances

Chemical products Registration, risk assessment and

management, labelling obligations and

restrictions

Electrical and electronic equipment Bans on the use of certain substances,

collection, treatment, recycling and

recovery

Fertilizers Limits on the use of certain substances in

fertilizers (e.g. arsenic, cadmium, lead,

chromium and mercury etc.)

Emissions

reduction

Energy-using products such as electrical and

electronic equipment (e.g. air conditioners,

refrigerators and lamps) and other

household or office appliances

Eco-design requirements (e.g. standby

and off-mode electric power

consumption) and energy efficiency

labelling scheme

Taxis, road vehicles, passenger cars with

compression ignition engines and aircrafts

Emission standards, particle filters for

diesel engines, registration, certification

and fuel economy standards

15

Resource

management

Wood Certification for sustainable management

forests, tracing systems for sustainably

produced wood and labelling

Seal products Ban on the marketing, transit, import and

export of seal products

Organic agricultural and aquaculture

products

Production and labelling rules

Waste

management

Various industrial goods Promotion of waste reduction, reuse and

recycling, post consumption collection,

take-back obligations and substitution of

substances

Table 1: Environmental Aspects of Selected TBT STCs

EXERCISES:

5. Explain how the TBT and SPS Committees provide a framework for work on environmental requirements

and market access.

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II. LABELLING REQUIREMENTS FOR

ENVIRONMENTAL PURPOSES

II.A. INTRODUCTION

IN BRIEF

Often, environmental labels are used to differentiate environmentally friendly products and capture market

opportunities. They also serve to raise consumer environmental awareness; provide timely information on

certain environmental aspects of products and their processes and production methods; and direct

manufacturers to account for the environmental impacts of their products and production. They can

contribute to the development of a more environmentally conscious market. They can also have impacts on

the market, in particular with their recent proliferation and increasing complexity.

IN DETAIL

II.A.1. TYPES OF ENVIRONMENTAL LABELLING SCHEMES

There are different types of environmental labelling schemes, depending on their design and implementation,

for example:

Voluntary or mandatory: Most environmental labelling schemes are voluntary (e.g. environmental

labels on detergents and paper products). However, sometimes, they can be mandatory requirements

imposed by governments (e.g. energy efficiency label for home appliances).

Single or multiple sector/issue: Some labels focus on a specific product sector with multiple

criteria, looking into products' entire life cycle from their production, processing, transportation, sale,

use until their disposal (e.g. wood products, coffee and fisheries), while others focus on certain

environmental issues and may cover several product categories (e.g. organic production, recycle

material and energy efficiency).

Information or rating: Some labels provide direct information or quantitative data on products'

environmental performance, while others provide rating or select leadership based on criteria and

comparison (e.g. electronic and electrical appliances).

Self-declared or third party: Often labelling schemes require third party verification, but some

labels are in the form of self-declaration.

Government or non-governmental: Labelling schemes can be government-run or

privately-administered. There are also voluntary government-sponsored schemes. On the other hand,

a programme can be government-run, and subject to independent third-party certification. Many

governments were among the first to recognise the benefits of environmental labelling, and started

programmes that now successfully label a multitude of environmentally preferable products.

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ISO Classification

Labelling schemes can be classified based on the following International Organization for

Standardization (ISO) classification:

Type I labels are defined as voluntary, multiple-criteria-based programmes, administered by

third parties. Under these programmes, a license is awarded which authorises the use of an

environmental label intended to indicate the environmental preferability of a product, based

on life cycle considerations. These programmes provide a license to manufacturers to use a

certification mark, owned by an independent body, on their products.

Type II labels are self-declared environmental claims. Under the ISO’s definition, these are

environmental claims that are made, without independent third-party certification, by

manufacturers, importers, distributors, retailers, or anyone else likely to benefit from such a

claim.

Type III labels can be generally described as declarations of quantified environmental data

relating to a product.

Eco-labels

Eco-labels are specific environmental labelling schemes that are based on life-cycle analysis[14] or

“cradle-to-grave” approach (raw material, production, consumption and disposal). [15] The purpose is

to help consumers identify products that are environmentally preferable to other products in the same

category. Examples of eco-labelling labelling schemes include: the German "Blue Angel" (covers

different product groups e.g., heating systems, copying machines and paper products); the Japanese

"Eco Mark" (covering around 69 product categories, including stationary products - ballpoint and marker

pens, mechanical pencils, correction products and notebooks); and the Danish "Nordic Swan" label (e.g.

on toilet paper, paper towels and detergents).

Recently, eco-labelling schemes have been developed in many developing countries, such as the

Brazilian eco-label "Qualidade Ambiental"; China's "Environmental Labelling Scheme", the

Chinese Taipei's eco-label "Green Mark"; the Indian "Ecomark"; the "Green Choice Philippines"; and

the "Korea Eco-Label".

Figure 1: Examples of Eco-labelling Schemes

14 "Life-cycle analysis" looks at environmental impacts of a product throughout all stages, beginning from

extraction of raw materials used to produce the product, to production, transportation and distribution, sale,

use, repair and maintenance, disposal, recycling and end of life.

15 Introduction to Ecolabelling, Global Ecolabelling Network, 2004.

18

Note: Differences between environmental labelling and eco-labelling

The term eco-labelling is often misused to refer to all labels relating to the environment. In reality,

environmental labelling refers to a large and composite set of labels, declarations and claims of

environmental performance, while eco-labelling is a sub-group of environmental labelling schemes relying

on specific criteria based on life cycle considerations and awarded by an independent third party.

II.A.2. IMPACTS OF ENVIRONMENTAL LABELLING REQUIREMENTS[16]

The effects of environmental labels on producers, consumer behaviour, markets and the environment are

closely linked: producer and consumer behaviour will, to a certain extent, affect markets, and may in turn lead

to effects on the environment.

Impacts on producers

More and more companies are making improvements to their environmental performance as they strive to

meet consumers’ increased demand for environmentally preferable products. This also has an influence on

suppliers since manufacturers are increasingly demanding proof of their products’ environmental soundness in

order to prevent future liability or negative publicity. Environmental labels may serve as a communication tool,

allowing for "environmental benchmarking".[17] The criteria of an environmental label may help orient

companies’ R&D activities and internal requirements.

Impacts on consumers

Some studies reveal that consumers are willing to pay more for eco-labelled products. The effects depend on

consumers’ levels of education and environmental involvement, the media and the type of additional

information available. In general, environmental labels seem to raise consumers’ awareness of environmental

issues and change their purchasing behaviour while leading manufacturers to increasingly produce

environmentally preferable goods.

Impacts on environmental protection

Environmental labels can contribute to the development of a more environmentally conscious market (and

market behaviour) and help set standards for product development and manufacturing, directives and support

programmes, and contribute to a systematic approach in decision-making (e.g. "life-cycle analysis"). They can

also have a multiplier effect (raising public awareness for environmentally preferable products beyond the

labelled product group), and make the public aware of the environmental impacts of consumption, and can

therefore be employed to influence national policies.

The environmental effectiveness of environmental labelling requirements in terms of measuring improvements

to the environment is difficult to evaluate — owing mainly to difficulties in isolating environmental benefits

achieved through eco-labelling from environmental benefits attained by other environmental measures.

16 Effects of Eco-labelling Schemes: Compilation of Recent Studies, OECD, 2005.

17 "Environmental benchmarking" involves an actor (company, government, organization, etc.) measuring its

environmental performance for the purpose of self-assessment of progress at a future date, or assessment

against other actors.

19

Impacts on the market

The impact of environmental-labelling requirements on the market is directly linked to the general level of

environmental awareness and, consequently, the consumer demand for green products. Environmental

labelling schemes may have greater impact when they become a requirement imposed by retailers or when

they are used as instruments for “green” public procurement and institutional purchasing. However, empirical

evidence assessing trade effects of environmental-labelling is limited, and may depend inter alia on the design

of the measure, market structure in the trading countries and products covered.

II.A.3. RECENT TRENDS IN ENVIRONMENTAL LABELS

Proliferation

The use of labelling requirements by governments, industry and non-governmental organizations for

environmental purposes is increasing. The reason can be found in growing global concern for environmental

protection on the part of governments, businesses and the public. Environmental labelling schemes are

increasingly becoming an integral part of a government “environmental toolbox”. Moreover, as businesses

recognise that environmental concerns may be translated into a market advantage, various environmental

declarations/claims/labels (e.g. natural, organic, recyclable, eco-friendly, low energy and recycled content)

have emerged on products and services. These labels are common in the marketplace and become “price of

entry” for competition. However, the proliferation of labelling schemes could confuse consumers (i.e. prevent

them from being able to recognize or trust any particular label) and could make it difficult for exporters to

meet many different criteria and requirements.

Competing schemes

There are in essence two markets in which labelling schemes compete - the market for the label and the

market for the product itself. The market for the label includes not only competition between programmes that

make the same claim, but also competition between and among programmes making different claims for the

same product. For instance, a farm-raised fish that could qualify for one of several competing labels indicating

that it was produced under environmentally friendly conditions, could also qualify for an organic label, a fair

trade label, a country-of-origin label, or a label indicating freshness or making health claims.

Increase in complexity

The growing complexity and diversity of environmental labelling schemes raise difficulties for developing

countries, and particularly SMEs in export markets. Increasingly, environmental labelling requirements tend to

be based on "life-cycle analysis", i.e. the consideration of the environmental effects of a product from its

production to its final disposal.[18] In practice, life-cycle analysis is not easy to conduct. Frequently, criteria

are related not only to environmental issues but other sustainability aspects of the process of production or of

the product itself.

18 See also footnote 14, above.

20

EXERCISES:

6. What are eco-labels?

7. What are the potential impacts of environmental labelling requirements on environmental protection?

21

II.B. NON-PRODUCT RELATED PROCESS AND PRODUCTION

METHODS

The CTE has discussed extensively the question of whether eco-labelling based on life-cycle analysis or non-

product related process and production methods (nprPPMs) were covered by the TBT Agreement. Labelling

requirements for environmental purposes can cover product-related PPMs and non-product-related PPMs.

Product-related PPMs - the use of a different production method (e.g. no chlorine) may be visible in

the final product (paper not bleached), so it is a PMM that is related to the characteristics of the final

product.

Non-product related PPMs - the use of a different production method (e.g. filters to reduce

pollution) may not be visible in the final product, so it is a PMM that is not related to the characteristics

of the final product.

Since eco-labels were often based on a mixture of criteria relating to product and performance characteristics,

product-related and non product-related PPMs, some Members were of the view that it would not be practical

to separate the coverage under WTO provisions of eco-labelled products according to the nature of the criteria

used, and that all criteria involved in granting an eco-label should be covered by WTO disciplines. According to

some Members, the TBT Agreement provided sufficient flexibility to permit nprPPM-based eco-labelling to be

used, subject to appropriate trade disciplines. However, several other Members argued that the

TBT Agreement did not cover requirements based on nprPPMs. In their view, accepting nprPPMs and life-cycle

analysis under the TBT Agreement would permit one country to impose its environmental priorities on another

since these schemes reflected exclusively the environmental preferences of the importing country. There was

an objection to any attempt through CTE work on eco-labelling to extend the scope of the TBT Agreement to

permit the use of requirements based on nprPPMs.[19]

EXERCISES:

8. Give an example of a product related PPM and an nprPPMs.

19 WT/CTE/1 (November 1996).

22

II.C. CTE'S WORK ON ENVIRONMENTAL LABELLING

IN BRIEF

Labelling requirements for environmental purposes is one of the subjects assigned to the CTE. It is part of

item (3b) of the 1994 Marrakesh Ministerial Decision on Trade and Environment on the Committee’s work

programme in which the Committee is assigned to consider the relationship between the provisions of the

WTO’s Agreements and the requirements governments make for products in order to protect the

environment. In 2001, the Doha Ministerial Conference made labelling requirements for environmental

purposes an issue of special focus for the CTE.

IN DETAIL

Marrakesh Ministerial Decision on Trade and Environment - Item 3(b)

The relationship between the provisions of the multilateral trading system and requirements for

environmental purposes relating to products, such as standards and technical regulations, and

packaging, labelling and recycling requirements

Doha Declaration - Paragraph 32(iii)

We instruct the Committee on Trade and Environment, in pursuing work on all items on its agenda

within its current terms of reference, to give particular attention to: labelling requirements for

environmental purposes.

II.C.1. CTE DISCUSSIONS

Environmental labelling schemes are complex, causing concerns about developing countries’ and small

businesses’ ability to export. How do you use labelling to inform consumers about environmental protection

without jeopardizing these weaker players? Opinions are divided.

Effective policy tools

Members have debated the possible trade effects of eco-labelling schemes on a number of occasions. Some

Members believed these schemes are effective policy tools to encourage the use of environmentally sound

products and services; and, that it would be difficult to imagine a less trade restrictive alternative, as

eco-labelling schemes are often voluntary.

Negative market access effects

However, other Members reported that negative market access effects were real and that the environmental

efficiency and effectiveness of eco-labelling schemes had yet to be fully determined. A number of developing

countries also reported difficulties in complying with requirements based on nprPPMs. These problems were

particularly acute for SMEs, because e.g. of difficulties in obtaining and adapting to the required technology.

They argued that this is particularly the case when label criteria are determined through consultations only with

interested parties at the national level. For example, a common complaint by the users of eco-labels has been

that eco-labelling criteria tend to focus on local concerns and do not address the views of foreign suppliers, nor

23

the specific environmental situation in the countries of these suppliers. For instance, an eco-label developed in

a country with a serious air pollution problem may put the emphasis on air pollution control measures, whereas

the main environmental problem in the foreign country could have to do with water and not air. Concerns

have been also raised about the lack of transparency, potential for discrimination, proliferation, growing

complexity and diversity of environmental labelling schemes. It has also been noted that environmental

labelling schemes could be misused for the protection of domestic markets.

Developing countries concerns

Several developing country Members reported that developing countries were severely affected by

environmental requirements such as eco-labelling schemes. Some of the problems faced by developing

countries resulted from the multiplicity and growing complexity of eco-labelling schemes in developed

countries, their differing criteria, the increased costs in complying with eco-labels and the need for greater

transparency. One of the main concerns was that eco-labelling criteria did not take into account the conditions

of individual developing countries. These schemes often necessitated the acceptance of inappropriate criteria,

mainly as a result of a lack of participation of all interested countries in their formulation. This is especially the

case, they claimed, with labelling schemes based on life-cycle analysis and the use of nprPPM criteria. They

considered that these requirements could create difficulties for developing countries, and particularly SMEs in

export markets.[20] They expressed concern that their SMEs lacked the technical expertise to adhere to such

schemes. They argued that compliance costs and lack of capacity of developing country industries, particularly

SMEs, should be taken into account in designing eco-labelling criteria.

Technical assistance and capacity building

Developing country Members urged developed country Members to provide them with the necessary technical

assistance and capacity building to improve their environmental performance and their market access. It was

necessary to ensure the effective participation of developing countries, sufficient technology transfer, and

credit lines for developing country producers. The "principle of common but differentiated responsibility" was

recalled in this context and the idea that developing countries should be given longer periods to phase-in

environmental standards was mentioned. Another idea was to establish partnerships in order to adapt to these

eco-labels, especially in terms of compliance costs.

Adequate WTO disciplines

Most Members were also of the view that existing WTO disciplines were adequate to deal with the issue of

environmental labelling, including specific trade concerns (STCs) that could arise. In their view, no compelling

argument had been made for the need for a common understanding or guidance to be negotiated. Nor was it

clear that further work on this issue needed to include the clarification of existing rules. The TBT and SPS

Agreements, it has been claimed, had created the appropriate balance of rights and obligations for both

mandatory and voluntary labelling programmes.[21]

20 For further information, see document WT/CTE/W/150, 29 June 2000, "Information Relevant to the Consideration of the Market Access Effects of Eco-Labelling Schemes", Note by the Secretariat.

21 WT/CTE/8 (July 2003).

24

National experience sharing

Several Members have shared their national experience in developing and implementing eco-labelling schemes.

For instance, Brazil presented its voluntary eco-labelling programmes in the leather and forestry sectors, which

aimed to encourage Brazilian consumer awareness, and ensure the competitiveness of Brazilian forestry and

leather and footwear products in the international market. Japan explained the development process of its

"Eco-mark" programme, which allowed for public review and participation by industry, consumers, and

academia. India reported mixed experience with the introduction of an eco-label called "Indian Eco Mark".

Iceland presented a report of the Working Group to the Nordic Council of Ministers on an eco-labelling scheme,

which provided fishing communities with market incentives to support responsible and sustainable fisheries

management. Some other Members explained the difficulties they had in meeting the requirements of eco-

labels in general. For instance, Colombia presented evidence of reduced market access due to eco-labelling

schemes in the bananas, flowers and textiles sector. This exchange of national experience has illustrated the

variety of approaches that have been adopted on eco-labelling by WTO Members and highlighted the perceived

environmental benefits and cost effectiveness of the different approaches. Members generally encouraged

further experience sharing on eco-labelling in order to enhance an understanding of the various approaches

used.

II.C.2. RECENT WORK IN THE CTE

Recent CTE work on environmental labelling touch upon the following areas: energy efficiency labelling

schemes and carbon labelling schemes.

Energy efficiency labelling schemes

Recent CTE work on labelling requirements for environmental purposes has focused on national experience

sharing on energy efficiency labelling schemes. For instance, in 2007, the United States gave a presentation

on the US “Energy Star” energy efficiency programme, a voluntary performance based labelling scheme

covering more than 50 product categories. This self-certification scheme was created with the objectives of

reducing greenhouse gas emissions and to enable consumers to better identify and choose products with

enhanced energy efficiency. There is a demand for these products in the market, since energy efficient

appliances, equipment, windows and doors, for example, reduce consumers' energy bills. Information was

provided on how the relevant requirements are developed including guiding principles and involving

stakeholder consultations; how the label is used inside and outside the US; how the integrity of the label can

be protected; and how coordination efforts have been made with other WTO Members on harmonization of

specifications and testing procedures. In 2008, Australia informed the CTE of its national experience on

minimum energy performance standards and mandatory labelling requirements that had led to an increase in

sales of energy efficient appliances in Australia. In September 2010, Chile shared its national experience with

public and private sector collaboration in developing labelling schemes for energy efficiency, among others.[22]

Carbon labelling schemes

Concern over climate change has stimulated interest in estimating the total amount of greenhouse gases

(GHG) emitted in the provision of goods and services. Carbon labelling schemes and their related standards

intend to reflect the total amount of GHGs emitted throughout the complete “life cycle” of goods and services

— i.e. including raw material extraction, manufacturing, processing, transportation, sale, use and disposal.

These schemes variously permit comparison of carbon footprint values between different products, between

22 WT/CTE/17.

25

the same product from different producers, and between the same product from the same producer in different

locations. In 2009-2010, a number of delegations mainly from the Southern Hemisphere (e.g. Argentina,

Australia, Kenya, New Zealand, Colombia and Uruguay) raised concerns over the recent proliferation of

unilateral voluntary carbon footprint labelling schemes. Some countries believed that these schemes often did

not reflect the entire life cycle of a product by only focusing on transportation, and generally lacked

consistency. Concerns were also raised on challenges related to data collection and high costs, the

effectiveness of these schemes, as well as their possible trade impacts.

It was proposed that the CTE should study various initiatives being developed at the international and national

levels (both by governments and private bodies) and assess their trade impacts, effectiveness and

environmental benefits. In this respect, an Information Exchange session was organized in February 2010.[23]

Following this session, some Members, including Chile, the Republic of Korea and New Zealand, shared their

national experiences on the development of new carbon footprint and labelling schemes.[24]

EXERCISES:

9. What are the concerns expressed by some WTO Members with regard to carbon labelling schemes? How

do these concerns differ from concerns that have been raised with eco-labelling schemes?

23 WT/CTE/M/49/Add.1.

24 WT/CTE/18.

26

II.D. ENVIRONMENTAL LABELLING AND THE TBT

AGREEMENT

IN BRIEF

Most Members believe that existing disciplines on technical barriers to trade are adequate to deal with

environmental labelling, and that the TBT Agreement has created the appropriate balance of rights and

obligations for both mandatory and voluntary labelling programmes. For voluntary environmental labelling

schemes, the TBT Agreement contains a “Code of Good Practice for the Preparation, Adoption and Application

of Standards”. Agencies and organizations that develop labelling requirements are encouraged to accept this

Code.

IN DETAIL

II.D.1. TBT COMMITTEE'S WORK ON ENVIRONMENTAL LABELLING

REQUIREMENTS

Notifications

A number of environmental labelling measures have been notified to the TBT Committee by WTO Members in

compliance with their transparency obligations. These labelling requirements relate to environmental issues

such as GMOs, energy efficiency, emissions reduction, toxic and hazardous substances, waste management,

natural resources conservation and organic products.

15%

34%

13%21%

13%19% 19% 18% 16%

26% 23%31%

15

23

15

21

14

23

30 30

39

71

61

83

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Percentage of environment-related notifications related to labelling

Number of environmental labelling TBT notifications

Figure 6: Environmental Labelling TBT Notifications (2000 – 2011)

27

Specific trade concerns

Moreover, environmental labelling-related STCs are frequently raised in the TBT Committee. The concerns,

ranging from seeking further information to challenging the legitimacy of the measures, are often resolved

through discussions at Committee meetings.

2 2

1

5

1

2

1

4

3

2 2

63

1

5

6

3

4

11

6 6

1

7

4

12 12 12

10

14

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Number of STCs related to environmental labelling

Number of STCs related to labelling

Figure 7: Environmental labelling STCs raised in the TBT Committee (1995-2011)

3

10

14

18 18

24

3334

Nu

mb

er o

f S

TC

s

Figure 8: Concerns over environmental labelling STCs raised in the TBT Committee (1995-2011)

28

II.D.2. TBT DISCIPLINES

The TBT Agreement seeks to ensure that product specifications, whether mandatory or voluntary (known as

"technical regulations" and "standards"), as well as procedures to assess compliance with those specifications

(known as "conformity assessment procedures"), do not create unnecessary obstacles to trade. In its

Preamble, the TBT Agreement recognizes the right of countries to adopt such measures at the level which they

consider appropriate, and recognizes in Article 2.2 the protection of human, animal or plant life or health, and

the protection of the environment as being legitimate objectives for countries to pursue. The Agreement calls

for non-discrimination and the avoidance of unnecessary trade barriers in the preparation, adoption and

application of standards, technical regulations and conformity assessment procedures. It also encourages

Members to harmonize these specifications with international standards. Transparency through notifications

and the establishment of national enquiry points is a central feature of the Agreement.

Most Members are of the view that existing WTO disciplines are adequate to deal with the issue of

environmental labelling. For these Members, the TBT Agreement has created the appropriate balance of rights

and obligations for both mandatory and voluntary labelling programmes.

II.D.3. TRANSPARENCY AND DEVELOPING COUNTRIES' PARTICIPATION

The importance of transparency in the development and implementation of eco-labels has been reiterated on a

number of occasions. Information on regulations has to be properly disseminated for foreign producers not to

be at a disadvantage and not to suffer unnecessary losses. The benefits that have been highlighted include:

reduction of the risk that environmental criteria in eco-labelling schemes only reflect national

considerations and timely reflection of different environmental approaches;

ensuring that foreign producers or countries with significant trade interests in a labelled product have

both timely and effective input throughout the entire eco-labelling process;

avoidance of negative impact on market access, including unnecessary discrimination;

increase of the legitimacy of such schemes; and

promotion of the understanding of eco-labelling schemes.

Members generally agree that participation of all relevant stakeholders in developing and implementing

eco-labelling scheme is crucial to reduce the risk of a negative impact on market access. The participation of

developing countries in particular needs to be improved so as to ensure that their interests are taken into

account. The existence of multiple schemes and constantly changing criteria and the lack of capacity have

made developing countries' participation more difficult. Developing countries tend to be standard-takers rather

than standard-setters and it has been pointed out that international standards are frequently skewed towards

developed country interests. Information from international standards setting organizations has been shared

in the TBT Committee, from instance from ISO on its efforts to improve developing countries' participation in

standards development.

29

TBT CODE OF GOOD PRACTICE FOR THE PREPARATION, ADOPTION AND

APPLICATION OF STANDARDS

With respect to voluntary environmental labelling schemes, the TBT Agreement's Code of Good Practice for the

Preparation, Adoption and Application of Standards (Annex 3 of the TBT Agreement) is important, and acceptance

of this Code by the bodies developing labelling requirements is encouraged. The Code contains similar disciplines

as the main TBT Agreement itself: non-discrimination, avoiding unnecessary barriers to trade, harmonization, and

transparency. According to Article 4 of the TBT Agreement, Members are required to ensure that their central

government standardizing bodies adhere to the Code, and are to take reasonable measures for ensuring that

other standardizing bodies in their territories adhere to the Code. Members generally agreed on the desirability of

standardizing bodies preparing eco-labelling schemes to adhere to the TBT Code of Good Practice, as this would

help address trade concerns, while maintaining an environmentally-credible eco-labelling programme.

Moreover, it has been recalled that the TBT Committee's Decision on the "Principles for the Development of

International Standards" provided useful guidance.[25] This decision contains principles for the development of

international standards, including environmental labelling standards. These are: transparency, inclusiveness or

openness (that all stakeholders be involved in the development of the standard), impartiality and consensus,

effectiveness and relevance, coherence, and, wherever possible, responsiveness to the needs and interests of

developing countries.

II.D.4. HARMONIZATION, MUTUAL RECOGNITION AND EQUIVALENCE

Given the growing number of eco-labelling schemes, the importance of harmonization or equivalence among

standards as well as mutual recognition of conformity assessment results was discussed on several occasions.

The importance of regional harmonization of environmental requirements was also mentioned. Harmonization

could help avoid trade and market distortions or consumers' confusion. Several Members repeatedly insisted on

the importance of equivalence and mutual recognition in order to take into account different approaches and

circumstances of Members and facilitate trade. It was indicated that a more flexible use of equivalence and

mutual recognition was important to developing country exporters, particularly SMEs. For developing countries,

the recognition of the equivalence of their own labelling/certification systems was an area of particular concern; it

was important to concentrate on assisting developing countries to design schemes that supported environmental

objectives within their own domestic context. Some countries also noted that equivalence could be complex to

implement in particular in environmental areas where life-cycle analysis was applied to different eco-systems.

II.D.5. DISCUSSIONS IN DIFERENT COMMITTEES

Since 1995, discussion on eco-labelling has been taking place in parallel both in the CTE and the

TBT Committee. Some Members preferred discussing eco-labelling in the CTE, believing that the subject was

mentioned explicitly in the CTE's work programme and that the issues it raised went beyond the mandate of

the TBT Committee. With the DDA mandating the CTE to give particular attention to labelling requirements for

environmental purposes, some Members were of the view that the discussion in the CTE could then be used as

an input to the debate in the TBT Committee. On the other hand, some Members favoured discussions on the

impact of eco-labelling to take place in the TBT Committee. They argued that the TBT Committee was better

suited for the task of deliberating WTO rules vis-à-vis labelling since it was already discussing labelling in

general, including in the context of specific trade concerns (STCs) on environmental labelling. They were of

25 G/TBT/1/Rev.10.

30

the view that it would be unwise for the CTE either to pre-empt or to duplicate such work and more preferable

to consider the results of the work carried out in the TBT Committee before taking a decision on the course of

action for the CTE.

II.E. MARKET ACCESS ISSUES FACED BY DEVELOPING

COUNTRIES

IN BRIEF

Developing-country producers, in particular the SMEs, may find it challenging to meet environmental

requirements in export markets. They may find it difficult to make the needed investments. In addition,

there can be lack of infrastructure, capital and skills, and insufficient access to information and technology.

Developing-country responses to environmental requirements vary, ranging from a firefighting approach to a

holistic approach to harness the sustainable development benefits. A number of activities, including

improving information flows, technical assistance and capacity building, have been carried out both at the

national and international level to ease the challenges faced by developing countries.

IN DETAIL

II.E.1. BACKGROUND[26]

The extent to which a country is affected by environmental requirements in export markets depends on the

degree of diversification of its exports (i.e. whether or not its total exports are concentrated in products that

are subject to environmental requirements in major export markets). Often, developing countries' exports are

concentrated in a small number of products and sectors (e.g. textiles and clothing, leather and leather

products, footwear, timber, wooden furniture and paper, food and fishery products) in which environmental

requirements apply. Limited diversification also makes these countries more affected by changes in

requirements. Moreover, often large shares of their exports are low value-added products deriving from

natural resource intensive industries that compete on the basis of price in international markets.

In developing countries, SMEs often account for a significant proportion of exporters but export only a small

share of their total output. Compared to large firms, making adjustments to environmental requirements is

generally more difficult for SMEs. Investments required to comply with some environmental standards and

regulations, such as installations for recycling industrial waste or waste water treatment, may not be

economical on a small scale. These problems are exacerbated in the case of SMEs that are often family-run,

located in urban areas with deficient infrastructure, working with obsolete technologies, with a weak market

and financial position and little scope for improvement.

The relatively weak domestic environmental legislation and demand for environmentally-friendly products in

developing countries, does not necessarily provide developing country producers with sufficient incentives to

26 Document WT/CTE/W/26.

31

make the investments needed for changes in production methods, and makes it more challenging for them to

comply with stringent environmental requirements in developed country markets.

New market opportunities

There is growing demand in developed countries for environmentally preferable products. For instance, the

demand for organic agricultural products has been growing faster than overall food products over the past two

decades. This presents promising export opportunities for producers and exporters of organic products in

developing countries. In addition to income generation, organic agriculture also has the potential to offer a

range of local and national sustainable development opportunities.

II.E.2. MAIN CHALLENGES

Lack of information

Disseminating information on environmental requirements to domestic industry in a timely manner requires

effective communication networks, and it could be a challenge, in particular for LDCs and for SMEs in

developing countries. Information disseminated on draft regulations through the WTO, including through the

internet, facilitates developing countries' access to relevant information. This early awareness may avoid

situations in which exporting country governments or industries may have insufficient time to respond to the

requirements before their exports are affected.

Lack of capacity and resources

Some developing country producers may not have the needed knowledge to comply with environmental

requirements. This is particularly the case when changes in processes and production methods are required,

and the know-how is lacking due to insufficient prior research. In some cases, exporters, in particular SMEs,

may not be able to understand fully the details of the requirements due to technical complexity. Often, they

lack the capital to invest in the new processes and production methods (e.g. pollution control installation,

specific machinery or chemical agents). Difficulties may also arise due to the lack of substitution products that

are sometimes linked to technologies held exclusively by a company or are simply too expensive and not

readily available to developing-country producers, in particular SMEs.

Proliferation of heterogeneous requirements

One of the main challenges for developing country exporters is the need to both keep up with changing

requirements and deal with divergent measures in different markets. The associated costs include the

expenditure on information and conformity assessment, as well as the loss of economies of scale. Concerns

can be heard regarding requirements that assume "one size fits all" and therefore do not take into account the

special circumstances of certain developing countries. Possible solutions can be to develop relevant

international standards or to negotiate equivalence agreements.

Costs of conformity assessment

In many developing countries, local certification bodies are not recognized or accredited by the importing

countries' authorities. In some cases, there may be a lack of supporting infrastructure such as laboratories,

metrology, data and technologies. For example, importers may fix a very low limit on residues that has to be

measured by sophisticated laboratory equipment operated by highly qualified technicians. This leaves

exporters with no choice but to pay the high cost of using laboratories and certifying bodies recognized by, and

usually based in, importing countries. The situation can be particularly difficult for SMEs who need to provide

32

“proof of compliance” with diverse requirements in different markets. Although mutual recognition agreements

(MRAs) could provide a solution to multiple certifications, their use has generally been limited, since the

conclusion of MRAs tend to be complex and time-consuming.

II.E.3. DEVELOPING-COUNTRY RESPONSES[27]

Developing-country responses to environmental requirements vary. It depends, for instance, on the

characteristics of the industry, producers and countries involved. More advanced developing countries tend to

attract subcontractors, subsidiaries and branches of large companies from developed countries, and therefore

tend to be better informed of, or prepared for new requirements. Many of the large producers may be partly

or wholly owned by companies based in developed countries, and therefore be able to obtain the needed

knowledge and capital to adapt to new processes and production methods. On the other hand, producers in

LDCs and locally owned SMEs may be less able to adapt to new environmental requirements in export markets.

A holistic approach

Some developing countries address environmental requirements in a holistic way, attempting to promote

reconciliation at a high level of environmental protection and stronger growth in exports. The impetus appears to be

coming from a desire to promote policy coherence and regulatory reform to make government regulations more

efficient and trade-friendly. For instance, proactive policies of this kind can be observed in China, the Philippines and

Thailand on their adjustment strategies to new electronic electrical equipment (EEE) environmental requirements in

the global markets and their need to address problems related to the growing domestically generated EEE

waste.[28] Actions include information-sharing; better understanding on environmental requirements in key export

markets; participation in standard-setting consultations where there are significant implications for exporters;

coordinating efforts to assess implications of new requirements; raising general public's awareness on

environmental and health issues; improving infrastructure for waste management; developing an appropriate

legislative framework and enforcing environmental regulations; collaboration between government and private

sector stakeholders; training and strengthened research; and enhancing SMEs' capabilities to adopt environmental

management systems.[29]

Improving information flows

On improving information flows to key actors at the national level, some countries operate an early warning system

aimed at helping exporters to anticipate new requirements including environmental ones(e.g. the system of the

Brazil's national standards institute INMETRO).[30] Information provided can cover areas such as requirements set

out in environmental measures; market opportunities offered by the measures; and the most effective ways for

producers to adjust to the measures. Some other vehicles for disseminating information can be holding workshops

and seminars, sending information missions or undertaking longer-term outreaching projects to exporters. Such

27 Document WT/CTE/W/244.

28 Environmental Requirements and Market Access, OECD Trade Policy Studies, OECD, 2005.

29 Trade and Environment Review 2006, UNCTAD, 2006. Relevant discussions have taken place in the context

of the "UNCTAD Consultative Task Force on Environmental Requirements and Market Access for Developing

Countries" (CTF).

30 More information on TBT national enquiry points is available in the TBT Information management System.

33

"outreach" activities with direct interaction with producers and exporters provides an effective means of transferring

information and knowledge.[31]

I.B.4. ACTIVITIES TO EASE DEVELOPING COUNTRIES' CHALLENGES[32]

A number of activities could usefully ease developing countries' market-access challenges as a result of

environmental requirements.

Procedures for the preparation, implementation and review of environmental requirements

Environmental requirements, if well designed and implemented, can minimize their trade impacts, create new

export opportunities for developing countries, while improving environmental performance. In this respect, the

importance of inclusiveness and transparency to facilitate participation of developing country in stakeholder

consultations and ex-ante assessments has been highlighted. The usefulness of periodic reviews to avoid

regulations and standards becoming obsolete has also been underlined.

Information and communication

At the multilateral level, the WTO's TBT and SPS Agreements provide disciplines on transparency to improve

information flow. WTO Members are obliged to notify draft regulations and conformity assessment procedures,

including environmental requirements, and to provide opportunities for comments and consultations.

Capacity building and technical assistance

There is a substantial role of targeted capacity-building initiatives from bilateral and multilateral donors to

assist developing countries to overcome challenges regarding environmental requirements. Capacity building

may cover a broad range of activities aimed at improving a country's human, scientific, technological,

organizational and institutional capacities and resources. Although these initiatives may not be able to address

short-term problems of market access, in the long run they can increase the ability of exporters and their

governments to anticipate and react positively to new environmental requirements. Capacity building

initiatives are also carried out by Multilateral Environmental Agreements (MEAs). For example, the Montreal

Protocol's mechanism provides financial and technical assistance, including technology transfer, to reduce the

cost for developing countries of measures to control emissions of ozone-depleting substances. There are also

private organization initiatives. For instance, the Marine Stewardship Council assists developing countries in

sustainable managed fishery. For example, on organic agriculture, at the multilateral level, the International

Task Force on Harmonization and Equivalence in Organic Agriculture was created by the International

Federation of Organic Agricultural Movements, the Food and Agriculture Organization (FAO) and the UNEP-

UNCTAD Capacity Building Task Force on Trade, Environment and Development provide capacity building

activities.

31 The International Trade Centre (ITC) is involved in several environment-related projects in order to assist

developing country exporters in exploring environmental market opportunities.

32 Document WT/CTE/W/244.

34

EXERCISES:

10. What are the main challenges faced by developing countries producers in complying with environmental

requirements in export markets?

11. What can developing countries do to address new environmental requirements in the global markets in a

proactive way?

12. What can be done in the preparation, implementation and review of environmental requirements to ease

the challenges faced by developing countries?

13. What is the view of most WTO Members regarding the TBT disciplines dealing with environmental

labelling?

35

III. SUMMARY

ENVIRONMENTAL REQUIREMENTS AND MARKET ACCESS

Introduction

Environmental requirements are requirements adopted to achieve environmental objectives. Recently,

consumers, producers, regulators and stakeholders are becoming increasingly aware of environmental and

health problems, and are looking for versatile tools to address them effectively. As a result, in particular in

developed countries, environmental requirements are becoming increasingly complex, aimed at fulfilling not

only environmental objectives but often also other public policy objectives.

Developing country exporters, in particular SMEs, may face challenges to implement environmental

requirements, for instance due to the proliferation of heterogeneous requirements, resources restraints, the

lack of information and capacity, as well as costly conformity assessment procedures. Approaches such as

early warning, improved information flow, targeted capacity-building initiatives are undertaken by

government and non-governmental agencies at the national and international levels to respond to these

challenges.

There is a general view that environmental requirements, if well designed and implemented, can create new

export opportunities for developing countries while improving the environmental performance of affected

industries. Needs have been highlighted, including inclusiveness and transparency, facilitating participation

of developing country representatives in stakeholder consultations and ex-ante assessments; the usefulness

of periodic reviews to avoid regulations and standards becoming obsolete or out of date; and delays in

implementation to address difficulties faced by developing countries.

CTE discussions

The effects of environmental measures on market access is an important subject in the work of the CTE

(DMD Paragraph 32 (i)). The discussion in the CTE has highlighted a list of issues that could be useful to

overcome market access challenges: transparency, notification (early warning), consultation, impact

assessment, taking into account comments while a measure is being prepared, technical assistance and

capacity building to assist the implementation of environmental requirements, and coordination within

exporting countries.

Various views have been expressed among WTO Members, including the following:

WTO Member governments consider that the protection of the environment and health are legitimate

policy objectives. But they also acknowledge that measures designed to meet these objectives could

hinder exports. The answer is not to weaken environmental standards, but to enable exporters to

meet them.

WTO Agreements (e.g. TBT and SPS Agreements) have enough scope to ensure that environmental

measures do not unduly restrict exports. A balance is needed between safeguarding market access

and protecting the environment. There is a need to examine how environmental measures could be

designed so that they are: consistent with WTO rules; inclusive; take into account capabilities of

developing countries; and meet the legitimate objectives of the importing country.

Environmental standards, objectives and priorities need to reflect the particular environmental and

developmental context to which they apply — so says Principle 11 of the 1992 Rio Declaration on

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Environment and Development.

It is recognized that it is essential to involve developing countries in the design and development of

environmental measures as a way of mitigating negative trade effects. Once developed, flexibility in

the application of environmental measures is seen as key.

The Plan of Implementation adopted at the World Summit on Sustainable Development (WSSD) in

Johannesburg in 2001 has reiterated the need to support voluntary, WTO-compatible market-based

initiatives for the creation and expansion of domestic and international markets for goods which are

environmentally friendly.

The CTE could look at incentives and means to assist developing countries to identify products, and

develop export markets or environmentally friendly products in areas where these countries enjoy a

comparative advantage.

Recently, the CTE discussion has been focusing on a number of specific environmental requirements,

including organic product requirements, biofuel certification, private voluntary standards and carbon

footprint measures.

TBT and SPS Committees' work

Furthermore, the TBT and SPS Committees provide a unique framework for work on environment-related

regulations and standards through notifications and debates at committee meetings on specific trade

concerns.

LABELLING REQUIREMENTS FOR ENVIRONMENTAL PURPOSES

Introduction

Increasingly, labels are used to inform consumers that a labelled product is more environmentally friendly

relative to other products in the same category. The objectives are to differentiate environmentally friendly

products and capture market opportunities; raise consumer environmental awareness; provide accurate and

timely information to consumers; and direct manufacturers to account for the environmental impact of their

products.

There are different types of labelling schemes (e.g. voluntary or mandatory, single or multiple issue, self-

declaration or third party verification, government-run or privately-administered schemes). Eco-labels are

specific environmental labelling schemes that are generally based on a life-cycle analysis approach. The

effects of eco-labels on producers, consumer behaviour, markets and the environment are closely linked:

producer and consumer behaviour will, to a certain extent, affect markets, and may in turn lead to effects on

the environment. Recently, there has been an increase in environmental labelling requirements and in their

complexity.

CTE discussions

Labelling for environmental purposes is one of the subjects assigned to the CTE (DMD Paragraph 32(iii)).

Environmental labelling schemes are complex, causing concerns about developing countries’ and small

businesses’ ability to comply and export. WTO Members generally agree that voluntary, participatory,

market-based and transparent environmental labelling schemes are potentially efficient economic

instruments to inform consumers about environmentally friendly products. Moreover, they tend to be less

trade restrictive than other instruments. However, environmental labelling schemes could be misused for the

protection of domestic markets. Hence, these schemes need to be non-discriminatory and not result in

37

unnecessary barriers or disguised restrictions on international trade.

A common concern by the users of eco-labels has been that eco-labelling criteria tend to focus on local

concerns in markets where they are developed and applied, and do not address the views of foreign

suppliers, nor the specific environmental situation in the countries of these suppliers. Concerns have been

also raised about the lack of transparency, potential for discrimination, proliferation, growing complexity and

diversity of environmental labelling schemes. This is especially the case with labelling based on life-cycle

analysis and the use of nprPPM criteria. These requirements could create difficulties for developing

countries, and particularly SMEs in export markets.

There are divergent views among Members on the appropriate forum to discuss the issue of environmental

labelling. Some Members are of the view that, considering the mandate contained in Paragraph 32(iii) of the

Doha Ministerial Declaration, which instructs the CTE to give particular attention to labelling requirements for

environmental purposes, the CTE needs to intensify its work on environmental labelling. Other Members,

however, argue that the TBT Committee is better suited for the task of examining WTO rules vis-à-vis

labelling since it is already discussing labelling in general, including under “specific trade concerns”.

TBT disciplines

Most Members believe that existing TBT disciplines are adequate to deal with environmental labelling, and

that the TBT Agreement has created the appropriate balance of rights and obligations for both mandatory

and voluntary labelling programmes. For voluntary environmental labelling schemes, the TBT Agreement

contains a “Code of Good Practice for the Preparation, Adoption and Application of Standards”. The TBT

Agreement provides a number of principles that countries must adhere to in the development of labelling

requirements, such as non-discrimination, avoidance of unnecessary trade obstacles, harmonization, and

transparency, amongst others.

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PROPOSED ANSWERS:

1. Environmental requirements are requirements adopted to achieve environmental objectives. They can be

requirements aimed at ensuring a certain standard on product characteristic and performance to pursue

environmental objectives (e.g. energy efficiency requirements on electronic and electrical appliances);

environmental-labels to inform consumers and raise their awareness about the environmental

characteristics of a product; and packaging requirements that aim at reducing the quantity of packaging

waste, facilitating its recovery, reuse, recycling or disposal, and obliging producers to take more direct

responsibility for tackling the environmental problems they poses.

2. Recent trends in environmental requirements include:

proliferation and growing complexity;

rise in private sector voluntary initiatives; and

increase in global supply chain-driven requirements.

3. Some WTO Members are concerned that private voluntary standards are becoming de facto mandatory

for market access, and that at the same time these standards are not developed subject to the

disciplines contained in TBT Agreement Code of Good Practice for the Preparation, Adoption and

Application of Standards. More specially, concerns with regard to private voluntary standards include:

the de facto mandatory nature of these requirements; the difficulties in keeping up with rapid

proliferation of private schemes; their effect on market access, in particular for SMEs in developing

countries; the lack of transparency of some of the schemes; lack of harmonization across schemes; the

difficulties faced by producers to participate in standards development; lack of scientific basis in

standards development; insufficient data; and, the large variety of methodologies used. Other WTO

Members have expressed caution in this debate, highlighting the need to reflect on the right format and

approach for discussions on standards prepared by private entities.

4. In the past four years, under its agenda item environmental requirements and market access, the CTE

has held focussed discussions on organic agricultural products, biofuels and private voluntary standards.

5. The TBT and SPS Committees provide a unique framework for work on environmental requirements

through notifications to provide transparency, and opportunities for comments and consultations.

Moreover, WTO Members regularly use the TBT and SPS committee meetings to raise specific concerns

on potential adverse trade effects or any perceived non-compliance with the obligations of the

Agreements of other Members' measures, including environmental measures.

6. Eco-labels are specific environmental labelling schemes that based on life-cycle analysis or “craddle-to-

grave” approach (raw material, production, consumption and disposal). In general, eco-label criteria are

set so that only a small percentage of products in a product category (typically, 5 to 30%) can meet

these criteria. The purpose is to selectively identify a sub-set of products that are environmentally

preferable to other products in the same category.

7. Environmental labels can contribute to the development of a more environmentally conscious market.

For example, they can have a multiplier effect to raise public awareness for environmentally preferable

products beyond the labelled product group, and make the public aware of the environmental impacts of

consumption.

8. Product-related PPM implies that the production method leaves a trace in the final product (e.g. cotton

grown using pesticides, with pesticide residue in the cotton itself), while non-product-related PPM or

39

"unincorporated PPMs" are PPMs which leave no trace in the final product (e.g. cotton grown using

pesticides, with there being no trace of the pesticides in the cotton).

9. Some WTO Members are concerned that carbon labelling schemes sometimes did not reflect the entire

life cycle of a product by only focusing on transportation, and generally lacked consistency. Concerns

were also raised on challenges related to data collection and high costs, the effectiveness of these

schemes, as well as their possible trade impacts. With regard to eco-labelling schemes, developing

country Members have stressed they were severely affected by the multiplicity and growing complexity

of eco-labelling schemes in developed countries. Moreover, the fact that the criteria subject to eco-

labelling often did not take into account the conditions of individual developing countries was

highlighted. For instance, an eco-label developed in a country with a serious air pollution problem may

put the emphasis on air pollution control measures, whereas the main environmental problem in the

foreign country could have to do with water pollution and not air pollution.

10. The main challenges faces by developing country producers in complying environmental requirements in

export markets are:

lack of information;

lack of capacity and resources;

difficulties to keep up with proliferating heterogeneous requirements; and

high costs of related testing and certification requirements.

11. Developing countries can address new environmental requirements in the global market in a proactive

way by adopting a holistic approach aiming at achieving environmental protection and stronger export

growth at the same time. Actions can include information-sharing; raising general public's awareness

on environmental and health issues; coordination and collaboration between government and private

sector stakeholders; improving infrastructure; developing an appropriate legislative framework and

enforcing environmental regulations; training and strengthened research; and enhancing SMEs'

capabilities to adopt environmental management systems.

12. Environmental requirements, if well designed and implemented, can minimize their unnecessary trade

barriers and create new export opportunities for developing countries, while improving the

environmental performance of affected industries. Needs have been highlighted for inclusiveness and

transparency to facilitate participation of developing country representatives in stakeholder consultations

and ex-ante assessments. The usefulness of periodic reviews to avoid regulations and standards

becoming obsolete, and delays in the implementation of requirements by developing countries have also

been underlined.

13. Most WTO Members believe that existing disciplines on technical barriers to trade are adequate to deal

with environmental labelling, and that the TBT Agreement has created the appropriate balance of rights

and obligations for both mandatory and voluntary labelling programmes. For voluntary environmental

labelling schemes, the TBT Agreement contains a “Code of Good Practice for the Preparation, Adoption

and Application of Standards”. Agencies and organizations that develop labelling requirements are

encouraged to accept this code.

40

Videos E-Learning short videos – Trade and environment -

http://etraining.wto.org/admin/files/Course_278/Videos/TE.mp4

Debate: Sustainable energy and the WTO -

http://WTO.http.internapcdn.net/WTO/flash/2012_08_28_energy.mp4

Debate: Trade and Sustainable Development -

http://WTO.http.internapcdn.net/WTO/flash/2012_06_07_rio.mp4

World Environmental Day: the role of trade -

http://WTO.http.internapcdn.net/WTO/flash/2010_06_05_DG_WED.mp4

Other videos - http://www.youtube.com/user/WTO