Tecnologias da Informao e a Formao a Distncia TRAINFORTRADE 2000

1

Trade, Environment and Development
Environmentally Preferable Products

Module 4
2

Why important?

• Increasing consumer demand
• Production and exports of environmentally
  preferable products (EPPs) may
• Enhance competitiveness
• Result in win-win situations, i.e. trade,
  environmental, and developmental gains
• Provide options for diversification
• Result in price premiums
• However, investment required may be high and
  returns uncertain
• need for objective information and analysis

TrainforTrade Trade, Environment and Development
3

Objectives of this module

• Assist Government, producers, exporters, NGOs and
  other stakeholders in Viet Nam identifying and
  promoting opportunities for the production and
  exports of EPPs
• Provide background information and analysis
• Facilitate policy dialogues
• Help identify capacity building needs

TrainforTrade Trade, Environment and Development
4

Structure of this presentation

• Selected categories of EPPs
• Key issues
• Costs
• Standards and certification
• Information requirements
• Issues for discussion
• Opportunities and constraints in the case of Viet
  Nam
• Capacity building needs and follow up

TrainforTrade Trade, Environment and Development
5

• PART I
• SELECTED CATEGORIES
• OF EPPs

TrainforTrade Trade, Environment and Development
6
Criteria of environmental friendliness

• Use of natural resources and energy
• Amount of waste generated along the life cycle
• Impact on human and animal health
• Preservation of the environment
• Source UNCTAD/COMM/70

TrainforTrade 2000 Trade, Environment and
Development
7

Examples of EPPs

• Categories examined in this module
• Organic food and agricultural products
• Certified timber products
• Non-wood forest products (NWFPs)
• Products based on traditional knowledge
• Fairtrade products

TrainforTrade Trade, Environment and Development
8

• Organic food and agricultural products

TrainforTrade Trade, Environment and Development
9

Organic agriculture IFOAM definition

• Environmentally, socially and economically sound
  production of food and fibres
• Production based on local soil fertility
• Optimal quality in all aspects of agriculture and
  the environment
• Dramatic reduction of external inputs by
  refraining from the use of chemo-synthetic
  fertilizers, pesticides, and pharmaceuticals.
• Laws of nature allowed to increase both
  agricultural yields and disease resistance

TrainforTrade Trade, Environment and Development
10

Organic agriculture Some considerations

• Potential trade, environmental and social
  development benefits are significant
• However, there is a need to overcome policy,
  market and technical obstacles
• Other objectives, such as food security, need to
  be considered
• High productivity chemical agriculture may be
  required, although in certain cases
• Agricultural policies could focus on reducing the
  use of chemical fertilizers and pesticides, even
  though organic standards are not met
• Rice, even higher grades, can be grown with
  lesser use of chemical fertilizers and pesticides

TrainforTrade Trade, Environment and Development
11

Constraints (1)

• Lack of know-how and extension services
• Limited research in high productivity organic
  agriculture
• Risks involved in shifting to new farming methods
• Uncertain crop yields
• Lack of infrastructure, incl. transport and
  storage
• Short shelf life

TrainforTrade Trade, Environment and Development
12

Constraints (2)

• Small markets
• Inability to achieve economies of scale due to
  small holdings
• Limited market information
• Difficult market access
• High certification costs

TrainforTrade Trade, Environment and Development
13

Still a niche market.............

• Promising trading opportunities
• The size of certified organic agricultural sector
  is still small (generally not more than 1 to 2
  per cent in developed countries)
• Products from developing countries need to
  compete in markets with stringent quality
  requirements, increasing pressure for subsidies
  and other support measures, uncertain price
  premiums and preferences for locally-produced
  food

TrainforTrade Trade, Environment and Development
14
Highlights of International Market of Organic
Products

• World market
• US market
• European market
• German market
• Annual growth rate in major markets
• Fastest growth rate

• US17.5 billion
• US 8 billion
• US 7 billion
• US 2.2-2.4 billion
• 10-20 per cent
• United Kingdom (25-30 per cent)

15
Highlights of International Market of Organic
Products

• Highest percentage of food sales
• Major commodities
• Major exporters
• Major developing country exporters

• Switzerland and Denmark
• Grains, coffee, tea, cotton
• United States, Italy
• Mexico, Argentina, Chile

16
Standards and certification

• Organic products sold in the markets of developed
  countries need to be certified
• Very large number of standards and labels by
  private bodies and government institutions
• Initially, most programmes were managed by the
  private sector
• Recently more Government involvement

TrainforTrade Trade, Environment and Development
17
Standards and guidelines

• IFOAM
• (International Federation for Organic
• Agricultural Movements)
• Codex Alimentarius
• European Union
• United States
• For a datase on legislation concerning organic
  standards see
• http//www.organic-research.com/LawsRegs/legislat
  ion.htm

TrainforTrade Trade, Environment and Development
18

• General Principles set out the goals of organic
  production and processing
• Recommendations provide standards which IFOAM
  promotes, but does not require to be
  incorporated into certification standards
• Basic Standards are the minimum requirements that
  must be fully incorporated into certification
  standards

TrainforTrade Trade, Environment and Development
19
IFOAM Basic Standards have been developed, for
example, for

• Crop Production
• Animal Husbandry
• Aquaculture Production
• Processing and Handling
• Forest Management
• Processing of Textiles

TrainforTrade Trade, Environment and Development
20
Codex Alimentarius Guidelines

• Guidelines for the Production, Processing,
  Labelling and Marketing of Organically Produced
  Foods. GL 32 1999
• Coverage
• Unprocessed plants and plant products
• Processed product for human consumption, derived
  mainly from the above
• http//www.fao.org/es/esn/codex/STANDARD/standard
  .htm

TrainforTrade Trade, Environment and Development
21
European Union

• EU Council Regulation No. 2092/91 on organic
  production and labelling entered into force on 22
  July 1991
• The Regulation covers production, processing,
  labelling and inspection of agricultural products
  and foodstuffs from organic agricultural
  production
• Recently, it was amended to also cover standards
  for livestock production

TrainforTrade Trade, Environment and Development
22
EU Imports (1)

• Article 11 of Regulation 2092/91, paragraph 1
• third-country list of countries with which
  equivalence is established
• Countries currently on the list Argentina,
  Australia, the Czech Republic, Israel, Hungary
  and Switzerland

TrainforTrade Trade, Environment and Development
23
EU Imports (2)

• Article 11 of Regulation 2092/91, paragraph 6
• By way of derogation from paragraph 1, organic
  products from other countries can be marketed in
  the EU provided the importer submits
  documentation to confirm that the products are
  produced and certified according to rules
  equivalent to those of EU
• Managed by EU Member States
• Used by over 70 countries, incl. Viet Nam

TrainforTrade Trade, Environment and Development
24
United States (1)

• The Organic Foods Production Act (OFPA) of 1990
  required the US Department pf Agriculture (USDA)
  to develop national standards for organically
  produced agricultural products and to establish
  an organic certification program
• The National Organic Program (NOP) is a marketing
  program housed within the USDA Agricultural
  Marketing Service (AMS), the agency that sets
  marketing standards

TrainforTrade Trade, Environment and Development
25
United States (2)

• Certifying agents operating in foreign countries
  may apply for USDA accreditation
• Otherwise, a foreign certifying agent may
• Receive recognition when USDA has determined,
  upon the request of a foreign government, that
  its authorities are able to assess and accredit
  certifying agents as meeting the requirements of
  the NOP or
• Receive recognition as meeting requirements
  equivalent to the NOP under an equivalency
  agreement negotiated with the United States

TrainforTrade Trade, Environment and Development
26

Experience of Viet Nam

• Viet Nam has traditionally practiced organic
  agriculture, but the process of modernization, in
  particular agricultural research, led to
  increased use of chemicals
• Renewed emphasis on organic agriculture
• Limitations of chemical and high irrigation
  agriculture are being felt
• Experiments with organic agriculture and safety
  vegetables

TrainforTrade Trade, Environment and Development
27

Experience of Viet Nam

• Options
• In urban areas vegetables, fruits, spices and
  animal husbandry products
• In the mountainous provinces tea, coffee,
  pepper, fruits, medicinal plants, forest
  specialties and husbandry products

TrainforTrade Trade, Environment and Development
28

Trade policy issues

• Organic food standards have been notified under
  TBT Agreement
• Potential trade policy issues include standards,
  harmonization, equivalence, subsidies, conformity
  assessment procedures and trade preferences

TrainforTrade Trade, Environment and Development
29

• Certified timber products

TrainforTrade Trade, Environment and Development
30

Certified timber products

• Increasing international attention for
  sustainable forest management (SFM)
• Forest Principles adopted at UNCED
• Forest resources and forest lands should be
  sustainably managed to meet the social, economic,
  ecological, cultural and spiritual needs of
  present and future generations

TrainforTrade Trade, Environment and Development
31

Sustainable Forest Management

• Over 150 countries are participating in a number
  of regional and international processes aimed at
  establishing criteria and indicators for SFM
• The International Tropical Timber Organization
  (ITTO) was the first organization to elaborate
  agreed guidelines for sustainable management of
  natural tropical forests

TrainforTrade Trade, Environment and Development
32

Timber certification

• Increasing number of producer countries, such as
  Malaysia, Indonesia, Finland, Sweden and Canada,
  with certification schemes
• international certification systems
• The International Standards Organisation (ISO)
• Forest Stewardship Council (FSC)
• Certified forests account for approximately two
  percent of the world's forests

TrainforTrade Trade, Environment and Development
33

ISO system for certification of SFM

• A system for the certification of sustainable
  forest management is being developed under the
  ISO 14000 Series
• Objective To develop a tool for forestry
  organisations to continually improve their
  management systems and thereby their
  environmental performance
• It is a process, not a performance, standard

TrainforTrade Trade, Environment and Development
34

Forest Stewardship Council (FSC) (1)

• Encourages global forest management which is
  sustainable from environmental, economic and
  social point of view
• Favours a performance-based approach.
• Criteria for sustainably managed forests and for
  plantations
• The FSC certificate guarantees the chain of
  custody of timber, considering its life cycle
  (including transport or processing)

TrainforTrade Trade, Environment and Development
35

Forest Stewardship Council (FSC) (2)

• The FSC is an accreditation organisation (does
  not certify itself). Certification to be carried
  out by accredited organisations that must adhere
  to the FSC principles
• Accredited organisations include Soil
  Association (UK), Rainforest Alliance (USA),
  Scientific Certification Systems (USA), SGS
  Qualifor (UK), SKAL (Netherlands)

TrainforTrade Trade, Environment and Development
36

Timber certification and trade

• Extensive media campaigns by NGOs (e.g. Germany,
  the Netherlands and the UK)
• Europe demand for sustainably produced timber
  presently exceeds supply
• Certification can be used as marketing tool
• Also concern that certification could act as
  trade barrier against those unable to become
  certified
• Need to avoid discrimination against tropical
  timber

TrainforTrade Trade, Environment and Development
37

• Non-Wood Forest Products (NWFPs)

TrainforTrade Trade, Environment and Development
38

Non-wood forest products

• FAO Goods of biological origin other than wood,
  derived from forests, other wooded land and trees
  outside the forest
• NWFPs include food items, such as honey, nuts,
  berries, mushrooms, essential oils, spices, and
  animal fodder, construction materials, medicinal
  plants, other health care and cosmetic products,
  and items of cultural and spiritual significance

TrainforTrade Trade, Environment and Development
39

Important at local level...

• NWFPs are primarily consumed at the local or
  national level
• Particularly for the poor in developing
  countries, NWFPs can be of crucial importance,
  both for the material needs of the family and as
  a means to generate income
• Around 80 per cent of the population in
  developing countries use NWFP to meet nutrition
  and health needs

TrainforTrade Trade, Environment and Development
40

Local employment and industry...

• Harvesting, processing and marketing NWFPs can be
  important for local employment and provide the
  basis for local small-scale industries
• External entrepreneurs often appropriate a large
  part of the revenues of NWFPs
• Efforts must be made to enhance the value-added
  accruing to local communities
• Environmental limits must be taken into account

TrainforTrade Trade, Environment and Development
41

World trade no reliable statistics...

• Exports of NWFPs are a significant source of
  foreign exchange earnings for several developing
  countries
• Some 150 NWFPs are traded internationally in
  significant quantities, including cork, essential
  oils, forest nuts, gum arabic, rattan and plant
  and animal components of pharmaceutical products
• World trade in NWFPs is roughly US 11 billion

TrainforTrade Trade, Environment and Development
42
World Trade in NWFPs (US millions)

• Natural honey
• Mushrooms and truffles
• Nuts
• Spices
• Ginseng roots
• Gum arabic
• Plants used in pharmacy
• Essential oils
• Cork and cork products
• Rattan

• 268.2
• 210.7
• 593.1
• 175.7
• 389.3
• 101.3
• 689.9
• 312.5
• 328.8
• 19.0

Preliminary figures!!
TrainforTrade Trade, Environment and Development
43

Examples of market opportunities (1)

• Alternative wood sources
• Bamboo used in furniture production and a range
  of traditional uses, such as handicrafts
• Food products
• Medical substances

TrainforTrade Trade, Environment and Development
44

Examples of market opportunities (2)

• Cosmetics and perfumery
• Biopesticides
• Biochemicals
• Lac, the resinous secretion obtained from the
  hemipterous insect and produced in Viet Nam finds
  a variety of uses in plastics, adhesives, wood
  finishing, polish and others

TrainforTrade Trade, Environment and Development
45

• Products and services based on Traditional
  Knowledge (TK)

TrainforTrade Trade, Environment and Development
46

Products from Traditional Knowledge (TK)

• TK is an important resource in the development
  process of Viet Nam, e.g. traditional agriculture
  and medicines as well as handicrafts
• Need for legal protection
• Need for comprehensive policies aimed at
  harnessing TK for development and trade, e.g. by
  commercialization of TK-based products and
  services
• (See Module 7)

TrainforTrade Trade, Environment and Development
47

Commercialization

• Complements legal protection of TK by enhancing
  economic value, income and employment
• Consumer demand for natural products
• Raw material sourcing partnerships often provide
  benefits for local communities or conservation
  programs

TrainforTrade Trade, Environment and Development
48

Constraints

• TK may have cultural and spiritual values that
  preclude commercialization
• Problems with marketing, standardization, and
  scaling up production
• Risk of over-harvesting economically significant
  TK-based natural products
• TK is often accessed by companies through
  databases and literature, and in some cases
  through multiple intermediaries access to TK and
  sharing of benefits have often been de-linked

TrainforTrade Trade, Environment and Development
49

What is
needed? 1

• Raising awareness of the commercial potential
  among Government and local and indigenous
  communities
• Identifying aspects of TK that could be of wider
  interest and a basis for commercialization
• Developing capacities to meet stringent
  standards, for example in the case of herbal
  medicines
• Obtaining market information

TrainforTrade Trade, Environment and Development
50

What is needed? 2

• Establishing certification procedures to
  guarantee that products are made by LICs and
  enhance their commercial value
• Develop and implement other instruments to
  enhance commercial value of TK-based products,
  including IPRs
• Explore ways in which benefit-sharing packages
  can be structured to benefit LICs and
  conservation
• Developing partnerships, including capacity
  building and technology transfer

TrainforTrade Trade, Environment and Development
51

• Fairtrade products

TrainforTrade Trade, Environment and Development
52

Background

• Increasing demand for products from developing
  countries that are produced in a manner which
  takes into account social equity and justice in
  the producing country, through "fair trade
• Fairtrade initiatives seek to improve market
  access, strengthen producer organizations, pay
  better prices and provide continuity in the
  trading relationship

TrainforTrade Trade, Environment and Development
53

The fair trade label guarantees

• Fair production conditions and trading relations,
  including
• A price that covers the cost of production
• Social premium for development purposes
• Partial payment in advance to small producer
  organizations
• Long term trade relations that allow proper
  planning and sustainable production practices
• Minimum environmental criteria

TrainforTrade Trade, Environment and Development
54

Who is involved?

• Producer organizations produce a range of
  handicraft and food products
• Consumers
• Fair trade importing organizations buy products
  at a fair price directly from producers and give
  them various forms of advice, support and
  training. They sell the products through
  channels such as specialized "world shops", local
  groups, and increasingly supermarkets

TrainforTrade Trade, Environment and Development
55

Who is involved?
2

• World Shops sell fair trade products and raise
  awareness about fair trade issues
• Fair trade labelling initiatives seek to enlarge
  the market for fair trade products by bringing
  them into mainstream sales outlets like
  supermarkets while at the same time offering
  consumers an independent guarantee of fair trade
  standards

TrainforTrade Trade, Environment and Development
56

Fairtrade Labelling Organisations (FLO)
International

• Founded in 1997 to coordinate efforts and to
  ensure the audit of all fair trade labelled
  products from the producer to the supermarket
  shelf
• FLO has developed criteria for coffee, cocoa,
  tea, honey, sugar, bananas and orange juice
• It also aims at the introduction of a single
  international fair trade label

TrainforTrade Trade, Environment and Development
57

Markets for fairtrade products

• Products including coffee, chocolate, tea, honey,
  sugar, bananas, and orange juice are now
  available in more than 43,000 supermarkets
  throughout Europe
• Market shares are expanding, in particular in
  Switzerland and the Netherlands
• Market share of fair trade bananas is 15 in
  Switzerland and 4.2 in the Netherlands
• The market share of fair trade tea is 4 in
  Switzerland and 2.5 in Germany.

TrainforTrade Trade, Environment and Development
58

• PART II
• KEY ISSUES

TrainforTrade Trade, Environment and Development
59

Costs of EPPs, some considerations

• EPPs often are more expensive than conventional
  competitor products
• Adjustment costs
• Production costs
• Certification costs
• Distribution costs
• Cost disadvantage for EPPs might be attenuated,
  in the long run, as environmental policies become
  more stringent and costs and benefits are more
  fully incorporated in prices

TrainforTrade Trade, Environment and Development
60

Standards, certification

• The very large number of standards set by
  governmental and private bodies, e.g. in the case
  of organic agriculture may create problems for
  developing countries
• Need to promote practical application of mutual
  recognition and equivalence
• Need to strengthen developing countries
  effective participation in international standard
  setting

TrainforTrade Trade, Environment and Development
61

Reducing certification costs (1)

• Donor assistance, e.g. in the framework of
  FairTrade and development projects
• Training of local inspectors and other personnel
  working for international certification bodies
  operating in Viet Nam
• Development of national certification system
• International accreditation of national
  certification bodies

TrainforTrade Trade, Environment and Development
62

Reducing certification costs (2)

• Negotiation of equivalency agreements, including,
  for example, recognition under EU Regulation
  2092/91
• Group certification
• Regional cooperation

TrainforTrade Trade, Environment and Development
63

Information on EPPs

• Producers
• Producers need information on environmentally
  sound technologies (ESTs) and production
  practices
• Marketing intelligence
• Consumers
• Consumers may not have enough information about
  the availability and benefits of particular EPPs
• Need for campaigns

TrainforTrade Trade, Environment and Development
64

Commercial strategies (1)

• Many EPPs, such as NWFPs, are new products, and
  introducing them to the market is important. It
  is easier to start with products that are already
  on the market
• Certain EPPs are still mostly sold in niche
  markets low traded volumes are normally
  associated with higher unit transaction costs
  which make EPPs less price competitive and,
  hence, less attractive to traders and consumers.

TrainforTrade Trade, Environment and Development
65

Commercial strategies (2)

• Shift to the mainstream is often hampered by lack
  of reliable supplies of adequate quantity and
  consistent quality. Supply of commercially viable
  quantities of EPPs can be achieved, for example,
  by associating small producers in cooperatives
• Direct channels may provide better chances of
  obtaining price premiums

TrainforTrade Trade, Environment and Development
66

• PART III
• ISSUES FOR DISCUSSION
• AND POSSIBLE FOLLOW-UP ACTIVITIES

TrainforTrade Trade, Environment and Development
67

Opportunities for Viet Nam?

• Does Viet Nam have good options to increase
  production and exports of EPPs?
• Organic food and agricultural products?
• Certified timber products?
• Non-wood forest products (NWFPs)?
• Products based on traditional knowledge?
• Fairtrade products?

TrainforTrade Trade, Environment and Development
68

Opportunities for Viet Nam?

• What are major constraints to be resolved?
• Who should play a lead role in promoting EPP?
• Producers?
• Government?
• NGOs?
• Other?

TrainforTrade Trade, Environment and Development
69

What should be done concerning 1

• Creating awareness among producers and other
  stakeholders?
• Identifying Vietnams supply capacities for
  specific categories of EPPs?
• Developing or strengthening domestic standards,
  regulations and certification facilities in Viet
  Nam?
• Identifying international market trends and
  options for creating a domestic market?

TrainforTrade Trade, Environment and Development
70

What should be done concerning 2

• Removing policy, market and technical obstacles?
• Reducing certification costs?
• Promoting regional cooperation?
• Participating effectively in international
  debates?

TrainforTrade Trade, Environment and Development
71

What should be done concerning 3

• Negotiation of equivalency agreements for organic
  products, for example, recognition under EU
  Regulation 2092/91?
• Group certification?
• Regional cooperation?
• How can CBTF follow-up activities be useful to
  Viet Nam?

TrainforTrade Trade, Environment and Development