The Impact of Globalization on Our Industry

1
The Impact of Globalization on Our Industry

• Lawrence A. Kogan, Esq.

2
National Wooden Pallet Container Association

• 2005 Annual Leadership
• Conference Exposition
• Education Session 1

3
Post World War II International Order/Paradigm

• Bretton Woods Institutions
• International Monetary Fund and World Bank
• United Nations
• Offices, agencies and related international
  organizations
• GATT/WTO

4
Post World War II International Order/Paradigm -
continued

• These Organizations objectives were
• Free, Stable Capital Markets Investment
• Individual Political Freedoms Basic Human
  Rights/Democracy
• Free Trade Economic Development

5
The Modern Era of Globalization

• As the Cold War was ending, it was believed
• There would no longer be ideological divisions
• There would be Peaceful co-existence
• Nations would pursue their economic interests
• There would be economic and political
  interdependence
• Yet, even before this time, Globalization had
  prompted many fears leading to UN action

6
The Modern Era of Globalization (continued)

• Economic, Social Cultural Fears
• A world full of profit-seeking corporations
• Market failures due to uncontrolled
  interconnected capital flows
• Strains on social fabric caused by widening
  income gaps between rich and poor
• Loss of cultural identity (McWorld factor)

7
The New Paradigm of Sustainable Development

• Environmental Fears
• 1972 Club of Rome Report Limits to Growth
• 1987 Report of the World Commission on
  Environment and Development Our Common Future
• Redefines the term development
• Environmental concerns -- Economic growth cannot
  continue to take place at the expense of the
  earths natural capital (its stock of renewable
  nonrenewable resources)

8
The New Paradigm of Sustainable Development -
continued

• 1992 United Nations Conference on Environment and
  Development (UNCED)
• Rio de Janeiro Earth Summit
• Rio Declaration on Environment and Development
• Non-binding broad principles providing the basis
  for establishing international environmental
  norms and expectations during the past 13 years
• Agenda 21
• A non-binding global plan of action for more
  sustainable societies that is ostensibly in favor
  of economic growth, in addition to social
  development and environmental protection
•             

9
The New Paradigm of Sustainable Development -
continued

• 2002 World Summit on Sustainable Development
  (WSSD)
• Endorsed UNEP Strategic Approach to International
  Chemicals Management (SAICM)
• Implementation -- Its goal is to ensure that, by
  2020, chemicals are used and produced in ways
  that lead to the minimization of significant
  adverse effects on health and environment
• Cooperation between UNEP, IOMC, IFSC, etc.

10
The New Paradigm of Sustainable Development -
continued

• 2002 World Summit on Sustainable Development
  (WSSD)
• Adopted Plan of Implementation stipulated that
  all countries should promote sustainable
  production and consumption patterns
• Encouraged all countries to develop a 10 year
  timeframe for inducing such shift
• Promotion of reduction, reuse and recycling of
  waste (3 Rs)
• Life Cycle Assessment

11
The New Paradigm of Sustainable Development -
continued

• The world economy must learn to live off its
  interest
• reducing energy use
• fuel shifting from carbon-based fuels
• employ sustainable systems of resource
  management, which requires sweeping restrictions
  on use of resources
• wide-ranging interventions in governance and
  behavior of multinational companies AND
• restrictions on international trade are necessary

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The New Paradigm of Sustainable Development -
continued

• Its a matter of morality
• Change basis attitudes about material wealth,
  abundance and waste
• Its a matter of limiting economic growth
• Limit individual production and consumption
• Its no longer a matter of national sovereignty
• We know better than developing countries
• -- Companies Have a Role to Play
• Corporate Social Responsibility (CSR)

13
The New Paradigm of Sustainable Development -
(continued) CSR

• Business decision-making linked to
• ethical values
• compliance with legal requirements AND
• respect for people, communities and the
  environment
• Operating a business in a manner that EXCEEDS the
  ethical, legal, commercial and public
  expectations society has of business
• Pursuant to a comprehensive set of policies,
  practices and programs

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The New Paradigm of Sustainable Development -
CSR - (continued)

• United Nations Global Compact Office
• Secretary General Kofi Annans Office
• European companies leading the charge
• Development of Supply Chain Management
• Assisted by civil society -
• International Labor Organization
• Environmental non-governmental organizations
• Human Rights Groups

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The Precautionary Principle

• Rio Declaration Principle 15
• In order to protect the environment, the
  precautionary approach shall be widely applied
  by States according to their capabilities. Where
  there are threats of serious or irreversible
  damage, lack of full scientific certainty shall
  NOT be used as a reason for postponing cost
  effective measures to prevent environmental
  degradation.

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The Precautionary Principle - continued

• Wingspread Version
• Precaution is not simply the prevention of
  manifest or predicted results that have been
  scientifically proven. Rather, the precautionary
  principle goes beyond the notion of prevention in
  the sense that it insists that policymakers move
  to anticipate problems before they arise or
  before scientific proof of harm is established.

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The Precautionary Principle - continued

• Consequences of Wingspread Version
• Better Safe Than Sorry
• I Fear, Therefore I Shall Ban
• Reversal of burden of proof from government to
  show harm to industry to show safe
• One is guilty until proven innocent when
  tampering with the environment
• Perceived Risks vs. Actual Risks
• Hazard assessment vs. Risk assessment

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The Precautionary Principle - continued

• Consequences of Wingspread Version
• No economic cost-benefit analysis
• Broad duty of care to take measures not to harm
  the environment or to human, plant or animal
  health
• Best available techniques / state of the art
  would no longer be enough as a defense in the
  event of environmental or health damage
• Increased administrative and compliance costs
• Increased liability costs imposes strict
  statutory liability for damages

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International Organizations Environment

• UN Organizations
• Food Agriculture Organization (FAO)
• Administers IPPC Secretariat
• World Health Organization (WHO) Scientific body
  focusing on effects of environment on human
  health.
• Administers IFCS
• United Nations Environment Program (UNEP)
• Supports Multilateral Environmental Treaties
• Promotes Sustainable Development

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International Organizations Environment
(continued)

• International Labor Organization (ILO)
• Develops and monitors compliance with labor
  rights treaties
• Other
• Organization for Economic Cooperation
  Development (OECD)
• Tracks all HPV chemicals assessments SIDS

21
WTO Agreement on Application of Sanitary and
Phytosanitary (SPS) Measures

• Purpose of the SPS Agreement
• Scope
• Implementation/Administration of SPS Agreement

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Purpose of the SPS Agreement

• establishes a multilateral rules-based system by
  which national/regional SPS measures are to
  applied
• aims to achieve harmonization of national
  SPS measures
• recognizes the sovereign right of all WTO Members
  to employ SPS measures to protect human, animal
  or plant life or health

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Purpose of the SPS Agreement,Continued

• permits application of SPS measures provided
• they are not arbitrary or unjustifiable
• they do not discriminate between otherwise like
  or similar domestic and imported products or
  between otherwise like or similar imports
  from different countries AND
• they are not utilized as disguised restrictions
  on international trade

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Scope of the SPS Agreement

• Covers all sanitary and phytosanitary
  (phyto) measures that may directly or
  indirectly affect international trade,
  particularly those intended
• to protect animal or plant life or health from
  risks from the entry, establishment or spread of
  pests, diseases, disease-carrying organisms or
  disease-causing organisms

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Scope of the SPS Agreement - Continued

• to protect human or animal life from risks
  arising from additives, contaminants, toxins or
  disease-causing organisms in foods, beverages or
  foodstuffs
• to protect human life or health from risks
  arising from diseases carried by animals, plants
  or products thereof, or from the entry,
  establishment or spread of pests or
• to prevent or limit other damage from the entry,
  establishment or spread of pests.

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Scope of the SPS Agreement - continued

• Measures -- all relevant decrees, regulations,
  requirements and procedures including, among
  other things
• End product criteria
• processes and production methods (PPMs)
• quarantine treatments, including relevant
  requirements associated with transport of animals
  or plants or materials associated with their
  survival
• sampling procedures and methods of risk
  assessment and
• packaging and labeling requirements directly
  related to food safety

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Implementation/Administration of the SPS Agreement

• Committee on SPS Measures
• Facilitates consultations and negotiations
• Encourages the use of relevant International
  Standards
• Promotes integration of national and
  international approaches
• Secures best available scientific and technical
  advice from relevant international organizations
  specializing in SPS protection

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Implementation/Administration of the SPS
Agreement - continued

• International Organizations
• Codex Alimentarius Commission
  (human life health food safety)
• International Office of Epizootics
  (animal life health or zoonoses)
• Secretariat of the International Plant Protection
  Convention (plants and plant products)

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International Plant Protection Convention (IPPC)

• Achieving biosecurity while facilitating
  international trade
• Biosecurity
• International Trade
• Governance
• Secretariat
• Standards Committee

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International Plant Protection Convention (IPPC)
- continued

• Biosecurity
• Food Safety
• Conservation of the Environment
• Sustainability of Agriculture

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International Plant Protection Convention (IPPC)
- continued

• International Trade
• International Standards developed with IPPC
• Scientific/technical justification
• Provisional Emergency measures in absence of
  scientific certainty of risk
• Choose least trade restrictive policy

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International Plant Protection Convention (IPPC)
- continued

• IPPC Governance
• Interim Commission on Phytosanitary Measures
  (ICPM)
• IPPC Secretariat
• Standards Committee

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IPPC Governance

• Interim Commission on Phytosanitary Measures
  (ICPM)
• Comprised of Treaty Party Representatives
• Adopts ISPMs

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IPPC Governance

• IPPC Secretariat
• Standards Activity Coordination
• Information Exchange
• Technical Assistance

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IPPC Governance

• IPPC Standards Committee
• Assists in development of ISPMs
• Manages Standard-Setting Process

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WTO Technical Barriers to Trade Agreement

• Purpose of the TBT Agreement
• Scope of the TBT Agreement
• Major Principles

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Purpose of the TBT Agreement

• To further the GATT 1994 Objectives
• To encourage development of international
  standards
• To promote international harmonization of
  national / regional regulations and standards
• To prevent regulations and standards from
  creating unnecessary obstacles to trade

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Purpose of TBT Agreement (continued)

• Recognizes sovereign right to take measures to
  protect human, animal or plant life or health,
  provided
• they are not arbitrarily or unjustifiably applied
  in a discriminatory manner
• Recognizes international standardization can
  contribute to technology transfers

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Scope of TBT Agreement Very Broad

• Covers all technical regulations, standards and
  conformity assessment procedures other that SPS
  measures
• Covers products, processes and services
• Covers all products, including industrial AND
  agricultural products
• Covers all standards prepared by recognized
  standardization bodies, whether or not they are
  based on consensus

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Scope of TBT Agreement Definitions

• Technical Regulation
• A document laying down product characteristics or
  their related processes and production methods
  (PPMs), including applicable administrative
  provisions AND
• With which compliance is MANDATORY
• May also include or deal exclusively with
• terminology - packaging - labeling
• symbols - marking

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Scope of TBT Agreement Definitions
(continued)

• Standards
• A document approved by a recognized body that
  provides for common repeated use, rules,
  guidelines or characteristics AND
• With which compliance is NOT MANDATORY
• May also include or deal exclusively with
• terminology - packaging - labeling
• symbols - marking

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Scope of TBT Agreement Definitions (continued)

• Conformity Assessment
• Any procedure used directly or indirectly to
  determine that relevant requirements in technical
  regulations or standards are fulfilled
• May include, among other things, procedures for
• sampling, testing inspection
• evaluation
• verification assurance of conformity
• registration, accreditation, and approval

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The TBT Agreement Major Principles(Tech Regs)

• National Treatment
• No less favorable treatment than...
• No Unnecessary Obstacles to Trade
• No more trade restrictive than necessary to
  fulfill a legitimate objective
• Considering the risks of non-fulfillment
• When assessing the risks, consider
• available scientific and technical info
• related processing technology
• intended end-uses of products

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The TBT AgreementMajor Principles (Tech
Regs) (continued)

• Use Relevant International Standards
• Rebuttable Presumption of No Obstacle to Trade
• Use Equivalent National Standards of other WTO
  Members, Even if Differ from your own
• If Develop Own Which May Have Significant Effect
  on Trade, Provide Justification
• Early Detailed Notification
• Transparency

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The TBT AgreementMajor Principles
(Standards) (continued)

• Do NOT take measures that encourage local
  government and non-governmental bodies to act
  inconsistent with Code of Good Practice
• Take reasonable measures to ensure that they
  follow the Code of Good Practice
• WTO Members are held responsible for the
  activities of such bodies whether or not they
  have accepted the Code of Good Practice

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The TBT AgreementMajor Principles
(Standards) (continued)

• Code of Good Practice
• National Treatment
• No Unnecessary Obstacles to Trade
• Use Relevant International Standards
• Specify Performance-Based (Rather than
  Process-Based) Standards
• Notification
• Transparency
• Market Relevance

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What is The European Union Trying to
Accomplish?

• Enlightened Brussels bureaucrats are influenced
  by politically strong anti-industry, anti-free
  market, anti-private property European Green
  groups many of whom previously lived behind the
  Iron Curtain
• They are enacting more and more regulation to
  address their aversion to health and
  environmental risks and to redistribute wealth
• The EU is demographically older than the U.S.

48
What is The European UnionTrying to
Accomplish? (continued)

• The activities of the Greens and of the Brussels
  regulators have caused labor costs, taxes and
  regulatory costs to rise and to be absorbed by
  European industry
• EU industry subject to regional expectations of
  Corporate Social Responsibility
• Cant fight the Greens and socialists
• Lack credibility with a skeptical anti-business
  public

49
What is The European UnionTrying to
Accomplish? (continued)

• EU companies have thus increasingly been placed
  at an economic competitive disadvantage vis-à-vis
  the U.S.
• Since 2000, Europe has publicly sought to surpass
  U.S. economic competitiveness by 2010
• The Lisbon Agenda - to become the most dynamic
  and competitive knowledge-based economy in the
  world

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What is The European UnionTrying to Accomplish?
(continued)

• EU RD capital investment has dropped
• On the one hand,
• EU companies seek the assistance of the U.S. to
  fight this EU/Green regulatory juggernaut
• But, on the other hand,
• EU companies hide behind these Green and Social
  rules and actually use them as regional trade
  barriers for their relatively weaker industries

51
What is The European UnionTrying to Accomplish?
(continued)

• EU industry interests have converged with those
  of EU regulators and EU Greens under the guise of
  protecting the environment and human health to
• EXPORT the high cost European regulatory model
  globally throughout the global supply chains
• This levels the global economic playing field
  by creating a negative competitive advantage

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What to Do?

• Seek expert advice
• Monitor European and Chinese technical
  regulations and product standards
• Become active in and monitor the activities of
  international standards bodies
• Organize and communicate within your industry to
  focus on international issues
• Reach out to work with other affected
  industries in the U.S. and those abroad

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What to Do?

• Work with the USG to craft a proactive strategy
  -- to date it has been only reflexive
• Reach out to international think-tanks, academics
  and advocacy groups that support a rules-based
  system that provides opportunities for business

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What to Do?

• We are not an island
• International laws already affect business
  conducted across borders and it can also affect
  businesses here if U.S. law changes to satisfy it
• U.S. industry can no longer ignore international
  rules that govern the international trade system
  -- if we do, we do so at our own peril
• 2002 Wall Street Journal Article