Trade , Environment and Development

1

Trade , Environment and Development
Environmental requirements and market access

Module 3
2

Background

• Environmental and health-related requirements are
  becoming more frequent and/or more stringent in
  certain (but not all) sectors of export interest
  to Viet Nam
• Non compliance may result in trade losses
• Viet Nam needs to strengthen its abilities to
  respond to such requirements
• Viet Nam also needs to reflect its objectives and
  concerns in international debates

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Objectives of this module

• To assist the Government of Viet Nam, VIETRADE
  and others in enhancing understanding of
  environment-and health-related requirements in
  export markets
• To assist Viet Nam in identifying policies aimed
  at strengthening capacities to respond to such
  requirements
• To examine relevant WTO rules, in particular the
  SPS and TBT Agreements
• To identify possible follow-up under CBTF

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Structure of this presentation

• Environment-and health-related requirements in
  international markets
• Factors determining potential impacts on trade
• Case study fishery products
• WTO provisions
• Possible policy responses
• Issues for discussion

http//www.vietrade.gov.vn/english/activities/inde
x.shtml
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• Environment- and health-related requirements

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Environmental requirements and market access

• Stringent environment- and health related
  requirements
• Demand for Environmentally preferable products
  (e.g. organic food)

• Potential trade barriers for developing
  countries?
• Potential trading opportunities for developing
  countries?
• (Module 4)

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Environment- and health related requirements
that may have impacts on exports from Viet Nam

• Sanitary and Phytosanitary (SPS) Measures
• Products standards
• Labels
• Packaging requirements
• informal (buyer) requirements imposed by
  companies/importers, including on process and
  production methods

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SPS measures

• Governments use a variety of measures to ensure
  that food products are protected from
  contaminants, toxins, and other organisms, which
  may be responsible for diseases
• Sanitary and phytosanitary (SPS) measures are
  also taken to protect human health from pests and
  other diseases, which may be transmitted by
  plants or animals
• These measures are covered by the SPS Agreement

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Technical regulations 1

• Product standards and regulations (which are
  legally binding) can relate to the composition of
  products (e.g. heavy metals content), quality or
  performance (e.g. energy consumption, emissions)
  
• Bans on environmental grounds are becoming
  increasingly frequent due to the widespread
  public concern over hazardous substances and
  because it may sometimes be easier to legislate
  bans than technical regulations involving complex
  risk assessment

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Technical regulations 2

• Bans on substances that are hazardous to the
  environment or public health may affect trade in
  products containing such substances
• Such bans are emerging in sectors of export
  interest to developing countries, such as
  textiles, leather and footwear
• For example, imports of products containing
  pentachlorophenol (PCP) and formaldehyde have
  been restricted in many countries, affecting
  leather exports from countries. Textiles
  containing azo dyes have also been prohibited.

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Product standards and regulations 3

• Technical regulations and bans of products
  containing hazardous substances are aimed at
  protecting the domestic environment and public
  health in the importing country against the
  harmful effects of the consumption or disposal of
  domestically manufactured and imported products
• WTO rules allow countries to impose bans as long
  as such bans apply equally to domestic products

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Packaging requirements

• Packaging regulations may ban certain materials
  or encourage materials that are
  recyclable/disposable
• Take-back obligations make producer/importer
  responsible for recycling/disposal of used
  packaging material. In practice, the importer
  rather than the foreign producer is held
  responsible, and service companies can be used
• Exporters should be aware of the type of
  packaging materials that will be acceptable to
  importers/consumers

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Labelling 1

• Labels provide information related to inter alia
  health and environmental ingredients, use, and/or
  disposal of products
• Labels may contain warnings or indicate positive
  environmental characteristics (e.g.
  biodegradable)
• Labelling may be compulsory or voluntary
• In certain cases, labels may provide an
  alternative to trade bans (dolphin-free)

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Labelling 2

• A key issue is the possible use of labels
  (mandatory or voluntary) in the case of
  genetically modified organisms (GMOs)
• (see module 5, Biosafety Protocol)
• Exporters fear that labels may contain GMO may
  have negative affects on consumption
• Use of labels may also imply a need to segregate
  GMO and non-GMO commodities, which is very costly

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Eco-labelling 1

• ISO distinguishes three types of eco-labels
• Type I are multi-issue labels that give
  environment-related information on the overall
  environmental quality or characteristics of a
  product, based on third- party certification.
• Type II self-declaration environmental claims
  made by manufacturers, importers, distributors or
  retailers
• Type III labels provide information on a product
  in the form of a bar graph of various indices,
  without any judgement about their relative
  importance

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Eco-labelling 2

• The trade and environment debate on eco-labels
  has focussed on type I eco-labels
• Criteria take into account the processes and
  production methods (PPMs) of a product
• WTO rules, however, are based on the concept of
  like product
• So far, the effects of type I environmental
  labels on the market place and on international
  trade have been limited, including for imports
  from developing countries

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Global Ecolabelling Network

• Non-profit organization
• Collection and dissemination of information on
  ecolabelling programs through Internet
• Position papers and analyses on issues such as
  ecolabelling and trade, harmonization, etc.
• Exploring mutual recognition among programs
• Technical assistance to developing programs
• Information exchange among members with regard to
  setting criteria, marketing, etc.
• Publishing of newsletter providing up-to-date
  information
• http//www.gen.gr.jp/whats.html - top

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Global Ecolabelling Network

http//www.gen.gr.jp/members.html
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Fiscal instruments

• Product taxes and charges can be based on some
  characteristics of the product (e.g. on the
  sulphur content in mineral oil) or on the product
  itself (e.g. mineral oil).
• Product charges may be imposed with two aims
• to raise revenues
• to discourage the production and consumption of
  products on which the tax is levied
• Deposit refund schemes these provide an
  incentive for consumers to return used products
  to retailers

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Public procurement

• Public procurement practices could have effects
  on producers from developing countries if
  products of significant export interest to them
  were to be affected
• For example, boycotts on tropical timber could
  lead to trade displacements and may require
  expensive counter campaigns
• Developing country producers and Governments
  might have difficulties in obtaining timely
  information from sub-national entities in order
  to take advantage of trading opportunities or to
  present arguments against boycotts

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Informal requirements

• Due to increased consumer demand for
  environmentally preferable products importers may
  impose certain environmental requirements upon
  their suppliers in developing countries

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• Case study
• fishery products

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Fishery products multiple requirements
concerning

• Health conditions for the production and placing
  on the market of fishery products
• Restrictions on veterinary medicines
• Pesticide residues (maximum pesticide residue
  levels, MRLs), heavy metals, polychlorinated
  biphenyls (PCBs), food additives, radiological
  contamination of foods, irradiation of food
• Packaging
• The obligation to introduce a system based on the
  principles of Hazard Analysis Critical Control
  Point (HACCP) in fish processing companies

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HACCP 1

• The Hazard Analysis Critical Control Point
  (HACCP) system aims to ensure the safety and
  suitability of food for consumption
• The HACCP system sets out principles and key
  hygiene controls at each stage of the food chain,
  from primary production to final consumption
• It enables the user to assess hazards and
  establish control systems that focus on
  prevention rather than relying on testing of the
  end-product

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HACCP 2

• HACCP is specifically designed for the food and
  food-related industry and focuses on hygiene
• It is a systematic approach of preventing and
  reducing risks.
• The HACCP system adopted as one of the
  international standards of the Codex Alimentarius
  has now been implemented in the national
  legislation of a number of countries
• Will increasingly become a market requirement
  imposed upon developing exporters by their buyers
  

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US regulations for fishery products

• The regulations for the Safe and Sanitary
  Processing and Importing of Fish and Fishery
  Products (21 CFR part 123) require that all
  seafood products have been processed in
  accordance with both the HACCP principles and the
  State sanitary requirements
• Importers have a responsibility under those
  regulations to verify that the fish and fish
  products they are importing meet those
  requirements

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US - Options for importers 1

• To show compliance, importers may
• Import from a country with equivalence or
  compliance agreement with FDA covering fish and
  fishery products (The government of the foreign
  country is operating a regulatory system for
  seafood safety that ensures that the products
  being exported.satisfy U.S.safety concerns)
• If no such agreement exists, importers must take
  their own "affirmative steps" to verify that the
  products have been processed in accordance with
  FDA regulations."

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US - Options for importers 2

• In considering whether to accept imports of
  products from processors on foreign
  government-supplied lists as satisfying the
  affirmative step obligation, FDA may consider
  such factors as
• the length of time since the foreign government
  inspection authority has updated its list
• the compliance history of the country and the
  individual foreign processor
• what is known generally about the regulatory
  structure of the foreign country

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EU regulations

• Directive 91/493/EEC health conditions for the
  production and placing on the market of fishery
  products in general
• Directive 91/492/EEC stringent conditions for
  live bivalve molluscs
• All fishery products (whether fresh, chilled,
  frozen, canned, salted, smoked or dried) imported
  from third countries into the EU must come from a
  preparation, processing, packaging or storage
  facility that is approved by the competent body
  in the country concerned

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Characteristics and implications

• The Directives are based on the HACCP quality
  assurance approach
• Its main purpose is to avoid systematic
  detention, heavy sampling and laboratory checks
  at the point of entry in the EU
• Instead, actual control will take place in the
  third country. Implications for developing
  countries
• Regulations need to be updated
• Inspection services need to be organized
• Handling and processing probably need to be
  improved

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Implementation of these two Directives

• Companies must allow certain investigations and
  must record the data for a supervisory authority
• Exporting country has to submit complete
  legislation and other documentation to the
  European Commission (EC)
• EC delegation will visit the country
• Depending on findings, EC may issue either a
  permanent approval, or a provisional one for a
  limited time

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Experience of Viet Nam

• EC mission to Viet Nam (5 to 15 October 1998)
• Legislation in Viet Nam found equivalent to EU
• Decision 1999/813/EC of 16 November 1999 Viet
  Nam added to Group I (OJ L 315 of 9 December
  1999)
• Amended by Decision 2000/331/EC of 25 April 2000
  (OJ L 114 of 13 May 2000)
• NAFIQACEN (National Fisheries Inspection and
  Quality Assurance Center) of the Ministry of
  Fisheries is the competent authority in Viet Nam
• Around 20 authorized establishments in Viet Nam

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Chloramphenicol detected in shrimps

• Decision 2001/699/EC of 19 September 2001
• Presence of chloramphenicol has been detected in
  shrimps imported from Viet Nam (and China)
• Member States shall, using appropriate sampling
  plans and detection methods, subject each
  consignment of shrimps from Vietnam (and China)
  to a chemical test.
• Member States shall inform the Commission of the
  test results, using the Rapid Alert System for
  Food
• Official Journal L 251 of 20 September 2001

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Preliminary conclusions

• Viet Nam has been able to develop legislation and
  infrastructure to export fishery products and
  live bivalve molluscs
• Chloramphenicol case shows need for continued
  control to avoid cost increases and uncertainty

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• Concerns of
• developing countries

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Concerns and constraints..

• With regard to standard-setting and
  implementation in major markets
• Transparency
• Administrative delays
• Complexity of standards
• Threshold limits
• Constraints at the national level
• Concerns with international standard-setting and
  trade rules

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Transparency

• Lack of transparency may create significant
  problems for exporters
• Some emerging environmental policy instruments do
  not have provisions regarding notification and
  established mechanisms allowing foreign producers
  to comment
• The strong reliance on voluntary measures may
  raise questions as to accountability in the
  context of international trade rules

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Becoming an approved exporter can take a lot of
time

• In several sectors (e.g. fishery products or
  honey), imports are allowed only from countries
  that are on a list of approved countries,
• Exporting country needs time for legislation and
  other steps
• Importing country needs time to arrange for
  inspection mission and consider its findings
• In several sectors (e.g. poultry), countries have
  to be declared free of certain diseases
• It took Costa Rica five years to be declared free
  of Newcaste disease for exports to the US

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Stringency of standards

• Aflatoxin
• Stringent limit values for aflatoxin levels for
  groundnut imported into EU (more stringent than
  Codex Alimentarius)
• Maximum Residue Levels (MRL)
• Threshold for MRLs can be very low and difficult
  to comply with
• Cuba claims that MRL levels for honey prescribed
  by the EU are so low that it is impossible for
  Cuban laboratories to check them. Honey has to be
  checked in Germany

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Capacities in developing countries

• Standard setters and standard takers
• Relevance of standards for domestic conditions
• Domestic regulatory problems
• Small and medium-sized enterprises (SMEs)
• Other capacity problems

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SMEs may face particular problems

• Lack of information, technology and capital
• Difficulty to achieve economies of scale to make
  the environmental investment profitable
• Lack of infrastructure and limited physical space
  available for environmental equipment
• Difficulty to acquire inputs at competitive
  prices
• Difficulty to ensure that raw materials are
  produced in accordance with environmental
  criteria
• Costs of testing, inspection, and verification
  may be very high

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Factors influencing impacts on trade and
competitiveness

• Destination of exports Greater trade effects for
  exports to countries imposing stringent
  environmental regulations
• Basis for export competitiveness Export
  competitiveness based on low prices may be more
  affected by the need to comply with environmental
  requirements
• Firm size SMEs may find it particularly
  difficult to comply with environmental
  requirements

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Factors influencing impacts on trade and
competitiveness

• Availability of raw materials specialized
  inputs, technology and information play a key
  role
• Corporate structure Companies which are
  vertically integrated can exercise some control
  over their suppliers
• Relationship with foreign firms Strong links
  with foreign firms can facilitate compliance by,
  for instance, increasing access to and transfer
  of environmentally sound technologies

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International standard-setting

• Negotiations on international standards and
  guidelines are normally open to all interested
  countries, but effective participation requires
  detailed preparation at the national level
• The participation of developing countries in
  international standard-setting is, in general,
  weak. Standard-setting processes may be
  time-consuming and expensive
• Improving effective participation of developing
  countries is a key implementation issue

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• WTO provisions
• http//www.wto.org/english/tratop_e/envir_e/envir_
  e.htm

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General principles 1

• Most Favoured Nation principle
• there should be no discrimination between like
  products of different Member countries. Thus,
  the same regulations should apply to all
  countries
• The national Treatment principle
• Imported products must be accorded a treatment no
  less favourable than like domestic products

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General principles 2

• Like products
• WTO rules have generally been interpreted as not
  allowing to differentiate products based on their
  processes or production methods (PPMs), unless
  the PPM has an impact on the final
  characteristics of a product
• Therefore, it is generally considered that WTO
  rules do not permit WTO Members to impose
  restrictions on imports of a product purely on
  the basis of how the product is produced
  (non-incorporated PPMs)

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Agreement on the Application of Sanitary and
Phytosanitary Measures (SPS)

• The Agreement addresses the variety of measures
  used by governments to ensure that human and
  animal food is safe from contaminants, toxins,
  disease-causing organisms and additives, and
  measures to protect human health from pests or
  diseases carried by plants and animals
• http//www.wto.org/english/tratop_e/sps_e/sps_e.ht
  m

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SPS Agreement 1

• SPS measures may only be applied to the extent
  that they are necessary to the protection of life
  of humans and animals or for the protection of
  plant life
• They should not create arbitrary or unjustified
  discrimination between Member Countries where
  identical or similar conditions exist
• Member Countries are encouraged to establish
  their measures on the basis of standards,
  directives and international recommendations, in
  order to internationally harmonise sanitary and
  phytosanitary measures

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SPS Agreement 2

• International standard-setting bodies mentioned
  in the SPS Agreement
• Codex Alimentarius
• the International Office of Epizootics
• the International Plant Protection Convention
• WTO Members may introduce or maintain stricter
  measures if these are based on a scientific
  justification or if they are the consequence of
  coherent decisions based on an appropriate
  evaluation of risks

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SPS Agreement 3

• Equivalence
• Article 4 of the SPS Agreement, which stipulates
  that measures, which are demonstrably equivalent,
  should be acceptable to the importing country
• Some members of the WTO have interpreted
  equivalence to mean sameness to achieve the
  required level of SPS protection
• Regional standards
• Allow countries to export from certain regions
  that are free from diseases

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Special and differential treatment 1

• Article 10 of the SPS Agreement provides scope
  for the phased introduction of new SPS measures
  and longer periods for compliance for products of
  export interest to developing countries
• The SPS Committee may also grant developing
  countries and LDCs exceptions from the
  obligations under the agreement based on their
  financial, trade and development needs
• Active participation of developing country
  Members in international organisations should be
  encouraged

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Special and differential treatment 2

• Article 9 provides for technical assistance that
  may be awarded for technical expertise, training
  and equipment to adjust and comply with
  appropriate SPS measures
• Important The above are best endeavour and not
  mandatory provisions

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Enquiry points

• Each WTO Member country must establish one
  enquiry point to respond to questions from other
  Member countries and provide documentation on
  sanitary and phytosanitary regulations adopted or
  proposed, control and inspection procedures,
  production and quarantine treatment, pesticide
  tolerance, risk assessment procedures, etc.
• Same requirement exists under the TBT Agreement

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Agreement on Technical Barriers to Trade (TBT)

• Aims to ensure that technical regulations,
  standards and conformity assessment procedures do
  not create unnecessary obstacles to trade
• Recognizes the right of WTO Members to protect
  human, animal and plant life or health or the
  environment and to set the level of protection as
  it deems appropriate
• Encourages countries to use international
  standards where these are available
• http//www.wto.org/english/tratop_e/tbt_e/tbt_e.ht
  m

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Conformity assessment procedures

• These include, for example control, testing,
  verification and certification
• The TBT Agreement calls upon WTO Members to
  ensure, whenever possible, that results of
  conformity assessment procedures in other Members
  are accepted, even when those procedures differ
  from their own, provided they are satisfied that
  those procedures offer an assurance of conformity
  with applicable technical regulations or
  standards equivalent to their own procedures.

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• Policy responses

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At the national level

• Awareness raising
• Implementation of national enquiry points
• Training
• National and regional standard setting
• Technology, innovation and enterprise development
• Support for small and medium sized enterprises
  (SMEs)
• Institutional changes

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Awareness raising

• Campaigns to create awareness on food safety
• Awareness of commercial and environmental
  benefits of environmental quality

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National standard setting

• Formulation of comprehensive policies on food
  safety and quality
• Development of national standards compatible with
  both standards in international markets and
  domestic conditions
• Policy dialogues to develop standards and
  regulations that can be effectively enforced
• Strengthening domestic infrastructure, e.g. in
  the areas of training, testing and certification

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Technology, innovation and enterprise development

• New processes for processing and packaging with
  greater emphasis on environment-friendly inputs
• Promotion of clean technologies (UNEP/UNIDO
  Centres for Clean Technology)
• Enterprise development to strengthen
  environmental quality of products and production
  processes and gain international competitiveness
• Business partnerships

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Support for SMEs

• Facilitate the registration of SMEs
• Improve the provision of timely and accurate
  information to SMEs
• Improve the availability of environment-friendly
  input materials for SMEs
• Promote partnerships

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Institutional measures

• Policy dialogues and co-ordination, involving the
  private sector
• Sharing of information
• National and regional networks of laboratories
• Regional testing and certification bodies

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At the multilateral level

• Transparent and participatory preparation of
  standards
• International standard setting processes
• Technical assistance
• Multilateral aid agencies

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In the area of trade rules

• Technical assistance under trade rules
• Mutual recognition of conformity assessment and
  certification procedures
• Equivalence

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• UNCTAD/CBTF contribution and possible follow up

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Ongoing UNCTAD initiatives

• Project Standards and Trade
• Funded by International Development Research
  Centre (IDRC), Canada
• Regional scoping studies
• Africa
• Central America
• South Asia
• Overall scoping paper
• Workshop (2002)
• UNCTAD/UNDP Project on Trade and
• Environment Policy implications for Viet Nam

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• Issues for discussion

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Experiences of Viet Nam?

• Has Viet Nam faced significant health and/or
  environmental requirements in overseas markets?
• How has Viet Nam responded to such requirements?

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What should be priorities for Viet Nam?

• Creating awareness of health and environmental
  requirements in international markets among
  government ministries, producers and others?
• Improving information flows?
• Improving institutional capacity to develop
  and/or strengthen domestic standards and
  infrastructure?
• Exploring regional cooperation?
• Enhancing understanding of WTO rules, in
  particular the SPS and TBT Agreement?
• Participating effectively in international
  standard-setting and other international debates?
  
• Others?

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Possible follow up under CBTF?

• What issues should be further elaborated in
  future training activities?
• How could CBTF assist Viet Nam
• Sector-specific studies?
• Training?
• Policy dialogues?
• Regional initiatives?
• Support to Vietnams effective participation in
  international standard-setting?

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• End
• Thank you very much

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