Contents

1
Contents

• Introduction
• Eco-labelling and the WTO
• Potential trade distortions
• Possible approaches to minimise trade distortive
  effects
• Conclusion

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I. Introduction

• Eco-labelling schemes
• are market based and rely on consumers choice
• are usually voluntary
• are often based on life cycle analysis and
  therefore awarded on the basis of non-product
  related Process and Production Methods (PPMs)
• do not establish direct restrictions at the
  border
• can, however, lead to trade distortions caused by
  the way the criteria for awarding a label are
  determined

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II. Eco-labelling and the WTO

• Controversy if rules of Agreement on Technical
  Barriers to Trade (TBT) or General Agreement on
  Tariffs and Trade (GATT) do apply for
  eco-labelling schemes based on a life cycle
  analysis
• Application of WTO rules ensure that the
  criteria for obtaining an eco-label are
  non-discriminatory and transparent and that
  eco-labelling schemes do not create unnecessary
  barriers to trade
• Eco-Labelling Schemes must comply with
  non-discrimination principle
• i.e. a product with an eco-label must be treated
  in the same way like a product without eco-label
  (no different taxation!!). Products remain like
  products according to the traditional GATT
  like-product principle.

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II. Eco-labelling and the WTO

• Doha Development Agenda (DDA)
• The ministers instruct the Committee on Trade
  and Environment...to give particular attention to
  labelling requirements for environmental
  purposes.
• Work includes the identification of any need to
  clarify relevant WTO rules
• CLARIFICATION is necessary because
• labelling activities by developed countries
  increase
• unsatisfactory legal situation in WTO / no case
  law yet

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III. Potential trade distortions

• Eco-labelling schemes can establish non-tariff
  barriers to trade!
• Direct discrimination
• Foreign companies are ignored when the
  eco-labelling scheme is set up
• Unequal access to information for domestic and
  foreign firms
• Indirect discrimination
• Criteria for awarding the label are based on
  domestic environmental conditions and preferences
  without consideration of differing regional
  conditions
• Eco-labelling schemes are often biased toward
  domestic industry and production standards
• Special problems for developing countries
• Limited ability to compete with technological
  more advanced PPMs used in developed countries
• Costs for certification and compliance are
  especially burdensome for developing countries

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IV. Possible approaches to minimise trade
distortive effects

• All companies (foreign and domestic) must have
  equal access to information on labelling
  programmes and procedures
• Transparency and consultation during
  eco-labelling process
• Notification of eco-labelling schemes under
  TBT-Agreement (including schemes based on life
  cycle analysis)
• International harmonisation of criteria for
  awarding eco-labels
• Standards on standard setting (ISO 14 000 series)
• Criteria of ecological equivalence e.g.
  recognition of exporters compliance with their
  domestic environmental standards
• Mutual recognition of eco-labelling schemes among
  WTO members
• Capacity building and technical assistance for
  developing countries
• Clarification of eco-labelling with WTO rules

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V. Conclusion

• Eco-labelling schemes can be crucial in solving
  the PPM problem provided that they meet the
  following criteria
• Openness
• Transparency
• Ecological Equivalence
• No different treatment of identical products
  which carry an eco-label and which do not carry
  an eco-label