The full text of this study when printed out is 81 pages long, with 249 footnotes. In order to post it on the internet, it required dividing the text into an executive summary and 8 parts. Below is the Table of Contents for the complete document.
Introduction Page 1
Section One: Policy Discussion Page 5
A. Balancing Interests Page 6
Conflicts Between Consumers and Producers
Conflicts Between Competing Producers
B. Implementation Feasibility Page 9
Processing and Production Methods (PPMs)
Life Cycle Analysis (LCA)
Equivalency and Mutual Recognition
Institutional Capture
Section Two: Four Case Studies Page 18
The Timber Case
The Cost of Electricity Case
The Organic Foods Case
The Artificial Breastmilk Substitutes Case
Section Three: Conclusion and Recommendations Page 29
A. Conclusion Page 30
B. Recommendations Page 31
Appendix: Existing Schemes Page 39
A. National Schemes Page 39
Austria
Canada
China
Germany
India
Indonesia
Japan
The Netherlands
Republic of Korea
Singapore
Turkey
United Kingdom
B. Intergovernmental Standards Page 49
Codex Alimentarious Commission
Convention on International Trade in Endangered Species
European Union
International Standards Organization
International Tropical Timber Organization
Nordic Coordinating Body for Environmental Labeling
World Health Organization
World Trade Organization Committee on Trade and Environment
C. Major Non-Governmental Ecolabels Page 63
ECO-O.K.
Forestry Stewardship Council
Green Seal
Scientific Certification Systems
D. Fair Trade Labeling Page 67
The Fair Trade Federation
Max Havelaar
Sustainable Coffee Initiative
TransFair International
E. Other Health and Safety Labels Page 72
Chemical Right-to-Know
International Federation of Organic Agriculture Movements
rBGH-Free Dairy Products
Other Genetically Engineered Foods
ABSTRACT
In recent years, environmental concern has stimulated new initiatives
in labeling policies, which have been used to protect consumer
health and safety for more than a century. Voluntary "ecolabelling"
schemes now exist in dozens of countries, as official governmental
policy or promoted by non-governmental organizations, and internationally.
As trade expands, international cooperation amongst ecolabelling
schemes is required. Negotiated agreements based on equivalent
environmental impacts or mutual recognition between national schemes
is feasible, but only if there is a careful balancing of all interests.
By definition, ecolabelling imparts preferential access to markets
for producers complying with certain processing and production
methods. Such discrimination may conflict with the GATT's Most-Favoured-Nation
rules and certainly generates new competitive pressures amongst
producers. In particular, producers with scarce capital may lose
markets and low per capita income countries may lose valuable
foreign exchange.
When ecolabelling criteria are stringent, producers lacking assured
returns on their environmental investments may seek to undermine
implementation. When ecolabelling criteria reflect a nation's
domestic preferences, foreign producers may challenge them as
trade barriers. When processing and production criteria are uninformed
by an internationally standardized life cycle analysis, negotiations
for equivalency and mutual recognition may fail. When producers
are denied access to the ecolabelled market niche for any of these
reasons, existing trends towards monopolistic global trade are
exacerbated; ecolabelling itself may become a restrictive business
practice enhancing the market shares of major transnational corporations.
Especially when ecolabelling and certification bodies, or other
decisionmaking institutions, are captured by powerful interests,
the implementation of an effective ecolabelling policy may be
impossible.
In the present period of international institutional evolution,
broad and balanced participation is essential to ensure both the
design and the implementation of effective policies to achieve
sustainable patterns of production and consumption.
EXECUTIVE SUMMARY
For at least the past century, the labeling of products to provide
information valued by consumers has been commonplace. Private
initiatives such as the insurance industry's labeling of safe
electrical appliances mingle with governmental regulations for
the labeling of tobacco and packaged foods.
During the past decade or so, the green movement has created demand
for a whole new body of labeling regimes that give consumers information
about the environmental impacts of the products they buy. The
term "ecolabel" has become officially accepted: national
governments, the European Union, the Organization for Economic
Cooperation and Development (OECD) and other intergovernmental
bodies are all working to establish ecolabelling policies that
meet the demands of the greens as well as national and regional
interests. Simultaneously, numerous non-governmental organizations
have spawned their own ecolabels.
The typical ecolabelling program is sponsored by a government
agency or a credible non-governmental organization with the objective
of encouraging manufacturers to meet specifications ensuring that
their products and manufacturing processes have a lesser impact
on the environment. The specifications are usually drawn up for
individual product categories -- such as bathroom tissue or light
bulbs -- by a committee comprised of corporate representatives,
environmentalists, consumers, and other interested parties such
as religious organizations. The committee is generally appointed
by the sponsoring agency, and advised by a recognized scientific
organization. Often the committee will design the specifications
so that only a small number of manufacturers in the market for
each product category will be licensed to carry the label; while
this policy does not mean that labeled products meet "best
available" standards, it does contribute to continuous improvement
in environmental quality by encouraging competitors within a market
to upgrade.
Manufacturers prepared to meet the specifications usually pay
an application fee to submit their product for testing by the
scientific body, along with any essential documentation regarding
the production process -- which may be inspected by the scientific
body as well. Products meeting the specifications earn their manufacturers'
the right to display the ecolabel, on the product or its packaging
and on advertisements; this right is usually licensed for a period
of time and subject to periodic re-inspections. License renewal
often requires payment of both an annual fee and a stipulated
percentage of the revenues earned for that product.
The proliferation of ecolabelling schemes, especially in Europe,
prompted the Organization for Economic Cooperation and Development
(OECD) to host a Workshop on Ecolabelling and International Trade
in October 1994. The discussion paper for this workshop points
out that most ecolabelling programs tend to focus on domestic
products and domestic environmental standards, thus creating incentives
that discriminate against imported goods. The paper suggests that
international environmental standards could be used to establish
criteria enabling "equivalency" and "mutual recognition"
amongst differing national schemes. Otherwise, ecolabelling programs
could be considered non-tariff trade barriers in violation of
the rules of the newly formed World Trade Organization (WTO),
set during the Uruguay Round negotiations of the General Agreement
on Tariffs and Trade (GATT.)
Ecolabelling is on the future agenda of the Committee on Trade
and Environment of the WTO. At present, the GATT Agreements on
Technical Barriers to Trade and on the Application of Sanitary
and Phytosanitary Standards -- known as the TBT and SPS agreements
-- do require the use of international standards, where they exist,
as the basis for national standard-setting. During the Uruguay
Round negotiations, there was fierce opposition to this principle,
primarily on grounds that the international standards would, in
some cases, undermine more stringent national standards for health,
safety and environmental protection. This objection has already
emerged in preliminary debate over a WTO policy on ecolabelling:
that international criteria for awarding an ecolabel could likewise
oblige harmonization towards lower standards rather than higher.
Developing countries, on the other hand, want to ensure that ecolabels
will not become yet another restrictive business practice, further
limiting access to markets for their products. After all, many
national economies depend upon export earnings with which to pay
for food imports and social services. During a week-long meeting
in December 1994, delegates to a working group on trade, environment
and development of the United Nations Conference on Trade and
Development (UNCTAD) emphasized the competition problems facing
developing countries. These problems include the high costs of
submitting products for certification, especially for small producers;
the high costs of altering production processes to meet the varying
criteria of a number of different foreign programs; and biased
criteria-setting, with most of the programs designed in the importing
countries with the participation of domestic competitors according
to domestic perceptions of environmental issues.
Presumably, these discriminatory effects could be eliminated by
developing broad consensus on conventions for "processing
and production methods" (PPMs) and life cycle analysis (LCA)
-- an evaluation of the environmental impacts of a product "from
the cradle to the grave" or, as the UNCTAD working group
put it, "from cradle to export border" and "from
import border to grave." In fact, most existing ecolabelling
schemes utilize LCA methodology to some extent but skip many stages
of analysis, especially for PPMs. Collecting life cycle information,
even for a limited model, can be very costly. In some cases, data
will be reported differently by different companies; in other
cases, data may not even exist. As a result, these analyses do
not yield decisive information and can lead to contradictory conclusions.
In addition to problems of data collection, there are no conventions
for developing consistency in LCA methodology itself, as yet.
There is no convention for determining boundaries -- that is,
whether to include the full life cycle of each of the product's
component parts or just that of the final product; and whether
or not to consider the energy inputs, byproducts and waste outputs
of the manufacturing processes of either the product or its component
parts. Indeed, researchers are far from agreeing on the full costs
of relative forms of energy. And there is no convention for assessing
qualitative, as opposed to quantitative, values. While the monetary
value of impacts like the extinction of a species or the destruction
of massive tracts of habitat may be described as "infinite,"
so too the failure to establish monetary values -- and liability
claims -- lowers these values to essentially zero.
Such technical problems make international agreement on policies
that can have significant economic and social impacts extremely
difficult. When institutions with decisive roles in standard-setting
and other definitional processes are unduly influenced by private
interests, the public policy goal of negotiating effective conventions
may seem unreachable. Critics point to the participation of food
industry executives on official delegations of Codex Alimentarious,
for example, where presumptive standards for health and safety
such as maximum residue levels of pesticides on internationally
traded foods are negotiated. Similar fears are expressed by environmental
advocates as the International Standards Organization proceeds
with its 14000 Series on Environmental Management Systems, which
includes Environmental Labelling Guidelines. As ecolabelling becomes
a matter of international policy, decisive inputs from captured
institutions could jeopardize its viability as effective public
policy. Indeed, in such a case, many producers may regard ecolabelling
as a restrictive business practice with some legitimacy and the
public's health and welfare and both local and global environmental
impacts would not benefit as they should from an ecolabelling
regime.
There are examples of these problems worth studying. Austria introduced
national legislation mandating the ecolabelling of imported tropical
timber; exporting countries which feared losses in market share
to unlabelled temperate and boreal products successfully blocked
the initiative by challenging the Austrian as a non-tariff trade
barrier at the GATT. Similar challenges could arise over the ecolabelling
of some manufactured goods as more "energy efficient;"
varying life-cycle methodologies affect producers differently
in different regions of the world, as do the environmental impacts
of various forms of electricity generation. In the international
organic food industry, efforts to define equivalency and to achieve
mutual recognition have advanced fairly well; a virtual trade
war broke out between European and U.S. producers and certifiers,
nonetheless, which may result in higher standards rather than
lower, given the absence of institutional capture. On the other
hand, the Gerber Company invoked the GATT and other international
trade agreements to threaten Guatemala's adherence to its own
national laws that were based on the World Health Organization's
international standards for the labeling and marketing of artificial
breastmilk substitutes.
These cases illustrate the way in which ecolabelling has provoked
an international debate with major economic and political implications.
While there are legitimate reasons for encouraging ecolabelling
as a means of providing consumers with information they desire
in an increasingly complex marketplace, producers have legitimate
concerns regarding the fairness of these schemes in regulating
their access to markets. Both consumers and producers have reason
to examine the merits of one scheme over another in meeting environmental
goals as well as other social objectives, while seeking solutions
to the problems created by a proliferation of differing schemes
throughout the world. Conscientious consumers, too, may wish to
consider the social impacts as well as the environmental impacts
of the products they buy and the labeling programs they support.
And finally, institutional and technical considerations will require
significant attention if ecolabelling is to contribute to the
construction of an ecologically sustainable and socially just
global marketplace.
There is evidence that labeling has been very successful in meeting
environmental objectives in some cases. In Germany, for example,
the labeling of low-emissions oil and gas heating appliances reduced
the quantities of sulphur dioxide, carbon monoxide, and nitrogen
oxides emitted by 30 percent; the labeling of low-solvent paints
and varnishes increased the market share for these products from
1 to 50 percent with an estimated reduction of some 40,000 fewer
tons of solvents released into the environment.
On the other hand, there is also some evidence that labels can
be ineffective or even a disincentive. Manufacturers avoided the
Netherlands' ecolabel for refrigerators, first published in late
1993, presumably in order to seek the impending EU label instead
which would allow some use of hydroflourocarbons excluded from
the more rigorous Dutch scheme. And Korean
consumers avoided certain ecolabelled products, preferring virgin
materials when price factors were equal.
On balance, however, green products seem to sell well -- judging
from the many producers who have invested in green public relations.
If ecomarketing is here to stay, then ecolabelling may provide
consumers with both information and a political instrument capable
of regulating inaccurate "greenwash" -- providing that
the ecolabelling institutions remain vehicles of balanced policymaking.
Consumers must have ample access to and authority within the institutional
mechanism, and smaller businesses must be as well represented
as larger firms. This is as true at the international level as
it is within a national context.
Apart from the institutional issues of transparency and balanced
participation in the policymaking process, consumers and producers
both rightly note that existing structures and incentives -- whether
regulatory or market-based -- are generally inadequate to ensure
investment in environmental, health and safety, and other socially
responsible management processes. At the same time, structures
and incentives must be altered to ensure competition within the
different markets for ecological and otherwise socially responsible
products.
In seeking to make the implementation of effective ecolabelling
policies feasible, we offer a few recommendations:
1) Ecolabelling schemes should be linked to a public campaign
of intensive consumer education based on accurate, thorough and
intelligible product information.
2) Ecolabelling schemes should broaden their scope to include
social criteria -- prioritizing the health and safety of consumers,
workers, communities and ecosystems; when criteria differ, they
should seek mutual recognition and equivalency based on negotiations
to define minimum levels of protection while encouraging better
practices.
3) Ecolabelling schemes should be linked to compatible financing
vehicles to enable compliance while ensuring competition; they
should seek to negotiate a standardized approach to life cycle
analysis in order to better structure loan arrangements.
4) Ecolabelling schemes should seek to negotiate procurement
agreements with major consumer institutions to achieve essential
economies of scale.
5) Ecolabelling schemes should ensure balanced access to and
influence within policymaking structures.
While institutional innovation at the international level undoubtedly
proceeds into the next century, certain principles are fundamental
prerequisites to any international mechanism that expects to balance
competing interests in order to achieve successful policy results.
Broad participation of all interested parties is essential. Transparent
negotiations based on accurate information that is appropriate
to differing economic, social, ecological, and cultural circumstances,
must be encouraged in multi-party and multilateral frameworks.
The differentiation of markets into those that are ecolabelled
and those that are not will not necessarily increase opportunities
for small producers while lowering consumer prices, as the theory
of monopolistic competition would suggest. To the contrary, ecolabelling
could exacerbate current global trends by which developing countries'
shares of international markets shrink and, within all countries,
small businesses' shares of both national and international markets
shrink unless ecolabelling schemes are accompanied by aggressive
affirmative policies to facilitate the participation of small
firms and developing country exporters.
In sum, political processes fully engaging consumers and environmentalists,
health and safety advocates, and other social reformers with producers
large and small, committed to devising policies linked to adequate
financing, standardized life cycle analysis, and strategic procurement
can ensure that ecolabelling contributes effectively to building
a more sustainable future.
INTRODUCTION
In 1894, just after the invention of electricity, an agent of
the Chicago Board of Fire Underwriters founded the Underwriters'
Electrical Bureau. He saw ample business opportunity in evaluating
product safety, as lighting and other new-fangled electrical devices
created substantial new risk of liability for the insurance industry.
Today, labels awarded by the private not-for-profit Underwriters
Laboratory ("The UL Mark") are practically universal
for toasters, refrigerators, fans and other electrical, mechanical,
and electronic products in the United States and Canada, as consumers
learned not to buy products lacking this assurance of safety.
In 1910, the Good Housekeeping Seal of Approval was launched in
the United States. Over the decades, it has become a household
term for anything considered absolutely reliable. Other labeling
programs, too, became popular and even obligatory as means of
informing consumers -- and at times, warning them -- of some possible
impacts of their purchasing decisions. "Union-made"
and "Made in America" are voluntary labels encouraged
by the trade union movement.
After World War II with a surge in the 1970s, public-spirited
organizations in Europe organized markets for fair trade, products
shipped directly from peasants in the Third World to consumers
in the First World. These projects increasingly rely upon sophisticated
marketing, with labels assuring not only socially responsible
consumption but ecologically sound production as well.
The labeling of tobacco products began in 1966, when the Federal
Trade Commission required all cigarette packages to be labeled
with "Surgeon General's Warning: Smoking Causes Lung Cancer,
Heart Disease, Emphysema, and May Complicate Pregnancy."
Written warnings are also enclosed with thousands of kinds
of commercial products, as manufacturers seek to escape product
liability lawsuits; a legally "adequate" warning may
require not only a written package insert but correspondence with
user classes, notices in prominent journals, and so on.
Nutritional labeling of packaged foods became mandatory in the
U.S. in 1982 although optional labeling was well-established earlier.
The new rules defined standard serving sizes, required the publication
of caloric values, and set criteria for low-fat, saturated fat,
and unsaturated fat. In subsequent years, these rules have been
significantly revised; for example, in 1993, new regulations came
out for the labeling of fresh produce coated with wax or resin.
During the past decade or so, the green movement has created demand
for a whole new body of labeling regimes that give consumers information
about the environmental impacts of the products they buy. The
term "ecolabel" has become officially accepted: national
governments, the European Union, the Organization for Economic
Cooperation and Development (OECD) and other intergovernmental
bodies are all working to establish ecolabelling policies that
meet the demands of the greens as well as national and regional
interests. Simultaneously, numerous non-governmental organizations
have spawned their own ecolabels.
Ecolabelling programs sponsored by government agencies have the
objective of encouraging manufacturers to meet specifications
ensuring that their products and manufacturing processes have
a lesser impact on the environment. The specifications are usually
drawn up for individual product categories -- such as bathroom
tissue or light bulbs -- by a committee comprised of corporate
representatives, environmentalists, consumers, and other interested
parties such as religious organizations. The committee is generally
appointed by the sponsoring agency, and advised by a recognized
scientific organization. Often the committee will design the specifications
so that only a small number of manufacturers in the market for
each product category will be licensed to carry the label; while
this policy does not mean that labeled products meet "best
available" standards, it does contribute to continuous improvement
in environmental quality by encouraging competitors (at least
those with adequate capital) to upgrade.
Manufacturers prepared to meet the specifications usually pay
an application fee to submit their product for testing by the
scientific body, along with any essential documentation regarding
the production process -- which may be inspected by the scientific
body as well. Products meeting the specifications earn their manufacturers'
the right to display the ecolabel, on the product or its packaging
and on advertisements; this right is usually licensed for a period
of time and subject to periodic re-inspections. License renewal
often requires payment of both an annual fee and a stipulated
percentage of the revenues earned for that product.
The proliferation of ecolabelling schemes, especially in Europe,
prompted the Organization for Economic Cooperation and Development
(OECD) to host a Workshop on Ecolabelling and International Trade
in October 1994. The discussion paper for this workshop points
out that most ecolabelling programs tend to focus on domestic
products and domestic environmental standards, thus creating incentives
that discriminate against imported goods. The paper suggests that
international environmental standards could be used to establish
criteria enabling "mutual recognition" amongst differing
national schemes. Otherwise, ecolabelling programs could be considered
non-tariff trade barriers in violation of the rules of the newly
formed World Trade Organization (WTO), set during the Uruguay
Round negotiations of the General Agreement on Tariffs and Trade
(GATT.)
Ecolabelling is on the future agenda of the Committee on Trade
and Environment of the WTO. At present, the GATT Agreements on
Technical Barriers to Trade and on the Application of Sanitary
and Phytosanitary Standards -- known as the TBT and SPS agreements
-- do require the use of international standards, where they exist,
as the basis for national standard-setting. During the Uruguay
Round negotiations, there was fierce opposition to this principle,
primarily on grounds that the international standards would, in
some cases, undermine more stringent national standards for health,
safety and environmental protection. This objection has already
emerged in preliminary debate over a WTO policy on ecolabelling:
that international criteria for awarding an ecolabel could likewise
oblige harmonization towards lower standards rather than higher.
Developing countries, on the other hand, want to ensure that ecolabels
will not become yet another restrictive business practice or non-tariff
barrier, further limiting access to markets for their products.
After all, many national economies depend upon export earnings
with which to pay for food imports and social services. During
a weeklong meeting in December 1994, delegates to a working group
on trade, environment and development of the United Nations Conference
on Trade and Development (UNCTAD) emphasized the competition problems
facing developing countries. These problems include the high costs
of submitting products for certification, especially for small
producers; the high costs of altering production processes to
meet the varying criteria of a number of different foreign programs;
and biased criteria-setting, with most of the programs designed
in the importing countries with the participation of domestic
competitors according to domestic perceptions of environmental
issues.
The latter problem should concern consumers as well as developing
country producers. A few examples covering wood products, textiles,
and paper may help to explain these concerns. Labeling for sustainable
tropical timber ostensibly gives exporters with a label an advantage
over all other timber producers. But, as consumers learn to avoid
unlabeled tropical timber, it could also create an unfair advantage
for timber coming from clearcut forests in the North unless temperate
and boreal timber, too, were subject to equivalent labeling. In
the case of textiles, criteria favoring environmentally friendly
chemical dyes may exclude from consideration altogether dyes made
of natural substances. And preferences for recycled paper products
over virgin pulp would discriminate against sustainable plantation
forestry; it is at least debatable that farmed pulpwood from Brazil
could be as ecologically-sound as the energy-intensive re-manufacture
of post-consumer paper and the related disposal of de-inked wastes
in Denmark.
Presumably, the arbitrary nature of these discriminatory effects
could be eliminated by developing broad consensus on conventions
for "processing and production methods" -- and life
cycle analysis (LCA) -- an evaluation of the environmental impacts
of a product "from the cradle to the grave" or, as the
UNCTAD working group put it, "from cradle to export border"
and "from import border to grave." In fact, most existing
ecolabelling schemes utilize LCA methodology to some extent but
skip many stages of analysis regarding a product's processing
and production methods (PPMs). Collecting life cycle information,
even for a limited model, can be very costly. In some cases, data
will be reported differently by different companies; in other
cases, data may not even exist. As a result, these analyses do
not yield decisive information and can lead to contradictory conclusions.
In addition to problems of data collection, there are no conventions
for developing consistency in LCA methodology itself, as yet.
There is no convention for determining boundaries -- that is,
whether to include the full life cycle of each of the product's
component parts or just that of the final product; and whether
or not to consider the energy inputs, byproducts and waste outputs
of the manufacturing processes of either the product or its component
parts. Indeed, researchers are far from agreeing on the full costs
of relative forms of energy. And there is no convention for assessing
qualitative, as opposed to quantitative, values. While the monetary
value of impacts like the extinction of a species or the destruction
of massive tracts of habitat is often described as "infinite,"
so too the failure to establish monetary values -- and liability
claims -- lowers these values to essentially zero.
In short, there are legitimate reasons for encouraging ecolabelling
as a means of providing consumers with information they desire
in an increasingly complex marketplace. At the same time, producers
and consumers have legitimate concerns regarding the fairness
of these schemes in regulating access to markets. Both consumers
and producers have reason to examine the merits of one scheme
over another in meeting environmental goals, as well as other
social objectives, while seeking solutions to the problems created
by a proliferation of differing schemes throughout the world.
Conscientious consumers, too, may wish to consider the social
impacts as well as the environmental impacts of the products they
buy and the labeling programs they support. And finally, institutional
and technical considerations will require significant attention
if ecolabelling is to contribute to the construction of an ecologically
sustainable and socially just global marketplace.
In the following pages, we will elaborate on these points of view.
In Section One, we discuss current policy issues -- particularly
debates in trade policy -- raised by ecolabelling, and illustrate
the discussion with details from a variety of specific cases.
In Section Two, we discuss four case studies which illustrate
the policy issues. In Section Three, we draw conclusions and make
a few recommendations. In the Appendix, we describe in detail
a large number of existing ecolabelling schemes from governmental,
intergovernmental, and non-governmental initiatives.
Effective policy depends upon two essential factors. First, it
must carefully balance conflicting interests -- the result must
be so well balanced that the affected parties agree to cooperate
in its implementation. In the case of ecolabelling, or indeed
any labeling, conflicts arise between consumers and producers,
and between competing producers. Secondly, its implementation
must be feasible. In the case of labeling, there are several technical
problems of a legal, analytical, and political nature that have
yet to be solved. And there is the problem of institutional capture
-- perhaps the most difficult obstacle to establishing labeling
regimes that are well enough balanced to satisfy both consumers
and producers, while creating viable rules that will be recognized
by competing producers.
We will discuss each of these in more detail below, illustrating
with four cases regarding timber, the costs of electricity, organic
foods, and artificial breast milk substitutes.
A. BALANCING INTERESTS
Conflicts Between Consumers and Producers
Most consumers want information. They want to know what they are
buying to satisfy their desires and concerns whether they be environmental,
health and safety related, nutritional or other social concerns.
Surveys show consistently that a large and growing percentage
of consumers want this information in order to make choices with
their purchasing dollar, and that they are willing to pay more
for the products they consider superior, although a significant
portion of the consuming public remains ignorant of the distinction
and many cannot afford to pay more under any circumstances.
Producers, on the other hand, usually want to get their products
to market at the lowest possible cost. They are always willing
to invest in upgrading their operations, providing the financing
is available and they can be assured of timely returns on this
investment. So long as the market niche for a particular ecologically
sound product remains small, the return is less assured. And so
long as standards vary from market to market and are perceived
to fluctuate within markets, investing in change incurs greater
costs to meet each market's requirements as well as greater risk
that the investment will not achieve the ultimate standard.
Upgrading plants to meet environmental standards is a minor expense
relative to total costs for most industries. Nonetheless, those
sectors for which such upgrading entails a greater relative investment
include those for which standard-setting and ecolabelling are
most in demand: pulp and paper, mining and petroleum products,
chemicals, fertilizers, and wood products. Thus, many producers
find it more economical to avoid these investments.
Indeed, many consumers and environmentalists assert that irresponsible
lobbying and corporate "greenwash" predominate over
legitimate investment in improved corporate environmental performance
and management. Industry lobbying in opposition to stringent ecolabelling
criteria has been successful in the United Kingdom, where corporate
representatives have been appointed to seats on the UK Ecolabelling
Board, as well as in the European Community, where ecolabelling
boards are by law to "guarantee their independence and neutrality."
Generally, industry has better access to the decision making process
for most ecolabelling schemes. Virtually all invite balanced participation
from environmental, consumer and manufacturing groups; however,
the consumers and environmentalists rarely are able to provide
experts and may send token representation while affected industry
groups may send several. Germany's ecolabelling scheme is the
only one to exclude profit making organizations from decision
making on criteria.
Furthermore, some consumers and environmentalists object to ecolabelling
on grounds that it does little to address "over-consumption."
Conscientious consumers may mistakenly perceive that they can
freely consume ecolabelled products. For this reason, Canada's
Environmental Choice ecolabelling program emphasizes that it does
"not use the words 'environmentally friendly' ... because
we do not want to suggest that these products or services are
perfectly harmless to the environment..."
Non-governmental organizations at the 1995 meeting of the Commission
on Sustainable Development issued a statement calling for "extreme
caution in approaching eco-labeling." Among other reasons,
they noted that ecolabelling programs can "tend to deny access
for the products of small producers and create further exclusivity
in international markets while promoting inessential consumption."
Conflicts Between Competing Producers
According to economic theory, imperfect competition creates monopolistic
behavior within industries as certain firms enjoy better economies
of scale and are able to dominate over time. Higher prices resulting
from such dominance then encourage new firms to enter that market
with slightly differentiated products, drawing customers away
from the monopolist and bringing prices back to normal levels.
Consumer preferences for environmentally and socially responsible
goods are stimulating a new generation of product differentiation.
Whether ecolabels will help to enable new firms to enter these
new markets, keeping prices down, or whether present industry
leaders will capture these new markets and maintain price premiums
is a question of prime importance to both consumers and entrepreneurs.
The United Nations Conference on Trade and Development (UNCTAD)
recently published a statistical overview of ecolabelling programs.
Considering just the major schemes presently in effect -- those
of Canada, the European Union, Germany, Japan, the Netherlands,
and the Nordics, the study found 212 distinct product categories
for which labels are now offered to the producers of preferred
products. Presently, developing countries participate in just
6 percent of the trade for these product categories that is imported
into Canada and less than 1 percent of that imported by the Nordics,
although they enjoy 45 percent share of the European Union's total
imports of these goods. Whether they are able to preserve this
market share -- and perhaps enhance it -- is a question for developing
country economic planners.
Small firms find it particularly difficult to comply with ecolabelling
criteria. They generally lack access to capital, technologies
and information; have smaller economies of scale requiring more
extensive credit; lack infrastructure for certain upgrades such
as wastewater treatment; lack the capacity for monitoring suppliers
and for transferring cost burdens to suppliers; and cannot afford
the costs of compliance testing and verification.
Brazilian officials, for example, have commented that smaller
companies there will have difficulty negotiating with their foreign
suppliers of key inputs -- particularly chemicals, raw cotton
and leather -- for the provision of materials that meet the criteria
of ecolabelling programs. Should such negotiations be successful,
these firms will have further difficulties, both procedural and
financial, in documenting their compliance and especially that
of their foreign suppliers.
Textile producers in developing countries are particularly vulnerable,
as they are mostly very small firms. Developing countries presently
supply about 80 percent of the European Union's imported tee-shirts,
dress shirts and bed linens; Turkey, Hong Kong, India, Bangladesh,
Mauritius, Maldives and Pakistan together meet about half of this
demand. The loss of these markets, if the producers are unable
to upgrade their facilities and otherwise comply with upcoming
certification requirements, will hurt not only the particular
businesses but their national economies' foreign exchange earnings
and balances of trade.
B. IMPLEMENTATION FEASIBILITY
From a policy perspective, there are at least four major technical problems -- legal, analytical, political, and institutional -- that are of particular interest in planning an effective international regime for ecolabelling:
Processing and Production Methods (PPMs)
The problem of PPMs is essentially a legal problem. Under the
most fundamental rules of the GATT, as originally negotiated in
1947, nations may not discriminate amongst their trading partners.
Ecolabelling can, arguably, be discriminatory; some products are
certified as preferable, according to the determination of an
authorized agency. If a product lacking an ecolabel were denied
entry into another country on this basis, its manufacturer could
claim that the ecolabelling regime was GATT-illegal.
The principle of General Most-Favored-Nation Treatment is expressed in Part One, Article One, Paragraph One of that document:
"...any advantage, favour, privilege, or immunity granted
by any contracting party to any product originating in or destined
for any other country shall be accorded immediately and unconditionally
to the like product originating in or destined for the territories
of all other contracting parties."
The principle of National Treatment is expressed in Article Three, Paragraph Four:
"The products of the territory of any contracting party imported
into the territory of any other contracting party shall be accorded
treatment no less favourable than that accorded to like products
of national origin in respect of all laws, regulations and requirements..."
With the advent of the environmental movement, the concept of
"like products" has been challenged. Regardless of the
identical nature of two finished products, it is argued, the manner
in which the two were produced could vary greatly. A significant
degree of environmental harm occurs during the production and
processing phases of manufacturing -- emissions and effluents,
for example. Different processing and production methods (PPMs)
may have different environmental impacts, even when the characteristics
of the end product are identical. Thus, the act of discriminating
against one product manufactured under a careless PPM in favor
of a like product manufactured more carefully may be contrary
to the GATT, if the products are imports. Although several recent
dispute resolution panels of the GATT have held that PPMs do violate
the principle of National Treatment in Article III, the GATT Council
has not adopted any of these panel reports; thus, there is as
yet no definitive ruling on the legality of PPMs.
This principle was put to the test when Mexico challenged the
U.S. Marine Mammal Protection Act, by which the U.S. refused to
import tuna fish caught with the purse seine nets that also killed
large numbers of dolphins swimming with the tuna fish in the Eastern
Tropical Pacific. While there are other issues and the details
of this case are complicated, Mexico and other countries argued
successfully before two separate GATT dispute resolution panels
that the tuna caught by either method was a "like product"
and, therefore, the U.S. law discriminated against the Mexican
fishing fleet's product in violation of Article III on National
Treatment. Thus, the MMPA became the first disputed environmental
PPM.
The U.S. also regulated the use of labels on tuna fish cans sold
in the U.S. reading "dolphin-free," under the Dolphin
Protection Consumer Information Act (DPCIA.) This was contested
by Mexico as a violation of Article I on Most-Favored-Nation Treatment.
The GATT dispute resolution panel found that the voluntary nature
of the label meant that the product could be sold freely with
or without the label, and that any advantage to domestic producers
would result from the free choice of consumers and not from government
action. Finally, the panel determined that the right of access
to the label was available to all countries' fleets choosing to
fish in the Eastern Tropical Pacific. For these three reasons,
which would apply to most official ecolabelling schemes, the panel
found that the "dolphin-free" label did not violate
GATT Article One.
Environmentalists responded angrily to the GATT panel rulings.
Although voluntary ecolabelling itself was not considered a problem
by the panel, the rejection of PPMs as a valid cause for import
restrictions seemed unacceptable: a lot of the criteria in virtually
all ecolabelling schemes are PPM-related. The criteria for eligible
tissue paper in the European Union program, for example, is based
upon tons of wood and oil consumed, and kilograms of sulfur dioxide
and chlorinated organic compounds released, among other things.
If the tuna fish case becomes a precedent, these PPM-related criteria
might not withstand the scrutiny of a GATT dispute resolution
panel.
On the other hand, the legal problems with PPMs have been officially
recognized to the degree that the World Trade Organization's Committee
on Trade and Environment, the Organization for Economic Cooperation
and Development (OECD), the United Nations Conference on Trade
and Development (UNCTAD) and the United Nations Environmental
Programme (UNEP) all are studying the problem of PPMs, including
within the context of ecolabelling, to seek an acceptable compromise
between trade and environmental priorities.
Life Cycle Analysis (LCA)
Life cycle analysis (LCA) presents an enormous analytical challenge.
In keeping with the cradle-to-the-grave approach, analysts must
study a finished product and all of its component parts, and all
aspects of the production, transportation, consumption and disposal
processes attributable to that product and each of its component
parts. As one delegate to an UNCTAD Seminar on Ecolabelling held
in 1994 put it, life cycle analysis is a "descriptive science."
The complexity of this method can be easily seen if one tries
to imagine applying LCA to an automobile. One must conduct a life
cycle analysis for the steel and aluminum inputs -- from mining
to manufacture to industrial PPMs; one must determine the composition
and PPMs and byproducts of numerous plastic, glass and chrome
and obscure machine parts; and one must evaluate the impacts of
the energy inputs for all of this -- whether it be oil and nuclear
power in the U.S. and Japan, coal in Asia and Eastern Europe,
or hydropower in Latin America. To evaluate the consumption effects,
one would have to consider include miles per gallon and durability;
for the transportation effects, one would have to consider whether
the vehicles were shipped from Detroit or Tokyo; for the disposal
effects, one would look at whether the vehicles are to be dumped
or stripped for recycling and, if stripped, whether the non-reusable
waste components were to be landfilled or incinerated.
Some analysts have developed methodologies for monetizing value
-- sometimes called "shadow pricing" -- despite objections
that value is relative within differing cultures and not all value
can be expressed in monetary terms. The most thorough attempts
to monetize environmental impacts have been done in the field
of energy. Yet each of these analyses carefully specifies which
factors were excluded from their methodology of choice. Exclusions
ranged from numerous secondary pollutants and most phases of the
life cycle of fuels and generating plants to geographical and
land use factors, job impacts, tax policies, and direct and hidden
subsidies. The exclusions varied significantly from analysis to
analysis and, as a result, their conclusions were not comparable
despite being reported in monetary terms.
Other analysts have developed methodologies for quantifying natural
resources and establishing inventory systems for tracking stocks
and flows. Still others have combined this methodology with a
monetization methodology based upon the market value of commercially
exploited resources. The most thorough attempts in this area have
been done at the national level. The United Nations Statistical
Office has incorporated these methodologies in a satellite "System
of Integrated Environmental and Economic Accounting." The
World Resources Institute has integrated national environmental
accounts with calculations of Gross Domestic Product.
Despite these many forays into difficult analytical territory,
conclusions cannot be drawn. Based on incomplete data, hypothetical
projections, varied techniques for shadow pricing, and other inconsistencies,
national comparisons and product comparisons based on LCA should
be avoided until international agreements on the standardization
of methodologies can be achieved.
Equivalency and Mutual Recognition
The resolution to technical disputes over "equivalency"
and "mutual recognition" amongst ecolabelling schemes
may be found in political science. Each aspect of the system engages
the representatives of many institutions in an array of paperwork
and decisions. Given the proliferation of programs, criteria,
certification and licensing procedures and boards, fees, inspections
and marketing strategies that any aggressive international ecolabeller
has to manage, there is no doubt that some kind of synchronization
must evolve or the system will collapse altogether.
For developing countries, adherence to the notion of equivalency
could ease tensions between their own domestic producers and the
domestic producers of the ecolabelling countries. Under this concept,
different criteria can be accepted for each country if "comparable"
environmental objectives can be achieved, taking into account
each country's specific environmental conditions. Even if the
developing country lacks its own ecolabelling program, an evaluation
of comparable environmental improvement -- especially based on
a mutually acceptable methodology for LCA -- could open the foreign
niche market to its producers.
Of course, fairly determining what is comparable and equivalent
requires negotiation that engages all affected producers and consumers.
UNCTAD identified one strategy for simplifying the bargaining
process that would distinguish between two types of PPMs: "product-related
PPMs" that affect the importing country, such as factors
for consumption and waste; and "process-related PPMs"
that affect the exporting country at the point of manufacture.
So far, more research has been generated regarding product-related
PPMs, just as there are more regulations and policies addressing
environmental problems in the consuming industrialized countries.
Indeed, the GATT TBT and SPS agreements mandate compliance with
certain product-related PPMs such as allowable pesticide residues
in foods; they do not, however, refer to process-related PPMs
-- that is, to the impacts of processing in the countries of origin.
Political trade-offs between these factors could help lead to
acceptable determinations of equivalency.
Proposals for mutual recognition amongst existing ecolabelling
schemes creates similar tensions between producers in different
countries and between producers and consumers. Producers often
have economic reasons for seeking the least common denominator
in debates over mutual recognition and may lobby against the participation
of foreign producers altogether. Some kind of negotiation is required
to determine acceptable conditions for reciprocal exchanges of
labels, despite significant variations, without duplicative bureaucracies.
Institutional Capture
When public policy negotiations are dominated by private economic interests, the potential for a balanced result that can be effectively implemented diminishes considerably. For Southern producers, ecolabelling could restrict their access to markets in the North -- thus constituting another restrictive business practice. For Northern consumers, corporate influence over some criteria-setting committees and technical standard-setting bodies has weakened their credibility and, arguably, their viability as effective instruments of environmental and social policy.
As regimes for equivalence and mutual recognition amongst ecolabelling
schemes are negotiated, care must be taken to avoid imbalance
in the degree to which different stakeholders participate and
influence related processes in the international arena. To avoid
condemning international ecolabelling agreements as yet another
restrictive business practice, negotiators must ensure that consumers,
environmentalists, the religious community, and other public interest
groups from both the North and the South join the private sector
-- including both transnational corporations and small business
operations -- at the bargaining table.
Policies to avoid restrictive business practices were at one time
well-defined, as early proposals for international trade rules
indicate. In 1948, the Havana Charter was drafted by governments
convinced that a more open regime of international trade would
lead to increased economic activity and greater economic opportunities
for the majority of the world's people. The Charter spelled out
rules for trade to be carried out by Members of a new International
Trade Organization (ITO.) However, the ITO never formed, as the
U.S. failed to ratify the agreement during partisan political
controversy between the U.S. President and the U.S. Congress that
year.
Only one portion of the rules set forth in the Havana Charter were ever implemented: a commercial code of conduct that became the General Agreement on Tariffs and Trade (GATT.) Other portions, however, deserve reconsideration in light of contemporary circumstances. Of particular interest, especially in the context of producers' concerns regarding ecolabelling, is Article 46 which would establish a "General Policy towards Restrictive Business Practices." This article begins:
"Each Member shall take appropriate measures and shall co-operate
with the Organization to prevent, on the part of private or public
commercial enterprises, business practices affecting international
trade which restrain competition, limit access to markets, or
foster monopolistic control, whenever such practices have harmful
effects on the expansion of production or trade and interfere
with the achievement of any of the other objectives set forth
in Article 1."
Transnational corporations control more than 70 percent of global
trade in goods. Their ability to influence ecolabelling criteria
gives them the power to manipulate market access in ways that
can harm Third World producers as well as small producers everywhere.
Corporate manipulation of ecolabelling agencies can also subvert
consumers' right-to-know and lower standards. As a publication
of the United Nations Research Institute for Social Development
(UNRISD) describes it, transnational corporate "leverage
... has allowed them occasionally to play nations and communities
off against one another in an effort to receive the most advantageous
benefit package, a dynamic that generates a 'downward harmonization'
of labor, consumer and environmental standards."
The capture of public institutions by private commercial interests
is fairly widespread. Examples abound. The Ecolabelling Board
of the United Kingdom includes individuals employed by the Hoover,
Kingfisher, Pilkington Shell and Rhone Poulenc corporations. Representation
in the working groups of the International Standards Organization
is heavily weighted in favor of major corporate interests; the
chairs of two of the subcommittees of Technical Committee 207,
charged with drawing up environmental standards, are representatives
of the Merck and Bayer companies -- pharmaceutical industry giants,
while only one representative of a consumer group and one of an
environmental group have attended the TC 207 meetings. Initial
drafting of the U.S. proposal for the agriculture negotiations
of the Uruguay Round of the GATT was done by a former career executive
of the Cargill Company.
The Codex Alimentarious Commission, the international body referenced
in the Uruguay Round for setting international food safety standards,
is tied closely to its involvement with transnational food corporations.
Its mission is to harmonize international standards in order to
facilitate food trade. The U.S. food industry financed the U.S.
government's participation in Codex, upon its founding. More than
four out of five non-governmental participants on national delegations
at many Codex committee meetings represent industry. The International
Federation of National Associations of Pesticide Manufacturers,
for example, has sent dozens of representatives to Codex meetings.
Among non-governmental participants at the 1991 Codex meeting,
26 represented public interest groups and 662 represented industry.
The imbalanced representation of interests amongst non-governmental
participants is sufficient to demonstrate substantial corporate
influence over an institution like Codex. But the food industry
has even better access to decision making, seated as members of
official delegations. The official U.S. delegation to Codex Alimentarious
in 1989 included three executives of the Nestle Corporation, one
each from Coca Cola, Pepsi, Hershey, CPC International, Ralston
Purina, and Kraft, as well as representatives of the Grocery Manufacturers
of America, the Food Marketing Institute, the American Frozen
Food Institute, the Food Processors Association, and the Association
of Cereal Chemists. Half of the official delegates on both the
U.S. and the United Kingdom delegations at that year's Nutrition
Committee meeting were corporate officials. During the two-year
period of meetings referred to as Codex's 19th Session, from 1989-1991,
a total of 445 industry representatives served on national delegations,
compared to only 8 representatives of public interest non-governmental
organizations. At the 1995 meeting, the U.S. instructed its 19
delegates representing various corporations to lobby the delegates
of other countries regarding three important votes on the definition
of "sound science" and the health risks of using hormones
to promote growth in beef cattle and milk production in dairy
cows.
Such indications of institutional capture give rise to consumer cynicism regarding the potential use of otherwise innocuous-seeming policy statements as a restrictive business practice. For example, under the Uruguay Round Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) regarding food safety, countries may have national regulations that differ from those established by Codex Alimentarious and that create barriers to exporters only if:
These stipulations subject any local or national food safety regulation
with more stringent standards than those established by Codex
for protecting consumer health to potential dispute resolution
under the GATT. A government wishing to defend more stringent
regulation will likely bear the burden of proving that the regulation
is both necessary and scientific. Where a government is less protective
of health, the GATT has no jurisdiction. Thus, the net effect
of the GATT/Codex standard-setting regime may be to health and
safety regulation to a least common denominator. For the U.S.,
some 20% of more than 1,200 standards for maximum residue limits
of pesticides on foods are subject to challenge under these rules.
Similarly, under the Uruguay Round Agreement on Technical Barriers to Trade (TBT), countries "shall use ... relevant international standards" as a basis for national regulations and standards -- including packaging, marking and labeling requirements, and procedures for assessment. They may adopt unique domestic standards that create barriers to exporters only if:
Thus, both the SPS and TBT Agreements of the Uruguay Round limit
national policy and subject both national and international ecolabelling
schemes to a set of economic and scientific judgments. Placing
the burden of proof on nations to defend higher standards creates
downward pressure on standards, at the expense of consumers, and
the environment. References in these agreements that lock-in standards
set by Codex Alimentarious or other international standard-setting
bodies such as the International Standards Organization, where
corporate interests wield considerable influence, may severely
undermine the potential of ecolabelling as an effective instrument
for public policy.
While both the SPS and TBT Agreements of the Uruguay Round may
hinder sovereign nations from setting more stringent standards
for food safety and other technical regulation than exist by international
consensus, the Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPs) encourages countries to have stronger
national rules than those stipulated. Intellectual
property rights are restrictive business practices by definition:
they grant exclusive rights to monopolize an invention or other
industrial knowledge through the granting of patents, copyrights
and trademarks for extended periods of time. Under the TRIPs agreement,
most countries will have to upgrade their national intellectual
property laws -- regardless of their impact on national development
strategies and domestic social policies.
For example, India has historically denied patents for pharmaceutical
and agricultural products to ensure their broad availability to
the public. Brazil and Argentina have allowed patents on processes
but not on products, ensuring that domestic firms can develop
socially useful products such as medicines and improved seeds
through reverse engineering: while they may not copy the formula
of a patented product, they may create their own formula that
produces an identical result.
These national policies are subject to reversal by certain clauses
in the TRIPs agreement; exceptions may be conferred providing
they do not "unreasonably" conflict with or "jeopardize"
the rights of a patent holder. Similarly subjective terms make
it difficult for a nation to regulate the use of trademarks within
its boundaries: "The use of a trademark in the course of
trade shall not be unjustifiably encumbered by special requirements..."
As with some of the terms of the TBT and SPS agreements, such
language in the TRIPs agreement is ambiguous and subject to the
discretion of the participants on any potential dispute resolution
panel. The potential for institutional capture is great, especially
when the political processes are shrouded in private negotiations.
The ways in which a valid policy initiative can be paralyzed by the unresolved problems presented by processing and production methods, life cycle assessment, equivalency and mutual recognition, and institutional capture can be seen in all of the following cases. We will use each of the following stories, however, to emphasize one of these problems as follows:
The Timber Case
The case of timber is illustrative of the way in which consumer
and environmental preferences have sparked fiercely competitive
arguments among producers. The timber and wood products industries
are prime targets of ecolabelling schemes, and yet a number of
initiatives have been stymied -- largely because they have failed
to address the interests of competing producers in a satisfactory
manner.
In particular, the economies of developing countries will be affected
dramatically. This industry constitutes 30 percent of the total
export earnings for Burma, 18 percent for Laos, 14 percent for
Indonesia, and 12 percent for Malaysia. Although the primary suppliers
of European imports of wood pulp are the U.S., Sweden and Canada,
developing countries supply 9 percent of the European Union's
wood pulp imports. Given these factors, developing countries have
reason to fear labeling schemes that would discriminate against
tropical timber relative to timber from temperate and boreal forests.
Their arguments are particularly valid considering that timber
management in temperate and boreal forests is not sustainable,
either.
In preparation for the 1992 Earth Summit in Rio de Janeiro, conference
organizers prepared documentation for the negotiation of a legally-binding
treaty on the management and sustainable development of forests.
However, the U.S. led a few other countries in insisting upon
limiting the agreement to tropical forests. Malaysia's response
was resolute: "We need to have comprehensive studies on the
deforestation of boreal and temperate forests ...[and] an agreed
minimum level of forest cover for each country of the world...
[We] call upon all countries, particularly the developed countries
that have undergone extensive deforestation to draw up national
forestry action plans ... aimed at substantially increasing their
current extent of forest cover ... Countries which allocate more
than their fair share in forest land [should] be compensated ...
[and] any losses incurred by traditional users in reserving certain
forests or modifying existing forest-land-use [should] be compensated."
Also in 1992, Malaysia and a number of other countries defeated
the Austrian plan for a mandatory ecolabelling scheme for tropical
timber products. The law required that, by September 1, all tropical
timber imports would be labeled "made of tropical timber"
or "containing tropical timber" and levied a 70 percent
import tariff. Despite the fact that revenues from this tariff
plus an allocation of $17 million of new and additional funds
from Austria's treasury would be dedicated to compensating disadvantaged
exporting countries and financing tropical forest protection,
Malaysia and other timber exporters -- of tropical, temperate
and boreal forests -- threatened to file a formal complaint with
the GATT. They argued that the Austrian law discriminated against
tropical timber producers relative to Austria's domestic producers
-- it was discriminatory, protectionist and a hidden barrier to
trade. The threats were sufficient. In November 1992, Austria
rescinded the import tariff and mandatory ecolabel; a voluntary
label for all timber products remains in effect.
Brazil has also argued strenuously that ecolabelling criteria
are discriminatory to its producers, who use wood from plantation
forests. Most existing schemes prefer recycled paper over virgin
pulp and stipulate energy efficiency while ignoring renewable
resources. Brazil claims that its pulp industry meets criteria
for sustainable plantation forestry and utilizes renewable hydropower.
While these qualities could be appropriately valued in Northern
ecolabelling schemes, present criteria ignore these features and
create systems which allow highly-polluting paper mills to shift
the costs of environmental adjustment to suppliers of pulp.
Chile joins Brazil in arguing for better North/South balance in
criteria-setting. Chile's wood industry draws 90 percent of its
exports from plantations and its pulp industry meets stringent
international standards for chlorine-free bleaching, effluent
treatment, water consumption, energy use and sustainable forestry
management while exceeding domestic regulatory standards.
Argentina's paper industry, on the other hand, is based on small
firms using old equipment and outdated technologies; as a result
its environmental impact is greater and the costs of compliance
with international standards would also be greater.
Thus, the impacts of any ecolabelling scheme for timber will differentially
affect producers in different countries. The scale and age of
a producer's operation matters a great deal on the one hand, while
the design of the criteria matters a great deal on the other.
Achieving fairness in both regards, while enabling developing
countries to sustain foreign exchange earnings, will require some
innovation within existing ecolabelling schemes.
Innovative work is underway in several initiatives -- particularly
in Indonesia and the non-governmental Forestry Stewardship Council.
At the same time, such innovation could be cut short, as nearly
occurred when the Australian and Canadian standards agencies sought
to have the International Standards Organization establish a single
global system for certifying sustainable forest management.
The Costs of Electricity Case
The case of electricity costs illustrates both the importance
of life cycle analysis and the immaturity of methodological approaches
to conducting a useful life cycle analysis. While factors inherent
to a product's environmental impact can occur in many different
phases of production -- from the extraction of raw materials to
final disposal -- the lack of an accepted and consistent methodology
for LCA makes comparative evaluations -- the whole point of most
ecolabelling -- impossible.
Electricity inputs to manufacturing are a major cost factor and
most fuels are highly polluting and consume depleting resources.
On this basis, most ecolabelling schemes have established criteria
for low-energy consuming products and PPMs. However, as the Brazilians
have argued, a preference for low consumption is a PPM reflecting
the conditions of consuming countries; Brazil's use of renewable
hydropower in producing paper and other products, they argue,
merits favorable treatment, too. Yet most existing ecolabelling
schemes have no criterion for renewables, given their tiny share
in industrialized countries' energy supplies. How these relative
costs and benefits are -- and are not -- calculated illustrates
the enormous analytical challenge presented in trying to develop
a comprehensive approach to LCA that makes equivalency and mutual
recognition possible.
Nuclear power is often invoked as the environmentally-benevolent
alternative to fossil fuel-derived electricity, but such a conclusion
cannot be reached after a life cycle analysis -- especially if
health and safety costs are included. In setting energy prices,
most public utilities ignore LCA altogether: neither the "front
end" costs of the nuclear fuel cycle -- uranium mining and
milling, fuel processing, equipment manufacturing and transport
to the plant site -- nor the "rear end" costs of decommissioning
and nuclear waste disposal are generally considered.
Furthermore, there is considerable public subsidization of this private sector industry. By 1990, direct subsidies from U.S. taxpayers to the nuclear power industry had added up to $US97 billion. These included:
According to the U.S. Office of Management and Budget as well as the Congressional Budget Office, direct subsidies to energy corporations for fossil-fuel exploration and production cost taxpayers more than $US10 billion per year in the early 1980s. These included:
Nearly half of the states in the United States have experimented with LCA methodologies to incorporate in some way the costs of externalities in their selection of new electricity supplies. A review of 30 studies of these approaches found that the salient feature in each was the list of excluded factors such as:
Another study by Pace University, called the Environmental
Costs of Electricity , called "the state-of-the-art on
U.S. externalities costs" by the German Marshall Fund, reiterates
the limitations of LCA. This report excludes from its scope all
calculations of costs incurred at the front end of the fuel cycle,
all costs of controlling or mitigating damages, and all non-environmental
costs -- whilst acknowledging their significance. "Valuation
of environmental externalities is a discipline still in its infancy,"
it concludes. "A principal contribution of this study may
be to point out .. the principal research needs that exist."
The Pace University researchers called Olav Hohmeyer's 1988 report
for the Commission of the European Communities as "the most
thorough study of externality costs" to date. Yet in this
study, called Social Costs of Energy Consumption, Hohmeyer,
too, is compelled to exclude multiple factors that a "full"
cost accounting would entail. On Hohmeyer's list of excluded items
are costs to the health care system, intermediate foods used in
energy systems, certain states of the fuel cycle, some aspects
of climate change, "routine operations" risks of nuclear
plants, and hidden subsidies. Included are the impacts of energy
consumption on production, employment and trade balances, the
depletion of non-renewable resources, goods and services publicly
supplied, monetary subsidies including accelerated depreciation,
public research and development transfers, and defense costs --
in addition to environmental costs. Among other results, Hohmeyer
concludes that the social costs of fossil- fuel fired electricity
amount to 1.76-3.96 cents per kilowatthour while those of nuclear
power are two to three times greater at 4.4-8.8 cents per kilowatthour.
No single study can pretend to reflect the full panoply of costs externalized by energy corporations; they are so diffuse that they are hard to identify and harder to quantify. Nonetheless, as Paul Bland notes in an article for the Harvard Environmental Law Review,
"one cannot escape setting some value. A decision not to
consider external costs in itself quantifies them by setting their
value at zero. This is unreasonable, given both the strong evidence
that the costs are massive, and the significant difference between
the externalized costs of traditional central station plants and
alternative energy facilities. A crude approximation, made as
exact as possible and changed over time to reflect new information,
would be preferable to the manifestly unjust approximation caused
by ignoring these costs."
Any ecolabelling scheme that purports to consider the energy impacts
of a product based on life cycle analysis must consider this experience.
Parties seeking to evaluate the environmental impacts of the energy
consumed in various PPMs for like products must negotiate agreeable
boundaries that enable comparison. Some standardization of methodologies
for LCA could help in enabling mutual recognition, even if many
complex facets of a product's life cycles were excluded from the
analysis.
The Organic Foods Case
A dispute between organic producers in the U.S. and certification
boards in Europe illustrates the potential problems for achieving
mutual recognition. At the same time, the negotiations between
these parties and the International Federation of Organic Agriculture
Movements (IFOAM) intended to resolve the dispute could lead to
raising the recognized international standards for organic certification
to a higher common denominator.
Late in 1994, one of the most important organic foods certification organizations in the U.S., the Organic Growers and Buyers Association (OGBA), was informed by European organic standard-setting authorities that they would no longer automatically recognize the validity of the U.S. groups' label, thereby threatening the ability of U.S. producers using this certification organization to ship into Germany, France and the Netherlands under prior recognized terms of cooperation. In a letter to the U.S. Secretary of Agriculture, the Executive Director of the non-profit OGBA wrote, "This is an embargo -- pure and simple." The letter explains:
"In the Netherlands and France, government agencies are requiring
excessive paperwork regarding certification of U.S. organic products
prior to allowing import to those countries. The paperwork requirements
are clearly over and above all previous requirements... however,
attempts by U.S. certifiers to gather similar paperwork from exporters
in each of those nations is met by legal barriers of 'confidentiality'
that is a 'government requirement' for import, but a 'government
prohibition' for export... In Germany, the situation is far worse.
We have received correspondence that, in essence, says the importation
of U.S. organic products into Germany will be banned after December
31, 1994."
The OGBA had received varying responses to its earlier letters
expressing concern. The German agency cited three years old documentation
of the OGBA's accreditation with IFOAM, the International Federation
of Organic Agriculture Movements which has established a set of
Basic Standards of Organic Agriculture and Food Processing recognized
in many countries of the world, and requested further information.
The Dutch agency politely acknowledged that "[a]t this moment
we are discussing with OGBA how we can minimize the exchange of
information on certified companies between our two organizations."
Whether this case represents legitimate discrepancies between
different organic food certification systems or simply a disguised
trade barrier put up by the Europeans may be known only to those
involved. If the dispute continues to escalate, the parties may
find one of their respective governments referring to the Uruguay
Round Agreement on Technical Barriers to Trade, which obligates
member governments, "at the request of other Members, to
be willing to enter into negotiations for the conclusion of agreements
for the mutual recognition of results of each other's conformity
assessment procedures. Members may require that such agreements
... give mutual satisfaction regarding their potential for facilitating
trade in the products concerned."
As in the case of other Uruguay Round agreements, these terms
are so ambiguous that their utility may be limited to matters
of political will. Thus, if the negotiations between the OGBA
and its European counterparts fail, this dispute could escalate
to the level of a full-scale dispute at the GATT/WTO.
Meanwhile, IFOAM became engaged in the controversy and has proposed
several dozen changes in the set of standards around which OGBA
and the European parties were seeking mutual recognition. Although
a settlement has not yet been reached, there are indications that
there may be agreement on a large number of more stringent standards
than had been in place before. In the absence of institutional
capture, this negotiation could result in a higher common denominator
for organic food standards that become applicable not only to
those participating in the settlement but throughout IFOAM's global
system.
The Artificial Breastmilk Substitutes Case
The following case illustrates institutional capture and the extreme
leverage enjoyed by one major transnational corporation which
has used international trade policy to pursue its corporate interests.
The Gerber Company hopes to avoid compliance with labeling provisions
of both Guatemalan national law and the World Health Organization's
International Code of Marketing of Breastmilk Substitutes.
In October of 1992, Gerber Products sought to register a new baby
food with the Guatemalan Food and Drugs Registration and Control
Division (FDRC), in order to enter that market. The FDRC noticed
that the label on the new product was not consistent with the
national Law for Marketing of Breastmilk Substitutes and its Regulation,
nor with the WHO International Code, and requested that Gerber
make several changes to bring it into compliance, including the
elimination of Gerber's familiar baby face logo, the addition
of the words "Breastmilk is the Best for Baby," and
the addition of a notice regarding the appropriate age at which
the product should be introduced to the baby's diet.
Over the next year, FDRC and Gerber exchanged legal and political
correspondence. Gerber sought an injunction against the FDRC's
order, arguing that its new baby food was "complementary"
and not a "substitute" for breastmilk, and therefore
outside the jurisdiction of that law. This argument was rejected
by the Prosecutor General. Meanwhile, the First Lady of Guatemala
had solicited and been offered donations from Gerber, which she
refused after meeting with the National Breastfeeding Promotion
Commission (CONAPLAM), the Ministry of Health, and officials of
UNICEF, the United Nation's Children's Fund. The government began
administrative proceedings to exclude seven Gerber products from
the national market; Gerber began legal proceedings. The government
responded with its own suit, charging Gerber with violating not
only the Law on Marketing of Breastmilk Substitutes but also for
distributing unauthorized materials to hospital personnel, publishing
unauthorized advertisements in the press, and engaging in direct
contact with mothers in a private hospital.
By October 1993, the government sought an out-of-court settlement
but Gerber was not responsive, instead initiating further legal
procedures to allow the marketing of all its products without
changing any label. That same month, the Costa Rican Minister
of the Economy called his Guatemalan counterpart to accuse Guatemala
of non-compliance with the Central America Free Trade Treaty.
During the next half year, the political challenge escalated.
The U.S. Ambassador to Guatemala hosted a meeting on November
19 with UNICEF and CONAPLAM, urging the Guatemalan authorities
to negotiate with Gerber; they responded that their laws were
not negotiable. In February 1994, Guatemala's Ambassador in Special
Mission to the U.S. met several times with officials of the State
Department and a Gerber executive, who told him that "they
will fight with all their strength for the application and enforcement
of their industrial property rights in Guatemala" and that
"negotiations are being undertaken to secure sanctions against
Guatemala." Partial solutions were devised for several of
the products, including the placement of a sticker over the baby
face that offered the essential text.
By June, Gerber's Vice President and General Manager for Latin America Frank T. Kelly was corresponding directly with the President of Guatemala, Ramiro de León Carpio, putting on record a remarkable set of threats as follows:
"... We have decided to withdraw the accusation and the requirement
for commercial rights before the authorities of the General System
of Preferences, with the purpose of not damaging Guatemala's status
as beneficiary... Therefore, to confirm our goodwill and intention
to search for a favorable solution, we will limit our activities
to Washington DC. This way we will maintain the defense for our
rights and we will grant the opportunity to solve this matter
officially and legally, without harming the interests of the Government
of Guatemala in this moment. Upon the favorable and permanent
solution of this matter, we will withdraw all complaints before
the CBI, Gatt, and any future instance before the authorities
of the General System of Preferences. We will be prepared to reactivate
the defense efforts for our rights before the CBI, Gatt and in
the Congress of the United States of America, if a final and favorable
resolution is not reached in the short term. We will initiate
actions through the Caribbean Basin Initiative (CBI) using our
right established in the legislation referring to the "Interim
Trade Program" which also protects basic aspects of intellectual
property and famous trademarks. Therefore we request your intervention
in order that the Guatemalan Ministry of Health will stop deterring
our importation requirements and rush the approval and renewal
of the sanitary registrations of the Gerber food products."
The political and economic basis of these threats may be more
forceful than the legal grounds. The central question is whether
Guatemala's national law is subject to being overturned by international
agreements.
According to information obtained by the Geneva Infant Feeding
Association and other supporters of the WHO International Code,
Gerber would have to identify a sympathetic government willing
to bring a legal dispute before the GATT. Although the Uruguay
Round agreements on TBT, SPS and TRIPs do have some relevance,
they are not yet fully ratified and phased in according to terms
of the specific agreements. Under TRIPs, for example, developing
countries are given 5-year or 10-year grace periods, depending
upon their degree of impoverishment, to bring their national laws
into compliance -- leaving Gerber powerless to utilize this provision
against Guatemala until 2006.
Alternatively, the U.S. government could bring a Super 301 case
against Guatemala, which is on the U.S. Trade Representative's
1995 "watch list" as one of dozens of countries it considers
to be inadequately moving towards the intellectual property rights
regime defined in the TRIPs agreement. Under
Super 301, a provision of U.S. trade law, a country may be subject
to unilateral trade sanctions if the Trade Representative's Office
should find its trade policies to be "unfair and inequitable
... and a burden to U.S. commerce."
The provisions of the Caribbean Basin Initiative (CBI) and the
General System of Preferences (GSP), also cited by the Gerber
executive, are similarly written to the advantage of the U.S.
in relation to its trading partners. Under any of these scenarios,
Guatemala could lose a considerable amount of foreign exchange
revenues as a result of trade sanctions and other retaliatory
measures imposed by the U.S.
In light of the Gerber versus Guatemala experience, some restructuring of international institutions appears to be needed, with public policy objectives firmly in mind. This restructuring could reassess:
In addition, consideration should be paid to the lack of any mechanisms
for the international oversight of transnational corporations
and, in particular, their use of restrictive business practices.
Such a comprehensive reassessment of the international institutional
framework could help in achieving a better balance amongst producers
and between producers and consumers in the design of an ecolabelling
regime that is consistent with the GATT rules for non-discrimination
and an effective instrument for achieving environmental, health
and safety, and other social policy objectives.
As a market-oriented instrument of social policy, the question
before us is whether ecolabelling will contribute to environmental
protection, improved health and safety, and the achievement of
a more just society -- or will it exacerbate trends towards the
inequitable distribution of wealth, becoming just one more of
the restrictive business practices employed by transnational corporations
to unfairly compete in an increasingly monopolistic commercial
world. Can ecolabelling provide avenues for low per capita income
countries or regions to gain access to this market niche? Or will
it worsen their circumstances? If the answers depend upon how
a particular ecolabelling program is designed, and how differing
ecolabelling programs are reconciled, what are the conditions
required to achieve desired positive results?
A. CONCLUSION
There is evidence that labeling has been very successful in meeting
environmental objectives in some cases. In Germany, for example,
the labeling of low-emissions oil and gas heating appliances reduced
the quantities of sulphur dioxide, carbon monoxide, and nitrogen
oxides emitted by 30 percent; the labeling of low-solvent paints
and varnishes increased the market share for these products from
1 to 50 percent with an estimated reduction of some 40,000 fewer
tons of solvents released into the environment.
On the other hand, there is also some evidence that labels can
be ineffective or even a disincentive. Manufacturers avoided the
Netherlands' ecolabel for refrigerators, first published in late
1993, presumably in order to seek the impending EU label instead
which would allow some use of hydroflourocarbons excluded from
the more rigorous Dutch scheme. And Korean
consumers avoided certain ecolabelled products, preferring virgin
materials when price factors were equal.
On balance, however, green products seem to sell well -- judging from the many producers who have invested in green public relations. A survey in the Philippines, for example, identified 25 companies advertising their ecological commitment in one English-language daily newspaper. Of these, 3 promoted ecotourism, 6 promoted wildlife preservation, and 13 catered to female consumers of household and personal care products. Another promoted steel as an alternative to timber. As if a life cycle analysis of steelmaking would not show severe impacts in forests, as well as on steelworkers and nearby residents, one ad of the Filipino National Steel Corporation urged consumers:
"Use steel. Or the earth could pay a heavy price. The tag
on this stylish set tells you its price in pesos. But not its
price in trees, forests and watersheds. So check out the steel
furniture instead. They're stronger, more durable and more versatile.
As far as the earth is concerned, there are no hidden costs involved."
If ecomarketing is here to stay, then ecolabelling may provide
consumers with both information and a political instrument capable
of regulating such "greenwash" -- providing the ecolabelling
institutions remain vehicles of balanced policymaking. Consumers
must have ample access to and authority within the institutional
mechanism, and smaller businesses must be as well represented
as larger firms. This is as true at the international level as
it is within a national context.
Apart from the institutional issues of transparency and balanced
participation in the policymaking process, consumers and producers
both rightly note that existing structures and incentives -- whether
regulatory or market-based -- are generally inadequate to ensure
investment in environmental, health and safety, and other socially
responsible management processes. At the same time, structures
and incentives must be altered to ensure competition within the
different markets for ecological and otherwise socially responsible
products.
Taken together, the concerns of consumers and producers suggest the need for public policies linked to ecolabelling schemes that meet the following objectives:
Is this feasible? Implementation of these objectives will require
real changes in political culture within nations and across nations.
International solutions must be found to the difficult problems
presented by processing and production methods, life cycle analysis,
equivalency and mutual recognition, and institutional capture.
As the four case studies demonstrate, interested parties are deeply
entrenched in current structures organized according to contrary
principles.
B. RECOMMENDATIONS
In seeking to make the implementation of effective ecolabelling
policies feasible, we will offer a few recommendations in the
context of existing ecolabelling programs and the policy discussion
above.
1) Ecolabelling schemes should be linked to a public campaign
of intensive consumer education based on accurate, thorough and
intelligible product information.
While almost all of the existing ecolabelling programs are backed
by scientific institutions verifying accuracy, virtually none
of them can claim to be thorough -- either in product coverage
or in terms of the information available for each product. Most
are struggling within the institutional context to reconcile the
responsibility to provide thorough information with the convenience
of a simple marketing message, best conveyed by a familiar logo.
In the four case studies, policy paralysis resulted from uneven
demands for, availability of, and quality of information. Timber
consumers have been acutely aware of the problems of the rainforest
and relatively unaware of the problems of unsustainable management
of temperate and boreal forests; as a result, the proposed criteria
for timber processing and production methods were not equivalent
for tropical producers relative to temperate and boreal producers.
Similarly, European organic food certifiers demanded more processing
and production information from U.S. producers than was provided
in return; as a result, consumers on either side of the ocean
would not get equivalent information which in turn meant the producers
on either continent would be thrown into unfair competition. In
the case of electricity, it is apparent that consumers respond
to the information conveyed in energy prices, but that information
is based on incomplete life cycle analysis and is further distorted
by certain policies of captured institutions; thus, mutual recognition
of LCA methodologies for energy costs across labeling regimes
would be premature. And in the artificial breastmilk substitutes
case, information demands were simply disregarded by powerful
interests backed by captured institutions while, arguably, misinformation
was provided -- if Gerber's baby-face logo implies that its products
are unconditionally good for babies.
Information exchange is key to any society's daily life. Education
regarding the broadest range of environmental, health and safety,
and other social impacts of production and consumption should
be supported not only in the marketplace through ecolabelling
and other economic instruments but also in the news media, as
part of school curricula, and in other community fora. Different
perspectives must be available: from a consumer standpoint, from
an ecologists' standpoint, and from a producer's standpoint --
in the context of stimulating an important public debate. All
consumption and production should be subject to such scrutiny
and all information should be explicit and verifiable; likewise,
the dissemination of inaccurate information such as that presented
in some advertising should be discouraged. In all cases, information
should be provided in multi-lingual, multi-cultural formats --
including graphic information.
2) Ecolabelling schemes should broaden their scope to include
social criteria -- prioritizing the health and safety of consumers,
workers, communities and ecosystems; when criteria differ, they
should seek mutual recognition and equivalency based on negotiations
to define minimum levels of protection while encouraging better
practices.
Only the Nordics and the Indonesians, of all the governmental
and intergovernmental ecolabelling schemes, have introduced social
concerns -- reflecting their respective social conditions -- in
their criteria. Most have not. In contrast, many fair trade organizations
are now introducing environmental criteria to their labeling programs.
Indeed, there is an established regulatory framework for many
health and safety issues which should be integrated in new public
policies aimed at altering consumption and production patterns
in order to achieve sustainability.
As integration occurs, however, the result is often a drive towards
middling standards. The European Union's ecolabelling regulation,
for example, creates incentives for Ireland and Portugal to accept
standards for peat and paper more stringent than they wish, but
the regulation may also undermine more stringent standards for
paper and other products in the Netherlands.
In cases of institutional capture, standards may fall toward the
least common denominator. As negotiators representing participating
governments at Codex Alimentarious, for example, officials of
many transnational food companies' have succeeded in establishing
weak standards for levels of pesticide residues. And the U.S.
Food and Drug Administration's promotion of genetically-engineered
foods at Codex could undermine the EU's bans and other jurisdictions'
initiatives for labeling. In July 1995, the U.S. forced three
votes at a meeting of Codex -- which has only resorted to voting
twice before in its 35-year history of consensus-based negotiations
-- aimed at declaring the use of genetically-engineered hormones
that promote growth in beef cattle and milk production in dairy
cows to be "safe." First, the European Union lost its
motion to delay action on a motion regarding the beef hormones;
second, the U.S. won its motion declaring that Codex standards
should be based solely on science; third, the European Union won
its motion to delay action on the U.S. proposal asserting the
safety of recombinant Bovine Growth Hormone (rBGH.)
With the GATT agreement on Sanitary and Phytosanitary Standards
stipulating that WTO Members must justify national standards stronger
than Codex, the drive towards the middle or lower becomes locked
into global policy. Indeed, the European Union's agriculture commissioner
announced in early June 1995 that the new GATT rules obliged him
to reconsider the EU's ban on imports of genetically-engineered
beef hormones; the "situation needs to be reassessed from
a scientific point of view," he said. His counterpart in
the U.S. insisted that the "United States will not accept
the use of unsound science to restrict trade.... None of us can
afford to have unjustified sanitary regulations become the next
predominant trade barrier." Another U.S. official confirmed
that the U.S. would take the EU to the WTO on this matter, which
costs U.S. beef producers $100 million per year in lost sales.
The GATT agreement on Technical Barriers to Trade also stipulates
a number of disincentives to strong national rules protecting
consumers, workers, environmentalists and others seeking social
regulation. Standards recommended by the International Standards
Organization or other agencies, especially those captured by powerful
interests, could likewise be set as upper limits by future negotiators
at the WTO.
This drive towards middling or lower standards is not inevitable.
The international and multi-party character of IFOAM, recognized
by both parties in the organic foods case, has not inhibited IFOAM's
commitment to progressively strengthen its standards for organic
food certification while adding components for social justice
and fair trade.
3) Ecolabelling schemes should be linked to compatible financing
vehicles to enable compliance while ensuring competition; they
should seek to negotiate a standardized approach to life cycle
analysis in order to better structure loan arrangements.
Existing ecolabelling schemes are silent on financing, despite
the fact that many national policies and international agreements
are accompanied by firm institutional commitments to finance technology
transfer and other instruments critical to their implementation.
The drive towards middling or lower standards could be offset
by adequate incentives for conversion to sustainability.
Lacking capital, many producers will oppose ecolabelling initiatives;
others will simply be unable to compete in the eco-market niche.
As a result, the capacity of existing schemes to deliver effective
results is weakened. At the same time, larger firms with more
discretionary capital can more readily make the investments needed
to both upgrade their facilities to comply with PPM criteria and
to document their compliance. Without tied credit, the market
becomes more rather than less monopolistic.
The amounts of credit needed are substantial. In the timber case,
the $17 million of additional funding offered by Austria to compensate
tropical timber exporters who would lose markets initially while
enabling their conversion to sustainable production was not sufficient
to overcome the political opposition of competing producers. Indeed,
UNCED Secretary General Maurice Strong, who organized the 1992
Earth Summit, calculated it would require investments of some
$625 billion to offset structural incentives for unsustainable
development.
Sustainable forestry practices and clean paper production require
immediate outlays for new personnel and equipment as well as adjustment
in financing to accommodate losses in yield. Financing is essential
to cover short-term losses as well as to enable investments that
may be recouped over time as consumer prices rise in response
to reduced supplies; only adequate financing can avoid the type
of producer conflicts that have stymied timber policies for decades.
Financing is particularly crucial if smaller and older industries
such as the paper sector in Argentina are to participate. In the
alternative, the least-well capitalized producers will continue
to pollute until their timber resources are exhausted.
Similarly, small farmers practicing organic agriculture frequently
require extended credit with which to rebuild soils exhausted
by chemical and mechanical systems, to accommodate additional
labor costs, and to adjust to smaller yields due to insect damage,
especially during a transitional decade. Developing countries
dependent upon chemical-intensive commodity production have no
hope of converting to more sustainable agriculture without significant
financing.
In the case of electricity, only massive investment in the development
of renewable energy resources will shift production from fossil-fuel
and nuclear-powered systems in which vast quantities of capital
have already been sunk. Small producers using renewable fuels
and otherwise minimizing the life cycle costs of power generation
depend upon long-term financing to establish operations, often
within a glutted market. This is particularly true when captured
institutions distort the market by offering public subsidies to
operators with high life cycle costs.
Life cycle analysis, while presenting formidable analytical challenges,
can help in determining and appropriately allocating the costs
and benefits. Loans can be structured according to paybacks as
energy, agriculture, forestry and other systems convert to sustainability
-- providing that conventions for standardizing its application
can be negotiated. Payment arrangements can be shared among producers,
consumers, and the public sector according to shares in long-term
benefits. Especially given evidence that many environmental improvements
produce cost savings in the long run, effective financing instruments
should be feasible to design and implement.
For example, one proposal would finance sustainable commodities production under auspices of the international commodity agreements -- international instruments negotiated between the producing and consuming countries of a single major commodity such as coffee, cocoa, tea, rubber and many minerals. Under this proposal, the producer and consumer countries could finance a transition to sustainable commodity production by any one of three mechanisms: an agreement to comply with high international PPM standards financed on credit payable with increased earnings to be achieved through cartel pricing; an agreement to pay import tariffs on products produced by less-sustainable PPMs with the revenues transferred to a multilateral fund to support technology transfer and other conversion projects; or an agreement by which exporters gradually comply with stronger PPMs in exchange for preferential access to the importers' markets for those products complying with the higher PPMs.
The simple availability of adequate credit would ensure access
for smaller producers and developing countries to the ecolabelled
markets, while ensuring greater competition.
4) Ecolabelling schemes should seek to negotiate procurement
agreements with major consumer institutions to achieve essential
economies of scale.
As long as the market niche for ecolabelled products remains small,
only a few producers will be able to participate and, obviously,
the overall environmental and social impacts remain negligible.
As the market grows, more producers become interested in seeking
the labels; as it continues to grow, it becomes more feasible
for producers to anticipate returns on their investments sufficient
to undertake private financing arrangements. Competition increases,
an industrial sector adjusts, and aggregate environmental and
social benefits expand. On the other hand, restrictive business
practices may prevail in the absence of a substantial and growing
market.
The prime vehicle for influencing any market is government procurement.
When the U.S. decided to stimulate private domestic production
of integrated circuits for computers in 1962, the Department of
Defense ordered 160,000 units for strictly military purposes at
a price of $50 each. By 1968, the federal government was procuring
120 million of these computer chips, a level of production that
enabled the price to drop to $2.50 each. Today, billions of these
chips are produced in the U.S. for non-military purposes; virtually
all automobiles, cameras, stoves, clocks and other consumer goods
operate electronically with cheap mass-produced integrated circuits.
The procurement by governments, schools, hospitals, major corporations,
and any other large institution of ecolabelled products can create
economies of scale sufficient to convert whole industries to sustainable
PPMs. For example, the consumer population of the State of California
is so large that it can affect PPMs for the whole country. Laws
raising the state's air quality standards, for example, have regularly
driven the entire U.S. automobile industry to invest in building
automobiles with lead-free gasoline systems and improved miles-per-gallon
performance. When the California legislature passed Proposition
165, requiring all products produced with carcinogens or mutagens
to be so labeled, the label began appearing on these products
nationwide, as it was more economical for manufacturers to implement
the change throughout their production systems.
Institutional procurement of sustainably forested timber, renewable
energy supplies, organic foods, and other preferred products can
ensure that conscientious producers find adequate markets, that
conscientious consumers can buy the products they desire, and
that ecolabelling schemes can achieve significant results.
5) Ecolabelling schemes should ensure balanced access to and
influence within policymaking structures.
Unless decisions are informed by the genuine concerns of all parties,
they cannot be implemented effectively. Capture can occur easily,
and be as detrimental to civic discourse as it is to protection
of the environment, health and safety, and other goals of society.
In resolving conflicts over processing and production methods,
policymakers must be sure that they are informed by consumers
advocating PPMs as well as by producers advocating technology
transfer and market access. In resolving the analytical conflict
over LCA, policymakers must again be certain that the boundaries
set in standardizing a methodology appropriate for contemporary
ecolabelling schemes address both the product-related PPMs of
interest to consumers in importing countries and the process-related
PPMs of concern to manufacturers in exporting countries. In developing
equivalencies between and amongst ecolabelling schemes, policymakers
must be sure to compare the relative life cycle impacts of renewable
energy sources where supply is ample with energy efficiency where
demand is high.
Institutional reform according to principles of democratic global
governance is much needed. Generally, social policy with a weak
mandate has derived from the United Nations body of agencies while
economic policy with a strong mandate has derived from the so-called
Bretton Woods group -- the GATT, the World Bank, and the International
Monetary Fund. Neither set of institutions is especially democratic.
The UN gives every government equal voice and one vote except
in the Security Council; the World Bank and IMF are governed on
the basis of weighted votes according to governments' financial
contributions; the GATT historically gave every participating
country an effective veto but under the WTO, dispute panel decisions
will be binding unless rejected unanimously.
Certainly we are in the early stages of a period of systemic overhaul.
In recent years, a number of new international institutions have
been created such as the WTO and the Global Environmental Facility.
Others are proposed, such as a Global Environmental Organization
with authorities beyond the weak UN Environment Programme. Amalgams
of existing institutions are also discussed: one proposal suggests
a bifurcated structure comprised of a "competition agency"
to handle subsidies, intellectual property, restrictive business
practices, corruption and so forth -- perhaps based on the WTO,
and a "cooperation agency" to deal with research, technology
transfer, harmonization and mutual recognition of standards, and
macroeconomic coordination -- perhaps based on the tripartite
International Labor Organization.
While institutional innovation at the international level undoubtedly
proceeds into the next century, certain principles are fundamental
prerequisites to any international institution that expects to
balance competing interests in order to achieve successful policies.
Broad participation of all interested parties is essential. Transparent
negotiations based on accurate information that is appropriate
to differing economic, social, ecological, and cultural circumstances,
must be encouraged in multi-party and multilateral frameworks.
The differentiation of markets into those that are ecolabelled
and those that are not will not necessarily increase opportunities
for small producers while lowering consumer prices, as the theory
of monopolistic competition would suggest. To the contrary, ecolabelling
could exacerbate current global trends by which developing countries'
shares of international markets shrink and, within all countries,
small businesses' shares of both national and international markets
shrink unless ecolabelling schemes are accompanied by aggressive
affirmative policies to facilitate the participation of small
firms and developing country exporters.
In sum, political processes fully engaging consumers and environmentalists,
health and safety advocates, and other social reformers with producers
large and small, committed to devising policies linked to adequate
financing, standardized life cycle analysis, and strategic procurement
can ensure that ecolabelling contributes effectively to building
a more sustainable future.
A. NATIONAL PROGRAMS
Germany organized the first national voluntary ecolabelling program
in the world in 1978. Since then, about two dozen others have
been created -- separate and distinct from private schemes such
as those in the United States and intergovernmental schemes such
as those of the Nordics and the European Union as a whole. Despite
this proliferation, few have achieved impacts significant to international
trade.
For example, the United Nations Conference on Trade and Development
(UNCTAD) selected just the national programs of Canada, Germany,
Japan and the Netherlands, and the intergovernmental programs
of the European Union and the Nordics in building its statistical
analysis of the value of international trade that may be or may
become exposed to ecolabelling.
In many parts of the world, ecolabelling is a novel component
of environmental planning. Documentation is scanty and change
is rapid. The following describes a few of the more established
national programs in some detail, while providing a snapshot of
features of interest from programs in a few other countries.
Austria
By a vote of Parliament on June 5, 1992, Austria passed the world's
first mandatory ecolabling law and a voluntary label for all sustainably
produced timber. The law required that, by September 1, all tropical
timber imports would be marked "made of tropical timber"
or "containing tropical timber" on a label measuring
10 x 10 centimeters. In addition, the Parliament
levied a 70 percent import tariff, with revenues plus an allocation
of $17 million of new and additional funds from Austria's treasury
dedicated to compensating disadvantaged exporting countries and
financing tropical forest protection projects.
The law was challenged immediately -- by timber exporting countries,
particularly Malaysia and other members of the Association of
South East Asian Nations (ASEAN), and others including Japan,
Canada, New Zealand, and Australia -- as a violation of GATT principles
of non-discrimination. They also complained that the legislation
was implemented without prior notification of affected parties
and that the levy was not properly counterbalanced to achieve
a revenue-neutral result between Austria and its trading partners.
The complaint was reviewed at the GATT Council meeting of November
1992. Amid sharp criticism, Austria decided to rescind the import
tariff that December and rescinded the mandatory ecolabel in March
1993.
The voluntary label remains in place. The "quality mark" for all kinds of sustainably produced timber is awarded by the Federal Ministry for Environment, Youth and Family. The criteria require:
Canada
Canada's Environmental Choice program, which addresses both products
and services, uses an "EcoLogo" depicting three birds
whose tails fan out in a resemblance to a maple leaf, the national
symbol. It is administered by Environment Canada, an office of
the federal Ministry of the Environment. The Environment Minister
appoints an independent volunteer board which makes certification
awards in conjunction with the Canadian Standards Association
based on a good deal of citizens' input. Draft guidelines are
published in two national newspapers, the federal reporter, the
Environmental Choice newsletter, and mailed to more than 6,500
individuals, companies, and local governments officials. Government
procurement and institutional purchasing have stimulated a large
portion of the market for EcoLogo products.
In determining certification criteria, the Environmental Choice
board considers the full life cycle of a selected product or service,
and identifies ways the product or service could be developed
to lesson its environmental impacts. Criteria are designed to
achieve these reductions while accommodating established safety
and performance standards. The program emphasizes that it does
"not use the words 'environmentally friendly' ... because
we do not want to suggest that these products or services are
perfectly harmless to the environment... [P]roducts or services
are certified by Environmental Choice because they help reduce
the burden on the environment in specific ways."
Certified manufacturers and service providers pay an annual fee
to use the label, based on annual gross sales. Compliance with
the criteria and all Canadian laws and all "applicable laws
and regulations" is verified annually. The Canadian program
requires inspections of all applicants' manufacturing facilities,
whether in Ontario or Manitoba -- or China, payable by the applicant.
For example, a textile manufacturer in China seeking the Canadian
label for cloth shopping bags was fortunate that a Canadian official
was in China at the time and able to inspect the plant for minimal
costs, just travel within China and the time involved.
By early 1995, the Canadian EcoLogo program had established criteria
for 31 product categories and awarded labels in just 15 categories
for some 1,500 products to 116 manufacturers, of which 17 were
foreign.
Also in 1995, the Canadian Standards Association published draft
voluntary guidelines for Sustainable Forest Management, applicable
to a wide range of forest conditions. Although environmental groups
were invited to participate in the development of the guidelines,
none did so and none have endorsed them to date. The guidelines
are designed to enable independent auditors to assess forestry
practices according to standardized norms.
China
A "green sign" label has been launched; the label is
awarded for "green food" products according to a life
cycle analysis that evaluates pollution impacts during production
and transportation, and requires recyclable packaging as well
as high nutritional value. More than 380 labels have been awarded.
Consumer demand is high, and production plans are great.
Germany
The first national eco-labeling program was launched in 1977 by
Germany. For more than 10 years, the German program operated alone
in the world. By early 1995, the German program had established
criteria for 81 product categories and awarded labels in 61 categories
for some 4,350 products to 1,058 manufacturers, of which 175 were
foreign.
Initially, the "Blue Angel" logo was accompanied with
the words "Environmentally Friendly"; when critics from
Germany's Green Party pointed out that no manufactured goods are
truly environmentally friendly, the wording was changed to "Environmentally
Labeled." Meanwhile, German consumers' preference for "environmentally
friendly" products increased from 57 percent in 1981 to 72
percent in 1991.
For the more popular product categories, the Blue Angel program publishes detailed information sheets. The criteria for these products include:
The program bases its awards on a comparison among like products
based on a life cycle analysis, usability, and safety criteria.
For-profit businesses are explicitly excluded from the criteria-setting
process, although they do participate in other aspects of the
program. The Blue Angel is jointly sponsored by an Eco-Label Jury
-- consisting of independent representatives of the business,
environmental, consumer, trade union and religious communities
in addition to the government; the German Institute for Quality
Assurance and Labelling (RAL); and the German Environmental Protection
Agency.
Periodically, the Jury pre-selects product groups based on recommendations
that come almost without exception from manufacturers; the proposals
undergo technical study by the RAL. Out of some 200 proposals
each year, the Jury selects 3-6 product groups for further development.
Proposed criteria for these groups are submitted to an experts'
hearing organized by the RAL for factual review before final publication
by the Jury. The RAL then evaluates each applicant's products
and comments submitted by the Environmental Protection Agency
or the relevant German state government. Usually within a few
weeks, successful applicants are offered a contract for use of
the Blue Angel label on the product itself and on advertising
for the product. The application process is free but use of the
label entails a fee of approximately $US215, an annual contribution
ranging from about $US250 to $US2842 depending upon sales revenues
for the labelled product, plus another contribution in the amount
of 20 percent of that sum to an "advertising fund" for
the Blue Angel label itself.
Approval is granted for three years to leaders in each product
category, as a means of continuously upgrading the norm for that
category. When the market for a category is saturated with environmentally
sound products, no further labels are issued.
Foreign applicants are asked whether their manufacturing plants
meet relevant German standards. As of 1992, the Blue Angel had
been awarded to 89 foreign firms -- all European -- representing
12 percent of all firms using the label.
India
Set up in 1991, India's voluntary scheme offers an "Ecomark"
for products meeting specified criteria including quality, performance
and safety requirements of the Bureau of Indian Standards (BIS).
The Ministry of Environment and Forests convenes a Steering Committee
to identify product categories and develop criteria, and a Technical
Committee to certify eligible products. The license fee to use
the Ecomark can cost about US$1,700 to cover texting and verification
procedures, and is awarded for a minimum of one year with annual
renewals, subject to revocation by the BIS. The program addresses
the life cycle impacts for products in 16 categories including
soaps, paints, paper and packaging although by 1993 awards had
only been made in two of these categories.
Indonesia
In late 1993, the Indonesian government and a former Minister
of Population and Environment initiated the Indonesian Ecolabelling
Institute, intended to become an independent non-governmental
agency. The initial goals are to set criteria and define indicators
for forest sustainability, although other manufacturing and agricultural
products will eventually be included.
Draft criteria have been based on public consultations and the
work of the International Tropical Timber Organization, the International
Standards Organization TC 207, and the Forestry Stewardship Council
as well as numerous other national and regional wood products
certification schemes such as the Soil Association UK, the U.S.-based
Rainforest Alliance, the German Initiative Tropenwald and the
Green Label of the African Timber Organization. The criteria assume
three general goals -- sustainability of the forest's production
function; of its ecological function; and of its social and cultural
functions.
In addition to requiring the payment of a restoration fee and
other fees or taxes, forest managers must submit a five year working
plan addressing both village development and environmental management
and monitoring; aerial photos and satellite images; financial
reports; incremental data collections; and reports on boundary
maintenance and road construction. An assessor reviews this data;
if it is in order, a team of experts and local stakeholders will
visit the forest and its communities. Community endorsement is
required for certification.
As of March 1995, the draft criteria include:
Japan
The Japanese "Eco-Mark" was announced in February 1989,
after a contest resulted in a logo with a pair of arms encircling
the earth. It has words reading "Protect the Earth"
above the design, and a phrase describing the key environmental
value of the particular product below.
In addition to marking products, local officials are invited to
use it to sponsor activities such as a recycling project. Japanese
consumers are quite committed to environmental protection: 87
percent are willing to accept lower living standards and 60 percent
are willing to pay more to preserve the environment or conserve
resources.
An Eco-Mark Office within the Environmental Agency determines
product categories and sets criteria. Eligible products are either
"produced with environmentally sound manufacturing methods;"
"place a minimal burden on the environment;" or "made
from recycled materials or materials that can easily be recycled."
All products meeting this criteria may be awarded a label.
The Japanese program is one of the few national schemes
that sets absolute rather than relative criteria, offering the
label to all eligible manufacturers, with no intention of identifying
environmental leaders through the design of exclusive criteria.
Companies applying to use the label pay a fee based on the retail price of the labeled product --ranging from 40,000 yen for products retailing for 1,000 yen or less to 100,000 yen for products costing 100,000 yen or more. Awards are valid for two years, renewable upon written request; reapplication is required if the product has changed in any way. The first list of product categories included:
Additional categories followed promptly. By early 1995, the Japanese
program had established criteria for 65 product categories and
awarded labels in 63 categories for some 2,320 products to 1,039
manufacturers, of which 22 were foreign. Although
the application forms are in Japanese, a Japanese official will
help foreigners to apply.
The Netherlands
Stichting Milieukeur, the Dutch national eco-labeling organization,
had by April 1994 established criteria for toilet paper, shoes,
television sets and refrigerators with criteria for fabric, clothing,
and window treatments in progress. Its standards tend to be more
stringent than those of the European Union; according to the director
of Stichting Milieukeur, "some 50% of the products currently
on the Dutch market would meet the European requirements. That's
why we will keep the Dutch label," she said.
The Dutch criteria for tissue paper, for example, sets absolute threshold levels for various types of pollution while the EU program is based on "total load points" for seven pollutants. The Dutch criteria stipulate:
In the manufacture of shoes, the criteria stipulate:
For television sets, the Dutch require:
In eligible refrigerators, the Dutch disallow hydroflourocarbons
(HFCs) and hydrochloroflourocarbons (HCFCs) -- a criterion so
strict that manufacturers have not sought the label.
By early 1995, the Dutch program had established criteria for
20 product categories and awarded labels in 4 categories for some
40 products to 10 manufacturers, of which 3 were foreign.
The Netherlands has established national policy on tropical timber,
too, which also involves ecolabelling. In June 1993, the government
concluded a "Covenant" -- an enforceable agreement within
Dutch civil law -- with timber companies, trade unions and environmentalists
stipulating that by the end of 1995 all tropical timber imports
must come from sustainably managed forests and be furnished with
an ecolabel.
Recently, the Dutch Ministry of Agriculture, the Environment and
Fisheries contracted with two non-governmental organizations to
develop criteria for agro-environmental certification. While a
strictly defined label for organic products already exists, the
very narrowly defined criteria for this label limit its impact
on the majority of Dutch agricultural production. Thus, the goal
of the new project is "to facilitate the transition to sustainable
farming for the entire agricultural sector by identifying the
progress made by large groups of producers." Certification,
then, will not imply that a product was produced sustainably but
rather that it is the most environmentally friendly in its category.
Criteria will not be based upon methods of production; instead, they will be designed to achieve targeted improvements, measurable against a "yardstick." Under consideration are the following:
These criteria and the yardstick measures are still undergoing
development. Meanwhile, planners are developing operational goals
as well, including the definition of an Agro-Environmental Certification
Foundation; an inspection system based upon a contract between
the producer and the buyer, either of whom could carry the certification,
and a third party that stipulates regular improvement against
the yardstick with explicit penalties for failure to do so; marketing
strategies including certified producer cooperatives; building
relationships with other environmental institutions; and creating
international agro-environmental certification at the European
and global levels.
Republic of Korea
Begun in June 1992, the Korean "Ecomark" seeks to promote
the use of indigenous technologies for pollution control while
promoting consumer and environmental awareness. The Ecomark is
administered by the Ministry of Environment which prepares an
advisory document in consultation with several technical institutions.
An Ecomark Committee then selects product categories and drafts
criteria for the consideration of another committee which, in
turn, publishes the proposal, holds a public hearing, and submits
its proposed amendments back to the Ecomark Committee for a final
decision. Applicants submit their products to a technical review
committee with a fee between about US$40 and US$1,250.
Twelve product categories have been selected, including recycled plastics, tissues, and packaging materials; reusable diapers; regenerated soap made with waste edible oils; aerosol sprays; water valves; and non-asbestos brake linings. The criteria include:
Like in Japan, all products meeting the requirements may be labeled.
While environmental awareness in the Republic of Korea is growing,
there is evidence that some consumers may choose to avoid the
ecolabeled products in favor of such products as virgin plastics
and disposable diapers. After initiating the Ecomark, recycled
toilet tissue -- which is less expensive than the virgin product
-- was the only product category to increase its sales.
Singapore
Begun in 1992, Singapore's Green Label is administered by the
Waste Minimization Department (WMD) in the Ministry of Environment.
An Advisory Committee develops draft criteria -- drawn from other
schemes including those of Japan and Canada -- for products selected
by the WMD, which are finalized after publication and comment.
The WMD also conducts very simple testing and certification. Like
in Japan and the Republic of Korea, all eligible products may
be licensed. Applications are free for the first year after the
announcement of guidelines for a new product category; licenses
are valid for 5 years. After these deadlines, applications cost
just US$20.00 and the license remains free for three years.
Criteria include:
By 1993, criteria for eight product categories were established
and 18 Green Labels had been awarded. Of these manufacturers,
7 reported increased sales, 9 reported no difference in sales,
and 2 lost sales.
Turkey
Called the "friend of water and the environment label,"
Turkey's scheme is promoted by a number of institutions.
United Kingdom
The UK Ecolabelling Board is appointed by the Department of the
Environment and the Department of Trade and Industry. Acting in
their personal capacity, members of this board have included personnel
of major manufacturing companies including Kingfisher, Hoover,
Pilkington Shell and Rhone Poulenc. As a result of industry lobbying,
critics maintain, the standards are less effective for environmental
protection. For example, the final criteria for tissue paper were
considerably weaker than those initially proposed for both the
amount of absorbable organically bound halogens in bleach-plant
emissions and the allowable amount of virgin fibers.
B. INTERGOVERNMENTAL STANDARDS
Numerous intergovernmental fora are studying ecolabelling with
the intention of determining policy in the near future. Others
have already established ecolabelling policies and a few actually
administer ecolabelling or other health and safety labeling programs.
In this segment, we will describe those of the Codex Alimentarious,
the Convention on International Trade in Endangered Species of
Fauna and Flora (CITES), the European Union, the International
Standards Organization, the International Tropical Timber Organization,
the Nordic Coordinating Body for Environmental Labeling, the World
Health Organization, and the World Trade Organization's Committee
on Trade and Environment.
Codex Alimentarious Commission
Latin for "food code," Codex Alimentarious is the body
of international food standards developed by the Codex Alimentarious
Commission. The Commission was established in 1962 by the Food
and Agriculture Organization and the World Health Organization,
with the goal of promoting trade in food by harmonizing standards
for food safety. At that time, the U.S. government chose not to
finance its participation in the new organization, so the U.S.
food industry did so instead.
As of 1994, 146 countries are members of the Codex Commission.
Members may choose to adopt the Codex standards, which become
legally binding only when adopted as national requirements. However,
with the conclusion of the Uruguay Round of the GATT and entry
into force of the agreement on Sanitary and Phytosanitary Standards
(SPS), the standards, guidelines and recommendations of Codex
Alimentarious will become the presumptive standard for food safety
in GATT disputes.
Codex Alimentarious consists of standards, guidelines and principles
regarding food production and processing including the concentration
of additives, contaminants, pesticide residues, and animal drug
residues; procedures for sampling and analyzing processed foods
and for hygiene practices; and labeling. A new initiative addresses
the inspection and certification of food imports and exports.
A geographically-representative Executive Committee makes proposals
to the Commission, and may make decisions on its behalf subject
to later approval. Proposals for a new standard may come from
any of five types of subsidiary work bodies -- the World-Wide
General Subject Codex Committee; World-Wide Commodity Codex Committees;
Regional Commodity Codex Committees; Regional FAO-WHO Coordinating
Committees; and Joint United Nations Economic Commission for Europe/Codex
Alimentarious Groups of Experts --although the Codex Commission
decides whether to pursue the development of a new standard and
designates which subsidiary body will do the work. Each subsidiary
body consists of various committees with assignments ranging from
procedural to substantive matters.
The development of a standard passes through eight steps, although accelerated procedures are available when standards are updated, when new scientific information or technologies arise, or when urgent trade or health incidents occur. The steps are:
Members may accept the standard as adopted by the Commission in
one of three ways: fully; with specified deviations; or passively
acquiescing to the free distribution of products conforming to
the standard within their jurisdiction. In the case of full acceptance,
products not conforming with the standard are excluded from that
country's markets. In the case of deviations, countries specify
how products may differ from the standard and still circulate
freely in their markets; in this case, countries may choose whether
to accept the standard fully in the future and whether to allow
products that do conform with the standard into their markets.
In the case of acquiescing to free distribution, countries are
not obligated to prevent non-conforming products from circulating
in their markets.
Member countries notify the Commission of their choice regarding
the three options for acceptance; the Secretariat to the Commission
then publishes lists of countries that have accepted each standard
by each of the three options. The primary enforcement mechanism
has been border inspections although, as more and more standards
address production processing, inspection and certification of
processing facilities has become increasingly important.
A mere sampling of Codex standards includes:
Codex is currently circulating "Proposed Draft Guidelines for the Production, Processing, Labelling and Marketing of Organically Produced Foods" and for "Food Import and Export Inspection and Certification Systems." The labeling standards would:
The proposed guidelines for the inspection and certification of food imports and exports suggest that inspection systems:
Convention on International Trade in Endangered Species
of Wild Fauna and Flora (CITES)
Signed in 1973 by 80 nations of the world, the Convention on International
Trade in Endangered Species of Wild Fauna and Flora (CITES) was
at the time the most broadly accepted of international treaties.
CITES regulates trade in wildlife by listing, in three Appendices,
those species whose survival is most endangered, and threatened.
Correspondingly, commercial products from these species may be
prohibited, highly regulated, or less regulated. While only parties
may vote, this Convention has been exceptionally open to the active
participation of observers, including other intergovernmental
agencies as well as non-governmental organizations. By the end
of 1994, 128 nations had signed on as members.
Since 1989, CITES has required the ecolabelling of crocodile skins
according to their production as artificially propagated, captive
bred, or ranched to distinguish them from those that have been
poached and smuggled. At the November Ninth Conference of the
Parties (COP) to the CITES Convention, in November 1994, governments
adopted resolutions strengthening the standards, procedures and
requirements for labeling crocodile skins and initiated a voluntary
program "to identify, mark, register, and secure" legally
stockpiled rhinoceros horn. Although the sale, use and trade of
rhinoceros horn is illegal, stockpiles are maintained legally
in Taiwan, where the Constitution prohibits the seizure of private
property. Recently, the Taiwanese government
announced especially severe penalties for owners of rhino horn
stock that is not labeled and registered, and that it would confiscate
unlabeled stocks.
Also at COP 9, CITES began a Timber Species Working Group, which
will include in its agenda the labeling of legally-tradable products
of endangered or threatened species of trees. The Conference of
the Parties has also initiated preliminary consideration of marking
live animals with microchips imbedded under their skins to verify
legitimately obtained animals while documenting illegal trade.
The European Union
The day after finalizing agreement on the Maastricht treaty creating
the new European Union (EU), the European Commission agreed to
create a Community-wide voluntary "Green" label. The
logo, a flower with the characteristic "E" surrounded
by 12 stars symbolizing the member states, was announced on December
12, 1991.
Europeans were already experiencing at that time the problems
with a proliferation of labels -- in their case, national. In
keeping with the treaty's principle of "subsidiary,"
in which political decisions are made at the national rather than
EU levels when appropriate, the new labeling standards would be
established by a committee made up of experts from member states
after broad consultation with the public. National regulatory
agencies would certify products for the label, with an appeals
mechanism set up at the level of the EU. Existing national labels
would continue; manufacturers could seek to display both the national
and international labels. Food, pharmaceuticals and chemicals,
already governed by separate legislation, were exempted. The measure
was formally adopted on March 23, 1992.
The EU program requires member states to designate national bodies
for proposing product categories to be prioritized in developing
criteria for labeling, and to make the awards. The European Commission
is responsible for adopting final criteria for each product group
and coordinating relations amongst the national bodies. The regulation
requires a "cradle to grave approach" based on a matrix
setting out phases of the product life-cycle -- including pre-production,
production, distribution including packaging, utilization, and
disposal -- on one axis, and environmental fields -- waste impacts,
soil pollution and degradation, water and air contamination, noise,
energy and natural resource consumption, and ecosystem impacts
-- on the other.
Each of six governments accepted lead responsibility for developing
proposed criteria for a specific product group. As of July 1993,
criteria for two product groups had been proposed by the lead
countries, passed to a "Consultation Forum" of interested
parties, forwarded to a Regulatory Committee of Member States,
and finally approved by the Commission. To be eligible for the
EU label for washing machines and dishwashers, manufacturers must
pay a fee of about $US660 to the national body and demonstrate
that their products have low environmental impacts during use;
the criteria ignore other aspects of the appliances' life cycles,
after finding that 95 percent of the total environmental impacts
occurred during actual use. Once awarded a label, manufacturers
must thereafter pay an annual fee of 0.15 percent of the annual
volume of sales of the labeled products or a minimum of approximately
$US660.
More specifically, eligible washing machines and dishwashers must have:
One year later, criteria were ready for three additional products:
toilet paper, paper kitchen towels, and soil improvers. The approval
was not unanimous among Commission members: France has voted against
every set of criteria yet proposed; Portugal voted against the
paper standards, presumably in defense of its former colony Brazil,
a major paper exporter; the Netherlands simultaneously was developing
national standards for paper that were far stricter; and Ireland
objected to the ban on peat in soil improvers.
Nor were the new standards for paper products well-received by many foreign parties, who complained of probable trade barriers. While the criteria do not reference European legislation, they stipulate high waste content and low chlorinated organic emissions to water in the manufacture of certifiable paper goods -- standards likely to concern the pulp and paper industries not only in Brazil but in Canada and the U.S. as well. To win a label, a manufacturer's product must yield low scores, measured as "load points," for seven categories of environmental impact per ton of tissue produced:
In response to the publication of these criteria, the American
Forest and Paper Association said it and the U.S. government objected
on grounds that chemical oxygen demand is not measured in the
U.S.; that the strict limits on sulfur dioxide favored Scandinavian
producers; and that the limits on chlorinated organics emissions
are so low as to be "virtually meaningless as a measure of
environmental impact." Brazilian officials said their industry
cannot meet these levels for chlorinated organics emissions and
that, by excluding paper produced from their sustainably managed
forest plantations, the standard demonstrates European bias. A
representative of the Brazilian pulp industry said it constituted
"[e]xtra-territorial application of EU laws and regulations
on environment and health [that] goes against GATT principles."
The Netherlands, meanwhile, persisted in issuing national labeling
criteria for toilet paper that are far more stringent: 100 percent
recycled fiber content, no chlorine bleaching, and lower limits
for energy consumption and chemicals emissions.
By early 1995, the EU program had established criteria for 5 product
categories and awarded labels in only 1 category for some 8 products
to just 1 European manufacturer.
The International Standards Organization
The International Standards Organization (ISO) is certainly the
largest standard-setting organization in the world. With more
than 100 members, each representing the "national body most
representative of standardization in its country," the ISO
engages 30,000 experts in 2,754 technical bodies. The ISO was
created in 1946 by the governments of 25 countries to "facilitate
the international coordination and unification of industrial standards."
Although acting as national representatives, 30 percent of the
appointed members are private institutions.
Standards are voluntary, and directed at producers -- not governments.
They are adopted after a complex process, passing through a Technical
Committee as well as several subcommittees and working groups
before a consensus proposal can be bought to the entire ISO membership
where a 75 percent majority must approve it. By late 1994, the
ISO had produced 2,649 International Standards, mostly in the
fields of mechanical engineering, basic chemicals, non-metallic
materials and information processing, graphics and photography.
Many of these standards result in labelling schemes certified
by the national standard-setting bodies, which are much relied
upon by industry as guarantees that materials are of a dependable
quality.
Until the 1980s, ISO standards merely touched upon environmental
concerns such as designating criteria for equipment measuring
toxicity or pollution. During that decade, however, converging
global demand for environmental regulation compelled the ISO toward
developing uniform standards that could avoid the competitive
effects of differing regulations from jurisdiction to jurisdiction,
including within the European Community. Simultaneously, negotiators
at the Uruguay Round of the GATT introduced mandatory global harmonization
and the business community began its preparations for the 1992
Earth Summit in Rio de Janeiro.
In 1987, the ISO published a body of standards for management
and quality control known as the ISO 9000 series. This introduced
a set of standards for environmental management mandating compliance
with national requirements for "environmental considerations,
health and safety factors, and conservation of energy and materials"
as well as obligating analysis of "all phases in the life
cycle of a product and processes..." The standards also require
internal and external auditing as well as third party registration
verifying compliance.
The 9000 series became influential; more than 45,000 certificates
of conformity have been issued. In addition, EC directives reference
them, U.S. agencies have begun harmonization procedures to meet
them, and less developed countries have been selecting contractors
able to demonstrate compliance. Indeed, companies based in countries
where it was more difficult to comply -- including the U.S. where
a third party registrar was lacking -- began complaining that
use of the standards, especially in the EC, created non-tariff
trade barriers.
In preparation for the Earth Summit, the ISO joined the International
Electrotechnical Commission in creating an ad hoc Strategic Advisory
Group on Environment (SAGE) to assess "the needs for future
international standardization work ... including but not limited
to consumer information and eco-labelling..." After the Earth
Summit, SAGE recommended that a formal Technical Committee of
the ISO be established to carry on this work. Named "TC 207,"
this committee has divided into six subcommittees -- for management,
auditing and investigations, labeling, performance evaluation,
life cycle assessment, and terms and definitions.
The labeling subcommittee of TC 207 has aimed at harmonizing methodologies,
terms and principles for a range of ecolabelling programs. It
has identified three types of labels: Type I labels evaluate a
product's overall environmental impact and offer a seal indicating
superiority on all counts. Type II labels are those offered by
a manufacturer itself claiming qualities such as "biodegradable"
or "recyclable." Type III labels are broadly informational
and do not imply preferences, allowing consumers to judge for
themselves.
Business representatives are well represented in the labeling
subcommittee, outnumbering both governmental officials and representatives
of the quasi-governmental national standards institutes. The business
participants have shown a strong preference for Type III informational
labels. Type I labels are problematic for the subcommittee, in
that many ecolabelling schemes require a product's compliance
with existing national standards, which creates a non-tariff trade
barrier by definition. Type II labels open their companies to
potential truth-in-advertising litigation. In the U.S., 28 such
lawsuits have already been filed with the Federal Trade Commission
over deceptive environmental claims.
Indeed, on these grounds, the U.S. delegation has proposed striking
the goal of "environmental improvement" from the ISO
standard-setting process. According to the Worldwide Fund for
Nature (WWF), the U.S. position at a subcommittee meeting in March
1995 was that environmental labeling "should only be a marketing
tool with the potential effect of environmental improvement."
Supported by Japanese and European delegates, WWF argued to the
contrary -- that "the environmental labelling purpose is
to lessen the stress on the environment, using the marketing aspect
as a tool to achieve that goal." By the June 1995 meeting
of TC 207 in Oslo, the U.S. backed down; language making "environmental
improvement" an objective in the draft standard on "Goal
and Principles of all Environmental Labelling" was retained.
At the Oslo meeting, the subcommittee considered draft "Principles of All Environmental Labelling" stipulating that:
While noting the need to clarify the relationship between these principles and international environmental agreements and trade rules, TC 207 did list a number of ecolabelling procedures which it deemed potentially unfair trade barriers. These include:
These principles and related standards will eventually be issued,
as revised, as the ISO 14020 series of Environmental Labelling
Guidelines, part of the ISO's 14,000 series "that will enable
organizations to implement a total environmental management system
(EMS) that can be verified through an audit." While voluntary,
the standards are likely to very significantly affect the environmental
policies of all corporations engaging in international trade.
For example, there is legislation in the European Union that would
require all foods labeled "organic" to meet ISO standards
by a certifying agency accredited by a relevant national standards
body. Whether the ISO 14,000 Series of standards for eventually
become the baseline for rules at the national level, as in the
case of the TBT and SPS standards referenced in the Uruguay Round
rules of the GATT, remains to be seen.
The concept of a universal set of standards is controversial enough;
that the ISO should do so has generated considerable opposition.
For example, the national standards bodies of Australia and Canada
proposed in April 1995 that the ISO develop guidelines for the
implementation of its 14,001 standard on Environmental Management
Systems to establish "one internationally recognized and
equivalent system" for the voluntary certification of sustainable
forest management. The proposal was sharply
criticized by environmental groups, indigenous peoples organizations,
foresters, unions and others in Canada on grounds that the Canadian
Standards Association is collaborating with the Canadian Pulp
and Paper Association to enable the ecolabelling of present destructive
practices such as clearcutting.
Opponents organized a public campaign against the proposal and
sponsored a briefing for ISO delegates at the Oslo meeting in
June 1995, after which Canada and Australia withdrew their proposal.
The full TC 207 then passed two formal resolutions confirming
its withdrawal and preventing, for the time being, any other sector-specific
elaboration of the controversial draft standards for Environmental
Management Systems.
The International Tropical Timber Organization
The International Tropical Timber Organization, set up in 1985,
is composed of governmental representatives -- presently 25 from
timber-producing countries and 26 from timber-consuming countries.
Voting rights are distributed on the basis of financial payments
to the organization: Japan has one-third of the consumers' voting
rights; Indonesia, Brazil and Malaysia together share 45 percent
of the producers' voting rights.
The ITTO is considering labeling wood from sustainably managed
forests as a means of giving consumers information with which
to promote conservation while enabling responsible governments
to continue tropical timber exports. However, ITTO President Jerry
Rawlings acknowledged during a May 1995 meeting of the ITTO Council,
"It appears premature to determine what exactly is meant
by verifiable sustainable management on which certification eventually
will be based."
The Nordic Coordinating Body for Environmental Labeling
In November 1989, the Nordic Council of Ministers introduced a
label common to Sweden, Norway, Finland and Iceland. The logo
consists of a white swan in flight against a dark background,
stylized with angular stripes.
Use of the label is licensed separately within each country by
a national agency. These agencies collaborate as the Nordic Coordinating
Body for Environmental Labeling: the Swedish Standards Institution,
the Finnish Standards Institution, the Norwegian Foundation for
Environmental Labelling, and Iceland's Ministry of Environment
are joined by an observer from Denmark. All decisions must be
unanimous. Together, they determine eligible product groups and
criteria for each group. Draft criteria developed by Inter-Nordic
groups of experts -- drawn from government, environmental organizations,
trade ministries and industry -- are broadly circulated for comment.
Within each country, the national standards agency handles the
licensing process, including documentation, testing, and inspections.
A license awarded in one country is automatically recognized in
the other Nordic countries. There is an initial application fee
of about US$1,45O plus annual fees based upon product sales --
up to a maximum of about US$35,700 for the license -- which is
only awarded for two to three years, enabling the program to "be
tightened up in pace with new opportunities emerging."
The Nordic label sets standards for:
In 1994, the Nordics began offering a label for textiles. Criteria for finished products as well as yarn, fabric, and tricot require a minimum of 95 percent by weight -- not counting buttons, zippers and other fasteners -- of fibers that meet the standards for cotton, sheep wool, flax, regenerated cellulose fibers, and certain synthetics including polyester, polyamide, viscose, lyocell and acetate. Criteria for production, processing and finishing stipulate that:
By early 1995, the Nordics' program had established criteria for
31 product categories and awarded labels in 15 categories to 182
manufacturers, of which 19 were foreign.
World Health Organization (WHO)
Constituted as a United Nations agency in 1948, the World Health
Organization (WHO) evolved from prior efforts dating back to 1851.
It enjoys a broad mandate including the development of international
standards for food, biological and pharmaceutical products, proposing
new conventions, providing technical assistance, and conducting
research. WHO is governed by a World Health Assembly with an Executive
Board served by a Secretariat. The Assembly elects the 31-member
Executive Board annually and appoints a Director-General from
a slate of nominees of the Board. The work is conducted through
six regional offices.
Among numerous other initiatives, WHO established standards in 1981 for the labeling of baby food products that may be used as a substitute for breastfeeding -- after research demonstrated that malnutrition, severe dehydration, and infant death can result from improper use of the substitutes, especially in countries where safe drinking water is not readily available and literacy rates are low. The standards are voluntary, subject to adoption by individual countries as a matter of national law. The International Code on Breastfeeding Substitutes stipulates that labels should:
Numerous countries have adopted this Code, including Guatemala,
Brazil, the Philippines, India, Sri Lanka, Tunisia, and Colombia.
The United States has never endorsed the Code.
World Trade Organization (WTO)
Committee on Trade and Environment (CTE)
The World Trade Organization (WTO) was born in April 1994, when
more than 100 countries signed the Final Act of the Uruguay Round
of negotiations of the General Agreement on Tariffs and Trade
(GATT.) Scheduled for entry into force in
January 1996, the World Trade Organization will become a permanent
negotiating body for ongoing considerations regarding global trade,
including implementation of the rules established during the Uruguay
Round.
The WTO's mandate is considerably broader than that of the GATT:
the Uruguay Round introduced a number of new subjects to its realm
-- particularly services, investment measures, and intellectual
property rights; obligates members to accept all of the 20 or
so agreements as a package; and strengthens the WTO's powers of
dispute resolution. Each member of the WTO must "ensure the
conformity of its laws, regulations and administrative procedures
with its obligations as provided" with the new rules. Findings
of its Dispute Settlement Body will be considered binding. And
the WTO will become a permanent forum for ongoing negotiations.
In April, as government officials signed the Final Act, they created
a Committee on Trade and Environment (CTE), which met for the
first time on February 16, 1995. At this meeting, the WTO CTE
outlined a program of work for the year. A discussion on "requirements
for environmental purposes relating to products, including standards
and technical regulations, packaging, labelling and recycling"
was scheduled for late October 1995.
C. MAJOR NON-GOVERNMENTAL ECOLABELS
While governmental ecolabelling schemes receive most attention
in international policy debates regarding trade and environmental
issues, a number of non-governmental schemes have achieved prominence.
Particularly in the U.S., where the government has not moved toward
any official ecolabelling mechanism, the non-governmental approach
is important to consider. Here we will discuss the programs of
ECO-O.K. based in the U.S. and Latin America, the broadly international
Forestry Stewardship Council, and the U.S. nationwide programs
Green Seal and Scientific Certification Systems (SCS.)
ECO-O.K.
ECO-O.K. offers a "Green Label" for certified environmentally-friendly
tropical commodities including wood, bananas and coffee grown
in the commercial agricultural sector, primarily on plantations.
Sponsored by the Rainforest Alliance, it is presently considering
offering the label for environmentally-friendly vanilla, plantains,
cocoa and brazil nuts as well.
Companies seek certification from ECO-O.K., which sets up a committee
"with no financial or personal connections to the applicant"
to determine whether to award the label after a team of local
and international scientists inspects the plantation or logging
operation and recommends improvements to bring it up to the program's
standards. According to ECO-O.K., these are "stringent enough
to bring meaningful change but realistic and practical enough
to allow implementation within existing technological, managerial
and economic limits. The standards are modified to meet local
conditions in each country or region. While there are certain
nonnegotiable limits, the standards are flexible..." The
majority of Eco-O.K.'s 150 guidelines regulate agrochemicals.
ECO-O.K. does not insist upon organic production methods; it will
certify producers using any agrochemicals that are legal in the
U.S. and Europe while encouraging their phase-out. The program
does require "airtight controls" on the storage and
use of chemicals, and education as well as protective gear for
workers. The technical teams work on site with plantation managers
for "as much time as necessary," encouraging technology
transfer and offering seminars on topics such as the effects of
pesticides on wildlife and the management of plastic wastes.
ECO-O.K. has a strong presence in Costa Rica where it collaborates
with Clemson University's Wildlife and Toxicology Center, the
National University of Costa Rica, and the Archbold Tropical Research
Center. One study will compare wildlife population levels in banana
plantations, in natural forests, and in ECO-O.K. certified banana
farms.
The first banana farm to be certified ECO-O.K. sends 3,000 forty-pound
boxes of bananas from Costa Rica to Europe each week. A second
certified banana plantation operates in Hawaii. In December 1993,
Costa Rica's Agricultural College of the Tropical Humid Region's
307-hectare banana plantation became the third ECO-O.K. certified
banana producer in the world. At that time, however, the college's
buyer, Del Monte Fresh Fruit International, did not want to use
the Green Label. College officials speculated that Del Monte didn't
want a second sticker on bananas carrying its brand-name label,
especially if the second sticker might appear on competitors'
products as well. The college planned to apply the Green Label
to its 11,000 weekly boxes of bananas once the Del Monte contract
expired in 1994.
After seven years of evaluation, ECO-O.K. is preparing to enter
the labeled coffee market with its Guatemalan partners, the Fundación
Interamericana de Investigación Tropical and the Central
America Coffee Company. Unique among fair coffee traders, as it
will market coffee grown on plantations rather than that produced
by peasants, ECO-O.K.'s criteria will address land use, chemical
use, water and waste treatment, and training for personnel and
their families.
Forestry Stewardship Council
The Forestry Stewardship Council (FSC) offers a label certifying
wood products that are produced according to the FSC Principles
and Criteria. These apply to all forests: temperate and boreal
as well as tropical. With headquarters in Mexico, the non-profit
FSC conducts its business through two membership chambers: an
economics chamber and a social and environmental chamber. Members
include environmental, consumer, and industrial groups united
behind the goals of stopping rainforest destruction in the tropics
and biodiversity loss in temperate and boreal forests.
Site-specific forest management standards are developed through a multi-stakeholder consultative process in particular countries and regions. Certification entails compliance with a formal auditing system. Initial biodiversity criteria, drawn up in Scandinavia by scientists, representatives of industry, and non-governmental organizations, focus on:
The Swedish pulp and paper industry supports the organization.
According to a Swedish forestry expert with the Worldwide Fund
for Nature (WWF), who helped coordinate the biodiversity standards,
the FSC eco-labeling program is unique. "This is the first
resource-based system," he said. "Other eco-labeling
schemes such as the one in the EU or the Nordic countries or Germany
are schemes based on the product content... The FSC scheme looks
at what is happening in the forest."
In July 1995, the FSC began considering the accreditation of independent
certifiers of sustainably harvested wood, which are beginning
to proliferate in response to consumer demand. About 25 timber
operations in a dozen different countries have been certified
so far. The FSC is likely to accredit four certifiers: two from
the United Kingdom and two from the U.S. including Scientific
Certification Systems (SCS) and the Rainforest Alliance, each
of which uses a different logo on their respective ecolabels.
Green Seal
Green Seal is a national, independent, non-profit environmental
labeling and consumer education organization based in the U.S.
It receives no government sponsorship and is financed primarily
by private foundations. Chaired by activist Denis Hayes, the Board
of Directors includes representatives from business, government,
national environmental, consumer and other public interest groups.
Green Seal collaborates with Underwriters Laboratories, Inc. --
also an independent non-profit organization which has conducted
safety inspections and certification of commercial products in
the U.S. since 1894 -- and is a member of the American National
Standards Institute and the American Society for Testing and Materials
(ASTM).
The Green Seal certification marks are awarded for product categories
that may be nominated by a manufacturer or consumer or by Green
Seal itself. The program's experts study the selected product
category with input from manufacturers, trade associations, official
regulatory agencies, and public interest groups to identify opportunities
for reducing overall environmental impacts of the product. Their
analysis considers the materials in the product itself, its components,
the manufacturing process, the use and disposal of the product,
and its packaging. Green Seal issues a draft standard for circulation
and comment. Responses are studied in turn, before a final standard
is issued. Each product category is reviewed at least every three
years for revisions. Companies then apply to have their products
evaluated for compliance with the standard, paying a fee to cover
the costs. The product is then tested, usually by Underwriters
Laboratory, and the main manufacturing facility is inspected.
Successful manufacturers finally sign an agreement entitling them
to use the Green Seal on the product and in their advertising.
Even after the label is awarded, the manufacturer may be subject
to unannounced factory inspections and product tests.
Green Seal standards for a small sample of its selected product categories include:
By 1994, Green Seal had spent four years developing standards
for 45 product categories. Nine companies had received the seal;
they used the occasion of Earth Day to announce about a dozen
of their products bearing the label. The cost of certification
to the company is about $3,000 for the first product and another
$1,100 for each additional product. In late 1994, Green Seal began
promoting its label through a series of public service advertisements
in the print media and on television.
Green Seal promotes "green procurement" within large
institutions through its Environmental Partners Program. Members
sign a memorandum of understanding that commits them to procuring
certified products and "other products that are less damaging
to the environment" providing they are cost-competitive and
meet quality and performance expectations; members also agree
to complete an annual questionnaire, maintain an office recycling
program, and designate "liaisons" to Green Seal for
general oversight and media relations. Green Seal, for its part
in the partnership, commits to providing advice and assistance,
media and other publicity opportunities, and the broad use of
its "Environmental Partners" logo. Membership costs
$250 for most non-profit organizations, $350 for local businesses,
government agencies and universities, and $450 for national companies.
As of January 1995, there were 83 partners including Warner Brothers,
Montgomery Ward, the City of Santa Monica, the National Wildlife
Federation, Natural Resources Defense Council, the World Wildlife
Fund, the Humane Society, Rainforest Action Network, and others.
Scientific Certification Systems (SCS)
Scientific Certification Systems (SCS) of Oakland, California
was founded in 1990 as a for-profit company. Considered Green
Seal's chief competitor, SCS verifies claims on the environmental
impacts of individual products rather than rating products within
product categories. The company's earnings derive from fees paid
by manufacturers seeking to display its label.
SCS' initial criteria was narrowly focused on recycled materials
content; by avoiding the effort of setting standards for whole
categories, SCS was able to certify and mark more than 1,000 products
by 1993. That year, it began issuing an "Environmental Report
Card" that issues a bar graph indicating each product's generation
of more than a dozen pollutants. A producer may pay up to $50,000
for an Environmental Report Card.
D. FAIR TRADE LABELING
The fair trade movement actually began shortly after World War
II, as Oxfam and similar agencies sought more lasting strategies
than aid to help relieve famine and otherwise contribute to Third
World poverty. Known collectively as Alternative Trade Organizations
or ATOs, their primary objective is to ensure a more direct relationship
and a more equal basis of exchange between peasant producers in
the Third World and consumers in the First World. In 1989, 40
of these groups formed the International Federation for Alternative
Trade (IFAT) with headquarters in Amsterdam. Presently, they share
in several hundred million dollars worth of trade annually.
Some may reject including fair trade marks in a discussion of
ecolabelling. Today's ATOs, however, are developing environmental
criteria to accompany the social criteria that has traditionally
governed their marketing systems. They argue that "sustainable
development and global stability depend largely upon the world's
poor having a fairer share of the wealth they often help to create."
In the spirit of the 1992 Earth Summit of Rio de Janeiro, in which
sustainable development earned recognition as a prerequisite to
and a broader expression of environmental protection, we include
these labeling schemes. Below we describe the Fair Trade Federation,
the Max Havelaar program, the Sustainable Coffee Initiative, and
TransFair International.
The Fair Trade Federation
An international group of alternative trade organizations calling
itself the Fair Trade Federation (FTF) is seeking to promote fairly
traded products with the U.S. market. Sales presently gross about
$20-$25 million in the U.S., compared to some $225 million in
Europe, Canada and Japan. Based in Washington DC, the FTF membership
as of June 1995 included 18 producers, 46 retailers, 13 wholesalers,
16 wholesalers/retailers, and 25 non-profit marketing organizations
as of June 1995.
Also in 1995, a federation of Guatemalan producers known as ENLACE
Guatemala joined FTF and the Institute for Agriculture and Trade
Policy, initiated an electronic sales and communications network
called "The Fair Trade Mall of The Americas." The Mall
will market products labeled by various fair trade marketing initiatives
including TransFair International and Max Havelaar.
Max Havelaar
The Max Havelaar seal is named for a Dutchman living in Indonesia,
then colonized as the Dutch East Indies, who, in an 1859 letter
to the King of Holland, petitioned for more humane treatment of
the indigenous people working on Dutch coffee plantations there.
In 1988, fair trade groups joined religious organizations, consumer
organizations, development organizations and others in introducing
the "Max Havelaar" quality seal for coffee in the Dutch
market. Nobel Prize winner of economics Professor Jan Tinbergen,
who died in 1994, served as honorary Chair of the Max Havelaar
Foundation.
Coffee roasters seeking the right to sell coffee under the Max Havelaar seal must comply with the following conditions:
By 1991, the Max Havelaar seal was available in 89 percent of
all Dutch supermarkets and served more than 2 percent of the entire
Dutch coffee market -- equivalent to 3000 tons of green coffee
per year. Supplies were bought from more than 250,000 small producers,
who earned an additional income of more than US$3,227,889 by serving
this socially-conscious market. Members of the European Parliament
supported a resolution that year to extend the Max Havelaar quality
seal for coffee in all the member states of what was then the
European Community while declaring a Max Havelaar-blend as the
"official and only" coffee to be drunk in the Strasbourg
and Brussels buildings of the European Parliament.
By 1994, Max Havelaar/Netherlands was joined by affiliates in
Switzerland, Belgium, and Denmark which together sold about half
the European share of the labeled coffee market. Cooperating agreements
had been arranged between Max Havelaar and other ATOs including
Oxfam, Christian Aid, Twin, Traidcraft and New Consumer sharing
the much smaller "Fair Trade Mark" label in Belgium,
France, the Netherlands, Switzerland, and the United Kingdom,
and with yet a third major initiative called TransFair International.
Sustainable Coffee Initiative
Late in 1994, a wide range of non-governmental organizations began forming the Sustainable Coffee Initiative in the U.S. that would generate a new seal of approval combining environmental objectives with the traditional social concerns of ATOs. The Smithsonian Institute's Migratory Bird Center, Equal Exchange, Oxfam America West, Conservation International and others began meeting weekly by telephone to plan "bird-friendly / farmer fair" and organic (or reduced chemical inputs) certification for coffee, without excluding the potential for later certification of other products. Categories of criteria, still to be defined, for certification under this seal include:
Coffee is a natural for fair traders. It is produced primarily
by small farmers, many indigenous to their land, who sell their
product in the highly unstable commercial market at prices well
below the cost of production. For example, in 1981, a pound of
coffee averaged $1.15 on the New York Stock Exchange. The price
rose through 1986 when it hit $1.70. The next year, though, it
plunged to $1.07, and by mid-1989, it fell to just $0.70 as the
International Coffee Agreement and its administering body, the
International Coffee Organization (ICO), collapsed.
The producers, meanwhile, earn only 1 to 2 percent of the
value of coffee on the stock exchange: in 1989, indigenous producers
in Chiapas, Mexico collected a mere $1.22 per 100 pounds of green
beans; by 1994, their earnings fell to only 57 cents per 100 pounds.
On the other hand, consumers are increasingly willing to pay more
for higher quality specialty coffees. This market niche in the
U.S. has exploded to more than 15 percent of the total coffee
market. There is a parallel explosion of specialty distributors
claiming to be socially responsible; a short list would include
Allegro, Aztec Harvest, Cafe Paz/SERV, Coffee Kids, Elan, Equal
Exchange, Frontier, Green Mountain, and Thanksgiving. Likewise,
there are several certifying organizations who monitor and validate
fair terms for producers. By far, the two most important of these
endeavors are Max Havelaar and TransFair International.
TransFair International
German fair traders established TransFair International (TFI)
in 1992 as an umbrella organization open to all initiatives accepting
the "TransFair-mark" as a suitable label. Its members
presently include the European Fair Trade Association (a collaboration
of 13 ATOs) and national groups identifying themselves as TransFair
in Germany, Austria, Luxembourg, Japan, Canada, and Italy. Initiatives
in Australia and the U.S. are considering joining this global
umbrella.
A key criterion of TransFair International is that its members
have a national base, defined as including in the members' coalition
at least one "nationally respected NGO." It also entails
the signing of a "Cooperation Contract" which stipulates,
among other things, that national members pay TFI a negotiable
fee of 33 percent of the income realized by the marketing of products
licensed to use the TransFair-mark. Revenues
are used to support monitoring, promotional expenses at the national
and international levels, board meetings, and so on.
TFI has established minimum criteria for coffee, tea, honey, cocoa, and sugar and collaborates with Max Havelaar and Fair Trade Mark in maintaining joint producer registers for most of these products. Plans are underway for developing criteria for craft products as well. Generally, criteria include making sure that the products are marketed through cooperatives controlled by the producers themselves, and ensuring that the prices paid by buyers meet producers' expenses and other basic needs. There is also a stipulation that organically grown products must be bought at a premium price to provide incentives for chemical-free production. More specifically, the criteria:
For sugar, the minimum price varies for refined and non-refined,
brown and white products, given that small producers must contract
with outside refineries. For chocolate, which is made of multiple
ingredients, the criteria have yet to be settled; proposals suggest
a minimum of 51 percent "fair trade content" for each
ingredient.
In addition, retailers must label packages destined for the final consumer as follows:
"This high quality coffee has been awarded with the Transfair-seal for 'fair trade' by TransFair e.V. Transfair e.V. is an association of organizations, which promote trading relationships with the so called 'Third World' on a basis of partnership.
'Fair Trade' supports and improves the conditions of livelihood for the small farmers overseas. It does not provide development aid, but rather supports self-reliance and equality for those producers, who are disadvantaged under present trading conditions.
The specific measures of 'Fair Trade' include: producer prices,
which are significantly higher than the world market price; adequate
prefinancing; and longer term supply contracts and purchasing
contracts."
In 1993, its first year of operations, TransFair International
successfully countered four legal challenges in Germany. Twice
competitors tried to register its logo in their own name, and
twice the organization went to court to refute charges it claimed
were invalid. More than 20,000 German supermarkets offered TransFair
coffee that year, and it was served in the canteens of the German
parliament, a few Länder-parliaments, and a number of universities.
In Austria, the TransFair-mark reached 20 percent of all retail
grocers in the first year.
By 1994, TransFair International and its national affiliates had
nearly matched Max Havelaar in sales volume, with more than 4,000
tons of labeled coffee sales each. TFI has postponed plans to
label handicrafts, nuts, dried fruits, coconut products and spices
but is considering expanding the label soon to include bananas
and textiles.
E. OTHER HEALTH AND SAFETY LABELS
Just as discussions of ecolabelling frequently neglect fair trade labeling, so too do they tend to ignore the extensive history of labels developed to provide nutritional and other health and safety information to consumers. This neglect was noticed by non-governmental organizations at the 1995 meeting of the Commission on Sustainable Development, who expressed their strong preference for health-based labeling as a matter of priority. In a formal statement to the Commission, they wrote:
"Eco-labelling must begin with the mandatory labeling of
pesticides, fertilizers and other chemicals; genetically-engineered
organisms and their products; and irradiated foods and food additives."
In the following pages, we will describe the programs and labeling
procedures for a few of these products addressing the Chemical
Right-to-Know, the International Federation of Organic Agriculture
Movements, rBGH-Free dairy products, and other genetically-engineered
foods.
Chemical Right-to-Know
Trucking companies carrying hazardous materials in the U.S. must
take responsibility by law to ensure the material is labeled properly.
The warning labels range from the familiar skull-and-crossbones
logo to designs of bursting flames, exploding particles, and a
stalk of grain with an "X" through it over the words
"HARMFUL Stow Away From Foodstuffs."
The "Right to Know" became federal law in the U.S. in
1983, after community organizations, labor unions and environmental
groups spent a decade winning at the municipal and state levels
the "right-to-know" what chemicals were being stored
and used in their neighborhoods and workplaces. The law stipulates
container labeling rules and a variety of other informational
acts on the part of chemical distributors. By the late 1980s,
these activists were demanding the "Right to Act" --
the right to learn about hazards, inspect workplaces, negotiate
preventive measures, and otherwise act to ensure health, safety
and protection of the environment.
Internationally, a community's right-to-know depends upon its
government's participation in procedures for "prior informed
consent" (PIC). While the PIC procedures are presently under
consideration for development into a legally binding instrument
facilitated by the United Nations Environment Programme (UNEP),
several voluntary PIC agreements have been reached among
large numbers of countries.
Foremost among PIC agreements, the London Guidelines for the Exchange
of Information on Chemicals in International Trade were first
formalized in 1987. These guidelines encourage
an exchange of information among participating governments, including
information about the classification, packaging, and labeling
of pre-determined dangerous chemicals. The governments notify
each other, either directly or through UNEP, of domestic restrictions
and bans of chemicals and when these chemicals are to be exported.
Under PIC, implemented jointly by UNEP and the Food and Agriculture
Organization (FAO), UNEP ensures the exchange of information between
the governments of exporting and importing countries, and provides
health and safety data for the chemicals in question prior to
their export. The importing countries then notify UNEP if they
decide to restrict or prohibit the import, and UNEP ensures that
the exporting governments take action to regulate those exports.
The FAO cooperates with the management of data bases and technical
assistance.
Since 1992, the European Community has regulated more than 100
dangerous chemicals at the point of export. Unlike
the voluntary procedures of PIC, European exporters are obligated
to provide information about impending shipments to the EC authorities,
who in turn provide information to the governments of the countries
of import. The regulations require labeling and packaging conditions
identical to those applied to chemicals traded within the EC,
unless contrary to the laws of the importing country.
The FAO's 1985 Code of Conduct on the Distribution and Use of
Pesticides was amended in 1989 to incorporate the voluntary PIC
procedure for banned and severely restricted pesticides. The Code
recognizes the principle of "shared responsibility"
between governments and other parties, and establishes voluntary
standards of conduct for the pesticide industry, farmers and other
users, non-governmental organizations as well as for governments.
Among the standards in the code are provisions for packaging and
labeling.
Chemical companies signing on to The Code of Ethics on International
Trade In Chemicals commit themselves voluntarily to compliance
with the London Guidelines. The Code also
provides guidance for the environmentally sound management of
chemicals. Among the self-regulatory measures is a standard for
the classification, packaging and labeling of chemicals for both
export and domestic use. Part I of the Code sets out principles
for shared responsibility regarding the protection of human and
environmental health. Part II enumerates measures for self-regulation
of chemical management, from production to disposal, and addresses
suppliers, contractors, transporters, traders and users. Part
III establishes procedures for monitoring and compliance.
Associations of chemical companies from a number of industrialized
countries have also promoted self-regulation under the logo "Responsible
Care" since 1985. Companies displaying this label on their
advertising materials and products claim allegiance to a set of
principles and codes, evaluate their operations according to a
set of environmental and safety performance indicators, and agree
to communicate with others about their health, safety, and environmental
practices.
International Federation of Organic Agriculture Movements (IFOAM)
Founded in 1972, IFOAM serves as an umbrella organization for
360 members from 70 countries. Governed by a biannual General
Assembly and a World Board of Directors, IFOAM's purpose is to
promote organic agriculture generally and "to provide worldwide
for the production of high quality food sufficient to feed all
the people, while protecting the soils and enhancing their fertility,
as well as minimizing environmental pollution and the use of non-renewable
natural resources." While not promoting a label of its own,
IFOAM sets standards which national and regional bodies can reference
in certifying and labeling organic produce.
IFOAM promotes a single set of standards, called the Basic Standards
of Organic Agriculture and Food Processing, as a means of avoiding
discrimination in a cost efficient manner while providing a "global
guarantee" for consumers regarding the "equivalence
of sound production methods."
In the U.S., for example, there are 34 distinct agencies for certification
and labeling that verify whether producers comply with their respective
state regulations for organic agriculture. Likewise, European
nations have diverse standards for organic production. Producers
seeking to sell their organic products overseas find it difficult
to comply with the sheer paperwork of varying certification bodies.
IFOAM has been broadly accepted as an arbiter.
IFOAM regularly revises the Basic Standards, while its Accreditation
Programme determines equivalency amongst certification programs
worldwide. Accreditation establishes that a national, regional,
or private program meets both the criteria of the Basic Standards
and IFOAM's Criteria for Certification Programs. Participating
certification programs pay for the privilege of accreditation
by IFOAM.
In 1992, the IFOAM General Assembly asked its Standards Committee
to develop new guidelines, apart from the existing Basic Standards,
to assist other standard-setting bodies in evaluating specific
products or processing methods with regional variations taken
into consideration. This process resulted in new guidelines for
coffee, cocoa and tea; as well as guidelines on "Social Rights
and Fair Trade" and on "Evaluation of Inputs to Organic
Agriculture." All five guidelines were approved by the 1994
General Assembly.
The criteria for coffee, cocoa and tea address production as well as inspection and certification. The production guidelines require:
The new inspection and certification guidelines for Coffee, Cocoa and Tea require:
The Social Rights and Fair Trade criteria, considered minimalist, cite the United Nations human rights accords as a reference. The criteria require a conversion plan for achieving the following:
The new guidelines on Evaluation of Inputs to Organic Agriculture address fertilizers, crop-protecting agents, and veterinary medicine. Taking into consideration available alternatives, inputs must be:
rBGH-Free Dairy Products
Citizens throughout the U.S. have demanded labels on dairy products
from cows injected with recombinant Bovine Growth Hormone (rBGH),
a genetically engineered drug designed to accelerate the rate
of milk production in dairy cows. In Europe, objections to this
product, also known as recombinant Bovine Somatotropin (rBST),
were so strong as to result in a ban by vote of Parliament.
Among the concerns are that no long-term studies have been done
on the effects of rBGH or rBST on humans; that increased production
leads to higher incidence of mastitis, or udder infections, thereby
increasing the need for antibiotic treatments of the cows; and
that farmers are already operating under depressed milk prices
and a larger, rBGH-induced milk supply will only serve to put
many more of them out of business.
Despite consumer demand in the U.S., the federal Food and Drug
Agency (FDA) responsible for regulating genetically engineered
foods decided not to require labeling for milk and dairy products
derived from cows treated with the drug on grounds there was no
significant difference between the bovine growth hormone which
naturally occurs in cows and rBGH. Also, the FDA argued that,
because no test is yet available to detect the presence of rBGH,
labeling claims that a product was "rBGH-free" could
be false and misleading.
Nonetheless, in February 1994, the FDA did release voluntary "interim guidance" for processors wishing to label their products as free of rBGH. In these guidelines, the FDA suggests that:
Monsanto, the only company to receive FDA approval to sell its
rBGH product, Posilac, commercially, filed a lawsuit against two
processors -- Swiss Valley in Iowa and Pure Milk & Ice Cream
in Waco, Texas -- which had chosen to label their dairy products.
Both cases were settled out of court; the terms of the Iowa settlement
are sealed. Both Swiss Valley and the Pure
Milk and Ice Cream Company continue to label as before.
In the spring of 1994, Vermont became the first and only state
in the U.S. to pass a mandatory labeling law for rBGH. Vermont's
law calls for all milk and dairy products to be labeled: those
derived from cows treated with rBGH must say so, and those derived
from cows not treated with the drug must say they are not. To
this day, the law has yet to be implemented as members of the
dairy industry litigate.
In the spring of 1994, citizens and public interest groups in
Minnesota were able to pass a voluntary labeling law regarding
rBGH. Under the law, processors can say "farmer-certified
rBGH-free" on their label. They are not required to include
the rest of the qualifying statement recommended by the FDA although
they have the option to include the qualifying statement for the
purpose of conducting interstate commerce. The Minnesota Department
of Agriculture has oversight authority and can inspect processors'
records or affidavits upon request. According to Minnesota advocates,
approximately eight processors are utilizing the voluntary system.
Wisconsin and Maine have systems similar to Minnesota. In New
York, rules of the Department of Agriculture also allow voluntary
labeling of products made with milk from cows that have been injected
with rBGH. During 1994 and 1995, legislation for the labeling
of these products has been proposed in numerous other states.
Such proposals were defeated in Connecticut, California, Michigan,
Missouri, New Hampshire, and New Mexico. Initiatives in Massachusetts
and Rhode Island are pending legislative action.
In December 1994, European agricultural ministers extended the
European Union's ban on the large-scale commercial use of rBGH
until the end of 1999; some farmers will be able to use the drug
for testing purposes. Meanwhile, activists consider building a
major campaign against the import of U.S. dairy products. In a
recent letter to the Commissioner of the U.S. Food and Drug Administration,
the vice president of the agriculture committee of the European
Parliament suggested "a less contentious approach would simply
be to label meat and dairy products which are exported to the
EU."
Other Genetically-Engineered Foods
The European Union has already banned imports of beef produced
with the genetically engineered hormone recombinant Bovine Somatotropin
(rBST) based on its domestic ban on rBST use. The
U.S., however, has made it clear to the Europeans that it will
use the GATT rules on Sanitary and Phytosanitary Standards (SPS)
to challenge the EU import ban.
In May 1992, the U.S. Food and Drug Administration announced that
it would not require genetically engineered fruits and vegetables
to undergo testing before going to market, nor would it require
any formal notification when a genetically engineered product
is brought to market, nor would it require labeling of such products.
Only where "sufficient safety questions exist" -- an
evaluation to be made by those same companies introducing the
food -- must pre-market testing occur. The FDA decision was based
on the assertion that genetic engineering does not differ from
more familiar breeding techniques, and reverses the burden of
proof of safety established earlier for chemical food additives.
In response to the FDA's action, consumer groups in both the cities
of New York and Chicago sought municipal laws requiring the labeling
of genetically engineered foods. Both failed.
The New York proposal was introduced in March 1993. It would have
required manufacturers to label delivery tickets and invoices
with the words "genetically engineered," with the name
of the source material or the term "synthetic genetic material,"
and with a statement of the purpose of the genetic engineering
technique. Retailers would have been required to display these
foods or food organisms separately from other foods, with a "plain,
clear and conspicuous sign" providing that same information.
Failure to do so would be deemed a deceptive trade practice, subject
to a $500 fine in addition to the normal penalties thereof.
The Chicago legislation, introduced in August 1993, would have
required food purveyor establishments to post a prominent sign
near the display of such foods stating "This food has been
genetically engineered." Each day of violation would have
constituted a separate offense. A first offense would be fined
from $25-$100, up to $500 for a third offense. No provision was
made for more than three offenses.
Manufacturers and the U.S. government have persisted in maintaining
that genetically engineered foods do not require labels or any
other special consideration. A representative of the National
Food Processors Association objected to the Chicago ordinance,
stating that the "true purpose of such signs is not to inform
consumers, but to scare them." In a 1994
document carried by the U.S. government to a Codex Alimentarious
meeting on food labeling and biotechnology, narrowly argued that
genetic engineering is essentially like traditional breeding techniques.
In written comments responding to this document, the Union of
Concerned Scientists (UCS) pointed out that "because of its
unique power to manipulate isolated components from food and non-food
sources, genetic engineering shares traits with conventional food
additive technologies as well as traditional breeding."
Food additives are highly regulated in the U.S., precisely
because manufacturers can choose from both food and non-food ingredients
that may be undetectable to the consumer.
Noting that only a few of the source genes for genetically engineered
foods come from actual foods, the UCS said policymakers "should
consider labelling all food containing new proteins from non-food
sources." Even when the transferred genes do come from food
sources, consumers may need to know the ingredients. Consumers
allergic to shellfish, for example, could become ill from eggplant
if the shellfish gene were introduced across the eggplant's normal
biological boundary. In addition to allergenicity, the UCS suggested
that nutritional quality, and ethical and religious concerns are
also valid reasons for consumers to desire the labeling of genetically
engineered foods.
Non-governmental organizations attending the 1995 session of the
Commission on Sustainable Development, the United Nations body
established to monitor progress towards implementation of the
agreements reached in Rio de Janeiro at the Earth Summit of 1992,
called for the "mandatory labelling of genetically-engineered
organisms and/or their products, and irradiated foods and food
additives."