Contents

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

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

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

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

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

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

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