UNCTAD Virtual Institute Study Tour 2010 Geneva, 17 October 2008 Presented by: Ulrich HOFFMANN UNCTAD secretariat

1. Environmental Standards for Global Markets: Implications for Developing Countries UNCTAD Virtual Institute Study Tour 2010 Geneva, 17 October 2008 Presented by: Ulrich HOFFMANN UNCTAD secretariat

2. 2 The paradox is that the producers whom governments and donors most want to help are those who may be the least able to manage the changes required to meet the requirements of more conscientious consumers.

3. Sustainability Standards: Example Food/Horticulture 3 • WHY Food and Horticulture: Because private voluntary (sustainability) standards are most frequently used and most sophisticated • Standards for Good Agricultural Practices (GAP) • - Fresh Fruit and Vegetables (FFV), flowers, herbs • Environmental and ethical standards (Fair Trade; Rainforest Alliance etc.) • Standards for certification of organic produce • - Actually, these are voluntary standards, but in many developed countries there is also regulation on organic products • - Yet, private certification bodies may have their own standards and strategies (e.g. The Soil Association’s approach to the food miles issue) • Emerging voluntary standards on carbon footprint

4. 4 4 4 4 Taxonomy of Sustainability Standards

5. 5 5 5 5 Conventional Food Markets 2-4 % 3-5 % Importance of Sustainability Standards (SS) • SS are of key importance for Market ENTRY and sustainable development • Unless pro-actively addressed SS can become a serious market entry hurdle. • Real developmental opportunities exist in the light of strong dynamics in markets for sustainably produced products, which generally expand much faster than conventional agricultural markets. • Average Annual Rate of Growth of Key SS Markets (2004-2006)

6. 6 Private sectors standards Multiple certification ??? Harmonization & equivalence rare despite WTO NGO-set standards Mandatory requirements, e.g. on organic agriculture Coping with an Array of “Sustainability” Standards How can one effectively deal with an array of not harmonized and non-equivalent SS?

7. 7 7 7 7 Concerns at Producer’s Level • High cost of certification, especially for small producers • Burdensome documentation requirements for small producers • Are compliance costs being transferred to producers, including in developing countries (GAP standards)? • Implementation/certification costs for SS are up front; many benefits, however, come later or occur for stakeholders other than producers • Proliferation of environmental and ethical standards and certification programmes • Uncertainty about whether certification will bring commercial benefits • No forum yet for discussions on how to prevent possible adverse trade implications (UNCTAD’s CTF trying to help fill the gap); SPS Committee has recently started dialogue

8. Challenges of SS – Related to the Standards & Their Governance 8 • Proliferation, increasing complexity, and SS becoming a moving target • High certification costs (majority of compliance and certification costs fall on producers) and complex certification procedures • Multiplicity, which increases certification costs and can lead to confusion. Lack of equivalence & harmonization between SS. • Lack of transparency on applied criteria and modes of setting and implementation of SS • Limited stakeholder participation, especially SSF in standard setting • Lack of sufficient information on costs and benefits of SS • Little coherence between public and private sector requirements in standards, and the fact that they might jeopardize disciplines and market access gains under the TBT & SPS Agreements of the WTO • Risk of being abused as chain-governance tools (in particular when linked to IPRs, such as patents and trade marks)

9. 9 9 9 9 Concerns -- Regarding Government-set SPS Requirements • Growth in private voluntary standards (PVS) could undermine the hard- won improvements in market access through the SPS Agreement. • PVS can effectively introduce new (or stricter) sanitary measures, compared with those applied by the Competent Authority according to the recommendations of relevant international standard-setting bodies (OIE, Codex and IPPC). • Lack of transparency: no obligation and sometimes little possibility for governments to notify trading partners or to comment on private standards, including those that relate to health risks. • Some argue that PVS do not meet WTO requirements such as scientific justification of food safety measures and are more trade-restrictive than necessary to protect health. • Submission by the World Organization for Animal Health (OIE) to the SPS Committee, 2 April 2008

10. Challenges of SS – Related to Capacity Issues 10 • SSF may run the risk of exclusion under SS • Lack of financial & management capacity of SSF to convert production to SS requirements and maintain certification • Lack of organization of SSF and links with exporters • Insufficient marketing information • Insufficient extension services • Poor physical infrastructure and quality-management institutions • Lack of analytical capacity to carry out cost-benefit analysis that include external costs and benefits to the community

11. Challenges of SS – Policy Issues 11 • Governments and private sector do not adequately play their role in promoting trade of sustainably produced products for reasons such as insufficient awareness on the potential benefits of these products and/or related production processes • Lack of coherent national and regional policies, as well as coordination between public and private support programs (need for realistic concepts, PPP, role of the government etc.) • Often inadequate mandatory food-safety requirements and/or their poor enforcement in developing countries

12. Benefits of SS 12 • Specific benefits accrue to producers compliant with a particular SS • Benefits accruing to producers beyond the particular SS, in particular management related. • Benefits for the whole agricultural sector as SS can serve as a catalyst for modernization of agriculture • Benefits that go beyond the producer level, such as environmental, social, economic benefits to the community at large: • Benefits at the local level, which provide the rational for using public governmental and donor support to SS implementation • Benefits at the global level, which provide the case for linking SS with other international discussions, in particular climate change, environmental goods and service liberalization in the WTO, CBD etc.

13. 13 13 13 13 Contextualizing Sustainability Standards and National Strategies to Cope with Them • When contextualizing SS, it is important not to limit it to the commercial, micro-economic context of enabling producers to comply with downstream market standards. • Rather, national adjustment strategies should address both the commercial context and the non-commercial sustainability aspects, including benefits for worker health, national food safety, resource and input efficiency, the environment and national economic development, including transfer of technology and innovative management methods. • This is the background for using public (and development assistance) resources to support national programmes for pro- actively coping with SS.

14. 14 14 14 14 Trade and Development Implications for SSF • Some SS tend to favour Small-scale Farmers (SSF) • Fairtrade explicitly favours SSF • Organic Agriculture may favour SSF (e.g. because they often produce with little external inputs) • Private GAP standards tend to favour large-scale producers vis-à-vis SSF: • May contribute to declining participation of SSG in value chains • - Exporters may prefer to work with larger producers • - SSF do not have the necessary capital and cannot afford the initial investment costs and, once certified, cannot bear high costs to maintain certification • How can Governments, donors and other stakeholders identify and support viable forms of SSG participation in production for export (possibly in combination with exploring alternative markets)? • On the other hand, there may be increased opportunities for wage employment on agro-industrial estates

15. 15 15 15 15 Regional Issues • In East and South-East Asia, ¾ of horticultural export is intra-regional trade • Regional cooperation on harmonization and equivalence of SS is thus very important • Another Example: East African Organic Products Standard (EAOS) - Kenya, Tanzania and Uganda, later joined by Burundi and Rwanda. • Sub-regional cooperation in building infrastructure for accreditation and certification, testing (e.g. laboratories) • Can regional markets provide a viable option for some segments of SSF?

16. Pro-active Adjustment Strategies to SS 16 Governance Issues: • Assuring effective consultation with all affected stakeholders • Public and private-sector SS setters & regulators should cooperate to enhance interoperability of their standards & conformity assessment systems (on control points, quality management systems, technical assistance) • Use of competition policy to control inappropriate chain-governance implications of SS Coherence between government and voluntary requirements • Governments should actively take part in SS development, not as regulator but stakeholder ensuring that public and disadvantaged group interests are duly reflected • Non-governmental standard-setting organizations should apply the SPS disciplines and use the TBT and/or ISEAL Code of Good Practice • Current discussions in the WTO SPS Committee on private standards should contribute to clarify the coherence issue between voluntary and mandatory requirements.

17. Pro-active Adjustment Strategies to SS – National Policies 17 • There should be more analytical work on the real constraints (in particular of SSF) in effectively using SS • Enhance stakeholder dialogue and the creation of related platforms for continuous dialogue • Develop national strategies that clarify objectives and realistic strategies of pro-actively copying with SS in the light of concrete market requirements and existing capacities • Increased participation in effective public-private partnerships to promote smallholder participation in sustainable production and trade • Make sustainable agriculture part of Gov support to the agricultural sector (prioritize and mobilize adequate resources) • Need to integrate the public and private food safety and control systems to effectively seize market opportunities

18. 18 18 18 18 18 Illustration: Role of Governments in National GAP Programmes Supportive and Facilitating Role Facilitating Investment Devising flanking/support policies Policy Analysis Assuring policy coherence Facilitating stakeholder dialogue - facilitating and engaging in stakeholder dialogue on development & implementation of GAP • among government agencies dealing with various aspects of GAP • between public & priv requirements • towards donors • - on extension services • on financial support • addressing problems with registration of CPPs • - Facilitating conceptual clarity on enhancing developmental contribution • Addressing smallholder concerns • Optimizing costs & benefits - in physical infrastructure - in SMTQ systems & institutions - directing donor funding accordingly

19. Pro-active Adjustment Strategies to SS – Related to Capacity 19 • Create an enabling environment and provide support to private operators, farmers organizations, NGOs, etc. supplying inputs and credit to small farmers and ensuring a strong regulatory mechanism • Provide adequate bridge funding and credit facilities to provide working capital to SSF, in particular in adaptation or conversion phases, taking into account gestation periods of different crops • Support efforts to disseminate new technologies and management methods to SSFs (eg. creating centers of excellence) • Improve research, education, physical infrastructure, quality-management institutions and extension services for sustainable agriculture, in particular by enhancing budgetary allocations for sustainable agriculture research, support and extension. • Build capacity to develop and enforce food security standards at national level, and create awareness about food security issues. • Build capacity on providing independent info on existing SS and create information portals on SS and sharing of best practice in SS adaptation and compliance

20. 20 20 20 20 20 20 20 20 20 FAO-IFOAM-UNCTAD ITF CTF Sustainable Commodity Initiative (SCI) UNEP-UNCTAD CBTF UNCTAD Activities on Pro-active SS Adjustment Components

21. Consultative Task Force (CTF) 21 21 21 21 • To provide a forum for and support dialogue between public and private- sector organizations and institutions on SS standard development and implementation, in particular in developing countries • Undertake analysis of the mechanisms and communication channels for SSFs to participate in the governance of SS applied across several pilot countries (develop a guidance document and policy briefs for national governments and other stakeholders on best practices for SS) • Assist interested developing countries in developing coherent national programs that pro-actively deal with SS, in close collaboration with FAO and other relevant international organizations • Channeling concerns of developing countries to relevant standard-setting and international discussion forums on SS • Based on the analytical, capacity-building and outreach role of the CTF, actively participate in the discussions of the WTO SPS, TBT and CTE on PVS and appropriately assist developing countries in this regard

22. 22 22 22 22 UNEP-UNCTAD Capacity-building Task Force • Based on the successful work conducted in East Africa and the related East African Organic Products Standard, continue to assist interested developing countries in promoting production and trade of organic agricultural products, including harmonization and equivalence of related standards and regulation

23. 23 23 23 23 FAO-IFOAM-UNCTAD International Task Force for Harmonizing and Equivalence in Organic Agriculture Support the implementation of the recommendations and the main tools developed by the ITF: (Equitool - A Guide to Assess the Equivalence of Organic Standards, and the IROCBs - International Requirements for Organic Certification Bodies) - To continue communicating the results of the ITF to the relevant policy- makers and promoting the adoption of the ITF recommendations - To assist developing countries in the field-testing of the ITF tools - To facilitate the long-term take-up of the ITF tools by governments - To foster regional cooperation among stakeholders - To provide a platform for discussion and agreement on emerging issues; continued networking and updating the analysis

24. 24 24 24 24 Sustainable Commodity Initiative - Supporting SMEs through harmonized capacity building and technical assistance to create sustainable enterprises, through The Sustainable Commodity Assistance Network (SCAN) program - Expand the delivery of affordable financial services through The Finance Alliance for Sustainable Trade (FAST), a trade association of social lending institutions. - Expand SS impact assessment, related tool development and data c ollection through The Committee on Sustainability Assessment (COSA). - Promote knowledge sharing, effective harmonization and good practices for SS, through The Voluntary Standards Initiative (VSI) program

25. 25 25 25 25 Website on UNCTAD’s Activities www.unctad.org/trade_env www.sustainablecommodities.org ulrich.hoffmann@unctad.org