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Eco-labels and International Trade:Problems and Solutions
Richard BONSI, A. L. HAMMETT and Bob SMITH1
Eco-labeling is one way to assure consumers of the environmental suitability of
products they purchase. However, several arguments have evolved to show that the use
of eco-labels poses barriers to international trade. This exploratory study seeks to
determine whether or not the use of eco-labels is a barrier to international trade in
reference to the World Trade Organization (WTO) and International Standards
Organization (ISO) principles. Product related production processes and methods
(PPMs) and non-product related production processes and methods (npr-PPMs) have
been a major source of disagreement among researchers. Our study examined the ISO
criteria for eco-labeling that demand that life-cycle assessment (LCA) including both
PPMs and npr-PPMs be satisfied. One of the major problems uncovered is the
difficulty in identifying corresponding environmental variables for LCA requirements
since environmental conditions vary among countries. We provide some
recommendations and conclude that eco-labeling is not intended to be a barrier to
international trade provided that it is not advocated under the pretext of protectionism.
I. INTRODUCTION
Increasing problems of water, air and soil pollution have caused societies to
demand environmentally benign and high quality products. Producers are also
responding positively to consumer demands because such response presumably paves
the way for them to penetrate the market. International trade makes it possible for
countries with abundant resources (lower opportunity cost and higher comparative
advantage) to extract, process, and export such goods while importing goods that are
locally scarce. International trade also encourages economies of scale, where countries
specialize in producing fewer goods on a larger scale, thereby reducing cost (Krugman
and Obstfeld, 1997).
1 Richard Bonsi is a PhD student in the Department of Wood Science and Forest Products in the College ofNatural Resources at Virginia Tech. He holds an MBA degree from the Freiberg University of Mining andTechnology, Germany, in International Management of Resources and Environment. His research interestsinclude marketing, eco-labeling, international trade and strategic management.
Dr A. L. Hammett is Professor in the Department of Wood Science and Forest Products in the College ofNatural Resources at Virginia Tech. His research focus includes international trade, certified forest products,marketing, forest-based economic development and forest products marketing.
Dr Bob Smith is Professor in the Department of Wood Science and Forest Products in the College of NaturalResources at Virginia Tech. His research focus includes marketing, eco-labeling and certified forest products.
Journal of World Trade 42(3): 407±432, 2008.# 2008 Kluwer Law International. Printed in The Netherlands.
According to the United Nations Conference on Trade and Development
(UNCTAD) (2004), apart from 2001, the trends in exports and imports of developed,
developing and transition economies, have been increasing since 1990 at an average rate
of 6 percent (UNCTAD, 2004). Hanley et al. (2001) assert that if the average annual
growth rate in trade stays at 6 percent, world trade would double in 11 years. This
means that there will be more output of products as a result of the use of much more
input materials, thereby increasing global pollution, as the law of thermodynamics states
(Hanley et al., 2001). One example of such phenomenon is the pollution caused during
transportation of goods from one location to another in international trade. Folmer and
Gabel (2000) assert that, ``environmental problems are international because of trans-
boundary pollution or global pollution such as acid rain or climate change'' (Folmer and
Gabel, 2000). A concerted effort to enhance environmental protection has led to the
formulation of various environmental laws and conventions, and setting of standards,
for example the United Nations Convention on International Trade in Endangered
Species of Wild Fauna and Flora (CITES) (Hanley et al., 2001; CITES, 2007). Others
are the Montreal Protocol for phasing out the use of Chlorofluorocarbons (CFCs)
(Spencer, 2000), and ban imports of products containing CFCs by 1993 (Hanley et al.,
2001), and the Basel Convention on the Control of Trans-boundary Movements of
Hazardous Wastes and their Disposal, which restricts cross-border dumping of
hazardous wastes (Hanley et al., 2001).
Environmental degradation in the form of air and water pollution, overflowing
landfills and energy waste, has compelled consumers to make purchase decisions to
force companies to address impacts that their activities have on the environment
(Bagozzi et al., 1998). Increasingly, more customers would rather buy products that
have been produced in an environmentally benign atmosphere, whilst investors would
prefer to invest in companies that demonstrate environmental responsibility (Folmer
and Gabel, 2000).
As the acceptance of a company by its workforce, local residents, politicians,
environmentalists and the general public, depends not only on its economic
achievements but also more and more on its ecological responsibility (Folmer and
Gabel, 2000), adoption of environmental management systems by companies is
inevitable. So, satisfying the needs of all stakeholders and, for that matter, the
companies themselves would mean making headway towards sustainable business
development and environmental management. One way to achieve these needs is the
use of eco-labels. It is laudable that environmental consciousness is spreading fast. The
enactment of laws, setting of standards (needing voluntary and compulsory
compliance), and their implementation are equally praiseworthy. However, the
enigma that may be difficult to decipher is whether the use of eco-labels, an
environmental tool that informs consumers about the environmental suitability of
products, does not affect international trade. There have been several arguments about
whether the use of eco-labels affects international trade. The purpose of this study is to
determine whether or not the use of eco-labels is a barrier to international trade in
408 JOURNAL OF WORLD TRADE
reference to the WTO and ISO principles. To begin this effort, we review relevant
literature on eco-labeling and problems associated with eco-labels and international
trade in the following sections.
II. ECO-LABELING
This section defines and describes eco-labels and environmental labeling in
general. It also gives some examples of eco-labels and some notes about their
significance. The ISO 14020 series and the importance of LCA in eco-labeling are also
discussed.
A. DEFINITION AND DESCRIPTION OF ECO-LABELING
The efforts to inform consumers about the environmental friendliness of a product
have led to the creation and use of eco-labels, which is a relatively new trend (Potts and
Haward, 2007). The Global Eco-labeling Network (GEN), defines an eco-label as ``a
label which identifies overall environmental preference of a product (i.e., good or
service) within a product category based on life cycle considerations'' (GEN, 2004). In
this regard, products with eco-labels are expected to pose no, or an acceptable level of,
damage to the environment through their production, distribution, use or disposal
whereas similar products without eco-labels may cause unacceptable damage to the
environment (Anderson and Hansen, undated).
There are numerous benefits that are enjoyed through eco-labeling. Some of these
include easy identification of environmentally friendly products, protection and safety
of people, environmental impacts control, avoidance of market failure through quality
assurance, reduction in evaluation and comparison costs by consumers, and easiness of
monitoring. Others include continuous improvement, sustainable production and
consumption, a form of differentiation (Carter and Merry, 1998; Amacher et al., 2004),
promotion of certification, alleviation from expensive regulation controls, achievement
of higher economic incentives and attainment of competitive advantage (Teubner et al.,
1994; Folmer and Gabel, 2000; Cumbo and Smith, 2001; Wessells et al., 2001; Case,
2004; Goss, 2004). According to the United Nations Environment Program (UNEP)
eco-labels, unlike government laws, are voluntary tools that provide useful information
to help consumers make useful decisions in buying specific products (UNEP/IISD,
2000).
B. THE ISO 14020 FAMILY
The ISO 14000 series addresses various environmental issues and specifies
acceptable standards that help to abate environmental pollution. Most important to
consider here is the ISO 14020 family, which comprises a group of standards, set by the
International Standards Organization, to specifically govern environmental labeling
ECO-LABELS AND INTERNATIONAL TRADE 409
(ISO 14020, 2000). The principles that the ISO 14020 operates on include, accuracy
assurance, avoidance of unnecessary trade barriers, use of scientific methodology,
accessibility of adopted methodology, open and participatory consultation with interested
parties, life-cycle approach, allowance for innovation, posing of minimal administrative
burden, and provision of information on products (ISO 14020, 2000; GEN, 2004). The
ISO 14020 family includes three labeling schemes as explained below.
1. Type I Environmental LabelingÐEco-labelling (ISO 14024)
ISO 14024 contains the guiding principles and procedures for Type I
environmental labeling (ISO 14024, 1999; ISO 14020, 2000). It presents rules for a
voluntary third-party certification system, where it fulfills certain set up criteria, such as
scientific methods that cover the whole product life. This leads to the application of life
cycle analyses to ascertain the environmental impacts of the product (ISO 14024, 1999;
Folmer and Gabel, 2000). Applying life cycle assessment in this case means compiling
and evaluating the inputs, outputs and the potential environmental impacts of the
product system throughout its life cycle (ISO 14040, 1997; Taylor, 2002).
It is worth noting that, as development and definition of product criteria are done
through the third-party certification process, transparency and credibility are ensured.
Because it upholds the use of multi-criteria third-party certification, the efforts that
producers would have to put in to convince consumers about the environmental
friendliness of their products are reduced (Jensen, 2000). Type I environmental labeling
is the only labeling program that is compelled to employ the services of an eco-labeling
body.2 Therefore it is only Type I labels that qualify to be called eco-labels (ISO 14024,
1999; GEN, 2004).
2. Type II Environmental Labeling (ISO 14021)
The Type II environmental labeling scheme is supported by ISO 14021. It is a self-
declaration labeling type and environmental claim system where manufacturers,
importers, distributors, retailers or other stakeholders make direct claim about the
environmental friendliness of their products without third-party certification (ISO
14021, 1999; Folmer and Gabel, 2000). ISO 14021 specifies the requirements for self-
declared environmental claims, including symbols, regarding products. It also describes
selected terms commonly used in environmental claims and gives qualifications for
their use. In addition, the standard contains general evaluation and verification
methodology for self-declared environmental claims and specific evaluation and
verification methods (Jensen, 2000). Self-declared environmental claims may be in the
2 Third party body and its agents, which conducts Type I environmental labeling program (ISO 14024,1999).
410 JOURNAL OF WORLD TRADE
form of statements, symbols or graphics on product package labels or in other forms, for
example product literature, technical bulletins, advertising, telemarketing and the
Internet. However, the system does not use predetermined and accepted criteria for
reference (Goss, 2004), and normally covers only single attributes where it defines
terms such as ``no use of ozone depletion substances'', ``recycled material'', ``energy
efficient'', ``biodegradable'', ``designed for disassembly'' or ``reduced resource use'' (ISO
14021, 1999; Folmer and Gabel, 2000).
3. Type III Environmental Declaration (ISO 14025)
According to the Business and Sustainable Development Global Guide
(BSDGLOBAL) and ISO, the ISO 14025 provides guidance on technical,
formatting and administrative issues for Type III environmental declaration
(BSDGLOBAL, 2002; ISO 14025, 2006). Type III environmental declaration
provides quantified environmental data based on independent verification using
preset indices or predetermined parameters. In this sense, a third-party certification
agency or an independent body uses a number of environmental performance indicators
(EPI), including energy consumption, air emissions, water emissions, and others, to
obtain an environmental score, which serves as the paradigm for each product group. It
is assumed that such paradigms will help consumers to compare different goods and
then purchase the one with the best score.
There is, however, skepticism as to whether consumers have much time and
discerning ability to undertake all these somewhat difficult tasks before purchasing an
item (Goss, 2004; ISO 14025, 2006). In essence, Type III labels provide a list of impacts
a product is likely to pose to the environment throughout its life cycle. They are similar
to nutrition labels that give information about the fat, sugar and vitamin content of
food. Essentially, Type III environmental declarations are most appropriate for use in
business-to-business communication although they may be useful in business-to-
consumer communication too (ISO 14025, 2006).
C. SOME EXAMPLES OF ECO-LABELS
Several eco-labels exist; some examples are the EU flower (Goss, 2004), the
German Blue Angel (Cateora, 1996), the Nordic Swan, and the European eco-textile.
An EU eco-label (see Figure 1) on a mattress is an indication that there is a reduced risk
of allergic reactions to users, that water and air pollution during manufacturing is
limited, there is a reduction in residues of dangerous substances that may affect health
and the environment, ozone-depleting substances are absent and the product is
guaranteed to last as long as conventional mattresses (EUROPA, 2004).
A display of the German Blue Angel eco-label on products such as washing
machines demonstrates their suitability in the consumption of energy, water and
detergents. Products bearing the Blue Angel eco-label are therefore considered more
ECO-LABELS AND INTERNATIONAL TRADE 411
FIGURE 1: THE EUROPEAN UNION ECO-LABEL (THE EU FLOWER) AND THE NORDIC SWAN
Source: EUROPA, 2004, see <www.svanen.nu/Eng>.
environmentally friendly than products without such insignia (Markovich and
Reinhardt, 1995; Brassington and Pettitt, 2000). The Nordic Swan, which covers
about 60 product groups, is pictured in Figure 1.
There are other national eco-labeling systems within the EU that cover various
product groups. Examples of some of the recognized ones include Empfohlen vom
IBR, Umweltbaum of Germany, Neckermann UmweltpraÈdikat (Eco Seal) of
Germany, Bra MiljoÈval (Good Environmental Choice) of Sweden, Stiftung
Warentest, and the Milieukeur Label of the Netherlands (Goss, 2004).
III. PROBLEMS WITH ECO-LABELING AND INTERNATIONAL TRADE
The WTO permits national governments to formulate and apply environmental
policy instruments that they deem necessary with the condition that these do not
become encumbrances to trade. This means that environmental policy instruments
should not discriminate between domestic and foreign goods of the same quality
(Siebert, 1998). The preamble/chapeau of Article XX of the TBT Agreement of the
WTO or the General Agreement on Tariffs and Trade (GATT) states that ``subject to
the requirement that such measures are not applied in a manner which would
constitute a means of arbitrary or unjustifiable discrimination between countries where
the same conditions prevail, or a disguised restriction on international trade, nothing in
the GATT/WTO TBT Agreement shall be construed to prevent the adoption or
enforcement by any contracting party of measures:
(b) necessary to protect human, animal or plant life or health;
(d) necessary to secure compliance with laws or regulations which are not
inconsistent with the provisions of this Agreement, including those relating to
customs enforcement, the enforcement of monopolies operated under
paragraph 4 of Article II and Article XVII, the protection of patents, trade
marks and copyrights, and the prevention of deceptive practices.
412 JOURNAL OF WORLD TRADE
(g) relating to the conservation of exhaustible natural resources if such measures
are made effective in conjunction with restrictions on domestic production or
consumption'' (GATT, 1994).
However, enforcing environmental policy in trade may be restricted. For example,
the non-discriminatory principle means that goods that have been produced in an
environmentally damaging way could also enter the market which does not give
incentives to participants who have produced in an environmentally benign
atmosphere, using more expensive production methods (Folmer and Gabel, 2000).
Greaker (2006) contends that demands for eco-labeling are suspected to be
protectionist actions by some groups while others think eco-labeling would increase
costs of international trade (Melser and Robertson, 2005). Other problems we have
identified that might pose barriers to international trade with the use of eco-labels
include technical barriers, process and production methods, certification costs, low
credibility, chain of custody requirements, and problems faced by developing countries.
We expatiate on these in the next section.
A. TECHNICAL BARRIERS TO TRADE (TBT) OF THE GATT
Technical regulations and standards define the properties a product should possess,
for example, its size, shape, design, functions and performance, or way of labeling or
packaging before it is sold in the market (WTO, undated). Sometimes, these
characteristics are affected by the processing methods of the products, for example
making lumber from logs, so it is reasonable to develop technical regulations that must
be satisfied by these processes and production methods. The difference between a
standard and a technical regulation is that a technical regulation is mandatory and must
be obeyed whilst compliance with a standard is voluntary. This means an imported
good, which does not satisfy a domestic technical regulation, does not qualify for sale.
An imported good that does not meet the requirements of a standard is, however, not
prevented from entering the market, but domestic consumers who are standard
conscious may not patronize such goods (WTO, undated). However, a law may set
standards to achieve its purpose and once a standard is backed by a law or regulation
compliance with the standard is compulsory (WTO, undated).
The number of technical regulations and standards adopted by countries to ensure
that their environmental and quality goals are met has increased dramatically in recent
years (Ruddell and Stevens, 1998; WTO, undated). The adoption of technical
regulations and standards by countries is seen as costly in various ways. Without
international discipline, technical regulations and standards could likely be adopted and
applied solely to protect domestic industries. To ensure proper formulation,
interpretation and use of technical regulations and standards, and avoidance of
protectionism, the TBT Agreement or the Standards Code, which laid down the rules
for preparation, adoption and application of technical regulations, standards and
ECO-LABELS AND INTERNATIONAL TRADE 413
conformity assessment3 procedures was signed at the Uruguay Round (WTO,
undated).
The objectives of the TBT Agreement are to protect human safety or health,
protect animal and plant life or health, protect the environment, prevent deceptive
practices, and ensure quality, technical harmonization and trade facilitation. The TBT
Agreement respects standards and regulations of all countries provided they stand to
protect human, animal or plant life or health and not as a pretext to promote
protectionism. The number of technical regulations and standards has grown rapidly
(GATT, 1994).
Some problems have arisen between States regarding eco-labeling and
international trade. For example, the United States placed a ban on shrimp and
shrimp products from exporting nations not certified by US authorities. The United
States wanted exporting countries to have their shrimp and shrimp products certified by
the US authorities to prove that they used harvesting methods not leading to incidental
killing of sea turtles above a certain level (GATT, 1994).
In the forest products sector, Austria initiated a move in 1992 that was going to
require labeling of all imported tropical timber and timber products but was criticized
by some countries and later averted (Heissenbuttel et al., 1995; Markovich and
Reinhardt, 1995). In a similar direction in 1994, Greenpeace campaigned against
imports of British Columbia pulp into the UK with the claim that the pulp came from
poorly managed forests (Markovich and Reinhardt, 1995). A related scenario is the case
with Germany and the Netherlands in the early 1990s, which advocated against tropical
timber as not coming from sustainably managed sources (Wille, 1991). These actions
could be serious barriers to international trade.
In addressing the case with shrimp imports to the United States, a Panel was set to
settle the case and the Panel concluded that the case was not justifiable under GATT
TBT Agreement Article XX, because the Article did not state ``measures conditioning
access to its market for a given product upon the adoption by the exporting members of
certain policies''. Without examining the import ban on the basis of Articles XX(b) and
XX(g), the Panel concluded that the measure of the United States was not justified
under the terms of the chapeau of the Article (GATT, 1994). The Appellate Body,4
however, after assessing the consistency of the demand of the United States with the
GATT, saw the judgment of the Panel as a wrong interpretation of the scope of GATT
Article XX. In contrast, the Appellate Body judged that exporters could have
certification if they could prove that their shrimp or shrimp products were being caught
using methods, which did not engender adventitious killing of turtles beyond a certain
3 Conformity assessment procedures are technical proceduresÐsuch as testing, verification, inspection andcertification, which confirm that products fulfill the requirements laid down in regulations and standards.
4 A standing body of seven persons that hears appeals from reports issued by panels in disputes brought byWTO Members. The Appellate Body can uphold, modify or reverse the legal findings and conclusions of a panel,and Appellate Body Reports, once adopted by the Dispute Settlement Body (DSB) must be accepted by the partiesto the dispute.
414 JOURNAL OF WORLD TRADE
level. Also, the situation where importers may demand that exporters comply with, or
adopt certain policies prevailing in domestic markets to ensure conditioning access to
the domestic market may, to some extent, be necessary to meet the aims of the
exceptions (a) to (j) of Article XX.
The GATT recognizes domestic policies embodied in the measures necessary to
enforce these goals as important and legitimate. The Appellate Body further said that if
importing countries demand that exporters comply with, or adopt certain policies,
which of course would promote goals such as health protection and resource
conservation, such demands should not necessarily be assumed as out of the scope of
Article XX; such an interpretation of the Article would render its purpose null and void
(GATT, 1994). Besides, the Appellate Body described the chapeau of Article XX as
one that demands balance of rights and duties among States. This means there should
be a balance between the rights of a Member to adopt a measure in relation with Article
XX. It is also the duty of that Member to respect the treaty rights of other Members to
maintain equilibrium between rights of the Members involved and to avoid distortion
of rights among the Members and their obligations. It is a difficult task interpreting the
chapeau because of the broad nature of the standards inherent in it. However, a two-tier
(the chapeau and the provision) consideration of the Article with the specific
circumstances would yield fair judgments (GATT, 1994).
According to the WTO, its Members have autonomy to form their own policies
including those related to the environment and international trade. The WTO has
nothing against the environmental objectives and legislation of its Members provided
they respect the General Agreement and other Agreements (GATT, 1994). Despite the
likelihood that some countries may capitalize on GATT TBT Agreement Article XX
to indulge in protectionism, it is apparent from the judgments of the panels in the case
above and similar cases not mentioned here that the provisions of the Article might,
sometimes in contrast, be misinterpreted or evaded on the grounds that countries use
them to protect themselves on the pretext of environmental protection.
B. PROBLEMS WITH PROCESS OR PRODUCTION METHODS (PPMS)
The Organization of Economic Co-operation and Development (OECD), defines
process or production methods (PPMs) as the ways in which a product is manufactured
(OECD, 1997). Two kinds of PPMs exist with regard to environmental impacts.
± When process or production methods (PPMs) used to manufacture a product
impart certain characteristics to the product, making it pollute the environ-
ment upon consumption or use, the process and production methods are
called product-related PPMs or incorporated PPMs. Disposal of the product
and recycling, for example, form part of incorporated PPMs, which affect both
domestic and exporting countries.
± Non-product-related process and production methods (npr-PPMs) or
ECO-LABELS AND INTERNATIONAL TRADE 415
unincorporated PPMs do not adulterate the final product but rather, they
themselves inflict direct negative impact on the environment; for instance,
natural resource harvest in the production phase. These pollutions are localized
in the precincts of the manufacturer and do not pose a trans-boundary problem
(OECD, 1997; Wessells et al., 2001; Manoj, 2004).
According to Hanley et al. (2001), given that product-related environmental
policies are non-discriminatory, that is, applying the principle of most-favoured-nation
(MFN),5 they do not contravene GATT rules. So if Germany, for example, expects all
cars to have catalytic converters and seatbelts, the same standards are imposable on
imported cars, and not more (Hanley et al., 2001). The advocacy that cotton be
pesticide free is an incorporated PPM requirement. An unincorporated PPM
requirement may be that cotton be grown without pesticides, not minding whether
traces of the pesticide are found in the final cotton or not. Other examples of npr-PPMs
are organic products, in whose production the use of chemical fertilizers, pesticides and
preservatives are prohibited even though these chemicals could be absent from the final
product. Also npr-PPMs based, is the requirement that furniture be obtained from
wood originating from sustainably managed forests.
As the definition of technical regulations and standards depict, and thus supported
by Manoj, npr-PPMs are not covered by the TBT Agreement and according to the
history of the TBT Agreement, coverage of npr-PPMs was not planned to be included
in the functions of the TBT Agreement (Manoj, 2004). However, the definition of
eco-labeling, which includes LCA, demands that both PPMs and npr-PPMs be
satisfied. Manoj contends that voluntary or mandatory requirements on the bases of
npr-PPMs are outside the scope of the TBT Agreement. However, his reference to a
submission by Switzerland to the WTO in 2001 shows that some people argue out that
npr-PPMs are incorporated in the definition of technical regulation and standard in the
TBT Agreement (ibid.).
Voluntary standards, as we know, have no legal force. This means they must not
be prescriptive. Based on this, Bennett argues that ISO 14020 which makes references
to PPMs in eco-label usage is prescriptive and discriminatory and hence a serious
barrier to trade (Bennett, 2000). This point may be challenged since standards are laid
down criteria, which give a product a certain status and anyone who decides to adopt
the standard even voluntarily is expected to follow the laid down criteria.
What is questionable is whether conformity of PPMs with product characteristics
has to be verified in the importing country or exporting country. It is obvious that this
can be done only in the importing country (Wessells et al., 2001). Nevertheless, the
FAO says that eco-labeling in the fisheries sector is likely to be invariably awarded based
on npr-PPMs, especially those associated with harvesting methods such as type of gear
used, impacts on the marine habitats, compliance with management system and health
5 Applying to both domestic and foreign goods equally.
416 JOURNAL OF WORLD TRADE
of the stock of origin (ibid.). This supports the concept that eco-labeling demands
LCA, which includes PPMs and npr-PPMs.
C. PROBLEMS WITH CHAIN OF CUSTODY (COC) IN ECO-LABELING
The forestry sector has been chosen as a case for discussion in this section to
demonstrate the effects of COC. The supply chain of the wood industry from the forest
to the consumer is very long and may be unique for each product. It is difficult to get
consumers to trust a product claiming certification of a sustainably managed forest
status from this inordinately long process. So, to authenticate to consumers the integrity
of these claims, many forest certification schemes incorporate COC assessment in their
schemes.
So throughout the various stages of ownership, processing and transportation
between the certified forest and the final consumer, COC may involve tracking and
documenting the product (Hansen, 1997; Hansen and Heikki, 1999; Cumbo and
Smith, 2001; Brian, 2002). Some forest certification schemes demand independent
third-party certification of COC, and a product can only carry an eco-label if all
transfers of ownership from the forest to the consumer have COC certification
(Hansen, 1997; Kiekens, 2000). This means that an eco-labeled piece of furniture in a
retail shop must have had COC certification from the forest owner, the sawmill owner
and the secondary processor (Cumbo and Smith, 2001; Brian, 2002; Anderson and
Hansen, undated). The area of the world forest that is certified increased dramatically
from little more than 20 million hectares at the beginning of 2000 to about 150 million
hectares in January 2004 (Oliver, 2004).
However, all the certification schemes, for example the Forestry Stewardship
Council (FSC), the Sustainable Forestry Initiative (SFI), the Canadian Standard for
Sustainable Forest Management (CSA) and the Program for the Endorsement of Forest
Certification Schemes (PEFC) have special COC certification requirements and eco-
label usage, hence making their application very complex (Anderson and Hansen,
undated). Various obstacles to adoption of COC and eco-labeling have been observed.
Some examples include technical challenges, high costs, unwillingness of companies to
bear the costs of certification, imbalance between supply of labeled products and
demand, low demand for labeled wood products and the existence of more than one
certification body and their numerous and complex COC requirements (Vlosky and
Ozanne, 1998; Cumbo and Smith, 2001; Oliver, 2004). Forest certification is a
complex and costly process and most of the certification done so far in the tropics or
developing countries has been very small and successful only through public funding
(Kiekens, 2000; Oliver, 2004).
A study by Vlosky and Ozanne (1998) revealed that many US forest products
manufacturers are not willing to bear the costs of COC. Chain of custody may be
difficult for products such as paper and composite products that are obtained from
various sources (Kiekens, 2000; Rickenbach, Fletcher and Hansen, 2000). The length
ECO-LABELS AND INTERNATIONAL TRADE 417
of the certification process may also discourage domestic buyers from buying timber
from tropical and developing countries (Merry and Carter, 1997).
D. STANDARDS AS BARRIERS TO TRADE
A standard is defined as a:
``document approved by a recognized body, that provides, for common and repeated use, rules,guidelines or characteristics for products or related processes and production methods, withwhich compliance is not mandatory. It may also include or deal exclusively with terminology,symbols, packaging, marking or labeling requirements as they apply to a product, process orproduction method.'' (WTO, undated)
``Process standards specify the type of production process or emission reduction
equipment that polluting plants must install (e.g., a specific type of scrubber, pipe, water
purification device and so on)'' (Folmer and Gabel, 2000). ``Product standards define
the characteristics of potentially polluting products such as chemicals, detergents,
fertilizers, automobiles and fuels'' (ibid.). According to Case, each eco-labeling scheme
must have three main components to be fair: the validity of the standard used, the
process used to set the standard and the standard verification process (Case, 2004).
In countries where there are no government-endorsed multi-attribute eco-labels,
many private eco-labeling programs may spring up with variances in their standards. In
the United States, for example, lack of government supported eco-labeling programs has
led to a profusion of more than 40 US eco-labels (excluding all the food labels). The
number of eco-labels continues to increase as private companies, trade unions, and non-
governmental organizations create their own labeling programs and standard
requirements. Lack of harmony would definitely affect foreign importers (Case,
2004). The forest certification schemes have differences in their standards, which cause a
big problem in adoption. For instance, FSC has so complex a standard requirement that
stakeholders find it difficult to adopt (Oliver, 2004). In addition, self-certification with
random auditing, independent third-party certification and independent third-party
certification with on-site audits are different categories of standard setting and obligation
which may make international trade cumbersome since it is sometimes difficult to
determine which is best for economic gains and market penetration (Case, 2004).
Although ISO 14000 is applicable to all countries and contains good information
on the application of ISO 14001 for example, adoption of the standard is limited mainly
to developed countries. Only a little over 30 developing countries have eco-labeling
programs; this is woefully inadequate. A 2003 World Bank report on ``Standards and
Global Trade'' has admonished African governments on the need for them to adopt
international standards to be able to compete in the global market. The report says,
``some trade standards are set by international agreement, others by importing
countries, and still others by market demand'' (Saleson and Rios, 2003).
So, to be competitive in the global market, African firms have to upgrade their
facilities to meet global standards; for example, by investing in better processing,
418 JOURNAL OF WORLD TRADE
cooling and storage facilities. Out of about 200 licensed fresh fruit exporters in Kenya,
only four companies dominate the export market because only they are able to adopt
high standards in infrastructure improvements and quality control. Similarly, in
Nigeria the government is trying to promote awareness among consumers and
producers on the importance of standards, international standards and new equipment
acquisition to enhance international trade (Saleson and Rios, 2003). Setting stringent
standards discourages exporters, except that customers want products of such
standards.
E. PROBLEMS WITH CREDIBILITY
Using environmental labels that lack credibility can negatively affect international
trade. Different eco-labels in one product category exist. These labels are invariably not
equal and do not have the same meaning (Potts and Haward, 2007). They are created
by different organizations for different purposes. Some of them have high credibility
whilst others have no meaning at all (Heissenbuttel et al., 1995; Kiekens, 2000; Case,
2004). Credibility of the certifying organization is important for consumers to be
convinced about the claims made by eco-labels (Heissenbuttel et al., 1995; Teisl et al.,2002). According to the International Center for Trade and Sustainable Development
(ICTSD), establishing the credibility of existing eco-labeling programs will prevent the
proliferation of mediocre programs or too demanding standards set by environmental
organizations, large corporations, and other bodies (ICTSD, 2000).
A publication by Freese and Schubert (2004) contends that genetically modified
(GM) foods and crops are not well tested and regulated before they get labeled.
According to the authors the picture that emerges from their study of US regulation of
GM foods is a ``rubber-stamp'' ``approval process'' designed to increase public
confidence in, but not ensure the safety of genetically engineered foods (Freese and
Schubert, 2004). Meanwhile, the United States is the world's largest exporter of GM
crops and accounts for almost two-thirds of all biotechnology crops such as GM soy
and GM corn planted globally. This demonstrates lack of trust in labeling schemes and
loss of credibility (Freese and Schubert, 2004) and could mean that the required life-
cycle assessment is not performed or not strictly adhered to.
F. CERTIFICATION AND LABELING COSTS
The extra cost an organization or a country incurs in environmental protection can
alter its comparative advantage. Stringent environmental standards could lead to
countries or organizations losing their comparative advantage in certain products and
no longer export such goods. If factors of production are mobile, countries with
stringent environmental policies could shift their production facilities to countries with
less demanding environmental policies. This could be detrimental if the effect is global
but probably beneficial if the effect is local and easier to correct (Hanley et al., 2001).
ECO-LABELS AND INTERNATIONAL TRADE 419
Compliance with different foreign technical regulations and standards would likely
lead to significant costs for producers and exporters in many areas. Some of these
include costs in translation of foreign regulations, hiring of technical experts to explain
foreign regulations, adjustment of production facilities to comply with the
requirements and the need to prove that the exported product meets the
requirements of foreign regulations (WTO, undated). For example, Samartex
Timber and Plywood Company, a leading timber firm in Ghana, has spent more
than US$ 100,000 to undergo chain of custody assessment and other certification
requirements but has not been able to reach labeling status yet (Eshun, 2007). The
abundance and diversity of certification schemes increase costs of certification and
lower the market value of individual labels (Oliver, 2004). There are both direct and
indirect costs associated with certification and they vary significantly (Rickenbach,
Fletcher and Hansen, 2000; Cumbo and Smith, 2001; Humphries, Vlosky and Carter,
2001). For example, an FSC field assessment or ISO audit can cost US$ 3,000±7,000
for a 200-acre parcel aside the indirect costs of certification (Rickenbach, Fletcher and
Hansen, 2000). Certification is a costly activity that can preclude some countries and
firms from having access to some markets (Kiekens, 2000).
Testing costs for PPM based requirements are very high. For example, the
technology needed for testing for genetically modified organisms (GMOs) in food
products is very costly, so markets demanding GMO-free eco-labels cannot be entered
easily by exporters who cannot afford such expensive testing facilities. ISO standards
setting procedures are also very expensive and time-consuming for delegates involved
in setting the standards. These constraints make it difficult for developing countries to
be largely represented in the standards setting process (UNEP/IISD, 2000; Runnalls,
undated). In addition, eco-labeling schemes which demand high standards in COC,
PPMs and LCA may require installations of new production facilities and other
equipment, as has occurred at Samartex Timber and Plywood Company in Ghana
(Eshun, 2007), which may increase costs (Wessells et al., 2001).
G. PROBLEMS FACED BY DEVELOPING COUNTRIES
Eco-labeling may be difficult for developing countries to adopt. Increased demand
in environmental standards would result in a shift in production to countries, which are
able to keep to those standards. This means developing countries, which are unable to
keep to these high environmental standards because of economic reasons, will lose
competitive advantage and subsequent loss of market access. Besides, higher production
means higher income and higher ability to respond to environmental protection
demands. This scenario is illustrated by the environmental Kuznets curve in Figure 2.
To support Kuznets' theory, Hanley et al. quotes Beckerman (1992) as follows. ``The
only way to attain a decent environment in most countries is to become rich'' (Hanley
et al., 2001). Simon Kuznets developed the Environmental Kuznets Curve (EKC)
420 JOURNAL OF WORLD TRADE
FIGURE 2: ENVIRONMENTAL KUZNETS CURVE
Source: Hanley et al. (2001), p. 130.
theory, which is an inverted U-shaped relationship between income levels and the
equality of income distribution. The same kind of relationship has been found to exist
between income levels and environmental quality by the advocates of the EKC theory.
``The EKC theory states that as per capita incomes grow, environmental impacts rise,
hit a maximum and then decline'' (ibid.).
Y* represents the turning point of the curve. Before Y*, emissions are rising and
environmental quality is falling because of escalating consumption of resources, land
clearance and manufacturing. For incomes above Y*, damage to the environment drops
and environmental quality improves because of increasing incomes and environmental
consciousness, government regulations, technological advancements and changing
from manufacturing to services or high-tech industries (Hanley et al., 2001).
It is clear from the analogies above that eco-label usage, which demands various
procedures, criteria satisfaction, COC obligations, PPM obligations, LCA
application and others may be too costly for developing countries to afford and
hence may lose their comparative advantage to developed countries. This has already
shown up in the case where many African countries find it difficult to export
fisheries and fisheries products to Europe, the United States or Japan because of
stringent and expensive Sanitary and Phytosanitary (SPS) standards which cover
fisheries products based on PPMs (ICTSD, 2000). A survey conducted by the
Energy Research Institute, India, shows that a medium-sized firm in India would
need US$ 20,000±30,000 to be able to adopt some part of the ISO 14000 series
labeling certification (Manoj, 2004). Developing countries are very little involved in
trade with eco-labeled goods (ibid.).
Given the current rate of growth of imports and exports in developing countries
and their capital flows to other countries (UNCTAD, 2004), it is apparent that
increasing growth in demands by developed countries for eco-label usage would
markedly affect trade trends with developing countries. For example, Samartex Timber
ECO-LABELS AND INTERNATIONAL TRADE 421
and Plywood Company in Ghana, is currently under pressure from some of their
foreign buyers to get their products certified to ensure a continuous future loyal
relationship. Refusal of the company to respond to such demands could jeopardize its
position in the marketplace (Eshun, 2007). Developing countries have less financial
resources and inadequate technical expertise and hence are not able to adapt to
unceasingly changing rules and regulations (BourkeY and Leitch, 1998). Larger firms in
developed countries that are able to bear costs of certification, COC, LCA and other
related costs of eco-labeled and non-eco-labeled products are likely to overpower
smaller firms in developing countries (Wessells et al., 2001). Developing countries feel
that proliferation of private labeling schemes may not augur well for them because of
differences in standards. Proliferation of private schemes hinders participation and
monitoring, and increases costs (ICTSD, 2000).
Eco-labeling based on life-cycle assessment demands satisfaction of environmental
conditions that exist in both the importing country and the exporting country which
makes the whole eco-labeling process complex. If local industry determines which
products should bear labels, foreign countries may be discriminated against.
Furthermore, if exporters have to comply with conformity assessment procedures
and certification schemes of the importing countries, they may be discriminated against.
Developing countries have expressed dissatisfaction that they have not been involved in
the design of eco-labeling schemes and have the hope that their involvement would
foster fairness and harmony (Manoj, 2004).
According to the National Economic Development and Labor Council of South
Africa (NEDLAC), various OECD and UNCTAD studies have shown that no major
trade problems in eco-label usage have occurred but an increasing use of eco-labels,
particularly in the footwear, pulp and paper and textiles industry and others, could be a
difficult task for developing countries to adopt, and may pose a barrier to international
trade in the future. Other difficulties for developing countries are lack of access to
information on foreign labeling programs and the cost involved in hiring foreign
experts to elucidate on standards that may be enigmatic (NEDLAC, 2003).
IV. ADDRESSING BARRIERS TO ECO-LABELING AND INTERNATIONAL TRADE
The WTO has the responsibility of ensuring order in international trade. It is its
duty to address problems ensuing from eco-labeling and international trade. The
WTO, which plays an active role in dispute settlement between countries is
encouraged to address problems, such as disagreement of states on PPMs and npr-
PPMs, discrimination, and stringent standard procedures which are seen as
protectionist actions against other countries. This would lead to international trade
order and cooperation. The following discussions may be helpful in addressing some of
the problems that arise in international trade with the use of eco-labels.
422 JOURNAL OF WORLD TRADE
A. SETTING INTERNATIONAL STANDARDS
The International Standards Organization (ISO) is the institution responsible for
setting and harmonizing standards. The ISO 14020 family is responsible for standards in
environmental labeling. These include ISOs 14021, 14024 and 14025 (ISO 14021, 1999;
ISO 14024, 1999; ISO 14020, 2000; Jensen, 2000; ISO 14025, 2006). Standards have to
be clearly defined, identifiable and regularly monitored to ensure order in international
trade. Private regulators must make sure that their standards do not deviate from the ISO
14020 requirements. Standards must be easy to understand and they must not have
changing meanings irrespective of who does the certification (Case, 2004).
To fulfill its functions, the ISO is encouraged to consider environmental,
technological, economic and political factors in its standards setting process (Folmer
and Gabel, 2000). However, since political, environmental and technological
conditions vary from country to country it may be difficult to operate solely on
international standards. The procedure for setting international standards could be
influenced by small or large organizations or environmental groups provided their
contributions are unbiased (Bennett, 2000; Oliver, 2004). Since eco-labeling has
already gained grounds and is going to be continued, it is advisable to seek
intergovernmental consent including the FAO, WTO, ISO and other recognized
institutions to develop international labeling criteria that are non-discriminatory
(ICTSD, 2000). States can help in promoting the use of international standards and
reduce barriers to trade if they ensure that the formulation processes of technical
regulations incorporate extant international standards or important parts of them
(Wessells et al., 2001; Cabarle and Dieterle, 2006).
B. RECOGNITION OF NATIONAL STANDARDS
It is important to recognize national standards and develop their equivalencies that
can be accepted bilaterally (NEDLAC, 2003). Harmonization of standards may be an
obstacle to the progress of developing countries. Developing countries do not support
the idea that environmental standards be the same in all countries (ICTSD, 2000). Of
course, it is true that all countries do not have the same environmental conditions. One
good example is the institution of the Ghana Forest Standard in collaboration with the
Forest Stewardship Council (FSC) and other stakeholders, which describes certified
forests as having been managed in a sustainable way (Eshun, 2007).
C. OVERCOMING PPM PROBLEMS
Process and production methods are very important in eco-labeling. Non-
product-related aspects of eco-labeling are also very important. The disagreement that
normally ensues among interest groups in eco-labeling and international trade comes
mainly from npr-PPMs. Some people have the notion that npr-PPMs are excluded
ECO-LABELS AND INTERNATIONAL TRADE 423
from the requirements for eco-labeling but from the definition of the term ``eco-
labeling'' which applies LCA, it is inferable that both product-related PPMs and npr-
PPMs criteria need to be satisfied. It is pertinent that all stakeholders revisit the
definition of eco-labeling and get a clearer meaning of it. However, it is obvious that
environmental conditions are not the same in all places so prerequisite to LCA, all the
environmental variables need to be defined and equivalents developed. It is possible to
have differences in variables used for LCA calculations and these differences may cause
problems if input and output variables are not well defined and interpreted. The WTO,
ISO, governments and other interested organizations need to work in consultation to
develop equitable variables and equivalences in eco-labeling procedures.
D. ADDRESSING CHAIN OF CUSTODY (COC) CONSTRAINTS
The Forest Stewardship Council (FSC), whose initial actions did not consider the
economic interests of forest stakeholders, has improved its scheme to encourage the
admission of more and smaller forestland owners. So, in 1999, it reduced the limit of
certified raw material in labeled solid and composite wood products from 100 percent
to 70 percent. Later in 2002, it developed group COC certification guidelines to enable
smaller firms to certify their forests and products (Oliver, 2004). The FSC is currently
helping Ghana to certify its forests based on local conditions and meeting international
standards at the same time (Eshun, 2007).
Recently, the Program for the Endorsement of Forest Certification schemes
(PEFC) has also developed group COC certification, which is seen as cost effective and
easily adoptable by small firms. Under the new COC scheme, certified wood can be
procured from different countries using different national certification schemes and
labeling programs with only one COC system. The certified material then bears the
logo of the PEFC. To meet WTO and ISO standards setting and acceptability
requirements, the new standard was formulated in consultation with the public and
other stakeholders. Third-party certification has also been incorporated in the PEFC
certification scheme. This is expected to bring fairness in certifying forests and labeling
forest products internationally (PEFC, 2004).
Because of financial constraints, forest and forest products certification in the
tropics (mostly developing countries) is being done in phases. The first phase includes
recognition of national standards and certification to the national laws. Other elements
of sustainable forest management will then be introduced in a gradual process until
applicants are ready for full certification. The phased or stepwise approach in
certification has begun and is advancing. The Malaysian Timber Certification Council
(MTCC) has pioneered such a move, and the African Timber Organization (ATO) is
also developing a Pan African Certification Scheme (PACS), which would be adopted
by African timber producers (Oliver, 2004).
Chain of custody assessment is expected to be easier and cheaper in the future
with growing information technology. For example, smart tags being used in other
424 JOURNAL OF WORLD TRADE
production sectors to track goods and their components could be employed in assessing
COC. The tags have serial numbers, which can be read with the help of the Internet by
a sensor to determine their composition, origin and any other information that is
necessary. Adoption of this technology would markedly reduce costs incurred in COC
assessment (Oliver, 2004). Nevertheless, building bridges between the existing forest
certification schemes would enhance harmony, unity and progress.
E. CREDIBILITY
According to Folmer and Gabel, to ensure credibility of labeling, and to win the
trust of consumers the awarding agents must be reputably certified and accredited. This
means all the certification bodies such as the FSC, GMO testing bodies and the EU
eco-labeling programs must certify products which meet high environmental standards
and uphold efficient monitoring and sanction guidelines (Folmer and Gabel, 2000).
The certification schemes should meet well defined and established criteria set by
competent bodies (Folmer and Gabel, 2000), and the verification process should also be
based on the requirements of the standards (Case, 2004). Certification bodies should be
ready to make their financial stand, evaluation criteria and standard setting and
monitoring procedures overt to win the trust of consumers (BSDGLOBAL, 2002).
Government participation in eco-labeling schemes enhances the legality and
credibility of the schemes among stakeholders. It also allows public involvement in
setting new standards and adoption of international standards, which ensures
uniformity and credibility (BSDGLOBAL, 2002). This may be seen in the efforts
the EU is making to harmonize and unify labeling standards among its Member States
by introducing the EU flower to be the single label representative of all existing labels in
the EU (Goss, 2004). A single government recognized labeling program can help
reduce the increasing number of private eco-labels which have a lot of differences and
whose credibility may be questionable (Case, 2004). For Wessells et al., credibility
means that the results of the process are the same in similar situations and certifying
bodies remain independent of influences from manufacturers, no parties are sidelined in
developing the eco-labeling program, and full consultation of all stakeholders is
enforced to ensure transparency (Wessells et al., 2001).
F. ASSISTING DEVELOPING COUNTRIES
Assisting developing countries in various ways can be a major step towards global
adoption of eco-labeling. The WTO requires developed countries to assist developing
countries in developing technical regulations and standards (WTO, undated). It is
worth noting that some African fishing companies are working in a sustainable safe
environment and are therefore capitalizing on eco-labeling schemes to hit market
targets. Meanwhile, there is still much to be done. The World Wildlife Fund (WWF),
which is affiliated to the Marine Stewardship Council, has been involved in projects in
ECO-LABELS AND INTERNATIONAL TRADE 425
developing countries towards sustainable and cost-effective certification of fisheries
(ICTSD, 2000). The WWF is also working through the Global Forest and Trade
Network (GFTN) and in collaboration with the US Forest Service to provide training
and technical support in developing forest management plans to help developing
countries such as Ghana meet the goals of certification. Other international
organizations and non-governmental organizations are also actively involved in
helping developing countries meet certification goals (Eshun, 2007).
Developing countries also need a more lenient treatment considering their weak
financial stand (Wessells et al., 2001). They may need financial assistance to change
existing facilities to more efficient ones. It may also be helpful to explain standards to
them at lower costs. It is advisable to consult and involve developing countries in all
standard setting processes.
V. DISCUSSION
Eco-labeling is a very important environmental tool and market determinant.
It is very important to note that an eco-label is different from an ordinary
environmental label. Whereas eco-labels are awarded through third-party certification
and life-cycle assessment, environmental labels are awarded only through either of these
attributes or none of them. So, Type II environmental labeling, which is a self-declared
labeling (non-third-party certified) and not provided through LCA is simply,
environmental labeling. Type III environmental declaration applies LCA but does
not judge products; it only gives certain characteristics of the product, for example,
composition, and hence is also simply environmental labeling. There is the likelihood
that some people wrongly call all the three types of labels, eco-labels. If the scientific
basis of validation, avoidance of unnecessary barriers to trade, LCA application and
others are well adhered to, and an eco-label made for the products, one would get a
clear distinction between eco-labels and environmental labels.
From the definition of life-cycle assessment, it is clear that all the environmental
aspects of a product throughout all stages of its life are considered. This means that from
extraction through manufacturing, packaging, transportation, marketing and use to
waste management, recycling and final disposal the environmental impacts of the
product are not supposed to be negative. A product that meets this requirement in
addition to other requirements for eco-labeling qualifies to bear an eco-label. It is clear
that products that bear eco-labels have been made in such a way that during their
production there were acceptable levels of emission to the atmosphere, soil, human and
animal habitats and so on. In life-cycle assessment both product-related PPMs and npr-
PPMs are embedded. So as it stands, the use of eco-labels is not supposed to conflict
with the WTO principles.
It is obvious from the numerous benefits accrued from eco-labeling that its usage
needs to be continued. As mentioned earlier, the ultimate aim for eco-labeling is to
curb market failure arising from asymmetries of environmental quality information.
426 JOURNAL OF WORLD TRADE
Increasing interest of consumers in environmental goods is an indication that demand
and supply can change according to their interest. In this regard, an eco-label must be
obtained genuinely and its implications well construed. Governments need to promote
eco-labeling by explaining its importance to the populace. This is even a cheaper way of
environmental safety and assurance than regulation controls which are more costly to
governments.
Looking at the myriad number of existing technical regulations, succumbing to
international discipline is necessary to reduce the number to fewer, affordable, but
efficient and internationally agreed upon ones. The TBT Agreement of the WTO or
the standards code ensures that international order is maintained through the
conformity assessment procedures. The TBT Agreement sets boundaries within
which countries should operate. It clearly declares and maintains order within the
international trade arena. What may pose a problem is the variation in the variables that
may be considered in carrying out the life-cycle assessment since all countries do not
have the same environmental conditions.
As the TBT principles propose, countries should mutually recognize standards of
their trade partners, compute equivalences for inputs of technical regulations, ensure
transparency, respect the code of good practice, ensure bilateral relationships and avoid
discrimination. However, given the large number of a variety of regulations and
standards, countries need to adopt recognized standards such as the ISO 14020 series
and ISO 14040. The differences and the numerous private labeling schemes create
difficulties in understanding the different labeling programs and standard requirements.
This could pose untenable problems to exporters who may sometimes be in a maze as
to which methods to apply. If each country is to have its own standard setting criteria a
product which is produced to be exported to ten countries, for example, would have to
meet the standard requirements for each of these ten countries. This may be impossible.
So the ISO standards, which are internationally required, would be the best to adopt.
Standards need to be simple, easily applicable and economically affordable.
Developing countries need to be more committed to ISO standards, take part in all the
consultative meetings and adopt ISO standards to make them competent in the global
market. Environmental organizations, trade associations, companies, governments and
other stakeholders need to work together in a team to develop more reliable labeling
programs. The less private labels there are, and the more government-supported labels
there are, the more the credibility. The more stakeholders adopt ISO standards, the
more the credibility, transparency and trust. Proliferation of eco-labels made through
different criteria is not likely to achieve expected results. Eco-labeling organizations
need to be accredited, or special accredited organizations should be the only authorities
to confer eco-labeling eligibility on applicants.
Cost of installations to meet new standards, cost of setting standards, meetings of
consultative groups and hiring technical experts are sometimes difficult to afford.
Nevertheless, without such actions, mediocre products will dominate the market.
There needs to be a balance between economic constraints and environmental
ECO-LABELS AND INTERNATIONAL TRADE 427
responsibility. If developing countries lag behind in improved environmental
responsibility, and production shifts from developed countries to developing
countries because of the existing lower environmental costs, the developing
countries will become havens of pollution, exacerbating the problem. It is advisable
that developing countries show more commitment to environmental responsibility and
clean production technology. On the other hand, if production shifts to developed
countries because of their ability to produce clean products, developing countries will
lose competitive advantage. This also further admonishes developing countries to
endeavor to adopt clean technologies to maintain a good position in the competitive
market, and explains why Samartex's forest certification initiatives are laudable.
Since eco-labeling is authenticated through LCA, the environmental conditions in
the exporting and importing countries need to be considered. The inventory and
extraction phase of LCA must consider the situation in the exporting country while the
impact phase must consider the situation in the importing country. This is quite
cumbersome and needs full consultation between the exporting and importing
countries.
VI. CONCLUSIONS
Eco-labeling is a very important tool that has many benefits including helping
consumers to determine the environmental status of products. In totality, eco-labeling
promotes sustainable management and development. The definition of eco-labels
according to ISO and WTO principles includes life-cycle assessment. This means that
both npr-PPMs and product related PPMs have to be satisfied. In this regard, it is
expected that COC, TBT, PPMs requirements and international standards pose no
problem to trade. However, for international trade, data is needed from both the
exporting and importing countries to be able to obtain accurate results for phases such
as inventory, extraction and impact in the LCA calculation process. Collection of data
from the countries involved and the whole LCA process may be complex and
expensive. There is the need for consultation and collaboration between the countries
involved, and WTO and ISO need to find ways of making the process simpler, feasible
and affordable. If the eco-labeling process is accurately followed, it is supposed to pose
no barrier to international trade.
It has been revealed that developing countries find the adoption of eco-labeling
difficult and costly. However, it is expected that countries trade in goods in which they
have comparative advantage and lower opportunity cost. So, advocates of eco-labeling
may trade more in such goods. Nevertheless, there is the possibility of non-participants
losing market access because of competition. This means that some barriers may exist.
Also, some countries would likely create stringent environmental requirements on the
pretext of environmental responsibility that might be barriers to international trade.
It is important that countries adopt international standards such as the ISOs 14020,
and 14040 to ensure uniformity in eco-labeling. Besides, other countries should respect
428 JOURNAL OF WORLD TRADE
national standards and there should be negotiation if necessary. An example of this has
been seen in Ghana where the FSC is considering Ghana's standards in conjunction
with international standards to establish the Ghana Forests Standard of certification. It is
also important to assist developing countries technically as the WWF and other
organizations have initiated.
Finally, differences in environmental, political, and technological conditions in
countries are likely to have an impact on the implementation of international standards.
This means various countries need to be represented in ISO committees on
international standards setting. However, it may be difficult to operate solely on
international standards, so national regulations should be well examined and
equivalences developed in bilateral trade transactions.
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