Trade, Environment and Development UNCTAD Module 4 Environmentally Preferable Products.

Trade, Environment and Development

UNCTAD

Module 4

Environmentally Preferable Products

Increasing consumer demandIncreasing consumer demand Production and exports of Production and exports of

environmentally preferable products environmentally preferable products (EPPs) may:(EPPs) may:

• Enhance competitivenessEnhance competitiveness• Result in “win-win” situations, i.e. trade, Result in “win-win” situations, i.e. trade,

environmental, and developmental gainsenvironmental, and developmental gains• Provide options for diversification Provide options for diversification • Result in price premiumsResult in price premiums

• However, investment required may be However, investment required may be high and returns uncertainhigh and returns uncertain

• need for objective informationneed for objective information and analysisand analysis

TrainforTrade: Trade, Environment and Development

Why important?

Assist Government, producers, exporters, NGOs and other stakeholders in Viet Nam identifying and promoting opportunities for the production and exports of EPPs

Provide background information and analysis

Facilitate policy dialogues Help identify capacity building needs


Objectives of this module

• Selected categories of EPPs• Key issues

Costs Standards and certification Information requirements

• Issues for discussion Opportunities and constraints in the

case of Viet Nam Capacity building needs and follow up


Structure of this presentation

PART ISELECTED CATEGORIES

OF EPPs


Use of natural resources and energy

Amount of waste generated along the life cycle

Impact on human and animal health

Preservation of the environment

Source: UNCTAD/COMM/70

Criteria of environmental friendliness

TrainforTrade 2000: Trade, Environment and Development

Categories examined in this module:

Organic food and agricultural products

Certified timber products Non-wood forest products (NWFPs) Products based on traditional

knowledge Fairtrade products


Examples of EPPs

Organic food and agricultural products


Environmentally, socially and economically sound production of food and fibres

Production based on local soil fertility Optimal quality in all aspects of agriculture

and the environment Dramatic reduction of external inputs by

refraining from the use of chemo-synthetic fertilizers, pesticides, and pharmaceuticals.

Laws of nature allowed to increase both agricultural yields and disease resistance


Organic agriculture IFOAM definition

Potential trade, environmental and social development benefits are significant

However, there is a need to overcome policy, market and technical obstacles

Other objectives, such as food security, need to be considered

High productivity chemical agriculture may be required, although in certain cases: Agricultural policies could focus on reducing the use

of chemical fertilizers and pesticides, even though organic standards are not met

Rice, even higher grades, can be grown with lesser use of chemical fertilizers and pesticides


Organic agriculture Some considerations

Lack of know-how and extension services

Limited research in high productivity organic agriculture

Risks involved in shifting to new farming methods

Uncertain crop yields Lack of infrastructure, incl. transport

and storage Short shelf life


Constraints (1)

Small markets Inability to achieve

economies of scale due to small holdings

Limited market information Difficult market access High certification costs


Constraints (2)

Promising trading opportunities The size of certified organic agricultural

sector is still small (generally not more than 1 to 2 per cent in developed countries)

Products from developing countries need to compete in markets with stringent quality requirements, increasing pressure for subsidies and other support measures, uncertain price premiums and preferences for locally-produced food


Still a niche market.............

Highlights of International Market of Organic Products

World market US market European market German market Annual growth rate

in major markets Fastest growth

rate

US$17.5 billion US$ 8 billion US$ 7 billionUS$ 2.2-2.4 billion 10-20 per cent

United Kingdom (25-30 per cent)

Highlights of International Market of Organic Products

Highest percentage of food sales

Major commodities

Major exporters Major developing

country exporters

Switzerland and Denmark

Grains, coffee, tea, cottonUnited States, ItalyMexico, Argentina, Chile


Standards and certification

Organic products sold in the markets of developed countries need to be certified

Very large number of standards and labels by private bodies and government institutions

Initially, most programmes were managed by the private sector

Recently more Government involvement


Standards and guidelines

IFOAM IFOAM (International Federation for Organic (International Federation for Organic

Agricultural Movements)Agricultural Movements)

Codex AlimentariusCodex Alimentarius European UnionEuropean Union United StatesUnited States

For a datase on legislation concerning organic standards For a datase on legislation concerning organic standards see:see:

http://www.organic-research.com/Laws&Regs/legislation.htmhttp://www.organic-research.com/Laws&Regs/legislation.htm


General Principles set out the goals of organic production and processing

Recommendations provide “standards” which IFOAM promotes, but does not require to be incorporated into certification standards

Basic Standards are the minimum requirements that must be fully incorporated into certification standards


IFOAM Basic Standards have been developed, for example, for

Crop Production Animal Husbandry Aquaculture Production Processing and Handling Forest Management Processing of Textiles


Codex Alimentarius Guidelines

Guidelines for the Production, Processing, Labelling and Marketing of Organically Produced Foods. GL 32 – 1999

Coverage• Unprocessed plants and plant products• Processed product for human

consumption, derived mainly from the above

http://www.fao.org/es/esn/codex/STANDARD/standard.htmhttp://www.fao.org/es/esn/codex/STANDARD/standard.htm


European Union

• EU Council Regulation No. 2092/91 on organic production and labelling entered into force on 22 July 1991

• The Regulation covers production, processing, labelling and inspection of agricultural products and foodstuffs from organic agricultural production

• Recently, it was amended to also cover standards for livestock production


EU: Imports (1)

Article 11 of Regulation 2092/91, paragraph 1

“third-country” list of countries with which equivalence is established

Countries currently on the list: Argentina, Australia, the Czech Republic, Israel, Hungary and Switzerland


EU: Imports (2)

Article 11 of Regulation 2092/91, paragraph 6

By way of derogation from paragraph 1, organic products from other countries can be marketed in the EU provided the importer submits documentation to confirm that the products are produced and certified according to rules equivalent to those of EU

Managed by EU Member States Used by over 70 countries, incl. Viet Nam


United States (1)

The Organic Foods Production Act (OFPA) of 1990 required the US Department pf Agriculture (USDA) to develop national standards for organically produced agricultural products and to establish an organic certification program

The National Organic Program (NOP) is a marketing program housed within the USDA Agricultural Marketing Service (AMS), the agency that sets marketing standards


United States (2)

Certifying agents operating in foreign countries may apply for USDA accreditation

Otherwise, a foreign certifying agent may: Receive recognition when USDA has

determined, upon the request of a foreign government, that its authorities are able to assess and accredit certifying agents as meeting the requirements of the NOP; or

Receive recognition as meeting requirements equivalent to the NOP under an equivalency agreement negotiated with the United States

• Viet Nam has traditionally practiced organic agriculture, but the process of modernization, in particular agricultural research, led to increased use of chemicals

• Renewed emphasis on organic agriculture:

• Limitations of chemical and high irrigation agriculture are being felt

• Experiments with organic agriculture and “safety vegetables”


Experience of Viet Nam

Options• In urban areas: vegetables,

fruits, spices and animal husbandry products

• In the mountainous provinces: tea, coffee, pepper, fruits, medicinal plants, forest specialties and husbandry products


Experience of Viet Nam

• Organic food standards have been notified under TBT Agreement

• Potential trade policy issues include standards, harmonization, equivalence, subsidies, conformity assessment procedures and trade preferences


Trade policy issues

Certified timber products


Increasing international attention for sustainable forest management (SFM)

Forest Principles adopted at UNCED:Forest Principles adopted at UNCED:

Forest resources and forest lands should be sustainably managed to meet the social, economic, ecological, cultural and spiritual needs of present and future generations


Certified timber products

• Over 150 countries are participating in a number of regional and international processes aimed at establishing criteria and indicators for SFM

• The International Tropical Timber Organization (ITTO) was the first organization to elaborate agreed guidelines for sustainable management of natural tropical forests


Sustainable Forest Management

• Increasing number of producer countries, such as Malaysia, Indonesia, Finland, Sweden and Canada, with certification schemes

• international certification systems

• The International Standards Organisation (ISO)

• Forest Stewardship Council (FSC)

• Certified forests account for approximately two percent of the world's forests


Timber certification

• A system for the certification of sustainable forest management is being developed under the ISO 14000 Series

• Objective: To develop a tool for forestry organisations to continually improve their management systems and thereby their environmental performance

• It is a process, not a performance, standard


ISO system for certification of SFM

• Encourages global forest management which is sustainable from environmental, economic and social point of view

• Favours a performance-based approach.

• Criteria for sustainably managed forests and for plantations

• The FSC certificate guarantees the “chain of custody” of timber, considering its life cycle (including transport or processing)


Forest Stewardship Council (FSC) (1)

• The FSC is an accreditation organisation (does not certify itself). Certification to be carried out by accredited organisations that must adhere to the FSC principles

• Accredited organisations include: Soil Association (UK), Rainforest Alliance (USA), Scientific Certification Systems (USA), SGS Qualifor (UK), SKAL (Netherlands)


Forest Stewardship Council (FSC) (2)

• Extensive media campaigns by NGOs (e.g. Germany, the Netherlands and the UK)

• Europe: demand for sustainably produced timber presently exceeds supply

• Certification can be used as marketing tool

• Also concern that certification could act as trade barrier against those unable to become certified

• Need to avoid discrimination against tropical timber


Timber certification and trade

Non-Wood Forest Products (NWFPs)


FAO: “Goods of biological origin other than wood, derived from forests, other wooded land and trees outside the forest”

NWFPs include food items, such as honey, nuts, berries, mushrooms, essential oils, spices, and animal fodder, construction materials, medicinal plants, other health care and cosmetic products, and items of cultural and spiritual significance


Non-wood forest products

NWFPs are primarily consumed at the local or national level

Particularly for the poor in developing countries, NWFPs can be of crucial importance, both for the material needs of the family and as a means to generate income

Around 80 per cent of the population in developing countries use NWFP to meet nutrition and health needs


Important at local level...

Harvesting, processing and marketing NWFPs can be important for local employment and provide the basis for local small-scale industries

External entrepreneurs often appropriate a large part of the revenues of NWFPs

Efforts must be made to enhance the value-added accruing to local communities

Environmental limits must be taken into account


Local employment and industry...

Exports of NWFPs are a significant source of foreign exchange earnings for several developing countries

Some 150 NWFPs are traded internationally in significant quantities, including cork, essential oils, forest nuts, gum arabic, rattan and plant and animal components of pharmaceutical products

World trade in NWFPs is roughly US$ 11 billion


World trade: no reliable statistics...

World Trade in NWFPs (US$ millions)

Natural honey Mushrooms and truffles Nuts Spices Ginseng roots Gum arabic Plants used in pharmacy Essential oils Cork and cork products Rattan

268.2210.7593.1175.7389.3101.3689.9312.5328.819.0


Preliminary figures!!

Alternative wood sourcesBamboo: used in furniture production and a range of traditional uses, such as handicrafts

Food products Medical substances


Examples of market opportunities (1)

Cosmetics and perfumery Biopesticides Biochemicals

Lac, the resinous secretion obtained from the hemipterous insect and produced in Viet Nam finds a variety of uses in plastics, adhesives, wood finishing, polish and others


Examples of market opportunities (2)

Products and services based on Traditional

Knowledge (TK)


• TK is an important resource in the development process of Viet Nam, e.g. traditional agriculture and medicines as well as handicrafts:• Need for legal protection• Need for comprehensive policies aimed

at harnessing TK for development and trade, e.g. by commercialization of TK-based products and services

(See Module 7)


Products from Traditional Knowledge (TK)

Complements legal protection of TK by enhancing economic value, income and employment

Consumer demand for natural products

Raw material sourcing partnerships often provide benefits for local communities or conservation programs


Commercialization

TK may have cultural and spiritual values that preclude commercialization

Problems with marketing, standardization, and scaling up production

Risk of over-harvesting economically significant TK-based natural products

TK is often accessed by companies through databases and literature, and in some cases through multiple intermediaries: access to TK and sharing of benefits have often been de-linked


Constraints

Raising awareness of the commercial potential among Government and local and indigenous communities

Identifying aspects of TK that could be of wider interest and a basis for commercialization

Developing capacities to meet stringent standards, for example in the case of herbal medicines

Obtaining market information


What is needed? [1] [

Establishing certification procedures to guarantee that products are made by LICs and enhance their commercial value

Develop and implement other instruments to enhance commercial value of TK-based products, including IPRs

Explore ways in which benefit-sharing packages can be structured to benefit LICs and conservation

Developing partnerships, including capacity building and technology transfer


What is needed? [2]

Fairtrade products


Increasing demand for products from developing countries that are produced in a manner which takes into account social equity and justice in the producing country, through "fair trade“

Fairtrade initiatives seek to improve market access, strengthen producer organizations, pay better prices and provide continuity in the trading relationship


Background

Fair production conditions and trading relations, including: – A price that covers the cost of production – Social premium for development purposes – Partial payment in advance to small

producer organizations– Long term trade relations that allow

proper planning and sustainable production practices

– Minimum environmental criteria


The fair trade label guarantees:

Producer organizations produce a range of handicraft and food products

Consumers Fair trade importing organizations buy

products at a fair price directly from producers and give them various forms of advice, support and training. They sell the products through channels such as specialized "world shops", local groups, and increasingly supermarkets


Who is involved?

World Shops sell fair trade products and raise awareness about fair trade issues

Fair trade labelling initiatives seek to enlarge the market for fair trade products by bringing them into mainstream sales outlets like supermarkets while at the same time offering consumers an independent guarantee of fair trade standards


Who is involved? [2]

Founded in 1997 to coordinate efforts and to ensure the audit of all fair trade labelled products from the producer to the supermarket shelf

FLO has developed criteria for coffee, cocoa, tea, honey, sugar, bananas and orange juice

It also aims at the introduction of a single international fair trade label


Fairtrade Labelling Organisations (FLO) International

Products including coffee, chocolate, tea, Products including coffee, chocolate, tea, honey, sugar, bananas, and orange juice honey, sugar, bananas, and orange juice are now available in more than 43,000 are now available in more than 43,000 supermarkets throughout Europesupermarkets throughout Europe

Market shares are expanding, in particular Market shares are expanding, in particular in Switzerland and the Netherlandsin Switzerland and the Netherlands

Market share of fair trade bananas is 15% Market share of fair trade bananas is 15% in Switzerland and 4.2% in the in Switzerland and 4.2% in the NetherlandsNetherlands

The market share of fair trade tea is 4% in The market share of fair trade tea is 4% in Switzerland and 2.5% in GermanySwitzerland and 2.5% in Germany..


Markets for fairtrade products

PART IIKEY ISSUES


EPPs often are more expensive than conventional competitor products

Adjustment costs Production costs Certification costs Distribution costs

Cost disadvantage for EPPs might be attenuated, in the long run, as environmental policies become more stringent and costs and benefits are more fully incorporated in prices


Costs of EPPs, some considerations

The very large number of standards set by governmental and private bodies, e.g. in the case of organic agriculture may create problems for developing countries

Need to promote practical application of mutual recognition and equivalence

Need to strengthen developing countries’ effective participation in international standard setting


Standards, certification

Donor assistance, e.g. in the framework of FairTrade and development projects

Training of local inspectors and other personnel working for international certification bodies operating in Viet Nam

Development of national certification system

International accreditation of national certification bodies


Reducing certification costs (1)

Negotiation of equivalency agreements, including, for example, recognition under EU Regulation 2092/91

Group certification Regional cooperation


Reducing certification costs (2)

Producers Producers need information on

environmentally sound technologies (ESTs) and production practices

Marketing intelligence

Consumers Consumers may not have enough

information about the availability and benefits of particular EPPs

Need for campaignsNeed for campaigns


Information on EPPs

Many EPPs, such as NWFPs, are new products, and introducing them to the market is important. It is easier to start with products that are already on the market

Certain EPPs are still mostly sold in niche markets: low traded volumes are normally associated with higher unit transaction costs which make EPPs less price competitive and, hence, less attractive to traders and consumers.


Commercial strategies (1)

Shift to the mainstream is often hampered by lack of reliable supplies of adequate quantity and consistent quality. Supply of commercially viable quantities of EPPs can be achieved, for example, by associating small producers in cooperatives

Direct channels may provide better chances of obtaining price premiums


Commercial strategies (2)

PART IIIISSUES FOR DISCUSSION

AND POSSIBLE FOLLOW-UP ACTIVITIES


• Does Viet Nam have good options to increase production and exports of EPPs?• Organic food and agricultural products?• Certified timber products?• Non-wood forest products (NWFPs)?• Products based on traditional knowledge? • Fairtrade products?


Opportunities for Viet Nam?

• What are major constraints to be resolved?

• Who should play a lead role in promoting EPP? • Producers?• Government?• NGOs?• Other?


Opportunities for Viet Nam?

• Creating awareness among producers and other stakeholders?

• Identifying Vietnam’s supply capacities for specific categories of EPPs?

• Developing or strengthening domestic standards, regulations and certification facilities in Viet Nam?

• Identifying international market trends and options for creating a domestic market?


What should be done concerning: [1]

Removing policy, market and technical obstacles?

Reducing certification costs? Promoting regional cooperation? Participating effectively in international

debates?



Negotiation of equivalency agreements for organic products, for example, recognition under EU Regulation 2092/91?

Group certification? Regional cooperation?

How can CBTF follow-up activities be useful to Viet Nam?



Trade, Environment and Development UNCTAD Module 4 Environmentally Preferable Products.

Documents

environment source

pesticides trainfortrade

aspects of agriculture

agricultural yields

food security

agricultural policies

sound production of

objective information