Arthur E. Appleton, J.D., Ph.D. is a Partner at Appleton Luff- International Lawyers (Geneva). The expression "mind the gap" will be familiar to those who have ridden the London underground. This work is adapted from a longer paper presented in September 2007 at the World Trade Institute's World Trade Forum in Bern, Switzerland. I am grateful for the research assistance of Marcia Aribela de Lima Gomes Pereira. Any errors that remain are my own
Consumers are increasingly faced with supermarket labels that reflect whether a product meets various environmental criteria, whether it is organic, whether and how far it was air-freighted (Air Miles), and some supermarkets are debating whether to label the distance that produce has traveled from its source (Food Miles).2 In addition to being shrewd marketing schemes, these private labeling and certification schemes often have protectionist motives. For example, in Switzerland, "Bio Suisse" refuses to grant "organic" certification for products imported by air.3 Hence, the "Bio Suisse" scheme favors Swiss farmers and their neighbors, to the detriment of more distant developing countries. Likewise, in the United Kingdom, the Soil Association is examining whether to assess the impact of airfreight when it grants its "organic" certification.4 The result would also be the same-protection of local farmers.
Supermarkets in the United Kingdom are in the forefront of this effort and claim to be targeting health and environmental concerns, particularly climate change. Is this really the case? This article summarizes policy implications that arise from private labeling schemes and identifies "gaps" in the World Trade Organization (WTO) Agreement on Technical Barriers to Trade (TBT Agreement)5 that may result in private labeling schemes falling outside TBT disciplines.
Private labeling schemes-including supermarket labeling schemes-exist for legitimate objectives such as environmental protection, but also to further protectionism. They raise several policy issues:
By emphasizing one stage in a product's life-cycle, private labeling schemes, including those based on Air Miles and Food Miles, provide a misleading view of a product's environmental implications. When environmental and organic labeling schemes take transport considerations into account, the result is often de facto discrimination against exports from developing country farmers. Such schemes may therefore cause economic damage that leads to other environmental problems.8
Sophisticated environmental labeling schemes depend upon an assessment of a product's entire life cycle. This is a new form of accounting without a generally accepted methodology. Should certain phases in a life-cycle analysis receive greater weight for accounting purposes? How does one evaluate transport-related criteria which may discriminate against imports? How does one evaluate products produced using polluting or non-renewable forms of energy? Potential considerations include emissions from: farm equipment, plants manufacturing fertilizer, pesticides and greenhouses; fuel to heat greenhouses, emissions from vehicles used by employees to get to the farm and their manufacturing jobs, and landfill emissions from associated waste. The list is almost endless, however, and the risk exists that without agreed accounting standards consumers will face deceptive labeling practices.
Private labeling is an imperfect tool to address environmental problems. Private labels usually Private labeling schemes-including supermarket labeling schemes-exist for legitimate objectives such as environmental protection, but also to further protectionism. Page 11 focus on narrow issues, only influence a limited number of consumers, and fail to provide a comprehensive regime to address environmental concerns. For example, schemes such as Food Miles and Air Miles are not as effective as taxes and other pricing policies to force polluters (and ultimately consumers) to bear the full cost of pollution.
The TBT Agreement is the most specific of the WTO's "covered agreements" applicable to environmental and organic labeling schemes. It governs mandatory "technical regulations," voluntary "standards" and "conformity assessment" (testing) covering a wide range of goods. If applicable, a WTO panel seized with a labeling dispute would turn first to this Agreement before addressing GATT issues.9 Compliance with a private labeling scheme is almost always voluntary. If a scheme falls within the TBT Agreement, Article 4 and Annex 3 (the Code of Good Practice for the Preparation, Adoption and Application of Standards) would be applicable. Standardizing bodies that are bound by the Code or have accepted its obligations are required to accord most-favored-nation and national treatment to like products.10 Their standards must not create unnecessary obstacles to international trade,11 and they are required to use relevant international standards when they exist or their completion is imminent.12
Article 4 provides that central government standardizing bodies are bound by the Code and that other standardizing bodies have the option to accept and apply the Code. Members are obligated to take "reasonable measures" to assure compliance with the Code by regional, local and non-governmental "standardizing bodies." Nevertheless, Members are responsible for the compliance of standardizing bodies whether or not a standardizing body has accepted the Code. The important term is "standardizing bodies." Members have no responsibility under Article 4 if the body in question is not a "standardizing body."
Four TBT issues with relevance to private labeling schemes are discussed: (1)...