Agenda

1. Sustainability and Technical Barriers to TradeEnvironmental Standards as Technical Barrier to Trade?Axel MangelsdorfBAM Federal Institute for Materials Research and Testing, GermanyandBerlin Institute of Technology, Chair of Innovation Economics

2. Introduction: Some trends in global trade. • Tariffs • Supply Chains • Standards • NTBs • Environmental Standards and Trade: • What is the legal status? • What is the empirical evidence? • Summary and Conclusion Agenda

3. Trends in Global Trade (1): Unilateral reduction of tariffs in developing countries Introduction

4. Trends in Global Trade (2): Emergence of Global Supply Chains • Source: Baldwin (2012) Introduction

5. Trends in Global Trade (2): Emergence of Global Supply Chains • Source: Foundation for Economic Education (2012) Introduction

6. Trends in Global Trade (3): Emergence of standards • Source: ITC Standards Maps Introduction

7. Trends in Global Trade (3): Emergence of standards • Example: Growth of Sustainability Standards in Coffee by Volume (2005-07) • Source: Giovannucci (2009) Introduction

8. Trends in Global Trade (4): Increased use of non-tariff measures (NTMs) Introduction

9. Trends in Global Trade • (1) Reduction of tariffs • (2) Emergence of Global Supply Chains • (3) Emergence of standards • (4) Increased use of non-tariff measures (NTMs) • Are environmental standards legal instruments in the multilateral legal framework? • Is there evidence of ‘green protectionism’ through environmental standards? Introduction

10. Legal status of environmental standards in the multilateral framework • Article XX GATT • TBT Agreement: Technical Regulations and Standards • SPS Agreement Environmental Standards and Trade

11. Legal status of environmental standards in the multilateral framework • Article XX GATT: General Exceptions • WTO Members have the right to adopt measures to protect the environment • Specific instances in which WTO Members may be exempted from GATT rules • Articles XX (b) and (g) are relevant for protection the environment: • (b) “[measures] necessary to protect human, animal or plant life or health” • (g) “[measures] relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption.” Environmental Standards and Trade

12. Legal status of environmental standards in the multilateral framework • TBT Agreement: Technical Regulations and Standards • Article 2: Preparation, Adoption and Application of Technical Regulations by Central Government Bodies • Article 2.2. “[..] technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective [..]. Such legitimate objectives are, inter alia: national security requirements; the prevention of deceptive practices; protection of human health or safety, animal or plant life or health, or the environment. [..].” • Article 2.4: “Where technical regulations are required and relevant international standards exist or their completion is imminent, Members shall use them, or the relevant parts of them, as a basis for their technical regulations [..]” Environmental Standards and Trade

13. Legal status of environmental standards in the multilateral framework • SPS Agreement: food safety, and human, animal and plant health and safety regulations • SPS Agreement complements the TBT Agreement • Allows members to adopt SPS measures for environmental purposes • Measures must be based on a risk assessment • Measures should be non-discriminatory and transparent • Private Standards covered in WTO agreements?  Non-governmental measures • Concerns about cost of (multiple) certifications which can be a problem, especially for small-scale producers and particularly in developing countries Environmental Standards and Trade

14. What is the empirical evidence? • Empirical Papers • Eco-labels • ISO 14001 • TBT and SPS notifications Environmental Standards and Trade

15. What is the empirical evidence? • Eco-Labels Environmental Standards and Trade

16. What is the empirical evidence? • Eco-Labels Environmental Standards and Trade International Accreditation Forum (IAF) Peer Review by foreign Accreditation Body Accreditation Bodies (AB) Accredits the Certification Bodies (CBs) Certification Bodies Audits the organizations Organization 1 Organization 2 Organization n

17. What is the empirical evidence? • Eco-Labels • Eco-Labels and international trade: • Concerns: Lacks of checks in regard to proliferation of eco-labels and cost of conformity assessment for developing countries and SMEs • Although not legal mandatory eco-labels often become economic impetrative • What is the empirical evidence? •  Difficult to isolate the trade effect of labels Environmental Standards and Trade

18. What is the empirical evidence? • Eco-Labels: What is the empirical evidence? • German “Green Dot”: Domestic and foreign producers have to take back their packaging and bear the costs of recycling • “Nordic Swan”: Low participation of developing countries in the scheme  can only marginally benefit from eco-labeling; • Trade distortion: un-labeled products (e.g. tropical timber) would be exported to other markets • More and more exporters in developing countries are exposed to labels as more and more products fall under the different schemes Environmental Standards and Trade

19. What is the empirical evidence? • ISO 14001 • Environmental Management Standard • Bellesi et al. (2005): Impact of ISO 14001 certifications on exports • Survey of 130 exporting • ISO 14001 evaluated as third most important factors determining selection of suppliers (price, quality) • European customers rather require ISO 14001 certification compared to American customers • ISO 14001 certification costs are not trivial but represents an advantage in international markets Environmental Standards and Trade

20. What is the empirical evidence? • ISO 14001 • Massoud et al. (2010): ISO 14001 and challenges for developing countries • ISO 14001 often a requirement to do business in Europe • Developing country firms account for less than 3% of ISO 14001 certified enterprises worldwide • Massive problems for firm from developing countries to achieve certification: investments, lack of institutional capacity, skills, lack of local expertise, etc. Environmental Standards and Trade

21. What is the empirical evidence? • TBT and SPS • Fontagne et al (2005): Impact of environmental TBT and SPS on trade • Focus on notifications of environmental-related regulations made to the WTO under the TBT and SPS agreement • Gravity model with 114 exporting and 61 importing countries and 61 products • Results: positive impact for some products and negative for others • Positive: Medicaments, chemicals • Negative: Meat, vegetables Environmental Standards and Trade

22. International Trade: Tariff reduction, global supply chains, proliferation of standards, ethical trade, increased use of NTMs • WTO and environmental standards: GATT Article XX, TBT and SPS Agreement: environmental standards can be used by member states when they are not discriminatory, based on international standards, applied in a transparent manner • Evidence for green protectionism? Difficult to isolate the effect of environmental standards but: • Eco-labels are a concerns for developing countries • ISO 14001 standards are often demanded in developed countries especially by European countries • Environmental TBT and SPS: mixed impact, case sensitive Summary and Conclusion

23. Thank you very much for you attention!