The Commonwealth Secretariat has posted a discussion paper in its Trade Hot Topics series on the challenges and opportunities arising for small states and LDCs from eco-labelling schemes. The paper notes fears that “eco-labelling schemes could be a disguised form of protectionist trade policy”, given the absence of a “universally accepted standard” and the existence of “over 400 recorded eco-labelling programmes implemented in 197 countries in 25 different industry sectors”.

The paper observes that the use of eco-labelling schemes by large retailers, often promoted by national governments, is increasing, and that production process-related requirements are increasingly becoming a precondition for access to key components of the retail market, potentially increasing the scope for disputes.

The voluntary nature of eco-labelling schemes is also highlighted, as well as the commercial interests of retailers in eco-labelling. The analysis points to the absence of any “direct legal obligation to consider the export interests of other countries” in the elaboration of eco-labelling schemes, as well as “few incentives to do so”.

The paper also observes that the complex realities and challenges thrown up by eco-labelling schemes are of growing interest to WTO members, particularly in their relationship to:

• the implications for competitiveness of these schemes;
• the costs and market impact of multiple schemes for developing countries;
• the potential non-neutrality of carbon footprint methodologies;
• the lack of a uniform methodology for measuring standards;
• the risk of discrimination on the basis of non-product related processes and production methods.

A particular concern is that any or all of these aspects of eco-labelling could create new barriers to exports for small and least developed economies.

The absence of regulatory control and supervision over the multiplicity of eco-labelling schemes in operation needs to be seen against the background of WTO requirements under the Technical Barriers to Trade agreement, which states that governments should promote “some level of oversight of the design and implementation of private eco-labelling schemes”.

While eco-labelling standards pose challenges, they can also provide “an avenue for gaining access to niche markets in which a premium price is paid for “green” products”. As such, “eco-labelling can present an opportunity to add value to existing products, expand reach in existing markets, or maintain market share in a competitive environment through product differentiation.” However, this always needs to involve a careful cost–benefit analysis, since higher prices do not always mean higher net benefits for primary producers. Often the value of adopting a particular eco-labelling standard lies in the security of market access it provides rather than in any “immediate price and profit increase”. This is particularly the case as eco-standards become the industry norm, the paper notes.

The paper advances a number of recommendations that are relevant to ACP governments. These include:

• seeking greater involvement in the design of methodologies behind labelling schemes, including pro-active engagement;
• promoting further elaboration of the Doha Round Work Programme on labelling schemes, particularly on Paragraph 32 of the Doha Declaration Work Programme, which calls for more attention to be paid to “the effects of environmental measures on developing and least developed countries”;
• the promotion of greater discussion in the WTO on how market restrictions arising from voluntary environmental standards can be addressed.

The paper suggests that if these sorts of challenge are not effectively taken up, then eco-labelling may prove “coercive for many poor, small and vulnerable countries”.