space GEN Discussion Paper on Enhanced Co-operation (April 1999)

space 1.0spaceIntroduction:

space The popularity of eco-labelling is growing world-wide as a market based method to promote pollution prevention and sustainability. The motivating force behind the development of most eco-labelling programs has been environmental improvement at the domestic level. As a result, international trade impacts were previously seldom considered by most programs. However, with the proliferation of interest in eco-labelling, a series of questions and concerns about the potential trade impacts of these programs has been raised by certain industry sectors and also in a number of international organizations. Because eco-labelling is normally implemented in a way that reflects national values and eco-system sensitivities, full international standardization is not likely to occur.

Paradoxically, eco-labelling is also beginning to be viewed as a means to promote exports, particularly to those countries where consumers are making environmental choices in their purchasing decisions. This does not change the environmental benefits that could result, but rather whether it is the domestic or foreign consumer that creates the market stimulation for environmental improvement.

The purpose of this paper is:

to provide background on the potential trade issues of concern to eco-labelling;
to discuss the importance of enhanced cooperation between members of the Global Eco-Labelling Network (GEN); and
to outline how this cooperation can be implemented for optimum value while maintaining the core values of each program.

space 2.0spaceTrade Issues:

space A measure is considered to be a barrier to international trade when it disadvantages or restricts the access of foreign products to domestic markets. A number of different, but related issues of concern have been identified in regard to eco-labelling:

Access to the Label:
Whether there is equal access for domestic and foreign companies to carry the eco-label.

Program Transparency:
Whether program development is open and transparent to both domestic and foreign stakeholders (interested parties). This includes foreign participation in any criteria development and review process, and foreign input to the related public consultations.

PPM Requirements:
Criteria or requirements that relate to the manufacturing process but which have no impact at the product use or disposal stages are referred to as requirements arising from Non Product Related Production & Process Methods (NPRPPMs). In an environmental context, Non Product Related PPMs normally refer to situations where the environmental damage caused by the PPM is not transmitted by the product itself. In the WTO context, NPRPPM requirements present a fundamental challenge to the basic GATT-WTO concept of Alike product@ (ie product designed for same purpose).

space While there is general agreement that these are the central issues in the eco-labelling and trade context, elements of solutions have only been discussed. The challenge is to put these elements together and implement them in a way that is practical and can be broadly accepted. Not only will this ensure that unnecessary barriers to trade are avoided but it will serve to promote eco-labelling programs both at the domestic and international level.

space 3.0spaceImplementation Considerations

space The concepts of Enhanced Cooperation, Mutual Recognition and Equivalence play an important role in dealing with the trade issues and also serve as an opportunity to expand eco-labelling world-wide. However, before designing any system or approach, it is important that each country have the flexibility to design and operate programs that meet national needs. In designing and implementing co-operation systems eco-labelling, there are a number of issues that need to be recognized:

program credibility must be supported;
consumer values (cultural, environmental and societal) and eco-system sensitivities must be respected;
unnecessary trade restrictive effects should be avoided;
simplicity of design and implementation must be sought. A multilateral system will require a certain level of negotiation. Developing a series of bilateral arrangements would provide a practical starting point. The experience gained and the structures developed would be invaluable in the development of a multilateral system.

space Generally speaking, mutual recognition relies upon confidence and trust between programs, can be based on the concepts of harmonization or equivalency, and may apply to: testing and verification, conformity assessment, administrative procedures and environmental criteria. Enhanced co-operation should take these factors into account and apply them where possible, while recognizing that full harmonization may not be achievable in every situation, particularly in regard to criteria development.

space 4.0spaceEnhanced Cooperation for Eco-Labelling

space The following four step approach to Mutual Recognition has been adopted by the Global Eco-Labelling Network (GEN) at its 1997 annual meeting:
1. Co-operation and interchange of information, including policy objectives;
2. Mutual confidence is established on the basis of the GEN Code of Good Practice. This Code takes into account, among other things, relevant aspects of ISO 14024 and ISO 9001 and replaces the earlier Rules of GEN Membership;
3. Mutual recognition of testing and verification is established;
4. Analysis of environmental criteria leading to mutual recognition.

space The creation of the GEN itself and its various mechanisms already play a role in information exchange (Step 1). The approach requires a set of guiding principles (Step 2), the development of a system of equivalency and mutual recognition (Steps 3 & 4) and an appropriate means for implementation. However, it should be recognized that full equivalence or harmonization of criteria will not always be possible or desirable, and that a system of enhanced co-operation may not always be able to include the fourth step. Nonetheless, most of the elements of this approach are not new and can be found in the multilateral and bilateral work already underway in various fora and on a variety of subject matters.

4.1spaceCo-operation and Interchange of Information

space The first step of any co-operative relationship, be it multilateral or bilateral, is the exchange of basic information on the operation of the programs. This should include policy objectives, existing product criteria, product selection and criteria development methodologies and marketing strategies. In order to proceed beyond this first step, there needs to be a level of comfort and compatibility between the programs involved.

4.2spaceMutual Confidence

space The second step, establishing mutual confidence, is a prerequisite for implementing a bilateral or multilateral Enhanced Co-operation Agreement. In order for any program to accept the results of another program, be it verification, testing or environmental criteria, some common standards of behaviour need to be in place. The GEN has adopted ISO 14024 as a ACode of Good Practice" to guide program development, operation and management. In many ways, this builds upon the earlier membership requirements drafted in Washington at the GEN founding meeting in 1994.

The Code defines the principles for how responsible eco-labelling programs should operate while respecting the need for individual program flexibility, criteria and national or regional environmental values and priorities.

Programs must be able to demonstrate compliance with the GEN Code of Good Practice in order to consider participation in Mutual Recognition with other programs. This compliance will be self declared, but will be evaluated by potential Enhanced Co-operation partners after the exchange of information stage Step 1) has been satisfied. In essence, programs will need to be comfortable and confident that their credibility will not be damaged by entering into any co-operative relationships with other eco-labelling programs.

4.3spaceMutual Recognition of Testing and Verification

space Once the first two stages have resulted in mutual confidence between programs, the important step of mutual recognition of testing, assessment and verification can be established. Normally, this means that if a product meets an importing country's eco-labelling requirements and has been verified by an exporting country's eco-labelling program as meeting those requirements, further verification would not be required and the related costs avoided. This approach applies whether or not the exporting country's environmental criteria are similar to the importing country's program requirements. This could provide a substantial economic incentive for the manufacturer or distributor to get such a product certified.

4.4spaceAnalysis of Environmental Criteria

space The fourth step in the process is the analysis of participating country programs' environmental criteria. There are two types of criteria that merit further discussion:
space those that relate to the product=s use and disposal; and
those that relate to the product=s manufacture, but whose impacts are not transferred at the use or disposal stages of the product=s life cycle. These were defined earlier as Non Product Related PPM=s

space While it is unlikely that participating programs will accept products which meet different product related environmental requirements as equivalent, there is an opportunity to treat the PPM question in a different manner.

space Dealing with PPMs in any ecolabelling co-operation agreement poses a number of challenges. The system must be flexible in order to deal with different products, values and marketplaces. It should also allow for environmental priorities to differ from program to program and rely on equivalency of environmental requirements where it can be evaluated on a case by case basis and be acceptable from the perspective of program credibility.

space The dictionary defines equivalent as:
space Aequal in force, amount or value@,
Alike in significance or import@ and
Avirtually identical in effect or function@.

space For the purposes of this document and process, two definitions are used:
(i) equality of measure (ie equal in force, amount or value) and
(ii) equality of result (like in significance, import, effect or function).

space Equality of measure can be interpreted to mean absolutely the same (equal). For the GEN approach to Mutual Recognition, this is the approach generally required for environmental criteria related to a product=s use and disposal.

space Equality of result can be interpreted a number of ways:
X results derived from measurement methods of the same parameter could be considered equivalent because the test methods correlate well. For example biodegradability could be measured by the Sturm test or the OECD test;
X different levels of the same parameter that have similar environmental impact. For example, different levels of acid deposition in different areas (eco-systems) could have the same effect depending on the buffering capacity of the receiving environment;
X different parameters could have similar environmental impacts. For example, AOx as a measure of the effects of chlorine bleaching in paper production and actual measurement of eco-system impacts could be deemed equivalent;
X different parameters with different environmental impacts but similar in significance. For example the effect of air quality and water quality in different countries will be different but may be deemed equivalent in significance.

space For the GEN System of Mutual Recognition, only the first interpretation of equality of result should be used in application to product related requirements (ie same parameters, different tests which correlate well). However, all of the interpretations of equality of result could be used in regard to the evaluation of equivalency of non product related PPM=s

space 5.0spaceMaking Enhanced Co-operation Work

space The GEN System of Mutual Recognition was designed to operate on an Aas needed@ and Aproduct by product@ basis. The application of this system should involve a process that is applied when exporters (or importers) want to have foreign products licensed by an eco-labelling program. Such a system should take into account situations where either one or both (exporting and importing) countries have eco-labelling programs and be designed to allow for the application of equivalency and mutual recognition in either case.

Three key points in any co-operation arrangement are:
(a) the determination of equivalency of PPM requirements; and,
(b) the establishment of mutual respect and confidence in the situation where two eco-labelling programs are in place.
(c) the receiving country program retaining authority over related decisions.

space For a product made in a foreign country whose manufacturer or distributor is seeking an eco-label from an importing country eco-labelling program, the decision making process could be as follows:

space can the manufacturer of the product in question demonstrate compliance with local environmental, health and safety laws and regulations (including legal requirements at all relevant levels of government?

space does the exported product meet the requirements (related to the product=s use and disposal) of the eco-labelling program in the importing country?

space does the product meet the non product related requirements of the importing country eco-labelling program? If not, can the product=s PPM performance be deemed to be equivalent to the requirements of the eco-labelling program?

space do both importing and exporting countries have eco-labelling schemes? If mutual confidence has been established do both programs have criteria for the product category in question and is it eco-labelled by the exporting country program?

space The answers to these questions lead to four possible outcomes.

[1] an eco-label cannot be awarded;

[2] an eco-label could be awarded, but the product must meet all of the program=s requirements (ie no equivalency);

[3] verification of importing country program requirements can be done by the exporting country program;

[4] an eco-label is awarded on basis of mutual recognition.

space The following criteria are included in this system:

space compliance by eco-labelling programs with the agreed principles and practices would provide the necessary confidence and be the basis for mutual recognition;

space where similar parameters are measured using different techniques, these different test methods are evaluated to determine whether some correlation exists upon which to base equivalency;

space where PPM requirements are different between countries, an expert panel could be formed to assess relative environmental values. While such a panel would normally be comprised of national experts, the possibility could exist for appropriate foreign experts to also participate;

space where only the receiving country has an eco-labelling program, and the product meets different PPM requirement(s) and the PPM requirement(s) fall(s) into one of the categories above, an expert panel could be used to evaluate the possibility of accepting equivalence.

space The modalities of setting up and operating such an expert panel should ensure that the views of both exporting and importing countries are represented. While each country program will have its own Terms of Reference for such an Experts Panel, the terms should include the following:

space membership should include environmental, consumer, scientific and industry representation;

space members, and their constituencies, should not have any conflict of interest with the products being reviewed;

space an expert panel meeting can be convened by the eco-labelling program directly or upon request of the manufacturer or distributor of an imported product;

space the expert panel should be provided, in advance, with sufficient information on the requirements of the receiving eco-labelling program, the environmental performance of the product in question (including it=s manufacture), test method correlations, relative environmental leadership in the country of manufacture, and differences in environmental priorities and values;

space the expert panel will make recommendations on accepting or rejecting equivalence and may identify conditions which must be met before equivalence can be accepted;

space the expert panel will only review an issue once in order that equivalence applications can be dealt with in a timely fashion.

space 5.0spaceSummary

space In the fullness of time, the GEN may wish to develop a general agreement for a multilateral System of Enhanced Co-operation. This system could be automatically employed by eco-labelling programs when they join the GEN. However, in the short term, this concept will be applied only on a bilateral basis by those programs wishing to pursue enhanced co-operation. Several eco-labelling Programs have already developed bilateral pilot agreements and other programs have also been encouraged to get engaged.