eco-labels and international trade: problems and solutions · eco-labels and international trade:...

Eco-labels and International Trade:Problems and Solutions

Richard BONSI, A. L. HAMMETT and Bob SMITH1

Eco-labeling is one way to assure consumers of the environmental suitability of

products they purchase. However, several arguments have evolved to show that the use

of eco-labels poses barriers to international trade. This exploratory study seeks to

determine whether or not the use of eco-labels is a barrier to international trade in

reference to the World Trade Organization (WTO) and International Standards

Organization (ISO) principles. Product related production processes and methods

(PPMs) and non-product related production processes and methods (npr-PPMs) have

been a major source of disagreement among researchers. Our study examined the ISO

criteria for eco-labeling that demand that life-cycle assessment (LCA) including both

PPMs and npr-PPMs be satisfied. One of the major problems uncovered is the

difficulty in identifying corresponding environmental variables for LCA requirements

since environmental conditions vary among countries. We provide some

recommendations and conclude that eco-labeling is not intended to be a barrier to

international trade provided that it is not advocated under the pretext of protectionism.

I. INTRODUCTION

Increasing problems of water, air and soil pollution have caused societies to

demand environmentally benign and high quality products. Producers are also

responding positively to consumer demands because such response presumably paves

the way for them to penetrate the market. International trade makes it possible for

countries with abundant resources (lower opportunity cost and higher comparative

advantage) to extract, process, and export such goods while importing goods that are

locally scarce. International trade also encourages economies of scale, where countries

specialize in producing fewer goods on a larger scale, thereby reducing cost (Krugman

and Obstfeld, 1997).

1 Richard Bonsi is a PhD student in the Department of Wood Science and Forest Products in the College ofNatural Resources at Virginia Tech. He holds an MBA degree from the Freiberg University of Mining andTechnology, Germany, in International Management of Resources and Environment. His research interestsinclude marketing, eco-labeling, international trade and strategic management.

Dr A. L. Hammett is Professor in the Department of Wood Science and Forest Products in the College ofNatural Resources at Virginia Tech. His research focus includes international trade, certified forest products,marketing, forest-based economic development and forest products marketing.

Dr Bob Smith is Professor in the Department of Wood Science and Forest Products in the College of NaturalResources at Virginia Tech. His research focus includes marketing, eco-labeling and certified forest products.

Journal of World Trade 42(3): 407±432, 2008.# 2008 Kluwer Law International. Printed in The Netherlands.

According to the United Nations Conference on Trade and Development

(UNCTAD) (2004), apart from 2001, the trends in exports and imports of developed,

developing and transition economies, have been increasing since 1990 at an average rate

of 6 percent (UNCTAD, 2004). Hanley et al. (2001) assert that if the average annual

growth rate in trade stays at 6 percent, world trade would double in 11 years. This

means that there will be more output of products as a result of the use of much more

input materials, thereby increasing global pollution, as the law of thermodynamics states

(Hanley et al., 2001). One example of such phenomenon is the pollution caused during

transportation of goods from one location to another in international trade. Folmer and

Gabel (2000) assert that, ``environmental problems are international because of trans-

boundary pollution or global pollution such as acid rain or climate change'' (Folmer and

Gabel, 2000). A concerted effort to enhance environmental protection has led to the

formulation of various environmental laws and conventions, and setting of standards,

for example the United Nations Convention on International Trade in Endangered

Species of Wild Fauna and Flora (CITES) (Hanley et al., 2001; CITES, 2007). Others

are the Montreal Protocol for phasing out the use of Chlorofluorocarbons (CFCs)

(Spencer, 2000), and ban imports of products containing CFCs by 1993 (Hanley et al.,

2001), and the Basel Convention on the Control of Trans-boundary Movements of

Hazardous Wastes and their Disposal, which restricts cross-border dumping of

hazardous wastes (Hanley et al., 2001).

Environmental degradation in the form of air and water pollution, overflowing

landfills and energy waste, has compelled consumers to make purchase decisions to

force companies to address impacts that their activities have on the environment

(Bagozzi et al., 1998). Increasingly, more customers would rather buy products that

have been produced in an environmentally benign atmosphere, whilst investors would

prefer to invest in companies that demonstrate environmental responsibility (Folmer

and Gabel, 2000).

As the acceptance of a company by its workforce, local residents, politicians,

environmentalists and the general public, depends not only on its economic

achievements but also more and more on its ecological responsibility (Folmer and

Gabel, 2000), adoption of environmental management systems by companies is

inevitable. So, satisfying the needs of all stakeholders and, for that matter, the

companies themselves would mean making headway towards sustainable business

development and environmental management. One way to achieve these needs is the

use of eco-labels. It is laudable that environmental consciousness is spreading fast. The

enactment of laws, setting of standards (needing voluntary and compulsory

compliance), and their implementation are equally praiseworthy. However, the

enigma that may be difficult to decipher is whether the use of eco-labels, an

environmental tool that informs consumers about the environmental suitability of

products, does not affect international trade. There have been several arguments about

whether the use of eco-labels affects international trade. The purpose of this study is to

determine whether or not the use of eco-labels is a barrier to international trade in

408 JOURNAL OF WORLD TRADE

reference to the WTO and ISO principles. To begin this effort, we review relevant

literature on eco-labeling and problems associated with eco-labels and international

trade in the following sections.

II. ECO-LABELING

This section defines and describes eco-labels and environmental labeling in

general. It also gives some examples of eco-labels and some notes about their

significance. The ISO 14020 series and the importance of LCA in eco-labeling are also

discussed.

A. DEFINITION AND DESCRIPTION OF ECO-LABELING

The efforts to inform consumers about the environmental friendliness of a product

have led to the creation and use of eco-labels, which is a relatively new trend (Potts and

Haward, 2007). The Global Eco-labeling Network (GEN), defines an eco-label as ``a

label which identifies overall environmental preference of a product (i.e., good or

service) within a product category based on life cycle considerations'' (GEN, 2004). In

this regard, products with eco-labels are expected to pose no, or an acceptable level of,

damage to the environment through their production, distribution, use or disposal

whereas similar products without eco-labels may cause unacceptable damage to the

environment (Anderson and Hansen, undated).

There are numerous benefits that are enjoyed through eco-labeling. Some of these

include easy identification of environmentally friendly products, protection and safety

of people, environmental impacts control, avoidance of market failure through quality

assurance, reduction in evaluation and comparison costs by consumers, and easiness of

monitoring. Others include continuous improvement, sustainable production and

consumption, a form of differentiation (Carter and Merry, 1998; Amacher et al., 2004),

promotion of certification, alleviation from expensive regulation controls, achievement

of higher economic incentives and attainment of competitive advantage (Teubner et al.,

1994; Folmer and Gabel, 2000; Cumbo and Smith, 2001; Wessells et al., 2001; Case,

2004; Goss, 2004). According to the United Nations Environment Program (UNEP)

eco-labels, unlike government laws, are voluntary tools that provide useful information

to help consumers make useful decisions in buying specific products (UNEP/IISD,

2000).

B. THE ISO 14020 FAMILY

The ISO 14000 series addresses various environmental issues and specifies

acceptable standards that help to abate environmental pollution. Most important to

consider here is the ISO 14020 family, which comprises a group of standards, set by the

International Standards Organization, to specifically govern environmental labeling

ECO-LABELS AND INTERNATIONAL TRADE 409

(ISO 14020, 2000). The principles that the ISO 14020 operates on include, accuracy

assurance, avoidance of unnecessary trade barriers, use of scientific methodology,

accessibility of adopted methodology, open and participatory consultation with interested

parties, life-cycle approach, allowance for innovation, posing of minimal administrative

burden, and provision of information on products (ISO 14020, 2000; GEN, 2004). The

ISO 14020 family includes three labeling schemes as explained below.

1. Type I Environmental LabelingÐEco-labelling (ISO 14024)

ISO 14024 contains the guiding principles and procedures for Type I

environmental labeling (ISO 14024, 1999; ISO 14020, 2000). It presents rules for a

voluntary third-party certification system, where it fulfills certain set up criteria, such as

scientific methods that cover the whole product life. This leads to the application of life

cycle analyses to ascertain the environmental impacts of the product (ISO 14024, 1999;

Folmer and Gabel, 2000). Applying life cycle assessment in this case means compiling

and evaluating the inputs, outputs and the potential environmental impacts of the

product system throughout its life cycle (ISO 14040, 1997; Taylor, 2002).

It is worth noting that, as development and definition of product criteria are done

through the third-party certification process, transparency and credibility are ensured.

Because it upholds the use of multi-criteria third-party certification, the efforts that

producers would have to put in to convince consumers about the environmental

friendliness of their products are reduced (Jensen, 2000). Type I environmental labeling

is the only labeling program that is compelled to employ the services of an eco-labeling

body.2 Therefore it is only Type I labels that qualify to be called eco-labels (ISO 14024,

1999; GEN, 2004).

2. Type II Environmental Labeling (ISO 14021)

The Type II environmental labeling scheme is supported by ISO 14021. It is a self-

declaration labeling type and environmental claim system where manufacturers,

importers, distributors, retailers or other stakeholders make direct claim about the

environmental friendliness of their products without third-party certification (ISO

14021, 1999; Folmer and Gabel, 2000). ISO 14021 specifies the requirements for self-

declared environmental claims, including symbols, regarding products. It also describes

selected terms commonly used in environmental claims and gives qualifications for

their use. In addition, the standard contains general evaluation and verification

methodology for self-declared environmental claims and specific evaluation and

verification methods (Jensen, 2000). Self-declared environmental claims may be in the

2 Third party body and its agents, which conducts Type I environmental labeling program (ISO 14024,1999).


form of statements, symbols or graphics on product package labels or in other forms, for

example product literature, technical bulletins, advertising, telemarketing and the

Internet. However, the system does not use predetermined and accepted criteria for

reference (Goss, 2004), and normally covers only single attributes where it defines

terms such as ``no use of ozone depletion substances'', ``recycled material'', ``energy

efficient'', ``biodegradable'', ``designed for disassembly'' or ``reduced resource use'' (ISO

14021, 1999; Folmer and Gabel, 2000).

3. Type III Environmental Declaration (ISO 14025)

According to the Business and Sustainable Development Global Guide

(BSDGLOBAL) and ISO, the ISO 14025 provides guidance on technical,

formatting and administrative issues for Type III environmental declaration

(BSDGLOBAL, 2002; ISO 14025, 2006). Type III environmental declaration

provides quantified environmental data based on independent verification using

preset indices or predetermined parameters. In this sense, a third-party certification

agency or an independent body uses a number of environmental performance indicators

(EPI), including energy consumption, air emissions, water emissions, and others, to

obtain an environmental score, which serves as the paradigm for each product group. It

is assumed that such paradigms will help consumers to compare different goods and

then purchase the one with the best score.

There is, however, skepticism as to whether consumers have much time and

discerning ability to undertake all these somewhat difficult tasks before purchasing an

item (Goss, 2004; ISO 14025, 2006). In essence, Type III labels provide a list of impacts

a product is likely to pose to the environment throughout its life cycle. They are similar

to nutrition labels that give information about the fat, sugar and vitamin content of

food. Essentially, Type III environmental declarations are most appropriate for use in

business-to-business communication although they may be useful in business-to-

consumer communication too (ISO 14025, 2006).

C. SOME EXAMPLES OF ECO-LABELS

Several eco-labels exist; some examples are the EU flower (Goss, 2004), the

German Blue Angel (Cateora, 1996), the Nordic Swan, and the European eco-textile.

An EU eco-label (see Figure 1) on a mattress is an indication that there is a reduced risk

of allergic reactions to users, that water and air pollution during manufacturing is

limited, there is a reduction in residues of dangerous substances that may affect health

and the environment, ozone-depleting substances are absent and the product is

guaranteed to last as long as conventional mattresses (EUROPA, 2004).

A display of the German Blue Angel eco-label on products such as washing

machines demonstrates their suitability in the consumption of energy, water and

detergents. Products bearing the Blue Angel eco-label are therefore considered more


FIGURE 1: THE EUROPEAN UNION ECO-LABEL (THE EU FLOWER) AND THE NORDIC SWAN

Source: EUROPA, 2004, see <www.svanen.nu/Eng>.

environmentally friendly than products without such insignia (Markovich and

Reinhardt, 1995; Brassington and Pettitt, 2000). The Nordic Swan, which covers

about 60 product groups, is pictured in Figure 1.

There are other national eco-labeling systems within the EU that cover various

product groups. Examples of some of the recognized ones include Empfohlen vom

IBR, Umweltbaum of Germany, Neckermann UmweltpraÈdikat (Eco Seal) of

Germany, Bra MiljoÈval (Good Environmental Choice) of Sweden, Stiftung

Warentest, and the Milieukeur Label of the Netherlands (Goss, 2004).

III. PROBLEMS WITH ECO-LABELING AND INTERNATIONAL TRADE

The WTO permits national governments to formulate and apply environmental

policy instruments that they deem necessary with the condition that these do not

become encumbrances to trade. This means that environmental policy instruments

should not discriminate between domestic and foreign goods of the same quality

(Siebert, 1998). The preamble/chapeau of Article XX of the TBT Agreement of the

WTO or the General Agreement on Tariffs and Trade (GATT) states that ``subject to

the requirement that such measures are not applied in a manner which would

constitute a means of arbitrary or unjustifiable discrimination between countries where

the same conditions prevail, or a disguised restriction on international trade, nothing in

the GATT/WTO TBT Agreement shall be construed to prevent the adoption or

enforcement by any contracting party of measures:

(b) necessary to protect human, animal or plant life or health;

(d) necessary to secure compliance with laws or regulations which are not

inconsistent with the provisions of this Agreement, including those relating to

customs enforcement, the enforcement of monopolies operated under

paragraph 4 of Article II and Article XVII, the protection of patents, trade

marks and copyrights, and the prevention of deceptive practices.


(g) relating to the conservation of exhaustible natural resources if such measures

are made effective in conjunction with restrictions on domestic production or

consumption'' (GATT, 1994).

However, enforcing environmental policy in trade may be restricted. For example,

the non-discriminatory principle means that goods that have been produced in an

environmentally damaging way could also enter the market which does not give

incentives to participants who have produced in an environmentally benign

atmosphere, using more expensive production methods (Folmer and Gabel, 2000).

Greaker (2006) contends that demands for eco-labeling are suspected to be

protectionist actions by some groups while others think eco-labeling would increase

costs of international trade (Melser and Robertson, 2005). Other problems we have

identified that might pose barriers to international trade with the use of eco-labels

include technical barriers, process and production methods, certification costs, low

credibility, chain of custody requirements, and problems faced by developing countries.

We expatiate on these in the next section.

A. TECHNICAL BARRIERS TO TRADE (TBT) OF THE GATT

Technical regulations and standards define the properties a product should possess,

for example, its size, shape, design, functions and performance, or way of labeling or

packaging before it is sold in the market (WTO, undated). Sometimes, these

characteristics are affected by the processing methods of the products, for example

making lumber from logs, so it is reasonable to develop technical regulations that must

be satisfied by these processes and production methods. The difference between a

standard and a technical regulation is that a technical regulation is mandatory and must

be obeyed whilst compliance with a standard is voluntary. This means an imported

good, which does not satisfy a domestic technical regulation, does not qualify for sale.

An imported good that does not meet the requirements of a standard is, however, not

prevented from entering the market, but domestic consumers who are standard

conscious may not patronize such goods (WTO, undated). However, a law may set

standards to achieve its purpose and once a standard is backed by a law or regulation

compliance with the standard is compulsory (WTO, undated).

The number of technical regulations and standards adopted by countries to ensure

that their environmental and quality goals are met has increased dramatically in recent

years (Ruddell and Stevens, 1998; WTO, undated). The adoption of technical

regulations and standards by countries is seen as costly in various ways. Without

international discipline, technical regulations and standards could likely be adopted and

applied solely to protect domestic industries. To ensure proper formulation,

interpretation and use of technical regulations and standards, and avoidance of

protectionism, the TBT Agreement or the Standards Code, which laid down the rules

for preparation, adoption and application of technical regulations, standards and


conformity assessment3 procedures was signed at the Uruguay Round (WTO,

undated).

The objectives of the TBT Agreement are to protect human safety or health,

protect animal and plant life or health, protect the environment, prevent deceptive

practices, and ensure quality, technical harmonization and trade facilitation. The TBT

Agreement respects standards and regulations of all countries provided they stand to

protect human, animal or plant life or health and not as a pretext to promote

protectionism. The number of technical regulations and standards has grown rapidly

(GATT, 1994).

Some problems have arisen between States regarding eco-labeling and

international trade. For example, the United States placed a ban on shrimp and

shrimp products from exporting nations not certified by US authorities. The United

States wanted exporting countries to have their shrimp and shrimp products certified by

the US authorities to prove that they used harvesting methods not leading to incidental

killing of sea turtles above a certain level (GATT, 1994).

In the forest products sector, Austria initiated a move in 1992 that was going to

require labeling of all imported tropical timber and timber products but was criticized

by some countries and later averted (Heissenbuttel et al., 1995; Markovich and

Reinhardt, 1995). In a similar direction in 1994, Greenpeace campaigned against

imports of British Columbia pulp into the UK with the claim that the pulp came from

poorly managed forests (Markovich and Reinhardt, 1995). A related scenario is the case

with Germany and the Netherlands in the early 1990s, which advocated against tropical

timber as not coming from sustainably managed sources (Wille, 1991). These actions

could be serious barriers to international trade.

In addressing the case with shrimp imports to the United States, a Panel was set to

settle the case and the Panel concluded that the case was not justifiable under GATT

TBT Agreement Article XX, because the Article did not state ``measures conditioning

access to its market for a given product upon the adoption by the exporting members of

certain policies''. Without examining the import ban on the basis of Articles XX(b) and

XX(g), the Panel concluded that the measure of the United States was not justified

under the terms of the chapeau of the Article (GATT, 1994). The Appellate Body,4

however, after assessing the consistency of the demand of the United States with the

GATT, saw the judgment of the Panel as a wrong interpretation of the scope of GATT

Article XX. In contrast, the Appellate Body judged that exporters could have

certification if they could prove that their shrimp or shrimp products were being caught

using methods, which did not engender adventitious killing of turtles beyond a certain

3 Conformity assessment procedures are technical proceduresÐsuch as testing, verification, inspection andcertification, which confirm that products fulfill the requirements laid down in regulations and standards.

4 A standing body of seven persons that hears appeals from reports issued by panels in disputes brought byWTO Members. The Appellate Body can uphold, modify or reverse the legal findings and conclusions of a panel,and Appellate Body Reports, once adopted by the Dispute Settlement Body (DSB) must be accepted by the partiesto the dispute.


level. Also, the situation where importers may demand that exporters comply with, or

adopt certain policies prevailing in domestic markets to ensure conditioning access to

the domestic market may, to some extent, be necessary to meet the aims of the

exceptions (a) to (j) of Article XX.

The GATT recognizes domestic policies embodied in the measures necessary to

enforce these goals as important and legitimate. The Appellate Body further said that if

importing countries demand that exporters comply with, or adopt certain policies,

which of course would promote goals such as health protection and resource

conservation, such demands should not necessarily be assumed as out of the scope of

Article XX; such an interpretation of the Article would render its purpose null and void

(GATT, 1994). Besides, the Appellate Body described the chapeau of Article XX as

one that demands balance of rights and duties among States. This means there should

be a balance between the rights of a Member to adopt a measure in relation with Article

XX. It is also the duty of that Member to respect the treaty rights of other Members to

maintain equilibrium between rights of the Members involved and to avoid distortion

of rights among the Members and their obligations. It is a difficult task interpreting the

chapeau because of the broad nature of the standards inherent in it. However, a two-tier

(the chapeau and the provision) consideration of the Article with the specific

circumstances would yield fair judgments (GATT, 1994).

According to the WTO, its Members have autonomy to form their own policies

including those related to the environment and international trade. The WTO has

nothing against the environmental objectives and legislation of its Members provided

they respect the General Agreement and other Agreements (GATT, 1994). Despite the

likelihood that some countries may capitalize on GATT TBT Agreement Article XX

to indulge in protectionism, it is apparent from the judgments of the panels in the case

above and similar cases not mentioned here that the provisions of the Article might,

sometimes in contrast, be misinterpreted or evaded on the grounds that countries use

them to protect themselves on the pretext of environmental protection.

B. PROBLEMS WITH PROCESS OR PRODUCTION METHODS (PPMS)

The Organization of Economic Co-operation and Development (OECD), defines

process or production methods (PPMs) as the ways in which a product is manufactured

(OECD, 1997). Two kinds of PPMs exist with regard to environmental impacts.

± When process or production methods (PPMs) used to manufacture a product

impart certain characteristics to the product, making it pollute the environ-

ment upon consumption or use, the process and production methods are

called product-related PPMs or incorporated PPMs. Disposal of the product

and recycling, for example, form part of incorporated PPMs, which affect both

domestic and exporting countries.

± Non-product-related process and production methods (npr-PPMs) or


unincorporated PPMs do not adulterate the final product but rather, they

themselves inflict direct negative impact on the environment; for instance,

natural resource harvest in the production phase. These pollutions are localized

in the precincts of the manufacturer and do not pose a trans-boundary problem

(OECD, 1997; Wessells et al., 2001; Manoj, 2004).

According to Hanley et al. (2001), given that product-related environmental

policies are non-discriminatory, that is, applying the principle of most-favoured-nation

(MFN),5 they do not contravene GATT rules. So if Germany, for example, expects all

cars to have catalytic converters and seatbelts, the same standards are imposable on

imported cars, and not more (Hanley et al., 2001). The advocacy that cotton be

pesticide free is an incorporated PPM requirement. An unincorporated PPM

requirement may be that cotton be grown without pesticides, not minding whether

traces of the pesticide are found in the final cotton or not. Other examples of npr-PPMs

are organic products, in whose production the use of chemical fertilizers, pesticides and

preservatives are prohibited even though these chemicals could be absent from the final

product. Also npr-PPMs based, is the requirement that furniture be obtained from

wood originating from sustainably managed forests.

As the definition of technical regulations and standards depict, and thus supported

by Manoj, npr-PPMs are not covered by the TBT Agreement and according to the

history of the TBT Agreement, coverage of npr-PPMs was not planned to be included

in the functions of the TBT Agreement (Manoj, 2004). However, the definition of

eco-labeling, which includes LCA, demands that both PPMs and npr-PPMs be

satisfied. Manoj contends that voluntary or mandatory requirements on the bases of

npr-PPMs are outside the scope of the TBT Agreement. However, his reference to a

submission by Switzerland to the WTO in 2001 shows that some people argue out that

npr-PPMs are incorporated in the definition of technical regulation and standard in the

TBT Agreement (ibid.).

Voluntary standards, as we know, have no legal force. This means they must not

be prescriptive. Based on this, Bennett argues that ISO 14020 which makes references

to PPMs in eco-label usage is prescriptive and discriminatory and hence a serious

barrier to trade (Bennett, 2000). This point may be challenged since standards are laid

down criteria, which give a product a certain status and anyone who decides to adopt

the standard even voluntarily is expected to follow the laid down criteria.

What is questionable is whether conformity of PPMs with product characteristics

has to be verified in the importing country or exporting country. It is obvious that this

can be done only in the importing country (Wessells et al., 2001). Nevertheless, the

FAO says that eco-labeling in the fisheries sector is likely to be invariably awarded based

on npr-PPMs, especially those associated with harvesting methods such as type of gear

used, impacts on the marine habitats, compliance with management system and health

5 Applying to both domestic and foreign goods equally.


of the stock of origin (ibid.). This supports the concept that eco-labeling demands

LCA, which includes PPMs and npr-PPMs.

C. PROBLEMS WITH CHAIN OF CUSTODY (COC) IN ECO-LABELING

The forestry sector has been chosen as a case for discussion in this section to

demonstrate the effects of COC. The supply chain of the wood industry from the forest

to the consumer is very long and may be unique for each product. It is difficult to get

consumers to trust a product claiming certification of a sustainably managed forest

status from this inordinately long process. So, to authenticate to consumers the integrity

of these claims, many forest certification schemes incorporate COC assessment in their

schemes.

So throughout the various stages of ownership, processing and transportation

between the certified forest and the final consumer, COC may involve tracking and

documenting the product (Hansen, 1997; Hansen and Heikki, 1999; Cumbo and

Smith, 2001; Brian, 2002). Some forest certification schemes demand independent

third-party certification of COC, and a product can only carry an eco-label if all

transfers of ownership from the forest to the consumer have COC certification

(Hansen, 1997; Kiekens, 2000). This means that an eco-labeled piece of furniture in a

retail shop must have had COC certification from the forest owner, the sawmill owner

and the secondary processor (Cumbo and Smith, 2001; Brian, 2002; Anderson and

Hansen, undated). The area of the world forest that is certified increased dramatically

from little more than 20 million hectares at the beginning of 2000 to about 150 million

hectares in January 2004 (Oliver, 2004).

However, all the certification schemes, for example the Forestry Stewardship

Council (FSC), the Sustainable Forestry Initiative (SFI), the Canadian Standard for

Sustainable Forest Management (CSA) and the Program for the Endorsement of Forest

Certification Schemes (PEFC) have special COC certification requirements and eco-

label usage, hence making their application very complex (Anderson and Hansen,

undated). Various obstacles to adoption of COC and eco-labeling have been observed.

Some examples include technical challenges, high costs, unwillingness of companies to

bear the costs of certification, imbalance between supply of labeled products and

demand, low demand for labeled wood products and the existence of more than one

certification body and their numerous and complex COC requirements (Vlosky and

Ozanne, 1998; Cumbo and Smith, 2001; Oliver, 2004). Forest certification is a

complex and costly process and most of the certification done so far in the tropics or

developing countries has been very small and successful only through public funding

(Kiekens, 2000; Oliver, 2004).

A study by Vlosky and Ozanne (1998) revealed that many US forest products

manufacturers are not willing to bear the costs of COC. Chain of custody may be

difficult for products such as paper and composite products that are obtained from

various sources (Kiekens, 2000; Rickenbach, Fletcher and Hansen, 2000). The length


of the certification process may also discourage domestic buyers from buying timber

from tropical and developing countries (Merry and Carter, 1997).

D. STANDARDS AS BARRIERS TO TRADE

A standard is defined as a:

``document approved by a recognized body, that provides, for common and repeated use, rules,guidelines or characteristics for products or related processes and production methods, withwhich compliance is not mandatory. It may also include or deal exclusively with terminology,symbols, packaging, marking or labeling requirements as they apply to a product, process orproduction method.'' (WTO, undated)

``Process standards specify the type of production process or emission reduction

equipment that polluting plants must install (e.g., a specific type of scrubber, pipe, water

purification device and so on)'' (Folmer and Gabel, 2000). ``Product standards define

the characteristics of potentially polluting products such as chemicals, detergents,

fertilizers, automobiles and fuels'' (ibid.). According to Case, each eco-labeling scheme

must have three main components to be fair: the validity of the standard used, the

process used to set the standard and the standard verification process (Case, 2004).

In countries where there are no government-endorsed multi-attribute eco-labels,

many private eco-labeling programs may spring up with variances in their standards. In

the United States, for example, lack of government supported eco-labeling programs has

led to a profusion of more than 40 US eco-labels (excluding all the food labels). The

number of eco-labels continues to increase as private companies, trade unions, and non-

governmental organizations create their own labeling programs and standard

requirements. Lack of harmony would definitely affect foreign importers (Case,

2004). The forest certification schemes have differences in their standards, which cause a

big problem in adoption. For instance, FSC has so complex a standard requirement that

stakeholders find it difficult to adopt (Oliver, 2004). In addition, self-certification with

random auditing, independent third-party certification and independent third-party

certification with on-site audits are different categories of standard setting and obligation

which may make international trade cumbersome since it is sometimes difficult to

determine which is best for economic gains and market penetration (Case, 2004).

Although ISO 14000 is applicable to all countries and contains good information

on the application of ISO 14001 for example, adoption of the standard is limited mainly

to developed countries. Only a little over 30 developing countries have eco-labeling

programs; this is woefully inadequate. A 2003 World Bank report on ``Standards and

Global Trade'' has admonished African governments on the need for them to adopt

international standards to be able to compete in the global market. The report says,

``some trade standards are set by international agreement, others by importing

countries, and still others by market demand'' (Saleson and Rios, 2003).

So, to be competitive in the global market, African firms have to upgrade their

facilities to meet global standards; for example, by investing in better processing,


cooling and storage facilities. Out of about 200 licensed fresh fruit exporters in Kenya,

only four companies dominate the export market because only they are able to adopt

high standards in infrastructure improvements and quality control. Similarly, in

Nigeria the government is trying to promote awareness among consumers and

producers on the importance of standards, international standards and new equipment

acquisition to enhance international trade (Saleson and Rios, 2003). Setting stringent

standards discourages exporters, except that customers want products of such

standards.

E. PROBLEMS WITH CREDIBILITY

Using environmental labels that lack credibility can negatively affect international

trade. Different eco-labels in one product category exist. These labels are invariably not

equal and do not have the same meaning (Potts and Haward, 2007). They are created

by different organizations for different purposes. Some of them have high credibility

whilst others have no meaning at all (Heissenbuttel et al., 1995; Kiekens, 2000; Case,

2004). Credibility of the certifying organization is important for consumers to be

convinced about the claims made by eco-labels (Heissenbuttel et al., 1995; Teisl et al.,2002). According to the International Center for Trade and Sustainable Development

(ICTSD), establishing the credibility of existing eco-labeling programs will prevent the

proliferation of mediocre programs or too demanding standards set by environmental

organizations, large corporations, and other bodies (ICTSD, 2000).

A publication by Freese and Schubert (2004) contends that genetically modified

(GM) foods and crops are not well tested and regulated before they get labeled.

According to the authors the picture that emerges from their study of US regulation of

GM foods is a ``rubber-stamp'' ``approval process'' designed to increase public

confidence in, but not ensure the safety of genetically engineered foods (Freese and

Schubert, 2004). Meanwhile, the United States is the world's largest exporter of GM

crops and accounts for almost two-thirds of all biotechnology crops such as GM soy

and GM corn planted globally. This demonstrates lack of trust in labeling schemes and

loss of credibility (Freese and Schubert, 2004) and could mean that the required life-

cycle assessment is not performed or not strictly adhered to.

F. CERTIFICATION AND LABELING COSTS

The extra cost an organization or a country incurs in environmental protection can

alter its comparative advantage. Stringent environmental standards could lead to

countries or organizations losing their comparative advantage in certain products and

no longer export such goods. If factors of production are mobile, countries with

stringent environmental policies could shift their production facilities to countries with

less demanding environmental policies. This could be detrimental if the effect is global

but probably beneficial if the effect is local and easier to correct (Hanley et al., 2001).


Compliance with different foreign technical regulations and standards would likely

lead to significant costs for producers and exporters in many areas. Some of these

include costs in translation of foreign regulations, hiring of technical experts to explain

foreign regulations, adjustment of production facilities to comply with the

requirements and the need to prove that the exported product meets the

requirements of foreign regulations (WTO, undated). For example, Samartex

Timber and Plywood Company, a leading timber firm in Ghana, has spent more

than US$ 100,000 to undergo chain of custody assessment and other certification

requirements but has not been able to reach labeling status yet (Eshun, 2007). The

abundance and diversity of certification schemes increase costs of certification and

lower the market value of individual labels (Oliver, 2004). There are both direct and

indirect costs associated with certification and they vary significantly (Rickenbach,

Fletcher and Hansen, 2000; Cumbo and Smith, 2001; Humphries, Vlosky and Carter,

2001). For example, an FSC field assessment or ISO audit can cost US$ 3,000±7,000

for a 200-acre parcel aside the indirect costs of certification (Rickenbach, Fletcher and

Hansen, 2000). Certification is a costly activity that can preclude some countries and

firms from having access to some markets (Kiekens, 2000).

Testing costs for PPM based requirements are very high. For example, the

technology needed for testing for genetically modified organisms (GMOs) in food

products is very costly, so markets demanding GMO-free eco-labels cannot be entered

easily by exporters who cannot afford such expensive testing facilities. ISO standards

setting procedures are also very expensive and time-consuming for delegates involved

in setting the standards. These constraints make it difficult for developing countries to

be largely represented in the standards setting process (UNEP/IISD, 2000; Runnalls,

undated). In addition, eco-labeling schemes which demand high standards in COC,

PPMs and LCA may require installations of new production facilities and other

equipment, as has occurred at Samartex Timber and Plywood Company in Ghana

(Eshun, 2007), which may increase costs (Wessells et al., 2001).

G. PROBLEMS FACED BY DEVELOPING COUNTRIES

Eco-labeling may be difficult for developing countries to adopt. Increased demand

in environmental standards would result in a shift in production to countries, which are

able to keep to those standards. This means developing countries, which are unable to

keep to these high environmental standards because of economic reasons, will lose

competitive advantage and subsequent loss of market access. Besides, higher production

means higher income and higher ability to respond to environmental protection

demands. This scenario is illustrated by the environmental Kuznets curve in Figure 2.

To support Kuznets' theory, Hanley et al. quotes Beckerman (1992) as follows. ``The

only way to attain a decent environment in most countries is to become rich'' (Hanley

et al., 2001). Simon Kuznets developed the Environmental Kuznets Curve (EKC)


FIGURE 2: ENVIRONMENTAL KUZNETS CURVE

Source: Hanley et al. (2001), p. 130.

theory, which is an inverted U-shaped relationship between income levels and the

equality of income distribution. The same kind of relationship has been found to exist

between income levels and environmental quality by the advocates of the EKC theory.

``The EKC theory states that as per capita incomes grow, environmental impacts rise,

hit a maximum and then decline'' (ibid.).

Y* represents the turning point of the curve. Before Y*, emissions are rising and

environmental quality is falling because of escalating consumption of resources, land

clearance and manufacturing. For incomes above Y*, damage to the environment drops

and environmental quality improves because of increasing incomes and environmental

consciousness, government regulations, technological advancements and changing

from manufacturing to services or high-tech industries (Hanley et al., 2001).

It is clear from the analogies above that eco-label usage, which demands various

procedures, criteria satisfaction, COC obligations, PPM obligations, LCA

application and others may be too costly for developing countries to afford and

hence may lose their comparative advantage to developed countries. This has already

shown up in the case where many African countries find it difficult to export

fisheries and fisheries products to Europe, the United States or Japan because of

stringent and expensive Sanitary and Phytosanitary (SPS) standards which cover

fisheries products based on PPMs (ICTSD, 2000). A survey conducted by the

Energy Research Institute, India, shows that a medium-sized firm in India would

need US$ 20,000±30,000 to be able to adopt some part of the ISO 14000 series

labeling certification (Manoj, 2004). Developing countries are very little involved in

trade with eco-labeled goods (ibid.).

Given the current rate of growth of imports and exports in developing countries

and their capital flows to other countries (UNCTAD, 2004), it is apparent that

increasing growth in demands by developed countries for eco-label usage would

markedly affect trade trends with developing countries. For example, Samartex Timber


and Plywood Company in Ghana, is currently under pressure from some of their

foreign buyers to get their products certified to ensure a continuous future loyal

relationship. Refusal of the company to respond to such demands could jeopardize its

position in the marketplace (Eshun, 2007). Developing countries have less financial

resources and inadequate technical expertise and hence are not able to adapt to

unceasingly changing rules and regulations (BourkeY and Leitch, 1998). Larger firms in

developed countries that are able to bear costs of certification, COC, LCA and other

related costs of eco-labeled and non-eco-labeled products are likely to overpower

smaller firms in developing countries (Wessells et al., 2001). Developing countries feel

that proliferation of private labeling schemes may not augur well for them because of

differences in standards. Proliferation of private schemes hinders participation and

monitoring, and increases costs (ICTSD, 2000).

Eco-labeling based on life-cycle assessment demands satisfaction of environmental

conditions that exist in both the importing country and the exporting country which

makes the whole eco-labeling process complex. If local industry determines which

products should bear labels, foreign countries may be discriminated against.

Furthermore, if exporters have to comply with conformity assessment procedures

and certification schemes of the importing countries, they may be discriminated against.

Developing countries have expressed dissatisfaction that they have not been involved in

the design of eco-labeling schemes and have the hope that their involvement would

foster fairness and harmony (Manoj, 2004).

According to the National Economic Development and Labor Council of South

Africa (NEDLAC), various OECD and UNCTAD studies have shown that no major

trade problems in eco-label usage have occurred but an increasing use of eco-labels,

particularly in the footwear, pulp and paper and textiles industry and others, could be a

difficult task for developing countries to adopt, and may pose a barrier to international

trade in the future. Other difficulties for developing countries are lack of access to

information on foreign labeling programs and the cost involved in hiring foreign

experts to elucidate on standards that may be enigmatic (NEDLAC, 2003).

IV. ADDRESSING BARRIERS TO ECO-LABELING AND INTERNATIONAL TRADE

The WTO has the responsibility of ensuring order in international trade. It is its

duty to address problems ensuing from eco-labeling and international trade. The

WTO, which plays an active role in dispute settlement between countries is

encouraged to address problems, such as disagreement of states on PPMs and npr-

PPMs, discrimination, and stringent standard procedures which are seen as

protectionist actions against other countries. This would lead to international trade

order and cooperation. The following discussions may be helpful in addressing some of

the problems that arise in international trade with the use of eco-labels.


A. SETTING INTERNATIONAL STANDARDS

The International Standards Organization (ISO) is the institution responsible for

setting and harmonizing standards. The ISO 14020 family is responsible for standards in

environmental labeling. These include ISOs 14021, 14024 and 14025 (ISO 14021, 1999;

ISO 14024, 1999; ISO 14020, 2000; Jensen, 2000; ISO 14025, 2006). Standards have to

be clearly defined, identifiable and regularly monitored to ensure order in international

trade. Private regulators must make sure that their standards do not deviate from the ISO

14020 requirements. Standards must be easy to understand and they must not have

changing meanings irrespective of who does the certification (Case, 2004).

To fulfill its functions, the ISO is encouraged to consider environmental,

technological, economic and political factors in its standards setting process (Folmer

and Gabel, 2000). However, since political, environmental and technological

conditions vary from country to country it may be difficult to operate solely on

international standards. The procedure for setting international standards could be

influenced by small or large organizations or environmental groups provided their

contributions are unbiased (Bennett, 2000; Oliver, 2004). Since eco-labeling has

already gained grounds and is going to be continued, it is advisable to seek

intergovernmental consent including the FAO, WTO, ISO and other recognized

institutions to develop international labeling criteria that are non-discriminatory

(ICTSD, 2000). States can help in promoting the use of international standards and

reduce barriers to trade if they ensure that the formulation processes of technical

regulations incorporate extant international standards or important parts of them

(Wessells et al., 2001; Cabarle and Dieterle, 2006).

B. RECOGNITION OF NATIONAL STANDARDS

It is important to recognize national standards and develop their equivalencies that

can be accepted bilaterally (NEDLAC, 2003). Harmonization of standards may be an

obstacle to the progress of developing countries. Developing countries do not support

the idea that environmental standards be the same in all countries (ICTSD, 2000). Of

course, it is true that all countries do not have the same environmental conditions. One

good example is the institution of the Ghana Forest Standard in collaboration with the

Forest Stewardship Council (FSC) and other stakeholders, which describes certified

forests as having been managed in a sustainable way (Eshun, 2007).

C. OVERCOMING PPM PROBLEMS

Process and production methods are very important in eco-labeling. Non-

product-related aspects of eco-labeling are also very important. The disagreement that

normally ensues among interest groups in eco-labeling and international trade comes

mainly from npr-PPMs. Some people have the notion that npr-PPMs are excluded


from the requirements for eco-labeling but from the definition of the term ``eco-

labeling'' which applies LCA, it is inferable that both product-related PPMs and npr-

PPMs criteria need to be satisfied. It is pertinent that all stakeholders revisit the

definition of eco-labeling and get a clearer meaning of it. However, it is obvious that

environmental conditions are not the same in all places so prerequisite to LCA, all the

environmental variables need to be defined and equivalents developed. It is possible to

have differences in variables used for LCA calculations and these differences may cause

problems if input and output variables are not well defined and interpreted. The WTO,

ISO, governments and other interested organizations need to work in consultation to

develop equitable variables and equivalences in eco-labeling procedures.

D. ADDRESSING CHAIN OF CUSTODY (COC) CONSTRAINTS

The Forest Stewardship Council (FSC), whose initial actions did not consider the

economic interests of forest stakeholders, has improved its scheme to encourage the

admission of more and smaller forestland owners. So, in 1999, it reduced the limit of

certified raw material in labeled solid and composite wood products from 100 percent

to 70 percent. Later in 2002, it developed group COC certification guidelines to enable

smaller firms to certify their forests and products (Oliver, 2004). The FSC is currently

helping Ghana to certify its forests based on local conditions and meeting international

standards at the same time (Eshun, 2007).

Recently, the Program for the Endorsement of Forest Certification schemes

(PEFC) has also developed group COC certification, which is seen as cost effective and

easily adoptable by small firms. Under the new COC scheme, certified wood can be

procured from different countries using different national certification schemes and

labeling programs with only one COC system. The certified material then bears the

logo of the PEFC. To meet WTO and ISO standards setting and acceptability

requirements, the new standard was formulated in consultation with the public and

other stakeholders. Third-party certification has also been incorporated in the PEFC

certification scheme. This is expected to bring fairness in certifying forests and labeling

forest products internationally (PEFC, 2004).

Because of financial constraints, forest and forest products certification in the

tropics (mostly developing countries) is being done in phases. The first phase includes

recognition of national standards and certification to the national laws. Other elements

of sustainable forest management will then be introduced in a gradual process until

applicants are ready for full certification. The phased or stepwise approach in

certification has begun and is advancing. The Malaysian Timber Certification Council

(MTCC) has pioneered such a move, and the African Timber Organization (ATO) is

also developing a Pan African Certification Scheme (PACS), which would be adopted

by African timber producers (Oliver, 2004).

Chain of custody assessment is expected to be easier and cheaper in the future

with growing information technology. For example, smart tags being used in other


production sectors to track goods and their components could be employed in assessing

COC. The tags have serial numbers, which can be read with the help of the Internet by

a sensor to determine their composition, origin and any other information that is

necessary. Adoption of this technology would markedly reduce costs incurred in COC

assessment (Oliver, 2004). Nevertheless, building bridges between the existing forest

certification schemes would enhance harmony, unity and progress.

E. CREDIBILITY

According to Folmer and Gabel, to ensure credibility of labeling, and to win the

trust of consumers the awarding agents must be reputably certified and accredited. This

means all the certification bodies such as the FSC, GMO testing bodies and the EU

eco-labeling programs must certify products which meet high environmental standards

and uphold efficient monitoring and sanction guidelines (Folmer and Gabel, 2000).

The certification schemes should meet well defined and established criteria set by

competent bodies (Folmer and Gabel, 2000), and the verification process should also be

based on the requirements of the standards (Case, 2004). Certification bodies should be

ready to make their financial stand, evaluation criteria and standard setting and

monitoring procedures overt to win the trust of consumers (BSDGLOBAL, 2002).

Government participation in eco-labeling schemes enhances the legality and

credibility of the schemes among stakeholders. It also allows public involvement in

setting new standards and adoption of international standards, which ensures

uniformity and credibility (BSDGLOBAL, 2002). This may be seen in the efforts

the EU is making to harmonize and unify labeling standards among its Member States

by introducing the EU flower to be the single label representative of all existing labels in

the EU (Goss, 2004). A single government recognized labeling program can help

reduce the increasing number of private eco-labels which have a lot of differences and

whose credibility may be questionable (Case, 2004). For Wessells et al., credibility

means that the results of the process are the same in similar situations and certifying

bodies remain independent of influences from manufacturers, no parties are sidelined in

developing the eco-labeling program, and full consultation of all stakeholders is

enforced to ensure transparency (Wessells et al., 2001).

F. ASSISTING DEVELOPING COUNTRIES

Assisting developing countries in various ways can be a major step towards global

adoption of eco-labeling. The WTO requires developed countries to assist developing

countries in developing technical regulations and standards (WTO, undated). It is

worth noting that some African fishing companies are working in a sustainable safe

environment and are therefore capitalizing on eco-labeling schemes to hit market

targets. Meanwhile, there is still much to be done. The World Wildlife Fund (WWF),

which is affiliated to the Marine Stewardship Council, has been involved in projects in


developing countries towards sustainable and cost-effective certification of fisheries

(ICTSD, 2000). The WWF is also working through the Global Forest and Trade

Network (GFTN) and in collaboration with the US Forest Service to provide training

and technical support in developing forest management plans to help developing

countries such as Ghana meet the goals of certification. Other international

organizations and non-governmental organizations are also actively involved in

helping developing countries meet certification goals (Eshun, 2007).

Developing countries also need a more lenient treatment considering their weak

financial stand (Wessells et al., 2001). They may need financial assistance to change

existing facilities to more efficient ones. It may also be helpful to explain standards to

them at lower costs. It is advisable to consult and involve developing countries in all

standard setting processes.

V. DISCUSSION

Eco-labeling is a very important environmental tool and market determinant.

It is very important to note that an eco-label is different from an ordinary

environmental label. Whereas eco-labels are awarded through third-party certification

and life-cycle assessment, environmental labels are awarded only through either of these

attributes or none of them. So, Type II environmental labeling, which is a self-declared

labeling (non-third-party certified) and not provided through LCA is simply,

environmental labeling. Type III environmental declaration applies LCA but does

not judge products; it only gives certain characteristics of the product, for example,

composition, and hence is also simply environmental labeling. There is the likelihood

that some people wrongly call all the three types of labels, eco-labels. If the scientific

basis of validation, avoidance of unnecessary barriers to trade, LCA application and

others are well adhered to, and an eco-label made for the products, one would get a

clear distinction between eco-labels and environmental labels.

From the definition of life-cycle assessment, it is clear that all the environmental

aspects of a product throughout all stages of its life are considered. This means that from

extraction through manufacturing, packaging, transportation, marketing and use to

waste management, recycling and final disposal the environmental impacts of the

product are not supposed to be negative. A product that meets this requirement in

addition to other requirements for eco-labeling qualifies to bear an eco-label. It is clear

that products that bear eco-labels have been made in such a way that during their

production there were acceptable levels of emission to the atmosphere, soil, human and

animal habitats and so on. In life-cycle assessment both product-related PPMs and npr-

PPMs are embedded. So as it stands, the use of eco-labels is not supposed to conflict

with the WTO principles.

It is obvious from the numerous benefits accrued from eco-labeling that its usage

needs to be continued. As mentioned earlier, the ultimate aim for eco-labeling is to

curb market failure arising from asymmetries of environmental quality information.


Increasing interest of consumers in environmental goods is an indication that demand

and supply can change according to their interest. In this regard, an eco-label must be

obtained genuinely and its implications well construed. Governments need to promote

eco-labeling by explaining its importance to the populace. This is even a cheaper way of

environmental safety and assurance than regulation controls which are more costly to

governments.

Looking at the myriad number of existing technical regulations, succumbing to

international discipline is necessary to reduce the number to fewer, affordable, but

efficient and internationally agreed upon ones. The TBT Agreement of the WTO or

the standards code ensures that international order is maintained through the

conformity assessment procedures. The TBT Agreement sets boundaries within

which countries should operate. It clearly declares and maintains order within the

international trade arena. What may pose a problem is the variation in the variables that

may be considered in carrying out the life-cycle assessment since all countries do not

have the same environmental conditions.

As the TBT principles propose, countries should mutually recognize standards of

their trade partners, compute equivalences for inputs of technical regulations, ensure

transparency, respect the code of good practice, ensure bilateral relationships and avoid

discrimination. However, given the large number of a variety of regulations and

standards, countries need to adopt recognized standards such as the ISO 14020 series

and ISO 14040. The differences and the numerous private labeling schemes create

difficulties in understanding the different labeling programs and standard requirements.

This could pose untenable problems to exporters who may sometimes be in a maze as

to which methods to apply. If each country is to have its own standard setting criteria a

product which is produced to be exported to ten countries, for example, would have to

meet the standard requirements for each of these ten countries. This may be impossible.

So the ISO standards, which are internationally required, would be the best to adopt.

Standards need to be simple, easily applicable and economically affordable.

Developing countries need to be more committed to ISO standards, take part in all the

consultative meetings and adopt ISO standards to make them competent in the global

market. Environmental organizations, trade associations, companies, governments and

other stakeholders need to work together in a team to develop more reliable labeling

programs. The less private labels there are, and the more government-supported labels

there are, the more the credibility. The more stakeholders adopt ISO standards, the

more the credibility, transparency and trust. Proliferation of eco-labels made through

different criteria is not likely to achieve expected results. Eco-labeling organizations

need to be accredited, or special accredited organizations should be the only authorities

to confer eco-labeling eligibility on applicants.

Cost of installations to meet new standards, cost of setting standards, meetings of

consultative groups and hiring technical experts are sometimes difficult to afford.

Nevertheless, without such actions, mediocre products will dominate the market.

There needs to be a balance between economic constraints and environmental


responsibility. If developing countries lag behind in improved environmental

responsibility, and production shifts from developed countries to developing

countries because of the existing lower environmental costs, the developing

countries will become havens of pollution, exacerbating the problem. It is advisable

that developing countries show more commitment to environmental responsibility and

clean production technology. On the other hand, if production shifts to developed

countries because of their ability to produce clean products, developing countries will

lose competitive advantage. This also further admonishes developing countries to

endeavor to adopt clean technologies to maintain a good position in the competitive

market, and explains why Samartex's forest certification initiatives are laudable.

Since eco-labeling is authenticated through LCA, the environmental conditions in

the exporting and importing countries need to be considered. The inventory and

extraction phase of LCA must consider the situation in the exporting country while the

impact phase must consider the situation in the importing country. This is quite

cumbersome and needs full consultation between the exporting and importing

countries.

VI. CONCLUSIONS

Eco-labeling is a very important tool that has many benefits including helping

consumers to determine the environmental status of products. In totality, eco-labeling

promotes sustainable management and development. The definition of eco-labels

according to ISO and WTO principles includes life-cycle assessment. This means that

both npr-PPMs and product related PPMs have to be satisfied. In this regard, it is

expected that COC, TBT, PPMs requirements and international standards pose no

problem to trade. However, for international trade, data is needed from both the

exporting and importing countries to be able to obtain accurate results for phases such

as inventory, extraction and impact in the LCA calculation process. Collection of data

from the countries involved and the whole LCA process may be complex and

expensive. There is the need for consultation and collaboration between the countries

involved, and WTO and ISO need to find ways of making the process simpler, feasible

and affordable. If the eco-labeling process is accurately followed, it is supposed to pose

no barrier to international trade.

It has been revealed that developing countries find the adoption of eco-labeling

difficult and costly. However, it is expected that countries trade in goods in which they

have comparative advantage and lower opportunity cost. So, advocates of eco-labeling

may trade more in such goods. Nevertheless, there is the possibility of non-participants

losing market access because of competition. This means that some barriers may exist.

Also, some countries would likely create stringent environmental requirements on the

pretext of environmental responsibility that might be barriers to international trade.

It is important that countries adopt international standards such as the ISOs 14020,

and 14040 to ensure uniformity in eco-labeling. Besides, other countries should respect


national standards and there should be negotiation if necessary. An example of this has

been seen in Ghana where the FSC is considering Ghana's standards in conjunction

with international standards to establish the Ghana Forests Standard of certification. It is

also important to assist developing countries technically as the WWF and other

organizations have initiated.

Finally, differences in environmental, political, and technological conditions in

countries are likely to have an impact on the implementation of international standards.

This means various countries need to be represented in ISO committees on

international standards setting. However, it may be difficult to operate solely on

international standards, so national regulations should be well examined and

equivalences developed in bilateral trade transactions.

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