STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Sustainability and Technical Barriers to Trade Environmental Standards as Technical Barrier to Trade? Axel Mangelsdorf BAM Federal Institute for Materials Research and Testing, Germany and Berlin Institute of Technology, Chair of Innovation Economics

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Agenda I.Introduction: Some trends in global trade. (1)Tariffs (2)Supply Chains (3)Standards (4)NTBs II.Environmental Standards and Trade: (1)What is the legal status? (2)What is the empirical evidence? III.Summary and Conclusion

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Introduction Trends in Global Trade (1): Unilateral reduction of tariffs in developing countries

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Introduction Trends in Global Trade (2): Emergence of Global Supply Chains Source: Baldwin (2012)

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Introduction Trends in Global Trade (2): Emergence of Global Supply Chains Source: Foundation for Economic Education (2012)

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Introduction Trends in Global Trade (3): Emergence of standards Source: ITC Standards Maps

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Introduction Trends in Global Trade (3): Emergence of standards Example: Growth of Sustainability Standards in Coffee by Volume ( ) Source: Giovannucci (2009)

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Introduction Trends in Global Trade (4): Increased use of non-tariff measures (NTMs)

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Introduction 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?

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Environmental Standards and Trade (1)Legal status of environmental standards in the multilateral framework Article XX GATT TBT Agreement: Technical Regulations and Standards SPS Agreement

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Environmental Standards and Trade (1)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.

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Environmental Standards and Trade (1)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 [..]

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Environmental Standards and Trade (1)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

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Environmental Standards and Trade (2)What is the empirical evidence? Empirical Papers i.Eco-labels ii.ISO iii.TBT and SPS notifications

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Environmental Standards and Trade (2)What is the empirical evidence? i.Eco-Labels

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Environmental Standards and Trade (2)What is the empirical evidence? i.Eco-Labels Audits the organizations Accreditation Bodies (AB) Certification Bodies International Accreditation Forum (IAF) Accredits the Certification Bodies (CBs) Peer Review by foreign Accreditation Body Organization 1 Organization 2 Organization n

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Environmental Standards and Trade (2)What is the empirical evidence? i.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

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Environmental Standards and Trade (2)What is the empirical evidence? i.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

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Environmental Standards and Trade (2)What is the empirical evidence? iii.ISO Environmental Management Standard Bellesi et al. (2005): Impact of ISO certifications on exports Survey of 130 exporting ISO evaluated as third most important factors determining selection of suppliers (price, quality) European customers rather require ISO certification compared to American customers ISO certification costs are not trivial but represents an advantage in international markets

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Environmental Standards and Trade (2)What is the empirical evidence? iii.ISO Massoud et al. (2010): ISO and challenges for developing countries ISO often a requirement to do business in Europe Developing country firms account for less than 3% of ISO certified enterprises worldwide Massive problems for firm from developing countries to achieve certification: investments, lack of institutional capacity, skills, lack of local expertise, etc.

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Environmental Standards and Trade (2)What is the empirical evidence? iii.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

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Summary and Conclusion 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 standards are often demanded in developed countries especially by European countries Environmental TBT and SPS: mixed impact, case sensitive

STANDARDIZATION AND THE INTERNATIONAL TRANSFER OF SUSTAINABLE TECHNOLOGIES WORKSHOP Thank you very much for you attention!