Voluntary Sustainability Standards: Virtue Enhancers Or Trade Discriminatory?

Voluntary standards are seen by some as acting as barriers to trade, in particular for developing countries unable to meet the requirements of those private standards. At the World Trade Organization Public Forum, two panels presented two approaches, one looking at governments’ role in voluntary sustainability standards, and launching a report by a multi-agency United Nations initiative on those standards. The other one focused on the challenges private standards can represent for developing countries.

The WTO Public Forum took place from 27-29 September.

The panel on voluntary sustainability standards (VSS) and inclusive trade and the role of governments was organised by the UN Forum for Sustainability Standards (UNFSS), a joint initiative bringing together five UN agencies: The Food and Agriculture Organization of the UN (FAO), the UN Industrial Development Organization (UNIDO), the International Trade Centre (ITC) (joint agency of the WTO and the UN), the UN Environment Programme (UNEP), and the UN Conference on Trade And Development (UNCTAD) (IPW, United Nations, 18 March 2013).

The UNFFS launched its 2^nd Flagship Report [pdf] today, looking at how VSS are meeting sustainability goals and the role of governments.

According to the report, VSS have emerged in the past two decades to help meet some of the most pressing sustainability challenges when government policy commitments failed to do so. They include respect for human rights, workers’ health, safety, decent income, and the environment. Developed with different actors, they aim to provide producers with market incentives to opt for more sustainable production processes. There are growing concerns about accountability for the impact of VSS on the environment and the lives of actors in the value chain, it said.

Joakim Reiter, deputy secretary-general of UNCTAD, speaking on the panel on behalf of UNFSS, said VSS serve companies who are desperate to differentiate themselves from their competitors, but also are useful to create customer confidence and empowerment. Customers are more and more ready to pay more for sustainable products, including developing country customers, he added.

However, there is a risk of fragmentation of the market and VSS might be detrimental to small companies in developing countries by adding production costs and acting as market barriers.

Among the challenges, he pointed out the issue of interoperability in a rapidly increasing VSS standards landscape, now at some 400 standards. VSS need to be legitimate and accountable and need to be discussed with governments, he said.

According to the report, “there are fundamental questions about whether broad-based implementation of VSS can bring a wide swath of producers out of extreme poverty. … To date, certification benefits have typically gone to larger, more organized producers in regions that have more developed production capacities.”

The report also underlines a “longstanding concern of many developing-exporters has been that VSS may be used to limit the access to developed countries’ agricultural markets.”

The role of governments, as detailed in the report, is to ensure that VSS can contribute to local needs by managing issues such as the proliferation of standards, ensuring that VSS are relevant to local contexts.

The report calls for governments to work in coalition with civil society and the private sector to draw on strengths of each sector. Governments signatories to major trade agreements may be able to use that opportunity to engage with VSS to ensure coherence between their trade commitments, and VSS, the report said.

On the panel, Ravi Singh, secretary-general, Quality Council of India, presented the Indian National Platform on Private Sustainable Standards, launched in March. Singh said the platform is a unique place to set up voluntary sustainable standards and is independent from the government and from industry.

Singh said the government provides regulations on health, safety, and national security. Voluntary sustainable standards have a competitiveness goal to help businesses getting into the global market, he said. Private standards provide a faster response to international requirements than governments, he said.

Karin Kreider, executive director ISEAL Alliance, said the alliance is meant to strengthen sustainability standards systems for the benefit of people and the environment, said governments are interested about what other governments are doing on VSS. A good practice guide for government use of VSS would be interesting, she said, if it stems from a collaborative process.

For Aimée Hampel-Milagrosa, senior researcher at the German Development Institute, governments have the responsibility to make sure that farmers are not left behind. She mentioned the possibility for governments with limited financial needs to enter into cooperation with the private sector, and cited Thailand’s multi-stakeholder approach to link farmers to the global value chain.

Sustainability Standards: Challenges for Developing Countries

A panel also held on the last day of the Public Forum looked into the potential role of WTO to assess the legitimacy, effectiveness, and accountability of sustainability standards.

Panel moderator Vera Thorstensen, professor of international trade at Fundação Getulio Vargas in Brazil, and chair of the Brazilian Committee on Technical Barriers to Trade, said although what was heard during the Public Forum this year and last year is that private standards are “nice and green,” they are in fact discriminatory to trade and creating trade barriers. She remarked that most of the UNFSS standards came from Europe.

Gabrielle Marceau, counsellor in the Legal Affairs Division at the WTO, said the issue of private standards is not new and complex, and that private standards are considered under the Agreement on Technical Barriers to Trade (Article 4).

Article 4 states that members shall ensure that their central government standardising bodies accept and comply with the Code of Good Practice for standards, and shall take such reasonable measures to ensure that local government and non-governmental measures within their territories also comply with this code.

Scott Andersen, partner at Sidley Austin LLP, examined the conditions under which a country such as Brazil could start a dispute under the WTO on barriers to trade as a result of private standards. He said no such dispute has ever been filed at the WTO.

Standard under the TBT are defined as follows: “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, with which compliance is not mandatory…”

Bringing a dispute under the WTO would mean overcoming a number of issues, including the classification of standards provided by private entities, such as an industry association, a business association, or an individual business such as Tesco or Carrefour, which have “huge market power and market share,” he said. The issue here would be to determine if those actors can be considered as standard-setting bodies.

Another major issue would be to prove that there is an underlying violation of the TBT Code of Good Conduct, he said.

Reinhard Weissinger, senior expert, research and education, at the Central Secretariat of the International Organization for Standardization (ISO,) said ISO currently covers 21,000 ISO standards on many sustainability topics, such as climate change, water and sanitation, and health.

Some VSS suffer from a lack of transparency and inclusiveness in their development, he said. Other issues with VSS include the fact that the scientific basis upon which they are built is sometimes not secured, and they imply high investment cost and multiple certifications, which can lead to potential exclusion of producers from market access, he added.

On the positive side, he said VSS can establish high sustainability performance. On possible synergies between VSS and ISO, he said more dialogue is needed and less competition between international standardisation systems, and a multi-organisational dialogue.