4 min

The growth in eco-labeling programs worldwide highlights the potential tensions between environmental protection and free trade. Environmental advocates hail eco-labeling as a market based means to reward companies for producing environmentally sound products. Many manufacturers fear that eco-labeling programs suffer serious flaws and can serve as cover for underlying protectionist aims. Currently, the US Government is attempting to navigate a path that may satisfy both sides. Unfortunately, this approach may please neither.

Within the past twenty years, nations and private organizations have begun instituting eco-labeling programs, whereby labels are put on products in order to inform consumers of their environmental impacts. The goal is to better inform consumers and promote consumer products which are considered more environmentally friendly than other similar products. While different types of labels exist, eco-labeling programs typically shun single issue labels such as "recycled" or "biodegradable" and focus on an overall assessment of a product's environmental quality.

Several nations have set up eco-labeling programs. The oldest program, Germany's Blue Angel program, started in 1978. This program now has over 3,600 labeled products in 64 product categories. Canada, Japan, and the Nordic Countries all have eco-labeling programs. Recently, the European Union instituted an eco-label program and this program has brought the potential trade and environmental conflicts inherent in eco-labeling to a head.

The European Union recently approved criteria for eco-labels for copying paper, despite calls by U.S. and European industry to suspend this project. Industry has complained that the eco-labeling process is not transparent (open to public review and input), is discriminatory and violates WTO rules. American industry particularly is worried that the fine paper standards are biased towards recycled paper, as opposed to virgin fiber produced by American manufacturers. American officials have warned the EU that the eco-label program could trigger a WTO complaint by the United States.

U.S. policy makers are in a quandary as to whether and how to address eco-labels in the World Trade Organization. Eco-labels have the strong support of environmental groups, but have caused great anxiety in the American business community. Further, it is far from clear as to what forum the US can or should use to address any concerns with eco-labeling programs. While industry believes the WTO should handle this issue, environmentalists fear that the WTO, as a trade organization, lacks the capability to properly address what they believe fundamentally to be an environmental policy question. In March 1996, the U.S. issued a submission to the WTO Committee on Trade and Environment (CTE) stating that the U.S. believed that the WTO Technical Barriers to Trade Agreement covered eco-label programs. The US also proposed full transparency for eco-labeling programs. However, U.S. policy makers continue to debate if further steps need be taken.

The U.S. has considered submitting to the WTO CTE an industry drafted proposal consisting of a set of principles for international trade rules on eco-labeling. These principles were drawn from the Guidelines for the Use of Environmental Marketing Claims, which were developed by the Federal Trade Commission to regulate advertising of products in the U.S. Under the industry proposal, WTO rules would require eco-labeling programs to be transparent, non-discriminatory, truthful, based on sound science, substantiated and not misleading to consumers.

In letters to members of Congress and to EPA Administer Browner and Acting U.S. Trade Representative Barshefsky, environmental groups roundly criticized these principles and continued to question the ability of the WTO to handle eco-labeling issues. Several House Democrats urged the Clinton Administration not to submit the principles to the WTO CTE.

Following this debate, the Administration determined not to submit the principles to the WTO CTE. However, eco-labeling remains a hot issue. Industry continues to lobby for international guidelines on these programs and may press for a WTO challenge of the EU copying paper standards. The U.S. and the European Union are set to begin bilateral discussions on eco-labeling programs.

The USTR created the Trade and Environment Policy Advisory Committee (TEPAC), made up of industry, environmental and state government representatives, to provide advise to USTR on issues that impact both Trade and the Environment. A TEPAC Task Force was formed to look at eco-labeling programs. This Task Force presented its recommendations to the USTR in June. That report indicated a division among the Task Force members on how to approach this issue, with no consensus on whether the US should raise eco-label principles with the WTO. However, the Task Force will continue to look at eco-label issues.

Joseph G. Block is a member of TEPAC. Andrew Herrup serves as a staff member on TEPAC. If you have any questions on eco-labeling, please contact Andrew at (202) 962-4855 or e-mail ARHerrup@Venable.com.