Background on Developing Nation Claims that Private Health Standards are Barriers to Trade in Disguise

There is currently a growing area of international trade disputes that sees developing nations argue that developed nations are creating barriers to trade in the form of health and safety standards. However, these current forms of standards are not being introduced by member nations of trade organizations themselves, they are being introduced by companies incorporated and operating within their borders. The current legal status of standards developed, not by nations, but by corporations, is unclear. However, the main governing body of international trade, the WTO, has perhaps provided some direction for both sides in this growing area of dispute. Different safety and health standards for agricultural products and goods have often been identified in the past as non-competitive barriers to trade. [i] However, these standards were most often developed by governments, or were developed by standards bodies and adopted by governments, and therefore clearly fell under WTO dispute resolution mechanisms. More recently, the trend has been toward a decrease in such official global barriers to trade. The result has been an increase in the number of restrictions that non-governmental entities (NGOs) have implemented. As many of these restrictions are impacting the developing nations among world trade partners, it is they who have been most critical of this development. [ii] However, since it is NGOs who are developing these standards, it has been difficult for the developing nations to gain any traction behind claim these health and safety standards should fall under the purview of WTO agreements such as the SPS [iii] or TBT [iv]. Perhaps the best claim developing nations could make regarding private standards is that Article 4 of SPS compels Members to ‘…take such reasonable measures as are available to them to ensure that local and non-governmental standardizing bodies also accept and comply with the Code.’ [v] Before getting past whether or not standards developed by corporations would be viable under SPS or TBT however, it would first be necessary to determine whether corporations are included under the term ‘non-governmental standardizing body.’

The term ‘non-governmental standards’ is used interchangeably with ‘private standards’ and ‘private-sector standards’ in the literature. Although this is a new and rapidly developing area of trade law (underscored by the lack of an entry on Wikipedia.org defining ‘private standard’), there is some guidance regarding what this term might mean. The United Nations Industrial Development Organization (UNIDO) has taken the lead on defining ‘private standards,’ how they should be interpreted and what the implications of them are. [vi] Most notably, it has defined private, industry or buyer standards as: 1. Consortia standards – which are often developed by a sector-specific consortium (ie. EurepGAP) 2. Civil society standards – established as an initiative by an non-profit organization usually as a response to concerns over social and environmental conditions (e.g. Forest Stewardship Council) 3. Company –specific standards – which are developed internally and apply to the whole supply chain of a company (e.g. Tesco’s Nature’s Choice). [vii] The UNIDO site explains that though private sector firms have often been the driving force behind the development of standards in the past, there is a growing sense that their own internal standards are having an increasing impact on developing country firms’ ability to participate in global supply chains. The ultimate effect of this would be that corporate-developed standards essentially act as another barrier to entry. [viii] UNIDO goes on to identify increasing safety concerns such as dioxins and bioterrorism inter alia as reasons for the increasing trend in retailer standards. It also notes reputation, brand protection and marketplace differentiation as factors. [ix] In addition to UNIDO, another multinational body addressing the issue has been the Organisation for Economic Co-operation and Development (OECD). In a 2006 report, FINAL REPORT ON PRIVATE STANDARDS AND THE SHAPING OF THE AGRO-FOOD SYSTEM, it addressed many of the current issues surrounding private standards in the supermarket industry and included a survey addressing standards issues from a producer perspective. [x] Another UN organization, FAO (Food and Agriculture Organization of the United Nations) has provided guidance for producers in the form of manuals describing some of the standards applicable to producers in its geographically-based offices. [xi] The EC has also, predictably, weighed in as it has been the catalyst for many anti-competitive claims. [xii] Finally, although it has not perhaps provided a convenient definition for the term private standards, the WTO has also provided some guidance on the issue itself. [xiii] In the 2005 report Food Safety and Agricultural Health Standards: Challenges and Opportunities for Developing Country Exports, the WTO provided guidance on the issue of private standards, and perhaps insight into how it might approach a future claim under SPS or TBT. For example, in a February 2009 News Item, it claims that SPS and TBT agreements are ‘…only binding on governments, not directly on companies or private sector organizations.’ [xiv] In addition, it appears that the WTO is guiding developing countries to see standards as beneficial. For example, it states:

‘An alternative and less pessimistic global perspective might emphasize the opportunities provided by the emerging standards and the possibility that certain developing countries could use those opportunities to their competitive advantage. From this viewpoint, many of the emerging public and private standards represent a potential bridge between increasingly demanding consumer requirements and the participation of distant suppliers. Many of these standards provide a common language within the supply chain and raise the confidence of consumers in food product safety.’ [xv]

The WTO’s established committee addressing SPS has provided additional guidance on private standards issues, having addressed the issue for the first time in 2005 and in several committee meetings and roundtables since. [xvi] [xvii] The WTO committee on TBT, though it has had less opportunity to address specific issues pertaining to private standards, has also addressed the issue. [xviii] [xix] Both of these committees, reflecting the broader statements of the WTO itself, have tried to steer producers in the direction that standards could provide opportunities, as compliant products would have a much larger demand base in developed countries.

One group that has not addressed the issues surrounding private standards at length is the academic community, perhaps simply because it is such a new issue. Far more research has been published on trade issues surrounding environmental standards, of which many are governmental by nature. [xx] However, there is some scholarship regarding the topic. [xxi]

In conclusion, the very new topic of private standards has received the most attention in the context of SPS agreements. Specifically, the most notable area of concern on the part of producers has been large grocery stores who have instituted safety and health standards for agricultural products. However, there are implications under TBT as well. Although the issues have not been addressed by a broad swath of governments, scholars, or commentators yet, the WTO and others have approached the topic from the perspective that it could lead to opportunities for developing country producers to improve their potential pool of buyers rather than opportunities to force lower standards on developed countries under the guise of fair trade practice. This is despite that the fact that the SPS could be read in a way that suggests governments should ensure that corporations do not hinder fair trade. To meet this goal, the WTO, its committees on standards, and organizations such as OECD and FAO, have attempted to provide manuals to developing countries in a move to increase transparency in standards. Ultimately, based on the WTO’s recent statements, developing nations will likely have to make efforts to incorporate standards rather than fight against them in global trade organization forums. [i] http://publicaa.ansi.org/sites/apdl/Documents/News%20and%20Publications/Links%20Within%20Stories/trade_barriers_report.pdf (May 2004 DOC report identifying that, ‘…issues relating to standards and conformity assessment to those standards are among the greatest barriers to expanding exports.’ [ii] http://www.cuts-citee.org/pdf/RREPORT02-02.pdf (a paper on the market access implications of SPS and TBT with a case study on frozen shrimp exports from Bangladesh to the EU subsequent to new health regulations) [iii] http://www.wto.org/english/tratop_e/sps_e/sps_e.htm [iv] http://www.wto.org/english/tratop_e/tbt_e/tbt_e.htm [v] Peter Van den Bossche, The Law and Policy of the WTO, Text, Cases and Materials, 458 (2007). [vi] http://www.unido.org/index.php?id=5815 [vii] http://www.unido.org/index.php?id=5815 [viii] http://www.unido.org/index.php?id=5815 [ix] http://www.unido.org/index.php?id=5815 [x] http://www.olis.oecd.org/olis/2006doc.nsf/43bb6130e5e86e5fc12569fa005d004c/4e3a2945ffec37eec12571bc00590ce3/$FILE/JT03212398.PDF [xi] http://www.fao.org/docrep/010/ag130e/ag130e00.htm [xii] http://ec.europa.eu/food/international/organisations/sps/docs/report_2526022009_en.pdf [xiii] http://siteresources.worldbank.org/INTRANETTRADE/Resources/Topics/Standards/standards_challenges_synthesisreport.pdf [xiv] http://www.wto.org/english/news_e/news09_e/sps_25feb09_e.htm [xv] http://siteresources.worldbank.org/INTRANETTRADE/Resources/Topics/Standards/standards_challenges_synthesisreport.pdf [xvi] http://www.wto.org/english/news_e/news05_e/sps_june05_e.htm [xvii] http://www.unctad.org/trade_env/test1/meetings/wto1/Summary%20of%20SPS%20Committee%20Discussion%20on%20Private%20Standards.pdf (SPS committee meeting summary) [xviii] http://www.wto.org/english/news_e/news09_e/tbt_16mar09_e.htm (TBT barriers to trade workshop summary) [xix] http://www.wto.org/english/tratop_e/tbt_e/wkshop_march09_e/tbt_16mar09_report_e.doc (a full report on the aforementioned TBT barriers to trade workshop) [xx] See c.f., B.C. Envtl. Aff. L. Rev. 79, (2009) (for a discussion of how private environmental standards impact international trade agreements)

[xxi] See, 24 Wis. Int’l L.J. 961 (2007)