Monday, January 28, 2008

Discerning the Forest From the Trees: How Governments Use Ostensibly Private and Voluntary Standards to Avoid WTO Culpability

By Lawrence A. Kogan

Global Trade and Customs Journal

VOL 2; NUMBER 9, pages 319-337 (2007)


[This international law journal article has been catalogued by the British Public Library and may be accessed in hardcopy. See: ].

[Article title :Discerning the Forest From the Trees How Governments Use Ostensibly Private and Voluntary Standards to Avoid WTO Culpability

Author: Kogan, L. A.


Bibliographic details: 2007, VOL 2; NUMBER 9, pages 319-337


Country of publication: Netherlands

ISBN: ISSN 1569-755X

Unique item number: RN215946290

Shelfmark: 4195.476860

Language: English

Pricing: To buy the full text of this article you pay:£12.50 copyright fee +
service charge (from £7.85) + VAT, if applicable ]




A. The Purpose of This Article

The purpose of this article is to explore whether national and/or regional governments can be held responsible under the General Agreement on Tariffs and Trade (GATT)/World Trade Organization (WTO)1 law if it can be proven that their official policies and activities directly or indirectly permit, support or otherwise influence the adoption, promulgation and/or maintenance of ostensibly private and voluntary standards that result in discriminatory trade
practices or in the creation of unnecessary obstacles to international trade.

It is generally agreed that official government regulatory policymaking and private standard setting activities currently taking place within many WTO member countries are not sufficiently transparent and inclusive of foreign stakeholder input. It is also generally agreed that regulations and standards (whether technical, social or environmental) can materially impact international (cross-border) trade flows when not drafted and implemented in a benchmarked and balanced manner.2

Some governments, more than others, recognize that standards can improve their countries’ industrial and technological global competitiveness and have increasingly synchronized their use with official regulations. 3 As a result, such countries may have more than acquiesced in the development of ‘private’ environmental and corporate social responsibility (CSR) certification and labelling standards regimes that have had the effect of denying market access to a host of foreign products and services. In particular, companies operating within natural resource-based
developing countries have incurred significant and unnecessary costs and administrative burdens to satisfy such developed country environmental certification and eco-labelling standards. According to a recent study, ‘making certification a condition for trade in international
markets could reduce exports of wood products from these countries – with considerable negative impacts on forest-dependent populations’.4

This article focuses strictly on the relationship between private European-centric sustainable forest management (SFM) schemes that have arisen during the past twenty years and the official policy goals articulated by the European Community (EC), and later by the European Union (Eu)5 within its Fifth and Sixth Environmental Action Programmes (EAPs). The analysis and findings which follow, however, are equally relevant to ascertaining whether a nexus exists between official EU government sustainable development and corporate governance policies and
currently evolving private EU-centric (CSR) standards. The establishment of such a link is required before culpability can be ascribed for alleged violations of WTO law. This article does not address the merits of any claim of trade discrimination or disguised trade protectionism (i.e., the purported effects on international trade flows in forest/wood products) that could conceivably be brought against the EC and its Member States by an aggrieved GATT/WTO member as a consequence of such standards.6


During the past twenty years, European governments created a national, regional and global policy framework that facilitated and promoted the development, adoption and implementation of private Euro-centric SFMcertification and eco-labelling standards. SFM standards-related activities were undertaken within the borders of specific EUMember States and the European region by recognized private standardization bodies, namely the FSC and the PEFC. These activities were, at the very least, indirectly funded by European governments. They also clearly
reflected a key regional EU policy priority: the global promotion of SFM as part of environment-focused negative SD.

The GATT case law and the TBT Agreement provide that when governments, which are charged with the responsibility of preventing private standards setting activities undertaken within their jurisdictions from creating unnecessary obstacles to international trade, become sufficiently involved in those activities, they may be attributed to them as a matter of law. Consequently, if it can be proven that such activities gave rise to discrimination against ‘like’ foreign products or constituted disguised trade protectionism, governments may be held accountable in a WTO dispute settlement proceeding initiated by aggrieved WTO members.

The evidence in this case reveals that the EU Brussels institutions and Member State governments have been sufficiently involved in the ostensibly private SFM standards setting and implementation activities of the FSC and the PEFC to have those activities and their market effects on developing country forest/wood products attributed to them. As a result, the SFM standards activities of such groups can fairly be characterized as part of an overall EU governmental regime, and thus, as an extension of EU ‘governmental conduct’. Therefore, to the extent aggrieved WTO developing country members can prove that the FSC or PEFC standards resulted in actual trade discrimination or that they were intended to create or had the effect of creating unnecessary obstacles to trade, they may hold the EU and its participating Member States culpable under GATT/WTO law.170

Related Endnotes:

1 General Agreement on Tariffs and Trade, 33 I.L.M. 1125 (1994) (GATT); World Trade Organization (WTO).
2 Lawrence A. Kogan, National Foreign Trade Council, Looking Behind the Curtain: The Growth of Trade Barriers That Ignore Sound Science (May
2003) available at .
3 Erkki Liikanen, European Enterprise Commissioner, Commission Marks World Standards Day With Focus on Environment and Standards, in IP/01/1408 (12 October 2001) available at¼gt&doc¼IP/01/1408%7C0%7CRAPID&lg¼EN .
4 Carolyn Fischer, Francisco Aguilar, Puja Jawahar and Roger Sedjo, Resources for the Future – Forest Certification: Toward Common Standards?, World Bank Foreign Investment Advisory Group Discussion Paper 05-10 (Washington, DC: World Bank, April 2005), available at .
5 The European Community (EC) was previously known as the European Economic Community (EEC),whichwas formed pursuant to the Treaty of Rome, on 25March 1957. It consisted of six ‘commonmarket’ countries: Belgium, France, Italy, Luxembourg, the Netherlands and former West Germany. The EEC was renamed the EC on the signing of the Maastricht Treaty, on 7 February 1992, which led to the formation of the unique political union now recognized as the European Union (EU). The EC remains one of three pillars of the EU–i.e., the Community pillar, which concerns economic, social and environmental policies. See e.g., ’European Community’, Wikipedia at: ; ‘The Three Pillars of the European Union’ Wikipedia at: , last visited on 15 July 2007.
170 See Brien, as note 8 above. -- Laurel A. Brien, Understanding the International Agreement on Technical Barriers to Trade and Related Provisions of the US Trade Agreements Act of 1979 (Washington, DC: US Department of Commerce, International Trade Administration, Office of Trade Policy, September 1984) (explaining the barriers to trade requirements).

EU Injects Political Precautionary Principle and Anti-Patent-based Industry Standards to Secure Global Competitive Advantage

By Lawrence A. Kogan

Back during 2002, a Wall Street Journal columnist prepared a prescient but largely unnoticed article that unfortunately was a negative harbinger of things to come. It described how the European Union had largely become the de facto global legislator and regulator of all kinds of rules concerning the environment, human health and safety that would eventually touch and materially impact practically every industry sector within the United States, and by extension, the world.

“Because of differing histories and attitudes toward government, the EU…with the world’s second-largest economy, regulates more frequently and more rigorously than the U.S., especially when it comes to consumer protection. So, even though the American market is bigger the EU, as the jurisdiction with tougher rules, tends to call the shots for the world’s farmers and manufacturers. EU rules often cause particular friction in the high-tech fields, such as software, electronic commerce and biotechnology” (emphasis added). [1]

EU policy documents then reflected that the products covered by EU environment, health and safety regulations, directives and standards “represent a large proportion of [all] products placed on the market. It is estimated that, as of 2003, the trade of products covered only by the major [agricultural and industrial] sectors regulated…largely exceeds the volume of 1500 billion euro (1.5 trillion euro) [(or approximately $2.25 trillion)] per year”. [2]

In effect, this article implied that America would, over time, lose its sovereign ability to determine its own economic fate and destiny, first outside, and then within its own borders, if it did not act quickly and resolutely enough to slow down and reverse Europe’s regulatory juggernaut.

Now, more than four years later, this has become abundantly clear.

“Sometimes voluntarily, sometimes through gritted teeth and sometimes without knowing, countries around the world are importing the EU’s rules. It is a trend that has sparked concerns among foreign business leaders and that irritates US policymakers. But whether they like or not, rice farmers in India, mobile phone users in Bahrain, makers of cigarette lighters in China, chemical producers in the US, accountants in Japan and software companies in California have all found that their commercial lives are shaped by decisions taken in the EU capital.

...The EU’s emergence as a global rulemaker has been driven by a number of factors, but none more important than the sheer size and regulatory sophistication of the Union’s home market...At the same time, the drive to create a borderless pan-European market for goods, services, capital and labor has triggered a hugely ambitious program of regulatory and legislative convergence among national regimes.

This exercise has left the Union with a body of law running to almost 95,000 pages – a set of rules and regulations that covers virtually all aspects of economic life...Compared with other jurisdictions, the EU’s rules tend to be stricter, especially where product safety, consumer protection and environmental and health requirements are concerned. Companies that produce their goods to the EU’s standards can therefore assume that their products can be marketed everywhere else as well.

...As...two US-based academics point out in a recent paper that examines the global impact of three recent EU laws on chemicals, electronic waste and hazardous substances, ‘The EU is increasingly replacing the United States as the defacto setter of global product standards and the center of much globally regulatory standard setting is shifting from Washington DC to Brussels’”. [3]

Indeed, Europe had long targeted the U.S. regulatory and free enterprise systems for fundamental restructuring. Its aim has all along been to achieve supranational legal and economic governance over the affairs of global (mainly U.S.) industry through an environment-centric negative paradigm of ‘sustainable development’.[4] There is, in fact, significant documentary evidence showing how the European Community and a number of EU member state governments have, for many years, tried to persuade/compel American-based international businesses and their domestic and foreign suppliers, as well as, U.S. federal, state and local legislators, to adopt similar rules. In so many words, Europe has been engaged in a legalistic and economic war with the United States in an effort to reshape the post-World War II paradigm in the European image.[5] And, it has employed ‘soft’ regulatory rather than ‘hard’ military power to achieve this. The unfortunate reality is that Europe is now well on its way to governing the American way of life, that is, re-colonizing America and the world, unless America and its allies find a way to reverse this trend.

“...Brussels is becoming the world's regulatory capital. The European Union's drive to set standards has many causes—and a protectionist impulse within some governments (eg, France's) may be one. But though the EU is a big market, with almost half a billion consumers, neither size, nor zeal, nor sneaky protectionism explains why it is usurping America's role as a source of global standards. A better answer lies in transatlantic philosophical differences.

The American model turns on cost-benefit analysis, with regulators weighing the effects of new rules on jobs and growth, as well as testing the significance of any risks. Companies enjoy a presumption of innocence for their products: should this prove mistaken, punishment is provided by the market (and a barrage of lawsuits). The European model rests more on the “precautionary principle”, which underpins most environmental and health directives. This calls for pre-emptive action if scientists spot a credible hazard, even before the level of risk can be measured. Such a principle sparks many transatlantic disputes: over genetically modified organisms or climate change, for example.

In Europe corporate innocence is not assumed. Indeed, a vast slab of EU laws evaluating the safety of tens of thousands of chemicals, known as REACH, reverses the burden of proof, asking industry to demonstrate that substances are harmless. Some Eurocrats suggest that the philosophical gap reflects the American constitutional tradition that everything is allowed unless it is forbidden, against the Napoleonic tradition codifying what the state allows and banning everything else.

...One American official says flatly that the EU is “winning” the regulatory race, adding: “And there is a sense that that is their precise intent.” He cites a speech by the trade commissioner, Peter Mandelson, claiming that the export of “our rules and standards around the world” was one source of European power. Noting that EU regulations are often written with the help of European incumbents, the official also claims that precaution can cloak “plain old-fashioned protectionism in disguise” (emphasis added). [6]

Europe's efforts to define global standards has now extended beyond politically motivated environmental and health standards to also include intellectual property standards. This was revealed within a recent IP Watch newsletter article.[7]

Efforts by European Union authorities to take advantage of standardisation as a de facto regulatory tool have not been sufficiently systematic in recent years, according to a study published by the European Commission last week. Yet standards especially in information and communications technology (ICT) are becoming more important, said Patrick Van Eecke, attorney at the Brussels office of DLA Piper UK and co-author of the study. [8] .

The study recommended a dialogue between standardisation organisations and all stakeholders. Also urgently needed is a balance between technical standards and intellectual property rights, according to the study. Concerns that overly rigid IPR protection might become a problem for invention and innovation recently also resulted in other recommendations and decisions at the EU level. A call for changes in the EU patent system was made in a study commissioned by the European Parliament’s Scientific and Technological Options Assessment (STOA) unit and an inquiry into possible anticompetitive practices by the pharmaceutical industry that was initiated by European Commissioner for Competition Neelie Kroes.

A debate on future EU standardisation policy will take place at a conference organised by the European Commission on 12 February in Brussels.Author Van Eecke, speaking with Intellectual Property Watch, pointed to the growing relevance of technical standards that “are more important than legislation.” Companies and citizens either abide by laws passed by governments or not, but to not follow well-established technical standards would mean to be excluded from the market.

“If you are a policymaker, you really would like to make sure that companies and citizens abide by the rules, so instead of drafting a law you could put them into a standard,” he said.

Using privacy as an example, he said, “You can draft one hundred laws that should protect it - and hope that people follow the law. But if you are able to have EU data protection implemented in the technical standards, it might be much more effective.” Van Eecke said that legislators who try to rule via standards would end up drawing the conclusion from American cyberlaw luminary Lawrence Lessig’s theory that code is the (new) law and shifts legislators’ attention to standardisation.

[1] See Brandon Mitchener, “Rules, Regulations of Global Economy Are Increasingly Being Set in Brussels”, WALL ST. J., (4/23/02).
[2] See “Enhancing the Implementation of the New Approach Directives, Communication from the Commission to the Council and the European Parliament”, COM (2003) 240 final, May 7, 2003, at 3, at: .
[3] See Tobias Buck, “Standard Bearer”, Financial Times (July 10, 2007) at: .
[4] For a discussion of this concept, See, e.g., “Issues”, The Institute for Trade, Standards and Sustainable Development, website at: .
[5] See Lawrence A. Kogan, “Exporting Europe’s Protectionism”, The National Interest (Fall 2004) at p. 95, at: .
[6] See “Brussels Rules OK - How the European Union is Becoming the World's Chief Regulator”, The Economist (Sept. 20, 2007) at: .
[7] See Monika Ermert, "Standardisation Policy More Effective Than Legislation On IP?", Intellectual Property Watch (Jan. 25, 2008) at: .
[8] DLA Piper and the Universidade Nova de Lisboa and T.U. Delft, "EU Study on the Specific Policy Needs for ICT Standardisation" (July 2007) at: .