At the invitation of the International Grains Council (IGC), DDG Paugam participated in a panel on sustainability criteria and trade policy. Representatives from groups such as Bunge-Africa, Cargill, Bioline InVivo France, the US Chamber of Commerce and US Soybean Export Council reviewed the challenges and opportunities associated with sustainability standards in global commodity and agri-food supply chains.

Noting the growing prevalence of private standards in agri-food trade, the panel pointed to the need for efficient schemes to encourage the uptake of sustainable practices by all supply chain stakeholders, including through certification programmes. At the same time, to avert market fragmentation and trade protectionism, public and private players need to develop viable business models and strengthen national and international regulatory frameworks.

DDG Paugam's remarks

Good morning to all IGC partners. Your interest and engagement with the WTO is vital. It's great to have this opportunity to interact with all of you today.

Let me thank you for having me on this very timely and relevant panel on sustainability criteria and trade policy.  Let me try to make three points.

First, how is the issue of sustainability unfolding in world trade today?  The answer is very simple: we see it everywhere. It is no longer relevant to assert that sustainability is the future of trade; the future is already here.

The drive towards sustainability is first and foremost a societal transformation led by civil society, consumers and the private sector. And I am very happy to join a panel of private actors who have shared their experience in dealing with this important issue. And you know better than I do why the private sector has been mobilizing over the past few years. This is because you are responding to market forces, whether these forces result from consumers' demand or civil society or from new market regulations enacted by governments.

Today, we observe a massive movement of companies turning to net-zero strategies, embracing the decarbonization of value chains, introducing corporate social responsibility codes of conducts, and adopting traceability schemes for all sourcing and production processes. This trend can be observed in all categories of businesses engaged in international supply chains, including, for instance, logistics and transportation through decarbonization efforts by shipping compagnies and port authorities.

Driven by political demands, government trade policies are also adapting to the same powerful forces. This is reflected in the way trade-related sustainability issues are being discussed in the WTO. Once again, the future is already here: sustainability issues affecting grain and oilseed markets are unfolding in many WTO entry points, including agriculture, SPS, TBT and Environment.

— The first example is the notifications of trade measures related to environmental objectives. Our Environmental Database shows that these measures have been soaring during the last 10 years, with a strong acceleration over the last 5 years. These measures take the form of government subsidies, technical regulations and specifications, sustainability standards, conformity assessment and monitoring procedures, market access instruments such as taxes and emission trading schemes. The scope of these measures covers a wide variety of stated objectives, such as energy transition, the fight against deforestation, and the conservation of natural resources.

— The second example comes from the notifications of bilateral and regional trade agreements submitted by our members.  A great majority of these agreements now includes a chapter dedicated to sustainable trade, including climate change policy. Today, over 270 of these agreements contain provisions related to sustainability.

So, what are the results of all these trends and dynamics? Somehow a proliferation of policies and sustainability standards.

For the world, a greater focus on the environment is very good news: we certainly need to do more and faster. For a world trade perspective, the picture is mixed: some studies show that, far from hindering trade, sustainable standards tend to support it by improving productivity. 

But there is also a risk of fragmenting the trading system and increasing transaction costs arising from compliance to a vast array of sustainability norms. There is also a risk of marginalizing the most vulnerable developing countries and SMEs in world trade.

My second point deals with the question: how does the WTO deal with such dynamics?  Well, the answer is twofold:

1) we have quite a solid legal apparatus to deal with sustainability matters and prevent fragmentation, although it is far from being complete or perfect.

2) we are not yet approaching this dynamic in a systematic or holistic manner.

Our apparatus works as follows.

— First, it must be recalled that WTO law fully recognizes sustainable development objectives.  These are placed at the core of our founding document, i.e., the Marrakech Agreement establishing the WTO.  Our rules give WTO Members plenty of room to pursue environmental and other policy goals, while keeping a tab on discrimination and protectionism.

— Second, we have a rather good regulatory system to deal with public sustainability standards.

Our Agreement on Technical Barriers to Trade and our Agreement on Sanitary and Phytosanitary Standards deal with the use of the environmental, health and food safety standards.  WTO also explicitly recognizes the role of international standards developed by standard setting bodies — for example, on food safety from the Codex Alimentarius and animal health from the World Organization for Animal Health.

But here may lie a problem: there is not yet a central standard setting body specifically dedicated to issues such as carbon content and traceability in goods. So, the convergence needed around international standards that could underpin some climate policies may not happen soon enough. And the WTO itself cannot fill this gap because it is not a standard setting organization.

— Third, we are confronting a grey zone, or loophole, when it comes to private standards. Our Members have long debated whether we should be discussing these types of standards in the first place, and there has been a strong divide on this matter within the WTO. 

The reasons are many. Some Members have raised concerns over the rapid proliferation of sustainability standards and the diverse range of actors involved in setting them. This creates a lack of clarity and a multiplicity of schemes which increases the cost of compliance and difficulties in accessing export markets. Others have voiced that governments should focus on regulation and leave sustainability standards alone.

So, there is presently no agreed definition of sustainability standards, neither inside the WTO, nor outside — which is challenging if concerted action is to be achieved.

Let me share the example of bananas. Back in 2005, Saint Vincent and the Grenadines expressed concerns over the growing number of sustainability standards which were facing not only the banana industry but other industries too. Such standards posed a real challenge to small farmers and small vulnerable economies, due to “confusion, inequity, and lack of transparency”. The debate and arguments around the application of WTO rules to sustainability standards gained strength in WTO's Committee on Sanitary and Phytosanitary Measures as part of a dedicated discussion of SPS-related standards. Ultimately, members struggled to agree on the definition of “SPS-related private standards”.  Although the SPS Committee was able to recommend a number of “Actions Regarding SPS-Related Private Standards” in 2011, the discussion was eventually dropped in 2015.⁽¹⁾

But the struggle to define “sustainability standards” does not only arise within the WTO, but also outside as no internationally recognized definition exists today.

This is a problem: if we don't find common ground for sustainability standards, we risk generating trade frictions and unpredictability for agriculture and agri-food businesses already strained by recent crises. 

According to the International Trade Centre, over the past two decades approximately 20% of all-new sustainability standards are agriculture related. Today the sector has over 100 sustainability standards, and they affect trade.

— Fourth and finally, our negotiating system does not really approach this sustainability dynamic in a holistic manner. However, we do have new discussions in the Committee on Trade and Environment, as well as in three ministerial initiatives which are pushing the frontier on making trade work for the environment, people and prosperity.  In this dialogue, the focus is on key issues of environmental sustainability from plastics pollution, circular economy to fossil fuel subsidy reform. We have also had efforts to negotiate trade barriers to environmental goods and services, and sometimes, in agriculture negotiations, on domestic subsidies in favour of agricultural producers. But these are sectorally-driven negotiations, and we don't yet have an overarching framework in place.

The discussion on the environmental sustainability aspects of agriculture subsidies is gradually building up at the WTO, and, as you know, the topic of subsidies is currently high on our reform agenda.

So, where do we go from here?

In the mid-term, the business community could join forces with public actors, international-standard setting bodies, and the WTO, to work towards the development of a common approach to deal with sustainability standards in the agricultural sector.

For instance, The TBT Agreement contains a Code of Good Practice for standard-setting bodies — and the TBT Committee has developed a set of principles for the development of international standards. That is something to build on.

We need to continue promoting the role of international standard-setting bodies and encouraging them to continue working with both public and private standards.

For the short-term, we also need to enhance WTO's transparency and trade facilitation mechanisms, especially for SMEs confronted to private sector decarbonization policies and sustainability standards.  In this context, I am pleased to inform you that we are planning to organise a first event on this topic in the summer.

1. More recently, the SPS Committee discussed “Voluntary Third-Party Assurance as Part of National SPS Control Systems” and held a Thematic Session to address government reliance on certification to private standards schemes. back to text