1. In accepting a proposal submitted by Norway on behalf of the Nordic countries, the Committee on Fisheries (COFI) Sub-Committee on Fish Trade at its Sixth Session, Bremen, 3-6 June 1998, agreed that FAO should organize a technical consultation to investigate the feasibility and practicability of developing non-discriminatory, globally applicable, technical guidelines for the eco-labelling of fish and fishery products which should take into account inter alia the specific characteristics of the fisheries of each State and region. The Nordic proposal was stimulated by the fact that the issue of certification of sustainable fisheries had become a focus of the debate on trade in fish and fishery products, not least because of the joint initiative of a leading environmental organization and a large multinational company holding a major share in the European and US retail and wholesale fish markets to introduce eco-labelling of fish and fishery products from marine capture fisheries. The Nordic proposal and its acceptance by the COFI Sub-Committee reflect concern among many governments regarding the scientific basis of the criteria used for eco-labelling schemes of marine fish and fishery products, the attitude of consumers to such schemes and the potential threat of such schemes to free trade in fish and fishery products, especially as such schemes may cause discrimination against fish exports from developing and transition economies.

2. Product labelling schemes have been introduced in various sectors and for different objectives by non-government agencies, private industry and governments. Their common feature is that the consumers� purchasing behaviour is directed to take into account attributes of the products other than their price and mandatory quality and health standards. These attributes can relate to economic and social objectives (fair trade; support to small farmers; discouragement of child labour) in addition to environmental and ecological ones. The schemes may comprise specific support programmes to facilitate compliance by the private sector with the labelling criteria, especially in developing countries, as well as temporary measures to compensate individuals and households who might be negatively affected.

3. The potential usefulness of eco-labelling schemes to create market-based incentives for environmentally friendly products and production processes was internationally recognized at the 1992 UN Conference on Environment and Development (UNCED) in Rio de Janeiro, Brazil, where governments agreed to "encourage expansion of environmental labelling and other environmentally related product information programmes designed to assist consumers to make informed choices."¹ Consumers are provided with the opportunity to express their environmental-ecological concerns through their choice of products. The consumers� preferences are expected to result in price and/or market share differentials between eco-labelled products and those which either do not qualify to be eco-labelled or those whose producers do not seek to obtain such labelling. The label is obtained through a certification process based on a set of criteria (i.e. the desired standard). Potential price and/or market share differentials provide the economic incentive for firms to seek certification of their product(s).

4. Since the first successful eco-labelling scheme was introduced by the Government of Germany in the 1970s, such schemes have proliferated in many countries and for a wide range of products including food items and forest products. According to their design and administration, eco-labelling schemes are often classified into the following three categories:

• First party labelling schemes, emanating from individual companies based on their own product standards. The standards might be based on criteria related to specific environmental issues known to informed consumers through the media or advertising.
• Second party labelling schemes, established by industry associations for their members� products. Certification criteria are elaborated by the members, sometimes by drawing upon external expertise from academia and environmental organizations. Verification of compliance is achieved through internal certification procedures within the industry, or employment of external certifying companies.
• Third party labelling schemes, usually independent from the producers, distributors and sellers of the labelled products. While the criteria may be established through a negotiation process among the various interested parties, they are often motivated by the environmental objectives of the private initiators of such schemes.

5. Environmental organizations generally advocate eco-labelling schemes based on third party certification because of the heightened confidence that private commercial interests will not compromise the criteria applied to the schemes and strict compliance with them based on verifiable and impartial certification procedures.

6. The environmental information provided through eco-labelling schemes can remove concerns among environment-conscious consumers about possible negative environmental impacts of their product choices. In recent years, public awareness has greatly increased about the extent of over-exploitation of marine fish stocks. This might influence fish demand in those countries where consumers are highly responsive to environmental issues. The concerns about reduced supplies from over-exploited fish stocks and possible declining preferences by consumers for fish and fishery products are likely to be important reasons why industry associations and large-scale fish wholesalers and retailers in some countries give serious consideration to the introduction of eco-labelling schemes for fish and fishery products. Reduced supplies if coupled with lower demand will ultimately result in lower turn-over and reduced profits.

8. Article 11.1.11 of the CCRF calls upon States to "ensure that international and domestic trade in fish and fishery products accords with sound conservation and management practices through improving the identification of the origin of fish and fishery products traded". Article 11.2.2 states that "[i]nternational trade in fish and fishery products should not compromise the sustainable development of fisheries and responsible utilization of living aquatic resources." Improved information on the origin of fish and fishery products can result in more informed purchasing behaviour by consumers and intermediaries taking into account the status of specific fish stocks. References to the environment and related aspects are also contained in Articles 11.1.12, 11.2.3, 11.2.4, 11.2.13 and 11.3.2 (for the full text of these Articles, see Annex).

• The setting of fisheries management objectives, and certification criteria and standards
• The congruence between the management objectives and the procedures to attain them
• The requirements for non-discrimination
• Special considerations regarding developing countries and countries in transition

10. If applied to marine capture fisheries, the goal of eco-labelling would be to achieve certain specific fisheries management objectives. These objectives find expression in the criteria underlying certification standards. The setting of fisheries management objectives is, in principle, the prerogative of States. However, in various international binding and voluntary instruments, States have given the undertaking to pursue certain objectives related to the conservation and management of marine fisheries resources. These include, inter alia, the 1982 United Nations Convention on the Law of the Sea, the 1995 Agreement for the Implementation of the Provisions of the United Nations Convention on the Law of the Sea of 10 December 1982 Relating to the Conservation and Management of Straddling Fish Stocks and Highly Migratory Fish Stocks, and CCRF. Other international instruments that contain provisions related to the conservation and management of marine living resources and their habitats include the Convention on Biological Diversity and Agenda 21 of UNCED.

11. In addition to the above global instruments, fisheries management objectives for certain marine fishery resources have been laid down by regional fisheries management organizations and within bilateral and multilateral treaties among States sharing one or several fish stocks.

12. These global, regional and bilateral instruments, generally, do not express fisheries management objectives in sufficient detail and with the required precision to serve as certification criteria for eco-labelling schemes of specific fish and fishery products obtained from marine capture fisheries.

13. Where criteria cannot be directly derived from international instruments for certification purposes, the issue arises of how and by whom management objectives should be set in eco-labelling schemes. The 1984 Strategy for Fisheries Management and Development of the FAO World Conference on Fisheries Management and Development states that "States have sovereign rights to determine their policies for the development and use of their fishery resources." These include, inter alia, fish stocks in the exclusive economic zones (EEZs) of coastal States. From this statement one may draw the conclusion that, in general, States should establish, or be involved in establishing, management objectives and criteria of any labelling scheme for fish and fishery products derived from marine fishery resources within their own EEZs.

14. Another point of view, however, could be based on the understanding that through their ratification, States have already committed themselves to certain fisheries management objectives in various international instruments including the UN Law of the Sea Convention which provide sufficient basis for the elaboration of certification criteria. Consequently, as long as the certification criteria concur with the relevant provisions of such instruments, labelling schemes do not require States to be party to the setting of management objectives, or to endorse them.

15. Where a State has assigned long-term or perennial use or property rights of fishery resources to private persons and/or entities, one could argue that the right for the setting of management objectives lies with such persons or entities within the limits of the relevant provisions of international and national legal instruments. If this view is accepted, it may be inferred that private persons and/or entities endowed with well-defined use or property rights may apply or submit to eco-labelling schemes independent from States.

16. Still another point of view could be that standards of eco-labelling schemes for products from marine capture fisheries should be based solely, or primarily, on criteria related to the management process rather than the management outcome. This is the approach followed by the International Organization for Standarization (ISO) for its ISO 9000 and ISO 14000 families of international standards for product quality and environment management. Under this scheme, an organization (e.g. fishery management authority) institutes a management system certified to an ISO 14000 environmental standard, this would mean that an independent auditor has checked that the production processes influencing the impact of the organization�s activities on the environment conform to the relevant standard�s requirements. ISO 14000 standards do not in themselves set levels of environmental performance but rather specify the requirements of an environmental management system. In the case of marine capture fisheries, a standard�s requirements could relate to criteria such as the following: a fisheries management plan is in place; assessment of fish stocks is being undertaken; measures have been taken to reduce over-capacity and limited fishing effort; a monitoring, control and surveillance system has been implemented.

17. In examining the feasibility and practicability of developing international guidelines on eco-labelling of products from marine capture fisheries, the Technical Consultation may wish to discuss the possible respective roles of States and private entities including non-governmental organizations in the setting of management objectives and certification criteria taking into account the relevant provisions of international legal instruments and the specific characteristics of fisheries resources including their transboundary and shared nature. In particular, the Technical Consultation may elaborate on the following set of questions and issues:

1. Should there be an international understanding/code of practice on how and by whom fisheries management objectives should be set?
2. Should there be an international understanding/code of practice on how and by whom certification criteria are established?
3. Should there be global minimum (or framework) criteria (minimum international standards) to be followed in all eco-labelling schemes for fish and fishery products from marine capture fisheries? If so, who should establish such criteria?
4. Should standards relate to management performance, i.e. the outcome or results from fisheries management, or to the management processes or both?
5. Should standards relate only to biological and conservation criteria or should they also take into account economic, social and cultural impacts on fishworkers, fishing communities and the fishing industry? How general could the latter be?
6. Should standards include other dimensions of conservation than fish stock(s)? (e.g. fish habitats, eco-systems; energy use in harvesting and processing; etc.)

18. The feasibility of achieving fisheries management objectives through eco-labelling schemes is subject to certain requirements being met. The economic incentive created by the labelling scheme needs to be sufficiently high to be attractive to the fishery management authority and to the participants in the fishery to seek certification and cover the related fisheries management and labelling costs. The fishery management authority could rest with a State or delegated by it to a regional fisheries management organization, a private entity, a fishing industry association, a fishing community, a fishing cooperative or a combination thereof. The economic incentive may not necessarily be solely the result of a higher price and/or market share of the labelled product but could derive from financial support of the State and donor agencies including non-governmental organizations, investments into fisheries management by financial agencies including development banks, as well as through the direct gain of resource rents by the participants in the fishery and/or the management authority. Resource rents may only accrue with a time lag after the instituting of an effective management regime. The duration of this time lag would depend on various factors including the time needed to restore the abundance of the fishery resource(s) to the desired level.

19. Economic rationale would suggest that as a minimum condition for financial feasibility, the economic gain derived from higher product prices and/or market share is sufficiently high to cover the direct costs associated with the eco-labelling scheme including consumer education and costs of auditing, certification, product labelling and maintenance of chain of custody. In cases where the economic gain is less than these costs, instituting a fisheries management regime without eco-labelling would be the more cost-effective option.

20. In eco-labelling schemes, it can be assumed that economies of scale prevail because certain basic labelling costs arise irrespective of the scale of the fishery measured in total catch or revenue. These "fixed costs" accrue principally in the assessment, auditing and monitoring procedures where a minimum of expertise and staff time is needed independent from the scale of the fishery. As a consequence, the financial feasibility of certifying small, local fisheries may not be given, or could only be assured through a procedure where the labelling of fisheries with large turn-overs is used to subsidize those producing small volumes and values.

21. Consumers� product choices and their willingness to pay a higher price for an eco-labelled product will depend on their general responsiveness and capacity to address environmental concerns through their purchasing behaviour and their awareness and understanding of the specific objectives pursued through the labelling scheme. Consumers need also to be confident that these objectives are being reached through such a scheme. This requires that consumers are provided with accurate information about the labelling scheme and have trust in the procedures to (i) set objectives and establish appropriate standards and criteria; (ii) ensure compliance with these standards and criteria; and (iii) maintain the chain of custody through all stages of the product cycle.

22. In the absence of sufficient and accurate information, consumers may be misled about the environmental benefits resulting from their product choices. Consumer confusion could result, inter alia, from the existence of competing labelling schemes which are based on different sets of criteria and standards. For example, consumers may associate a label indicating that a certain species is not taken as by-catch in the capture of a target species as evidence for the sustainability of the target fishery. Consumers may also be misled about the environmental impacts of purchasing unlabelled fish and fishery products which could not be assumed, a priori, to come from unsustainable fisheries.

23. Intermediaries in the chain of supplying fish and fishery products from the producers to the consumers such as fish processing, wholesaling and retailing companies might have considerable influence in guiding the purchasing behaviour of consumers through advertising, shelf display and choice of suppliers. Their position towards eco-labelling schemes, therefore, could play a significant role in attaining acceptance of the schemes by consumers and in the provision of related information.

24. The responsiveness of consumers� product choices to environmental concerns varies greatly among countries and regions. Consumers of North America and of some European countries such as the Scandinavian countries, Germany, UK and Switzerland, are fairly responsive to eco-labelling schemes. In other regions and countries, the response is more limited because other factors are more important for purchasing decisions. As a consequence, at least in the short to medium term, the range of fisheries which might benefit from eco-labelling schemes is restricted to those which supply fish and fishery products to markets with responsive consumers.

25. The fact that the responsiveness of consumers to eco-labelling schemes varies greatly among regions and countries is likely to create an incentive to direct those fishery products to eco-sensitive markets which can become certified, whereas uncertified or uncertifiable products will be directed to eco-insensitive markets. Most of the future expansion in demand for fish and fishery products is expected to arise in Asia, Latin America and Africa whose consumers are presently not very responsive to eco-labelling of fish and fishery products. Therefore, it appears that, at least in the medium term, the extent to which eco-labelling cam serve as a tool for achieving sustainable fisheries is rather limited.

26. Eco-labelling schemes applied to marine capture fisheries could result in perverse effects if certain safeguards are not in place. While a higher price of eco-labelled products is a desired feature of labelling schemes, improved profitability could incite fishery participants to increase fishing capacity and fishing effort in the certified fishery. This could arise in situations where fishing effort and/or catch limitations cannot be strictly controlled.

27. Perverse effects could also occur if fishing capacity and fishing effort is redirected from a certified fishery to uncertified or uncertifiable fisheries, thus permitting fish stocks in the latter fisheries to be subjected to higher exploitation rates. Without safeguards to prevent the diversion of fishing capacity and fishing effort, therefore, an eco-labelling scheme may facilitate rather than reduce over-exploitation of marine fishery resources.

28. In view of the congruence between fisheries management objectives and the procedures to attain them as discussed above, the Technical Consultation may wish to consider the requirements for international guidance particularly on the following points:

1. The endorsement of eco-labelling schemes by governments and/or regional fisheries management organizations and conditions for such endorsement including avoidance of consumer confusion through competing labelling schemes
2. Maintaining the chain of custody through all stages of the product cycle
3. Safeguard measures to prevent redirection of fishing effort and fishing capacity to non-certified or non-certifiable fisheries
4. The minimum qualifications of certifying agents and a register or registers of authorized certifiers
5. The minimum tasks to be completed by certifiers in the certification process
6. Minimum requirements on the information conveyed to consumers on the objectives of the eco-labelling scheme through brochures, advertisement, and other means.
7. Minimum information requirements to be displayed on the eco-label about the fishery from which the product originates.

29. Principle 12 of the Rio Declaration on Environment and Development of 1992 explicitly refers to the requirement of non-discrimination in trade policies for environmental purposes and calls for an international consensus for environmental measures addressing transboundary and global problems. It states:

"Trade policy measures for environmental purposes should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade. Unilateral actions to deal with environmental challenges outside the jurisdiction of the importing country should be avoided. Environmental measures addressing transboundary or global environmental problems should, as far as possible, be based on an international consensus."

30. Concern has been expressed that eco-labelling could create barriers to market access, especially by producers from developing countries. Eco-labelling mandated by States would come within the scope of the rules of the World Trade Organization (WTO), specifically those contained in the Agreement on Technical Barriers to Trade (TBT Agreement) and its Code of Good Practice for the Preparation, Adoption and Application of Standards (Annex 3 of the TBT Agreement). The TBT Agreement also makes reference to private and voluntary labelling schemes and requires States to ensure that standard setting bodies, public or private, comply with the Code of Good Practice.

31. Article 2.1 of the TBT Agreement requires States to accord equal treatment among imported products and domestic products with regard to technical regulations relating to legitimate objectives including, inter alia, protection of the environment.

32. Article 2.2 requires States to ensure that technical regulations are not prepared, adopted or applied with a view or with the effect of creating unnecessary obstacles to international trade. The text further states: "For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective [inter alia environmental], taking account of the risks non-fulfillment would create." � "In assessing such risks, relevant elements of consideration are, inter alia: available scientific and technical information, related processing technology or intended end-uses of products. "

33. Technical regulations including standards for environment protection that are based on processes and production methods (PPMs) relating to the characteristics of a product are clearly covered by the provisions of the TBT Agreement. Standards for product-related PPMs aim at ensuring that environmental effects in the consumption or utilization of the product or with regard to its disposal (consumption externalities) stay within certain prescribed limits. A typical example would be a standard prescribing the lead content of gasoline. It is generally recognized that a State has sovereign rights to regulate in its own territory, and within multilateral trading rules, product-related PPMs which have detrimental environmental effects. Thus, it could legitimately restrict the importation of a product on the ground that it does not adhere to the required standard as long as the same standard applies to domestic products.

34. Eco-labelling schemes often apply the Life Cycle Approach (LCA) which assesses the environmental impact of a product through all stages from production to consumption and/or disposal. This is in line with paragraph 4.20 of Agenda 21 of UNCED which states: "Governments and international organizations, together with the private sector, should develop criteria and methodologies for the assessment of environmental impacts and resources requirements throughout the full life cycle of products and processes. Results of those assessments should be transformed into clear indicators in order to inform consumers and decision-makers."

35. LCA commonly results in standards that are based on a mixture of product-related and non-product related PPMs. The latter�s environmental effects are caused by production externalities and would typical be the focus of eco-labelling fish and fishery products with respect to aspects such as the status of the stock from which the product originates and the status of the stocks of associated species captured or killed in the harvesting process.

36. A document prepared by the WTO Secretariat on the negotiating history of the coverage of the TBT Agreement notes that "many participants [in the negotiations] were of the view that standards based inter alia on PPMs unrelated to a product's characteristics should not be considered eligible for being treated as being in conformity with the TBT Agreement."² In discussing the applicability of the TBT Agreement to non-product related PPMs for standards and technical regulations, the Committee on Trade and Environment (CTE) has so far not reached a consensus position. Some Members of the CTE suggested that the term "Standard" in the TBT Agreement is ambiguous with respect to its coverage of standards based on non-product related PPMs. Therefore, it could not be stated, a priori, that such standards are inconsistent with the terms of the Agreement.^3,4

37. From a ruling of a GATT arbitral panel it can be inferred that voluntary eco-labelling schemes are not, in principle, in contravention of existing multilateral trade rules irrespective of their coverage of PPMs unrelated to a product�s characteristics.⁵

38. There is international agreement that mandatory labelling requirements are subject to the notification provisions of Article 2.9 of the TBT Agreement regardless of the kind of information that is provided on the label. Similarly, voluntary labelling standards are subject to the notification provisions of Article 4 and Annex 3 (Code of Good Practice) of the TBT Agreement regardless of the kind of information that is provided on the label.⁶

39. In the light of the above information, the Technical Consultation may wish to discuss, inter alia, the following issues with regard to non-discrimination of eco-labelling fish and fishery products from marine capture fisheries:

1. The mandatory or voluntary nature of eco-labelling schemes
2. The requirement of avoiding unnecessary trade barriers
3. The need for scientific and technical information to assess environmental risks
4. The nature of eco-labelling standards for fish and fishery products from marine capture fisheries which constitute non-discrimination
5. The requirements for consensus and transparency in the development of eco-labelling guidelines

40. The management of many marine fisheries in developing countries poses special difficulties, particularly for small scale fisheries with large numbers of participants operating from numerous landing places concurrently exploiting multiple fish stocks. Furthermore, the capacities of fisheries administrations are often insufficient and existing infrastructure facilities inadequate for effective fisheries management. While many small-scale fisheries produce primarily for domestic markets, the catches of certain high priced species for export markets often make a significant contribution to revenue and income.

41. The management of large-scale industrial fisheries of developing countries and of countries in transition, generally, poses less difficulties but these are still substantial in many instances in view of the constraints which fisheries administrations often face. Therefore, while certification of certain specific fisheries may entail significant business opportunities, the scope of developing and transition countries to apply or adhere to eco-labelling schemes of products from marine capture fisheries is, in general, less favourable than that of developed countries. For this reason, special considerations may need to be given to allow developing and transition countries to participate in eco-labelling schemes on an equal footing. These considerations may relate to the criteria underlying the required labelling standards, specific capacity-building measures through technical and financial assistance and appropriate funding arrangements which ensure that adequate financial resources are available for marine fisheries management. In this respect, note should be taken, inter alia, of the provisions of Article 5 of the Code of Conduct for Responsible Fisheries on the special requirements of developing countries and the provisions of Article 12 of the TBT Agreement regarding the special and differential treatment of developing country members.

42. The Technical Consultation may wish to discuss the special requirements of developing and transition countries in eco-labelling schemes, in particular with regard to the following aspects:

1. The specific problems faced by developing countries and countries in transition in implementing eco-labelling standards and certification procedures;
2. The need for country-specific eco-labelling standards and certification procedures;
3. The direct costs of eco-labelling schemes arising in developing and transition countries and measures of cost-coverage;
4. The technical and financial assistance requirements of developing and transition countries to achieve sustainable fisheries; and,
5. Arrangements to finance marine fisheries management in developing and transition countries.

43. The Technical Consultation is invited to discuss and provide guidance to the issues summarized in paragraphs 17, 28, 39 and 42.