LKoganPresentationDr aft

The Impact of Globalization on Our Industry: 

The Impact of Globalization on Our Industry Lawrence A. Kogan, Esq.

National Wooden Pallet & Container Association: 

National Wooden Pallet & Container Association 2005 Annual Leadership Conference & Exposition Education Session 1

Post World War II International Order/Paradigm: 

Post World War II International Order/Paradigm Bretton Woods Institutions International Monetary Fund and World Bank United Nations Offices, agencies and related international organizations GATT/WTO

Post World War II International Order/Paradigm - continued: 

Post World War II International Order/Paradigm - continued These Organizations’ objectives were: Free, Stable Capital Markets & Investment Individual Political Freedoms & Basic Human Rights/Democracy Free Trade & Economic Development

The Modern Era of Globalization: 

The Modern Era of Globalization As the Cold War was ending, it was believed: There would no longer be ideological divisions There would be Peaceful co-existence Nations would pursue their economic interests There would be economic and political interdependence Yet, even before this time, Globalization had prompted many fears leading to UN action

The Modern Era of Globalization (continued): 

The Modern Era of Globalization (continued) Economic, Social & Cultural Fears: A world full of profit-seeking corporations Market failures due to uncontrolled interconnected capital flows Strains on social fabric caused by widening income gaps between rich and poor Loss of cultural identity (McWorld factor)

The New Paradigm of Sustainable Development : 

The New Paradigm of Sustainable Development Environmental Fears 1972 Club of Rome Report – ‘Limits to Growth’ 1987 Report of the World Commission on Environment and Development – ‘Our Common Future’ Redefines the term ‘development’ Environmental concerns -- Economic growth cannot continue to take place at the expense of the earth’s natural capital (its stock of renewable & nonrenewable resources)

The New Paradigm of Sustainable Development - continued : 

The New Paradigm of Sustainable Development - continued 1992 United Nations Conference on Environment and Development (UNCED) Rio de Janeiro – ‘Earth Summit’ Rio Declaration’ on Environment and Development Non-binding broad principles providing the basis for establishing international environmental norms and expectations during the past 13 years Agenda 21 A non-binding global plan of action for more sustainable societies that is ostensibly in favor of economic growth, in addition to social development and environmental protection             

The New Paradigm of Sustainable Development - continued : 

The New Paradigm of Sustainable Development - continued 2002 World Summit on Sustainable Development (WSSD) Endorsed UNEP Strategic Approach to International Chemicals Management (SAICM) Implementation -- Its goal is to ensure that, by 2020, chemicals are used and produced in ways that lead to the minimization of significant adverse effects on health and environment Cooperation between UNEP, IOMC, IFSC, etc.

The New Paradigm of Sustainable Development - continued : 

The New Paradigm of Sustainable Development - continued 2002 World Summit on Sustainable Development (WSSD) Adopted Plan of Implementation stipulated that all countries should promote sustainable production and consumption patterns Encouraged all countries to develop a 10 year timeframe for inducing such shift Promotion of reduction, reuse and recycling of waste (3 ‘R’s) Life Cycle Assessment

The New Paradigm of Sustainable Development - continued : 

The New Paradigm of Sustainable Development - continued The world economy must learn to live off its interest reducing energy use; fuel shifting from carbon-based fuels; employ sustainable systems of resource management, which requires sweeping restrictions on use of resources; wide-ranging interventions in governance and behavior of multinational companies; AND restrictions on international trade are necessary

The New Paradigm of Sustainable Development - continued : 

The New Paradigm of Sustainable Development - continued It’s a matter of morality Change basis attitudes about material wealth, abundance and waste It’s a matter of limiting economic growth Limit individual production and consumption It’s no longer a matter of national sovereignty We know better than developing countries -- Companies Have a Role to Play Corporate Social Responsibility (CSR)

The New Paradigm of Sustainable Development - (continued) CSR: 

The New Paradigm of Sustainable Development - (continued) CSR Business decision-making linked to: ethical values; compliance with legal requirements; AND respect for people, communities and the environment Operating a business in a manner that EXCEEDS the ethical, legal, commercial and public expectations society has of business Pursuant to a comprehensive set of policies, practices and programs

The New Paradigm of Sustainable Development - CSR - (continued) : 

The New Paradigm of Sustainable Development - CSR - (continued) United Nations Global Compact Office Secretary General Kofi Annan’s Office European companies leading the charge Development of Supply Chain Management Assisted by civil society - International Labor Organization Environmental non-governmental organizations Human Rights Groups

The Precautionary Principle : 

The Precautionary Principle Rio Declaration Principle 15: “In order to protect the environment, the ‘precautionary approach’ shall be widely applied by States according to their capabilities. Where there are threats of serious or irreversible damage, lack of full scientific certainty shall NOT be used as a reason for postponing cost effective measures to prevent environmental degradation.”

The Precautionary Principle - continued : 

The Precautionary Principle - continued Wingspread Version: “[Precaution] is not simply the prevention of manifest or predicted results that have been scientifically proven. Rather, the precautionary principle goes beyond the notion of prevention in the sense that it insists that policymakers move to anticipate problems before they arise or before scientific proof of harm is established.”

The Precautionary Principle - continued : 

The Precautionary Principle - continued Consequences of Wingspread Version: ‘Better Safe Than Sorry’ ‘I Fear, Therefore I Shall Ban’ Reversal of burden of proof from government to show ‘harm’ to industry to show ‘safe’ One is guilty until proven innocent when tampering with the environment Perceived Risks vs. Actual Risks Hazard assessment vs. Risk assessment

The Precautionary Principle - continued : 

The Precautionary Principle - continued Consequences of Wingspread Version: No economic cost-benefit analysis Broad duty of care to take measures not to harm the environment or to human, plant or animal health Best available techniques / ‘state of the art’ would no longer be enough as a defense in the event of environmental or health damage Increased administrative and compliance costs Increased liability costs – imposes strict statutory liability for damages

International Organizations –Environment: 

International Organizations –Environment UN Organizations: Food & Agriculture Organization (FAO) Administers IPPC Secretariat World Health Organization (WHO) – Scientific body focusing on effects of environment on human health. Administers IFCS United Nations Environment Program (UNEP) Supports Multilateral Environmental Treaties Promotes Sustainable Development

International Organizations –Environment (continued): 

International Organizations –Environment (continued) International Labor Organization (ILO) Develops and monitors compliance with labor rights treaties Other: Organization for Economic Cooperation & Development (OECD) Tracks all HPV chemicals & assessments; SIDS

WTO Agreement on Application of Sanitary and Phytosanitary (SPS) Measures: 

WTO Agreement on Application of Sanitary and Phytosanitary (SPS) Measures Purpose of the SPS Agreement Scope Implementation/Administration of SPS Agreement

Purpose of the SPS Agreement: : 

Purpose of the SPS Agreement: establishes a multilateral rules-based system by which national/regional SPS measures are to applied; aims to achieve harmonization of national SPS measures; recognizes the sovereign right of all WTO Members to employ SPS measures to protect human, animal or plant life or health;

Purpose of the SPS Agreement,Continued: : 

Purpose of the SPS Agreement, Continued: permits application of SPS measures provided: they are not arbitrary or unjustifiable; they do not discriminate between otherwise ‘like’ or ‘similar’ domestic and imported products or between otherwise ‘like’ or ‘similar’ imports from different countries; AND they are not utilized as disguised restrictions on international trade

Scope of the SPS Agreement: : 

Scope of the SPS Agreement: Covers all ‘sanitary’ and ‘phytosanitary’ (phyto) ‘measures’ that may directly or indirectly affect international trade, particularly those intended: to protect animal or plant life or health from risks from the entry, establishment or spread of ‘pests’, diseases, disease-carrying organisms or disease-causing organisms;

Scope of the SPS Agreement - Continued: : 

Scope of the SPS Agreement - Continued: to protect human or animal life from risks arising from additives, contaminants, toxins or disease-causing organisms in foods, beverages or foodstuffs; to protect human life or health from risks arising from diseases carried by animals, plants or products thereof, or from the entry, establishment or spread of pests; or to prevent or limit other damage from the entry, establishment or spread of pests.

Scope of the SPS Agreement - continued: : 

Scope of the SPS Agreement - continued: ‘Measures’ -- all relevant decrees, regulations, requirements and procedures including, among other things: End product criteria; processes and production methods (PPMs); quarantine treatments, including relevant requirements associated with transport of animals or plants or materials associated with their survival; sampling procedures and methods of ‘risk assessment’; and packaging and labeling requirements directly related to food safety

Implementation/Administration of the SPS Agreement: 

Implementation/Administration of the SPS Agreement Committee on SPS Measures Facilitates consultations and negotiations Encourages the use of relevant International Standards Promotes integration of national and international approaches Secures best available scientific and technical advice from relevant international organizations specializing in SPS protection

Implementation/Administration of the SPS Agreement - continued: 

Implementation/Administration of the SPS Agreement - continued International Organizations: Codex Alimentarius Commission (human life & health – food safety) International Office of Epizootics (animal life & health or zoonoses) Secretariat of the International Plant Protection Convention (plants and plant products)

International Plant Protection Convention (IPPC): 

International Plant Protection Convention (IPPC) Achieving “biosecurity” while facilitating international trade Biosecurity International Trade Governance Secretariat Standards Committee

International Plant Protection Convention (IPPC) - continued: 

International Plant Protection Convention (IPPC) - continued Biosecurity Food Safety Conservation of the Environment Sustainability of Agriculture

International Plant Protection Convention (IPPC) - continued: 

International Plant Protection Convention (IPPC) - continued International Trade International Standards developed with IPPC Scientific/technical justification Provisional Emergency measures in absence of scientific certainty of risk Choose least trade restrictive policy

International Plant Protection Convention (IPPC) - continued: 

International Plant Protection Convention (IPPC) - continued IPPC Governance Interim Commission on Phytosanitary Measures (ICPM) IPPC Secretariat Standards Committee

IPPC Governance: 

IPPC Governance Interim Commission on Phytosanitary Measures (ICPM) Comprised of Treaty Party Representatives Adopts ISPMs

IPPC Governance: 

IPPC Governance IPPC Secretariat Standards Activity Coordination Information Exchange Technical Assistance

IPPC Governance: 

IPPC Governance IPPC Standards Committee Assists in development of ISPMs Manages Standard-Setting Process

WTO Technical Barriers to Trade Agreement: 

WTO Technical Barriers to Trade Agreement Purpose of the TBT Agreement Scope of the TBT Agreement Major Principles

Purpose of the TBT Agreement: 

Purpose of the TBT Agreement To further the GATT 1994 Objectives To encourage development of international standards To promote international harmonization of national / regional regulations and standards To prevent regulations and standards from creating unnecessary obstacles to trade

Purpose of TBT Agreement (continued): 

Purpose of TBT Agreement (continued) Recognizes sovereign right to take measures to protect human, animal or plant life or health, provided: they are not arbitrarily or unjustifiably applied in a discriminatory manner Recognizes international standardization can contribute to technology transfers

Scope of TBT Agreement Very Broad: 

Scope of TBT Agreement Very Broad Covers all technical regulations, standards and conformity assessment procedures other that SPS measures Covers products, processes and services Covers all products, including industrial AND agricultural products Covers all standards prepared by recognized standardization bodies, whether or not they are based on consensus

Scope of TBT Agreement Definitions: 

Scope of TBT Agreement Definitions Technical Regulation A document laying down product characteristics or their related processes and production methods (PPMs), including applicable administrative provisions AND With which compliance is MANDATORY May also include or deal exclusively with: terminology - packaging - labeling symbols - marking

Scope of TBT Agreement Definitions (continued): 

Scope of TBT Agreement Definitions (continued) Standards A document approved by a ‘recognized body’ that provides for common & repeated use, rules, guidelines or characteristics AND With which compliance is NOT MANDATORY May also include or deal exclusively with: terminology - packaging - labeling symbols - marking

Scope of TBT Agreement Definitions (continued): 

Scope of TBT Agreement Definitions (continued) Conformity Assessment Any procedure used directly or indirectly to determine that relevant requirements in technical regulations or standards are fulfilled May include, among other things, procedures for: sampling, testing & inspection evaluation verification & assurance of conformity registration, accreditation, and approval

The TBT Agreement Major Principles(Tech Regs): 

The TBT Agreement Major Principles(Tech Regs) National Treatment No less favorable treatment than... No Unnecessary Obstacles to Trade No more trade restrictive than necessary to fulfill a legitimate objective Considering the risks of non-fulfillment When assessing the risks, consider: available scientific and technical info related processing technology intended end-uses of products

The TBT AgreementMajor Principles (Tech Regs) (continued): 

The TBT Agreement Major Principles (Tech Regs) (continued) Use Relevant International Standards Rebuttable Presumption of No Obstacle to Trade Use Equivalent National Standards of other WTO Members, Even if Differ from your own If Develop Own Which May Have Significant Effect on Trade, Provide Justification Early Detailed Notification Transparency

The TBT AgreementMajor Principles (Standards) (continued): 

The TBT Agreement Major Principles (Standards) (continued) Do NOT take measures that encourage local government and non-governmental bodies to act inconsistent with ‘Code of Good Practice’ Take reasonable measures to ensure that they follow the ‘Code of Good Practice’ WTO Members are held responsible for the activities of such bodies whether or not they have accepted the ‘Code of Good Practice’

The TBT AgreementMajor Principles (Standards) (continued): 

The TBT Agreement Major Principles (Standards) (continued) Code of Good Practice National Treatment No Unnecessary Obstacles to Trade Use Relevant International Standards Specify Performance-Based (Rather than Process-Based) Standards Notification Transparency Market Relevance

What is The European Union Trying to Accomplish? : 

What is The European Union Trying to Accomplish? ‘Enlightened’ Brussels bureaucrats are influenced by politically strong anti-industry, anti-free market, anti-private property European Green groups many of whom previously lived behind the Iron Curtain They are enacting more and more regulation to address their aversion to health and environmental risks and to redistribute wealth The EU is demographically older than the U.S.

What is The European UnionTrying to Accomplish? (continued) : 

What is The European Union Trying to Accomplish? (continued) The activities of the Greens and of the Brussels regulators have caused labor costs, taxes and regulatory costs to rise and to be absorbed by European industry EU industry subject to regional expectations of Corporate Social Responsibility Can’t fight the Greens and socialists Lack credibility with a skeptical anti-business public

What is The European UnionTrying to Accomplish? (continued): 

What is The European Union Trying to Accomplish? (continued) EU companies have thus increasingly been placed at an economic competitive disadvantage vis-à-vis the U.S. Since 2000, Europe has publicly sought to surpass U.S. economic competitiveness by 2010 The ‘Lisbon Agenda’ - “to become the most dynamic and competitive knowledge-based economy in the world”

What is The European UnionTrying to Accomplish? (continued): 

What is The European Union Trying to Accomplish? (continued) EU R&D & capital investment has dropped On the one hand, EU companies seek the assistance of the U.S. to fight this EU/Green regulatory juggernaut But, on the other hand, EU companies hide behind these Green and Social rules and actually use them as regional trade barriers for their relatively weaker industries

What is The European UnionTrying to Accomplish? (continued): 

What is The European Union Trying to Accomplish? (continued) EU industry interests have converged with those of EU regulators and EU Greens under the guise of protecting the environment and human health to: EXPORT the high cost European regulatory model globally throughout the global supply chains This ‘levels the global economic playing field’ by creating a negative competitive advantage

What to Do?: 

What to Do? Seek expert advice Monitor European and Chinese technical regulations and product standards Become active in and monitor the activities of international standards bodies Organize and communicate within your industry to focus on international issues Reach out to & work with other affected industries in the U.S. and those abroad

What to Do?: 

What to Do? Work with the USG to craft a proactive strategy -- to date it has been only reflexive Reach out to international think-tanks, academics and advocacy groups that support a rules-based system that provides opportunities for business

What to Do?: 

What to Do? We are not an island International laws already affect business conducted across borders; and it can also affect businesses here if U.S. law changes to satisfy it U.S. industry can no longer ignore international rules that govern the international trade system -- if we do, we do so at our own peril 2002 Wall Street Journal Article