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Article Excerpt
[The embrace of carbon footprinting and local food sourcing as environmental measures designed to reduce greenhouse gas emissions poses a potential threat to Australian food export industries which are geographically distant to market, like the Australian wine industry. Food transport costs can add considerably to a product's carbon footprint and detrimentally affect sales. The raison d'etre of carbon footprinting is to encourage responsible environmental production methods. However, the author questions whether this aim can be effectively fulfilled and whether carbon footprinting and local food sourcing policies are instruments of anti-globalisation sentiment and thus can be challenged under the World Trade Organization framework.]
CONTENTS I Introduction II The Australian Wine Industry: A Snapshot III Carbon Footprinting, Food Miles, Globalisation and Localisation A Globalisation and Localisation B Food Miles C Carbon Footprinting IV Concerns Generated by Carbon Footprinting and Food Miles A Erosion of Competitive Advantage B Unwarranted Discriminatory Effects C Prohibitive Costs of Implementing Carbon Footprinting V WTO: Potential Redress A Article III:4 of GATT 1994 1 Are Food Products Such As Wine with Carbon or Food Mile Labels 'Like' Wine without Such Labels? 2 Does Voluntary Carbon Footprinting Coordinated and Supported by the Government Amount to a Requirement? 3 Does the Voluntary Imposition of Food Miles by Highly Consolidated Retailers and Wholesalers, though Unsupported by Government, Amount to a Requirement? 4 Does Food Miles Labelling or Carbon Footprinting Lead to Discrimination against Imported Products? B The TBT Agreement VI Conclusion
I INTRODUCTION
When the respected British newspaper The Times called on its readers to purchase French wine instead of New Zealand wine as part of a 'low carbon diet
masterplan', (1) New Zealand winemakers soon realised the threat that this exhortation posed to their export-driven and geographically isolated industry. New Zealand Winegrowers, the national wine industry body, responded with press releases attacking what was characterised as a myopically focused approach to environmental sustainability, while simultaneously extolling the New Zealand wine industry as clean, green and headed toward carbon neutrality. (2) Government ministers also came to the industry's defence with press releases of their own attempting to debunk the concept of food miles. (3)
New Zealand Winegrowers and the New Zealand Government were greatly assisted by a report prepared by a small group of academics at Lincoln University, (4) which examined the carbon footprint of a number of key New Zealand export products using a life cycle assessment approach that calculated total energy arising from production and processing, as well as transportation. Their report found that the energy cost of producing food such as lamb, apples and onions in the United Kingdom was significantly greater than the carbon dioxide ('C[O.sub.2]') emissions generated by transportation between New Zealand and the UK. Another report from the UK found that C[O.sub.2] costs for freighting food by sea and air over long distances were trivial in comparison to the energy emissions of domestic food transport. (5)
Given that Australia, like New Zealand, is geographically isolated from most of its export markets, with an average of over 18 000 kilometres between point of shipment and market, the debate over food miles is of equal concern to the Australian wine industry. (6) Indeed, notwithstanding the dubious connection between distance to market, C[O.sub.2] emissions and other indicators of environmental sustainability, major wine retailers--such as ASDA and Tesco--have announced a commitment to purchase as much locally produced food as possible. This is in addition to mandating the labelling of air-freighted products. (7) Furthermore, despite the lack of evidence showing that locally sourced food (including wine) has less environmental impact than imported food, transport costs remain a key target for the European Commission in its bid to cut C[O.sub.2] emissions. (8)
While the position of wine retailers in the United States is less rigorous in respect of the environmental credentials of imported wine, (9) one major and influential retailer, Wal-Mart, has recently introduced a 'Global Sustainable Sourcing Initiative', committing it to prefer suppliers that aggressively reduce C[O.sub.2] emissions and use recycled or recyclable packaging. (10) This could also lead to implications for the Australian market.
Apart from the adoption of local food sourcing policies by individual retailers, the UK government has encouraged the development of a method for measuring the paddock-to-plate carbon footprint of individual products, which incorporates, inter alia, carbon emissions generated by transport to market. As this commentary will later show, carbon footprinting is a more accurate measure of environmental sustainability than food miles.
The embrace of local food sourcing and carbon footprinting in key export markets for Australian wine has evolved from a combination of consumer concern, the advent of carbon budgeting (11) and carbon trading, and 'soft' regulation--that is, by corporate social responsibility rather than explicit directive. (12) Thus, private rather than public standards have been predominant. In 2007, however, the UK Parliament passed the Sustainable Communities Act 2007, which aims to devolve power to local authorities to develop plans that will result in local sourcing of goods and services, the implementation of measures to conserve energy and an increase in the growth of organic farm production and the local food economy. Facilitating localisation through planning and resource management is not the only available regulatory strategy for promoting or mandating carbon footprinting. Other options include mandatory labelling, mandatory local food sourcing targets, mandatory carbon footprint standards for specific products, prohibiting imports that do not satisfy carbon footprint targets, and the discriminatory use of taxation and subsidies. (13) The UK Parliamentary Environmental Audit Committee is currently conducting an inquiry into some of these matters. (14)
By directly or indirectly encouraging discrimination against products originating in geographically distant markets, however, importing states risk breaching the Marrakesh Agreement, (15) and in particular the General Agreement on Tariffs and Trade (16) and the TBT Agreement. (17) Although the objective of sustainable development has been embedded within the World Trade Organization framework, (18) under these Agreements environmental measures must be WTO compliant and must not constitute disguised restrictions on international trade. (19) Arguably, discriminating against food products on the basis of food miles without scientific evidence establishing a link between long distance transport and negative impact on sustainability amounts to a disguised restriction on international trade. Alternatively, adopting a mandatory carbon footprinting framework which imposes significant cost upon exporters in distant markets discriminates unnecessarily against those exporters and creates a substantial impediment to international trade.
This commentary will examine whether the above contentions are correct within the context of the Australian wine industry and current developments apropos carbon footprinting and food miles in Australia's key export markets. The Australian wine industry provides an interesting case study on a number of grounds:
1 it has strong, well-established environmental credentials and is proactive in developing standards including carbon footprinting;
2 it is export driven; and
3 it is highly consolidated and thus reflects general trends toward corporatisation and globalisation within modern food systems.
However, it should be borne in mind that much of the discussion will apply to the food export activity of any country with distant markets. More philosophically, the discussion also reflects upon the tensions that the food miles debate evokes between globalisation and localisation, and between free trade and desired social or environmental outcomes.
The first half of the commentary commences with a discussion of the features of the Australian wine industry, especially its environmental credentials. The commentary then examines the divergence between the forces of globalisation and localisation observed in international food trade and their relationship to the food miles and carbon footprinting debate. Recent developments in formulating standards for carbon footprinting and their potential application to the Australian wine industry are discussed. Likely objections to the imposition of food miles labelling or carbon footprinting are then outlined.
In the second half of the commentary, the objections considered earlier are incorporated into a discussion of whether food miles labelling or carbon footprinting are consistent with WTO rules, especially art III:4 GATT 1994 and the TBT Agreement. Insofar as art III:4 GATT 1994 is concerned, matters considered in this part of the commentary include whether products with carbon footprint or food miles labelling are 'like' products without such labelling, whether food miles labelling or carbon footprinting accords less favourable treatment to imported products than domestically produced products and whether environmental and public health exceptions to the national treatment principle embodied within art XX GATT 1994 apply. The discussion regarding the TBT Agreement considers whether current regulatory and private measures concerning food miles and carbon footprinting amount to laws, regulations or requirements or whether they fall under the rubric of standards. Depending upon that categorisation, the commentary also considers what obligations might thus apply to their formulation and application.
The commentary's conclusion is that far more work needs to be done to determine the costs and benefits of carbon footprinting before it becomes standardised or incorporated into regulation. Food miles labelling and other local food sourcing policies without objectively causal links to environmental or other public health benefits are firmly rejected.
II THE AUSTRALIAN WINE INDUSTRY: A SNAPSHOT
The pattern of ownership and participation in the Australian wine industry has undergone substantial change since the mid-1980s. Currently, the industry is dominated by five large wine companies--Constellation-BRL Hardy, Orlando Wyndham, Berringer-Blass (Fosters), McGuigan-Simeon and Casella--which account for 60 per cent of branded case output. (20) About 2000 small to medium wineries compete for the remaining 40 per cent of the market, with a large number of those wineries producing less than 100 tonnes per annum. (21)
The above pattern of consolidation has also been a significant feature of wine retailing. In the past several years, supermarket chains Coles and Woolworths have been acquiring large numbers of wine merchants and liquor outlets, expanding their combined market share to 46 per cent of all wine sales. (22) Consolidation is even more marked in Australia's export markets, particularly in the UK, where retail chains like Tesco and Sainsbury's hold approximately 75 per cent of the retail wine market. Wine wholesaling in the US is also rapidly consolidating. (23) Analysts predict further mergers in the global wine industry as large retailers want fewer suppliers and a narrower, less geographically diverse portfolio. (24)
In 2005-06, the value of Australian food exports was AU$23.8 billion with the export of wine accounting for a significant 12 per cent of that value. (25) Although falling substantially behind Italy, France and Spain, the Australian wine industry now holds the fourth largest volume share of world wine exports. (26) Relative to total production, the Australian wine industry is heavily dependent upon export earnings. Currently, approximately 66 per cent of total wine production is exported. (27)
In terms of export strategy, the Australian wine industry is relatively unique. Unlike many other industries where marketing efforts are fragmented between firms, there has been a concerted effort by Australian winemakers, industry bodies and the Australian government to jointly engage in the development of new markets and to build 'Brand Australia'. (28) To date the strategy has been highly successful. In 2006, the Country Brand Index named Australia as the world's most recognised country brand. (29)
Cooperation has also been a hallmark of research and development in the Australian wine industry. Research and development are funded on an industry-wide basis through statutory levies on grape growers and winemakers, exacted under the Primary Industries (Excise) Levies Act 1999 (Cth), and supported by matching Commonwealth government funding and private sector partnerships. Such public funding underwrites the work of the Grape and Wine Research and Development Corporation ('GWRDC') and, through that body, the Australian Wine Research Institute and the Cooperative Research Centre for Viticulture. Funds allocated by the GRWDC for 2005-06 amounted to AU$22.413 million. (30)
A significant proportion of the research in the wine industry has been directed towards sustainable grape growing and wine production practice, which in turn has been supported by industry wide environmental strategies and policies. (31) Environmental guidelines have been produced for sustainable management of fertiliser and soil, water use, pests and chemicals, and vehicle equipment and machinery in viticulture. (32) Mitigation of, and adaptation to, climate change insofar as it impacts upon grape phenology, water supply, wine quality and other key elements of the wine industry has also recently been a focus of concern and research, partly as a result of market demand, but principally as a result of the threat that climate change poses to the ongoing viability of an industry inextricably linked to climatic forces. (33)
In response to the demand for sustainability (including carbon sustainability), eco-efficiency agreements have been entered into by industry bodies such as the Winemakers Federation of Australia, and state winemaking bodies, such as the South Australian Wine Industry Association, whereby the associations have agreed with the Commonwealth Government to undertake work with their members to increase efficiency and reduce their environmental impact. (34) An audit of the Australian wine industry in 2003 revealed broad implementation of the industry environmental policies among viticulturalists and winemakers. (35) The majority had established and developed environmental management systems, eco-efficiency and greenhouse gas abatement initiatives, cleaner production methods and supply chain management programs, while having implemented environmental stewardship undertakings. (36)
A wine industry stewardship program has also been established to ensure that the Australian wine industry is able to meet or exceed the environmental assurance requirements of export markets. (37) In conjunction with that program, the Winemakers' Federation of Australia--together with the Wine Institute of California, New Zealand Winegrowers and Integrated Production of Wine South Africa--has commissioned a Greenhouse Gas' Accounting Protocol for the International Wine Industry. (38) The development of the protocol is a response to several factors: market demands for information about carbon impact; predicted mandatory reporting requirements; future implementation of an emissions trading scheme; and the need...
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