EU divided over country labeling issue

07 Jun '11

4 min read

The issue of country-of-origin labeling seems to have divided the European Union. The proposal to make it mandatory for the companies to have 'Made in' tags on 11 categories of goods, including textiles, has already been approved by the EU Parliament and the European Commission.

The plan now awaits approval of the individual EU member countries. Once it is approved by the majority of the EU nations, 'Made in' tags would become mandatory across Europe, initially for a trial period of five years.

While the north European countries which sell imported items are mostly against the plan, the southern countries which have their own manufacturing base are in favour.

The current EU regulations concerning product-labeling are one of the world's most elaborate and it is surprising that it does not include the country-of-origin.

Countries like Japan and China mandate that the imported apparels should have a 'Made in' tag, to help domestic manufacturers to compete with foreign products. The US also has the country-of-origin labeling since the 1930s.

EU surveys estimate that nearly 25 percent of consumers base their choice of product on its origin. Hence, the fact that the plan has got clearance from the EU Parliament and the European Commission reflects the EU's concerns due to its reviving economy and a fear of losing jobs to competition abroad.

However, multinational companies are opposing the plan as it would add up to €2, or nearly US$ 3, an item, to their manufacturing cost because it will need more people to do the job. Secondly, such labels are vulnerable to counterfeiting and an origin tag does not always guarantee that the product is from the mentioned country. Thirdly, they create excessive paperwork. Fourthly, they fail to convey the complex modern manufacturing process which involves production in several stages distributed across various countries.

Surprisingly, the EU plan is also being opposed by some of the countries which are outside the EU, and have similar laws. For example, China feels that if the EU plan becomes a law, it can affect trade relations between the EU and itself, as it will make European investors to rethink prior to investing in China.

For US, the law would cover only a small part of its exports, but for low-cost countries like Tunisia, Turkey, and the other export-based Asian economies, the law would cover most of their exports.

In 1981, a judge had struck down the origin labeling laws in individual EU member countries as the law was against provisions for a single, open market. Since then, all attempts to bring in a new labeling law have been opposed by business groups and have come to a naught.

According to statistics from Global Trade Information Services, the top five exporters of clothing accessories and apparels to the EU in 2010 were China (US$ 20.1 billion), Turkey (US$ 3.8 billion), India (US$ 3 billion), Bangladesh (US$ 2.3 billion), and Tunisia (US$ 2.2 billion). These countries will be the most affected if the EU plan to make country labeling mandatory, comes into force.

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