PPMs Are Back: The rise of new sustainability-oriented trade policies based on process and production methods

The paper examines the rise of trade measures based on non-product-related process and production methods (PPMs) used to address climate change, biodiversity loss, and human rights. It analyzes the legal requirements for such measures to be WTO-compliant, highlighting the importance of non-discrimination and proportionality. The authors provide examples of current PPM-based policies, including forced labour import bans, deforestation-free supply chain regulations, and sustainability-linked tariff preferences in regional trade agreements, while noting ongoing WTO disputes between the EU, Indonesia, and Malaysia over biofuels.

• Non-product-related process and production methods (PPMs) are techniques used to produce goods that impact the environment, human health, or animal welfare but do not alter the physical characteristics or quality of the final product.
• Regulatory distinctions based on PPMs are not inherently illegal under WTO law, but their compliance depends on their legal architecture, specifically whether they meet the 'chapeau test' under GATT or are 'necessary' for a 'legitimate policy objective' under the TBT Agreement.
• Sustainability-oriented PPM measures are most likely to withstand WTO scrutiny if they are proportional, apply equally to domestic and foreign producers, are context-sensitive, and are accompanied by financial and technical support for developing countries.
• Forced labour import bans, such as the U.S. Uyghur Forced Labor Prevention Act (UFLPA), are increasing in use; however, to be WTO-compliant, such bans should be non-discriminatory regarding geographical origin and based on evidence that they are the least trade-restrictive option.
• Recent regulations targeting deforestation-free value chains, such as the European Commission's 2021 proposal and the UK's 2021 Environment Act, function as PPMs by differentiating commodities based on production methods. Compliance is more likely if these are based on international standards, such as those from the UN Food and Agriculture Organization.
• Including PPM-based measures in regional trade agreements (RTAs) may be a more direct path to WTO compliance than unilateral policies. An example is the 2018 EFTA–Indonesia Comprehensive Economic Partnership Agreement (CEPA), which links preferential tariff treatment for raw palm oil to sustainability objectives.
• The WTO is shifting from a trade-liberalization paradigm toward a trade-regulation paradigm that incorporates sustainability concerns, influenced by the 2030 Agenda for Sustainable Development.

APA

Oeschger, A., & Bonanomi, E. B. (2023). PPMs Are Back: The rise of new sustainability-oriented trade policies based on process and production methods. International Institute for Sustainable Development. https://www.iisd.org/articles/policy-analysis/ppms-rise-new-sustainability-oriented-trade-policies-process-production-methods

Chicago

Oeschger, Andreas, and Elisabeth Bürgi Bonanomi. PPMs Are Back: The rise of new sustainability-oriented trade policies based on process and production methods. International Institute for Sustainable Development, 2023. https://www.iisd.org/articles/policy-analysis/ppms-rise-new-sustainability-oriented-trade-policies-process-production-methods.

Wikipedia

{{cite report |last1=Oeschger |first1=Andreas |last2=Bonanomi |first2=Elisabeth Bürgi |title=PPMs Are Back: The rise of new sustainability-oriented trade policies based on process and production methods |publisher=International Institute for Sustainable Development |date=14 April 2023 |url=https://www.iisd.org/articles/policy-analysis/ppms-rise-new-sustainability-oriented-trade-policies-process-production-methods |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{oeschger2023ppms, author = {Oeschger, Andreas and Bonanomi, Elisabeth Bürgi}, title = {{PPMs Are Back: The rise of new sustainability-oriented trade policies based on process and production methods}}, institution = {International Institute for Sustainable Development}, year = {2023}, month = apr, url = {https://www.iisd.org/articles/policy-analysis/ppms-rise-new-sustainability-oriented-trade-policies-process-production-methods}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }