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The European Union’s Labeling Quandary

The European Commission, Europe’s executive branch, proposed a package of new rules aimed at improving market transparency.

After years of fumbling over how to regulate labels on clothing and other non-food consumer products, the European Union is stepping toward a more harmonized system. On Feb. 13, the European Commission, Europe’s executive branch, proposed a package of new rules aimed at improving market transparency, including laws that would require labeling product origin on imported goods — a topic that has caused member states to clash in the last decade.

This story first appeared in the February 22, 2013 issue of WWD.  Subscribe Today.

If the European Council and Parliament approve the legislation, it will go into effect in 2015, supported in the meantime by 20 “concrete actions” aimed at improving controls under the current legal framework. Under the proposed guidelines, goods made in the EU could be labeled either with a specific country’s name, or with a general “Made in the EU” tag, while items produced outside the borders must be labeled with specific country names.

Speaking for the Italian fashion industry, Michele Tronconi, president of Sistema Moda Italia, an organization that represents the fashion and textile industry, called the proposal “an important step toward defending the rights of consumers, and of producers with high quality standards.”

“We know that some northern European countries that no longer have major manufacturing industries would prefer to maintain the status quo, but I am confident that in the end, safeguarding transparency will prevail,” he said.

ario Boselli, president of the Camera della Moda, said he applauded the Commission’s proposal. “I am beyond happy, because the whole Italian system, based on quality and artisanship, will benefit,” he said. “Better late than never.”

Italy, which takes great pride in its fashion and design, is among the EU countries that have made greater clarity in labeling a cause célèbre over the years. Tronconi said the EU’s initial goal of “developing the internal market” and discouraging overly nationalist sentiment led to the abolition of existing national regulations for labeling product origin, without distinguishing between intra-EU and other trade.

In 2001, China joined the World Trade Organization and on Jan. 1, 2005, the 30-year-old Multi-Fiber Arrangement expired, eliminating quotas on textiles exported from developing countries to developed countries. With the sudden, large-scale influx of products from the Far East, Europe began scrutinizing its labeling regulations.

In 2003, Pascal Lamy, then European Commissioner for Trade, floated the idea of a “Made in Europe” label, mentioned in the Commission’s Oct. 29 report called “The future of the textiles and clothing sector in the enlarged European Union.”

“A ‘Made in Europe’ label could help increase the confidence of consumers, that when they are purchasing a garment they are paying a price that corresponds to the highest standards of production and style expected from European manufacturing,” stated the report. “As is the case in some major EU partners such as the U.S., Japan or China, the EU could consider, as part of its policy aimed at providing better and more information to consumers, the introduction of labeling of origin for textiles and clothing products marketed in the EU.”

The proposal floundered chiefly because of a lack of international recognition of Europe as a unified country.

In the ensuing discussions in 2004, the Commission could not get a majority to agree on a similar proposal for a “Made in Europe” label hyphenated with member countries’ names. Discussions over labeling textiles persisted for years, with mounting frustration from the European fashion industry. In Italy, companies that make national artisan expertise a selling point insisted they were losing business to cheaper products that were not labeled or mislabeled.

Italian products “are associated with the Italian way of life and the three Fs: food, fashion and furnishing,” noted Boselli. “When people buy an Italian product, whether it’s a tie or a design object, they feel like they are joining the club.”

The conflict lay mostly with Austria and Germany, both of which heavily delocalized textile production, said Tronconi. The German press, for instance, has revealed that many lederhosen — the traditional Bavarian leather breeches — are now actually made in Sri Lanka, China or Romania and sold cheaply to unsuspecting tourists. This is one reason, Tronconi argued, why countries like Romania have sided with Austria and Germany in EU debates, whereas Italy, Spain, Portugal, Greece and France have all been in favor of requiring country-of-origin labels.

Eurobarometer polls support this assertion: A significant majority of southern Europeans agree the EU should be more actively “protecting European Union products from nonmember countries’ products.”

The Treaty of Lisbon, an amendment to the treaties at the basis of the EU constitution, became effective in 2009 and granted more power to the European Parliament. Over the past several months, arguments over labeling came to a boil when the European Council moved in October 2012 to cease discussions, and in a plenary debate Jan. 17, several members of Parliament accused northern European multinationals with blocking labeling regulations to cover up environmental and social dumping.

Antonio Tajani, the Commission’s vice president and commissioner for industry and entrepreneurship, said the Feb. 13 proposal — which if passed will affect not only textiles, but toys, cars, household gadgets and cosmetics — was needed to “reap the full economic benefit of the single market.”

“We are convinced that consumers, businesses and national authorities will greatly benefit from clear and consistent rules across the single market, with more effective market surveillance and improved traceability of products,” added Tonio Borg, the commissioner for health and consumer policy.