Technical Barriers to International Trade a new agenda, a

Technical Barriers to International Trade: a new agenda, a new reality Barbara Kotschwar Trade Unit, Organization of American States Presentation to Seminar on Strategic Standardization Catholic University of America November 27, 2000 Standards and the new trade agenda  Why should trade policy people care about standards? – Positive effects on trade – Negative effects on trade – Increasing role of standards in trade The OECD estimates that 80% of goods traded are subject to some standards-related measure Standards: Impact on Trade FOR CONSUMER WELFARE: O Information Transmitted in a Consistent and Predictable Format O Comparison of Products and/or Services on a Common Basis O Mixing and Matching of Products O Environmental Cleanliness and Product Safety Ensured Standards: Impact on Trade FOR PRODUCER WELFARE: Economies of Scale in Output O Parts and Components Combined Efficiently in Production O Technology Embodied in Products and Processes Diffused O Reference Tool for Organizing Production Process O Standards: Impact on Trade  Standards would be unable to fulfill these purposes without confidence that claims for conformity are justified.  Conformity assessment procedures are those by which products and processes are evaluated and determined to conform to particular standards.  Conformity assessment is a central aspect of the use of standards Standards: Impact on Trade  Role of standards is key in defining the contestability of markets Barriers arise from heterogeneity across national markets of product and process standards, technical regulations, conformity assessment procedures – products may face several levels of testing – foreign products may be denied entry through lack of recognition of equivalency of product or testing procedures – barriers at certification or accreditation stage  Standards: Impact on Trade  In a 1996 study, OECD economists found that differing standards and technical regulations, combined with the cost of testing and compliance certification can constitute between 2 and 10 percent of overall production costs – not an insignificant amount! The new trade reality Changes in communications and transportation technology  Changes in national trade policy: Unilateral reduction/elimination of tariffs and QRs  8 successive rounds of multilateral trade liberalization  The new trade reality: declining communication and information costs Cost of 3-minute call from New York to London Cost of a computer 20000 15000 10000 5000 0 1970 1980 1990 1999 35 30 25 20 15 10 5 0 1970 1980 1990 Source: IMF, WEO The new trade reality: trade liberalization Average Latin American tariff, 1986-1998  40 35 30 25 20 15 10 5 0 1986 1990 1992 1994 1996 1998 In Latin America, tariff schedules have been rationalized and tariffs have fallen from an average 40% in 1986 to a current level of 1112% Source: ALADI, World Bank The new trade reality: liberalization  As tariffs  standards and technical regulations are increasingly brought to the forefront of commercial policy Globalization of production: “slicing up the value-added chain” • This increases the importance of standards: globalization of production increases need for interchangeable parts and processes  The new trade reality: multilateral disciplines Tokyo Round 1979: “Standards Code” --- plurilateral agreement  1994 Uruguay Round Agreement on Technical Barriers to Trade – mandatory obligation, part of single undertaking  initially there were 23 GATT signatories; there are now (as of November 2000) 139 members of the WTO WTO TBT AGREEMENT Obligatory Disciplines for Technical Regulations  Guidelines for Disciplines on Standards  The new trade reality: disputes at the multilateral level Cases brought to Dispute Settlement Mechanism: O O O O O O O Reformulated Gasoline (U.S.-Venezuela/Brazil) Shelf Life of Products (Korea-U.S.) Trade Description of Scallops (E.U.-Canada,Chile) Bottled Water (Korea-Canada/U.S.) Meat & Meat Products (Hormones) (EUUS/Australia/Canada/N.Zealand) Inspection of Agricultural Products (Korea-U.S.) Prohibition of Shrimp Imports (U.S.-Philippines) Over the first two years of operation of WTO DSM, one fourth of cases involved TBT Agreement The new trade reality: new regional disciplines NAFT A Mexico-Nicaragua CARICOM Latin American Integration Association Bolivia-MERCOSUR Andean Community Central AmericaDominican Republic Chile-Canada MERCOSU R MERCOSUR-Chile Mexico-Bolivia Grupo de los Tres Mexico-Costa Rica Central American Common Market 1990s Chile-Central America ChileMexico The Western Hemisphere and the new trade environment: towards the FTAA Standards and TBT in the Western Hemisphere  Regional Standardizing Activities in the Western Hemisphere – COPANT: Pan American Standards Commission – SIM: Inter-American Metrology System – IAAC: Inter-American Accreditation Cooperation Standards and TBT in the FTAA: subregional approaches 2 main approaches:  Harmonization: making standards, technical regulations and procedures the same in all members  Increasing compatibility: acceptance of each other’s procedures as long as they aim for the same objective Standards and TBT in the FTAA: SUBREGIONAL APPROACHES: CUSTOMS UNIONS  Andean Community: Decision 376 created the Andean System of Standardization, Accreditation, Testing Certification, Technical Regulations and Metrology  objective: harmonize standards among members to create a common set of Andean standards Standards and TBT in the FTAA: SUBREGIONAL APPROACHES: CUSTOMS UNIONS MERCOSUR  no explicit reference to standards in Treaty  Article 1: Parties should “harmonize their legislation in the relevant areas in order to strengthen the integration process” – Mercosur Technical Committee 3 is responsible for technical regulations – has developed over 85 common standards Standards and TBT in the FTAA: SUBREGIONAL APPROACHES: CUSTOMS UNIONS Central American Common Market  objective, as set out in Article VII of Guatemala Protocol: to harmonize member standards  Central American system of Standardization Caricom  Article 42: “recognize the desirability to harmonize as soon as practicable….of the Common Market in industrial standards” Standards and TBT in the FTAA: SUBREGIONAL APPROACHES: FTAs NAFTA  Includes chapter on standards,technical regulations and conformity assessment (Chapter 9) – based on WTO TBT Agreement – objective: to “make compatible” standardsrelated measures Standards and TBT in the FTAA: SUBREGIONAL APPROACHES: FTAs Group of Three (G-3)  objective: “to promote the compatibility of specific standards-elated measures” and to “make compatible, to the greatest extent possible, their respective technical regulations and conformity assessment procedures”  sets out possibility of negotiating mutual recognition agreements Standards and TBT in the FTAA: SUBREGIONAL APPROACHES: FTAs Bilateral FTAs: Chile agreements: objective is to analyze standards with a view to preventing them from becoming barriers Mexico post-NAFTA agreements: aim to promote compatibility FTAA PRINCIPLES Consensus Transparency Consistent with the rules and disciplines of the WTO Single undertaking Co-exist with bilateral and sub-regional agreements Attention to Smaller Economies Countries may negotiate and accept FTAA obligations individually or as members of one sub-regional integration group which negotiate as one unit Standards and TBT in the Western Hemisphere – WTO TBT Agreement sets out • national treatment and nondiscrimination in conformity assessment • general principles for development and application of standards through the Code of Good Practice • avoidance of “unnecessary barriers to trade” • nonbinding commitment to harmonize national standards with international standards • establishment of enquiry points Standards and TBT in the Western Hemisphere  A common base: WTO TBT 6 of the 34 countries were signatories to the Tokyo Round standards code in 1993; now 33 countries are members of the WTO – WTO Disciplines “floor” for FTAA Standards and TBT in the FTAA  The Working Group on Standards and Technical Barriers to Trade constituted one of the twelve Working Groups of the FTAA preparatory process Standards and TBT in the FTAA Transparency, and information exchange inventory of national practices provisions in trade and integration arrangements Inventory of conformity assessment , accreditation bodies Promote understanding of the WTO Agreement on Technical Barriers to Trade Consideration of MRAs questionnaire to determine the present situation with respect to infrastructure and capacity Common Objectives Paper Standards and TBT in the FTAA Working Group on Standards and Technical Barriers to Trade OAS / IDB / ECLAC Tripartite Committee Organization of American States Working Group on Standards and Technical Barriers to Trade OAS / IDB / ECLAC Tripartite Committee Organization of American States National Practices on Standards, Technical Regulations and Conformity Assessment in the Western Hemisphere Provisions on Standards and Conformity Assessment in Trade and Integration Arrangements of the Western Hemisphere Standards and TBT in the FTAA  With the launching of the FTAA negotiations, S/TBT came under the auspices of the Negotiating Group on Market Access  to draw up a proposal for identification and elimination of unnecessary technical barriers to trade among the participating countries objective: Standards and TBT in the FTAA  Technical assistance activities – - Under Working Group: 3 regional seminars (Uruguay, Trinidad and Guatemala) Objective: helping FTAA countries to become more familiar with the provisions and obligations of the TBT Agreement. The seminars focused on TBT implementation and on strengthening national capacities, particularly targeting the creation of national information centers. International experts from organizations such as the WTO, the ISO and national and regional bodies provided their expertise. Standards and TBT in the FTAA Technical assistance activities (during negotiating phase):  Assessment of technical assistance needs in this area  Database of sources of technical assistance  Standards and TBT in the FTAA  Seminar on WTO TBT implementation and technical assistance in Paraguay - country-to-country assistance  Seminar (with World Bank) in Panama on International Trade, Regulation, and Standards: The Development Challenge in Central America in advance of 2nd Triennial Review in WTO – Need for stable legal infrastructure – Need for communications among internal actors – Sharing of regional resources Papers and proceedings available at http://www.worldbank.org/research/trade/conference/WBI_OAS.htm Standards and TBT in the FTAA Achievements: – common basis of provisions and disciplines – discussion of elements for FTAA chapter – identification of technical assistance needs/supply FTAA Compliance with WTO TBT Agreement In 1997 7 FTAA  Compliance with WTO TBT Obligations in FTAA countries 30 25 20 15 10 5 0 Statement of Implementation Enquiry Point Code of Good Practice  countries had submitted their Statement of Implementation (Article 15.2), 14 had established an enquiry point and 8 had accepted the Code of Good Practice. Compliance has more than doubled: as of February 2000 14 have submitted their Statement of Implementation; 28 have established an enquiry point and 21 accepted Code of Good Practice. 23 are members of ISO Source: WTO 1997 2000 Standards and TBT in the FTAA Challenges: – WTO implementation – diversity in size, levels of development and infrastructure of participants – policy approaches – technical assistance needs INTERNET RESOURCES FTAA Official Site http://www.ftaa-alca.org http://www.sice.oas.org