RESTRICTED
WORLD TRADE G/TBT/W/42
28April 1997
ORGANIZATION(97-1818)
Committee onTechnical Barriers toTrade
RESTRICTIVE TRADE EFFECTS OFSTANDARDS, TECHNICAL REGULATIONS AND
CONFORMITY ASSESSMENT PROCEDURES
Background Paper bytheSecretariat
I. INTRODUCTION
1. ThisPaper hasbeenprepared inresponse toarequest bytheCommittee forabackground
document discussing therestrictive trade effects thatmaybeassociated withstandardization, testing
andcertification activities. Thefocus isthusonimpediments associated withtechnical requirements,
including conformity assessment procedures, thatthetrading community orindividual exporters may
deem,fordifferentreasons,tobeunnecessarilystringent.Forexample,suchproblemsmaybeassociated
withrequirements inareas not(yet)subject tointernational harmonization, thusleaving scope for
disparate, incompatible national approaches, orwith national provisions going beyond existing
international standards. Inaddition, duetotheirresource constraints, smaller andlesseconomically
advancedcountriesmayhavebeenpreventedfromeffectivelyparticipatingininternationalstandardization
processes andbedissatisfied withtheoutcome andanyensuing trade effects. From amore general
perspective, however, suchproblems would needtobesetagainst other, positive effects onmarket
access, competition and,thus,consumer welfare likely toresult fromtheavailability anduseofcommon
standards.
2. Standards-related trade issues havegained prominence inrecent years forvarious reasons.
First, withthereduction oftariff barriers insubsequent GATT Rounds, thepolicy focus hasshifted
toalternative barriers tomarket entry which mayfrustrate theeffects oftariff liberalization. Second,
thedemand byindustries andconsumers fornewstandards andtechnical regulations appears tohave
expanded overtimeduetotechnical developments, andthenecessity toensure thereliable andsafe
operation ofcomplex products andsystems, aswellasrising public interest inhealth, safety and
environmental issues. And, thirdly, regulatory developments atregional level, including inside the
EC,havestimulated theinternational debate about ways andmeans toavoid market segmentation and
promote regulatory reform.
3. Thefollowing presentation isessentially intwoparts, with thefirstbeing devoted to
product-relatedstandardsandtechnicalregulations.Asecondpartdealswithissuesrelatedtoconformity
assessment procedures. Thisseparation wasinspired mainly bythefactthatthematerial content of
standards andtechnical regulations, andtheensuing trade effects, areinfluenced bynational policy
objectives andpriorities, thusentailing adegree ofsubjectivity. Bycontrast, conformity assessment
procedures appear moreamenable toobjective criteria, relating forexample tothetechnical competence
ofaforeign institution toperform testsagainst, andcertify compliance with, animporting country 's
regulations.G/TBT/W/42
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II. STANDARDS AND TECHNICAL REGULATIONS
(i) Underlying objectives andpotential effects
4. Standards andtechnical regulations aregenerally intended toenhance overall economic
performance, facilitate trade and/or implement certain public policy objectives. They aredeemed
necessary, forexample, toensure theinteroperability ofcomplex technical systems, improve market
transparency andreduce information cost,prevent fraud, orcontain health- andenvironment-related
risks. Inaddition, standards mayreduce theriskofindividual companies introducing their own
requirements withaview to,ortheeffect of,compartmentalizing markets andcreating dominant
positions.Withouttheinformationcontentconveyedthroughcommonstandards,demandfortechnically
complex orotherwise sensitive products could shrink and/or focus onafewwell-established suppliers.
5. However, there arerisks andpitfalls aswell. While acknowledging thepositive effects of
regulation, inparticular onhealth, safety andenvironmental grounds, recent policy discussions have
alsopointed totheeconomic losses associated withover-regulated markets. Itiswidely heldthat
excessive requirements could undermine market contestability, discourage newentrants and,thus,
condone economic inefficiencies. Trade, employment andgrowth maysuffer, withtheensuing welfare
losses being compounded bytheinability ofconsumers toexpress theirtruepreferences.
6. Inturn,thissuggests thattheremaybeoptimal levels ofregulation atwhich theadverse impact
ofregulatory involvement (orregulatory neglect) onconsumer welfare, trade andoverall economic
performance isminimized. However, theremaybeavariety ofsuchaoptima depending on,andvarying
with, theunderlying regulatory goals, national preferences, climatic andtechnical conditions, anda
country 'slegal/institutional framework. Forexample, consumer welfare considerations inadensely
populated region maycallforthetightening ofenvironmental regulations forcarsbeyond thelevels
maintained bymaintrading partners, orrelatively laxproduct liability provisions mayprompt national
authorities tooptfortighter safety regulations thandeemed necessary incountries withstricter liability
rules. (Atthesametime, tighter regulations mayspurindustrial innovation and,thus,afford domestic
companies aheadstartinnewmarket areas.) Yet,inallthesecases, access conditions might deteriorate,
withapotentially adverse impact oncompetition, resource efficiency andinnovation.
7. While, asarule,lowlevels ofregulation tendtobebeneficial forforeign suppliers, therecould
alsobecases where relatively stringent requirements contribute topropping upuserconfidence and
boosting overall sales.1Inthese circumstances, theaccess costsforimporters maybeoutweighed by
thepositive impact ofanexpanding market onbusiness performance. Thiswould require, nevertheless,
thatregulations arenotdrafted andapplied forindustrial policy orother domestic economic purposes,
andforeign companies areallowed fairparticipation inthestandardizing process.
8. Asimporters arenotnormally ahomogenous group, additional considerations maycome into
playiftheirdomestic commercial background istaken intoaccount. Forinstance, some suppliers,
especially from developing countries, mayfinditmore difficult thanothers tobridge awidening
regulatory gapvis-à-vis foreign markets. Small companies lacking sufficient ownfunds, technical
expertiseandinternationalcontactsaresupposedtohaveparticularinformationandadjustmentproblems.
Astudy onadjustments intheIndian leather industry toaGerman banontheuseofatoxic chemical
(pentachlorophenol -PCP) fortanning suggests thatinformal (unorganized) enterprises werefarmore
1Concerning certification requirements, forexample, ithasbeen estimated that"green" tropical timber
certificates mayresult inrevenue increases, duetoaprice premium andexpanding sales, ofupto5percent
oftotal developing countries 'revenue from tropical timber exports. SeeESCAP/UNCTAD (1996).G/TBT/W/42
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affectedthanorganizedmediumandlargerscaleunits.Thelattercoulddrawontheirlong-termcustomer
relations andtheiraccess to,andcommand of,advanced technologies.2
9. Thetrade effects oftechnical regulations maythusdepend onavariety offactors, including
thecountry-product pairsinvolved andthedomestic availability ofsubstitute products andtechnologies.
However, these factors andtheireffects arenoteasily quantifiable. Arecent publication found that
"theempirical economic literature is...replete withestimates ofthewelfare losses fromconventional
protectionist measures andthebenefits ofliberalizing them. Bycontrast, theeffects oftechnical barriers
aretypically hardtomeasure. They areoften hidden inthefirm-specific costsofmodifying aproduct
tomeetastandard orregulation, orinthewaysthatnon-compliance withastandard mayaffect consumer
purchasingdecisions.Broadsystemicstudiesoftechnicalbarriersaregenerallylacking,andtheavailable
information tends tobelimited toparticular markets andindustries inwhich disputes havearisen or
inwhich casestudies havebeenundertaken. Even then, much ofwhatweknow isimpressionistic
andanecdotal."3
(ii) Issues raised intheCommittee onTechnical Barriers toTrade
10. Discussions intheTBTCommittee maybeillustrative ofcertain standards-related problems
concerning theinternational trading community. However, theydonotnecessarily givearepresentative
picture. First, membership oftheTokyo Round Committee wasfarfrom being universal, withless
thanhalfoftheCommittee 's46members in1995 being developing countries. Second, focusing on
obligations under therelevant Agreements, GATT/WTO Committees tendtobemore concerned with
implementation andcompliance issues rather thanwithaccess problems ofamore general nature.
11. Since theTBTCommittee 'scoming intobeing inJanuary 1980, Members havereferred to
itatotalof41cases (country/product combinations) ofstandards-related concerns. They involved
thematerial content, ortheapplication, ofstandards andtechnical regulations, including labelling and
packaging requirements, aswellastesting andcertification procedures. While there isasignificant
degree ofoverlap and,thus,double-counting, theproblems raised maybecategorized intofourgroups:
(i)non-compliance withnotification requirements under theAgreement (23cases); (ii)restrictive
provisions considered tocreate an"unnecessary obstacle totrade" (20); (iii)cases involving denial
ofm.f.n. ornational treatment (11); and(iv)departures fromexisting international standards, including
labelling provisions, without sufficient justification (3).Some 40percentofallcases raised involved,
among other things, labelling, marking orpackaging requirements; while theirfocus wasinparticular
onfoodproducts, theyalsoincluded textiles, motor vehicles, wood andwood products, technical
appliances andarange ofotherproducts. Nofurther information wasavailable, however, onanyfurther
action. While theTBTAgreement provides thebasistosolve standards-related tradeproblems through
consultations, current information requirements provide noclue, whatsoever, ontheiroutcome.
12. Reflecting theregional composition oftheTokyo Round TBTCommittee, amajority ofthe
cases discussed, 28intotal, concerned standards-related problems between developed countries. Of
these, 13cases involved boththeUnited States andtheEuropean Communities orcurrent ECmember
States (some cases predated theiraccession totheEC). Anadditional 10cases concerned problems
between developed anddeveloping countries. Notasingle issuewaspursued beyond theconsultation
stage; while therehavebeenattempts toinvoke thedispute settlement provisions oftheTokyo Round
TBTAgreement, e.g.concerning theEuropean Communities 'banonhormonal growth promoters,
nopanel hasbeenestablished.
2Thestudyalsonotedthatproblemsconfrontingthecompaniesconsistedmainlyoflackofinformation,testing
facilities andsubstitute chemicals. SeeGerman Development Institute (1994).
3Sykes (1995).G/TBT/W/42
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(iii) Empirical studies
13. Thefollowing section provides anoverview ofvarious empirical studies ontheimpact ofnew
external technical requirements onbusiness costs ortrade. Given thediversity ofthecountries and
sectors covered andtheapproaches chosen, itisdifficult, however, todraw general conclusions. In
particular, theoverview mayover-emphasize theeconomic impact oftechnical requirements, whether
positive ornegative, asresearch notleading tosignificant results mayhavegoneunpublished.4Further,
thecostestimates provided bysome studies arenotnecessarily indicative of,andmustnotbeequated
with, similar effects ontrade orcompetitiveness. Rather, anystandards-related costincreases may
beoffset bysavings elsewhere intheproduction process, absorbed intheformoflower factor returns
oroutweighed bysimultaneous costincreases incompeting industries abroad.5
Adjustment costs tonewenvironmental standards: studies bytheUNCTAD andESCAP Secretariats
andindependent researchers
14. Research undertaken bytheUNCTAD Secretariat suggests thatcompliance withspecific
environmentalstandardsinexternalmarketsmayprovemoreexpensivefordevelopingcountryindustries,
sometimes eveninabsolute terms, thanfortheirdeveloped country counterparts.6Thisisattributed
mainly toalackofinvestment ininfrastructure aswellastheabsence oftechnologies andinputs required
foreffective adjustment. Inaddition, itappears more difficult forsmall thanforlarge firms tocope
withenvironmental regulations aslargecompanies havebetter access toinformation, inputs andfinance,
andaremore likely toachieve thescale ofoperations required forefficient technology use. Given
differences inexport patterns, bothbyproduct anddestination, andinthedomestic availability ofmore
environmentally sound products andprocesses, thetradeeffects ofexternal environmental regulations
may, however, varywidely between developing country exporters.7
15. AccordingtosurveysconductedinIndia,textilesandclothingisthesectormostseverelyeffected
byforeignenvironmentalrequirements.8Compliancecostfortextilesandleatherproducersareestimated
toamount to3to5percentoftotalcost,withonecompany evenreporting incremental costof10to
15percentresulting fromtheuseofsubstitute chemicals inleather processing. Bycontrast, theimpact
onbusinesses ofnewpackaging requirements appears tohavebeenmarginal todate; some exporters
evenachieved costreductions owing totheuseofcheaper materials.
4Forexample,accordingtoareportbytheEconomicandSocialCommissionforAsiaandthePacific(ESCAP),
thefactthatthetrade impact ofexternal environmental requirements hasnotbeencovered extensively byarecent
study onthePhilippines, contrary totheimpact ofstricter domestic policies, mayindicate thatexternal measures
have notseriously constrained Philippine trade. SeeESCAP/UNCTAD (1996).
5Thelatter factor mayexplain, atleastinpart,whyastudy ontheMalaysian refrigerator andairconditioner
sector showed noevidence ofadverse effects stemming from theMontreal Protocol. SeeESCAP/UNCTAD
(1996).
6Foranoverview seeUNCTAD (1995).
7Forexample, according UNCTAD (TD/B/WG.6/6), Indian exporters reported thataGerman banonPCPs
hadraised thecostoftanning leather, while Argentinean producers didnotindicate anysignificant costincreases.
Thismight havebeendueatthattime, interalia,toArgentina 'strade liberalization policies which hadfacilitated
imports ofsubstitute chemicals.
8ESCAP/UNCTAD (1996).G/TBT/W/42
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16. Inasurvey carried outamong Turkish exporters, aslight majority responded thatenvironmental
regulations inwestern markets didnotadversely effect theircompetitiveness.9While afewtextiles
producersfearedthattheywouldbeunabletomeetcertainimporters'requirements,giventheiroutmoded
technologies, some other companies expected thattheircompetitive position would improve. These
expectations were based mainly ontheview thatcompetitors inother European andMediterranean
countries might finditmore difficult thanTurkish firms torespond todemand shifts inexport markets
favouringmoreadvancedprocessandproductiontechnologiesandtheincreaseduseoforganicmaterials.
Bycontrast, Turkish companies which alsosupplied domestic andnon-OECD markets, weregenerally
concerned about theadverse impact onproduction costs oftheir coping with disparate quality
requirements.
Theeconomic effects onECmember States ofthe1992 Single Market: theCecchini Report10
17. TheCecchini Report wascommissioned bytheECCommission in1985toassess theeconomic
benefits ofremoving tradebarriers between Member states and,inthecontext ofthe1992Single Market
programme, creating afullyintegrated common market. Abusiness survey underlying theReport
identified technical barriers, i.e.theeffects ofnational product regulations andstandards, asoneof
themostimportant costs tobusiness inthepre-1992 ECenvironment. Other problems atthetimeof
theCecchiniReportincludedadministrativebarriers,physicalbordercontrolsanddelays,andrestrictions
imposed byCommunity law.Atthesectoral level, thecostsoftechnical barriers toEC-based producers
were estimated at:ECU 0.85to1.1billion (US$ 0.83to1.07 billion)11fortelecommunications
equipment;ECU2.6billionformotorvehicles(includingcostsattributedtotheexistenceofanexcessive
number ofdifferent carplatforms); ECU 0.5to1billion forfoodstuffs (including costsresulting from
thethennational ingredient requirements, labelling andpackaging laws, etc.); andECU 0.82billion
forbuilding products.12
Other studies
18. Intheearly 1970s, Saudi Arabia setupanational standards organization whose activities
benefited fromtechnical cooperation extended, interalia,under ECprogrammes. Reportedly, technical
cooperation extended bytheUnited States didnotinclude standards formany years; andexperts feel
thatthishadanadverse impact onmarket access. TheU.S.share inSaudi Arabia 'simports fellfrom
30percentin1980 to19percentin1987.13
9Thesurvey covered some 60companies inthetextiles andclothing, machinery andequipment, andfood
sectors. SeeAruoba (1993).
10Cecchini (1988).
11At1986 annual average exchange rates.
12Thelatter estimate excludes economies ofscale which alone areexpected togenerate savings ofsome
ECU 1.7billion inthefivelarger ECeconomies.
13According toSykes (1995). In1989, theU.S.Government andtheprivate sector initiated apilotstandards
programme whichconsistedmainlyofemployingtwostandardsexperts,oneinRiyadhandoneattheU.S.National
Institute ofStandards andTechnology. They were commissioned totransmit Saudi Arabian draft standards for
comment topotentially affected U.S.industries, develop acoordinated position, andcommunicate ittotheSaudi
Arabian Standards Organization (SASO). During thefirsttwoyears ofoperation, SASO reportedly incorporated
essentially allcomments inthedrafts andnostandards adverse toU.S.products were adopted. (Tupper, 1992).G/TBT/W/42
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(iv) Relevant requirements under theTBTAgreement andscope forapplication
Disciplines onthedomestic regulatory process
19. Asindicated above, regulatory objectives arelikely tovarywidely between countries and
products, depending, forexample, onincome levels, natural andclimatic conditions andpopulation
preferences. Article 2oftheTBTAgreement, while defining trade-related requirements, thusleaves
considerable leeway forthepursuit ofcountry-specific objectives. Under Article 2.2,Members are
committed nottoprepare, adopt orapply technical regulations "with aviewtoortheeffect ofcreating
unnecessaryobstaclestointernationaltrade".Therelevantregulations"shallnotbemoretraderestrictive
thannecessary tofulfil alegitimate objective, taking account oftherisksthatnon-fulfilment would
create". Thus, theAgreement seeks tominimize thetrade-restrictive effects arising from Members '
pursuit oflegitimate objectives, including theprotection ofhuman health orsafety andtheenvironment.
Thelisting given inthiscontext isopen-ended.
International standardization
20. Bydefinition, regulatory access barriers could belowered ifcountries wereabletoagree on
andimplement common requirements. International regulatory harmonization would helptoensure
aneutral basisforcompetition, byeliminating thepossibility fornational "champions" ofinfluencing
theirdomestic regulatory environment, andofferconsumers anattractive range oflow-priced, mass-
produced goods. However, thescope forinternational regulatory harmonization islimited bythe
diversityofproductionandconsumptionconditionsworldwide.Thus,whileWTOMembersarerequired
under theTBTAgreement torelyoninternational standards asabasis fortheirtechnical regulations,
Article 2.4expressly exempts cases where suchstandards "would beanineffective orinappropriate
means forthefulfilment ofthelegitimate objectives pursued, forinstance because ofclimatic or
geographical factors orfundamental technological problems". Again, thelistofpossible exceptions
isopen-ended. Encouraging theuseofinternational standards, Article 2.5stipulates thatnational
regulations conforming tointernational standards "shall berebuttably presumed nottocreate an
unnecessary obstacle tointernational trade".
21. Inorder fortheAgreement 'sreferral tointernational standards tobeeffective, suchstandards
mustbeavailable. Thisdepends, inturn,onthework ofthecompetent international bodies andthe
contribution, including through technical andfinancial support, thatcountries areprepared tomake.
Experts haveexpressed concern incertain cases about lengthy standardization processes, implying
theriskthattheresults arealready obsolete atthedateofpromulgation, andabout various options
incorporated inafinalstandard toaccommodate diverging views among participants. Inturn, this
could undermine thepositive trade effects associated withtheuseofsuchstandards.
22. Giventheresourceconstraintsthatmayaffectdevelopingcountries'sabilitytopreparestandards,
establish national standardization bodies andparticipate ininternational bodies, Members areencouraged
under Article 11oftheTBTAgreement toprovide advise andgrant technical assistance onmutually
agreed terms andconditions.
Acceptance offoreign regulations
23. Theacceptance offoreign regulation maybecontemplated, inparticular, bysmaller countries
whose producers 'performance suffers fromstandards-related market segmentation orbyparticipants
inregional integration projects. Asaresult, products complying withdisparate regulatory features
maycompete head-on inthesame market. Consumers might thusnotonlybeabletoexpress their
preferences within arelatively homogenous range ofgoods but,possibly, beconfronted withproducts
incorporating diverging levels ofhealth, safety ortechnical risks. Insuchcircumstances, theconceptG/TBT/W/42
Page7
ofcompetition could evenimply, toacertain degree, competition between regulatory strategies inthe
samemarket. However, consumers andregulators maynotbeprepared tofullyaccept theuncertainties
involved, butstrive foradequate safeguards. These might include assurances frompartner countries
thattheirrelevant regulations arebased onsimilar principles. Thus, thecommitment under theTBT
Agreement to"give positive consideration" toaccepting foreign regulations asequivalent (Article 2.7),
islinked totheproviso thatMembers aresatisfied thatsuchregulations adequately fulfil thesame
objectives astheirown.
24. TheEuropean Communities 'experience suggests thattheclarification ofbasic objectives -
orminimum requirements -isparticularly important insensitive product areasinorder forarecognition
strategy towork (Box 1).Intheabsence ofaharmonized regulatory baseline, forexample viathe
Communities '"new approach" directives, therecognition principle mayprove unable toovercome
national regulators 'andusers'concerns andsuspicions. According toanexpert 'sview, without
regulatoryapproximation,referencetoforeignorinternationalstandards"hangsintheair"astheessential
requirements areunspecified atmultilateral level.14
Box1
Standards harmonization versus recognition ofequivalence: theECapproach
Until themid-1980s, theEuropean Communities 'integration strategy relied strongly onfullregulatory
harmonization oftechnical specifications. Given thecumbersome procedures involved, compounded by
demanding voting requirements atpolicy level (unanimity), theresults remained disappointing.
Streamlining regulatory procedures andremoving thewide array ofEC-internal technical barriers thus
became amajor element ofthe1985 Single Market programme.
Inspired bylandmark rulings oftheEuropean Court ofJustice ("Cassis deDijon"), theCommunities '
internal market policy hasrelied since onathree-pronged strategy: (a)continued fullharmonization in
areas such aspharmaceuticals, pesticides, food additives andmotor vehicles, which aredeemed
particularly sensitive forhealth, safety, technical ortrade policy reasons; (b)theestablishment of
essential technical requirements inother sensitive areas, complemented byvoluntary technical
specifications developed byEuropean standards-making institutions; and(c)freecirculation ofthebroad
range ofnon-sensitive products. Thesecond option, theCommunities 'so-called "new approach", is
intended toovercome barriers inareas where member States have "legitimately imposed technical
requirements onproducts forpublic policy reasons, andconflicting national legislation restricts thefree
movement ofproducts". While producers arefreetodeviate from theadditional technical specifications,
theymayberequired tosubstantiate, forexample through independent certification, thattheessential
safety requirements aremet. New approach directives cover areas such assimple pressure vessels, toy
safety, medical devices andtelecommunication equipment.
Source: GATT (1991 and1993).
Special anddifferential treatment ofdeveloping countries
25. Article 12oftheTBTAgreement contains provisions tohelpeasethedifficulties developing
countries mayencounter inliving upandadjusting totherequirements oftheAgreement. These include,
interalia,theobligation ondeveloped country Members: totakeintoaccount thespecial development
andtrade needs ofdeveloping countries intheimplementation oftheAgreement andtheoperation
ofitsinstitutionalarrangements;toensurethattechnicalregulations,standardsandconformityassessment
procedures donotcreate unnecessary obstacles todeveloping country exports; nottoexpect developing
countries touseasabasis international standards which arenotappropriate totheirdevelopment,
14Sykes (1995), p.113f, andcomments byJacques Pelkman, p.164ff.G/TBT/W/42
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financial andtradeneeds; toensure thatinternational standards-related bodies andsystems areorganized
andoperated soastofacilitate active representative participation; toencourage standardization activities
inproduct areasofspecial interest todeveloping countries; andtoprovide technical assistance toavoid
thecreation ofunnecessary obstacles totheexpansion anddiversification ofexports fromdeveloping
countries. Finally, under Article 12.10, theCommittee istoexamine periodically thespecial and
differential treatment, aslaiddown intheAgreement, granted todeveloping countries onnational and
international levels.
26. TheSecretariat hasreceived noinformation onthepolicies pursued andmeasures taken todate
under Article 12intheareaofstandards, technical regulations andconformity assessment procedures.
While thismight beindicative oftheabsence ofsuchinitiatives, itcould alsoreflect thelackof
appropriate notification andrecording requirements within Member countries.
III. CONFORMITY ASSESSMENT PROCEDURES
(i) Potential trade effects
27. Conformity assessment maybeconsidered thefinallinkinaregulatory chain thatstarts with
domestic orinternational standardization. Andthislinkmaydetermine thestrength ofthewhole chain.
Inother words, attempts toreduce technical trade barriers should ensure thatliberalization effects in
other areas arenotthwarted bythepersistence ofonerous testing andcertification requirements.
Although theWTO Secretariat isnotaware ofempirical studies onthetradeeffects ofsuchrequirements
inindividual product fields, itisnotdifficult again toconceive ofaconflict between domestic regulatory
andforeigntradeinterests.Especiallyinareasdeemedsensitiveonhealthandsafetygrounds,consumers
andregulators mayprefer compliance withrelatively strict provisions -domestic orinternational -
tobeconfirmed andcertified subject tonational procedures andpractices. Inturn, thismayleadto
costly and,possibly, redundant testing andcertification procedures. While assuring domestic consumers
ofthesafety andreliability ofaproduct, theymayhaveadeterrent impact onforeign firms, inparticular
onneworsmall suppliers, asagainst well-established incumbents.
28. Mutual recognition agreements (MRAs) mayhelptomeetdomestic regulatory requirements
without confronting foreign suppliers withunnecessary costs. Forexample, intheareas covered, they
would provide fortheimporting country accepting foreign testsandcertificates asbeing equivalent
totestsconducted andcertificates issued bydomestic bodies. Inturn,however, asMRAs agreements
mayaffect thecompetitive position ofnon-participants, theirtrade implications could warrant further
discussion inWTO fora.
29. IntheTBTCommittee,discussionsonactualimpedimentsresultingfromconformityassessment
requirements haveremained limited toeightcasestodate.Theyconcerned complaints about preferential
access conditions fornational producers tocertification andhomologation systems inSpain andJapan
(raised inthefirsthalfofthe1980s),15onerous testing andcertification requirements inBrazil and
Hungary (1992 and1994),16andalleged mis-specification ofacar-safety testinCanada (1996).
15Theproducts involved were metal softball bats(Japan) andheating radiators, electric medical equipment,
metallic tableware andsanitary fittings. Thecases areincluded inthedatareferred toinSection II(ii). See
GATT documents TBT/Spec/7 andTBT/Spec/9 of20September 1982 and20February 1984.
16While pesticide registration requirements inBrazil were considered astooexpensive anddemanding,
complaints inthecaseofHungary concerned costly andnon-transparent certification requirements forover
300consumer goods. SeeGATT documents TBT/M/42 andTBT/M/45 of17June1992 and14January 1994.G/TBT/W/42
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(ii) Provisions intheTBTAgreement
30. Mirroring theprovisions ofArticle 2.2ontechnical regulations, Article 5.1.2 ofthe
TBTAgreement requires Members toensure thatconformity assessment procedures arenotprepared,
adopted orapplied "with aviewtoortheeffect ofcreating unnecessary obstacles tointernational trade".
Thisisunderstood toimply, interalia,thattheprocedures arenotstricter orapplied more strictly
thannecessary togivetheimporting country "adequate confidence" thataproduct conforms withthe
relevant regulations. Moreover, theAgreement commits Members inprinciple toadopting therelevant
guides orrecommendations ofinternational standardizing bodies. (However, there isno"incentive"
similar totherebuttable presumption expressed inArticle 2.5toprovide thatprocedures based on
international rules arenotconsidered toconstitute anunnecessary obstacle totrade.) Members are
further held, whenever possible, toprovide fortheacceptance offoreign conformity assessments if
theyaresatisfied thatthese offeranassurance ofconformity equivalent totheirownprocedures. In
thiscontext, theAgreement explicitly recognizes thatconsultations maybenecessary toarrive ata
mutually satisfactory understanding withaview, inparticular, toensuring thecompetence ofthebodies
concerned andlimiting theacceptance ofconformity assessments todesignated bodies.
31. Toprevent thatsuchconsultations result inexclusive arrangements among afewcountries,
Members arerequired under Article 9oftheTBTAgreement, whenever practicable, toformulate and
adopt international systems ofconformity assessment. Moreover, Article 10.7encourages participants
inagreements covering technical regulations, standards orconformity assessment procedures toenter
intoconsultations withothercountries "forthepurpose ofconcluding similar agreements orofarranging
fortheirparticipation inexisting agreements".
32. UnderArticle11,Membersareheldtoprovideadviseandgranttechnicalassistance,onmutually
agreed terms andconditions, regarding thestepstobetaken bydeveloping country producers tohave
access toconformity assessment systems. Inaddition, Members aretogrant technical assistance to
otherMembers regarding theestablishment oftheinstitutions andthelegalframework thatwould enable
them toaccede toorparticipate insuchsystems.
(iii) Main features ofmutual recognition agreements
33. Mutual recognition agreements (MRAs) mayprove aflexible, economically attractive approach
toovercoming access barriers associated withincompatible standards and/or multiple testing and
certification requirements. While suchagreements could cover theentire regulatory process -from
therecognition ofastandard 'sequivalence totheacceptance oftestresults andcertificates -countries
areinnowayprecluded from focusing onspecified stages. Under theTBTAgreement (Article 6),
theconcept ofMRAs covers onlyconformity assessment procedures, i.e.testing andcertification.
MRAs insuchareas maythuswellcoexist withharmonized or,asthecasemaybe,diverse product
standards andrequirements between thesame countries forthesame product. Through obviating
repetitive testing andcertification oftheproduct inindividual markets, mutual recognition agreements
maynevertheless playanimportant partinreducing marketing costs, accelerating product dissemination
and,thus, promoting competition. Inaddition, inopening anewmarket segment toforeign access,
MRAs maycontribute toenhancing regulatory andprocedural efficiency inparticipating countries.
34. AsMRAs arerelatively recent policy development, itisdifficult tobuttress empirically their
perceived positive effects onmarket access. While recent policy initiatives todiscuss orconclude such
agreements areindicative oftheparticipants 'positive expectations, these arenotnecessarily sharedG/TBT/W/42
Page10
bythird countries ifnon-originating products donotqualify the"preferences" extended under an
agreement.17Infact,suchproducts normally remain subject tomultiple testing andcertification.
35. Inview oftheir perceived trade impact, MRAs areoften considered asanexchange of
concessions, comparable totariff agreements.18Unilateral recognition offoreign regulations, tests
orcertificates doesnotapparently playasignificant rôle,atleastamong major developed countries.
Evidence fromvarious GATT/WTO Trade Policy Reviews suggests thatunilateral recognition ismore
theresult ofresource constraints indeveloping countries thanofadeliberate policy decision, in
appropriate areas, toensure market contestability andreaptheensuing benefits interms oflower prices
andwider product choice.
36. From theperspective ofthemultilateral system, mutual recognition agreements riskcreating
overlapping, mutually incompatible regulatory régimes. Forexample, ifcountry Aconcludes an
agreement withBandC,therelevant rulesandconditions maydiffer and,moreover, exclude bilateral
tradebetween thelatter twocountries. (Inturn,BandCmight decide tonegotiate aseparate agreement
ofdifferent content.) While, ontheonehand, significant tariffreductions insubsequent GATT/WTO
Rounds haveeased theexternal ramifications oftraditional freetradeagreements, MRAs mayintroduce
similar effects onacountry/sector basis-beyond thescope ofGATT Article XXIV. Inaddition, given
theresource impact involved inMRA-related negotiations andtheimportance ofdeveloping a"common
language" among participants interms ofproduct testing andapproval requirements, MRAs arelikely
tofocus oncertain country/product clusters. Inthiscontext, modern technology products andother
strongholds ofindustrial economies -including telecommunications equipment andpharmaceuticals -
mayprevail overtraditional manufactures andother keysupplies ofdeveloping countries.
37. Notallofthese problems areeasily amenable topolicy correction. Some maybeconsidered
asinevitable -andacceptable -side-effects ofagenuinely positive development. Some arerooted,
toacertain degree, inthecontractual nature oftheWTO framework andtheabsence ofastrong
institutional centre governing thescope ofregulatory activities. Unlike infederal States orintegrated
common markets, there arenocoordination mechanisms atmultilateral leveltoensure broad sectoral
andregional coverage ofnewpolicy initiatives and,thus, prevent (unintentional) discrimination. As
comparable levels ofinstitutional integration areelusive among WTO Members, however, thechallenge
forthemwould betocreate conditions conducive totheconclusion ofMRAs, while defusing adverse
effects fornon-beneficiaries.
38. Forthispurpose, corefeatures ofMRAs orevenmodel agreements maybediscussed and
developedintheWTO,buildingontherelevantprovisionsinArticles9and10.7oftheTBTAgreement.
Comparable work isalready being doneatregional level, forinstance inAPEC. Bywayofexample,
Members maywishtoconsider thefollowing benchmark criteria formutual recognition agreements:
(a)openness toanycountry withaproven ability toimplement therelevant obligations; (b)a
commitment nottoinclude non-technical aspects related, forexample, toactual orfuture trade flows;
and(c)non-discriminatory treatment ofproducts originating innon-participating countries. Thelatter
point mayprove ofparticular importance tosmaller andlesseconomically advanced countries lacking
theeconomic andtechnical capacity tooperate owntestandcertification systems and,thus, actively
participate inmutual recognition agreements. Given thebeneficial effects thatMRAs mayhaveon
market access and,byimplication, competition andinnovation, thereshould beanyinterest inexploiting
andextending these effects across thewidest possible range ofsectors andcountries.
17MRAs exist between Australia andNew Zealand onavariety ofproducts; APEC andFTAA members
arecurrently considering thepossibility ofsuchagreements, andtheUnited States, Canada, Japan, Australia
andother countries areinvolved indiscussions ornegotiations withtheEC.
18Leebron (1996).G/TBT/W/42
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