Thank you very much for the invitation to join your meeting on World Standards Cooperation.
I moved back to Geneva this last summer after an absence of several decades. At the time of my first visit, I was with the U.S. Treasury Department. My assignment, among other things, was to attend a three week drafting session on what became the TBT agreement. Four years later, I was U.S. Deputy Trade Representative, and celebrating the conclusion of the Tokyo Round and giving public speeches about the landmark agreement on standards.
From what WTO Members tell me, this code has worked well.
In the year that I was negotiating for the U.S. government with Japan I received letters from Japanese consumers of American cars, a rarity, complaining that because of standards, they could not use the cars on the highways of Japan, without prohibitively expensive modifications. The impact of standards on trade has again been forcefully made clear to me by my purchase of a car in Switzerland last September. I was informed that the car that I was getting, a BMW, could not be registered in the United States, and that if I wanted a BMW that could be brought back, I would need to get one brought over from BMW's South Carolina plant, but that I would have to either sell it to another diplomat or take it back when I was done using it here, because no Swiss could register it here.
A central feature of the Trans-Atlantic Trade and Investment Partnership (TTIP), now on pause, was to have been harmonizing EU and U.S. auto and truck standards. According to the EU:
The WTO does not set standards, but through the TBT Agreement we aim to ensure that technical regulations, standards, and conformity assessment procedures are non-discriminatory and do not create unnecessary obstacles to trade. With this one caveat, the WTO rules recognize that members retain full rights to implement measures to achieve legitimate policy objectives, including the protection of human health and safety, or protection of the environment. The TBT Agreement strongly encourages members to base their measures on international standards as a means to facilitate trade. Through its transparency provisions, it also aims to create a predictable trading environment.
The US accounts for 18 % of all EU vehicle exports. And more than 1 in 8 cars imported to the EU comes from the US.
Sophisticated regulations in the EU and the US generally achieve similar levels of safety. So a vehicle proved safe in the EU should be considered safe in the US, just as a US vehicle should be in the EU.
But our regulations developed in parallel, creating differences that make it costly to comply with both sets of rules.
Overcoming trade barriers could see a rise in this trade of anything from 70% to 350% between 2017 and 2027.
Despite the upsurge in anti-trade sentiments based on nationalism, populism, globalization, waves of emigration and dislocations caused by technological change, the world trading system of the WTO still delivers strong positive results. Cooperation in the area of standards both TBT and SPS is still very good.
This does not mean that there are not issues to be confronted in the WTO. Up until December of last year, way forward for WTO negotiations was not promising. And at the Ministerial meeting in Buenos Aires, members could not reach agreement on the two matters ripe for consideration – regulation of fisheries subsidies and conditions under which public stockholding would take place related to world trade.
The reports in the press of the WTO Ministerial emphasized these few issues that were not resolved. That is not my reading of the importance of the Buenos Aires Ministerial meeting. As a result of the meeting, there is now a clear path forward for negotiations on important topics in which members have a keen interest. At Buenos Aires --
- 71 WTO Members representing about three-quarters of world trade (77%) and world output (GDP) “committed themselves to a program of exploratory work which they expect will lead to negotiations" on electronic commerce.
- 58 members representing 74% of world exports and 59% of global GDP agreed to address domestic regulation of services.
- 70 countries, accounting for 73% of trade and 60% of GDP support this initiative, calling for “closer international cooperation to creating a more transparent, efficient, and predictable environment for facilitating cross-border investment”.
- 85 members accounting for 78% of world exports and 64% of global GDP decided to create an Informal Working Group on Micro, small and medium sized enterprises (MSMES) seeking ways to promote a more predictable regulatory environment for MSMEs; reduction of trade costs, including shipping and logistics, and procedures and requirements related to origin; promotion, including through cooperation with other multilateral institutions, of better access to trade finance for MSMEs; Consideration of how technical assistance and capacity building initiatives could take into account the trade needs and challenges of MSMEs”.
A Joint Declaration was circulated at the Ministerial Conference on Trade and Women’s Economic Empowerment, noting that “inclusive trade policies can contribute to advancing gender equality and women’s economic empowerment, which has a positive impact on economic growth and helps to reduce poverty”. It cited “Goal 5 of the Sustainable Development Goals in the United Nations 2030 Agenda for Sustainable Development, which is to achieve gender equality and empower all women and girls”.
In short, there is extraordinary excitement and positive feeling among a large body of WTO members about the prospects for making progress on a number of fronts to improve the world trading system.
The path forward will be arduous at times. Member countries have interests that are by no means identical, but the path forward has been identified.
On another front, dispute settlement, the system continues to deliver results, but it is clear that agreement has to be reached this year on reforms that are broadly acceptable to the members of the WTO if this valuable system is to be preserved and improved.
The overall outlook is very positive. Global trade is actually growing. Growth in 2017 was stronger, and forecasts for 2018 are also quite encouraging. But standards, which regulate almost all of world trade, have a central role to play if the world trading system is to continue delivering these results.
This brings me to the conversation which I would like to have with you today – what can you as the leading international standards bodies do to support such efforts?
Let me suggest several lines of action:
1. Improve coherence
Coherence is crucial for effective global governance. I think this is particularly important for international standards on innovative technologies. International standards in new areas like Additive Manufacturing, Artificial Intelligence, Robotics and Augmented/Virtual Reality provide a significant opportunity to deepen interconnectedness and facilitate trade, because we are working from a clean slate.
On the other hand, competing or contradictory standards can build insurmountable walls, and can lead to fragmented regulatory approaches down the line.
Our members, and their stakeholders, are worried about mounting incoherence in other areas of standards development (like food and health policy), which creates market access problems. In order to address these types of problems, coherence was agreed by members as one of the WTO TBT Committee principles for the development of international standards. It takes a concerted effort by standards developers to see this through.
We know that there are more than just the three organizations in the room that set standards, including a number of organizations in the US. But I believe that you, as some of the leading organizations, are well positioned to set an example of proactive coherence for others to follow that draws on your respective strengths, ensures consistency and avoids overlaps. And be unapologetically transparent about these efforts.
2. Support quality infrastructure development
We are hearing louder calls to support members in developing their national quality infrastructure (NQI). If SMEs and enterprises don't have access to adequate conformity assessment, standardization and metrology infrastructure, particularly in developing and least developed countries, they cannot engage successfully in trade. This risks further isolating those at the margins of the multilateral trading system, prompting further backlash against globalization and integration.
NQI has important trade facilitating benefits. Coordination between regulators and different parts of the NQI can help reduce barriers to trade, including in the area of conformity assessment procedures. The alternative is often duplicative or overly burdensome testing and certification requirements, which increase trade costs. In this respect, international guides and systems for conformity assessment are of great benefit.
The WTO is part of a successful partnership with four other organizations (FAO, World Bank, OIE, WHO), the Standards and Trade Development Facility (STDF), to enhance capacity of developing countries to meet sanitary and phytosanitary standards.
The STDF promotes coherence in donor activities on SPS, by serving as a global coordination and knowledge hub. The STDF also supports specific projects to build SPS capacity (more than 75 since 2004). Some examples:
- Enhancing phytosanitary controls to drive growth in Uganda`s flower exports;
- Improving Belize's SPS regime and animal health controls to facilitate live cattle exports;
- Boosting safe fruit and vegetable exports from Thailand and Viet Nam.
(1) We don't have a parallel mechanism for TBT and quality infrastructure. I think this is a gap worth thinking about, given the positive contribution of the STDF. A common TBT data collection hub could help identify and prioritize NQI capacity gaps.
(2) This could also be presented as a system for rating the level of development of NQI in countries in a manner similar to the ease of doing business ratings provided by the World Bank.
At this turning point for the multilateral trading system and the WTO, we need to do things differently and improve how we work together.
We need to challenge ourselves to think about how we together can better support capacity building and quality infrastructure development. Some of the possible partners for this kind of initiative are sitting around this table. I look forward to continuing this discussion.
3. Promote Inclusivity and SMEs
An ever growing group of WTO members are seeking ways to support MSMEs to engage in trade. Some have raised concerns that while standards can help SMEs, they can also create costs and small players face capacity constraints that big players do not. What more can you do to ease the burden on small enterprises? Could you find a way, for instance, to facilitate their access to draft standards for free? Could you provide a central portal for SMEs to identify and access standards? You will have your own ideas as to how to facilitate access for SMEs.
There are also concerns that standards may not adequately take into consideration the challenges faced by SMEs. They may also find it extremely complex to take part in standardization systems, or are not fully aware of the importance that standards have for their trade. How can you bring them more into your standards setting practice and improve inclusivity?
4. Vocally Support Trade and the WTO
The backlash against globalization has tended to focus on trade as one of the most visible pillars of globalization. But behind trade are other drivers of change, like new technologies, and the international standards that support them. We are all part of the same vision of global integration as a means to reduce frictions, improve efficiency and create prosperity.
There is a strong complementarity between our two roles. For trade to occur, producers and consumers in different markets need to be able to trust the quality and safety of each other's products. There has to be compatibility between components, final goods and systems.
Without the connectivity which international standards bring to products and markets, market access opportunities offered by trade agreements will be hampered. At the same time, if governments take a more protectionist stance and retreat from international trade, other drivers of integration like international standards will matter much less. Either of these challenges will dim what promises to be a very bright future for the world economy and for the well-being of its peoples.
We are natural allies. We look forward to working with you.
The WTO TBT and SPS agreements promote using international standards as a basis for regulations and as way to reduce unnecessary divergences that could otherwise give rise to trade frictions.
This core work of the WTO is a success story, but it cannot be taken for granted. Raising the profile of this essential work through your members and stakeholders would be welcome support for the WTO.
All of us need to unabashedly, unapologetically and unreservedly carry the message to the world at large that an integrated global economy, with a strong and dynamic multilateral trading system, supported by international standards, is a better world for everyone.
The support of your members and private sector stakeholders is vital to spread this message at all levels and to all segments of society. We need you to radiate optimism at what can and likely will be accomplished. If we can do this, I am confident that we can make enormous progress together.