TECHNICAL BARRIERS TO TRADE: TECHNICAL EXPLANATION
Technical Information on Technical barriers to trade
The problem back to top
Why an Agreement?
High number of technical regulations and standards
In recent years, the number of technical regulations and standards adopted by countries has grown significantly. Increased regulatory policy can be seen as the result of higher standards of living worldwide, which have boosted consumers' demand for safe and high-quality products, and of growing problems of water, air and soil pollution which have encouraged modern societies to explore environmentally-friendly products.
Impact on international trade
Although it is difficult to give a precise estimate of the impact on international trade of the need to comply with different foreign technical regulations and standards, it certainly involves significant costs for producers and exporters. In general, these costs arise from the translation of foreign regulations, hiring of technical experts to explain foreign regulations, and adjustment of production facilities to comply with the requirements. In addition, there is the need to prove that the exported product meets the foreign regulations. The high costs involved may discourage manufacturers from trying to sell abroad. In the absence of international disciplines, a risk exists that technical regulations and standards could be adopted and applied solely to protect domestic industries.
From the Tokyo Round Standards Code to the WTO TBT Agreement
The provisions of the GATT 1947 contained only a general reference to technical regulations and standards in Articles III, XI and XX. A GATT working group, set up to evaluate the impact of non-tariff barriers in international trade, concluded that technical barriers were the largest category of non-tariff measures faced by exporters. After years of negotiations at the end of the Tokyo Round in 1979, 32 GATT Contracting Parties signed the plurilateral Agreement on Technical Barriers to Trade (TBT). The Standards Code, as the Agreement was called, laid down the rules for preparation, adoption and application of technical regulations, standards and conformity assessment procedures. The new WTO Agreement on Technical Barriers to Trade, or TBT Agreement, has strengthened and clarified the provisions of the Tokyo Round Standards Code. The TBT Agreement, negotiated during the Uruguay Round is an integral part of the WTO Agreement. Before examining the Agreement in detail, it is necessary to define the meaning of technical regulations, standards and conformity assessment procedures.
Definitions back to top
Technical regulations and standards in the TBT Agreement
Technical regulations and standards set out specific characteristics of a product such as its size, shape, design, functions and performance, or the way it is labelled or packaged before it is put on sale. In certain cases, the way a product is produced can affect these characteristics, and it may then prove more appropriate to draft technical regulations and standards in terms of a product's process and production methods rather than its characteristics per se. The TBT Agreement makes allowance for both approaches in the way it defines technical regulations and standards (Annex 1).
Difference between a technical regulation and a standard
The difference between a standard and a technical regulation lies in compliance. While conformity with standards is voluntary, technical regulations are by nature mandatory. They have different implications for international trade. If an imported product does not fulfil the requirements of a technical regulation, it will not be allowed to be put on sale. In case of standards, non-complying imported products will be allowed on the market, but then their market share may be affected if consumers' prefer products that meet local standards such as quality or colour standards for textiles and clothing.
Conformity assessment procedures
Conformity assessment procedures are technical procedures such as testing, verification, inspection and certification which confirm that products fulfil the requirements laid down in regulations and standards. Generally, exporters bear the cost, if any, of these procedures. Non-transparent and discriminatory conformity assessment procedures can become effective protectionist tools.
Objectives back to top
Protection of human safety or health
The largest number of technical regulations and standards are adopted to aim at protecting human safety or health. Numerous examples can be given. National regulations that require that motor vehicles be equipped with seat belts to minimise injury in the event of road accidents, or that sockets be manufactured in a way to protect users from electric shocks, fall under the first category. A common example of regulations whose objective is the protection of human health is labelling of cigarettes to indicate that they are harmful to health.
Protection of animal and plant life or health
Regulations that protect animal and plant life or health are very common. They include regulations intended to ensure that animal or plant species endangered by water, air and soil pollution do not become extinct. Some countries, for example require that endangered species of fish reach a certain length before they can be caught.
Protection of the environment
Increased environmental concerns among consumers, due to rising levels of air, water and soil pollution, have led many governments to adopt regulations aimed at protecting the environment. Regulations of this type cover for example, the re-cycling of paper and plastic products, and levels of motor vehicle emissions.
Prevention of deceptive practices
Most of these regulations aim to protect consumers through information, mainly in the form of labelling requirements. Other regulations include classification and definition, packaging requirements, and measurements (size, weight etc.), so as to avoid deceptive practices.
Other objectives of regulations are quality, technical harmonization, or simply trade facilitation. Quality regulations e.g. those requiring that vegetables and fruits reach a certain size to be marketable are very common in certain developed countries. Regulations aimed at harmonizing certain sectors, for example that of telecommunications and terminal equipment, are widespread in economically integrated areas such as the European Union and EFTA.
Divergent regulations Ś costs for
exporters back to top
Loss of economies of scale
If a firm must adjust its production facilities to comply with diverse technical requirements in individual markets, production costs per unit are likely to increase. This imposes handicap particularly on small and medium enterprises.
Conformity assessment costs
Compliance with technical regulations generally needs to be confirmed. This may be done through testing, certification or inspection by laboratories or certification bodies, usually at the company's expense.
These include the costs of evaluating the technical impact of foreign regulations, translating and disseminating product information, training of experts, etc.
Exporters are normally at a disadvantage vis-Ó-vis domestic firms, in terms of adjustments costs, if confronted with new regulations.
The Agreement (1)
Avoidance of unnecessary obstacles to
trade back to top
What are the sources of technical barriers to trade?
Technical barriers to trade generally result from
the preparation, adoption and application of different technical regulations
and conformity assessment procedures. If a producer in country A wants to
export to country B, he will be obliged to satisfy the technical
requirements that apply in country B, with all the financial consequences
this entails. Differences between one country and another in their technical
regulations and conformity assessment procedures may have legitimate origins
such as differences in local tastes or levels of income, as well as
geographical or other factors. For example, countries with areas prone to
earthquakes might have stricter requirements for building products; others,
facing serious air-pollution problems might want to impose lower tolerable
levels of automobile emissions. High levels of per capita income in
relatively rich countries result in higher demand for high-quality and safe
TBT provisions on technical regulations
The TBT Agreement takes into account the existence
of legitimate divergences of taste, income, geographical and other factors
between countries. For these reasons, the Agreement accords to Members a
high degree of flexibility in the preparation, adoption and application of
their national technical regulations. The Preamble to the Agreement states
that no country should be prevented from taking measures necessary to
ensure the quality of its exports, or for the protection of human, animal,
and plant life or health, of the environment, or for the prevention of
deceptive practices, at the levels it considers appropriate. However,
Members' regulatory flexibility is limited by the requirement that technical
regulations are not prepared, adopted or applied with a view to, or with
the effect of, creating unnecessary obstacles to trade. (Article 2.2).
Avoidance of unnecessary obstacles to trade
For a government, avoiding unnecessary obstacles
to trade means that when it is preparing a technical regulation to achieve a
certain policy objective - whether protection of human health, safety, the
environment, etc - the negotiations shall not be more trade-restrictive than
necessary to fulfil the legitimate objective. According to the TBT
Agreement, specifying, whenever appropriate, product regulations in terms of
performance rather than design or descriptive characteristics will also help
in avoiding unnecessary obstacles to international trade (Article 2.8). For
example, a technical regulation on fire-resistant doors should require that
the door passes successfully all the necessary tests on fire resistance.
Thus it could specify that the door must be fire resistant with a 30-minute
burn through time; it should not specify how the product must be made,
e.g., that the door must be made of steel, one inch thick. Avoidance of
trade obstacles means also that if the circumstances that led a country to
adopt technical regulations no longer exist or have changed, or the policy
objective pursued can be achieved by an alternative less trade-restrictive
measure, they should not be maintained.
When is a technical regulation an unnecessary obstacle to trade?
Unnecessary obstacles to trade can result when (i)
a regulation is more restrictive than necessary to achieve a given policy
objective, or (ii) when it does not fulfil a legitimate objective. A
regulation is more restrictive than necessary when the objective pursued can
be achieved through alternative measures which have less trade-restricting
effects, taking account of the risks non-fulfilment of the objective would
create. Elements that Members can use for risk assessment are: available
technical and scientific information, technology or end-uses of the
products. Article 2.2 of the Agreement specifies that legitimate objectives
include inter alia: national security requirements, prevention of
deceptive practices, protection of human health or safety, protection of
animal and plant life or health or the environment.
TBT provisions on conformity assessment procedures
The obligation to avoid unnecessary obstacles to trade applies also to conformity assessment procedures. An unnecessary obstacle to trade could result from stricter or more time-consuming procedures than are necessary to assess that a product complies with the domestic laws and regulations of the importing country. For instance, information requirements should be no greater than needed, and the siting of facilities to carry out conformity assessment, and the selection of samples should not create unnecessary inconvenience to the agents (Articles 5.2.3 and 5.2.6).
Non-discrimination and national treatment back to top
Like many other WTO Agreements, the TBT Agreement
includes the GATT's Most Favoured Nation (MFN) and national treatment
obligations. Article 2.1 of the Agreement states that in respect of their
technical regulations, products imported from the territory of any Member be
accorded treatment no less favourable than that accorded to like products of
national origin and to like products originating in any other country.
Conformity Assessment Procedures
The MFN and national treatment provisions also apply to conformity assessment procedures. Procedures for conformity assessment shall be applied to products imported from other WTO Members in a manner no less favourable then that accorded to like products of national origin and to like products originating in any other country (Article 5.1.1). This means that imported products must be treated equally with respect to any fees charged to assess their conformity with regulations. Similarly, Members must respect the confidentiality of information about the results of conformity assessment procedures for imported products in the same way as for domestic products so that commercial interests are protected (Articles 5.2.4 and 5.2.5).
Harmonization (1) back to top
The arguments for harmonization of technical regulations are
well-known. Harmonization is necessary for the connection and compatibility of parts of
products, i.e. telecommunications equipment or car parts. Lack of technical compatibility
might otherwise generate barriers to international trade. For example, television sets
suitable for the US market would be unsaleable in Europe due to divergences in colour
broadcasting formats (NTSC vs PAL or SECAM). Similarly, in order to be marketable in the
United Kingdom, French or German motor vehicles need to be adjusted to right-hand drive.
The costs of designing, manufacturing, and delivering the same product in various
configurations may be high.
Technical harmonization may increase consumer welfare. Within a harmonized regulatory environment, competition ensures that consumers have a wide and economically attractive choice of products. This presupposes, however, that harmonized standards do not go beyond fulfilling their legitimate regulatory objective, i.e. that they do not stifle innovation or otherwise discourage producers from introducing new products or product variants.
Harmonization (2) back to top
For many years, technical experts have worked towards the international harmonization of standards. An important role in these efforts is played by the International Standardization Organization (ISO), the International Electrotechnical Commission (IEC) and the International Telecommunication Union (ITU). Their activities have had major impact on trade, especially in industrial products. For example, ISO has developed more than 9,600 international standards covering almost all technical fields.
Harmonization and the TBT Agreement
The Agreement encourages Members to use existing international
standards for their national regulations, or for parts of them, unless their use
would be ineffective or inappropriate to fulfil a given policy objective. This may
be the case, for example, because of fundamental climatic and geographical factors
or fundamental technological problems (Article 2.4). As explained previously,
technical regulations in accordance with relevant international standards are rebuttably
presumed not to create an unnecessary obstacle to international trade. Similar
provisions apply to conformity assessment procedures: international guides or
recommendations issued by international standardizing bodies, or the relevant parts of
them, are to be used for national procedures for conformity assessment unless they are
inappropriate for the Members concerned for, inter alia, such reasons as
national security requirements, prevention of deceptive practices, protection of human
health or safety, animal or plant life or health, or protection of the environment;
fundamental climatic or other geographical factors; fundamental technological or
infrastructural problems (Article 5.4).
Participation in international standardizing bodies
Widespread participation in international standardizing bodies
can ensure that international standards reflect country-specific production and trade
interests. The TBT Agreement encourages Members to participate, within the limits of their
resources, in the work of international bodies for the preparation of standards (Article
2.6) and guides or recommendations for conformity assessment procedures (Article 5.5).
Special and differential treatment
Implementing and enforcing international standards may require technical and financial resources beyond the capabilities of developing countries. The TBT Agreement eases the impact of certain provisions whose full application would not be compatible with developing country Members' development, financial and trade needs. Moreover, in view of their particular technological and socio-economic conditions, developing country Members may adopt technical regulations, standards or test methods aimed at preserving indigenous technologies and production methods and processes compatible with their development needs (Article 12.4). Finally, developing country Members may request international standardizing bodies to examine the possibility of, and if practicable, prepare international standards for products of special trade interest to them.
Equivalence back to top
What is equivalence?
The process leading to the preparation of an international
standard can be lengthy and costly. Reaching consensus on technical details can take
several years. The time gap between the adoption of an international standard and its
implementation by national regulators can also be significant. For these reasons,
negotiators introduced in the TBT Agreement a complementary approach to technical
harmonization, known as equivalence. Technical barriers to international trade could be
eliminated if Members accept that technical regulations different from their own fulfil
the same policy objectives even if through different means. This approach, based on the
European Community's 1985new approach to standardization, is contained in
Article 2.7 of the TBT Agreement.
How does equivalence work?
Let us assume that country A, wishing to protect its environment from high auto emission levels, requires that cars be equipped with a catalytic converter. In country B, the same objective is achieved through the use of diesel engines in motor vehicles. Since environmental concerns are identical in the two countries to reduce the levels of pollutants in the air A and B can agree that their technical regulations are essentially equivalent. Thus, if car manufacturers in country A want to export to B, they will not be obliged to satisfy country B's requirement to fit diesel engines, and vice versa. This will eliminate the costs of adjusting production facilities to fulfil foreign regulations.
The Agreement (2)
Mutual recognition back to top
Costs of multiple testing
As explained in the previous section, demonstrating compliance
with technical regulations may impede international trade. In particular, if products are
to be exported to multiple markets, multiple testing may be required. Manufacturers can
have difficulties in securing approval for their products on foreign markets, for instance
because testing experts disagree on optimal testing procedures, from bureaucratic inertia,
or even from manipulation of the testing process by protectionist groups. Whatever the
reason might be, such diversity of procedures and methods significantly increases the
costs of producers who sell in multiple markets.
What is mutual recognition of conformity assessment procedures?
One of the main difficulties exporters face is costly multiple
testing or certification of products. These costs would be drastically reduced if a
product could be tested once and the testing results be accepted in all markets.
How does mutual recognition work?
In practice, countries would agree to accept the results of one
another's conformity assessment procedures, although these procedures might be different.
Mutual recognition and the TBT Agreement
Article 6.3 of the TBT Agreement strongly encourages WTO Members to enter into negotiations with other Members for the mutual acceptance of conformity assessment results. The presence of a high degree of confidence in testing and certification bodies is, in fact, a prerequisite for the good functioning of an MRA. For this reason, Article 6.1 of the TBT Agreement recognizes that prior consultations may be necessary to arrive at a mutually satisfactory understanding regarding the competence of the conformity assessment bodies. It also points out that compliance by conformity assessment bodies with relevant guides or recommendations issued by international standardizing bodies can be regarded as an indication of adequate technical competence.
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Technical regulations and conformity assessment procedures
Members must notify when two conditions apply: (1) whenever a
relevant international standard or guide or recommendation does not exist, or the
technical content of a proposed or adopted technical regulation or procedure is not in
accordance with the technical content of relevant international standards or guides of
recommendations; and (2) if the technical regulation or conformity assessment procedure
may have a significant effect on the trade of other Members (Articles 2.9 and 5.6). Draft
regulations should be notified to the WTO Secretariat, if possible sixty days prior to
their formal adoption so as to allow time for other Members to make comments. Regulations
can also be notified ex-post whenever urgent problems of safety, health, environment
protection arise (Articles 2.10 and 5.7). Local Governments at the level directly below
central government are required to notify technical regulations and conformity assessment
procedures which have not been previously notified by their central government authorities
(Article 3.2 and 7.2).
Statements on the implementation and administration of the Agreement
Each WTO Member must, promptly after the Agreement enters into
force for it, notify Members of the measures in existence or taken to ensure the
implementation and administration of the Agreement and of any subsequent changes to them
(Article 15.2). This written statement has to include, inter alia, all relevant
laws, regulations, administrative orders, etc., to ensure that the provisions of the
Agreement are applied; the names of the publications where draft and final technical
regulations, standards and conformity assessment procedures are published; the expected
length of time for the presentation of written comments on technical regulations,
standards or conformity assessment procedures; and the name and address of the enquiry
points established under Article 10.
Bilateral or plurilateral agreements
Under Article 10.7, a Member who has reached an agreement with
any other country or countries on issues related to technical regulations, standards or
conformity assessment procedures which may have a significant effect on trade must notify
other Members through the WTO Secretariat of the products to be covered by the agreement,
and provide a brief description of the agreement.
Code of good practice
The Code of Good Practice for the Preparation, Adoption and Application of Standards lays down disciplines in respect of central government, local government, non-governmental and regional standardizing bodies developing voluntary standards. The Code is open for acceptance by any of these standardizing bodies. Central government standardizing bodies must accept and comply with the provisions of the Code. A standardizing body wishing to adhere to, or withdraw from, the Code has to notify its acceptance of, or withdrawal from, the Code using the appropriate notification format (paragraph C of the Code). Standardizing bodies which have accepted the Code must notify at least twice a year the existence of their work programme, and where details of this programme can be obtained (paragraph J). Notifications have to be sent either directly to the ISO/IEC Information Centre in Geneva, or to the national member of ISO/IEC or, preferably, to the relevant national member or international affiliate of ISONET.
Transparency (2) back to top
As a complement to the obligation to notify, each WTO Member must set up a national enquiry point. This acts as a focal point where other WTO Members can request and obtain information and documentation on a Member's technical regulations, standards and test procedures, whether impending or adopted, as well as on participation in bilateral or plurilateral standard-related agreements, regional standardizing bodies and conformity assessment systems (Article 10). Enquiry points are generally governmental agencies, but the relevant functions can also be assigned to private agencies. The obligation to set up enquiry points is particularly important for developing countries. On the one hand, it is the first step by a developing country Member towards implementation of the TBT Agreement. On the other, developing countries can acquire information from other Members' enquiry points on foreign regulations and standards affecting products in which they have a trade interest.
The Committee on Technical Barriers to Trade
Finally, transparency is also ensured through the existence of a TBT Committee. This allows WTO Members the possibility of consulting on any matters relating to the operation of the Agreement or the furtherance of its objectives. The Committee holds on average two to three meetings a year and, if necessary, can establish working parties to carry out specific functions.
The Code of Good Practice back to top
Why a Code of Good Practice?
Product standards can be prepared by governmental or
non-governmental standardizing bodies. Over the years there has been a proliferation of
private standardizing bodies. The Code of Good Practice, contained in Annex 3 of the WTO
TBT Agreement provides disciplines, including those related to transparency, for the
preparation, adoption and application of standards by all central governmental, local
government, non-governmental and regional standardizing bodies.
Who can accept the Code?
The Code is open for acceptance to any standardizing bodies,
whether central government, local government or non-governmental and regional
standardizing bodies. The Code of Good Practice contained in Annex 3 of the WTO TBT
Agreement seeks to bring all standards within its purview and provides for [and gives]
transparency in the preparation, adoption and application of standards.
What does membership entail?
Members of the TBT Agreement are responsible for the acceptance and compliance with the Code of Good Practice by their central government standardizing bodies. Furthermore, they are required to take such reasonable measures as may be available to them to ensure also that local government and non-governmental standardizing bodies within their territories, and regional standardizing bodies of which they are members, accept and comply with the Code.
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Who has the right to technical assistance?
Any Member, and especially developing country Members, can
request technical assistance from other Members or from the WTO Secretariat, on terms and
conditions to be agreed by the Members concerned (Article 11). Requests for technical
assistance received from least-developed Members have priority.
What type of assistance?
The coverage of technical assistance ranges from the preparation
of technical regulations and the establishment of national standardizing bodies to the
participation in international standardizing bodies and the steps to be taken by
developing country Members to gain access to regional international conformity assessment
systems. Technical assistance can help firms in developing country Members to manufacture
products in accordance with the technical requirements existing in an importing country,
thus ensuring that the products are accepted on the importing Member's market.
WTO Secretariat's technical assistance activities
The WTO Secretariat's assistance to developing and least-developing countries on TBT matters often takes the form of regional or sub-regional seminars. Recently, technical assistance seminars have been organized jointly with other international and regional organizations.