Detailed Presentation of Non-Discrimination and Avoidance of Unnecessary Obstacles to Trade in the TBT Agreement

Transcription

1 WTO E-LEARNING COPYRIGHT 12 Detailed Presentation of Non-Discrimination and Avoidance of Unnecessary Obstacles to Trade in the TBT Agreement OBJECTIVES Present two core principles of the TBT Agreement: (i) Non- Discrimination and (ii) Avoidance of Unnecessary Obstacles to Trade; Explore them as they apply to the three measures disciplined by the TBT Agreement: Technical Regulations, Standards and Conformity Assessment Procedures; Present the approaches to facilitate the acceptance of conformity assessment procedures results by Members. M y C o u r s e s e r i e s

2 I. INTRODUCTION Within the WTO framework, the TBT Agreement is intended to ensure that technical regulations, standards and conformity assessment procedures do not constitute unnecessary barriers to international trade, while recognizing the right of Members to take regulatory measures to achieve their legitimate objectives. As you know, there are three sets of measures regulated by the TBT Agreement: Technical Regulations, Standards and Conformity Assessment Procedures. As you remember, obligations undertaken by WTO Members may vary according to the measure they implement and according to the body concerned. RECALL The TBT Agreement applies to: Technical regulations, which are measures that lay down product characteristics or their related processes and production methods, with which compliance is mandatory. Standards, which are Documents approved by a Recognised Body that provides, for common and repeated use, rules, guidelines or characteristics for products or related processes and production methods, with which compliance is voluntary. Conformity assessment procedures, which are procedures used directly or indirectly to determine that relevant requirements in technical regulations or standards are fulfilled. Moreover, understanding the five principles contained in the TBT Agreement (Non-Discrimination; Avoidance of unnecessary obstacles to international trade; Harmonisation (and Equivalence); Transparency; and Special and Differential Treatment, and Technical Assistance to Developing Members) is about understanding the rights and obligations of each Member under the TBT Agreement. In this Module we are going to learn about two of these principles: the Principle of Non-Discrimination and the Principle of Avoidance of Unnecessary Obstacles to Trade. Finally, we are also going to examine various approaches envisaged by WTO Members to facilitate the acceptance of Conformity Assessment Procedures. These are, among others: Unilateral Recognition of Results of Foreign Conformity Assessment; Mutual Recognition Agreements; Arrangements for Conformity Assessment; Supplier's Declaration of Conformity (SDoC); and The use of Accreditation. So, it is time to start Module! Please, remember to click on the hyperlinks and to see the original documents. They are very important to fully take advantage of this experience while also getting familiarized with the WTO Documentation system. Oh, and remember to send your questions to your tutor or to post them at the Enquiry Board and to also regularly participate in our discussion forums. 2

3 Non-Discrimination in the TBT Agreement The concept of non-discrimination is a pillar of the world trading system. Mainly aimed at tariff reductions (that is, market access), it also involved regulatory equality. Articles I and III of GATT 1994 contain the two components of the core principle of non-discrimination for the trade in goods: the Most-Favoured Nation (MFN) and the National Treatment Principles. RECALL GATT ARTICLE I Pursuant to Article I, on the Most Favoured Nation Principle, WTO Members are bound to grant to the products of other Members treatment no less favourable than that accorded to the products of any other country. Thus, no Member is to give special trading advantages to one Member at the exclusion of others. All Members are meant to be treated on an equal footing and share the benefits of any moves towards lower trade barriers. GATT ARTICLE III Article III contains the National Treatment Principle. It stipulates that once goods have entered a market, they must be treated no less favourably than like products that are domestically produced. More specifically, Article III:4 requires that the products of any Member imported into any other Member shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use". As we are going to see in this Module the application of the principle of non-discrimination to the measures disciplined by the TBT Agreement is very similar to what was explained above. TIP Take a look at Understanding the WTO if you want to see more examples regarding the national treatment and the most favourite nation principles. 3

4 I.A. TECHNICAL REGULATIONS The principle of non-discrimination, as stated in Article 2.1 of the TBT Agreement, incorporates elements of both the Most-Favoured-Nation (MFN) Principle (Article I of GATT 1994) and the Principle of National Treatment (Article III of GATT 1994). TIP Remember: You can find the TBT Agreement at our Digital Library. IN DETAIL TBT Article 2.1 reads: "Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country." (Emphasis added) WHAT DO YOU THINK "LIKE PRODUCTS" AND "NO LESS FAVOURABLE TREATMENT" MEAN? The non-discrimination principle and the related terms "like products" and "no less favourable treatment than" have not been tested in dispute settlement proceedings in the TBT context. Nonetheless, the following subsection provides a brief summary of the concept of likeness in the GATT context, which should provide some guidance as for their meaning. CASE STUDY: DETERMINATION OF LIKENESS Like Products In the GATT context - the predecessor of the WTO - the report of a 1970 Working Party on Border Tax Adjustments adopted by GATT Contracting Parties suggested some criteria for determining whether products are "like": the product's end-uses in a given market; consumers' tastes and habits, which change from country to country; the product's properties, nature and quality. Important note Tariff classification was added as a supplementary element to these criteria by the Appellate Body while deciding the case Japan - Taxes on Alcoholic Beverages (WT/DS8, 10, 11). 4

5 Analysis of the likeness of products has therefore been based on these four criteria, which have been rephrased by the Appellate Body in the EC Asbestos case (WT/DS135) RECALL Do you remember the EC - Asbestos (WT/DS 135) case? In EC - Asbestos, it was decided that four categories of "characteristics" might help determine the likeness of products: Their physical properties. The extent to which they are capable of serving the same or similar end-uses. The extent to which consumers perceive and treat them as alternative means of performing particular functions in order to satisfy a particular want or demand. Their international classification for tariff purposes. However, the Appellate Body in the EC Asbestos case also made it clear that these criteria were simply tools to assist in the task of sorting and examining the relevant evidence and not a closed list of criteria that would determine the legal characterization of products. That is, the ascertaining of product likeness should be made on a case by case basis. No less favourable treatment than In the same case, concerning the term "no less favourable treatment than", the Appellate Body has indicated, in relation to Article III:4 of the GATT 1994, the following: A "formal difference in treatment" between like products was not sufficient to show a violation of Article III:4. Whether or not products are treated "less favourably" should be assessed "by examining whether a measure modifies the conditions of competition in the relevant market to the detriment of imported products". The examination of whether a measure involves "less favourable treatment" must be based on close scrutiny of the "fundamental thrust and effect of the measure itself" in the marketplace. In other words, it is not because like products have not received identical treatment by the importing country that we can say they received a less favourable treatment. Therefore, while importing a product, a WTO Member may impose requirements through the means of a technical regulation (for example, mandatory labelling requirements) which slightly differ from those imposed on domestic producers, for the simple fact that often the latter are already subject to a more strict control by public authorities. If these requirements do not affect the conditions of competition between domestic producers and exporters, or do not discriminate among exporters, it is likely that foreign producers have not been treated less favourably. ILLUSTRATION The republic of Vanin, a WTO Member, through its central government regulatory body, decides to enact a measure regarding clocks and wrist-watches, aimed at protecting human health. What should the regulatory 5

6 body in Vanin keep in mind while elaborating and applying the measure, in terms of the non-discrimination obligations provided for in the TBT Agreement? First of all, one has to verify whether the measure in question is regulated by the TBT Agreement. Let's assume that the measure (i) lays down product characteristics; (ii) with which compliance is mandatory. As we can note, clocks and wrist-watches are clearly identifiable products. Well, it seems like we are talking about technical regulations, are we not? And, for the purpose of this technical regulation aimed at protecting human health, are clocks and wrist-watches like products? There is no easy answer to the question, and finding an answer is not the objective of our exercise. However, we would like to show you some factors that could help you build your reasoning so as to find the most appropriate answer in each case. In this particular example, we could say that the physical property of the products is similar, for specific categories of these products - let's say wrist-watches and clocks are both made of steel. They both have the same end use, that is, they serve to tell the time. We could also say that, depending on the relevant market (Western countries consumers behaviour is very different from Middle Eastern, for example), these two products are seen as an alternative means for performing the same function. About international classification for tariff purposes, these two products are, according to the Harmonized System Classification 2007, classified differently. While steel watches are classified under the heading 91.01, clocks are classified under and Consumers' tastes and habits cannot be said to be the same for these products either, in most societies. Vanin takes this analysis into consideration and decides that, due to the fact that a wrist watch is in direct contact with human skin for prolonged periods, it should have a stricter requirement concerning the concentration of steel in it, while clocks may have a higher concentration of this metal. Therefore, they are treated differently by the regulation and as long as they can be considered as non-like products, it is in accordance with the TBT Agreement. What if they are considered like products by the exporting WTO Members who sell them to Vanin? Then it is relevant to verify if one product receives a less favourable treatment in relation to the other. Remember that it is not enough for products to be treated differently; that is, products have to be treated less favourably, for example in such a way that modifies the conditions of competition in the relevant market to the detriment of the imported products. Note Vanin will also have other TBT-related obligations while drafting is technical regulations. It should avoid the creation of unnecessary obstacles to trade, should base its regulation on a relevant international standard if it exists or its completion is imminent, and, once the draft is ready, Vanin should notify it to the WTO Secretariat. 6

7 EXERCISES: 1. TBT Agreement Article 2.1 says: "Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country." Why did the drafters of Article 2.1 of the TBT Agreement refer to "any other COUNTRY" and not "any other MEMBER"? 2. How has the expression "like product" been interpreted in WTO case law? Is this a rigid interpretation? 7

8 I.B. CONFORMITY ASSESSMENT PROCEDURES Suppliers of products in WTO Members shall be granted access (right to an assessment of conformity) under conditions no less favourable than what is accorded to suppliers of like products of national or foreign origin, in a comparable situation. IN DETAIL Article reads: "Conformity assessment procedures are prepared, adopted and applied so as to grant access for suppliers of like products originating in the territories of other Members under conditions no less favourable than those accorded to suppliers of like products of national origin or originating in any other country, in a comparable situation... " (emphasis added) Here, the non-discrimination principle is applied to conformity assessment procedures in terms of no less favourable "access", and not "treatment" as is the case in Article 2 on technical regulations, in relation to suppliers of like products of national origin or originating in any other country. "Access" is defined in the second part of Article as follows: Access entails suppliers' right to an assessment of conformity under the rules of the procedure, including, when foreseen by this procedure, the possibility to have conformity assessment activities undertaken at the site of facilities and to receive the mark of the system; (emphasis added) Moreover, unlike Article 2.1, non-discrimination in Article is imposed on like products in comparable situations. The overall examination of compliance with the principle of non-discrimination in relation to conformity assessment procedures is linked to the determination of "likeness" between products (as was the case in relation to technical regulations), and if the products are found to be like, the examination extends to the determination of whether "no less favourable access" has taken place between these products in a comparable situation, with regard to suppliers' access (i.e. suppliers' right to an assessment of conformity). ILLUSTRATION Coming back to the example of Vanin and concentration of steel in wrist-watches. impose requirements for conformity assessment procedures. Regulations may also As you remember, there are three types of conformity assessments: (i) first party assessment, for which the supplier itself carries out the conformity assessment procedure; (ii) second party assessment, for which the purchaser or a conformity assessment body on his/her behalf carries out the conformity assessment procedure; (iii) third party assessment: when an entity, independent from both the supplier and the 8

9 purchaser, carries out the conformity assessment procedure. Article applies to all types of conformity assessment procedures: First, Second and Third Party Assessment. Supposing the regulation we suggested states that a first party assessment should take place by testing and hence the foreign supplier should provide the results of testing the concentration of steel on wrist-watches to Vanin's central government body. In that case, if more than one WTO Member exports products which are like products to Vanin's, they should be subject to a similar requirement on conformity assessment procedures, as long as they are in comparable situations. Those WTO Members that have adopted, with Vanin, some approach to facilitate the acceptance of conformity assessment results (such as an agreement of mutual recognition of conformity assessment) may be seen as not being in a comparable situation in relation to those Members which do not have adopted any. I.C. STANDARDS Products from any WTO Member shall be treated by standardizing bodies no less favourably than like products of national origin or originating in any other country. IN DETAIL Annex 3.D of the Code of Good Practice reads: In respect of standards, the standardizing body shall accord treatment to products originating in the territory of any other Member of the WTO no less favourable than that accorded to like products of national origin and to like products originating in any other country. RECALL Do you remember what are standardizing bodies? Standardizing bodies are those that create standards. They may be a central government, a local government, non-governmental or regional entities. WTO Members have the obligation to ensure that central government bodies comply with the Code of Good Practice in the Preparation, Adoption and Application of Standards, which includes the obligation of non-discrimination and to treat like products in a no less favourable manner, similarly to what was explained above regarding technical regulations and conformity assessment procedures. As for the other kinds of standardizing bodies, these should also accord treatment no less favourable to like products, and WTO Members shall take reasonable measures to make them accept and comply with the Code. Remember that the obligation of Members with respect to compliance of standardizing bodies with the provisions of the Code of Good Practice shall apply irrespectively of whether a standardization body has accepted it. The government has the obligation to take reasonable measures to ensure compliance, while the standardizing bodies other than a central government body are bound to comply with the Code of Good Practice if they have accepted it. 9

10 EXERCISES: 3. What does the non-discrimination principle mean in the context of conformity assessment procedures? 4. What does the non-discrimination principle mean in the context of standardisation (standards and standardizing bodies)? 10

11 II. AVOIDANCE OF UNNECESSARY OBSTACLES TO INTERNATIONAL TRADE Within the WTO framework, the TBT Agreement is intended to ensure that technical regulations, standards and conformity assessment procedures do not constitute unnecessary barriers to international trade, while recognizing the right of Members to take regulatory measures to achieve their legitimate objectives: national security requirements, quality requirements, protection of human health or safety, protection of animal or plant life or health, protection of the environment, prevention of deceptive practices, among others. Given that this list is not exhaustive, Members may protect other legitimate objectives while using the measures prescribed under the TBT Agreement. Nevertheless, regulatory measures undertaken with the purpose to protect a Member's legitimate objectives shall neither hinder the rights of other WTO Members nor what has been achieved through market access liberalization, that is, through the decrease of import duties and taxes. Let's examine how the requirement to avoid unnecessary obstacles to international trade applies to technical regulations, conformity assessment procedures and standards. II.A. TECHNICAL REGULATIONS IN BRIEF The TBT Agreement contains a general requirement that technical regulations are not to be prepared, adopted or applied with a view to, or with the effect of creating unnecessary obstacles to international trade. IN DETAIL Article 2.2 reads: Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create. Such legitimate objectives are, inter alia: national security requirements; the prevention of deceptive practices; protection of human health or safety, animal or plant life or health, or the environment. In assessing such risks, relevant elements of consideration are, inter alia: available scientific and technical information, related processing technology or intended end-uses of products. What would an "unnecessary" obstacle to trade be? Pursuant to Article 2.2, it would be the case if a measure was found to be more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create. It is important to examine Article 2.2 in its various parts, so that we can fully understand the various concepts included therein. We will first address the concept of necessity (in the GATT context). Then, we will discuss 11

12 the definition of "legitimate objectives". The third section deals with the fact that Members must take into account the risks non-fulfilment of the legitimate objective would create when assessing the necessity of the measure. Finally, the last section addresses less trade restrictive means to fulfil a legitimate objective. II.A.1. CONCEPT OF NECESSITY IN THE GATT CONTEXT Article 2.2 first sentence provides that: Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. Technical regulations should not create unnecessary obstacles to international trade not only while being prepared (by a previous examination of the effects and of the purpose of the regulation) but also while being applied (by continual examination of the regulation's effects on international trade, after it has been put in place). That is, a WTO Member has the obligation to assess whether a regulation already in place - or which was enacted before the entry into force of the TBT Agreement - creates such unnecessary obstacles. In order to determine what an "unnecessary obstacle" would be, we have to look into what a "necessary obstacle" would be. The concept of necessity has never been tested in dispute settlement proceedings in the TBT context, but there has been an evolving interpretation of necessity in the GATT context, particularly in the context of GATT Article XX, paragraphs (b) and (d). Although the concept of "necessity" does not have the same application and meaning in the TBT Agreement, we will briefly analyse the interpretation of necessity in the GATT (Article XX) context, as it provides useful guidance. GATT Article XX is an exception to the obligations set forth in the GATT Agreement. That is, a Member who violates a GATT obligation (for example, Article I, III or XI, among others), may claim that its measure is justified under Article XX because it fulfils one of the objectives set forth in the paragraphs of this article (while also complying with the requirements of the chapeau of the article). However, there are situations in which, even if fulfilling one of the objectives protected by Article XX, a Member's measure is not found in violation of other GATT obligations, and thus Article XX is not applicable to the case. In the context of Article 2 of the TBT Agreement, the question of necessity is not related to an exception, but rather to the basic rights and obligations of Members: A technical regulation must not create an unnecessary obstacle to trade and not be more trade restrictive than necessary to fulfil a legitimate objective, regarding the risks non-fulfilment would create. 12

13 CASE STUDY Determination of Necessity in the GATT Context In WTO case law, panels and the Appellate Body have considered the following elements when defining the "necessity test": the reach of the word "necessary" is not limited to what is "indispensable"; and "a 'necessary' measure is, in this continuum, located significantly closer to the pole of 'indispensable' than to the opposite pole of simply 'making a contribution to' ". In the Korea Various Measures on Beef (WT/DS161, 169) case, the Appellate Body ruled that determination of whether a measure which is not "indispensable" may nevertheless be "necessary", "involves in every case a process of weighing and balancing a series of factors which prominently include the contribution made by the compliance measure to the enforcement of the law or regulation at issue, the importance of the common interests or values protected by that law or regulation, and the accompanying impact of the law or regulation on imports or exports". This "process of weighing and balancing" has been further developed in the EC Asbestos case (WT/DS135), where the Appellate Body found that "the more vital or important the common interests or values pursued, the easier it would be to accept, as 'necessary', measures designed to achieve those ends". The Appellate Body noted that in the Asbestos case, the objective pursued by the measure was the preservation of human life and health, a value both "vital" and "important in the highest degree". Important note This "weighing and balancing" approach seems particularly relevant in the TBT context. Article 2.2 implies the striking of a balance between on the one hand the legitimate objectives pursued and the risks that nonfulfilment would create, and the necessity of the measure on the other. A WTO Member, when confronted to a situation where it believes a measure is creating an unnecessary obstacle to trade, might follow a number of steps, including raising a specific trade concern at the TBT Committee. II.A.2. LEGITIMATE OBJECTIVES The second sentence of Article 2.2 states that: For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create. Such legitimate objectives are, inter alia: national security requirements; the prevention of deceptive practices; protection of human health or safety, animal or plant life or health, or the environment. WTO Members shall pursue a legitimate objective when preparing, adopting or applying a technical regulation which is trade-restrictive. Article 2.2 contains a list of legitimate objectives, which is non-exhaustive: 13

14 Figure 1: List of legitimate objectives In addition to the objectives mentioned above, others have been cited (G/TBT/18) in the notifications made by Members (while drafting new regulations) to the TBT Committee: consumer information and labelling; quality requirements; harmonization; lowering or removal of trade barriers; and trade facilitation. Other objectives may be proposed and accepted. In the EC Sardines case, the European Union had argued that the measure at stake had three objectives, which were acknowledged by the complainant as legitimate: (i) consumer protection, (ii) market transparency and (iii) fair competition. II.A.3. RISK OF NON-FULFILMENT While assessing the necessity of a measure to fulfil a legitimate objective, Members shall take into account the risks that the non-fulfilment of that legitimate objective would create. This represents a final requirement of the determination of necessity. The final sentence of Article 2.2 presents relevant elements for the consideration of non-fulfilment risks, that is, the risks that the non-enactment of a regulation would create. It states: In assessing such risks, relevant elements of consideration are, inter alia: available scientific and technical information, related processing technology or intended end-uses of products. Such relevant elements - available scientific and technical information, related processing technology or intended end-uses of products - are mentioned as inter alia, i.e., among other things. Therefore, WTO Members may make use of other relevant elements for assessing the risk, such as reports from consumers' institutions, for example. It is interesting that the drafters of the TBT Agreement have left this as an open list of elements. It could be seen as recognition that in the field of technical regulations, technology entails 14

15 constant evolution of processes and products, and thus methods for assessing risks have to be updated occasionally. II.A.4. LESS TRADE RESTRICTIVE MEANS The concept of "less trade restrictive means" is not an isolated one. It is very closely linked to the one of "necessity", and of course to the objective a Member seeks to protect. But how can we determine if a certain means is the less restrictive one? It can only be assessed on a case by case basis, depending on the specific characteristics of the regulation, the product covered by it and the objective it tries to fulfil. However, certain tools mentioned in Article 2 can lead to the adoption of a less trade restrictive means to fulfil a legitimate objective. The instruments, which will be discussed below, are: a. Use of International Standards. b. Use of Equivalence. c. Adoption of Technical Regulations based on performance. d. Review of regulations based on the change of circumstances. In addition, discussions have taken place in the TBT Committee on the issue of (G/TBT/13): e. Good regulatory practice. Note Good Regulatory Practice is not mentioned in Article 2, nor anywhere else in the TBT Agreement. It is a topic that came out of the discussions Members have held in the TBT Committee. a. USE OF INTERNATIONAL STANDARDS Article 2.4 states that Members shall use relevant international standards, or parts of them, as a basis for their technical regulations, except when they would be an ineffective or inappropriate means to fulfil a legitimate objective. If Members adopt a technical regulation with one of the purposes stated in Article 2.2 and this regulation is in accordance with an international standard (that is, incorporates the international standard domestically), it shall be presumed not to create an unnecessary obstacle to trade (Article 2.5). Harmonization is an important way of facilitating trade. In this sense, the use of international standards can also be seen as an element of good regulatory practice. b. USE OF EQUIVALENCE Article 2.7 states that Members shall give positive consideration to accepting as equivalent technical regulations of other Members: Even if these regulations differ from their own; and 15

16 provided they are satisfied that these regulations adequately fulfil the objectives of their own regulations. As a way of facilitating trade, some Members have indicated that they have accepted, as equivalent, technical regulations from other Members, even though the requirements therein differ from their own. In this sense, equivalence can be seen as an element of good regulatory practice. c. TECHNICAL REGULATIONS BASED ON PERFORMANCE An important element in the preparation, adoption and application of technical regulations is contained in Article 2.8, which states a preference for regulations based on performance rather than design. This stated preference for performance-based technical regulations may also be seen as a less trade restrictive means to fulfil a legitimate objective. Indeed, the idea of this provision is to allow producers to find the most cost-effective way of fulfilling the requirements of a technical regulation. What counts is the result, i.e., the performance of a product, rather than the way in which this outcome is achieved. However, not every product can be regulated through technical regulations based on performance, and WTO Members are aware of that. ILLUSTRATION For example, a technical regulation on fire resistance doors could either require that, to be fire-resistant, the door could be two centimetres thick or that it should have a 30 minutes burn through time. Which one is less trade restrictive? Well, a technical regulation on fire-resistant doors should require that the door passes all tests on fire resistance successfully. Thus it could specify that "the door must be fire resistant with a 30 minute burn through time"; instead of specifying how the product must be made, e.g., that "the door must be made of steel, two centimetres thick". d. CHANGE OF CIRCUMSTANCES AND LESS TRADE-RESTRICTIVE MEANS Article 2.3 provides that Members shall not maintain a technical regulation if: the circumstances or objectives giving rise to its adoption have ceased to exist; and these circumstances or objectives changed and may be addressed in a less trade-restrictive manner. In the EC Sardines case, the Panel noted that: "The language of Article 2.3 suggests that Members are to eliminate technical regulations that no longer serve their purpose or amend them if the changed circumstances or objectives can be addressed in a less trade-restrictive manner". Thus, we could say that Members should periodically revaluate their technical regulations, given new scientific, social, cultural or any other relevant information. 16

17 e. GOOD REGULATORY PRACTICE At the Third Triennial Review (Document G/TBT/13), it was stated that good regulatory practice could facilitate the avoidance of unnecessary obstacles to trade in the preparation, adoption and application of technical regulations (including associated standards) and conformity assessment procedures. In considering the preparation of a technical regulation, the need to identify the magnitude of the problem and the legitimate objective sought has been stressed. The question of the choice between using a mandatory (technical regulation), or a voluntary measure (standard), to achieve regulatory objectives has frequently arisen and Members have emphasized the need to minimize the use of mandatory technical regulations. The use of international standards has been taken as a sign of good regulatory practice. During the 4th Triennial Review, recently concluded, this was also one of the most discussed topics. This time, WTO Members stressed the benefits of simplifying and improving regulatory environments and emphasized the need for openness, transparency and accountability in the development and application of technical regulations and conformity assessment procedures, and the importance of regulatory cooperation between regulators from different countries as a means of achieving a better understanding of different regulatory systems. To sum up, when "good regulatory practice" is discussed, we are discussing the effectiveness of regulatory policy to achieve a certain policy goal. So, this is not a theoretical discussion, but actually one that relates to the practical implementation of all the provisions contained in the TBT Agreement. The TBT Committee serves as a forum where WTO Members can share experiences and exchange information on regulatory practices, regarding the identification of elements of good regulatory practice at the domestic level; the choice of policy instruments and the use of regulatory impact assessment; and the sharing of experiences on equivalence. ILLUSTRATION This time, Vanin adopts a technical regulation aimed at ensuring that the wood commercialized within its boundaries is Forest Friendly wood, which does not risk certain trees which are endangered species. It offers several means to attest that the wood (domestic and imported) is Forest Friendly, and creates a system of label recognition. In this case, we can see that Vanin's measure is a product-based measure aimed at environmental protection, which is a legitimate objective within the scope of the TBT Agreement. The question is: in order to protect the environment, is it necessary to impose restrictions on the wood commercialized? Or could the requirement be better fulfilled (and in a less trade-restrictive way) with a "Forest Friendly" voluntary label? What regulators have to remember is that for a measure to be considered necessary, it does not have to be indispensable. Even when a WTO Member has other measures available, the one in question could be considered necessary taking into account the risks that non-fulfilment with the measure would create. In this example a regulator might consider that the objective of environmental protection can be fulfilled with a voluntary Forest Friendly label and that this would be a less restrictive measure than a simple ban on wood coming from certain types of forests, or than the request that the wood be processed in Vanin. On the other hand, a regulator, taking into account the risks that the environment suffers from deforestation, might consider that another requirement such as a restriction on the commercialization on certain types of woods could better fulfil the legitimate objective, and would constitute a necessary restriction. 17

18 However, if such a measure is considered to be too trade restrictive, taking into consideration the risks of its non-fulfilment, other WTO Members might question it, and raise concerns at the TBT Committee. EXERCISES: 5. How has the concept of "necessity" been interpreted in WTO case law? 6. What are the legitimate objectives mentioned in the TBT Agreement? Is this a closed list? 7. What are the five instruments that could contribute to the adoption of a less trade restrictive means to fulfil a legitimate objective? 8. What are the elements that your country takes into consideration when adopting a technical regulation? Does it implement good regulatory practices? 18

19 II.B. CONFORMITY ASSESSMENT PROCEDURES WTO Members are under the general requirement that their conformity assessment procedures are not to be prepared, adopted or applied with a view to, or with the effect of, creating unnecessary obstacles to international trade. IN DETAIL Article of the TBT Agreement reads: [Members shall ensure that conformity assessment procedures] are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. This means, inter alia, that conformity assessment procedures shall not be more strict or be applied more strictly than is necessary to give the importing Member adequate confidence that products conform with the applicable technical regulations or standards, taking account of the risks non-conformity would create. A conformity assessment procedure would be an "unnecessary" obstacle to international trade if it was found to be stricter, or be applied more strictly, than is necessary to give the importing Member adequate confidence that products conform with the applicable technical regulations or standards. As stressed by the term "inter alia", this is only one of the possible ways to verify necessity. Remember that the risks non-conformity would create shall also be taken into account. There are two differences in the concept of necessity between Article 2.2 on technical regulations and Article on conformity assessment procedures: Article implies that there may be several ways to determine the necessity of a conformity assessment procedure while Article 2.2 states explicitly that technical regulations "shall not be more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create"; and the necessity of a technical regulation is determined in relation to its trade restrictiveness while the necessity of the conformity assessment procedure is established in relation to its strictness. Furthermore, while implementing Article 5.1 on non-discrimination and avoidance of unnecessary obstacles to international trade regarding conformity assessment procedures, Members have to observe the requirements contained in Article 5.2. These requirements can be classified in four categories: 1. requirements on timing; 2. requirements on transparency; 3. information requirements; and 4. operation conditions. 19

20 II.B.1. REQUIREMENTS ON TIMING Members shall ensure that conformity assessment procedures are undertaken and completed as expeditiously as possible and in a no less favourable order for products originating in the territories of other Members than for like domestic products. II.B.2. REQUIREMENTS ON TRANSPARENCY Members shall ensure that conformity assessment providers respect the following obligations aimed at transparency of the process for the applicants: Publication/communication of the standard processing period for each procedure; Prompt examination of the completeness of the application by the competent body and request of faulting documents in a precise and complete manner without delay; Expeditious transmission of precise and complete results of the assessment by the competent body; Continuation of the procedure as far as practicable even in case of deficiencies of an application, if the applicant so requests; and If requested by the applicant, timely information about the stage of the procedure. II.B.3. INFORMATION REQUIREMENTS There are two types of information requirement one related to the information to be submitted by the applicant and one to the treatment of the information received by the Member imposing the procedure: the amount of information requested must be limited to what is necessary to assess conformity and determine fees; confidentiality of information derived from the procedure is to be respected in the same way for domestic and foreign products, so that "legitimate commercial interests are protected". II.B.4. OPERATION CONDITIONS The last four provisions of Article 5.2 are intended to ensure that the principles of non-discrimination and avoidance of unnecessary barriers to international trade are respected in relation to: Fees imposed for assessing the conformity of products originating in the territories of other Members and those originated domestically are equitable, taking into account communication, transportation and other costs arising from differences between locations of facilities; the sitting of facilities used and the selection of samples, so as to avoid unnecessary inconvenience to applicants or their agents; when the specifications of a product change, the modified product should be assessed to the limit of what is necessary to determine whether adequate confidence exists that the product still meets the technical regulations or standards concerned; and 20

21 a review procedure exists for complaints concerning the operation of a conformity assessment procedure, so that corrective action is taken when a complaint is justified. Although Members shall not be prevented from carrying out reasonable spot checks within their territories, they are encouraged to permit the participation of conformity assessment bodies located in the territories of other Members in their own conformity assessment procedures. This kind of participation could contribute to providing a wider choice of competent conformity assessment bodies for suppliers and regulators. ILLUSTRATION One example of unnecessary obstacles to international trade discussed in the TBT Committee is the existence of multiple testing and certification requirements. The Committee noted the growing concern with respect to this issue and that the principle of "one standard, one test" and, if required, "one certification, one time", should be pursued to facilitate trade and reduce costs. However, ensuring the "portability of certification" implies complex conditions, such as confidence, high levels of technical competence and the use of common procedures. It has been observed that either exporting firms (i) have to meet multiple certification requirements, or (ii) choose to use the services of multinational certification companies. While for large enterprises these situations can represent a burden and a serious trade barrier, for small and medium-sized enterprises (SME) they would have the effect of practically excluding them from the market. This issue is one of the reasons why WTO Members have spent a lot of their time discussing harmonization at the TBT Committee. IF YOU WANT TO KNOW MORE... SMES, INTERNATIONAL TRADE, STANDARDS AND THE WTO The International Trade Centre ( works since 1964 with capacity building and consulting for international trade among private business. It works in partnership with the WTO and the United Nations Conference on Trade and Development (UNCTAD) and has increasingly engaged resources into assisting small and medium-size enterprises in standards and quality management. You can check this specific programme at: II.C. STANDARDS The principle of avoidance of unnecessary obstacles to trade is expressed in paragraph E of the Code of Good Practice, which reads: The standardizing body shall ensure that standards are not prepared, adopted or applied with a view to, or with the effect of, creating unnecessary obstacles to international trade. 21

22 Similarly to technical regulations, a means to avoid unnecessary obstacles to international trade is foreseen in the stated preference for standards based on performance rather than design. EXERCISES: 9. What are the main differences between the concept of necessity regarding technical regulations (Article 2.2) and regarding conformity assessment procedures (Article 5.2.1)? 10. What are the requirements on non-discrimination and avoidance of unnecessary obstacles to trade for conformity assessment procedures, under Article 5.2 of the TBT Agreement? 22

23 III. APPROACHES TO FACILITATE THE ACCEPTANCE OF CA RESULTS The preamble to the TBT Agreement recognizes the important contribution international standards and conformity assessment systems can make by improving efficiency of production and facilitating the conduct of international trade. That is also the reason why Members are encouraged to accept other Members' conformity assessment results. The TBT Committee spent a considerable amount of time during the Second Triennial Review debating this subject. The results were meaningful, and can be found in the document G/TBT/9. Note Important work on conformity assessment procedures was carried out as a result of the work programme agreed at the Third Triennial Review of the TBT Agreement. Check document G/TBT/13 for details. IN DETAIL The source of the obligation to recognize other Members' conformity assessment procedures and conformity assessment results can be found in Article 6 - Recognition of Conformity Assessment by Central Government Bodies - which states that: With respect to their central government bodies: 6.1 Without prejudice to the provisions of paragraphs 3 and 4, Members shall ensure, whenever possible, that results of conformity assessment procedures in other Members are accepted, even when those procedures differ from their own, provided they are satisfied that those procedures offer an assurance of conformity with applicable technical regulations or standards equivalent to their own procedures. It is recognized that prior consultations may be necessary in order to arrive at a mutually satisfactory understanding regarding, in particular: adequate and enduring technical competence of the relevant conformity assessment bodies in the exporting Member, so that confidence in the continued reliability of their conformity assessment results can exist; in this regard, verified compliance, for instance through accreditation, with relevant guides or recommendations issued by international standardizing bodies shall be taken into account as an indication of adequate technical competence; limitation of the acceptance of conformity assessment results to those produced by designated bodies in the exporting Member. 6.2 Members shall ensure that their conformity assessment procedures permit, as far as practicable, the implementation of the provisions in paragraph Members are encouraged, at the request of other Members, to be willing to enter into negotiations for the conclusion of agreements for the mutual recognition of results of each others conformity assessment procedures. Members may require that such agreements fulfil the criteria of paragraph 1 and give mutual satisfaction regarding their potential for facilitating trade in the products concerned. 23

24 6.4 Members are encouraged to permit participation of conformity assessment bodies located in the territories of other Members in their conformity assessment procedures under conditions no less favourable than those accorded to bodies located within their territory or the territory of any other country. The TBT Committee has identified five approaches to facilitate the acceptance of conformity assessment procedures (G/TBT/9): accreditation; the unilateral recognition of results of foreign conformity assessment as equivalent, including the possibility of government designation of specific conformity assessment bodies; the negotiation and conclusion of Mutual Recognition Agreements (MRAs) for conformity assessment between governments; the conclusion of co-operative (voluntary) arrangements between domestic and foreign conformity assessment bodies; and the use of Supplier's Declaration of Conformity (SDoC). Accreditation, unilateral recognition and mutual recognition agreements are expressly mentioned in the TBT Agreement. The other two approaches were proposed by the TBT Committee during the Second Triennial Review of the Agreement as part of an indicative list of existing mechanisms to facilitate the acceptance of conformity assessment results. This list was not intended to prescribe particular approaches that Members might choose to adopt, as it was recognized that the application of different approaches would depend on the situation of Members and the specific sectors involved. Figure 2: Indicative list to approaches to facilitate the acceptance of conformity assessment results 24

25 IF YOU WANT TO KNOW MORE... DIFFERENT APPROACHES TO CONFORMITY ASSESSMENT Check the website dedicated to the TBT workshop on the different approaches to conformity assessment, organized by the WTO Secretariat following a mandate contained in the Third Triennial Review, and held in March In the workshop's website you will find materials on presentations made by various organizations and WTO Members, including discussions on sectoral specific issues, such as CA for vehicle emissions or the electricity sector. The programme for the TBT workshop on the different approaches to conformity assessment included: Session I: Conformity Assessment Procedures at the National Level I.A I.B National Considerations for the Preparation and Application of Conformity Assessment Procedures Sector Specific Approaches to Conformity Assessment Session II: Facilitating the Acceptance of Conformity Assessment Results II.A II.B Approaches to Facilitate the Acceptance of Conformity Assessment Results Mutual Acceptance of Conformity Assessment Results Session III: Building a Conformity Assessment Infrastructure in Developing Country Members III.A III.B The Conformity Assessment Infrastructure of Developing Country Members Establishment of a Conformity Assessment Infrastructure III.A. ACCREDITATION Accreditation is the procedure by which an authoritative body gives formal recognition that a body or person is competent to carry out specific tasks. Accreditation bodies are authoritative and independent entities that do not themselves deal with verification of product specifications but whose task is to assess the organizations carrying out such functions (testing laboratories, inspection bodies and certification bodies). When operated according to relevant international standards, guides and recommendations, it offers a mechanism which could promote confidence and therefore facilitate international trade (Article 6.1.1). Cooperation on accreditation is carried out, at international level, by the ILAC and the IAF. The International Laboratory Accreditation Cooperation (ILAC) operates as a forum for accreditors of laboratories and inspection bodies, and the International Accreditation Forum (IAF) fulfils this function for accreditors of certification bodies. 25