Evaluating effects of world trade agreements on technical trade barriers

Enterprises face a wide range of trade barriers in the form of technical regulations, standards and conformity assessment procedures. The Agreement on Technical Barriers to Trade (TBT) and the Agreement on Sanitary and Phytosanitary Measures (SPS) were both part of the WTO Agreements, and came into force on 1 January 1995. Both agreements seek to ensure that regulations, standards, and conformity assessment procedures do not act as barriers to trade. Both the TBT Agreement and the SPS Agreement identify the conditions under which trade restrictive measures may be applied for non-trade purposes.

The TBT Agreement concerns general technical product regulations, standards, and conformity assessment procedures including terminology, symbols, packaging, marking or labelling, while the SPS Agreement is applicable to additives, contaminants, toxins and disease-carrying organisms in food, beverages and foodstuffs. Any measure under the SPS Agreement must be necessary for the protection of human, animal, plant life or health and must be based on scientific principles and sufficient scientific evidence, and be supported by a risk assessment process taking into account the available scientific evidence and economic factors, including the objective of minimising negative trade effects. The SPS Agreement also permits interim measures based on the precautionary principle where relevant scientific evidence is insufficient.

Under the SPS Agreement, developing and least developed countries were accorded transition periods during which SPS measures can be applied without the necessity of establishing a scientific justification for the measures. Under both the SPS and the TBT Agreements, assistance is provided to developing countries in the development of international standards and the preparation and application of technical regulations and standards. Under the TBT Agreement there is provision for review and revision of the Agreement every three years, with a review due in 2000. So far, the review process has not lead to modification or changes to the existing Agreements.

The European Union has expressed its concern with problems resulting from, among others things, non-alignment of domestic standards and technical regulations with relevant international standards, the non-harmonisation of conformity assessment procedures, discriminatory and non-transparent formulation and implementation of technical standards, the scope of products subject to mandatory certification, and the eco-labelling issue. It proposes negotiations address these problems by: (1) strengthening existing provisions of the TBT Agreement. This will be sought in the following areas: (a) guidance on good regulatory practice, and support for use of international standards by manufacturers as a means to demonstrate compliance with requirements; (b) promote uptake of the Agreement's Code of Good Practice on standards; (c) provide greater technical assistance for capacity building in developing countries to enable compliance with obligations and participation in preparation of international standards. (2) Clarification of existing definitions and provisions: (a) status of international standards and linkage between the Agreement and international guides for conformity assessment; (b) application of TBT Code of Good Practice principles (transparency, impartiality, accountability) to international standardisation bodies; (c) health, consumer health and environmental issues to be addressed to achieve appropriate balance between right to take action to achieve these objectives, and obligation to avoid trade restrictions. (3) Expansion of scope of Agreement: (a) promote international harmonisation of conformity assessment procedures; (b) development of multilateral guidelines on labelling; (c) establish non-discriminatory rules for the creation and administration of eco-labelling schemes based on a life-cycle approach.

Clarification and harmonisation of the rules relating to technical barriers to trade is likely to act as a constraint on the use of such measures for protectionist purposes. This can be expected to result in a net economic gain for the global economy. The magnitude and distribution of the economic impact will be affected by the way in which international standards and regulations are developed, and in particular, the extent to which the developing countries are active participants in this process.

The interests of developing countries have not always been well served by the TBT Agreement, despite existing provision for technical assistance. Developing countries have often not been fully involved in the preparation of international standards, which therefore may be set to their disadvantage, restricting their access to developed country markets. Many developing countries regard this as being particularly important in respect of SPS, given many developing countries' comparative advantage in agricultural products.

While the TBT Agreement represents a starting point in developing co-operation in technical regulations, standards, and conformity assessment procedures, much more remains to be achieved including issues relating to the establishment and acceptance of international standards, and internationally agreed mechanisms for assessing conformity with these standards. There should also be increased incentives for countries to adopt international standards. International standards do not exist for many products, and when they do, they are not always taken up leaving countries using (divergent) national standards that can restrict market access.

The interests of developing countries have not always been well served by the TBT Agreement, despite existing provision for technical assistance. Developing countries have often not been fully involved in the preparation of international standards, which therefore may be set to their disadvantage, restricting their access to developed country markets. Many developing countries regard this as being particularly important in respect of SPS, given many developing countries' comparative advantage in agricultural products.

The application of international standards and promotion of the international harmonisation of conformity assessment procedures could yield economic advantages to European producers who already comply with these standards, and are therefore able to take market share from exporters who are unable to meet the required standards for market entry. They could also gain from reducing the duplication of tests, and by a facilitation of trade. International harmonisation of risk assessment criteria could strengthen the legitimacy of using TBT measures as a mitigation measure in the areas of public health or environmental protection. Eco-labelling, if applied on the PPM principle, would strengthen European producers' market position, as compared to other countries who are unable to meet the standards warranting the awarding of a label.

Developing countries are now reaching the end of the transition period for compliance with the TBT Agreement requirements. They are likely to face difficulties in complying with the different standards set in their export markets. Where importing countries apply TBT on grounds of public health or environmental protection, any WTO member can challenge these measures under the WTO system. The burden is then on the respondent state to justify its measure. In the knowledge of this, developing countries may be reluctant to apply and enforce measures necessary to protect their domestic interests. Firms in developing countries exporting to countries imposing technical barriers may lose market share if they are unable to comply with the required standards. The economic impact may be negative, if employment falls in exporting industries.

For the exports of developing countries, there will be significant economic and administrative costs in meeting international standards. They often lack the information on the existing standards and regulations applicable to their exports, and the technical guidance and expertise on how to satisfy them. Testing and assessment procedures can be costly, and standardisation is often negotiated in forms where developing countries has little representation or influence. However, to the extent that there are provisions to address these concerns, and to give additional support to developing countries, these costs could be reduced.

The TBT Agreement as currently implemented only offers limited restraint on the use of technical barriers, and many issues remain ill-defined, including what an international standard is, appropriate international conformity assessment criteria, the treatment of commodities for which international standards do not exist, and the grounds on which exceptions are permissible.