The WTO/World Bank Conference on
Developing Countries' in a Millennium Round
WTO Secretariat, Centre William Rappard,
Geneva,
20-21 September 1999
Trade Facilitation:
Technical Regulations and Customs Procedures
Patrick A. Messerlin
Institut d’Etudes Politiques
Jamel Zarrouk
Arab Monetary Fund
13 September 1999
Trade Facilitation:
Technical Regulations and Customs Procedures
Patrick A. Messerlin and Jamel Zarrouk
Trade facilitation, especially issues related to customs procedures and technical regulations
and standards (TRS) have become an increasing source of concern for the international
business community and source of conflict in the WTO. Industrial countries perceive that
customs procedures in developing countries and emerging markets have not evolved enough
to adjust to the rapidly growing volume of trade of the last decade. Their complaints are
echoed by service providers, such as express mail courriers which depend heavily on customs
procedures for providing certain features of their services (the guaranteed time of delivering a
mail or a parcel) and which manipulate a substantial proportion of all customs entries (more
than 30 percent in their largest markets). In response, developing countries have increasingly
raised concerns about the imposition of ever expanding technical regulations and standards
(hereafter TRS) by industrial countries.1/ Developing countries argue that TRS are beyond
their technical competence or not taking into account special development needs and
technological problems [UNCTAD, 1999]. Conversely, complaints are also expressed by
developing countries about the “spaghetti bowl” of rules of origin included in the customs
procedures of the industrial countries (in particular, those which are hubs of regional
agreements), while industrial countries complain about the adoption by some developing
countries of technical regulations that have no scientific basis and appear to be used to
substitute for quantitative restrictions and similar instruments.
These developments suggest that it makes sense to examine customs regulations and
TRS together, under the general headline of trade facilitation. Both components of the trade
facilitation agenda give rise to the same challenge: how to minimize the unnecessary burden
for trading partners of the national application of national regulations, which reflect each
WTO Member’s right to regulate its own economy as it wishes.
One reason these complaints have become noisier is that many tariffs and “standard”
non-tariff barriers such as quantitative restrictions or voluntary export restrictions have been
reduced or eliminated. But other factors can explain the fact that trade facilitation is rising on
the agenda of trade negotiations as well. First, the growth of intra-firm trade (where the same
firm is at both ends of the trade flows concerned) makes large firms less willing to accept
external constraints on their cost-minimized internal production process. Second, small and
medium enterprises (either SMEs in large industrial countries, or large firms in smaller
developing economies) are playing an increasing role in world trade: customs procedures and
/Standards are, by nature, voluntary: they consist in “a document, established by consensus
and approved by a recognized body, that provides, for common and repeated use, rules,
guidelines or characteristics for activities or their results, aimed at the achievement of the
optimum degree of order in a given context” [ISO Guide, 1991].
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TRS are for them new problems -- in sharp contrast with large firms having an experience in
these issues, and/or a better grip on them -- fueling the feeling of unfair competition. Third,
differing customs regimes and requirements, and duplicate standards applied to the same
international transaction may be best explained by regulatory regimes that range from a
strong tradition of centralized (often public) action to an almost complete lack of action by
central authorities. Last but not least, TRS are closely related to two issues of increasing
importance in the world trade system: health and environment. This importance is being
greatly magnified by small and well-organized interest groups/NGOs which have strong
views on what are the “best” TRS, are able to convey their messages quickly and across
frontiers through Internet connections, and are skilled in getting attention in the media.
What can then be done during the coming decade in the TF field? In order to answer
this question, the paper is organized as follows. Section 1 tries to provide a sense of the exact
importance of the TF topics by asking two questions: (i) to which extent developing and
emerging countries are more, or less, concerned by TF problems than industrial countries
through their trade flows with industrial countries; and (ii) how frequent and important have
been TF issues in WTO dispute settlement cases? Section 2 looks at the possibility for
unilateral, regional and multilateral actions for addressing the issues raised by the design of
TRS, and what they imply for WTO rules. Section 3 does the same for issues that arise in the
design of customs procedures. Section 4 discusses mechanisms for the enforcement of TRS
and customs-related regulations. Throughout, we use the EC experience in managing these
two TF issues as a guideline for assessing what could be done at the multilateral level.
Section 5 concludes.
Two general lessons emerge from the paper. First, a top-down approach aiming at
eliminating TRS-related trade conflicts by adopting similar TRS among trading partners
(through harmonization or mutual recognition) is likely to be unproductive for the WTO, and
to be a source of distortions when followed by regional groups of countries. By contrast,
public initiatives at the level of enforcement -- following a bottom-up approach -- seem to
offer much better perspectives if TF activities are increasingly conceived as services, and as
such, subject to domestic regulatory reforms and liberalization. Second, private initiatives can
be very useful at both levels (design and enforcement) because they can be much more
flexible and more responsive to consumers’ demand than public actions, and because the
risks of private collusive behavior (which would lead to trade distortions) could be managed
by competition authorities (to the extent that they are independent from governments’ and
medias’ pressures).
1. The Extent of TRS and Customs Requirements
TRS are introduced for a wide range of reasons (including for giving the impression
of public action). They can be applicable to products, production or producers (licensing
requirements for service suppliers), and to consumption (bans of certain products for certain
use, see below the beef hormone case). The scope and type of product and process-specific
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regulation will reflect a society’s attitudes toward the level of acceptable risks, its knowledge
and ability to manage risk, and its environmental factors (endowments). As is well known,
the result of differences between countries in any of these determinants is often that domestic
markets are sheltered from foreign competition.
The last fifty years have witnessed a considerable increase of TRS in almost all the
countries. In fact, the main force behind EC efforts for creating European TRS during the
1970s has been the boom of new TRS adopted by Member states (in 1992, EC Member states
were enforcing more than 80,000 norms, compared to less than 2,000 European norms [WTO
TPR, 1993, p.111]). Since then, EC TRS represent the largest body of EC law: in less than 25
years, 503 Directives (laws in EC parlance) on TRS have been adopted -- more than a third of
all the 1381 Directives adopted by the EC since 1958 and included in the 1997 acquis
communautaire [Annual Report to the Parliament on Community Law, 1998]. The two next
largest packages of Directives are agriculture and environment, respectively 383 and 144
Directives -- a substantial proportion of them including TRS-related regulations. To a lesser
extent, the same observation could be done for customs procedures for a wide variety of
reasons: for instance, from the need to create new tariff codes for products subject to
antidumping duties to always longer and more detailed rules of origin.
This general evolution in most of the WTO Members has led to a multiplication of
duplicative requirements at the borders -- from testing and certification to the origin of the
imported products -- which have rapidly become more important as a barrier to international
trade.2 It has been estimated that over 60 percent of U.S. exports are subject to mandatory
health, safety, and related TRS. For exports to the EC, government-issued certificates were
required for 45 percent of these goods, whereas private, third party certification was accepted
in 15 percent of cases, and for the remainder manufacturers self-certification sufficed. In the
EC, some 75 percent of the value of intra-EU trade in goods is subject to mandatory technical
regulations. As a result, the impact on firms operating in the most concerned sectors can be
huge: redundant testing and conformity assessment procedures faced by Hewlett-Packard
increased six-fold over the years 1990-1997.
Similar observations can be done for the other TF component -- customs procedures.
The average customs clearance transaction in developing countries involves 25 to 30 different
parties, 40 documents, 200 data elements, some 30 of which are requested at least 30 times,
and 60 to 70 percent of which must be re-keyed at least once [Roy, 1998].
Increasingly numerous and complex TRS, and customs procedures and requirements
generate substantial costs. These costs have been estimated in the EC equivalent to a “tax” of
up to 2 percent of the value of the goods shipped. In a developing country environment, they
can be a multiple of this. For instance, Egyptian customs clearance practices in the early
1990s were characterized by extensive “red tape” and many goods were subject to redundant
testing and idiosyncratic standards -- the latter being equivalent to between 5 and 90 percent
of the value of the goods [Hoekman, 1998].
2
The remainder of this Section draws on Hoekman (1998).
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1.1. The trade coverage of TRS: a differentiated impact?
Almost all the above figures are global. They are silent on whether TF-related costs
are relatively uniformly spread over all the trading partners of a country, or whether they tend
to hurt more certain countries than others. Differentiated effects can flow from various
sources: certain products are more subject to TRS than others; bilateral or regional
agreements on common TRS could result in discrimination and trade distortions -- both
between members of the agreement (in this respect, common TRS are analyzed as potentially
similar to endogeneous tariff formation in the context of a free trade zone, hence favoring the
dominant industry of the zone [Olarreaga and Soloaga, 1998]) and between members and
non-members (in this respect, common TRS are analyzed as potentially equivalent a common
external tariff leading to trade-creation and trade-distortion effects between a customs union
and the rest of the world).3/ What follows aims at providing a sense of the magnitude of a
possible differentiated impact (based on the EC experience for which there has been an effort
to collect systematic data on the TRS coverage by sector).
Table 1 is based on information published by the European Commission [Single
Market Review, III.1, 1998]. The two first columns provide crude estimates of the sectoral
value-added covered by EC efforts either to harmonize Member state TRS (substituting
European TRS to Member state regulations) or to promote the mutual recognition of Member
state TRS by each other (around a minimal core of European common regulations). The sum
of the two columns by line does not necessarily add up to 100 percent (some products are still
subject to no Member state nor EC TRS). The third column provides an “index of failure” of
the EC efforts for eliminating TRS-related trade barriers within the EC. This index ranges
from 1 (EC efforts have been relatively successful at eliminating intra-EC TRS-related
barriers) to 2 (success is mixed) and 3 (serious problems remain). The EC average index of
failure is roughly 1.5, but sectoral indices vary substantially. The last column recapitulates
the rates of global protection (adding up tariffs, non-tariffs barriers and antidumping
measures) on goods imported by the EC from the rest of the world [Messerlin, 1999].
Table 1 provides two main results (all related to manufacturing only). First, sectors
dominated by the harmonization process per se (more than 50 percent of the sector is covered
by harmonizrd TRS) represent 33 percent of EC value added, 35 % of intra-EC trade, but
only 22 % of EC imports from the rest of world. This differential could reflect a possible
discriminatory effect (among other factors) of the EC harmonization on extra-EC trade, all
the more because they are concentrated in sectors where there are high rates of EC global
protection.4/ Differences between the EC trading partners can be substantial: if these sectors
/Harmonization ( the EC “Old Approach,” see below) can generate internal and external
distortions, whereas mutual recognition (the EC “New Approach,” see below) seems more
limited to distortions between members and non-members.
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/Any EC TRS Directive has two possible effects on extra-EC trade: (i) it can reduce it to the
extent that, in addition to some perfectly respectable economic purposes, it includes a
protectionist element which creates an additional extra-EC trade barrier; and (ii) it can be a
source of trade diversion to the extent that it is a successful instrument of intra-EC trade
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represent 22-26 % of EC imports from the U.S., Japan, and Central European countries, they
represent 14% and 29% for EC imports from the emerging countries (Hong Kong, Korea,
Indonesia, Malaysia, Singapore, Taiwan and Thailand) and from ACP countries, respectively.
Combining high coverage by the harmonization method and a low (close to 1) index of
failure (meaning that the adoption of EC TRS has succeeded) may be a particularly
dangerous combination for non-EC countries: it maximizes the likelyhood of extra-EC
protection with intra-EC trade diversion (from the success of creating European TRS). This
mix is observed in mining (mostly energy), paper, and transport equipment: it represents 21
% of intra-EC trade and 13 % of EC imports from the world, with again a differentiated
impact on EC trading partners (substantial for the U.S. and Japan, more limited for the three
other groups of trading partners).
The second group of results is related to sectors with high indices of failure of the EC
TRS policy. These sectors with an index higher than the average represent 62 % of intra-EC
trade and 69 % of EC imports from the world, suggesting that things are slow to change
(except, possibly, for the Central European countries). Sectors with an index of failure larger
than 2 are much smaller: 35 % of intra-EC trade, 32 % of EC imports from the world, with a
large difference between Japan (relatively unconcerned) and ACP countries (relatively
protected by the ineffectiveness of the EC TRS policy).
1.2. Trade Facilitation and WTO Dispute Settlement Cases
Both components of trade facilitation (TRS and customs procedures) have emerged as
one of the recurrent theme in WTO dispute settlement cases. Cases raised by customs
procedures have involved customs classification, duty collection, GSP coverage, quota
management and import measures. Cases raised by TRS are even more numerous: cases on
tunas and dolphins, shrimps and turtles, beef hormones, and on asbestos focus on this topic,
but provisions from the Uruguay TBT Agreement is invoked in many other complaints. All
these cases have involved industrial and developing countries, both as complainants and
defendants.
These cases have had (so far) a very different fate, depending whether customs
procedures or TRS are at stake. Cases on customs procedures have been kept at their
technical level, terminated without too many fights, and are (so far) followed by compliance
of the loosing party (or, at least, an official statement to comply). In sharp contrast, cases
involving TRS have generated a lot of emotion and heat, and compliance to panel rulings
seems far to be automatic (in particular since the EC decision not to implement the beef
hormone WTO ruling).
The first lesson to be drawn from these four years of cases is that the approach used
by the WTO (which is similar to the approach used internally by WTO Member states) does
not provide the robust guidelines necessary for a satisfactory handling of dispute settlement
cases. The WTO approach relies on scientific expertise, in accordance with many of its
liberalization.
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provisions (for instance, Article 1.1 of the Uruguay TBT Agreement). This reliance leads to
two typical situations. In the first situation, the scientific community is unable to assess risks
-- a not so rare situation, particularly for technologies lacking the data necessary for risk
assessment because evidence has to be found ex post (asbestos) or because new technologies
are involved (genetically modified organisms or GMOs). In the second possible situation, the
scientific community largely agrees (inocuous beef hormones) but governments captured by
vested interests (or simply by their inability to act) blauntly dismiss scientific evidence.5/ This
WTO problem with scientific evidence is compounded by the fact that, almost by definition,
trade conflicts are likely to arise in these two situations -- the first one being highly correlated
with the emergence of a more efficient (maybe more costly in the long run) production
pattern, the second one with a typically protectionist behavior.
Again, these problems are not specific to the WTO. In North America, an additive to
gas for cars (methylcyclopentadienyl manganese tricarbonyl, or MMT) has been banned on
health grounds by the U.S. EPA, but not by Health Canada -- fueling one of the most bitter
disputes in Canada-U.S. trade. In the EC, Finland (which produces cadmium-free phosphates)
believes that cadmium in phosphate is damaging for health in the long run, whereas Spain or
Italy (which import cheap phosphates with a relatively high cadmium content from Morocco)
do not. Such examples abound. But the additional problem for the WTO is that it relies on a
strict de jure consensus between Member states -- increasingly complicated with a de facto
consensus between people because of NGO-driven medias.
Two actions could be envisaged by the WTO for making more robust the scientific
support it depends on more critically than WTO Member states. The first is to put into a
perspective the dispute settlement cases. The fact that medias report on a case by case basis is
highly counter-productive: it exacerbates unrational feelings, and their easy capture by the
vested interests. For instance, many Europeans (Americans) find acceptable (unacceptable)
the EC ban on imports of beef hormones and unacceptable (acceptable) foreign prohibitions
on EC exports of non-pasteurized cheeses (despite risks of salmonella). In order to reveal
these many inconsistencies, information from the WTO on scientific summaries related to
dispute settlement cases would be helpful.
A second action would be a commitment by WTO Members to take domestic
measures for educating their population on “risk management” in health and environment
matters. In too many countries (including industrial), scientific committees are not trusted by
the public opinion, and they are perceived as captured by their government or lobbies.
Tightening cooperation between the WTO, UN Agencies in food and environment and top
/The EC has banned the use of six hormones for cattle growth promoting purposes in 1988,
after years of strong intra-EC conflicts. Few experts (including in Europe) believe in a serious
health risk related to beef hormones. In fact, three of the six hormones are authorized in the
EC for therapeutic uses, and there are constant rumors reporting a sizable illegal (growth
promoting) use of all these hormones in the EC. The ban is deeply related to the depressed
situation of the beef market and the unability to reform the CAP (hormones can increase beef
production by 20 percent, meaning increased meat stocks under unchanged CAP rules.
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scientists would be a way to enhance the reputation of world-based scientific committees, and
to stabilize public opinion.
2. The top-down approach : TRS
Eliminating differences between TRS seems a priori the best way to eliminate TRSrelated trade conflicts. This “top-down” approach has been chosen by the EC, but it has
proven to be a mitigated success (as implicitly suggested by the many indexes of failure
higher than 1 or 1.5 in Table 1). What follows suggests that a government-based top-down
approach in the WTO context would be also costly -- but that private initiatives (possibly
supported by public actions) would be useful.
TRS can be “produced” in two ways. They can rely on mandatory public norms (the
“TR” side of TRS), defined by governments or public agencies more or less actively backed
by scientific committees (with the above-mentioned credibility problems). At the other end of
the spectrum, TRS can be defined by firms, or groups of firms (the “S” side of TRS), which
are then seen as the only economic operators knowledgeable enough for mastering adequatly
the problems raised by technical progress: firms are left free to develop their own appropriate
standards (eventually to monitor them with the necessary disciplines) in which they invest
their own credibility (loose standards would damage the firm's reputation and profits). Firms
can act collectively: the fact that TRS can require collective action does not necessarily imply
that they require state or public actions.
All these distinctions are particularly important in the WTO for several reasons. First,
WTO Members are very different in terms of the proportion of the two sources of TRS: a TRbased mix remains largely dominant in many former centrally-planned economies and
developing countries, whereas a S-based mix emerges as an important force in developed
market economies -- except for health and environment related issues (an important
exception, since, at noted in the introduction, these topics are particularly conflictual in trade
matters). This remark is reinforced by the fact that some WTO Members, such as the U.S.,
are largely impermeable to this concept. Second, these two approaches have a quite different
potential impact on trade. Although no general rule can be suggested, it seems reasonable to
assume that the deeper the involvment of public authorities is, the more likely the
protectionist and discriminatory impact of TRS could be. This hypothesis does not mean that
firms-based standards have no protectionist or discriminatory content (they do, maybe even
more than mandatory standards designed by public authorities). The justification of the
hypothesis relies rather on the firms’ unability to enforce trade barriers in the long run
without the help of public authorities. If this hypothesis is correct, it suggests that the deeper
the involvment of public authorities is, the more likely trade conflicts could emerge.
2.1. Harmonization
Table 2 aims at clarifying the WTO options by describing the four different basic
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steps of a typical TRS policy: design, notification, enforcement of the TRS before the product
reaches the market (a step which covers the many operations related to conformity
assessment) and finally enforcement of the TRS once the product is available on the market
in order to eliminate fraud (market surveillance). The first column presents the main GATT
Articles or related textes refering to these various steps. The three other columns presents a
brief summary of the progressive construction of the EC TRS regime (seen as an interesting
illustration since the EC is a deeply integrated region).
During its first 25 first years (1958-1985), the Community has aimed at harmonizing
the pre-existing Member state TRS (the so-called “Old Approach” illustrated in column 2) by
adopting “European norms” proposed by the Commission and negotiated by the Member
States in the Council of Ministers. Adopting Directives based on full harmonization required,
on average, two to three years (up to eleven years in the case of the “Mineral water”
Directive) because the unanimity rule was necessary at the Council of Ministers (en passant,
this condition would also be required at the WTO), and because the technical work was
devoted to the Commission which was barely prepared and equiped for handling it. As a
result, only 3 EC TRS Directives were adopted in 1969, despite the growing number of TRS
adopted by Member states and of the increasing impression that they restricted intra-EC
trade.
In the 1970s and early 1980s, the EC tried to break this deadlock by reducing the
scope of harmonization through several options: (i) optional harmonization (a producer has
the choice between EC harmonized rules or national rules -- but goods traded across borders
will have to meet EC harmonized standards or the standards of the destination country); (ii)
partial harmonization (harmonized rules apply only for cross-border transactions); (iii)
minimal harmonization (Member states may add more stringent rules to the EC harmonized
rules); (iv) alternative harmonization (the Directives provide alternative harmonization
schemes for achieving the objective pursued); and (v) piecemal harmonization (each aspect or
input of a product is harmonized separatly: for instance, car tyres, manometers for car tyres
and auto glass are subject to separate Directives of harmonization).
Following these efforts, a much larger number of Directives (222 between 1969 and
1986) was adopted, but at two high costs. First, the product coverage of these Directives is
very narrow, often a consequence of piecemal harmonization. Second, most of these
Directives have been drafted in extremely detailed manner -- hence requiring frequent and
substantial redrafting (still ongoing today) which is a source of permanent conflicts (it offers
permanent incentives to Member states to renegotiate past Directives). For instance, one of
the first Old Approach Directives adopted (Directive 71/320) which deals with “braking
devices on certain categories of motor vehicles and of their trailers” has been revised eight
times, and its last version is 146-page long and intertwined with another Directive (Directive
70/156) which exhibits the same complexity (in 1997, there were 201 vehicle-related
Directives).
By contrast, harmonization at the world level could be better promoted by firms or
regulatory bodies which can develop enough technical competence and prestige that they
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could generate worldwide harmonization in their sector of competence. Some of these bodies
could be inheritated from the inter-governmental “system of conferences” or “congresses” of
the late XIXth century and early 1900s through which governments sought to address issues
that had cross-border dimensions -- more than 30 intergovernmental organizations from mail
(1863) to aerial navigation (1910). For instance, the International Telecommunications Union
(ITU) eliminated the need for telegrams to be printed at each border post, walked across, and
retyped by requiring international interconnection. After declining in importance during the
interwar period, intergovernmental organizations again proliferated after the Second -expanding to new fields (such as labor markets, with ILO, or banking supervision rules, with
the BIS) but with, as the primary area for cooperation, the same goal of establishing standards
for products (services) and producers, and their enforcement [Hoekman, 1998].
Since the Second World War, a few regulatory bodies have had a worldwide
influence, even if coming from one country, as best illustrated by the U.S. Federal Aviation
Authority about aircraft safety during the 1970s and the 1980s. Today, these rare cases could
expand to more complex situations, based on a mix of worldwide firms’ and public agency’s
reputations (and the high costs associated to reputation loss, such as the ValueJet case).
Another source of worldwide TRS is collective efforts from enterprises. For instance,
international railway unions promoted the establishment of networks by adopting the same
rail gauge, standardizing rolling equipement, driving on the left, and adjusting signals, brakes
and timetables to each other. Interestingly, these inter-firm agreements tend to have spillovers on related services, such as negotiated agreements on companies’ use of each other’s
rolling stock, on the mutual repair and cleaning of freight cars, on the adoption of a single bill
of lading (a single document could be used for all trans-European shipments), and they could
culminate into trade liberalization, such as abolishing transit duties on goods shipped by rail
[Hoekman, 1998].
These examples suggest that firms can achieve more easily wider cooperation than
governments. However, it is also fair to raise the possibility that they generate market
dominance for the initiating firms (which is not a problem) and its potential abuse (which is).
An illustration of these concerns is the inter-war efforts by steelmakers from Belgium, the
Netherlands, France and Germany to use “freight rates, terminal charges, and complex
systems for documentation and classifying raw materials and finished goods to favor their
own producers, ports, cities or transfer points” [Murphy, 1994, p. 109]. These efforts for
reducing intra-European TRS were clearly aiming at consolidating at the European level the
efforts to cartelize national European steel industries.
The collusion issue is often raised as an argument dismissing the benefits from
collective efforts by firms for designing TRS, or as an argument for substituting public efforts
to private initiatives. Both arguments are not convincing. As underlined above, public efforts
to design worldwide (or plurilateral) TRS are less likely to succeed and/or to survive:
governments are less flexible than firms, less willing to take into account consumers’ requests
(and to revise their plans accordingly) and more easily captured by the most extreme vested
interests (so that they are often at the roots of conflicts which could have been solved more
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easily under firms’ management). Concerning the risks of collusive behavior, they exist of
course. But governments have the necessary instruments to discipline them (when they do not
reinforce them, a not so rare situation). In particular, competition authorities have enough
muscles (if they are “free” enough) to discipline most of the risks of such collusive behavior.
For instance, all these aspects seem present in the GMOs issue. Public intervention in this
source of tensions has not simplified or made less conflictual the issue (on the contrary). In
sharp contrast, certain U.S. and EC firms have recently started to build their reputation on the
absence of GMOs inputs. Farmers are waving consumers’ interests, but in fact, they are
concerned by their own direct interests: GMOs are likely to increase the quasi-vertical
integration links between farmers and GMO producers, at a time when farmers feel too much
integrated to retailers for other farm products -- all difficult issues in terms of competition
policy.
2.2. Notification
The failure of the Old Approach by the EC was made more visible by the adoption by
Member States of a considerable amount of domestic new TRS. In 1983, the Commission
tried to stop this increasing divergence by imposing a notification process (under Directive
83/189) whenever a Member state was considering the adoption of new technical regulations.
In addition to its monitoring function, the Directive allows for standstill arrangements and for
proposals of EC TRS (instead of Member state TRS) whenever the Commission believed that
the proposed national legislation would generate new technical barriers. Notifications are
examined by a Committee 83/189, formed of high level officials from Member states and
from the Commission. Notifications revealing possible conflicts between EC and national
TRS are sent for comments to the concerned bodies of each Member state (Ministries and
Member State Standard Bodies) and of the Community (the Commission and European
Standard Bodies). Comments can lead to “observations” and, in case of possible infringement
to Community law, to “detailed opinions” suggesting Community measures in order to
eliminate conflicts.
During most of the 1980s, Directive 83/189 has had a limited impact. Since the early
1990s, it has played an increasingly important role for several reasons: the recourse to
“mutual recognition” (see below, “New Approach”) which offered an alternative to deadlocks
on harmonization; the expansion of its coverage to key sectors (food products,
pharmaceuticals and cosmetics) and to EFTA countries (large producers of TRS-intensive
goods, and eager to keep EC markets open); and the relatively easy access of EC firms to the
procedure. Since the mid-1990s, the 83/189 Committee examines between 430 and 470 new
regulations each year. If many notifications are effectively done by Member states, there are a
substantial number of cross-notifications or firms’ complaints. Out of all these 430-470
annual notifications, 75% have raised observations and 40% “detailed opinions.” However,
actions have been taken only in a very small number of cases (2 percent).
The 1994 Uruguay Round has introduced three measures in favor of notification of
TRS: (i) the creation of an “enquiry point” in each WTO Member [TBT Agreement, Article
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10], (ii) the creation of a WTO standards information system (Ministerial Decision on
Proposed Understanding on WTO-ISO Standards Information System) and the regular review
of the notification requirement by WTO Members (Ministerial Decision on Review of the
ISO/IEC Information Centre Publication). However, these measures are far to meet the major
reasons for the (relative) success of the Committee 83/189: in particular, there is no
institution equivalent to the Commission which could discuss proposed TRS in the same
room that Member’s delegates, and there is no easy access of firms to the WTO procedure. In
this context, the only useful improvement would be to open to firms access to WTO
notifications. This type of proposal is not very palatable to such a government-driven
institution as WTO. However, it should be possible to find, through institutions such as the
International Chamber of Commerce, a forum where firms’ rights could be exercised, and
then sent to the WTO for information.
2.3. Mutual recognition
After the limited success of harmonization and notification, the EC introduced the
notion of “mutual recognition” at the level of the design of TRS. This so-called “New
Approach” consists in limiting harmonization to the minimum core of technical aspects (the
“essential requirements” which could also be optional, partial, minimal, etc.) and in ensuring
the mutual recognition of existing Member state TRS for all the other aspects of the TRS
examined. This approach looks flexible enough to be an interesting solution in the WTO
contexte. However, the New Approach has required three conditions in the EC which are not
met at the WTO. Moreover, its success requires a word of caution: its implementation is very
recent, and its (unweighted) average index of failure is 1.4 -- not very mcuh different from
1.6 for the Old Approach.
First, the New Approach has not been initiated by the Commission but by the Court of
Justice in two landmark rulings (the 1974 Dassonville and the 1979 Cassis de Dijon rulings).
The Commission could have initiated the New Approach on the basis of Article 30 of the
Treaty of Rome which states that “quantitative restrictions on imports and all measures
having equivalent effect shall [..] be prohibited between Member states:” defining TRSrelated trade barriers as such measures having equivalent effect was quite possible. But the
Commission felt that it had not the political clout necessary for such an inititiative.
The absence of a Commission and a Court, and a GATT Article XI weaker than
Article 30 of the Treaty of Rome leaves a WTO approach in this direction in the fragile hands
of a series of panel rulings going in the same direction and long enough to build a solid
jurisprudence. This last condition will require at least a decade or two (it is useful to note that
it took ten years after the Dassonville case and six years after the Cassis de Dijon ruling for
the Commission to engulf the EC in the track open by the Court of Justice). Ultimatly,
introducing the New Approach would require a firm commitment by the WTO Members, as
it has been the case in the EC: the New Approach was definitively part of the EC only when a
new Article 100 was introduced in the Maastricht version of the Treaty of Rome in order to
give a robust legal basis for the mutual recognition principle in the field of the
11
“approximation of laws.” In particular, Article 100A introduced an innovation hard to
imagine in the WTO context: the qualified majority vote in TRS matters.
Second, the adoption of mutual recognition at the level of designing TRSs has also
required an elaborate system of safeguards in the EC. No less than three “safeguard” clauses
(Articles 36 and 100A:4, and the “rule of reason,” or “mandatory requirements,” included in
the Cassis de Dijon ruling) counterbalance Articles 30 and 100A. The use of these safeguards
is strictly limited by conditions imposed by the Court: (a) causality (for being prefered to EC
TRS, Member state TRS must contribute directly to the policy objective); (b) proportionality
(Member state TRS should not be more trade-restrictive that it is necessary for achieving the
policy goals); and (c) the choice of the least trade-distorting instrument (the Member State
shall choose the least trade-distorting instrument for achieving its fixed goals). Conditions
(a) and (c) are hard to imagine in the WTO context. Moreover, the European Court of Justice
recognizes the right to enforce Member State TRS in a few limited cases which include
public health, consumer protection, and protection of the environmental or the working
environment, that is, in all the topics which are at the heart of today’s most conflictual and
difficult trade disputes. This right is often used by Member states, generating a continuous
erosion of what has been achieved.
All these legal difficulties should not hide a third, more profound, problem: the real
efficacy of the New Approach. The EC expected that this Approach would lead to rapid and
substantial progress. And indeed, the New Approach (based mostly on 28 Directives) covers
a larger value added share than the Old Approach Directives (43% vs 33% of total industrial
value added, as shown by Table 1), with much less time absorbed by their drafting and with a
much simpler legal system (for instance, one Directive (89.392 on machines and lift
machines) is estimated to cover 55,000 types of machines [Pelkmans and Egan, 1992]).
However, there are signs of disappointment coming from three sources, all of them
suggesting some caution for the WTO. First, the procedure for producing New Approach
Directives has remained very complex. The Commission issues “mandates” to the European
Standard Bodies (ESBs) by which it invites them to prepare “European standards” complying
with the “essential requirements” the Commission defines in the Directives. Essential
requirements have often been too vague to be useful, leading to unclear mandates for the
technical work to be done by the ESBs (for instance, in the “Machine safety” and
“Construction products” Directives, the Commission has been obliged to draft “interpretative
documents” of its own essential requirements, making the process of defining European TRS
again very slow and frustating). Second, creating operational standard bodies (SBs) has
proven much more difficult than expected. The ESBs were not initially conceived for
fulfilling the rôle of providers of TRS devolved to them by the New Approach. The three
major ESBs (CEN, Comité européen de normalisation, CENELEC, Comité européen de
normalisation électro-technique, and ETSI, European Telecommunications Standards
Institute) were mere fora where Member state standards bodies could gather for
implementing international standards drawn up by the international standard organizations
(ISO) in an uniform manner in the EC. Lastly, and probably more deeply, it has been
12
progressively realized that the level of designing TRS Directives is only one aspect of a
complete TRS regime: it leaves (and indeed can exacerbate) many pending problems at the
enforcement level, as section 3 shows.
Despite all these difficulties, mutual recognition at the level of designing TRS seem to
be increasingly used at the regional level -- with the risk of discrimination against nonmembers of the regional agreements (see section 1). Regional experiences have a wide range:
from the Trans-Tasman Mutual Recognition Arrangement (TTMRA) which covers all goods
and services (except, medical practitioners) and which reduces to nothing the essential
requirements (goods legally sold in one country can be sold in the other, and service
providers registered in one country can practice in the other) to the much more limited
NAFTA approach [Beviglia Zampetti, 1999]. A key point in such agreements is whether
foreign products imported in one Member state could be exported to the other Member states
without further formalities: this condition is likely to be respected in the case of a customs
union (because it is felt required by the notion of a “single market,” as in the EC) but not
necessarily in the case of free trade areas.
In this context, it seems that the essential role for the WTO would be to ensure that
this discrimination should be minimal -- by ensuring that the principles of open access and
conditional MFN can be applied to third parties seeking to join the regional agreement
[Messerlin 1996, Hoekman, 1998]. In particular, this condition requires that any country
meeting the “essential requirements” should be able to participate to the TRS regional
agreement.
3.
Market surveillance at the borders: customs procedures
Excessive control and inefficiency of customs clearance procedures, combined with
the monopoly of service providers in the ports or other key entry points in importing
countries, have been widely observed in many part of the developing world. Resulting costs
can exceed tariffs in many cases. Documentary red tape in customs procedures increases the
cost of imports substantially -- around 7-10 percent of the world trade according to Staples
[1998]. Anecdotal evidence of administrative customs inefficiencies and of its impact in
several developing countries is abundant. The average customs clearance transaction in
countries of the Middle East and North Africa (e.g., Egypt, Jordan, Lebanon) requires 25 to
30 stages, and takes from one day to several weeks [Roy, 1998]. Valuation procedures are a
major uncertainty on the part of importers, as Customs generally expects underinvoicing. It is
the practice in some Middle East and North Africa countries that Customs officers question
every invoice in order to charge penalties or collect “rewards” (for instance, in Jordan, the
law rewards Customs officers who allegedly uncover invoice misreporting and charge
penalties to the importers).
An other related customs barrier to trade facilitation are the problems facing transport
operators when crossing the frontiers. Transportation by road is an important cross-border
mode of passenger and freight transport in many countries (in particular for the landlocked
13
countries in Africa and Latin America). The International Road Transport Union has reported
that the most restrictive cross-border transportation can be found in some parts of Europe and
the Middle East and North Africa [WTO Document, S/C/W/60]. The cost of delays that
affects international trade is estimated to be about 6 percent of transport time in some
countries of Central and Eastern Europe. Complaints from the transport profession mention
also excessive charges that impair the freedom of transit contained in Article V of the GATT.
The monoply of port services has led to inefficient regulation of port operations and has
contributed to implicit tariffs of 5 to 15 percent on exports in Latin America [Guasch and
Spiller, 1999]. The cost per ton of handling a container in the port of Alexandria (in Egypt) is
reported to be a multiple of that in other Mediterranean countries [Hoekman, 1995]. The lack
of competition in related services to trade (such as in insurance) has been translated into
higher insurance premia charged for trade coverage, as compared to insurance charges facing
Egypt's competitors in other regions.
Unilateral reforms (often assisted by the IMF and the World Bank) have been initiated
by many developing countries. They deal with national customs procedures and regulatory
requirements imposed by other agencies on cross-border trade, and they aim at ensuring an
efficiency mix in revenue collection and trade facilitation following a set of guidelines
covering best practices developed in particular countries and customs administrations. A
number of developing country members of the WTO have stepped up efforts to improve
inspection and clearance activities in anticipation of the full implementation of the WTO
Agreements which have a direct relation to trade facilitation. Many others need longer
transition periods with regards to the implementation of parts of the Agreements (Egypt has
already asked for an extended period of three years to implement the Agreement on customs
valuation). The same trends of restructuring and reform have been taking place for port
services through privatization and government relinquishing to the private sector the lease
and management of public port facilities.
In this context, multilateral initiatives are particularly useful for generating guidelines
based on best practices, and for accelerating reforms. Following the many Uruguay
Agreements that have implications for customs procedures (Customs Valuation, Import
Licensing Procedures, Preshipment Inspection, Rules of Origin, Technical Barriers to Trade
and Sanitary and Phytosanitary Measures) the 1996 Singapore Ministerial Declaration added
trade facilitation to the WTO agenda, and held a Symposium on Trade Facilitation in
December 1997.6/ The following main obstacles related to customs procedures have been
listed: excessive documentation requirements, lack of automation and low use of information
technology, lack of transparency in import and export requirements, lack of use of risk
assessment techniques and audit-based controls and lack of cooperation among customs and
other governments agencies. A report is to be submitted to the next Ministerial Conference
evaluating the exploratory and analytical work to assess the scope for the WTO rules in the
area of trade facilitation.
/UNCTAD has contributed to this effort, most ntoably with the UNCTAD Trade Efficiency
Symposium.
6
14
The basic guidance for customs administrations as regards customs procedures
remains the WCO’s international Convention on the Simplification and Harmonization of
Customs Procedures, known as the Kyoto Convention. The latter comprises a set of
principles and 31 Annexes that lays out standards and recommended best practices for
Customs procedures or arrangements. The Kyoto Convention has not been a successful
multilateral instruments since it was drawn up in the 1973, because of its non-binding nature
and the many outdated Annexes that do not reflect latest techniques and developments such
as risk assessment, audit-based systems of control and automated systems. As a result, the
Kyoto Convention has been under revision to reflect these points, and to become a
comprehensive set of customs best procedures covering imports and exports, transit and
warehousing. Expected major changes to the current Convention include a set of guideline
drawn from best practices with specific examples from particular countries and customs
administrations to assist other countries with available successful experience. Enforcing the
revised Kyoto Convention will require a lot of efforts (and funds), in particular for valuation
and enforcement training, and for developing contacts with the business and trade community
in developing countries (customs’ partners should learn and understand all the new
requirements and procedures).
The key issue is whether the revised Kyoto Convention would be binding, or not. The
Kyoto Convention is above all a set of customs best practices that is subject to technological
changes. The WCO being in close cooperation with the Customs administrations around the
world is the appropriate institution to oversee and enforce the Kyoto Convention.
Nonetheless, enforcing a set of applying procedures would need a “dispute settlement”
mechanism. The WTO as a rule-making institution might extent its “dispute settlement”
mechanism to enforce the Kyoto Convention.
Some WTO members have argued that the WTO should not be used to ensure
enforcement of an instrument that was developed by another organization. A counterargument to this view is that the WTO has a mandate to achieve greater coherence in global
economic policy making by cooperating with other international organizations. The WTO
members have already given the WCO the responsibility for developing the rules of origin for
non-preferential trade, in addition to the responsibility for promoting the WTO Agreement on
Customs Valuations (including technical assistance to those countries in transition from the
old GATT valuation system). A WCO/WTO cooperation in enforcing a new Kyoto
Convention will mean that customs administrations in all the WTO members are operating
from the same rules which is a further facilitative measure for the international business
community. A way to get the benefits from the WTO/WCO cooperation and to appease the
fears associated to the use of the WTO as an enforcing stick would be to negotiate a
“restricted” list of international organizations with which the WTO could have deeper and
more institutional relations. The list could start with one item in the coming Round -- the
WCO -- but it could be subject to review in every Round.
15
4. The bottom-up approach : Enforcement
Table 3 shows two “bottom” levels in trade facilitation: conformity assessment
procedures (CAPs), such as testing, certification, marking, etc., which ensure that, before
being sold, products comply with country’s TRS; and market surveillance (which includes
customs procedures and requirements) which aims at ensuring that all the products available
on its domestic market are conform to country’s TRS.
As is well known, harmonized or mutually recognized TRS still impose a burden on
trade if traded products or services are subject to CAPs in both the exporting and importing
countries, or if they are subject to severe constraints on their choice of CAP units (either there
are too few CAP units available, what is equivalent to a quantitative restriction, or enough
CAP units are available, but at higher transport or transaction costs). Similarly, excessive
customs procedures and requirements impose additional costs by requiring firms to spend
unproductive resources from which no benefits are derived. These observations suggest an
important corollary: the huge efforts invested in a “top-down” approach to the TRS issue
(focusing on harmonization or mutual recognition at the level of design of TRS) can be a
waste of resources if serious pending problems are left at the two bottom levels.
This optimal balance between a “top-down” and a “bottom-up” approach is one of the
most important TF issues, as illustrated by the EC. On the one hand, the ongoing discussions
between the EC and the Central European countries (CECs) have generated a fear in the EC
that CECs will not meet the level of competence at the CAP level desirable for implementing
EC TRS, and will endanger the whole system. On the other hand, the negotiations and
signatures of 58 MRAs at the CAP level between the EC and its major industrial trading
partners [WTO TPR, 1997, p.139] seems an approach with large net benefits. Both
observations suggest the bottom-up approach as the most necessary (for CECs and
developing countries) and the most profitable (for industrial countries).
4.1.Conformity Assessment Procedures (CAPs)
As said above, CAPs deserve attention because they can channel protectionist actions
of their own. They cover a wide range of procedures -- from confidence in private behavior
(manufacturers have strong interests to take care of their reputation which is an essential part
of the firm’s capital) to reliance on ad hoc public agencies. Recognizing this range of
procedures is essential in an open trade context because, as suggested in the introduction, the
heaviest reliance on public intervention is, the easiest protectionist actions can be. It happens
that in most WTO Members, CAPs traditionally rely mostly on state-related agencies.
CAPs are performed by specialized units of all kinds (laboratories, public agencies,
private firms) which constitute the core of a TRS “industry” which is relatively large in
industrial countries: for instance, enforcing the 80,000 TRS existing in the whole EC requires
10,000 independent CAP units employing 200,000 workers, and having a turnover of ECU
10-11 billion (these estimates date from the mid-1990s).
Regulating the CAP units is thus a crucial component of any TRS policy. In fact, the
16
huge increase of TRS-related activities in many countries requires to consider this services
industry in the same perspective than it has routinely been done for the telecom or banking
industries: the growth of the industry, its expanding scope of activities and its new
requirements in terms of competence and technology require domestic regulatory reforms to
be coupled with progressive liberalization.
The condition of domestic regulatory reforms is well illustrated by the EC case. Most
of the problems raised by CAPs converge to one point: the level of technical competence and
ethical behavior required from the CAP units which is increasingly necessary in all the
possible situations to be faced by CAPS. For instance, Table 3 illustrates the fourteen basic
“modules” of CAPs existing in the EC for taking into account the nature of the product, the
stage and type of the production process, the kinds of risks involved. For each of these
modules, a EC Decision adopted in 1993 defines, in general terms, the tasks to be done, the
operators in charge (manufacturer or CAP units) and the sharing of their responsibilities.7/
But each of the Directives imposing TRS on a given product selects the modules effectively
open to the manufacturer (or importer) and to the CAP units, and can require that Member
States “notify” and “accreditate” the CAP units (called the “Notified Bodies,” or NBs) that
they declare competent to carry out the CAP activities for the group of products covered by
the Directive in question.
These 600 NBs (compared to the total of 10,000 EC CAP units) have thus a pivotal
role: the technically correct and economically sound implementation of the whole New
Approach depends from the competence of a relatively small number of organizations. But,
in a recent survey (1996), the Commission found that the “accreditation” of NBs by Member
states obeys to such a wide range of rules, methods and procedures -- or rather an absence of
rules, methods and procedures -- that it represents a threat to the credibility of the EC TRS
regime. This conclusion has induced the Commission to table several proposals for
“harmonizing” accreditation procedures. It should be added that the problems raised by CAPs
outside the scope of the New Approach are similar -- but made even more difficult by the
wider range of CAP activities (not “limited” to 14 basic modules), by a larger number of
available CAP units (10,000 units) and by a wider scope of CAP units (which range from the
large organizations, such as SGS or Veritas, to small inhouse private units or to large
government laboratories). In this wider context, the key issue is the recognition of the CAP
unit chosen by a given manufacturer (often in its own country) or by its business partners
(other producers, large retailers or distributors, or even consumers).
In this context, what do domestic regulatory reforms mean? First, they would consist
/ For instance, under module "A-A" in Table 3, it is up to the manufacturer to declare the
conformity of its product to the essential requirements listed in the appropriate Directive(s)
and to the European standards established by the appropriate ESB. By contrast, the procedure
under the module "B-F" is more complex: a CAP unit declares the conformity at the
conception level of the product (with the necessary tests, if any) whereas, at the production
level, the manufacturer is also involved for declaring the conformity of its product to its
"type."
7
17
in introducing a healthy dose of competition between CAP units by allowing entry of foreign
CAP units in domestic markets. Taking the EC case as an example, a CAP unit located in a
Member state could decide to provide the “best” CAP services for only a limited range of
goods -- those for which the agency believes to have the best expertise, that is, “comparative
advantages” -- but for the whole EC.8/ If the “specialized” CAP unit has rightly assessed its
abilities, it will attract manufacturers from the whole EC (not only those of its Member state
of origin, as today). Second, regulatory reforms imply that conditions on ethical behavior
(about the independence and qualification of the CAP unit staff, about confidentiality and
traceability of the work done by the CAP unit, etc.) will be met. Presumably, these conditions
are likely to be very similar across countries.
Looking at TRS enforcement as an industrial activity, to be subject to domestic
regulatory reforms combined with opening to foreign competition, makes this level of a TRS
policy well fit to WTO activities: fundamentally, it assimilates the CAP level to a case for
service liberalization.
Such an approach can be adopted on an unilateral basis (as it has been the case in
certain services and countries), as illustrated by the International Conformity Certification
Program (ICCP) elaborated by the Saudi Arabian Standards Organization (SASO), the
primary agency responsible for CAPs in Saudi Arabia. SASO Program has been a pilot
conformity assessment procedure in developing countries that rely on the private sector to
inspect shipments for compliance verification in the exporting countries. The ICCP is a
combined conformity assessment, preshipment inspection and certification scheme to regulate
and monitor shipments of selected categories of products prior to their leaving their ports of
exports before reaching Saudi Arabia (the Program currently applies to 76 products
categories divided into five groups: food and agriculture, electronics and electrical products,
automobile and related products, chemical products, and others). The key element of the
SASO Program is that each shipment must provide evidence of conformity to SASO
standards (or their approved equivalents) before the certificate of conformity (required for
every consignment) can be issued, and ensure both exporters and importers of a streamlined
customs process which allows goods to clear faster and to face a minimum rejection risk at
the port of entry. So far SASO Program has not been a complete success: it is considered as a
costly process by traders in major trading partners to Saudi Arabia (complaints have been
related to high fees payed for obtaining certificates of conformity, and to the high strorage
fees, as each consignment has to be isolated in storage during the testing stage).
But the interesting aspect of the SASO Program is that test data can be produced by
nationally or internationally accredited laboratories approved by SASO, or by the
manufacturer’s declaration of conformity. At the conclusion of the SASO approved
laboratory testing, a Conformity Test and Evaluation Report is issued and submitted to the
/En passant, this alternative is much more consistent (in sharp contrast with an increasing
grip policy) with the popular view in the EC according to which the New Approach and
MRAs are a way to promote competition between rules and between regulators.
8
18
Regional Licensing Center for verification of Conformity to SASO Program Requirements.
SASO Program closely follow ISO/IEC Guide 28 (General Rules for a Model Third Party
Certification System for products), particularly with regards certain products that have
achieved full compliance with Saudi standards. These products qualify for Type Approval
License that allows their imports with the minimum of intervention.
A key aspect of the SASO Program is that SASO has contracted an international firm
to carry out these activities. This firm is in turn assisted by a network of accredited testing
laboratories and inspection bodies around the round. The SASO experience shows that
compliance verification of national standards might be better and cost-effectively served
through mutual recognized agreements that will improve the certification time and reduce the
induced cost for exporters.
Many existing MRAs about CAPs signed by WTO Members are more limited: they
do not generate a worldwide web of CAP units, and they aim more at eliminating excess
costs from duplicate CAPs or from artificial constraints on CAPs than at reducing costs by
increasing the competitive conditions on the market of CAP activities.
In this context, the WTO should work in two directions. First, as for MRAs at the
level of TRS design, the WTO should ensure that MRAs on CAPs do not distort trade by
favoring MRA signatories at the detriment of non-signatories: as in section 2, this goal could
be achieved by establishing clear “essential requirements,” the fulfilment of which would be
an automatic passport to be a signatory of the MRA in question. If this condition is met, there
should be few concerns about the burgeoning of bilateral and regional MRAs (in fact, the
European Accreditation of Certification Bodies (EAC) in 1990 and to the European
Cooperation for Accreditation of Laboratories (EAL) in 1994 have been prepared by a series
of bilateral MRAs, such as those signed by France, the Netherlands and Sweden in the early
1980s).
Second, the WTO should be the place to discuss CAP issues within the global
framework of service liberalization with, ultimatly, exchanges of concessions on market
access for CAP units.9/ At the beginning, this liberalization may be limited to industrial
countries, because many developing countries still do not accept test data or product
certifications issued through foreign laboratories and firms (foreign laboratories are allegedly
not competent to serve domestic safety standards). However, increasing competition between
CAP units from industrial countries may also enlarge the choice of developing countries
about the foreign laboratories and firms that they could accreditate -- eroding their
opposition.
4.2. Domestic market surveillance
Ultimatly, the credibility of any TRS regime depends on its final impact on the
markets -- that is, the fact that products and services on sale follow legal TRS. In order to
/The proposal of an “APEC-wide Recognition of Product Certification,” based on an “APEC
Laboratory Recongition Center,” is a regional variant of such an approach [Wilson, 1995].
9
19
achieve these results, there are two main approaches -- one focusing on reputation and ex post
penalties, the other one on ex ante surveillance of the markets by public agencies. An
efficient functioning of CAP and market surveillance requires a delicate balance between
reliance on manufacturers' reputation and credible actions from ad hoc quasi-public agencies.
5.
Conclusion
The paper has addressed trade facilitiation issues at large -- that is, covering technical
regulations and standards (TRS) and customs procedures and requirements. All these issues
are increasingly the source of trade conflicts, particularly acrimonious and damaging for the
world trade system when they concern health and environment issues.
The paper makes negative and positive proposals. If eliminating differences between
TRS seems a priori the best way to eliminate TRS-related trade conflicts, this “top-down”
approach has proven to be very costly in time and efforts, and ultimatly a limited success, as
illustrated by the EC experience. There is no reason to believe that the same conclusion
should not be reached at the world level, all the more because “scientific” evidence has
proven a poor support for the WTO (and a poor protection in case of disputes between WTO
Members). However, private initiatives in this domain (possibly supported by public actions,
and checked by competition policy) have been numerous and often successful.
In the context of enforcing existing TRS, the perspectives for direct WTO work are
much better. First, the WTO should ensure that bilateral or regional agreements in these
matters (the so-called mutual recognition agreements, or MRAs) do not distort trade by
favoring the MRA signatories at the detriment of non-signatories: this goal could be achieved
by establishing clear “essential requirements,” the fulfilment of which would be an automatic
passport to become a signatory of the MRA in question. Second, the enforcement issues
related to TRS (and, to a lesser extent, customs formalities) should be discussed in the global
framework of service liberalization: increased competition between the agencies, firms and
institutions in charge of conformity assessment would be beneficial. Such an increased
competition would flow from domestic regulatory reforms leading to trade liberalization -- a
process that is increasingly driving the WTO negotiations in services. Lastly, in the area of
customs procedures, the enforcement of the revised Kyoto Convention on customs best
practices needs better coordination between the WCO and the WTO, which might extend to
the ability of invoking WTO dispute settlement mechanisms.
20
References
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and Limits of GATS Article VII (Recognition), mimeo, World Services Congress,
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Guasch, J. Luis and Pablo Spiller, 1999, “Managing the Regulatory Process: Design,
Concepts, Issues, and the Latin America and the Caribbean Story,” The World Bank
Institute, Washington, DC.
Hoekman, Bernard, 1995, “The WTO, The EU and The Arab World: Trade Policy Priorities
and Pitfalls,” Center for Economic Policy Research, Paper No. 1226.
Hoekman, Bernard, 1998, “Beyond National Treatment: Integrating Domestic Policies,”
mimeo, World Bank, Washington.
Messerlin, Patrick A., 1996, A Transatlantic Free Trade Agenda on Non-tariff Barriers, in
Bruce Stokes, Ed., Open for Business: Creating a Transatlantic Marketplace, Council
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Messerlin, Patrick A., 1999, The Costs of Protection in Europe, Institute for International
Economics, Washington.
Olarreaga, Marcelo and Isidro Soloaga, 1998, Endogeneous Tariff Formation: The Case of
Mercosur, Centre for Economic Policy Research, London.
Saudi Arabian Standards Organization (SASO), 1998, “Conformity Certification Program:
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<http://www.worldbank.org/trade/>.
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Wilson, John, 1995, Standards and APEC: An Action Agenda, Institute for International
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21
Table 1. EC TRS Directives and EC imports, by sector, 1995
EC TRS
coverage
[b]
Manufactur
ing sectors
ISIC
classificati
on [a]
Ha
rm
oni
zati
on
[c]
200
311-312
313
321
322
323
331
341
351-352
353
354
355
361
369
371
381
382
383
384
385-390
Mining
Agro-business
Beverages and sugar
Textiles
Clothing
Leather goods
Wood and wood products
Paper and paper products
Chemicals
Petroleum refineries
Petroleum & coal products
Rubber and rubber products
Pottery, china, etc.
Non-metallic products
Iron & steel
Metal products
Machinery
Electrical & electronic goods
Transport equipment
Other manufacturing goods
All manufacturing
96
100
63
Mutual
tion
81
54
79
*
11
18
73
sum
33
*
Rate of
"failure"
global
Intra-EC
protect.
imports
World
U.S.
Japan
CECs
Emer-
ACPs
0.4
5.8
3.2
3.6
2.3
0.4
1.9
4.7
14.7
1.5
0.8
3.7
0.3
1.9
6.9
3.1
14.0
10.0
15.6
5.3
2.4
3.8
1.1
4.2
5.6
1.0
2.2
2.5
9.2
1.6
8.5
2.1
0.6
1.0
7.1
2.2
16.5
13.5
8.3
6.7
[e]
2.5
2.1
0.9
1.2
0.6
0.2
1.4
3.7
14.1
0.7
0.0
2.3
0.3
0.7
3.7
1.7
29.0
18.2
11.4
5.5
[e]
0.0
0.1
0.1
0.9
0.2
0.0
0.0
0.5
9.1
0.0
0.1
2.7
0.0
0.9
0.8
1.3
32.4
25.5
22.4
3.1
[f]
1.8
6.6
0.6
10.3
16.6
0.9
6.9
1.8
6.7
2.5
0.6
2.4
0.8
3.8
9.9
5.2
5.8
8.1
6.8
2.0
ging [g]
0.6
3.5
0.6
8.2
10.2
1.0
3.8
0.8
3.4
0.2
0.0
3.3
0.0
0.7
0.6
2.9
23.5
25.1
4.8
6.7
5.1
8.4
9.5
3.9
1.9
1.4
4.7
0.0
3.0
0.3
34.8
0.1
4.2
0.0
7.7
0.1
0.6
0.5
5.7
8.0
25.8
22.9
74.0
15.9
22.5
10.4
53.9
22.6
13.8
6.2
77.0
18.2
29.1
10.8
71.0
63.8
recogni-
37
59
77
63
18
100
Index of
100
27
79
55
51
43
93
82
20
62
sum
43
[d]
1.2
2.0
2.0
0.9
1.5
(%)
3.4
30.4
22.5
23.1
31.4
1.3
1.4
2.7
1.0
2.9
2.4
1.6
2.5
1.5
1.0
1.9
1.8
0.9
2.1
avg
1.5
4.8
7.8
7.9
4.3
9.0
7.8
8.4
4.8
15.8
6.5
4.5
8.0
9.2
5.9
avg
13.7
EC trade
Extra-EC
imports
from
:
All sectors with harmonization > 50% value added
78.4
12.0
1.6
12.2
34.9
21.8
23.5
harm. > 50% val.ad. and failure index < 1,50
77.5
6.6
1.2
6.8
20.6
13.3
17.6
index of failure > 1,50
23.9
62.9
2.1
12.8
61.9
68.5
73.6
index of failure > 2,00
35.1
51.5
2.4
12.6
35.3
32.3
25.6
Sources: The Single Market Review, 1997, Annexes. WTO TPR, 1997, p.139, Messerlin [1999].
Notes: [a] Based on a crude correspondance with NACE classification. [b] in % value added. [c] a "*" signals an important proportion of "mixed old approach."
[d] see text. [e]: shade locates sectors with MRAs with the EC. [f] CECs: Central European countries. [g] Emerging: Emerging countries (see text).
1
Table 2. The basic elements of Trade Regulations and Standards
GATT & WTO
provisions
Stages
1.
Intensity of
harmonization
Who decides?
3.
GATT, TBT
Agreement
WTO MSs
Legal reference
Who is
responsable?
Where?
TBT Agreement
WTO MSs
Articles 30, 36, 100, 100A4
None
"Essential requirements"
None
Commission &
Council
Commission & Council
Member States
SBs (at EC or MS level)
SBs at MS level
Directive 83/189
MSs/SBs
Directive 83/189
MSs/SBs
Directive 83/189
MSs/SBs
Committee
83/189
Committee 83/189
Committee 83/189
Legal reference
TCM procedures
Rules on TCM
units:
TBT Agreement
quality assurance
NBs
The "ten" basic modules
NBs (600 units)
The "ten" basic modules
TCM units (10,000)
mandatory
EOTC
mandatory (target EN45000)
yes, EOTC
voluntary
EAC, EAL, GLP, EOTC
no
yes
and Bilateral MRAs
no
Testing, certification and
marking (TCM)
CE marking
Market surveillance
A.
B.
Note:
Articles 30 and
36
Full or "limited"
Notification of TRS
(a) accreditation
(b)mutual
recognition
4.
No Harmonization Approach
Adoption of TRS
Legal reference
2.
European Community
Mutual Recognition
("New Approach")
Harmonization
("Old Approach")
Customs
procedures
Domestic
monitoring
(see text, Section
3.2)
"SAD"
MSAs
MSs: Member states. MSAs: market surveillance authorities. NBs: notified bodies. SBs: Standardization bodies
2
MSAs
MSAs