CHAPTER 10
STANDARDS AND CONFORMITY ASSESSMENT
SYSTEMS
1.
OVERVIEW OF RULES
(1)
Standards and Conformity Assessment Systems
Standards and conformity assessment systems consist of technical regulations, standards,
and rules for judging whether products conform to those particular standards. Used
throughout the world, these systems serve a variety of purposes, such as ensuring the quality
of products, ensuring public safety, and protecting the environment. Restricting trade must not
be among their intended purposes.
However, standards and conformity assessment systems can function as de facto trade
barriers when a country imposes criteria under which it is more difficult for foreign products
than for domestic products to meet the relevant standards. Also, governments may implement
standards and conformity assessment systems under the guise of legitimate objectives
mentioned above, when in fact they are designed to limit imports or subject imports to
discriminatory treatment. In such cases, standards and conformity assessment systems can be
trade-restrictive.
International disciplines are needed to eliminate the unnecessary trade restrictive effects
of standards and conformity assessment systems. Some organizations, such as the
International Organization for Standardization (ISO), the International Electrotechnical
Commission (IEC), and the Joint FAO/WHO Food Standards Programme Codex Alimentarius
Commission, have been working for years to create a unified system of international
standards and conformity assessment.
In the GATT context, the Agreement on Technical Barriers to Trade (hereinafter referred
to as the “Standards Code”) was concluded in 1979 as part of the Tokyo Round of GATT
negotiations, to promote the harmonization of standards and conformity assessment systems
and to establish rules on transparency and other aspects of related measures. The Uruguay
Round has produced a new Agreement on Technical Barriers to Trade (hereinafter referred to
as the “TBT Agreement”) that makes obligations under the old Standards Code more
definitive and strengthens its provisions. In addition, specific disciplines concerning sanitary
and phytosanitary measures were negotiated as a part of the Uruguay Round agricultural
negotiations. In the final agreement, however, they were concluded as a separate agreement
known as the Agreement on the Application of Sanitary and Phytosanitary Measures
(hereinafter referred to as the “SPS Agreement”).
Participation in the Standards Code was left to the discretion of each country. As a result
of the Uruguay Round, the TBT Agreement and the SPS Agreement were subject to the single
undertaking requirement as agreements annexed to the WTO Agreement. This change has
brought about a significant expansion in the range of countries covered by agreements in
these areas, which means a major strengthening of international disciplines on standards.
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(2)
Legal Framework
<TBT Agreement>
The TBT Agreement sets forth certain requirements for technical regulations, standards,
and conformity assessment procedures for products or related processes and production
methods ( PPMs ). These terms are defined as follows:
(i)
Technical regulations: Technical specifications, including applicable administrative
provisions, with which compliance is mandatory by law or regulation;
(ii) Standards: Standards with which compliance is not mandatory; and
(iii) Conformity assessment procedures: Procedures to judge whether a product conforms to
applicable technical regulations and standards, and to accredit conformity assessment
bodies.
To ensure that such technical regulations, standards and conformity assessment
procedures do not act as unnecessary barriers to trade, the TBT Agreement directs
standardizing bodies to ensure most-favoured-nation treatment and national treatment, to use
international standards as a basis for new technical regulations, and to use standards and
conformity assessment procedures when preparing them. It also requires standardizing bodies
to take appropriate steps to ensure transparency, such as notifying the WTO when preparing
or revising standards.
The TBT Agreement requires the following two kinds of obligations for Members with
respect to their central and local government standardizing bodies and their non-governmental
standardizing bodies. The first is the primary obligation for Members to ensure compliance by
their own standardizing bodies with the TBT Agreement. The second is the related
obligation for Members to take reasonable measures as may be available to them to ensure
compliance by their own standardizing bodies with the TBT Agreement (see Figure 10-1).
Under the TBT Agreement, Members have various obligations including those to ensure
transparency in general and also to notify the WTO. Standards and conformity assessment
systems that have the effect of unjustifiably discriminating between domestic and foreign
products or limiting the quantity of imports may constitute violations of the national treatment
provision Article III of the GATT, the general elimination of quantitative restrictions
provision Article XI of the GATT or the non-discriminatory administration of quantitative
restrictions provision Article XIII of the GATT, depending on their content. These measures
may also violate several articles including Articles 2.1 and 2.2 of the TBT Agreement which
stipulate that: (i) 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; and (ii) 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.
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< Figure 10-1 > Members' Obligations
Level of Government
To comply
(primary obligation)
Central government
(i),(ii),and (iii)
Local governments
On the level directly below (i) and (iii)
(obligation to notify
central government
WTO)
(prefectural level)
Other local governments and
non-governmental bodies
Reasonable measures to
ensure the compliance of
local government and nongovernmental bodies
(secondary obligation)
(ii)
(i)and (iii)
(obligation other than WTO
notification)
(i),(ii)and (iii)
: Note: (i) Technical regulations, (ii): Standards, (iii): Conformity assessment procedures
An underlined character ( ) indicates obligations expanded or strengthened by the TBT Agreement.
All obligations under (iii) were expanded, while (i) was strengthened with respect to local governments
positioned one level directly below the central government.
< SPS Agreement >
The SPS Agreement seeks to prevent the use of sanitary and phytosanitary measures as
disguised trade restrictions, and to harmonize national sanitary and phytosanitary measures
based on international standards. The basic points are as follows:
-
Members have the right to take sanitary and phytosanitary measures necessary for the
protection of human, animal, or plant life or health, provided that such measures are not
inconsistent with the provisions of the SPS Agreement (Article 2.1).
-
Members shall ensure that any sanitary and phytosanitary measure is applied only to the
extent necessary to protect human, animal, or plant life or health, based on scientific
principles (Article 2.2).
-
Members shall ensure that sanitary and phytosanitary measurers do not arbitrarily or
unjustifiably discriminate between Members where identical or similar conditions
prevail. Sanitary and phytosanitary measures shall not be applied in a manner which
would constitute a disguised restriction on international trade (Article 2.3).
-
Members shall base their sanitary or phytosanitary measures on international standards,
guidelines, or recommendations, where they exist, except as otherwise provided for in
the SPS Agreement (Article 3.1).
-
Members may introduce or maintain sanitary or phytosanitary measures which result in
a higher level of sanitary or phytosanitary protection than would be achieved by
measures based on the relevant international standards, guidelines or recommendations,
if there is a scientific justification (Article 3.3).
141
-
In cases where relevant scientific evidence is insufficient, a Member may provisionally
adopt sanitary or phytosanitary measures on the basis of available pertinent information,
including that from the relevant international organizations as well as from sanitary or
phytosanitary measures applied by other Members (Article 5.7).
-
Members shall notify changes in their sanitary or phytosanitary measures and shall
provide information on their sanitary or phytosanitary measures to ensure transparency.
Margin should be even the SPS Agreement also specifies procedures for consultations
and dispute settlement (Articles 7 and 11).
< Box-1 > Mutual Recognition
Article 6.3 of the TBT Agreement provides that “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 other's conformity assessment
procedures.” The TBT Agreement thus encourages the mutual recognition of results of each
other's conformity assessment procedures, not that of standards themselves.
Mutual recognition is a tool used by the EU to integrate standards and conformity
assessment systems as part of the larger process of market integration in the EU. The results
have been favourable enough that the EU has been actively pursuing mutual recognition with
external countries, in which the EU accepts the result of the conformity assessment
procedures by its trading partner's conformity assessment bodies as equivalent to its own
result, in exchange for the trading partner accepting the result of the conformity assessment
procedures by the EU’s conformity assessment bodies. Mutual recognition streamlines
conformity assessment procedures and reduces costs, and therefore, improves market access.
The EU has discussed mutual recognition agreements ( MRAs ) with Australia, New
Zealand, the United States, Canada, Switzerland, Japan, and other countries. It has already
agreed to sign MRAs for some areas with Australia and New Zealand (both in July 1996) and
the United States and Canada (both in June 1997). In the Transatlantic Economic Partnership,
the EU states that it will develop the sector of conformity assessment systems, particularly
between the EU and the United States. Japan and the EU began talks in May 1995 and are
currently studying electrical appliances, telecommunication equipment, good manufacturing
practice ( GMP ) for pharmaceuticals, and good laboratory practice ( GLP ) for chemical
products. Australia has also begun mutual recognition talks with the United States, Canada,
Japan, and other countries.
When the Japanese Prime Minister visited Korea in March 1999, the two countries
agreed to begin exchanging information with related to eventual mutual recognition
agreement as called for in "Agenda 21."
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< Box-2 > The Relationship between Eco-Labelling Schemes and the TBT Agreement
The WTO Committee on Trade and Environment ( CTE ) has considered the
relationship between eco-labelling schemes and the TBT Agreement as an item associated
with standards and conformity assessment. Eco-labelling schemes seek to contribute to
expansion of the market for environmentally-sound products by affixing a label that informs
consumers of the products' environmental merits. It is used in many developed countries
including Japan.
There is a conflict of opinion between developed countries who emphasize the
usefulness of eco-labelling schemes for environmental conservation and its relative lack of
trade-impairing effects, and developing countries who worry that such labels do impair trade.
All countries, however, recognize the significance of ensuring transparency in the
administration of eco-labelling schemes as well as the need for full consideration of this issue.
If eco-labelling schemes are subject to the TBT Agreement which deals with labelling
rules, then transparency in the administration of the eco-labelling scheme can be ensured
through the application of the TBT Agreement. However, countries are divided on their
interpretation of the Agreement with respect to its coverage, with some maintaining that it
covers standards which focus on non-product-related processes and production methods
( PPMs ), and others that do not. A form of eco-labelling certification that has gained growing
prominence in recent years is the life cycle approach, which examines positive and negative
impacts of products on the environment from the design stage through final disposal. This
approach considers the environmental-soundness of the product itself (its energy
conservation, for example) and also that of its PPMs (what happens to waste liquids from the
manufacturing process, does it use Chlorofluorocarbons. ( CFCs ), etc.).
In the CTE, some countries have argued either that the TBT Agreement should be
interpreted to cover eco-labelling schemes focusing on non-product-related PPMs, or that new
rules should be created outside of the TBT Agreement that would allow eco-labelling schemes
focusing on non-product-related PPMs. Others, however, are of the opinion that, in light of
the basic GATT rule that like products be given no less favourable treatment, the creation of
eco-labelling schemes focusing on non-product-related PPMs itself is impermissible. No
conclusion has been reached on this issue. It will require continued and careful discussion.
For eco-labelling schemes that focus on product characteristics or product-related
PPMs, the CTE has confirmed that transparency must be maintained in accordance with the
TBT Agreement. (On a related subject, see the discussion in Chapter 3 of the Relationship
between the WTO Agreements and Trade Measures pursuant to Multilateral Environment
Agreements ( MEAs ), another major subject discussed in the CTE.)
(3)
Notification to the WTO
The WTO disciplines on standards and conformity assessment emphasize the
improvement of transparency by requiring notification of measures. The TBT Agreement and
the SPS Agreement both include an obligation to notify other Members through the
Secretariat and to allow reasonable time for other Members to make comments when a
relevant international standard does not exist and if new standards or conformity assessment
systems may have a significant effect on the trade of other Members. The Committee on TBT
143
and the Committee on SPS, established under the TBT Agreement and the SPS Agreement,
recommend that this period of time be 60 days.
Under the Standards Code, there was much discussion on how to ensure prompt
notification, enhancement of the notification system will continue to be an important issue
under the WTO because the increase in participating countries is expected to increase the
number of notifications made.
As supplementary information in this regard, we outline the number of notifications
made under the Standards Code and the TBT Agreement. Between 1980 and 1999 there was a
total of 7,400 notifications, of which 725 were from Japan (see Figure 10-2). In 1998, only
149 out of the total of 648 notifications (23 percent) had provided comment periods in excess
of the 60 days recommended, but in 1999 there was a slight improvement to 162 out of 669
(24 percent; see Figure 10-3).
< Figure 10-2 > Number of Notifications
Country
Under Standards Code
*
1980-1994
Australia
1992
Canada
1980
EU
1980
Japan
1980
United States 1980
Total (including others)
54
396
226
548
500
4,464
Under TBT Agreement
1995-1998
1999
SubTotal
67
21
88
85
24
109
135
35
170
147
30
177
124
45
169
2,267
669
2,936
Total
142
505
396
725
669
7,400
(Source: GATT/WTO Documents)
Note: * Year of participation in the Standards Code
< Figure 10-3 > Length of Comment Period
1998
Less than
45 days
Australia
Canada
EU
Japan
United States
Total(incl.others)
7
15
8
8
8
241
45-59
days
0
0
14
3
10
151
1999
60 days
or more
1
3
14
16
14
149
Not
specified
or lapsed
0
1
0
0
1
107
(Source: WTO Documents)
Note: * including urgent notifications
144
Less than
45 days
4
8
1
9
13
243
45-59
days
11
11
1
15
6
166
60 days
or more
4
5
32
6
25
162
Not
specified
or lapsed
2
0
1
0
1
98
(4)
Economic Implications
When significant differences exist between the standards and conformity assessment
systems of different countries, the smooth development of free trade is likely to be impeded
because exporters must deal with separate measures for each country, causing manufacturing
and sales costs to increase. Furthermore, when such measures have an effect which
discriminates between domestic and foreign products, or limits the quantity of imports,
international trade is unreasonably distorted. To enhance free trade, it is essential to promote
the international harmonization of standards and conformity assessment systems, to provide
more transparency in the drafting and administration processes of domestic standards
regulations, and to ensure that equal treatment is accorded to domestic and foreign products.
Sanitary and phytosanitary measures are applied to prevent the entry of diseases and
pests from abroad, taking into account their prevalence in exporting countries and importing
countries, and other relevant factors, based on scientific and technical ground. Although there
will naturally be differences in the sanitary and phytosanitary systems adopted by different
countries, in no case should they be used to disguise restrictions on international trade.
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< Box-3 > The TBT Agreement and inappropriate international standards
The TBT Agreement obligates Members in principle to base their technical regulations
(technical regulations established for purposes such as consumer safety and environmental
conservation, which must be adhered to in order for products to be distributed) and standards
(standards that are not mandatory, but are referred to in order to facilitate transactions) on
internationally-accepted standards. The intention behind the Agreement is to have Members
bring their national standards into line with international standards so as to reduce the barriers
to trade caused when different countries employ different standards.
In light of its TBT Agreement obligations, Japan worked from 1995 to 1997 to bring
its national "JIS" standards in line with international standards formulated by the ISO and
IEC. It found, however, that many international standards contained technology that was
already obsolete or failed to accurately reflect market conditions so that it would be
inappropriate to bring Japanese standards into conformance with them. (The field of pipe
joints is one particularly vivid example.) The existence of such "inappropriate international
standards" means that the TBT Agreement obligations, which were designed to lower the
barriers to trade, work in the favour of only particular countries, regions, and industries, and
actually inhibit appropriate competition. As a result, they have the potential to expand the
barriers to trade rather than reduce them.
There are two problems in the review process of "international standardization
institutions" that undoubtedly contribute to the existence of "inappropriate international
standards:"
1)
Measures to ensure the openness and fairness of procedures and the transparency
of the review process are insufficient, and therefore do not accurately reflect the
wishes of national industries or consumers.
2)
International standards have not been reviewed in an appropriate and timely
manner, so that "inappropriate standards" remain on the books long after their
usefulness has expired.
International standardization institutions need to take steps to develop more
appropriate standards so as to resolve these issues. At the same time, we also need to express
our concerns over "inappropriate international standards" at WTO fora, and take steps to
explain and discuss the nature of the problems involved. In 1997 Japan brought these
problems up during the three-year review of the TBT Agreement. We are continuing to deepen
the discussion in preparation for the next three-year review (scheduled to conclude during
2000), and look forward to appropriate remedies during the next round of liberalization
negotiations.
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< Box-4 > Genetically-engineered agricultural products
In 1994, the United States began to commercialize genetically-engineered agricultural
products (herbicide-resistant soybeans, pest-resistant corn, herbicide-resistant rape seed), and
large-scale commercialization of these crops began shortly thereafter in the United States,
Canada, Argentina, and other countries. By 1998, a total of 27.8 million hectares were under
cultivation, approximately 75 percent of which were in the United States. When Argentina and
Canada are factored in, the three countries had a combined total of 99 percent of world
production. Estimates for 1998 show that in terms of land under cultivation approximately 30
percent of herbicide-resistant strains of US soybean, 20-30 percent of pest-resistant US corn,
and approximately 40 percent of herbicide-resistant Canadian rape seed are used in
genetically-engineered food products. The safety of genetically-engineered agricultural
products is still being debated, as are appropriate labelling methods, and large gaps can be
observed in the thinking and attitudes of different countries and regions.
Disputes about Safety: In 1990, the EU began requiring importers and distributors to
submit information on environmental impact and human risk, and review and approval
procedures were formulated for EU members and the EU as a whole. Some EU members were
dissatisfied with these regulations, however, prompting the EU to announce a moratorium on
approvals for genetically-engineered agricultural products until such time as the absence of
detrimental environmental and health effects could be demonstrated or desired improvements
were implemented (Decision of Environmental Ministers Meeting, June 1999). The US has
denounced this decision, which it calls scientifically unfounded and inspired by opposition
from environmental groups and by political motives.
Disputes about Labelling: In May 1997, the EU enacted new food regulations requiring
labelling for products that are not equivalent to conventional products in composition,
nutrients or use, that impact the health of specific individuals, that may generate ethical
concerns, or that contain vegetables or other items. with genetically-altered cells. Currently no
such products are distributed in the EU. Labelling is required for genetically-engineered
agricultural products approved prior to the new food regulations if these products contain
altered DNA or new proteins. (Regulations took effect in November 1997, with detailed rules
formulated in May 1998.)
The US does not require labelling of genetically-engineered agricultural products,
except in cases where there are significant changes in composition compared to existing
products, or where there are clear increases in allergic reactions or other health risks. The US
has denounced the EU labelling regulations for genetically-engineered agricultural products,
arguing that the detection methods and marginal detection values for DNA and new proteins
are not established, and that segregated management of genetically-engineered and
conventional agricultural products in the production and distribution stages will be
excessively costly.
Japan finalized its labelling rules for genetically modified foods on August 10, 1999.
Products will be required to note the use of genetically modified foods in their quality
labelling under the amended JAS Law. (The law is scheduled for promulgation in April 2000,
followed by an appropriate transition period before it takes effect.)
147
Discussion in International fora: The Organization for Economic Cooperation and
Development (OECD) has established a "Working Group on Harmonization of Biotechnology
Regulation and Supervision" to study concepts for evaluating environmental and food safety
and internationally harmonizing the environmental safety regulations of member countries.
The Working Group is currently building a system for international institutions and members
to exchange information on the scientific findings that underlie safety evaluations and current
regulations on genetic engineering. The OECD has also established a "Task Force on New
Food and Fertilizer Safety" to undertake a specific study of the safety of food and fertilizer
products. This Task Force is engaged in efforts similar to those of the Working Group. The
Cologne Summit of June 1999 called for a report on biotechnology and food safety to be
prepared by July 2000.
The Food Labelling Group of CODEX began studying the labelling of genetically
modified foods in 1997, and in April 1999 decided to establish a working group of a small
number of countries to study the issues in more detail. CODEX also established an ad hoc
group to formulate international standards for evaluating the safety of biotechnology-applied
foods in July 1999.
The signatories to the Convention on Biological Diversity began in 1996 to study the
formulation of a "Bio Safety Protocol" that would contain provisions for the safe transport,
handling and use of living modified organism during export and import. This protocol was
adopted in January 2000.
At the WTO, the Committee on Technical Barriers to Trade (TBT Committee) is
discussing the EU labelling regulations for genetically modified agricultural products. The US
argues that the rules constitute a significant barrier to trade because application began before a
list of exempted products was compiled. The EU argues that genetically modified agricultural
products are scientifically different from conventional foods and that its consumers therefore
have a strong need for labelling.
2.
PROBLEMS OF TRADE POLICIES AND MEASURES IN INDIVIDUAL COUNTRIES
Measures taken in connection with standards and conformity assessment systems and
with sanitary and phytosanitary systems must be enacted and implemented to the minimum
extent necessary for certain purposes, e.g., to ensure product quality, to maintain safety and
health, to protect the environment. Japan should urge that measures that act as avoidable entry
barriers against domestic markets be either abolished or simplified, and operated in a more
transparent manner in light of the TBT Agreement and the SPS Agreement.
Recently, countries are increasingly active in establishing and improving standards
aimed at protecting the environment. It would be necessary to ensure their transparency, and
to watch carefully in particular whether they respect relevant international standards, and
whether they constitute unnecessary obstacle to international trade. If such measures
discriminate against imports, either in general or from specific countries, or become
unnecessary import restrictions, it is necessary to deal with them by urging their rescission,
and by claiming their inconsistency with the WTO Agreement through the WTO dispute
settlement mechanism where necessary.
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(1)
United States
(i)
American Automobile Labelling Act
The American Automobile Labelling Act was enacted under Section 210 of the
Passenger Motor Vehicle Content Information Disclosure Act of October 1992. It requires all
passenger cars and light trucks to carry labels indicating their domestic content percentage of
value added in the United States and Canada. More specifically, labels must indicate:
-
-
The content percentage of United States and Canadian parts (on a model-bymodel basis).
The country, state and city of final assembly.
If countries other than the United States and Canada supply 15 percent or more of
the parts in the vehicle, the label must indicate the top two countries supplying
parts and the percentages supplied by each country.
The country of origin of the engine and transmission (the country adding 50
percent or more of the value or the most added-value).
The Act took effect on 1 October 1994. Violations are subject to a fine of $1,000 per vehicle.
The explanation offered for the system is that it will help consumers make better
purchasing decisions by providing them with information on the percentage of the
automobile's price produced within the United States/Canada. But the system is in fact a “Buy
American” provision that implicitly attempts to call on consumers to buy domestic goods. We
find that the following aspects of the law discriminate against foreign automobiles:
-
It distinguishes between parts purchased from wholly-owned subsidiaries and
independent suppliers, and uses different methods to calculate their value. Parts
from wholly-owned subsidiaries can be counted at full purchase price even if
their local content is less than 70 percent, while parts from foreign independent
suppliers are not allowed to count as domestic parts at all unless their
US/Canadian content is in excess of 70 percent.
-
Calculations are based on model averages. Thus, if the same model is produced
both inside the United States and in other countries, a weighted average of the
two is applied. As a result, the content of cars produced by foreign automotive
makers within the United States is understated, because foreign automotive
makers typically have factories in other countries besides the United States and
Canada.
-
Content is calculated at the place of final assembly, but the rules specify that the
place of final assembly be geographically separate from the location of the
painting process. Foreign automotive makers, who generally utilize integrated
production systems in which painting is done at the final assembly factory, are
not able to count painting costs in the purchase price, so their contents are
calculated less favourably than American auto makers’ content.
-
Content is calculated only in terms of parts prices, excluding the labour and
assembly costs incurred for final assembly of the vehicle. If the purpose of the
even margin law is to measure the value added in the United States and Canada,
149
then labour costs should obviously be included. Failure to do so results in an
unnecessary understatement of US/Canadian value.
-
US/Canadian content is handled together and a breakdown of their respective
portions is not published. This is problematic in terms of Most-Favoured-Nation
Treatment because it disadvantages countries other than Canada.
Additionally, the law forces foreign auto makers with operations in the United States,
who tend to use large amounts of non-US/non-Canadian parts, and dealers, who import
vehicles, to take on an enormous amount of clerical work and record-keeping in order to
calculate parts percentages. The system is therefore likely to become an unnecessary obstacle
to trade and may be in violation of Article 2.1 and 2.2 of the TBT Agreement.
Although the full effects of this system on trade are not obvious, Japan should monitor
developments under the law and when necessary use bilateral consultations and other means
to resolve any problems.
(ii)
Regulation on Corporate Average Fuel Economy (CAFE)
The Energy Policy and Conservation Act of 1975 includes Corporate Average Fuel
Economy (CAFE) regulations obligates automobile manufacturers and importers to achieve
certain levels of average fuel economy for the vehicles they handle, providing fines levied on
violations. CAFE regulations stipulate that domestic and imported vehicles be distinguished
and their average fuel economy be calculated separately.
Because most of the vehicles exported by European manufacturers to the United States
were large cars with low fuel economy, the EU considered the CAFE programme to be
discriminating against such imported large cars. In May 1992, the EU requested consultations
with the United States because it viewed the CAFE regulations as being inconsistent with
Article III:4 of the GATT provisions for national treatment. In March 1993, it requested that a
GATT panel be established because it did not receive a satisfactory response at the
consultations. In September 1994, a report was issued.1
The panel noted that separate foreign fleet accounting prevented manufacturers of large
domestic cars with low fuel economy from meeting the CAFE requirement for their domestic
fleet by adding to it small foreign cars with high fuel economy. Such manufacturers may
avoid fines only when they increase the volume of business of small domestic cars with high
fuel economy. In such cases the CAFE measure placed small foreign cars in a less favourable
competitive position with respect to small domestic cars. The panel also noted that the CAFE
measure prevented manufacturers of large foreign cars with low fuel economy from meeting
their CAFE requirements for their imported fleet by adding to it small domestic cars with high
fuel economy. This treatment makes it difficult for large foreign car manufacturers to meet the
CAFE requirements. In such cases the CAFE measure also placed large foreign cars in a less
favourable competitive position with respect to large domestic cars. The panel therefore found
the CAFE regulation in violated Article III:4 of the GATT because the requirement of separate
foreign fleet accounting under the CAFE regulation accorded foreign products conditions of
1
During this panel, the EU also argued that (i) the “Luxury Tax” which was a retail excise tax imposed on cars
sold for more than a certain price and the “Gas Guzzler Tax” imposed on the sale of each car that had low fuel
economy also constituted a violation of GATT Article III:2. The panel, however, concluded that these measures
did not violate GATT Article III:2.
150
competition less favourable than those accorded to like domestic products. It further found
that the practice could not be justified under Article XX(g) of the GATT.
The report was not adopted and the United States has taken the position that since the
CAFE regulations do not harm EU commercial interests, there is no reason to revise them.
(iii)
Adoption of the metric system
The purpose of the TBT Agreement is to reduce the technical barriers to international
trade by encouraging the adoption of international standards. The ISO and other international
standardization institutions have adopted the international system of units (SI), which is based
on the metric system, as the units to be used in formulating standards.
While virtually every other country in the world uses the SI--the metric system--the
United States still uses yards and pounds for most purposes. Indeed, it is the only country not
to have made any progress in adopting the metric system.
This has enormous impact on world trade. In bilateral talks on structural issues and
other bilateral conferences, Japan has sought measures from the United States to adopt the
metric system. In the Second Annual Report of Structural Impediments Initiative Follow-up
the U.S. committed: 1) to use the metric system in federal procurement, subsidy programs,
and commercial activities, and 2) to implement a Department of Commerce study on ways to
substantially expand and increase use of the metric system by the private sector. Similarly, in
the second Joint Status Report on Japan-U.S. Enhanced Initiative on Deregulation and
Competition Policy of 1999, the US committed to: 1) amending the Fair Packaging and
Labelling Act to allow only metric indications for products designated by federal and state
governments, and 2) to amend the uniform rules on packaging and labelling (formulated by
the National Conference on Metrology). In spite of these commitments, only about 20 percent
of private-sector businesses within the US use the metric system, and there has been no
significant progress on its adoption. Japan continues to seek effective, on-going initiatives
from the United States towards wider adoption of the metric system.
(2)
European Union
Phytosanitary Measures
The EU allows the import of Japanese five-leaf white pine, Japanese cypress and
juniper bonsai plants from Japan, on the condition that they undergo inspections over a period
of two years in Japan at the cultivation site and other phytosanitary measures. Plants meeting
this condition, however, can only be imported for a period of three years. If Japan does not
ask for an extension of the import period, the EU refuses to permit imports after the three-year
deadline. The three-year limit on imports is not based on any scientific rationale. Japan should
continue to request the EU to relieve this measure.
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< Box-5 > Measures Concerning Meat and Meat Products (Hormones)
In December 1985, the EU, referring to consumer concerns, decided that beginning in
January 1988, all imports of meat from animal raised using hormones would be banned (the
decision not to use hormones within the region was made in March 1988). The United States
requested consultations under Article XXIII of the GATT arguing that the measures lacked
scientific evidence and were inconsistent with Article 7.2 of the Tokyo Round Standards
Code. In January 1989, the EU began enforcing a total ban on imports of meat raised with
growth hormones. The United States, in response, invoked retaliatory measures that same
month under Section 301 trade remedy 100 percent hikes in tariffs on beef, tomato-based
products, coffee, alcoholic beverages and pet food, worth about $90 million.
The impasse remained unresolved, in June 1995, the United States charged that the EU
measures lacked a scientific basis and were in violation of both the GATT and the SPS
Agreement. The Unites States intended to refer the matter to the WTO dispute settlement
procedures, if the dispute was not resolved by the end of 1995.
In response, the EU convened a “Scientific Conference on the Use of Growth Promoters
in Meat Production” for scientists and consumer groups. The conference’s report, which was
published in January 1996, concluded that the data on the use of natural and artificial
hormones and related compounds has shown no evidence of human health risk. The EU
agriculture ministers, however, decided to continue the import ban regardless.
In January 1996 the United States, therefore, requested consultations under Article XXII
of the GATT, alleging that the EU measures were inconsistent with Articles III and XI of the
GATT, and Articles 2, 3, and 5 of the SPS Agreement. In May 1996 a panel was established.
In July 1996 Canada also requested consultations under Article XXII of the GATT and in
October 1996 a different panel was set up.
In August 1997, the panel report was issued. It found that the EU measures were based
on neither international standards nor any risk assessment, and that arbitrary or unjustifiable
distinctions in the level of protection result in discrimination or a disguised restriction on
international trade. The panel therefore found the EU measures in violation of SPS Agreement
Articles 3.1, 5.1 and 5.5.
In September 1997, the EU appealed the panel finding to the Appellate Body. In January
1998, the Appellate Body submitted its report, finding that the EU measures were not to be
regarded as discrimination or a disguised restriction on international trade and therefore not
inconsistent with Article 5.5 of the SPS Agreement. On the other hand, it upheld the panel's
findings that the EU measures were not based on sufficient assessment of risk, and therefore
found the measures to be in violation of Article 5.1 of the SPS Agreement. The Appellate
Body reversed the ruling of the panel and found that the burden of proof to establish a WTO
redaction remains on the complaining country (in this case, the United States). When a
country introduces or maintains sanitary or phytosanitary measures which result in a higher
level of protection than would be achieved by relevant international standards. In February
1998, the Appellate Body report was adopted, and the DSB advised the EU to take
appropriate measures in light of the Appellate Body report.
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The EU had an obligation that it would follow the Appellate body decision and bring its
measures into conformance to the WTO by May 1999. However, the EU failed to withdraw
the import ban by the deadline, prompting the US and Canada on 14 May to seek approval
from the WTO for temporary suspension of concessions on imports from the EU equivalent to
$220 million and $70 million respectively.
On 12 July, the WTO announced results of arbitration finding the economic damage to
the US and Canada from the EU beef import ban to be worth $117 million and $11.3 million
respectively. The DSB approved a suspension of concessions based on these findings. In
accordance with WTO procedures, the US hiked tariff rates effective 29 July, Canada
effective 1 August.
< Box-6 > Ban on Use of Livestock Products with TSE Risk (EU)
An EU decision in July 1997 (97/534/EC) has banned in the EU all use of substances
originating from particular organs (such as brains, spinal cord, eyeballs.) of cattle, sheep, and
goats, beginning in January 1998. It will also require non-member countries, which export
food, pharmaceuticals, or cosmetics (including intermediates for any of these) to the EU, to
provide a certificate issued by the government of the country of origin attesting that these
banned substances are not used, beginning in January 1998.
This measure was responding to the possibility that human spongiform encephalopathy
is caused by the intake of substances from cows afflicted with BSE (Bovine Spongiform
Encephalopathy), one strain of TSE (Transmissible Spongiform Encephalopathy). It seeks to
prevent the distribution of products containing ingredients that might cause TSE. (It is
regarded that BSE itself was caused by the use in feeds of sheep that suffered from scrapie,
the strain of spongiform encephalopathy that afflicts sheep.)
Afterwards, EU Committee made a proposal that Members be divided into four types on
a basis of the TSE occurrence conditions and each measure be dependent on each type.
However, the proposal could not be carried out because of opposition from Members. EU,
therefore, postponed starting the measures until January 2000. Moreover, the measures were
postponed again after July 2000 because new scientific information should be required more.
(3) Korea
Detailed Rules for the Control of Product Origin
In July 1991, Korea established “Detailed Rules for the Control of Product Origin”
(Customs Agency Notification) that require labels of product origin to be affixed to the
smallest packaging unit of products, according to a revision of the International Trade Control
Regulations in May 1991. These labels had to be: (a) written in Hangul (domestic language)
or English characters; (b) displayed in a form and method that is easy for final purchasers to
read; (c) placed in an easily recognizable location; and (d) made in a way that they can be
permanently preserved. The rules initially covered 250 items at the 4 digits level under the
harmonized tariff system. In application, the system places excessive burdens on trading
companies and therefore constitutes a restriction on trade which is likely to be inconsistent
with Article II:2 of the TBT Agreement.
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The system was slightly improved in May and July 1993 when revisions to the law
made it possible to label in Chinese characters and expanded the number of exceptions for
which labelling on the package was permitted. Effective July 2000, stamps and labels will be
permissible for cases in which the nature of the product makes permanent labelling difficult.
On the other hand, the revisions also strengthened the requirements to confirm the origin of
OEM products. Since that time, there have been gradual additions to the list of products
covered under the regulation, which had reached 650 as of January 2000. There are, therefore,
many problems that remain.
Japan pointed out the problems involved in this system during the Trade Policy Review
( TPRM ) for Korea that was held at the WTO in September 1996. We will need to continue to
seek improvements for those requirements that place excessive burdens on exporters.
(4) Australia
Measures Affecting Importation of Salmon
In September 1983, Australia began requiring permits for the importation of fresh,
chilled, and frozen salmon products under the Quarantine Law of 1908 and Quarantine
Ordinance 86A of 1975. In October 1995 Canada requested consultations under Article 4.4 of
the DSU, claiming that the measure violated Article 2 (basic rights and obligations), Article 3
(harmonization), and Article 5 (assessment of risk and determination of the appropriate level
of sanitary or phytosanitary protection) of the SPS Agreement as well as Article XI and
Article XIII of the GATT. A panel was established for the case in April 1997.
The panel, which submitted its report on 12 June 1998, found violations of Article 5.1
and Article 2.2 because Australia failed to provide evidence to refute the claim that it did not
apply risk-assessment-based phytosanitary measures to all salmon products. The report also
found no rational relationship between the measures and a 1996 report issued by Australia on
the effectiveness of the standard for heating Salmon which had been offered as scientific
rationale for the measures. It further noted that Australia did not impose restrictions on the
importation or domestic distribution of other fishing products also potentially infect with the
diseases at issue, and therefore found the measure to be a discriminatory and disguised trade
restriction. Both Australia and Canada were dissatisfied with the panel report on several
points and appealed. The Appellate Body upheld the panel judgements except that it
overturned the rule on heating standards for smoked salmon under a 1988 ordinance, claiming
that this issue was beyond the panel's scope. The Appellate Body report and the amended
panel report were adopted by the DSB meeting on 25 November 1998. In July 1999, Australia
amended its quarantine for salmon products, but Canada, claiming that the new system is still
not in line with the SPS Agreement, requested the establishment of a panel under Article 21:5
of the DSU as a preliminary step to sanctions. Australia responded by seeking the
establishment of an arbitration panel under Article 22:6 of the DSU. On 18 February 2000, the
panel under Article 21.5 of the DSU found that Australia violated Articles 5.1 and 2.2 of the
SPS Agreement. Japan should continue to monitor the developments.
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