Doaa Abdel Motaal 1 I. Overview
Since the signing of the General Agreement on Tariffs and Trade (GATT) in 1947, tariffs have been bound for a large number of industrial and agricultural goods, and have declined significantly.
2 The Uruguay Round alone (1986-93) increased the percentage of bound product lines from 78 to 99 per cent for developed countries, from 21 to 73 per cent for developing countries, and from 73 to 98 per cent for economies in transition. It also resulted in substantial tariff reductions, occasionally to zero. Through a parallel process of 'tariffication', the trading system has initiated the conversion of all non-tariff import restrictions to tariffs for transparency, paving the way for their binding and gradual decline. Despite the significant achievements of the trading system in reducing tariff barriers to trade, as early as 1970, GATT Contracting Parties expressed their dissatisfaction with the emergence of new non-tariff barriers (NTBs). In the 1970s, a GATT Working Group was established to evaluate the impact of NTBs on international trade, and reached the conclusion that technical barriers were the main form of NTBs which faced exporters.
3 While a number of GATT provisions already addressed technical barriers, their scope was deemed to be insufficient to tackle growing concerns. During the Tokyo Round, a Standards Code was drafted to govern the preparation, adoption and application of technical regulations, standards and conformity assessment procedures. Negotiated during the Uruguay Round, the new Agreement on Technical Barriers to Trade (TBT) has built upon, as well as strengthened, the Standards Code.
4 It has entered into force in 1995, with the entry into force of the World Trade Organization (WTO). The TBT Agreement is premised on an acknowledgement of the right of WTO Members to develop technical requirements, and to ensure that they are complied with. However, the Agreement has as its objective ensuring that unnecessary obstacles to international trade are not created. This is achieved through a delineation of a number of legitimate objectives for which mandatory technical requirements may be developed, and through a number of principles which govern the preparation, adoption and application of mandatory and voluntary requirements and conformity assessment procedures, such as: non-discrimination, the avoidance of unnecessary obstacles to international trade, harmonization, the equivalence of technical regulations and of the 1 This document is written on the sole responsibility of the WTO's Trade and Environment Division. 2 Tariff binding means that a tariff level for a particular product becomes a commitment by a WTO Member and cannot be increased without compensation negotiations with its main trading partners. 3 The term 'technical barriers' refers to product standards. Other forms of NTBs may include quotas, import licensing arrangements, etc. 4 Whereas the Standards Code was a plurilateral agreement (with only limited membership), the Agreement on Technical Barriers to Trade applies to all WTO Members. 1
results of conformity assessment procedures, mutual recognition of conformity assessment procedures, and transparency. The scope of the Agreement extends to central and local governmental standardizing bodies, as well as to non-governmental ones. A more detailed presentation of the Agreement is provided in the following sections.
II. Coverage and Definitions
The TBT Agreement divides technical requirements into two categories: technical regulations and standards. According to the Agreement, a technical regulation is a: "Document which lays down product characteristics or their related processes and production methods, including the applicable administrative provisions, with which compliance is mandatory. It may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method." On the other hand, a standard is a: "Document approved by a recognized body, that provides for common and repeated use, rules, guidelines or characteristics for products or related processes and production methods, with which compliance is not mandatory. It may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method." While both technical regulations and standards are product technical requirements, the main difference between the two is that compliance with technical regulations is mandatory, while compliance with standards is voluntary. An example of a technical regulation could, for instance, be a law that stipulates that all vehicles be equipped with catalytic converters. An example of a standard could, for instance, be a voluntary product labelling requirement affirming that there has been no testing on animals (the labelling requirement would, however, have to be "approved by a recognized body" and would have to provide for "common and repeated use, rules guidelines or characteristics", as stated in the above-mentioned definition of a standard). Technical regulations are addressed in the main body of the Agreement, and provisions are laid out to ensure that they do not act as unnecessary obstacles to trade. The provisions apply to technical regulations developed by central and local governments, as well as non-governmental bodies. WTO Members are fully responsible for ensuring the observance of all the provisions of the Agreement relating to technical regulations. They must also formulate and implement positive measures and mechanisms in support of the observance of the provisions of the Agreement by local and non-governmental bodies. Standards are addressed separately under a the Code of Good Practice, which forms one of the Annexes to the Agreement (Annex 3). Most of the principles applied by the Agreement to technical regulations, apply to standards through the Code. The Code is open to acceptance by central, local and non-governmental standardizing bodies (at the national level), as well as to regional governmental or non-governmental ones.
5 However, the Agreement notes that "The obligations of Members with respect to compliance of standardizing bodies with the provisions of 5 The Code is open to acceptance by governmental regional standardizing bodies when one or more of their members are WTO Members, and to non-governmental regional standardizing bodies when one or more of their members are situated in the territory of a WTO Member. 2
the Code of Good Practice shall apply irrespective of whether or not a standardizing body has accepted the Code of Good Practice." The Agreement also addresses conformity assessment procedures, and defines them as: "Any procedure used, directly or indirectly, to determine that relevant requirements in technical regulations or standards are fulfilled." Conformity assessment procedures are subject to many of the same principles which apply to technical regulations and standards, in order to ensure that they themselves do not constitute unnecessary obstacles to international trade. Members are fully responsible for ensuring the observance of all provisions relating to conformity assessment under the Agreement, and must formulate and implement positive measures and mechanisms in support of the observance of the provisions by local government bodies. They must also ensure that central government bodies rely on conformity assessment procedures operated by non-governmental bodies only if these bodies comply with the relevant provisions of the Agreement. As can be seen, therefore, the TBT Agreement covers a broad set of measures. Its broad scope is amongst its strengths in that a large number of measures fall under its purview, and must be developed, adopted and applied while respecting its requirements.
III. Legitimate Objectives
Under the TBT Agreement, technical regulations may only be developed for one or more of the objectives considered 'legitimate' by the Agreement. Legitimate objectives include: "
, national security requirements, the prevention of deceptive practices, protection of human health or safety, animal or plant life or health, or the environment." While the Agreement lays out certain legitimate objectives, the words "
" indicate that other objectives may be considered. According to the Agreement, WTO Members may develop technical regulations to, for instance, protect themselves against certain armaments (for national security), to protect endangered species (for the environment) and to warn consumers against the hazards of cigarette smoking (for human health). Deceptive practices refer to measures which mislead or deceive consumers, such as false labels. WTO Members are allowed to adopt technical regulations to guard against such practices. The risks associated with legitimate objectives are assessed against a number of factors, including: "
, available scientific and technical information, related processing technology or intended end-uses of products." Once again, the inclusion of the words "
", indicates that some flexibility may be exercised in the selection of factors against which risks may be assessed.
The principle of non-discrimination constitutes the backbone of the international trading system. In general, it is a principle which outlaws discrimination amongst the products of WTO Members, and between imported and domestically produced products. According to GATT Article I, the "Most-Favoured-Nation" (MFN) clause, WTO Members are bound to grant to the products of other Members treatment no less favourable than that accorded to the products of any other country. Thus, no country is to give special trading advantages to another, or to discriminate against it. According to GATT Article III, the "National Treatment" (NT) clause, Members must treat imported goods no less favourably than domestically produced goods. The TBT Agreement 3
embraces the GATT principle of non-discrimination, and applies it to technical regulations, standards and conformity assessment procedures. With respect to both technical regulations and standards, the Agreement stipulates that the non-discrimination principle be observed throughout the different stages of their preparation, adoption, and application. For instance, a WTO Member cannot adopt a technical regulation mandating that all imported vehicles meet certain air emission standards, if it does not enforce such standards on its own domestically produced vehicles. In addition, it cannot enforce such a technical regulation on one of its trading partners, but not on the others. Providing treatment that is no less favourable, therefore, is essential under the disciplines of the TBT Agreement and the WTO system as a whole. WTO Members must also ensure that conformity assessment procedures are not prepared, adopted or applied discriminatorily. Non-discrimination with respect to conformity assessment includes ensuring suppliers' right to conformity assessment under the rules of procedure, including the possibility to have conformity assessment activities undertaken at the site of facilities and to receive the mark of the system. Conformity assessment systems must not create undue distinction between the procedures to be followed by products originating from different sources. For instance, they cannot subject similar products to tests of varying degrees of stringency based on their sources of supply.
V. Avoidance of Unnecessary Obstacles to International Trade
The avoidance of unnecessary obstacles to international trade is the principal objective of the TBT Agreement. With respect to both technical regulations and standards, the Agreement states that Members must ensure that neither technical regulations nor standards are "prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade." With respect to technical regulations, the Agreement elaborates on the meaning of this phrase. It stipulates that technical regulations not be more trade restrictive than necessary to fulfill a legitimate objective, taking into account the risks that non-fulfilment would create. Therefore, two steps are involved in determining whether a technical regulation poses unnecessary obstacle to international trade. First, the regulation must be designed to meet one of the legitimate objectives delineated in the Agreement (discussed in the previous section), and, second, it must be the least trade-restrictive option available to a WTO Member that achieves that legitimate objective, taking into account the risks that would be associated with its non-fulfilment. For instance, it is possible to imagine a situation in which a WTO Member wishing to warn consumers against certain remote health hazards associated with a particular medicament, issues a technical regulation mandating that all such medicaments carry the warning "very dangerous". However, given that such a mandatory warning requirement exaggerates the health risks associated with the medicament (which are, after all, only remote), it may not necessarily be the least trade restrictive option available to the WTO Member that fulfills the stated objective. In addition, the damage done to trade by imposing the regulation may by far outweigh the benefits of the exaggerated warning (in other words, may outweigh the risks that non-fulfilment of the regulation would create). Therefore, less-trade restrictive options, such as more accurate (and less exaggerated) warning requirements, may need to be explored. Also, with respect to the avoidance of unnecessary obstacles to trade, the Agreement encourages WTO Members to develop technical regulations and standards that are based on product performance, rather than design, requirements. Such requirements create fewer obstacles 4
to trade, providing exporters with greater leeway in fulfilling the objectives of the technical requirements. For instance, if a country wished to ensure that all imported doors are fire-proof, and could either stipulate that they have a burn-through time of a minimum of 30 minutes, or that they all be made of certain materials (such as steel) and have a certain thickness, the former option would be preferred to the latter. This is the case as the performance requirement (the former option), which has the same capacity of fulfilling the objective of having fire-proof doors as the design requirement, allows manufacturers to use whatever material is readily available to them and to design the doors in the way they choose. With the design requirement, stipulating the employment of steel could restrict the options available to manufacturers that operate in countries in which steel is scarce. To avoid unnecessary obstacles to international trade, the Agreement requires WTO Members to disinvoke technical regulations when the objectives that had given rise to their adoption no longer exist, or if changed circumstances or objectives can be addressed in a less trade-restrictive manner. In the preparation, adoption and application of conformity assessment procedures for technical regulations and standards, WTO Members must also ensure that unnecessary obstacles to international trade are avoided. The Agreement states that "This means,
, that conformity assessment procedures shall not be more strict or be applied more strictly than is necessary to give the importing Member adequate confidence that products conform with the applicable technical regulations or standards, taking account of the risks that non-conformity would create." In other words, conformity assessment procedures must not be applied more stringently than is necessary to ensure conformity. They must consider the risks of reduced stringency, and decide on whether or not they outweigh the benefits of having fewer obstacles to international trade. The Agreement also urges Members to ensure that conformity assessment procedures are undertaken as expeditiously as possible, that information requirements are limited to whatever is necessary, that the confidentiality of information is respected for legitimate commercial interests, that the fees charged domestically are equitable to the fees charged for foreign products, and so on and so forth.
The TBT Agreement encourages WTO Members to base their technical regulations, standards, and conformity assessment procedures, on international standards, and guides and recommendations, when these exist or their completion is imminent, except when they are deemed to be inappropriate or ineffective. The call for harmonization is designed to avoid the emergence of undue layers of technical requirements and assessment procedures, and to encourage the use of ones that have been developed with the approval of the international community. To complement this requirement, the Agreement calls upon Members to participate in the work of international standardizing and conformity assessment bodies. However, the Agreement recognizes that there may be instances in which Members would need to derogate from this obligation. It allows them to do so for technical regulations and standards in the event of fundamental climatic or geographic differences, or due to fundamental technological problems. For example, a WTO Member may derogate from the use of international construction standards if, due to a fundamental geographic difference, such as its country being particularly earthquake prone, the standards are inappropriate for it. Such derogation could also take place when, for instance, the technology required for the application of the international standard is unavailable domestically. 5
The exceptions allowed for conformity assessment procedures are broader. According to the Agreement, these may be obtained for "
, such reasons as: national security requirements; the prevention of deceptive practices; protection of human health or safety, animal or plant life or health, or the environment; fundamental climatic or other geographic factors; fundamental technological or infrastructural problems." Therefore, while the Agreement calls upon Members to use international standards, guides or recommendations, it creates sufficient scope for them to derogate from this obligation in order to tailor domestic requirements to the specifics of their situation.
VII. Equivalence and Mutual Recognition
The TBT Agreement stipulates that WTO Members give positive consideration to recognizing other Members' technical regulations as equivalent to their own, even when they differ from theirs, provided they are satisfied that they adequately fulfill their objective. As international harmonization is a time-consuming process, and is sometimes one which is difficult to achieve, the Agreement encourages Members to accept each other's regulations as equivalent until full-fledged international harmonization becomes possible. Therefore, the principle of equivalency is designed to complement that of harmonization. Through equivalency arrangements, products that meet the regulations of the exporting country do not have to comply with the regulations of the importing country, provided that the same objectives are fulfilled by the two sets of requirements. This significantly reduces barriers to trade. With respect to conformity assessment procedures, the Agreement calls upon WTO Members to ensure, whenever possible, that the results of the assessment procedures of other Members are accepted as equivalent, even when they differ from theirs, provided the procedures give the same level of confidence. The purpose of this provision is to avoid multiple product testing (in both exporting and importing country markets), and its associated costs, financial and otherwise. The Agreement recognizes, however, that for equivalence to be achieved, negotiations may need to be entered into so that the continued reliability of conformity assessment results can be ensured (the accreditation of conformity assessment bodies is a factor that can be taken into account in this regard). As a specific approach to achieving the equivalence, the Agreement encourages Members to enter into mutual recognition agreements (MRAs) for the acceptance of each other's assessment results (MRAs are usually negotiated on either a bilateral or plurilateral basis to cover defined product groups). While the specific steps involved in an MRA are not covered in the TBT Agreement, in general MRAs tend to involve: (1) a definition of the products covered by the agreement, (2) an obligation to accept reports, certificates and marks of conformity by approved bodies as equivalent to one's own, (3) the establishment of criteria for the identification of competent laboratories and certifiers (i.e. accreditation), (4) provisions for the exchange of information, (5) the establishment of dispute settlement mechanisms, and, usually, (6) provisions for the future broadening of scope.
Transparency is a central feature of the TBT Agreement, and is comprised of: notification obligations, the establishment of enquiry points, and the creation of the WTO TBT Committee. Notification means the circulation of information by a WTO Member to other Members on matters relating to the Agreement. Notification obligations include: notifying the measures taken to implement the provisions of the TBT Agreement nationally (such as how its provisions have been incorporated into domestic legislation); notifying draft technical regulations, conformity 6
assessment procedures and standards and providing other Members with sufficient time to comment on them, with the obligation of taking these comments into account; 6 and, notifying entry into any bilateral or multilateral agreements regarding technical regulations, standards or conformity assessment procedures. Notifications allow for the dissemination of information, and for avoiding unnecessary obstacles to international trade at an early stage. They allow exporters to be informed of new requirements that are developed in their export markets prior to their entry into force, to comment on these requirements, to have their comments taken into account, and to prepare themselves for compliance. The TBT Agreement stipulates that each WTO Member establish an enquiry point that can respond to questions on technical regulations, standards and conformity assessment procedures (whether proposed or adopted), and supply relevant documents. Enquiry points are designed to increase transparency by contributing to the flow of information. The Agreement has also established a TBT Committee in the WTO, which is a standing body that acts as a forum for consultation and negotiation on all issues pertaining to the Agreement. Participation in the Committee is open to all WTO Members.
IX. Developing Countries
Under the TBT Agreement special and differential treatment for developing countries is authorized. Such treatment includes: ensuring that the technical regulations, standards and conformity assessment procedures of developed countries do not create unnecessary obstacles to developing country exports (including to their expansion and diversification); not expecting developing countries to use international standards (since these, for instance, may be inappropriate for their level of technological development); ensuring that developing countries participate representatively in international standardizing bodies and international systems for conformity assessment; preparing international standards for the products that are of export interest to them; and, allowing them (particularly the least-developed among them) to obtain certain time-limited exceptions from obligations. In addition, the Agreement calls upon developed countries to provide developing countries with technical assistance. Such assistance may be directed towards helping developing countries prepare their own technical regulations, meet the technical requirements of their export markets, establish national standardizing bodies and participate in international ones, establish bodies for conformity assessment with technical regulations and standards, access the conformity assessment systems of other countries, and become members of international bodies. Priority is to be given to the needs of least-developed countries.
X. Dispute Settlement
Disputes under the TBT Agreement are settled using the WTO's Dispute Settlement Mechanism. 6 Draft technical regulations and conformity assessment procedures only have to be notified when an international standard, guide or recommendation, does not exist (or they are not in accordance with existing ones), and if they may a have a significant effect on the trade of other WTO Members. 7