REMOVING TECHNICAL BARRIERS REMOVING TECHNICAL BARRIERS

EU Lessons for AsiaEU Lessons for Asia

Jacques PelkmansJacques Pelkmans

Jan Tinbergen Chair, College of Europe, Bruges

BOAO, Hainan, China

ASEM & the World Bank, 26 & 27 June 2006

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STRUCTURESTRUCTURE1.1. What are technical barriers ?What are technical barriers ?

2.2. A fundamental lesson first.A fundamental lesson first.

3.3. The internal market regime.The internal market regime.

4.4. Technical barriers in the EU goods market.Technical barriers in the EU goods market.

5.5. Technical harmonisation.Technical harmonisation.

6.6. Preventing new TBTs from arising.Preventing new TBTs from arising.

7.7. European standardisation.European standardisation.

8.8. Possible lessons for East Asian integration.Possible lessons for East Asian integration.

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WHAT ARE TECHNICAL WHAT ARE TECHNICAL BARRIERS ?BARRIERS ?

Non-tariff Measures

Regulatory Barriers

Regulatorybarriers

Technicalbarriers

Regulations | standards | conformity assessment

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A FUNDAMENTAL LESSON A FUNDAMENTAL LESSON FIRSTFIRST

Removal of TBTs hinges critically on Removal of TBTs hinges critically on methodsmethods..

ObjectivesObjectives are about (overcoming) market failures. are about (overcoming) market failures.

Yet, there may be various methods to pursue an objective.Yet, there may be various methods to pursue an objective.

If If methods and their designmethods and their design are negotiable. are negotiable.

And And ONLY objectivesONLY objectives are “regulatory autonomy”. are “regulatory autonomy”.

TBT removal can go far.TBT removal can go far.

And … the EU has inspiring lessons.And … the EU has inspiring lessons.

IF domestic regulators want full control on methods AND IF domestic regulators want full control on methods AND objectives, TBTs will only get worse.objectives, TBTs will only get worse.

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INTERNAL MARKET REGIMEINTERNAL MARKET REGIME

common policies

treaty objectives

Internal Market

EMU

goods services capital persons

customs union

free movement

free establishment

agro + fisheries trade competition transport

fiscal (e.g. VAT) risk regulation

approximation

mutual recognition

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INTERNAL MARKET REGIME INTERNAL MARKET REGIME (2)(2)

Internal market consists of Internal market consists of – Negative integration (left box)Negative integration (left box)– Positive integration (right box)Positive integration (right box)– Mutual recognitionMutual recognition

Note : free movement (of goods, here)Note : free movement (of goods, here) A right (!) to market accessA right (!) to market access Except for “derogations”Except for “derogations”

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INTERNAL MARKET REGIME INTERNAL MARKET REGIME (3)(3)

Thus, in the EU, TBT removal boils down Thus, in the EU, TBT removal boils down toto

Various methods to minimize derogationsVarious methods to minimize derogations

Free movement (automatic)Free movement (automatic)

Without a race-to-the-bottomWithout a race-to-the-bottom

DEROGATIONS ARE MAINLY ABOUT DEROGATIONS ARE MAINLY ABOUT SHEC (= risk regulation for goods)SHEC (= risk regulation for goods)

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INTERNAL MARKET REGIME INTERNAL MARKET REGIME (4)(4)

What is mutual recognition ?What is mutual recognition ? Combines “free movement” with “regulatory autonomy”.Combines “free movement” with “regulatory autonomy”. Hinges on the “fundamental lesson” of slide 4.Hinges on the “fundamental lesson” of slide 4. While recognizing free movement as a “must”While recognizing free movement as a “must”

THUSTHUS If regulatory SHEC If regulatory SHEC objectives “equivalent”objectives “equivalent”

Free movement can not undermine themFree movement can not undermine them

Hence, Hence, methodsmethods & nitty-gritty can not be a reason to block/condition & nitty-gritty can not be a reason to block/condition imports.imports.

IMPACTIMPACTi.i. Direct import liberalisation (intra-EU)Direct import liberalisation (intra-EU)

ii.ii. Changed mindsets (domestic) regulators from focus on all to Changed mindsets (domestic) regulators from focus on all to focus on objectives.focus on objectives.

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TBTs REMOVAL IN THE EU (1)TBTs REMOVAL IN THE EU (1)Technical RegulationsTechnical Regulations

CAUSECAUSE

IF “objective or IF “objective or effect” not effect” not equivalent equivalent between Member between Member States.States.

REMEDIESREMEDIES

Old Approach Old Approach harmonisationharmonisation

New Approach New Approach harmonisationharmonisation

(new, horizontal) EU (new, horizontal) EU food lawfood law

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TBTs REMOVAL IN THE EU (2)TBTs REMOVAL IN THE EU (2)Technical StandardsTechnical Standards

CAUSECAUSE

Compulsory reference Compulsory reference in national law.in national law.

National standards National standards (though voluntary) (though voluntary) indispensable for indispensable for access.access.

Incompatibilities/lack Incompatibilities/lack of interoperability.of interoperability.

REMEDIESREMEDIES

If protection equivalent, If protection equivalent, mutual recognition mutual recognition applies.applies.

Building EU-wide “trust” Building EU-wide “trust” [Eur. Standards, [Eur. Standards, voluntary equivalence]voluntary equivalence]

European standardisationEuropean standardisation– Link New ApproachLink New Approach– Not linked to EC lawNot linked to EC law– Network industriesNetwork industries

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TBTs REMOVAL IN THE EU (3)TBTs REMOVAL IN THE EU (3)Conformity AssessmentConformity Assessment

CAUSECAUSE

Disparities testing.Disparities testing.

Testing houses quality Testing houses quality (“trust”).(“trust”).

Certification “too” local Certification “too” local (“lack of trust”).(“lack of trust”).

Accreditation “too”local.Accreditation “too”local.

REMEDIESREMEDIES

Harmonize testing Harmonize testing requirements in law (Old requirements in law (Old Approach) or in standards Approach) or in standards (New Approach).(New Approach).

High EU-wide quality High EU-wide quality requirements testing houses.requirements testing houses.

Idem, for certification bodies, Idem, for certification bodies, so so mutual recognition.mutual recognition.

Minimum accreditation rules.Minimum accreditation rules.

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EU TECHNICAL HARMONISATION EU TECHNICAL HARMONISATION (1)(1)

OLD APPROACHOLD APPROACH

i.i. Not suitable for ASIA, or for FTAS.Not suitable for ASIA, or for FTAS.

ii.ii. EU reducing scope of Old Approach a little.EU reducing scope of Old Approach a little.

iii.iii. EU reducing high costs of Old Approach a littleEU reducing high costs of Old Approach a little

iv.iv. Old Approach Old Approach = = total harmonisation of objectives, total harmonisation of objectives, methods, all details of standards, conformity assessment methods, all details of standards, conformity assessment and accreditation.and accreditation.

v.v. NowadaysNowadays Only high-risk sectorsOnly high-risk sectors Or, high-precision sectorsOr, high-precision sectors

vi.vi. Scope : cars, tractors, chemicals, medicines, metrology, Scope : cars, tractors, chemicals, medicines, metrology, cosmetics, chocolate.cosmetics, chocolate.

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EU TECHNICAL HARMONISATION EU TECHNICAL HARMONISATION (2)(2)

NEW APPROACHNEW APPROACH

Agree on common SHEC

objectivesMandates

European standardsCEN/CENELEC/ETSI

Presumption of conformity

CE mark With conformity assessment by Notified Bodies

Free movement

[see also Figure 3 in paper]

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NEW APPROACH & THIRD NEW APPROACH & THIRD COUNTRIESCOUNTRIES

New approach has lowered external TBTs. Why ?New approach has lowered external TBTs. Why ?

a.a. Non-discriminatoryNon-discriminatory If a Chinese toy is legally marketed in Slovenia, the EU is If a Chinese toy is legally marketed in Slovenia, the EU is

open to it [legally means, essential requirements open to it [legally means, essential requirements fulfilled]fulfilled]

b.b. Drastic simplificationDrastic simplification Apply only a Apply only a singlesingle European standard instead of 25/27. European standard instead of 25/27.

c.c. European standards have become betterEuropean standards have become better Flexible, performance requirements.Flexible, performance requirements. (often) aligned (or identical) world standards.(often) aligned (or identical) world standards.

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CONFORMITY ASSESSMENTCONFORMITY ASSESSMENTGlobal ApproachGlobal Approach

Risk based.Risk based. Modules (i.e. predictable).Modules (i.e. predictable). Companies with ISO 9000.Companies with ISO 9000. Conf. Ass. Bodies EN 45000 quality (notified bodies).Conf. Ass. Bodies EN 45000 quality (notified bodies). Leads to competition in Conf. Ass., without compromising Leads to competition in Conf. Ass., without compromising

SHEC.SHEC.

Mutual Recognition Agreement (MRA)Mutual Recognition Agreement (MRA) Modest in set-up.Modest in set-up. Modest Modest netnet gains. gains. High transaction costs.High transaction costs. ““Trust” [hence, mistrust] is deeply-rooted.Trust” [hence, mistrust] is deeply-rooted.

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PREVENTING NEW TBTsPREVENTING NEW TBTs

EU mechanism highly beneficial, but (yes) EU mechanism highly beneficial, but (yes) demanding.demanding.

Organisationally (all “regulatory” ministries Organisationally (all “regulatory” ministries of all Member States).of all Member States).

In terms of “intrusion” domestically (stand In terms of “intrusion” domestically (stand still, before your parliament).still, before your parliament).

Verfication, analysis, consultation (+ Verfication, analysis, consultation (+ infringement procedures).infringement procedures).

[see Table 4][see Table 4]

Modern economies are regulatory machines.Modern economies are regulatory machines.If no prevention, TBTs will increase, even in If no prevention, TBTs will increase, even in the presence of some removals !!the presence of some removals !!

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EUROPEAN STANDARDSEUROPEAN STANDARDS

Has, by now, become a major driving Has, by now, become a major driving force in overcoming TBTs.force in overcoming TBTs.

02000400060008000100001200014000160001800020000

1992 1994 1996 1998 2000 2002 2004 2004

Source: European Commission, Internal Market Scoreboard no. 14, July 2005; the numbers of standards linked to directives in 2004 were 1680 for CEN, 964 for CENELEC and 228 for

ETSI.

= CEN

= ETSI

= CENELEC

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EUROPEAN STANDARDS (2)EUROPEAN STANDARDS (2)

Most ENs (Eur. Standards) are NOT linked to EU Most ENs (Eur. Standards) are NOT linked to EU regulationregulation Rapidly Europeanisation.Rapidly Europeanisation. Also, voluntary conformity ass.t. is quickly Also, voluntary conformity ass.t. is quickly

Europeanisation.Europeanisation.

““Regulation-driven” standards also increase, but less Regulation-driven” standards also increase, but less rapidly ; also new types of less formal standards rapidly ; also new types of less formal standards quickly multiply (e.g. for ICT, etc.)quickly multiply (e.g. for ICT, etc.)

CEN standardsCEN standards 27 % based on ISO27 % based on ISO

CENELEC CENELEC 57 % + 8 % based on IEC57 % + 8 % based on IEC

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POSSIBLE LESSONSPOSSIBLE LESSONSi.i. For TBT removal, think in terms of objectives, For TBT removal, think in terms of objectives,

and de-emphasize method & nitty-gritty.and de-emphasize method & nitty-gritty.

ii.ii. Pick-and-choose from EU experience is Pick-and-choose from EU experience is possible, but quite limited ; possible, but quite limited ; Why ? Internal Market Regime, plus (often) Why ? Internal Market Regime, plus (often) demanding architecture.demanding architecture.

iii.iii. Do not consider TBT as a pure trade issue ; it Do not consider TBT as a pure trade issue ; it is not !! (Deeply) involve is not !! (Deeply) involve domestic domestic regulators, and both regulators, and both beforebefore and and afterafter..Too ambitious ? Too bad.Too ambitious ? Too bad.Too much turf fighting ?Too much turf fighting ?Get the entire cabinet to make it “strategic”.Get the entire cabinet to make it “strategic”.

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POSSIBLE LESSONS (2)POSSIBLE LESSONS (2)iv.iv. Old Approach holds no lesson for FTAs.Old Approach holds no lesson for FTAs.

BUT… it does hold a warning. These sectors will BUT… it does hold a warning. These sectors will also plague your FTAs !also plague your FTAs !

v.v. New Approach is instructiveNew Approach is instructive(see section 6.2, p.20, for a proposal for FTA)(see section 6.2, p.20, for a proposal for FTA)

vi.vi. Global Approach can provide lessons for FTAs ; Global Approach can provide lessons for FTAs ; accept a accept a modularmodular approach, based on approach, based on riskrisk..

vii.vii. Do not neglect the “invisible”. Attempt to Do not neglect the “invisible”. Attempt to prevent prevent new TBTsnew TBTs from arising. from arising.

Best endeavour clauses.Best endeavour clauses. Reporting system, say, WTO-plus.Reporting system, say, WTO-plus. Insert “equivalence” clauses.Insert “equivalence” clauses. Accept FTA partners to discuss your draft laws.Accept FTA partners to discuss your draft laws.

viii.viii. Promote more activity regional standards, based on Promote more activity regional standards, based on world (or EU) standards.world (or EU) standards.

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THANK YOUTHANK YOU