REMOVING TECHNICAL BARRIERS EU Lessons for Asia Jacques Pelkmans

1. REMOVING TECHNICAL BARRIERS EU Lessons for Asia Jacques Pelkmans Jan Tinbergen Chair, College of Europe, Bruges BOAO, Hainan, China ASEM & the World Bank, 26 & 27 June 2006

2. What are technical barriers ? A fundamental lesson first. The internal market regime. Technical barriers in the EU goods market. Technical harmonisation. Preventing new TBTs from arising. European standardisation. Possible lessons for East Asian integration. STRUCTURE

3. WHAT ARE TECHNICAL BARRIERS ? Non-tariff Regulatory barriers Measures Regulatory Technical barriers Barriers Regulations | standards | conformity assessment

4. A FUNDAMENTAL LESSON FIRST • Removal of TBTs hinges critically on methods. • Objectives are about (overcoming) market failures. • Yet, there may be various methods to pursue an objective. • If methods and their design are negotiable. • And ONLY objectives are “regulatory autonomy”. • TBT removal can go far. • And … the EU has inspiring lessons. • IF domestic regulators want full control on methods AND objectives, TBTs will only get worse.

5. treaty objectives EMU Internal Market goods services capital persons agro + fisheries trade competition transport fiscal (e.g. VAT) risk regulation common policies customs union free movement approximation free establishment mutual recognition INTERNAL MARKET REGIME

6. INTERNAL MARKET REGIME (2) Internal market consists of • Negative integration (left box) • Positive integration (right box) • Mutual recognition Note : free movement (of goods, here) • A right (!) to market access • Except for “derogations”

7. INTERNAL MARKET REGIME (3) Thus, in the EU, TBT removal boils down to • Various methods to minimize derogations • Free movement (automatic) • Without a race-to-the-bottom DEROGATIONS ARE MAINLY ABOUT SHEC (= risk regulation for goods)

8. INTERNAL MARKET REGIME (4) What is mutual recognition ? • Combines “free movement” with “regulatory autonomy”. • Hinges on the “fundamental lesson” of slide 4. • While recognizing free movement as a “must” THUS • If regulatory SHEC objectives “equivalent” • Free movement can not undermine them • Hence, methods & nitty-gritty can not be a reason to block/condition imports. IMPACT • Direct import liberalisation (intra-EU) • Changed mindsets (domestic) regulators from focus on all to focus on objectives.

9. CAUSE IF “objective or effect” not equivalent between Member States. REMEDIES Old Approach harmonisation New Approach harmonisation (new, horizontal) EU food law TBTs REMOVAL IN THE EU (1)Technical Regulations

10. CAUSE Compulsory reference in national law. National standards (though voluntary) indispensable for access. Incompatibilities/lack of interoperability. REMEDIES If protection equivalent, mutual recognition applies. Building EU-wide “trust” [Eur. Standards, voluntary equivalence] European standardisation Link New Approach Not linked to EC law Network industries TBTs REMOVAL IN THE EU (2)Technical Standards

11. CAUSE Disparities testing. Testing houses quality (“trust”). Certification “too” local (“lack of trust”). Accreditation “too”local. REMEDIES Harmonize testing requirements in law (Old Approach) or in standards (New Approach). High EU-wide quality requirements testing houses. Idem, for certification bodies, so mutual recognition. Minimum accreditation rules. TBTs REMOVAL IN THE EU (3)Conformity Assessment

12. EU TECHNICAL HARMONISATION (1) OLD APPROACH • Not suitable for ASIA, or for FTAS. • EU reducing scope of Old Approach a little. • EU reducing high costs of Old Approach a little • Old Approach = total harmonisation of objectives, methods, all details of standards, conformity assessment and accreditation. • Nowadays • Only high-risk sectors • Or, high-precision sectors • Scope : cars, tractors, chemicals, medicines, metrology, cosmetics, chocolate.

13. EU TECHNICAL HARMONISATION (2) NEW APPROACH Agree on common SHEC objectives European standards CEN/CENELEC/ETSI Mandates Presumption of conformity CE mark With conformity assessment by Notified Bodies Free movement [see also Figure 3 in paper]

14. NEW APPROACH & THIRD COUNTRIES New approach has lowered external TBTs. Why ? • Non-discriminatory • If a Chinese toy is legally marketed in Slovenia, the EU is open to it [legally means, essential requirements fulfilled] • Drastic simplification • Apply only a single European standard instead of 25/27. • European standards have become better • Flexible, performance requirements. • (often) aligned (or identical) world standards.

15. CONFORMITY ASSESSMENT Global Approach • Risk based. • Modules (i.e. predictable). • Companies with ISO 9000. • Conf. Ass. Bodies EN 45000 quality (notified bodies). • Leads to competition in Conf. Ass., without compromising SHEC. Mutual Recognition Agreement (MRA) • Modest in set-up. • Modest net gains. • High transaction costs. • “Trust” [hence, mistrust] is deeply-rooted.

16. PREVENTING NEW TBTs Modern economies are regulatory machines. If no prevention, TBTs will increase, even in the presence of some removals !! EU mechanism highly beneficial, but (yes) demanding. • Organisationally (all “regulatory” ministries of all Member States). • In terms of “intrusion” domestically (stand still, before your parliament). • Verfication, analysis, consultation (+ infringement procedures). [see Table 4]

17. EUROPEAN STANDARDS Has, by now, become a major driving force in overcoming TBTs. = ETSI = CENELEC = CEN 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.

18. EUROPEAN STANDARDS (2) Most ENs (Eur. Standards) are NOT linked to EU regulation • Rapidly Europeanisation. • Also, voluntary conformity ass.t. is quickly Europeanisation. “Regulation-driven” standards also increase, but less rapidly ; also new types of less formal standards quickly multiply (e.g. for ICT, etc.) CEN standards  27 % based on ISO CENELEC  57 % + 8 % based on IEC

19. POSSIBLE LESSONS • For TBT removal, think in terms of objectives, and de-emphasize method & nitty-gritty. • Pick-and-choose from EU experience is possible, but quite limited ; Why ? Internal Market Regime, plus (often) demanding architecture. • Do not consider TBT as a pure trade issue ; it is not !! (Deeply) involve domestic regulators, and both before and after.Too ambitious ? Too bad.Too much turf fighting ?Get the entire cabinet to make it “strategic”.

20. POSSIBLE LESSONS (2) • Old Approach holds no lesson for FTAs.BUT… it does hold a warning. These sectors will also plague your FTAs ! • New Approach is instructive(see section 6.2, p.20, for a proposal for FTA) • Global Approach can provide lessons for FTAs ; accept a modular approach, based on risk. • Do not neglect the “invisible”. Attempt to prevent new TBTs from arising. • Best endeavour clauses. • Reporting system, say, WTO-plus. • Insert “equivalence” clauses. • Accept FTA partners to discuss your draft laws. • Promote more activity regional standards, based on world (or EU) standards.

21. THANK YOU