Chapter B - Technical barriers to trade

The TBT Agreement imposes disciplines on the adoption of mandatory technical product regulations in member countries, as well as on con-formity assessment, testing and certification procedures.⁸ The TBT and SPS agreements are similar in that they both address product regulation and both address more specifically how to balance the basic national treat-ment rule (GATT Article III) with the legitimate need that may arise to use measures that may restrict trade to ensure the realization of health and safety objectives. The SPS Agreement is more narrow in scope, mainly

7 See Majone (2002) on the use and implications of precaution as a principle.

8 See Mavroidis (2016) (volume 2, chapter 10) for an extensive treatment of the WTO provisions on TBT. Henson and Wilson (2005) is a compilation of papers taking different perspectives on TBT matters from a WTO perspective.

dealing with mandatory regulations aimed at safeguarding animal, plant and human health and safety, while the TBT Agreement deals with a much broader set of goods that includes all industrial products, measures to pro-tect the environment, safeguard consumers and propro-tect the welfare of an-imals – all matters that are not covered by the SPS Agreement. The SPS Agreement goes beyond the TBT Agreement in calling for science- and risk-based regulation and supporting the use of international standards.

It also goes beyond the TBT Agreement in the types of measures that are covered, which are not limited to technical requirements and include leg-islation and regulation, production methods as well as the products them-selves (e.g. pesticide residues). Conversely, the TBT Agreement is broader than the SPS Agreement in covering both mandatory (legally enforceable) technical product regulations and related conformity assessment proce-dures and addressing the use of voluntary standards.⁹

The basic rules are that central government bodies not discriminate and adopt TBT requirements that are not more trade-restrictive than neces-sary to meet legitimate objectives such as prevention of deceptive prac-tices and protection of human health, safety and the environment. This applies to conformity assessment procedures as well. Moreover, techni-cal regulations based on product requirements should be worded in terms of performance rather than design or descriptive characteristics. What the underlying regulatory objectives are is not questioned by WTO. Members are free to pursue any objective they deem appropriate but should do so with policy instruments that minimize negative trade effects. This “least trade restrictiveness” criterion is a reflection of a basic objective of WTO:

to facilitate trade.

The TBT Agreement encourages the use of international standards where these exist (Article 2.4) and participation in international systems for conformity assessment as trade facilitating measures. They are also en-couraged to negotiate mutual recognition agreements for conformity assessment and may not discriminate in permitting foreign certifica-tion bodies to participate in nacertifica-tional conformity assessment procedures.

The results of conformity assessment procedures undertaken in export-ing countries must be accepted if consultations determine that these are equivalent to domestic ones. Countries are free not to use international standards if there are climatic, geographical or technical reasons that sug-gest that this is not an optimal course. WTO case law has made clear that governments are effectively unconstrained in the scope to diverge from international standards. WTO members must notify proposed technical

9 See Ahn (2001) for a comparative discussion of the coverage of the SPS and TBT agreements.

al standard, allow reasonable time for other members to comment, as well as a reasonable period of time for exporters to adapt to new requirements.

Members must establish a national enquiry point where traders may ob-tain documents and answers regarding: (i) technical regulations adopted or proposed by bodies which have legal power to enforce them; (ii) meas-ures adopted or proposed; and (iii) conformity assessment procedmeas-ures.¹⁰ 4.3 Chapter C - Pre-shipment inspection

PSI involves the inspection of goods by specialized firms before they are shipped to the country of importation. Governments of importing coun-tries may engage the services of PSI firms to reduce the scope for ex-porters and imex-porters to engage in over-invoicing or under-invoicing of consignments or to ensure that goods satisfy product standards. In prac-tice PSI requirements have tended to be motivated by determination of the quantity and value of imported goods and a desire to reduce revenue leakage for the government and control fraud. Governments have used PSI in large part because national customs administrations are not able to undertake the required activities. This may reflect a lack of institution-al capacity, or problems related to rent seeking and corruption (Low, 1995).

The WTO Agreement on Pre-shipment Inspection specifies that countries using PSI agencies ensure that PSI is carried out in an objective, transpar-ent and non-discriminatory manner; and that verification of prices is based on a comparison with the price(s) of identical or similar goods offered for export from the same country of exportation around the same time. The selling price of locally produced goods, the export price of other producers, the cost of production or arbitrary prices may not be used for price verifi-cation purposes. To help to ensure compliance with the agreement, WTO members that use PSI must establish domestic appeals procedures where firms can petition decisions/regulations in this area.

The 2013 TFA bans the use of PSI for classification and valuation purpos-es by countripurpos-es that do not already have PSI programmpurpos-es in place. This provision of TFA reflects the view of most customs administrations and many traders that PSI may be helpful in the short term to deal with cor-ruption and tax avoidance, but that the longer-term solution is institu-tional strengthening to allow a government to manage the border itself (Hoekman, 2016). The customs community used the TFA negotiations as an opportunity to reassert their exclusive authority to determine the clas-sification and valuation of goods for tariff revenue collection purposes.

10See Ahn (2001) for a comparative discussion of the coverage of the SPS and TBT agreements.

The ban on PSI is not necessarily a feature of TFA that is consistent with trade facilitation given that it may be an effective mechanism to address serious instances of corruption in customs.¹¹