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Speech by Mauro Petriccione
Head of Unit for investment, dual-use goods, standards
and certification,
Directorate-General for Trade, European Commission
Washington, 10-12 February 2000
at the
TRANSATLANTIC CONSUMER DIALOGUE
Mutual recognition agreements
Introduction
I am very pleased to have been invited here to discuss MRAs. I look
forward to an open and frank exchange of views to help both the internal
policy debate on MRAs in the European Commission, as well as the ongoing
negotiations on MRAs between the EU and the US. I hope that our discussions
will act as a springboard for greater co-operation in the future between
all parties here.
The main question I wish to address here today is whether and how mutual
recognition agreements benefit consumers and act as an incentive to establish
higher standards of consumer protection. I intend to address MRAs as we
have them today; to touch upon similar or complementary instruments; to
give some ideas of what we are doing in TEP in this respect.
Domestic regulation
As we all know, regulation has a key and vital role in promoting public
policy objectives, including consumer interests. At the same time, the
question of the impact of regulation on economic activity and trade is
an inescapable one. I do not intend to address here the question of trade
barriers disguised as regulatory measures. That is an important issue
and a serious problem, but it does not pose a conceptual challenge. These
disguised barriers are not acceptable, but the problem there is how to
strip them of that disguise.
There is another facet of the trade / regulation link that is much
more important and I wish to concentrate on that. Legitimate, non-discriminatory
and proportionate regulatory requirements can and do hamper trade. This
is unavoidable and has become increasingly apparent as "traditional" trade
barriers, such as tariffs and quotas, diminish and trade flows multiply.
Governments and all stakeholders need to work together to avoid either
under- or over-regulating trade and economic activity. "Under-regulation"
means that important public policy interests may go unprotected. "Over-regulation"
means that we may subject trade and the economy to superfluous regulation.
In either case, we, as consumers and citizens, are the ultimate losers.
MRAs on conformity assessment
There are a number of tools that can facilitate trade by addressing
these differences in regulations while ensuring that public policy objectives
are maintained. MRAs are one such tool (and only one such tool). In this
respect, I would like to make one point clear: I have spoken of trade
facilitation. This should not be confused with liberalisation of trade.
MRAs, etc. do not liberalise trade, because they do not allow what was
not allowed before. They facilitate trade because they allow traders to
comply more easily and at less cost with whatever requirements they have
to comply with. This, in turn, may or may not increase trade.
What is an MRA? There is no uniform type of MRA - each one is tailor-made.
However, the MRAs concluded by the EU to date, including that with the
US, are based on a common principle. This is the recognition by each party
of the certification procedures of the other. These so-called MRAs on
conformity assessment procedures do not change the standards or regulations
applicable to any product in either party to the agreement. The change
is that certification can take place in the exporting country, prior to
exportation, this certification being on the basis of the requirements
of the importing country.
How does an MRA work then? What does it do? When an European exporter,
for instance, wishes to export to the US, its products must comply with
US requirements. The US may require that compliance is demonstrated by
a certificate, for instance issued by a competent laboratory (which may
be a public or private one). An MRA between the EU and the US in that
sector would allow the European exporter to test and certify its products
in the EU rather than in the US. The same is of course true for US exporters
in the EU market.
A key to the success of an MRA is that there is mutual confidence as
to the ability of testing and certification bodies on each side to understand
and apply the requirements of the other party. For this reason, the current
EU-US MRA foresees transitional periods and confidence building activities,
which are still ongoing in all the sectors covered - telecommunications
equipment, recreational craft, electrical safety, medicinal products and
finally, as already mentioned, medical devices.
It should also borne in mind that MRAs cannot and should not be concluded
with any country. Given the need for the kind of confidence I have mentioned,
there is only a limited number of countries who have enough of a developed
infrastructure (competent laboratories, sureveillance authorities, etc.)
to be able to make an MRA work between them. The EU, for instance, has
concluded MRAs with the US, of course, and with Australia, Canada, New
Zealand and Switzerland. There are very few other countries with whom
we woud feel confortable concluding an MRA. With other countriss, we have
to use other instruments (for instance, regulatory cooperation, exchanges
of views on best regulatory practices) and engage in supplying them with
technical assistance in the field of standards and conformity assessment.
The impact of MRAs on consumers
Duplication of testing and certification is a serious hidden cost that
is eventually borne by the final user or consumer of a product. In certain
cases its impact is a bar to tha availability itself of a product in a
given market, for instance because the additional cost and hassle is not
commercially justifiable. By facilitating trade, MRAs can benefit consumers
through promoting lower prices and greater choice. This principle is central
to all efforts to liberalise trade, be it at a bilateral, plurilateral
or multilateral level. But what about the impact of MRAs on standards
for consumer protection? I would like to underline that as technical regulations
and standards are not affected by MRAs on conformity assessment: whatever
consumer protection is set at domestic level is not affected by an MRA.
Each party to an MRA maintains its standards for consumer protection at
whatever level it deems necessary. MRAs do not interfere with that freedom
and do not undermine the technical regulations and standards themselves.
In addition, both parties remain free to carry out market surveillance
activities.
Harmonisation
Another tool to address regulatory differences is harmonisation. In
Europe, this approach has been used to great effect in the establishment
of the Single Market. By its very nature, harmonisation means that technical
regulations and standards change. The key is to ensure that this is not
downwards towards the lowest common denominator. From our experience in
Europe, this can be achieved provided that there is a common understanding,
accountability and transparency in the standard-setting procedures. At
the international level this is a bigger challenge, and even more so is
to create a system that encourages both sides to raise standards. Public
and consumer opinion has a particularly important role to play in this
context, as it has done in the EU Single Market.
MRAs on technical regulations
Yet another tool to address regulatory differences are MRAs on technical
regulations. This approach can be useful when harmonisation is impossible
or is only a distant prospect. It can also be useful when harmonisation
has almost been achieved through voluntary international standards and
equivalence would then step in to close the remaining gap, which is often
rooted in the peculiarities of a country's administrative and legal structure,
rather than in any objective difference on what needs to be regulated
and how. In this scenario, manufacturers on both sides would be able to
respect exclusively their domestic requirements. They would be able to
export to the other party if they met these requirements.
The EU and US are exploring such an agreement in the context of the
Transatlantic Economic Partnership, notably in the area of marine safety
equipment. If such an agreement goes ahead, it would mean that European
manufacturers would be able to produce products, such as lifejackets,
to European standards and sell them in the US. In exploring this possibility,
we are all too aware of the importance of ensuring that any such agreement
does not undermine safety standards.
There are a number of conditions that need to be met if an MRA on technical
regulations is to be reached. The main condition is that that foreign
standards give the same assurances as domestic ones in terms of the fulfilment
of the objective of the domestic regulation. In other words, if a domestic
standard is prescribed in order to achieve a given level of safety, or
consumer protection, the foreign standard must be capable of assuring
the same level of safety or quality for that product. Therefore, an agreement
based on the concept of equivalence would not affect the existing level
of consumer protection in either party provided that equivalence has been
determined on the basis of objective criteria related to the purpose of
these regulations, that is, in our example of marine equipment, mainly
safety at sea.
An important issue here is the impact of such an agreement on incentives
to raise standards at some point in the future. I believe that such agreements
can help raise standards.
Taking a theoretical EU-US MRA on technical regulations as an example,
what would happen if the US wanted to raise standards and increase the
level of, say, health protection in a particular sector? What is the danger
here? One springs to mind: that the US may be reluctant to move its domestic
standards upwards, for fear of upsetting the equivalence with EU standards
and therefore losing the benefit of this agreement. What can we do to
avoid this? For a start, we might build into the agreement incentives
to re-establish equivalence at a higher level. For instance, we could
write into the agreement a clause that makes the agreement asymmetrical
in favour of the party that raises its standards.
In my example, EU exporters would lose the benefit of the agreement,
because supposedly lower EU standards would no longer be considered equivalent
to US standards. However, this would not be a problem for the US producers
because supposedly higher US standards would still be considered "equivalent"
to EU standards, so that they would still be able to gain access to the
EU market. Such a mechanism would put on the EU the burden to raise its
domestic standards in order to retain the benefits of the agreement, or
denounce the agreement altogether. This second option would not go down
well with either EU consumers or EU producers because it would signal
(a) that the EU is unwilling to protect health to the highest standards
and (b) that is it not willing to ensure the best access to the US markets
for its producers. Thus, the overall impact on consumer protection would
be positive. Moreover, the link with international standards should not
be overlooked. This kind of mechanism also provides both the EU and the
US with an incentive to work together to raise international standards
to their own level.
Regulatory co-operation
An important spin-off of the EU-US negotiations on MRAs has been enhanced
regulatory co-operation. Regulators on both sides of the Atlantic are
now talking to each other far more than in the past.
Regulatory co-operation should not interfere with the institutional
responsibilities of any of the regulators involved or with their ability
to carry out their tasks. These agencies are normally entrusted with the
protection of important public policy interests and their role and authority
has to be preserved. However, in the areas in which these agencies are
normally involved, such as health and safety of consumers, there are often
a variety of policy responses available. The choice is partly a consequence
of the level of knowledge of the underlying problem: pooling and sharing
knowledge as to product hazards and to the sensitivity of the public to
certain hazards should in fact improve the regulators' effectiveness.
Moreover, to the extent that the choice between equivalent responses may
be influenced by economic considerations, similar or compatible choices
by EU and US regulators would avoid unnecessary barriers to Trans-Atlantic
trade.
Conclusion
The Community, working closely with its major trading partners, notably
the US, has been at the forefront of developments in the field of MRAs.
As I said at the start of this presentation, if correctly structured and
implemented, MRAs should benefit consumers and promote higher levels of
consumer protection. At the same time, I fully recognise that important
issues are raised for consumer interests by MRAs and I look forward to
hearing your views. I am fully committed to ensuring that the opinion
of civil society, and consumers in particular, is fully taken on board
in work in this area.
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