Technical Barriers to Trade in the WTO

Module

3

The Agreement on Technical Barriers to Trade

ESTIMATED TIME: 3 hours

OBJECTIVES OF MODULE 3

• Present the background of the Agreement on Technical Barriers to Trade (TBTAgreement); and
• explain the TBT Agreement structure and application.

I.Introduction

As learn in the previous Module, the multilateral trading system was founded in 1947. In its earliest years, the General Agreement on Tariffs and Trade (GATT), which later evolved into the WTO, concentrated on reducing tariffs and quantitative restrictions.

Soon, however, Contracting Parties recognized that other non-tariff measures needed to be tackled. In the1960s, an inventory based on notifications from Contracting Parties revealed that more issues were raised on technical barriers to trade than on any other category of measures.

This provided the impetus for the first Agreement on Technical Barriers to Trade, which came into force on a plurilateral basis in 1980, at the end of the GATT Tokyo Round of trade negotiations (1973-1979). This agreement will be referred to here as the "Tokyo Round TBT Agreement".

In 1994, with the creation of the World Trade Organization, the new WTO Agreement incorporated a modified and strengthened multilateral Agreement on Technical Barriers to Trade. This is the "TBT Agreement" we have nowadays.

In brief

It is time for us to proceed to an examination of the TBT Agreement: its history, objectives, structure, scope of application, coverage, matters not covered by it and its relationship with the SPS Agreements, definitions, institutional application and temporal scope of application.

II.The TBT agreement

II.A.History of the TBT Agreement

The GATT 1947 had not established a comprehensive legal structure for the treatment of technical regulations and standards. The idea that a specific agreement was necessary emerged during the 1970s.

A Plurilateral Tokyo Round TBT Agreement was signed at the end of the Tokyo Round on 12 April 1979 and entered into force on 1January1980. It laid down rules for the preparation, adoption and application of technical regulations, standards and conformity assessment procedures. By the time the Uruguay Round of negotiations was concluded, 46 GATT Contracting Parties had accepted the Tokyo Round TBT Agreement (BISD26S/8 (1980)). This Agreement was seen as a "highly successful" one, in the sense that many GATT Parties adhered to it, which was not always the case for other plurilateral agreements created under the GATT1947.

Note that plurilateral obligations regarding general disciplines (different to the plurilateral sectoral agreements we have today) can be quite problematic with regards to the predictability, stability and uniformity of the legal system. In order to tackle these issues, the "single undertaking" rule was envisaged for the Uruguay Round Agreements. This ensured that all WTO Members would be bound by the same obligations, making the system more balanced and predictable.

RECALL

Do you recall the single undertaking rule? If not, take a look at Module 1 again. This is the principle that states that WTO Members are bound by all WTO Multilateral Agreements. There are very few Plurilateral Agreements, currently two, which only bind the WTO Members who have accepted to be bound by them.

The Tokyo Round TBT Agreement applied to technical regulations, standards and conformity assessment procedures in general, including measures aiming at food safety and human, animal and plant life or health protection from contaminants, pests and diseases. Such topics are currently under the discipline of the multilateral Agreement on the Application of Sanitary and Phytosanitary Measures (the SPS Agreement).

The main differences between the WTO TBT Agreement and the Tokyo Round TBT Agreement are:

Under the Uruguay Round's "single undertaking", when signing the WTO Agreement, all Members were automatically signing into the TBT Agreement, too. This stands in contrast to the plurilateral nature of the Tokyo Round TBT Agreement.

Under the WTO, two separate agreements have been created – the SPS Agreement on food safety and animal and plant health protection against pests and diseases – and the TBT Agreement, whose combined coverage is roughly the same as the Tokyo Round TBT Agreement.

The WTO TBT Agreement is subject to the unified dispute settlement provisions of the WTO, although it also contains some specific additional provisions on the matter. The Tokyo Round TBT Agreement had its own dispute settlement mechanism.

Unlike the Tokyo Round TBT Agreement, the WTO TBT Agreement covers measures applicable both to products and to related processes.

The WTO TBT Agreement, negotiated during the Uruguay Round, is one out of 12 multilateral trade agreements on the international trade in goods, subsumed under the General Agreement on Tariffs and Trade 1994 (GATT 1994). The WTO TBT Agreement has strengthened and clarified the provisions of the Tokyo Round TBT Agreement.Many of the latter's provisions have been carried forward, but there are significant differences, both in form and content, as explained above.

II.B.Objectives

In brief

Given that this list is not exhaustive, Members may protect other legitimate objectives while using the measures prescribed under the TBT Agreement. Nevertheless, regulatory measures undertaken with the purpose to protect a Member's legitimate objectives shall neither hinder the rights of other WTO Members nor what has been achieved through market access liberalization, that is, through lower import duties and taxes.

To sum up, regulatory measures are permitted as long as they are not applied in a manner which constitutes a means of "arbitrary or unjustifiable discrimination between countries where the same conditions prevail" or a "disguised restriction on international trade", and are otherwise in accordance with the provisions of the Agreement. This is will be further explained throughout our course.

In detail

The relevant part of the Preamble to the TBT Agreement reads as follows:

As we are going to see below, being aware of the objectives incorporated in the TBT Agreement is very important for verifying if such Agreement applies to a certain measure.

Moreover, the preamble of an international treaty provides information about the object and purpose of the treaty. That is, the preamble is important for the interpretation of the agreement, as provided by the customary rules of treaty interpretation referred to in Article3.2 of the WTO Dispute Settlement Understanding.

If you want to know more...

Customary rules of treaty interpretation

The customary rules of treaty interpretation are enumerated in Article31 and 32 of the Vienna Convention on the Law of Treaties (VCLT) of 1969, which can be found at our Digital Library.These two articles provide that a treaty shall be interpreted in good faith and according to the ordinary meaning of its terms in their context and in the light of its object and purpose. Besides the Preamble, other instruments serve to determine the context of a treaty, such as other (related) agreements celebrated between the same parties.

The Appellate Body, while deciding the case US - Gasoline (WT/DS2), noted that Article31 of the VCLT forms part of the customary rules of treaty interpretation, incorporated into Article3.2 of the WTO Dispute Settlement Understanding.

EXERCISES:

1.What are the objectives of the TBT Agreement?

II.C.Structure

The TBT Agreement consists of a Preamble, setting out the general objectives of the Agreement, 15 articles and three annexes. Its structure is straightforward:

The first set of provisions concerns the preparation, adoption and application of technical regulations (Articles2-3).

The second set deals with the preparation, adoption and application of standards (Article4, and Code of good practice for the preparation, adoption and application of standards (Annex3).

The third set of provisions relates to conformity assessment procedures (Articles5-9).

The remainder of the Agreement (Articles10-14) deals with transparency, technical assistance, special and differential treatment, dispute settlement and institutional issues (the work of the TBT Committee).

In addition, Annex 1 contains definitions of the terms used in the Agreement and Annex 2 lays down provisions referred to technical experts groups. Annex 3 deals with the preparation, adoption and application of standards by standardizing bodies.

In detail

Now it is time for us to present the TBT Agreement's provisions on applicability, coverage, matters excluded from the TBT Agreement, relationship with the SPS Agreements, relevant definitions, institutional coverage and temporal applicability.

II.D.SCOPE OF APPLICATION

The TBT Agreement applies to:

Technical regulations: measures which lay down product characteristics or their related processes and production methods, with which compliance is mandatory.

Standards: measures approved by a Recognised Body that provide, for common and repeated use, rules, guidelines or characteristics for products or related processes and production methods, with which compliance is voluntary (i.e. not mandatory).

Conformity assessment procedures: procedures used, directly or indirectly, to determine the fulfilment of relevant requirements contained in technical regulations or standards.

The TBT Agreement covers the measures above, as well as their amendments and additions, as applied to final products and/or to related processes and production methods. Technical regulations and standards include terminology, symbols, packaging, marking or labelling requirements, among others.

It is important to know the scope of application of the TBT Agreement, to be able to verify if it applies to a certain measure, since there are two other WTO agreements, the GATT 1994 and the SPSAgreement which also regulate internal measures (such as domestic technical regulations).

In fact, the Agreement on Sanitary and Phytosanitary Measures covers regulations with very specific objectives such as to prevent risks arising from food, and animal or plant-carried diseases and pests. Thus, the verification of a measure's characteristics and the identification of its object are important steps to determine if a measure is covered by the TBT Agreement.

However, it is clear that often the same regulation has more than one objective and may be subject to the disciplines of both, the SPS and the TBTAgreements. Parts of the regulation (that is, some provisions) could fall within the scope of the SPS Agreement, while others could fall within that of the TBT Agreement.

We shall present a full definition of the three types of measures regulated by the TBT Agreement in Module 4. For now, let’s just keep in mind that "technical regulations", "standards", and "conformity assessment procedures" are the three types of measures within the scope of applicability of the TBT Agreement.

II.E.Coverage

In detail

The coverage of the TBT Agreement extends to all technical regulations, standards and conformity assessment procedures that apply to trade in goods, i.e. to all agricultural and industrial products.

Article1.3 reads:

In terms of the definitions contained in Annex 1, paragraphs1 and 2 of the TBT Agreement:

In addition, the second sentence of Annex 1, paragraphs1 and 2 provides that:

The TBT Agreement does NOT apply to:

Sanitary and phytosanitary (SPS) measures

Purchasing specifications prepared by governments

Regulations and standards related to services

II.E.1.Process and Production Methods (PPMs)

It is important to keep in mind that, in contrast to the Tokyo Round TBT Agreement, the current TBTAgreement does regulate technical regulation and standards focused on processes and production methods (PPMs), when they are related to the characteristics of products covered by the TBT Agreement.

However, PPMs not related to these characteristics, in other words, PPMs that are not detectable in the final product, i.e., do not leave traces, or, in trade jargon, "non-product related PPMs", are seen by the majority of Members as not regulated by the TBT Agreement. The issue of coverage of non-product related PPMs has triggered a complex debate both in the TBT Committee and, in the context of the discussion on eco-labelling, in the Committee on Trade and Environment (CTE). Non product related PPMs may constitute important policy tools in order to secure the safety of employees or to protect the environment.

The applicability of the TBT Agreement to non-product related PPMs has never been interpreted at the WTO by a Panel or the Appellate Body, nor has it been the object of an Understanding of Interpretation by Members. Nevertheless, even if the TBT Agreement were not applicable to measures on non-product related PPMs, these are covered by other WTO Agreements, for example, ArticleXX of the GATT.

GATTArticleXX has been interpreted in WTO dispute settlement cases time and again. An important case was decided in 2001 in the US - Shrimp Turtle dispute (United States — Import Prohibition of Certain Shrimp and Shrimp ProductsWT/DS58). Here, the Appellate Body (AB) had the opportunity to examine PPMs measures under the GATT Agreement, not under the TBT Agreement.

The case involved a typical situation of non-product related PPMs. The measure in question was a regulation adopted by the UnitedStates (US) which banned imported shrimps which had been caught using a different method to the one recommended to prevent killing sea turtles. Now, shrimps caught using a method that could kill sea turtles and shrimps caught with the recommended method that prevents such occurrence (TED), cannot be distinguished between one another, at least not solely based on the product's characteristics.

The Appellate Body recognized the right of WTO Members to protect exhaustible natural resources, as long as they do not do this in a way that arbitrarily or unjustifiably discriminates between countries where the same conditions prevail, or that disguisedly restricts international trade.

However, in the US - Shrimp Turtle case, the Appellate Body did not expressly recognize the two "types" of shrimp as "unlike" products. What it did, during the case's implementation phase, was to accept that a WTO Member may adopt a PPM measure that is non-product related and still find a justification for it under ArticleXX (General Exceptions). That is, the measure may be seen as a valid reason for violating other WTOobligations, such as the prohibition on quantitative restriction or the national treatment principle, as long as it complies with all the requirements of ArticleXX, i.e., be subsumed to at least one of the paragraphs of ArticleXX and be in accordance with the obligations provided for in the chapeau of the Article.

RECALL

Do you remember which are the GATT basic obligations and general exceptions?

GATTArticleI

Pursuant to ArticleI, on the Most Favoured Nation Principle, 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 Member is to give special trading advantages to one Member at the exclusion of others. All Members are meant to be treated on an equal footing and share the benefits of any moves towards lower trade barriers.