Standards and Rules of Origin in East Asia: introducing the key issues

Robert Kirk rkirk@tsginc.com

World Bank-BFA WorkshopHainan, China, June 26-27,2006

Overview

Rules of Origin –

Definition

Approaches to ROO

Impact on ASEAN of ROO Standards –

Standards as a trade issue

Multilateral and Regional Approaches

Rules of Origin: Defining Origin

Wholly Obtained Substantial Transformation

– Change of Tariff Classification (CTC)– Value Added– Specific Manufacturing Processes

Rules of Origin: Features

Cumulation (bilateral, diagonal, full)

Tolerance or de minimis

Absorption or Roll-Up Principle

Duty Drawback

Measuring ‘Restrictiveness’ of ROO

Recent work follows Estevadeordal (2000)Index of RestrictivenessCTC at HS 8-10 digitCTC at HS 6 digitCTC at HS 6 digit plus value contentCTC at HS 4 digitCTC at HS 4 digit plus value contentCTC at HS 2 digit level CTC at the HS 2 digit and Technical Requirements

Rules of Origin

EU- Pan Euro/GSP/Cotonou

CTC (4,2) VA (import content 50-30), Tech

Cumulation (bilateral, diagonal, full [Cotonou]

Tolerance (10, 10, 15 [Cotonou]), Absorption

NAFTA

CTC (2,4,6),VA (import content 50-40),Tech

Cumulation, Tolerance (7), Absorption

ASEAN Rules of Origin

AFTA

Value Added (import content 60 per cent)

Selected Specific Manufacturing Process

Bilateral Cumulation

Absorption

ASEAN Experience

Administrative compliance costs Cumbersome paperwork Weak capacity for verification Difficult for New ASEAN Members (CLMV) Lack of certainty

Why standards?

“The real 21st Century issues are standards and rules in areas such as safety, health or consumer protection”

Pascal Lamy September 9, 2004

Standards and International Trade

Decline in tariffs Increase in standards and technical regulations-

potential to use as a ‘tool of protection’ Voluntary standards and mandatory technical

regulations Contrast with tariffs-technical regulations serve a

‘desirable’ objective and cannot be negotiated away WTO TBT and SPS Agreements

0

100

200

300

400

500

600

700

800

900

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Source: WTO (2005a) Tenth Annual Review of the Implementation and Operation of the TBT Agreement G/TBT/15

365

460

648 669

794

611

538581

794

638

Total number of TBT notifications since 1995

WTO Principles

Most Favoured Nation National Treatment Technical Regulations (as far as possible)

based on international standards Not create unnecessary obstacles to trade Transparent process

Standards: Institutions and Policy Issues

Establishing the standard (technical experts)

Ensuring goods and services meet the standard (conformity assessment)

Ensuring conformity assessment functions well –accreditation and recognition

Second and Third-Party Assessment First-Party Assessment

Market

Certification

Metrology Accreditation

Testing Inspection

Product

Supplier

And/Or

Market

SDoc

Product

Supplier

Metrology

The Technical Infrastructure of Conformity Assessment

Traditional and New Approaches to Standardization

Traditional Approach Weights and Measures

and Health & Safety Static Structure Domestic Focus Public Sector Activity Regulatory Focus

New Approach National and

International Focus Flexible structure Public-Private Activity International

Recognition Voluntary standards

ASEAN and Standards

ASEAN Consultative Committee on Standards and Quality (ACCSQ)

Institutional Structure (12 sub committees) Goal of ‘One Standard, One Test, Accepted

Everywhere’ Upgrade to international standards AFTA Council identified 20 products as priorities for

standards harmonization (1997-2005) Main Focus now on Mutual Recognition Agreements

(MRA)

Mutual Recognition Agreements

Limited in Scope –product group approach The Pre-Conditions for equivalence between

national systems Automaticity: What is recognized at the

individual level and what are the entry requirements (pre-market approval)

Constraints within ASEAN

Inadequate legal framework Ineffective control of compliance Deficient institutional coordination Lack of awareness on quality issues No accreditation infrastructure Weak WTO Enquiry points

Summary

Rules of Origin Keep it simple and transparent with low

compliance costs

Standards Use regional agreements to support effective

implementation of multilateral agreements