Standards, Conformity Assessment, and Trade

Into the 21st Century

International Standards, Conformity Assessment, and U.S. Trade Policy Project Committee

Board on Science, Technology, and Economic Policy

National Research Council

NATIONAL ACADEMY PRESS
Washington, D.C.
1995



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--> Standards, Conformity Assessment, and Trade Into the 21st Century International Standards, Conformity Assessment, and U.S. Trade Policy Project Committee Board on Science, Technology, and Economic Policy National Research Council NATIONAL ACADEMY PRESS Washington, D.C. 1995

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--> NATIONAL ACADEMY PRESS 2101 Constitution Avenue, N.W. Washington, D.C. 20418 NOTICE: The project resulting in this report was approved by the Governing Board of the National Research Council (NRC), whose members are drawn from the councils of the National Academy of Sciences (NAS), the National Academy of Engineering (NAE), and the Institute of Medicine (IOM). The members of the expert committee responsible for the report were chosen for their special competencies and with regard for appropriate balance. The report has been reviewed by individuals other than the authors according to procedures approved by a Report Review Committee. This committee consists of members of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The Policy Division of the NRC consists of the Board on Science, Technology, and Economic Policy (STEP), the Committee on Science, Engineering, and Public Policy, and the Government-University-Industry Research Roundtable. The STEP Board reports as a unit of the Policy Division to the NRC Governing Board. This is the body by which the NAS, NAE, and IOM govern the work of the National Research Council. This study was supported by the U.S. Department of Commerce's National Institute of Standards and Technology. Library of Congress Cataloging-in-Publication Data National Research Council (U.S.). International Standards, Conformity Assessment, and U.S. Trade Policy Project Committee. Standards, conformity assessment, and trade: into the 21st century / International Standards, Conformity Assessment, and U.S. Trade Policy Project Committee, National Research Council. p. cm. Includes bibliographical references and index. ISBN 0-309-05236-X 1. Quality control—Standards—United States. 2. Manufactures—Quality control—Standards—United States. I. Title TS156.N366 1995 658.5'62'021873—dc20 95-1649 CIP Copyright 1995 by the National Academy of Sciences. All rights reserved. Printed in the United States of America

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--> Members Of The International Standards, Conformity Assessment, And U.S. Trade Policy Project Committee GARY C. HUFBAUER, Chairman, Reginald Jones Senior Fellow, Institute for International Economics, Washington, D.C. DENNIS CHAMOT, Associate Executive Director, Commission on Engineering and Technical Systems, National Research Council, Washington, D.C. LEONARD FRIER, President, MET Laboratories, Inc., Baltimore, Maryland STEVEN R. HIX, Chairman and CEO, Sarif, Inc., Vancouver, Washington IVOR N. KNIGHT, President, Knight Communications Consultants, Clarksburg, Maryland DAVID C. MOWERY, Associate Professor, Walter A. Haas School of Business, University of California, Berkeley MICHAEL M. O'MARA, Business Leader, GE Plastics Cycolac Business, General Electric Company, Washington, West Virginia GERALD H. RITTERBUSCH, Manager, Product Safety and Environmental Control, Caterpillar, Inc., Peoria, Illinois RICHARD J. SCHULTE, Senior Vice President, Laboratories, American Gas Association, Cleveland, Ohio SUSAN C. SCHWAB, Director, Corporate Business Development, Motorola, Inc., Schaumburg, Illinois MICHAEL B. SMITH, President, SJS Advanced Strategies, Washington, D.C. LAWRENCE L. WILLS, IBM Director of Standards, IBM Corporation, Thornwood, New York Professional Staff JOHN S. WILSON, Project Director JOHN M. GODFREY, Research Associate PATRICK P. SEVCIK, Project Assistant

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--> Board On Science, Technology, And Economic Policy A. MICHAEL SPENCE, Chairman, Dean, Graduate School of Business, Stanford University, Standford, California JOHN A. ARMSTRONG, South Salem, New York JAMES F. GIBBONS, Dean, School of Engineering, Stanford University, Stanford, California GEORGE N. HATSOPOULOS, Chairman and President, Thermo Electron Corporation, Waltham, Massachusetts KAREN N. HORN, Chairman and Chief Executive Officer, Bank One Cleveland, Cleveland, Ohio DALE W. JORGENSON, Frederic Eaton Abbe Professor of Economics, Harvard University, Cambridge, Massachusetts RALPH LANDAU, Listowel Company, New York, New York JAMES T. LYNN, Senior Advisor, Lazard Frères and Co., Washington, D.C. BURTON J. McMURTRY, General Partner, Technology Venture Investors, Menlo Park, California RUBEN METTLER, Chairman and Chief Executive Officer (retired), TRW, Inc., Los Angeles, California MARK B. MYERS, Senior Vice President, Corporate Research and Technology, Xerox Corporation, Stamford, Connecticut DONALD E. PETERSEN, Chairman (retired), Ford Motor Company, Birmingham, Michigan MICHAEL E. PORTER, Professor, Harvard Business School, Boston, Massachusetts (until December 31, 1994) JAMES POTERBA, Professor, Department of Economics, Massachusetts Institute of Technology, Cambridge GEORGE M. WHITESIDES, Professor, Department of Chemistry, Harvard University, Cambridge, Massachusetts Staff STEPHEN A. MERRILL, Executive Director

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--> The National Academy of Sciences (NAS) is a private, self-perpetuating society of distinguished scholars in scientific and engineering research, dedicated to the furtherance of science and technology and their use for the general welfare. Under the authority of its congressional charter of 1863, the Academy has a working mandate that calls upon it to advise the federal government on scientific and technical matters. The Academy carries out this mandate primarily through the National Research Council, which it jointly administers with the National Academy of Engineering and the Institute of Medicine. Dr. Bruce M. Alberts is President of the NAS. The National Academy of Engineering (NAE) was established in 1964, under the charter of the NAS, as a parallel organization of distinguished engineers, autonomous in its responsibilities for advising the federal government. Dr. Robert M. White is President of the NAE. The Institute of Medicine (IOM) was chartered in 1970 by the National Academy of Sciences to enlist distinguished members of appropriate professions in the examination of policy matters pertaining to the health of the public. In this, the Institute acts under both the Academy's 1863 congressional charter responsibility to be an adviser to the federal government and its own initiative in identifying issues of medical care, research, and education. Dr. Kenneth I. Shine is President of the IOM. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy's purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Bruce M. Alberts and Dr. Robert M. White are chairman and vice chairman, respectively, of the National Research Council.

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--> Preface Product and process standards, as well as methods to ensure conformance to these standards, have important implications for economic progress and public welfare. They also are increasingly important to global commerce. We hope this book will serve as a reference document for public policy. It begins with a discussion of the relationship between standards, product testing, certification, and world trade. The volume then examines the role and responsibilities of U.S. government and industry in the system. Emerging trends in key international policies and programs are also addressed. The report concludes with a set of recommendations both to strengthen the U.S. domestic system and to enhance U.S. interests in overseas markets. The National Research Council of the National Academies of Science and Engineering was asked by Congress in P.L. 102-245 to study these issues (Appendix B). The Council's Science, Technology, and Economic Policy Board provided the forum through which the study was initiated. A panel of experts provided oversight of the resulting study and the professional staff work which produced the final report. The report addresses an extremely important set of goals for national policy. These involve removing ineffective and duplicative rules and regulations that govern testing, certification, and laboratory accreditation. Urgent reform is needed in national conformity assessment policy. This will come about, in part, through changes in the mandate of the National Institute of Standards and Technology. This report also discusses ways in which the United States can promote open trade by removing standards-related barriers to trade and mechanisms to better support U.S. exports in world markets. The U.S. should aggressively

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--> eliminate barriers to global trade embedded in discriminatory foreign policies and practices. At the same time, we should lead the international community in creating a global network of mutual recognition agreements by governments with differing national conformity assessment systems. Numerous individuals provided advice and assistance throughout the project. Most importantly, John Godfrey and Patrick Sevcik deserve great credit for their outstanding work. The committee served with extraordinary dedication to the success of this effort. Many individuals in government provided assistance to the project, especially those at the National Institute of Standards and Technology and the Office of the U.S. Trade Representative. Numerous experts in industry and universities also provided briefings, important information, and other assistance in our work. This is particularly true of those affiliated with the American National Standards Institute and other U.S. standards bodies. Gary Clyde Hufbauer Chairman John Sullivan Wilson Project Director

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--> Contents     EXECUTIVE SUMMARY   1     Conformity Assessment   2     Standards Development   3     International Trade   4     Addressing Future Challenges and Opportunities   6 1   INTRODUCTION   9     Functions of Standards   11     Commercial Communication   11     Technology Diffusion   11     Productive Efficiency   14     Enhanced Competition   14     Compatibility   15     Process Management   15     Public Welfare   16     Conformity Assessment   17     Standards, Conformity Assessment, and Public Policy   18     Assessing the U.S. System   18     Public Welfare   20     U.S. International Trade Policy   20 2   STANDARDS DEVELOPMENT   23     Scope of the U.S. System   26     Private-Sector Standards   29

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-->     Economic Rationale for Consensus Standardization   30     Voluntary Consensus Standardization Processes   33     Standards-Developing Organizations   36     Professional Societies   36     Industry Associations   37     Membership Organizations   38     Consortia   39     American National Standards Institute   39     International Standards Development   46     Government Role in Standardization   48     National Institute of Standards and Technology   52     Federal Use of Voluntary Consensus Standards   54     Public-Private Cooperation   57     Summary and Conclusions   60 3   CONFORMITY ASSESSMENT   65     Conformity Assessment System Framework   68     Testing and Certification   71     Product Testing   71     Product Certification   72     Private and Public Certification Programs in the United States   73     Quality System Registration   77     Accreditation and Recognition   80     Accreditation Services   80     Costs of Redundancy in U.S. Accreditation   87     Government Recognition of Accreditation Services   97     Summary and Conclusions   99 4   INTERNATIONAL TRADE   103     Standards, Trade, and U.S. Economic Progress   104     Standards and the Economic Benefits of Trade Expansion   104     Cost of Protection: Non-Tariff Barriers to Trade   107     Barriers to Trade in Key U.S. Export Markets   108     Multilateral Trading System: The Uruguay Round   112     Membership and Expansion of Scope   113     Coverage of Conformity Assessment   118     Extension of Coverage to Nongovernmental Organizations   119     Dispute Settlement   120     U.S. Trade Policy and Section 301   121     Overview of U.S. Trade Policy Formation and Implementation   121     Private-Sector Advisory Mechanisms   124     Removing Standards-Related Trade Barriers: Section 301   124     Mutual Recognition Agreements   126     Background: Product Approval in the European Union   126     U.S.-European Union MRA Negotiations   130     Mutual Recognition Agreements: APEC   134

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-->     U.S. Export Promotion   140     U.S. Export Promotion Policy   140     Case Example: Emerging Standards and Conformity Assessment Systems in Indonesia   141     A Model for Standards Assistance Activities   144     Summary and Conclusions   147 5   RECOMMENDATIONS TO ADDRESS FUTURE CHALLENGES AND OPPORTUNITIES   153     Conformity Assessment   154     Standards Development   157     International Trade   160     Meeting Future Challenges   163     APPENDIXES         A New Developments in International Standards and Global Trade: A Conference Summary John S. Wilson, John M. Godfrey, Holly Grell-Lawe   169     B Legislative Request for the Study: Public Law 102-245   197     C Biographical Information on Committee and Staff   199     D Glossary and Acronyms   205     E Selected Bibliography   213     INDEX   229