Standards, Conformity Assessment, and Trade: Into the 21st Century

Executive Summary

The United States is the most productive and competitive nation in the world.[1]
This fact is based on a high degree of efficiency in the domestic economy. In particular, significant progress has been made over the past several decades to foster a competitive economic environment for workers and firms. Initiatives by both industry and government to restructure the nation's productive capacities and promote microeconomic efficiencies have resulted in many benefits. This includes an acceleration of technological advance. We have eliminated many unnecessary rules and regulations that block U.S. firms and workers from taking full advantage of our creativity, industrial infrastructures, and technological edge. The United States has led the world in removing regulatory controls in the transportation, energy, and telecommunication sectors, for example. Continued progress, however, is needed if we are to move forward into the twenty-first century and achieve higher levels of productivity and economic growth. This progress will come, in part, through aggressive and targeted efforts to remove the remaining costly, inefficient, and unnecessary barriers to industrial production embedded in the U.S. national standards and conformity assessment system.

As we approach the year 2000, national welfare and economic strength will also increasingly center on the advantages the United States enjoys in global commerce. In addition to reform of the domestic economy, we need ever more innovative methods to promote goods and services overseas. The U.S. government must also continue to exercise leadership in the international community by aggressively removing the remaining barriers to trade. A high-level focus by government and industry on standards and conformity assessment policy is one way of reaching these goals and promoting a more productive national economy.

This report offers a comprehensive analysis of these subjects and the relationships among industrial production, standards, and conformity assessment. It provides recommendations to support both domestic policy reform, and the continued success of U.S. products in global markets. The information and data presented here support the conclusion that in most instances, the U.S. standards development system serves the national interest well. There is, however, evidence to indicate that our domestic policies and procedures for assessing conformity of products and processes to standards require urgent improvement.

At the same time, we must recognize the strategic importance of standards and conformity assessment systems in supporting national trade objectives. In order to address the new international dynamics of global trade, an innovative U.S. trade policy to meet challenges of the post-Uruguay Round trading environment is required. This should involve an integrated strategy by the U.S. government to link standards, conformity assessment, and trade. Our policies should aggressively seek to reduce standards-related barriers to trade. This involves both unilateral action through U.S. trade law and a new commitment to international negotiation aimed at mutual recognition by governments of conformity assessment systems.

The following summarizes the report's conclusions and recommendations, which are outlined in detail in each chapter of the report. An extensive discussion of the implications of these recommendations is included in Chapter 5.

CONFORMITY ASSESSMENT

The U.S. conformity assessment system has become increasingly complex, costly, and burdensome to national welfare. Unnecessary duplication and complexity at the federal, state, and local levels result in high costs for U.S. manufacturers, procurement agencies, testing laboratories, product certifiers, and consumers.

Government agencies should retain oversight responsibility for critical regulatory and procurement standards in areas of public health, safety, environment, and national security. The assessment of product conformity to those standards, however, is performed most efficiently and effectively by the private sector. Government should act only in an oversight capacity. The government should evaluate and recognize private-sector organizations that are competent to accredit testing laboratories, product certifiers, and quality system registrars.

  • RECOMMENDATION 1: Congress should provide the National Institute of Standards and Technology (NIST) with a statutory mandate to implement a government-wide policy of phasing out federally operated conformity assessment activities.

    NIST should develop and implement a National Conformity Assessment System Recognition (NCASR) program. This program should recognize accreditors of (a) testing laboratories, (b) product certifiers, and (c) quality system registrars. By the year 2000, the government should rely on private-sector conformity assessment services recognized as competent by NIST.

  • RECOMMENDATION 2: NIST should develop, within one year, a ten-year strategic plan to eliminate duplication in state and local criteria for accrediting testing laboratories and product certifiers. NIST should lead efforts to build a network of mutual recognition agreements among federal, state, and local authorities.

    After 10 years, the Secretary of Commerce should work with federal regulatory agencies to eliminate remaining duplication through preemption of state and local conformity assessment regulation.

STANDARDS DEVELOPMENT

The U.S. standards development system serves the national interest well. In most cases, it supports efficient and timely development of product and process standards that meet economic and public interests. Federal government use of the standards developed by private standards organizations in regulation and public procurement has many benefits. These include lowering the costs to taxpayers and eliminating the burdens on private firms from meeting duplicative standards in both government and private markets. Although not every public standard can be developed through private-sector processes, government should rely on private activities in all but the most vital cases involving protection of public health, safety, environment, and national security.

Current efforts by the U.S. government to leverage the strengths of the private U.S. standards development system, as outlined in the Office of Management and Budget (OMB) Circular A-119, "Federal Participation in the Development and Use of Voluntary Standards," are inadequate. Effective, long-term public-private cooperation in developing and using standards requires a clear division of responsibilities and effective information transfer between government and industry. Improved institutional mechanisms are needed to effect lasting change.

  • RECOMMENDATION 3: Congress should enact legislation replacing OMB Circular A-119 with a statutory mandate for NIST as the lead U.S. agency for ensuring federal use of standards developed by private, consensus organizations to meet regulatory and procurement needs.

  • RECOMMENDATION 4: The director of NIST should initiate formal negotiations toward a memorandum of understanding (MOU) between NIST and the American National Standards Institute (ANSI). The MOU should outline modes of cooperation and division of responsibility between (1) ANSI, as the organizer and accreditor of the U.S. voluntary consensus standards system and the U.S. representative to international, non-treaty standard-setting organizations and (2) NIST, as the coordinator of federal use of consensus standards and recognizing authority for federal use of private conformity assessment services. NIST should not be precluded from negotiating MOUs with other national standards organizations.

    In addition, all federal regulatory and procurement agencies should become dues-paying members of ANSI. Dues will support government's fair share of ANSI's infrastructure expenses.

INTERNATIONAL TRADE

Expansion of global trade is increasingly important to domestic economic growth, productivity, and high-wage employment opportunities in the United States. The reduction of barriers to international commerce and aggressive promotion of U.S. exports must continue to be the fundamental objectives of a post-Uruguay Round trade strategy. At the multilateral level, the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) achieved significant progress in reducing barriers related to discriminatory standards and national product testing and certification systems.

There is evidence to indicate that the growing complexity of conformity assessment systems in many nations threatens, however, to undermine future global trade expansion. U.S. exporters face high costs in gaining product acceptance in multiple export markets. Many nations impose duplicative, discriminatory requirements for product testing, certification, and quality system registration. The European Union's (EU's) mechanisms for approving regulated products, in particular, continue to pose serious barriers to expanded export opportunities for U.S. firms. Clearly, the severity of these obstacles varies by industry sector. From a national perspective, it is important, however, to achieve a rapid, negotiated removal of EU barriers. This will serve both to expand trade opportunities with our European partners, and to help promote the success of similar negotiations between the United States and other trading partners, especially those in the emerging economies of the Asia Pacific Economic Cooperation (APEC) forum.

Agreements between governments to recognize national conformity assessment mechanisms have a great potential to facilitate trade. A network of global mutual recognition agreements (MRAs) would enable manufacturers to test products once and obtain certification and acceptance in all national markets. At the regional level, for example, a successful conclusion to discussions within the APEC forum on an MRA would provide significant new opportunities for U.S. trade expansion in rapidly growing markets of Asia.

  • RECOMMENDATION 5: The Office of the U.S. Trade Representative (USTR) should continue ongoing mutual recognition agreement negotiations with the European Union. The USTR should also expand efforts to negotiate MRAs with other U.S. trading partners in markets and product sectors that represent significant U.S. export opportunities. Priority should be given to conclusion of MRAs on conformity assessment through the Asia Pacific Economic Cooperation forum.

As noted above, negotiations between the United States and the EU toward mutual recognition of conformity assessment mechanisms merit the continued high-level support of government, specifically the Office of the USTR. It is possible, however, that negotiations with Europe may not reach a timely or successful conclusion. Under these circumstances, failure by the Europeans to remove trade barriers in conformity assessment within a reasonable time period should lead to unilateral action by the United States, as authorized under our trade laws. Moreover, the USTR should use the full potential of targeted action on a unilateral basis under our laws, as appropriate, to remove barriers in other markets.

  • RECOMMENDATION 6: The USTR should use its authority under Section 301 of the Trade Act of 1974 to self-initiate retaliatory actions against foreign trade practices involving discriminatory or unreasonable standards and conformity assessment criteria. In particular, if U.S.-EU negotiations do not succeed within two years in securing fair access for U.S. exporters to European conformity assessment mechanisms, the USTR should initiate retaliatory actions under Section 301.

Innovative export promotion programs, in combination with a systematic policy to lower trade barriers, have the potential for significant, long-term economic benefit. By providing technical assistance to countries in emerging markets as they construct modern standards and conformity assessment systems, the United States has a unique and valuable opportunity to facilitate future world trade.

  • RECOMMENDATION 7: NIST should develop and fund a program to provide standards assistance in key emerging markets. The program should have four functions:

    (a) provide technical assistance, including training of host-country standards officials, in building institutional mechanisms to comply with the Agreement on Technical Barriers to Trade under the Uruguay Round of the GATT;

    (b) convey technical advice from U.S. industry, standards developers, testing and certification organizations, and government agencies to standards authorities in host countries;

    (c) assist U.S. private-sector organizations in organizing special delegations to conduct technical assistance programs, such as seminars and workshops; and

    (d) report to the export promotion agencies of the Department of Commerce (such as the U.S. and Foreign Commercial Service) and the USTR regarding standards and conformity assessment issues affecting U.S. exports.

ADDRESSING FUTURE CHALLENGES AND OPPORTUNITIES

The nation's ability to anticipate and respond to new developments in standards and conformity assessment will influence our future in many ways. There is the urgent need for increased federal data gathering and analysis on standards and conformity assessment. We require an ongoing capacity to analyze the economic effects of developments in domestic and international standards and conformity assessment systems. This new capacity would support improvements not only in our domestic systems, but also in our ability to monitor and anticipate international developments in key emerging areas such as environmental management standards.

In addition, wide dissemination of information to U.S. firms about standards and certification requirements in global markets is needed to improve prospects for future U.S. export expansion. Detailed and readily available information about international developments is especially important for our small and medium-size firms wishing to compete in global export markets.

  • RECOMMENDATION 8: NIST should increase its resources for education and information dissemination to U.S. industry about standards and conformity assessment. NIST should develop programs focusing on product acceptance in domestic and foreign markets. These efforts should include both print and electronic information dissemination, as well as seminars, workshops, and other outreach efforts. Programs should be conducted by NIST staff or by private organizations with NIST cooperation and funding.

  • RECOMMENDATION 9: NIST should establish a permanent analytical office with economics expertise to analyze emerging U.S. and international conformity assessment issues. The office should evaluate and quantify the cost to U.S. industry and consumers of duplicative conformity assessment requirements of federal, state, and local agencies. To support the work of the USTR and other federal agencies, including those involved in export promotion, it should also collect, analyze, and report data on the effects of foreign conformity assessment systems and regulations on U.S. trade.

  • RECOMMENDATION 10: The USTR's post-Uruguay Round trade agenda, including work through the World Trade Organization, should include detailed analysis and monitoring of emerging environmental management system standards and their potential effects on U.S. exports. Technical assistance should be provided to USTR by NIST.

NOTE

1. For a comprehensive discussion of U.S. economic performance relative to other industrialized nations, see; the Annual Report of the World Economic Forum. Davos, Switzerland, 1994. Data series reported annually by the Bureau of Labor Statistics (BLS), U.S. Department of Labor on "International Comparisons of Manufacturing Productivity," and BLS data on relative levels of real gross domestic product (GDP) per employed person are relevant to cross-national comparisons of U.S. productivity and output. Numerous data sets which reveal relative competitive positions of the United States in service and manufacturing sectors are reported by the Organization for Economic Cooperation and Development and the World Bank in annual publications.

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