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

Standards and Rules of Origin in East Asia: introducing the key issues. Robert Kirk rkirk@tsginc.com World Bank-BFA Workshop Hainan, China, June 26-27,2006. Overview. Rules of Origin – Definition Approaches to ROO Impact on ASEAN of ROO Standards – Standards as a trade issue

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

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  1. Standards and Rules of Origin in East Asia: introducing the key issues Robert Kirk rkirk@tsginc.com World Bank-BFA Workshop Hainan, China, June 26-27,2006

  2. Overview • Rules of Origin – Definition Approaches to ROO Impact on ASEAN of ROO • Standards – Standards as a trade issue Multilateral and Regional Approaches

  3. Rules of Origin: Defining Origin • Wholly Obtained • Substantial Transformation • Change of Tariff Classification (CTC) • Value Added • Specific Manufacturing Processes

  4. Rules of Origin: Features • Cumulation (bilateral, diagonal, full) • Tolerance or de minimis • Absorption or Roll-Up Principle • Duty Drawback

  5. Measuring ‘Restrictiveness’ of ROO Recent work follows Estevadeordal (2000) Index of Restrictiveness CTC at HS 8-10 digit CTC at HS 6 digit CTC at HS 6 digit plus value content CTC at HS 4 digit CTC at HS 4 digit plus value content CTC at HS 2 digit level CTC at the HS 2 digit and Technical Requirements

  6. 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

  7. ASEAN Rules of Origin AFTA Value Added (import content 60 per cent) Selected Specific Manufacturing Process Bilateral Cumulation Absorption

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

  9. 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

  10. 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

  11. Total number of TBT notifications since 1995 794 794 669 648 638 611 581 538 460 365 Source: WTO (2005a) Tenth Annual Review of the Implementation and Operation of the TBT Agreement G/TBT/15

  12. 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

  13. 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

  14. TheTechnical Infrastructure of Conformity Assessment Market Market Certification SDoc Metrology Accreditation Metrology And/Or Testing Inspection Product Product Supplier Supplier

  15. 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 Traditional and New Approaches to Standardization

  16. 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)

  17. 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)

  18. 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

  19. Summary Rules of Origin • Keep it simple and transparent with low compliance costs Standards • Use regional agreements to support effective implementation of multilateral agreements

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