The Role of Standards and Regulation in Eliminating Trade Barriers

by Bill Cunningham

Trade, regulation, and standardization are increasingly being understood as interdependent. Canadian General Standards Board Director Bill Cunningham describes some of Canada’s successes along the route to this understanding, both interprovincially and internationally.

(This article is excerpted from Bill Cunningham’s presentation to the 2001 COPANT (Pan American Standards Commission) General Assembly in Venezuela.)

Searching for Harmony

In Canada, over the years, the voices of trade, regulation, and standardization have each developed their policy environments, development processes, and consultative mechanisms. They have focused on their particular social and economic interests, but with little regard for the activities of and their impacts on each other. Historically, cooperation between these three areas was weak; however, there have been exceptions.

Among the most successful examples are the development of model codes for the building and construction industries, such as the National Building Code of Canada and the National Electrical Code.

In Canada regulatory authority over buildings and construction is typically a municipal responsibility. In the past, the construction industry faced a hodgepodge of differing and sometimes capricious regulations from municipality to municipality. The solution, developed over 60 years ago, was the National Building Code of Canada. Under the leadership of the National Research Council, this model code was created by a process of voluntary consultation with technical experts. The National Building Code combined technical specifications and incorporated references to several hundred Canadian standards.

The development of the model National Building Code provided Canadian municipalities with an expert standard that they could adopt without in any way limiting their ability to set regulations suitable to local circumstances. And the municipalities did. The Provincial-Territorial Committee on Building Standards, a committee of federal, provincial, and territorial authorities, advises the National Research Council of Canada on the need for building and construction standards in Canada.

Similarly, the model Canadian Electrical Code was developed for provincial electrical regulators by the Canadian Standards Association, one of four accredited standards development organizations in Canada.(1) Like the National Building Code, the Canadian Electrical Code provided provinces and municipalities with an expert code they could adopt while retaining their right to set regulations suitable to their local needs. The Canadian Advisory Committee on Electrical Safety, a committee of provincial and territorial regulators, advises the Canadian Standards Association and the Standards Council of Canada on the content and the need for electrical standards in Canada.

Because these codes have been widely adopted by local regulators across Canada, Canadian and foreign building contractors and construction and equipment suppliers can confidently market their products and services in Canada.

Another success story concerns the development of the National Dairy Code for Canada’s food inspection system.

Canada’s food inspection system operates in a complex jurisdictional context. Federal authorities regulate food packaging, labeling, and advertising. They also establish and enforce health and safety standards for imports, exports, and interprovincial trade. The provinces and territories regulate health, safety, and quality within their borders.

Recently, Canada moved toward a more integrated regime. The 1994 Blueprint for the Canadian Food Inspection System called for harmonized standards and integrated inspection systems. The Canadian Food Inspection System Implementation Group has focused on developing harmonized standards and, in 1997, approved the National Dairy Code. Now, the Implementation Group is developing similar codes for meat and retail service sectors.

Their objective is to develop model codes for legislation at all levels of government, and to promote outcome-based regulations supported by voluntary codes that describe best practices.(2)

As you can see, model codes have been very successful in Canada. This standards-based approach has helped bring harmony to a multitude of internal regulatory jurisdictions without infringing on their authority.

But internal barriers to trade continued to exist in Canada in many important areas of the economy, including mobility of products, services, and labor. These internal barriers prevented Canadian companies from being efficient and achieving the economies of scale needed to compete in and outside Canada, kept production costs high, raised government costs, reduced consumer choice, and undermined social and political harmony.

In 1995, after decades of discussion, the federal government succeeded in brokering an agreement among the provinces, known as the Agreement on Internal Trade. This agreement, modeled after international trade agreements, flowed from a negotiating process among the provinces similar to that among sovereign states. It established general rules for the free movement of persons, goods, services, and investments within Canada in areas where the provinces had exclusive jurisdiction or shared jurisdiction with the federal government.

The Agreement on Internal Trade identifies the harmonization of standards and regulations as one of the principal mechanisms for eliminating barriers. However, since most Canadian standards are national, not provincial, it is likely that the most common barriers are regulatory and related technical specifications rather than standards.

The Agreement on Internal Trade is a step in the right direction. The agreement has achieved progress in deregulating and harmonizing interprovincial trucking, in eliminating local residency requirements in a number of areas, in enforcing consumer protection legislation, and in establishing a Code of Conduct on Incentives.

But the response to the progress has been mixed. The business community, academics, and international organizations have criticized the Agreement on Internal Trade because of the inability of governments to meet deadlines for completing negotiations, the limitations on coverage and exclusions, and the cumbersome dispute settlement processes.

Canada has also created harmony between regulation and standardization by using voluntary standards to complement existing regulations.

• The federal government administers the Care Labeling Program, which encourages garment manufacturers to use the National Standard of Canada, Care Labeling of Textiles. This Canadian General Standards Board standard specifies cleaning and safety information that manufacturers should include on garment and textile labels. The standard is not referenced in regulation but supplements the Government of Canada’s consumer protection legislation.
• Similarly, the validity of non-paper documents as evidence in legal proceedings is a concern of a number of federal and provincial government bodies. These bodies recognize the Canadian General Standards Board’s voluntary standard, Microfilm and Electronic Images as Documentary Evidence, as a key standard without directly referencing it in their regulations.
• Recently, the Canadian General Standards Board has been asked to develop a voluntary standard for labeling foods to identify whether they contain genetically modified products or processes. The government hopes that the consensus standards development process, and consumer demands for food labeling in this contentious area, will provide sufficient incentive for food producers to label their foods without additional government regulation.

There are, of course, many examples of standards referenced in regulations as a means to ensure that the content of the standards becomes mandatory. Regulations may incorporate part or all of technical standards, depending on the interests of the regulator and the scope of the standard.

• The National Fire Code of Canada refers to many standards developed by Underwriters’ Laboratories Canada.
• I have already mentioned the National Building Code of Canada, which has been adopted by municipalities across Canada. The National Building Code incorporates over 200 standards developed by several standards development organizations, including some international standards.
• And the Government of Canada’s Transportation of Dangerous Goods Act refers to a number of standards developed by the Canadian General Standards Board.

Another way in which Canadian standards are becoming aligned with regulatory and trade interests is by looking beyond our borders for opportunities to adopt international standards, such as those of the International Organization for Standardization and the International Electrotechnical Commission, as National Standards of Canada.

But we do not only look in the direction of ISO and IEC. We are very interested in bilateral harmonization with our major trading partners. For example, there has been a significant degree of harmonization between Canadian standards and those of a number of United States standardization organizations. This harmonization occurs when Canadian and U.S. organizations agree on the mutual adoption of technical standards, or the reproduction of the relevant parts of one country’s standard by the other country, or by the sharing of the same or equivalent test methods.

The International Score

Throughout the history of modern trade agreements—the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO)—Canada has been an active participant. Canada has always believed that in a world of larger traders, the promotion of Canadian trade interests depended on a multilateral framework of rules and appropriate procedures and on an institution to enforce them.(3)

Early on, Canadians played a large role in GATT’s development, chairing various committees and working groups, injecting ideas and proposals into discussions, and finding formulas that could overcome stalemates among the major players. Our commitment paid rich dividends in later years, giving Canada an influence in international economic affairs disproportionate to our economic power.

With the confidence gained from our earlier experience in GATT, Canada negotiated a free trade agreement with the United States in the 1980s, consistent with GATT, that created a combination of more competition at home and greater export opportunities in the United States. Subsequently the agreement was expanded to include Mexico, becoming the North American Free Trade Agreement (NAFTA).

As I stated earlier, the reduction of tariff barriers has moved the focus of trade interests now to reducing or at least harmonizing the non-tariff barriers to efficient trade. Canada is a signatory to the WTO Agreement on Technical Barriers to Trade and has taken steps to implement the requirements for technical regulations, standards, and conformity assessment.

Because Canada’s economy is dwarfed by those of our key trading partners—the United States, the European Union, and Japan—Canadians rely on the use of international standards to help ensure the competitiveness of domestic goods and services. International standards are critical to our standardization activity. For instance, in a recent three-year period, almost 80 percent of the National Standards of Canada approved by the Standards Council of Canada were based on international standards.

Canada’s federal regulatory policy requires that federal regulators respect international and intergovernmental agreements. In particular, for technical regulations that affect trade, federal regulators must notify the public of intended activities; specify technical requirements in terms of performance where possible; use available international standards, guidelines, and recommendations where those standards achieve the regulatory objective; and consider accepting as equivalent other forms of technical regulatory requirements.(4)

Obviously then, one of the easiest ways for regulators to reduce non-tariff barriers is to reference national standards, particularly those based on international standards, in their regulations. Canadian regulators know the benefits of developing standards and are seeking ways of working more closely: (5, 6)

• International and national standards can be the basis for harmonization with other jurisdictions.
• Standards can be written in plain language, improving comprehension.
• Standards can be more responsive to new and changing technologies because they are easier to update or change than regulations.
• The consensus process of standards development provides transparency and improves prospects for acceptance and compliance.
• The same standards can be referenced easily by other authorities.

Nevertheless, Canadian regulators have identified some real and perceived obstacles to referencing standards in technical regulations:

• There is a public perception that use of standards is an abrogation of regulators’ responsibilities.
• The composition of standards development committees may not always be a balance of interests and may be unduly influenced by industry.
• Necessary changes to standards may not be made when consensus is difficult to reach.
• Standards development organizations may not be able or willing to undertake high-risk projects.
• Participation by regulators in the development and maintenance of standards requires a significant commitment of resources.

Against this backdrop of pluses and minuses, Canada continues to harmonize its trade, regulation, and standardization policies. The federal government has established two committees to encourage communication and sharing of experiences: the Interdepartmental Standards Committee, which provides a forum for federal regulators to discuss standardization issues related to their responsibilities, and the Trade and Regulation Interdepartmental Committee, which provides a forum for federal trade experts and regulators to discuss policy issues related to our international agreements.

I have described how our relatively small economy has exerted significant influence in reducing international trade barriers, and our experience in reducing domestic trade barriers between our provinces and various levels of government. As well, I have provided some examples of how Canada’s regulators have used standards to overcome trade barriers—examples that included model codes, standards referenced in regulations, and voluntary standards as complements to regulatory programs.

It is clear that closer harmony between trade, regulation and standardization is key to Canada’s success in the global economy. //

References

1 The Standards Council of Canada has accredited four Standards Development Organizations in Canada: Canadian General Standards Board (CGSB), Canadian Standards Association (CSA), Underwriters’ Laboratories of Canada (ULC), and Bureau de Normalisation du Québec (BNQ).

2 Canada, Industry Canada, Standards Systems: A Guide for Canadian Regulators (Ottawa, 1998). Retrieved August 2001, from the World Wide Web: http://strategis.ic. gc.ca/sc_mrksv/regaff/stdguide/engdoc/ Index.html.

3 Michael Hart, “Globalization and Standardization: Does a Global Economy Need Global Rules?” paper prepared for the Regulatory Affairs and Standards Policy Directorate, Industry Canada (November 1998).

4 Canada, Privy Council Office, Government of Canada Regulatory Policy (Ottawa, November 1999). Retrieved August 2001, from the World Wide Web: http://www. pco-bcp.gc.ca/raoics-srdc/reg-pol/reg- pol_e.pdf

5 Canada, Office of the Auditor General of Canada and the Commissioner of the Environment and Sustainable Development, “Federal Health and Safety Regulatory Programs (Chapter 24),” 2000 Report of the Auditor General of Canada (Ottawa, November 2000).

6 Dr. Elizabeth Nielsen, Health Canada, Office of Regulatory and International Affairs, Health Products and Foods Branch, “Standards and the Management of Health and Safety Risks,” presentation to the Interdepartmental Standards Committee (March 2001).

Copyright 2001, ASTM