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Assistant Secretary of Commerce Michael C. CamuÑez

Market Access and Compliance

Open Forum 2012: Building Bridges Across the Standards Ecosystem
American National Standards Institute
Monday, October 9, 2012
Washington, DC

As prepared for delivery

Introduction

Thank you very much, Joe, for that kind introduction, as well as for your strong leadership of ANSI. ANSI is a key partner for the Department of Commerce and a champion of the competitiveness of U.S. industry globally.  For more than ninety years, ANSI has served as the coordinator of our nation’s private sector-led and public sector-supported voluntary consensus standards and conformity assessment system.  I can say without qualification that your leadership has made a bona fide difference, so it is a real pleasure for me to be a part of this annual forum and to celebrate World Standards Week with all of you.

I was asked to speak today to address the important role standards play in facilitating trade and how the International Trade Administration of the Department of Commerce is approaching this work globally as a key market access issue. It’s an incredibly important topic, but I have just about twenty-five minutes or so to cover it, so I will ask your indulgence as I endeavor to hit just the highlights, recognizing that such a substantive topic merits a much more thoughtful approach. I hope we will have a few minutes left at the end to take a few questions and have a discussion.

Two Trends Making International Standards More Important Than Ever…

I want to start by putting the entire subject of standards development and conformity assessment in proper focus and in the context of the rapidly changing state of the global marketplace.  I approach this from the perspective of having circled the globe a few times in my job as Assistant Secretary, where I have worked to advance U.S. commercial interests in strategic markets, including helping to guide U.S. trade policy as we seek to create, grow and defend U.S. market access globally.  I believe there are two specific trends or dynamics that are making ANSI’s work, and its commitment to the development of international standards, more important than ever.

The first is the changed nature of the global marketplace.  As you all know, we’re living through extraordinary times.  And I’m not just referring to the recent state of our domestic economy, or even to the Great Recession, which has posed significant challenges for U.S. industry as well as substantial hardship on the American people.  Rather, I’m speaking of the tectonic shifts in global commerce, the rise of new and thriving economies in emerging markets around the globe, and the imperative that has created for American industry to engage more than ever in foreign trade.  In comparing China and India’s current growth to that of Britain and the United States during the Industrial Revolution, the McKinsey Global Institute recently observed: 

The… Industrial Revolution, hatched in the mid-1700s, took two centuries to gain full force… Britain, the revolution’s birthplace, required 150 years to double its economic output per person; in the United States, [the] locus of the revolution’s second stage, doubling GDP per capita took more than 50 years. A century later, when China and India industrialized, the two nations doubled their GDP per capita in 12 and 16 years, respectively. Moreover, Britain and the United States began industrialization with populations of about ten million, whereas China and India began their economic takeoffs with populations of roughly one billion [each]. Thus the two leading emerging economies are experiencing roughly ten times the economic acceleration of the Industrial Revolution, on 100 times the scale—resulting in an economic force that is over 1,000 times as big.

The report goes on to note that by “2025, the consuming class will swell to 4.2 billion people. Consumption in emerging markets will account for $30 trillion—nearly half of the global total.”  This is consistent with recent World Bank and IMF forecasts, which predict that about 95% of consumers and up to 90% of world GDP will take place outside the territory of the United States in the coming decades.  And this rapid growth, as you know, is not limited to the so-called BRICs—Brazil, Russia, India and China.  Indeed, six of the 10 fastest growing economies in the world are in Sub-Saharan Africa.  The fastest growing economy in Europe last year was Turkey.  The fastest growing market in the EU was not Germany but Poland.  And this says nothing of the Southeast Asian economies and their white hot markets.

Recognizing these megatrends and their implications for our own competitiveness, President Obama has correctly focused considerable attention on promoting exports and driving international trade as a key element of his economic recovery agenda.  In early 2010 he launched the National Export Initiative, a whole of government approach that commits the full suite of federal resources to helping U.S. industry compete more effectively in global markets.  While the NEI is ostensibly about doubling exports in five years, in reality it reflects the President’s much more strategic commitment to re-orient the federal government to help American industry, and particularly Small and Medium Sized companies, engage in international markets.  The key insight of the NEI is the recognition that we can no longer rely exclusively on our own domestic economy to drive demand and growth.  To retain their competitiveness and preeminence, American companies simply must compete globally, and compete to win.

But to compete, we must ensure that companies can play in an open and transparent marketplace that is governed by the rule of law and that offers that proverbial “level playing field”—allowing  farmers, entrepreneurs, small business owners (who by the way make up the majority of U.S. exporters), and multinationals full and fair market access.  Central to this objective is ensuring that American products are not intentionally or otherwise excluded, or hindered from entering and competing in, foreign markets due to the manipulation of standards and technical regulations. 

Standards have always been important to world trade.  But they have taken on added significance and importance given the second changing dynamic in the global market: the role of technology as a massive accelerant of innovation, especially in critical emerging sectors of the economy where interoperability and physical and cyber connectivity are essential to product development, adoption, and usage.  The modern economy is no longer driven predominantly by labor- and capital-intensive factors of production, but by the competitive advantage that arises from the effective deployment of technology that enables dramatic efficiencies and other improvements in key growth sectors like information technology and telecommunications, renewable energy and smart grid development, intelligent transportation systems, bio- and nano-technology, and, increasingly, the digitization of the health sector.  As the world becomes, in Tom Friedman’s words, even flatter, it has also become more interconnected and interdependent. And the convergence and interoperability of products, systems, and “systems of systems” has become not just the norm, but the imperative.

In this context what is needed more than ever is a global approach to standards development, and the regulations that implement them, that:

• fosters efficient production and enables more widespread access to technical innovations;
• ensures the compatibility of inputs sourced in global markets, verifies product compliance with standards requirements, and promotes market confidence;
• is market-driven and industry-led, allowing full participation at the earliest stage of development; and
• that enables governments to protect human health and the environment and prevents deceptive practices.

In short, our objective must be to create an economic ecosystem that fosters and promotes innovation, drives economic growth, and puts millions of people to work in our own country and elsewhere. And the work we do on standards, together with stakeholders like ANSI, is at the heart of that agenda.

Standards and Conformity Assessment as Leading Market Access Barriers…

I’m cognizant of the fact that I am speaking to an audience of experts on the issue of standards, Technical Barriers to Trade (TBTs) and Sanitary and Phyto-Sanitary Measures (SPS), but I would like to share with you some of the common challenges I see on the horizon as we pursue our ambitious trade agenda.  And the first thing I want to say is that TBT and SPS issues are, in my view, among the most significant market access problems we see worldwide.  Along with corruption and transparency, the full range of standards-related Non-Tariff Barriers are by far one of the greatest challenges facing American industry as it seeks to do business in foreign markets, and this is not limited, I should note, to emerging economies.  In fact, some of our biggest standards-related challenges can be found in the advanced economies of the European Union, which, as you know, takes a very different, top-down approach to standards development than we do here in the United States.  And this is why standards and regulatory cooperation has been such a central part of our agenda through the Transatlantic Economic Council (the “TEC”). 

And just as standards-related NTBs are not limited to specific markets, they are likewise not limited to particular industries or companies.  In fact, we see them across the board, and they represent a challenge not just for multinational companies doing business in multiple markets but, especially, for small and medium sized enterprises, many of whom lack a physical presence in foreign markets and thus can lack direct  access to the standards-setting process.  As a result, they can be effectively shut out of markets because of anticompetitive standards and conformity assessment rules developed without their input.  I’m fond of  WTO Director General Pascal Lamy’s statement that “a standard you can’t meet is like a 1,000% tariff.” 

Among the most common challenges we’re seeing today in this space are:

• requirements to use a unique standard that is overly trade restrictive or discriminatory;
• duplicative or burdensome and costly conformity assessment procedures;
• trade barriers disguised as mandatory labeling requirements;
• concerns about release of proprietary information during conformity assessment testing;
• and, importantly, product restrictions not supported by science. 

Now I could give you a laundry list of specific standards issues in specific countries; they would not be a surprise to you and it would take all of our time today.  The reality is that while the world has largely embraced the benefits of tariff liberalization, protectionism is alive and well, especially in these challenged economic times.  Regrettably, the favored mode of protectionism in this era is the manipulation of non-tariff barriers, including especially the standards and conformity assessment issues I’ve just described. 

In light of these challenges, let me try to frame for you how we at ITA are approaching our engagement on these issues and what our priorities have been.

The ITA’s Engagement on Standards Challenges Globally

I think it’s helpful to think about our engagement on standards in the following three ways:  first, we ensure that standards and conformity assessment issues are prioritized as a matter of policy in the negotiation of trade agreements that we support; second, we actively and vigorously monitor the activities of our trading partners to ensure their compliance with their FTA and, especially their WTO commitments, and we deploy aggressive commercial diplomacy to address instances of non-compliance; and third, we leverage our engagement in key bilateral and multilateral institutions to promote greater collaboration on standards development and conformity assessment.  Let me say just a brief word about each.

Seeking Robust Commitments in FTAs

I hope it is clear to all of you that the United States has consistently advanced robust commitments to ensure an open, market-led approach to standards development through the free trade agreements we have negotiated and are currently pursuing.  For example, through our leadership of the negotiation of the Trans-Pacific Partnership Agreement (TPP), we are now endeavoring to take existing standards trade disciplines, like those in the Korea-US Free Trade Agreement,  to the next level. Our hope is that the TPP will establish the high water mark on standards and regulatory disciplines as well as providing the framework for an eventual free trade agreement of the Asia Pacific region.

For example, in the TPP we have proposed for the first time a “21st Century” chapter of horizontal commitments on Regulatory Coherence, including domestic coordination procedures and mechanisms to prevent the creation of unnecessary regulatory obstacles to trade across all regulated sectors before they become the topic of U.S. and international concern.  ITA representatives are making important contributions to this work.

In the TPP TBT Chapter, the United States is similarly building upon the provisions of the KORUS FTA as we seek advanced commitments on transparency and nondiscriminatory participation in the development of standards-related measures.  For example, we are seeking to expand reliance on the TBT Committee’s Decision on the Principles for the Development of International Standards, as well as seeking impartial recognition of U.S. conformity assessment bodies. 

It’s also important to note that, for the first time, the U.S. is seeking to build on the commitments in the WTO SPS Agreement through the TPP chapter on SPS measures.  We are likewise pressing for WTO plus commitments on transparency, science, and laboratory testing procedures.

Beyond our work on the TPP, it is well known that the U.S. and the EU have publicly announced that they are exploring whether to initiate formal negotiations on a comprehensive transatlantic trade agreement.  One of the key challenges for such an agreement may well be whether the U.S. and the EU can bridge substantial differences on standards, conformity assessment and regulatory coherence.  I can tell you this is an issue that we are giving substantial time and attention to, and that I know matters greatly to U.S. industry.  Of course, strengthening U.S.-EU cooperation on standards is critical not just for transatlantic trade, but it has significant consequences for what happens in third markets.  Regrettably, the European Union has aggressively promoted the adoption of EU standards and its approach to regulation in many emerging markets, limiting acceptance of the multiple path approach to regulatory compliance and posing significant challenges for U.S. industry.

But apart from the market access challenges this poses for our companies, I believe the real risk lies in the fact that it diverts our attention from what should be a common focus, and that is ensuring that we work together for the establishment of truly international standards that ensure both the quality and safety of products circulating in international commerce.  By failing to work together, we risk enabling emerging economies like China and India, with their enormous and growing internal markets, to set standards that can be imposed, by shear market share, on our industry and consumers.  So these standards issues will remain, for some time, at the forefront of our trade policy negotiations.

Addressing Standards Challenges Through Commercial Diplomacy

A second focus of our engagement concerns our efforts to ensure compliance with WTO and FTA commitments.  As you know, TBT and SPS issues are raised with great frequency in the relevant committees in Geneva at the WTO, and ITA extensively supports the formal effort that our U.S. Trade Representative leads on that front. But many standards related problems get identified, addressed and resolved informally—through commercial diplomacy through ITA’s Trade Agreements Compliance ( “TAC”) Program—long before they ever reach the WTO.  In addition to the more than 200 international trade specialists in my office who have country and region-specific responsibilities who support TAC, we also deploy Standards and Trade Compliance Attaches embedded in key markets including the EU, China, Brazil, Mexico, and Central America to provide on-the-ground assistance to address U.S. company concerns.  This of course is in addition to the more than 170 foreign commercial service officers we have deployed in embassies around the globe.  Working together, in 2011 ITA staff initiated 42 formal cases to address standards-specific trade barriers inhibiting the ability of U.S. companies to access these markets.  This represented 17 percent of all compliance cases we initiated last year.  Since 2000, ITA staff has worked with U.S. companies to address nearly 650 compliance cases involving standards-related barriers to trade.

I want to stress that our goal is not only to address standards problems once they are discovered—when it is by then very difficult to undo the damage done—but preferably  to prevent them from arising in the first place.  This is why we have invested so much in critical capacity building and technical assistance efforts through our Total Economic Engagement (TEE) Program, working with foreign governments, trade associations, and standards setting bodies like ANSI on key public-private partnerships to advance a more collaborative and open process to foster greater harmonization and convergence. 

For example, we have worked with ANSI and others in China, where we have sought to gain better market access for U.S. testing and certification bodies in China’s compulsory certification (or CCC mark) testing regime.  Together we’ve convened industry roundtables in Beijing to discuss TBTs related to Chinese conformity assessment procedures.  Through the CAP Project, we have urged China's Certification and Accreditation Administration (CNCA) and China’s Quality Certification Centre (CQC) to boost transparency, foster more predictable administrative processes, and develop more appropriately designed verification procedures for China’s CCC program in accord with China’s WTO commitments.  We will continue to push these efforts with the Chinese through the Joint Commission on Commerce and Trade (JCCT).

Of course our efforts go well beyond China.  With the Russian Federation’s recent accession to the WTO, we have already begun to assess how to best ensure that American companies can gain full access to the Russian market.  Russia offers U.S. producers and exporters a potentially significant export market for high quality products. The Russian economy, one of the ten largest in the world, is home to140 million consumers, and boasts the highest GDP per capita among all of the BRIC countries.  Recent growth has been higher than elsewhere in Europe, and Russia’s commodity wealth provides steady purchasing power to buy U.S. goods and services that can sustain high paying, quality U.S. jobs.

I believe that Congress will soon act to establish Permanent Normalized Trade Relations with Russia.  When it does, we must move quickly to ensure that Russia remains open to adopting and using  international standards, including standards developed by U.S.-domiciled standards development organizations, and that Russia honors its new commitments under the WTO, especially on SPS and TBT issues.  Given the volume of trade between the EU and Russia, there is considerable risk that Russia will be tempted to adopt and deploy European standards that could significantly disadvantage U.S. industry and mitigate the benefits of this new market opening.  It’s worth remembering that, in 2011, the EU was by far Russia’s number one trading partner, accounting for half of Russia’s total trade, compared to the United States, which accounted for only about 4 percent of total trade with Russia.

To head off challenges proactively, and to ensure Russia is living up to its WTO commitments, ITA is conducting a series of outreach events across the United States to raise awareness of the new trade rights that will be afforded to U.S. companies under Russia’s WTO commitments.  We have already met with your leadership team at ANSI to collaborate on these domestic outreach events, and we’re also putting in place a strategy, with ANSI, to work cooperatively with Russian Federation officials on standards issues.  Building on our work together in China, we will be incorporating these efforts into our workplan under the Commerce Department-led Business Development and Economic Relations Working Group, one of the principal trade and economic engagement mechanisms with Russia under the Bilateral Presidential Commission. I look forward to working proactively with ANSI and its leadership on this important project.

Leveraging Our Engagement in Bilateral and Multilateral Institutions

The third way that ITA has prioritized standards and conformity assessment is by engaging in key bilateral initiatives and through multilateral institutions.  There’s a lot to say here, but let me just give a few highlights.  In the bilateral space, we have consistently utilized our premiere government-to-government platforms, like the U.S.-Brazil and the U.S.-India Commercial Dialogues, to raise and advance standards and conformity assessment issues on behalf of U.S. industry.  For example, under the Brazil Commercial Dialogue, we have established a Standards Working Group, coordinated by ITA with substantial support from our sister bureau, NIST.  Our engagement with INMETRO, Brazil’s NIST, has helped to counteract what we perceive as stepped up work in Brazil by our competitors, including Japan and the EU, to create a competitive advantage for their companies in the Brazilian market.  For example, NIST and ITA have worked to increase INMETRO’s understanding and cooperation on approaches to voluntary standards, technical regulations, and conformity assessment, as well as biofuels characterization and measurement standards.  Remarkable progress also has been made in the areas of green buildings and intelligent transportation systems.  In the latter case, as a result of these efforts, Brazil adopted U.S.-friendly standards that will mean important opportunities for U.S. companies, including in preparations for the 2016 Sao Paolo Olympics.

We are also in the process of launching a first of its kind multilateral Commercial Dialogue with the five nations that comprise the East African Community.  The U.S.-EAC Commercial Dialogue, our first in Africa, will play a pivotal role in advancing the trade and commercial dimensions of the President’s recently announced Strategy for Sub-Saharan Africa, which focuses considerable effort on supporting regional integration. A key element of regional integration includes, of course, harmonizing standards and conformity assessment procedures so that goods can move freely throughout the EAC.  In fact, the absence of a harmonized approach to standards is one of the main impediments to the EAC’s ability to create a truly common market and regional platform that is needed to attract the type of investment that will drive further growth of key markets like Kenya, Tanzania, and Rwanda.

As I noted at the outset, our engagement on standards is not limited to emerging markets but includes robust engagement with our biggest trading partners, who represent some of the most advanced economies in the world. This is why we have established high level regulatory cooperation forums with the EU, Mexico and Canada, where we have prioritized the sharing of good regulatory practices as a primary objective.  With these more advanced economies our goal has also been to focus on key emerging growth sectors, where standards development and regulation is still in the nascent stages.  These so-called “upstream” issues are, we believe, the most fruitful areas for collaboration.  And we have already seen significant results.  Perhaps the best example of this is our work to develop common international standards affecting the smart grid and, importantly, electric vehicles—a space where ANSI, in particular, has played a critical role on the U.S. side in helping us to develop a common U.S.-EU e-vehicle “road map.”  Time won’t permit me to describe the process or the effort in any detail, but I do want to say that the process has demonstrated that it is possible for the U.S. and the EU, together with industry, to lead the way on the establishment of truly international standards.  I want to thank, in particular, ANSI’s Jim McCabe for his leadership in this space. 

Finally, let me just conclude by noting that we are pursuing a robust and important standards agenda through a wide range of multilateral institutions beyond the WTO.  This includes our work with the Codex Alimentarius Commission—the UN food standards developer— as well as our participation as part of U.S. Technical Advisory Groups in standards development in the International Organization for Standardization (ISO) to ensure that standards being developed  are science-based and do not create market access barriers for American companies.  We are also deeply engaged in bodies like the Asia Pacific Economic Cooperation (APEC) forum and the Association of Southeast Asian Nations (ASEAN) to ensure that the standards used in these markets are trade facilitating, particularly in sectors such as green building, solar technologies, energy management and food safety.  Again, ANSI has been an important partner in these efforts and through its leadership in the Pacific Area Standards Congress.

Conclusion: An Enduring Public-Private Partnership

Let me conclude by saying that, as Assistant Secretary of Commerce for Market Access and Compliance, and on behalf of the talented men and women who comprise the professionals in the International Trade Administration, I am proud to stand shoulder to shoulder with ANSI to use my good offices to work for a more strategic and coherent approach to dealing with standards and conformity assessment challenges facing U.S. companies.  The list of challenges is long; there is clearly much more to do.  But as I hope my presentation today made clear, the Obama Administration gets just how important this work is, and we are fully committed to keeping our efforts in this space front and center in our trade policy agenda.  We are grateful to ANSI and its members for its partnership and support, and we are counting on you going forward for your continued leadership. 

I wish you a very successful conference, and I thank you, sincerely, for the privilege of allowing me to address you today.
           

 

 

 

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