The following article has been extracted from the Report of the Taskforce on Developing Roadmap to Mutual Recognition Agreements in ASEAN. The Report was prepared for submission to the Eleventh Meeting of the ACCSQ on 11-12 March 1998.
The Roadmap serves as a guide for developing Government to Government (G-to-G) MRAs to facilitate the achievement of the ASEAN Free Trade Area.
1. Definition
MRA are agreements between two or more parties to mutually recognize or accept some or all aspects of one another’s conformity assessment results (e.g. test reports and certificates of compliance). Through MRAs products that are tested and certified before export, can enter the importing country directly without having to undergo similar conformity assessment procedures in the importing country. Thus MRAs become an important tool to facilitate international trade.
2. Technical vs Government-to-Government MRAs
MRAs can be concluded at the technical or the government-to-government (G-to-G) levels.
Technical MRAs are concluded between technical bodies (e.g, testing laboratories, inspection bodies, certification bodies, and accreditation bodies) to establish equivalence in the technical competence of the MRA partners to carry out specific conformity assessment activities. Such MRAs do not necessarily entail commitment by the governments of the MRA partners to accept each other’s conformity assessment results. Hence, they do not involve regulatory requirements for entry into markets. Nonetheless, technical MRAs reflect mutual confidence in the technical or standards and conformance infrastructures of the MRA partners and hence provide the foundation for G-to-G MRAs. This relationship will be elaborated.
Significant developments in technical MRAs have taken place, particularly in the areas of laboratory accreditation. Bilateral MRAs between laboratory accreditation bodies in the Asia-Pacific region-NATA (Australia), IANZ (New Zealand), A2LA (USA), HOKLAS (Hong Kong) and SINGLAS (Singapore) - had been concluded. These are based on technical peer evaluations to verify compliance with recognized international standards, which provide for objective and transparent assessment of technical competence.
In November 1997; the signatories of these bilateral MRA’s concluded a first multilateral technical MRA of the Asia-Pacific Laboratory Accreditation Cooperation (APLAC), which replaces the bilateral agreement concluded earlier. Apart from the above-mentioned organizations, the signatories to the multilateral agreement include National Voluntary Laboratory Accreditation Program (NVLAP, USA) and the Chinese National Laboratory Accreditation, (CNLA, Chinese Taipei).
Other Specialist Regional Bodies such as the Pacific Accreditation Cooperation (PAC) and the Asia-Pacific Metrology Programme (APMP) are also in the process of developing multi-lateral MRAs.
G-to-G MRAs are concluded for product sectors regulated by the governments concerned. Under such agreements, the MRA partners are obliged to accept one another’s conformity assessment results as meeting its own regulatory requirements. Examples of G-to-G Mutual Recognition Agreements/Arrangements include those that the EU has in recent years initialed with the US, Australia and New Zealand and the one signed between Australia and New Zealand. At APEC Sub-Committee on Standards & Conformance (SCSC), such agreements/arrangements are also being developed for the food, electrical & electronic, telecommunications and transportation sectors.
3. Bilateral vs Multilateral MRAs
MRAs can be concluded bilaterally or multilaterally/plurilaterally. The MRAs involving the EU, US, Australia and New Zealand are bilateral agreements. Plurilateral/multilateral MRAs refer to MRAs between two or more parties/countries. The APLAC MRA and the umbrella MRA developed by the APEC SCSC are examples of such. However, the sector-specific MRAs deriving from the umbrella MRA are expected to be a network of bilateral and multilateral MRAs depending on the sectoral interests of member economies. It is often easier to negotiate MRAs on a bilateral rather than plurilateral or multilateral basis because more parties involved means more widely differing trade interests have to be taken into account.
4. Single-Sector vs Multi-Sector MRAs
An MRA may cover only a single product (eg. tyres) or product sector (eg. automotive). The APEC Mutual Recognition Arrangements are single-sector ones. Single-sector agreements are difficult to negotiate at the bilateral level since the larger exporter of that sector is likely to gain more from the agreement. On a multilateral basis, it is easier to arrive at a rough balance of gains. Negotiating for a multi-sector MRA is the approach adopted by the EU thus far. A basket of sectors negotiated at the same time has the advantage of a more likely balance of economic interests since a sector, which lacks exports, could be balanced by another sector with a larger export volume. Hence, bilateral multi-sectoral or multilateral single-sector agreements are preferred to bilateral single sector MRAs.
5. Types of G-to-G Mutual Recognition
It is possible to conceptualize MRAs in terms of four different types, namely, full harmonization, equivalence of compliance, full recognition of conformity assessment and recognition of test reports.
(i) Full harmonization refers to a situation in which the conformity assessment requirements (i.e. the standards and regulations in the sectors concerned) of the partners are harmonized. An example of this is the European Single Market where all the 15 European countries have a common regulatory framework with common standards or essential requirements. A manufacturer whose product can be demonstrated to fully comply with the requirements of one country automatically demonstrates full compliance with the requirements of the other countries. No further assessment should be necessary for entry into the second market. Such an MRA gives maximum assurance of market access once products are tested or certified locally and shown to be in full compliance with the requirements. It is relatively simple to implement since conformity assessment bodies do not need to test to different requirements and regulators have greater confidence in each other. Harmonizing differing regulatory requirement, however, can be a difficult task.
(ii) Equivalence of compliance refers to a situation where the partners agree that while their conformity assessment requirements differ, they are equivalent in terms of meeting the regulatory objectives of the MRA partners. The exporting country can therefore test or certify according to its own standards and regulations and if the product is shown to be in compliance, will be accepted for entry into the importing country. Such and MRA requires a high compatibility of and mutual confidence in the regulatory systems. As a result, implementation can be expected to be relatively simple. As with the previous case, there is recognition of both regulatory requirements as well as the ability to assess compliance with those requirements. An example of an MRA based on the equivalence of compliance is the Trans-Tasman MRA signed between Australia and New Zealand.
(iii) An MRA based on full recognition of conformity assessment entails partners testing and certifying products according to the standards and requirements of the country of import. A certificate indicating full compliance to the importing country’s requirements issued in the exporting country is accepted by the importing country without any further need for assessment. Such an MRA gives maximum assurance of market access in a situation where the partners have non-equivalent conformity assessment requirements. Conformity assessment bodies in the exporting countries need to have the capability to test to the requirements of the importing country. Mutual confidence becomes a greater issue because of the differing requirements and differing capabilities required. The principle of mutual recognition applies to the recognition of the ability to assess compliance with regulatory requirements and not the requirements themselves. The EU-Australia and EU-New Zealand MRAs are based on full recognition of conformity assessment.
(iv) An MRA based on recognition of test reports refers to the situation where the conformity assessment is undertaken in the exporting country to show compliance with the importing country’s requirements but the importing country is only obliged to accept the test reports as equivalent to the ones generated in its own territory. This does not guarantee full access to the market since the regulator in the importing country may have stipulated that other requirements be met.
6. Key Elements of MRA
The key elements that could be included in an MRA are:
• scope
• types of mutual recognition
• commencement and duration
• definition of terms
• designating and designated bodies
• general obligations of signatories market surveillance mechanisms
• exchange of information
• joint monitoring and dispute settlement
• sectoral annexes
• criteria for conformity assessment bodies.
7. Considerations for Concluding MRAs
The process of negotiating MRAs can be a long and expensive process which requires close coordination at the national level between the negotiating bodies, standards and conformity assessment bodies, the regulatory bodies and industry. The key considerations to take into account by a government before embarking on this process are discussed below.
i. Political and Economic Interests
The decision to enter into an MRA with another country may be dictated by political factors such as foreign relations considerations as well as the economic benefits discussed in the preamble. As MRAs benefit exports, it is common to examine the current and future expected trade flows with respect to the potential MRA partner.
It is useful to bear in mind that a rough balance of trade benefits would facilitate the negotiations. In addition, it is also useful to identify, through consultation with industry, the trade barriers that exist and in which sectors they exist. This will help in the identification of sectors to be covered by the MRA.
ii. Need for Regulatory and Legislative Changes
As developing economies grow, there is a tendency for additional controls and regulations to be introduced to protect local users of products and services, and the environment. Over a period of time, this can lead to a regulatory regime that imposes excessive requirements on cross-border trade. It is useful, when preparing for an MRA, to review one’s regulatory framework to bring practices more in line with international practices, where appropriate. As a result, there may be a need to amend legislative and administrative provisions.
In addition, such changes may be required to fulfil the obligations under an MRA. For example, the application of MRAs at the local as well as federal levels have to be considered. In the case of Australia, certain legislative changes had to be made at the federal and state levels.
iii. Ability to Assess Conformity with Partner’s Requirements
Where the conformity assessment ability of the potential MRA partner are different from one’s own, there is a need to consider whether there is available expertise and facilities to test or certify to those requirements. If these are not available, the cost and viability of acquiring them may be an issue.
iv. Consumer Protection Legislation
Many developed countries have product liability laws that give consumers who suffer losses as a result of product failure, the power to seek compensation from the local manufacturer or dealer of the product. Some have provisions for the injured parties to claim compensation from other sources. Under an MRA, a product failure may result due to the failure of the other party’s conformity assessment system. If appropriate legislation does not exist, injured parties may not have the recourse to such compensation. It is reasonable to assume that the risk of product failure could rise under an MRA as regulators have to rely much on an overseas conformity assessment system.
v. Technical Competence and Mutual Confidence
Technical competence and mutual confidence in one another’s capacity and competence to assess conformity is an essential pre-requisite for mutual recognition. A government will need to ensure that the necessary technical infrastructure is put in place (this aspect is elaborated at the next section). Confidence in the competence of a country’s technical infrastructure to assess conformance to standards could be generated through exchange of information and frequent working contact with potential MRA partners over a period of time. Alternatively, it could be generated through attestation by a higher level system, such as an international organization, using objective and recognized standards. Hence, being admitted to IAF multilateral MRA would give confidence in a country’s accreditation body for quality systems and through that, the competence of the accredited certification bodies in the country.
For countries whose technical infrastructure is undeveloped, these countries may wish to consider cooperating unilaterally with an organization whose technical competence can be demonstrated. For example, if a country’s accreditation scheme does not meet the requirements of internationally recognized standards, they may wish to appoint an organization in the region that is already a signatory to the multilateral MRA on accreditation system.
8. Technical Infrastructure Requirements
A national standards and conformance infrastructure is the crucial foundation for MRAs. The infrastructure comprises three components, measurement, standards and conformance. Each function is to ensure that products and services comply with both local and international market requirements, and provide buyers with the confidence that the products and services will perform as claimed, and are fit for purpose.
i. Elements of Technical Infrastructure
Measurement provides the underpin to all activities in industry, commerce, science and engineering, and is the foundation for a high quality standards and conformance infrastructure guideline. Standards provide the basis for efficiency in producing and trading goods suited to the needs of the community and markets. Conformance provides confidence in performance and certainty that goods and services meet required standards and that requirements are being met, through testing, certification and inspection. The conformance function of the infrastructure includes the process of accrediting the bodies which carry out those testing and certification activities (see Figure I).
The EU, for instance, has set the pace internationally in putting strong emphasis on standards and conformance structures for intra-regional trade. Harmonized systems and a series of multilateral MRAs have been developed within the community, that form the backbone for implementation of the EU Directives. Requirements are similarly imposed on third countries that wish to enter the EU market as well.
ii. Developing Technical Infrastructure
The development of technical infrastructure can be achieved through cooperation within ASEAN, working bilaterally with third countries or leveraging on the Specialist Regional Bodies (SRBs). However, the effectiveness of the first option may be limited as countries with advanced technology, especially in the field of metrology, lie outside ASEAN.
The development of technical infrastructure could take the form of acquiring the “hardware”, as in the case of metrology, or “software”, as in the training of personnel to use and maintain the hardware. Of equal importance is the setting up of systems such as those for testing, certification and accreditation. These are essential elements of a national technical infrastructure, not only for promoting quality of products and services in a country, but also for generating the confidence of a potential MRA partner. The international linkages in these areas further strengthen such confidence through the use of international standards as a benchmark.
iii. Building Blocks of G-to-G MRAs
The areas of metrology, testing, certification, accreditation etc. form the desirable building blocks of a national standards and conformance infrastructure to ensure quality of goods and service (see Figure 2).
They are to some extent, hierarchical. For example, metrology is fundamental as accurate measurements are essential for proper testing and calibration. Proper testing is needed for a product to be certified. Testing facilities in turn need to meet certain standards before they can be accredited.
In the same way, technical MRAs in these areas are building blocks for G-to-G MRAs. Mutual confidence at a particular level, reflected in a technical MRA at that level, lays the foundation for an MRA at the next higher level. Taken as a whole, the technical MRAs provide the confidence on the part of the regulators that the standards and conformance structure in the other country is as good as its own. However the path to a G-to-G MRA does not always follow rigidly the sequence shown in Figure 2.