Bringing Standards Together - an International Framework

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Director U.S. Consumer Product Safety Commission..............................................................54 Panel III Playing from the Same Deck: The Business End of Standards Harmonization Gary W. Kushnier Vice President, International Policy American National Standards Institute (ANSI)............................................................56 Mary Anne Lawler Director, Standards Relations IBM Corporation..........................................................................................................58 Richard J. Schulte President & Chief Executive Officer International Approval Services..................................................................................64 David A. Miller President Toy Manufacturers of America....................................................................................68 iii Mark Silbergeld Co-Director, Washington Office Consumers Union........................................................................................................73 Wrap-up Session Building the Foundation: Honing the Tools Linda Horton Director, International Policy Staff Food and Drug Administration.....................................................................................77 Mary McKiel Director, EPS Standards Network U.S. Environmental Protection Agency........................................................................77 Steven Spivak Chairman, Consumer Policy Committee (COPOLCO) International Organization for Standardization (ISO) General Assembly; University of Maryland.................................................................................................77 Erich Linke Principal Administrator, Competition and Consumer Policy Division Organization for Economic Co-operation and Development (OECD) ........................78 Nancy Harvey Steorts President, Nancy Harvey Steorts International; ex-Chairman, CPSC ...................................................................................................79 Jean Wong Chief, Policy Planning and Information, Product Safety Bureau (PSB), Health Canada............................................................79 Edward Becker Snell Memorial Foundation..........................................................................................79 Closing Remarks Ann Brown Chairman U.S. Consumer Product Safety Commission...............................................................81 1 EXECUTIVE SUMMARY On July 18, 1995, the United States Consumer Product Safety Commission (CPSC) sponsored the international conference, "Bringing Standards Together: An International Framework," with the dual objectives of enhancing consumer protection and increasing international trade. Over 300 attendees from industry, government, academia and consumer organizations joined an extraordinary group of experts from the public and private sectors to share information and help ascertain ways to internationally harmonize consumer product safety standards while maintaining and strengthening consumer product safety. The conference evolved from the need to ensure that optimal product safety is maintained as an increasing number of consumer products are imported from the growing global marketplace. Making U.S. safety standards compatible with those of our trading partners is becoming the foundation for building strong trade relationships and creating U.S. jobs and effective markets abroad for U.S. products. Therefore, the Toy Manufacturers of America, Inc. and others throughout the international business community urged CPSC to take a leadership role in coordinating efforts to ensure product standard harmonization is recognized as a priority by both the public and private sectors. Each of the three keynote speakers emphasized the importance of harmonizing U.S. and international product standards to increase U.S. exports and improve product safety around the world. First, U.S. Trade Representative Mickey Kantor stated that product standards harmonization is a critical link to opening foreign markets, leveling the playing field and breaking down trade barriers. He urged that standards be "harmonized up, and not down," because higher standards mean more safety, greater protection of consumers in the global marketplace and the growth of jobs throughout the world. Second, the chief executive officer of Toys "R" Us, Michael Goldstein, said more compatible international standards would increase exports and improve product safety standards throughout the world. He argued that uniform quality safety standards worldwide would reduce business expenses substandard or harmful products. He pledged his industry's support to make international safety standards a reality. Third, Secretary of Commerce Ronald H. Brown stated that with tariffs and quotas falling around the world, product standards are increasingly the most significant barriers to truly free trade. He stressed that standards harmonization could actually become the leading edge of trade arrangements. He recommended a public-private partnership to achieve international harmonization of standards. Three panels of experts then shared their knowledge and experience on 1) the history and current status of international trade agreements, standards, and conformity assessment negotiations; 2) government success stories demonstrating different ways to achieve standards harmonization; and 3) private industry's successful experiences and consumer product safety concerns. Finally, CPSC Chairman Ann Brown closed the conference with a commitment to maintain the levels of consumer product safety that are now taken for granted in the U.S. and to promptly and seriously consider all suggestions and recommendations from the conference on how to promote international harmonization of consumer product safety standards. Some of the comments and recommendations from speakers, panelists and wrap-up session participants included the following: 1. Increased product standard harmonization would enable the Commission to create alternatives to costly product recalls, reduce regulatory costs of labeling and other means of informing the public about product hazards, more effectively promote educational activities, minimize protracted legal disputes and deal more effectively with the imported harmful products. 2. Effective trade policies designed to expand exports and create jobs must be accomplished by harmonizing up, not down. As a matter of United States policy, safety must not be compromised. 3. The U.S. Government and American industry can, and should, work together to develop a mutually acceptable position tying the benefits of product standard harmonization to economic growth and consumer protection. 4. CPSC first should attempt harmonization on a pilot project basis by developing a compatible standard with Canada, e.g., a toy standard, then attempt to gain acceptance of an effective international toy standard. 5. Federal regulatory agencies, with an interest in product standard harmonization, should cooperate in sharing information, expertise and strategies to contribute to a stronger and more unified comprehensive U.S. harmonization effort. 6. The memorandum of understanding between CPSC and its counterpart, Health Canada, should serve as a model for future bilateral agreements between CPSC and its counterparts in other countries. 7. The establishment of a technical committee on consumer product safety 3 should be considered under the International Organization for Standardization to develop harmonized international standards. 8. CPSC should continue to actively participate in interagency groups developing and implementing U.S. trade agreements. CPSC should become more active in international organizations such as the Organisation for Economic Co- operation and Development to develop responsible policies affecting consumer safety, product standards and international trade harmonization. 9. Where necessary, CPSC should support bilateral negotiations with Europe and other countries to generate mutual recognition agreements covering testing and inspections. 10. CPSC should consider a policy of accepting the integrity of accreditation systems and the results of independent laboratories that support the U.S. market as a means of recognizing the safety of products from abroad. 11. In dealing with foreign regulators, CPSC should adopt positions that promote the lowest cost product certification requirements commensurate with product risk. 12. CPSC should consider the potential for international harmonization of product standards and other regulatory requirements with countries that involve heavy U.S. exports and imports. OPENING REMARKS 4 WELCOME AND INTRODUCTIONS Ann Brown Chairman U.S. Consumer Product Safety Commission Good morning. I'm Ann Brown, Chairman of the U.S. Consumer Product Safety Commission. Welcome to CPSC's conference, "Bringing Standards Together: An International Framework." Before we begin, I would like to recognize CPSC's two other commissioners, Mary Sheila Gall and Thomas Moore, and to note that we have many distinguished guests here today, including several members of the diplomatic community. I also would like to thank Senator Slade Gorton of Washington State -- and his hard-working staff -- for making it possible for this conference to be held in such a stately and historic room. This has been the site of many important hearings throughout history, including the Senate Watergate hearings. This conference is the exciting beginning of CPSC's leadership in harmonizing international product safety standards, enhanced by the level and quality of participation from all of you. Since I've come to CPSC, we have seen how a cooperative relationship can work between government and industry on a national level. Today marks the beginning of that same partnership on an international level. Today, we will work to integrate increased profitability with increased safety for a growing global economy. But as we move forward, we must ensure that product safety will not be compromised. Trading partners worldwide should strive to raise the level of safety rather than diminish consumer protection. Over 20 years ago, CPSC, as a newly created agency, harmonized product standards so that companies could produce one product that met the safety requirements of all 50 states. At our "Safety Sells" conference earlier this year, the toy industry and other multinational manufacturers brought to our attention that they now have a harmonizing problem on an international level. Some must produce different versions of the same product to meet the individual standards for different countries. Industry's question was simple: "Could CPSC help in harmonizing international product standards?" Well, this agency jumped at the chance. 5 Today we are here to talk about how we can work together and form partnerships to make it easier to harmonize these product standards, and just as vital, to ensure the highest possible element of safety in consumer products for the international marketplace. With industry's knack for creativity and innovation and CPSC's current track record of success, I know we can accomplish our goal of harmonizing international standards without compromising the safety of products. Today's conference not only will help establish harmonized international standards as the rule rather than the exception, it will bring CPSC's mission of saving lives and reducing injuries to the international forefront. Today, we will hear from three world-class keynote speakers: Ambassador Mickey Kantor, United States Trade Representative; Michael Goldstein, Vice Chairman and Chief Executive Officer of Toys "R" Us; and the Honorable Ronald Brown, Secretary of Commerce. Ambassador Mickey Kantor was sworn in as the United States Trade Representative on January 22, 1993. He is the President's foremost advisor on international trade and represents the United States as chief negotiator in major international trade negotiations. He has the responsibility for developing and implementing trade policy within our government. Ambassador Kantor has many accomplishments, including his tireless efforts in negotiating the United States-Japan auto parts framework agreement, which averted a major trade war with Japan. Next, I want to introduce Michael Goldstein. One of the things I learned at our "Safety Sells" conference in March was how many companies in the private sector are actively involved in promoting product safety. It's good for consumers and it's good for business. This progressive practice is exemplified through the leadership of Michael Goldstein, Vice Chairman and CEO of Toys "R" Us. Prior to 1983, Mr. Goldstein was Senior Executive Vice President of Lerner Stores. Preceding that, he was a partner of Ernst & Young in New York. Last year I was honored to award Toys "R" Us as the first retailer to receive the coveted "Chairman's commendation for substantial contribution to product safety." It gives me great pleasure to have Michael at this conference to share his views with us on the importance of government and business partnerships in successful 6 product standard harmonization. Secretary Ronald Brown needs little introduction. His appointment as the 30th U.S. Secretary of Commerce was confirmed by the U.S. Senate on January 21, 1993. He went to work the very next day. Ron Brown is a man of many skills and talents, including lawyer, negotiator, pragmatic bridge builder and the highly successful former chairman of the Democratic National Committee and 1993 inaugural committee. Secretary Brown brings wide experience to this newest challenge of building strong private partnerships between business and government. He has been an outstanding Secretary of Commerce, serving the President in a broad capacity -- even broader than the vast jurisdiction of his department! Secretary Brown will speak today about the importance of international trade to our economy. Our three panels and wrap-up session at the end will provide the technical expertise for the conference. Our first panel will describe the international agreements and standards that are the foundation for product standards harmonization. The second panel, made up of representatives from four federal agencies, will discuss how each is successfully reinventing government standards. The third panel will focus on the business end of standards harmonization. 7 KEYNOTE SPEAKER Mickey Kantor United States Trade Representative Office of the U.S. Trade Representative Good morning to everyone. Thanks for having me here. I'm delighted that one of our keynote speakers is Ron Brown, the best Secretary of Commerce that we ever had, and that the other is Michael Goldstein from Toys "R" Us. As a parent of four children, I want my dividend. In 26 years of purchases, I know the price is right at Toys "R" Us, but the fact is I think I deserve something back after all these years. It's a wonderful operation and, of course, has done quite well around the world. It certainly represents a part of what we are talking about here today. What I'd like to do, with your permission, is try to put what you're doing today in a little larger context, and try to indicate to you how important what you are doing is to world trade, to our ability not only to grow jobs here in the United States, but also to formulate global growth and to make sure, of course, that we use trade as a political tool, as well as to improve our relations among nations. When you talk about harmonizing standards, on safety as well as other areas, we talk about everything from packaging to labeling, from testing to certification. All these things are under discussion right now, everywhere from Geneva, the World Trade Organization, the OECD in Paris, in regional discussions we are having with APEC, the Asia-Pacific Economic Cooperation forum, the Summit of the Americas process, leading to the Free Trade Area of the Americas, and to our bilateral relationships from China all the way to Europe and into Latin America. All of this is critical if we are going to create two sides of the same corner. On one side we have harmonization of standards, safety certification and testing issues. On the other side we have trade barriers. In order to deal with both sides, we can open up markets and expand trade. Frankly, we can have what I call a win-win-win situation -- safer products, removing barriers and growing jobs here in the United States. That's what this administration has been dedicated to since we came into office. No President of the United States in this century has done more in trade than President Clinton. We have had 149 trade agreements -- bilateral, regional and multilateral -- in 30 months. Seventy are bilateral agreements in textiles and apparels, which are very important. We have had 16 agreements with Japan. The latest was a couple of weeks ago, when we reached an agreement in Geneva on autos and auto parts. On the regional level, of course, we have the Free Trade Area of the Americas. We have had the Bogor Declaration, which will open up free trade in Asia by the year 8 2010 for developed countries, by 2020 for undeveloped or developing countries. Then, of course, we had the Uruguay Round, the largest trade agreement in history. In addition, we had the North America Free Trade Agreement, an agreement with China protecting intellectual property rights and many other agreements as well. This administration came in and said we have got to do this, we have got to open up these markets and grow jobs. First, though, we've got to strengthen our own economy here at home. You can't compete in the world economy unless you strengthen your own economy at home. The President's economic plan and the earned income tax credit helped lower interest rates, create capital, fuel a capital expansion in private business, grow jobs, lower the budget deficit and lower the number of federal employees. At the same time we are increasing the number of private businesses more than at any time in history in this country. The President's plan has worked and worked well. As you know, we've created about seven million jobs since we've been in office. Average income is rising, although median income is not rising as fast as we would like. We would like to continue to work on that. So, one part is to strengthen our economy by growing private -- not public -- jobs. We've created a higher percentage of jobs in the private economy than any administration since Warren Harding was President of the United States. The unemployment rate came down to 5.4 percent last month. That's Part I. Part II is to continue to educate and train the American people. It does us no good to strengthen our economy if you don't take our most important asset -- our work force -- and educate and train them and provide them with the necessary tools to compete in what has become a global economy. Part III, of course, is to take care of the global economy. We've got to compete and win again. We've got to create hope in the American people if they are to compete with the Japanese or Europeans in this ever-increasing competition around the world. That means expanding trade is critical to our economy. This year our trade will exceed $2 trillion -- $2.2 trillion. It has gone from 24.8 percent of our economy in late December 1992 until the end of this year, when we estimate it will be over 30 percent of our economy. It's growing at a rate of 25 percent. Just this year our exports grew -- 18 percent last month -- and is growing at a rate of about 17 percent for the year. That's about the highest percentage growth in exports in American history. Expanding trade is critical because it represents jobs. Twelve million jobs in our 9 economy are directly related to exports, and those jobs pay an average of 17 percent more than other jobs. Trade is an increasing percentage of our economy and, of course, our globe is shrinking. At the end of the Second World War, the U.S. was 44 percent of the world's production. We're now down at 22 percent. That's good news and that's not-as-good news. The not-as-good news is that we are not as strong and powerful or as dominant economically. The good news is that we are getting middle class consumers all over the world who will buy our products and will raise our incomes. We've got to see that as an opportunity, not a problem. We've got to make sure that as we grow this international trading system, we try to do it in a way we did not do it after the Second World War. It used to be that we had strategic and political issues. Economic issues were only a tool by which we advanced those other two broader concerns. During the Cold War, our strategic and political concerns were such that we used trade to make sure we bolstered the economies of Japan and Europe as bulwarks against Soviet and Chinese expansionism. It was a proper policy and it worked. But in the meantime, what we did in Japan and Europe and in other areas was create multiplying sanctuary economies in a non-level playing field. Not only did it hurt us economically in the '70s as we became less and less dominant economically, it also created a sense in the American people that their government was not standing up for their interests. Of course, what that did was hurt our ability to reach trade agreements because the American people were so cynical and skeptical regarding what their Government would and would not do either for them or on their behalf. We've tried to turn that around in three ways. First of all, the President said that our economic security and our national security are inextricably intertwined -- we have a three-legged stool made up of economic, political and strategic considerations as we deal with other nations. We are putting economics on the same level as we have put these other considerations. Second, we said we wanted a level playing field. As we begin to phase into the Uruguay Round, the World Trade Organization, the Free Trade Area of the Americas, the Asia-Pacific Economic Cooperation forum, or bilateral treaties, we will insist that the United States have the same access to foreign markets as foreign countries have to our markets. Simple principle. Makes good sense. We've not followed that principle for good and sufficient reasons in the past, but as we begin to follow that principle, two or three things will happen. One, we will grow jobs here at home; two, we'll fuel global growth; and three, we'll do something very important -- we'll create credibility and, frankly, confidence in the American people. 10 They can rely on their government to stand up for their interests in this new global economy. Last but not least, we have to come to the recognition that if you were doing a marketing study today, you would say our markets, being four percent of the world's population, exist outside our borders. Let's understand where we are demographically. We are an aging population, and I am among them, unfortunately; in this job I get a little older very quickly. We are nearly at zero population growth. Our economy will never grow as fast as Asian or Latin American economies. They have younger populations, faster growing labor forces and a faster growing middle class. But there's a pony in that closet, folks, and the pony is that those are our markets of the future. If trade creates higher paying jobs and we can sell the high value-added goods representing high-wage, high-skill jobs, that's good -- it's not bad -- that's terrific for the United States. We just have to have the confidence in wanting to compete and win. So, as we look at this we see the following: trade has become critical to our economy; the whole world is reaching standards that are leveling the playing field (I'll come back to that in a moment); and this is good for our economy because it's a new opportunity for us. Now, where do harmonization and standards fit into this? Not only do they fit very nicely, but critically. We can't engage in a level playing field, equal trade, open up markets and get rid of trade barriers unless we harmonize standards. But as we do it, we've got to harmonize up, not down. Critical. If nothing else gets across this morning, and you will hear a lot of speakers, very bright people, certainly brighter than I, harmonizing standards up is critical to our future. It's critical to safety, it's critical to health, and it's also critical to our ability to compete and win. We can't win in a war where standards get lower. We can only compete in a war where standards get higher. So, it's a win-win situation: higher standards, more safety, protect the health of consumers around the world, and grow jobs here at home as well as globally. As you go through your deliberations, what I would love to hear discussed, and I'm am sure you are going to do it, is how do we harmonize our standards up, how do we get our trading partners to agree to that, how do we use that to open markets, not just in the safety area -- that's critical -- or the health area, but how do we do it in packaging, labeling, certification and testing? There are all kinds of areas that all of you know more about than I do. I guess my gentle challenge to you today is, in just a few hours, to come up with formulas we will need to follow as we proceed with these trade agreements, as we develop the Free Trade Areas of the Americas, APEC, and as we continue to 11 develop in the World Trade Organization in Geneva, which is so critical to multi-lateral disciplines. As we use the OECD and other organizations to pursue these objectives, you can help us define what these goals will be and how we are going to get there. All of you, I appreciate what you are doing here. I especially appreciate what a wonderful job Ann does every day for all of us. I appreciate the fact that you will spend your time talking about this public-private partnership we've got to have in order to pursue it. It can't be done by government alone. We couldn't have gotten an auto and auto parts agreement with Japan if it were government alone. We couldn't have had a Uruguay Round Agreement if it had been the private sector alone. We've got to do this together. Our job is to prepare the tracks and clear them for the engine of growth that is private industry. Your job is to put the proper train on the tracks. So we will work with you. We will be your advocates. We will listen to you. We will follow your dictates, as long as we agree with them, and we will work closely with you every step of the way. I thank you for having me and I look forward to working with you. Thank you very much. 12 KEYNOTE SPEAKER Michael Goldstein Chief Executive Officer Toys "R" Us, Inc. Thank you, Ann. It is indeed an honor to be invited to share the platform with Ambassador Mickey Kantor and deliver the opening remarks at this conference. Ambassador Kantor, thank you for your efforts in reducing foreign trade barriers that frustrate American companies anxious to expand their international presence. Ambassador Kantor's efforts to protect American intellectual property rights in China, to open the auto and insurance markets in Japan and to create NAFTA are excellent examples of ways to improve market access for American companies. Every day U.S. companies trying to export their products must work with regulators concerned with health, safety and a myriad of other regulations before these products can be exported. Therefore, this conference is very timely. I would like to thank Ann Brown, her fellow commissioners and the entire staff of CPSC for their sense of urgency, energy and creativity in setting up this conference. On March 28th of this year, about three-and-a-half months ago, at CPSC- sponsored "Safety Sells" conference, I indicated the need for international safety standards. Many of the representatives at that conference, including CEOs from numerous international consumer products companies, agreed that international standards would not only help U.S. industries to increase their exports, but also improve safety standards throughout the world. Ann Brown indicated at the conference that she would immediately look into this issue. At the International Council of Toy Industries world toy conference held just one month ago, Alan Hassenfeld, CEO of Hasbro and chair of the conference, said of this issue, and I am quoting Alan, "International safety standards -- wouldn't it be amazing to have one set of quality standards worldwide." Many speakers at the conference from nations all over the world echoed Alan's comment. There was a universal plea among this group that we need international safety standards. World trade has exploded over the last 10-15 years and unfortunately, progress to date on international standards has been modest at best. Well, when Ann Brown sees the need for action, she moves and moves quickly. 13 That's why we are here today to address this important issue. Ann, thank you for getting business and government leaders like Ambassador Kantor and Secretary Ron Brown focused on the need for international safety standards. Why is this issue important? Why is it important for a company like Toys "R" Us? Why is it important for our suppliers and other manufacturers? Toys "R" Us now has stores in 21 countries, including the United States, and will enter two additional countries later this year. Next year, we hope to open stores in two to four additional countries. We now have 618 toy stores in the United States and over 300 toy stores in other countries of the world, with our biggest store groups in Canada, the United Kingdom, Germany, France, Spain and Japan. Toys "R" Us seeks to offer for sale only those products that meet rigorous safety standards. All merchandise we buy for the United States must conform with current CPSC regulations, FDA requirements, all federal, state and local laws and industry voluntary standards. When we are the importer of record, we insist on comprehensive safety testing by our approved testing laboratory. We follow similar types of rigorous safety procedures throughout the world. Unfortunately, standards are different in various countries, and the following problems arise. Duplicate testing Manufacturers selling a product to Toys "R" Us must perform different testing for different countries, and in certain countries a toy must be labeled that it has met a certain standard. The manufacturers could save lots of time and testing expenses if there were a reasonable set of worldwide standards. A simplistic answer could be for the manufacturer to select the most rigorous standard for each test and use that standard. Unfortunately, that doesn't work because there are certain country standards in place that are unreasonable, and until reasonable standards are in place, uniform testing cannot be done. Exporting difficulties Recently, I was in several European countries and noticed that some of the juvenile products being sold in our stores did not look as attractive nor were they as innovative as certain items we sell in the United States. I spoke to the general merchandise manager for our international division about this. He indicated to me that he agreed with my assessment but that certain United States manufacturers were not willing to enter international markets because of the different safety standards in place. I then contacted several of the manufacturers and told them they have a unique 14 opportunity to sell some wonderful made-in-the-U.S.A. products in our stores throughout the world. Many of these manufacturers are small in size and capitalization and indicate that the changes they would have to make to conform to certain country requirements would probably be too costly for them to undertake. They agreed to research the issue further, but I am not too optimistic that they will move forward, or if they do it, it will be with only one or two items, not with a full line that would give them sufficient clout in terms of marketing and in-store support to make a successful entry. If there were uniform international standards, there would be a more level playing field. This would help U.S. exporters, particularly smaller, entrepreneurial companies. Movement of merchandise from country to country Some product lines become popular in one country well before they are introduced in other countries. Some products become successful in certain countries and fail in others. Finally, some products begin to lose their popularity in certain parts of the world, possibly because the product was introduced there earlier, whereas in other countries the product is still in a strong part of its life cycle. For Toys "R" Us and its suppliers, the ability to move products from country to country adds to our flexibility as retailers and manufacturers. Unfortunately, if there are different safety or labeling standards involved, those transfers become very expensive. To relabel is an expensive and time-consuming task and generally makes intercountry transfers not practicable. To need further testing prior to transfer generally precludes the transfer option. A good example of this involves Power Rangers toys. The Power Rangers toy line, which was developed in Japan and initiated in the United States and Canada, was a spectacular success. There was overwhelming demand for the product based on the success of the TV show. The manufacturer did not ship products to many other countries because they couldn't even keep up with U.S. and Canadian demand. The U.S. demand remained strong. However, after some time the Canadian interest declined significantly because of criticism of the TV show in Canada. Soon after Canadian demand diminished, we were able to transfer certain products from Canada to the United States because there were no additional safety or labeling issues to deal with. When the Power Rangers show and product were introduced in Europe, Australia and other parts of the world, the product became a huge success in most of these countries. The demand for the initial products was very high, whereas popularity of the initial products in the United States began to wane as new, updated versions were introduced. Unfortunately, we could not transfer these initial products without some additional testing and, even more important, we had to re-label every item before we could move these goods into certain European countries. We decided the time and 15 cost to do this extra work was not cost effective, so we had to pass on this opportunity. There are many more examples that could be used for the toy industry, and I'm sure this affects lots of other industries as well. Improved safety Since there are experts on safety in all parts of the world, wouldn't it be wonderful not only if the safety information were shared on a worldwide basis, but also because of the pursuit of international safety standards, different countries would concentrate on different issues so that the very best research was done and the very best, practical safety standards were used? With international standards, there would be less concern about unsafe items being exported into countries, like the United States, with high safety standards. Wouldn't it be ideal for the toy industry to know that because of excellent, practical safety standards practiced on a worldwide basis, fewer children in this world would be harmed by unsafe toys? The same issue applies to other industries as well. Level playing field Although I mentioned this earlier, I think this issue deserves a fuller discussion. With international safety standards two anti-competitive issues would be eliminated. First, no country would be able to use safety standards in an unfair manner to favor domestic industries or to discriminate against products originating from certain countries. Second, manufacturers of quality, well-made products, should have less competition from similar looking, knock-off products of inferior quality. In the toy industry, this could mean the reduction and eventual elimination of poorly made toys that somewhere pass through customs checks and end up on some retailers' shelves. I assume this issue affects other industries as well. So, with a level playing field, United States exporters, whether in the toy, juvenile products or any other industry, would have the opportunity to export more products, create more jobs and improve the standard of living by making available the best quality products at the best available prices. In conclusion, I think this conference is an excellent step in developing international safety standards. The toy industry would like to work with CPSC and the governing safety commissions throughout the world to make international safety standards a reality. I hope CPSC will be able to work with the various European and Asian groups to move this process along. I know that David Miller, President of Toy Manufacturers of America, in his comments this afternoon will also stress both the need for international safety standards and that the toy and allied industries would like 16 to be leaders in this push for international standards. Thank you. 17 KEYNOTE SPEAKER Ronald H. Brown Secretary U.S. Department of Commerce Good morning and welcome to this important conference. I want to thank Chairman Brown for inviting me and to thank all of you for attending. When I became Secretary of Commerce, and with that position, Chairman of the Trade Promotion Coordinating Committee, I had two important tactical goals: to reach out across sectoral boundaries and form an effective partnership with the private sector and to work more closely across agency lines to ensure that the federal government's many trade agencies worked as a unified force on behalf of the America's export firms. We have done that. I think the $40 billion in exports we have helped leverage, through Department of Commerce programs, advocacy, streamlining and targeting, speaks for itself. But I have to wonder if maybe Ann Brown hasn't done us one better. What Chairman Brown has done is recognize the potential of her commission to be an ally in the fight to open markets for American exporters. This conference and CPSC's work to further standards harmonization around the world reflects the unabashedly pro- business stance of this administration. It also reflects the creativity we are bringing to this effort. With tariffs and quotas falling around the world, standards are increasingly the most significant barriers to truly free trade. Meeting product standards and specifications dictated by a foreign government can be a costly burden, particularly for smaller companies or those doing business in a number of markets. A typical U.S. machine manufacturer may spend $50,000 to $100,000 a year complying with foreign standards requirements. Foreign product standards and certification requirements affect about half of all U.S. exports -- approximately $300 billion in 1993. Recently, the Commerce Department, representatives of the European Union (EU) and private business people from both sides of the Atlantic formed something we call the Transatlantic Business Dialogue. Our goal was to bring the private and public sectors together to find ways of speeding commercial integration of America and Europe. This year we contacted over a thousand businesses in an attempt to more closely align our agenda with that of the private sector. The results were something of a surprise. With all the press that free trade agreements -- real and potential -- had been getting, we thought that a U.S.-EU free trade agreement would be the hottest item on the list. It wasn't. What these 18 corporations cared about more than anything else was lowering the standards and certification barriers that transatlantic traders face every day. We were surprised, but we were gratified as well. As the results of this survey were coming in, it was also becoming apparent that Commerce would win a long battle to persuade the EU to rethink proposed ecolabeling that might have blocked $2 billion in U.S. exports. Because of our close relationship with the private sector, the Commerce Department's priorities were already aligned with America's private firms. The Clinton Administration understands that international trade will power America's economic growth for the foreseeable future. So, we are backing our impressive string of free trade treaties with an ongoing and comprehensive effort to ensure that standards certification barriers fall as rapidly as tariffs barriers are. Our approach is particularly effective for two reasons: first, because we are working closely with the private sector, the people who know best which regulations provide the most formidable barriers; and second, because it is truly a coordinated interagency approach, with the Commerce Department at its center. The Commerce Department's National Institute of Standards and Technology (NIST) is placing standards experts in key embassies around the world. These advisors wear two hats. They work with foreign standards organizations to ensure that their actions do not exclude American products, and they work with American exporters to advise them how best to meet the standards these organizations set. By the end of the summer, we hope to add Brussels, seat of the European Union, Mexico City, and Buenos Aires, where we will focus on hemispheric standards, to our list of foreign capitals with standards experts available. But the Commerce Department does not pursue these goals alone. With support from the Food and Drug Administration (FDA), the United States has negotiated an agreement with Russia through which drugs and biologics approved by and manufactured in the United States can be accepted into Russia under streamlined procedures. The FDA and NIST also have ongoing exchange programs with Chinese and Russian scientists to increase mutual understanding of differing standards regimes. The Office of the U.S. Trade Representative (USTR), Commerce and the Department of State -- with broad support from technical and regulatory agencies and many private certifiers -- negotiated bilateral agreements with the European Union for the acceptance of U.S. test results, plant inspections and, in some cases, certification of products. The resulting mutual recognition agreements will cover as much as $40 billion of U.S. exports in such sectors as information technology equipment, machinery, 19 telecommunications equipment and medical devices. The Federal Communications Commission amended its rules to harmonize the standards for U.S. radio frequency emissions from digital devices with international emissions standards. This affects more than $30 billion of U.S. exports and will save manufacturers as much as $100 million a year in design and testing costs. NIST, the Environmental Protection Agency (EPA) and the Department of Energy are participating in the new International Organization for Standardization (ISO) initiative to develop harmonized environmental management standards. NIST published an informational document on ISO environmental management standards activities in July 1994 that will enable a wider audience in both the public and private sectors to track this standards activity. The Department of Agriculture, EPA and FDA, as members of the Codex Alimentarius, are working to harmonize international pesticide and residue tolerances to make export certification of many food products less burdensome. NIST is managing a grant to develop a national standards system network. The network will create an electronic infrastructure linking the databases of developers, producers, distributors and users of technical standards in the United States. It will also include information on regional and international standards. In addition, NIST and the Commerce Department's International Trade Administration introduced new business information programs on the ISO 9000 quality management standards, a guide to Russian consumer protection requirements, and exporter guidance on Canadian and Mexican standards in support of NAFTA. Because we have worked so closely with our partners in private industry, we understand that standards harmonization can actually become the leading edge of free trade arrangements. As many of you know, at last December's Summit of the Americas in Miami, President Clinton led the heads of 34 democracies in endorsing the creation of a free trade area of the Americas (FTAA). We are pledged to reach an agreement that will create the FTAA by 2005. To help jump-start the process, Ambassador Kantor and I welcomed over a thousand officials and executives from throughout the hemisphere to Denver last month for a trade and commerce forum. One of our first priorities at the summit was clearing the way for standards harmonization -- to create a platform upon which the formal agreement can be built. Ambassador Kantor's Trade Ministerial created a working group on standards and technical barriers to trade. This working group will compile information on conformity assessment and technical regulation bodies, recommend specific ways to enhance 20 transparency and make recommendations on product testing and certification, with a view to mutual recognition agreements. At the next day's commercial forum, private sector leaders had an opportunity to share with me and other ministers their views and ideas on standards harmonization. The upshot is a hemispheric integration process in which the private sector will have significant influence and in which tangible steps toward freer trade will be taken without having to wait for formal agreements. I'd like to thank Chairman Brown for her hard work in making this conference a success and to thank all of you for coming out to hear what we have to say and telling us what we need to know. Together we can ease exports and create jobs while creating effective standards and protecting consumers. Thank you. PANEL I THE GLOBAL MILIEU: THE FOUNDATION FOR MULTINATIONAL HARMONY Moderator : Suzanne M. Troje, Director for Standards Office of the U.S. Trade Representative Panelists: Richard G. Meier, Office of the U.S. Trade Representative Charles M. Ludolph, International Trade Administration John Sullivan Wilson, National Academy of Sciences Joe Bhatia, Industry Functional Advisory Committee on Standards; Underwriters Laboratories, Inc. 21 THE TOOLS OF THE TRADE: SHAPING STANDARDS POLICY THROUGH INTERNATIONAL AGREEMENTS Richard G. Meier Deputy Assistant U.S. Trade Representative for GATT/WTO Affairs Office of the U.S. Trade Representative Thank you very much. I appreciate the opportunity to be here with you. It is an unusual experience for me to share the podium with my boss, Ambassador Kantor. He really did challenge the group in terms of what U.S. trade policy goals are and how they relate to the questions you are dealing with at this conference. I will try to fill in the very few blanks that he didn't cover in his talk. I would like to briefly describe the series of international agreements that really provide a foundation for doing some of the things that were described by Ambassador Kantor and the needs described in the talk we just heard from Mr. Goldstein. I think it will serve as a foundation for the remarks of the other panelists. These agreements deal with both standards themselves and their development, whether they be voluntary standards, or in our terms, regulations that are mandatory standards having the force of law. These agreements deal with the matters of testing and inspections, the type of problems Mr. Goldstein described in his presentation. This whole range of issues has become known as conformity assessment. We frequently find that international trade problems relate as much, if not more, to conformity assessment as they do to the specific standard or regulation against which the product is tested. The Technical Barriers to Trade Agreement is our most fundamental agreement. It was originally negotiated during the Tokyo Round of trade negotiations, which was recently renegotiated and expanded as part of the Uruguay Round of multilateral trade negotiations and is now part of the World Trade Organization (WTO) agreement. I should note that the Tokyo Round code was adhered to by only 45 countries. As part of the World Trade Organization, this agreement and its obligations and commitments are now required of all WTO members -- as of today, around 100 countries. We expect that to increase to about 145 when countries complete their ratification of, or in some cases accession to, the WTO, if not by the end of this year, next year. That group of countries covers all but a very small proportion of world trade. Let me briefly tell you what the major objectives and commitments of the Technical Barriers to Trade Agreement are and how they apply in the other agreements that I will briefly note. First, standards or conformity assessment procedures are not to 22 be used as unnecessary barriers to trade. Second, the application and development of standards shall not be used to discriminate either vis-à-vis domestic producers versus foreign producers or one group of foreign producers versus another. Finally, the use of international standards is to be encouraged. This is a long-term goal. Obviously, if more countries and industries use international standards, the process of harmonization becomes nearly automatic. The process of harmonization as a long-term goal is also encouraged in these agreements. The basic principles of the agreement noted above have now found their way into a number of other agreements. Foremost of these is NAFTA and before that, the Canadian Free Trade Agreement, which builds upon the Tokyo Round Agreement and expands and intensifies it in terms of a smaller group of countries -- the three countries of NAFTA. Thus, we could tailor that agreement to meet the special needs of that group. Suzanne Troje is really the expert here, so I won't tread on her territory too much. As Ambassador Kantor noted, we are also discussing standards issues in the Asian-Pacific Economic Cooperation forum (APEC). Toys as well as processed foods are among the sectors being looked at as a pilot project. Also in APEC, there has been a great deal of work to examine and identify the standards requirements in the various nations of that region, so there is a great improvement in our degree of knowledge of the problems and requirements that exporters face in that region. As Ambassador Kantor also noted, we are starting to negotiate the Free Trade Agreement of the Americas stemming from the Miami Summit and more recently, the Denver meetings. Standards are an issue there, too. We are in the very early stages of that process; we have not yet built our objectives or negotiating positions. We will start that very soon, so for those interested in that region of the world, it's a good chance to give us your ideas and advice. We also are negotiating a free trade agreement with Chile, basically an extension of the NAFTA. We foresee that the standards chapter of the NAFTA will be extended to Chile, probably without extensive revision, although that's certainly a question we can address as we go through it. Standards also are an issue in a host of bilateral arrangements too numerous to mention here. These agreements, in particular some of ones we now are looking at in APEC and Latin America, provide a chance to use American leadership to convince these countries to use or adapt themselves to U.S. standards and U.S. regulatory approaches. This is not to say we know best, but certainly we want to advocate our system to these countries. That, too, would be a step of easy harmonization. If we can present our system -- voluntary or regulatory -- to these countries, I think we will improve our trading relations and make it a lot easier to trade with these nations. So, 23 it's a good opportunity to use American leadership in the standards system as we negotiate these agreements. Finally, I want to stress that throughout this process of negotiation, we depend on a cooperative relationship with our private sector, consumer groups, labor groups, industry groups, standardizers, testers and the regulatory community. I particularly want to commend the Consumer Product Safety Commission and its staff for the efforts they have made in the negotiation and implementation of the agreements I have mentioned and their continued participation in the negotiations underway. I will also just make one final note. International cooperation, as well as domestic cooperation, is an important tool in achieving success in this area. Regardless of your industry, regulator or consumer group, as you deal with your foreign counterparts, encourage them to advocate positions that go in the direction of what the United States is trying to accomplish. Your individual opinions as to which goals are most important may differ, but it's very important to develop an international constituency for some of the goals identified here today and in your ongoing work. I think I will close there. I am available for questions at the end of the panel. Thank you very much. 24 CREATIVE CONFORMITY: THE EUROPEAN EXPERIENCE Charles M. Ludolph Director, Office of European Union and Regional Affairs International Trade Administration A few days ago, I attended a small meeting of U.S. industry executives who were deciding how much time they should put into international standards development activities. After much discussion on the importance and growth of international standards, one of the executives expressed frustration. He observed that all the presentations included statistics showing substantial growth in international standards. Why, then, he asked, wasn 9t one of his customers or government procurement contracts specifying international standards in their contract negotiations? No one in his experience had ever asked him to fulfill a contract to an International Organization for Standardization (ISO) standard, and he wondered what people were doing with these proliferating international standards and why he should spend money on them. Obviously, these days, resources can only support what is actually used in the marketplace. Business wants to know where and when international standards are applied, as well as what they are. This little vignette is played out again and again across the country by business persons wanting to take the next step in being competitive and deciding whether to design their product to a standard or change a standard to reflect their design. I think this is the starting context for our discussions in this conference and recommendations to the Consumer Product Safety Commission (CPSC) on its program in international standards to protect the consumer and support business. There are many explanations to the paradox. The one I want to focus on here is very relevant to CPSC. International standards are only useful if the market place validates them by using them. Regulatory authorities like CPSC have enormous impact on where, when and how international standards are used in the United States. Many are the international standards that successfully bring together producers' and consumers' interests that fall into disuse and neglect because a code, regulatory body or government does not accept the standards. Therefore, I will focus my comments on how the European Union (EU) is using standards to open the 15 member state markets to each other by harmonizing regulatory requirements and what that implies for the United States. In 1989 or so, the European Union introduced a new approach to regulating the safe performance of consumer and industrial products, ranging from toys to machines. Unlike the traditional approaches to product performance regulation, where government reserved the right to approve a product fit for sale in the market or relied on manufacturers to attest that product met legal requirements, the European Union 25 introduced a system of government-appointed, private sector cfor profit d product certifiers located only in Europe. Moreover, Europe adopted a policy that its regulators generally would rely on voluntary regional product standards and test methods developed by the private sector. But there is no consistent policy for taking those regional standards to support international activities. This all leads to pre-market approvals and marking of products to a minimum level of safety harmonized among all 15 members. While Europe has developed a single legal environment for pre-marketing approvals, there is no unified approach for post-marketing surveillance and enforcement. Moreover, the responsibility of insurance companies to uphold product liability, workers compensation claims and other tort issues has not been resolved or harmonized by these new regulations, nor is the role of international standards, or even regional standards, in these contexts resolved. The point I want to lead you to in this summary of Europe and its efforts to make a single market with laws and standards and product approval marks is that important levels of regulatory activity were ignored. That is a problem in marketing products, reducing costs of doing business and regulation. It is not clear today, in 1995, that the uses of international standards in each national economy in Europe were effectively harmonized in all the ways that a market is regulated, particularly in post-marketing surveillance. It is also true that there is a strong interdependence between international standards and national regulations. Another, more stark way to summarize the experience of Europe is that you can develop an international standard and harmonize approvals around that standard, but you still may not develop effective market access if the marketplace, and particularly the regulators, insurance companies and governments integrate that standard into their post-market regulatory oversight. Voluntary standards, after all, are a thing of commerce and are developed to support trade. The very existence of voluntary international standards speaks to the fact that several nations saw the merit of reaching consensus on a technical specification that helps commerce. It does not, however, guarantee that standard will be used by consumers, regulators and procurement contractors. That is a very important and key step in the making of a single European market, as well as facilitating trade among larger trading groups. Since 1989, U.S. businesses and regulators have tried to adapt to these innovations. Europe 9s system of accreditation of laboratories and ISO 9000 registrars, close government oversight, supervised product standards development, and limited access to required test procedures has meant non-European businesses and governments have had to adapt to these changes at considerable expense. European 26 regulatory systems frequently diverge from that of the U.S. and other countries. Imports into the United States reflect these differences. The demands for harmonization are growing from the marketplace; U.S. multinationals are demanding that U.S. regulators create one standard and one approval to reduce the U.S. multinationals' costs. Secretary Brown and the staff of the Department of Commerce recognized several months ago that there were gaps in our ability to deal with international trade regarding technical requirements. Trade agreements that recognized international standards answered only part of the problem of market access. By the same token, support of the development of international standards did not address market access where a government procurement regulation or safety regulator preferred only a national standard or technical barrier. Steps had to be taken to make regulators aware of the international consequences of their decisions. The International Trade Administration (ITA) of the Department of Commerce, with the European Commission, developed a transatlantic regulatory cooperation agreement that raises market access and regulatory requirements to a higher focus in the U.S.-EU trade agenda. This transatlantic regulatory cooperation is implemented in the context of the overall Transatlantic Declaration of 1991, overseen for its implementation by the U.S. State Department 9s sub-cabinet meeting and coordinated for the U.S. Government by the ITA. The goal of this cooperation is to see that resources and priorities are placed in regulators' hands to take account of the international implications of their domestic programs and to protect the safety of their market. It would be very important for CPSC to work within this cooperative context to expand the regulatory cooperation between the U.S. and EU and increase the effect of international standards harmonization. Another gap in international relations that Secretary Brown has filled is in the area of close coordination of business policy with the business community. The Secretary has recently launched a transatlantic business dialogue with the European Commission, which is comprised of several score company CEOs whose advice will lend a strategic viewpoint to U.S. and EU policy-making. It is key that business interests become part of the development of the new approach to market access. Recommendations for CPSC 1. Where necessary, support bilateral negotiations with Europe and other countries to generate mutual recognition agreements covering testing and inspections. 2. Consider the potential for recognizing and relying on accreditation systems and independent testing laboratories that support sales in the U.S. market. 27 3. In dealing with foreign regulators, adopt positions that promote the lowest cost product certification requirements commensurate with product risk. 4. Consider the potential for international harmonization of standards and other regulatory requirements with countries that involve heavy U.S. exports and imports. 5. Consider the minimum necessary surveillance and enforcement systems available in foreign countries that will satisfy high levels of international trade. 6. Finally, support efforts of the Trade Promotion Coordination Committee's national export strategy to reduce requirements on U.S. exporters for exporting to foreign markets where surveillance s

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