Opening doors for EU-Ukraine trade: interview

Stefanos Ioakeimidis is the Team Leader of an EU-funded project

To remove technical barriers to EU-Ukraine trade, the EU launched a Sector Policy Support Programme[1] worth €39 million. The Ministry for Economic Development and Trade is implementing this programme with the support of a Technical Assistance Project, which is also funded by the EU.

We met with the team leader of the Technical Assistance Project, Stefanos Ioakeimidis, and with Dmytro Lutsenko, its Legal Expert, to talk about product safety in Ukraine and the EU, as well as technical regulations, standards and other technical barriers to EU-Ukraine trade.

What do you mean by technical barriers to trade?

Products placed on the market should respect safety rules, which are defined with a complex array of technical regulations, standards, etc. But technical regulations can, on the pretext of safety, be used by states to protect local manufacturers against possible competition from imports. In concrete terms, a state can argue that a product cannot be imported unless it is manufactured according to national technical regulations, because otherwise it is not safe. Here you have a technical barrier to trade.

What are the ways to solve this problem?

Referring to Ukraine, one of the ways to solve the problem is to approximate its system of technical regulation to that of the EU, which is entirely compatible with Ukraine’s obligations regarding World Trade Organisation (WTO) accession. In the EU, the New Approach, in place since 1985, easily and effectively eliminated technical barriers to trade among the EU Member States.

What is the key idea of this New Approach?

There are many. Firstly, it was considered unnecessary to regulate, at the EU level, products posing a low level of risk. Secondly, the legislation was limited to “essential requirements of safety,” based on the potential risks from the product’s use. For example, for an electric appliance, one essential requirement is that a user is not electrocuted if he or she touches it. In contrast, the Old Approach defined every technical detail in the regulation, something extremely difficult to achieve.

Next, standards “translate” the essential requirements into technical terms. Standards at the EU level are adopted by the European Standards Bodies, and are voluntary – I stress this point. The manufacturer can follow the standards to produce his product, in which case the product is assumed to comply with the essential requirements. This is known as “reference to standards,” another key idea of the New Approach. Alternatively, the manufacturer may use own techniques, but then he has the burden of proof of compliance. The voluntary nature of standards has been a main factor of product differentiation and innovation.

Another key element is that the responsibility for complying with the safety requirements is shifted from the state to the manufacturer. The state does not intervene in the design or manufacturing of products, but performs only three functions: 1) the legislative function;  2) accreditation, which ensures that the organisations authorised to verify compliance of products with the essential requirements possess the technical competence for this task, known as “conformity assessment”; and 3) law enforcement through market surveillance.

How would you describe the difference between the Soviet (GOST) standardisation model and the EU standardisation model?

Dmytro Lutsenko is the Legal Expert of the initiative
Dmytro Lutsenko is the Legal Expert of the initiative

In the GOST model, the state acted as designer and manufacturer of products through subsidiary manufacturing companies, and prescribed detailed product design specifications that were expressed as standards. In the EU, the role of the state is limited only to the three functions I mentioned previously. In the GOST model, observance of the standards was compulsory because otherwise the whole production chain could be broken. In the EU, standards are voluntary. I also add that in the EU, there cannot co-exist under the same roof, functions presenting a conflict of interest, for example conformity assessment and market surveillance, which was the case under the GOST model.

Does Ukraine still have this Soviet model, where standards are compulsory?

To a certain extent, unfortunately yes. Ukraine was long ago declared a free market economy, but the tool regulating safety of products is based on ideas and several elements of the “good old system.” Important steps have been taken to change it, but the process was never completed. Ukraine remained in a “perpetual state of transition,” where standards remain compulsory, imposing a bureaucratic burden on the manufacturers.

What should Ukraine do to move away from this heritage of planning economy and get closer to the EU practice?

Firstly a general remark: the President’s plan for economic reforms gives the main directions – it is up to the administration to implement it. It is necessary to complete the legal and regulatory framework, especially in the areas of metrology and standardisation. The mandatory use of standards must be eliminated. In parallel, technical regulations for industrial products must be aligned to the respective European Directives, European harmonised standards must be adopted and conflicting old GOST standards must be withdrawn.

What authorities are responsible for making this decision?

The Cabinet of Ministers decides on Technical Regulations. The national standards body is responsible for adoption of standards, which is currently performed by the Ministry for Economic Development and Trade (MEDT) until the establishment of the new national standards body. The Parliament adopts the laws in the areas of standardisation and metrology.

What would be an optimal institutional solution for Ukraine? Should it have a separate standardisation body? A separate accreditation body?

A separate accreditation body is already established – this was an important step. Separate market surveillance authorities have been established – another important step. A separate national standards body remains to be established for an optimal institutional structure along EU practices. As you see we are quite close, but action should not be delayed.

Should the new standardisation body be independent?

Ideally, it should. In the EU, standardisation is not so much an affair of the state; industry is the main motivating force behind it, together with other stakeholders (consumers, small and medium enterprises, environmentalists, etc.). Standardisation procedure is bottom-up: it starts from interested parties and not from the state. This is another difference with GOST. If Ukraine wants to follow the European model, there should be a higher degree of independence in the production of standards.

* Stefanos Ioakeimidis is the Team Leader of an EU-funded project “Complementary measures to the Sector Policy Support Programme ‘Promoting mutual trade by removing technical barriers to trade between Ukraine and the European Union”. Dmytro Lutsenko is the Legal Expert of this initiative.

[1] Based on policy dialogue and capacity-building, Sector Policy Support programmes integrate EU assistance into the reform strategies of partner countries, such as Ukraine. With support from the EU, Ukraine has set its own development goals and is accountable for its achievements in a sector. EU payments to the government budget are made when the agreed goals are met.