Experts praise increased flexibility of EU’s technical regulation system

On September 18, experts working on an EU-funded project* discussed Ukraine’s progress in reforming its technical regulation system for non-food products. The reforms are currently taking place as part of the establishment of a deep and comprehensive free trade area (DCFTA) between the EU and Ukraine.

The European system is simple and imposes less of a bureaucratic burden on consumers
The European system is simple and imposes less of a bureaucratic burden on consumers

The initiative will bring Ukraine’s technical regulations and standards closer to those of the EU. Stefanos Ioakeimidis (SI), the project’s team leader, and Dmytro Lutsenko (DL), the project’s legal expert, discussed the reforms in a September 18 webinar, focusing on Ukraine’s current technical regulation system and the ways the country may benefit from adopting European standards.

Read the summary of their remarks below.

On the advantages of the European technical regulation system: SI: There are several advantages of the European technical regulation system. First, it provides for a high level of product safety, but at the same time is dynamic rather than static. The whole system of developing standards and regulations in the EU is conceived to ensure that technological achievements are continuously reflected in the standards. Second, the system’s flexibility promotes innovation and product differentiation. Take mobile phones as an example: today, there are many different models of mobile phones on the market. All of them have to conform to the same standards and the same safety requirements. But thanks to the flexibility of the system, manufacturers produce many different models of phones, each of which corresponds to the needs of particular consumers. Third, the European system is simple and imposes less of a bureaucratic burden on consumers. This translates into lower costs for manufacturers and lower prices for consumers.

On the current Ukrainian system: DL: In contrast to the EU’s flexible system, Ukraine has a very strict technical regulation system. In the EU, and around the world, according to the WTO agreement on technical barriers to trade, the “standard” is a voluntary document. Obligatory requirements are established by documents called “technical regulations,” which only regulate the safety requirements of a product. In Ukraine, this new WTO-aligned legislation, in which standards are considered voluntary, coexists with old legislation, which sets standards as obligatory, imposes strict conditions, and restricts innovation. Within this old system, a producer keen to invent and produce something new can face a situation when an obligatory standard will make this invention impossible.

On obsolete standards. DL : Many current Ukrainian standards were adopted back in the time of the Soviet Union: in the 1960s, 1970s or 1980s. Some of them even date back to the 1930s. This means that, quite often, Ukrainian industry is forced to produce according to old technologies.

On financial burden. DL : In Ukraine, technical regulation is a “normative-legal act” and is free of charge. However, standard is a “normative document” and must be purchased. Therefore its obligatory status imposes an additional financial burden on the manufacturer.

On excessive duplication of functions. DL : In Ukraine, similar products are subject to different regulatory regimes. This means that various documents, written by various people at different times, regulate the production of very similar goods. These norms are often conflicting while they are also obligatory, making the business constantly “guilty” of infringement.

On paper mentality. DL : A “paper mentality” is dominant today in Ukraine. This means that governing bodies control paper instead of goods. Goods themselves are only rarely checked; instead, the controlling body checks if all relevant certificates or declarations have been obtained.

On conflicts of interest. DL : In Ukraine’s current system, a single body can maintain functions that would be seen as incompatible under a genuine system of rule of law. For example, a body can perform a regulatory function (determine the rules), commercial function (conduct a paid inspection checking if an enterprise is adhering to the rules), and controlling function (conduct a state inspection). These functions are clearly incompatible as they create a conflict of interest.

On challenges to the current Ukrainian system. DL : First, within the current system, consumers remain unprotected because controlling bodies inspect papers instead of goods. Second, prices for goods remain high: manufacturers need to pay for numerous certificates, approvals and inspections from different bodies, and these costs are included in the price of the product. Third, Ukraine experiences serious delays in adopting new technologies: it is difficult for a manufacturer to achieve a technological breakthrough when many different controlling bodies must evaluate every invention.

On the benefits of Ukraine’s approximation to the European system. DL : First, the European technical regulation system will provide flexibility. It provides a reasonable balance between state regulation and satisfying citizens’ needs. Second, European standards have huge potential for modernization: when the system is flexible, it creates room for innovation. Third, the current Ukrainian system is not trusted abroad; by contrast, the European system is respected internationally. When Ukraine moves toward the EU system, its exports into the EU and worldwide will not have to be checked both in Ukraine and abroad. Fourth, Ukrainian manufacturers will save funds that currently go toward paying for expertise, certification, and other bureaucratic procedures. Fifth, consumers will be better protected: the European system will ensure the safety of goods rather than simply the availability of relevant papers or certificates. Consumers will also get more choice on the market and will enjoy a price decrease.

SI: With Ukraine’s adoption of the EU technical regulations system, Ukrainian products will be treated on EU markets in exactly the same way as EU products. This will create increased opportunities for exports, investments, and growth for Ukrainian industries.

*The 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’” aims at supporting the elimination of technical barriers to EU-Ukraine trade. It has recently launched online discussions to initiate dialogue with Ukrainian citizens.

The recording of the webinar is now available on the project’s website: http://no-trade-barriers.com/