THE ROLE OF QUALITY IN EXPORT COMPETITIVENESS


Dated 09th September 2012

To become and remain competitive in local and foreign markets one must meet challenges in:

Product development. The emphasis is on faster, more systematic quality processes to develop new products that meet rapidly changing global market requirements and customer preferences

Supply and purchasing. Organizations require productive partnerships with suppliers, including outsourcing partnerships in other countries, to take advantage of the globalization of the supply chain

Training and human resources development. Employees must be given quality tools, processes and support to enable them to continuously improve the business and its products

Economics of quality. The costs of achieving customer satisfaction while absorbing the economic pressures of globalization must be systematically measured and managed

Hands-on management. Managers must take a strong, strategic and hands-on approach to continuous management of innovation based on quality.

The concepts of “quality” and “innovation” feature prominently in such challenges. Quality has many dimensions beyond compliance with stated requirements or established standards. It can encompass performance of primary characteristics, including inferred quality or reputation, the probability of malfunction, and the amount of use before the product deteriorates. Therefore, organizations have a key need for:

Comprehensive and up-to-date information on mandatory or “ voluntary ” technical requirements, either clearly specified in standards, or demanded by the market

Capacity building and advisory services to assist in product design and development, international purchasing and supply chain management, quality management including costs, and innovation

Prompt and cost-effective conformity assessment services to provide evidence that products conform to requirements, whether mandatory or “voluntary”.

Innovation is increasingly fundamental to marketing success as global competition toughens. But even the most innovative products must conform with standards, especially those relating to health and safety. Similar arguments apply to products that must integrate with existing systems, particularly in electronics and communication. Conformity with standards, whether mandatory or voluntary, is therefore fundamental to gaining and maintaining market access, and is an essential part of total product quality, whether innovative or not. Mandatory requirements are generally contained in technical regulations and SPS measures, whereas voluntary requirements are found in standards.

Standards requirements, technical regulations and SPS measures differ greatly between products and markets, and can be quite daunting for any exporter or potential exporter. Whereas conformity with standards is a voluntary decision by the supplier, technical regulations and SPS measures have to be complied with by law.

Technical regulations and SPS measures

Governments develop and implement technical regulations and SPS measures for products that could have a damaging effect on the environment, or on the health and safety of the population. Technical regulations comprise requirements that are often comparable to standards for the same products, and administrative provisions that include conformity assessment requirements. SPS measures are similar and must also be considered, especially in the food sector.

All products falling within the scope of these two regulator y areas must comply with requirements as a mandatory or legal obligation. However, since some fall outside the scope, it is very important to establish whether a technical regulation or an SPS measure exists in the target export market for a product or service.

Technical regulations and SPS measures are normally valid for decades rather than years. This is an advantage for the supplier, as compliance must be consistently and continuously applied. But they can also become a barrier to innovation if they do not keep up with technical developments. Nevertheless, all suppliers must provide evidence of compliance. Hence, it can be argued that competitiveness is not determined by compliance with technical regulations or SPS measures, since they lead to a level playing field for all suppliers. However, if products or services do not comply with such requirements, then there is no way the supplier can enter the market. For SMEs in developing economies, they can be a formidable barrier to entry into lucrative developed economy markets. This is especially so of environmental and health regulations requiring complex and expensive conformity assessment services that may not be available locally.

Voluntary and private standards

At the next level are the many regional, national or international standards where conformity may be contractually demanded by the purchaser and therefore becomes a business decision for the exporter.
Formal international standards are an established and proven approach to technological and global challenges. WTO disciplines in using standards as the basis for regulatory measures demand that “international standards” be developed by designated organizations in the case of the SPS Agreement or according to principles for international standards development in the case of the TBT Agreement. Formal international standards, such as those from ISO and the International Electrotechnical Commission (IEC), are prepared following such principles.

A distinction is made between international standards prepared using the principles set out in the WTO Agreements and disciplines established through the Code of Good Practice for the Preparation, Adoption and Application of Standards , and other “ private ” standards that do not adhere to these principles and disciplines. Standards that are developed using processes open to worldwide participation, and that use these principles, are considered to be “international standards”. ISO International Standards are developed within proven structures, operational approaches and participation models detailed in ISO/IEC’s existing directives and development procedures. While other standards may be developed that meet the needs of specific sectors or segments of the population, and may be perfectly valid and relevant for their purpose, they do not adhere to such disciplines, nor do they share other attributes of formal international standards. Several international standards – notably the management system standards ISO 9001 and ISO 14001 – have become extremely important in the manufacturing and service sectors.

The use of international standards in support of public policy and regulation has increased in recent years, as countries have joined the WTO and have begun to apply TBT and SPS Agreement disciplines in using standards as a way of reducing barriers to trade.

Examples of regional standards are those of the European Union (EN), East African Community (EAC) and Southern African Development Community (SADC). Other bilateral and multi-lateral trade arrangements, as well as existing and new regional free trade agreements in different parts of the world, have also been major drivers to adoption of international standards. Organizations or trade areas, such as the Organization for Economic Co-operation and Development (OECD), Asia-Pacific Economic Cooperation (APEC), and Southern Common Market of Argentina, Brazil, Paraguay and Uruguay (MERCOSUR), encourage the use of international standards as a way of fostering trade within their membership, and with the rest of the world.

Standards at national level are too numerous to list, since nearly 150 of the 163 ISO member bodies publish national standards. Fortunately, many are based on international standards, but full equivalence is not always achieved. In many countries, technical regulations are based on national standards or reference them as is. This means that information regarding national standards in target markets remains a key need of any exporter.

International standards are reviewed approximately every five years to ensure they remain useful and relevant. National standards have a similar life cycle.

There is a vast and growing number of non- governmental standards and significant differences in the bodies/organizations that develop them for areas such as governance, development approach and stakeholder engagement. ISO makes a distinction between “formal” international standardizing organizations as described above, and other “private” standards setters. At least three important categories of private standards have evolved in the context of ISO’s work, leading to efforts to harmonize or coordinate them with the ISO standards development system:

Private standards in the information and communication technology (ICT) sectors (consortia and fora)

Private standards from the retail and agri-food industry

Private standards related to social and environmental aspects.

Compliance with private standards is not a legal requirement, but is frequently a precondition for trading with some of the major purchasing groups or retailers in the developed economies. However, certification to these standards can be costly. The market reality is that they are in place, and current or potential exporters to such markets have to pursue compliance in order to be competitive.

Other private standards are those imposed by some of the large multinational retail organizations. These are developed as a consequence of intense competition among retailers and are used to gain a competitive advantage. These retail organization standards have a very short lifespan, typically one to two years, until competitive advantage has diminished and a new one has to be sought. Currently, these standards apply mainly to the food sector, but they may extend to other areas in the future.

New ISO brochure clarifies distinctions between International Standards and “private standards”

The context for the brochure, International Standards and “private standards”, is the concern over the potential of increasing numbers of “private standards” for creating technical barriers to trade and confusion in the market-place as to which standards should be used.

ISO warns that the existence of a growing multitude of private standards in such fields as information and communication technologies, agri-food, and on social and environmental issues, may ultimately confuse users and consumers, thereby diminishing their important market, safety, social or environmental effect.

“In addition,” states ISO, “claims of conformance, using potentially inconsistent methodologies for their assessment, may also undermine the intended impacts of such private standards.”

I
ISO points out in the brochure that its International Standards are developed according to principles stipulated by the World Trade Organization’s Technical Barriers to Trade Committee (WTO/TBT):

Transparency
Openness
Impartiality and consensus
Effectiveness and relevance
Coherence
Addressing the concerns of developing countries.

Other standards developed to meet the needs of specific sectors, or segments of the population, may be perfectly valid and relevant for their purpose, but should not be considered as equivalent to ISO standards because they do not adhere to the above criteria, nor do they share all of the other attributes of formal international standards.

However, because ISO’s voluntary standards do meet these criteria, as do those of its partner organization the International Electrotechnical Commission (IEC), their standards can, for example, be used by governments as technical support for public policy and regulations, particularly in such fields as health, safety and the environment.

“Coherence, harmonization and a closer level of cooperation between the developers of private standards and the formal International Standards system needs to occur,” ISO states in the brochure, concluding, “Ultimately, the goal of one International Standard, one test and one certificate should be pursued in these domains in order to achieve global acceptance, as well as their intended impacts.”

SOURCE: WTO, UNTCAD, ISO

 

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