Quantifying the Impact of Technical Barriers to Trade: A Review of Past Attempts and the New Policy Context

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Quantifying the Impact of Technical Barriers to Trade: A Review of Past Attempts and the New Policy Context+ Keith E. Maskus∗ John S. Wilson** Abstract: This paper provides an overview of the policy debate and methodological issues surrounding product standards and technical barriers to trade. There has been a rising use of technical regulations as instruments of commercial policy in unilateral, regional, and global trade contexts. These non-tariff barriers are of particular concern to developing countries, which may bear additional costs in meeting such mandatory standards. We begin with a review of the policy context driving demand for empirical analysis of standards in trade. We then provide an analytical overview of the role of standards and their relationship to trade. The paper then explains justifications for voluntary standards and mandatory technical regulations. Standards have impacts on both static and dynamic market failures. We review methodological approaches that have been used to analyze standards. The main interest lies in advancing techniques that are practical and may be fruitfully extended to the empirical analysis of standards and trade. The contribution of the paper is to discuss a set of concrete steps that could be taken to move forward a policy-relevant and practical research program of empirical work. Such steps would include (1) administering firm-level surveys in developing countries, (2) devising methods for assessing the trade restrictiveness of standards, and (3) establishing econometric approaches that could be applied to survey and micro data for understanding the role of standards in export dynamics.

Paper prepared for the World Bank Workshop on "Quantifying the Trade Effect of Standards and Technical Barriers: Is it Possible?" April 27, 2000. ∗ Department of Economics, University of Colorado at Boulder, Campus Box 256, Boulder Colorado 80309-0256, and The World Bank, email: Keith.Maskus@colorado.edu. ** Development Research Group (DECRG), The World Bank, 1818 H Street, N.W., Washington, D.C. 20433, email: jswilson@worldbank.org.

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Introduction

The impact of standards and technical regulations on trade is at the forefront of policy discussions.1 This is particularly true in relation to challenges confronting developing nations as they seek to increase production for global export markets. In regard to voluntary standards, such as those in the International Organization for Standardization (ISO) 9000 series on quality for example, developing nations face continued constraints in diffusing best practice information on standards and resources necessary to aid in the adoption of appropriate process and production methods (World Bank 2000). In addition, as traditional trade protection measures such as tariffs, quotas, and voluntary export restraint (VER) agreements have been eliminated throughout the 1990s, barriers to trade reflected in use of domestic technical regulations have become much more important channels through which trade is blocked.2 The success of multilateral liberalization through trade talks ending in conclusion of the Uruguay Round in 1994 has highlighted the importance of non-tariff barriers in national standards. Certainly not all market access commitments in the World Trade Organization (WTO) Agreements concluded in the 1994 have been fully implemented or enforced.3 Nor is it the case that barriers to trade such as subsidies to agricultural production or prohibition on foreign investment in services, for example, have been completely eliminated. It is clear, however, that domestic regulation affecting imports through technical requirements, testing, certification, and labeling represent one of the most important new areas for focus in continuing liberalization efforts. Mandatory regulations imposed by governments at the border can produce serious distortions in commercial markets. Domestic regulatory systems may restrain trade and limit market entry...
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