Raising the Bar on Products and Process Standards: Economic Principles

Raising the Bar on Products and Raising the Bar on Products and Process Standards:Process Standards:Economic PrinciplesEconomic Principles

J. Christophe BureauJ. Christophe BureauInstitut National Agronomique, ParisInstitut National Agronomique, Paris

The World Bank, 2003The World Bank, 2003

OverviewOverview DefinitionsDefinitions Economics of standardsEconomics of standards The political economy of standardsThe political economy of standards The role of standards in the process of The role of standards in the process of

market integration, trade and market integration, trade and economic developmenteconomic development

ConclusionConclusion

DefinitionsDefinitions Standards, technical regulations and Standards, technical regulations and

other termsother terms Types of standardsTypes of standards Examples of standardsExamples of standards Different roads leading to a standardDifferent roads leading to a standard International standards and International standards and

standardization bodiesstandardization bodies

Standards, technical Standards, technical regulations and other termsregulations and other terms

""Standard" (Standard" ("norme""norme")): broad meaning in : broad meaning in the general languagethe general language

More restrictive meaning in official and More restrictive meaning in official and technical languages: refers to something technical languages: refers to something voluntary voluntary

Mandatory standards are called Mandatory standards are called "technical regulations" ("technical regulations" ("réglements "réglements techniques"techniques"))

Standards, technical Standards, technical regulations (2)regulations (2)

Standards provide "rules guidelines, or Standards provide "rules guidelines, or characteristics for activities or their results, characteristics for activities or their results, aimed at the achievement of the optimum aimed at the achievement of the optimum degree of order in a given context" (ISO)degree of order in a given context" (ISO)

Standards include various layers of "quality Standards include various layers of "quality insurance institutions": rule making, insurance institutions": rule making, conformity assessment, accreditationconformity assessment, accreditation

Standards, technical Standards, technical regulations (3)regulations (3)

Rule making: development of technical Rule making: development of technical specificationsspecifications

Conformity assessment: ensures that Conformity assessment: ensures that one complies with requirementsone complies with requirements

Accreditation/recognition: ensures that Accreditation/recognition: ensures that the conformity assessment worksthe conformity assessment works

Labels and conduct codes are special Labels and conduct codes are special casescases




Types of standardsTypes of standards Various typologies including according to:Various typologies including according to:

Area addressed: technical, environmental, Area addressed: technical, environmental, sanitary and phytosanitary, labor standards, sanitary and phytosanitary, labor standards, etc.etc.

Economic impact: Economic impact: Compatibility Compatibility (network (network effects)effects), minimum quality and interface , minimum quality and interface (information)(information), variety reduction , variety reduction (minimize (minimize wasteful proliferation)wasteful proliferation), information and , information and measurement measurement (compatibility and risk of (compatibility and risk of litigation) litigation) standardsstandards

Types of standards (2)Types of standards (2) A distinction particularly relevant in trade A distinction particularly relevant in trade

issues: Product standards issues: Product standards vs vs Process and Process and Production Methods standardsProduction Methods standards

Specific treatment of process standards in Specific treatment of process standards in multilateral trade agreements (GATT)multilateral trade agreements (GATT)

However, hazy area between products However, hazy area between products and process standards often causes trade and process standards often causes trade disputesdisputes




Examples of standardsExamples of standards Technical standards include:Technical standards include:

standards sanctioned by an accredited standards sanctioned by an accredited standards body standards body

““de facto” standards de facto” standards (Microsoft Windows; (Microsoft Windows; Video cassette recorders)Video cassette recorders)

““ad hoc” standards“ or “consensus” ad hoc” standards“ or “consensus” standards (widely used by mutual standards (widely used by mutual agreement; agreement; non proprietary Digital Video non proprietary Digital Video Disks standards)Disks standards)

Examples of standards (2)Examples of standards (2) Sanitary and phytosanitary standards: Sanitary and phytosanitary standards:

Protection of human health, animal Protection of human health, animal health, flora and fauna health, flora and fauna

Bans, quarantine regulations, inspection Bans, quarantine regulations, inspection of products, specific treatment or of products, specific treatment or processing of products, maximum processing of products, maximum allowable levels of residues, etc. allowable levels of residues, etc.

Examples of standards (3)Examples of standards (3) Environmental standardsEnvironmental standards

Some mandatory, but many voluntarySome mandatory, but many voluntary Some international Some international (ISO 14000, Forest (ISO 14000, Forest

Stewardship Council, etc.)Stewardship Council, etc.) Many national standards Many national standards (Canadian (Canadian

Forest Management System Standard; Forest Management System Standard; New Zealand Forest Accord; Finnish New Zealand Forest Accord; Finnish Certification Standard; Living Forest Certification Standard; Living Forest Project in Norway, etc.)Project in Norway, etc.)

Examples of standards (4)Examples of standards (4) Labor standardsLabor standards

Typically a process standardTypically a process standard No international agreement, but a core of No international agreement, but a core of

United Nations standards; Often poorly United Nations standards; Often poorly enforcedenforced

Can lead to the exclusion of certain countries Can lead to the exclusion of certain countries from international agreements from international agreements (Myanmar)(Myanmar)

Pressures may create a de facto standard Pressures may create a de facto standard (child labor in garments in Bangladesh)(child labor in garments in Bangladesh)

Examples of standards (5)Examples of standards (5) Broader ethical standardsBroader ethical standards

Reflect new concerns of citizensReflect new concerns of citizens Combine environment, labor, and possibly Combine environment, labor, and possibly

other ethical values other ethical values (SA8000)(SA8000) Animal welfare standards (e.g. EU Animal welfare standards (e.g. EU

regulations)regulations) Fair trade standards Fair trade standards (Max Havelaar)(Max Havelaar) No international agreement, source of No international agreement, source of

disputes between countriesdisputes between countries




Different roads leading to a Different roads leading to a standardstandard

Mandatory standards often government Mandatory standards often government defined; Voluntary standards have defined; Voluntary standards have public or private originpublic or private origin

Manufacturers, users, research Manufacturers, users, research organizations, government, consumers, organizations, government, consumers, work together to create standards work together to create standards

National standardization bodies National standardization bodies coordinate standard settingcoordinate standard setting

Different roads (2)Different roads (2) Examples: Examples:

American National Standards Institute (ANSI) American National Standards Institute (ANSI) British Standards Institution (BSI);British Standards Institution (BSI); European Committee for Standardization European Committee for Standardization

(CEN)(CEN) German Institute for Standardization (DIN)German Institute for Standardization (DIN) French AFNOR; French AFNOR; Standards Australia, etc.Standards Australia, etc.

Different roads (3)Different roads (3) Widespread use of voluntary standards Widespread use of voluntary standards

sometimes makes them mandatorysometimes makes them mandatory National and international regulations National and international regulations

rely on voluntary, sometimes private, rely on voluntary, sometimes private, standardsstandards

Private standards may use public or Private standards may use public or non profit association standards non profit association standards (electric (electric standards using fire hazards codes)standards using fire hazards codes)




International standards and International standards and standardization bodiesstandardization bodies

Growing importance of international Growing importance of international standards because of globalizationstandards because of globalization

International institutions setting International institutions setting standards standards (Codex Alimentarius)(Codex Alimentarius)

Coordination in international fora Coordination in international fora (APEC)(APEC); mutual recognition; mutual recognition

International federation and International federation and management of voluntary standards management of voluntary standards (ISO)(ISO)

International standards (2)International standards (2) The ISO:The ISO:

Non governmental; Worldwide federation Non governmental; Worldwide federation of 146 national standard bodiesof 146 national standard bodies

Promotes standardization to facilitate Promotes standardization to facilitate tradetrade

2937 technical bodies; Staff of 500; 2937 technical bodies; Staff of 500; 30000 experts participating a year30000 experts participating a year




Economics of standardsEconomics of standards Useful economic conceptsUseful economic concepts Desirable economic effects of Desirable economic effects of

standardsstandards Potential problems with standardsPotential problems with standards Strategic use of standardsStrategic use of standards Economic rationale of government Economic rationale of government

intervention in standard settingintervention in standard setting The role of market forcesThe role of market forces

Useful economic conceptsUseful economic concepts Quality includes several product Quality includes several product

attributes (Lancaster). Valued with attributes (Lancaster). Valued with different weights by consumersdifferent weights by consumers

Lack or economic operability of the Lack or economic operability of the concept, leads to distinguish vertical concept, leads to distinguish vertical and horizontal product differentiation and horizontal product differentiation

Quality refers to vertical, horizontal Quality refers to vertical, horizontal refers to "variety" refers to "variety"

Useful economic concepts Useful economic concepts (2)(2)

"Socially optimal quality" balances costs "Socially optimal quality" balances costs of higher quality and benefits for of higher quality and benefits for consumers consumers Example of product safety, when marginal Example of product safety, when marginal

cost of risk reduction increases. Defines of cost of risk reduction increases. Defines of optimal level of safety (Antle, Viscusi)optimal level of safety (Antle, Viscusi)

"Optimal environmental quality" based on "Optimal environmental quality" based on equalization or marginal pollution abatement equalization or marginal pollution abatement costs and marginal damage provides an costs and marginal damage provides an economic basis for setting a standard economic basis for setting a standard


Economies of scale. Economies of scale. Internal (e.g. fixed Internal (e.g. fixed costs) and external (e.g. cluster of costs) and external (e.g. cluster of industries)industries)

Network economies Network economies The value of a product for consumers The value of a product for consumers

increase with the number of consumers of increase with the number of consumers of compatible product compatible product (fax machines)(fax machines)

The value of the base product is enhanced The value of the base product is enhanced as the variety of compatible products as the variety of compatible products increases increases (CD player and CDs)(CD player and CDs)


Imperfect information: search goods, Imperfect information: search goods, experience goods and credence goodsexperience goods and credence goods

Moral hazard and adverse selection Moral hazard and adverse selection (important for safety standards, (important for safety standards, standards ensuring fairness of trade)standards ensuring fairness of trade)

Social costs of imperfect information Social costs of imperfect information generating market inefficienciesgenerating market inefficiencies




Desirable economic effects Desirable economic effects of standardsof standards

Standards define the technology; Standards define the technology; Enhance innovationEnhance innovation

Change in use of inputs; Changes in Change in use of inputs; Changes in modes and forms of organisation in modes and forms of organisation in production production (quality management standards)(quality management standards)

Increase skill requirements; "race to the Increase skill requirements; "race to the top" in terms of quality requirementstop" in terms of quality requirements

Desirable economic effects Desirable economic effects (2)(2)

Ensure product compatibilityEnsure product compatibility (compatibility and interface in information (compatibility and interface in information technology)technology)

Division of labor; Improves Division of labor; Improves coordination of production and coordination of production and distributiondistribution

Reduce transaction costs, between Reduce transaction costs, between firms and with consumer, and lowers firms and with consumer, and lowers risks, including risks of litigationrisks, including risks of litigation


Economies of scale Economies of scale ((componentscomponents)). . Larger market essential in industries Larger market essential in industries with large fixed costswith large fixed costs

Standards create credibility, focus and Standards create credibility, focus and critical mass in markets for new critical mass in markets for new technologies technologies

Increase globalization of markets Increase globalization of markets (mutual recognition, harmonization)(mutual recognition, harmonization)


Provide information to consumers Provide information to consumers (minimum quality standards)(minimum quality standards)

Generate trust Generate trust (safety standards; voluntary (safety standards; voluntary process standards for credence goods)process standards for credence goods)

Increase consumer awareness and Increase consumer awareness and concerns concerns (environmental standards; ethical (environmental standards; ethical standards)standards)


Overall, significant economic impacts on:Overall, significant economic impacts on: Macroeconomic growth, in spite of lack of Macroeconomic growth, in spite of lack of

precise measurement (German study: 0.9 precise measurement (German study: 0.9 points out of 3.3 of GDP)points out of 3.3 of GDP)

Integration into a global market Integration into a global market (electronics (electronics in South Asia)in South Asia). Obviously a necessary but not . Obviously a necessary but not sufficient conditionsufficient condition

Quality improvement Quality improvement (accessing countries to (accessing countries to the EU)the EU)




Potential problems with Potential problems with standardsstandards

Standards not always well defined Standards not always well defined (standards that involve a negative (standards that involve a negative environmental balance)environmental balance)

Can drive the whole economy into Can drive the whole economy into technical errors technical errors (fire hazard standards and (fire hazard standards and asbestos)asbestos)

Can be set at a level that is not socially Can be set at a level that is not socially optimal optimal (environmental standards, under (environmental standards, under uncertainty on costs and damages)uncertainty on costs and damages)

Potential problems (2)Potential problems (2) Can limit market coverageCan limit market coverage

Minimum quality standards, or de facto Minimum quality standards, or de facto requirementsrequirements (airbags) (airbags) may raise product may raise product prices prices

May prevent a fringe of some consumers May prevent a fringe of some consumers to access lower quality but cheaper to access lower quality but cheaper products products (cars in Europe)(cars in Europe)

Can impose a particular burden on Can impose a particular burden on small enterprisessmall enterprises

Potential problems (3)Potential problems (3) Proliferation of standards inefficient. Proliferation of standards inefficient.

Lack of "standardization of standards" Lack of "standardization of standards" costly costly (US estimates of costs associated to (US estimates of costs associated to complying to various national standards complying to various national standards between bn$ 20 and 40 a year)between bn$ 20 and 40 a year)

Like patents, standards may have a Like patents, standards may have a dissuasive effect on innovationdissuasive effect on innovation

This may involve costs for consumersThis may involve costs for consumers




Strategic use of standardsStrategic use of standards Standards can lead to strategic Standards can lead to strategic

behavior and can be used as barriers behavior and can be used as barriers to entry against competitors or foreign to entry against competitors or foreign firmsfirms

Standard setting can provide Standard setting can provide opportunities for collusion (Shapiro)opportunities for collusion (Shapiro)

Governments may use standards to Governments may use standards to favor domestic firmsfavor domestic firms

Strategic use of standards Strategic use of standards (2)(2)

Case for strategic use of standards Case for strategic use of standards firms well documented in academic firms well documented in academic literature:literature: Standards can serve to segment marketsStandards can serve to segment markets Strategic incompatibility of standards can Strategic incompatibility of standards can

be used for organizing market powerbe used for organizing market power Variety reduction standards may facilitate Variety reduction standards may facilitate

oligopolistic coordination within a carteloligopolistic coordination within a cartel Standards used by an oligopoly to Standards used by an oligopoly to

discipline a potential competitordiscipline a potential competitor

Strategic use of standards Strategic use of standards (3)(3)

Academic literature shows complex Academic literature shows complex interaction between competition and interaction between competition and informational effects of standards. informational effects of standards. Strategic standard setting may backfireStrategic standard setting may backfire

Shapiro and Varian: Shapiro and Varian: "Winning a battle of "Winning a battle of standards depends on intellectual property standards depends on intellectual property rights, control over and installed base of users, rights, control over and installed base of users, ability to innovate, first mover advantages, ability to innovate, first mover advantages, manufacturing abilities, strength in manufacturing abilities, strength in complements and on brand name and complements and on brand name and reputation..."reputation..."




Economic rationale of Economic rationale of government interventiongovernment intervention

The regulator has to arbitrate between The regulator has to arbitrate between imposing standards in order to :imposing standards in order to : address informational market inefficienciesaddress informational market inefficiencies impose a socially optimal quality to an impose a socially optimal quality to an

oligopoly that would not do so oligopoly that would not do so spontaneouslyspontaneously

And the risk that the standards And the risk that the standards imposed limit competition, be imposed limit competition, be eventually detrimental to consumerseventually detrimental to consumers

Government intervention Government intervention (2)(2)

Antitrust bodies have frequently ruled Antitrust bodies have frequently ruled against strategic standards setting against strategic standards setting that is detrimental to the society as a that is detrimental to the society as a whole whole (US macaroni in the 1960s to recent (US macaroni in the 1960s to recent computer standards using patents)computer standards using patents)

However, in some cases the trade-offs However, in some cases the trade-offs betwen the "bads" and the "goods" of betwen the "bads" and the "goods" of a standard is not obviousa standard is not obvious (e.g. (e.g. governments hesitations on GM food in governments hesitations on GM food in Europe)Europe)




The role of market forcesThe role of market forces Self control of quality can be based on Self control of quality can be based on

market forcesmarket forces Reputation may be a powerful instrument Reputation may be a powerful instrument

that can replace command and control that can replace command and control instruments in case of product safety instruments in case of product safety (e.g. brand name)(e.g. brand name)

Voluntary standards, codes of conducts, Voluntary standards, codes of conducts, certification can be effective tools for certification can be effective tools for ensuring that products are of high qualityensuring that products are of high quality

The role of market forces The role of market forces (2)(2)

Informational instruments can be a good Informational instruments can be a good substitute for mandatory regulation substitute for mandatory regulation (unpasteurized cheese)(unpasteurized cheese)

Market based regulation is often less costly Market based regulation is often less costly than command and control regulationthan command and control regulation

It can also be more relevant (firms have It can also be more relevant (firms have more information on processes and costs)more information on processes and costs)

Voluntary and informational instruments Voluntary and informational instruments leave consumers freedom to choseleave consumers freedom to chose


Rather than costly inspection and Rather than costly inspection and control, liability can be a powerful way control, liability can be a powerful way to ensure that firms do not sell to ensure that firms do not sell hazardous or tainted producthazardous or tainted product

The issue is however linked to the The issue is however linked to the existing legal system (e.g. the existing legal system (e.g. the existence of punitive damages)existence of punitive damages)


However, market based instruments However, market based instruments are not appropriate in all cases. There are not appropriate in all cases. There are many cases where mandatory are many cases where mandatory standards are needed or usefulstandards are needed or useful

Consumers trust implicitly come from Consumers trust implicitly come from the knowledge that the government the knowledge that the government will not tolerate tainted/hazardous will not tolerate tainted/hazardous product to be soldproduct to be sold


Reputation based instruments are not Reputation based instruments are not effective for credence goods, or for effective for credence goods, or for experience goods where a damage experience goods where a damage appears much later in time appears much later in time (cancer (cancer inducing residues)inducing residues)

Self discipline through liability runs Self discipline through liability runs into organized insolvency (into organized insolvency (judgment judgment proofproof). Less effective for imported ). Less effective for imported goods goods (environment, GM crops)(environment, GM crops)




Political economy of Political economy of standardsstandards

Driving forces behind standardsDriving forces behind standards Growing interactions in standard Growing interactions in standard

settingsetting Interest groups influencing standardsInterest groups influencing standards

Driving forces behind Driving forces behind standardsstandards

Socio-economic changes Socio-economic changes (urbanization (urbanization and relationship to agriculture/food)and relationship to agriculture/food) Increase in income: risk less acceptedIncrease in income: risk less accepted Globalization: less familiar products on the Globalization: less familiar products on the

shelvesshelves New concerns (ethics, environment, New concerns (ethics, environment,

animal welfare, etc.)animal welfare, etc.) All these factors are leading to a All these factors are leading to a

demand of more standards, regulationsdemand of more standards, regulations




Growing interactions inGrowing interactions in standard setting standard setting

Increasing interaction of the various Increasing interaction of the various stakeholders in standard settingstakeholders in standard setting

Public and international standards rely Public and international standards rely on industry standards and vice versaon industry standards and vice versa (e.g. ISO and EU directives)(e.g. ISO and EU directives)

Non governmental organization Non governmental organization standards serving as a basis for standards serving as a basis for voluntary / private as well as voluntary / private as well as mandatory / public standardsmandatory / public standards

Growing interactions (2)Growing interactions (2) Mandatory / public standards are Mandatory / public standards are

becoming less constraining that becoming less constraining that voluntary standardsvoluntary standards

Voluntary standards de become de Voluntary standards de become de facto mandatory because imposedfacto mandatory because imposed by firms to suppliers by firms to suppliers (Ford and ISO 14001)(Ford and ISO 14001) by retailers by retailers (animal welfare in the UK)(animal welfare in the UK) by consumers by consumers (dolphin safe tuna in the US)(dolphin safe tuna in the US)




Interest groups influencing Interest groups influencing standardsstandards

Scientists and engineers still play a major Scientists and engineers still play a major role in standard settingrole in standard setting

However, even in public and international However, even in public and international institutions, scientists are subject to institutions, scientists are subject to growing economic and political pressuresgrowing economic and political pressures

Typically the case in food when Codex Typically the case in food when Codex Alimentarius standards became the Alimentarius standards became the reference for solving commercial reference for solving commercial disputesdisputes

Interest groups (2)Interest groups (2) Firms influent in public institutions of Firms influent in public institutions of

standard setting standard setting (Codex Alimentarius (Codex Alimentarius committees)committees)

UUnions lobbying for standards nions lobbying for standards (work (work safety standards)safety standards)

Consumers more present in standard Consumers more present in standard setting vociferous setting vociferous (food safety)(food safety)

Environmental groups develop Environmental groups develop significant activity of certificationsignificant activity of certification (organic, forestry)(organic, forestry)

Interest groups (3)Interest groups (3) Other NGOs on ethical issuesOther NGOs on ethical issues (animal (animal

welfare, human rights, fair trade)welfare, human rights, fair trade) Shareholders concerned by public Shareholders concerned by public

image image (environmental standards)(environmental standards) Pressure of citizens echoed by Pressure of citizens echoed by

governments standards governments standards (mandatory (mandatory disclosure, accounting, environmental disclosure, accounting, environmental reports) reports)

Interest groups (4)Interest groups (4) Concerns of appropriation of standard Concerns of appropriation of standard

setting by vested interestssetting by vested interests NGOs criticizing choice of standards NGOs criticizing choice of standards

favorable to firms rather consumers or favorable to firms rather consumers or environment environment (Codex; ISO)(Codex; ISO)

Pressure for protectionist standardsPressure for protectionist standards Concerned consumers' demands Concerned consumers' demands

converging with protectionist interests converging with protectionist interests make the issue difficult to unravel make the issue difficult to unravel (child (child labor)labor)




Standards, market Standards, market integration, trade and integration, trade and

developmentdevelopment The trade facilitating role of standardsThe trade facilitating role of standards Harmonization and mutual recognitionHarmonization and mutual recognition Standards as non tariff barriersStandards as non tariff barriers

Trade facilitationTrade facilitation Standards have a major role in Standards have a major role in

facilitating exports and in the global facilitating exports and in the global marketmarket

Product compatibility make trade Product compatibility make trade possiblepossible

Standards restore trust of consumers Standards restore trust of consumers on quality of unfamiliar importson quality of unfamiliar imports

Standards reduce international Standards reduce international transaction costs transaction costs

Trade facilitationTrade facilitation By raising requirements, quality By raising requirements, quality

standards on the world market pull the standards on the world market pull the general level of the industry. This is an general level of the industry. This is an indirect, but considerable, effect of indirect, but considerable, effect of participation to the world marketparticipation to the world market

However, the cost of complying to However, the cost of complying to international standards is a selection international standards is a selection instrument, between countries and instrument, between countries and firmsfirms

Trade facilitationTrade facilitation However, the standards that enhance However, the standards that enhance

trade are mainly:trade are mainly: Product, rather than process, standardsProduct, rather than process, standards International standardsInternational standards

In other cases, standards may actually In other cases, standards may actually act as a barrier to tradeact as a barrier to trade



Harmonization and mutual Harmonization and mutual recognitionrecognition

Harmonization of standards at the Harmonization of standards at the international level is a major drive for international level is a major drive for tradetrade

Estimates (Estimates (Moenius): 1% rise in shared Moenius): 1% rise in shared standards between the US and trading standards between the US and trading partners would raise U.S. trade by $6 bnpartners would raise U.S. trade by $6 bn

Full harmonization often too costlyFull harmonization often too costly Mutual recognition is an alternative Mutual recognition is an alternative

(basis of EU standard policy)(basis of EU standard policy)

Harmonization (2)Harmonization (2) If lack of international harmonization / If lack of international harmonization /

recognition: standards may impedes traderecognition: standards may impedes trade Design of products for a given market, difficult to Design of products for a given market, difficult to

export is standards differexport is standards differ Conformity assessment may be a large barrier to Conformity assessment may be a large barrier to

trade (administrative costs, delays, etc.)trade (administrative costs, delays, etc.) Particularly a problem for some developing Particularly a problem for some developing

countries lacking skilled labor and capitalcountries lacking skilled labor and capital Particularly a problem for small enterprisesParticularly a problem for small enterprises



Standards as non tariff Standards as non tariff barriersbarriers

Some countries seem to use deliberately Some countries seem to use deliberately domestic standards in order to restrict domestic standards in order to restrict importsimports

Several international disputes brought to Several international disputes brought to the World trade organization, especially the World trade organization, especially in the agricultural/food sectorin the agricultural/food sector

There are ongoing problems such as the There are ongoing problems such as the EU-US disputes on GM standards, and the EU-US disputes on GM standards, and the EU-Australian dispute on sanitary EU-Australian dispute on sanitary standardsstandards

Non tariff barriers (2)Non tariff barriers (2) Since 1994, a more efficient mechanism Since 1994, a more efficient mechanism

for dispute settlement relyies on for dispute settlement relyies on scientific elements and international scientific elements and international standards through the SPS and TBT standards through the SPS and TBT agreementsagreements

Because it is difficult to distinguish Because it is difficult to distinguish genuine protection of citizens, flora and genuine protection of citizens, flora and fauna from protectionist measures, fauna from protectionist measures, there is still scope for disagreement there is still scope for disagreement




ConclusionConclusion Standards can have a considerable Standards can have a considerable

role of facilitating trade, make market role of facilitating trade, make market integration possible and contribute to integration possible and contribute to growthgrowth

They can be beneficial to consumers They can be beneficial to consumers by lowering production costs, facilitate by lowering production costs, facilitate trade and reduce informational market trade and reduce informational market inefficienciesinefficiencies

Conclusion (2)Conclusion (2) However, the standard setting However, the standard setting

procedure can lead to poorly defined procedure can lead to poorly defined standards, strategically set standards, standards, strategically set standards, or standards that protect vested or standards that protect vested interests, including protectionist interests, including protectionist standardsstandards

This can result in costs for consumers This can result in costs for consumers

Conclusion (3)Conclusion (3) Market based standards can me more Market based standards can me more

cost effective than mandatory public cost effective than mandatory public standards, but the latter are necessary standards, but the latter are necessary in some casesin some cases

Trade facilitating standards tend to be Trade facilitating standards tend to be international (rather than domestic) international (rather than domestic) standards, and product (rather than standards, and product (rather than process) standardsprocess) standards

Documents

Raising the Bar on Products and Process Standards: Economic Principles