Advisory ToolkiT 2 – FebruAry 2014

product standardsand international trade negotiationsa practical guide

Written by Ben shepherd. the author is grateful to the following for many helpful discussions:Bernard Hoekman, pablo Jenkins, Michael Johnson, petros Mavroidis, ilmari soininen, Melvinspreij, gretchen stanton, Hanna Vitikkala, and erik Wijkstrom.

Front cover photograph: Martin roemers/panos

this material has been funded by uK aid from the uK government. However the views expresseddo not necessarily reflect the uK government’s official policies.

this toolkit is provided solely for educational purposes. neither the author nor the publisheroffer it as professional services advice. While best efforts have been used in preparing this book,the author and publisher assume no liabilities of any kind with respect to the contents. neitherthe author nor the publisher shall be held liable or responsible to any person or entity withrespect to any loss or incidental or consequential damages caused, or alleged to have beencaused, directly or indirectly, by the information contained herein. Views expressed in thepublication are the author’s own and HM government is not bound by them.

© trade advocacy Fund 2014

For more information, please visit the trade advocacy Fund website atwww.tradeadvocacyfund.com.

Contents

About TAF 2

executive summary 4

using the standards Toolkit 6

PArT oNe: 7introduction

1. What are standards? 7 2. How do standards affect trade 7

and development?

PArT TWo: 10economic rationale, typology, and national standards infrastructure

1.What are standards used for? 102.What are the different types of standards? 133.How can a country develop its 16

own standards?

PArT THree: 19Policy approaches to dealing with the trade impacts of standards

1. Harmonization and recognition 202. Multilateral approaches 213. unilateral and preferential approaches 26

PArT Four: 30standards-related technical assistance and capacity building

PArT Five: 34key takeaways and questions for trade negotiations dealing with standards

1. Key takeaways? 34 2. Key questions for standards-related 35

trade negotiations

references and further resources 37

Glossary

ACP: african, caribbean, and pacific countries

AfT: aid for trade

ANsi: american national standards institute

AseAN: association of southeast asian nations

CAC: codex alimentarius commission

CeN: european committee for standardisation

dTis: diagnostic trade integration study

eiF: enhanced integrated Framework (Wto, World Bank,iMF, itc, unctad and undp)

ePA: economic partnership agreement

eu: european union

FAo: Food and agriculture organisation

GATT: general agreement on tariffs and trade

GvC: global value chain

iPPC: international plant protection convention

iso: international organisation for standardisation

iTC: international trade centre

ldC: least developed country

liC: low income country

MrA: Mutual recognition agreement

NGo: non-governmental organisation

oAs: organisation of american states

oie: World organisation for animal Health

PTA: preferential trade agreement

sPs: sanitary and phyto-sanitary

sTdF: standards and trade development Facility

TbT: technical barriers to trade

uN: united nations

uNido: united nations industrial developmentorganisation

usA: united states of america

WHo: World Health organisation

WTo: World trade organisation

2

international trade agreements are complex, covering many economic, technical and legal issues. countriesparticipate in and implement different types of trade negotiations, whether directly with one another or within andaccording to the rules of multilateral institutions. each category of negotiations poses different demands andchallenges.

developing countries often face limited human, financial and technical resources. sometimes they require support todevelop trade policy positions and negotiate beneficial trade deals. they may lack access to expert trade policyanalysis and negotiation skills, limiting their opportunities to secure international agreements which would supporttheir country’s development.

the united Kingdom department for international development (dFid) has established the trade advocacy Fund(taF) to provide short-term, demand-driven, hands-on support to trade policy makers and negotiators in eligiblecountries, communities and organisations.

taF assistance responds specifically to the real, practical needs of the applicant country. the Fund provides:

impartial information, analysis and advice on the technical and legal aspects of trade negotiations and disputes,●and on formulating negotiating positions;

training, capacity building and internships for relevant officials and organisations;●

limited logistical support to participate in negotiations, disputes and key policy meetings.●

taF also publishes a series of toolkits that provide developing countries with step-by-step guidance on key aspects ofinternational trade negotiations. see www.tradeadvocacyfund.com for details.

taF is managed on behalf of dFid by a dedicated Fund Manager (FM): crown agents and saana consulting.

Technical assistance and strategic planning for negotiations

countries need to participate in different types of trade negotiations. such negotiations do not only take place in themajor multilateral trade bodies such as the World trade organisation (Wto). there are many international bodies thatnegotiate for and administer agreements on highly technical matters such as industrial and health standards,intellectual property (ip) protection, air and sea transport, environmental protection, labour standards, customsprocedures and so on, which have direct and immediate impacts on trade. Members have to implement theobligations which they accept under those agreements. each category of negotiations poses different demands andchallenges. taF assistance is tailored to match the specific demands of the applicant country in relation to actual orplanned negotiations. it responds to real, practical needs.

this toolkit is designed to guide you on one aspect of those negotiations that is becoming increasingly important:product standards.

ABOUT TAF

3

there are a number of key decision points where a lack of technical expertise or institutional capacity can have asignificant negative impact on the implementation of trade strategy. the trade advocacy Fund has been specificallydesigned to assist low-income developing countries in addressing technical and capacity development gaps.examples of activities that taF could support include:

1. specialized training in policy analysis and strategic planning

2. assistance with preparation of economic and legal analyses related to specific trade negotiations

3. policy research on specialized trade strategy topics

4. inter-departmental planning and coordination for trade and trade-related ministries

5. Hands-on advice and assistance with preparing negotiating positions

6. Financial assistance for short-term attendance at trade negotiation sessions.

The Trade Advocacy Fund has beenspecifically designed to assist low-income developing countries inaddressing technical and capacitydevelopment gaps

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4

What are product standards?

product standards are documents that set outcharacteristics which products, processes or systems arerequired or encouraged to meet. typically, productstandards are not designed with trade in mind. they areusually related to the pursuit of legitimate social aimssuch as consumer protection or environmentalprotection. in most cases, standards are aboutprotection, not protectionism.

standards are developed and implemented through acomplex national infrastructure, which involves avariety of actors and stakeholders from the public andprivate sectors. they come in a variety of types.

Mandatory standards are sets of product characteristicsthat producers must comply with in order to sell theirgoods legally in a particular market. Many countries,particularly developed ones, have seen a gradual moveaway from mandatory standards over recent decades,but they remain important in some sectors. examplesinclude standards dealing with chemical residues infood for human consumption, and standards governingthe requirements that must be met by medicines beforethey can be put on the market.

voluntary standards, by contrast, are sets of productcharacteristics that producers may choose to complywith, but compliance is not a legal requirement. suchstandards are very numerous – perhaps tens ofthousands – in developed countries, and in somedeveloping countries. they cover all sectors. althoughcompliance is voluntary, it is often a commercialnecessity, particularly in the context of global andregional value chains in which there is a strong need forstandardised intermediate and final products.

Why and how do product standards affecttrade?

although they are not primarily about trade in mostcases, standards can still have significant trade effects.this toolkit is designed to provide trade negotiators andstakeholders – including other government officials, theprivate sector, and civil society – with a basic overview ofthe trade effects of standards, and the policies that havebeen developed to deal with those effects.

the main reason why product standards can have trade

effects is that when they differ across countries,producers in the exporting country may need to complywith foreign standards in order to achieve real marketaccess. this process can be costly. in many developingcountries technical and financial capacity may belacking, with the result that producers find themselvesunable to export to markets of potential interest.

standards do not only have negative effects, however. inaddition to advancing legitimate social objectives in theimporting country, they can sometimes have positiveeffects on exporting countries too. these effects – suchas technological upgrading and productivityimprovement – are usually felt over the medium to longterm. the potential costs of standards – the need toadapt and the risk of losing market share – are felt in theshort term. economists therefore tend to see standardsboth as “barriers” to trade, and “catalysts” for positivechange depending on the particular countries,standards, and circumstances involved.

What policies are available to deal with thetrade effects of product standards?

Multilateral, preferential, and unilateral strategies existto help countries deal with the trade effects of productstandards.

under a harmonisation policy, countries adopt thesame standard to replace their previous ones whichwere different. as a result, producers in the harmonizingzone can export to any country within that zone uponcompliance with the same standard.

a policy of recognition, by contrast, means that eachcountry within the recognising zone accepts othercountries’ standards as essentially equivalent to its own.producers can therefore export to any country withinthe zone upon compliance with any of the nationalstandards in force for the product concerned within thezone.

Both harmonisation and recognition are very difficultpolicies to pursue at the multilateral level. the reason isthat countries have different national preferences forthe protection of particular interests. in addition, thetechnical and financial resources available for standardsdevelopment and implementation are dramaticallydifferent. From a political point of view, no countrywants to be seen as accepting “sub-standard” products,

EXECUTIVE SUMMARY

5

i.e. goods that are perceived, rightly or wrongly, as notcomplying with desirable requirements governing suchareas as safety and consumer protection.

a number of organisations are active, however, in theharmonisation of standards at the international level.the international organisation for standardisation (iso)is one such body. it brings together national standardsagencies to develop and adopt harmonisedinternational standards. this work centres on voluntarystandards, which national agencies are then free toadopt or not, depending on national preferences andcapacities. in the agribusiness sector, the codexalimentarius commission (cac) is also involved in thedevelopment of harmonised standards. althoughcountries remain free to adopt or not to adopt codexstandards based on their own preferences andcapacities, codex standards often form the basis ofmandatory product requirements because of their closerelationship to the core social interest of food safety.

recognition, by contrast, is typically pursued on apreferential basis, particularly regionally. it is politicallymuch easier to implement among countries that are atrelatively similar levels of development, and which havesimilar standards infrastructures. given the high level ofmutual trust required to implement a policy ofrecognition of standards, it is common for countries tostart the process with the less controversial policy ofrecognition of conformity assessment. under this typeof recognition, producers in an exporting country muststill comply with potentially different standards in theimporting country. However, they can have theirproducts assessed for conformity with the foreignstandard in their own country. Being able to undertakeconformity assessment procedures locally is often morecost effective than doing so in a foreign market, and thustends to boost trade.

although active in the area of product standards, theWto does not itself set standards or undertakeharmonisation or recognition policies. two Wtoagreements – the agreement on technical Barriers totrade (tBt), and the agreement on the application ofsanitary and phyto-sanitary Measures (sps) – focus ontrade-related standards issues that can be effectivelydealt with at the multilateral level. in broad terms, bothagreements attempt to assist countries in ensuring thatstandards are used in furtherance of legitimate socialobjectives, and that they distort trade as little as

possible. they also impose obligations of transparencyon some parts of the standard-setting process. Bothagreements are complex, technical, and sometimessubject to competing interpretations. expert legal andcommercial advice is therefore required in order toensure that developing countries are able to complywith their legal obligations in this area.

BOX 1

Are technical assistance and capacitybuilding resources available for trade-related standards issues?

Many developing countries need assistance indealing with the many issues posed by productstandards and their trade effects. examples ofareas in which technical assistance and capacitybuilding could be useful include: developmentof a national standards infrastructure;understanding foreign standards; upgradingthe national product base to meet standards inimportant foreign markets; implementinginternational standards; and complying withobligations under the relevant Wtoagreements.

resources for technical assistance and capacitybuilding are available from a variety of sources.Multilateral programmes include the multi-agency standards and trade developmentFacility stdF), the united nations industrialdevelopment organisation (unido), and themulti-donor enhanced integrated Framework(eiF). new generation economic partnershipagreements also increasingly deal with trade-related standards issues, including in somecases technical assistance and capacitybuilding. on a bilateral level, some majordonors, such as the european union and theunited states regularly include productstandards in their development assistanceprogrammes.

6

this toolkit is designed to provide trade negotiators andstakeholders – including other government officials, theprivate sector, and civil society – with a basic overview ofthe trade effects of standards, and the policies that havebeen developed to deal with those effects. the term“standards” is used broadly to include any documentsthat set out characteristics which products, processes orsystems are required or encouraged to meet. the toolkitfocuses only on standards that affect goods, includingboth industrial and agricultural products, in the market.it does not deal with standards related to servicesuppliers.

readers can use the Toolkit in two main ways.

First, it can serve as backgroundfor those who have not previously dealt with standards-related aspects of trade. it provides a generalintroduction to the area, explains the key jargon instraightforward terms, and should enable readers tonavigate better the issues and policies involved inmultilateral and preferential approaches to standards.

second, the Toolkit can serve as a ready referencefor those who already have a basic grounding in theissues. it provides examples of how the issues have beendealt with in concrete contexts, including tradeagreements and other international trade-relatedinitiatives. readers can refer to these examples in moredetail when they are confronted by similar issues in theirown work.

Because of the complexity of the area, it is impossible toprovide a common template or checklist of what to doand what not to do in relation to the trade-relatedimpacts of standards. the key takeaway for readersshould be an improved understanding of principles,which can then be put to work in negotiations or otherinteractions relating to trade agreements. to facilitatethis process, the last part of the toolkit contains bulletpoint lists of key takeaways, and key standardsquestions that need to be addressed in the context oftrade negotiations. these lists can help negotiators andother stakeholders to ensure that trade negotiationscover issues of importance to their countries or sectorsor, conversely, that negotiations on standards-settingpay due regard to trade consequences. However, theyare not prescriptive, because the diversity of nationalcircumstances, development levels, and discussioncontexts makes it impossible to set out a single set of

guidelines that can be used in all situations.

the information presented in the toolkit is applicable toa wide variety of trade related settings, includingmultilateral and preferential negotiations. the toolkitpresents in detail the particular way in which the Wtoagreements deal with the trade implications ofstandards. as noted above, two agreements are ofparticular relevance: the agreement on technicalBarriers to trade; and the agreement on the applicationof sanitary and phyto-sanitary Measures.

the tBt agreement divides “standards” (as the term isused throughout the toolkit) into two categories:technical regulations, which are mandatory standardsthat a product must comply with in order to be legallyoffered for sale; and product standards, which arevoluntary standards that a product can comply with ifthe manufacturer considers it advantageous, but wherecompliance is not necessary as a matter of law. the spsagreement applies more broadly to “measures”, a termthat is defined in a way that focuses on mandatorystandards, but which could also include some voluntarystandards. the toolkit therefore takes a comprehensiveapproach that deals with all types of standards, in orderto make it applicable both inside and outside the Wtosetting.

against this background, the purpose of this toolkit is toguide trade negotiators and other stakeholders throughthe major issues associated with product standards inthe context of trade negotiations. part 2 briefly explainsthe different types of standards, and the economicrationale behind them. this part is important, because ithighlights the fact that unlike traditional trade policymeasures such as tariffs and quotas, standards areusually about protection of people or the environmentrather than protectionism. in part 3, the main policyapproaches to dealing with the trade effects ofstandards are presented, focusing first on multilateralissues, and then on unilateral, bilateral, and preferentialapproaches. part 4 discusses technical assistance andcapacity building, which is an increasingly importantissue in the context of standards and trade. it arises bothin the multilateral context, and in north-south regionalor preferential trade agreements (ptas). part 5concludes the toolkit, by presenting key takeaways andquestions for dealing with product standards in tradenegotiations.

Using the Standards Toolkit

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PART I

1. What are standards?in the broadest possible terms, standards aredocuments that set out characteristics for products,processes or systems to meet.

Most often, their purpose is to ensure the quality andsafety of goods which consumers buy and use. theimpetus behind the development of standards cancome from a variety of sources: consumers, nationalcourts, the private sector, or government regulators, forexample. given the importance of the objectives whichstandards pursue, they can sometimes raise seriouspolitical issues, as well as economic and social ones.negotiators dealing with standards need to be aware ofthe full range of interests in play.

the focus of this toolkit is on the first category ofstandards, namely product standards. they areincreasingly common tools of regulation andcoordination, particularly in developed countries likethe usa, the eu, and Japan. selling goods in thosemarkets often requires producers to comply, for eitherlegal or commercial reasons, with a range of productstandards.

the ability to produce goods that conform to foreignstandards can be an important determinant of exportsuccess, particularly for developing country firms. thisdynamic is becoming more and more important in thecontext of global and regional value chains (gVcs),where lead firms often set or implement particularstandards. Joining the chain and moving up within it toundertake higher value added tasks both requirecompliance with standards.

2. How do standards affect tradeand development?Although standards are primarily instruments ofdomestic regulation and coordination, they can havesignificant trade impacts.

their effects on trade, as well as their importance in thecontext of gVcs, mean that they have a significantdevelopment dimension too. as a result, the trade-related aspects of product standards need to beunderstood both by trade negotiators and by standardsspecialists, because they are increasingly being dealtwith in multilateral trade agreements and in ptas.

negotiators also need to remember that preferentialaccess to developed country markets is often effectivelyconditional on the ability of developing country firms tocomply with relevant product standards. Zero tariffs andquotas do not necessarily make for large export gains ifpotential exporter firms cannot comply with developedcountry product standards. the development ofinfrastructure for compliance with public and privatesector standards is therefore a serious trade issue, andone that needs to be dealt with effectively bynegotiators.

academic and policy work on standards has tended tocoalesce around two competing views of the tradeeffects of standards: “standards as barriers”, and“standards as catalysts”. under the first view, thecompliance costs associated with meeting developedcountry standards are prohibitive for many developingcountry firms, with the result that they have difficulty inexporting at all to those markets. in effect, standards actas regulatory trade barriers, even though they are non-discriminatory and the intent behind them is generallynot protectionist at all. this view is supported by workshowing that developing country exports aresometimes rejected at the borders of major developedcountries because of failure to comply with mandatorystandards in areas such as food safety (see the examplein Figure 1).

under the second view, by contrast, product standardsin developed country markets give developing countryproducers an incentive to upgrade productionprocesses in order to meet them. the result is that atleast some firms invest in improved plant andmachinery, as well as in additional human capital in the

Negotiators dealingwith standards needto be aware of thefull range ofinterests in play

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PART I Introduction

8

PART I form of training, and are able to meet the relevant

standards. to be able to export to developed countrymarkets, some developing country producers invest intechnology upgrading, which increases overall sectoralproductivity and of course produces higher-qualityproducts for the domestic market as well – a positiveoutcome from a development point of view.

For economists, both views can hold weight in particularcircumstances, and there is supporting research in eachcase. However, much depends on the particularcountries and standards under consideration. inaddition, the two views are not necessarily in completeopposition, as they might first appear. it is possible tosynthesize them into a single, coherent view of the tradeeffects of standards. to do so, it is necessary to recognisethat product standards affect individual firms differentlydepending on how large and productive they are: thebiggest and most productive firms can often absorb thecompliance costs associated with foreign standards, butsmaller and less productive firms cannot. the result isthat standards are barriers for some (small) firms, butcatalysts for other (large) firms.

the second aspect that needs to be kept in mind istemporal: standards can act as barriers in the short term,because compliance takes time and resources. over themedium-term, however, standards are more likely to actas catalysts, at least for some firms. the synthesis viewtherefore emphasises the differences among firmswhen it comes to standards compliance capabilities,and the importance of studies over time in determiningthe net effect of standards on trade. the example of euaflatoxin standards and african groundnut exportsdemonstrates these points well.

FIGURE 1: EU AND US REJECTIONS OF FOOD ANDFEED IMPORTS FROM PAKISTAN BY REASON,2002–2008

Source: UNIDO (2010)

other

Filthy/unsanitary

unregisteredprocess/manufacturer

pesticide residues

labelling

Heavy metals

Foreign bodies

Veterinary drugresidues

organoleptic aspects

Microbiologicalcontaminants

unauthorised foodadditives

Mycotoxins

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%eu us

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PART I

BOX 2

EU Aflatoxin Standards and African groundnut exports

Aflatoxins are naturally occurring substances that pose significant risks to human life and health if they areconsumed in sufficiently large amounts. in particular, they pose the risk of cancer. some products, such asedible groundnuts, can become contaminated with aflatoxins. As is often the case for food safety issues,mandatory standards are used in many countries to limit the level of aflatoxins that can be contained inshipments of groundnuts.

a number of african countries have traditionally exported significant quantities of groundnuts and groundnutproducts to developed country markets, including the eu. in 1998, the eu adopted new standards limiting thepermissible amount of aflatoxins in groundnuts and related products for human consumption. the newstandards were stricter than those established by the codex alimentarius commission—an international foodstandards body; see further in subsection 3.1 below—and were seen as a potential barrier to trade by africanexporters. indeed, World Bank research released in 2001 suggested that africa stood to lose substantialamounts of exports to the eu market as a result of the new standards. Based on a highly stylized model, theWorld Bank authors concluded that african exports to the eu could decline by as much as 64%, or $670 million.

the overall effect of eu aflatoxin standards remains highly controversial, however. later work has questionedthe approach and findings of the initial World Bank study. in particular, it has highlighted that only a very smallquantity of african exports—no more than $1.5 million worth over the 2004-2006 period—was intercepted byeu authorities due to lack of compliance with aflatoxin standards. Moreover, nearly 80% of the interceptedconsignments would have failed the less stringent codex standard in any event.

although african groundnut exporters have lost substantial market share in recent years, the latest researchshows that the challenges posed by aflatoxin standards are just one of the many competitiveness issues thatexporters face. the eu, along with other developed country markets, has been on a consistent path of qualityupgrading in this sector since at least the 1980s. it has been difficult for african exporters to keep up with thetrend.

at the same time, government policies affecting the supply side in african countries have made it difficult forgrowers and exporters to access important inputs. groundnuts are just one example of a product in whichtraditional agricultural policies have not necessarily served african countries well in more recent times. thereal issue facing groundnut exporters is therefore one of how to upgrade the whole supply chain to deal with arapidly evolving marketplace. standards are only one part of the equation, and arguably not the mostimportant aspect of what needs to be a broad-based upgrading process.

Source: Jaffee et al. (2011)

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PART II

this part of the toolkit provides an overview of thestandards system. it is important for negotiators andstakeholders to have a basic understanding of whatstandards are, where they come from, and what they areused for. only with those issues in mind is possible todeal successfully with their trade and developmenteffects, which as the previous part showed can besignificant.

crucially, negotiators and stakeholders need torecognise that standards are not usually designed to actas trade barriers. their aim is generally to promote alegitimate social objective, such as consumerprotection, or environmental protection. the question istherefore not how to “roll back” standards (as if theywere tariffs or quotas), but how to manage them andtheir trade effects so that they do not unintentionallymake it more difficult for developing countries to accessmarkets.

1. What are standards used for?broadly speaking, there are two very general rationalesbehind the existence of product standards: regulationand coordination (Figure 2).

this section addresses each in turn. in summary,standards are used for regulatory purposes when thefree market does not produce socially optimal results(what economists call cases of “market failure”).standards are used as coordination devices whentransaction costs in the absence of standards would bevery high. standards in gVcs are a good example of thisrationale in action: component parts need to bemanufactured in a standardised way so that they caneasily be brought together for final assembly, in aseamless process.

FIGURE 2: ECONOMIC RATIONALES BEHIND STANDARDS

Source: Author

STANDARDS

Regulatory bodiesCoordination devices

Economic rationale 1:reduce informationasymetries

Economic rationale:reduce transaction costs

Economic rationale 2:internalisation of negativeeffects of actions on thirdparties (“externalities”)

Example:standards governing use ofthe “organic” label

Example:component manufacturingstandards in a gVc

Example:standards requiringmanufacturers to useenvironmentally friendlypackaging

PART II Economic rationale,typology, and nationalstandards infrastructure

11

PART II

Standards as regulatory tools

some standards are used by governments and otheragencies as regulatory tools. different types ofstandards – see the next part – reflect differentregulatory approaches. the strongest form of regulationuses standards to set out characteristics that must bemet if a product is to be sold legally in a particularmarket. non-conforming goods are simply not allowedinto the marketplace at all.

a weaker form of regulation specifies that goods thatcomply with a particular standard can receive aparticular label, such as “organic”. products carryingthese kinds of labels can attract a premium price fromconsumers because of their perceived attributes. goodsdo not have to meet the requirements of the standard inorder to be sold, but they can carry the premium labelonly if they do.

Why do governments and other agencies use standardsin this way? there are strong economic rationalesbehind the use of standards. unlike other trade-relatedmeasures, such as traditional tariffs and quotas,standards are not usually protectionist in intent(although they sometimes can be used in that way).Most typically, governments use standards as a form ofintervention designed to correct a situation in which thefree market does not produce a socially optimaloutcome (“market failure”). to understand better theeconomic rationale for standards as regulatory tools, theremainder of this subsection discusses the two maintypes of market failure that standards usually deal with:externalities, and information asymmetries.

externalities

the term “externality” refers to an effect that is not fullyfelt by an individual when he or she engages in aneconomic activity. For example, a computermanufacturer ships goods to consumers in varioustypes of protective wrapping, such as foam, plastic, andcardboard. the computer manufacturer is notresponsible for disposal of the wrapping material –which can be environmentally unfriendly – after theconsumer unpacks the computer. in the jargon ofeconomists, the manufacturer’s activity is said to createa “negative externality” for the environment because thepacking material has to be disposed of.

the same is true of a power generation facility thatproduces co2 or other pollutants: it imposes a negativeexternality on those living near the plant because thequality of the air they breathe is reduced. it also imposesa negative externality on society at large because co2emissions contribute to global warming, which has awide range of environmental and social consequences.

implementing product standards can be a way ofencouraging or requiring producers to “internalize” theexternality. this expression means that the producertakes account of the full social costs of its activity.returning to the example of the computermanufacturer, a standard on packaging might providethat only recycled and recyclable materials can be used,thus reducing the environmental impact of packaging.in the case of the power plant, a standard might limit theamount of co2 or other pollutants that can legally bereleased. in both cases, the standard is a way of ensuringthat the producer does not act solely in accordance withits private interest, but also with the public interest morebroadly. in both cases, standards are used as aregulatory tool designed to assist society in achieving alegitimate goal, such as environmental protection.

consumer protection is another legitimate goal that isfrequently promoted by the use of standards asregulatory instruments. Medicines, for example, mustgo through a rigorous approval process before they areallowed to be sold to consumers. they must be shown tobe both safe and effective in the treatment of illness. thereason for such a stringent approach is that in theabsence of standards, unsafe products could easily besold. consumers clearly want to purchase products thatdo no harm, and which indeed help them withtreatment of a medical condition. the imposition ofstandards in the case of medicines is therefore a way ofprotecting consumers from unscrupulous operators.

another example of standards being used to promotelegitimate social objectives comes from the automotiveindustry. cars and other vehicles must satisfy minimumsafety standards, which ensure that consumers cannotmistakenly buy unsafe vehicles (consumer protection).in many countries, particularly developed countries,motor vehicles must also satisfy minimum standardsrelating to emissions (pollution). the second set ofstandards promotes environmental protection. in thiscase, two of the common aims of regulatory standardsoverlap.

12

PART II

information Asymmetries

the second common economic rationale for standardsis information asymmetry. this situation arises when aproducer has much more information about the qualityof a product than the consumer can easily acquire uponinspection.

For instance, a computer manufacturer selling goodsover the internet knows more about the quality of itsmerchandise than does a consumer prior to actuallybuying the goods. the asymmetry of informationbetween the producer and the consumer can create asituation in which the former has an incentive to try tomislead the latter by passing off a low quality product asa high quality one. this situation is clearly sociallyundesirable, because the consumer can end up buying atype of product that he or she does not really want.

How do standards deal with the problems raised byinformation asymmetry? By setting out characteristicsthat a product must have in order to be sold legally in amarket, or that it must have in order to carry a particularlabel, standards reduce the information asymmetrybetween seller and buyer. For example, if a standard setsout that a computer or any other electrical item can onlybe sold if it meets certain requirements governing thesafety of electrical appliances, then a consumer can atleast be certain that the device is safe for use before heor she purchases it online.

similarly, a standard might set out requirements ofenergy efficiency that must be met in order for thecomputer or other device to carry a particular label(“energy efficient”). if it carries that label, the consumerknows that it meets the relevant requirement, and he orshe can then make a more informed purchasingdecision. again, the purpose of the standard in bothcases is to reduce the information asymmetry betweenthe seller and the buyer, and to bring the seller’s privateincentives more in line with social goals, in this caseconsumer protection and environmental protection.

Standards as coordination devices

not all standards are government interventionsdesigned to alleviate market failures. some are put inplace by private entities, such as non-governmentalstandards agencies, or even private firms (see further inthe next subsection). a common rationale for these

standards is that they facilitate coordination of activitiesin the marketplace, and thereby reduce transactioncosts.

For example, gVcs typically spread their productionprocesses over a number of countries. a large number offirms might be involved. each firm usually specializes inthe production of one component part that is used inthe final product. a different firm in another countrythen specializes in assembly of the final product, i.e.putting all the components together. a cell phone likeapple’s iphone is an example of this kind of gVcproduction process.

the gVc production model is commercially viable only ifthe components produced by firms within the chain arehighly standardized, which includes interoperability(the ability to work together as part of a single unit).small differences in size, shape, or performance canmake it harder, or even impossible, for final assembly totake place. in some cases, gVcs use pre-existingstandards to ensure that such differences are limited tothe extent possible. they can use the national standardsof the country in which they are based, or internationalstandards (see the discussion in part 3 below).alternatively, lead firms in value chains can set their ownstandards that suppliers need to meet. standards theneffectively become part of the business model of thegVc. in both cases, the economic mechanisms in playfrom the supplier point of view are very similar, eventhough the origins of the standards are different.

in addition, components need to be interoperable, inthe sense that they need to work together in astandardized way. negotiating individual productcharacteristics for each firm and each component isextremely costly and time consuming. economists referto these types of costs as “transaction costs”. standardscan greatly reduce them: instead of negotiatingeverything separately, all the lead firm in the gVc needsto do is to specify which standards the componentmakers need to comply with. although there are stillmonitoring costs – the lead firm needs to ensure thatsuppliers do indeed comply with standards – thetransaction costs are greatly reduced. in an importantway, standards contribute to the success of gVcbusiness models in areas as diverse as electronics andagribusiness.

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PART II

2. What are the different types ofstandards?As the previous subsection has shown, standards comein many different varieties, and serve numerousdifferent purposes. This subsection provides a simpletypology of standards, to guide negotiators andstakeholders in trying to navigate this complex area.

Public and private standards

the first distinction that needs to be kept in mind isbased on the origin of the standard: does it hail from thepublic sector or the private sector? public standards areset by governmental bodies – Ministries or otheragencies – and often carry the force of law. privatestandards are set by non-governmental bodies, andusually do not carry the force of law.

an example of a private body that sets standards is theamerican national standards institute (ansi). theeuropean committee for standardisation (cen) is also aprivate body. although arrangements differ from onecountry to another, developed country standardsagencies are typically private bodies but whose workand output are often supported by governments. publicstandards are set directly by government agenciesthrough regulations, and even in some cases bylegislation.

Mandatory and voluntary standards

the second important distinction between differenttypes of standards relates to the nature of compliancerequired: is it mandatory or voluntary? Mandatorystandards must be met by a manufacturer if its goodsare to be legally sold in a particular market. Voluntarystandards need not be met in order to sell goods legally,but compliance usually gives the manufacturer the rightto market its products as compliant with the standard inquestion. compliance with voluntary standards issometimes associated with the right to use a particularlabel, such as “organic” or “energy efficient”.

clearly, the four categories of standards that have beenidentified in this subsection overlap. Many publicstandards are mandatory, although some are voluntary.By contrast most private standards are originallyvoluntary, but legislation can give them the force of law(i.e., make them mandatory) in certain cases. it isimportant to look at both the origin and substance of aparticular standard in order to understand whichcategories it falls into. the differences among thesecategories are particularly important in the tradecontext, because trade agreements tend to dealexplicitly with some kinds of standards, but not others.the Wto agreements are typical of such an approach.

if a standard sets out that an electrical itemcan only be sold if it meets certainrequirements, then a consumer can becertain that the device is safe for use

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PART II

BOX 3

A typology of standards at the WTO

The WTo Agreements deal with standards, but use distinct terminology to identify the categories of standardsdiscussed in this subsection (Figure 3). Two of the agreements are of particular relevance: the Agreement onTechnical barriers to Trade (TbT), and the Agreement on the Application of sanitary and Phyto-sanitaryMeasures (sPs).1 The TbT Agreement covers product standards in all sectors (industrial products andagricultural goods), whereas the sPs Agreement covers only measures designed to protect human, animal,or plant life or health from risks associated with pests, diseases, additives, toxins, or contaminants.

strictly the “tBt” agreement is wrongly named, because it is about much more than barriers. it lays downrequirements concerning the positive processes and criteria for determining and setting standards formanufactured products or the processes used in producing them, and then implementing those standardsfairly and uniformly so that they do not become barriers to trade. in past years its predecessor agreementunder the gatt, which had the same title, was informally known as the “standards code”, which reflected moreaccurately what it was designed to do.

the terminology of the tBt and sps agreements is somewhat different from the language used in this toolkit.the toolkit uses the term “product standard” to apply to any document setting out product characteristics. thetBt agreement, by contrast, distinguishes between technical regulations on the one hand, and productstandards on the other. technical regulations in Wto parlance are mandatory standards. product standards, bycontrast, are voluntary. the different types of obligations attaching to these types of instruments are discussedin detail in part 3 of this toolkit. the sps agreement uses the term measure to describe the instruments anddocuments to which it applies, and the extent of that term is again discussed further in part 3.

FIGURE 3: ECONOMIC TERMINOLOGY VERSUS WTO LEGAL TERMINOLOGY.

Source: http://www.wto.org/english/tratop_e/tbt_e/tbt_info_e.htm;http://www.wto.org/english/tratop_e/sps_e/spsund_e.htm; and WTO (2005).

Economicterminology usedin this Toolkit

WTO legal terminology

Mandatory(minimum)standard

1. no labelnecessary

technical regulation under tBt or sanitary or phytosanitarymeasure under sps

Voluntaryminimumstandard

2. labelnecessary inorder forconsumers todistinguishbetweenproductsmeeting thestandard andthose notmeeting thestandard

2(a) government obliges thosenot meeting the standard to usea label (“negative labelling”):mandatory labelling

technical regulation under tBt or sanitary or phytosanitarymeasure under sps

2(b) government does not obligethose not meeting the standardto use a label. producers ofproducts meeting the standardmay end up labelling voluntarily(positive labelling”)

standard under tBt

1 In addition, some standards are dealt with as part of the non-tariff barrier discussions in the broader WTO negotiations onmarket access. The primary agreements dealing with standards, however, are SPS and TBT.

15

PART II

in developed countries, recent decades have seen acontinuous move away from mandatory publicstandards towards private voluntary ones (Figure 4). inmost developed country markets, mandatory publicstandards are reserved for particularly important socialobjectives. the safety of food products andpharmaceuticals are examples: mandatory publicstandards are common for these goods. However, thenumber of public mandatory standards is generally

much smaller than the number of private voluntarystandards. For example, the eu has adopted mandatoryharmonised standards in only a small number of sectors,but cen had issued over 12,000 voluntary harmonisedstandards by 2006, with another 3,500 then inpreparation. indeed, the growth rate of cen standards inan area of export interest to developing countries –textiles and clothing – has been rapid (Figure 5).

FIGURE 4: SHARE OF MANDATORY STANDARDS IN TOTAL NUMBER OF STANDARDS DEVELOPED BY NATIONALSTANDARDS BODIES, AVERAGE BY REGION

Source: WTO (2005)

non-iso

iso

40%

30%

20%

10%

0%asia central and

eastern europe,the Baltic states

and the cis

latinamerica

Middleeast

northamerica

Westerneurope

africa

FIGURE 5: TOTAL NUMBER OF CEN STANDARDS IN AGRICULTURE, AND TEXTILES AND CLOTHING, 1995–2003

Source: Shepherd (2006). Note: ISO refers to CEN standards that are identical to an ISO standard. Non-ISO refers to CENstandards that are different from ISO standards

800

600

400

200

01995 1996 1997 1998 1999 2000 2001 2002 2003

16

PART II

although it might be thought that the economic impactof voluntary standards could be slight or evennegligible, because compliance is not required as amatter of law, the available research suggestsdifferently. private voluntary standards have economicand trade effects too: even though compliance is notrequired by law, it is often commercially necessary ifgoods are to be effectively marketed in a developedcountry.

often, a distributor or lead firm in a gVc will not dealwith products that do not meet particular voluntarystandards. compliance can become a matter ofcommercial survival, even though, in principle, non-compliant goods could be legally marketed. privatevoluntary standards are an increasingly important issuethat trade negotiations are going to need to grapplewith.

3. How can a country develop itsown standards?The discussion of the trade effects of standards in Part 1highlighted the case in which two countries havedifferent national standards, or in which one country(typically the developed country) has standards but thepotential exporter (typically the developing country)does not, or at least not to the same level.

indeed, there is a significant standards gap betweendeveloped and developing countries, with the problembeing particularly serious in lics and ldcs.

this observation gives rise to the question of whatdeveloping countries can do to develop their ownstandards. it is not just a case of issuing documents,however. development and implementation ofstandards takes place within a complex set of public andprivate institutions (Figure 6 presents an example).standardisation is only part of the process. countriesalso need access to independent testing laboratoriesthat can assess whether or not particular goods complywith a given standard (a process often referred to as“conformity assessment”). if they do comply, they maybe eligible for certification (including labelling, in somecases), again by a specialised independent body. testinglaboratories themselves need to be monitored for thequality of their instruments and procedures. thisprocess involves a metrology agency, which is againindependent from all of the others. “Metrology” is thescience of measurement, and international and nationalmetrology agencies develop standards for comparablemeasures and measurement techniques.

as can be seen from Figure 6, development of a nationalstandards infrastructure is an extremely complex andcostly process. For smaller countries, lics and ldcs, itmay often prove too challenging in terms of the human,technical, and financial resources it requires, althoughtechnical assistance and capacity building efforts – seepart 4 below – can help alleviate these difficulties.

international approaches to standardization, testing,and certification are of particular interest to thesecountries, because they can be much simpler and lesscostly to put in place. implementation can also takeplace more quickly: by contrast, it can take many yearsto develop a national standards infrastructure. tradeagreements – both multilateral and preferential – can be

Internationalapproaches are ofparticular interestbecause they can bemuch simpler andless costly to put inplace

“

”

17

PART II

FIGURE 6: ELEMENTS OF A NATIONAL STANDARDS INFRASTRUCTURE.

Source: UNIDO (2010)

ACCREDITATION BOARD

priv

ate

and/

or p

ublic

lega

lfr

amew

ork

inst

itutio

nsse

rvic

es

STANDARDS BODYMETROLOGY INSTITUTE

Calibrationservices

Testingservices

CALIBRATION TESTING INSPECTION CERTIFICATION

VolumetemperatureMassetc

chemicalMicrobiologicalpesticideresiduesetc

inspectionbodiescompetentauthorities

productsprocesses

STANDARDSMETROLOGY ACCREDITATION

INTERNATIONAL GOVERNANCE

VALUE CHAIN: PRODUCERS/EXPORTERS/CONSUMERS

18

one way of taking advantage of the internationalenvironment to try and deal with the development ofstandards capacity at home.

although the international environment can providecountries with an incentive to engage in thedevelopment or improvement of their standardsinfrastructure, the impetus behind particular standardsis most often domestic. in some cases, standards are aresponse to problems identified by the public, eitherinterested groups (such as environmental protectionorganisations), or consumer associations. cases ofinadequate consumer protection identified by theseparties, by national courts, or proactively bygovernment regulators, can generate the political will toupgrade or implement standards.

alternatively, standards can be developed in responseto demand from private sector actors. industryassociations are usually actively engaged with nationalstandards agencies. in particular in the case ofcoordination standards, their impetus and informationcan be crucial in helping agencies to developappropriate responses to overly high transaction costs.

From a negotiation point of view, the important point totake away from this brief background is that standards-related work necessarily involves a wide range ofstakeholders. trade negotiators need to ensure thatthose actors are all engaged with the negotiatingprocess. stakeholder management is a key aspect ofdealing with the trade-related aspects of productstandards.

PART II Stakeholder

management is akey aspect ofdealing with thetrade-relatedaspects of productstandards

“

”

19

to the extent that standards have negative impacts ontrade, and particularly on the exports of developingcountries to developed markets, they do so because ofdifferences in national standards. When standards in theimporting country are different from standards in theexporting country (or when the latter does not have anystandards), producers must undertake costlyproduction upgrading, as well as testing andcertification, before their goods can be exportedsuccessfully.

even though this process can be beneficial in themedium-term – the “standards as catalysts” view – it iscostly in the short run (“standards as barriers”).particularly in lics and ldcs where financial markets arerelatively undeveloped and human capital is in shortsupply, the net result can be severe difficulties in exportmarkets. as a starting point, countries have identical orsimilar (“shared”) standards only in a relatively limitednumber of cases, and coverage varies considerablyacross sectors (Figure 7).

PART III

PART III Policy approaches to dealing with the tradeimpacts of standards

FIGURE 7: TOTAL AND SHARED STANDARDS IN SELECTED MARKETS, 1980–2004

Source: WTO (2005)

40

30

20

60

50

10

0

agric

ultu

reM

inin

g

Food

, drin

k & to

bacc

o

clot

hing

, text

iles,

foot

wea

r

Woo

d, co

rk &

furn

iture

pape

r & p

rintin

g

indu

stria

l che

mica

ls

petro

leum

refin

ing

rubb

er &

pla

stic

prod

ucts

glass

& ce

ram

ics

cons

truct

ion

mat

eria

ls

Basic

met

al in

dust

ries

Fabr

icate

d m

etal

pro

duct

s

non-e

lect

rical

mac

hine

ry

offi

ce m

achi

nery

& co

mpu

ters

elec

trica

l mac

hine

ry

elec

troni

c equ

ipm

ent &

tele

com

ship

build

ing

Mot

or ve

hicle

sae

rosp

ace

oth

er tr

ansp

ort e

quip

men

tin

stru

men

ts

num

ber o

f sta

ndar

ds (t

hous

ands

) total

shared

20

1. Harmonisation and recognitionTrade agreements sometimes incorporate one or bothof two approaches designed to reduce the problemsthat can be caused when different national standardsact, often unintentionally, as export barriers:harmonisation, and recognition.

Harmonisation means that two or more countries agreeto use the same, common standard (Figure 8). thisapproach is one way of eliminating the divergence instandards that causes the trade difficulties.

the other approach, recognition, involves one or morecountries agreeing to recognise standards elsewhere as

PART III

FIGURE 8: STANDARDS IN TWO COUNTRIES BEFORE AND AFTER HARMONISATION

Source: Author

COUNTRY A

STANDARD A

COUNTRY B

STANDARD B

EXPORTS COMPLY WITH B

EXPORTS COMPLY WITH A

BEFORE HARMONISATION

COUNTRY A

STANDARD C

COUNTRY B

STANDARD C

EXPORTS COMPLY WITH C

EXPORTS COMPLY WITH C

AFTER HARMONISATION

FIGURE 9: STANDARDS IN TWO COUNTRIES BEFORE AND AFTER RECOGNITION

Source: Author

COUNTRY A

STANDARD A

COUNTRY B

STANDARD B

EXPORTS COMPLY WITH B

EXPORTS COMPLY WITH A

BEFORE RECOGNITION

COUNTRY A

STANDARD A

COUNTRY B

STANDARD B

AFTER RECOGNITION

EXPORTS COMPLY WITH A OR B

EXPORTS COMPLY WITH A OR B

21

effectively equivalent to domestic standards (Figure 9).this approach leaves overseas producers free to complyeither with the foreign standard, or with their owndomestic standard, which is now recognised asequivalent. again, recognition removes the costadjustment problems associated with different nationalstandards, although it does so in a fundamentallydifferent way from harmonisation.

recognition is not always applied to standards as such.it can also be applied to conformity assessmentprocedures which, as noted above, refer to proceduresby which an organisation assesses whether or notparticular goods comply with a given standard. in thatcase one country agrees to recognise conformityassessment undertaken in another country asequivalent to the same operation undertaken at home.

the advantage of recognizing overseas conformityassessments is that it reduces the compliance costswhich businesses face when trying to export or import:they can have testing and certification proceduresundertaken in their own country rather than in anoverseas market. recognition of conformity assessmentprocedures can therefore be an important complementto recognition of standards, as well as a standalonemeasure that makes it easier to trade goods acrossborders.

the next two subsections examine the implementationof harmonisation and recognition, as well as otherpolicies that accompany them, at the multilateral level,and then at the unilateral and preferential levelstogether. of course, these policies are only part of theanswer, and in the short term, to dealing with standards-related issues in developing countries. technicalassistance and capacity building also have a role to play.those issues are addressed separately in part 4.

2. Multilateral approachesNegotiating the trade-related aspects of standards atthe multilateral level is complicated due to the largenumber of participants involved, and their verydifferent levels of development.

the development gap is a major issue, becausestandards infrastructure and the use of standards differmarkedly across countries. in a multilateral agreementsome participants would have to raise their standards,while others might be faced with reducing theirs. as ageneral proposition, countries are reluctant to be seenas raising or lowering their standards to meet thedemands of their trading partners, and that makes theprospects for broad agreement on either harmonisationor recognition of standards on a general basis very dim.

the difficulty of negotiating at the multilateral leveldoes not mean that there is no international work onstandards, however. in fact, a number of organisationsare very active in the standards field. one is the isowhich develops and publishes voluntary internationalstandards in all sectors. it has published over 19,500standards. its members are national standards bodies.

of course, implementation of iso standards inindividual countries is a matter for each standards bodyto consider separately. sometimes iso standards arewidely adopted as national standards, in which case theconsensus process by which iso operates brings aboutan outcome that is essentially wide-spreadharmonisation. not all iso standards are broadlyadopted, however. national circumstances differ, andwhat is optimal for some countries may not be forothers. differences in national standards thereforepersist in many areas, and there is little prospect thatiso’s work will ever eliminate them completely (Figure10).

another important international standards body is thecac, which was established jointly by the un Food andagriculture organisation (Fao) and the World Healthorganisation (WHo). it develops harmonised standardsin the area of international food trade. cac standards donot, after adoption, immediately become mandatorystandards. they are voluntary, and can be adopted ornot by individual countries according to their ownpreferences. nevertheless they often serve as the basisfor mandatory food standards in those countries that do

PART III

22

PART III

adopt them. as noted in part 2, food safety is oneexception to the general trend away from the use ofmandatory standards and towards the use of voluntaryones. Because consumer life and health are at stake,food safety standards are usually mandatory.

Many other international bodies are also involved in thedevelopment of standards at the multilateral level.typically they deal with voluntary standards, andindividual countries remain free to implement them ornot at the national level. However, some internationalstandards bodies are particularly important in the tradecontext, because international standards are givenspecial attention in the sps and tBt agreements. Forexample, the sps agreement refers to standardsdeveloped by the cac, as well as the World organisationfor animal Health (oie) and the international plantprotection convention (ippc).

the Wto, unlike organisations such as iso and the cac,does not develop international standards itself. nor dothe tBt and sps agreements adopt a broad-basedsystem of multilateral harmonisation or recognition.instead, the two agreements contain a series ofobligations designed to ensure that the standardsetting process in member countries is transparent, andresults in standards that do not distort trade more thanis necessary to attain a set of important social objectives,such as consumer protection, protection of theenvironment, or protection of human health.

2Both

agreements encourage but do not require the use ofinternational standards – such as those issued by isoand the cac – whenever feasible and appropriate givennational circumstances.

although international standards have many benefits –and there is evidence to suggest that their use by

FIGURE 10: TOTAL NUMBER OF STANDARDS ADOPTED VERSUS NUMBER OF INTERNATIONAL STANDARDSADOPTED AS NATIONAL STANDARDS, AVERAGES BY REGION (2002)

Source: WTO (2005)

8000

6000

4000

2000

0asia central and

eastern europe,the Baltic states

and the cis

latinamerica

Middleeast

Westerneurope

northamerica

16000

14000

12000

10000

africa

2 The two Agreements cover different ranges of justifications for the imposition of SPS Measures or of standards for manufacturedproducts respectively.

total number of standards published

number of international standardsadopted as national standards

23

PART III

developed countries can help to minimize negativetrade impacts on developing countries – their substanceis determined by the deliberations of the issuing body.Many developing countries find it difficult to participatefully in international standardization bodies, despitethese bodies’ efforts to promote inclusive participationand provide technical assistance and capacity buildingwhen possible.

iso, for example, recognises three types of membership(Figure 11): members can participate fully in thedevelopment of iso standards; correspondent membershave observer status, and, like members, can adopt isostandards nationally; and subscribers simply keep up todate with iso’s work, but cannot sell iso standards oradopt them nationally.

the pool of correspondent members and subscribers ismade up almost exclusively of developing countries, asis the group of countries that have no relationship at all

with iso. even when a developing country hasmembership status, constraints on human, technical,and financial resources often mean that it is difficult toparticipate fully in the organisation’s work, especiallygiven the wide range of sectors and increasingly largenumber of standards involved.

as a result of these factors, there is a risk that someinternational standards might be better suited to thedevelopment level and market conditions prevailing indeveloped countries, than to those in developingcountries. if this is indeed the case, it makes adoption ofsome international standards difficult for developingcountries, in addition to rendering compliance withforeign standards based on the international ones allthe more challenging for exporters. participation bydeveloping countries in international standardizationbodies is therefore key to ensuring that standards are asappropriate as possible for a broad range ofenvironments.

FIGURE 11: ISO MEMBERSHIP BY CATEGORY, 2013

Source: http://www.iso.org/iso/home/about/iso_members.htm

Member bodies

correspondent members

subscriber members

24

PART III

in contrast to the work of most international standardsbodies, which focus on voluntary standards, the tBtagreement deals primarily with mandatory standards.this focus is largely due to the fact that the Wto is anintergovernmental agreement that applies to publicsector actions. the national and international bodiesthat design voluntary standards are often establishedunder private law, and are not strictly speakinggovernmental entities. the nature of voluntarystandards is that they are not issued in the exercise ofgovernmental authority. as noted above in subsection2.2, the tBt agreement therefore directly applies only to“technical regulations” – what this toolkit has termedmandatory standards, which are generally also publicstandards.

the tBt agreement is not completely silent on “productstandards” (voluntary standards), however. its annex 3contains a code of good practice for standardizationbodies. standardization agencies of centralgovernments of Wto member countries are required toadopt the code. However, its adoption is voluntary forother standardization bodies, private or public, in Wtomembers.

in essence, the tBt code of good practice allows thesebodies to adopt similar obligations to those set out formandatory standards in the tBt agreement itself: forexample, they can undertake to ensure that voluntarystandards do not constitute unnecessary obstacles tointernational trade, and to treat like products from allcountries in similar ways. although the substantiveprovisions of the tBt agreement on mandatorystandards can be enforced through the Wto’s disputesettlement understanding, the legal obligationsaccepted by member countries in relation to the code ofgood practice are much lighter. they are only requiredto take “such reasonable measures as may be availableto them” to ensure that standardizing bodies notdirectly associated with the central government complywith the terms of the code of good practice. the netresult is therefore that the area of voluntary standards isleft less regulated at the international level through theWto than is the case for mandatory standards.

the sps agreement is not as clear as the tBt agreementwhen it comes to the treatment of voluntary and privatestandards. the text of the agreement refers to“measures”, and gives a non-exhaustive list of examples,including laws, decrees, regulations, requirements and

procedures. the sps agreement fully applies tomeasures adopted by government bodies; in addition,Wto members “shall formulate and implement positivemeasures” to ensure observance by other than centralgovernment bodies (such as local governments), and“take such reasonable measures as may be available tothem to ensure that non-governmental entities withintheir territories” comply with the agreement (article 13of the sps agreement).

as a result of this language, there are different views asto whether the sps agreement can cover the types ofvoluntary or private standards on packaging, labelling,and quality that are increasingly used by supermarketchains and other lead firms in agribusiness gVcs.Member countries have raised concerns related tovoluntary standards in the Wto sps committee, but todate there have been no cases brought concerningvoluntary sps measures under the Wto’s disputesettlement understanding.

The area ofvoluntarystandards is left lessregulated at theinternational levelthrough the WTOthan is the case formandatorystandards

“

”

25

PART III

BOX 4

Key principles behind standards obligations in the WTO Agreements

The previous discussion and the material in this box make clear that standards are dealt with in a complexway at the WTo. in some cases, they give rise to legal obligations for national governments, and can becomethe subject of proceedings under the WTo’s dispute settlement procedures. it is important that legal advicebe sought in relation to the design and implementation of WTo-compliant national standards systems, aswell as the rights and duties attached to the sPs and TbT Agreements. This box is not a substitute for suchadvice, but it highlights some of the most important points as an aide-mémoire.

sectoral coverage:the tBt agreement applies to all sectors. the sps agreement does not indicate a sectoralcoverage, but covers only measures applied to: protect animal or plant life or health from pests, or prevent orlimit damage from the spread of pests; protect human or animal life or health from additives, contaminants, ordisease-causing organisms; or protect human or animal life or health from diseases carried by plants, animals,or related products.

Types of standards covered: the tBt agreement only directly applies to mandatory standards. it has avoluntary code of good practice for standardisation bodies that are not part of the central government. thesps agreement applies to any measure taken to protect human, animal, or plant life or health from certainrisks, including contaminants and pests (see annex a of the sps agreement). the agreement applies tomeasures adopted by government bodies; in addition, Wto members “shall formulate and implementpositive measures” to ensure observance by other than central government bodies (such as localgovernments), and “take such reasonable measures as may be available to them to ensure that non-governmental entities within their territories” comply with the agreement.

right to impose standards: Wto member countries retain the right to impose mandatory standards thataffect trade. the sps agreement requires sps measures to be necessary to protect human, animal, or plant lifeor health, and that such measures be based on scientific evidence. the tBt agreement requires thatmandatory standards be necessary to fulfil a “legitimate objective”, such as: national security; prevention ofdeceptive practices; or protection of human health or safety, animal or plant life or health, or the environment.(the list of “legitimate objectives” given by the tBt agreement is not exhaustive.)

Non-discrimination: under the tBt agreement, countries when preparing, adopting or applying standardscannot give more favourable treatment to like products from national sources or discriminate betweenproducts originating from other Wto members. in the sps agreement, arbitrary or unjustifiablediscrimination is prohibited with respect to national production or to goods from other Wto members,provided that identical or similar conditions prevail.

Protection, not protectionism: the sps agreement prohibits standards that are disguised restrictions oninternational trade, and the tBt agreement prohibits standards that are more trade restrictive than necessaryto fulfil the given objective. sps measures need to be supported by scientific evidence.

Preference for international standards: the sps and tBt agreements both encourage, but do not require,Wto members to use international standards as the basis for their own standards when appropriate.examples of international standards include those issued by iso and the cac.

Transparency: Both agreements set out basic obligations of transparency and communication in the standardsetting process. the aim is to ensure that standards are readily available to other members and to the public,their justifications are fully presented, and other members are able to initiate consultations if a standardcreates a trade difficulty for them.

Source: http://www.wto.org/english/tratop_e/tbt_e/tbt_info_e.htm, andhttp://www.wto.org/english/tratop_e/sps_e/spsund_e.htm

26

PART III

3 Unilateral and preferentialapproachesAs noted at the beginning of the previous subsection,multilateral work on standards is often extremelydifficult. Countries at very different levels ofdevelopment, or with very different priorities, typicallyfind it difficult to agree to large-scale harmonisation orrecognition programmes.

that is one reason why the Wto agreements that dealwith standards focus on more basic obligationsregarding the standard setting procedure, and permitdeviation from international standards.

other approaches are available, however, to countriesthat are interested in reducing the costs which arisefrom the operation of different standards in differentcountries. unilateral and regional approaches are bothfeasible, and are increasingly used by countries as analternative to multilateral agreement.

unilateral action means that a country acts on its own,for example to adopt the same standard as a majortrading partner (harmonisation), or to recognise thatother country’s standard as equivalent to its own(recognition). the action is referred to as unilateralbecause it does not require the agreement of the othercountry – it can be undertaken by one country acting onits own.

Preferential approaches, by contrast, involve more thanone country. preferential approaches to standards areembedded within ptas involving at least one othertrading partner, and typically a number of othercountries. the advantage of this approach over themultilateral one is that it involves a more manageablenumber of participants for negotiating purposes. inaddition, preferential groupings are often regional innature, which tends to reduce (but not eliminate) theextent of differences in development levels andpreferences. these factors combine to make it generallyeasier for countries to move forward on standards, in thesense of adopting harmonisation or recognitionprogrammes, in the context of ptas than it is elsewhere.

unilateral use of international standards, or those of amajor trading partner, is a particularly attractive optionfor small developing countries, lics and ldcs. (“use” of astandard in this case covers both its publication as a

national standard – harmonisation – and its recognitionas equivalent to a national standard.) the reason is thatthe development of a national standards infrastructure,as discussed in subsection 2.3 above, can be very costlyand time consuming.

although adoption of a foreign or internationalstandard does not fully eliminate the problem ofdeveloping a national standards infrastructure, it canhelp to reduce the costs associated with thedevelopment of standards. of course, adoption of othercountries’ standards does not come without its owncosts: if national priorities are very different, or if thestandard was set primarily with developed countrymarkets in mind, it might not be entirely appropriate forthe national setting. However, it represents a potentiallyattractive choice in at least some cases. adoption of aninternational standard has the added benefit ofautomatic compliance with the Wto sps and tBtagreements.

Conformity assessment is also an issue that can beaddressed unilaterally. one country can decide torecognise foreign laboratory testing and certificationprocedures as effective in its own national market. thisoption is again attractive to small developing countries,lics, and ldcs. in environments where testinglaboratories are small, or even non-existent, itrepresents a way of “outsourcing” an important part ofthe national standards infrastructure. it could perhapsbe seen as a temporary measure, to be used whilecountries develop their own capacities in testing andcertification. like unilateral use of foreign orinternational standards, unilateral recognition ofconformity assessment has the potential to reducestandards-related trade costs for the implementingcountry.

although harmonisation and recognition can both beimplemented unilaterally, a more common approach isfor them to be embedded in a preferential setting,including bilateral agreements (Figure 12). Manymodern ptas deal with standards issues, including somenew generation north-south ptas such as the economicpartnership agreements (epas) with the eu. typically,countries at relatively similar levels of development andwith similar priorities, such as those in a regionalgrouping, find it easier to explore harmonisation andrecognition than do countries where the developmentgap is significant. the epas, for example, tend to focus on

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technical assistance and capacity building rather thanharmonisation or recognition; that aspect is dealt within further detail in part 4, below.

one advantage of dealing with standards in the settingof a preferential agreement is that the negotiationprocess is much easier than at the multilateral level: thenumber of parties and interests involved is necessarilymuch smaller. However, even relatively homogeneousgroups, such as the eu, have had difficulty undertakinglarge-scale programmes of harmonisation. two realitiesintrude. the first is that it is extremely difficult forcountries to agree on the highly detailed specificationsthat harmonised standards must include. the second isthat no country wants to be seen as “harmonizingdown”, i.e. lowering its standards in response todemands from trading partners. there is therefore astrong force in favour of “harmonizing up”, but itencounters resistance from commercial interestsreluctant to engage the extra costs associated withmoving to a more stringent standard.

in the case of the eu, the very small number ofHarmonisation directives adopted led to theimplementation in 1985 of the so-called “newapproach”: under this legal harmonisation is limited to asmall set of essential requirements, rather than the fullrange of characteristics typically set out in a standard.

the elaboration of more detailed standards is then leftto cen.

the net result of the eu’s new approach is thatmanufacturers in all member states are required to meetthe essential requirements laid out in any newapproach directives – i.e. these are mandatorystandards – but the way in which their products meetthose requirements is left to them. cen standards arevoluntary, and just represent one way of meeting adirective’s essential requirements: manufacturersremain free to adopt alternative means if it iscommercially preferable to do so. the eu’s newapproach illustrates the difficulty of harmonizationwithin a preferential context, as well as the need forvarious types of standards – public and private,mandatory and voluntary – to coexist side by side.

the mechanics of negotiating preferential recognitionare simpler than is the case for harmonisation, becausecountries do not need to agree on some set of specificcharacteristics that individual products must have.rather, they need only to agree to recognise eachother’s standards as equivalent, so that manufacturerscan comply with whichever of the preferential group’sstandards is most appropriate for them. However,recognition is also extremely difficult to implement on abroad basis, again because no country is keen to be seen

FIGURE 12: MUTUAL RECOGNITION AGREEMENTS NOTIFIED TO THE WTO

Source: WTO (2005)

Notified MrAs by region

africa 5%

north america 12%

asia 24%

europe51%

Notified MrAs by country group

developing 11%

developed/developing36%

latin america 8%

developed53%

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BOX 5

Mutual recognition in ASEAN

AseAN member states have embarked on a number of interesting regional initiatives in the area ofstandards. First, they have selected a number of priority sectors for harmonization of product standards. inaddition, they have adopted a framework for negotiating sectoral mutual recognition agreements (MrAs)for product standards and conformity assessment.

one key sector that is covered in both cases is electrical and electronic equipment. although the negotiatingdifficulties facing even a relatively small group of countries in dealing with these kinds of agreements are veryreal, significant progress has already been made, particularly in the area of recognition. as member statesadvance toward the goal of an asean economic community, it is expected that further implementation willtake place.

cambodia, an asean member state with a small market and low level of per capita income, has takenimportant steps towards overcoming its deficiencies in many aspects of a national standards infrastructure.For example, a private firm, intertek, has established a local office to provide testing and certification servicesto exporters. it primarily serves apparel manufacturers exporting to the usa and the eu. its entry into themarket as a purely private entity not associated with the government has led to a decrease in costs forexporters, which helps them to improve regional and global competitiveness.

to increase its effectiveness intertek has entered into Mras with foreign counterparts – again, as a privatesector initiative. six member states with better developed standards infrastructures (Brunei darussalam,indonesia, Malaysia, the philippines, singapore, and thailand) have entered into Mras dealing with laboratoryaccreditation on a national basis.

regional cooperation can provide an important, and in many cases temporary, backstop during thedevelopment of a national standards infrastructure. For example, one asean member state, Bruneidarussalam, has agreed with another, singapore, to have an organisation from the latter performaccreditation of laboratories and certification and inspection bodies in the former. there is also a provision forlocal capacity building, with the goal of developing national capabilities over the medium to long term.

Source: Maur and Shepherd (2011); and http://www.asean.org/communities/asean-economic-community/item/asean-framework-agreement-on-mutual-recognition-arrangements-2

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as letting in “inferior” foreign goods (i.e., those thatcomply with a standard that is perceived, rightly orwrongly, as less stringent than the national one).

as a starting point towards pta-based cooperation onstandards, it is increasingly common for countries tolook at recognition of conformity assessmentprocedures. under this kind of recognition, countries donot recognise each other’s standards as essentiallyequivalent. each country retains its own standards, andexporters need to comply with them if they want to dobusiness in a given market. What changes with this typeof policy is the process that exporters need to gothrough to prove that their goods meet relevantstandards in the importing market.

in the absence of a recognition agreement coveringconformity assessment, exporters must usually havetheir goods tested and certified overseas. if conformityassessment procedures are recognised, however,compliance with the importing market’s standard canbe assessed and certified by an appropriate body in theexporting country. the process becomes less expensivefor the exporter in this way, and such measures can helpto boost trade. they are also an important way ofbuilding trust among pta members, so that deepercooperation on standards-related issues can perhapstake place in the future.

cooperation among members of a pta – most typically aregional grouping – is not necessarily limited to policiessuch as harmonisation and recognition of individualstandards. it is also possible for members to cooperatemore broadly, in a sense sharing national standardsinfrastructure through the creative pooling of resourcesand expertise. particularly for small developingcountries, lics and ldcs, steps that might be out ofreach on a national basis – such as the development of atechnically complex or expensive piece of standardsinfrastructure – can become more practical if resourcesare essentially pooled across countries.

a complementary approach is for those countries withless developed standards infrastructures to rely onorganisations from the public and private sectors incountries with better developed standards systems. asptas become increasingly focused on deep integration(i.e., going beyond traditional trade policy measures liketariffs and quotas), this kind of cooperation is becomingmore common. as shown in Box 5, asean provides agood example of a set of regional initiatives onstandards taken within the framework of a pta.

Steps that might be out of reach on anational basis can become morepractical if resources are essentiallypooled across countries

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dealing with standards often requires substantialhuman, technical and financial resources. developing afull standards infrastructure, as outlined in subsection2.3, is a long and challenging process, particularly insmall developing countries, lics and ldcs. in theabsence of core elements of national infrastructure,such as testing laboratories or certification bodies, it canbe difficult to deal properly with trade-related concernsraised by the private sector. technical assistance andcapacity building can therefore play a vital role inhelping developing countries to negotiate standards-related provisions in their trade agreements, as well as todeal with standards-related concerns that arise once anagreement is in place.

Multilateral agreements like the Wto sps and tBtagreements, as well as ptas, increasingly provide fortechnical assistance and capacity building in favour ofdeveloping country members. However, it is politicallydifficult, and potentially in conflict with importanteconomic and social goals, for a trading partner to applyless stringent standards to developing countries as akind of special and differential treatment.

sometimes, trading partners accord an extended graceperiod for developing country producers to achievecompliance with a new or more stringent standard.More commonly in the multilateral context, however,technical assistance and capacity building focus on thebasic processes underlying standards development andcompliance. the sps and tBt agreements, for example,refer to technical assistance and capacity buildingefforts on a multilateral or bilateral basis. althoughdeveloping country members have the right to requesttechnical assistance and capacity building, including inappropriate cases from the Wto secretariat or otherinternational bodies, the terms of each project need tobe specifically agreed between donors, beneficiaries,and provider agencies.

standards-related technical assistance and capacitybuilding fall within the purview of broader aid for trade(aft) initiatives. Broadly speaking, the vision for aft is tohelp developing countries to participate more fully inglobal trade, including by improving supply-sidecapacity (referred to as building productive capacity).However, due to the way in which aid flows are reported,it is not possible to separate out the proportion of totalaft that is spent on standards-related projects.

in line with the fact that international standards involvea number of different organisations, technical assistanceand capacity building at the multilateral level are notjust about the Wto. Frequently, inter-agencycollaboration is required so that experts in trade,standards development and implementation, andbusiness production processes are all involved. oneexample of working together like this in the sps area isthe standards and trade development Facility.

north-south trade cooperation, including throughptas, increasingly includes a standards element.However, the core problem for developing countriesremains the same as in the multilateral context:upgrading production facilities and processes so as toensure compliance with a new or more stringentstandard overseas.

For example, the eu-cariforum epa contains provisionson sps measures and product standards. the partiesreaffirm their commitment to the principles containedin the Wto agreements. in addition, they agree tocooperate in areas such as: sharing and developingexpertise, including through training activities;development of private sector capacity; anddevelopment and adoption of some harmonizedstandards based on relevant international standards.However, all of these provisions are obligations ofconduct rather than of result. that is, they do not requirethe parties to achieve any particular outcome. nor doesthe epa specify the extent of financial resourcesavailable for technical assistance and capacity building.the epa therefore goes further than the Wtoagreements in terms of the types of cooperationenvisaged in the standards area, but the obligations aresimilarly open to interpretation in practice.

another instrument that is sometimes adopted, andwhich provides a more tangible benefit to developingcountry partners to a pta, is extended implementationperiods. For example, shrimp was a significant export ofsome West african countries to the eu prior to passageof a new, stricter set of eu standards in 1995. somecountries were given a grace period until 2003 tocomply, but an eu mission in 2002 found that manyproducers were still unable to comply with the newstandard: significant production upgrading had nottaken place.

PART IV Standards-related technicalassistance and capacitybuilding

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BOX 6

The Standards and Trade Development Facility (STDF)

established in 2002 following an initiative taken at the WTo’s doha Ministerial Conference in 2001, the sTdFbrings together the FAo, the World organisation for Animal Health (oie), the WHo, the World bank, and theWTo. it is a partnership and trust fund that is now funded by 13 donor countries, following seed fundingprovided by the World bank and the WTo.

the stdF acts as a knowledge platform for information exchange, sharing experiences and the identificationand dissemination of good practice on sps-related technical cooperation. the Facility encouragescollaboration among providers of sps-related technical cooperation, promotes synergies and enhanceseffectiveness. this includes thematic work on cross-cutting topics such as: public-private partnerships toenhance sps capacity; the use of economic analysis to inform sps decision-making; and linkages between spsand trade facilitation.

the stdF Working group, which comprises stdF partner organizations, bilateral donors and developingcountry experts, meets at least twice a year in geneva to discuss sps technical cooperation efforts, relatedinitiatives and pertinent issues in sps capacity building. other organizations involved in sps capacity buildingoften participate and share information on their programmes.

apart from its coordination role, the stdF also has a small funding mechanism. it finances projects inbeneficiary countries with two aims in mind: on one hand increasing awareness, mobilizing resources,strengthening collaboration, identifying and disseminating good practice; and on the other, providingsupport and funding for the development and implementation of projects that promote compliance withinternational sps requirements.

two types of funding are available: project preparation grants of up to us$50,000 to help beneficiaries toarticulate their sps needs and develop project proposals; and grant financing of up to $1 million for approvedprojects. Beneficiaries are required to co-finance any projects undertaken with stdF grants.

an example of a project financed by the stdF is upgrading of the Brazil nut production chain in Brazil, peru,and Bolivia to help reduce aflatoxin contamination (compare Box 1). the safenut project, implemented by theFrench agency cirad, ran from 2006 to 2008, and had a budget of over $600,000.

the safenut project was a direct response to stricter european regulations on aflatoxins and a rise in eu bordernotifications related to contamination of unshelled nuts, mainly from Brazil. stakeholders involved in theproject’s design expected that reducing aflatoxin contamination in unshelled nuts would enable the Brazilianindustry to regain its position in international markets, particularly in europe. However, in response to thestricter requirements in the eu market, the industry turned to other regional markets with less stringentstandards, which highlights the importance of diversifying market options.

the project was nevertheless a model for institutional cooperation and coordination on aflatoxin control inBrazil nut production. it facilitated public-private dialogue on how to achieve effective aflatoxin managementsolutions for Brazil nuts. according to a 2010 evaluation based on a survey of stakeholders and projectimplementers, the project “contributed to narrowing knowledge gaps, especially improving awareness of thecritical points and factors for fungal growth and aflatoxin production, as well as increased local capacity foraflatoxin surveillance and control”.

Source: http://www.standardsfacility.org/en/index.htm

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BOX 7

Main capacity building options for product standards

A number of options are available in addition to the sTdF for funding standards-related capacity buildingefforts, and those that cover trade aspects in particular.

The multi-donor enhanced integrated Framework (eiF) has at least two potential funding tracks for work onstandards. First, diagnostic trade integration studies (dtis) frequently deal with standards-related issues. thedtis process involves producers and exporters, as well as standards agencies, as stakeholders. it is therefore agood opportunity for affected parties to clarify their interests in relation to standards issues, and formulaterequests for technical assistance and capacity building. in addition to the dtis process, eiF “tier 2” projects canalso support work on standards. For example, at the time of writing Burundi currently has eiF tier 2 workunderway on building sps capacity.

The uN industrial development organisation (uNido) is another multilateral initiative that has experience indealing with the development aspects of product standards. as part of its trade capacity building programme,unido works with developing countries to build capacity across the full breadth of the national standardsinfrastructure. its work covers both agricultural and industrial products. unido can assist developingcountries individually and regionally to develop competence in the full range of processes associated withstandards, as well as in dealing with the particular trade-related issues that are the focus of this toolkit.

some bilateral donors also work on standards-related issues.the eu, for example, funds national andregional programmes aimed at building standards capacity. one such project is a partnership with the acpgroup of countries focusing on tBt issues.

some projects led by the united states also deal with standards. For example, the West african agribusinessand trade promotion project provides resources for producers and traders to deal with the implications ofavian influenza. this case is one example of a consumer protection issue in which the legitimate social goalspromoted by standards need to be balanced against the potential for severe impacts on trade, and byextension on the livelihoods of producers.

Sources: http://www.enhancedif.org/en/country-profile/burundi; http://www.unido.org/en/what-we-do/trade/quality-and-compliance-infrastructure.html; http://www.acp-eu-tbt.org/how-to-apply/eligibility-criteria/; and http://www.agribizafrica.org/about-us/what-we-do-and-why

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as a result of these factors, some West african countriesno longer export shrimp in significant quantities to theeu. on the other hand, they have recently begunexports to alternative markets, where standards in thissector are less costly and compliance requires fewerhuman, technical, and financial resources to complywith. the lesson of stories like this one is that extendedimplementation periods are not enough on their own tohelp developing countries comply with developedcountry standards. development of local human andtechnical capacities, and the access to financialresources which that requires, are necessary. a graceperiod, like the one accorded in the shrimp case, canonly allow more time for production upgrading to takeplace.

it is important for developing countries to keep in mindthat it is not only public sector expertise and resourcesthat are potentially available for standards-relatedtechnical assistance and capacity building. the privatesector – including non-governmental organisations(ngos) – also participates in these kinds of activities.

West africa again provides an example of this type ofcollaboration. pineapple producers in the region usepart of their crop to produce juice. traditionally, theyhave exported to regional markets where development,implementation, and enforcement of standards arerelatively lax. However, the eu market offersconsiderable potential for future growth, and producershave recently initiated moves to expand their exports toinclude the eu. eu standards impose stringent processrequirements, governing the type of machinery thatneeds to be used to produce the juice, as well as the wayin which it is bottled prior to export.

a French ngo has been active in mobilizing technicaland financial resources in favour of a group ofproducers, who are currently upgrading theirproduction processes in an effort to comply with eustandards. although governments are stronglysupportive of initiatives like this one, the impetus andactivity have come primarily from the private sector andcivil society.

Extendedimplementationperiods are notenough on theirown to helpdevelopingcountries complywith developedcountrystandards

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this toolkit has provided an overview of the main issuessurrounding standards in the trade context. as will havebecome apparent, the subject is extremely complex. todeal with the details of particular standards and theregimes that govern them, expert commercial and legaladvice will usually be necessary. despite thecomplexities, however, it is becoming more and moreimportant for developing country negotiators andstakeholders to be able to deal effectively withstandards issues. this observation applies just as muchto the pta context as to the multilateral one. standards-related policies, such as harmonization and recognition,are increasingly important features of the multilateraltrading system, regional agreements, and “north-south”trade agreements.

What are the key points that negotiators can takeaway from the Toolkit?

given the diversity of subject matter covered bystandards, the policy instruments available for dealingwith them, and national circumstances, it is impossibleto provide a comprehensive list of best practice fornegotiating the standards aspects of trade agreements.What is possible, however, is to remind negotiators ofthe key points that have been highlighted in the toolkit,as well as to identify questions that trade agreements –regardless of the level at which they are negotiated –tend to encounter.

1 Key takeawaysstandards are generally about protection of•legitimate social and economic objectives, notprotectionism. as such, standards negotiationsgenerally do not seek a “roll back” but rather to put inplace rules and policies to limit the possible adversetrade effects of standards implementation, and tomake sure the standard setting process is transparent.

legitimate objectives furthered by standards•include: consumer protection; environmentalprotection; protection of human, animal or plant lifeor health; dealing with quarantine pests; and reducingtransaction costs associated with coordination ofproduction in complex, multi-actor processes.

Although standards in developed country markets•can act as barriers to developing country exports inthe short run, they can act as catalysts for upgradingand technological improvement in the medium tolong term. However, only relatively productive firmstend to be able to find the financial and humanresources necessary to upgrade production followingimplementation of a new standard overseas.

development and implementation of standards•requires a complex national infrastructure, coveringassociated areas such as metrology, accreditation,testing, and certification. small developing countries,lics and ldcs face considerable challenges indeveloping this infrastructure. creative approaches tothe effective pooling of resources on a regional basiscan be one way of partially overcoming this hurdle.

PART V

PARTV Key takeaways and questionsfor trade negotiationsdealing with standards

To deal with the details of particularstandards and the regimes that governthem, expert commercial and legaladvice will usually be necessary

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Trade agreements sometimes deploy two policy•instruments to limit any negative trade effectsassociated with standards: harmonization, andrecognition. Both tools can be applied unilaterally(without an agreement), preferentially, andmultilaterally. However, both are very difficult tonegotiate in practice.

building trust between trading partners is important•if any harmonization or recognition is to take place.an increasingly common place to start is withrecognition of conformity assessment procedures,rather than recognition of standards as such.

on a multilateral level, many organisations deal with•standards. the Wto does not produce standards.However, it encourages its Members to adhere tointernational standards, and imposes basicobligations of transparency on the domestic standardsetting and implementation process, and requiresthat countries take steps to ensure that theirstandards do not distort trade more than is necessaryto achieve a legitimate objective.

voluntary standards (often issued by private sector•organisations) are increasingly importantcommercially, but they are not dealt with ascomprehensively by the sps and tBt agreements asare mandatory standards. they have been raised bycountries in the relevant committees, but it is not clearto what extent Wto disciplines are applicable, and inwhich exact cases.

Technical assistance and capacity building are•important areas of standards-related tradecooperation, particularly in the context of north-south ptas.

2 Key questions for standards-related trade negotiations

is it possible to have access to expert commercial and•legal advice on the trade-related aspects ofstandards?

How developed is the national standards•infrastructure? are all the key actors necessary fortrade-related negotiations already in place andfamiliar with trade issues, or are some elementsmissing or underdeveloped?

Will national standards bodies be fully involved in the•negotiating process, thus ensuring the availability oftechnical knowledge as well as buy-in by keystakeholders?

Are national standards bodies already in contact with•the corresponding agencies in the relevant tradingpartners? do they participate fully and actively in thework of international standard setting bodies like isoand the cac?

Are the private sector and civil society fully and•actively involved in the work of national standardsbodies? does the impetus for development of newstandards include private sector initiatives, as well asproactive interventions by regulators?

Has the private sector been consulted as to the main•standards-related obstacles it faces in foreignmarkets? From the private sector’s perspective, whichare the key sectors in this regard?

is it most appropriate and feasible to raise a given•trade-related standards issue multilaterally,bilaterally, or regionally?

What types of standards does any planned•agreement intend to cover? public and/or private?Mandatory and/or voluntary?

if the agreement is preferential, is it consistent with•the WTo obligations in the sPs and TbT Agreements?

What are the best policy instruments available to•deal with standards-related trade concerns? What isthe right combination of harmonization and PA

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recognition, along with broader cooperation,technical assistance, and capacity building?

How feasible is it as a matter of politics and•negotiating strategy to implement policies such asharmonisation and recognition? is the developmentgap between trading partners too wide?

is it appropriate to start with measures like•recognition of conformity assessment procedures tohelp boost trade on the one hand, and initiatestandards cooperation and build trust on the other?

What is the appropriate role for international•standards in any trade agreement?

For small developing countries, liCs and ldCs, is it•feasible to pool resources with regional partnerseffectively to make up for national deficiencies instandards infrastructure?

What multilateral, regional, and bilateral sources are•available for technical assistance and capacitybuilding? What are the priority areas for allocation ofthose resources?

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REFERENCES ANDFURTHER RESOURCEScadot, o., M. Malouche, and s. saez. 2012. Streamlining Non-Tariff Measures: A Toolkit for Policy Makers. Washington, d.c.: World Bank.

guasch, J.-l., J.-l. racine, i. sanchez, and M. diop. 2007. Quality Systems and Standards for a Competitive Edge.Washington, d.c.: World Bank.

international trade centre (itc). 2011. Export Quality Management: A Guide for Small and Medium-Sized Exporters – Second Edition.geneva: itc.

Jaffee, s., s. Henson, and l. diaz rios. Smallholder Farmers, Emerging Standards, and Development Assistance Programs in Africa. Washington, d.c.: World Bank.

Maur, J.-c., and B. shepherd. 2011. “product standards” in J.-p. chauffour and J.-c. Maur (eds.) Preferential Trade Agreement Policies for Development: AHandbook. Washington, d.c.: World Bank.

shepherd, B. 2006.“the eu standards database: overview and user guide.”http://siteresources.worldbank.org/intres/resources/469232-1107449512766/eusdB_overview_userguide_021306.pdf.

unido. 2010. Meeting Standards, Winning Markets. Vienna: unido.

World Bank. 2005. Food Safety and Agricultural Health Standards: Challenges and Opportunities for Developing Country Exports.Washington, d.c.: World Bank.

Wto. 2005. World Trade Report 2005: Trade, Standards, and the WTO.geneva: Wto.

taF is managed on behalf of dFid by a dedicatedFund Manager: crown agents and saana consulting

trade adVocacy Fund

www.tradeadvocacyfund.cominfo@tradeadvocacyfund.com

Advisory ToolkiT 2 – FebruAry 2014

SAANA CONSULT ING

TAF assistance is tailored to matchthe specific demands of theapplicant in relation to actual orplanned negotiations. It respondsto real, practical needs.

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