Trade Standards and the WTO World Trade Report

Trade, Standards and the WTO World Trade Report 2005 Marion Jansen Economic Research and Statistics Division, WTO Public Forum September 25, 2006 Session: “International standards in the multilateral trading system: a stakeholders’ discussion”

A world of standards n n Language Software and hardware formats Plugs and sockets Safety standards for buildings/cars

Benefits from standards n Ensure compatibility (network externalities) Compatibility standards create a larger network of users (e. g. mobile phones) n Information Asymmetries Safety standards ensure quality and safety (e. g. safety of motor vehicles) n Negative externalities Environmental standards allow society to curb or eliminate pollution (e. g. car emission standards)

Should harmonization of standards at the global level be the ultimate aim? n n Harmonization lowers trade costs But, harmonization reduces product variety • Sometimes desirable: compatibility standards (e. g. plugs) • But not always (safety, environment): • Countries differ (consumer preferences, level of development) • What is the optimal level of diversity?

Should standard setting be left to the private sector ? n Private standard setting is preferable because: • • • n Closer to the market More flexible Less costly But • Government intervention necessary to avoid deceptive practices (credence goods) • Producers favour protectionist standards

Standards and the WTO: Deals with the rules of international trade Þ And thus also with the role of standards in international trade Some important WTO disputes involved standards, e. g. : Þ EC-Hormones Þ US-Shrimps Þ EC-Sardines

Is the WTO adequately equipped to deal with disputes on standards ? Disagreement usually on: policy objective (e. g. public health) policy instrument (e. g. standard) tradable good (e. g. food) • Is the WTO dispute settlement system well-equipped to deal with the (scientific) evidence used to analyse these questions? • Which is the appropriate relationship between the WTO and international standard setting bodies?

How can developing countries benefit from standards? What are the effects of developed country standards on developing countries’ exports? => no general answer n n n Making standard setting at the national level more market-focused Greater participation in international standard setting bodies Finding niches in global trade as high quality suppliers