World Trade Report 2005: Standards, Offshoring and Air Transport

Written by WTO economists, this report underlines the important benefits that standards can deliver in terms of information for consumers, environmental protection and compatibility of related goods and services. It also draws attention to the fact that technical standards can also be used as protectionist measures and can result in higher operating costs for developing country producers.
The report points to the growing importance of international standards and identifies ISO and its partners the IEC (International Electrotechnical Commission) and the ITU (International Telecom-munication Union) as the most important of the 49 international standardizing bodies.
It explains the increase in standardization activity by, among other factors, demand by consumers for safer and higher quality products, technological innovations, the expansion of global commerce and the increased concern of many governments and nongovernmental organizations with regard to social issues and the environment, stating that standards have played an important role in fulfilling these needs. While the private sector provides the strongest impetus to develop standards, the report points out that nongovernmental organizations have become involved, working with industry and international organizations to develop standards in such areas as the environment and corporate social responsibility.
The Report focuses on three key areas:
a) The economics of standards in relation to international trade: The need for standards and the role they play in economic activity is examined. Standards provide scope for achieving economies of scale and network externalities. They increase economic efficiency by enhancing compatibility among products and providing information. They serve important public policy goals in solving problems associated with imperfect information and negative externalities. Standards are compared with other economic instruments available to firms and governments. Then the likely impact of standards on international trade is explored, taking into account the functions of standards and the needs that they meet, and the conditions under which standards are likely to create or impede trade. The role of harmonization, equivalence and mutual recognition in reducing the trade-hampering effects of standards is then examined. Finally, the available empirical literature on the relationship between standards and trade is reviewed. Questions addressed include the impact of standards on prices, costs, trade volumes and social welfare.
b) The institutional setting in which standard-setting and conformity assessment occurs: The report describes how national standards are developed in practice and who designs them. It finds that standards development involves a diverse group of actors from government bodies, industry groups, consortia of firms, individual companies and NGOs. A description is also provided of the international architecture of conformity assessment and standardization, which is relevant to the national context and the overall standards regime encountered in trade. Finally the specific problems faced by developing countries in complying with the requirements set in the advanced countries are discussed. It is underlined that improving the participation of developing countries in international standardization is “crucial”.
c) The role of WTO agreements in reconciling the legitimate policy uses of standards with an open, non-discriminatory trading system: The report relates the economic analysis of standards to the relevant WTO legal tex xts – GATT 1994, the TBT Agreement and the SPS Agreement – and related jurisprudence. The major provisions of these Agreements are identified and it is shown how, taking into account the public policy objectives underlying standards, the provisions reduce the threat of standards being used for hidden protection or discrimination. It contains detailed analyses of the extent to which the major economic principles underlying the role of standards are reflected in WTO agreements, and ultimately in WTO jurisprudence.



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