Standards and Trade: An Overview. Key Issues Definitions and Classification of standards Definitions and Classification of standards Trade Effects of.

Standards and Trade:Standards and Trade:An OverviewAn Overview

Key IssuesKey Issues

Definitions and Classification of Definitions and Classification of standardsstandards

Trade Effects of StandardsTrade Effects of Standards Costs of ComplianceCosts of Compliance Role of the WTORole of the WTO SPS AgreementSPS Agreement

Question 1Question 1

What capacity do developing What capacity do developing countries need to establish in order countries need to establish in order

to meet the challenges posed by to meet the challenges posed by standards in export markets?standards in export markets?

Question 2Question 2

How might the SPS and TBT How might the SPS and TBT Agreements be amended to meet Agreements be amended to meet

better the needs of developing better the needs of developing countries?countries?

Question 3Question 3

How might the implementation of How might the implementation of higher standards in export markets higher standards in export markets

be a source of competitive be a source of competitive advantage?advantage?

Question 4Question 4

To what extent should developing To what extent should developing countries develop their own countries develop their own

standards rather than standards rather than implementing international implementing international

standards?standards?

Question 5Question 5

What is the role of the public and What is the role of the public and the private sector in developing the private sector in developing standards capacity in developing standards capacity in developing

countries?countries?

OutlineOutline

BackgroundBackground What are standards?What are standards? ConclusionsConclusions

BackgroundBackground

Fundamental role in economic activityFundamental role in economic activity Trade effects recognizedTrade effects recognized Greater incidence of standardsGreater incidence of standards Greater range of standardsGreater range of standards Addressed by WTO through SPS and Addressed by WTO through SPS and

TBT AgreementsTBT Agreements Impact on trade complexImpact on trade complex

Notifications of Technical Notifications of Technical Measures to GATT/WTO, 1981-Measures to GATT/WTO, 1981-

20022002

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

What are standards?What are standards?

““Specification (or a set of specifications) Specification (or a set of specifications) that relates to a product's attributes”that relates to a product's attributes”

““Providing for common and repeated Providing for common and repeated uses, rules guidelines, or uses, rules guidelines, or

characteristics for activities or their characteristics for activities or their results, aimed at the achievement of results, aimed at the achievement of

the optimum degree of order in a the optimum degree of order in a given context”given context”

Standards ClassificationStandards Classification

TerminologyTerminology Basic standardsBasic standards Dimensional standardsDimensional standards Performance standardsPerformance standards Variety reductionVariety reduction Testing & quality controlTesting & quality control

Content of StandardsContent of Standards

Product Standards

Process & Production Methods

Legal Basis of StandardsLegal Basis of Standards

Mandatory standardsMandatory standards De factoDe facto mandatory standards mandatory standards Voluntary consensus standardsVoluntary consensus standards

Classifying StandardsClassifying Standards

Public Private

Mandatory

Voluntary

Number of firms Certified to ISO Number of firms Certified to ISO 9000 and ISO 14000 in Selected 9000 and ISO 14000 in Selected

Developing Countries, 2002Developing Countries, 2002

0

2000

4000

6000

8000

10000

India South Africa Brazil Thailand

ISO 9000 ISO 14000

Sanitary and Phytosanitary Sanitary and Phytosanitary MeasuresMeasures

Bans:Bans: TotalTotal PartialPartial

Technical specifications:Technical specifications: Process standardsProcess standards Product standardsProduct standards Packaging standardsPackaging standards

Information requirements:Information requirements: Labelling requirementsLabelling requirements Controls on voluntary claimsControls on voluntary claims

Trade Effects of StandardsTrade Effects of Standards

Impacts:Impacts: Trade reductionTrade reduction Trade diversionTrade diversion

Trade effects related to costs of Trade effects related to costs of compliancecompliance

Impact on exporter competitivenessImpact on exporter competitiveness Empirical evidence remains limitedEmpirical evidence remains limited

Trade Effects of StandardsTrade Effects of Standards

Detention dataDetention data WTO counter-notificationsWTO counter-notifications Case studiesCase studies Quantitative estimatesQuantitative estimates

US Border Detentions of US Border Detentions of Egyptian Agri-Food Exports, Egyptian Agri-Food Exports,

20032003

0

10

20

30

40

Fruit &vegetables

Herbs & spices Confectionery Dairy products Other

Reasons for US Border Reasons for US Border Detention of Egyptian Agri-Food Detention of Egyptian Agri-Food

Exports, 2003Exports, 2003

0

10

20

30

40

50

60

Salm

onella

Filth

y

Insan

itary

Low

-acidca

nned

food

Pro

cessnot

appro

ved

Lab

elling

Pesticid

es

Unsafe

additive

%

Counter-Notifications Relating to Counter-Notifications Relating to New Measures in SPS Committee, New Measures in SPS Committee,

1995-20021995-2002Country ApplingMeasure

Regulatory Goal of Contested Measure

Plant Health

Animal Health

Human Health

Other Total

Number of Complaints by Developed Countries

Developed Countries 16 7 44 3 70

Developing Countries 17 11 41 4 73

Multiple Countries - 2 - - 2

Sub-total 33 20 85 7 145

Number of Complaints by Developing Countries

Developed Countries 12 12 34 2 60

Developing Countries 8 17 7 2 34

Multiple Countries - 2 - - 2

Sub-total 20 31 41 4 96

Total 53 51 126 11 241

Phytosanitary Restrictions on Phytosanitary Restrictions on Mexican Avocado Exports to Mexican Avocado Exports to

the USthe US Longstanding dispute dating back to Longstanding dispute dating back to

19141914 Relates to avocado seed weevilRelates to avocado seed weevil Entry granted to fruit from Michoacan in Entry granted to fruit from Michoacan in

1994 under agreed control system1994 under agreed control system Regions of US to which can export Regions of US to which can export

gradually extendedgradually extended Exports increased significantly over timeExports increased significantly over time

Imports of Avocados to the Imports of Avocados to the United States, 1991-2002United States, 1991-2002

0

50000

100000

150000

1991 1993 1995 1997 1999 2001

Short

tonnes

Mexico Other

EU Hygiene Requirements and EU Hygiene Requirements and Fish Exports from KenyaFish Exports from Kenya

Nile perch fishery of Lake Victoria developed Nile perch fishery of Lake Victoria developed as export-oriented sectoras export-oriented sector

On-going problems:On-going problems: General hygiene standardsGeneral hygiene standards Border detection of Border detection of SalmonellaSalmonella Pesticide residuesPesticide residues

Periods of restrictions on exports to EU over Periods of restrictions on exports to EU over period 1997-2001period 1997-2001

Efforts by government and exporters to Efforts by government and exporters to complycomply

Full harmonization in December 2003Full harmonization in December 2003

Guatemalan Exports of Guatemalan Exports of Raspberries to the USRaspberries to the US

Off-season exports of raspberries Off-season exports of raspberries developed through late 1980sdeveloped through late 1980s

Cases of human Cases of human CyclosporaCyclospora linked to linked to raspberries in 1996raspberries in 1996

Guatemalan raspberries identified as Guatemalan raspberries identified as source of contaminationsource of contamination

System of food safety controls System of food safety controls implementedimplemented

Exports never recoveredExports never recovered

Impact of EU and Codex Standards for Impact of EU and Codex Standards for Aflatoxins on Imports of Cereals to the EUAflatoxins on Imports of Cereals to the EU

EU Member State EU Standard Codex Standard Difference Between

Scenarios (%)

Austria +5 +5 0

Belgium/Luxembourg -10 +13 80

Denmark 0 +5 50

Finland -1 +3 61

France -92 +123 80

Germany 0 +10 50

Ireland -3 +4 80

Italy -22 +29 80

Netherlands -8 +11 80

Portugal -35 -22 87

Spain -10 +13 80

Sweden -1 +3 61

UK 0 +3 50

EU -177 +202 76

Costs of ComplianceCosts of Compliance

Costs of compliance:Costs of compliance: Non-recurringNon-recurring RecurringRecurring

Significant impact on small exportersSignificant impact on small exporters Related to underlying technical capacityRelated to underlying technical capacity Can be source of competitive advantageCan be source of competitive advantage Great cost-great benefit?Great cost-great benefit? Scope for strategic choicesScope for strategic choices

Costs of Compliance with Export Costs of Compliance with Export Food Safety Requirements in Food Safety Requirements in

Bangladeshi and Nicaraguan Shrimp Bangladeshi and Nicaraguan Shrimp Processing SectorsProcessing Sectors

Costs(US$ million)

Bangladesh(1996-98)

Nicaragua(1997-2002)

Industry Facility UpgradingGovernment

Training ProgramsTotal

17.550.380.07

18.01

0.330.140.090.56

Annual Maintenance of HACCP Program

2.43 0.29

Shrimp Exports During Focal Periods 775.00 92.60

Average Annual Shrimp Exports 225.00 23.20

Upgrade/Focal Year ExportMaintenance/Annual Exports

2.3%1.1%

0.61%1.26%

Role of the WTORole of the WTO

GATT Article XXGATT Article XX Standards CodeStandards Code WTO Agreements:WTO Agreements:

SPS AgreementSPS Agreement TBT AgreementTBT Agreement

Role of the WTORole of the WTO

Right to implement standards in pursuit Right to implement standards in pursuit of legitimate objectivesof legitimate objectives

Non-discriminationNon-discrimination Least trade-distortingLeast trade-distorting Special & differential treatmentSpecial & differential treatment

SPS AgreementSPS Agreement

HarmonizationHarmonization EquivalenceEquivalence ‘‘Appropriate level of protection’Appropriate level of protection’ RegionalizationRegionalization TransparencyTransparency Consultation & dispute settlementConsultation & dispute settlement

ConclusionsConclusions

Standards a significant trade issueStandards a significant trade issue Evidence have major impact on tradeEvidence have major impact on trade WTO established coherent rules in WTO established coherent rules in

international contextinternational context Ways in which SPS and TBT Ways in which SPS and TBT

Agreements applied is changing over Agreements applied is changing over timetime

Major issue for developing countriesMajor issue for developing countries