Standards and Trade: An Overview

Key Issues Definitions and Classification of standards Definitions and Classification of standards Trade Effects of Standards Trade Effects of Standards Costs of Compliance Costs of Compliance Role of the WTO Role of the WTO SPS Agreement SPS Agreement

Question 1 What capacity do developing countries need to establish in order to meet the challenges posed by standards in export markets?

Question 2 How might the SPS and TBT Agreements be amended to meet better the needs of developing countries?

Question 3 How might the implementation of higher standards in export markets be a source of competitive advantage?

Question 4 To what extent should developing countries develop their own standards rather than implementing international standards?

Question 5 What is the role of the public and the private sector in developing standards capacity in developing countries?

Outline Background Background What are standards? What are standards? Conclusions Conclusions

Background Fundamental role in economic activity Fundamental role in economic activity Trade effects recognized Trade effects recognized Greater incidence of standards Greater incidence of standards Greater range of standards Greater range of standards Addressed by WTO through SPS and TBT Agreements Addressed by WTO through SPS and TBT Agreements Impact on trade complex Impact on trade complex

Notifications of Technical Measures to GATT/WTO,

What are standards? “Specification (or a set of specifications) that relates to a product's attributes” “Providing for common and repeated uses, rules guidelines, or characteristics for activities or their results, aimed at the achievement of the optimum degree of order in a given context”

Standards Classification Terminology Terminology Basic standards Basic standards Dimensional standards Dimensional standards Performance standards Performance standards Variety reduction Variety reduction Testing & quality control Testing & quality control

Content of Standards Product Standards Process & Production Methods

Legal Basis of Standards Mandatory standards Mandatory standards De facto mandatory standards De facto mandatory standards Voluntary consensus standards Voluntary consensus standards

Classifying Standards PublicPrivate Mandatory Voluntary

Number of firms Certified to ISO 9000 and ISO in Selected Developing Countries, 2002

Sanitary and Phytosanitary Measures Bans: Bans: Total Total Partial Partial Technical specifications: Technical specifications: Process standards Process standards Product standards Product standards Packaging standards Packaging standards Information requirements: Information requirements: Labelling requirements Labelling requirements Controls on voluntary claims Controls on voluntary claims

Trade Effects of Standards Impacts: Impacts: Trade reduction Trade reduction Trade diversion Trade diversion Trade effects related to costs of compliance Trade effects related to costs of compliance Impact on exporter competitiveness Impact on exporter competitiveness Empirical evidence remains limited Empirical evidence remains limited

Trade Effects of Standards Detention data Detention data WTO counter-notifications WTO counter-notifications Case studies Case studies Quantitative estimates Quantitative estimates

US Border Detentions of Egyptian Agri-Food Exports, 2003

Reasons for US Border Detention of Egyptian Agri-Food Exports, 2003

Counter-Notifications Relating to New Measures in SPS Committee, Country Appling Measure Regulatory Goal of Contested Measure Plant Health Animal Health Human Health OtherTotal Number of Complaints by Developed Countries Developed Countries Developing Countries Multiple Countries-2--2 Sub-total Number of Complaints by Developing Countries Developed Countries Developing Countries Multiple Countries-2--2 Sub-total Total

Phytosanitary Restrictions on Mexican Avocado Exports to the US Longstanding dispute dating back to 1914 Longstanding dispute dating back to 1914 Relates to avocado seed weevil Relates to avocado seed weevil Entry granted to fruit from Michoacan in 1994 under agreed control system Entry granted to fruit from Michoacan in 1994 under agreed control system Regions of US to which can export gradually extended Regions of US to which can export gradually extended Exports increased significantly over time Exports increased significantly over time

Imports of Avocados to the United States,

EU Hygiene Requirements and Fish Exports from Kenya Nile perch fishery of Lake Victoria developed as export-oriented sector Nile perch fishery of Lake Victoria developed as export-oriented sector On-going problems: On-going problems: General hygiene standards General hygiene standards Border detection of Salmonella Border detection of Salmonella Pesticide residues Pesticide residues Periods of restrictions on exports to EU over period Periods of restrictions on exports to EU over period Efforts by government and exporters to comply Efforts by government and exporters to comply Full harmonization in December 2003 Full harmonization in December 2003

Guatemalan Exports of Raspberries to the US Off-season exports of raspberries developed through late 1980s Off-season exports of raspberries developed through late 1980s Cases of human Cyclospora linked to raspberries in 1996 Cases of human Cyclospora linked to raspberries in 1996 Guatemalan raspberries identified as source of contamination Guatemalan raspberries identified as source of contamination System of food safety controls implemented System of food safety controls implemented Exports never recovered Exports never recovered

Impact of EU and Codex Standards for Aflatoxins on Imports of Cereals to the EU EU Member StateEU StandardCodex StandardDifference Between Scenarios (%) Austria+5 0 Belgium/Luxembourg Denmark0+550 Finland+361 France Germany Ireland Italy Netherlands Portugal Spain Sweden+361 UK0+350 EU

Costs of Compliance Costs of compliance: Costs of compliance: Non-recurring Non-recurring Recurring Recurring Significant impact on small exporters Significant impact on small exporters Related to underlying technical capacity Related to underlying technical capacity Can be source of competitive advantage Can be source of competitive advantage Great cost-great benefit? Great cost-great benefit? Scope for strategic choices Scope for strategic choices

Costs of Compliance with Export Food Safety Requirements in Bangladeshi and Nicaraguan Shrimp Processing Sectors Costs (US$ million) Bangladesh ( ) Nicaragua ( ) Industry Facility Upgrading Government Training Programs Total Annual Maintenance of HACCP Program Shrimp Exports During Focal Periods Average Annual Shrimp Exports Upgrade/Focal Year Export Maintenance/Annual Exports 2.3% 1.1% 0.61% 1.26%

Role of the WTO GATT Article XX GATT Article XX Standards Code Standards Code WTO Agreements: WTO Agreements: SPS Agreement SPS Agreement TBT Agreement TBT Agreement

Role of the WTO Right to implement standards in pursuit of legitimate objectives Right to implement standards in pursuit of legitimate objectives Non-discrimination Non-discrimination Least trade-distorting Least trade-distorting Special & differential treatment Special & differential treatment

SPS Agreement Harmonization Harmonization Equivalence Equivalence ‘Appropriate level of protection’ ‘Appropriate level of protection’ Regionalization Regionalization Transparency Transparency Consultation & dispute settlement Consultation & dispute settlement

Conclusions Standards a significant trade issue Standards a significant trade issue Evidence have major impact on trade Evidence have major impact on trade WTO established coherent rules in international context WTO established coherent rules in international context Ways in which SPS and TBT Agreements applied is changing over time Ways in which SPS and TBT Agreements applied is changing over time Major issue for developing countries Major issue for developing countries