Regional Approaches to Better Standards Systems
| Author | Enrique Aldaz-Carroll |
| Pages | WPS3948 |
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Enrique Aldaz-Carroll. Email: ealdazcarroll@worldbank.org. This paper was written as a Background paper for the Global Economic Prospects 2005: Trade, Regionalism and Development, World Bank, Washington, D.C. The author would like to specially thank Paul Brenton for his very helpful suggestions and comments and all those who provided useful comments on the paper; particularly Manuel Olarreaga, Fredy Núñez, Reinaldo Figueiredo, Richard Newfarmer, Mirvat Sewadesh, Fernando Hernandez, Barbara Kotschwar, John Wilson, Steve Jaffee and Manuel Albaladejo; as well as the interviewees for their time.
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Enrique Aldaz-Carroll1
Developing countries are experiencing an increasing need to upgrade standards in their domestic and export markets. The need for higher standards requirements in their domestic market is caused by the surge in imports to developing countries resulting from their greater liberalization. This surge is raising developing countries' concern about ensuring that imported products are safe for consumers and the environment. Such is the case for instance in Peru, which is experiencing a great influx of low quality Chinese manufactured goods. The need for higher export standards originates from the rising standards requirements in developed countries' markets.
This paper examines different approaches available to developing countries in upgrading their standards and conformity assessment procedures, focusing particularly on approaches followed within the context of regional trade agreements (RTAs), as these are yielding promising results. Based on RTAs' upgrading experiences, the paper makes suggestions for a more effective upgrading implementation process.
There are different paths available to upgrade standards. Upgrading standards unilaterally to international levels is the simplest process, but can prove costly for countries in a low development stage. The cost these countries must incur to readjust their production and regulatory structures to meet international standards is significant, yet the returns are not always ensured since the satisfaction of international standards does not guarantee market access. If the upgrading is not coordinated with trading partners, the upgrade might not be high enough to meet partners' new standards and conformity assessment requirements. To minimize this problem many countries have upgraded their standards following a coordinated harmonization process with other trading partners.
The type of coordinated path that a country can follow depends on the institutional sophistication of the trade agreement that the country has with the partners with which it is coordinating its upgrading. Two distinct coordinated approaches are the cooperation approach and the RTA approach. The cooperation approach is that followed by bilateral trade agreements and by multilateral cooperative agreements, like APEC. It has less enforcement power than an RTA approach, and can therefore encounter greater obstacles if some members are not fully committed to the upgrading process. An RTA approach is that followed by the members of an RTA and it involves not only the upgrading of standards, but also the regional harmonization of standards.
Two types of RTA approaches to standards upgrading can be identified based on the speed at which the regional standard is upgraded to the international standard and will be the ones this paper focuses on. The first is the one go approach: member countries Page 2 regionally harmonize and upgrade their standards for the selected product at once, equating the regional standard to the international standard. This approach is followed by RTAs like the Association of South-East Asian Nations (ASEAN),
The second approach is the gradual upgrading approach: member countries upgrade their standards gradually towards the international standard rather than immediately. This approach tends to be followed by RTAs with members that have a technological level or health, security and environment objectives that are not aligned with international standards. Such is the case of the Andean Community and Mercosur. In order to guarantee market access as standards rise, member countries coordinate their upgrading by regionally harmonizing their standards towards a certain intermediate level. Exports satisfying this intermediate standards level are guaranteed market access to member countries' markets.
To date, RTAs in the developing world have not begun to realize their full potential for overcoming standards related obstacles to regional or global trade. Though there is yet no clear best practice, it is possible to draw some common principles from RTAs' past experiences and from existing literature for a more effective upgrading and harmonizing process of standards and conformity assessment procedures: prioritize sectors for reform; build trust between RTA members; set a quality regulation based on simplification, transparency and dynamism; allow for gradual reform if needed; build regulatory capacity; and promote mutual recognition of conformity assessment procedures.
This paper aims to contribute to the scarce literature on regional approaches to standards upgrading. It complements Kotschwar's (2001) review of standards in Latin American RTAs and Xiaoyang-Chen and Mattoo's (2004) assessment of the impact of regional standards agreements on trade by employing information obtained through interviews to draw lessons from RTAs' experiences on standards upgrading. The interviews were conducted with representatives of firms, business associations, laboratories, accreditation bodies, standardization bodies, and national and regional bodies of TBT and SPS standards in Argentina, Brazil, Chile, Peru, Uruguay, and Washington DC.
The paper is structured as follows. Section 1 briefly presents standards and conformity assessment procedures. Section 2 reviews the unilateral and coordinated approaches to standards upgrading. Section 3 examines RTA standards upgrading and harmonizing experiences and derives some common features. Section 4 presents principles that can guide developing countries in the process of regional upgrading and harmonizing of standards and conformity assessment procedures and suggestions for a more effective participation in the international standards arena. The last section concludes.
A standard outlines the special characteristics of processes, products, or services. Standards facilitate trade since they"stipulate what can or cannot be exchanged and define the procedures that must be followed for exchange to take place" (Brenton Page 3 2004:1). Thus complying with standards requirements in foreign markets is a critical factor determining market access to those markets.2
Standards can be of a voluntary or compulsory nature. A technical regulation is a compulsory standard imposed by a government at the local, regional or national level to secure health, safety, and environmental and consumer protection. A technical regulation for instance can specify the limit of car exhaust emission levels. A voluntary standard is a market driven standard that"reflects the demands and tastes of consumers or the technological requirements of industrial purchasers" (Brenton 2004:1). A voluntary standard for instance specifies the type of knobs used in a car. Note that while the satisfaction of a voluntary standard is legally voluntary, it is de facto necessary to secure sales since most voluntary standards are enforced by the market (Hufbauer, Kotschwar and Wilson 2001). It would therefore be more accurate to name these two types of standards public and private standards, but we will follow convention and refer to...
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