World Trade Report12 e

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World TradeReport 2012Trade and public policies:

A closer look at non-tariff measures in the 21st century



The World Trade Report is an

annual publication that aims to

deepen understanding about trends in trade, trade policy

issues and the multilateral

trading system.

The 2012 World Trade Report

is split into two main parts.

The first is a brief summary

of the trade situation in 2011.

The second part focuses on

the special theme of non-tariff

measures in the 21st century.

Website: www.wto.orgGeneral enquiries:

[email protected]

Tel: +41 (0)22 739 51 11

What is the World

Trade Report?

Using this report

Find out more



1

CONTENTS

Contents

Acknowledgements and Disclaimer 2

Foreword by the WTO Director-General 3

Executive summary 5

I World trade in 2011 16

II Trade and public policies: A closer lookat non-tariff measures in the 21st century 34

A Introduct ion 36

1. What is the World Trade Report 2012 about? 37

2. History of NTMs in the GATT/WTO 39

B An economic perspective on the use of non-tarif f measures 48

1. Reasons for government intervention an tyes of measures

2. The hoie of NTMs in ight of omesti an internationa onstraints 3

3. Measures affeting trae in servies 73

. NTMs in the 21st entury 79

. ummary an onusions 7

C An inventory of non-tari ff measures and services measures 94

1. oures of information on NTMs an servies measures 9

2. tyize fats about NTMs reate to trae in goos 1

3. ervies measures 122

. onusions 12

D The trade effects of non-tarif f measures and services measures 134

1. stimating the trae effets of NTMs an servies measures 13

2. isentanging trae effets of TT/P measures an omesti reguation in servies 13

3. Harmonization an mutua reognition 19

. onusions 12

E International cooperation on non-tarif f measures in a globalized world 160

1. The reguation of NTMs in trae agreements 12

2. ooeration in seifi oiy areas: TT/P an servies measures 17 3. GATT/WTO isiines on NTMs as interrete in isute settement 17

. Aating the WTO to a wor beyon tariffs 23

. onusions 21

F Conclusions 220

Bibliography 224

Technical notes 236

Abbreviations and symbols 240

List of figures, tables and boxes 242

WTO members 245

Previous World Trade Reports 246



WORLD TRADE REPORT 2012

2

AcknowledgementsThe World Trade Report 2012 was reare uner thegenera iretion of the WTO’s euty iretor

Genera Aeanro ara an suervise by Patrik Low,iretor of the onomi Researh an tatistisivision. The writing of this year’s reort wasoorinate by Mar ahetta an osimo everei.Work on iniviua setions was oorinate byAeaner Kek, oeman Nee, Roberta Piermartinian Mihee Ruta.

The authors of the reort were: Mar ahetta,osimo everei, Robert Guotty, ohn Hanok,Aeaner Kek, Gaurav Nayyar, oeman Nee,Roberta Piermartini, Mihee Ruta an Robert Tehonomi Researh an tatistis ivision; Lee Ann

akson Agriuture an ommoities ivision; AanYanovih Aeate oy eretariat; evinManies an rik Wikström Trae an nvironmentivision; Antonia arzaniga an Hoe Lim Trae inervies ivision. Mihae errantino, Pau Kaengaan Robert taiger wrote bakgroun aers. Otherwritten ontributions were rovie by HiegunnNorås an Mevin rei. The Internationa Traeentre rovie usefu ata roesse seifiay forthis reort. Partiuar aknowegement is owe toGabriee Mareau, Naia Roha an Roy antana fortheir many suggestions on the Reort.

tatistis were rovie by the tatistis Grou of theonomi Researh an tatistis ivision,oorinate by Hubert saith, uia e Verteui,Anreas Maurer an ürgen Rihtering. TheAgriuture an ommoities ivision an the Traean nvironment ivision, aong with the tatistisGrou, rovie information an guiane on theeifi Trae onerns atabase. Researh inutswere rovie by auia öhringer, Pramia rivei,

Liiana oetti, iio Gregorini, asmin Grösh,Abigai Hunter, hruti Kashya, Gianua Orefie,

Lorenzo Rotunno, oonas Uotinen an Giuia Zanvettor.Other ivisions in the WTO eretariat rovievauabe omments on rafts at various stages ofrearation. The authors wish to aknowege theavie reeive from severa oeagues in theAgriuture an ommoities ivision Grethentanton, the Aeate oy eretariat aroGamberae, Matteo errero, the Lega Affairs ivisionKerry Abeury, Aegyoung un, Maria Pereyra, theTrae in ervies ivision Hami Mamouh an theInstitute for Training an Tehnia ooerationHetor Torres.

The foowing iniviuas from outsie the WTOeretariat aso mae usefu omments on earierrafts: Rihar awin, ohn eghin, Oivier aot,Phiia ee, Panagiotis eimatsis, Ian Gison,ernar Hoekman, Phii Levy, Mariem Maouhe,ébastien Mirouot, Anrew Mithe, amie Morrison,Aessanro Niita, Hiegunn Norås, ennis Novy,Mareo Oarreaga, oost Pauweyn, ebastian aez,Rani agao, Robert taiger, oe Trahtman, TaniaVoon, ohn Whaey, Robert Wofe an o Xiong.

The roution of the Reort was manage by PauettePanhette of the onomi Researh an tatistis

ivision, assiste by Véronique ernar, an inooeration with Anthony Martin, Heather aeyPertinan Heen wain of the Information an ternaReations ivision. Anthony Martin an ohn Hanokeite the reort. Aknowegement is owe toebastian Arq an Mike ank of Meneey for hewith the bibiograhy. The transators in the Languages,oumentation an Information Management ivisionworke har to meet tight eaines.

DisclaimerThe World Trade Report an any oinions reflete therein are the soe resonsibiity of the WTO

eretariat. They o not urort to reflet the oinions or views of members of the WTO. The main authorsof the Reort aso wish to eonerate those who have ommente uon it from resonsibiity for anyoutstaning errors or omissions.



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FOREWORD

Foreword by the WTODirector-General

This year’s World Trade Report takes a fresh ook at ano issue. Nontariff measures NTMs have been withus sine nations have trae an they have ertainyonstitute a key eement of the work of the GATT anthe WTO over the years. I offer seven reasons why it isa goo time for the WTO to be thinking about NTMs.

irst, NTMs have aquire growing imortane astariffs have ome own, whether through mutiatera,referentia or uniatera ation. eony, a ear trenhas emerge over the years in whih NTMs are essabout shieing rouers from imort ometitionan more about the attainment of a broa range ofubi oiy obetives. You ou say we are movingfrom rotetion to reaution. This teneny isisernibe in ratiay every eonomy, as onernsover heath, safety, environmenta quaity an othersoia imeratives gain rominene. Moreover, issuessuh as these take on a more entra roe in oiy as

eonomies eveo an inomes grow.

Thiry, growing ubi oiy onerns a signifiantyto the ome nature an variety of NTMs eoye bygovernments, aing for an aitiona ayer of anaysisto tease out the trae effets of aternative aroahestowars the attainment of eare oiy goas.ourthy, the eansion of the ubi oiy agenameans that NTMs wi not foow a ath of iminishingreevane ike tariffs have one. They wi not shrink inimortane. Reguatory interventions aressing marketfaiures an internationa siovers, with inevitabeonsequenes for trae flows an investment, are here

to stay. ifthy, the inrease roe of ubi oiybeomes ever more resent in internationa eonomireations as gobaization intensifies intereenenyamong nations. ithy, a this takes us to where theWTO omes in. I see effetive internationa ooerationon NTMs as a key haenge faing the mutiateratraing system in the years ahea. inay, a reateoint to the ast is that NTMs figure rominenty amongisutes brought to the WTO.

We have to think ifferenty about the haenges ofinternationa ooeration. When trae oening is theore business, the “eve aying fie” imagery aies.ut with ubi oiy, it oes not. The aim is not toreue ubi oiy interventions to zero; it is torener them omatibe with the gains from trae. Wean no onger think about reution formuae,

beoming immerse – an sometimes ost – in enessebates about the size of reution oeffiients oreetions to the oeffiients. Reiroity innegotiations oes not have the same meaning. Theoiy too bo is quite ifferent. The haenge isabout fining ways of managing a wier set of oiy

referenes without isreseting those referenesor aowing them to beome ometitiveness onernsthat unneessariy frustrate trae.

Referene is often mae to istintions betweenshaow an ee integration an between borermeasures an behintheborer measures. These arenot earut ategories an they are use in ifferentways by ifferent ommentators. rom the urrentersetive, where vibrant trae reations must beunerinne by ubi oiy infrastruture withotentia trae effets, it makes sense to think interms of the eeer en of the integration setrum.

Inee, one way of thinking about the haenges ofeonomi integration is ess as a quest for free traean more as rogress towars a goba market.

These are some of the issues that the World TradeReport takes u this year. eginning with a shorthistoria overview, the Reort shows how the earyfous on removing NTMs that were argey surrogatesfor tariffs has given way to a muh subter an moreome wor in whih ubi oiy onerns fingreater eression in trae reations than they i afew eaes ago. The Reort tries to ientify themaor motivations that romt governments to use

NTMs. A sime threefo istintion is between thoseNTMs that serve ubi oiy essentiay noneonomi issues, those that have an eonomi fousbase on a nationa wefareinreasing auus, anthose that have a oitia eonomy motivation thatserves artiuar interests, an quite ossiby o notinrease nationa wefare.

These istintions annot aways be easiy rawn, butthey make ear why eaing with NTMs is so muhmore omiate than simy working for more oenmarkets by removing other barriers to trae. NTMs angeneray be eete to have trae effets an theymay inrease or erease trae. The outome eensboth on the motivation for the measure an the way itis esigne. In keeing with oiy trens in the area ofNTMs, most of the anaysis in the Reort fouses




4

rimariy on ubi oiy interventions that are overeby the Tehnia arriers to Trae TT Agreement,the Aiation of anitary an Phytosanitary PMeasures Agreement, Artie XX of the GeneraAgreement on Tariffs an Trae GATT, an on the

omesti reguation rovisions of the GeneraAgreement on Trae in ervies GAT.

ine ubi oiy NTMs are ikey to have traeeffets, we annot atogether esae onsieration ofthese effets. Poiymakers may not ostensiby refletany trae intent in their ubi oiy interventions, butin ratie these interventions might be intene toserve a ua urose. They may be esigne oraministere in ways that intentionay restrit traeeven if their rimary urose is to serve a ubi oiy.This has been referre to as “oiy substitution” an itarises either where aternative, ess oaque oiies

suh as tariffs are unavaiabe, or where oiymakerswish to onea the obetive. Note aso that thisrobem an arise not so muh in the esign of a oiybut in the way it is aministere. When this is the ase,fining a systemati remey an be muh more iffiut.A goo ea of the ase oa in GATT/WTO isutesettement has turne on the tension between gooubi oiy an hien rotetion.

The issue of oiy substitution is but one eement ofengagement when it omes to internationaooeration on NTMs. It is robaby one of the easierasets of ooeration. Matters beome more

omiate when we think about the trae effets ofNTMs not in terms of rotetionist intent, but rather interms of the trae effets of ivergent aroahes toNTMs. The issue of ivergene emboies at eastthree eements. The first is otentiay the eastomiate an reates to what we might think of as“inienta or atheenent ivergene” – that is,oaize reguatory ooeration may have e toifferent reguatory aroahes that are not grounein any strong referene, but rather in habit or ustom.With no strong veste interest in ursuing ivergentaroahes, ooeration to harmonize or mutuayreognize suh iverging aroahes shou be

reativey straightforwar. Inee, this was very muhthe sirit of the suggestion in ast year’s World TradeReport on referentia trae agreements that the risksof reguatory ivergene ou be essene through amutiateraization of referentia oiies in this area.

The seon aset of ivergene in nationa or regionaaroahes to NTMs is muh more eiate. ivergenemay reflet something more rofoun that goes to theroot of soieta referenes. Vaue systems may varyaross soieties in ways that make the iea ofharmonization or mutua reognition unaetabe. Thisou be ae “referene ivergene” an it wou be

a brave erson who argue that trae shou trumsuh iversity. Yet suh reaities may arry strong

onsequenes for the abiity of nations to ooeratean benefit mutuay from ehange. In suh ases, theony sensibe aroah is to ensure that ifferenes arereserve an resete at minimum ost in terms ofany siage towars a uaurose aroah to ubi

oiy formuation an aministration.

The thir aset of ivergene onerns the iffiutiesfae by oorer ountries in meeting stanars inmaor markets they serve. One ou haraterize thisas “invountary ivergene”. eveoing ountries haveno motivation for referring ifferent stanars; it ismerey a question of aaity. With the neessary wian ommitment, this robem is reaiy amenabe tosoution. As note in the Reort, a number of aaitybuiing initiatives are attemting to aress this issue.

The eonomi gains from oint internationa ation to

remove rotetionist eements in the esign anaministration of NTMs wou be onsierabe. Workon minimizing reguatory ivergene, throughharmonization, mutua reognition of stanars anation to ensure that rivate stanars o not unuysegment markets, wou aso romise onsierabebenefits. Muh has areay been ahieve in managingubi oiy regaring TT/P measures in thegoos area, an omesti reguation in servies. Therogress that has been mae hos romise for furtheravanes.

A goo art of this reort is eiate to ientifying

information avaiabe on NTMs an our aaity toanayse an assess the imat of these measures. Thereview is very usefu, but it oes not make for heerfureaing. We know far ess than we shou about theeistene an effets of NTMs. ome of the iffiutyis of a tehnia nature, as the Reort arefuyouments. The new Integrate Trae InteigenePorta ITIP information system being eveoe bythe WTO eretariat is an effort to inreasetransareny. ut it is ear that governments bear aresonsibiity for the insuffiieny of avaiabeinformation. A strong ase eists for seekingimrovements in the esign an ontent of notifiation

obigations an in the eve of omiane with theseobigations. This wou seem to be a reonition forserious internationa engagement, whether regionayor mutiateray, in making rogress on an agena thatromises signifiant gains to those who engage.

Pascal LamyiretorGenera



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EXECUTIVE SUMMARY

Executive summaryThis year’s World Trade Report ventures beyon tariffsto eamine other oiy measures that an affet

trae. As tariffs have faen in the years sine the birthof the Genera Agreement on Tariffs an Trae GATTin 19, attention has rogressivey shifte towarsnontariff measures NTMs. The range of NTMs isvast, ome, riven by mutie oiy motives, aneverhanging. Pubi oiy obetives uneryingNTMs have evove. The rivers of hange are many,inuing greater intereeneny in a gobaizingwor, inrease soia awareness, an growingonerns regaring heath, safety, an environmentaquaity. Many of these fators a for a eeening ofintegration, wresting attention away from moretraitiona an shaower forms of ooeration. Trae

in servies is a art of this eveoment an has omeuner greater srutiny, aong with the oiies thatinfluene servies trae.

The ontinuing mutiiation of oiy iretions anreouations resents haenges for internationaooeration. The GATT/WTO has aresse some ofthe haenges reate by NTMs, both through itsisute settement mehanism an suessive rounsof GATT/WTO negotiations. The Tokyo an Uruguayrouns, in artiuar, fouse on a number of NTMs,inuing stanars, whih were rogressivey subetto heightene mutiatera isiine. The Uruguay

Roun aso marke the inusion of servies in theWTO.

Reguatory measures suh as tehnia barriers to traeTT an sanitary an hytosanitary P measuresin goos an omesti reguation in servies raise newan ressing haenges for internationa ooeration inthe 21st entury. They aso ose aute transarenyissues. More than many other measures, they refletubi oiy goas suh as ensuring heath, safety anwebeing of onsumers. Their trae effets may beinienta, but they an aso be esigne an aie ina manner that unneessariy frustrates trae. Moreover,

they raise a number of issues that are seifi togovernments an firms in eveoing ountries. Thesheer breath of the subet area has meant that thefous of this reort is on TT/P measures anomesti reguation in servies.

A. Introduction

etion A of the Reort resents an overview of thehistory of nontariff measures in the GATT/WTO. Thisoverview isusses how motivations for using NTMshave evove, omiating this area of trae oiy butnot hanging the ore haenge of managing thereationshi between ubi oiy an traingoortunities.

etion eamines the reasons why governments useNTMs an servies measures an the etent to whihubi oiy interventions may aso istort internationatrae. The henomenon of offshoring an the rosseffets of servies measures on goos trae are aso

onsiere. The setion anayses hoies amongaternative oiy instruments from a theoretia anemiria ersetive. inay, ase stuies areresente on the use of NTMs in artiuar ontets.These inue the reent finania risis, imatehange oiy an foo safety onerns. The asestuies onsier how far measures aote may osea haenge for internationa trae.

etion of the Reort surveys avaiabe soures ofinformation on NTMs an servies measures anevauates their reative strengths an weaknesses. It




6

B. An economic perspective on

the use of non-tariff measures

Reasons for government intervention

and types of measures

Governments employ non-tariff measures to

increase national welfare and for “political

economy” reasons.

Nontariff measures, suh as TT/P measuresinuing abeing, taes an subsiies, are often thefirstbest oiy instruments to ahieve ubi oiyobetives, inuing orreting market faiures suhas information asymmetries where arties o not havethe same information or imerfet ometition, anursuing noneonomi obetives, suh as the

rotetion of ubi heath. NTMs suh as eortsubsiies an eort taes inrease nationa inomeby eoiting market ower in internationa markets.Whie many NTMs are onerne with onsumerrotetion, NTMs an aso be utiize by oitiainumbents to rotet omesti rouers.

The use of NTMs, irrespective of the motive that

underlies them, will often have trade effects.

In some ases, the use of NTMs an romote trae butin many other ases, they restrit it. In ases where theNTMs are meant to orret a market faiure, the traeeffets are an inavertent byrout of ursuing aubi oiy obetive. At other times, when NTMs areemoye to maniuate the terms of trae or rotetomesti rouers, averse trae effets on artnersare the means through whih gains are ature. Thefat that the same NTM use to ursue a ubi oiyobetive an aso be use for rotetionist urosesunerines the iffiuty of istinguishing between“egitimate” an rotetionist motivations for NTMs,an of ientifying instanes where NTMs reateunneessary trae osts.

The choice of NTMs in light of domesticand international constraints

Analysing the choice among alternative

instruments in light of the domestic political and

economic context can help identify the motivation

behind policy interventions.

Neither the eare aim of a oiy nor its effet ontrae rovies onusive eviene on whether or notan NTM is innouous from a trae ersetive. Ananaysis of the nature of these measures an of theoitia an eonomi onitions eaing to theiraotion an rovie imortant insights in this regar. Inartiuar, the oaque nature of erta in NTMs omarewith tariffs an other oiy instruments aowsoitiay motivate governments to onea the true

osts an benefits of a measure an, thus, satisfy theemans of rouer obbies whie maintaining theaearane of ursuing a oiy of ubi interest.Various irumstanes in the oitia environment, suhas eetion yes or intereartmenta onflits, an

give further iniations as to why the use of NTMsersists. etor harateristis aso ay a roe.Pressure from arge influentia firms regaring inreasesin fie osts or the revaene of internationaoffshoring in ertain inustries is boun to affetgovernments’ eisions on the use of ertain NTMs.

As countries make commitments in trade

agreements that constrain their ability to pursue

certain trade policies, less effectively regulated

measures may emerge as a secondary means of

protecting or supporting domestic industries.

When tariffs an other trae measures inreasingybeome unavaiabe to governments, ertain NTMs,inuing behintheborer NTMs suh as TT/Pmeasures, may be use to influene trae. or eame,a government may be temte to imose more stringentomesti tehnia reguations if omesti firms in animortometing inustry fin it easier than foreignomanies to omy. isting emiria evieneaues to inrease use of NTMs when tariffs areonstraine by internationa agreements.

Measures affecting trade in services

Despite the peculiarities of services trade,distinguishing when services measures pursue

public policy objectives from instances in which

they distort trade is fraught with the same

fundamental difficulties as in the case of NTMs.

The ase for reguating servies markets is artiuaryevient given the iniene of market faiures in manyservies setors. At the same time, the seifiharateristis of servies trae, notaby theintangibiity of servies an the ifferent moes ofsuy, imy that reguatory measures, mosty aie“behin the borer”, are the ony form of trae

rotetion. Thus, whie some servies measures maybe use eiity for rotetionist uroses, muhservies reguation ursues ubi oiy obetives,but might nonetheess have effets on trae.

Ensuring that services measures do not unduly

distort trade has become of even greater

significance in light of the unbundling of

production processes.

Trae in servies ays an imortant roe in suortinginternationa roution networks. Measures thatrestrit trae an ometition in servies markets mayaffet more than the setor irety onerne.Partiuary in the ase of infrastrutura servies,siover effets on other servies an goos an besignifiant.



7

EXECUTIVE SUMMARY

NTMs in the 21st century

The use of NTMs in the financial crisis, and

policies addressing climate change and food

safety measures are all examples of how

challenges arise at the interface of public policyand trade policy.

uring the reent finania risis, a number of“emergeny” measures were taken to stem the sreaof systemi amage. At the same time, it was fearethat the risis ou inrease the temtation to resortto beggarthyneighbour oiies. This has heightenethe nee for the monitoring of measures taken inresonse to the risis in orer to guar against thesetre of rotetionism.

In regar to imate hange, ountries with strit

regimes wi be temte to resort to NTMs in orer tomanage the environmenta an trae onsequenes oftheir imate oiies. Two of these onsequenes arearbon eakage whereby reutions of greenhousegas emissions by a ountry with strit reguations areoffset by inrease emissions by a ountry with essstrit reguations an the oss in ometitiveness offirms in ountries with tough environmenta reguations.Whie environmenta reasons ou motivate the use ofNTMs, suh as borer austment measures, thesemeasures aso he ometitivey haenge omestirouers, giving rise to a risk of reguatory ature.

onomi, soia an tehnoogia avanes haveresute in higher onsumer eman for foo safetyan ose new haenges in managing gobayfragmente suy hains. oo safety measures haveroiferate as a too to reson to these haenges.As a onsequene, various aroahes to mitigateossibe negative trae imats, suh as harmonizationof stanars, equivaene an ommitment to a set ofrues, are reeiving wiesrea attention.

See page 48

C. An inventory of non-tariff

measures and services

measures

Sources of information on NTMs andservices measures

Transparency is a major issue with regard to both

NTMs and services measures. Despite recent

efforts aimed at filling the information gap in this

area, data remain sparse.

The reative sarity of information on nontariffmeasures is arty ue to the nature of thesemeasures, whih are inherenty more iffiut tomeasure than tariffs. The WTO an other internationaorganizations have unertaken substantia efforts anmae goo rogress in assifying an oeting ataon NTMs in reent years, an these efforts are startingto eten to servies measures. However, more neesto be one to obtain a earer an more ometeiture of the trae oiy ansae.

WTO interna soures inue WTO members’ sheuesof onessions/ommitments, notifiations, WTO traeoiy reviews, monitoring reorts, an information onseifi trae onerns Ts raise by WTO membersan isutes brought to the WTO. Most of thesesoures suffer from imitations an fai to rovie theeve of transareny they are suose to eiver. WithWTO members’ notifiations, for eame, the owomiane rate an be a serious imitation.

Another robem is the aessibiity of ata whih arenot aways store in atabases an are sattere. Thesituation with regar to the aessibiity of NTM atashou imrove onsieraby with the WTO’s newIntegrate Trae Inteigene Porta ITIP, whih isurrenty being eoye.

With regar to nonWTO soures, it beame evient bythe eary 2s that UNTA’s Trae Anaysis anInformation ystem TRAIN atabase, the mostomete oetion of ubiy avaiabe information onNTMs, was in nee of ugraing.

A mutiageny grou inuing a reevantorganizations uate UNTA’s outate oingsystem. At the same time, UNTA, the InternationaTrae entre an the Wor ank starte oorinatingtheir efforts to oet offiia information on NTMs.They aso unertook a series of business surveys thatusefuy omement offiia information.

Other nonWTO soures of NTM ata inue theGoba Antiuming atabase, the oRe NTMsatabase an the Goba Trae Aert atabase.

None of these ata soures rovies omrehensiveoverage of NTMs. However, eah shes ight on a




8

artiuar aset, an taken together they roviesignifiant information.

esies the seifi ommitments uner the GeneraAgreement on Trae in ervies an referentia trae

agreements, there is very itte information on serviesmeasures. The O’s Prout Market Reguationfamiy of iniators is the main soure of informationon aie measures. However, it oes not istinguishbetween market aess an nationa treatmentimitations on the one han an omesti reguation onthe other. The most reiabe information on omestireguation omes from setorseifi ata, foreame in finania servies.

Stylized facts about NTMs

Despite common perceptions about a rising trend

in NTMs, evidence is inconclusive. NTMs appearto have risen in the mid-1990s, but between 2000

and 2008 activity remained relatively flat before

picking up again following the financial crisis.

However, WTO notifications suggest an upward

trend in TBT/SPS measures.

Aoring to historia ata from the UNTA TRAINatabase, shares of rout ines an trae vauesovere by NTMs rose between the ate 199s aneary 2s, but then staye flat or eine sightyu to 2.

WTO ata on notifiations, however, show inreasinguse of TT/P measures sine the mi199s. Thisinrease in the iniene of TT/P measures isreflete in an inrease in the number of seifi traeonerns raise by WTO members in the TT an Pommittees. requeny an overage ratios forseifi trae onerns have aso risen over time,athough not eveny.

viene from WTO isutes in reation to TT anP measures is more nuane. Over the ast fiveyears, ony 11 er ent of isutes ite the PAgreement an 12 er ent ite the TT Agreement.

The Genera Agreement on Tariffs an Trae GATTwas ite more than haf of the time er enturing the same erio. One ossibe eanation forthis isreany is that other ommitteebaseooeration mehanisms are effetive in iffusingonflits.

TBT/SPS measures are the most frequently

encountered NTMs according to data collected

from official sources. They are also considered

among the most relevant impediments to exports,

according to business surveys.

Newy oete offiia NTM information from3 eveoing ountries, the uroean Union anaan shows a high rosssetiona iniene of TTan P measures.

viene from business surveys onute by the ITin 11 eveoing ountries suggests that TT/Pmeasures are the most burensome for eorters. In21, the share of TT/P measures in a NTMsereive burensome by eorting firms was er

ent. imiary, surveybase ata show a arge shareof TT/P in measures affeting U eorters ustover er ent, but the U share is ower aroun2 er ent. This isreany might be eaineby ifferenes in methooogy between the U anU surveys.

Evidence from WTO members’ specific trade

concerns and ITC business surveys indicates that

TBT/SPS measures applied by developed

countries are an important source of concern.

TT/P measures imose by eveoe eonomies

raise reativey more seifi trae onerns thanmeasures imose by eveoing eonomies. The ITbusiness surveys show a greater resort to TT/Pmeasures by eveoe eonomies.

NTMs, and TBT/SPS measures in particular, vary

across sectors but are especially prevalent in

agriculture.

eifi trae onerns reate to P measuresoverwhemingy affet the agriutura setor9 er ent, whih is far from surrising. Moreuneete is the fat that a arge number of TT

onerns 29 er ent aso reate to agriuture.Aitionay, eonometri anaysis shows that TTs asmeasure by seifi trae onerns are mostimortant, in terms of numbers of tariff ines an traevaue, in the agriutura setor.

If IT survey resonses are weighte by trae, thereorte iniene of NTMs among firms in theagriutura setor is 3 er ent, omare with er ent in manufaturing. urthermore, TT/Pmeasures are far more revaent among NTMs inagriuture 9 er ent than in manufaturing3 er ent.

viene from WTO isutes aso shows a greaternumber of itations of the P an TT agreements inases invoving agriutura routs. oth agreementswere ite in 2 er ent of isutes invovingagriutura routs as efine in the Agreement onAgriuture between 27 an 211. Meanwhie, noisutes invoving nonagriutura routs itethe P Agreement an ony 2.9 er ent ite theTT Agreement.

Evidence also suggests that procedural obstacles

are the main source of difficulties for exporting

firms from developing countries.

IT business surveys show that, for eorters, morethan 7 er ent of burensome NTMs aso raise a



9

EXECUTIVE SUMMARY

roeura obstae. Time onstraints an unusuayhigh fees or “informa” ayments together aount formore than haf of reorte obstaes.

Services measures

The currently available sources of information on

services measures are unsatisfactory in a number

of respects. WTO notifications suffer from low

compliance rates. WTO members’ schedules of

market access and national treatment

commitments provide information on bound

policies but the regimes actually applied are

often more open. Domestic regulation is generally

measured using poor proxies.

Prout Market Reguation PMR iniators, the mostfrequenty use ata on servies measures, have

foowe a ownwar tren in O ountries sinethe ate 199s. This iniates an inrease in marketontestabiity, but rovies imite information ontrens of market aess, nationa treatment anomesti reguation. Very itte is known on the trensin servies measures in most nonO ountriesbeause they are not inue in the PMR.

There is some eviene of isrimination againstforeign servies an servies roviers, in artiuarfrom the foreign iret investment I restritivenessine auate by the O. uh isrimination,whih is ikey to generate rents for omesti

inumbents, has however foowe a ownwar trensine the ate 199s, eseiay via reutions inforeign equity restritions.

As far as omesti reguation is onerne, the atasituation is artiuary troubing. The trae iteraturehas use PMR iniators to roy for omestireguation, but suh iniators o not rovie asatisfatory aount of quaifiation requirements anroeures an tehnia stanars in servies. Oneof the iffiuties in measuring omesti reguation isthat it is often setorseifi. Not surrisingy, themost reiabe information omes from setorseifi

atasets, suh as the Wor ank ataset on bankingreguation.

See page 94

D. The trade effects of non-tariff

measures and services

measures

The quantification of trade effects

Non-tariff measures are diverse and cannot easily

be compared across countries and sectors. The

existing literature, however, suggests that NTMs

significantly distort trade, perhaps even more

than tariffs. Moreover, the relative contribution of

NTMs to the overall level of protection appears to

increase with the level of GDP per capita.

A number of stuies quantify the effet of NTMs oninternationa trae by estimating an “avaorem tariffequivaent” AV. Averaging aross ountries an

aross tariff ines, NTMs amost oube the eve oftrae restritiveness imose by tariffs. More reenteviene suggests that with faing tariffs, theontribution of NTMs to overa trae restritiveness isikey to have inrease even more. The eviene asosuggests that as WTO members beome riher, thetrae restritiveness of NTMs – reative to tariffs –inreases. urthermore, the average AV foragriutura routs aears to be muh higher thanthat for manufature goos.

The degree of restrictiveness of services measures

is generally higher in developing countries than in

developed countries. Yet there is no systematicrelationship between the restrictiveness of

services measures and income per capita.

The restritiveness of servies measures oes notaear to be systematiay assoiate with a ountry’seve of eveoment beause there is muh variationwithin the grou of eveoing eonomies. urthermore,it aears that the rossountry variation in therestritiveness of servies measures may een onthe artiuar servie setor uner onsieration.

The methods developed in the trade literature to

estimate the degree of restrictiveness of NTMsand services measures suffer from a number of

limitations. These are aggravated in the presence

of global supply chains.

The methooogia imitations an be trae, in art, toa ak of transareny in the use of NTMs an serviesmeasures. Probems aso arise ue to insuffiient ataon ifferent ries, the sensitivity of resuts from theuse of ifferent eonometri tehniques an theiffiuty of attributing rie inreases to a singemeasure when a market is haraterize by mutieNTMs an servies measures.

fforts so far to measure the trae effets of NTMsan servies measures o not aress the fat that ina goba suy hain semifinishe goos have to




10

move aross internationa borers more than one.The effet of a margina inrease in trae osts ismuh arger than wou be the ase if there were asinge internationa transation.

Estimates of the restrictiveness of servicesmeasures do not account for their impact on

trade in goods.

The traerestritive imat of servies measuresgoes beyon trae in servies an sis over to traein goos. Transort an trave aount for about haf ofrossborer trae in servies an are obviousy themost imortant iret servies inuts to internationatrae. There is eviene that barriers to trae anometition in transort an ogistis have a negativeimat not ony on rossborer trae in transortservies, but aso on a ountry’s overa trae

erformane. imiary, reguatory barriers to I flowsan business servies are shown to affet eorterformane in manufaturing setors suh asmahinery, motor vehies, hemias an eetriequiment.

The omementarities between goos an serviesan the siover effets of servies measures onmerhanise trae are eseiay strong aong gobavaue hains. Oen an ometitive business serviesmarkets are essentia for moving u the vaue haininto more ifferentiate an servieintensivemanufature goos.

stimates of the overa restritiveness of serviesmeasures shou take interations between trae inservies an trae in goos into aount, but emiriaanaysis on this is sti sare.

A focus on TBT/SPS measures and

domestic regulation in services

A comparative analysis of the role that the various

types of NTMs play in the overall level of NTM

restrictiveness does not exist. However, the

impact on trade is not necessarily restrictive forall measures. TBT/SPS measures and domestic

regulation in services, in particular, do not

unambiguously increase or decrease trade.

In genera, TT/P measures have revaentyositive effets for more tehnoogiay avanesetors, but negative effets on trae in fresh anroesse goos. urthermore, when negative, theeffet of TT/P measures on trae is foun to beriven by the imat on eveoing ountries’ eorts,eseiay sma ountries.

miria eviene on the trae effet of omestireguation in servies is etremey imite. omestireguation that reues ometition negativey affetsbiatera trae. In ontrast, eviene from the finania

setor shows that omesti reguation aime at ensuringaroriate stanars has a ositive effet on trae.

TBT/SPS measures and domestic regulation in

services affect not only how much two countries

trade but also the number of countries with whomthey trade.

It has been argue that TT/P measures maymainy reresent a fie ost to enter a new market.or eame, a firm may nee to ay an initia ost ofaatation to the stanar in a foreign market that itenters, but this ost is ineenent of the amount thefirm ses. This is onsistent with eviene thatTT/P measures have a stronger effet on smarather than arge firms, an on firms that outsouretheir omonents.

The imortane of the fie ost omonent aso isonsistent with the eviene that TT/P measuresan omesti reguation in servies affet trae boththrough their imat on the voume of trae betweentwo ountries, an through their effet on theiversifiation of eort markets.

There is some evidence that conformity

assessment is particularly burdensome.

A stuy on P measures onute for this reortfins that onformity assessment measures have astronger negative imat on foo an agriuture trae

reative to reguations on rout harateristis.

Negative effects on trade are mitigated by a

reduction in policy divergence, whether through

convergence to international standards,

harmonization or mutual recognition.

The emiria iterature measures the etent ofharmonization of TT/P measures in ifferent ways.or eame, some stuies onsier a stanar to beharmonize if it onforms to an internationa stanarubishe by the Internationa Organization fortanarization IO, the Internationa etrotehnia

ommission I, the Internationa TeeommuniationUnion ITU or simiar boies. Other stuies treatstanars as harmonize if they are ommon to a grouof ountries. Notwithstaning these ifferenes, agenera fining in the iterature is that harmonization ofTT/P measures inreases trae. In artiuar,harmonization of TT/P measures is shown toenhane the resene of sma an meiumsize firmsin eort markets.

As with goos, it has been argue that ifferenes inservies reguation aross ountries oiyheterogeneity onstitute reguatory trae restritions.There is inee eviene that a reution in oiyheterogeneity, arrie out through mutua reognitionof stanars or onvergene to internationastanars, has e to inrease servies trae.



11

EXECUTIVE SUMMARY

If harmonization and mutual recognition of

standards occur at the regional level, there may

be significant trade-diverting effects on outsiders

and regulatory “lock-in”. This appears to be the

case especially for developing countries.

isting stuies iniate that harmonization at theregiona eve tens to ivert trae. uh traeiversion negativey affets eveoing ountries’eorts in artiuar. The inusion of seifirovisions in referentia trae agreements aears tofoow a “hub an soke” struture, with a argerartner reresenting the hub to whose stanars thesokes wi onform.

As isusse in ast year’s World Trade Report , the riskof a okin effet eists in regiona rovisions onTTs. Harmonization to a regiona stanar may

inrease the osts for further mutiatera traeoening. If aoting a ertain stanar invoves theayment of some form of fie ost, the risk eists thatregiona rovisions may work as a stumbing bok inmutiatera ooeration.

See page 134

E. International cooperation

on non-tariff measures

in a globalized world

Regulation of NTMs in trade agreements

Shallow agreements contain provisions that focus

on addressing the problem of tariffs being

replaced by non-tariff measures.

Uner the main eonomi theory for trae agreements,the main robem that the rues on nontariff measuresin a trae agreement nee to aress is “oiysubstitution” between tariffs an nontariff measures.ffiieny an be obtaine with a sime set of rues,whih eave substantia autonomy to nationagovernments in setting NTMs “shaow” integration.

The changing nature of international trade and

the use of private standards may prompt the need

for deeper forms of institutional integration.

The roiferation of goba roution hains reatesnew forms of rossborer oiy siovers. In aition,firms inreasingy emoy rivate stanars to aressthe haenges in governing their suy hains, withimiations for market aess. This rovies arationae for ee ooeration on NTMs within traeagreements. eause roution is internationa,some of the osts of trae fritions are borne by firms

in foreign states. Trae agreements ay a roe inreventing governments an firms from istortingtrae an investment eisions aross the suyhain.

Moreover, the growing number of reasons why

governments resort to NTMs, including for health,

safety and environmental considerations, creates

a need to develop rules to facilitate cooperation

in the identification of efficient and legitimate

uses of NTMs.

As onsumer onerns beome more imortant in

areas suh as heath an the environment, reguationsay a more rominent roe in government eisions foregitimate reasons. However, the omeity of ertainNTMs an reate ineffiienies beause oiymakersmay not have a the neessary information about theirown reguatory nees an the nees of their traingartners. The oaity of many NTMs aso makesenforement of reguations a iffiut internationaeneavour, beause it eens on the abiity of eahgovernment to observe how the others are hoing utheir en of the bargain.

GATT rules regarding national treatment and non-

violation complaints were designed to address

the policy substitution problem between tariffs

and NTMs. Deep agreements regulate NTMs in

different ways, creating trade-offs.




12

One of the rinia onstraints on isrimination viaNTMs is the obigation to treat foreign routs ateast as favouraby as “ike” omesti routsnationa treatment. When a measure oes noteiity vioate nationa treatment rues, governments

may instea aea to so ae “nonvioation”omaints that are aowe if one government anshow that it has been erive of an eete benefitbeause of another government’s ation. In ratie,however, nonvioation omaints have been resorteto rarey by WTO members in isutes an where suhomaints have been ut forwar, they often have notrosere.

Three forms of ee integration are often isusse:mutua reognition of reguations, inking tariff annontariff measures in trae negotiations, anharmonization of NTMs. These aroahes imy

traeoffs that een on a number of eonomionitions e.g. the etent of trae integration,ifferenes in oiy referenes aross ountriesthat nee to be eary assesse.

Cooperation in specific policy areas:

TBT/SPS measures, services measures

Countries cooperate on TBT/SPS measures to

address problems that arise when balancing

trade restrictiveness and the achievement of

policy objectives.

Probems may arise when governments try to baanetrae restritiveness an the ahievement of oiyobetives through effiient reguations. To aressthese robems, ountries ooerate by eveoing,isseminating, an aoting ommon aroahes toreguation, suh as “goo reguatory raties”, an byeveoing internationa stanars as benhmarks formeasures.

The WTO’s TT an P ommittees aso a ow WTOmembers to aress robems regaring ak ofinformation. Transareny roeures eveoe by

the ommittees for the “notifiation” by WTO membersof raft measures have enhane the quaity anavaiabiity of information on measures. isussions ofseifi trae onerns rovie information about howother members are baaning trae restritiveness anthe ahievement of oiy obetives.

WTO members cooperate through the GATS

by subjecting certain types of services measures

to negotiations on progressive trade opening.

Trae rotetion in servies an be foun in interna aw,reguations, rues, roeures, eisions, aministrativeations an suhike. Athough suh servies measuresoften o not rimariy have a traereate fous, theremay be ases where reguations have unneessariytraeistortive an restritive effets.

The GAT rovies a framework for istinguishingbetween those reguations whih an be onsiereas barriers to trae in servies, an thus subet torogressive trae oening, an other measures whihare omesti reguation. isriminatory reguation,

whih vioates nationa treatment, an quantitativerestritions on market aess are areay isiineby the GAT an their remova is the subet ofnegotiations.

WTO members face the challenge of negotiating

disciplines on domestic regulation to complement

market access commitments.

ome omesti reguations are outsie the soe ofmarket aess negotiations, but nevertheess have animat on trae. The haenge is to fin ways toensure that they fufi their state obetives in amanner whih is not more burensome thanneessary.

Thus, the fous of work in the GAT has been onnegotiating a set of isiines on omesti reguationto ensure that these measures are base ontransarent an obetive riteria, are not moreburensome than neessary to ensure the quaity ofthe servie an, in the ase of iensing roeures,are not in themseves a restrition on the suy ofservies. The eeriene of the P an TTagreements oints towars the nee for a simiar set

of isiines in servies to eiminate or reuerequirements whih are not neessary for the obetivesought.

GATT/WTO disciplines on NTMs as

interpreted in WTO dispute settlement

GATT rules on NTMs are consistent with a “shallow

integration” approach.

The GATT oes not onstrain the reguatory autonomyof WTO members eet where a measure treats an

imorte rout ess favouraby than a “ike”omesti rout Artie III: nationa treatment,isriminates between two ike imorte routsArtie I: mostfavoure nation, or onstitutes aborer rohibition or restrition that has a imitingeffet on the quantity or amount of a rout beingimorte or eorte Artie XI. This framework issuemente by the ossibiity that haenges maybe brought against GATTonsistent measures thatnuifie or imaire benefits aruing to a traingartner.

However, even where an NTM is inonsistent with the

nonisrimination obigations of Arties I an III, orthe rohibition on quantitative restritions in Artie XI,it may be ustifie uner one of the genera eetionsof GATT Artie XX.



13

EXECUTIVE SUMMARY

Different approaches have been advocated to the

question of whether NTMs that pursue a

legitimate regulatory objective should be found

to violate the non-discrimination obligations in

the GATT and the other WTO agreements.

ome onsier that the nationa treatment obigation inArtie III shou be interrete strity to aow for NTMsthat, esite being isriminatory, ursue a egitimatereguatory urose or an obetivey be sai not to havea rotetionist intent. or others, suh onsierationsare not aroriate in the anaysis uner Artie III, butrather beong in the assessment of whether the measureonerne an be ustifie uner one of the generaeetions of Artie XX of the GATT.

The roe of reguatory urose for the anaysis unerArtie 2.1 of the TT Agreement was reenty arifie

by the Aeate oy in two reent isutes US –Clove Cigarettes an US – Tuna II (Mexico). TheAeate oy he that to run afou of Artie 2.1 ofthe TT Agreement, the tehnia reguation must notony have a etrimenta imat on the ometitiveoortunities of the imorte rout, but aso suhetrimenta imat must not stem eusivey froma egitimate reguatory istintion. In interretingArtie 2.1, the Aeate oy note that whie theGATT an the TT Agreement seek to strike a simiarbaane, the two agreements are struture ifferenty.In the GATT the baane is eresse by the nationatreatment rue in Artie III: as quaifie by the

eetions in Artie XX, whereas in the TT Agreementthe baane is to be foun in Artie 2.1 itsef.

The SPS and TBT agreements are “post-

discriminatory” agreements.

Athough the P an TT agreements inue nonisrimination obigations, they ontain rovisions thatgo beyon a “shaow integration” aroah. Theyromote harmonization through the use of internationastanars an inue obigations that are aitiona tothe nonisrimination obigation. This inues, forinstane, the nee to ensure that requirements are not

unneessariy trae restritive. ome question thearoriateness of these “ostisriminatory”obigations, arguing that the assessment of ameasure’s onsisteny with suh requirements isiffiut without WTO auiators “seonguessing”a member’s omesti reguatory hoies.

Challenges in dealing with non-tariff

measures

Recent changes in the global economic environment

have altered both the perceived need for NTMs and

the structure of government incentives to use these

measures for protectionist purposes.

The rues of the GATT were esigne for a wor oftrae in fina goos, but the growing omeity of

roution networks aross borers is atering thenature of moern internationa trae. These hangesose haenges for governane, as the kins ofrobems that arise in a wor of offshoring requiresome rethinking about the urrent market aess

base framework of the mutiatera traing system.

hanges in internationa markets o not ony arisefrom ifferenes in how businesses organize, but asofrom a number of other issues, inuing the growingsensitivity of onsumers an voters to heath animate onerns. On the other han, it is aso ikeythat the use of NTMs wi be resonsive to a number offoreseeabe trens in the goba eonomienvironment, inuing the way foo is roue anonsume, the entra roe of internationa finane inthe eonomy an in eonomi rises, an thefunamenta haenges of imate hange.

Transparency provisions in the WTO agreements

help address the problems raised by the opacity

of NTMs but they are not sufficient. This is, at

least in part, because, contrary to what is often

claimed, not everyone benefits from transparency.

Whie every government is intereste in its artners’NTMs, it may be reutant to isose information onits own NTMs. The WTO’s Trae Poiy ReviewMehanism an its monitoring reorts he to aressthis robem, but resoures an the timeframebetween reorts imit their usefuness.

Inreasing transareny, in effet, oens trae. Thismeans that for governments, the inentives to maintainoaity are simiar to those for imosing a tariff.esite ommon rhetori enorsing transareny, theistributiona imat of transareny rovisions istyiay ignore in a manner inomatibe witheonomi inentives.

Among the otions to imrove transareny areroviing the WTO with the resoures neessary toineenenty monitor governments an markets, orreying on some thir arty to o the same. omiane

wou sti be an issue, as eegation of this monitoringroe oes not eiminate the ak of inentive forgovernments to be transarent. Members may neebiatera an/or uriatera negotiations overtransareny obigations in orer to imrove thesituation.

Limiting the protectionist application of NTMs

requires better integration of economic and legal

analysis. Economic theory can help in identifying

situations in which governments may be more

likely to employ NTMs for competitiveness

reasons rather than the stated public policy

rationale.

When there is a ega isute as to the imortane ofthe urose, rationae, or intent of a measure,




14

eonomi theory ou rovie insight into agovernment’s hoie of a measure, as we as the wayit is aministere. NTMs an be evauate usingeonomi reasoning to assess their suitabiity inaressing various ubi oiy onerns. Government

oiy ou aso be sreene for eviene ofrotetionism.

Whie the use of “eonomi iniators” is ertainyneither ehaustive nor abe to rovie a onusiveanswer as to the true oiy rationae of an NTMaffeting foreign trae interests, it may nevertheessbe the ase that this tye of anaysis ou usefuy beemoye to narrow evientiary gas that may arise inthe eamination of ertain trae rues.

While current WTO rules focus on the policy

substitution problem between tariffs and NTMs,

policy flexibility is in some cases too limited.

A nonvioation aroah to omaints ou ay aroe in aowing WTO members to retaiate againstother members’ use of NTMs to irumvent theirobigations – the soae “oiy substitution”robem. However, when a member wishes to hoose aomesti measure that owers restritions to trae, therues o not aow members to raise their tariffs tomaintain their ommitte eve of market aess. Thisak of fleibiity may isourage the aotion ofeffiient omesti reguations or even traeonessions. Therefore, broaening the soe of non

vioation omaints may imrove eonomi effiieny.

On the ega sie, there remain a number of ambiguitiesonerning the eements that a omainant mustsatisfy for its aim of nonvioation to suee. WTOmembers have referre to aress NTMs anomesti reguation in servies using other rues.inay, even if there were a suessfu ase, theremey avaiabe when a nonvioation omaint issuessfu is weaker than the remeies avaiabe inases of vioation.

Strong encouragement in the SPS and TBT

agreements to follow international standardscreates tension in practice.

The P an TT agreements enourage the use ofinternationa stanars. There is, however, a “ine oftension” between, on the one han, reiane oninternationa stanars as a way to avoi unneessariytraerestritive measures, an, on the other han,eoying a “reevant” internationa stanar.Internationa stanars may be iffiut to use anthere may be ifferenes in referenes among WTOmembers, an iffiuties in setting internationastanars, inuing iffering aaities to influenethe esire outomes. The reguar work of the TTan P ommittees an erta in asets of ongoingnegotiations in the oha Roun are affete by thistension.

The responsibility of governments with respect to

private standards and the role of the WTO are not

clear.

The roe of the WTO in aressing the trae imat of

“rivate stanars” is another imortant haengefaing the mutiatera traing system. This toi arisesaross the WTO’s reguar work in ontets as iverseas green rotetionism, foo safety an soiaresonsibiity. Athough these stanars are ast as“vountary” in nature beause they are imose byrivate entities, they may nevertheess have signifiantde facto imats on trae, an this has been ofartiuar onern to eveoing ountries in the WTO.onsiering that rivate stanars are nongovernmenta by efinition, this gives rise to questionsregaring the resonsibiity of governments withreset to rivate stanars uner WTO isiines,

as we as the roe of the WTO itsef. Whie somemembers see no ae for this isussion in the WTO,others are keen to engage.

It is vital to ensure that market access and

national treatment commitments in the GATS are

not impaired by unduly burdensome or

protectionist practices.

The rinia onern is that ommon rues at themutiatera eve wi resut in a oss of reguatoryfreeom to ursue nontrae obetives for servies.One way to overome onerns regaring reguatory

autonomy wou be to fous the isiine on theneessity of the measure use to ahieve its stateurose. Another wou be to foster greater awarenessof the trae an investment imiations of reguatoryraties.

It is important to identify possible areas where

trade instruments for pro-competitive regulation

of services could be used.

The WTO has the eeriene of suessfuyeveoing a tet that suorts ometition in theteeoms setor. uh eeriene ou be use in

other setors where there might be otentia for theuse of simiar instruments. Ientifying ossibe areasfor the use of trae instruments for roometitivereguation wou require ation by a wie range ofnationa, regiona an internationa agenies in orerto ean reguatory iaogue an ooeration.

Capacity building is a vital part of improving

international cooperation both on TBT/SPS

measures and on domestic regulation in services.

Reguations aime at eaing with ubi oiy are notsubet to marketoening negotiations in the same wayas rotetionist trae barriers, an therefore there is noae for thinking about referentia arrangements,suh as the Generaize ystem of Preferenes, toassist eveoing ountries to eveo an grow.



15

EXECUTIVE SUMMARY

Instea, the eveomenta haenge assoiate withtraefrieny ubi oiy invoves tehnia assistanean aaitybuiing. In the area of P an TT,eveoing an easteveoe ountries often akthe reguatory institutions, the training aaity, an

hysia infrastruture that wou enabe them to esignan imement effetive measures in these areas.

The tanars an Trae eveoment aiity T,a goba artnershi estabishe by the oo anAgriuture Organization of the Unite Nations AO,the Wor Organization for Anima Heath OI, theWor ank, the Wor Heath Organization WHOan the WTO, suorts aaity buiing efforts in theP area. The nhane Integrate ramework anthe Ai for Trae Initiative are aso reevant here.

Aressing reguatory haenges in trae in servies

requires oing more than urbing nontransarent orunuy restritive reguatory raties. esite over aeae of negotiations, muh remains to be one toimrove ooeration an awareness among reguators,oiymakers an trae negotiators of the inksbetween reguatory issues an trae rinies. haringknowege on goo raties an strengtheningreguatory institutions are imortant riorities for theroer funtioning of servies markets.

See page 160




16

World trade growth decelerated sharply in

2011 as the global economy struggled under

the influence of natural disasters, financial

uncertainty and civil conflict. A slowdown in

trade had been expected after the strongrebound of 2010 but the earthquake in Japan

and flooding in Thailand shook global supply

chains, and fears of sovereign default in the

euro area weighed heavily in the closing

months of the year. The civil war in Libya also

reduced oil supplies and contributed to

sharply higher prices. All of these factors

combined to produce below average growth

in trade in 2011.

I. World trade in 2011



I – WORLD TRADE IN 2011

17

A .I NT R OD U C T I O

N

Contents A Introution 1

tate of the wor eonomy an trae in 211 2

Aeni figures an tabes 2




18

A. IntroductionThe voume of wor merhanise trae rose . er entin 211, aomanie by goba outut growth of

2. er ent. This marke a signifiant sowown from21, when trae avane 13. er ent an oututeane by 3. er ent see igure 1.1.1

ower growth in both trae an outut ha beenantiiate for 211, but mutie eonomi shokshe bak eonomi ativity an trae uring the year.The earthquake, tsunami an nuear inient that hitaan in Marh shary eresse the ountry'seorts in the seon quarter, whie flooing inThaian reue the suy of key arts anomonents in the fourth quarter an further istortegoba roution networks. Turmoi in North Afrian

ountries took a to on the region's eorts, eseiayin Libya, where oi roution an eorts unge.inay, negative gross omesti rout GP growthin the uroean Union reue eman for imortegoos in the fourth quarter as the euro sovereign ebtrisis ame to a hea.

The suggish ae of eonomi growth in 211 reueimort eman in the argest eonomies an resute ingoba eort growth beow the WTO's foreast of. er ent. aan's outut ontrate in the fourthquarter after reoring ust onequar ter of eansion onthe year in the thir quarter. ven hina’s ynami

eonomy aeare to be sowing towars the en of theyear as its fourth quarter GP growth sie to anannuaize rate of 7. er ent after averaging aroun9. er ent over the first three quarters, aoring toata from hina’s Nationa ureau of tatistis.onomi iniators imrove in the Unite tates inthe osing months of 211 as outut growthaeerate to 3. er ent annuaize in the fourth

quarter an unemoyment fe to .3 er ent ineember aoring to ata from the O, but this

ony arty mae u for earier setbaks.

eveoe eonomies eeee eetations witheort growth of .7 er ent in 211 whie eveoingeonomies for the uroses of the anaysis, thisinues the ommonweath of Ineenent tates, orI i worse than eete, reoring an inrease of

ust . er ent . In fat , shiments from eveoingeonomies other than hina grew at a sighty sowerae than eorts from eveoe eonomiesinuing isasterstruk aan. The reativey strongerformane of eveoe eonomies was riven bya robust 7.2 er ent inrease in eorts from the

Unite tates, as we as a . er ent eansion ineorts from the uroean Union. Meanwhie, aan's. er ent ro in eorts etrate from theaverage for eveoe eonomies overa.

evera averse eveoments isroortionateyaffete eveoing eonomies, inuing theinterrution of oi suies from Libya that auseAfrian eorts to tumbe er ent in 211, an thesevere flooing that hit Thaian in the fourth quarter.The aanese earthquake an tsunami aso isrutegoba suy hains, whih enaize eorts fromeveoing ountries suh as hina, as reue

shiments of omonents hinere roution ofgoos for eort see quartery voume eveomentsfor seete eonomies in Aeni igure 1.

ignifiant ehange rate flutuations ourre uring211, whih shifte the ometitive ositions of somemaor traers an romte oiy resonses e.g. inwitzeran an razi. utuations were riven in

igure 1.1: Growth in volume of world merchandise trade and GDP, 2000-11

annua erentage hange

2000 2001 2002 2003 2004 20062005 2007 20092008 20112010

15

10

5

-5

-10

-15

GDPExports

0

Average export growth

1991-2011

Average GDP growth

1991-2011

Source: WTO eretariat.




19

A .I NT R OD U C T I O

N

arge art by attitues towars risk reate to the eurosovereign ebt risis. The vaue of the U oar fe. er ent in nomina terms against a broa basketof urrenies aoring to ata from the eeraReserve, an .9 er ent in rea terms aoring to

ata from the Internationa Monetary un, makingU goos generay ess eensive for eort. NominaU oar ereiation aso wou have inflate theoar vaues of some internationa transations.

The eveoments outine above refer to trae in reai.e. voume terms, but nomina flows i.e. in urrenyterms for both merhanise an ommeria servieswere simiary affete by reent eonomi shoks.

In 211, the oar vaue of wor merhanise traeavane 19 er ent to U$ 1.2 triion, surassingthe revious eak of U$ 1.1 triion in 2. Muh of

the growth was ue to higher ommoity ries, butmonthy trae flows were mosty flat or eining in manymaor traers over the ourse of the year see monthynomina eveoments in Aeni igure 2.

The share of eveoing eonomies an the I in thewor tota aso rose to 7 er ent on the eort siean 2 er ent on the imort sie, the highest evesever reore in a ata series etening bak to 19.

The vaue of wor ommeria servies eortsinrease by 11 er ent in 211 to U$ .2 triion,with strong ifferenes in annua growth rates for

artiuar ountries an regions. Afrian eorts werehit har by the turmoi in Arab ountries, reoring zerogrowth as gyt’s eorts of trave servies ungemore than 3 er ent. Quartery ata on servies

ointy reare by the WTO an the Unite Nations

onferene on Trae an eveoment UNTAaso showe a shar sowown in the fourth quarter,oiniing with the heightene eve of finania marketturmoi surrouning the euro ebt risis.

The . er ent growth of wor merhanise trae in211 was beow the rerisis average of . er entfor 199–2, an was even beow the average ofthe ast 2 years, inuing the erio of the traeoase . er ent. As a resut, trae voume ofwor trae was even further away from its rerisistren at the en of 211 than it was a year earier. Infat, this ga shou ontinue to inrease as ong as

the rate of trae eansion fas short of earier evessee igure 1.2.

iminating this ivergene wou require faster thanaverage growth at some oint in the future.oneivaby, this ou haen after governments,businesses an househos in eveoe ountriesreue their ebt burens to more manageabe eves,but this roess of eeveraging reuing reiane onebt an fisa onsoiation reuing bugetefiits is ikey to take years. In the meantime, thewor may have to resign itsef to a ong erio ofsowerthanaverage growth in internationa trae.

igure 1.2: Volume of world merchandise exports, 1990-2011inies, 199=1

1 9 9 7

1 9 9 6

1 9 9 5

1 9 9 4

1 9 9 3

1 9 9 1

1 9 9 2

1 9 9 0

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 5

2 0 0 4

2 0 0 6

2 0 0 7

2 0 0 8

2 0 1 0

2 0 1 1

2 0 0 9

350

300

400

250

200

150

100

50

Trend (1990-2008)Export volume


Endnote1 Note that merhanise trae voume figures refer to growth

in rea terms, i.e. auste to aount for hanges in theries of eorts an imorts.




20

1. onomi growthThe rate of wor outut growth fe to 2. er ent in211 from 3. er ent in the revious year, weigheown by the ongoing sovereign ebt risis in uroe,suy hain isrutions from natura isasters inaan an Thaian, an turmoi in Arab ountries. Thisae of eansion was we beow the 3.2 er entaverage over the 2 years eaing u to the finaniarisis in 2 see Tabe 1.1.

aan’s . er ent ontration in outut, brought onby the atastrohi earthquake in Marh 211,

ontribute to the akustre 1. er ent growth ofeveoe eonomies in 211. Growth of GP totaroution in the ountry in the Unite tates wassighty faster than the average of a eveoeeonomies at 1.7 er ent, whie the U’s rate was inine with the average at 1. er ent.

The fastest growing regions were the Mie ast at.9 er ent, foowe by the ommonweath ofIneenent tates at . er ent an outh anentra Ameria at . er ent. Afria, with GPgrowth of 2.3 er ent, might have grown even faster if

not for the urisings that ourre in Libya, Tunisia,gyt an esewhere.

One again, hina’s GP growth outae the rest ofthe wor at 9.2 er ent, but this rate was no betterthan what the ountry ahieve at the eak of the gobafinania risis in 29. In ontrast to this erformane,the newy inustriaize eonomies of Hong Kong,hina, of the Reubi of Korea, of ingaore an ofhinese Taiei together grew at ess than haf the rateof hina .2 er ent. eveoing eonomies an theI together reore a .7 er ent inrease in 211.

Aggregate quartery figures for wor GP growth arenot reaiy avaiabe, but suh growth ikey sowetowars the en of 211 in the fae of heawins fromthe uroean sovereign ebt risis. Outut of the euroarea ontrate at a 1.3 er ent annua rate in thefourth quarter, marking the first quarter of negativegrowth sine the urreny bo emerge fromreession in 29 see igure 1.3. At the same time,hina’s eonomy sowe an aan remaine mire inreession. Growth ike u in the Unite tates inthe fourth quarter as unemoyment ease, but thiswas ikey outweighe by eveoments esewhere.

B. State of the world economy andtrade in 2011

Tabe 1.1: GDP and merchandise trade by region, 2009-11annua erentage hange

GDP Exports Imports

2009 2010 2011 2009 2010 2011 2009 2010 2011

World 2. 3. 2. 12. 13. . 12.9 13.7 .9

North America 3. 3.2 1.9 1. 1.9 .2 1. 1.7 .7

Unite tates 3. 3. 1.7 1. 1. 7.2 1. 1. 3.7

South and Central Americaa .3 .1 . .1 . .3 1. 22.9 1.

Europe .1 2.2 1.7 1.1 1.9 . 1.1 9.7 2.

uroean Union 27 .3 2.1 1. 1. 11. .2 1.1 9. 2.

Commonwealth of IndependentStates (CIS) .9 .7 . . . 1. 2. 1. 1.7

Africa 2.2 . 2.3 3.7 3. .3 .1 7.3 .

Middle East 1. . .9 . . . 7.7 7. .3

Asia .1 . 3. 11. 22.7 . 7.7 1.2 .

hina 9.2 1. 9.2 1. 2. 9.3 2.9 22.1 9.7

aan .3 . . 2.9 27. . 12.2 1.1 1.9

Inia . 1.1 7. . 22. 1.1 3. 22.7 .

Newy inustriaize eonomies b . . .2 .7 2.9 . 11. 17.9 2.

Memo: Developed economies .1 2.9 1. 1.1 13. .7 1. 1.9 2.

Memo: Developing and CIS 2.2 7.2 .7 7. 1.9 . 1. 1.1 7.9

a Inues the aribbean.b Hong Kong, hina; Reubi of Korea; ingaore; an hinese Taiei.





21

B . S T A T E OF T HE

W OR L DE C ON OMY

A NDT R A DE I N

2 0 1 1

2. Merhanise trae in voumei.e. rea terms

Wor merhanise trae voume grew . er ent in211, an Asia’s . er ent inrease e a regions

see Tabe 1.1. One of the more signifianteveoments in 211 was the .3 er ent ontrat ionin the voume of Afria’s eorts. This was argey ueto the ivi war in Libya, whih reue the ountry’s oishiments by an estimate 7 er ent. aan’seorts aso fe by the same . er ent as theountry’s GP, whie shiments from the I avane

ust 1. er ent.

Athough Afria reore a resetabe . er entinrease in imorts, other resoureeorting regions

erforme better. Imorts of the I grew faster thanthose of any other region at 1.7 er ent, foowe byouth an entra Ameria’s at 1. er ent.Meanwhie, aan’s imort growth was the sowest ofany maor eonomy or region in 211 at 1.9 er ent.

Inia ha the fastest eort growth among maortraers in 211, with shiments rising 1.1 er ent.Meanwhie, hina ha the seonfastest eortgrowth of any maor eonomy at 9.3 er ent.

The ombination of ow eort voume growth an highimort voume growth seen in the ommonweath ofIneenent tates in 211 an be attribute to the32 er ent rise in energy ries for the year, whihbooste eort earnings an aowe more foreigngoos to be imorte see Tabe 1.2.

igure 1.3: Real GDP growth and trade of euro area economies, 2008-11

annuaize erentage hange over revious quarter

Source: O Quartery Nationa Aounts.

Tabe 1.2: World prices of selected primary products, 2000-11annua erentage hange an U$ er barre

2009 2010 2011 2000-11 2005-11

A ommoities 3 2 2 12 1

Metas 19 1 1 1

everagesa 1 11 2 11

oo 2 1 17 1 13

Agriutura raw materias 17 33 23 9

nergy 37 2 32 1 1

Memo: rue oi rie in U$/barreb 2 79 1 7

a omrising offee, ooa beans an tea.b Average of rent, ubai, an West Teas Intermeiate.

Source: IM Internationa inania tatistis.




22

Aeni igure 1 shows seasonay austequartery merhanise trae voumes for seeteeonomies, reveaing some of the ynamis ofhanges that ourre in 211. The eine in etraU imorts i.e. imorts from outsie the uroean

Union measure 3. er ent in the fourth quarter,equivaent to 1. er ent at an annuaize rate. uha rate of eine is unikey to go on for very ong, but ithes to eain the weakness of eorts of othereonomies at the time. Imorts of the Unite tateswere flat rather than faing uring 211, but both theUnite tates an the uroean Union saw theireorts rise over the ourse of the year.

The other maor eveoment was the sum inhinese imorts that ourre aroun the time of theaanese earthquake in the seon quarter of 211.etween the first an seon quarters, hina’s imorts

roe .1 er ent, equivaent to 27 er entannuay, but in subsequent quarters trae rose.2 er ent 1 er ent annuaize an 7.3 er ent32 er ent annuaize. This is onsistent with astrong but reativey shortive iret imat from theisaster, athough other iniret influenes might be

ust as imortant . It aso emonstrate the stronginsertion of hina in Asian vaue hains.

Athough not shown in the harts, the voume ofThaian’s eorts unge . er ent in the fourthquarter ue to flooing that signifianty affete

eorts of intermeiate goos, further isturbinggoba roution networks.

3. Merhanise an ommeriaservies trae in vaue i.e. oarterms

The tota oar vaue of wor merhanise eorts ume 19 er ent to U$ 1.2 tri ion in 211see Tabe 1.3.1 This inrease was neary as arge asthe 22 er ent rise in 21 an was riven in argeart by higher rimary ommoity ries.

ommeria servies eorts aso grew 11 er ent in211 to U$ .1 triion. The share of ommeriaservies in tota goos us ommeria servies traeon a baane of ayments basis was 1. er ent,the smaest suh share sine 199.

Transort servies reore the sowest growth of anysubategory of servies er ent, foowe byother ommeria servies 11 er ent an trave12 er ent.

The sow growth of transort servies is erhas notsurrising onsiering the ose reationshi betweenthis ategory of servies an trae in goos, whihstagnate in the seon haf of 211. An oversuy ofnew ontainer shis may have aso eresserevenues in the shiing setor.

Aeni tabes 1 to rovie etaie information onnomina merhanise an ommeria servies traeflows by region an for seete eonomies. They asoinue tabes of eaing eorters an imorters withan without intraU trae i.e. trae betweenU members. ome noteworthy eveoments formerhanise trae an ommeria servies aresummarize beow.

a Merhanise trae

The oar vaue of North Ameria’s merhaniseeorts rose 1 er ent in 211 to U$ 2.2 triionequa to 12. er ent of the wor tota, whie imortsgrew 1 er ent to U$ 3.9 triion 17.2 er entsee Aeni Tabe 1.

outh an entra Ameria’s eorts avane27 er ent to U$ 79 biion .2 er ent of thewor tota, buoye by stronger rimary ommoityries. At the same time, the region’s imorts inreaseby 2 er ent to U$ 727 biion . er ent.

uroe’s nomina eorts grew 17 er ent toU$ . triion, or 37.1 er ent of the wor tota.The region’s imorts were aso u 17 er ent toU$ . triion 3.1 er ent.

Tabe 1.3: World exports of merchandise and commercial services, 2005-11

U$ biion an annua erentage hange

Value Annual percentage change

2011 2009 2010 2011 2005-11

Merhanise 1,217 22 22 19 1

ommeria servies ,19 11 1 11 9

Transort 23 1 7

Trave 1,3 9 9 12 7

Other ommeria servies 2,22 7 11 1

Source: WTO eretariat for merhanise an WTO an UNTA eretariats for ommeria servies.




23


W OR L DE C ON OMY

A NDT R A DE I N

2 0 1 1

orts of the ommonweath of Ineenent tates ume 3 er ent to U$ 7 bi ion, suorte byrising energy ries. Imorts aso inrease by3 er ent to U$ biion. hares of I eortsan imorts in wor trae were . er ent an

3. er ent, resetivey.

Afria’s eorts were u 17 er ent to U$ 97 biion3. er ent of the wor tota whie imorts rose1 er ent to U$ biion 3.1 er ent.

orts from the Mie ast surge 37 er ent in oarterms to U$ 1.23 triion or .9 er ent of the wortota as a resut of rising oi ries. In ontrast to this,imorts ony inrease by 1 er ent to U$ . biion3.7 er ent.

inay, Asia’s eorts were u 1 er ent in 211 to

U$ .3 triion 31.1 er ent of the wor tota whieimorts avane 23 er ent to U$ .7 triion3.9 er ent.

The to five merhanise eorters in 211 were hinaU$ 1.9 triion, or 1. er ent of wor eorts, theUnite tates U$ 1. triion, .1 er ent, GermanyU$ 1.7 triion, .1 er ent, aan U$ 23 biion,. er ent an the Netherans U$ biion,3. er ent. The eaing imorters were the Unitetates U$ 2.27 t riion, 12.3 er ent of wor imor ts,hina U$ 1.7 triion, 9. er ent, GermanyU$ 1.2 triion, . er ent, aan U$ biion,

. er ent an rane U$ 71 biion, er entsee Aeni Tabe 3.

If we ignore trae between uroean Union memberountries an treat the U as a singe entity, the toeorters were the uroean Union U$ 2.13 triion, or1.9 er ent of the wor tota, hina 13.3 er ent,the Unite tates 1.3 er ent, aan .7 er entan the Reubi of Korea U$ biion, or3.9 er ent. The eaing imorters, euing traebetween U ountries, were the uroean UnionU$ 2.3 triion or 1.2 er ent of wor imorts, theUnite tates 1. er ent, hina 12. er ent,

aan .9 er ent an the Reubi of KoreaU$ 2 biion, or 3. er ent see Aeni Tabe .

There were few signifiant moves u or own in thewor rankings in 211. The Russian eeration wentfrom being the 12th argest eorter of merhanise in21 to being the ninth in 211 inuing U members.

b ommeria servies trae

The region with the fastest growth in ommeriaservies eorts in 211 was the I, with 2 er entgrowth in the oar vaue of its eorts. Afria ha thesowest eort growth of any region at zero er ent. Aother regions reore oubeigit growth between1 an 1 er ent. The sow growth of Afrian eortswas argey ue to the turmoi in North Afrian ountries.

gyt an Tunisia were eseiay har hit as theirommeria servies eorts fe 2 er ent an19 er ent, resetivey. However, ubaharanAfria's eorts inrease in ine with the wor averageof 11 er ent see Aeni Tabe 2.

Meanwhie, Afrian servies imorts rose 9 er ent,sighty ess than the wor average of 1 er ent. Inontrast to eorts, there was not as muh of aivergene between Northern Afria an ubaharanAfria on the imort sie, as the former grew 7. erent an the atter 9. er ent. The region with thefastest growth in servies imorts was the I at21 er ent, foowe osey by outh an entraAmeria at 1 er ent. Other regions reore growthrates for ommeria servies imorts between an1 er ent.

The to five eorters of ommeria servies in 211were the Unite tates U$ 7 biion, or 1 er entof the wor tota, the Unite Kingom U$ 27 biion,7 er ent, Germany U$ 23 biion, er ent, hinaU$ 12 biion, er ent an rane U$ 11 biion, er ent. The Unite Kingom reae Germany asthe wor’s seonargest eorter of servies omarewith ast year's tabes, but this was mainy ue to a argeuwar revision in offiia statistis on UK eorts ofother business servies an finania servies, whihtogether make u roughy haf of a UK ommeriaservies eorts see Aeni Tabe .

The to five imorters of ommeria servies were theUnite tates U$ 391 biion, or 1 er ent of thewor tota, Germany U$ 2 biion, 7 er ent,hina U$ 23 biion, .1 er ent, the UniteKingom U$ 171 biion, er ent an aanU$ 1 biion, .3 er ent. There were no hangesin the ranking of the to imorters.

The above figures inue intraU ommeria serviestrae, i.e. servies trae between uroean Unionmember ountries. If this trae is eue from thewor tota an the uroean Union is treate as a

singe entity, the U beomes the to eorter ofommeria servies U$ 79 biion, 2. er ent ofthe wor tota, foowe by the Unite tates U$ 7biion, 1.2 er ent , hina U$ 12 biion, .7 erent, Inia U$ 1 biion, .7 er ent an aanU$ 13 biion, . er ent. The uroean Unionaso beomes the eaing imorter U$ 39 biion,21.1 er ent of the wor tota, foowe by the Unitetates U$ 391 biion, 12.9 er ent, hina U$ 23biion, 7. er ent, aan U$ 1 biion, . erent an Inia U$ 13 biion, .3 er ent seeAeni Tabe .

. etora eveomentsPries for trae manufature goos have tene tobe more stabe than those of rimary routs, both




24

before an after the eonomi risis. As a resut,movements in nomina trae fows refet hangesin quantities reasonaby we. With this in min,igure 1. shows yearonyear growth in the quar teryvaue of wor trae in severa asses of manufature

goos.

A tyes of manufature goos saw yearonyeargrowth fa towars zero over the ourse of 211. oreame, wor trae in automotive routs si from er ent in the first quarter of 21 to 1 er ent inthe fourth quarter of 211. Offie an teeomequiment went from ositive to negative, as yearonyear growth rates fe from aroun us 1 er ent inthe first quarter to minus 2 er ent in the fourth quar ter.

. hange rates

The aanese yen an the wiss fran both reoresignifiant nomina areiations against the U oarin 211. The yen was u 1 er ent yearonyear,

arty ue to the safe haven roe of the urreny uringtimes of unertainty. Meanwhie, the fran ume17 er ent, romting interventions by the wissNationa ank in urreny markets to fore own thevaue of the urreny, eseiay against the euro. Theraziian rea was aso u . er ent against theoar, an the hinese yuan an Korean won rose.7 er ent an .3 er ent, resetivey. esite thesovereign ebt risis in uroe, the euro areiate er ent against the oar see igure 1..

igure 1.: Quarterly world exports of manufactured goods by product, 2008Q1-2011Q4yearonyear erentage hange

Source: WTO eretariat estimates base on mirror ata for avaiabe reorters in the Goba Trae Atas atabase of Goba TraeInformation ystems.

igure 1.: Nominal dollar exchange rates, January 2005 – February 2012

inies of U oars er unit of nationa urreny, 2=1

Source: eera Reserve ank of t. Louis.




25


W OR L DE C ON OMY

A NDT R A DE I N

2 0 1 1

Nomina ehange rates suh as these may over orunerstate the ometitive effets of ehange ratemovements. As a resut, “rea effetive” rates thataverage the ehange vaue of a urreny againstmany traing artners whie austing for ifferenes

in inflation rates may rovie a better iniation of theometitiveness of a ountry’s eorts.

Rea effetive ehange rates suie by theInternationa Monetary un show that the U oar’sereiation in 211 was even stronger in reaeffetive terms .9 er ent than in nomina terms.On the other han, the average areiation of othermaor urrenies was overstate. The aanese yenony areiate 1.7 er ent in rea terms whie thehinese yuan rose 2.7 er ent. razi’s urrenyregistere a strong inrease of .7 er ent in reaeffetive terms, whie the euro’s rise of 1. er ent

was reativey sma.

Endnote1 Wor eorts of goos measure on a baane of ayments

basis were u 2 er ent in 211.




26

C. Appendix figures and tables

Aeni igure 1: Seasonally adjusted quarterly merchandise trade volume indices,

2008Q1 – 2011Q4

inies, 2Q1 = 1

a Hong Kong, hina; Reubi of Korea; ingaore; an hinese Taiei.

Sources: Nationa statistis an WTO eretariat auations. easonay auste figures for the Unite tates, the uroean Union,aan an Hong Kong, hina are taken from nationa soures. Nonseasonay auste voume figures for other ountries were seasonayauste by the eretariat




27

C .A P P E NDI X F I G

UR E S A NDT A B L E S

Aeni igure 2: Monthly merchandise exports and imports of selected economies,

January 2008-February 2012

U$ biion

Sources: IM Internationa inania tatistis, Goba Trae Information ervies GTA atabase, nationa statistis.




28

Aeni Tabe 1: World merchandise trade by region and selected economies, 2011

U$ biion an erentageExports Imports

Value Annual percentage change Value Annual percentage change

2011 2005-11 2009 2010 2011 2011 2005-11 2009 2010 2011

World 17,779 1 23 22 2 1, 9 23 21 19

North America 2,23 21 23 1 3,9 2 23 1

Unite tates 1,1 9 1 21 1 2,2 2 23 1

anaaa 2 31 23 17 2 21 22 1

Meio 3 9 21 3 17 31 2 2 1

South and Central

Americab 79 13 23 2 27 727 1 2 3 2

razi 2 1 23 32 27 237 2 27 3 2

Other outh anentra Ameriab 93 12 2 22 27 9 1 2 2 2

Europe ,1 7 22 12 17 , 7 2 13 17

uroean Union 27 ,29 7 22 12 17 ,21 7 2 13 1

Germany 1,7 7 23 12 17 1,2 22 1 19

rane 97 21 1 71 22 9 17

Netherans 22 1 1 97 9 2 17 1

Unite Kingom 73 23 1 17 3 2 1 13

Itay 23 2 1 17 7 2 17 1

Commonwealth of

Independent States (CIS) 7 1 3 31 3 17 33 2 3

Russian eerationa 22 1 3 32 3 323 17 3 3 3

Africa 97 11 3 29 17 1 1 1 1outh Afria 97 11 2 31 2 122 12 27 27 29

Afria ess outh Afria 12 31 29 17 33 1 12 12 1

Oi eorters 331 11 3 3 1 1 1 9 11

Non oi eorters 19 13 1 21 2 27 1 1 1 1

Middle East 1,22 1 31 27 37 12 1 13 1

Asia ,3 12 1 31 1 , 13 2 33 23

hina 1,99 1 1 31 2 1,73 1 11 39 2

aan 23 2 33 7 9 2 2 23

Inia 297 2 1 33 3 1 21 2 3 29

Newyinustriaizeeonomies 1,29 1 17 3 1 1,32 1 2 32 1

Memorandum

MROURe 3 1 22 29 2 33 2 2 3 2

AANf 1,2 11 1 29 1 1,11 11 23 31 21

U 27 etratrae 2,131 2 17 19 2,3 27 19 17

Leasteveoe ountriesLs 23 1 2 27 2 22 1 11 19

a. Imorts are vaue f.o.b.

b. Inues the aribbean. or omosition of grous see the Tehnia Notes of WTO, International Trade Statistics , 211.

. Ageria, Angoa, ameroon, ha, ongo, quatoria Guinea, Gabon, Libya, Nigeria, uan.

. Hong Kong, hina; Reubi of Korea; ingaore; an hinese Taiei.e. ommon Market of the outhern one: Argentina, razi, Paraguay, Uruguay.

f. Assoiation of outheast Asian Nations: runei arussaam, amboia, Inonesia, Laos, Maaysia, Myanmar, Phiiines, ingaore, Thaian,Viet Nam.





29



Aeni Tabe 2: World trade in commercial services by region and selected country, 2011

U$ biion an erentage

Exports Imports

Value Annual percentage change Value Annual percentage change

2011 2005-11 2009 2010 2011 2011 2005-11 2009 2010 2011

World ,1 9 11 1 11 3, 9 11 1 1

North America 7 9 1 1

Unite tates 7 9 11 391 7

South and Central

Americaa 13 11 1 1 13 1 23 1

razi 37 1 9 1 21 73 22 1 3 22

Europe 1,9 7 13 1 1, 13 3

uroean Union 27 1,72 7 13 1 1, 12 2

Germany 23 9 3 9 2 12 3 Unite Kingom 27 1 2 11 171 1 19 1 7

rane 11 13 1 11 11 2 7

Netherans 12 9 11 11 3 2 12

ain 11 7 1 1 1 91 17

Commonwealth of

Independent States (CIS) 9 1 17 13 2 133 1 19 19 21

Russian eeration 1 19 22 9 1 2 22 2

Ukraine 19 13 23 2 13 1 13 3 1 19

Africa 7 1 11 19 13 12 1 9

outh Afria 1 17 2 9 13 2 13

gyt 19 1 11 2 13 22 2

Moroo 1 11 7 2 1 13 11

Middle East 111 … 3 1 21 … 7 9 1

aui Arabia, Kingom of 12 … 3 1 17 …

Israe 2 7 1 13 2 7 1 1

Asia 1,9 13 11 23 12 1,91 11 1 21 1

hina 12 1 12 32 7 23 19 22 23

aan 13 1 1 3 1 12

Inia 1 19 13 33 2 13 19 9 12

ingaore 12 1 2 12 11 12 9 22 1

Korea, Reubi of 9 12 19 19 9 9 17 19 3

Hong Kong, hina 121 11 23 1 9 7 1 1

Austraia 9 1 9 12 13 22 1

Memorandum item

traU27 trae 79 13 12 39 7 13

a. Inues the aribbean . or omosition of grous see hater IV Metaata of WTO Internationa Trae tatistis , 211.

Note: Whie rovisiona fuyear ata were avaiabe in eary M arh for ountries aounting for more than t wothirs of wor ommeria

servies trae, estimates for most other ountries are base on ata for the first threequarters.Source: WTO an UNTA eretariats.




30

Aeni Tabe 3: Merchandise trade: leading exporters and importers, 2011


Rank Exporters Value Share

Annual

percentage

change

Rank Importers Value Share

Annual

percentage

change

1 hina 1,99 1. 2 1 Unite tates 2,2 12.3 1

2 Unite tates 1,1 .1 1 2 hina 1,73 9. 2

3 Germany 1,7 .1 17 3 Germany 1,2 . 19

aan 23 . 7 aan . 23

Netherans 3. 1 rane 71 3.9 17

rane 97 3.3 1 Unite Kingom 3 3. 13

7 Korea, Reubi of 3. 19 7 Netherans 97 3.2 1

Itay 23 2.9 17 Itay 7 3. 1

9 Russian eeration 22 2.9 3 9 Korea, Reubi of 2 2.9 23

1 egium 7 2. 17 1 Hong Kong, hina 11 2. 1

retaine imorts 13 .7 1

11 Unite Kingom 73 2. 17 11 anaaa 2 2. 1

12 Hong Kong, hina 2. 1 12 egium 1 2. 17

omesti eorts 17 .1 1

reeorts 39 2. 1

13 anaa 2 2. 17 13 Inia 1 2. 29

1 ingaore 1 2.2 1 1 ingaore 3 2. 1

omesti eorts 22 1.2 23 retaine imortsb 1 1. 27

reeorts 1 1. 1

1 aui A rabia, K ingom of

3 2. 1 ain 32 2. 111 Meio 3 1.9 17 1 Meio 31 2. 1

17 Taiei, hinese 3 1.7 12 17 Russian eerationa 323 1. 3

1 ain 297 1. 17 1 Taiei, hinese 21 1. 12

19 Inia 297 1. 3 19 Austraia 2 1.3 21

2 Un ite Ar ab mi rat es 2 1. 3 2 Turkey 21 1.3 3

21 Austraia 271 1. 27 21 razi 237 1.3 2

22 razi 2 1. 27 22 Thaian 22 1.2 2

23 witzeran 23 1.3 2 23 witzeran 2 1.1 1

2 Thaian 229 1.3 17 2 Poan 2 1.1 17

2 Maaysia 227 1.2 1 2 Unite Arab mirates 2 1.1 2

2 Inonesia 21 1.1 27 2 Austria 192 1. 2

27 Poan 17 1. 17 27 Maaysia 1 1. 1

2 ween 17 1. 1 2 Inonesia 17 1. 3

29 Austria 179 1. 17 29 ween 17 1. 1

3 zeh Reubi 12 .9 22 3 zeh Reubi 11 . 2

Total of aboved 14,835 81.4 - Total of aboved 15,180 82.6 -

Worldd 18,215 100.0 19 Worldd 18,380 100.0 19


b. ingaore’s retaine imorts are efine as imorts ess reeorts.. eretariat estimates.

. Inues signifiant reeorts or imorts for reeort.





31



Aeni Tabe : Merchandise trade: leading exporters and importers(excluding intra-EU (27) trade), 2011



Annual

percentage

change


Annual

percentage

change1 traU27 eorts 2,131 1.9 19 1 traU27 imorts 2,3 1.2 17

2 hina 1,99 13.3 2 2 Unite tates 2,2 1. 1

3 Unite tates 1,1 1.3 1 3 hina 1,73 12. 2

aan 23 .7 7 aan .9 23

Korea, Reubi of 3.9 19 Korea, Reubi of 2 3. 23

Russian eeration 22 3. 3 Hong Kong, hina 11 3. 1

retaine imorts 13 .9 1

7 Hong Kong, hina 3.2 1 7 anaaa 2 3.2 1

omesti eorts 17 .1 1

reeorts 39 3.1 1

anaa 2 3.2 17 Inia 1 3.1 29

9 ingaore 1 2.9 1 9 ingaore 3 2. 1

omesti eorts 22 1. 23 retaine imortsb 1 1.2 27

reeorts 1 1.3 1

1 aui A rabia, K ingom of 3 2. 1 Meio 31 2. 1

11 Meio 3 2. 17 11 Russian eerationa 323 2.2 3

12 Taiei, hinese 3 2.2 12 12 Taiei, hinese 21 1.9 12

13 Inia 297 2.1 3 13 Austraia 2 1.7 21

1 U ni te A rab mi rate s 2 2. 3 1 Turkey 21 1.7 3

1 Austraia 271 1.9 27 1 razi 237 1. 2

1 razi 2 1. 27 1 Thaian 22 1. 2

17 witzeran 23 1. 2 17 witzeran 2 1. 1

1 Thaian 229 1. 17 1 Unite Arab mirates 2 1. 2

19 Maaysia 227 1. 1 19 Maaysia 1 1.3 1

2 Inonesia 21 1. 27 2 Inonesia 17 1.2 3

21 Norway 19 1.1 21 21 outh Afria 122 . 29

22 Turkey 13 .9 19 22 aui Arabia,Kingom of

112 .

23 Iran 131 .9 3 23 Viet Nam 17 .7 2

2 Nigeria 119 . 2 2 Norway 91 . 17

2 Kuwait, tate of

9 .7 2 Ukraine 3 . 32 Qatar 9 .7 2 Israe 7 . 2

27 outh Afria 97 .7 2 27 hie 7 . 2

2 Viet Nam 97 .7 3 2 Argentina 7 . 31

29 Venezuea, o ivar ianRe. of

93 . 1 29 Iran .

3 Kazakhstan . 3 Phiiines . 9

Total of aboved 12,865 89.8 - Total of aboved 13,085 90.3 -

Worldd (excl. Intra-

EU(27))

14,320 100.0 20 Worldd (excl.

Intra-EU(27))

14,485 100.0 20


b. ingaore’s retaine imorts are efine as imorts ess reeorts.. eretariat estimates.

. Inues signifiant reeorts or imorts for reeort.





32

Aeni Tabe : Leading exporters and importers in world trade in commercial services, 2011



Annual

percentage

change


Annual

percentage

change

1 Unite tates 7 13.9 11 1 Unite tates 391 1.1

2 Unite Kingom 27 . 11 2 Germany 2 7.3

3 Germany 23 .1 9 3 hina 23 .1 23

hina 12 . 7 Unite Kingom 171 . 7

rane 11 3.9 11 aan 1 .3

Inia 1 3. 2 rane 11 3. 7

7 aan 13 3. 3 7 Inia 13 3. 12

ain 11 3. 1 Netherans 11 3.1 12

9 Netherans 12 3.1 11 9 Itay 11 3.

1 ingaore 12 3. 12 1 Irean 113 2.9

11 Hong Kong, hina 121 2.9 1 11 ingaore 11 2.9 1

12 Irean 17 2. 1 12 anaa 99 2. 1

13 Itay 17 2. 9 13 Korea, Reubi of 9 2. 3

1 witzeran 9 2.3 17 1 ain 91 2.

1 Korea, Reubi of 9 2.3 1 Russian eeration 9 2.3 2

1 egium 2.1 1 1 egium 2 2.1

17 ween 7 1. 1 17 razi 73 1.9 22

1 anaa 7 1. 1 1 Austraia 9 1. 1

19 Luembourg 72 1.7 19 enmark 1. 11

2 enmark 1. 11 2 Hong Kong, hina 1. 1

21 Austria 1. 11 21 ween 1. 1

22 Russian eeration 1.3 22 22 aui Arabia,Kingom of

1.

23 Austraia 1.2 23 Thaian 1.3 13

2 Taiei, hinese 1.1 1 2 witzeran 7 1.2 1

2 Norway 2 1. 7 2 Unite Arab miratesa 1.2 …

2 Thaian 1. 19 2 Austria 1.2 2

27 Greee 1. 7 27 Norway 1.1 2 Maao, hina 39 .9 3 2 Taiei, hinese 1 1.1 11

29 Turkey 3 .9 12 29 Luembourg 1. 1

3 Poan 37 .9 12 3 Maaysia 37 1. 17

Total of above 3,480 83.8 - Total of above 3,140 81.2 -

World 4,150 100.0 11 World 3,865 100.0 10

a. reiminary estimates.

Note: igures for a number of ountries an territories have been estimate. Annua erentage hanges an rankings are affete byontinuity breaks in the series for a arge number of eonomies, an by imitations in rossountry omarabiity.

Source: WTO an UNTA eretariats.




33



Aeni Tabe : Leading exporters and importers in world trade in commercial services (excludingintra-EU(27) trade), 2011



Annual

percentage

change


Annual

percentage

change

1 traU27 eorts 79 2. 12 1 traU27 imorts 39 21.1

2 Unite tates 7 1.2 11 2 Unite tates 391 12.9

3 hina 12 .7 7 3 hina 23 7. 23

Inia 1 .7 2 aan 1 .

aan 13 . 3 Inia 13 .3 12

ingaore 12 3.9 12 ingaore 11 3.7 1

7 Hong Kong, hina 121 3. 1 7 anaa 99 3.3 1

witzeran 9 3. 17 Korea, Reubi of 9 3.2 3

9 Korea, Reubi of 9 2.9 9 Russian eeration 9 3. 2

1 anaa 7 2.3 1 1 razi 73 2. 22

11 Russian eeration 1.7 22 11 Austraia 9 2. 1

12 Austraia 1. 12 Hong Kong, hina 1. 1

13 Taiei, hinese 1. 1 13 aui Arabia,Kingom of

1.

1 Norway 2 1.3 7 1 Thaian 1.7 13

1 Thaian 1.3 19 1 witzeran 7 1. 1

1 Maao, hina 39 1.2 3 1 Unite Arab miratesa 1. …

17 Turkey 3 1.2 12 17 Norway 1.

1 razi 37 1.2 21 1 Taiei, hinese 1 1. 11

19 Maaysia 3 1.1 9 19 Maaysia 37 1.2 17

2 Israe 2 . 2 Inonesia 32 1.1 2

21 Inonesia 2 . 23 21 Meio 2 . 1

22 gyt 19 . 2 22 Irana 22 .7 …

23 Ukraine 19 . 13 23 outh Afria 2 .7 13

2 Lebanese Reubia 1 . … 2 Israe 2 .7 1

2 Phiiines 1 . 2 Angoaa 2 .7 …

2 Meio 1 . 2 Turkey 2 . 7

27 outh Afria 1 . 27 Nigeriaa 17 . …

2 Argentina 1 . 1 2 Argentina 1 . 1

29 Moroo 1 . 1 29 Lebanese Reubia 1 . …

3 roatia 13 . 13 3 Ukraine 1 . 19

Total of above 2,920 91.9 - Total of above 2,690 88.9 -

World (excl. intra-

EU(27))

3,180 100.0 12 World (excl.

intra-EU(27))

3,025 100.0 13

a. Preiminary estimates.

Note: igures for a number of ountries an territories have been estimate. Annua erentage hanges an rankings are affete byontinuity breaks in the series for a arge number of eonomies, an by imitations in rossountry omarabiity.

Source: WTO an UNTA eretariats.



The World Trade Report 2012 ventures

beyond tariffs to examine other policymeasures that can affect trade. Regulatory

measures for trade in goods and services

raise new and pressing challenges for

international cooperation in the 21st century.

More than many other measures, they reflect

public policy goals (such as ensuring the

health, safety and well-being of consumers)

but they may also be designed and applied in

a manner that unnecessarily frustrates trade.

The focus of this report is on technical

barriers to trade (TBT), sanitary and

phytosanitary (SPS) measures (concerning

food safety and animal/plant health) and

domestic regulation in services.

II. Trade and public

policies: A closer lookat non-tariff measuresin the 21st century



Contents A Introution 3

An eonomi ersetive on the use of nontariff measures

An inventory of nontariff measures an servies measures 9

The trae effets of nontariff measures an servies measures 13

Internationa ooeration on nontariff measures in a gobaize wor 1

onusions 22




36

Non-tariff measures that can potentially affect

trade in goods present the multilateral trading

system with a basic policy challenge – how to

ensure that these measures meet legitimate

policy goals without unduly restricting ordistorting trade. The same challenge applies

to measures that can affect trade in services.

This introduction discusses how the

motivations for using non-tariff measures

and services measures have evolved,

complicating the policy panorama, but not

changing the core challenge of how to

manage the tension between public policy

goals and trading opportunities.

A. Introduction



II – TRADE AND PUBLIC POLICIES: A CLOSER LOOK AT NON-TARIFF MEASURES IN THE 21ST CENTURY

37

A .I NT R OD U C T I ON

1. What is the World Trade Report2012 about?

a Persetives an insights in the World

Trade Repor t 2012 This year’s World Trade Report ventures beyon tariffsto investigate other oiy measures that an affettrae. ine the birth of the Genera Agreement onTariffs an Trae GATT in 19, tariffs have beenrogressivey reue an “boun”.1 ome tariffs stireresent signifiant barriers to trae, but at tention isrogressivey shifting to nontariff measures NTMs,suh as tehnia barriers to trae, subsiies or eortrestritions. Measures affeting trae in servies haveaso ome uner greater srutiny, refleting the fatthat servies have inrease their share of goba trae

whie the omementarity between trae in goosan servies has beome more aarent, eseiay ininternationa suy hains. This reort seeks toeeen our unerstaning of the iniene, roe aneffets of NTMs an servies measures, an to offernew insights into the soe for further internationaooeration in these areas.

Nontariff measures are nothing new. They have raiseoiy onerns sine the estabishment of the GATT.uh measures an iute or even nuify the vaue oftariff binings an affet trae in unreitabe ways.rafters of the GATT inue genera rues overing

broa ategories of measures, suh as Artie XI onthe genera eimination of quantitative restritions,whih aies to borer measures, an the “nationatreatment” obigation uner Artie III i.e. grantingequa treatment to imorte an “ike” omestirouts, whih aies to behintheborermeasures. Over time, more seifi isiines werenegotiate, suh as those aying to tehniabarriers to trae TT or sanitary an hytosanitaryP measures i.e. foo safety an anima an antheath measures. ervies measures mae their entryinto the mutiatera traing system in the UruguayRoun, whih got uner way in 19. They are overe

by the Genera Agreement on Trae in erviesGAT, whih istinguishes between imitations tomarket aess an nationa treatment, on the onehan, an omesti reguation on the other.

oth nontariff measures an servies measuresontinue to raise haenges for internationaooeration in trae in the 21st entury. our broaonsierations unerin the anaysis of this reort.

irst, nontariff measures an servies measures tento be oaque an riven by a variety of onsierations.They are iverse in harater an this iversitytransates into highy variabe trae an wefareeffets. Moreover, not ony o measures themsevesaffet trae, so too oes the manner in whih they areaie. Unerstaning, assessing an omaring

these effets is not ony ruia for a soun oiystrategy, but aso from the ersetive of internationaooeration. fforts to inrease the transareny ofNTMs, however, meet with a number of haenges.etter ata on NTMs an servies measures are

neee to inform both our unerstaning of NTMs anthe oiy referenes that rive them.

eony, the mi of nontariff measures is onstantyhanging. or eame, when some measures aresubete to strit isiines, a temtation may ariseto reae them with other, ess reguate measures.imiar fores may be at work in trae in servies,athough there is very itte eviene in this area. uh“oiy substitution” raises a number of haengeswhih are aresse in the Reort. This is the ontetin whih a rotetionist use of NTMs is most ikey tobe enountere.

Thiry, hanges in the traing environment ater boththe nee for nontariff measures an serviesmeasures an the nature of government inentives touse them. The Reort isusses the haenges raiseby eveoments suh as the growth in gobaroution networks, the reent finania risis, thenee to aress imate hange, an growingonsumer onerns regaring foo seurity anenvironmenta issues in rih ountries. The inreasingnumber of reasons for using NTMs reflets a moveaway from a fous on the roution sie of the

equation towars the efene of onsumer ansoieta interests.

ourthy, when it omes to internationa trae antraereate oiies, the greater use of nontariffmeasures an their inreasing omeity in terms ofesign an urose have intensifie the haenge ofseuring effetive an stabe internationa ooeration.These issues are isusse in the Reort, inuingwith reset to internationa onvergene, rivatestanars an omesti reguation in servies.

eause of the iversity an omeity of nontariff

measures an servies measures, the Reort fouseson TT an P measures in trae in goos, an onomesti reguation in trae in servies. TT/Pmeasures are now among the most frequentyenountere NTMs. y their very nature, they oseaute transareny robems, both in their formuationan aministration. More than any other NTMs,TT/P measures romte by egitimate ubioiy obetives an have averse trae effets,eaing to questions about the esign an aiationof these measures. They are aso at the forefront oftensions that an arise over rouerriven anonsumerriven NTMs. ssentia oiy asirations,

suh as ensuring the heath, safety an webeing ofonsumers, for eame, may have averse traeeffets onsiere by some arties as inefensibe onubi oiy grouns.




38

To aress the averse effets on trae ause byTT an P measures, internationa ooerationtakes the form of reguatory onvergene. This oursin many ifferent forms an at various eves. At themutiatera eve, it raises a number of new haenges

for the WTO that are isusse in this reort. ome ofthose haenges are seifi to eveoing ountries,where aaity buiing rather than referentiatreatment in the form of ower tariffs an he toaress them. omesti reguation in servies raisesthe same haenges. As see out in the net subsetion, these inue reguations on iensing/quaifiation requirements an roeures as we astehnia stanars.

b Terminoogy

Lawyers, eonomists an other soia sientistssometimes use simiar terms to refer to ifferentonets, whie at other times they use ifferent termsto refer to simiar onets. or eame, in WTO aw, astanar is nonmanatory by efinition see TTAgreement, Anne 1:2, whie for eonomists,stanars an be either manatory or vountary. ometerms have a seifi efinition in WTO aw. oreame, the term “measure” refers to ations an“nonations” by the rivate setor an governmentaboies, whie the term “reguation” is imite togovernmenta ation an eues rivate setormeasures.

In this reort, “nontariff measures” refer to oiymeasures, other than tariffs, that an otentiay affettrae in goos. “TT/P measures” inue ameasures overe by the WTO’s TT an Pagreements. It therefore inues tehnia reguations,stanars an onformity assessment roeures asefine in Anne 1 of the TT Agreement an theP measures iste in Anne A, aragrah 1, of theP Agreement. Whenever the isussion euesany governmenta ations, the term “rivate measures”is use.

“ervies measures” refer to a measures that anaffet trae in servies. ervies measures isteuner GAT Artie XVI:2 are referre to as “marketaess imitations”. “Nationa treatment restritions”are servies measures that aor servies suiersof another WTO member ess favourabe treatmentthan that aore to the WTO member’s own “ike”servies suiers as of GAT Artie XVII. inay,“omesti reguation in servies” inues iensingan quaifiation requirements an roeures, antehnia stanars as of GAT Artie VI:negotiating manate. etions to these efinitionsmay be mae from time to time when iting nonWTO

researh an/or atabases that efine their termsifferenty. In suh ases, the soure’s terms may beuse, but any nonstanar terminoogy is earyientifie.

The terms “nontariff measures” an “serviesmeasures” istinguish between oiy measures thataffet trae in goos an those that affet trae inservies resetivey. In reaity, the two ategories ofmeasures are not mutuay eusive. ertain servies

measures aso affet trae in goos an thus shouaso be onsiere as NTMs. onversey, ertainNTMs affet trae in servies. uh “rosseffets”may ontinue to grow in imortane with thetransformation of trae atterns an the eansion ofgoba roution sharing, but very itte emiriaeviene eists on their signifiane. The Reort asoisusses the reevane of “omementarity effets”,namey the mutuay reinforing effet of trae ingoos an servies.

truture of the Reort

etion eamines the reasons why governments usenontariff measures an to what etent thesemeasures, whih may be ursue for a variety of oiyuroses, an have averse trae effets. imiarquestions are aso aresse for servies measures. Itis argue that governments use NTMs to aressvarious tyes of market faiures or to ursue ubioiy obetives, but o so sometimes in ways thatreson to the influene of seiainterest grous.The oaqueness – in terms of urose an effets –of ertain NTMs, their aea in the resene ofomesti institutiona an oitia onstraints, as weas their effets on fie an variabe trae osts an

eain why governments may give referene toeonomiay ineffiient measures or to rotetionistmeasures in isguise.

etion aso onsiers whether, an how, thehenomenon of offshoring rovies aitionamotivations for governments to istort omestioiies. Moreover, it anayses governments’ hoie ofaternative measures. The reasons for governmentintervention, an the otentia for averse traeeffets, are aso isusse with referene to serviesmeasures. The setion ens by resenting asestuies on NTMs aie in the ontet of imate

hange an foo safety, an investigates to whatetent measures taken may ose a haenge tointernationa trae.

etion surveys avaiabe soures of information onnontariff measures an servies measures anevauates their reative strengths an weaknesses. Itaso summarizes the ontents of the main atabasesontaining information on NTMs an serviesmeasures an uses this information to estabish anumber of “styize fats”, first about NTMs an thenabout servies measures. stabishing those styizefats turns out to be surrisingy iffiut ue to argegas in the avaiabiity of ata on both NTMs anservies measures an to numerous shortomings ineisting atasets. esite these imitations, many keyfeatures of the urrent reguatory ansae are




39


ature an a number of imortant trens in the useof NTMs over time are oumente.

etion isusses the magnitue an the traeeffets of nontariff measures an servies measures

in genera before fousing on TT an P measuresan omesti reguation. ue to ak of transareny,as we as the imortane of aministrative behaviourin etermining the imat of interventions, it is iffiutto measure the effets of NTMs omare with thoseof tariffs. Ad valorem equivaents nee to be auatebefore making any omarison. However, variousmethooogia haenges an shortomings aguesuh auations. Likewise, onetua anmethooogia haenges arise in the auation oftariff equivaents of servies measures.

To the etent ossibe, the trae effets of TT an

P measures an of omesti reguation in serviesare isentange in severa imensions, inuing theseifi hanne through whih trae is affete, theeffets aross ountries, setors an firms, an theeffets of the imementation of a measure, istintfrom the effets of the esign of the measure itsef.inay, the setion eamines whether reguatoryharmonization an/or mutua reognition of stanarshe to reue any traehinering effets of TT anP measures an omesti reguation in servies.

etion overs internationa ooeration on nontarif fmeasures an servies measures. The first art reviews

the eonomi rationae for suh ooeration in theontet of trae agreements. It rovies a frameworkfor evauating the effiient esign of rues on NTMs in atrae agreement. The seon art of this setion ooksat ooeration on TT/P measures an omestireguation in ratie, both in the mutiatera traingsystem an within other internationa fora aninstitutions. The thir art of the setion eas with theega anaysis of the treatment of NTMs in the GATT/WTO system an the interretation of the rues that hasemerge in reent internationa trae isutes. eiaattention is evote to how WTO agreements anisute settement have eat with the istintionbetween egitimate an rotetionist NTMs. The setiononues with a isussion of the haenges forimroving an fostering further mutiatera ooerationon NTMs an servies measures.

2. History of NTMs inthe GATT/WTO

Nontariff measures have aways resente themutiatera traing system with a basi oiyhaenge – how to ensure that NTMs o not restrit oristort trae, an at the same time ensure that theyan be use for neessary an egitimate oiy goas.Whie the oiy haenge has remaine the same, theseifi issues, ebates an soutions have evoveover time.

In the eary GATT years, the main fous was onmeasures reate to baaneofayments, emoymentan eveoment issues. More reenty, the fous hasbeen on the growing number of measures reate totehnia, heath or environmenta onerns. Whereas

nontariff measures in the ast were often riven, orinfluene in terms of esign, by rouer interests,toay’s NTMs reflet a greater iversity in ubi oiyonerns, inuing onsumer interests.

eeening eonomi integration an the eansion oftrae rues into new areas, suh as agriuture,servies an inteetua roerty, have ae to theomeity of the ebate – generating new traefritions over omesti reguatory ifferenes, rawingnew onstituenies, suh as environmentaists anonsumer grous, into the ebate ay an Kuwahara,199; Low an Yeats, 199 an raising new onerns

about the tension between internationa rues anoiy sovereignty. In resonse to these hangingissues an ressures, the mutiatera traing systemontinues to evove. If in the ast, the fous was onnationa measures – ensuring nonisrimination antransareny, whie avoiing rotetionism – in reenteaes there has been a growing fous ontransnationa measures – enouraging reguatoryooeration, mutua reognition agreements an theinternationa harmonization of stanars.

Athough the GATT was aunhe as a tariff agreement– an its eary eaes were fouse mainy on the

negotiation an “bining” of tariff reution – the issueof nontariff measures was unavoiabe from the outset.Originay envisage as one ar t of a future InternationaTrae Organization ITO, the GATT was the routof an initia tariff reution negotiation among23 ountries that onue in Otober 197 – ust intime to avoi the eiration of U negotiating authority,an si months in avane of the anne onusion ofthe arae ITO negotiations Garner, 19.

To ensure that the agree tariff reutions were notiute or unerut by other trae measures, the GATTinororate many of the ommeria oiy rovisions

of the raft ITO harter.2 ven this ste was viewesetiay by the U ongress, sine the 19etension of the reiroa trae agreements authorityony authorize unertakings to reue tariffs another trae restritions. The GATT’s genera ausesasse srutiny ony beause they were ustifie as aneessary baksto to any tariffreution agreement. H. akson, 199. When it beame ear by 19that the Havana harter estabishing the ITO wounot be ratifie by the Unite tates, it fe to the GATTto assume the ommeria oiy roe that ha beenenvisage for the ITO – but without its organizationaor roeura rovisions, an minus the haters on“moyment an onomi Ativity”, “onomieveoment an Reonstrution”, “Restritiveusiness Praties” an “Internationa ommoityAgreements”.




40

rom a traeoening ersetive, the GATT rew abasi oiy istintion between tariff an nontariffmeasures. In artiuar, it favoure the use of tariffs. Inaition to being revenue generating, tariffs wereviewe as a “fairer” form of rotetion, more effiient

in terms of their eonomi onsequenes an moreamenabe to reutions through negotiations.Quantitative restritions an other nontariff measureswere seen as inherenty more isriminatory, morevarie an more isrutive of market fores.3

In rinie, U negotiators took a more etreme viewof nontariff measures, aiming to want to rohibit aquantitative restritions an most other nontariffbarriers to trae – uner a omrehensive oegoverning wor trae – an to initiate internationanegotiations to reue tariffs athough the Unitetates was aso intent on roteting the quotas an

restritions that buttresse its own agriutura suortrogrammes. However, other ountries were ust asintent on reserving their freeom to use quantitativerestritions, ehange ontros an other NTMs foromesti oiy uroses.

The Unite Kingom an other uroean ountriesfae serious baaneofayments iffiuties at theen of the eon Wor War, an were unreare togive u trae an ehange ontros that they beievewere neee to reserve maroeonomi stabiity.Uner the influene of Keynesian eonomis an itswartime eeriene, the Unite Kingom was intent on

reserving its freeom to use trae restritions in theursuit of omesti “fu emoyment”. Meanwhie,eveoing ountries resiste interferene in theirambitious efforts to evise more stabe internationaommoity agreements or to ursue omestieveoment an inustriaization strategies. Thus, thenegotiations eaing to the Havana harter for theanne Internationa Trae Organization wereominate by intense ebates about nontariffmeasures – an quantitative restritions, in artiuar– as nations strugge to onstrut a universa egasystem that ou aso enomass their oftenonfliting omesti obetives an interests.

Given the omiate negotiating history on nontariffmeasures, the variety of forms they took an the fatthat many measures ha a oiy intent ony iniretyreate to trae, the GATT’s arhitets faie to arriveat a omrehensive aroah enomassing a nontariff measures an treate various tyes of measuresifferenty. onsistent with the GATT’s basi oiythrust, ertain NTMs were rohibite outright.Quantitative restritions were the most imortant nontariff measures when the GATT was being rafte, soit is not surrising that they are subet to etaie anome rovisions.

Artie XI of the GATT eary rohibite theintroution of new quantitative restritions anrequire the eimination of eisting ones, but this rue

was subet to three main eetions. Refletinguroe’s baaneofayments an urreny onerns,the most imortant eetion was for quantitativerestritions an ehange ontros maintaine forbaaneofayments uroses, etaie in Arties XII

to XV. The seon eetion was for quantitativerestritions use in suort of ertain agriuturasuort rogrammes that aime to kee omestiries above wor ries – a key obetive of theUnite tates. The thir eetion was imite toquantitative restritions use by easteveoeountries Ls to romote infant inustries aneonomi eveoment, or to manage their ownartiuar foreign ehange robems.

Other nontariff measures were reguate, notrohibite, by GATT rues to ensure that neessaryan egitimate omesti oiies were non

isriminatory an east trae restritive. The basi“nationa treatment” obigation, Artie III, outaweinterna taes or harges on imorte routs thatwere not aie equay to “ike” omesti routs.Nationa treatment aso require that omesti awsan reguations reate to saes, urhases,transortation an istribution be nonisriminatoryin their aiation. Athough the GATT mae noseifi referene to tehnia or heath stanars,Artie III’s overage of “aws, reguations, anrequirements” was generay assume to ay.

ignifianty, Artie XX eiity reognize that

measures “neessary to rotet human, anima orant ife an heath” were ustifie – onfirminggovernments’ resonsibiity for ensuring that goos ofa kins meet ertain nationa stanars – but ony soong as these measures met the “neessity” stanar,an i not “onstitute a means of arbitrary orunustifie isrimination or a isguise restrition oninternationa trae”. The GATT aso reguate ertainnontariff measures in an affirmative way through itsArtie X requirement that imortreate aws, uiiaeisions an reguations be “ubishe romty”.

Other nontariff measures were onsiere too

ome or ontroversia to be aresse throughgenera rues or “oes of onut” aone. Artie VIestabishe rues regaring antiuming anountervaiing uties – whih were aowe ony inertain resribe ases, an at eves eemesuffiient to aomish arove obetives. ArtieVII seifie that ustoms vauation systems shounot be base “on arbitrary or fititious vaues” assigneto imorts. Artie VIII aime to imit aministrativefees assigne to imorts an trie to simify theoumentation require by ustoms offiias. Artie IXsought to revent isriminatory restraints on imortsthrough the use of rues of origin i.e. roeureswhih etermine a rout’s ountry of origin anonsequenty how it is treate. Often the soe oroverage of suh agreements was imite. Onsubsiies, for eame, GATT Artie XVI merey




41


require notifiation an onsutation, with a view toreuing subsiization. Athough the Unite tatesan severa other eegations viewe state traingativities – whih were wiesrea uring the eonWor War an its aftermath – as a signifiant trae

istortion, GATT rues Arties II:, III: an XVII inot rohibit state traing agenies but simy requirethat their urhases an saes be subet to marketfores.

To further rotet boun tariff reutions from beingunfairy unermine by nontariff measures, theorigina GATT arhitets aso introue an eansivean ontroversia “nonvioation” rovision – unerArtie XXIII:1 of the isute settement roeure –whih aowe a WTO member to argue, even in theabsene of any breah of GATT obigations, that itsmarket aess “benefits” ha been nuifie or imaire

by “any measure” introue by another member, or by“any other situation”, an to seek omensation. Theinherent ambiguity of the nonvioation rovision wasintentiona, esigne to over not ony governmentNTMs that fe outsie the soe of eisting GATTrovisions, but measures that governments mightinvent in the future to irumvent or iute their tariffommitments.

The first five GATT negotiating rouns – Geneva197, Anney 199, Torquay 191, Geneva 19an ion 191 – were evote amost eusiveyto tariff negotiations an the aession of new

members. However, uring the 19 “reviewsession”, members searatey rafte rotoosrevising severa GATT rovisions eaing with nontariff measures. Whie these eary rouns, eseiaythe first one, resute in signifiant overa tariffreutions, the traeoening imat was oftenfrustrate by ountries’ use of nontariff measures –further inreasing the ressure on the GATT system toarify the istintion between rotetionist anegitimate NTMs. Most uroean ountries were stiaying a range of quantitative restritions, athoughess for baaneofayments reasons, aninreasingy to imit growing imort ometition from

Asia, eseiay aan, whih ha reenty aee tothe GATT.

onerns were aso growing about the eansion ofantiuming ations, eseiay by the Unite tatesan anaa, an the ak of rues governing the usean aiation of nationa tehnia, heath an safetystanars. The negotiation of the 192 LongTermArrangement Regaring Internationa Trae in TetiesLTA – whih emboie a ome network ofrestritions on teties an othing eorts – wentsome way towars aeasing inustria obbies anhee the U aministration seure ongressionanegotiating authority for what beame the KenneyRoun Low, 1993. However, there were growingworries, eseiay among eveoing ountries, aboutthe etent to whih suh “vountary” arrangements

were substituting trae reguation for markets anweakening the intent, if not the rues, of the mutiateratraing system. In these an other areas, it wasbeoming ear that GATT rues often faie to givesuffiienty reise guiane for the internationa

reguation of nontariff measures. The robem wasmae worse by the GATT’s “Protoo of ProvisionaAiation”, whih require ountries to reset PartII rues – i.e. those overing nontariff measures – ony“to the fuest etent not inomatibe with eistingegisation” am, 197; . H. akson, 199. As aresut, nontariff measures that ou be reate tonationa egisation in eistene rior to 197effetivey “esae” the GATT’s isiines.

y the time the Kenney Roun was aunhe in 19,ressure was buiing from governments to aress abroa range of nontariff measures, inuing those

faing uner the “esae ause”, “resiua” quantitativerestritions, antiuming, state traing, governmentrourement, ustoms vauation, isriminatory imortrestritions, borer ta austments, an inreasingytehnia an heath stanars. At a meeting in May193, rearing the groun for the Kenney Roun,trae ministers agree that the forthomingnegotiations “shou ea not ony with tariffs but asowith nontariff barriers”.7

Unfortunatey, the Kenney Roun’s suess ingraing with nontariff measures was imite. Aninitiay ositive resut was an agreement on anti

uming measures, the soae “Antiuming oe”,aime at seeier an more transarent roeures inthe aiation of nationa antiuming aws. Theoe was negotiate searatey from the Roun’stariff negotiations, an agreement was reahe withsurrisingy itte iffiuty Winham, 19. Anotherositive resut was an Amerian eing Prie APagreement, whereby the Unite tates wou haveene its use of a vauation system for benzenoihemias that uroe aime was inomatibe withthe GATT, an the uroean ommunities wou haverovie aitiona tariff reutions on hemias another trae onessions . H. akson, 199.

The antiuming an AP agreements reresenteimortant otentia rogress in the reguation of nontariff measures. However, even before the onusionof the Kenney Roun in 197, oonents in ongressargue that both agreements ha been negotiatewithout an eiit ongressiona manate, an a biwas subsequenty asse rohibiting the U Tariffommission from imementing the oes Winham,19. The agreements ie as a resut ester,19. Athough the Kenney Roun was againsuessfu in reuing tariffs, it i not bring aboutany signifiant hanges to the GATT rues governingNTMs Preeg, 199.

It fe to the Tokyo Roun between 1973 an 1979 tounertake a maor reform an eansion of the GATT’s




42

nontariff rues – in many ways iking u where theKenney Roun ha eft off. esite the GATT’ssuess in owering tariffs, members were inreasingyaware that tariff reutions aone were not suffiientto guarantee market aess. onerns were again

eresse that nontariff measures were frustratingthe intent of tariff ommitments, an that eistingGATT rues were in some ases not reise or etaieenough to ensure that ertain NTMs were notisriminatory or unneessariy trae restritive. Thisview was eseiay revaent in the Unite tates,whih was areay worrie about the effets on itseorts of an overvaue oar an the onsoiationof the uroean ommon market.

The Unite tates ommission on Internationa Traean Investment, the soae “Wiiams ommission”,aointe in 1971 to avise the aministration on

future trae oiy, stresse that Amerian eortswere being inreasingy imee by “nontariffbarriers” in overseas markets, an roose the aunhof new mutiatera negotiations whih, among otherthings, wou raw u “oes of onut” to aressnontariff issues. In seeking ongressiona negotiatingauthorit y in 1973, the U eia Trae Reresentative,Wiiam bere, argue that “the forthoming traenegotiations must iffer substantiay from those of theast ... The negotiations must over all barriers whihistort trae”.

The uroeans, for their art, wante to return to

issues that they ha unsuessfuy ushe uring theKenney Roun, eseiay ustoms vauation an theremova of the AP, antiuming an governmentrourement Winham, 19. The growing imortaneof nontariff measures was further highighte by aNonTariff Measure Inventory that ha been omieby the GATT eretariat, base on members’ reversenotifiations, sine 197.

The Tokyo Roun gave entre stage to the negotiationof imrove an eane rues on nontariffmeasures. In the ministeria earation aunhing theRoun, a key state obetive was to “reue or

eiminate nontariff measures or, where this is notaroriate, to reue or eiminate their traerestriting or istorting effets, an to bring suhmeasures uner more effetive internationaisiine”. Refleting this riority, the TraeNegotiations ommittee reate a seia negotiatingsubommittee on nontariff measures in ebruary197; this ommittee was itsef ivie into subgrous on quantitative restritions, tehnia barriersto trae, ustoms matters, subsiies an ountervaiingmeasures, an after uy 197 governmentrourement. The main outome of their efforts wasthe negotiation of si new uriatera agreements – or“oes” – whih, with the eetion of governmentrourement, buit on eisting GATT rovisions.esite their imite membershi – for eame, ust39 ountries, a thir of the GATT membershi, ote

to sign the Tehnia arriers to Trae oe asoreferre to as the tanars oe at the en of theRoun – these agreements marke a signifiantavane in the system’s efforts to arify rues in anumber of nontariff areas.

The ustoms Vauation oe brought greateruniformity an stanarization to the way that imortswere vaue. New rues in the Imort Liensing oereue the soe for isrimination in the way thatustoms authorities ou ay ienes. The oeson government rourement an subsiy/ountervaiwere aso imortant breakthroughs in the Tokyo Roun– the former beause it brought a maor new area ofeonomi ativity uner GATT rues, the at ter beauseit emonstrate the wiingness of ountries tonegotiate on an inreasingy highrofie anontentious nontariff measure Winham, 19.

As a ear signa of the way that the fasteaningarray of omesti tehnia, heath an safety nontariff measures wou be aresse by GATT rues inthe future, the new tanars oe was arguaby oneof the most signifiant an imortant Tokyo Rounresuts. Not ony i the oe eiity reiterate theGATT’s eisting nonisrimination obigationsregaring the aministration of tehnia reguations, itaso obige ountries to aot eisting internationayaete stanars – uness inaroriate for efinereasons – whie urging them to work towars thefurther harmonization of stanars. urthermore, the

oe enourage ountries to aot a “mutuareognition” oiy, whenever ossibe, for test resuts,ertifiates an marks of onformity.

Athough the Tokyo Roun’s tariff reution agreementwas signifiant, the Roun’s main ahievement wasthe eveoment of a omrehensive regime for nontariff measures. The Tokyo Roun oes were notwithout weaknesses – some of whih were to roviean imetus for aunhing the Uruguay Rounnegotiations. ine the oes’ membershi wasimite, they were sometimes ause of not beingfuy “mutiatera”, of reating a twotiere GATT, an

of weakening the rinie of nonisrimination. Theoes’ searate ommittees, rovisions an isutesettement roeures aso oen them to the hargeof “bakanizing” the mutiatera traing system. omeof these onerns were aresse in the November1979 GATT eision, whih affirme that theseagreements eet government rourement woube aie in a manner fuy onsistent with mostfavoure nation i.e. nonisrimination, so nonsignatories reserve their eisting rights.

The eision aso seure the right of nonsignatoriesto artiiate in the various oe ommittees asobservers – aressing a onern of eveoingountries. esite these shortomings, the TokyoRoun eary marke the most signifiant avane inthe system’s efforts to ea with nontariff measures




43


sine the GATT’s rues were first negotiate after theeon Wor War.

Nontariff measures remaine a main fous of theUruguay Roun – in art to bui an ean uon

what ha been ahieve in the Tokyo Roun. The 19Punta e ste earation, aunhing the Roun,rovie a broa manate: “negotiations sha aim toreue or eiminate nontariff measures, inuingquantitative restritions”. aan, the first ountry toformay roose aunhing the new Roun, seifiaysought strengthene GATT isiines on NTMs,eseiay vountary eort restraints an othermanage trae arrangements roome, 199. TheUnite tates, for its art, not ony sought imrovemarket aess for its manufature an agriuturaeorts, but eane oortunities for i ts inreasingyometitive servies eorts, an to strengthen

foreign rotetion an enforement of its inteetuaroerty rights – a of whih invove a muh broaerfous on nontariff measures than ha been envisagein the ast.

Like the Unite tates, the uroean ommunitiesaso ha an interest in oening u servies trae anstrengthening inteetua roerty rotetion.Meanwhie, a ritia mass of eveoing ountrieswere reare to ontemate new servies aninteetua roerty rues in ehange for imroveaess to eveoeountry markets for theirmanufature eorts, inuing by ismanting the

Mutiibre Arrangement whih ha reae the LTAin 197, amening the safeguar ause, an generaystrengthening the GATT’s nonisriminatory rues.

The Uruguay Roun marke another maor eansionof the system’s overage of nontariff measures. Thewiening of mutiatera rues to inue servies traean inteetua roerty rotetion – through theGAT an the Traereate Asets of InteetuaProerty Rights TRIP Agreement – invove newisiines aross a whoe range of measures.However, these were not the ony areas where theUruguay Roun eane internationa reguation of

NTMs.

Agriutura trae ha argey been eemte fromrevious GATT negotiations an the use of nontariffmeasures, suh imort quotas an subsiies, inagriutura oiy ha enoye seia status unerGATT rues. Uner the Uruguay Roun’s agriutureagreement, however, most remaining nontariffrestritions were reae by tariffs – a roess knownas tariffiation – an new ommitments wereunertaken to isiine omesti suort an eortsubsiies. In aition to imrovements to the Tehniaarriers to Trae Agreement, a new anitary anPhytosanitary Measures Agreement was negotiateeaing seifiay with agriuturereate stanars.y treating sanitary an hytosanitary P measuresuner a searate an more rigorous agreement,

negotiators not ony aknowege the growingimortane an rominene of foo safety issues – antheir inreasing reevane to agriutura trae – butaso the ossibiity that ountries might be temteto omensate for negotiate tariff an subsiy

reutions through inrease use of P measuresroome, 199.

GATT isiines on imort iensing an rues oforigin were aso strengthene, whie eisting rues onsubsiies – inuing their assifiation into rohibite,ermissibe an ossiby ermissibe subsiies – wereeane. ountries aso agree to ismanterogressivey the Mutiibre Arrangement, whih haevae GATT rues sine 192, ening one of themost rominent an ontroversia trae arrangements.

The hanging fous an soe of eah roun of GATT

negotiations sine 197 not ony reflets the ongoingreevane of nontariff measures to the internationatraing system, but aso how the reative imortane ofvarious measures has shifte over time see Tabe A.1.Quantitative restritions were the most ressingrobem faing the eary GATT negotiators beauseountries were sow to ismante wartime ontros anuroe was reouie with baaneofaymentsrobems an oar shortages. However, thesegrauay iminishe in imortane uring the 19sas the oar shortage resove itsef an as imortan ehange ontros were ifte.

Later, uring the Kenney Roun, attentioninreasingy turne to ustoms vauation anomaies,antiuming ations, an the eansion of traeagreements between ountries. Notwithstaning theefforts mae to aress these issues uring theRoun, quantitative restritions an embargoes stiaounte for more than a quarter of the nontariffmeasures notifie in the 19 inventory an ontinueto be reevant after the Uruguay Roun. Rising traeonflits over roution subsiies an heath ansafety stanars were ae to the ist of emergingrobems uring the Tokyo Roun i.e. . er ent an9.2 er ent of the measures notifie in the 1973

inventory. uring the Uruguay Roun, isussions onNTMs eane ramatiay to inue the host ofomesti reguations reate to servies aninteetua roerty, in aition to the wie array ofagriuture an tetie measures that ha reviousybeen eemt from GATT rues.

In the urrent oha Roun, “stanars” an “ustomsan aministrative roeures” have reemerge as thetwo most imortant ategories of nontariff measuresbeing aresse in the negotiations on manufaturerouts NAMA, or nonagriutura market aessan trae faiitation at 37. er ent an 2. er entresetivey, these were among the to three ategoriesof NTMs notifie in the 2 inventory. The fat thatthe GATT’s transit, aministrative an transarenyrovisions Arties V, VIII an X, argey negete in




44

Tabe A .1: Non-tariff measures notified by GATT/WTO members for non-agricultural products

share of NTMs by inventory ategory

Parts and

sectionsDESCRIPTION

Inventory

(1968)1Inventory

(1973)2Inventory

(1989)3

NAMA,

1st Inv.

(2003)

NAMA,

2nd Inv.

(2005)

Part I

Government participation in trade and

restrictive practices tolerated by

governments

11.9 15.3 20.9 7.1 7.0

A Government ais 2.7 . 7.3 1. 1.7

ountervaiing uties . . . .2 .

Government rourement 3.7 3. . .9 .7

Restritive raties toerate by governments . . 2. 3. .3

tate traing, government monooy raties,et.

.9 .1 . . .3

Part IICustoms and administrative entry

procedures14.8 14.6 11.9 23.5 26.2

A Antiuming uties 1.1 1. 2.3 1. 2.3

Vauation . . .1 2.3 .3

ustoms assifiation 1.3 .7 . .7 3.3

onsuar formaities an oumentation .7 . 3. 2.3 3.

ames .7 . .2 .1 .

Rues of origin 1.3 . . 7. 2.

G ustoms formaities .2 . 1.1 9.1 9.

Part III Technical barriers to trade 6.1 9.2 8.2 29.9 37.1

A Genera . 9.2 1. 3.2 .9

Tehnia reguations an stanars .2 . 3. 1. 13.2

Testing an ertifiation arrangements .9 . 3. 11. 1.9

Part IV Specific limitations 36.7 31.5 31.7 34.9 26.8

A Quantitative restritions an imort iensing 2.7 1. 13.9 12. 7.

mbargoes an other restritions of simiareffet

. . .3 . .

reentime quotas an other miingreguations

1.9 3. 1. . .7

hange ontro 2.3 1.2 1.2 1.3 1.3

isrimination resuting from biatera

agreements . 1. 1.1 .1 .7

isriminatory souring . 1. . .3 1.7

G ort restraints 1. . . .2 1.

H Measures to reguate omesti ries 1. . 1.2 .2 .3

I Tariff quotas .2 .3 . .3 1.3

ort taes . . 2.1 .2 1.

KRequirements onerning marking, abeingan akaging

1. 1. 2.1 7.2 .3

L Other seifi imitations .3 .1 2.1 11. 1.7




45


Parts and

sectionsDESCRIPTION

Inventory

(1968)1Inventory

(1973)2Inventory

(1989)3

NAMA,

1st Inv.

(2003)

NAMA,

2nd Inv.

(2005)

Part V Charges on import 29.2 29.4 27.3 4.4 1.7

A Prior imort eosits 1.9 1.9 1. .2 . urharges, ort taes, statistia taes, et. 13. 1. 1. 3. 1.3

isriminatory fim taes, use taes, et. 11.1 . . .2 .3

isriminatory reit restritions 1.3 1. 1.2 .2 .

orer ta austments .9 11.2 . .2 .

mergeny ation . . .9 . .

Other 1.4 0.0 0.0 0.2 1.3

Total 100.0 100.0 100.0 100.0 100.0

Memo: Number of items in the categories 873 731 561 2556 302

Source: antana an akson 212.

Note: The information resente in this tabe is argey base on “reverse” notifiations aoring to the inventory ategories in oumentTN/MA//. eause the ategories use in eah of the inventories iffer, severa eements ha to be auste as esribe beow. Where anitem orresone to two or more inventory ategories, the item was ounte uner a the reevant ategories. This means that the number ofitems resente in this tabe overestimates the atua number of items in the inventory.

1 ase on the Inventory on NonTariff Measures of the ommittee on I nustria Prouts, oument OM.IN/ an Aena, of 11 eember19. The ategories of this inventory iverge onsieraby from the ones use for this tabe. The frequeny of measures was groue anreassigne aoringy. ome of the ifferenes inue inter alia.: ountervaiing uties were assifie uner Part II ustoms anaministrative roeures an not uner Part I; the “ustoms assifiation” of II. i not eist, but there were ategories for “Harmonizationof Nomenature” an “Arbitrary assifiation”; onsuar formaities were inue uner Part II an not in Part I; quantitative restritions aniensing requirements were resente as two searate items; marking an akaging requirements were assifie uner Part III tehniabarriers to trae; the “restritive raties toerate by governments” were inue in the “other” ategory, et.

2 ase on the Note by the eutive eretariat of the GATT entite “Inventory of NonTariff Measures – aane sheet of notifiations”,oument OM.IN/W/12 of 11 Ari 1973. The inventory ategories iffer sighty from the ones use in this tabe. or eame, in the 1973

inventory, Part III was entite “tanars” an was subivie into: A Inustria stanars; Heath an safety stanars; Other stanarsonerning rout ontents; an Requirements onerning marking, abeing an akaging; the ategory of “eort ta es” i not eist, et.

3 ase on the GATT’s eretariat Anaysis of the oumentation of the Tehnia Grou on Quantitative Restritions an other NonTariffMeasures, GATT oument NTMTG/W/ of 2 ebruary 199, Anne 1 QRs an 12 NTMs other than QRs.

The summary is base on the WTO eretariat’s reort O3/12, whih omie information of notifiations in the TN/MA/W/2series. The seon notifiation eerise notifie by members in the TN/M A/W/ series was not taken into aount. ata was roesse anrearrange in a manner that wou aow for the ounting of iniviua measures as er the inventory ategories. eause severa measuresreate to two or more inventory ategories were notifie, there is an overa an mutie ounting of the same measure. The WTO eretariatnote in this reort that information was often inaurate or inomete, to whih the authors wou a that the manner in whih routs weregroue aso iverge, ranging from grouing of ategories of routs to ientifying tariff ines at the tenigit eve. This summary shou,therefore, be interrete with aution.

The summary is base on the WTO eretariat’s reort O/2/Rev.7, whih omie information of notifiations in the TN/MA/W/oument series. The information notifie by razi in oument TN/MA/W//A.1 was ae. The same roessing notes of oumentO3/12 ay.

revious rouns, are one again in the sotight throughthe trae faiitation negotiations emonstrates howenuring the nontariff measures agena remains. Inshort, few of the nontariff issues on the mutiateratrae agena are ometey new or have ometeyisaeare.

If nontariff measures are emerging as an even moreritia fous of the WTO’s work, it is argey arefletion of the system’s suesses, not its faiings.The eansion of wor trae, the eeeningintegration of eonomies, an the wiening anstrengthening of trae rues have inevitaby resute innontariff measures emerging as an inreasingysaient feature of the internationa trae ansae.eining tariff rotetion has e some ountries tomake more reative an etensive use of nontariff

measures. Many ountries, artiuary in theeveoe wor, have aso eane heath, safetyan environmenta reguations in reent eaesTrebiok an Howse, 1999 – whose trae imat isoften magnifie by umbersome aministrative anomiane roeures as highighte in etion .

Another maor reason why nontariff measures havegrown in rominene in the WTO is beause the fouson them has inrease – as the ine between “foreign”an “omesti” issues an oiies beomes inreasingyburre.9 This eveoment has aso inrease theomeity of the WTO’s work, sine the system hashistoriay foun it harer to aress NTMs than tariffs.This is arty beause they are more ome anountryseifi, arty beause they o not easiy enthemseves to negotiations that have traitionay




46

fouse on the ehange of tariff reutions, but mainybeause they an invove omesti oiy obetivesony inirety reate to trae.

Yet over the eaes, the mutiatera traing system

has eveoe an inreasingy effetive means ofreguating nontariff measures – by rohibiting themost rotetionist measures, by onstrainingisriminatory an unneessariy traerestritive

measures, by strengthening genera an seifitransareny obigations, an by enouragingtransnationa reguatory ooeration an onvergene– buiing on the GATT’s surrisingy aatabe an“moern” founations. This suggests that the future

trae agena, ike the ast one, wi fous on refiningan imroving eisting isiines, whie taking intoaount hanging ontets as they arise, rather thanstarting anew in entirey unharte waters.




48

Governments use non-tariff measures and

services measures for a growing number of

reasons. This section examines what these

are and how they may affect trade. It also

analyses the choices available togovernments among a variety of policy

instruments, from a theoretical and an

empirical perspective. The section ends

with case studies on non-tariff measures

in the context of the recent financial crisis,

climate change and food safety.

B. An economic

perspective on the useof non-tariff measures




49

B .A NE C ON OMI C P

E R S P E C T I V E ON

T HE U S E OF N ON-T A R I F F ME A S UR E S

Contents 1 Reasons for government intervention an tyes of measures

2 The hoie of NTMs in ight of omesti an internationa onstraints 3

3 Measures affeting trae in servies 73

NTMs in the 21st entury 79

ummary an onusions 7

Some key facts and findings

• Non-tariff measures (NTMs) are often first-best policies to correct

market failures. However, as the same NTM used to pursue a public

policy objective may also be employed to distort international trade,

it can be difficult to distinguish “legitimate” from protectionist

motivations for NTMs.

• Neither the declared aim of a non-tariff measure nor its effect on

trade provides conclusive evidence of whether it is innocuous

from a trade perspective. However, analysing the nature of these

measures – their opaqueness, efficiency and effect on various

groups in society – and their political and economic context can

provide important insights.

• Non-tariff measures, including behind-the-border measures,

may take the place of tariffs and border NTMs that are disciplined

in trade agreements. This raises important questions regarding

the regulation of NTMs at international level.

• Similar issues arise in relation to services measures, which have

become increasingly significant in light of the international

fragmentation of production processes.

• Developments such as the recent financial crisis, current debates

on climate change and heightened concerns about food safety

have led to the increased use of NTMs and services measures in

the 21st century, illustrating the difficulties involved in dealing with

public policy measures and their impact on international trade.




50

Trae agreements are meant to isiine oiiesthat istort trae without onstraining governmentsin their ursuit of other egitimate ubi oiyobetives, suh as onsumer heath an safetyrotetion – even if these haen to affet trae.

Thus, whie ertain nontariff measures NTMs entaitrae osts, these osts an be ustifie for otherreasons. This setion seeks to she ight on theimortane of making this istintion an on how itan be mae, a key question from the ersetive ofthe WTO.

etion .1 introues ifferent tyes of nontariffmeasures an isusses how they are emoye toahieve a range of oiy obetives. In anaysing thewefare an trae effets of NTMs in more etai, itbeomes ear that usuay more than one measurean be use to ursue a given oiy goa, in a more

or ess effiient manner. Whie a seifi NTM anreresent the firstbest oiy to ursue a egitimateubi oiy obet ive, the same measure an aso beuse for rotetionist uroses or reate unneessar ytrae osts. Making this istintion is not aways easyan reresents a maor haenge for traeagreements that target the atter, whie seeking notto interfere with the former.

etion .2 ientifies situations in whihgovernments may be rone to emoy nontariffmeasures for trae ometitiveness reasons, even

if the state oiy rationae is a ifferent one,or imement an ineffiient instrument that mayaffet trae more than neessary to ahieve agiven obetive. rom this anaysis, a number offators reating to the hoie of NTMs anthe setors an oitia ontet in whih theyare aie an he istinguish between “egitimate”an “rotetionist” or eessivey traerestritiveuse. Another reason why governments may turn toNTMs reates to “oiy substitution” – that is, theuse of ertain NTMs when tariffs or other NTMsare effetivey reguate in internationa traeagreements.

The seia harateristis of servies trae, notabythe intangibiity of servies an the ifferent moesof trae, make it neessary to ask, in etion .3, towhat etent the revious anaysis aies to serviesas we.

The enutimate art etion . eamines asestuies on the rise of nontariff measures uringthe reent finania risis, in the ontet ofimate hange an in reation to foo safety.The obetive of this subsetion is to iustratehow reent eveoments have e to an inrease

use of NTMs an to what etent the measurestaken may ose a haenge for internationatrae. inay, the main resuts are summarizein etion ..

1. Reasons for governmentintervention an tyes of measures

a assifying NTMs an government

motivesThere are various ways to ategorize both nontariffmeasures an the reasons why governments use them.The assifiations isusse in this setion rovie ausefu way to onsier many of the issues raise in thisreort.

The trae iterature tyiay istinguishes betweeninterventions aime at inreasing nationa wefare anthose motivate by “oitia eonomy” goas. Theformer inues interventions to orret market faiuresan to eoit a ountry’s or a firm’s market ower by

maniuating the terms of trae an shifting rofits.One key oint is that interventions to eoit marketower ome at the eense of one’s trae artnersbeggarthyneighbour raties, whereas thosefouse on orreting market faiures have traeeffets that are unintene onsequenes of theoiy.

Poitia eonomy motives reflet the resonse ofoitia inumbents to seia interest grous, usuayassume to be organize rouer grous. Athoughthe eonomi iterature generay assumes onsumersare too numerous an iverse to oorinate effetivey,

they an ut effetive ressure on oitiians on issuesthat invove onsumer heath an safety. In aition,ivi soiety an nongovernmenta organizations havebeome owerfu avoates for issues suh as theenvironment. Poitia eonomy motives are ikey toea to oiies that sheter favoure rouers anreue trae flows at the eense of nationa wefare.This suggests a further istintion between nontariffmeasures motivate by ubi oiy obetives anthose motivate by ometitiveness onerns. Thisoes not mean that ubi oiy an ometitivenessonerns annot overa – for eame, whenroteting an infant inustry whose eansion an

inrease nationa wefare. However, there are ikey tobe many more instanes where romoting a omestirouer’s interests omes at the eense of thesoia goo. Lasty, motives an be istinguisheaoring to their intene istributiona effets –seifiay, whether they benefit onsumers orrouers.

o far, the isussion has fouse on the eonomimotives of governments for emoying nontariffmeasures. However, nationa wefare an ubi oiyobetives may embrae far more than urey eonomiissues. Governments are resonsibe for safeguaringnationa seurity. Governments may wish to firmyuho ertain mora an reigious tenets. Where asoiety is mae u of ifferent ethni or reigiousgrous, a high vaue wi be ae uon the




51




reservation of soia ohesion. These goas may beomromise if ertain goos are freey avaiabe inthe ountry, requiring governments to use NTMs so asto restrit their suy via internationa trae.

The assifiation an quantifiation of nontariffmeasures is a ongstaning area of researh a artiaisting inues awin, 197; Lair an Yeats, 199;earorff an tern, 1997; ee an errantino, 2.This researh has rovie the onetua frameworkfor the various NTM atabases – inuing the WTO’s– that wi be reie on etensivey in this reort,eseiay in etion .

oowing taiger 212, nontariff measures an beassifie aoring to whether they are aie at theborer, to eorts e.g. eort taes, quotas or bansan imorts e.g. imort quota, imort ban, or behin

the borer. This atter ategory an be further subivie aoring to whether the NTMs are omestitaes, other harges, an subsiies, or whether theyare reguatory. The istintion between borer anbehintheborer NTMs aears frequenty in theeonomi iterature. In one sense, it is a istintionbase on where the measures are aie. However, inanother sense, it invoves a istintion betweenmeasures aie to foreign goos ony at the boreran those aie equay to omesti an foreigngoos. This raises a key question about behintheborer measures – i.e. whether, intentionay or defacto, they treat omesti an foreign goos ifferenty.

What is ommon about the interventions oetiveyae nontariff measures, irresetive of their

motives, is that they have trae effets either iberaor restritive. ometimes the trae effets are simythe byrout of ursuing a artiuar ubi oiyobetive. Other times, the trae effets are therimary goa. ine governments usuay aim that

their oiies have auabe obetives, eareintentions may offer itte insight into the motivesbehin interventions. Instea, motives an best beeue from the tye of NTM hosen, from the setorto whih it is aie, from its esign animementation, an from its imat – i.e. whetheronsumers or rouers benefit an whether foreigngoos are isriminate against or not.

or the urose of ater anaysis of the trae anwefare effets of nontariff measures, a istintionwi aso be mae between NTMs that are rie,quantity or “quait y” fouse. A rie measure suh as

a subsiy oerates by hanging reative ries whie aquantity measure suh as a quota works by iretyimiting the quantity of some ati vity. Quaity measuressuh as a tehnia barrier to trae measure or asanitary an hytosanitary measure hange somefeatures of a rout or the roess by whih it isroue. This ategorization hes to simify theanaysis of the trae an wefare effets of NTMs byusing eames taken from eah ategory rather thanby eamining ehaustivey a NTMs.

Another imortant theme in the iterature – an in thisreort – is the transareny of nontariff measures.

Athough there is no agree efinition of whatonstitutes a transarent NTM, o .1 isusses howthe issue might be aroahe an onetuaize.

o .1: Defining transparency in non-tariff measures

riteria for assessing the transareny of nontariff measures are not reaiy avaiabe in the trae iterature,so the foowing anaysis raws on severa aers that aress ubi oiy transareny more broay.These inue Geraats 22 whih efines transareny in entra banking an in the onut of monetaryoiy, Wofe 23 whih isusses transareny requirements foun in WTO agreements, oinsWiiamsan Wofe 21 whih eveos what the authors esribe as an “anayti framework” for thinking aboutWTO transareny rovisions an Hebe et a. 29 whih isusses the transareny of the traingenvironment an onues that it eerts an ineenent imat on trae flows.1 None rovie a efinition oftransareny that an be taken “offtheshef” an aie irety to NTMs. However, the aers o roviea number of usefu ieas for aroahing the task of assessing the transareny of NTMs.

irst, at a onetua eve, transareny an be efine as the absene of information asymmetry, a situationwhere oiy makers an reevant eonomi agents have the same information Geraats, 22. Informationasymmetry generates unertainty for the agents with ess information. Those with aess to rivateinformation may try to maniuate the beiefs of others an thereby inirety ater eonomi behaviour. Thus,eonomi effiieny requires information be mae ubiy avaiabe. In the ase of nontariff measures, itmay be imortant to istinguish between ifferent eonomi agents – the rivate setor an othergovernments – beause eah is ikey to be onerne with ifferent asets of information. Governmentsare ikey to want information that aows them to better evauate whether their trae artners are abiing byinternationa ommitments. The rivate setor is ikey to be more onerne with information asymmetrythat hamers its abiity to take avantage of ommeriay rofitabe oortunities.

eony, given the range an iversity of nontariff measures, removing information asymmetry may requireevoting more effort to some measures than others.




52

Any isussion of the motives an imats of nontariff measures nees to take into aount theinreasing fragmentation an offshoring of roution.Unfortunatey, there is very itte iterature about howfragmentation affets government motives to emoyNTMs so what an be sai is rather imite anonetura.

The internationa fragmentation of roution arossmany arts of the wor is we oumente in reentemiria researh. Hanson et a. 2 iustrate theetent of U mutinationas’ trae in intermeiate

inuts between arent firms an their foreign affiiates.Hummes et a. 21 emonstrate the egree ofvertia seiaization among ten O an fouremerging ountries. Kimura an Ano 2 show

the etent of internationa roution/istributionnetworks in ast Asia. Theoretia researh into thefragmentation of roution has aso grown in tanemwith this eaning emiria work see the reentsurvey by awin an RobertNiou, 27.

The eonomi theory of fragmentation ones anKierzkowski, 199; 2 ontens that inreasemarket size makes it rofitabe to sit u the roessof roution an aow seiaization to reue erunit ost.3 This ivision of abour an take ae withina ountry, but if ountries iffer in their omarative

avantages, greater ost savings from seiaizationan be obtaine by offshoring roution. This roessof fragmentation requires firms to be abe to oorinatebetween roution oations an to move arts an

Reguations invoving human heath, foo safety or the environment usuay require seiaize knowegean wi be intrinsiay more ome than an ad valorem tariff. As oinsWiiams an Wofe 21 ut it,traing artners annot see what is going on “behin the borer” without he. This means that mehanismsto ahieve reguatory transareny may have to be esigne or struture ifferenty than other tyes ofnontariff measures given their greater omeity.

Thiry, a more systemi view of transareny is neee whih takes into aount the oiymaking roessas a whoe. One of the key iffiuties is istinguishing whether a nontariff measure is ut in ae beauseof ubi oiy onerns or a esire to rotet omesti rouers. It is muh easier to resove this questionif one has knowege of the eision or oiymaking roess as a whoe, an is not imite to rawinginferenes soey from the NTM’s esign or it s imementation.

ourthy, in this onnetion, it may be ossibe to take the stages of oiymaking ientifie in Geraats22 an aat them to a trae or NTM ontet. The aer istinguishes between ifferent stages of theoiymaking roess – oitia, eonomi, roeura, oiy an oerationa – an makes the oint thattransareny wi nee to ay to eah of these stages an that it may a for ifferent requirements at eahstage.2 In the NTM ontet, oitia transareny refers to oenness about oiy obetives an theimortane assigne to them. ientifi or tehnia transareny means making avaiabe the informationuse as the basis for imementing a measure, inuing the unerying ata, eert oinion an riskassessment. Proeura transareny esribes the way oiy eisions are taken, inuing the soe forubi onsutations an aess to ineenent auiation. It a so inues the ubiation an notifiationof measures an the estabishment of enquiry oints. Oerationa transareny onerns the esign animementation of the NTM. y omaring the transareny of NTMs in this “systemi” way, the whoe oiymaking roess ou be taken into aount, or ust one artiuar stage of it.

ifthy, the aers by Hebe et a. 29 an Wofe 23 assoiate transareny with reitabiity ansimiity. Preitabiity reues the ost stemming from oiy unertainty whie simifiation reues theinformation osts from an overy ome traing environment that may hiner eonomi agents. A “boun”imort tariff is more transarent than an unboun tariff beause the tariff bining reates greaterreitabiity for eorters to that ountry. These aers suggest that reitabiity an simiity areimortant imensions of transareny an rovie another way of omaring the transareny of ifferentnontariff measures. At the oerationa stage for eame, the transareny of an NTM may be uge bywhether traers fin its esign or imementation to be sime an reitabe.

inay, an unstate assumtion in a these aers is that aggregate wefare shou inrease with enhanetransareny. Whie this is ikey to be the ase, not everyone wou neessariy be bet ter off if trae ar tnersbeome more transarent with one another. ome imortometing firms may ose out if, as a resut ofgreater transareny of the home ountry’s nontariff measures, foreign ometitors eort more beause ofthe reution in unertainty. As wi be eaine in etion .2, some oiymakers may have no interest intransareny beause oaqueness aows them to rewar oitia bakers without aying a oitia rie.This may eain why introuing more transareny in NTMs is ikey to be a iffiut unertaking, notneessariy beause of the tehnia haenges invove, but beause there are interests that wi beoose to it.




53




omonents aross nationa borers. This unersoresthe ruia roe of servies, artiuaryteeommuniations an transort, in onnetingfragmente roution boks.

Proution fragmentation has an imat on whygovernments use nontariff measures an how theyinfluene trae. irst, where goba suy hains arerevaent, it is not ossibe to isentange merhanisetrae from servies trae an foreign iret investmentI. This means that NTMs, whih affet merhanisetrae, are aso ikey to have an imat on servies anI flows. onversey, servies an investmentreguations are ikey to imat merhanise trae aswe. eony, whie governments’ usua motives foremoying NTMs remain – i.e. to aress marketfaiures, to eoit market ower or to reson tooitia eonomy ressures – roution

fragmentation makes some motives more ressingthan others. or instane, governments may seeinformation asymmetry as more ritia given thatrouts are now mae from arts an omonentsoming from istant an mutie soures see thease stuy of foo suy hains in etion ..eary, the roe of NTMs in a wor of inreasingyfragmente roution is a fertie area for futureresearh.

b How o nontariff measures ahieveoiy obetives?

The isussion here iustrates how nontariffmeasures an be use to ahieve ubi oiy as weas oitia eonomy obetives. Athough it is not anehaustive isussion of a ossibe governmentmotives for using NTMs, two broaer observations anbe mae. irst, more than one NTM an frequenty beuse to ursue the same oiy obetive. rom the

stanoint of eonomi effiieny, governmentsshou use the NTM that maimizes nationa wefare –i.e. the firstbest NTM see o .2 whih isusseshow this eisionmaking roess is akin to ostbenefit anaysis. eony, NTMs use to ursue

egitimate oiy obetives an aso be use forrotetionist uroses, unerining the iffiuty ofistinguishing “egitimate” from “rotetionist”government motives. This setion begins with severaases of market faiures, ooks at instanes of beggarthyneighbour oiies, touhes on equity motivations,an ens with oitia eonomy eames.

(i) Correcting market failures

Health and safety of consumers and

consumer choice

As isusse in o .1, information asymmetry refersto a situation where one set of agents invove in aneonomi transation or ehange has an informationaavantage over other arties. An eame is the seerof a use ar who has better information about thestate of the ar than the otentia buyer Akerof,197. Another eame is the ob seeker who hasbetter information about his routivity an atituefor work than the otentia emoyer ene, 1973.A thir eame is the ase of a rouer who ses asubstanar rout whih an omromise theheath an safety of unwitting onsumers.

The eistene of information asymmetry an ea to anumber of ineffiienies in the market. In the use areame, sine buyers know that they are at aninformation isavantage they wi ony be wiing to bia ow rie – with the resut that owners of gooquaity use ars o not bother to ut their ars u forsae, an the use ar market ens u being

o .2: Choice of NTMs and cost-benefit analysis

There are a number of methos that governments an foow in hoosing nontariff measures. Trahtman2 rovies a reativey omrehensive isting of these methos e.g. baaning, meansens rationaity,roortionaity. The eonomiay oherent way to think about government intervention an the hoie of

NTMs is in the ontet of a ostbenefit anaysis own an Trahtman, 29. In broa terms, a ostbenefitanaysis invoves auating the net gains to nationa wefare by imementing one measure reative to anaternative. Note that the own an Trahtman aer goes one ste further than this by inuing thehange in the wefare of the trae artner as we beause they are onerne with goba an not ustnationa wefare.

The resumtion is that nontariff measures wi vary in their abiity to ahieve the oiy goa an that theywi aso iffer in their osts. Governments wi therefore nee to evauate the benefit from ahieving a givenoiy obetive e.g. the wefare gain from reuing oution, the ontribution that a artiuar NTM anmake to ahieving the oiy goa, an the ost inurre in aying the NTM. The outome of the ostbenefit anaysis etermines not ony whether government intervention is ae for in the first ae thebenefit must eee the ost but aso rovies a ranking of the NTMs. In artiuar, the metho shou beabe to ientify the firstbest measure – that whih roues the argest ifferentia in benefit over ost. It is

ikey that a ostbenefit anaysis wou be more informationintensive an tehniay haenging to aythan some of the simer methos mentione above. enefits an osts nee to be quantifie an monetaryvaues assigne to them. Informationa an resoure onstraints may eain, at east arty, why somegovernments o not make more etensive use of ostbenefit anaysis in eisionmaking on NTMs.




54

overwheme by owquaity ars, i.e. there is averseseetion. In the obseeking eame, informationasymmetry may ea the ob seeker to eenresoures to “signa” his routivity to the otentiaemoyer e.g. atten a more eensive shoo even

though that eision wi not neessariy inrease hisroutivity. In the ase of the substanar rout,sae of the rout an ause inuries or even fataities.As these eames show, markets wi not neessariyeiver the most effiient outomes, an this faiurerovies a rationae for ubi ation. This eains, foreame, why a wie range of onsumer goos – foo,rugs, vehies, eetria aianes, safety equiment– fae many tyes of requirements, from esign e.g.toys to ingreients e.g. hemias to the roess ofmanufature or roution e.g. asteurization of mikan to erformane e.g. hemets Wor TraeOrganization WTO, 2a. What these measures

are esigne to o is to wee out those routs,whether omesti or foreign, that wi omromise theheath or safety of onsumers.

Information asymmetry is aso reevant to internationatrae. uose that ountries iffer in the safety orquaity of the goos that they roue, with the homeountry seiaizing in highquaity routs an theforeign ountry seiaizing in owquaity ones.Imagine that onsumers in both ountries iffer in theirreferene for quaity, with some wiing to ay morefor highquaity routs, an others unwiing to ay

more. In this senario, onsumers are aso unabe tote the ifferene between highquaity an owquaity routs beause these goos are notistinguishe by origin. Uner these irumstanes,on 19 shows that the ountry with highquaityrouts may ose if it traes with the ountryrouing owquaity routs. This arises beausetrae reues the average quaity of routs so inthe market of the highquaity rouing ountry,whih sis over to affet the eete wefare of aonsumers in the imorting ountry.

The firstbest oiy is abeing to aow onsumers to

istinguish between home highquaity an foreignowquaity routs. onsumers with a taste forhighquaity goos wi urhase home goos anonsumers satisfie with owquaity goos wiurhase foreign goos, resuting in a twoway trae inequiibrium. ah rout wi se for the “right” rie– highquaity goos at higher ries an owquaitygoos at ower ries. The abiity to istinguishbetween home an foreign routs eaves bothountries better off as a resut of trae beause iteans the variety of routs avaiabe to onsumers,an eas to a better math between onsumer tastesan routs. A simiar resut is estabishe in Pienaar2 where requiring foreign goos to be abeeaoring to their ountry of origin gives the onsumera the neessary information, an unambiguousyimroves the wefare of the imorting ountry.

Uner ertain irumstanes, eort subsiies anaso he reue or eiminate information asymmetryagwe an taiger, 199. onsumers in theimorting ountry iffer in their taste for quaity. omeonsumers ike highquaity goos an are wiing to

ay a higher rie for them; others wou rather ay aower rie for the owquaity goo. Unfortunatey, thegrous are unabe to te the ifferene between highquaity an owquaity routs unti they make theurhase, i.e. these are “eeriene goos” Neson,197.

Prouers in the eorting ountry, who make thehighquaity rout, inur a higher ost of routionthan rouers in the imorting ountry, who make theowquaity goo. If both goos iruate in theimorting ountry, onsumers wi be unabe to te theifferene an the rie wi reflet the average quaity

of these goos. At suh a rie, highquaity rouerswi not be abe to eort their goos sine it wi notover their ost of roution. If the highquaity firmsare aie by an eort subsiy, they an se theirgoos at the average rie an sti earn a rofit.Having been introue to the highquaity rout,onsumers referring highquaity goos wi be abeto make reeat urhases, aying a rie that refletsthe quaity of the goo. At this ater stage, the highquaity rouer reeives a rie that overs his ostof roution, an the government an withraw theeort subsiies. onsumers satisfie with owquaitygoos benefit as we sine they an now ientify

these goos an ay a ower rie for them.7

Pollution and the environment

Another tye of market faiure that an ustifygovernment ation is a negative eternaity suh asoution. Negative eternaities arise when an agent’seonomi ativity generates osts to others that theagent oes not fuy absorb. Hene, the sae of hisativity eees the soiay otima amount. In reenteaes, the ubi an oiymakers have beomeinreasingy aware of the environmenta onsequenesof ertain eonomi ativities. Muh of the eonomi

iterature fouses on the use of taes to orretnegative eternaities – the soae Pigouvian ta.Nevertheess, many governments have hosen toursue environmenta obetives using nonriemeasures, suh as erformane stanars, emissionquotas, an manate tehnoogies.

One rawbak of trying to reue oution throughgovernmentmanate tehnoogies is that theinentive to fin ess osty ways to ahieve the sameenvironmenta obetive is remove. Nevertheess,governments may refer these measures foristributiona or ometitive reasons, beause ofunertainty about the osts an benefits of abatement,or to avoi the ost of monitoring an enforementovenberg an Gouer, 22. Regaringistributiona or ometitiveness onerns, for




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eame, governments may be sensitive to the fatthat a oution ta requires firms to ay for eah unitof emission whie an emission quota oes not. Whieboth instruments might ea the firm to urtaiemissions by the same amount, the ta saes the

firm with an aitiona iabiity that it oes not faewith a quota. If oiymakers are unertain about thetrue ost of mitigating environmenta amage, but areertain that assing beyon a thresho eve ofenvironmenta amage wou be atastrohi,quantitybase measures wi be referre to riebase measures.9

ome of the more omiate an ontentiousenvironmenta issues invove rossborereternaities. One tye of rossborer eternaityinvoves ountries whose eonomi ativity outes orreues a ommon resoure, amaging a ountries.

A notabe eame of this is goba warming see theisussion in etion .. Another tye of rossborer eternaity is where the ativity ours in one urisition , but the averse imats are ar ty or fuyfet in another urisition.

rossborer eternaities are often omoune byifferenes in ountries’ inome eves, or institutionaan environmenta aaities. ine aotingenvironmentfrieny roution methos often entaishigher osts, this an ea to isagreements betweenountries about the istribution of the osts anbenefits of orreting the eternaity. A number of

GATT/WTO isutes – tunaohin1 an shrimturte11 – aear to fa within this ategory. Whie suhifferenes make it iffiut for ountries to reah anagreement, markets ou ay a roe in mitigating oreiminating a rossborer eternaity. Assuming thatreibe information about the environmenta osts ofrouing a goo were avaiabe, onsumers might bewiing to ay more for the rout if it was rouewithout ausing environmenta harm. Higher rieswou rovie an inentive for rouers to swith tomore environmentfrieny methos, thereby reuingressure on the environment.

However, routs mae by environmentayfrienyroesses may not be istinguishabe from thosemae by ess environmentayfrieny roesses. Tunaaught by fishing methos whih eave ohinsunharme tastes the same as tuna aught by methosetha to ohins. This introues a seon marketfaiure – information asymmetry see isussion above– to the origina robem of a rossborer eternaity.eauieu an Gaisfor 22 anayse the effets ofattemting to aress these robems through variousnontariff measures – from outright bans to abeing.

Given the eistene of market faiures, oen trae isnot neessariy otima. eening on the strength ofonsumer referenes for the environmentfrienygoo, an outright ban of imorts from ountries thatare the soure of the environmenta eternaity may be

even better than oen trae. The rationae is that a banimroves onsumer onfiene in the routs sinethey know that ony environmentfrieny goos an beso. This eas to an inrease in eman, i .e. a shift inthe eman urve, an to greater onsumer surus.

or the imorting ountry, the rawbak of an imortban is that some onsumers may be inifferent toenvironmentfrieny an environmentunfrienyrouts, an unwiing to ay a remium for theformer. The ban aversey affets them sine it imitstheir hoie to the eensive, environmentfrienygoo.

Whie there are goo reasons to question theavantages of imort bans, there are notabe eamesof routs whose trae the internationa ommunityhas banne for environmenta reasons, inuingenangere seies banne uner the onvention on

Internationa Trae in nangere eies of Wiauna an ora an ozoneeeting substanesbanne uner the Montrea Protoo.12 Of ourse,onsumer onfiene an aso be enhane by aabeing sheme that orrety istinguishes betweengoos mae with itte or no harm to the environmentan those that imose an environmenta ost. ffetiveabeing wou be suerior to a ban sine it imrovesonsumer onfiene without artifiiay restritingimorts. onsumers unwiing to ay a remium for theenvironmentfrieny goo are sti abe to urhasetheir referre owrie environmentayunfrienygoo.

Infant industry protection

In some ases, an agent’s eonomi ativity generatesbenefits for others that the agent oes not fuyature. These “ositive eternaities” reresent animortant ass of market faiure that an ustify ubiintervention sine the sae of ativity is ess than thesoiay otima amount. One eame is infant inustryrotetion.

uose the onitions for suorting an infantinustry eist.13 The home ountry has a highost

inustry that fins it iffiut to omete with foreigngoos, but there are ynami earning effets that areeterna to the firm an benefiia to the ountry. Theeeriene that omesti firms aumuate byrouing the goo wi reue their osts over time.urthermore, these earning effets annot beontaine within the firm but are aso of benefit toother firms in the inustry. This siover effet meansthat a firm oes not fuy internaize the gains from itsearning, an so the roset of ater rofit may not besuffiienty attrative to warrant absorbing ossesuring the initia earning erio. This situationrovies the neessary ustifiation for eteningtemorary government suort to the inustry. Unerthese onitions, the firstbest soution is forgovernments to use a roution subsiy rather than atariff to assist the infant inustry hagwati an




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Ramaswami, 193. It irety targets the soure ofthe market faiure by suorting earning in theomesti inustry without enaizing onsumers with ahigher rie for the rout, the rinia rawbak ofusing a tariff.

Ieay, the suort etene to the infant inustryshou eine as earning takes ae. However,information about the ae of earning may not beknown with ertainty by the oiymaker. Aying afie subsiy rate means that the rotetion eteneto the infant inustry wi be beow the otimum eve atthe start of the eaning erio an too high at the en.Uner these irumstanes, Meitz 2 roosesusing a quota instea of a subsiy, noting that it wiaow the eve of infantinustry rotetion to austautomatiay as the inustry’s osts eine.1 Overtime, the quota wi beome ess istortive as the

omesti inustry’s ometitiveness imroves.

Network ef fects/externalities

ertain routs or servies are more vauabe to abuyer when more onsumers use the same rout orservie. or eame, the greater the number ofsubsribers to a teehone system, the more vauabethat network wi be to otentia subsribers. Likewise,aebook, Twitter or LinkeIn aounts are morevauabe the more “friens”, “foowers”, or rofessionaontats are rawn into these soia networking sites.uh routs or servies are subet to what have

been ae “network effets/eternaities” Katz anhairo, 19.1

Potentiay there is a market faiure assoiate withthese networks. An iniviua eies to oin a networkbeause of the benefits he or she wi obtain, notbeause of the benefits eisting members wi erivefrom him or her oining. As a resut, the size of thenetwork is smaer than the soiay esirabe size. Ifthere are ometing networks, eah one of whih isowne by a ifferent firm, one way the robem ofnetwork size an be resove is by making themomatibe so that ients of one network are onnete

to the ients of a other networks Katz an hairo,19. Given that eah user’s utiity inreases as thesize of the network eans, omatibiity amongnetworks inreases soia wefare.

omatibiity an be ahieve through aotion ofommon stanars. The key question is whether firmshave enough inentives to eveo omatibiitystanars on their own without governmentintervention. One reason to be setia of governmentintervention is that governments are unikey to have asignifiant informationa avantage reative to rivatearties when emerging tehnoogies are onerne,an so annot be resume to know whih stanar isthe otima one Katz an hairo, 199. On the otherhan, beause of the network effets, a rout’somatibiity inreases its vaue to onsumers who wi

then be wiing to ay more for it than for a ometingbut inomatibe rout. There may aso be a marketmeiate effet, as when a omementary goosare arts, serviing, software beomes heaeran more reaiy avaiabe the greater the omatibiity

of markets arre an aoner, 19. ase oneviene from the Unite tates, these inentivesaear to be suffiienty arge to inue a number ofrivate institutions – from umber omanies to LoaArea Networks – to get invove in stanarizationativity arre an aoner, 19. o .3 roviesother eames of the eveoment an use of rivatestanars by inustry grous.

Monopoly power

Imerfet ometition reresents another instane ofmarket faiure whih oasions various forms of

government intervention. Tyiay though, suhmeasures are irete at the behaviour of firms annot at the routs or servies they roue.ometition rues wi revent a firm from ouingwith others, imit its merger an aquisition ativity,an guar against abuse of a ominant osition.

A seifi eame iustrates the roe of nontariffmeasures in aressing this artiuar market faiure.

A sma ountry is ony abe to soure a seifirout from a foreign monooist beause it is notroue omestiay. The imorting government’sobetive is to ean imorts an reue the artifiia

sarity resuting from the foreign monooist’s ontroof the omesti market. Instea of NTMs being useto restrit trae, in this ase NTMs wi be use to tryto ean trae an/or reue the rie harge bythe monooist. The otima oiy is a rie eiing onthe imorte rout set equa to the monooist’smargina ost of roution Heman an Krugman,199. In other wors, the foreign monooist wi beaowe to se to the home ountry ony if it as itsrie at the eiing estabishe by the imortingountry. If the monooist ha been a omesti firm, aometition authority wou have aote a simiaroiy of marginaost riing. More eaborate

eames are isusse in Heman an Krugman199 invoving the use of other NTMs, suh as imortsubsiies an minimum imort voume requirements,to inue foreign firms with market ower to suymore to the imorting ountry.

(ii) Beggar-thy-neighbour policies

A ountry with market ower in internationa trae aninrease nationa wefare by imroving its terms oftrae the ratio of eort to imort ries. If firmsometing in internationa trae have market ower –so that one firm’s ations have an effet on the rofitsof its rivas – then government ations an shiftrofits from the foreign firm to the home firm, resutingin a gain in nationa wefare. In both instanes, nontariff measures an be use by the home ountry to




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oket termsoftrae an rofitshifting gains. Thesewefare gains wi ome at the eense of other

ountries – i.e. these are beggarthyneighbouroiies. Unike the motives isusse before, wherethe trae effets may be unintene onsequenes ofthe oiy, in this instane the trae effets are theintene aim of the oiy. They are the means bywhih the ountry aroriates gains at the eenseof its artner.

Manipulating the terms of trade with NTMs

Muh of the iterature on how the terms of trae anbe shifte by trae oiy has fouse on the roe ofimort tariffs ohnson, 19, Mayer, 191; agwe

an taiger, 1999. An imort tariff reues theeman for imorts, so for a arge ountry this wihave the effet of reuing the wor rie of itsimorts reative to the rie for its eorts. However,

an eort ta an have a simiar effet on a argeountry’s terms of trae sine the reue avaiabiity

of a ountry’s eort goo in wor markets shouea to a rise in it s rie reative to the imort rout.1 It turns out that an eort subsiy an aso shift theterms of trae in favour of the eorting ountryrovie that it has another goo that it eorts anthere are ifferenes in onsumtion atterns betweenthe imorting an eorting ountries eenstra,19.17

If a ountry is not onstraine in its use of thesemeasures, suh as by internationa agreements, theywou be wiey use to maniuate the terms of trae.Reguatory instruments, suh as tehnia barriers to

trae TT an sanitary an hytosanitary Pmeasures, wou be use to orret market faiuresan wou be set at their soiay otima evesagwe an taiger, 21; taiger an ykes, 211.

o .3: Network effects/externalities and private standards

Where network effets/eternaities eist, rivate stanarsetting is a ommon outome. Inee,omatibiity an integration are aramount to eoit suh eternaities. The foowing two eamesiustrate the huge inentive to eveo an imement rivate stanars in inustries haraterize bynetwork eternaities.

One eame is ebusiness. The Internet has beome an inreasingy imortant ommeria marketae inreent eaes, thanks to mass Internet onnetivity, an the eansion of web browsers an interativeweb sites Pant an Ravihanran, 21.

It is reasonabe to assume that the vaue of an ebusiness information system inreases with the number ofeoe, IT routs, an networks interating through it – an in genera, systems of ebusiness thatonstrut goba ommunities of ustomers, suiers an business artners ahieve a higher vaue Pantan Ravihanran, 21. However, in orer to funtion an to rovie ustomers with timey informationabout routs, ebusiness systems nee to be integrate with omanies’ interna systems an suiers’information systems. uh integration an be effetivey ahieve through stanarization ativities hen,23. business stanars aow a seifiation of business obets, ata an roesses invove in webbase ommere. Therefore, their aotion reresents a ste towars omatibiity an interoerabiityamong omanies, generating an enhane vaue for the firms invove an the inustry as a whoe Zhao eta., 27.

etroni ar ayments etroni uns Transfer at Point of ae or “TPO” rovie a seon eameof the inentive to eveo stanars in ontets haraterize by network eternaities Guibourg, 21. Inthe ast eaes, the TPO market has eveoe in many inustriaize ountries, evoving from aerbase instruments to ebit an reit ar ayments. Usuay, these ayments are use for faetofaetransations, an reresent more effiient aternatives to ash as they aow a reution in both osts anrisks reate to suh ayments. Network eternaities are evient in this ontet. The usefuness to thearhoer inreases as the aetane of the ar as a means of ayment grows broaer an the numberof omatibe terminas inreases.

In orer for eetroni ayments to take ae, an for network eternaities to ome to fu reaization, someonitions must ay. omementarities between users nee to be in ae. Inee, the utiity of aniniviua in an TPO market is zero if no retaier aets eetroni ayments. However, the resene ofomementarities is not a whoy suffiient onition. or network eternaities to ay a roe, omatibiityamong routs is aso ruia. The fina transfer is base on an ehange of information to authentiate anauthorize the ayment, an retaiers nee to own a termina that a ows ommuniation with the ustomer’sbank whih in turn authorizes the transfer. This requires a teeommuniations infrastruture that onnetsthe retaier’s termina with both the retaier’s an the ustomer’s bank. Interoerabiity is therefore aramountto eoit network eternaities, an it an be ahieve through ommon rues, oerationa stanars anformats Guibourg, 21.




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However, this resut may not neessariy ho in awor where roution is inreasingy offshore aninternationa trae flows are ominate by intermeiateinuts, many of whih aear to be highy seiaizeto their intene use taiger, 212. etion .2 wi

rovie a more etaie isussion of this resut.

Profit-shifting non-tariff measures

Nontariff measures an aso be use to shift rofitsfrom the foreign to the home ountry. This is mostreevant in imerfety ometitive markets wherefirms have market ower, an an effetivey useNTMs, suh as subsiies, eort taes an TT/Pmeasures, to take market share an rofits away fromforeign rivas.

uose that two firms, the home an foreign firm,

omete in seing to a thir market. ometitionbetween them an take many forms but for theurose of this isussion two tyes of ometitionare eamine – through their hoie of outut ournotometition or through their hoie of rie ertranometition.

Uner ournot ometition, raner an ener19 emonstrate that a government an use eortsubsiies to he the home firm ean outut, therebyforing its foreign riva to ontrat roution anonee market share. The subsiy has the effet ofommitting the omesti firm to a more aggressive

strategy whih in turn inues the foreign firm toroue ess.1 rom the oint of view of the homeountry, even though the subsiy ayment is ust atransfer from the government to the home firm, therofitshifting effet resuts in the firm’s rofit rising bymore than the amount of the subsiy, reating a netgain to the home ountry. Note that the eort subsiyreates a termsoftrae oss for the omesti ountry,but this is more than mae u for by the rofitshiftingeffet of the oiy raner, 199.

If firms omete in ries, aton an Grossman 19show that the otima oiy wi be an eort ta

rather than an eort subsiy. Uner ertranometition, both firms wou ike to harge a higherrie but if ony one firm oes so it wi fae owereort eman. However, a rie hike wou not roveetrimenta to the home firm if its riva foows with arie inrease of its own. oth firms wi earn ositiverofits as a resut. y imosing an eort ta on itsfirm, the home government in effet ommits the homefirm to harge a higher rie for any given rie hosenby the riva. This ersuaes the foreign firm to foowsuit – math the home firm’s higher rie – whihbenefits it an the home firm as we.19

omesti subsiies in the form of researh aneveoment R& subsiies an aso be use to shiftrofits from foreign rivas to omesti firms. This oiyturns out to be otima regaress of whether firms

engage in ertran or ournot ometition. asiay,the R& subsiy rovies an inentive to the homefirm to inrease its R& investments, therebygenerating ostreuing innovation.2 If the foreignfirm is not subsiize in turn by its government, ony a

sma eve of R& sening wi be otima withunfavourabe onsequenes for its abiity to generateostreuing innovation. The home government’ssubsiy fores a ontration in the otima amount ofR& sening by the riva firm, thereby shifting rofitsfrom the foreign firm to the home firm.

Athough suh subsiies ominate isussion in therofitshifting iterature, other nontariff measures,suh as TT/P measures, an ay a simiar roeisher an erra, 2. onsier a situation inwhih home an foreign firms are ometing in thehome market. The home government an imose a

new TT/P measure whih raises both firms’ osts.This measure aso burens onsumers, as both firmstry to ass on the aitiona ost in the form of higherries. esite this, the home government may fin itworthwhie to imose the measure if, as aonsequene, the foreign firm is fore to eit thehome market, eaving the home firm free to earnmonooy rofits, an if the resuting gains outweighthe oss in onsumer surus. The reason that theTT/P measure weighs more heaviy on the foreignfirm is beause it must reorganize roution toonform with two ifferent sets of reguations – onefor routs so in the home market, an the other for

routs estine for the foreign market.

(iii) Equity

Governments are not ony onerne with inreasingnationa inome but aso with istributing inome moreequitaby. This tye of motive ou be har toistinguish from the rotetion for sae motive isussebeow. irstbest oiies for inome reistribution arenot tariffs or nontariff measures. In avane ountries,the fisa system – both on the ta an eeniture sie– is use to ater the istribution of inome. Partiuaryin easteveoe ountries Ls, where fisa

systems are ess eveoe an soia safety nets oftennoneistent, governments aear to use trae oiyinstruments an NTMs in artiuar to ahieve inomeistribution goas.21

Kaenga 212 rovies eviene that imort aneort bans an quota restritions on ommoity traeontinue to make u a signifiant art of NTMs in subaharan Afria. The use of eort restritions by anumber of emerging eonomies when ommoityries sike in 2 was motivate in art to aeviatethe ressure of high foo ries on the mostisavantage Organisation for onomi ooeration an eveoment O, 29a. etion.3 an o .7 rovie other eames of measuresin the servies setor whose unerying motive isequity an inome reistribution.




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(iv) Political economy (protection for sale)

A the motivations isusse above invove inreasingsoia wefare by using nontariff measures to orretmarket faiures or to take avantage of a ountry’s or a

firm’s internationa market ower. However, oitiaeaers may have other motivations beyon the wefareof itizens. or eame, they may een on finaniaontributions from seia interest grous who want asay in trae oiy Grossman an Heman, 199. 22

In these ases, trae rotetion is “for sae” to thehighest bier. If oiies are being influene byseia interest grous, it shou be aarent from thestruture of the rotetion being offere anthe nature of the obbying behin it. This is isussein greater etai in o ..

The origina stuy by Grossman an Heman onyonsiere the use of trae taes – tariffs, imortsubsiies, eort taes an eort subsiies – by“ative” oiymakers uner the influene of seiainterest grous. The subsequent rotetion for saeiterature etens the anaysis to over other nontariffmeasures. Maggi an Roríguezare 2, forinstane, onsier a situation where imorters makeontributions to the oitia inumbent. The interests ofimorters are oose to those of omesti rouerswho benefit from imort restritions. However, ifrotetion is to be given anyway, imorters wi referthat it takes the form of imort quotas rather than tarif fsbeause they wi be abe to obtain the quota rents i.e.the inome generate by imorts within the quota imit.Rather than being motivate by some ubi oiy

obetive, the use of quotas simy reflets the influeneof imorters’ interests on oiymakers. Maggi anRoríguezare oint out that oitia ontributionsmay be mae by foreign eorters as we. This oueain the use of vountary eort restraints VRs

sine the quota rents arue to foreign eorters ratherthan homeountry imorters.

Poitiians ative to seia interests might aso useTT/P measures or ustoms roeures as ameans of transferring rofits to their benefatorsAbeKoh, 21. One of the “styize” finings fromthe “new new” trae theory Meitz , 23; Heman eta., 2; haney, 2 is that ony the mostroutive firms in a ountry are engage in eorts.This styize fat is eaine by firms’ wiey ifferingroutivity “firm heterogeneity” an the eistene offie osts to eorting. These are osts that are

inurre by firms ony one in orer to aess a foreignmarket, suh as market information osts, the ost ofsetting u a istribution system, or the ost ofomying with foreign tehnia reguations. The fieost of eorting turns out to be ritia in eterminingwhih firms wi be abe to aess foreign markets anwhih firms wi fai to o so.

uose that the imorting ountry requires a foreigngoos to omy with its nationa TT/P measures.ine this inreases the fie ost of eorting, essroutive firms annot generate enough revenues toover the higher fie osts of aessing the foreignmarket an therefore eit it. This reues ometitionin the imorting ountry an inreases the market

o .: Is it possible to identify disguised protectionism in NTMs?

As note at the start of this setion, nontariff measures that are use to ahieve ubi oiy goas mayaso be use to ursue iegitimate ens. This makes it iffiut to asertain what motivates a government toay a ar tiuar NTM. Wi thout unerestimating the haenge this oses, the eonomi iterature ientifiesa number of benhmarks that ou be use to answer the question. To omement this anaysis, a set ofega toos to ientify isguise rotetionism base on WTO urisruene is isusse in etion .3.

The “rotetion for sae” iterature reits that organize or obbying setors wou be favoure. Within

organize grous, the imortometing members tyiay obtain rotetion whie eorting membersreeive an eort subsiy. Grossman an Heman aso reit that unorganize setors wi be enaize,with imortometing rouers faing an imort subsiy an eorting setors enaize with an eortta.23 etors with ow eastiities of imort eman eort suy wi enoy higher eves of rotetion orsuort. The rationae for this is that the government wi refer to raise ontributions from those setorswhere inrease rotetion reates the east osses to soiety.

inay, setors where imort enetration is ow wi enoy greater rotetion.2 This is beause in setorswith arge omesti outut, rouers have muh to gain from an inrease in the omesti rie, whie theeonomy has reativey itte to ose from rotetion when the voume of imorts is ow. Using U ata, anumber of emiria aers have been abe to onfirm that the observe attern of rotetion an obbying isonsistent with the reitions of the rotetion for sae moe Goberg an Maggi, 1999; Gawane ananyoahyay, 2; ahini et a. , 2; ombarini, 2.

The ak of transareny of a measure may aso be a tetae sign of urking rotetionism. Poitiainumbents have an interest in amouflaging the transfer of inome to seia interests. The ess transarentthe measures, the greater eeway inumbents have to serve their rinias.




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share an rofits of omesti firms. A governmentative to omesti rouers an use omianewith TT/P measures as a way of inreasing therofits of these rouers.

In the rotetion for sae iterature, it is assume thatnontariff measures are more wiey use nowbeause trae agreements an mutiatera ruesinreasingy onstrain the use of tariffs. However, thismay not be the ony reason why NTMs are use byoitia inumbents. As is eaine in etion .2,oitia eaers might refer to use TT/Pmeasures beause their greater oaqueness reuesthe eetora risk ose by their use oate an Morris,199; Kono, 2; turm, 2.

What are the trae an wefare effetsof NTMs?

The revious isussion estabishe that, aart fromoitia eonomy motives, governments use nontariffmeasures to inrease nationa wefare. This means thattrae an wefare effets nee not move in the sameiretion. The aiation of an NTM may reue traean yet inrease the wefare of the NTMayingountry. The effets argey een on the nature of themarket faiure, the tye of NTM use, an other marketseifi irumstanes. Nevertheess, the trae effetsof the seifi measures are highy reevant.

The trae effets of nontariff measures an be arge

in a wor of eeening eonomi integration anshae by ome rossborer roution in theform of goba suy hains. Using NTMs to ursuebeggarthyneighbour oiies – to maniuate aountry’s terms of trae or to stea rofits from foreignenterrises – is a game that an be aye by everyountry. A government temte to emoy suhmeasures, but onerne about nationa wefare, winee to worry about the ossibiity of simiar beggarthyneighbour NTMs being use against it by traeartners. The magnitue of the ossibe wefare ossesfrom others’ oortunisti ations is inke with thesize of the trae effets. This issue, an the roe thatinternationa ooeration an ay in aressing it, isthe fous of etion .

ven in the absene of eiit beggarthyneighbouroiies, an where nontariff measures are onytargete at genuine market faiures, the measures maybe oaque, oory esigne, or bay imemente,thus inreasing unertainty an trae osts. Anyountry – whether the home ountry or its traingartner – an be guit y of these faiings, whih wi enu reuing trae an the otentia wefare gains thatthe NTMs were intene to ahieve in the first ae.One area that iustrates the otentia robem isonformity assessment.2

onformity assessment roeures are tehniaroeures — suh as testing, verifiation, insetion

an ertifiation — whih onfirm that routs fufithe requirements ai own in reguations anstanars. Generay, eorters bear the ost, if any,of these roeures. Ieay, attestation of onformityshou be arrie out ony one in the most ost

effetive manner an, subsequenty, be reognizeeverywhere. However, in many instanes, authoritiesin the imorting ountry are not wiing to rey onforeign manufaturers’ own earations orreorts/ertifiations by thir arties that the requireseifiations have been met. Whatever the TT/Pmeasure may be, assurane of omiane wi besought from omesti boies in the imorting ountry.This wi unneessariy raise trae osts if foreignonformity assessment boies areay ossess theometene to assure them that routs meet therequirements of the imorting ountry. ee etion.2 an etion .2 for eviene about onformity

assessment roeures an estimates of the osts.

ine it is imossibe to anayse the trae an wefareeffet of every nontariff measure, the foowingsetion fouses on eames regaring quantity, riean quaity measures.

(i) Quantity measures

The assi eame of a quantitative restrition is animort quota whih fies trae flows at a given eve.ine the trae imat of a quota is unambiguous, theinteresting issue is its effets on other eonomi

variabes. etion .1b highighte instanes whenan imort quota was an instrument use to transferinome quota rent to seia interest grous anwhen a government might use an imort quota toahieve a ubi oiy goa.

If the eve of infant inustry rotetion nees toeine over time, an oiymakers ak reiabeinformation about the require oiy setting, a quotamay serve better than a subsiy Meitz, 2. If thesafety of foreign routs annot be assure anthere is no way for onsumers to istinguish betweensafe an unsafe routs, an imort ban might be

warrante. However, a arefu onsieration of theseatter instanes suggests that etenuatingirumstanes in the form of high information ostswere require to ustify the use of imort quotas. Inamost a other irumstanes, other nontariffmeasures wou be referabe to quotas. or eame,in the ase of infant inustry rotetion, a subsiy issuerior to an imort quota. Likewise, TT/Pmeasures or abeing shemes work better than a banin aressing a but the most etreme forms ofinformation asymmetry. The foowing isussionaresses other issues reate to the effets of aquota.

In rinie, it is ossibe to auate an ad valorem tariff rate that, if aie in ae of a quota, wi havethe same trae effet . ven though imort eves wou




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be ientia, there are ritia ifferenes betweentariffs an quotas that have an imortant bearing onwefare. If eman eans beause of inome orouation growth, for eame, imorts wi growuner a tariff but not uner a quota. A quota aso

generates inome quota rent for imorters whereastariffs generate revenues for government. In aition,the eistene of quota rent an ea to an unheathystrugge among interest grous to aquire these rents,a behaviour known as “rentseeking” Krueger, 197,whih an either be ega or iega e.g. taking the formof bribery or orrution of offiias. ine ometinggrous een resoures to ature the quota rent,rentseeking as to the wefare osses orineffiienies uner quantitative restrition that o noteist uner tariffs.

If omesti rouers have market ower, a quota aso

gives them greater soe to restrit imorts than atariff hagwati, 19. Whie tota imorts remain thesame as uner a tariff, omesti rouers are abe toharge onsumers a rie greater than the wor rieus the tariff equivaent of the quota. This effet isemonstrate most eary in the ase of a monooy.Uner a tariff, the omesti monooist annot hargeany rie above the wor rie us the tariff withoutimorts flooing in. However, a quota insuates theomesti market from trae one a given thresho ofimorts is reahe, aowing the monooist to hargethe monooy rie beause there is no offsettinginflow of imorts.

The ase where the imortometing inustry is maeu of an oigooy i.e. a market ominate by a smanumber of seers is more omiate. If theoigooists omete with one another, it wi sti be truethat a quota gives the omesti firms greater soe toeerise market ower. The omesti rie ens ubeing above the wor rie us the tariff equivaent ofthe quota but ess than the monooy rie Hemanan Krugman, 199.2 If the oigooists oue, itturns out araoiay that the arte may harge aower rie uner a quota than uner a tarif f Rotembergan aoner, 19 beause artes are subet to

efetion by members. The higher the rie harge bythe arte, the greater the temtation for any singemember to heat by seing more than its aotte shareof tota outut. This oortunisti behaviour is rationafor a arte member even if it risks breaking u thearte, so ong as the aitiona rofit mae fromheating is greater than the resent vaue of thereution in future rofits resuting from the arte’soase.27 Given the ossibiity of a breakown of thearte an the ower rofits it imies, arte membersmay hoose to harge a ower rie whih is ust enoughto revent efetions.

(ii) Price measures

In etion .1b, severa eames of rie measuresa omesti ta, a roution subsiy, an an eort

subsiy were eamine, as we as their use inaressing market faiures suh as eternaities aninformation asymmetry an in shifting terms of traean rofits.

ine eternaities invove a faiure to inororate thebenefit or harm ause by a erta in eonomi ativityinto market ries, rie measures shou be thereferre too to aress this tye of market faiure.uh measures an resut in either an eansion orontration of trae flows. If there is a egitimate asefor infant inustry rotetion, for eame, a routionsubsiy reues imorts but aso imroves eonomieffiieny by giving omesti firms time to aumuateeeriene, whose earning in turn benefits theinustry as a whoe. In effet, there is “too muh” traesine the market fais to rie in omesti firms’aaity to earn an benefit other firms in the inustry.

A ifferent attern wi resut if a Pigouvian ta isaie to orret oution at home an the omestiinustry is imortometing. omesti oututeees the soiay otima amount an “too itte”trae is being generate beause the market fais torie in the environmenta harm reate by omestirouers. In this ase, the Pigouvian ta resuts inboth the imorts an the wefare of the imortingountry rising.

y its nature, an eort subsiy is intene to inreasethe subsiizing ountry’s trae. Leaving asie theeame isusse by eenstra 19, if markets are

erfety ometitive, an eort subsiy moves theterms of trae against the subsiizing ountry anreues its wefare. Trae an wefare therefore movein oosite iretions. esite the oss in soiawefare, this may we be the hosen trae oiy ifoiymakers are behoen to rouer grous. Asnote above, one of the reitions of the rotetionfor sae iterature is that organize grous in the eortsetor wi be suorte with eort subsiies. Ifmarkets are oigooisti, an firms omete inquantity, an eort subsiy wi move rofits to thesubsiizing ountry an inrease its wefare. In thisase, both trae an wefare move in the same

iretion. If firms omete in rie, an eort ta wibe require to shift rofits from the foreign to thehome firm. ine an eort ta reues trae, traean wefare of the ountry aying the nontariffmeasure move in oosite iretions.

Athough we o not normay think of rie measureswhen onfronte with robems of informationasymmetry, we saw an eame of how an eortsubsiy ou be use to overome that market faiurein etion .1b. Unerta inty in the imort ing ountryabout the quaity of foreign goos ats ike a marketbarrier. The eort subsiy aows the foreignrouer with the highquaity goo to introue itsrout to onsumers in the imorting ountry byseing at a ower rie. If enough onsumers therehave a taste for the highquaity goo, trae eansion




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wi be oue with a wefare gain for the imortingountry.

(iii) Quality measures

As eaine above, a quaity measure wi requirehanges to the tehnia features of imorte routswhih an be either an obstae to or a atayst fortrae. Requiring eorters to omy with the imortingountry’s TT/P measures an inrease trae ostsan iminish their eort rosets. On the other han,if omiane with the TT/P measure resovesunertainty about the quait y or safety of the imorterout, greater onsumer onfiene an inreasethe eman for the item an inrease trae. The traean wefare effets of a quaity measure een onwhether it aresses genuine market faiures. If themeasure is aie ony to rotet omesti rouers,

both trae an wefare in the imorting ountryerease. If, on the other han, the measure orretsan eisting market faiure, wefare is ikey to inreasewith ambiguous effets on trae.

Take the etreme ase where there are no marketfaiures but where the imorting ountry requires aimorte routs to omy with a newy introueTT/P measure.2 It is ossibe to istinguish twotyes of trae osts that wou be inrease by therequirement to omy with the imorting ountry’sreguation. omiane an inrease the variabe ostof eorting, with eah unit of eort inurring anaitiona ost. Aternativey, omiane an requirethe eorting firm to revam its roution roess orugrae its tehnoogy. In this ase, irresetive ofthe voume of eorts, the firm wi inur a fieamount of eeniture if it wants to aess the foreignmarket.

An inrease in either fie or variabe osts wi havetwo effets. irst, it wi erease the voume ofeorts of those firms who ontinue to serve theeort market. This is sometimes referre to as theintensive margin of trae. eony, the east

effiient eorters wi no onger be abe to overtheir fie osts of eorting an so wou be foreto quit eorting atogether, sometimes referre toas the etensive margin of trae.29 Where TT/Pmeasures are imose in the absene of a marketfaiure, soia wefare wi fa in the imortingountry. onsumers in the imorting ountry ose outboth beause the variety of goos is reue, assome eorters eit the market, an beause riesrise as the voume of trae eines. This is not tosay that there wi be no winners in the imortingountry. omesti firms stan to gain beause thewithrawa of some eorters an ower saes from

remaining eorters reues ometition in thehome market.

However, suose that there is a genuine marketfaiure invoving information asymmetry. onsumers inthe imorting ountry are unertain about the safety ofthe foreign goo. irms in the eorting ountry maybe newomers to goba trae an have itte or no

reutation to bui on. oreign rouers know if theirrout is safe or not, but onsumers in the imortingountry have no reason to trust their aims. Unerthese irumstanes, there may sti be eman for theforeign rout, but it is ikey to be ow. Requiringforeign routs to omy wi th the imorting ountry’sTT/P measures an resove this unertainty in themin of onsumers. omiane, however, as to theeorting firms’ ost of roution.

Uner these onitions, the reguation wi have twooosing effets on trae see o .. The nee toonform to the new reguation raises the ost of the

imorte goo whih wi ten to ower the voume oftrae. However, enhane onsumer onfiene in thesafety of the foreign rout wi inrease eman forit. Whie it is ossibe that the inrease omianeosts wi fore some eorters to eit the market,others wi use their omiane with the reguation asa ometitive avantage an inrease their marketshare. In the ontet of foo safety reguations, forinstane, affee an Henson 2 note that morestringent P measures in rih imorting ountrieshave ifferent imats on the ometitive osition ofeveoing ountries, eosing the weaknesses ofsome rouers but aentuating the uneryingsuyhain strengths of others.

urthermore, some ountries use highquaity ansafety reguations to suessfuy osition themsevesin goba markets. Like trae, the effet on wefare isambiguous an eens on the reative strengths ofthe fores ating on onsumers an omestirouers. The inrease ost inurre by foreigneorters to omy with the measure shou inreaseoutut an revenues for omesti rouers. oronsumers, there are two oosing effets – a higherrie for the rout whih nees to be weighe

against the imrovement in the rout’s safety orquaity.

inay, whie o . seems to suggest that aninrease erease in trae eas to an inreaseerease in wefare, this oes not neessariy houner more genera onitions. This is shown in isieran Marette 21 for eame, where esite areution in trae, wefare imroves when theaiation of a TT/P measure orrets an eistingmarket imerfetion. This resut is onsistent with theargument that sometimes the averse trae effet ofa nontariff measure is a byrout of ursuing a

egitimate ubi oiy goa.




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2. The hoie of NTMs in ightof omesti an internationaonstraints

In the revious subsetion it was shown that in manyinstanes, nontariff measures, even though they affet

trae, are firstbest oiies to aress a egitimateubi oiy obetive, suh as onsumer heath ansafety rotetion. However, the same measures anaso be emoye in a way that istorts internationatrae. In orer to eie in suh ases whether an NTMis innouous, it is usefu to etermine whether themeasure is ikey to be ursue for ometitivenessreasons rather than the state ubi oiy rationae orwhether it may affet trae more than is neessary toahieve its oiy aim.3 etion .2a eores a rangeof senarios in the omesti oitia an eonomiontet in whih governments may be inine to misuseNTMs in this manner. etion .2b onsiers how far

subotima oiy hoies reflet governmentimoseonstraints on aternative otions. The question ofossibe “oiy substitution” may arise wheninternationa trae agreements imit the use of tariffs

an ertain tyes of NTMs but reguate other, esseffiient otions ess effetivey.

a Use of NTMs an omesti oiyonsierations

An imortant reason why governments may hoose to

ursue trae oiy obetives by aying nontariffmeasures assoiate with other ubi oiy goas, or,more generay, may not hoose the most effiientmeasure for this urose reates to the ak oftransareny of ertain NTMs regaring their utimateeffet an urose. This “oaqueness” may make suhmeasures more attrative for oitiay motivateinterventions where benefiiaries an the size of theeffets are not easiy ientifie. Other eanations forsuh oiy hoies emhasize institutiona onstraintsthat entie oitiians to hoose NTMs with ertainharateristis even if these measures are eonomiaywastefu omare with aternative means.

The fat that some NTMs entai a fie rather thanvariabe ost is another fator that may eain why agovernment subet to ressure from artiuar grous

o .: Effect of TBT/SPS measures on trade and welfare

Assume that a ountry oes not roue the goo X an meets a its onsumtion through imorts. Theseimorte goos iffer wiey in quaity an onsumers are unabe to te them aart. eause of thisunertainty, eman is ow given by the ine in igures .1a an b an rie is equa to OW. Imortsare equa to OA. The government of the imorting ountry requires foreign rouers to omy with a quaityassurane rogramme; otherwise their goos wi not be aowe to be so in the ountry. omiane raisesthe osts of foreign rouers so that the rie they harge rises from OW to OW’. However, onsumers arenow assure that ony highquaity routs are being so in the market whih eas to a shift in theireman to ’. One ossibe outome is that tota imorts rise to OA’ in site of the higher ost of imortegoos see igure .1a. ome onsumer surus is ost, given by the area abee WW’, as aonsequene of the ost of omiane. However, the inrease onfiene in the higherquaity imortsresuts in a gain equa to the area abee . Overa, there has been an inrease in onsumer wefare soin this ase both soieta wefare an trae inrease at the same time. Another ossibe outome invovesimorts eining see igure .1b. The inrease in onsumer onfiene is not suffiient to overome thehigher ost of omiane. In this seon eame, both trae faing from OA to OA’ an soieta wefareeine the oss of WW’ outweighs the gain of .

igure .1a: Effect of TBT/SPS measures

on trade and welfare: both increase

O A A’ Imports

Market for X

D’D

WW’

E C

F

B

Price

igure .1b: Effect of TBT/SPS measures on

trade and welfare: both decrease

O AA’ Imports

Market for X

D’D

W

W’E

C

F

B

Price




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may favour NTMs over tariff rotetion. inay, theeistene of market ower in a ontet of offshoringan the ossibiity of etrating rofits from eortersmay eain why trae onerns an ea both wefarean oitiay oriente governments to tamer with

omesti oiies rather than borer oiies aone.ah of these eanations is isusse in turn.31

(i) Transparency

Athough it has been argue that in ometitiveoitia systems, oitiians who favour seifiinterest grous in an ineffiient manner wou be voteout of offie tiger, 1971, the oitia eonomyiterature has inreasingy ai attention to the form ofgovernment intervention. One branh of the iteratureresumes that itizens are oory informe as to theeffets of various oiies an the etent to whih

ifferent oitiians may be reetive to obbying. It isnot unreaisti to assume that oitiians have betterinformation than itizens about whether the onitionsfor a wefareimroving oiy intervention are atuaysatisfie.32 In aition, it may be true that itizensremain unsure after a oiy is imemente whetherthe government has ate in the nationa interest orsimy atere to organize interests.

In artiuar, as Tuok 193 observes, oiies maybe hosen that benefit organize interest grous an,at the same time, are ustifiabe on other wieyaete grouns, suh as environmenta rotetion,

an, hene, may affet ositivey the government’sreutation with the ubi at arge. This mismath ininformation between itizens an the governmentabout both oiies an oitiians’ motivations anea to the imementation of “ineffiient ‘sneaky’methos of reistribution over more transarenteffiient methos” oate an Morris 199: 1212,even when the atter are avaiabe.

In the fie of trae oiy, nontarif f measures may be ameans to inrease the inome of rouer obbies whieoneaing the assoiate osts an/or the truebenefits of the aege oiy obetive e.g. heath,

environment to the ubi at arge.33 Rather than tariffsthat are straightforwar in their rie imat an ost toonsumers, an “oaque” NTM, suh as an environmentareguation, may sheter an imortometing setorfrom foreign ometition an, at the same time, beereive as being in the ubi interest, even though aroer ostbenefit anaysis may not show a net wefaregain. Unertainty about the ustifiation for, an imatof, ifferent oiies annot eain on its own the useof oaque nontariff measures, as ometition amongoitiians wou aow voters to santion thoseoitiians that ursue ess effiient oiies.

However, this hanges when the ossibiity of“government faiures” is taken into aount. oate anMorris 199 esribe a situation where ifferent“tyes” of oitiians are ometing for offie an voters

are unsure as to the true nature of oitiians’ intentions.In suh a ase, reutation matters. “a” oitiians, i.e.those who wish to inrease the inome reeive byseia interest grous at the eense of the generaubi, may have an inentive to imement a “ubi”

oiy that inirety benefits the referre interestgrou, even though it is not warrante on grouns ofnationa wefare, beause oen favouritism to ertaingrous wou entai a greater reutationa amage.3

In other wors, by inreasing the inome of seiainterest grous through “oaque” rather than iretmeans, these oitiians imit the negative reutationaimat. This is beause voters annot be sure that agiven ubi oiy is being misuse by “ba” oitiians,as “goo” oitiians wou ursue the same oiy,abeit ony if it resute in an overa net wefare gain.As note above, this resuoses that itizens are

unabe to etermine the overa osts/benefits of theubi oiy in question with any egree of onfieneboth before an after it is imemente. This is aausibe assumtion for oiy eisions in manyareas oate an Morris, 199.3

The authors seifiay ite the eame of temoraryinfant inustry roution subsiies ursue toenourage earning by oing. Whether these subsiiesbenefit the ubi or not utimatey eens on theamount of earning by oing they engener, an it wibe iffiut for itizens to verify whether suh subsiieswere in their interest. turm 2 ites a number of

reent trae isutes over environmenta or heathreguations to onstrut a simiar moe, in whihunertainty about the otima eve of reguation aowsoitiians to rovie isguise rotetion to the oainustry an, hene, to imit ossibe negativeonsequenes in future eetions.3 Like oate anMorris 199, turm 2 haraterizes suh “greenrotetionism” i.e. the unwarrante imementation ofa rout reguation in view of the imiteenvironmenta risk as a oitia faiure, as referabeinstruments from a wefare ersetive are avaiabe –in this ase, iret subsiies to oa rouers.However, these are not hosen by “ba” oitiians

owing to their otentiay negative imat on theoitiians’ reeetion rosets.

In an interesting etension to the oate an Morris199 setu, turm 2 aso onsiers the oitiaonitions in the eorting ountry. It is assume thatthe foreign ountry has a omarative avantage in therout in question an that it wou be more osty forforeign rouers to omy with an environmentareguation than for omesti rouers. Poitiians inthe eorting ountry both “goo”, i.e. soey soiawefareoriente, an “ba” wou therefore oosethe rout reguation for its negative imat on theountry’s terms of trae. However, ue to the sameoitia faiure esribe above, “ba” foreign oitiianswou oose omiane with a rout reguationeven if the environmenta risk was suffiienty high to




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affet wefare of onsumers in their own ountry. Inother wors, athough aherene to the environmentareguation wou inrease wefare in the eortingountry as we, ba oitiians wou ontinue tooose it to the benefit of their onstitueny in the

eort setor, a situation the author as “environmentauming”.

A situation where oitiians in the imorting ountryimement the rout reguation, whie oitiians inthe eorting ountry o not i.e. a otentia faeoffon the trae imat of environmenta oiy, an haveimiations for their reutations in any one of the twoountries. Whie voters may be unabe to istinguishwhether the foreign environmenta oiy is too a orthe omesti reguation too high, they know that suhisagreement over the aroriate environmentaoiy imies that at east one of the two inumbent

governments is of the “ba” tye, i.e. rone to influenefrom rouer obbies.

In other wors, the “oitiian who is istorting theenvironmenta oiy … imoses a negative reutationaeternaity on the other inumbent” turm 2: 7,an, by imiation, isagreement over the aroriateoiy with a resetabe oitiian in another ountryan entai a reutationa amage for a omestiinumbent. In ratie, this imies that transarenyan the free flow of information on oiies an oitiaroesses aross ountries an he to onstrain

seia interestoriente oiy hoies.37

etion isusses further the rationaes for ooeration ongovernment reguations, for eame in the fies ofP measures an TT, an other tyes of NTMs anhighights the imortane of transareny.

(ii) Institutional constraints

Institutiona onstraints an make eonomiay esseffiient nontariff measures better for the interests ofoitiians or soia grous that ho oitia ower.irst, governments may be imite in their abiity toiret benefits to imortant onstituents. They may

ak the information neessary to target resourestowars their suorters, or the reibiity to maintainthose oiies, without an otherwise ineffiient nontariff measure.

eony, if the ubi eets a new government, theinterest grous that suort the inumbent may oseinfluene. Inonsisteny robems between thegovernment an it s suorters ea oitiians to try toenat oiies that are iffiut to reverse. ertainNTMs may be ess eose to the wins of oitiahange. inay, government oiy is not a “monoith”,but rather reflets the interests of arohiaeartments, bureaurats an egisators. Intragovernmenta onflit an reate fritions that ea tothe imementation of ineffiient NTMs favouring oneartiuar interest over another.

Targeting political supporters

ome nontariff measures that are omarativeyineffiient, suh as a marketistorting reguation, anhe the government to target oiies towars their

favoure onstitueny. onretey, a government mayrefer a oiy that is ess effiient if its outome is morereitabe. In orer to iustrate why suh istortionaryoiies ersist, Mithe an Moro 2 esribe aase in whih removing an ineffiient trae measurereates winners an osers in soiety.3 The authorsresume that the NTM in question is “informationay”effiient, as omensating those that wou ose fromtrae oening requires knowing the etent to whihforeign market ometition atuay auses the harm,whie keeing the NTM in ae requires no suhaitiona knowege. It is assume that informationabout atua osses is rivate, i.e. “osers” from trae

oening have the inentive to overreort their osses.

If the government worries about eessive seningon omensation oiy, it may refer to sustain theNTM rather than make eisions about how muh toomensate.39 Here, a key assumtion is that theeffets of an NTM are easier to verify than the effetsof trae oening. This argument is ess ausibe if theosts of overomensation are ow or the governmentis equay informe or equay ignorant about theeffets of an NTM omare with a more effiientreistributive oiy.

Aemogu an Robinson 21 aress a simiarrobem in the foowing eame. If farmers hosignifiant oitia sway, the government may onsierroviing either a umsum transfer i.e. inomesuort or rie suort in orer to maintain favourwith this grou. Prie suort reresents a ess effiientinstrument beause of its effets on rout markets,an from a nationa wefare ersetive, the governmentshou refer a umsum transfer. However, esite itsnegative effets on onsumers an trae, governmentsmay refer rie suort, whih effiienty targets thosewho are genuiney farmers in the shortrun, as farmoutut is a rerequisite for reeiving the subsiy.

onversey, umsum ayments might go to a argernumber of benefiiaries who merey aim or reten tobe farmers tiger, 1971.

In aition, Aemogu an Robinson 21 highightthat rie suort inreases the returns to farmingan, in the ong run, enourages more entry into farmativities, whih further entrenhes farmers’ oitiaower. Hene, for the government the istortiveeffets of the rie suort oiy are otentiayoutweighe by the benefits of soiifying the oitiaower of its favoure onstitueny.

Policy reversals

In ometitive oitia systems, governments in owerhange, whih an ea to oiy reversas. rom the




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ersetive of an interest grou, reativey more effiientoiy measures suh as a onetime subsiy or a tariffmay have the isavantage of being subet to review bynew egisatures or other eete offiias. y ontrast,ertain nontariff measures, suh as rout reguations,

may be efine an imemente by reguatory ageniesunaffete by oitia hange an may not be subetto a reguar renewa roess. Rubin 197 notes thatsuh ongive but ineffiient oiies an benefitoitiians by inreasing interest grou suort.

Poitiians who are unsure about their own reeetionrosets reeive ess from obbyists for a shortterm,reversibe oiy. However, oitiians may nonetheessreeive benefits from seia interests if they ut inae measures, suh as rout reguations an thereate bureaurati aaratus that ast beyon theireete areers. Ineffiient NTMs whih ak reguar

oversight aso a uon fewer resoures to influenethe oitia roess an, thus, are ess eensive forobbyists with suffiienty ongterm horizons.

Intra-governmental conflict

ven if egisators o have reguar oversight ofreguatory oiy measures, the bargaining neessaryto ass egisation an istort oiy eisions. ahegisator must eie how to aoate resourestowars oiies that benefit the whoe ountry anthose that rimariy benefit their oa onstitueny.Poitiians may be wiing to ass a oiy of nationa

interest ony if, for eame, a subsiy is given to aninustry oate in their home istrit. As a egisatorsmay nee to ater to seia interests, ineffiientoiies an roiferate Weingast et a., 191.1

urther ineffiienies an arise if eah egisatorreresents a number of onstituents with onflitinginterests. iit et a. 1997 eveo a moe in whihinterest grous sen resoures on obbying forgovernment oiy. As with the farming ase above,umsum ash transfer oiies by the governmentwou be more effiient from a wefare ersetive,but the authors emonstrate that ometition between

iniviua interest grous for more transfers an eato an ineffiient aoation of resoures to obbying.This an eain why the interest grous may seek toagree on a omarativey ess effiient nontariffmeasure that may not require them to obby. Whiesuh an NTM reues overa effiieny, it utimateyhannes more resoures to the grous.

The oversight robem aso arises beause of a ak ofoorination within governments an aross ageniesthat roue an reguate nontariff measures. eauseageny urisition is often aoate aoring to afuntion, a given kin of NTM an be the resonsibiityof a number of overaing eartments or ommitteeswithin a government. ffiient oiymaking requiresthe ontribution an ooeration of a number ofagenies with ifferent institutiona interests, but these

agenies may not vaue the overa oiy goa as muhas a arohia interest. As a resut, intraeartmentmisommuniation or ometition an roueersistenty ineffiient oiies. This imies thatreforming NTMs that invove a range of omesti an

ossiby subnationa reguatory agenies may requirebroaer attention to the otentia bureaurati fritionsthat revent ooeration Guotty, 211.

(iii) Firm preferences for trade measuresinducing fixed costs

Reent eonomi researh on the iverse nature offirms within a artiuar setor in terms of routivityan size has e to another rationae why traerotetion may ome in the form of “behintheborer” nontariff measures rather than borerrotetion. A range of NTMs, suh as TT/P

measures, have an imortant fie ost omonent, asosty roution austments have to be mae, buter unit osts subsequenty eine as more outut isso in the resetive market.2

Owing to routivity an size ifferenes among firms,fie ost inreases affet firms ifferenty, unikevariabe evies that raise osts for every firm by the sameerentage.3 Hene, athough a tehnia routreguation affets both omesti an foreign firms, thefie osts it entais reresent a higher buren forsmaer an ess routive firms in both ountries. As aonsequene, the east effiient firms wi ease to be

ometitive an eit the market, whie the moreroutive an arger firms both omestiay an abroawi see their rofits an market shares inrease.Utimatey, behintheborer nontariff measures of thissort ony benefit the ountry introuing the measure asa whoe if the ratio of very effiient to very ineffiientfirms is arger at home than in the eorting ountryRebeyro an Vauay, 29; AbeKoh, 21. Thisis in ontrast to borer measures, whih aways enaizeforeign firms to the benefit of omesti rouers.

Uner what irumstanes, then, wou a behintheborer nontariff measure rather than borerrotetion be introue? Of ourse, ike borermeasures, istortionary behintheborer measuresmay aso have a negative imat on onsumer wefare.However, as isusse in the revious subsetions, aoitiayoriente government may yie to obbyressure from omesti rouers. Assuming that onythe argest an most effiient firms have the means toobby the government, they may gain more from theintroution of a behintheborer NTM at theeense of sma, ess routive rouers at homeeven if some of the gains aso go to more routiveometitors abroa than from borer rotetion thatshies a omesti firms inuing those that o notobby from foreign ometition.

Lobbying for a more emaning rout reguation ismore ikey the ess the government is onerne




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about soia wefare an the fewer foreign firms areative in the omesti market. The reason for the atteris that when trae is areay ow e.g. ue to argeyineffiient foreign firms or eisting borer rotetion,an inrease in behintheborer nontariff measures

has a reativey more imortant effet on omestiometition. To some etent, this is ounterintuitive tothe iea of oiy substitution, i.e. the inrease ofbehintheborer NTMs when borer measures areiberaize. This is further isusse in the subsetionthat foows, where emiria eviene in suort ofoiy substitution is aso resente.

At higher eves of reguation, the margina gain frombehintheborer nontariff measures eines anhene the oitia ontributions obbying firms arewiing to make an at some oint beomes smaerthan the margina oss in soia wefare esite the

arger weight given to organize rouer interest. Asa resut, behintheborer NTMs may be set at some“intermeiate” eve.

onversey, for borer measures targete eusivey atforeign rouers, the omesti rouer obby’smargina gain in rofits an reate oitiaontributions o not erease with higher eves ofrotetion an obbies who gain a ot from keeingforeign ometition out an governments that are ittefor soia wefare may imement a rohibitive eve ofborer rotetion, or vieversa, none at a AbeKoh,21. In sum, athough the author formay oes not

onsier obbying for behintheborer as oose toborer measures simutaneousy, it is interesting to notethat when behintheborer NTMs are introue, theonflit of interest between omesti rouers ittingan organize obby of routive firms against the restmay ea to ess restritive measures than if borerrotetion were ursue.

(iv) Offshoring and bilateral bargaining

The inrease roe of internationa roution networksin toay’s goba eonomy an the fragmentation of theroution roess aross borers have require a

fresh ook at the imat of nontariff measures anservies measures on internationa trae an at theinentives for government intervention. In etion .1, itwas note that internationa roution sharing maya to market imerfetions, suh as informationasymmetries Kimura an Ano, 2 that an rovokereguatory intervention, for instane in reation to safetyan quaity ontro. In their semina work, ones anKierzkowski 199; 2 emhasize the effets thatgovernmenta measures in “servies inks” onnetingfragmente roution bos an have on trae inintermeiates, whie suh measures ay ess of a roewhen the roution of goos is integrate an traetakes ae in fina routs.

In regar to oitia eonomy rationaes, Grossmanan Heman 199 mention that the rotetion for

sae framework an easiy be etene to aow forimorte intermeiates, without hanges to itsfunamenta outomes. Protetion wou sti berovie to oitiay organize fina goos rouersrather than rouers of intermeiates, as the former

wou obby against rotetion for the atter.

Whie the fragmentation of the suy hain affetsgovernments’ motivations to intervene an enarge theambit of reevant oiy areas, as estabishe inetion .1, it may aso invove new onstraints anonsierations in the hoie of oiy measures. In areent set of aers, taiger 212 an Antràs antaiger 2 formaize a nove, eiit mehanism inreation to the internationa fragmentation of thesuy hain that ou ea to an inrease use ofnontariff measures. In their framework of offshoring,the etermination of internationa ries hanges from

one governe by market earing mehanisms to oneharaterize by biatera bargaining between foreignsuiers an omesti buyers. As note in etion.1, in suh a situation, governments an be eeteto use tariffs as a “firstbest” instrument for etratingrofits from foreign eorters.7 However, withinternationa offshoring, even though the governmentmay be free to use tariffs, other oiies, inuingbehintheborer NTMs, may aso be use, resutingin a istortion of their effiient eves.

The key feature in internationa offshoring emhasizeby the authors is the reationshiseifi nature of trae

between imorters an their seiaize suiersabroa. Owing to the seifiity of the inut, foreignsuiers ho some market ower over the imortingrouer. At the same time, one the inut is roueby the eorter aoring to the imorter’s seifiationsan the reate investment is sunk, the imorter anwie its bargaining ower to obtain a share of theforeign suier’s rofits. As a resut, internationa riesare etermine by biatera bargaining rather thanmarket earing. This henomenon, whih has beomeknown as the “hou” robem in the eonomisiterature, eas to the situation of “unerinvestment” byforeign suiers an, hene, an insuffiient suy of

inuts to omesti rouers.

The omesti government now faes a tension in itsobetive to maimize nationa wefare: it must rovieinentives to foreign inut suiers to roue morean, at the same time, it must he omesti rouersimorting these inuts to aroriate maimum rofitsin the biatera bargaining with the foreign suier.

In orer to ursue these ifferent obetives in itsforeign trae reationshi, the government wi not onyaust its tariff oiy on inuts, but aso emoymeasures in regar to fina routs. It wi o theformer to inrease the suy of foreign inuts an theatter in orer to affet ries reeive by rouersan, hene, rofits a aong the suy hain.onretey, Antràs an taiger 2 seek to eveo




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a reaisti senario, where a oitiay motivategovernment i.e. one that attahes a higher weight torouer benefits may reue tariffs on imorteinuts whih has a ositive effet on suy, but seekto inrease the rie of the fina rout, e.g. via an

imort tariff or an eort subsiy. A isroortionateart of the osts of these istortions is borne byonsumers, but a government that is suffiientyinfluene by organize rouer interests may bewiing to aow this to haen in orer to he omestirouers to inrease their rofits, even though someof these rofits may aso be issiate aong thesuy hain to foreign inut roviers.

uiing on this aroah, taiger 212 onstruts amoe in whih the government aies nontariffmeasures on to of tariffs to the same rout in orerto maimize nationa wefare in a situation of biatera

bargaining with foreign rouers.9 In his setu, theonsumtion of a goo that is subet to biaterabargaining when imorte an aso omestiayroue entais an averse effet on the environment.A onsumtion ta is imose in orer to “internaize”this environmenta eternaity – that is, to reue theoveronsumtion of the rout in question owing tothe ak of onsieration by onsumers of theenvironmenta harm imose on others. It an then beshown that the eve of the omesti onsumtion tause to aress the environmenta eternaity woube set “ineffiienty”, as art of the osts of the tawou be borne by the foreign inut suier.

onretey, uner ertain onitions, the imortingountry an be mae better off when imort tariffs onthe rout are reue an the omesti onsumtionta is inrease. The reason for this is that in taiger’smoe, ower tariffs irety affet the riing anroution eisions of eorting firms. On the otherhan, beause onsumers eeriene iminishing“utiity” from higher eves of onsumtion of the samerout, the ta oes not ater onsumer behaviour ina inear fashion.

Whie the ta artiay inues onsumers to ut

onsumtion, some of the buren of the ta is imoseon the foreign rouers by owering rouer ries. Through this mehanism, the government is abe toensure a given suy of the goo in question by oweringtariffs, whie at the same time reuing foreign rofits tothe benefit of omesti imorters. This austment iseventuay stoe when the istortion of omestieman, taking into aount the margina osts anbenefits of ontaining the environmenta eternaity,beomes too high in terms of nationa wefare. Whie thegovernment’s motivation to use nontariff measures insuh a situation is isusse in reation to a omestionsumtion ta as a targete routseifi anetaie rie instrument, taiger 212 briefly eainsthat the unerying ogi ou aso ay to other formsof “behintheborer” NTMs, suh as TT measures. Inartiuar, the author asserts that in ratie

governments ten to ay uniform saes or vaueaetaes aross wie ranges of routs rather than evyingifferentiate taes on iniviua goos. He shows thatwhere routeve omesti taes are unavaiabe oriffiut to imement, offshoring an biatera bargaining

an ea to a situation in whih rout reguations areset to be ineffiienty high.

b Use of NTMs an internationaonstraints

Governments an use mutie oiies to ahieve agiven obetive. In the ase of a market faiure, the“firstbest” oiy to aress a singe istortion is onethat offsets the soure of the istortion irety. orinstane, if the omesti roution of a ertain goois assoiate with ositive eternaities for aneonomy, a roution subsiy is the “firstbest” oiy– it is wefaresuerior to an imort tariff. What thenhaens in a situation where an eonomy faes aomesti istortion, an eternaity for eame, butaso has monooy ower in trae in that it an affetthe wor rie of the given rout? In a nonooerative framework, a government wou introuetwo “firstbest” or most effiient oiies – a nonistortionary nontariff measure to take the formeran a suitabe tariff for the atter hagwati anRamaswami, 193. However, the “firstbest” or mosteffiient measures may not aways be use bygovernments.

The revious setion showe that governments mayhoose to ursue trae oiy obetives using nontariff measures rather than tariffs even when the atter,more effiient, measure is avaiabe to them. Itattribute this to institutiona fators, the ak oftransareny of ertain NTMs, the fat that someNTMs entai a fie rather than variabe ost an theeistene of market ower in a ontet of offshoring.However, it may aso be the ase that the moreeffiient measures are not aways avaiabe togovernments. This setion isusses the use of NTMsin ight of onstraints imose by internationa trae

agreements – both mutiatera an regiona.

(i) International constraints

Uner the ausies of the GATT/WTO, the ast years have seen a ramati mutiatera reution intariff barriers owing to agreements that require membersto reset the negotiate tariff binings – eiings onaie tariffs. If members set tariffs above that bining,they may be subet to a osty isute initiate byanother member. imiar onstraints aso affet othertrae oiy measures – for eame, nontariffmeasures suh as imort an eort quotas as we aseort subsiies are generay rohibite, a though theiruse is aowe for “egitimate” reasons in seifi ases.ven in referentia trae agreements PTAs, ountriesagree to referentia tariffs between themseves an, in




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ustoms unions, to set a ommon eterna tarif f, wherebynonenforement of these tariffs ou generate ostyretaiation by other PTA members.

Unike borer measures, isiining behinthe

borer nontariff measures eiity uner themutiatera traing system, for instane, is morehaenging for the foowing reasons. irst, they aretyiay ess transarent. eony, as aue to inetion A, NTMs are often highy ome anountryseifi. This means that the formuation ofgenera rues to isiine them is ikey to invoveifferent authorities who are not use to oorinatingwith others. Thiry, whie NTMs may have aversetrae effets, some of them are assoiate withegitimate ubi oiy obetives. esite theseiffiuties, NTMs are not eft entirey unreguatebeause members of a trae agreement ou

otherwise uno any negotiate tariff restritions by,for instane, imosing ifferent saes taes forimorte an omesti routs Horn, 2. Ofourse, to the etent that ountries an use NTMs inimortometing setors as a means of reuingtrae flows, they an unermine ommitmentsreviousy mae with reset to trae oiy aonaan erington, 29.

(ii) Policy substitution

It is ikey that as ountries sign suessive rouns oftrae agreements that onstrain their abiity to ursue

trae goas through trae oiy tariffs an ertainborer nontariff measures, other NTMs, inuingthose behin the borer, beome attrative toos fortermsoftrae maniuation that shifts osts ontoforeign eorters. In other wors, there wi beinentives for governments to istort their NTMs as aseonary means of roteting imortometinginustries oean, 199; erington, 21; agwean taiger, 21; aona an erington, 29. Inthis ontet, it is even argue that there is a “Law ofonstant Protetion” hagwati, 19.

Aoring to Anerson an hmitt 23, when

tariffs are onstraine ooerativey, quotas wou bethe referre measure among the set of borer NTMsfor governments ooking for aternative measures.Antiuming oiies are ikey to be use ony whenthe use of quotas is aso suffiienty onstraine byinternationa agreements.1

imiary, if a government annot reson toometitive ressures abroa by uniateray restritingmarket aess with an inrease in its tariff, it may berawn into imosing a behintheborer NTM. oreame, it may be temte to imrove the reativeost osition of a omesti firm by reaing tehniareguations in its imortometing inustry, therebyrestriting aess to foreign suiers. ome foreignsuiers who eort to these markets may atuayower their ries to remain ometitive with omesti

rouers.2 However, even suh termsoftraemovement eas to foreign rouers absorbing someof the osts of the weakening of omesti tehniareguations agwe et a., 22. Hene, in ight offaing trae barriers, this reguatory ost shifting ou

resut in a “raetothebottom” robem wheregovernments might be temte to rea tehniareguations that ay to imortometing inustriesin the name of internationa ometitiveness – thosereating to abour an the environment are rominenteames agwe an taiger, 21; agwe et a.,22.

Aoring to agwe et a. 22, the true soure ofthe “raetothebottom robem” is not that weakforeign tehnia reguations generate ometitiveressures that inue ineffiienty ow omestitehnia reguations. Rather, it is the imerfetions in

roerty rights over market aess ommitments intrae agreements – a government is not free to austits oiy mi so ong as it maintains its market aessommitment. or instane, if a government inreasestehnia requirements in its imortometinginustry, this inustry wou be subete to inreaseometitive ressure from abroa. However, beausetrae oiy is onstraine by an internationaagreement, the government wou not be abe to raiseits tariff without a enaty an maintain its marketaess ommitment.

It is worth noting that instea of a “raetothebottom”

robem, it may even be the ase that inreaseonstraints on tariff oiy imose by internationaagreements are aomanie by rising tehniareguations. The internationa ostshifting inentiveesribe above may instea reate a teneny forgovernments to imose more stringent omestitehnia reguations if the omesti firm in an imortometing inustry fins it easier to omy with them,i.e. if the tehnia reguation imroves the reativeost osition of the omesti firm taiger an ykes,211. However, even when a tehnia reguationinreases the osts of roution more for the foreignfirm than the omesti firm, the substitution of

tehnia reguations for tariffs whih are onstraineby an internationa agreement is far fromstraightforwar.

In a reent stuy, ssai 21 onsiers twosenarios. irst, when tarif fs are rohibitive an henewhen a sma tariff reution enabes minimaartiiation by the foreign firm, governments areikey to have an inentive to raise tehnia reguations.This is beause the tariff ut inreases the marginabenefit of the reguation – beause imorts beomeheaer, the reguation beomes the instrument whihan imrove the omesti firm’s reative ost ositionan hene its rofits. At the same time, by worseningthe foreign firm’s roution osts, an reuingimorts, the tehnia reguation reues tariffrevenues. Hene, if the government ares about tariff




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revenues, its otima reguatory resonse to tariff utsis ess ear. However, rohibitive tariffs areinreasingy rare.

eony, in the ase where the foreign firm areay

has a signifiant market resene, the reationshibetween tariff uts – that eeen foreign enetrationeven further – an rising tehnia reguations is moretenuous. Tehnia reguations reue onsumersurus. However, a reution in tarif fs iminishes thereguation’s margina imat on onsumer surusbeause it owers ries fae by onsumers.imiary, whie reguations shift rofits to the omestifirm, tariff uts – by making imorts heaer –iminish the reguation’s margina effet on omestifirm rofits.

Given the above, if the government ony ares about

onsumer surus an the omesti firm’s rofits, itwou reson to tariff uts by reaing tehniareguations. This suggests that beause onstraintson the use of tariffs weaken the effetiveness of atehnia reguation as an instrument, tariffs antehnia reguations are atuay omements. Itunersores that what matters for oiy substitutionis not the iret effets of measures, but how theweakening of one measure affets the marginaeffetiveness of the other. The government’sresonse is more ambiguous when it aso worriesabout tariff revenues an negative onsumtion

eternaities.

A reution in tariffs, boun by an internationaagreement, enhanes the reguation’s margina effeton the onsumtion eternaity beause it remains theony instrument to reue eman in the eonomy.imiary, tariff reution enhanes the reguation’smargina effet on raising tariff revenues – onstraintson inreasing tariffs imy that atering tehniareguations is the ony way in whih the governmentan influene imorts an hene tariff revenue. Hene,if the imat of the reguation on the onsumtioneternaity is arge an/or if the initia tariff rate is

high, the imrovement in the reguation’s aaity toreue the eternaity an raise tariff revenues, on themargin, may offset the reution of its margina effetson omesti rofits an the onsumer surus. In thissituation, governments may reson to tariffreutions by tehnia requirements, i.e. oiysubstitution.

The finings of ssai 21 suggest that theroiferation of tehnia reguations in reent yearsmay not be riven by a esire to rotet omestifirms’ rofits when tariffs are onstraine by aninternationa agreement, but rather it may reflet a

growing awareness of onsumtion eternaities.Governments wi have an inentive to inreasetehnia reguations ony if the net margina benefit ofthe reguation inreases with faing tariffs.

(iii) What does the evidence suggest?

There is an emiria iterature whih uses formastatistia methos to anayse whether or notonstraints imose by internationa or biatera trae

agreements on governments’ abiity to set tariffs mayinue some ountries to reae them with nontariffmeasures. Using ata from oombia uring the mi19s an eary 199s, Goberg an Pavnik2 fin that tariffs an NTMs were ositiveyorreate, i.e. tariffs were reue, not simy to bereae by NTMs.

Anaysing ata for a arge rosssetion of ountries91 for a more reent time erio the eary 2s,Kee et a. 29 fin that the average ad valorem equivaent AV of nontariff measures aears toinrease with GP er aita . However, they aso fin

that the overa eve of rotetion ereases with GPer aita, mainy riven by average tariff eves thatten to be signifianty ower as ountries beomeriher. It suggests that, in genera, tariffs may besubstitute by NTMs. This is reinfore by theirfinings at the tariff ine eve, where tariffs arenegativey orreate with the AVs of NTMs. imiary,roa et a. 2 show that after GATT/WTO tariffommitments onstraine the Unite tates in itsabiity to use tariffs for the urose of termsoftraemaniuation, the ountry set signifianty higherNTMs in imortometing setors where it hagreater abiity to af fet foreign eorter ries.

In a more reent stuy, using ata on tariffs an nontariff measures for about , routs, Limao anTovar 211 eoit the variation in tariff onstraintsgenerate by the two most ommon ommitmentevies – mutiatera an referentia traeagreements PTAs. Imortanty, the authors estabisha ausa imat of the resuting tariff onstraints onthe use of NTMs – not merey a orreation whih maybe influene by other fators. onsier the foowing.ifferenes in the size of member states in a PTA,whih is a ustoms union, ea to the ommon eternatariff being etermine by the tariffs of the arger

artner. This an generate a arge hange in tariffs forthe smaer artner that is ikey to be “eogenous” –that is, ineenent of other eterminants of its traeoiy.

The aforementione argument is reevant for theanaysis in Limao an Tovar 211 beause they fouson a singe ountry, Turkey, whih ha to aot reeisting U tariffs in a arge number of routs. o ifthe ommon U tariff onstraine Turkey in its tariffsetting, this ou have ha a ausa imat onrotetion via nontariff measures on nonUeorters. Limao an Tovar 211 fin eviene ofoiy substitution – tariff ommitments imose viathe WTO an the PTA with the uroean Unioninrease the robabiity of Turkish NTMs. They asofin that the ikeihoo an restritiveness of Turkish




71




NTMs inrease with the stringeny of those tariffommitments. urthermore, it is worth noting that theauthors fin imerfet oiy substitution, therebyimying that tariff ommitments – whie artiayoffset by higher NTMs – may have sti reue tota

rotetion.

The stuies isusse above anayse a broa set ofnontariff measures, inuing omesti routstanars, tehnia reguations an vountary eortrestraints. There is aso a iterature whih anayses aossibe substitution effet between tariffs an aartiuar ass of NTMs – antiuming Ainitiations. vauating ata for 2 ountries17 eveoing an seven eveoe ountries uringthe erio from 199 to 23, einberg an Reynos27 fin that trae oening ommitments mae inthe Uruguay Roun – measure by hanges in boun

tariffs – have a statistiay signifiant, abeit sma,ositive effet on the ikeihoo3 of a WTO memberusing A rotetion. In aition, they use a simuationeerise to show that ha tariffs not been reueby the Uruguay Roun, there wou have been23 er ent fewer A ases from 199 to 23. Whenony onsiering the A ases brought by theeveoing ountries in their same, einberg anReynos 27 fin a muh arger ositive effet of aromise reution in tariffs uner the UruguayRoun. This hos true both for the ikeihoo of a WTOmember using A rotetion an the tota number ofA etitions fie by WTO members.

To view the above as eviene of oiy substitution,however, one must be autious. eveoing ountriesi not reue in the Uruguay Roun the tariffs thatthey atuay aie. Their ommitments were toreue the ga between the boun i.e. the uereiing an the aie rates the “ta riff overhang” byeging to kee within the ower boun rates.However, what firms atuay fae in ratie are theaie tariffs, whih are very ifferent from the bounrates, eseiay in eveoing eonomies.

or the eveoe ountries in their same, einberg

an Reynos 27 fin that ommitments to reuetariffs uner the Uruguay Roun are assoiate withess frequent A ativity. Aoring to the authors,this surrising resut may refet a move towarsaternative measures of rotetion, suh as TT anP measures. It may aso be at tributabe to a host ofomitte variabes, suh as the inreasing imortaneof servies an I, whih ou have iverte theattention of firms in these eonomies away from theA instrument einberg an Reynos, 27. Giventhe imitations of the stuy esribe above, it isiffiut to ientify a ausa imat of tariff reutionommitments uner the Uruguay Roun on Aativity.

More reenty, using ata for 3 ountries29 eveoing an si eveoe ountries over the

erio from 1991 to 22, Moore an Zanari 211aso eamine the reationshi between setora traeoening an subsequent A initiations. Unikeeinberg an Reynos 27, however, the authorsanayse aie rather than boun tariffs. urthermore,

they take aount of aitiona fators that may affetA initiations, inue a arger set of imorting aneorting ountries. They aso over a onger timesan, work with more isaggregate inustria setorsan use a more omete A atabase.

In genera, Moore an Zanari 211 fin thatreutions in aie tariffs o not ea to a higherrobabiity of A etitions. However, for a sma grouof eveoing ountries that have beome heavy usersof A in reent years, they o fin eviene of oiysubstitution – a statistiay signifiant imat of trae

oening on the robabiity of A fiings. or this subsame, a one stanar eviation inrease in tariffiberaization resuts in about a 2 er ent inrease inthe robabiity of observing an A initiation. Theabsene of a statistiay signifiant “substitutioneffet” for other eveoing ountries or for the sieveoe ountries in the same may be ue to thefat that the former initiate reativey few A etitionswhie the atter areay ha very ow tariff rates overthe entire erio overe in the anaysis.

The resuts of Moore an Zanari 211 are reinforeby the reent work by own an Tovar 211 on the

trae reforms unertaken by Inia in the 199s. Theyfin that taking other fators into aount, routsthat unerwent arger tariff uts as a onsequene ofthe trae reform were, by the eary 2s, subet toan inrease in the use of safeguars an A measures.In artiuar, they show that the robabiity of initiatingan A investigation an safeguar roeeing is er ent higher as a resut of a one stanareviation inrease in trae oening.

The eifi Trae onerns Ts atabasesreate by the WTO eretariat isusse in etai in

etion .1 have been use to she new ight onwhether aie tariffs an TT/P measuresmay have been use as substitutes over the erio19921. Aying an anaysis simiar in sirit toKee et a. 29 – who seek to ientify a “ean”orreation between tariffs an their estimate ad

valorem equivaent of nontariff measures, ratherthan ientifying a ausa ink – the resuts iniatesome eviene that TT measures may have beenuse to take the ae of tariffs, but there is veryimite eviene of substitution between tariffs anP measures see o .. This resut is in ine witheetations: P measures over a reativey narrow

area of heath an safety that is often irety reateto onsumer rotetion an may offer ess soe foroiy substitution than the wier set of TTmeasures.




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In onusion, the use of ess effiient nontariffmeasures instea of tariffs is faiitate by the fatthat whie binings on imort tariffs are rigi, theeiit isiining of NTMs within the framework of

internationa trae agreements is more iffiutbeause they are ess transarent. In aition, ertainNTMs an be use to aress a egitimate ubioiy onern heath, the environment, et., therebymaking it ossibe to onea a otentiay rotetionistintent behin the measure. However, is it the ase thatgovernments hoose to eue NTMs from suhinternationa agreements? An, if so, what eterminesthis hoie?

The trae iterature suggests a number of ossibiities.The eision to eue may simy reflet the osts ofwriting an enforing an agreement that overs a wierange of behintheborer nontariff measures Horn,2; Horn et a. , 21. It may aso be attributabe tounertainty about the irumstanes that wi revaiuring the ifetime of the agreement, thereby making it

iffiut to foresee a reguatory nees that may ariseattigai an Maggi, 23. There are furtherossibe eanations.

The noneiit reguation of nontariff measures mayreresent “esae auses” for members of theagreements – roviing them with the fleibiityrequire to maintain a sefenforing agreement in avoatie wor agwe an taiger, 199. It may evenbe the ase that governments an imrove theirbargaining ower vis-à-vis seia interest grous byommitting to onstrain tariffs through internationaagreements, an then using ess effiient NTMsinstea Limao an Tovar, 211. inay, ountries maywant to retain oiy sae in issues they onsier tobe “too imortant” to be subet to trae rues, e.g.

nationa seurity. An anaysis of suh fators that mayeain the “enogenous etermination” of theoverage of NTMs in internationa trae agreements isarrie out in etion .

o .: Policy substitution – evidence from specific trade concerns

rom the eifi Trae onerns Ts atabases, overage ratio the amount of trae overe by an Por TT measure an frequeny ratio the share of rout ines overe have been omute. requenyan overage ratios are inventorybase measures that o not neessariy ature the trae restritivenessof a measure. However, they iniate how muh trae is affete by it.7 These measures have beenomute for eah ombination of maintaining ountry the ountry that maintains the measure subet tothe seifi trae onern, H2 setor a twoigit assifiation in the Harmonize ystem an year.To anayse whether there is eviene of substitution between tariffs an P or TT measures, the foowingeonometri moe has been estimate:

!"# = !ln ()!"# + !"#

where y is the og of the overage ratio or the frequeny ine of the maintaining ountry i in H2 setor j in year t , an tar is the og average aie tariff in setor j . Year, ountry, setor an ountrysetor fieeffets have then been rogressivey ae to this baseine moe.

As argue in the main tet, the estimate regression oes not urort to ientify a ausa ink, but rather a“ean” orreation between tariffs an TT or P measures. It is simiar to the one estimate by Kee et a .

29, who fin eviene of substitution between tariffs an nontariff measures when onsiering thevariation within ountry an within setor. In ontrast to Kee et a ., there is aso time variation in the Tatabases, aowing the user to ientify variation within ountrysetor an time using a riher




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3. Measures affeting traein servies

a Why a searate isussion?

rossborer eivery aone oes not fuy atureinternationa servies transations. The intangibe annonstorabe nature of many servies imies thatsuiers an onsumers often have to be in hysiaroimity for servies rovision to take ae. Inee,trae in servies takes ae through four ifferent“moes of suy”: beyon the traitiona rossborermoe, it enomasses the onsumtion of a servie ina foreign territory an the movement of the suierabroa, either to estabish a ommeria resene or inerson. As a resut, aita an abour mobiity is ofteninetriaby inke to servies trae.

Against this bakgroun, measures affeting trae inservies warrant a searate isussion for at eastthree, reate reasons.

irst, the feasibiity of aying a tariff, an an ad

valorem tariff in artiuar, to the internationa rovisionof servies is remote. In most instanes, it wi be net toimossibe for ustoms offiias to observe a servie

“rossing a borer”, an the vaue voume of a serviestransation wi ony be known after the reevant serviehas been roue or onsume Hoekman an Primoraga, 1997. Trae rotetion in servies is thusessentiay in the form of reguatory measures. In aitera sense, a imitations to servies trae are “nontariff ”. Thus, it makes no sense to isuss why nontariffmeasures are use an to anayse their eonomi antrae effets in utaosition with tariffs as, in the aseof servies, tariffs are not strity avaiabe.

eony, an anaysis base on whether measures areaie at or behind the borer is aso argey unhefu.

Many servies transations invove the resene ofeither the suier or the onsumer insie the territoryof the “imorting” ountry. Hene, servies restritionsmosty ay “behintheborer”.

Tabe .1: Coverage ratio and frequency index of STCs and tariffs

SPS

Dependent variable Coverage ratio (ln) Frequency index (ln)

(1) (2) (3) (4) (5) (6) (7) (8)

Tariff (ln) .7 .2 .911*** .2 .*** .12 .9*** .9***

. .19 .13 .22 .99 .1 .139 .193

Fixed effects:

Country No Yes Yes Yes No Yes Yes Yes

Sector No No Yes Yes No No Yes Yes

Time No No Yes Yes No No Yes Yes

Country*sector No No No Yes No No No Yes

Observations 3,29 3,29 3,29 3,29 3,29 3,29 3,29 3,29

R-squared . .1 .337 .279 . .223 .31 .33

Number of id 223 223

TBT

Dependent variable Coverage ratio (ln) Frequency index (ln)

(1) (2) (3) (4) (5) (6) (7) (8)

Tariff (ln) .21*** .2 .12*** .39*** .23*** .1*** .12 .39***

.3 .17 .3 .113 .33 .2 . .123

Fixed effects:

Country No Yes Yes Yes No Yes Yes Yes

Sector No No Yes Yes No No Yes Yes

Time No No Yes Yes No No Yes Yes

Country*sector No No No Yes No No No Yes

Observations 9,7 9,7 9,7 9,7 9,7 9,7 9,7 9,7

R-squared . . .17 .17 . .1 .1 .1

Number of id 7 7

Notes: Robust stanar errors in arentheses; *** .1; oumns an : within estimation, i variabe: ountrysetor.

Source: WTO eretariat estimates.




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Thiry, given the moa efinition of servies trae,the anaysis nees to inue measures aying bothto the rout i.e. the servie an to the roueri.e. the servies suier. urthermore, the rouermay be hysiay resent in the territory of the

imorting ountry. Whie in the ase of goos, fatormovement reresents a substitute for rossborertrae, with many servies it is a reonition, or animortant omement, for any trae to take ae. Ameasures that govern how servies are roue anonsume in an eonomy are thus otentiaymeasures affeting servies trae. This is whymeasures isusse here that might aear to gobeyon traitiona “trae” instruments nee to befatore in when onsiering servies trae.

Whie it wou be imratiabe to um together aisussion of servies measures an nontariff

measures, this oes not imy, however, that serviesan goos trae, an the resetive trae imitations,shou be onsiere in isoation. Not ony are trae ingoos an trae in servies mutuay suortive,9 butaso many servies trae restritions affet goostrae, an vie versa.

ervies ay a key roe in suorting routionnetworks. Transort an ogistis servies areobviousy the most imortant iret servies inut tointernationa goos trae, but ommuniation,insurane an banking are aso key enabing servies.A rominent roe is aitionay aye by istribution,

business an other aftersaes servies suh as reairan maintenane.

Measures that restrit trae an ometition inservies markets thus affet not ony the eonomierformane of the setor onerne, but may,artiuary with infrastrutura servies, aso havesiover effets on the eonomi an eorterformane of goos an other servies inustriessee isussion in o .3.

Restritions on trae in ertain goos may imair theeffiieny an eort ometitiveness of servies

suiers that rey on those artiuar routs asinuts. Restritions on the imortation of ertainmeia equiment may raise osts for hositas whenroviing reate meia servies to nationa anforeign atients, for instane. Measures raising theost of imorte onsumer goos wou ikewisenegativey affet retaiers, an artiuary foreignretaiers souring many of their routs from theirhome ountry.

uh rosseffets are eseiay imortant in ight ofthe growing fragmentation of roution roessesaross ountries. As muh as threequarters ofservies trae is in intermeiate inuts Mirouot et a.,29, whie intrafirm trae aounts for 22 er entof U servies imorts an 2 er ent of its servieseorts Lanz an Mirouot, 211.1 Together, these

ata o inee aint a iture of servies trae as arominent, though robaby sti unerestimate,omonent of goba or regiona vaue hains.2 In ightof their siover effets beyon the inustryonerne, restritions to trae in suh “intermeiate”

servies an be argue to be of even greatersignifiane.

imiar to the anaysis of nontariff measures for goostrae, this setion wi first isuss the motivations forgovernments’ intervention in servies markets. It withen try to ategorize the main forms of interventionuse an, to the etent ossibe, eamine theireonomi an trae effets.

b Why o governments intervenein servies markets?

This setion isusses why governments mayintervene in servies markets. To a arge etent,the anaysis in setions .1a an 1bii aboveremains ertinent. A number of serviesseifiharateristis, however, nee to be fatore in .

(i) Public interest considerations

rom a ubi interest theory stanoint, governmentintervention in servies markets may be ustifie oneffiieny grouns, as we as on equity onsierations.ffiieny onerns reate rimariy to the eistene, inmany servies inustries of instanes of market faiure,

suh as asymmetri information i.e. one arty havingmore information than the other, imerfetometition an eternaities see beow.3 Whiethese faiures aso aear in goos inustries, theyseem to be more ervasive in the ase of servies. Theisussion that foows is argey iustrative.

Instanes of asymmetri information in servies arefrequent. This is, essentiay, beause of the intangibenature of many servies. Immateriaity imies thatonsumers annot easiy assess the quaity of aservie before onsuming it. Prouers wi ten to bebetter informe. However, they might not have aninentive to suy more information to onsumers, asthis might be osty to rovie, or retaining informationmay affor a ommeria avantage. At the same time,onsumers may ak the eertise require to assessmuh of the tehnia information they reeive. As aresut, onsumer hoie is insuffiienty informe forometition to funtion effetivey. This robem isaentuate by the fat that reeat urhases may notaways be an avenue to isiine rouer behaviour.ervies, by their nature, ten to be muh more iversethan goos. onsumers may not be wiing, or abe, toontinuay urhase ientia servies.

Though marketbase soutions ou see rouerssignaing a ommitment to quaity, for instane byinvesting in reutation, ustomer servie, bran nameor easiy aessibe omaint roeures, they are




75




unikey to be suffiient for highrisk ativitiesPekmans, 2. Governments thus often interveneto urb servies suiers from eoiting informationasymmetries. As it is generay imossibe to imose,verify an ensure omiane with erformane

requirements by fousing eusivey on the servie,governments frequenty intervene at the eve of thesuier. They may, for instane, require rouers toisose ertain information to onsumers, or imosequaifiation or iensing requirements that seek toensure the ometene of the servies suier anthus the quaity of the servies rovie.

Information asymmetries may aso be robemati forrouers where onsumers ossess rivateinformation, for eame about their heath status. Aak of generay avaiabe information may asoengener situations of “mora hazar”. or eame.

where someone other than the onsumer bears the furesonsibiity an onsequenes of his ations,eessive onsumtion may resut. Insurane marketsare a ase in oint.

Imerfet ometition is another market faiure oftenenountere in servies inustries. Many servies aresuie through networks: teeommuniations,osta servies, eetriity istribution, environmentaan rai transort servies are rominent eames.tanarize servies rovie over suhinfrastruture or istribution networks often ehibitsuh arge eonomies of sae that the reevant market

an be serve most heay by a singe or smanumber of firms, i.e. they are often naturaymonooisti/oigooisti. Unheke, these marketsresut in unersuy an ries set above marginaost. Government intervention is thus warrante, anmay imy instituting rie ontros or enabingometition e.g. through unbuning servies,reguating aess to essentia faiities, franhisingan onessions.

inay, both negative an ositive eternaities ourin servie markets when the rie of a servie oesnot reflet the true ost or benefit to soiety of

rouing that servie. This resuts, resetivey, ineessive or insuffiient onsumtion. Theenvironmenta onsequenes of heavy roa transortor intensive tourism are instanes of negativeeternaities. Network eansion inteeommuniations servies, inrease investment ineuation or vaination rogrammes, on the otherhan, are eames of ositive eternaities.

Government intervention in servies inustries mayaso be riven by equit y onsierations. Many serviesare inuts into human aita eveoment an, assuh, they unerin governments’ soia obetives.Heath an euation servies are tyia eames,but simiar onsierations may aso ay a roe insetors suh as auiovisua, teeommuniations,transort, energy an water servies. Unfettere

markets wou eave ertain geograhia areas orgrous of onsumers without afforabe ries oraequate suy. The imosition of “universa serviesobigations” has been one government resonse toounter these robems.

o .7 rovies some setorseifi eames ofservies measures that governments may use toaress effiieny an equity onerns.

(ii) Political economy considerations

Aoring to the eonomi theory of reguation,government intervention is not riven eusivey bythe ursuit of the “ubi interest”, but rather, oraitionay, by the onerns of seia interest grous.Governments may therefore intervene irresetive ofthe eistene of a market faiure. ven when

intervention is warrante on ubi oiy grouns,governments may sti, in eiing whih instrument toemoy, be “bought” into reying on those measuresthat benefit more organize grous, generay omestior inumbent rouers.

Whie the isussion in etion .1 remains ertinent,when it omes to servies inustries, oitia eonomyonsierations are artiuary signifiant in at eastfour resets.

irst an foremost, the most transarent form ofintervention when it omes to trae oiy, i.e. a tariff,

is not avaiabe in servies markets. y efinition,governments nee to resort to other, often moreoaque instruments. This offers greater soe to maskany rivate interest motivations, an thus otentiayreues the risk of eetora unishment.

eony, muh ess sientifi eviene eists onwhih servies intervention might be base an itseffetiveness teste. The iverse nature of manyservies, their intangibe nature, an the frequent neeto reguate at the rouer eve a imy thatreguation tens to be not ony ome, but aso muhmore iffiut to assess on the basis of eat riteria

aie at the rout eve. This may, one again, heamouflage governments’ true intentions.

Thiry, the omeity of muh servies reguationimies that reguators who are ess eeriene oress resoure might be more easiy “ature” byseia interest grous even if they inten to at inursuit of the “ubi interest”. Given suh informationasymmetries, rotetion might not even nee to be“bought”.

ourthy, given the equity an soia onerns attaheto many servies, onsumers might atuay sie withomesti rouers. onsumers may misguiey fearthat, if the interests of omesti rouers are noonger uhe, servie quaity wi suffer an/or rieswi inrease Hoekman et a., 27.




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o .7: Examples of services-specific measures to pursue public policy objectives

Equitable access

In the transort or teeommuniations setors, governments often want remote regions to be serve bysuh servies regaress of rofitabiity. asi equity obetives aso romt governments to ensure that aitizens have aess to euation an essentia heath are at ow or zero osts.

Measures inue rosssubsiization shemes to ensure that revenues in rofitabe areas are reinveste infavour of unereveoe regions or ersons in finania nee an iensing onitions whih inueuniversa servies obigations for eame, ommeria hositas are require to treat a ertain erentageof atients free of harge.

Consumer protection

With regar to rofessiona, finania or heath servies, the omeity of the servie that is rovie makesit very iffiut for onsumers to areiate quaity or safety rior to onsumtion. ervies suiers mayeoit suh information asymmetries.

Measures inue ruentia an other tehnia stanars to be omie with by servies suiers;ubiation requirements on osts, risks, sieeffets, et., so as to enabe the onsumer to make informeeisions; euation an training requirements to ensure ometene; an manatory rofessiona iabiityinsurane.

Reduction of environmental impacts and other negative externalities

Roa an air transort ause oution an noise; tourism ou ut the environment uner stress an isturbnatura habitats, et.

Measures inue traffi restritions over weekens, uring night hours or in sensitive areas; zoning aws anbuiing oes; ta/subsiy shemes to mobiize funs for the reservation of utura heritage.

Macroeconomic stability

inania institutions may engage in imruent ening or esign ome finania instruments that areinsuffiienty unerstoo. As a onsequene, eositors may ose onfiene an withraw their money,interbank ening may suffer, reit suy to the rea eonomy may be hamere, an so forth.

To ensure stabiity, finania institutions must omy with measures suh as minimum aita requirementsan higher aita reserves when new finania instruments are rovie. They must aso iversify assets toimit eosure to iniviua ients, reort on their ativities, or ut imits on remuneration of management.

Avoidance of market dominance and anti-competi tive conduct

onerns about antiometitive onut arise in setors rone to market onentration inuing servieswith network effets an interonnetion nees, suh as transort an teeommuniations, an iberaizeformer monooies.

Measures inue imitations on market shares, introution of rie surveiane or manatory rie as,interonnetion guarantees, an governmentmanate tehnia stanars to reae omanyseifirequirements.

Source: Wor Trae Organization WTO 2a

(iii) Pervasiveness of government

intervention

ervies inustries ehibit hugey ifferentharateristis an market strutures. There is a broa

range of setors in whih governments ay no seifi

roe. Nonetheess, it is wiey aknowege that,given the greater ikeihoo of market faiures an theotentiay bigger roe aye by rivate interestonsierations, government intervention in servies




77




markets as a whoe is more rominent than in goosmarkets.

The form of this intervention has hange over time,however. Historiay, severa infrastru tura an soia

servies, eseiay those rovie to the generaubi traitionay ae “ubi servies”, wereirety suie by government entities, usuay inmonooy situations. Reent eaes have seen amove away from state ownershi towars morereiane on rivate markets to rovie these servies.Governments rogressivey move bak from theirroe of suiers an inreasingy took on the roe ofreguators. One suh servies were no ongerubiy finane an rovie, governments werefore to introue new measures, with the stateobetive of romoting eonomi an soia wefare.Inee, reguation of these servies markets has

eane at the same time as the inustriesonerne have been rivatize an oene u toometition.

How o governments intervenein servies markets?

This setion highights the main tyes of governmentmeasures that have an effet on trae in servies. Itony skethes broa ontours. Given that the efinitionof trae in servies inues servies that are roueoay in the imorting ountry, the soe of measures

otentiay imating suh trae is vast, ranging fromororate taation to abour aws, to onsumersubsiies, to an ownershi rovisions, an so on. Theist is muh onger than in the ase of measuresassifie as nontariff measures in a goos traeontet.

The fat that a measure negativey affets trae inservies oes not imy that it shou be automatiayviewe as rotetionist. On the ontrary, as isusseabove, governments often intervene in serviesmarkets in ursuit of a variety of ubi oiyobetives that are unreate to trae oiy

onsierations. Their interventions might nevertheessraise the ost for servies suiers to enter/estabishor oerate in a market.

This setion resents a t yoogy of servies measuresan raws on the imite avaiabe iterature toisuss to what etent suh measures may beonsiere as trae restritions.

(i) Types of services measures

As highighte, the onet of “borer” is notneessariy a hefu riterion when trying to ategorizeservies measures. ranois an Hoekman 21

assify servies interventions aoring to whetherthey affet omesti an foreign servies anservies suiers ifferenty, i.e. are isriminatory,an whether they affet the abiity of firms toenter/estabish in a foreign market or have an imaton their oerations see Tabe .2.

uh a assifiation, whih is base on the effet ofthe measures, atures virtuay a forms ofgovernment intervention in servies markets. It isaso hefu in that it enabes a rough istintionbetween measures that usuay reue the number ofsuiers in a market i.e. those reate to market

entry/estabishment, an thus the quantity suie ata given rie, an measures that raise osts one amarket is entere into i.e. those that imatoerations an resut in a given quantity beingsuie at a higher rie.

It aso hes to highight that servies interventionsomrise measures that affet in the same way foreignan omesti rouers seeking aess to theomesti market. Measures imating either entry orestabishment in a nonisriminatory fashion mayrotet nationa, or inumbent, suiers, at theeense of foreign or new omesti suiers. In this

regar, some of the measures uner isussion mayatuay be restritive to ometition generay, ratherthan to “ foreign ometition”, i.e. trae.

Thus, what matters for servies trae is not ust theremova of isriminatory measures but theontestabiity of the market. ven in a situation wherea isriminatory measures were remove, a setorwou sti remain highy restrite if ony a fienumber of suiers were ermitte to oerate.Though there wou be no isrimination in favour ofnationas, the entry of any new suier to the market,be they foreign or omesti, wou sti be onstraine.

Aternative assifiations have aso been roose.They fous more on the tye of instrument being use,rather than its effets. Hoekman an Primo raga1997, for instane, istinguish between four mainategories: i quotas an oa ontent requirements;ii riebase instruments; iii stanars, iensingan rourement; an iv isriminatory aess to

Tabe .2: Typology of measures affecting services trade

Measures impac ting ent ry/estab lishment Measures impac ting opera tions

Non-discriminatory Restrition on the number of ienes for harmaies,

for eame

Reserve requirement for banks,

for eame

Discriminatory A imit on the number of foreign arhitets,for eame

Higher ort uties harge on foreignflagge vesses,for eame

Source: WTO eretariat, base on ranois an Hoekman 21.




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istribution networks. oean an Mattoo 2roose a fairy simiar assifiation. Theseassifiations, whih are more akin to those emoyeto assify nontariff measures aying to goos traesee etion .1, aear better suite to anayse the

eonomi effets of the various measures, reiseybeause avaiabe iterature borrows heaviy fromtraitiona i.e. goos internationa trae theory.

One instane that is not ature by either assifiationis when trae is affete by the absene, rather thanthe resene, of a measure. or eame, as isussefor nontariff measures, when there is signifiantunertainty about the quaity of a servie, eman foran trae of the servie onerne might ony inreaseif ertifiat ion requirements for suiers are introueas these he raise onsumer onfiene. Instanes ofnatura monooies or oigooies rovie a further ase

in oint. Uness roometitive measures areintroue, ominant inumbent suiers an, throughtheir ontro of essentia faiities, obstrut aess tothe market Mattoo an auvé, 23.

(ii) When is a measure a trade restriction?

Muh servies reguation ursues ubi oiyobetives. Nevertheess, suh reguation mayunintentionay aso have traerestritive effets. Or, atthe same time as aiming at omesti effiieny or soiaequity obetives, it might be ature by seiainterest grous to rotet omesti suiers at the

eense of onsumers. onomi oiy onsierationsmay aso ea to servies measures being useeusivey for rotetionist uroses. They may furtheraffet the hoie, among a ossibe aternatives, ofartiuary ineffiient oiy instruments.

Given the ervasiveness of servies reguation an it somminging with trae rotetion a ear ientifiationof whih measures are trae restritions, or a neatsearation of the rotetive omonent in suhmeasures, is fraught with iffiuty. As oean anMattoo 2 observe, the traereate imiationsof servies measures een on the seifi

harateristis of the servie inustry in question, anartiuary on the market imerfetions suhmeasures are esigne to orret or equity obetivesthey are ursuing. Market strutures iffer wieyamong servies setors ranois an Hoekman,21. ervies trae inues transations in highyontestabe setors as we as network inustriesharaterize by arge fie osts of entry, for instane.The trae effets of servies measures an thus beeete to be ifferent in these two tyes ofinustries.

Inee, at the setora eve, a great ea of iterature isavaiabe that assesses the reative effiieny of if ferentreguatory measures in attaining seifi ubi oiygoas. Though rarey eiity traeoriente, manyfinings ea to traereevant oiy onusions. At a

genera eve, however, very itte anaysis seems to havebeen unertaken on the reative effiieny of serviesmeasures. Nevertheess, the imite iterature that isavaiabe oes oint to some broa observations. Thefoowing isussion is organize aroun the tyoogy of

servies measures in ranois an Hoekman 21,omemente by an instrumentbase assifiation. Itaresses first isriminatory measures, an then nonisriminatory ones.

irst, isriminatory measures that imat eitherentry/estabishment or oerations ae foreignservies an suiers at a ometitive isavantagereative to omesti servies an suiers. They anbe onsiere trae restritions amost by efinition.They inue “traitiona” trae measures, suh asquantitative restritions, that imat foreignentry/estabishment, an isriminatory taes or

subsiies that affet the ost of foreign suiers’oerations.

Internationa trae theory suggests a ranking of suhinstruments of rotetion for goos trae seeetion .1. If the obetive of a oiy is to ean theoutut of an imortometing inustry, outut subsiiesan be shown to be a suerior instrument to tariffs, antariffs normay suerior to quotas. As Hiney 19iniates, this ranking shou, in rinie be as vai forservies as it is for goos. Nonetheess, aying asimiar anaysis to servies trae resents a number ofhaenges, as Mattoo 23 highights. irst, tariffs are

not neessariy a feasibe otion for servies. eony,measures that may have tariffike effets in terms ofraising foreign osts er unit of outut are not tariffikewhen it omes to generating revenue. Thiry, an mostsignifianty, the moa efinition of servies traeimies the ossibiity that trae restritions wi bringabout moeswithing an that fator movements wiirety affet market strutures.

Tariffike measures that o not roue any revenuewou imy a muh greater oss in nationa wefarethan a straight tariff if inome from quotas i.e. quotarents oes not arue omestiay.7 Generay

seaking, quota rents arue to the owners of the rightto imort the rout in the omesti eonomy. In thease of servies, foreign suiers generay se theirservie irety to omesti onsumers, so they aremuh more ikey to oet the quota rents than in thease of goos. Aitionay, quotas are oftenassoiate with wastefu aministration an rentseeking ativities, inuing orrut raties, thatush their soia ost above that of tariffs. Inimerfety ometitive markets, quotas are shown tobe even more wastefu oean an Mattoo, 2.

If trae is ossibe through ony one moe, a imitationon that moe may rener the servie onerne nontraabe. If moes an be substitute for eah other, arohibitive restrition may not have muh effet if theunonstraine moe is the most effiient one ranois




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an Hoekman, 21. If, however, it is not the firstbestotion, the swith to the aternative moe may resut ineaweight osses inue by trae iversion thoughossiby moerate by ower rie inreases than inthe ase where this moeswithing otion was not

avaiabe. Thus, any benefits resuting from themutie moes of servies rovision at the isosa ofsuiers fae with a trae restrition nee to beweighe against the aitiona ost to the imortingeonomy of aquiring the servie thorough a reativeyineffiient moe oean an Mattoo, 2.

or those servies where rossborer eivery is notfeasibe, imitations to entry on foreign investmentimy that the rie an quaity of the serviesonerne are etermine eusivey by the omestimarket struture. These restritions on foreign iretinvestment I generay take the form of either

entry quotas an/or restritions on foreign equityartiiation. Whie the atter restritions may reventtransfers of tehnoogy, skis an knowhow, theformer have been shown to be more soiay wastefu.oreign I might be attrate by returns toinvestment that have been artifiiay raise byrestritions on ometition an the true soiaroutivity of the investment may thus be ower thanthe returns to the investor Mattoo, 23.

As for nonisriminatory measures, imite theoretiaan emiria work has been unertaken on thesemeasures at a genera eve on the art of trae

eonomists. This is most robaby a onsequene oftheir rimariy omesti nature. Literature reating tothe eonomi effets of nonisriminatory restritionsto entry in iniviua setors is more reaiy avaiabe,but a review of this iterature wou be beyon thesoe of this reort.

Nevertheess, it is ossibe to oint to some generaobservations. irst, nonisriminatory measuresaffeting entry/estabishment, most notabyquantitative restritions, wou seem to be iffiut to

ust ify on effi ieny grouns, as Hiney 19 anoean an Mattoo 2 argue. y roteting

inumbent suiers from ometition, suh entryimitations reue market ontestabiity. They have onoasion been efene for infantinustry tyereasons an the fufiment of universa serviesobigations through rosssubsiization. However,aternative means have been shown to ahieve thesame obetives without the nee to restritometition, so that entry imitations are at bestseon or thirranking aternatives.

eony, nonisriminatory measures that imatsuiers’ oerations wou seem to be the serviesmeasures furthest remove from rotetionisturoses. ven when they are ursuing ubi oiygoas, however, they may, intentionay or otherwise,have siover effets on trae. or instane, oeanan Mattoo 2 observe that, though resoning

rimariy to robems of asymmetri information,ertifiation requirements for rofessionas have traean wefare effets that may vary eening on thesreening mehanisms hosen. Moreover, suhmeasures might yet again affet suy atterns by

inuing suiers to swith to aternative moes oftraing servies eimatsis, 2.

As suh, a ruia haenge ose by these measuresis how to istinguish between when they are useeusivey for ubi oiy obetives an when theyare aso being use for rotetionist urosessee etion .2. Mattoo an auvé 23 argue infavour of a “neessity test”. uh a test wou enabegovernments to attain their hosen eonomi an soiaobetives, but to o so in a manner that oes not“unneessariy” restrit trae. They onten that suh atest wou enourage the use of the most eonomiay

effiient measure among those avaiabe to remey amarket imerfetion an ursue noneonomi goas.

The ranking of instruments of rotetion in serviestrae that emerges from eonomi theory is, to a argeetent, reflete in the Genera Agreement on Trae inervies GAT. y esign, an as isusse in moreetai in etion , the GAT istinguishes broaybetween three tyes of servies measures: those thatrestrit entry/estabishment, whether isriminatory ornot; measures that are isriminatory, moifying theonitions of ometition in favour of nationa serviesan servies suiers; an measures that are non

isriminatory an nonquantitative in nature. The firsttwo tyes of measures essentiay market aess annationa treatment imitations as efine in GATArties XVI an XVII, resetivey are subet tonegotiations to rogressivey eiminate them. The thirtye of measures “omesti reguation” are notonsiere trae restritions as suh, but the GATaknoweges that they may nevertheess have t raerestritive effets an manates the estabishment ofreevant isiines uner Artie VI:.

. NTMs in the 21st entury

This setion esribes how reent or foreseeabehanges in the traing environment have affete ormay affet governments’ use of nontariff measuresan servies measures. This aows us to iustrate theratia iffiuties invove in eaing with measuresursue for ubi oiy reasons an the trae imatof suh measures. ames inue measures takenin the ontet of the reent finania risis, oiies inreation to imate hange an measures aressingfoo safety onerns.

a NTMs, servies measures anthe reent finania risis

onomi rises tyiay resut in the imementationof eonomi stimuus measures by governments.




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The use of nontariff measures is a art of suh risisinue government intervention. The reent finaniarisis, whih has ha an imat on the use of NTMs bygovernments worwie, is a ase in oint. In thissetion, an anaysis of the NTMs imemente in the

wake of the risis wi enabe us to iustrate theratia iffiuties invove in istinguishing betweenmeasures taken for ubi oiy reasons an thosethat onstitute isguise rotetionism. This setionwi aso isuss how reent hanges in the traingenvironment brought about by the finania risis mayaffet governments’ use of NTMs in the future. Itemhasizes that better monitoring of nontariffmeasures, whih ensures greater transareny in theiruse, is imerative in reserving onsumer interestsan reventing a roiferation of rotetionistmeasures. It aso aues to the fat that in situationswhere governments have a referene to rotetomesti inustry, a monitoring mehanism nees tobe aomanie by egay enforeabe rues thatenabe retaiation if an agreement is vioate to imitthe use of traeistorting NTMs.

(i) The recent financial crisis:attributing motive to the use of NTMsand services measures

It is weestabishe that the origin of the reentfinania risis an be trae to institutiona faiures inthe reguation of finania systems at a nationa eve.

Its effets were then transmitte aross manyountries through internationa trae an finaneinkages. In resonse to the risis, subsiies, in theform of iret funing, seia oans an guarantees,were rovie to bai out a number of finaniainstitutions in various avane eonomies awinan venett, 21. These “emergeny” measures inthe finania setor were assoiate with ubi oiyobetives; they were eeme neessary to stem thesrea of systemi amage an he restore thenorma funtioning of finania markets – ritia forboth onsumers an rouers aross the wor.

A number of ountries aso introue subsiies toenourage onsumers to buy seifi routsthrough, for instane, refuning a ertain amount ofthe urhase rie. or eame, the onsumerAssistane to Reye an ave AR At of 29in the Unite tates – referre to as the “ashforunkers” rogramme – rovie reits to onsumerswho trae in o, fueineffiient vehies when buyingor easing new, more fueeffiient vehiesongressiona Quartery, 29. uh onsumersubsiy shemes, imemente in a number of otheravane eonomies inuing Germany, rane an

the Unite Kingom, were use as measures tostimuate omesti eman – one again, a ubioiy obetive. Moreover, they were nonisriminatory internationay.

In times of eonomi reession, however, high eves ofunemoyment an resut in governments resorting tonontariff measures an servies measures thatisriminate against imorts ometing with “ike”omesti routs. Hene, as highighte earier, it

often beomes iffiut to istinguish ratiaybetween measures taken for ubi oiy reasonsathough their imosition may have averse traeeffets an those that onstitute isguiserotetionism. This ambiguity in government motivationis further omiate by the inrease imortane ofintermeiate goos trae in goba suy hainsHummes et a., 21; Kooman et a., 21. orinstane, onsier the inustryseifi subsiiesintroue by a number of eveoe eonomies toassist their strugging automotive inustries uring thereent risis. This is otentiay traeistorting for thefina rout market in the shortrun. However, it is

ossibe that by isruting an estabishe gobasuy hain, their oase wou have e to asubstantia eine in wor intermeiate goos trae,thereby resuting in signifiant ob oss among severaountries over the meiumrun.

Ientifying the motive behin nontariff measures anservies measures beomes eseiay imortant in arisis situation beause it an easiy ea to beggarthyneighbour oiies, i.e. traerestritive ationstaken by one ountry an trigger simiar ations byother ountries, eaing to a sira of ever morethreatening restritions. onsier, for eame,

subsiies to finania institutions. If baiout funs areonitiona on finania servie firms reiretingening towars the home market, this may be seen asisriminatory esite the aarent ruentiaonerns. The same hos true if subsiies areonitiona on the urhase of a omestiay rouerout.

(ii) Impact of the recent crisis on future useof NTMs and services measures

Monitoring and coordination

The reent risis may affet governments’ use of nontariff measures an servies measures in the future.arier in the setion, we argue that the inreaseiniene of NTMs may be inke, in art, to the fatthat they are ess transarent than borer measuressuh as tariffs, an hene harer to isiine unerinternationa agreements. An outome of the reentrisis was the reviva of the WTO’s trae monitoringmehanism in Otober 2 see etion .1.9 The reviva of this monitoring mehanism reresents anavane in aressing transareny in the use of NTMsan servies measures. It an at as a ommuniationevie to sove a oorination robem that eas toeessive rotetionism, via the use of suh measures.In the foowing hyothetia eame of how this mightwork, it is assume that governments refer oen traeoiies to rotetionism see Tabe .3.




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Given the ayoffs seifie for two traing artners inthe above tabe, there are two equiibria. If ountry 1resists rotetionism through nontariff measures, forinstane, ountry 2’s best resonse is aso not torestrit trae an vie versa. If, however, ountry 1 is

imosing trae restritions, ountry 2’s best resonseis aso to imose simiar restritions an vie versa.This reflets a beggarthyneighbour oiy – if, foreame, ountry 1’s eorters annot omete on aeve aying fie in ountry 2, the government ofountry 1 wou not want the ountry’s firms to asoose out on omesti market share to imortometition from ountry 2. or both ountries, thefirst equiibrium outome is referabe to the seon.ut if the two are unabe to ommuniate anoorinate their ations, they may en u with the essreferre equiibrium outome. Hene, by imrovingthe transareny of NTMs, WTO’s monitoring

mehanism an guie members to a better wefare“Paretosuerior” outome.

Of ourse, it may be the ase that governments referto rotet their omesti inustry. If so, the strategiinteration between governments is not simy aoorination game – the ayoffs resente in therevious hyothetia eame wou hange. uoseone ountry hooses “no rotetionism”, the otherwou want to hoose “rotetionism” as it wou getfu market aess to the former without having tooen u to ometition itsef. Tabe . reflets thisargument with reevant ayoffs for the two ountries. It

shows that the situation is reresentative of what isknown as a risoner’s iemma game, whereby botharties are motivate by the fear of what the othermight o.

Given the ayoffs seifie for two traing artners inthe above tabe, the equiibrium is both ountrieshoosing the strategy of rotetionism. Unike theoorination game, however, a monitoring mehanismthat hes the ountries to ommuniate with eahother wou not be suffiient to guie them to a betterwefare outome where both hoose the strategy of norotetionism. This is beause esite theommuniation, eah ountry wou have an inentiveto efet from their agree uon strategy, fearing thatthe other might o so. Hene, aong with a monitoringmehanism, egay enforeabe rues – that enaberetaiation in the event either ountry vioates anagreement of hoosing “no rotetionism” – wou berequire to ontro the use of traeistorting nontariff measures an servies measures. It is worthnoting, however, that uring the reent finania risis,

governments of both avane an eveoingeonomies have reaffirme their faith in the mutiateratraing system with reeate eges to guar againstrotetionist oiies.

Measures in the financial services sector

Given that the origin of this eonomi risis ay in afinania risis, it is ikey to af fet governments’ futureuse of measures in the finania servies setor, whihmay affet internationa market aess. The iteratureientifies the heterogeneity of reguatory raties asa maor onstraint on servies trae see etion .The reent finania risis may affet the motivation ofgovernments to ursue reguatory onvergene in thefinania servies setor ue to the reasons outinebeow.

irst, the reent risis was anhore in avaneinustriaize nations – those ereive to havereativey sohistiate reguatory regimes. In fat,ertain eveoing eonomies may assoiate theativities of some foreign finania oerators with whatthey ereive to be egitimate maroruentiaonerns. eony, unike severa eveoeeonomies whih are assoiate with highy iberaizeaita aounts, those whih maintaine greaterrestritions on aita transations an took a striterstane on finania everage aear to have weatherethe storm better eimatsis an auvé, 21. Thiry,goba iquiity growth, inue by eansionary

maroeonomi oiies imemente aross the gobeuring the reent risis, resute in a surge of aitaflows to emerging eonomies. This has omouneonerns about the intrinsi voatiity of shorttermaita flows, thereby giving eveoing ountries anaitiona reason to ringfene their eonomies againsta suen reversa iaoui et a., 211.

b NTMs an imate hange

(i) The future scenario

The urban imate hange onferene in eember211 ene with a ommitment “urban Patform fornhane Ation” to work towars a new goba treatyto reae the Kyoto Protoo by 21 at the atest anto estabish a new imate fun the “Green imateun” to he oor ountries both mitigate an aatto imate hange. Two years earier, the UN imatehange onferene in oenhagen estabishe atarget to kee the inrease in goba temerature fromreinustria times beow 2 egrees esius.

Tabe .3: Coordination game

Country 1

Country 2

No rotetionism Protetionism

No rotetionism 2, 2 ,

Protetionism , 1, 1

Tabe .: Prisoner’s dilemma game

Country 1

Country 2

No rotetionism Protetionism

No rotetionism 2, 2 , 3

Protetionism 3, 1, 1




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A number of observers Houser, 21; oansky,21 saw that target uner the oenhagen Aoras a signifiant ste forwars for the goba ommunitysine the ak of an eiit ongterm goa meantountries ha no ear iretion for nationa an

internationa oiy.7

urthermore, uner the Aorboth eveoe an eveoing ountries notifieemission reution targets to the Unite Nationsramework onvention on imate hangeUN.71

Nevertheess, both meetings fe short of eetationsthat they wou roue bining mitigationommitments from both eveoe an eveoingountries. Without reuging the outome, shou thenegotiations on a ostKyoto agreement roverotrate, what wi ikey emerge in the near term is aathwork of regiona an nationa imate hange

regimes with some ountries imementing fairy stritmitigation measures, others taking no meaningfuation, an a fair number of ountries with oiies thatie somewhere in between. This may ea toenvironmenta an eonomi outomes that ountrieswou then try to manage through the use of nontariffmeasures.

(ii) Carbon leakage and concerns aboutloss of competitiveness

Two reate onerns are ikey to eeen if nointernationa agreement emerges about the seifi

ations that a ountries nee to take to take imatehange. One is “arbon eakage” an the other is theossibe oss in ometitiveness of firms or inustriesin ountries whih take more stringent mitigationmeasures.

arbon eakage refers to a situation in whihreutions of greenhouse gas emissions by one set ofountries “onstraine” ountries are offset byinrease emissions in ountries whih o not takemitigation ations “unonstraine” ountries. Muh ofthe isussion of arbon eakage has taken ae inthe ontet of the Kyoto Protoo where soae

Anne I ountries reominanty eveoe ountriesha ommitments to ut bak on their emissions whienonAnne I ountries eveoing ountries i not.72

The eakage an our through a number of hannesinvoving hanges in internationa ries of energy anenergyintensive goos as we as the reoation ofroution. asiay, the mitigation measures inonstraine ountries reue the roution ofenergyintensive goos an raise their internationaries. The erease in roution of energyintensivegoos aso reues the eman for fossi fues aneas to a ro in their ries. Unonstraine ountriesean their roution of energyintensive goos inresonse to their higher internationa ries. The owerrie of fossi fues wi aso inue unonstraineountries to use more of it, thus inreasing emissions.

inay, energyintensive inustries may reoate fromonstraine ountries to unonstraine ountries.

However, there are aso offsetting effets whih neeto be onsiere. The first one is the inome effet

from the inrease in the rie of energyintensivegoos oean an Tayor, 2. The same riehange whih rives unonstraine ountries toinrease roution of energyintensive goosinreases their inome. Assuming that environmentaquaity is a norma goo, this inome effet wi rothem to take measures to mitigate emissions. Theseon effet that an ounterat arbon eakage isinnovation towars more energyeffiient means ofroution i Maria an Werf, 2. The same riehange resonsibe for arbon eakage aso inuesfirms to evote more of their researh an eveomentR& resoures to fin energyeffiient means of

roution. This is simiar to the argument mae byPorter an van er Line 199 that roery esigneenvironmenta reguations an sur innovation thatmay artiay or more than fuy offset the osts ofomying with them.

eause of these ossibe offsetting effets,estimates of the magnitue of arbon eakage varyonsieraby athough it is aways greater than zero.The stanar metho of measuring arbon eakageeresses it as a ratio of the inrease in O2 emissionsof unonstraine ountries an the reution in theemissions of onstraine ountries. Most of theestimates of the goba rate of arbon eakage varybetween er ent an 2 er ent im et a., 2.However, muh higher estimates reahing u to13 er ent have been auate abiker, 2.stimates of arbon eakage above 1 er ent imythat mitigation oiies in the onstraine ountriesare atuay ounterroutive sine they ea tohigher goba emissions as roution shifts tounonstraine ountries that emoy more emissionintensive tehnoogies. 73

Unike arbon eakage, there is no reise efinition of

ometitiveness in the imate hange iterature. Itmight refer to the imat of the mitigation measureson firms’ or inustries’ ost of roution, rofits,outut, emoyment, or market share. These iniatorshave been variousy emoye in a number of stuiesto measure oss of ometitiveness.7 Notwithstaningthis imreision, the shift in roution of energyintensive goos from onstraine to unonstraineountries, whih is what makes eakage ossibe,atures the essene of this ometitiveness onern.

(iii) Measures to address climate change,carbon leakage and loss

of competitiveness

The nee to mitigate imate hange wi sur manyountries to take uniatera mitigation measures,




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many of them faing in the ist of nontariff measuresthat have been isusse in this reort. However,arbon eakage introues a strategi imension toonstraine ountries’ mitigation efforts sine theymay onsier it neessary to take into aount “free

riing” by unonstraine ountries whih an iute orreverse the effet of their mitigation ations. The freeriing refers to the argument that unonstraineountries bear no ost of mitigation efforts, yetassuming arbon eakage is ess than 1 er entthey benefit from the reution in goba emissionsue to the mitigation ativity of the onstraineountries. It is argue that trae measures rovie away for onstraine ountries to ater the inentives tofreerie on their eneavours.

Theoretia work eists on the effet of inkinginternationa environmenta ooeration with trae

arrett, 199; arrett, 1997; otteon an arraro,199. The basi insight from these stuies is that thenumber of ooerating ountries in an environmentaaor wou be arger an the agreement more stabee.g. sefenforing if there are rovisions for traesantions against nonmembers. In other wors, usingtrae measures against nonooerating ountriesan be an effetive way of inreasing the number ofooerating ountries an of guaring againstefetion by urrenty onstraine ountries. As notereviousy in etion .1, a number of internationaenvironmenta agreements, namey the onvention onInternationa Trae in nangere eies of Wi

auna an ora IT an the Montrea Protoo,inue rovisions aowing for the use of traemeasures.

Nontariff measures that might be taken to mitigateimate hange as we as to ounter arbon eakageor to reue the oss of internationa ometitivenessby ountries with stringent mitigation oiies inueborer ta austments, subsiies, an reguatorymeasures inuing TT/P measures. There is bynow a ong ist of aers that have eamine the WTOonsisteny of these tyes of measures in the ontetof imate hange. A artia ist inues oroff

29, Low et a. 211, Pauweyn 27, an WorTrae Organization WTO an Unite Nationsnvironmenta Programme UNP 29. Thefoowing isussion wi fous on the eonomiasets rather than the egaity or WTOonsistenyof the measures.

Border adjustment measures

orer austment measures wou imose osts onimorts of emissionintensive goos ommensuratewith the osts of omiane with omesti emissionsreguations. On the imort sie, borer austmentsan take the form of a ta on imorte routs, or toa requirement for imorters to urhase emissionermits or aowanes for those foreign routs thatthey are imorting. On the eort sie, borer

austments an take the form of an eort rebate,where eorters shiing items to unonstraineountries are omensate for the ost of omyingwith emission requirements. This isussion fouseson a omesti ta on imorts sine that has rawn

more interest.

When onstraine ountries set their otima oiies,they wi nee to take arbon eakage into aount, i.e.they wi have to at strategiay. Hoe 199 showsthat the firstbest oiy of onstraine ountries wibe to imose a tariff on the emissionintensive imortan ay a uniform arbon ta on both omesti anforeign emissionintensive goos.7 The imort tariffwi be set so as to i shift the terms of trae in theimorting ountry’s favour an ii reue eman foremissionintensive foreign goos. This seon eementreflets the onstraine ountry’s strategi reognition

of arbon eakage an the nee to reson to it.

If a ountry annot freey aust its tariffs, the seonbest oiy wi require a nonuniform arbon ta, sineit not ony nees to reflet the soia ost of emissionsbut aso shift eman away from emissionintensiveforeign goos.7 There are two main haenges toimementing suh a borer ta austment. The first isthe aministrative iffiuty of imementing suh asheme given the enormous amount of informationrequire to etermine the emissions of foreignroue goos.77 The seon is the risk that one asystem of borer ta austments is ut in ae, it wi

be ature by rotetionist interests. Moore 21observes that the arbonintensive setors that areikey to be at the entre of the issue – stee, hemias,aer, ement, an auminium – are intensive users ofantiuming measures, suggesting that they wi beaggressive in their attemts to use borer taaustments as a means of imiting internationaometition.

Subsidies

As isusse in etion .1, the eistene of ositiveeffets an rovie a egitimate reason for

governments to use subsiies to suort an eonomiativity with soieta benefits that are not reflete inmarket ries. In the ase of imate hange, thereare strong reasons to beieve that tehnoogiahange offers the main avenue for reuing futureemissions an ahieving the eventua stabiization ofatmosheri onentrations of greenhouse gasemissions. The Intergovernmenta Pane on imatehange IP ientifies severa reasons why R&subsiies are warrante, artiuary in the energysetor Metz et a., 27.

The benefits of R& may not be reaize for eaes,whih is beyon the anning horizons of even themost forwarooking firms. Inustry an onyaroriate a fration of the benefits of R&investments an as a resut, firms unerinvest in R&.




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Moreover, firms fae iffiuties in evauating intangibeR& oututs an reguatory interventions an arofits in the ase of athbreaking researh suess.inay, given that the agriutura setor is a maorsoure of emissions, there is aso a otentia roe for

subsiies to faiitate the aotion of “imate smart”agriutura tehnoogies.

On the other han, it is aso true that subsiies roviegovernments with a means of suorting ometitiveyhaenge omesti firms an inustries. One areawhere the roe of subsiies has gaine inreaseattention is in biofues. There are no reaiy avaiabeata on the amount of these subsiies at the gobaeve. However, a reent stuy by teenbik 27using information on five O members – Austraia,anaa, the uroean Union, witzeran an theUnite tates – rovies an estimate of biofue

subsiies of about U$ 11 biion a year. A oint reortby severa internationa organizations inuing theWTO oo an Agriutura Organization AO et a.,211 estimates that uring the 279 erio,biofues aounte for a signifiant share of the gobause of severa ros – 2 er ent for sugar ane,9 er ent for vegetabe oi an oarse grains an er ent for sugar beet.

The oitia eonomy of subsiies has been raise inthe ontet of biofue subsiies, where it is aimethat a rimary obetive of some ountries’ biofueoiy is to inrease farmers’ an anowners’ inomes

Rubin et a., 2. A number of onerns, eonomi,environmenta an soia, have aso been raise aboutthe wisom of arge biofue subsiies. ome biofuesemit more greenhouse gases than they save. Anyeansion of biofue roution wi have inireteffets on greenhouse gas emissions through anuse eansion. ubsiies for biofues have aso beenimiate in the reent sike in ommoity rieswhih has been artiuary etrimenta to fooimorting eveoing ountries Mithe, 2.

Regulatory measures

As note in etion .1, reguations are wiey use toea with environmenta robems. The isussion thereaso suggeste that governments may refer thesemeasures for istributiona or ometitiveness reasons,unertainty about the osts an benefits of abatement,an the iffiuty of monitoring an enforement.

In the fie of imate hange, it is ossibe toistinguish between tehnoogy stanars thatmanate seifi oution abatement tehnoogies orroution methos, an erformane stanars thatmanate seifi environmenta outomes er unit ofroution athaye et a., 27. An eame of atehnoogy stanar is a reguation that requires theuse of seifi O2 ature an storage methos on aower ant; an eame of a erformane stanar isone that imits emissions to a ertain number of grams

of O2 er kiowatthour of eetriity generateathaye et a., 27. eyon these tyes ofreguations, some have aso ointe to the roset ofmore sanitary an hytosanitary measures beingtaken by ountries given that imate hange wi ater

the imat of ests an iseases akson, 2. Inthe fae of greater unertainty about estinvasiveness, ountries ou beome more risk aversean use emergeny trae restritions as a way ofmanaging those unertainties.

Assuming foreign rouers have higher emissions ortheir routs are ess energy effiient, requiringforeign rouers to omy with more stringentomesti requirements an reue arbon eakage.oreign roution of the goos, an their sae in thehome ountry an ontinue, but it wi be emoyingtehnoogy or stanars that are as environmentay

frieny as those in the home ountry. ine therequirements aso raise the trae osts of foreignrouers, omesti firms are abe to seure someavantage an the overa effet may be a reution ofimorts by the home ountry.

(iv) Conclusions

Nothing seaks to the intertwining of ubi oiygoas an omesti rouer interests more than theissue of arbon eakage an ometitiveness. Theose ink between these two issues onfronts us withone of the main themes of this reort: istinguishingbetween the ursuits of ubi oiy goas an ofomesti rouer interests. There is eary a gobainterest in reuing arbon eakage an ountries anhave strong environmenta reasons for using traemeasures to revent freeriing. The other sie of theoin, however, is that the same trae measure asohes ometitivey haenge omesti rouers sothat the risk of reguatory ature annot be easiyismisse. We may see inreasing use of nontariffmeasures in the future to ea with arbon eakagean ometitiveness onerns as we asisagreements about the unerying motivation behin

those measures an their trae effets.

oo safety measures

This setion isusses why foo safety measures7

aear to have beome more an more imortant inreent times an what the haenges are thatountries fae regaring their imat on internationatrae. It onues that more transareny is neeeto ensure the ursuit of onsumer interests an torevent rotetionist abuse.

(i) Increased importance of food

safety measures

The growing interest of onsumers worwie in safetyan quaity attributes of foo has rawn a ot of




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attention to the roe of foo safety an quaitymeasures in internationa trae, both governmentaan rivate Henson an aswe, 1999. On the onehan, governments intervene in foo markets asmarkets aone fai to rovie the soiay esirabe

eve of quaity an safety mith, 29. On the otherhan, agrifoo enterrises emoy rivate stanarsas a too for rout ifferentiation an quaitybaseometition Henson an Rearon, 2. Hene, thewiesrea iniene of both governmenta anrivate measures in the agrifoo setor reates toeveoments on both the eman an the suy sieof the agrifoo system, with ear inkages an intereenenies.

Demand-driven developments

Tehnoogia, soia an eonomi eveoments

have transforme onsumer eman, an reent foosafety inients have amifie this tren. A renewefous on onsumer awareness has resute in agrowing eman for higher eves of reguation anommuniation, an aears to have shifte foomarkets from riebase towars quaitybaseometition.

Growing attention by consumers to quality andsafety attributes

emograhi an soia trens – suh as urbanizationan the evoving roe of women in the workae –

have moifie eating habits an atterns of fooeman Rearon an arrett, 2. At the sametime, inreasing eves of inome, tehnoogiaavanes, more sohistiate information about theinfluene of iet on heath an its mass ommuniationhave influene onsumer attitues towars fooattributes, inreasing their awareness of risks anoortunities reate to eating behaviour aswe anMouszka, 199; Kaaitzanonakes et a., 2;Grunert, 2. This hange in fous has eonsumers to onsier asets of foo that annot beverifie at the time of onsumtion aswe anMouszka, 199. In aition, sientifi rogress has

faiitate a more reise ientifiation of heath risks,thus aowing onsumers to inrease their evauationstanars Mafra et a., 27.

Moreover, when assessing foo quaity, onsumersaear inreasingy to ay attention to a broaer rangeof rout an roess harateristis, suh as theimat of foo roution on the environment, workerwefare an goba overty Henson an Rearon,2. These eveoments, whih are inreasingyrominent aso in eveoing ountries Rearon et a.,21, have e to a market for quaity an safetyharaterize by imerfet information an substantiatransation osts in obtaining an using informationaswe an Mouszka, 199. Governments anrivate setor ators have intervene to orret theseineffiienies, introuing governmenta measures

that reguate foo routs an roution roessesan eveoing rivate stanars, resetivey.

Food safety scares

A number of highrofie foo safety sanas haveheightene ubi an rivate attention to fooattributes even further. The ioin risis in the outrysetor in the Netherans in 2, the bovinesongiform enehaoathy in the beef setorin various uroean ountries over a number of yearsan the hinese meamineauterate mikontamination in 2 are rominent eamesLatouhe et a., 199; Maruhek et a., 211.onsierabe meia attention towars these risesamifie their effets on onsumer attitues, an thisroess of “soia amifiation” has resute in animortant erease in onsumer trust in reation to

ubi an rivate assuranes regaring the safety offoo Latouhe et a., 199.

The subsequent nee to restore onfiene in ubiauthorities an foo rouers has e to an inrease intransareny in regar to the oeration of the suyhain öker an Hanf, 2; Mazzohi et a., 2,an governmenta an rivate foo safety measureshave roiferate as toos to guarantee suh eves oftransareny Henson an Humhrey, 21. Whieubi ators have tightene eisting measures aninstitute new measures for emerging an reviousyunreguate issues, foo omanies have fet the nee

to ontro reutationa an ommeria risks reate tofoo safety Henson an Rearon, 2.

Supply-driven developments

esies emanriven hanges, eveoments onthe suy sie of foo markets have ontribute to aninrease in both governmenta an rivate measuresreate to foo safety an quaity. The struture of thesuy hain has evove towars inreasefragmentation aross mutie enterrises anintegration into goba markets. This eveoment hasbeen riven by tehnoogia hanges whih have e

to a reorganization of farm ativities an an inreaserovision of goos an servies by offfarm enterrisesRearon an arrett, 2. The arge number ofayers invove in the suy hain has heightenethe nee for both oorination among firms angovernment assurane of quaity an safety in reationto foo routs an roution roesses. The gobareah of toay’s agrifoo suy hains, riven byavanes in ommuniation, istribution antransortation systems, has further amifie thehaenge to ensure traeabiity an omatibiityamong foo safety measures in ifferent urisitions.

Coordination costs and global supply chains

ragmente suy hains fae oorination anmonitoring haenges. Agrifoo suy hains may




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invove a high number of suierbuyer reationshisaross whih the quaity an safety of the fina foorout nees to be ensure Henson an Rearon,2. oorination an monitoring efforts inreasetransation osts an are further omiate by

ifferent eves of information between buyers ansuiers Gereffi et a., 2; Hammoui et a. , 29.This has e firms to aot “hanson” forms ofoorination or even to strive for omete vertiaintegration. Aternativey, oorination osts aninformation robems at the interfirm eve have beenmanage at arm’s ength via rout an routionstanars Ponte an Gibbon, 2; Gereffi et a.,2. As agrifoo hains beome goba an invoveifferent reguatory environments, the roe of theseinstruments in the oorination of suy hains anthe stanarization of rout requirements amongsuiers beomes of greater imortane Henson an

Rearon, 2; Maruhek et a., 211.

Importance of, and challenges related to, traceability

Aowing for the reise traking of foo routsaong the suy hain, traeabiity systems reresentimortant instruments to assure foo quaity ansafety in agrifoo suy hains. Their rinia aim isto oet the neessary information for theientifiation an the eventua rea of routs thatreresent a risk to onsumers Meuwissen et a.,23. The aotion of traeabiity systems is reateto the broaer henomena of inrease onsumer

attention to foo safety an quaity, tehnoogiarogress an the goba etension of foo suyhains. The safety sanas reviousy referre to haveinrease the interest of onsumers in theseinstruments ouzaMonteiro an aswe, 2;ikinson an aiey, 22. In orer to funtionaequatey, traeabiity systems must aow for theientifiation of a artners in the suy hain, angrant omete information transfers. The trentowars an inrease internationaization of suyhains has ose onsierabe haenges to theaomishment of these requirements, an e to agrowing nee for reguation an ooeration

Meuwissen et a. , 23.

(ii) Trade impacts of food safety measuresand mitigation strategies

Given the imortant roe that foo safety measuresay on both the suy an eman sie of foo,these measures are boun to af fet internationa traein these routs.79 This art esribes some of therinia ways in whih foo safety measures affetrouer strategies an onsiers mehanisms formitigating ossibe negative trae imats.

Trade impact

oo safety measures an reate both haenges anoortunities for rouers. ome of the main

haenges reate to the osts assoiate with iverserequirements. y investing in the aaity to rouerouts that ahieve higher safety requirements,rouers may aso benefit from aessing highervaue markets. Prouers may aso invest in eveoing

their own stanars as a marketing strategy an as ameans of managing rout quaity aong the vauehain.

Compliance costs and loss of economies of scale

osts of omiane an resut in the oss ofeonomies of sae for foreign rouers if ifferentrequirements ay in ifferent eort estinations.These osts wi be a funtion of the eorters’aministrative an tehnia aaity for managingiverse requirements Henson an Mituah, 2;Mathews et a. 23; Otsuki et a., 21. In aition,

foo safety measures usuay inue both a seifieeve for artiuar substanes an systemirequirements assoiate with reorkeeing anonformity assessment. Therefore, when they areonsiere umuativey, regaress of whether theeve of these foo safety measures is the same, if theonformity assessment roeures are ifferent, ostsmay inrease ue to uiative testing requirements.

Increase in value-added

oo safety/quaity measures may aso emboyavane reguatory “tehnoogy” an he inrease

vaueae in the eorting ountry. ome anaystsstress that rising foo safety requirements anatayse trae, reating inentive for firms to invest inorer to reosition themseves in ometitive gobamarkets affee an Henson, 2; winnen anMaertens, 29. Of ourse, foo safety measuresimat the ometitive osition of iniviua ountriesan istint market ar tiiants ifferenty eeningon their strengths an weaknesses. Highrequirements tyiay are assoiate with highvauetrae, whih means rouers artiiating in this tyeof trae wi be abe to reeive higher returns. In asuortive oiy environment, oor rouers may

benefit irety through ontrate artiiation in thevaue hain see, for eame, affee et a., 211.

Private standards and market power

Private setor foo safety stanars ay an imortant,an inreasing, roe in etermining internationa traeoutomes, aing an aitiona ayer of omeity tounerstaning trae in foo routs.1 When retaiershave buying ower, suh stanars an beome defacto market entry barriers for ertain rouersHenson an Humhrey, 29; Wor TraeOrganization WTO, 2b. This is artiuary thease for eveoing ountries whih at as “stanartakers” rather than “stanarmakers”. Researhiniates that in many ases, eveoing ountries arestanartakers beause eveoing their own




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stanars is more osty than aoting the stanarsof their maor markets tehenson, 1997.

Inreasingy, rivate omanies or grous of retaiershave reate their own stanars to satisfy onsumer

eman for artiuar rout harateristis an as atoo to segment markets. or eame, the UKsuermarket hain Teso has a stanar that a itssuiers of fresh fruits, vegetabes an saas mustmeet Garía Martinez an Pooe, 2. Privatestanars often go beyon foo quaity an safetyseifiations an inue ethia an environmentaonsierations as we winnen an Maertens, 29.The imiations for the mutiatera traing system inregar to rivate stanars as we as furtherhaenges in regar to mutiatera ooeration onfoo safety measures more generay are isusse inetion .

Mitigation of negative trade impacts

evera aroahes are avaiabe to mitigate theossibe negative imats of foo safety measures ontrae. ountries may seek to harmonize their foosafety measures to a ar tiuar benhmark. They mayaso negotiate an agreement to reognize othernationa foo safety systems as ahieving theneessary eve of foo safety. ountries aso ommitto a ommon set of rues embee in the WTO’s PAgreement that seek to imit the otentia use of foosafety measures for rotetionist uroses.

Harmonization and equivalence

Whie rotetionist inentives may ontribute toreguatory iversity in foo safety reguations, thisiversity ersists for a variety of other reasons. Riskeretions an referenes an the interretation ofsientifi eviene may vary among ountries. Theseifferenes may ea to the aotion of ifferent evesof foo safety reguations. oo safety measures,however, are tyiay more ome than aseifiation of a artiuar eve for ontent of riskymateria. A arge roortion of foo safety measures

are roess requirements whih efine artiuararoahes for ahieving seifie eves of foosafety. ine the onitions within eah ountry vary,the otima aroah for ahieving the same eve ofsafety may aso vary. There are various oetivearoahes for reuing the otentia negative traeimats assoiate with this iversity.

One aroah wou be for ountries to seek toharmonize foo safety measures to a singe stanaror stanars system. Harmonization an take manyforms an the imat of harmonization wi eenuon what eve is hosen as the benhmark. WTOrues in reation to foo safety enourageharmonization towars internationa stanars set bythe oe Aimentarius ommittee. Thisintergovernmenta boy oetivey eies on

stanars, guieines an reommenations in thearea of foo safety an, in rinie, shou inororatethe referenes of a ountries artiiating in thestanarsetting for more etaie isussion,see nger et a., 212; Hooker, 1999; ykes, 1999.

Another aroah for aressing reguatory iversityamong ountries is for ountries to reognize foosafety measures of traing artners as equivaenteven if these measures iffer from their own.2 Thisaroah wou enabe ountries to eveo foosafety systems to fit their seifi ontet, rather thanforing a onesizefitsa aroah to ahieving aartiuar eve of safety osing et a., 2.quivaene is artiuary imortant in the ase ofroess requirements ue to their omeity. yontrast, rout requirements are tyiay efineaong fewer imensions an are thus more easiy

omare. In ratie, the etermination of whether asystem of foo safety requirements ahieves areasonabe eve of safety may be aministrativeyburensome beause it requires an evauation of thesystem of risk management interventions, inuinginfrastruture, rogramme imementation an seifitehnia requirements.

Other means to prevent trade distortions

As foo safety measure an be abuse for rotetionisturoses,3 ountries an ommit to a range ofisiines that onstrain suh behaviour. omerinia obigations ontaine in the WTO PAgreement in this regar are outine beow.

irst, the right to imement traeistorting foosafety measures is inke to a sientifi ustifiation ofthe measure, seifiay that the measure be baseon sientifi assessment of foo safety risks. Anotheraset of the rues emhasizes that the eve of risksought within ountries shou be onsistent inifferent situations. Of ourse, as note above, whiefoo safety measures wi inue a target eve forontent of risky materia, the measures usuay aso

inue other imensions. ome anaysts havequestione whether onsisteny is a reaistieetation given the ome system of fators thatontribute to the eveoment of reguations ykes,2. inay, the WTO rues for foo safety eiitystate that foo safety measures shou be “not moretrae restritive than require to ahieve theiraroriate eve of sanitary or hytosanitaryrotetion”. As in the ase of reognition ofequivaene aross ountries, this requirementreognizes that there may be aternative aroahesthat ou be taken to reah esire eves of safety.

. ummary an onusionsThis setion has introue ifferent ategories ofnontariff measures an measures affeting trae in




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servies, anayse their oiy rationaes an eonomieffets an euiate the iffiuties invove inientifying ossibe rotetionist abuses. In etion.1, reasons for government intervention have beenreviewe, as have the oiies imemente in ursuit

of these goas that may affet trae. This has resutein the finings outine beow.

Nationa wefaremaimizing oiies that seek tomaniuate the terms of trae or shift rofits fromforeign to omesti firms are eiity traeoriente.Measures affeting foreign rouers may aso betaken in orer to riviege seifi inustry obbies foroitia eonomy motives. Other oiies aressubi oiy onerns, suh as environmentarotetion or onsumer heath. As suh, they are nottargete at istorting trae, but may nevertheessaffet trae in orer to reah their obetive.

A range of instruments are avaiabe to ursue theseoiies. Trae obetives an be ursue using tarif fsor oeny traeistorting nontariff measures, suh asquotas, eort taes or subsiies. or many ubioiy obetives, nonisriminatory NTMs, suh asreguatory measures or rout taes, are firstbestoiies. However, governments an aso imementoriginneutra measures in ways that de facto isriminate against foreign rouers or emoyNTMs that are ineffiienty reuing trae more thanneessary to fufi a ubi oiy goa.

Whie a government may eare its intention to ursuea ubi oiy obetive, suh as onsumer rotetion,it may emoy a nontariff measure in a way thatreates an artifiia avantage for omesti overforeign rouers. ehintheborer measures of thissort ose a artiuar haenge to trae ooerationbeause their effets an motivations are often essear than borer measures. In genera, the osts anbenefits of reguatory measures are more iffiut toevauate than assia rie an quantityinstruments, whih is why the remainer of thisreort uts a artiuar fous on TT/P measuresan omesti reguation in servies.

etion .2 has isusse a number of situations inwhih governments may be inine to use ertainnontariff measures rather than more effiientinstruments. Uner ertain onitions, governmentsmay seifiay refer “oaque” measures in terms ofboth their ause an effet or hoose NTMs thatinrease fie rather than variabe osts. Poitiamotives an institutiona onstraints an eain theersistene of ineffiient NTMs more generay. Thereent henomenon of offshoring, where businessreations are haraterize by biatera bargainingrather than market earing, rovies another reasonwhy, aso from a nationa wefare ersetive,governments may istort NTMs, inuing behintheborer oiy instruments suh as TT/P measures,in aition to tariffs in orer to influene trae. inay,

etion .2 has highighte that governments emoyNTMs that are not effetivey reguate at theinternationa eve an use these to take the ae oftariffs or other NTMs that are onstraine by traeagreements.

One of the main insights from this isussion has beenthat neither the eare aim of a oiy nor its effeton trae, whih may be oinienta in the ursuit of a“egitimate” ubi oiy obetive, in an of itsef anoffer a onusive answer to the question whether anontariff measure is innouous from a traeersetive or not. A number of fators have beenientifie in etions .1 an .2 that an beeamine in orer to assess whether an NTM may beemoye for ometitiveness reasons esitestatements to the ontrary or may otherwise unuyinfluene trae. These inue an anaysis of the

effiieny of the measure in ahieving its obetiveomare with aternative means as we as of itsiniene – that is the istribution of osts anbenefits among rouers an onsumers bothomestiay an abroa. An eamination of setorharateristis, suh as the egree of organization oretent of biatera bargaining in internationa businessreations, an the wier oitia ontet in terms ofinstitutions, oitia roesses, information robemsan the ike aso informs this assessment. Theseissues are further eaborate in etion ., wherehaenges fae by the mutiatera traing system inreation to NTMs an ossibe ways forwar are

isusse.

etion .3 has briefly resente the seifi featuresof servies trae, the tyes of servies measuresenountere an the rinia reasons whygovernments intervene in servies markets. esitethe euiarities of servies trae, the isussion hasreveae the same funamenta iffiuty inistinguishing situations when servies measuresursue eusivey egitimate obetives from instanesin whih they aso have a traereate urose.etion .2 rovies a more etaie aount of therogress mae an haenges fae in reguating

servies measures at the internationa eve.

inay, the ase stuies ontaine in etion . havehighighte the rominene of nontariff measures in anumber of urrent highrofie areas of governmentativity an the nee for a better unerstaning of thetyes of NTMs use, their obetives an effets. Thereent finania risis has given rise to a host of newNTMs taken for “emergeny” reasons. However, thegoba etent of the risis has quiky heightene thenee for wiesrea monitoring of the measures takenin orer to foresta temtations to ursue beggarthyneighbour oiies or to engage in suh raties inretaiation for ereive rotetionism.

The issue of arbon eakage an ometitiveness inthe ontet of imate hange oiy has given rise to




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etensive ebates about the use of nontariffmeasures in this regar an rovies a owerfueame of the iffiuties invove in istinguishingbetween the ursuit of egitimate ubi oiyonerns an the abiit y to serve setorseifi trae

interests. The ak of rogress in imate hangenegotiations an the esire by ertain ountries toforge ahea uniateray have the otentia to ea toan inrease use of NTMs an trae rows over theirtrue urose an imat.

Last but not east, eonomi, soia an tehnoogiaeveoments have fuee the rise of foo safetymeasures as an imortant too in suy hainmanagement an onsumer rotetion. oo safetymeasures offer oortunities an ose haenges torouers, an efforts to mitigate negative imatshave reeive renewe attention, not east with the

reation of the tanars an Trae eveomentaiity T, an interorganizationa initiative forenhaning eveoing ountries’ aaity to meet Prequirements.

A of these onerns have in ommon the nee foraroriate ata, an the haenges fae inimroving transareny through notifiations,monitoring an other tehniques are further isussein etion .. etion takes stok of the eistinginformation base on nontariff measures, whih formany tyes of measures is foun to be wanting. Wiegas in the overage an ontent of the ata make it

iffiut to gauge the etent to whih the use of NTMsin the areas esribe above an more generay hasinee inrease over time an whether this hasresute in aitiona imeiments to internationatrae, as wi be further esribe beow.

1 Wofe makes a simiar argument about the ositive effet oftransareny on trae, ointing to the roe of the WTO’smonitoring mehanism in reuing the iniene of

rotetionism uring the goba eonomi risis.

2 In the aer, oitia transareny refers to oenness aboutoiy obetives an institutiona arrangements that arifythe motives of monetary oiymakers. This ou inueeiit inflation targets, entra bank ineenene anontrats. onomi transareny fouses on the eonomiinformation that is use for monetary oiy, inuingeonomi ata, oiy moes an entra bank foreasts.Proeura transareny esribes the way monetary oiyeisions are taken. This inues the monetary oiystrategy an an aount of oiy eiberations, tyiaythrough minutes an voting reors. Poiy transarenymeans a romt announement an eanation of oiyeisions, an an iniation of ikey future oiy ations in

the form of a oiy inination. Oerationa transarenyonerns the imementation of monetary oiy a tions,inuing a isussion of ontro errors for the oeratinginstrument an maroeonomi transmission isturbanes.

3 This is an iea as o as Aam mith in the Wealth of

Nations: “As it is the ower of ehanging that givesoasion to the ivision of abour, so the etent of thisivision must aways be imite by the etent of that ower,or, in other wors, by the etent of the market”.

A abeing requirement may not be a anaea if for eameit require a etaie breakown of the origin of eahomonent art as this information ou be iffiut anosty to trak own.

Where there is ess than erfet information about goos,eonomists generay istinguish between searh,eeriene an reene goos. earh goos e.g. othesnee to be insete before buying in orer to observe theirharateristis. eriene goos e.g. wine have unknownharateristis, but these attributes are reveae af terbuying or onsuming them. reene goos have theharateristi that though onsumers an observe the utiitythey erive from the goo or servie ex post , they annot

uge whether the t ye o r quai ty t hey have ree ive is th eex ante neee one. ee uek et a. 211. An eameof a reene goo or servie is a otor’s avie aboutmeia treatment. The atient may reaize that he or she isgetting better from the treatment but oes not know if he or

she is being overtreate – being resribe rugs antheraies that are not strity require or are more osty.

agwe an taiger reognize that the fat onsumersearn about the quaity of the goos after urhasing oensthe oor for the highquaity firm to offer a ow introutoryrie at whih it suffers a oss but entie enough onsumersto urhase it an earn about its true quait y. Thus, thereou be irumstanes where eort subsiies wi not beneee to overome the ba rrier ose by informationasymmetry.

7 As agwe an taiger 199 note, eort subsiie s in thissituation imrove the wefare of both the eorting animorting ountries an o not have the begga rthyneighbour effets usuay assoiate with their use.

There are ony a few eames of environmenta taes in theUnite tates, notaby taes on ga soine, motor fues, oisis an hemia feestoks. ee ovenberg an Gouer22.

Endnotes




90

9 The assi isussion of rie versus quantity measuresuner oiy unertainty is foun in Weitzman 197.

1 The Utuna ase is a GATTera isute between Meioan the Unite tates onerning the atter’s ban onimorts of tuna aught using fishing methos that resute

in rates of aienta ki or inury of ohins eeeing Urequirements.

11 The Ushrim ase invove a isute between a numberof eveoing ountry omainants Inia, Maaysia ,Pakistan an Thaian an the Unite tates. It onernea U rohibition of imorts of shrim an shrim routsfrom ountries that i not use a artiuar tye of net inathing shrim, a net that wou a ow enangere turtesthat were aientay aught to es ae an avoi rowning.

12 The Montrea Protoo banne the trae of ozoneeetingsubstanes an require the hasing out of their roution.

13 These are seifie more formay in, for eame, Meae192, Kem 19 an oren 197.

1 A natura hoie of quota eve is the oiymaker’s foreastof the ongrun eve of imorts when the omesti inustryahieves fu maturity. The restritiveness of this quotaeines as the inustry’s eeriene aumuates unti thequota no onger bins when earning is omete.

1 Athough Katz an hairo 19 originay aie theterm “network eternaities” for these effets, Liebowitz anMargois 199 isute whether these were reayeternaities. In ater work by Katz an hairo 199, theyswithe to the term “network effets” suggeste byLiebowitz an Margois 199. ee a so the isussion ofnetwork effets/eternaities in Wor Trae OrganizationWTO 2b.

1 This symmetry between imort an eort taes was firstformay artiuate by Lerner 193.

17 The reason for this resut is as foows. An eort subsiygiven by the home ountry to its eort goo 1 wou ea toa fa in that goo’s wor rie an an inrea se in its rie athome. Tota eman foreign us home onsumers for theountry’s other eort goo 2 wi inrease if the tworouts are omements abroa an substitutes at home.Uner ertain onitions, the inrease eman for goo 2wi ea to a termsoftrae imrovement in that rout,whih wi more than of fset the termsoftrae oss in goo 1.

1 Uner ournot ometition, outut eisions are “strateg isubstitutes”. The inrease in the outut of the home firminues a reution in the outut of the foreign firm. trategies

are sai to be strategi substitutes if the otima resonse byone firm to more ess aggressive ay by another firm is to beess more aggressive uow et a., 19.

19 Uner ertran ometition, ries are “strategiomements”. An inrease in the rie harge by thehome firm inues an inrease in the rie harge by theforeign firm. trategies are sai to be strategiomements if the otima resonse by one firm to moreess aggressive ay by another firm is to be more essaggressive uow et a., 19.

2 This is to be istinguishe from “rout” or emanenhaning innovation. ee Athey a n hmutzer 199.

21 or ess resourestrae eveoing ountries,

onitiona ash transfer rogrammes whih rovie moneyto oor famiies ontingent on erta in behaviour, usuayinvestments in human aita suh as sening hiren toshoo, have beome more wiey emoye given theiraarent suess iszbein an hay, 29.

22 However, see Levy 23 for a ritique of the GrossmanHeman aroah. In his view, the GrossmanHemanaroah osits fuyinforme rationa ators who ivie ua surus. This wou not eain the use of a vountaryeort restraint VR, whih is an ineffiient means oftransferring inome to seia interests sine the ountry

inurs a termsoftrae oss.

23 This is beause obbies aso have onsumer interests an theybenefit from ower rotetion in setors other than their own.

2 On this ast oint, one shou note that the emiria stuyby Maggi an Roríguezare 2 arrives at theoosite onusion. They fin that the rotetion eveinreases with imort enetration, both in setors that arerotete with tariffs an in setors that are rotete withquantitative restritions.

2 ee the isussion of onformity assessment in the World

Trade Report 2005 Wor Trae Organization WTO,2b.

2 This assumes that the oigooists are ournot ometitors.This means that eah oigooist uses the eve of its outut,rather than say the rie it harges for its goo, as theinstrument to omete against its rivas. If it wants to bemore aggressive towars its rivas, it eans the voume ofits roution. If it wants to be more assive, it reues theeve of its outut or aaity.

27 It is assume that arte members foow a “grim trigger”strategy. They ooerate with other ar te members so ongas everyone ese is ooerating. They ease to ooeratean ursue that ath forever at the first instane of amember heating.

2 Aternativey, one an assume that the measure aies toboth omestiay roue an foreignmae goos, but

omiane with the reguation raises the ost s of foreignrouers more than omesti rouers. AbeKoh 21an Rebeyro an Vauay 29 isuss the ase whereomiane osts are ientia for omesti an foreignfirms but where firms have ifferent routivities.

29 An imortant arameter that affets these traeaustments is the egree of substitutabiity of the routs ,or more reisey the eastiity of substitution haney,2. The egree of rout substitutabiity has oositeeffets on eah margin. A higher eastiity ma kes theintensive margin more sensitive to hanges in trae osts,whie it makes the etensive margin ess sensitive. haneyis abe to show that if the routivity of firms foows aPareto istribution, austment aong the etensive margin

wi ominate.3 Here, it is generay assume that governments, when

enating oiy, ony take into aount nationa, not gobawefare. Or, in the a se of oitia eonomy, governmentsony onsier the interests of omesti, not foreign firmsan, hene, a t ifferenty than they wou if a rouerswere oate omestiay. ee, for instane, isher anerra 2 or Marette an eghin 21 for aformaization of this aroah. These aers ask moregeneray when rotetionism ours, whie the fous of thissubsetion is seifiay the hoie of oiy instruments,i.e. on the onitions uner whih seifi tyes of NTMsare hosen rather than other oiy otions.

31 There is no narrowy efine iterature in eonomis on this

subet an some of the stuies reviewe here beongrather to a oitia siene iterature. The ist ofeanations rovie here regaring governments’onstraints in the hoie of oiy instruments, whieimortant, is not neessariy ehaustive.




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32 In eamining the egree of “wefaremineness” ofgovernments aross a arge same of ountries, Gawane eta. 2 show emiria y that the more informe itizensare, the greater is governments’ onern wi th aggregatewefare rather than seia interest s in shaing trae oiy.

33 As note in the revious subsetion, in our onsierationsof oitia eonomy, we mainy resume rouers to beorganize an onsumers to be unorganize. or ma nyoiy issues, this has foun to be a reasonabe assumtion.However, where onsumer organizations eist, they mayhave onsierabe oitia influene as we, for eame inthe area of foo safety winnen an Vanemoortee, 211.Guati an Roy 27 show that oitia inks are reatebetween ifferent oiy instruments when governmentsnee to take into aount both rouer an onsumerinterest grous. uh inks may enhane or ushion thetrae imat of reevant oiies. In turn, suh inkages asoimy that when trae agreements ea with behintheborer issues that have traitionay been seen as being ofurey omesti onern, seia interest grous that

reviousy have not engage in trae oiy may begin totake an ative interest in this omain. etion ea s withinternationa ooeration on NTMs an wi touh further onthese issues an the imiations that they may give rise to,for instane in regar to tra nsareny.

3 A simiar argument for the use of ubi oiy measures asisguise rotetionist evies arises when severa interestgrous obby for rotetion but the government annotrovie rotetion to everyone through tariffs beause ofsome eterna onstraint, e.g. in the form of an internationatrae agreement imiting the overa eve of tariffrotetion. In this ase, the government ou rotet oneinustry with an NTM, e.g. a reguatory measure, assumingthat intereste arties ometitors, onsumers are unabe

to verify its rea rotetionist imat. A government mayaso refer a omarativey oaque NTM if it has seifities with erta in interest grous e.g. of an ethni or uturanature, but seeks to hie its isriminatory treatmentamong obbies Robinson an Torvik, 2. In a seminaaer, Laffont an Tiroe 1991 show that interest grousthemseves may have an interest in ineffiient reguations ifthey are rivy to reevant information about oiies that isnot avaiabe to oiymakers an this situation may afforthem aitiona oitia influene.

3 The authors highight that for questions of ubi oiy it isrationa for an iniviua to remain ignorant, when theeete benefits are sma reative to the osts of aquiringthe neessary information.

3 The author eains quite suinty that, a ese beingequa, a “ba” oitiian wou refer to rovie a iretsubsiy to rouers, “sine imementing the routstanar is istortionary in the owrisk state i.e. not otimaon wefare grouns an even ba inumbents are aboutwefare” turm 2: 7. However, the reeetionersetive an ominate this effet, i.e. “ ba” inumbentswho attah ow imortane to soia wefare an for whomreeetion is suffiienty benefiia refer to istort theenvironmenta oiy in orer to make an iniret transfer tooa rouers rather than to rovie a subsiy that wousigna their “ba” oitia behaviour to voters a n entaieetora efeat with ertainty.

37 ee aso Yu 2 who eveos a arsimonious moe in

whih hanges in the egree of transareny of an NTM, inthis ase a vountary eort restraint VR, omare to atariff an the reative market istortions that theseinstruments entai have an imat on governments in theirhoie of substituting an NTM for a tariff.

3 This is ifferent from a stran in the trae iterature that haseaine the eistene of trae oiies more generaywhen the ientity of winners an osers from trae oeningis unertain. ee, for eame, eenstra an Lewis 1991.

39 In eonomi terms, this means that the osts of aneessive overayment must be trae off against the“eaweight” oss assoiate with a istortionary oiy.

A simiar resut hos if egisators are motivate by oiyrather than obbying ontributions, so ong as the egisatorares about the oiies hosen after eaving offieMartimort, 21.

1 The reationshi between oiie s in the nationa interestan oiies oriente towars iniviua onstituenies anbe ome. ome nationa oiies, suh as a nationwieeuation rogramme, an have ongasting imats.attagini an oate 27 warn that one suh a oiy isin ae, future egisators an everage the gains from theinvestment to ivert resoures towars ess effiientmeasures that favour their onstitueny. A ntiiating the

istortionary effets of a surus of ubi goos, theauthors note that in some ases egisators may o better byartiay imiting investment in ubi goos to isourageineffiient NTMs.

2 Of ourse, onformity assessment for iniviua shimentssti entais some form of variabe ost reate to themeasure.

3 ee aso hmitt an Yu 21 an orgensen anhroer 2 for a ersetive on the wefare effets oftariffs in the resene of fie eorting osts.

To be more reise , unike in Rebeyro an Vauay 29,AbeKoh 21 shows that even if foreign firms are moreroutive on average an, onsequenty, imort

enetration is high, the introution of a behintheborerNTM may sti shift rofits towars omesti firms if in theatter the Pareto istribution of firm routivities is essskewe than abroa. In suh ase, the ratio of highyeffiient firms to rather ineffiient firms an hene the ratioof winners to osers from behintheborer measures ishigher for omesti than foreign firms, an, overa, rofitsare shifte from abroa towars the ountry introuing themeasure. This roosition may be seen a s a ossibeontraition to the reition by Grossman an H eman199 that the eve of rotetion varies inversey withimort enetration. However, as wi be isusse furtherbeow, it is sti generay true, abeit for ifferent reasons,that the eve of e.g. a reguatory measure wi be higher thefewer foreign firms are ative in the omesti market, as in

suh situations ometition among omesti firms an theotentia for omesti rofitshifting are reativey moreimortant.

ombarini 2 shows that when the hanneing ofoitia ontributions entais fie osts, the argest firms ina setor wi form a n interest grou. The author goes on toonfirm emiriay that setors with a higher share of argefirms ehibit a higher eve of oitia a tivity.

or an emiria onfirmation see Yi 23.

7 ee aso isher an erra 2, for eame, for theaiation of an environmenta measure in an internationauooy situation where the reguation is set ineffiientyhigh in orer to shift rents from the foreign to the omesti

rouer an imose art of the osts of reuing theeternaity on the foreign rouer. The authors ony showthat environmenta measures an be use a s a rotetionistevie, they o not seek to eain why the governmentwou use an instrument that aies to omesti an




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foreign rouers aike but imoses a higher ost on theatter who are a ssume to roue for severa marketsaoring to ifferent requirements rather than trae taes.

ee, for instan e, Antràs 211 for a reent overview of thisiterature.

9 Unike Antràs an taiger 2, taiger 212 obtains“reaisti” oiy reitions, i.e. oiies of inreaserotetion from imorts via NTMs, aso in a moe withoutoitia eonomy onsierations. In the former aer, thebasi moe reits a subsiization of imorts ofintermeiates by the home government an a ta ation ofintermeiates by the government in the eorting ountry.Whie this situation is not unreaisti er se, it may be morereevant in regar to trae in natura resoures an otherraw materias, where esaating rotetion an, hene, ahigher effetive rate of rotetion for fina routs as weas ounterating eort oiies have been observe, ratherthan in regar to trae in manufature inuts. ee asoWor Trae Organization WTO 21.

In other wors, ries fae by onsumers wi inrease essfor a given reution in quantity equa to the inrease inquantity in resonse to the margina erease in the imorttariff, as a rt of the ta iniene fas on rouers.

1 Anerson an hmitt 23 aso argue that whenometition within an inustry is ower, tarif f iberaization isower, an the enogenous resonse of imosing NTMs,suh as quotas an antiuming uties, is generay moremoest.

2 This aies if a “arge” ountry reues the requirementsaie to omestiayroue goos.

3 efine as the robabiity of a ountry fiing an A etition.

The ata o not istinguish between tariff iberaization that

was uniatera or riven by a n internationa agreement –mutiatera or regiona.

Aie rather than boun tariffs are use in the anaysisbeause in the resene of bining overhang, a reution inthe boun tariff may not have any effet on the a ietariff, therefore it wou not reate any inentive for oiysubstitution.

etais of the estimation of ad valorem equivaent of NTMsan be foun in etion .1.

7 etais about the onstrution of frequeny ine anoverage ratio an be foun in etion o .1.

In a narrow onnotation, the term “reguation” may esignate

the romugation of a bining set of rues awin et a .,212. In a broaer sense, it an be use to efine a stateations esigne to influene eonomi or soia behaviour,referring both to egisative ats an fisa measures. In theterminoogy of the GAT, the orresoning notion is that of“measures”, as in the Agreement “reguation” refers to aseifi tye of egisative at see, for instane, GATArtie XXVIII.

9 Lennon 29, for instane, argues that “trae in goosan in other ommeria servies reinfore eah other.iatera trae in goos eains biatera trae in servies:the resuting estimate eastiity is ose to 1. Reiroay,biatera trae in servies ositivey affets biatera trae ingoos: a 1% inrease in trae in ser vies raises traegoos by .%”.

Two or mutisie atforms i.e. atforms that serve twoor more istint grous of ustomers who vaue ea h other’sartiiation, suh as meia atforms that se avertisingto one grou of ustomers an ontent to another or

usters of horizontay omementary or ver tiayintegrate servies e.g. teeommuniations, auiovisuaan rereationa servies, or vertia y integrate retaiersroviing whoesae, warehousing an ogistis servies areeames of some of the interreations between ifferentservie setors.

1 The Unite tates is one of the few ountrie s that rovieinformation on intrafirm trae.

2 The roe of servies in internationa roution may besignifianty unerestimate in trae ata, beause serviesare to a muh arger etent than goos trae inirety,emboie in goos an other servies. Thus, it is estimatethat oa manufaturing vaue ae emboie in eortsaounts for ess than er ent of the gross vaue ofmanufaturing eorts, whie oa servies vaue aeaount for 1 er ent of gross vaue of ser vies eortsohnson an Noguera, 212. The authors auate traein vaue using the GTAP 7.1. atabase for 9 ountries an7 setors. A share higher than one is ossibe when iret

eorts of servies is ow, but oa ser vies are emboiein manufature eorts.

3 The maniuation of the terms of trae to inrease nationawefare is not onsiere a reevant ustifiation in the a seof servies trae, essentiay beause of the oftassoiatefator movement ranois an Hoekman, 21; Marhettian Mavroiis, 211.

The shift away from state ownershi an resonsibiity forthe rovision of a servie to rivate ownershi an rivaterovision with enhane state reguation has beenesribe as the rise of the “reguatory state” Maone,199.

or a isussion of the aiabiity of traitiona theoretia

moes to servies trae see, for eame, Wor TraeOrganization WTO 2. or aternative views, seeWhaey an hia 1997, for instane.

or instane, measures that raise the ost of foreign firmswhen they se in the omesti market a re more traerestritive in the resene of inumbent omesti monooyor oigooy than uner erfet ometition see earorffan tern, 2 an H eman an Krugman, 199.ranois an Wooton 21 show that, in the resene ofan imerfety ometitive omesti inustry, a foreignometitor might hoose whether to oin the home arte oromete with it eening on the etent of restritions torossborer trae.

7 Tariffike instruments ou be aiabe in ertain

setors for given moes. One might oneive, for instane,of a ta er as senger or er voume of argo in rossborer transort servies, gi ven that a hysia, visibeentity is assoiate with the servie being suie.Aternativey, entry, outut an rofit taes ou beaiabe to oa y estabishe foreign firms seeoean an Mattoo, 2.

However, Laffont 1999 shows that, in the resene ofweak emorati institutions, stimuating ometition mightnot aways be wefare enhaning.

9 The Goba Trae Aert, a simiar rivate initiative thatrovies information on state measures taken uring thereent eonomi ownturn, was estabishe in 29.

7 ee orfeeMorot an Hohne 23 for eame.

71 These emission reution targets, whih are onitiona onothers meeting theirs, an be foun in the UNwebsite: htt://unf.int.




93




72 Uner Artie 3 of the Kyoto Protoo, ountries iste unerAnne I of the Unite Nations ramework onvention onimate hange were to reue their overa emissions ofgreenhouse gases by at east er ent beow 199 evesin the ommitment erio 2 to 212.

73 ee oean an Tayor 199 for a isussion of howifferenes in the stringeny of environmenta reguationsbetween highinome an owinome ountries eas theformer to seiaize in ean inustries a n the atter toseiaize in outing inustries. urthermore, theyestabish that the resuting inrease in oution eves inowinome ountries more than offsets the eine inhighinome ountries.

7 To get a sense of the iversit y of the iniator s use, weeamine a ranom set of stuies. emaiy an Quirion2 use hanges in rofits an outut as iniators ofthe hange in ometitiveness; Zhang an ara nzini 2use the inrease in ost of roution; Reinau 2 usesrofits an market share; the tern Review tern, 27uses the hange in rouer ost an the ass through to

onsumer ries.

7 Marku sen 197 erives simiar resut s in a moe of traewith transbounary oution.

7 There is an interesting aer by Lokwoo an Whaey2 whih reates the urrent ebate on ometitivenessan borer ta austments to a 19s ebate on the VaueAe Ta VAT an borer ta austments in the U. Asthey make ear, the aaemi iterature of the time showethat a hange between origin a n estination basis in theVAT wou be neutra an hene the use of a borer taaustment in the U to aomany the VAT offere notrae avantage to uroe. However, that argument rests onthe neutraity of the VAT – reative ries in the U are eftunhange by the VAT. This wi not be the ase with arbontaes sine the intent of the mitigation mea sures is toinrease the reative rie of arbonintensive goos toreflet their soia ost.

77 ee Mattoo et a. 29, though, for how this may besimifie by assuming foreign goos have the same arbonfootrint as omesti goos. ee Ismer an Neuhoff 27for a roosa on how to simify an make W TOonsistenta borer austment sheme invoving urhases ofemission ermits.

7 or the sake of brevity, the isussion here riniay refersto foo safety measures, but aso mentions reevant asetsof measures reating to quaity an broaer attributes, suhas environmenta imiations of foo roution. winnen

an Vanemoortee 29 emhasize the etent to whihthe nature of suh measures affets their oitiay otimaeve an the ikeihoo of trae onflits, ointing outimortant ifferenes in this regar. This isussion isbeyon the soe of the resent subsetion.

79 winnen an Vanemoor tee 211 bui a moe toiustrate that foo safety measures amost aways affettrae an, in a oitia eonomy ontet, erive theonitions uner whih suh measures at as a atayst orbarrier to internationa trae. As note in etion .1, theauthors aso show that a ossibe negative effet on traeflows oes not automatiay reate to rouerrotetionism.

Mangesorf et a. 212, for instane, fin a ositive

imat of vountary stanars an manatory requirementson hinese foo an agriutura eorts, with the benefitsoutweighing inrease omiane osts.

1 or an etensive iterature review on rivate stanars, seeInternationa Trae entre IT at www.stanarsma.org,ast visite on 9 Marh 212, as we as Organisation foronomi ooeration an eveoment O 2an reate ubiations.

2 A reent eame is the agreemen t on organi foorouts signe between the uroean Union an Unitetates oming into effet in une 212. Agene ranePresse AP reorts that before the ea, omanies hato onform to two ifferent sets of requirements on bothsies of the Atanti.

3 The iterature on this subet is rather imite. oetti 211eamines the variation in maimum resiue imits MRLs forvarious estiies an routs in a range of ountries.Anaysing the reative ontribution of “onsumer rotetion”at the estiie eve an “rouer rotetion” at therout eve, she fins that whie heath motives eain asignifiant amount of the variation in MRLs , rotetionistmotives an eain u to one thir of the variation. As faras MRL eves are onerne, she fins that higher eves of

toiity resut in striter reguation, as was to be eete.However, whether a estiie is roue omestiay asoays a roe, resuting in more enient reguatory threshos.

In etion .1 the inentive for ountries to ooerate isestabishe in orer to avoi beggarthyneighbour oiiesor rovie a reibe ommitment evie that hes toontain ressure from omesti interest grous. utountries may aso ooerate on ubi oiy obetives inorer to ursue the most effiient oiy not ony from anationa, but goba wefare ersetive, or if they share aommon ubi oiy goa.

Athough, at fae vaue, the requirements of a measure maybe the same for omesti an foreign rouers, ertainasets in it s aiation may be inherenty more iffiut tofufi by foreign than by omesti manufaturers. oronetua work on this issue, see winnen anVanemoortee 29; 211. A weknown eame is theobigation for imorts to be teste for their onformity withtehnia requirements in seifi aboratories entaiinghigher aess osts for foreigners than for omestirouers. Another eame reates to rout ta es, wherethreshos are set suh that ometing foreign routs fain the higher ta braket.

ostbenefit anaysis was briefly introue in o .2. orthe eveoment of a ostbenefit framework to assessreguatory measures an its aiation to TT/P, seeVan Tongeren et a. 29; 21.




94

This section reviews available sources

of information on non-tariff measures (NTMs)

and services measures, evaluating their

relative strengths and weaknesses. It uses

available information to establish a numberof “stylized facts” regarding the incidence of

NTMs and services measures in general.

It looks in particular at technical barriers

to trade, sanitary and phytosanitary

measures and domestic regulation in

services.

C. An inventory of

non-tariff measuresand services measures




95

C .A NI NV E NT OR Y OF N ON-T A R I F F

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• Progress is being made on improving the quality and availability

of data on non-tariff measures and services measures, but much

remains to be done.

• Available data do not show any clear increasing trend in

the overall use of non-tariff measures in the last decade.

• Technical barriers to trade and sanitary and phytosanitary

measures appear to have become prominent, according to official

WTO information. This is confirmed by survey data from bothdeveloping and developed economies.

• Procedural obstacles are a particular source of concern for

exporters from developing countries.

• Although there is some evidence that measures restricting trade

in services have decreased over time in developed economies,

a serious limitation of available data on applied regimes in

the services area makes it difficult to distinguish between marketaccess, national treatment and domestic regulation.

Contents 1 oures of information on NTMs an servies measures 9

2 tyize fats about NTMs reate to trae in goos 1 3 ervies measures 122

onusions 12

Aeni .1: ata haning methooogy in the UNTA’s Trae AnaysisInformation ystem TRAIN 131

Aeni .2: Regression resuts 133




96

This setion surveys avaiabe soures of information onnontariff measures NTMs an servies measures,evauates their reative strengths an weaknesses,summarizes the ontent of the rinia atabases, anuses this information to estabish a number of “styize

fats” about these tyes of measures. This ast taskturne out to be surrisingy iffiut ue to signifiantgas in ata an to numerous shortomings in the atathat o eist. esite these imitations, the foowingisussion attemts to ature many key features of theurrent NTM ansae an to oument a number oftrens in their use over time. As far as serviesmeasures are onerne, the ata imitations aear tobe even more severe than in the ase of NTMs. Inartiuar, the urrent ata on servies measures o notaow ear istintions to be rawn between marketaess, nationa treatment i.e. the rinie of givingothers the same treatment as one’s own nationas an

omesti reguation issues.

The sarity of ata on nontariff measures anservies measures stems in arge art from the natureof these measures, whih fin their utimate eressionin ome ega ouments rather than in easiyquantifiabe tariff sheues. The universe of NTMsenomasses a measures that affet trae other thantariffs, but sine most reguatory ation unertaken bygovernments an at east otentiay influene trae,the set of ossibe NTMs is huge an its borersinistint. imiar onsierations ay to serviesmeasures. On the goos sie, this setion eamines

the avaiabe eviene, with a artiuar attention totehnia barriers to trae TT an sanitary anhytosanitary P measures overing foo safetyan anima an ant heath. Traitiona quantitativean riebase measures are aso isusse, but thefat that TT/P measures are among the mostfrequenty enountere NTMs an raise some of themost iffiut haenges from the WTO’s ersetive

ust ifies the aitiona attention ai to these kins ofmeasures. On the servies sie, the setion takesstok of a measures affeting trae in servies, tothe etent ossibe, before fousing on omestireguation.

tatistis on nontariff measures an serviesmeasures are oete by many ifferent institutionsfor a variety of uroses. As a resut, ata are oftenresente in formats that are not amenabe toquantitative anaysis, with signifiant gas in overagefor artiuar ountries an time erios. When reiabeinformation is avaiabe, it may sti rovie no ue asto how strity measures are aie, or whether theyare aie in a isriminatory manner. Most atasetssimy resent ounts of the number of measures ineffet at a artiuar ae an time, but these ountshave no natura eonomi interretation an saynothing about the restritiveness of iniviuameasures. or these reasons an others, the avaiabeata on NTMs an servies measures an ony beharaterize as sarse an inomete.

The remainer of the setion is organize as foows.etion .1 reviews the main soures of statistiainformation on nontariff measures an serviesmeasures, aying artiuar attention to areas wherethe ata are efiient. etion .2 etrats a number

of styize fats on NTMs in goos from the riniaatabases. etion .3 rovies a simiar aount ofstyize fats about servies measures. etion .ontains onuing remarks.

1. oures of information on NTMsan servies measures

This subsetion resents the main soures ofinformation on nontariff measures an assesses theoverage an quaity of the ata they rovie. othinterna WTO soures an eterna nonWTO soures

are eamine. The foowing overview highights theiversity of the soures an of the moes in whih theata are oete, istinguishing betweennotifiations, monitoring, seifi trae onerns,offiia ata oetion or business surveys. Aistintion is mae between information on NTMs aninformation on imeiments to trae reate to NTMs.It aso shows that esite this iversity, the ata areathy at best. ah ata soure shes ight on a smaart of the universe. The ight it shes eens on theseifi urose for whih the ata have beenoete as we as on how they have been oete,i.e. whether a measure is simy reorte/notifie or

whether there is a omaint reating to the measure.In any ase, onsierabe aution is warrante ininterreting the avaiabe eviene.

a WTO interna soures of information

One imortant soure of information on WTOmembers’ trae oiies are their sheues ofonessions/ommitments. These sheues, however,rovie usefu information on the oiies thatmembers have ommitte to ay rather than on theoiies they atuay ay. WTO agreements asoinue mutie rovisions aime at imroving the

transareny of oiy measures affeting trae.These rovisions an be groue into the foowingfour ategories: a ubiation requirements;b notifiation requirements; the Trae PoiyReview Mehanism an the monitoring reorts; theossibiity of raising seifi trae onerns in theP an TT ommittees an in the isutesettement mehanism M.

(i) Schedules of concessions/commitments

The sheues of onessions for goos mosty ontaininformation on members’ tariff ommitments but theyaso over their ommitments regaring the use of anumber of nontariff measures that affet trae inagriutura routs as we as their soae “nontariff onessions”. The agriutura NTM ommitments




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inue tariff quotas whereby quantities insie a quotaare harge ower imort uty rates than those outsieas we as ommitments imiting subsiization inagriuture tota Aggregate Measurement of uortAM ommitment for omesti suort, an bugetary

outays an quantity reution ommitments for eortsubsiies. As for the nontariff onessions Part III,they were either ae as art of the Uruguay Rounnegotiations but ony by a few members or after theUruguay Roun as art of a ountry’s WTO aessionroess.1 oth tariff an nontariff ommitments areaso avaiabe eetroniay in the onsoiate Tariffheues atabase. Note that the ommitments asomie in the atabase are not easiy omarabeaross routs an members.2

The sheues of ommitments for servies set outmarket aess an nationa treatment ommitments.

or eah servie on whih a ommitment is mae, thesheue iniates, uner eah of the four moes ofsuy, any imitations on market aess or nationatreatment whih the member is aowe to maintain.Limitations not reore in the sheues in this wayare iega. The sheues thus ombine a “ositive ist”of overe servies with a “negative ist” of imitations.They guarantee a minimum stanar of aess;members are aways free to grant more favourabeeves of market aess an nationa treatment thanare seifie in their sheues, on a mostfavourenation MN or equa treatment basis, an many o sosee etion .3.

(ii) Publication requirements andenquiry points

Artie X.1 of the Genera Agreement on Tariffs anTrae GATT requires the romt ubiation of atrae reguations “in suh a manner as to enabegovernments an traers to beome aquainte withthem”. evera other WTO agreements ontain moreseifi ubiation requirements. In the TTAgreement, for instane, Artie 2.9.1 requires theubiation of a notie when the government envisagesintrouing a tehnia reguation whih is not baseon internationa stanars an may have a signifianteffet on trae. imiary, Artie 2.11 requires theubiation of a tehnia reguations whih havebeen aote. Ientia rovisions aso ay toonformity assessment roeures. esies thoseubiation requirements, the TT Agreement asoinues rovisions requiring the estabishment ofenquiry oints abe to answer enquiries an roviereevant ouments regaring tehnia reguations,stanars an onformity assessment roeures.

The urose of ubiation requirements an enquiryoints is to ontribute to transareny by informingother members in genera, an rouers in eortingmembers in artiuar see Artie X as we as, forinstane, Arties 1, 2 an 3 of Anne of the PAgreement. Pubiation requirements an notifiations

see beow ten to omement eah other. The Pan TT agreements require the notifiation of raftreguations to the WTO eretariat an the ubiationof the aote reguations. An imortant ifferenebetween notifiation an ubiation requirements is

that the former is entraize in the WTO eretariatwhie the atter merey invoves making informationubiy avaiabe. Another ifferene is that whienotifiations must be transmitte to the WTO in one ofthe three offiia anguages ngish, renh oranish, ubiations are in the nationa anguage.

(iii) Notifications

The WTO framework ontains more than 2 ifferentega notifiation requirements, the arge maority ofwhih reate to nontariff measures. Notifiationrequirements uner the WTO are highy iverse.3 irst,

whie a vast maority of requirements obige membersto rovie information on their own oiies, some are“reverse” notifiations, whih aow members to ientifymeasures imose by other members. eony,notifiations iffer from eah other with regar to howfrequenty they are require. Most of those overingaws an reguations are oneoff requirements, with asearate obigation to notify any hanges thereafter.The notifiations that rovie information on themeasures themseves tyiay take two ifferentforms: they are either a ho or semi annua. Thiry,about haf of the notifiation requirements over NTMsthat tyiay ay to seifi routs. In those ases,

notifiation temates generay require members toiniate whih routs are overe. The other hafreates to measures e.g. aws an reguations thataffet, or ou otentiay affet, a routse.g. reshiment insetion or ustoms vauation.

A omarison of the ist of notifiations with the21 version of the Internationa assifiation of Nontariff Measures suggests that notifiations over mostof the ategories see Tabe .2. The internationaassifiation omrises 1 broa ategories ofmeasures, of whih ony three o not seem to beovere at a by WTO notifiation requirements. Those

are finane measures, istribution restritions anrestritions on ostsaes servies. A the otherategories are at east arty overe i.e. a number ofsubategories are overe whie others are not.

Where notifiation requirements broay math NTMategories, however, they o not neessariy over themeasures that ou be assifie therein. In the ase ofsanitary an hytosanitary measures, for eame,Artie 7 an Anne of the P Agreement requiregovernments to notify new P reguations whih are notbase on internationa stanars an have a signifianteffet on the trae of other members, an to notify thoseat an eary stage, i.e. when amenments an sti beintroue. Measures that were in ae before the entryinto fore of the P Agreement nee not be notifie,nor is there an obigation to notify the fina measures




98

when they enter into fore. This means that some of themeasures in ae were not notifie an that some ofthose notifie may have been amene before beingimemente or even not imemente at a.

Notifiations rovie an inomete an sometimesmiseaing aount of the iniene of nontariffmeasures. irst, WTO members o not neessariyomy with their notifiation requirements. Whie theeve of omiane is not easy to measure, a simeount of notifiations for seete requirementssuggests that at east in some areas, it is reativey ow.As isusse in more etai in etion ., iffiutiesfae by members in making their notifiations may beart of the reason for the ow omiane, but the maineanation is ertainy that governments have noinentive to notify, or, worse, may have an inentive notto notify. eony, notifiations serve various

uroses ahetta et a., 212. ome of themeary o not aim at roviing an ehaustive inventoryof a the measures in the area they over. In the Pan TT agreements, for eame, notifiations serveto aow other members to artiiate in the formationof new reguations. This eains why there is norequirement to notify measures in ae before 199when the agreements ame into effet or finameasures. Thiry, the “quaity” of the informationrovie varies signifianty among notifiations. Again, the quaity riteria may be ebatabe, but inmany ases, notifiations fai to rovie reiseinformation on imortant imensions of the measures,suh as rout overage or the time erio uringwhih the measure remains in ae.

Ony a subset of the information oete throughnotifiations is store in searhabe atabases. TheWTO eretariat has eveoe informationmanagement systems to faiitate aess to a theinformation on P an TT measures rovie bymembers through the various eisting transareny

mehanisms. The TT Information Managementystem an the P Information Management ystemare “onesto” systems that aow users to aessinformation on TT or P measures that membergovernments have notifie to the WTO as seifi

trae onerns raise in the P or TT ommittee orthrough member governments’ enquiry oints. The t woinformation management systems are not eaty NTMatabases. They are oument atabases whih makeit ossibe to searh reevant ouments by oe,by notifying member, by ate, by rout or by keywor.

Aess to a information from notifiations wi besubstantiay imrove with the new Integrate TraeInteigene Porta ITIP whih is urrenty beingeveoe by the WTO eretariat to rovie unifieaess to a information on trae an trae oiymeasures avaiabe at the WTO.

In servies, the transarenyreate notifiationobigation is ontaine in Artie III:3 of theGenera Agreement on Trae in ervies GAT. Itrequires WTO members to notify measures that“signifianty affet trae” in servies overe by theirseifi ommitments. As of en211, ust over notifiations in tota ha been reeive.7 igure .1 shows the number of notifiations reeiveer year sine 2.

onsiering the high number of setors withommitments by the 13 WTO members as of en211 on average, eveoing ountries haveommitments in more than setors an eveoeountries neary 11 setors, it seems aarent thatthe number of notifiations reeive in any given yearannot aount for the entire set of measures thatshou have been notifie by members. One iffiutyfor members regaring the GAT is that the soe ofmeasures to be notifie is not neessariy ear, as theGAT rovies no further guiane on the

igure .1: GATS Article III:3 notifications received, 2000-2011number of notifiations

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

50

25

30

35

40

45

20

15

10

5

0





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interretation of the term “signifianty affeting” traein servies. However, as areay mentione, owomiane with the notifiation requirements is mostyan inentive issue. In ommitte setors, memberswou have no inentive to “inriminate” themseves by

notifying measures that somehow vioate theirommitments. They might aso have an interest inbeing nontransarent about measures that“signifianty” iberaize aess to ommitte setors,as they might be fae with requests to bin any suh,not neessariy known, iberaization.

(iv) Trade policy reviews and monitoringreports

Trade policy reviews

The trae oiies an raties of a WTO members

are subet to erioi review: every two years for thefour ountries with the argest share of wor trae,every four years for the net 1 ountries an everysi years for the others. The review is arrie out bythe WTO’s Trae Poiy Review oy TPR on thebasis of two reorts: one by the member uner reviewan another by the WTO eretariat on its ownresonsibiity. In aition to the two reorts, the reviewroess inues a questions an answers mehanism.Two months before the review meeting, the reorts areiruate among a members who have one month tosubmit written questions to the member uner review.The atter must reson in writing before the meeting.

The reort by the WTO eretariat reviews a broarange of nontariff measures an is tyiay in fivearts: eonomi environment, trae an investmentregimes, trae oiies an raties by measure, traeoiies by setor an Ai for Trae. The hater ontrae oiies an raties by measure istinguishesbetween measures irety affeting imorts an thoseirety affeting eorts or those affeting routionan trae. Tabe .1 ists the measures eamine unereah of the three heaings in the 211 Trae PoiyReview for amboia, whih has been use foriustrative uroses. Poiies affeting trae in servies

are eamine setor by setor.

To reare its reort, the WTO eretariat uses varioussoures of information. The starting oint is usuay therevious reort, whih an be uate using informationfrom notifiations. The eretariat aso sens aquestionnaire to the government of the member unerreview. This questionnaire, whih aresses a areasovere in the reort, foows a genera temate but isoften ustomize. To omement the informationoete through these institutiona hannes, otherubi soures of information are use to ientify issuesworthy of investigation. esite onsierabe efforts,trae oiy reviews TPRs o not an annot rovieehaustive overage of a nontariff measures in aareas. or eame, as areay suggeste in Wor TraeOrganization WTO 2, information on subsiies in

TPRs is highy variabe. imiary, ony a subset ofservies setors is overe an, in the best ossibease, seete omesti reguation is eamine.

Whie the information on tariffs an trae use for the

reorts fees into the W TO’s Integrate atabase anis thus aessibe eetroniay, information on nontariff measures an on measures affeting trae inservies is not store systematiay in eetroniformat an thus is neither easiy omarabe arossWTO members, nor reaiy usabe for quantitativeanaysis. imiary, the questions aske an answersreeive as art of the review roess are ubisheas an anne to the minutes of the TPR meeting butthey are not systematiay oe an store in aatabase. This may hange with the new IntegrateTrae Inteigene Porta ITIP whih wi rovieaess to a information from TPRs. fforts wi be

mae to oify this information an thereby faiitatequantitative anaysis.

Monitoring reports

The WTO ubishes two tyes of monitoring reorts.The first tye is ubishe twie a year by the WTOeretariat for the Trae Poiy Review oy.9 Thereorts over trae an traereate eveoments ingoos an servies of a WTO members as we asobservers. They monitor hanges in both tariffs an

Tabe .1: Measures covered by trade

policy reviewsMeasures directly affecting imports

i ustoms roeures

ii Tariffs an other taes an harges affeting imorts

iii ustoms vauation

iv Preshiment insetion

v Rues of origin

vi Imort rohibitions, quotas, an iensing

vii Antiuming, ountervaiing uties, safeguar regimes

viii Government rourement

i tate traing enterrises

Other measures

Measures directly affecting exports

i Proeures

ii ort taes

iii ort restritions

iv ort subsiies

v ort romotion

vi eia eonomi zones

Measures affecting production and trade

i Reguator y framework

ii Tehnia barrier s to trae

iii anitary an hytosanitary measures

iv Traereate inteetua roerty rights

Source: Wor Trae Organization WTO 211a




00

nontariff measures as we as in a broa range ofmeasures affeting trae in servies. The seon tyeof reort is ubishe by the WTO eretariat togetherwith the seretariats of the O an UNTAfoowing a request by the G2 to monitor trae an

investment measures.1

These reorts, whih onyover G2 ountries, are aso issue twie a year.

The soures of information use for the two tyes ofreorts are simiar. oth reorts mosty use informationoete through a request for information sent toWTO members, informa reverse notifiations an theress. This information is then submitte to theresetive members for verifiation. The ata aremae avaiabe in ubi reorts an store in sreasheets, but not in a atabase. Like a the otherinformation on trae an trae oiy oete by theWTO, however, it wi be mae avaiabe through the

new Integrate Trae Inteigene Porta ITIP orta.

WTO members have reognize the usefuness of thetrae monitoring eerise. There is broa onsensusfor its ontinuation an strengthening as we as forthe reate briefings by the iretorGenera ininternationa fora suh as the G2.11

(v) Specific trade concerns and disputes

Specific trade concerns

WTO members have use both the TT an the P

ommittees as fora to isuss issues reate toseifi measures taken by other members. These arereferre to as “seifi trae onerns” an reatevariousy to roose measures notifie to the TT orP ommittees in aorane with the notifiationrequirements in the reevant agreement, or tomeasures urrenty in fore. ommittee meetings, orinforma isussions between members he on themargins of suh meetings, affor members theoortunity to review trae onerns in a biatera ormutiatera setting an to seek further arifiation.

eifi trae onerns raise by members are a

soure of otentiay interesting information on theeffets of nontariff measures. eifi trae onernsoint out artiuar obstaes fae by eorters fromthe ountry raising the onern in a given eortmarket. The information they rovie on the effets ofNTMs is thus simiar to that rovie by businesssurveys. The main ifferene is that seifi traeonerns are hannee through governments.orters faing an obstae may omain to thegovernment, whih may or may not raise the issue atthe WTO. This means that seifi trae onerns mayrovie a istorte iture of the traerestritive ortraeistortive effets of TT an P measures. Anumber of onerns may never be raise.12 Moreover,there are no reasons to beieve that the ones that getraise are statistiay reresentative of a theTT/P reate trae istortions fae by members.

As areay mentione, the TT InformationManagement ystem an the P InformationManagement ystem aow users to trak, an erformsearhes on, seifi trae onerns raise in the TTor P ommittees but they are not suitabe for

quantitative anaysis. The WTO eretariat has thusoe a the reevant information on seifi traeonerns an reate two atabases: one on TTmeasures an one on P measures. The TTeifi Trae onerns T atabase roviesinformation on the 317 onerns raise in the TTommittee between anuary 199 an une 211.13 The P T atabase rovies information on the312 onerns raise between anuary 199 aneember 21. ah of these orresons to aonern raise by one or more members in reation toa measure taken by one of their traing artners. inesome of these measures might have been notifie to

the WTO, the onern might be reate to one orsevera notifiations of the member taking themeasure. The main iffiuty with the oifiation wasto attribute rout oes from the Harmonizeystem the system use by artiiating ountries toassify trae goos on a ommon basis.1

Disputes

isutes initiate by members uner the WTO isutemehanism are another soure of otentiay interestinginformation on the effets of nontariff measures. TheWTO eretariat maintains a atabase on “requests for

onsutations”, the first ste in formay initiating aisute in the WTO. As of 31 eember 211, theatabase ha information on 27 suh requests.1 These ata o not iniate the tye of nontariffmeasure at issue in the isutes, but the WTOagreements an rovisions ite in eah isute areiste. Using the atter, it is ossibe to obtain anestimate of the number of ases invoving eah tye ofnontariff measure. When oing this, however, it isimortant to bear in min that for eonomi an oitiareasons, a number of NTMreate trae istortions maygo unhaenge. As with seifi trae onerns, thereis no reason to beieve that the measures haenge

were statistiay reresentative of a the NTMreatetrae istortions fae by members.1

Another robem with this aroah is that for anyisute, omainants ten to ite a arge number ofrovisions whih have aegey been breahe, whiein fat some of the rovisions are uiates orintimatey reate to other rovisions. The GATT, foreame, is ite in most isutes beause it inuesthe basi rues that ay to trae in goos. Moreover,even when a omainant brings a isute uner amore seifi agreement, suh as the TT Agreement,it may aso inue aims uner the GATT, suh asuner Artie III:. This means that a sime ount ofthe number of rovisions ite in the ases wou eato an overestimation of the number of NTMs that havebeen haenge.




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antana an akson 212 roose a methooogyto obtain a more reise view of the tyes of measuresthat are the subet of WTO isute settement byausting for the itation to the GATT in isuteswhere that agreement may have aye a seonary

roe. Using this methooogy, they have omie aataset on WTO isutes base argey on theatabase of requests for onsutations maintaine bythe WTO ega ivision.17 This ataset is not ubiyavaiabe, but it is onsistent with a atabase on WTOisutes aessibe on the Wor ank’s websitesee beow. In their ataset, akson an antana onot “oube ount” requests for onsutations that referto the GATT when the referene is ikey to be ofseonary imortane to the main aim of vioationi.e. a seiaize agreement or another GATT artie.They have aso restrite overage to isutes reateto trae in goos. This overs a tota of 393 isutes

out of the 27 fie uner the isute ettementUnerstaning U as of 31 eember 211.

b NonWTO soures of information

(i) Data collected from official sources

TRAINS and Market Access Map

The most omete oetion of ubiy avaiabeinformation on nontariff measures is the TraeAnaysis an Information ystem TRAIN eveoeby the Unite Nations onferene on Trae an

eveoment UNTA. UNTA starte oetingNTM information in 199 an simutaneousyeveoe the TRAIN atabase.1 TRAIN roviesinformation on trae, tariffs an NTMs by Harmonizeystem H tariff ine. NTMs were assifie aoringto a ustomize oing ystem of Trae ontroMeasures, whih istinguishe si ore ategories ofNTMs. The atabase inues between one an sevenyears of NTM information for ountries over theerio 1992 to 21. or some ountries/years, inartiuar after 21, ata were oete ony for asubset of NTM ategories. Various soures were useto rovie ata, inuing, where avaiabe, WTOsoures suh as notifiations.19 Overa, the overageis athy, resuting in bank es whih are iffiutto interret. They an signify missing ata or iniatethat a artiuar NTM is not aie to a artiuartariff ine.

In the eary 2s, it beame ear that the TRAINatabase require substantia imrovement an thatthe oing ystem neee an uate to reflet newraties. In 2, the eretary Genera of UNTAaunhe a roet aime at revaming the efinition,assifiation, oetion an quantifiation of nontariff measures.2 Uner the guiane of a Grou ofminent Persons, a mutiageny team omose ofeerts from a internationa agenies ative in theNTM area starte working on the roet. In 29,the mutiageny team roose an uate an

moifie version of the o oing ystem inuing1 ategories see Tabe .2 whih brought theassifiation oser to the reguatory framework.21 A iot roet on the oetion an quantifiation ofNTMs was arrie out by UNTA an the

Internationa Trae entre IT, with a view to testingthe new assifiation. With the suort of two UNregiona ommissions, UNTA an IT oeteNTM information in seven eveoing ountries.22 ase on the essons earne in the iot roet, theuate NTM assifiation was finaize an aote.

The uate assifiation aso introue the onetof “roeura obstaes”, efine as “issues reate tothe roess of aiation of an NTM, rather than tothe measure itsef” Unite Nations onferene onTrae an eveoment UNTA, 21: vii. Aninitia ist of roeura obstaes was estabishe an

teste in a series of interviews with eortingomanies arrie out as art of the iot roet seethe isussion of business surveys beow.23 On thebasis of essons earne in the iot roet, the initiaist of roeura obstaes was revise an eane.

Tabe .3 resents the ten broa ategories ofroeura obstaes in the ist urrenty use by IT.The istintion between a nontariff measure an aroeura obstae an sometimes be very subte,an is best iustrate with an eame. To imort arout, it may be neessary to have a seifiertifiation an NTM; however, the ertifiation

Tabe .2: International classification

of non-tariff measures

A anitary an hytosanitary measures

Tehnia barriers to trae

Preshiment insetion an other formaities

Prie ontro measures

Lienes, quotas, rohibitions an other quantityontro measures

harges, taes an other aratariff measures

G inane measures

H Antiometitive measures

I Traereate investment measures

istribution restritions*

K Restritions on ostsaes servies*

L ubsiies euing eort subsiies*

M Government rourement restritions*

N Inteetua roerty*

O Rues of origin*

P ort reate measures*

Source: Unite Nations onferene on Trae an eveomentUNTA 21.

Note: *iniates that no offiia information is oete by UNTAfor this ategory whih is ony use to oet information from therivate setor through surveys an web ortas.




02

authority or testing aboratory an be eessiveyosty, sow in resonse or be oate in a remote arearoeura obstaes reate to the NTM. Informationon roeura obstaes an ony be oete throughsurveys or other mehanisms that reor omaints.

oowing the iot roet hase, IT, UNTA anthe Wor ank starte to oet offiia ata on nontariff measures.2 Their strategy onsiste of hiringoa onsutants universities, think tanks or onsutingfirms an giving them assistane an guieines toraw u NTM inventories in oaboration with theministries an agenies onerne. Reying on outsieonsutants is intene to aress two of the robemsthat ague sefnotifiation: i the wie variety ofboies invove in initiating NTMs; an ii theinentives for authorities not to notify in orer to avoieosure. The ata oete by onsutants are

formatte aoring to internationa assifiation byrout at either the tariffine or H eve, togetherwith information on ega soures an enforingageny, in orer to ensure verifiabiity of theinformation. The inventories are then arove bynationa authorities uring vaiation workshos.inay, the ata are verifie an ae to both theTRAIN an Market Aess Ma, a atabase of tariffsan NTMs eveoe by IT.

To onsoiate ooeration an ean the reentoetion efforts, an ambitious mutiagenyartnershi, Transareny in Trae TNT, was

aunhe in 211 by the Afrian eveoment ank,IT, UNTA an the Wor ank. Using onorfinaning, the TNT initiative aims at giving a “big ush”to ata oetion, reating a onesto gobainformation soure. It rovies a framework throughwhih the four agenies oorinate their ataoetion efforts to fi key ata gas an worktogether to strengthen the aaity of institutions ineveoing ountries to oet an reort informationon trae oiies. TNT has four maor omonents:i toos the Market Aess Ma an the Wor ank’sWor Integrate Trae oution ortas rovie aessto the ata; ii tariff ata oetion; iii nontariff

measures ata oetion; an iv oiies affeting

trae in servies. One the first wave of ata oetionis omete, the haenge faing the TNT ar tnershiwi be to move to a more sustainabe struture thanthat rovie by onor finaning aone.

World Bank Temporary Trade Barriers Database(TTBD)

The Wor ank’s Trae arriers atabase TTwebsite hosts etaie an freey avaiabe ata onmore than 3 ifferent nationa governments’ use ofantiuming an ountervaiing uties sine 19an of goba safeguars sine 199 as we as onhina’s use of its seifi transitiona safeguar.2 TheGoba Antiuming atabase, eveoe by haown, with funing from the Wor ank, uses originanationa government oumentation to organizeinformation on affete ountries, rout ategory

at the H eve, tye of measure, ate of initiation,fina imosition of uties, an revoation ates, aneven information on the omanies invove.

The TT website aso hosts a ubi atabase withinformation on WTO isutes eveoe by HenrikHorn an Petros Mavroiis.2 It ontains informationon a stages of WTO isute settement roeeingse.g. ane reorts, aeas, omiane ane reortsfor a WTO isutes u to 11 August 211.

OECD product market regulation

The O onomis eartment has eveoe aatabase onsisting of iniators of rout marketreguation for member states. The aim is to turnquaitative ata on aws an reguations that may affetometition into quantitative iniators. The iniatorsmosty measure reguations that are otentiay antiometitive in areas where ometition is viabe. Withthe eetion of the foreign iret investment Irestritiveness ine, they o not istinguish betweenisriminatory an nonisriminatory measures seeetion .3. The main soure of information use forthis atabase is offiia government resonses to theO Reguatory Iniators Questionnaire, with ony a

sma fration of information being rawn from eternaatasets, thereby guaranteeing a high eve ofomarabiity aross ountries. The iniators aresubet to eer review by the nationa aministrations ofO member ountries.

The atabase rooses severa ifferent iniatorswhih have been auate for various years. irst,there is the eonomywie rout market reguationPMR iniator, whih overs omesti reguationsboth in the manufaturing an servies setors. Thishas been estimate for 199 an 23 for 3 Oountries onway et a., 2. The eonomywiePMR iniator was subsequenty reae with theintegrate PMR iniator, whih has been estimatemosty for 2 for 3 O ountries the fouraitiona ountries are hie, stonia, Israe an

Tabe .3: ITC list of procedural obstacles

A Aministr ative burens

Information/transareny issues

Inonsistent or isriminatory behaviour of offiias

Time onstraints

Payment

Infrastrutura haenges

G eurity

H Lega onstraints

I Other

Source: Internat iona Trae entre IT 211.




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ovenia as we as for razi, hina, Inia, Inonesia,Russia an outh Afria Wöfl et a., 29. Theintegrate PMR iniator overs genera reguatoryissues in fies suh as ubi ontro an rieontros, ega an aministrative barriers to market

entry, an barriers to trae an investment. It asoovers some inustryseifi reguatory oiies,notaby in air an rai assenger transort, rai anroa freight, teeommuniations an retai istribution.

eony, in arae with the PMR iniator, the Ohas eveoe a set of iniators overing reguationin seifi setors or seifi asets of reguation.The setora iniators over three nonmanufaturingsetors, an in artiuar network inustries suh asenergy eetriity an gas, transort air, rai an roatransort, an ommuniation ost an

teeommuniations as we as retai trae anrofessiona servies onway an Nioetti, 2.The energy, transort an ommuniations Treguation iniator overs measures af feting marketentry an ubi ownershi us vertia integrationan market struture, but ony in a subset of the seveninustries. The retai istribution iniator overs fourentry reguations registration, ienes an ermits,arge outet restritions, an rotetion of inumbentsan two onut reguations sho oening hours anrie ontros. inay, the rofessiona serviesiniator overs three market entry an four onut

reguations. The I reguatory restritiveness ineovers four tyes of measures: i foreign equityrestritions; ii sreening an rior arovarequirements; iii rues for key ersonne; aniv other restritions on the oeration of foreignenterrises Kainova et a., 21. The atest revisionof the ine overs these four tyes of measures fora rimary setors agriuture, forestry, fishing anmining, investments in rea estate, five manufaturingsubsetors an eight servies setors. The Irestritiveness iniator is avaiabe for 1997, 23,2 an 21 for ountries.

omare with other iniators of servies measures,the famiy of O reguation iniators has a numberof avantages. irst, the information summarize bythe iniators is “obetive”, in the sense that it isbase on rues, reguations an market onitionsrather than on eretions ature through surveys.eony, these iniators rovie the broaestoverage of setors an areas, an the ongest timeseries urrenty avaiabe to omare rout marketreguation aross ountries. As isusse in moreetai in etion .3, the PMR iniators over a wiearray of measures reevant to the servies setor but

they o not math the GAT ategories of measuresmarket aess an nationa treatment imitations; anomesti reguation. Moreover, they are ony avaiabefor a reativey sma grou of mosty rih ountries. 27

(ii) Business concerns

Most of the soures isusse so far are soures ofoffiia information, whether notifie to the WTO oroete from governmenta soures. Offiia

information has a number of istint avantages. irst,it is generay reiabe. It an be inke bak to a egatet an, at east for the WTO soures, it is aroveby governments. eony, in most ases it is oetein a systemati way.2 However, it aso has a fewisavantages, foremost among them that the ata aregenerate/reorte by the ountries imosing thenontariff measures. ome of these ountries maywant to avoi attrating attention to their aotion ofnew NTMs, or they may simy not eem them worthyof reorting, in whih ase the iniene of NTMs foriniviua ountries an in aggregate measures oube unerstate. urthermore, whie eviene suggeststhat how NTMs are aie or aministere anbeome a “roeura barrier to trae”, governmentshave absoutey no inentive to oument obstaesreating to the seifi way in whih measures areaie.

Questions reating to roeura obstaes may bebetter aresse using business surveys or informationon firms’ own eretions of the iffiuties they faeoing business in various markets. ata on eortereretions rovie a vauabe omement to atafrom offiia soures beause they he ientify those

measures that are ereive as imeiments to trae.These sorts of ata, however, reflet firms’ ugmentsan may be subet to various biases. usinesses mayeaggerate roeura obstaes – or, on the ontrary,minimize them – eening on the irumstanes.They may aso be unabe to ientify the seifioiies of onern, or may misientify them. Moreover,surveys, beause of robems reate to same sizean sefseetion of resonents, o not awaysguarantee rigorous an signifiant resuts.29 imiary,with websites where eorters an fie omaints,sefseetion eas to a biase statistia same.

Two soures of business ata are resente in thissubsetion an use in the net subsetion sinethey ea irety with nontariff measures. The first isa set of 11 business surveys onute by IT ineveoing ountries. The seon is the oRe NTMsomiation of reorte NTMs atabase omie byMartinez et a . 29, whih inororates informationfrom the Unite tates Trae Reresentative’sNationa Trae stimate Reorts on oreign Traearriers an the uroean Union’s Market Aess –Trae arriers atabase. These two soures give anoverview of barriers fae by firms from two of theargest eveoe eonomies. Other business surveysfousing on “ease of oing business” iniators are notisusse here even though they may ontain reevantinformation sine they require more attention to makesure the orret measures are ientifie.3




04

ITC business surveys

ine the en of the iot roet in 29 see subsetion 1bi above, the IT has arrie out argesae omany surveys on nontariff measures in more

than a ozen eveoing an easteveoe ountrieson a ontinents.31 The surveys over at east 9 erent of the tota eort vaue of eah artiiatingountry euing mineras an arms.32 The eonomyis ivie into 13 setors, an a setors aountingfor more than 2 er ent of tota eorts are inuein the survey. oth eorting an imorting omaniesare overe. The survey methooogy invoves atwoste aroah.

In the first ste, omanies that eeriene burensomenontariff measures are ientifie through honeonversations with a the omanies in the same. The

seon ste then onsists of faetofae interviewswith the omanies that reorte iffiuties with NTMsin the hone onversations. A traine interviewer hesresonents ientify the reevant reguation, the natureof the robem, the affete routs siigit eve ofthe Harmonize ystem, the artner ountry eortingor imorting the rout an the ountry aying thereguation artner, transit or home ountry. The IToes not imement the survey, but guies an suortsa oa survey omany an eerts in oing this. Uonfinaizing the survey, its resuts are resente anisusse at a issemination worksho, whih bringstogether a nationa stakehoers an fosters a iaogue

on NTM issues.

Compilation of NTMs reported by US and EU

exporters

Over the ast eae, the Offie of onomis of theUnite tates Internationa Trae ommission UIThas been engage in omiing a unifie atabaseusing the U’s Market Aess – Trae arriersatabase an the Nationa Trae stimate Reort onoreign Trae arriers issue by the Unite tatesTrae Reresentative UTR, as we as the WTO’strae oiy reviews. The first version of the UIT

NTM atabase ates bak to 22 an is esribe inManifo 22 an onney an Manifo 2.It was ater uate by Martinez et a. 29.

The U’s Market Aess – Trae arriers atabaserovies a snashot of nontariff barriers fae outsieof the U by eorters from U members. It is base onomaints registere by U eorters an roesse bythe uroean ommission. The atabase has 32 setorsan seven main ategories of measures: tariffs anuties, trae efene instruments, nontariff barriers,investmentreate barriers, inteetua roerty rightsreate barriers, other eortreate measures anserviesseifi measures. ah of those ategories isfurther ivie into a number of subategories. Nontariff barriers, for instane, are subivie into:registration, oumentation an ustoms; quantitative

restritions an reate measures; ometition issues;stanars, sanitary an other tehnia measures;government rourement; subsiies; other nontariffmeasures; an sanitary an hytosanitary measures.The UIT atabase oes not inue tariffs an trae

efene instruments an U ata are reassifieaoring to the UIT assifiation.

The Nationa Trae stimate NT Reort on oreignTrae arriers is issue annuay by the UTR. Itsrimary fous is on foreign barriers to U eorts. TheNT is not a sime business survey. It is base uoninformation omie within the UTR, the ear tmentof ommere an the eartment of Agriuture another U government agenies. It is suementewith information rovie in resonse to a notieubishe in the eera Register the offiia ourna

of the U Government, an with information frommembers of the rivate setor trae avisoryommittees an U embassies abroa. Whie eahountry is reviewe in a ifferent way, the isussiontyiay fouses on iniviua measures by setor.

Global Trade Alert

In 29, the entre for onomi Poiy ResearhPR teame u with ineenent researhinstitutes from aroun the wor to reate the GobaTrae Aert GTA initiative.33 Their obetive was toinrease the information avaiabe on state measures

that may affet traing artners’ ommeria interests,broay efine as imorts, eorts, foreigninvestments inuing inteetua roerty, anforeign emoyees. PR beieve that a ombinationof eer ressure us utoate, omrehensiveinformation wou he avoi the histori mistakes ofrotetionism of revious eras. In aition to trakinggovernment measures taken uring the urrent gobaeonomi ownturn, the GTA rovies researhers angovernment offiias with information on new atternsof state intervention that are robemati from theersetive of maintaining oen borers.

Regiona noes, a network of ineenent researhinstitutes an trae eerts from a over the gobe, areresonsibe for monitoring state measures introuein their own region an esewhere. The GTA initiativeaso enourages thir arties to submit measures forsrutiny, an weomes iaogue with imementing

urisitions onerning the measures they haveintroue. The vauation Grou, onsisting of theeaers of the regiona noes an haire by thereresentative of the network hub PR, isresonsibe for assessing this information an eiingwhether to ubish it on the GTA website. The GTA

oes not onfine itsef to the measures that areovere by the eisting boy of WTO agreements. Noroes the initiative ronoune on the WTO egaity of ameasure or whether a measure is “rotetionist”.




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2. tyize fats about NTMs reateto trae in goos

urrenty avaiabe atabases on nontariff measures,esite the shortomings isusse above, an be useto aress imortant questions about trae in goos,inuing whether suh measures have inrease overtime, how imortant P an TT measures areomare with other tyes of NTMs, an how firmsereive the obstaes they fae in internationamarkets. This subsetion oses severa suh questionsabout NTMs an rovies answers in the form ofesritive statistis in orer to estabish a number ofstyize fats about NTMs. Ony with a reiabe setof fats an researhers hoe to make rogress inaressing more funamenta questions about NTMs.

a Is there eviene of an inreasingmeium to ongterm tren in NTMs?

To gras the genera trens in nontariff measuressine the mi199s, information was first oetefrom the UNTA TRAIN atabase.3 Pane a ofigure .2 resents the average share of rout inesan share of trae vaue affete by NTMs for aountries for whih information has been oete. Aseaine in more etai in o .1, these areinventorybase measures of the intensive marginvaue of trae an the etensive margin number ofines affete of trae overe by NTMs, resetivey.

The shares of ines an trae vaue overe by NTMshave inrease between 1992 an 21,but there is no eviene of a further inrease for the2 erio.3

It is we known that the TRAIN atabase suffersfrom inonsistent ata oetion aross years. Toaress this robem, in Pane b of igure .2 thesame information is resente for seete LatinAmerian ountries with the most omete NTMinformation in the atabase.3 The quaitative resuts

are simiar to the ones in Pane a: the shares of inesan trae vaue overe by NTMs have inreasebetween 1992 an 21, but there is noeviene of a further inrease sine the mi2s.

eyon the weknown ata imitations, the abseneof onusive eviene of an inreasing use of nontariff measures may be ue to ifferent trens ofseifi NTMs. The fous of this reort is, however, onTT/P measures. WTO interna soures ofinformation on notifiations an seifi traeonerns an be use to isay the trens inTT/P measures sine 199. igure .3 shows thenumber of notifiations to the WTO an the number ofnotifying ountries sine 199 for both P an TTmeasures. oth series ehibit uwar trens.37

As a aveat, it shou be emhasize that WTO

members o not have the obigation to notify ameasures imose, but ony the new ones beingintroue see etion .1. Moreover, the mehanismunerying suh trens inreasing number ofmeasures or inrease omiane with WTOobigations annot be eary ientifie.

The eviene of an uwar tren in the number of Pan TT measures notifie is suorte by omaintbase information ontaine in the eifi Traeonerns atabase. In igure ., the eft aisreresents the number of P onerns initiate anresove er year.3 The right ais reresents the

umuative number of onerns. It is usefu to istinguishbetween new an resove onerns beause newonerns may signa an inreasingy averse effet ofmeasures or an inreasing artiiation of ountries inthe seifi trae onerns mehanism.39 The rate atwhih onerns are resove onveys artiainformation on the effetiveness of the mehanism. Thefigure shows that both the number of onerns initiatean the number of onerns resove flutuate wieybetween 199 an 21. However, ue to the fat thatthe former number is arger than the atter in a years

igure .2: Shares of product lines and trade value covered by NTMs, 1996-2008

erentage

1999-2002

0.40

0.49 0.51

0.61

0.52

0.61

2002-2005 2006-2008

0.5

0.6

0.4

0.3

0.2

0.1

0

Share of product lines Share of trade value

1996-2000 2001-2004 2005-2008

0.5

0.6

0.4

0.3

0.2

0.1

0

Share of product lines Share of trade value

0.260.29

0.49

0.570.53 0.54

Source: UNTA TRAIN.

Note: Latin Amerian ountries in Pane b inue Argentina, oombia, uaor, Peru, Uruguay an the oivarian Reubiof Venezuea.

a A avaiabe ountries b eete Latin Amerian ountries




06

igure .3: SPS and TBT notifications, 1995-2010

number of notifying ountries an number of notifie measures er year

1995 1996 1997 19991998 2000 20022001 2003 2004 20062005 2007 20092008 2010

60

30

40

50

20

10

1200

600

800

1000

400

200

00

Number of notifying countries (left axis)Number of measures (right axis)

1995 1996 1997 19991998 2000 20022001 2003 2004 20062005 2007 20092008 2010

100 1800

60

120070

1400

40800

30 600

501000

90

80

1600

20 400

10 200

00

Number of notifying countries (left axis)Number of measures (right axis)

Source: WTO ITIP atabase.

a P

b TT

eet 2, the umuative number of P onernsinreases over time.

A tota of 312 P seifi trae onerns were raisebetween 199 an 21. Ninetyfive 3 er ent werereorte as resove by WTO members to the Pommittee. ighteen er ent were reorte asartiay resove – meaning, for instane, that traemay have been aowe for seete routs or bysome of the members using the measure in question.No soutions were reorte for the remaining 21 traeonerns er ent. However, it is ossibe thatsome of these onerns were resove without the Pommittee being mae aware of these eveoments.Therefore, the number of resove onerns in

igure . shou be taken as a ower estimate.Tabe . beow ouments the fat that isutes itingP measures have not inrease over time, either asan annua tota or as a share of a isutes. This

suggests that the seifi trae onerns mehanismmay be funtioning better than the rising number of

isutes an notifiations in this area wou suggest.

In the ase of TT seifi trae onerns, onyinformation on initiation of onerns, but not on theirtermination, is avaiabe. The ata, shown in igure .,iniate an uwar tren in initiations but withreutions between 199 an 1999; 22 an 2;an 29 an 21.

onsistent with the measuresbase information fromnotifiations, there is aso some iniation that aninreasing number of ountries is invove in raisingseifi trae onerns or maintaining TT/P

measures subet to Ts see igure .. A keyeement is that eveoing ountries are beomingimortant users of the system – an issue that wi beeore in more etai in etion .2.




08

inuing miseaneous hemia routs, variousmetas, eetria mahinery an toys. Another onernwas raise in 2 by the Unite tates, anaa,aan an others against the uroean Union oneetria mahinery an instruments. inay, a TTeak in 21 was mainy ue to a onern raise by theuroean Union against the Unite tates, invoving awie set of setors, inuing hemias an astis.

eony, inventorybase measures of the inieneof nontariff measures, namey frequeny an overageratios, have been auate see o .1 formethooogy. In this ase, too, a seifi traeonern in TT is assume to be “resove” if, after itsinitiation, it is not raise again for two years; no iretomarison an be mae between P onerns seeigure .a an TT onerns see igure .b,eseiay on the absoute amount of trae overe. The

genera message is, however, that frequeny an

overage ratios are inreasing athough not eveny,iniating that P an TT measures subet to seifitrae onerns are affeting an inreasing number ofrout ines an an inreasing amount of trae.2

viene from isutes on trens in TT/Pmeasures is inonusive. Aoring to antana anakson 212, the number of isutes iting the Pan TT agreements fe between 199 an 211, butthe ro was onsistent with the overa eine in thenumber of isutes uring this erio see Tabe ..Requests for onsutations reate to P measuresfe from 1 in 1992 to seven in 2711, but theshare of P ases in the tota number of isutesinrease to 11 er ent from 9 er ent betweenthese two erios. isutes iting the TT Agreementnumbere 2 in the earier erio an ust eight in the

igure .: Maintaining and raising countries in specific trade concerns, 1995-2010

number of ountries

2 0 0 0

1 9 9 9

1 9 9 8

1 9 9 7

1 9 9 6

1 9 9 5

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

40

50

60

30

20

10

0

Raising countriesMaintaining countries

2 0 0 0

1 9 9 9

1 9 9 8

1 9 9 7

1 9 9 6

1 9 9 5

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

40

50

60

30

20

10

0

Raising countriesMaintaining countries


Note: In the TT ataset, a onern is assume to be “resove” if not raise again for two or more years. A “raising” ountry is the onewhih omains about a TT/P measure imose by a “maintaining” ountry in the reevant WTO ommittee.

a P

b TT




109


ME A S UR E S A ND

S E R V I C E S

ME A S UR E S

igure .7: Average value of initiated SPS and TBT concerns, 1995-2010

U$ biion

2 0 0 0

1 9 9 9

1 9 9 8

1 9 9 7

1 9 9 6

1 9 9 5

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

1.5

2 40

35

30

25

20

15

10

5

0

1

0.5

0

Average import value per new TBT concern(right axis)

Average import value per new SPS concern(left axis)

Source: WTO T atabase.

igure .: Coverage ratio and frequency index of STCs aggregated by year, 1995-2010

2 0 0 0

1 9 9 9

1 9 9 8

1 9 9 7

1 9 9 6

1 9 9 5

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

0.07

0.09

0.08

0.05

0.06

0.02

0.03

0.1

0.04

0.01

0

Frequency indexCoverage ratio

2 0 0 0

1 9 9 9

1 9 9 8

1 9 9 7

1 9 9 6

1 9 9 5

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

0.02

0.01

0.015

0.025

0.005

0

Frequency indexCoverage ratio


Note: In the TT ataset, a onern is assume to be “resove” if not raise again for two or more years .

a P

b TT




111


ME A S UR E S A ND

S E R V I C E S

ME A S UR E S

b Are TT/P measures more revaentthan other tyes of nontariff measures?

(i) Evidence from official sources

Reent anaysis by the Unite Nations onferene onTrae an eveoment UNTA 212, using

newy oete ata on nontariff measures in3 eveoing ountries us the uroean Union anaan suggests a signifiant revaene of TT anP measures over other NTMs. Together, they overmore routs an trae vaue than “har measures”,suh as rie an quantity ontro measures. Thisanaysis, using the new assifiation of NTMsisusse in etion .1, inues searate subategories aowing TT an P measures to beistinguishe. The former are more revaent than theatter – a fat that is in ine with the esritiveeviene on the number of measures notifie to theWTO see igure .3. In artiuar, the average

ountry imoses TT measures on about 3 er entof routs an trae an P measures on about1 er ent of routs an trae.

(ii) Evidence from business surveys

The IT business surveys rovie further eviene ofthe reominane of TT/P measures in nontariffmeasures, or at east in those NTMs ereive asburensome by firms in the 11 eveoing an easteveoe ountries where surveys have beenonute. The ata assifiation use in the surveysis simiar but not ientia to the mutiagenyassifiation outine in Tabe .2 an Tabe .3. TTan P measures are not shown searatey in theIT surveys ue to the iffiuty of istinguishing thesemeasures from survey resonses, but taken together

they orreson to the sum of the ategories“tehnia requirements” an “onformity assessment”.Reorts of burensome NTMs inue both measuresaie by imorting ountries an measures imoseby the home ountry. The former are referre to as“imortreate measures” whie the atter areassifie as “eortreate measures”.

igure .9 shows the breakown of reorte nontariffmeasures by tye of measure average over the11 ountries surveye to ate. ine some ountriesare arger than others, a sime average i.e. thearithmeti mean may give unue weight to smaerountries at the eense of arger ones. However,using a traeweighte average taking the vaue ofeah ountry’s eorts in 21 as weights oes notaear to have a maor imat on shares.

The share of tehnia requirements in tota nontariff

measures is somewhat smaer when the simeaverage is use 17 er ent than when the traeweighte average is use 23 er ent, but the reverseis true for onformity assessment 31 er entomare with 2 er ent. The sum of thesetwo ategories is roughy the same in either asearoun er ent, whih means that TT/Pmeasures omrise neary haf of a NTMs, inuingeortreate measures. Their share in imortreatemeasures is even higher at aroun er ent,regaress of the weighting struture. Of a“haenging” NTMs reorte by eorting omanies,about 7 er ent are aie by artner ountries an

2 er ent by home ountries. Aroun 1 er ent offirms reort a negative imat on their business fromrues of origin, whereas other measures are seen asess haenging.

Tabe .: Agreements cited in disputes related to trade in goods, 1995-2011erentage an number

1995-2000 2001-2006 2007-2011 1995-2011

Antiuming 1. 29.1 29.2 22.

Agriuture 19.1 1.9 13. 1.

Teties an othing 7.7 .7 . .1ustoms vauation . 2.2 . 3.

GATT austea .7 9. 3. .

Government rourement 2.1 . . 1.

Imort iensing 13. . 1. .9

Rues of origin 1. 1. 3.1 1.

ubsiies an ountervaiing measures 19. 2. 2. 22.

afeguars .2 17.2 .2 9.9

anitary an hytosanitary measures 9.3 9. 1. 9.

Tehnia barriers to trae 12. . 12.3 1.2

Traereate investment measures .2 . .2 .

Total number of disputes in goods 194 134 65 393

Source: WTO eretariat estimates.Note: Athough there were 27 requests for onsutations fie uner the isute ettement Unerstaning as of 31 eember 211, thistabe fouses on 393 isutes in goos, i.e . it eues 2 isutes with aims mainy invoving TRIP an nine isutes with aims mainyinvoving the GAT.aThis tabe foows the methooogy of antana an akson 212 to eiminate uiate itations of the GATT.




12

The IT ata an be further broken own by subategory of nontariff measures. These are shown inigure .1 for TT/P measures i.e. tehniarequirements us onformity assessment. Proutertifiation, whih is ereive as burensome by37 er ent of reorting firms, is the most frequentyite tye of measure in this grou. It is foowe byrout testing at 9 er ent, an insetionrequirement at er ent. Together, these three NTMsubtyes are resonsibe for more than haf of a firmomaints about TT/P measures.

igure .9: Burdensome NTMs by typeof measure, 2010

erentage

Simple averageTechnical requirements 17%

Conformityassessment

31%

Pre-shipmentinspection

5%

Para-tariffmeasures

6%

Quantity control

measures 4%

Rules of origin10%

Other import-related

measures 2%

Export-relatedmeasures 25%

Technical requirements 23%


24%

Pre-shipmentinspection

4%

Para-tariffmeasures

5%

Quantity controlmeasures 4%

Rules of origin9%

Other import-related

measures 4%


Trade-weighted average

Source: IT business surveys on NTMs.

Note: urveys were onute in 11 eveoing an easteveoe eonomies: urkina aso, gyt, amaia, Kenya,Maagasar, Mauritius, Moroo, Paraguay, Peru, Rwana anUruguay. Mineras an arms are eue from the survey.

omying with rout ertifiation requirements ineort markets an entai signifiant osts foreorting firms. ome reent numeria eames ofthese osts are summarize in etion , o ..These eames reate to osts onfronting firms

eorting from the Unite tates, but routertifiation may ose an even greater haenge foreorters oate in eveoing an easteveoeeonomies, sine they may have fewer finania aninstitutiona resoures to raw uon than firms ineveoe ountries.

Probems reating to home ountry ertifiation ofeorts are neary as etensive for firms as ertifiationin estination ountries, as an be seen in igure .11.The eortreate measures most frequenty ite byfirms are ertifiation requirements 2 er ent,eort insetion 23 er ent an obtaining eort

ienes/ermits 13 er ent. Together, thesethree ategories aount for more than er ent offirm omaints about eortreate measures.

As note in etion .1, the IT surveys are base oninterviews with firms in a sma number of eveoingeonomies, an as a resut the resonses o notreresent the onerns an eerienes ofbusinesses in eveoe ountries. The three argesteveoe eonomies the Unite tates, theuroean Union an aan a oet ata an issuereorts on trae barriers faing their eorters inforeign markets, but in genera these figures are not

ubiy avaiabe in a format that is amenabe toemiria anaysis. This situation has been artyremeie by researhers at the U Internationa Traeommission, Martinez et a. 29, whose oRe NTMatabase merges business surveys from the Unitetates an the uroean Union with information fromWTO trae oiy reviews using a singe iiosynratiata assifiation. igure .12 makes use of thisatabase, but it eues the WTO figures in orer tofous soey on the onerns of eveoe eonomyeorters.

ata for the Unite tates are soure from the

U Nationa Trae stimate NT whie figures for theuroean Union ome from the U’s Market Aessatabase. trity seaking, the U NT is not asurvey, but rather a reort base on the finings ofsevera U government agenies an embassiesabroa, as we as from rivate firms. However, thefigures shou sti rovie imortant insight into theriorities of Amerian eorters.

The to five robems faing U eorters are imortreate measures 2 er ent, investment measures2 er ent, stanars an testing 12 er ent, Pmeasures 1 er ent an inteetua roerty rights9 er ent. The eaing onerns of U firms are Pmeasures 3 er ent, stanars an testing1 er ent, antiometitive raties 9 er ent,inteetua roerty rights 7 er ent an imort




113


ME A S UR E S A ND

S E R V I C E S

ME A S UR E S

reate measures er ent. The sum of “Pmeasures” an “stanars an testing” in igure .12shou be roughy equivaent to TT/P measures asefine in etion A.1. TT/P measures aear tobe a maor onern for the uroean Union,reresenting more than haf 2 er ent of a issues

reorte by U eorters. However, the equivaentshare for the Unite tates is muh ower, at22 er ent. Reasons for this isarity are unear, butit ou be attributabe to ifferenes in methooogybetween the U NT ata an the U’s MarketAess atabase.

An imortant ifferene between the IT surveys anthe U/U reorts is the reativey high imortaneattahe to inteetua roerty rights by the argeeveoe eonomies. Aoring to the oRe NTMata, inteetua roerty rights aount for 9 er ent

of omaints from U eorters an 7 er ent ofomaints from U firms. On the other han, ust.3 er ent of firms reorting burensome NTMs inthe IT surveys ite inteetua roerty as a robem.

The ata on isutes in Tabe . show that requestsfor onsutations iting the P an TT agreementsresetivey reresente 11 er ent an 12 er ent ofa ases over the ast five years. Athough these sharesare not eaty sma, other agreements were ite moreoften, inuing GATTauste er ent, anti

uming 29 er ent, subsiies/ountervaiingmeasures 2 er ent an the Agreement onAgriuture 1 er ent. This ou ea one toonue that firms’ omaints about TT/Pmeasures o not neessariy transate into governmentation at the eve of the mutiatera traing system.On the other han, it ou aso be taken as evienethat the seifi trae onern mehanism may beresoving omaints before they eveo into fuyflege trae isutes.

Is there any ifferene in NTM usebetween eveoe an eveoingeonomies?7

The T atabase shes ight on the tye of ountriesmost invove in the mehanism. igure .13 resents

igure .1: TBT/SPS import-related measures by sub-type, 2010

erentage

0 5 10 15 20 25 30 35 40

Product certification 37.3

Special authorization due to riskof food-borne disease

Others

Restricted or prohibited useof substances(other than food)

Regulation on GMOs andother foreign species

Product identity requirements

Hygienic practices during production

Importer registration for health,safety, etc.

Restricted or prohibited useof substances in food

Prohibition for health, safety, etc.

Packaging

Authorization requirement for health,safety, etc.

Product registration

Tolerance limits for residuesor contaminants

Product characteristics including quality,performance

Fumigation

Origin of materials and parts

Labelling

Testing

Inspection requirement

8.7

7.9

6.0

4.4

4.1

3.6

3.5

2.9

2.6

2.5

2.5

1.5

1.5

1.2

1.2

1.2

1.2

1.0

5.3


Note: urveys were onute in 11 eveoing an easteveoe eonomies: urkina aso, gyt, amaia, Kenya, Maagasar,Mauritius, Moroo, Paraguay, Peru, Rwana an Uruguay. Mineras an arms are eue from the survey.




14

the number of “maintaining” an “raising” ountries byinome grou, auate as their share in the totanumber of ountries in the resetive inome grou. The resuts are earut: eveoe ountriesartiiate more in the seifi trae onernsmehanism than eveoing ountries. Moreover,

eonometri anaysis shows that the amount of traeovere by onerns overage ratio an frequenyine is higher when the maintaining ountry iseveoe than when the maintaining ountry iseveoing, both for P an for TT measuressubet to seifi trae onerns.9 However, the

igure .11: NTMs applied by home country on exports by sub-type, 2010

erentage

0 5 10 15 20 25 30

Other export quantitative restrictions

Export price control measures

Export prohibitions

Measures on re-export

Export subsidies

Export quotas

Export registration

Other export related measures

Other technical export measures

Licensing or permit to export

Export taxes and charges

Export inspection

Certification required bythe exporting country 26.1

23.1

12.6

10.0

8.6

7.3

5.5

1.9

3.4

0.5

0.5

0.4

0.1



igure .12: Non-tariff measures facing US and EU exporters, 2009

erentage

0 5 10 15 20 25 30

State-trading

Taxes

Export-related

Corruption

Customsprocedures

Anti-competitivepractices

Governmentprocurement

SPS measures

Intellectualproperty

Investment-related

Standards,testing, etc.

Import-related 24

20

12

10

9

7

5

5

4

2

1

1

0 5 10 15 20 25 403530

State-trading

Corruption

Export-related

Governmentprocurement

Customsprocedures

Investment-related

Taxes

Intellectualproperty

Import-related

Standards,testing, etc.

Anti-competitivepractices

SPS measures 35

16

9

7

6

6

5

6

4

4

0

0

Source: Martinez et a. 29.

Unite tates uroean Union




115


ME A S UR E S A ND

S E R V I C E S

ME A S UR E S

artiiation of eveoing ountries has steaiyinrease over the years, not ony as raising ountriesbut aso as maintaining ountries.

The IT business surveys aso fin greater use ofTT/P measures by eveoe eonomies.igure .1 shows the share of TT/P measuresi.e. tehnia requirements us onformity

assessment in imortreate nontariff measures,broken own by eve of eveoment. Aoring tothis figure, aroun threequarters of burensomeNTMs reorte by firms reate to TPT/P measureswhen the imorting ountry is eveoe, whereas thisshare fas to aroun haf when the imorting ountryis eveoing.

Other surveybase eviene suggests that intraregiona trae between Afrian ountries may besubet to a very ifferent set of nontariff measures. Insuort of efforts to estabish a triartite free traearea between the ommon Market for astern anouthern Afria OMA, the ast Afrianommunity A an the outhern Afrianeveoment ommunity A, an onine reortingsystem has been set u to register omaints about

NTMs an to seek resoution through a onsutationroess. Kaenga 212 reviews omaints submitteto the onine system between 2 an 211 an finsthat aministrative roeures are the most ommonsoure of robems for traers, whie TT/Pmeasures ay a minor roe see Tabe .. “ustomsan aministrative entry roeures” were ite in1 er ent of omaints an “Other roeura

robems” were mentione in another 2 er ent ofases, for a ombine tota of er ent. P anTT measures were ony resonsibe for 7 er ent an er ent of omaints, resetivey, for a tota of12 er ent. This ombine share is the same as theshare for “eifi imitations”, a ategory that inuesquantitative restritions an rohibitions. It is iffiut toraw strong onusions from suh a sma an ossibynonreresentative same, but the ata o suggestthat TT/P measures are muh ess wiey usethan other measures between Afrian ountries.

oes the iniene of NTMs varyaross setors?

As isusse in etion , there are goo reasons toeet the use of nontariff measures to vary

igure .13: Number of STC “maintaining” and “raising” countries as a share of the total numberof countries by level of development, 1995-2010

erentage

Source: WTO T atabase.

Note: In the TT ataset, a onern is assume to be “resove” if not raise again for two or more years. A “raising” ountry is the onewhih omains about a TT/P measure imose by a “maintaining” ountry in the reevant WTO ommittee.

1995-2000 2000-2005 2005-2010

0.6

0.8

0.5

0.7

0.9

0.4

0.3

0.2

0.1

0

Developed Developing

1995-2000 2000-2005 2005-2010

0.5

0.6

0.4

0.3

0.2

0.1

0


1995-2000 2000-2005 2005-2010

0.6

0.8

0.9

0.5

0.7

1

0.4

0.3

0.2

0.1

0


1995-2000 2000-2005 2005-2010

0.6

0.8

0.9

0.5

0.7

1

0.4

0.3

0.2

0.1

0


a P maintaining

TT maintaining

b P raising

TT raising




16

signifianty aross setors. Inee, NTMs aear toaffet ertain setors isroortionatey, but theetent of the imat is sensitive to the way that setorsare efine. Unfortunatey, there is onsierabe soefor onfusion ue to the eistene of mutieometing statistia efinitions. or eame, at eastthree efinitions of agriutura routs are wieyuse: the efinition from the WTO Agreement onAgriuture AOA, the efinition that aears in theWTO’s statistia ubiations base on the tanarInternationa Trae assifiation IT, an the first2 haters of the Harmonize ystem H traenomenature.

The AOA efinition is the narrowest as it refletsnegotiating onerns rather than anaytiarequirements. The ITbase WTO efinition is the

broaest, but it is oory suite to emiria researhsine tariffs are generay efine in terms of the Hassifiation. haters 1 to 2 of the H assifiationreresent a reasonabe omromise between anintuitive unerstaning of what onstitutes agriutura

routs an anaytia tratabiity. or this reason, itis aote as our stanar efinition, with nonagriutura routs efine negativey as a otherrouts. This shou not be onfuse with nonagriutura routs as use in onagriutura marketaess NAMA negotiations, whih are efine as anonAOA routs. The main ifferene betweenthese efinitions is the treatment of fish an fishrouts, whih are taken to be agriutura routsin this reort but are treate as nonagriuturarouts in AOA/NAMA. Neither the AOA nor the Hefinition inues woo, whih may be highy reevantto the P Agreement sine woo routs have been

known to harbour invasive seies that an be highyamaging to the imorting ountry.

Using the T atabase, one an get a sense of thetye of setors most affete by seifi traeonerns. A first istintion is between the agriuturean nonagriutura setors. onerns about Pmeasures overwhemingy affet the agriuture setor21 of the 27 seifi trae onerns for whih anH setor ou be ientifie, that is 9 er ent.1 or TT measures, out of the 23 seifi traeonerns for whih an H setor ou be ientifie,2 29 er ent are in agriuture an 1 er ent in other setors.2 However, eonometrianaysis shows that the overage ratio an thefrequeny ine of TT measures subet to seifitrae onerns are higher in agriutura setors thannonagriutura ones.3

or both P an TT measures, frequeny ineesan overage ratios are ower in setors haraterizeby a higher iniene of intermeiate routs. Asargue in etion , the theory of trae agreementsuner offshoring reits that, in the resene of trae

igure .1: Burdensome NTMs applied bypartner countries by level of development, 2010

erentage


50

60

70

80

90

100

40

30

20

10

0

TBT/SPS All other measures

74.4

25.6

50.6

49.4



Tabe .: Complaints about NTMs in COMESA-EAC-SADC, 2008-11number an erentage

Number of

complaintsShare in total

1: Government artiiation in trae an restritive raties toerate by governments 37 1

2: ustoms an aministrative roeures 11 1

3: Tehnia barriers to trae TT 19

: anitary an hytosanitary P measures 2 7

: eifi imitations 3 12

: harges on imorts 7 2

7: Other roeura robems 7 2

Total 368 100

Source: OMAAA onine NTM omaint system, Kaenga 212.




117


ME A S UR E S A ND

S E R V I C E S

ME A S UR E S

in intermeiate inuts an biatera rie bargainingbetween foreign suiers an omesti buyers, theeve of the behintheborer nonta reguatoryoiies aie to foreign eorts is set higher thanwou be effiient, beause of rentshifting i.e. shifting

rofits from the foreign to the omesti rouertaiger, 212. The regressions of the iniene ofTT/P measures on the setora share ofintermeiate routs o not onstitute a rigorous testof the theory of trae agreements uner offshoring.uh a test wou require etaie ata on the intensityof intermeiate routs an the amount of biaterabargaining. However, the resut that the amount oftrae overe by seifi trae onerns is ower inintermeiateintensive setors seems to iniate thatmotivations other than rentshifting may rive the useof TT/P measures in these setors see etion. for a etaie isussion.

viene that agriutura routs areisroortionatey affete by nontariff measures isehoe in the IT business surveys an iustrate byigure .1, whih shows the iniene of burensomeNTMs by setor of the reorting firms. In tota, about3 er ent of businesses sai they were negativeyaffete by NTMs or reate obstaes to trae, butthis share was higher for businesses in the agriuturasetor er ent an ower among manufaturingfirms 1 er ent. These shares were auate bytaking the sime average over the 11 avaiabeountries in the IT surveys, but the ontrast betweenagriuture an manufaturing is somewhat strongerwhen averages are weighte by eorts in eah setor.In this ase, the iniene of NTMs in agriuture was3 er ent, whereas it was ony er ent formanufaturing.

Not ony is the iniene of nontariff measures higherin the agriutura setor, but ifferent tyes of

measures are aso use omare with themanufaturing setor. igure .1 shows theistribution of NTMs by tye of measure in agriuturean manufaturing. orters of agriutura routsreort more robems reate to TT/P measures

i.e. tehnia requirements us onformityassessment than eorters of manufature goos9 er ent for the former, 3 er ent for the atter.On the other han, reshiment insetion, aratariffmeasures7 an rues of origin i.e. aws, reguationsan aministrative roeures whih etermine arout’s ountry of origin are omarativey more

igure .1: Incidence of NTMs by sector, 2010

erentage

Total Agriculture Manufacturing

50

60

70

40

30

20

10

0

Simple average Trade weighted average

53.451.2

60.1 62.5

50.845.1



igure .1: Type of NTM by sector, 2010

erentage

Para-tariffmeasures 4%




Rules of origin6%

Finance measures 2%

Otherimport-relatedmeasures 1%





36%

Conformity assessment 24%

Pre-shipmentinspection 3%

Pre-shipment inspection 8%

Para-tariff measures 8%

Rules of origin 14%

Agriculture

Manufacturing

Otherimport-relatedmeasures 2%






18

haenging for eorters of nonagriutura routs.ortreate measures seem to resent fewerrobems for agriutura eorters than formanufaturers, sine the share of these measures ina reorte NTM ases is erentage oints ower in

the agriutura setor 23 er ent than inmanufaturing 27 er ent.

ata on isutes from antana an akson 212aso oint to a higher iniene of TT/P measuresin agriutura routs AOA efinition than in non

agriutura routs see Tabe .. P an TTmeasures were both ite in 2 er ent of isutesuring the 2711 erio, whereas isutes invovingnonagriutura routs ony mentione the TTAgreement 3 er ent of the time an the P

Agreement not at a. This 2 er ent share initations was greater than for any other agreementother than the Genera Agreement on Tariffs an TraeGATT, whih was mentione in er ent of asesafter austment to eiminate uiate itations.TT/P itations in agriuturereate isutes have

Source: WTO eretariat estimates.

Note: Athough there were 27 requests for onsutations fie uner the isute ettement Unerstaning as of 31 eember 211, thistabe fouses on 393 isutes in goos, i.e. it eues 2 isutes with aims mainy invoving TRIP an nine isutes with aims mainy

invoving the GAT.aThe breakown by agriuture/nonagriuture is base on antana an akson 212. The tabe eues isutes invoving “generi ormie” routs.

bThis tabe foows the methooogy of antana an akson 212 to eiminate uiate itations of the GATT.

Tabe .: Agreements cited in disputes related to trade in agricultural and non-agricultural productsa

erentage an number1995-2000 2001-2006 2007-2011 1995-2011

Agricultural products (AoA definition)

Antiuming 12.3 11.1 12. 11.

Agriuture . 31. 2. 3.

Teties an othing 1. . . .7

ustoms vauation 7. 1.9 . .1

Genera Agreement on Tariffs an Trae GATT 9. 1.1 . .3

Imort iensing 2. 9.3 . 1.

Rues of origin 1. . . 2.2

ubsiies an ountervaiing measures 7. 2. 1. 1.

afeguars . 1. . 11.

anitary an hytosanitary measures 17. 2. 2. 2.

Tehnia barriers to trae 17. 7. 2. 1.

Traereate investment measures 7. . . .1

Total number of agriculture disputes 57 54 25 136

Non-agricultural products (NAMA)

Antiuming 22. 2. 7.1 33.2

Agriuture . 1. . .

Teties an othing 12. 1. . .

ustoms vauation 2. . . 1.

GATT auste b 7. . 1.2 .

Government rourement 2. . . 1.

Imort iensing 2. 2.9 2.9 2.

Rues of origin 2. 2.9 . 2.

ubsiies an ountervaiing measures 2. 3.9 2. 2.2

afeguars 7. 19.1 11. 119.

anitary an hytosanitary measures . . . 3.

Tehnia barriers to trae 13. . 2.9 .

Traereate investment measures 12. . .9 .

Total number of non-agriculture disputes 100 68 34 202




119


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ME A S UR E S

aso inrease over time, rising from 1 er ent in19921 to 2 er ent in 2711.

e What kins of roeura obstaes areassoiate with NTMs?

Nontariff measures ose many haenges foreorting firms, but more often than not it is themanner of imementation rather than the measureitsef that auses robems for businesses. As notein etion .1, these imementation issues arereferre to as “roeura obstaes” in the new mutiageny ata assifiation on NTMs. or eame, aountry ou have very high stanars for imortegoos, making it iffiut for eorters to omy withthese stanars. On the other han, eorters thatmanage to omy with the reguations might stihave robems emonstrating their omiane, or

ese might fae ong eays before their goos areamitte into the imorting ountry. In the first ase,an eorter ou ereive the NTM itsef to be themain imeiment to trae, whereas in the seonase they might view the roeura obstae as thesoure of their iffiuty.

In ratie, ata on roeura obstaes an ony beoete through surveys suh as the IT businesssurveys. igure .17 shows shares of reorte nontariff measures in the IT surveys with an withoutroeura obstaes assoiate with them. Theaverage share of roeura obstaes is 77 er ent if

we take the sime average over the 11 ountrieswhere surveys have been onute. The use of atraeweighte average reues this share sighty to72 er ent.

The tyes of roeura obstaes that businessesreort are shown in igure .1. The most ommonymentione obstae is “time onstraints”, inuingeays reate to reguations an short eainesfor submitting oumentation. This aounts for

3 er ent of reorte obstaes, foowe by“high/informa ayments” at 22 er ent, an“aministrative burens” at 17 er ent. There aresmaer shares for other reorte roeura obstaes.

The iniene of roeura obstaes varies wieyaross ifferent tyes of nontariff measuressee igure .19. or eame, neary er ent offirms reorting burensome onformity assessmentmeasures aso enountere roeura obstaes. Onthe other han, the iniene of roeura obstaes intehnia requirements was ust er ent. Proeuraobstaes were reorte ess frequenty for government

rourement restritions er ent, subsiies aso er ent an rie ontro measures 2 er ent,inuing antiuming an ountervaiing measures.They ourre most frequenty in measures reate tointeetua roerty 1 er ent an eortreatemeasures er ent.

f How have NTMs evove sinethe goba finania risis?

The shar eines in goba trae an outut thatfoowe the finania risis in 29 raise fears ofa rerun of the 193s, when rote tionism eaerbate

an roonge the Great eression. fforts by theWTO an others to monitor trae oiy eveomentsin the aftermath of the risis initiay foun that mostountries ha manage in 291 to avoi the worst

igure .17: Share of NTMs with and without

procedural obstacles, 2010

erentage

igure .1: Shares of reported procedural

obstacles by type, 2010

erentage

Simple average Trade-weighted average

50

60

70

80

90

100

40

30

20

10

0

NTM only NTM with PO

23.5

76.5 71.7

28.3

Time constraints 35%

Discriminatorybehaviour

6%

Information ortransparency

issues 5%

Informal orunusually highpayment 22%

Lack offacilities 8%

Recognition,accreditation 1%

Other 2%

Unspecified 4% Technical requirements17%








20

forms of rotetionism, but eveoments in 211oint to inreasing trae frition an a rise in the

number of restritive trae measures. To the etentthat trae oiy has beome more restritive reenty,it aears that most of the inrease is ue to nontariffmeasures.

Tabe .7 summarizes eviene from WTO monitoringreorts sine 2. The number of new restritivemeasures rose from 3 in 2 to 3 in 29 at theheight of the risis. New restritive measures then febak to 3 in 21 but inrease again to 3 in thefirst 1 months of 211. The number of iberaizingmeasures was sighty greater than the number of

restritive ones in 21, whih suggests itte or nohange in the overa eve of rotetionism that year.However, there was a net inrease in the number ofrestritive measures in 211, as iberaizing ations feto 3 from 323 in the revious year, whie restritiveones rose to 3 from 3.

Ony er ent of restritive measures introue in2 were tariffs, but this share rose to 1 er entin 29, then to 2 er ent in 21 before faing bakto 19 er ent in the first ten months of 211. Tabe .7eues TT an P measures, so the tariff share issomewhat eaggerate. P an TT measures are

intentionay not trake in WTO monitoring reorts inorer to avoi having to make any ugment as towhether suh measures are ustifie on ubi oiygrouns.

In the aftermath of the risis, ountries immeiateyresorte to trae “remeies”, suh as antiuming

ations an ountervaiing uties, as eviene by ashar inrease in the number of restritive measuresfrom 3 in 2 to 19 in 29, but this ater fe to132 in 21 an to 1 in 211. In 21, the numberof restritive trae remeies was roughy equa to thenumber of iberaizing measures, bringing their netontribution to the stok of restritive trae measuresose to zero, whie in 211 iberaizing ationsoutnumbere restritive ones.

One notabe feature of Tabe .7 is the sike in thenumber of restritive nontariff measures from 3 in21 to 1 in 211. At the same time, the number of

iberaizing NTMs fe from 23 to 13. The reentinrease in restritive measures is attributabe to anumber of eveoments, inuing striter imortontros an iensing requirements in some ountries,as we as imort rohibitions imose on someaanese goos foowing the ukushima nuearaient in Marh 211. ome of the main ountriesimosing the new measures in 211 were Inonesia,Inia an Argentina.

viene from the WTO’s monitoring reorts eas usto onue that the use of nontariff measures hasrisen reative to tariffs sine the finania risis,athough there are eetions for iniviua ountries.In every year sine 2, new restritive nontariffmeasures have outnumbere iberaizing ations.Meanwhie, the number of iberaizing tariff measures

igure .19: Shares of NTMs with and without procedural obstacles by type of NTM, 2010

erentage

0 10 40 50 70 80 100603020 90

Rules of origin

Export-related measures

Government procurement

Intellectual property

Anti-competitive measures

Subsidies

Price control measures

Quantity control measures

Finance measures

Pre-shipment inspection

Para-tariff measures

Conformity assessment

Technical requirements 44.7

20.5

28.9

32.9

28.2

27.5

75.0

100.0

19.4

100.0

100.0

18.8

12.5

55.3

79.5

71.1

67.1

71.8

72.5

25.0

80.6

81.2

87.5

NTM only NTM with PO






22

3. ervies measures

This subsetion isusses trens in serviesmeasures. As mentione in etion .1, the WTO’sinterna soures of information on servies measures

inue notifiations an GAT sheues ofommitments. GAT Artie III.3 notifiations, whihotentiay over a measures reevant to theAgreement, are ague with very ow omianerates. heues of market aess an nationatreatment ommitments rovie information on bounoiies, but the regimes that are atuay aie areoften more ibera.9 uh WTO interna soures ofinformation are of very imite use when assessingservies measures aie by WTO members.Therefore, this subsetion onsiers nonWTOsoures of information, asking whether they he toshe ight on the trens in servies measures.

A serious imitation of the urrent ata on serviesmeasures is that they aow to a very imite etent theistintion between market aess an nationatreatment measures an omesti reguation. Thisistintion is imortant beause these tois raiseifferent issues: imroving market ontestabiitythrough ow barriers to entry an eit an reuingisrimination, an imroving the governane of nonisriminatory reguation, resetivey. Moreover, theavaiabe information on omesti reguation is imitein overage an time frame an, in most ases, it onyinues reativey oor roies.

Internationa organizations, suh as the Organisationfor onomi ooeration an eveoment Oan the Wor ank, are urrenty running roets toroue ervies Trae Restritiveness IneesTRIs. TRIs were first estimate by the AustraiaProutivity ommission AP, but ony for a rosssetion of ountries no time series information isavaiabe. The TRI roue by the AP annottherefore be use to anayse trens over time. The

inees roue by the Wor ank an the Ohave not been mae ubiy avaiabe, yet. or thisreason, a isussion of TRIs is restrite to themethooogy see o .2.

a What are the trens in serviesmeasures?

As isusse in etion .1, the main avaiabe soureof internationay omarabe information on serviesmeasures is the Prout Market Reguations PMRata from the O. The PMR iniators inueinformation on eonomywie aws an reguationsthat are otentiay antiometitive in areas whereometition is viabe. The subset of the NonManufaturing Reguation NMR iniators, in turn,ony overs seifi servies. NMR iniators asomeasure reguations that urb effiienyenhaning

ometition onway an Nioetti, 2.

As oumente by Wöfl et a. 29, there has beena ownwar tren in the reguatory barriers toometition, measure by the PMR, in O ountriessine the ate 199s. Reguatory barriers toometition have aso erease in network serviessetors, suh as energy, transort an ommuniationssine the mi197s, as shown in Pane a ofigure .21. or rofessiona servies, too, there hasbeen a ownwar tren in overa reguation averageaross a rofessions over time, as shown in Pane bof igure .21.1

It is not ossibe to estabish a ink between the tyesof iniators isusse above an the GAT ategoriesof market aess Artie XVI, nationa treatmentArtie XVII an omesti reguation Artie VI..As an iustration, onsier the NMR iniators forrofessiona servies. ntry reguations inueiensing imitations that are market aess imitationsovere by GAT Artie XVI, euation requirementsthat are omesti reguation overe by GAT

igure .21: Time trend of NMR indicators in selected services sectors

number of reguations

Source: O NMR ataset.

1996 2003 2008

2.5

3

2

1.5

1

0.5

0

Overallregulations

Entryregulations

Conductregulations

1

9 7 5

1

9 7 7

1

9 7 9

1

9 8 1

1

9 8 3

1

9 8 5

1

9 8 7

1

9 8 9

1

9 9 1

1

9 9 3

1

9 9 5

1

9 9 7

1

9 9 9

2

0 0 1

2

0 0 3

2

0 0 5

2

0 0 7

5

6

4

3

2

1

0

ETC regulation indicator Entry barriers

a nergy, transort an ommuniationsT setors b Professiona servies




123


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ME A S UR E S

Artie VI. an quotas/eonomi nees tests forforeign roviers that are at the same time imitationsto market aess an nationa treatment, resetiveyovere by GAT Arties XVI an XVII. The iniatorfor onut reguation overs antiometitive

reguations on ries an fees, avertising, form ofbusiness an interrofessiona ooeration. Whiereguations on the form of business are market aess

imitations overe by GAT Artie XVI, the otherreguations are more generay overe by the GATuner Artie I as “measures affeting trae inservies”. A ownwar tren of rout marketreguation in servies may reflet a reution in

imitations to market aess or nationa treatment, butit may aso be ue to hanges in the stringeny ofomesti reguation.

o .2: Trade restrictiveness indexes for services

The Austraian Proutivity ommission AP ioneere the estimation of a ervies Trae RestritivenessIne TRI inay an Warren, 2. The AP omie information on measures in the 199s thatotentiay restrite trae in servies, overing a wie range of setors aross ountries. Most of theinformation was base on the tets of reguations, but some setors aso inue information from outomemeasures an the de facto imementation of reguations. In onstruting the ine, the AP istinguishebetween measures affeting market entry fie osts an those affeting the ostentry oerations of afirm variabe osts. Within eah ategory, measures an either be nonisriminatory or isriminatory. oreame, a nonisriminatory measure affeting market entry may imit the number of servie roviers inthe teeommuniations setor of a given ountry regaress of nationaity, whereas a isriminatory measurewou imose nationa quotas for foreign firms or eiings on maimum foreign equity artiiation. imiary,a nonisriminatory measure affeting ostentry oerations may stiuate, for instane, a minimum aitarequirement for a insurane firms, whereas a isriminatory measure wou entai aitiona aitarequirements for foreign suiers ranois an Hoekman, 21.

ores were assigne for eah restrition by eerts on the basis of a ugement about its stringeny. orinstane, an eonomy that restrits the number of banking ienes was assigne a higher sore than aneonomy that issues new banking ienes with ony ruentia requirements. Net, the ifferent restritionswere ombine in a weighte average, one again aoring to an eert vaue ugement about theirreative eonomi ost. or eame, restritions on banking ienes were assigne arger weights than

restritions on the temorary movement of eoe. The weights were hosen so that the resutingrestritiveness ine sore ranges from zero to one. De facto, the trae restritiveness ine for eaheonomy omrises two inees – a foreign trae restritiveness ine an a omesti trae restritivenessine. The foreign ine sore inues both isriminatory an nonisriminatory restritions, whie theomesti ine sore overs ony nonisriminatory restritions. Hene, the ifferene between the soresof the two inees is a measure of the isrimination against foreigners MGuire, 2. ome stuies inthe trae iterature have use these TRIs to estimate the rie effets of servies measures, taking aountof stanar eterminants of erformane for the setor onerne.

eyon the imite ountry an time overage, there are severa imitations of suh an TRI, outine byGrünfe an Mones 23. irsty, the TRI is not a tariff equivaent; thus it oes not rovie informationon rie or ost imats. eony, it oes not measure antiometitive raties, suh as riefiing,marketsharing arrangements an artes, whih onstitute imeiments to servies trae. Thiry, it is ony

omute for si inustries: banking, teeommuniations, maritime servies, istribution whoesae anretai, euation an rofessiona servies engineering, arhitetura an ega.

The onstrution of TRIs using a methooogy of sores an weights base on eert ugement is asobeing arrie out in ongoing Wor ank researh. isrimination against foreign suiers for eah serviessetor an moe of suy is mae on a fiveoint sae ranging from for no restritions to 1 highyrestrite, with three intermeiate eves of restritiveness .2, . an .7. etor resuts areaggregate aross moes of suy using weights that reflet the ugement of eerts on the reativeimortane of the ifferent moes for a setor. or eame, “temorary movement of suiers” moe isimortant for rofessiona servies, but not for teeommuniations, whereas “ommeria resene” orforeign iret investment moe 3 is the ominant moe for ontesting a market. Net, setor TRIs areaggregate into a singe measure for the servies setor as a whoe in eah ountry using setor GPshares or I shares as weights Gootiiz an Mattoo, 29a.

The maor imitation of the estimates base on the TRIs is that they rey on the ugement of eerts toetermine the severity of ifferent restritions. This ens an unavoiabe eement of subetivity to the ineGootiiz an Mattoo, 29b. In aition, there are onetua robems with the weights use.




24

Another istintion that is ony artiay ature byPMR iniators is the one between isriminatory annonisriminatory servies measures as efine inetion .2.2 This istintion is imortant for oiy

making. Using ata for 3 eonomies in the AsiaPaifi, uroean an Amerian regions, NguyenHong2 fins that rieost margins of engineeringfirms are negativey affete by nonisriminatorymeasures that restrit entry an ositivey affete byisriminatory measures on foreign estabishment anoeration. Inreases in rieost margins areinterrete as iniret eviene of the rentreating i.e.rofitgenerating effets of restritions, whiereutions in suh margins are interrete as inireteviene of ostreating effets. This suggests thatnonisriminatory measures are ikey to raise osts,whie isriminatory oiies suh as nationaity or

resieny requirements generate aitiona rofits foromesti inumbents ranois an Hoekman, 21.

The Austraia Proutivity ommission’s TRI is a firstsoure of information on isrimination against foreignroviers of servies. inay an Warren 2resent ame eviene that there is signifiantisrimination, both in the estabishment of foreignservies roviers an in the onut of theiroerations. As argue in o .2, the amount ofisrimination is auate as the ifferene betweenthe foreign TRI an the omesti TRI.

eony, some eviene on the etent of isriminationan be gathere from the O PMR iniator“isriminatory roeures” Ps. This iniatorinues information on whether there is “genera”isrimination an “ometition” isrimination againstforeign firms. Among the questions ertaining to“genera isrimination”, there is one asking whether theountry “has seifi rovisions whih require orenourage eiit reognition of the nationa treatmentrinie when aying reguations, so as to guaranteenonisrimination between foreign an omesti firms,goos or servies”.3 Like the genera PMR iniator,isriminatory roeures have aso, on average,erease over time.

A thir soure of information on isrimination inservies reguations is ontaine in the O’s I

Restritiveness Ine. The ine summarizes, for anumber of manufaturing an servies setors, theetent to whih foreign investment is restrite. Thisonstitutes, by efinition, a isriminatory restrition.

ase on the O ata, three inees that arereevant to servies setors have been reate: anovera ine; an ine for eetriity, transort anommuniations setors; an an ine for rofessionaservies. These inees rovie information onGAT moe 3 restritions.

I restritiveness in servies varies arossountries, as shown in Kainova et a. 21. Thereis aso some eviene of a ownwar tren in Irestritiveness iniators, both for the overa inean for the T an rofessiona servies inees.or the overa ine, Pane a of igure .22 earyshows that the unweighte average aross ountriesereases over time, whie the GP weighte averageis more stabe over time, robaby beause rihountries start from ow eves of I restritions.Likewise, Pane b of igure .22 shows a ownwartren in the unweighte averages, an a ess earattern of GP weighte averages, of the T anrofessiona servies iniators. Regression anaysis,however, reveas that the overa, T anrofessiona servies inees a erease over thesame erio.7 Moreover, as isusse in o .3,most of the reution in the I restritiveness

inees is riven by a reution in foreign equityrestritions.

b omesti reguation

Measuring omesti reguation in servies is iffiut.Most, if not a, omesti reguation is setorseifi.To rovie a oue of eames, seifi quaifiationan iensing requirements an roeures ay torofessiona servies roviers, suh as arhitets orengineers; tehnia stanars on aita requirementsisiine the rovision of finania servies by finaniaintermeiaries. Moreover, a reguation may not be

burensome per se , but rather beause of the way inwhih it is imemente. Given the inherent iffiutiesin measuring omesti reguation, it is hary surrisingthat most avaiabe roies are rather oor.

or eame, the use of atua I flows as weights introues a bias beause highy restrite setors areikey to eeriene ess I an therefore are aoate too ow a weight . imiary, using GP weights, setorssuh as heath, with reativey arge shares of GP, are subet to a ow number of restritions, whereas thosewith ow shares of GP, suh as transort, eetriity an finane, are generay highy restrite setors.

A reent stuy by the O 29 anayses aternatives to the eertbase methooogy for onstrutingTRIs. It argues that a ess subetive weighting sheme ou be base on imat anaysis – estimating theiret imat of ifferent servies measures on trae using regression tehniques. The stuy aso ientifiesrinia omonent anaysis PA as a ossibe weighting sheme. oring the statistia roerties ofthe unerying ata, this metho first grous together iniviua measures that are highy orreate. It thenreates weights base on eah grou’s ontribution to the overa variation in the observe outome, i.e.servies trae.




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ME A S UR E S

igure .22: FDI restrictiveness in services, evolution over time

ine between an 1

Source: O I restritiveness atabase.

1997 2003 2006 2010

0.2

0.25

0.15

0.1

0.05

0

Index GDP weighted index

1997 2003 2006 2010

0.2

0.25

0.3

0.15

0.1

0.05

0

ETC Index PS Index

GDP weighted ETC index GDP weighted PS index

a Overa ineb nergy, transort an ommuniations T an

rofessiona servies P

esite the absene of a ear orresonene with theGAT, PMR iniators have been use in the traeiterature to roy for omesti reguation mentione inGAT Artie VI.. In ar tiuar, Ko an Norås 27seet the subset of iniators that, aoring to them,omes osest to overing the reguation mentione inGAT Artie VI.. They ro a of the state ontromeasures, reonstruting the PMR iniator using onytwo main omonents with equa weight: “barriers toentry” an “barriers to trae an investment”.

arriers to entry is an equaweight aggregation of“reguatory an aministrative oaity”, “aministrativeburen on startus” an “barriers to ometition”.arriers to trae an investment is an equaweightaggregation of “isriminatory roeures” an“reguatory barriers”. As arty aknowege by theauthors themeseves, it is however unear to whatetent the reonstrute PMR atures the reguatorybarriers that ome oser to the ones faing unerGAT Artie VI..

Among the PMR iniators, the one that is mostosey reate to omesti reguation in GAT ArtieVI. is “ienes an ermits system” LP. Thisiniator omrises three questions with equaweights: i whether the “siene is onsent” rue isuse i.e. ienes are issue automatiay if theometent iensing offie has not ate by the en ofthe statutory resonse erio; ii whether there aresinge ontat oints “onesto shos” for gettinginformation on notifiations an ienes; iii whetherthere are singe ontat oints for issuing or aeting

notifiations an ienes.

A “yes” answer reeives a sore of zero; therefore theower the iniator, the ess burensome are theiensing requirements. or the same of 39 Oan arge eveoing ountries on whih PMRinformation eists in 199, 23 an 2, there issome eviene that iene an ermit systems havebeome ess burensome over time.

o .3: Decomposition of changes in FDI restrictiveness

The I restritiveness ine is onstrute as the sum of four omonents: foreign equity restritionsR, sreening an arova R, restritions on key foreign ersonne KP an other restritionsOTR. The average erentage ontribution of eah omonent to the growth rate in the tota ine between1997 an 21 is eomose using the foowing formua:

!""#!!"#"

= !"#!""#!!"#"

!"#!""#

+ !"#

!""#!!"#"!"#!""#

+ !"#!""#!!"#"

!"#!""#

+ !"#

!""#!!"#"!"#!""#

where γ ’s reresent growth rates between 1997 an 21 an θi is the share of subiniator i in the Irestritiveness ine in 1997.

The resuts, average aross ountries, are resente in Tabe .. R onstitute the most imortantomonent of the overa ine in 1997 . er ent an reresente the omonent with the argesterentage hange 33.7 er ent. A other omonents aounte for smaer shares in 1997 an smaer

growth rates in absoute vaue.




26

The most reiabe information on omesti reguation,oming oser to the tyes of measures mentione inArtie VI. of the GAT, is erive from setorseifi ata, namey in finania servies. The work by

arth et a. 2 omies information on bankingreguation in more than 1 ountries.9 Thisinformation is groue in four main omonents: entryrequirements, aita reguation, offiia suervisoryowers an rivate monitoring.

Iniators of iene requirements, aita reguation,offiia suervision, aounting stanars an finaniastatement transareny ome osest to the efinitionof omesti reguation use in this reort. As arguein etion .2, emiria anaysis by Ko anNorås 27 fins that reguation aiming at ensuringaroriate stanars is ositivey assoiate with

trae in finania servies.

. onusions

Athough this setion of the Reort has oumentenumerous trens an eveoments in nontariffmeasures an servies measures, ony a few strongresuts emerge from the anaysis for severa reasons.irst, eisting ata soures are omromise by argegas in ountry overage, intermittent ata oetionan a ak of share terminoogy. eony, somesoures of information, suh as seifi trae onernsan notifiations, reflet not ony the eve of NTMativity but aso the egree of engagement with theWTO on the art of its members. onsequenty, anyvisibe trens must be viewe with aution. inay,hanges in NTM ativity may be reativey sma,

making flutuations in the ata more iffiut to etet.esite these robems, some tentative onusionsan be rawn.

The iniene of nontariff measures oes not showany ear tren sine the mi2s. uh measuresaear to have inrease in the ate 199s, butbetween 2 an 2 NTM ativity was reativeyflat, before iking u again in the aftermath of thefinania risis. Whether the ostrisis inrease inNTMs is urabe remains to be seen, but it ertainy isa ause for onern. However, the reative stabiity ofovera NTM ativity in reent years must be onsierein the ontet of eines in tariff rates, whih havemae NTMs more imortant in reative terms.Moreover, TT/P measures aear to be on therise. This is imortant beause these tyes ofmeasures reresent a arge omonent of NTMs.

The share of TT/P measures in nontariff measuresis arge aross most of the maor atabases, inuingthe IT surveys. Their ak of rominene in WTOisutes ata may be interrete as suggesting that theseifi trae onerns mehanism is effetiveyefusing issues before they ome to a hea. Moreover,eonometri an survey eviene shows that TT anP measures are emoye more often by eveoethan by eveoing eonomies. uh measures aearto be ess robemati than umbersome aministrative

roeures, i.e. “re tae”, ony in the ase of intraregiona trae in Afria. Imementation issues aearto be the most imortant soure of onerns foreorters from eveoing ountries, inuing in Afria.

Tabe .: Decomposition of growth of FDI restrictiveness in total services, 1997-2010

Observations Mean Standard deviation Minimum Maximum

γ I restritiveness 3 37. 3.2 92. .

γ R 3 33.7 3.7 91. .

θR 3 . 2.2 1.2 1.

γ R 3 19.1 3. 1. 12.

θR 3 1. 23. . 3.

γ KP 3 1. 3.1 1. .

θKP 3 . 9.9 . .2

γ OTR 3 2. 1. 1. 1

θOTR 3 1. 1.9 . 71.

Source: O I restritiveness atabase.

The same eomosition was erforme for energy, transort an ommuniations T an rofessionaservies. The resuts are simiar for T setors, where most of the hange in the T iniator3 er ent was riven by the hange in R 33. er ent. In rofessiona servies, R sti reresentthe most imortant omonent of the ine. However, this omonent i not hange muh over time. Thus,the overa reution of 29 er ent in the rofessiona servies ine was mainy riven by reutions inR an OTR, with very sma ontributions from R an KP.




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Athough avaiabe ata are robemati in severaresets, the fat that simiar resuts are obtaine frommutie ata soures ens some onfiene to thesefinings. Other researh on nontariff measures asooints in a simiar iretion. In artiuar, the greater

imortane of TT/P measures is ehoe by Anoan Obashi 21, who fin that “nonore” NTMsinuing P an TT measures have higherfrequeny ratios than other tyes of measures inountries in the Assoiation of outheast Asian NationsAAN, an iess 23, who reorts that “tehniameasures” far outweigh other tyes of measures. eghin2 aso ouments an inrease in the share of “nonore” measures in NTMs from er ent to er entbetween 199 an 2. In the future, better ataoetion ou rovie a muh more etaie iture ofthe state of NTMs, an TT/P measures in artiuar.

Turning to servies measures, the ata situation is evenmore robemati than for nontariff measures.A maor issue is the weakness of the transarenyrovisions in the GAT. The notifiation requirements, inartiuar, are very imite. Using avaiabe nonWTO

soures of information, this reort has oumente aninreasing tren in market ontestabiity in a number ofmosty O ountries uring the ast eaes. Thereis aso some eviene that isrimination in the senseof omesti servies an servie suiers being

treate ifferenty than their foreign equivaents haserease in the ast eae. However, a seriousimitation of avaiabe ata is the iffiuty inistinguishing between market aess, nationatreatment an omesti reguation.

The roies for omesti reguation are generay ooran not very informative, eet for some setorseifi ata in finania servies. eary, transarenyis a maor haenge in the area of servies measures.urrent efforts are geare towars oetinginformation on aie regimes in market aess annationa treatment. or omesti reguation, a iffiuty

is to ientify the measures that otentiay affet traein the reguatory regime of a ountry. etion .isusses various otions for the WTO if it is to ay amore signifiant roe in imroving transareny inthis area.




28

Endnotes1 The members who inue nontariff onessions in their

sheues of ommitments uring the Uruguay Roun areeize, ameroon, gyt, avaor, Mata, Inonesia,

enega, an Trinia an Tobago. In most a ses, theseonessions rovie for the eimination of nonautomatiiene requirements on ertain routs. Those whoinue nontariff onessions in their sheues as art oftheir WTO aession roess are hina, aui Arabia,hinese Taiei, Ukraine an Viet Nam.

2 The tariff quotas are eresse in various quantity units anthe inquota an outofquota tariffs are often seifi ormie. As for the ommitments to imit omesti suort,they are eresse in nationa urrenies from 199.

3 or a etaie isussion of the iversity of notifiations anits auses, see ahetta et a. 212.

ahetta et a. 212 isuss in more etai the metris of

the omiane an quaity of notifiations an the reasonswhy both are often ow.

oinsWi iams an Wofe 21 isuss the quai ty of theinformation rovie by subsiies notifiations.

Note that ike a other WTO ouments, notifiations areaessibe through the WTO’s ouments Onine orta.

7 The number of notifiations orresons roughy to thenumber of measures notifie as eah hange in egisationis notifie searatey an eah hange in egisationtyiay invoves one measure.

Reorts broay foow a stanar temate but there is ana ho omonent.

9 It is a rearatory ontribution to the reort by theiretorGenera that is ae for in Paragrah G of Anne3 of the Marrakesh Agreement an that aims to assist theTPR to unertake a n annua overview of eveoments inthe internationa traing environment whih are having animat on the mutiatera traing system. ee WT/TPR/OV/W/1 to WT/TPR/OV/W/3 an WT/TPR/OV/1 to 13.

1 The seon series starte in ate 2 the first reort wasistribute in anuary 2 9 in the ontet of the reentgoba finania an eonomi risis. ee, for eame, theReort on G2 trae a n investment measures May 21to Otober 21 ate November 21.

11 In the ontet of the ourth Ara isa of the TPRM,eegations iniate their esire to bring this matter to the

attention of Ministers at the ighth Ministeria onferene,an to reare a Ministeria eision aime at theontinuation an strengthening of the trae monitoringeerise uner the TPR. ee etion VIII of W TOoument W T/MIN11 of 2 Novembe r 211. TheAraisa was arove by a members.

12 Members sometimes request the WTO eretariat to utonerns on the agena but withraw them before they areresente to the ommittee, arguing that a biateraarrangement has been foun.

13 oumen ts G/P/GN/2/Rev.11 an G/TT/GN/7/Rev.9 rovie summaries of the seifi traeonerns raise resetivey in the P an the TTommittees.

1 The ataset an the methooogy are avaiabe at htt://www.wto.org/engish/res_e/ubiations_e/wtr12_ ataset_e.htm.

1 Whie this atabase is not ubi, the Wor ank maintainsa ubi atabase on WTO isutes. ee etion .1b.

1 The isutes themseves are ony a subset of a theonflits that arise between members. In this ersetive,Aeate oy ases an be seen a s the ti of the “greatyrami” of the WTO ega orer, with most of the imortantnormative an onflit resoution work one muh oser tothe base of the yrami Wofe, 2.

17 antana an akson 212 have aso reviewe anomemente a ataset of request s for onsutations unerthe GATT isute settement overing the erio 19199.The origina ataset was reare by Reinhart 199 onthe basis of Hue 1993.

1 UNTA’s oaboration with Asoiaión Latinoamerianae Integraión ALAI stans out as its most suessfuattemt at engaging regiona organizations in the oetion

of NTM information. ine 1997, ALAI has been oetingNTM information for a number of ountries in the region anroviing this information to UNTA on an annua basis.The ata oete by ALAI is fuy omatibe with theUNTA TRAIN atabase. AL AI member ountries areamong the few for whih the NT M information in TRAINhas been reguary uate over the erio 1997 to 21.ee etion .2.

19 Among the soures use were various governmentubiations offiia ournas, ubiations frominternationa organizations suh as AP’s TINT, WTOnotifiations, the German oreign Trae Information OffieAI, the renh Internationa Trae Monitor MOI, theGerman Institute for onomi Researh IO or the ritish

usiness ourna.2 or more etais on this roet, see Unite Nations

onferene on Trae an eveoment UNTA 21.

21 This internationa assifiation wi be revise on a reguarbasis. The net uate wi be reease in Ari 212.

22 The seven iot roet ountries were razi, hie, Inia,Phiiines, Thaian, Tunisia an Ugana.

23 The initia ist of roeura obstaes an be foun inAnne 3 of Unite Nations onferene on Trae aneveoment UNTA 21.

2 y Marh 212, ata ha been oete for about ountries an it ha been isseminate for eight of them.

2 Aessibe at: htt://go.worbank.org/WAGKH.

2 ee aso the isussion of isutes as a soure ofinformation on NTMs in etion .1.a.

27 Moreover, it is not ear whether the PMR iniators takeinto aount the enforement of measures. However,onway an Nioetti 2 argue that NMR iniatorsarty take into a ount the imat of oiy enforement.

2 This is not aways true in the ase of notifiations. Asisusse, there are reasons to beieve that omiane withertain requirements may be ow.

29 ee Part II of Unite Nations onferene on Trae aneveoment UNTA 21 for a isussion of

quantifiation methooogies suite to survey ata. Onerobem isusse in Aeni 1 of Internationa Traeentre IT 211 is that many ountries ak a systematibusiness register overing a setors, whih makes ranomsaming in eah setor iffiut.




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3 or an overview of business surveys, see Organisation foronomi ooeration an eveoment O 2.Wor ank 2a, 2 b reort the resuts of two reentWor ank initiatives to oet N TM ata throughinterviews resetivey in 13 mosty Asian ountries an inast Afrian ountries, resetivey.

31 eete NTM survey ountries inue urkina aso,gyt, amaia, Kenya, Maagasar, Mauritius, Moroo,Paraguay, Peru, Rwana an Uruguay.

32 ee the etaie esrition of IT’s NTM surveymethooogy, inuing the saming tehnique inInternat iona Trae e ntre IT 211.

33 Wofe 212 omares the GTA an WTO monitoringmehanisms.

3 As eaine in Aeni .1, the ata avaiabe onUNTA TRAIN refer to the o NTM assifiation. Thereis no eat orresonene between the o an newassifiation. The use of ata from UNTA TRAIN u to2 is mae beause it is the ony soure of offiia atathat aows ientifying trens.

3 aution shou be taken in interreting these resuts,however, beause of gas in the ata an a so beause artof the information omes from WTO notifiations. Theinentives to notify an omiane rates hange over time.

3 Pane b of igure .2 has been onstrute with thesubset of Latin Amerian ountries with NTM informationin 1999, 21, 23, 2 , 2, 2 a n 2. Thisomrehensive information was eveoe by ALA I aninue in UNTA TRAIN. Note that the time eriossighty iffer in the two anes be ause of ata avaiabiity.

37 The average number of P notifiations issue ermember has flutuate wiey between 2 an 2 9,

though in the rior years it has shown an inreasing tren.or TT notifiations, the tren in the number ofnotifiations er member somehow reverses, with wieflutuations unti 2 an a marke inrease sine then.

3 The P T atabase inues information on thetermination of eah onern, whih is rovie by membersin the ontet of the P ommittee isussions. The atainue in the figure are between 199 an 21. iteennew onerns were issue in 211, but there is noinformation on the number of onerns resove in 211.

39 Unfortunatey, with the information at han, it is not ossibeto istinguish between these two hannes. A thirhyothesis is that there ou be some substitution betweenthe isutesettement mehanism an the seifi traeonerns mehanism.

eause information on the ate of resoution of TTseifi trae onerns is not avaiabe in the raw ata, wemake the foowing assumtion in the onstrution of igure.: we assify a TT onern as “resove” in year t if it isnot raise again for two or more years after year t . orinstane, if a seifi trae onern is first raise in the TTommittee in 1999, reraise in 2, an not reraise inany foowing year, it is assume to be “resove” in 2.As omare to P, the number of TT onerns assumeto be “resove” is therefore reativey high. This artyreflets the fat that a signifiant share of TT onerns areraise on ony one or two oasions, as a matter ofarifiation or further information. These onerns – for the

uroses of this anaysis – a re assume to be “resove”.

1 The resuts are essentiay unhange if trae vaues areeresse in rea terms, eflating them with the Uonsumer Prie Ine PI.

2 These resuts are statistiay signifiant. The oeffiient ofa time tren in a regression with the overage ratio or thefrequeny ine as eenent variabe is ositive ansignifiant at the 1 er ent eve, both for P an for TTonerns. The regressions inue setor, ountry anountrysetor fie effets to ontro for unobserve

setor, ountry an ountrysetor seifi variabes.3 ubsrits c an t are omit te for eositiona simiity.

In fat, the measures omute from the two atabases arenot omarabe; therefore, they are assigne ifferent names.

The regressions in o . use instea the ountry, H2setor an timeseifi inees iniate in the equations.

Preshiment insetions, whih uner the reviousassifiation were groue together with TT an Pmeasures uner the ategory of “tehnia measures”, overon average 2 er ent of routs an of trae vaue.

7 eveoe eonomies omrise the members of theuroean Union 27, witzeran, Nor way, the Unite

tates, anaa, a an, Austraia an New Zeaan.eveoing eonomies omrise a other ountries,inuing the ommonweath of Ineenent tates I.ountry overage eens on ata avaiabiity.

This takes into aount the fat that WTO membershiinues many more eveoing than eveoe ountries. Itshou be remine that in the T ataba se the uroeanUnion is onsiere a singe eveoe ountry. As noteabove, a “raising” ountry is the one whih omains abouta TT/P measure imose by a “maintaining” ountry inthe reevant WTO ommittee.

9 We run regressions of the overage ratio or the frequenyine on a ummy equa to one if the maintaining ountrybeongs to the grou of eveoe ountries an zero

otherwise. The oeffiients on suh ummy are ositive ansignifiant. The regression is at the twoigit eve ofisaggregation in the H 1992 nomenature, beausethis is the highest eve of isaggregation at whihfrequeny an overage ratios an be auate.Regression anaysis is referre in this ontet beause itaows to ontro for omitte variabes using fie effets. Inartiuar, the inusion of setoryear fie effets a ows toontro for unobserve heterogeneity within a setor overtime. ountry fie effets annot be inue, ue tooinearity with the variabe of interest eveoe ountryummy. The resuts are avaiabe uon request.

An eame is the mera Ash orer, a beete that wasintroue into North Ameria from Asia in the 199s, an

whih has sine evastate ash tree ouations. The totaisounte ost of the infestation to the Unite tates a oneis estimate at U$ 1.7 biion by Kovas et a. 21.

1 As argue by Unite Nations onferene on Trae aneveoment UNTA 212, the use of P measures isargey imite to agriutura setors a n routs fromanima origin beause their ontro is essentia for ensuringthe heath an webeing of onsumers an the rotetionof the environment.

2 Twenty onerns er ent over both agriu tura annonagriutura routs. The resuts a re quite simiar whenistinguishing between AOA an NAMA routs. In thisase, the resuts for P a n TT onerns are as foows.or P, er ent of seifi trae onerns are in AOA

routs an 7 er ent in NAMA routs, with er entovering both. or TT, 22 er ent of seifi traeonerns are in AOA, 7 er ent in NAMA an 21 er entin both.




30

3 We run regressions of the overage ratio or the frequenyine on a ummy equa to one if a seifi trae onernaffets any of the first 2 haters of the Ha rmonizeystem H trae nomenature. The oeffiient on suh aummy variabe is ositive an signifiant. The regressionsinue ountryyear fie effets to ontro for unobserve

heterogeneity within a maintaining ountry over time.etor fie effets annot be inue, ue to oinearitywith the variabe of interest agriutura setor ummy. Theresuts are avaiabe uon request.

ee Aeni Tabe .1 in Aeni .2. Intermeiateintensity is measure as the share of H routsassifie as art s an omonents in the tota number ofH routs beonging to a hater H2.

The institutiona imiations of the theory of traeagreements uner offshoring are anayse in etai inetion .

omanies that ou not be affiiate to a setor areeue from this auation.

7 Paratariff measures omrise various taes an hargesother than tariffs an ustoms uties.

Refers to measures assifie as “R” in GTA reorts,whih eary restrit trae.

9 ee Hoekman 199, arth et a. 2, Aung an Roy29 an Gootiiz an Mattoo 29a. a rth et a. 2,for instane, show that, in the finania servies setor,aie oiy in a same of 123 ountries is muh moreibera than what was ommitte to in the GAT.

This genera tren of inrease market ontestabiity an beeaine by the raising awareness that reforms thatromote rivate ororate governane an ometitionwhere these are viabe have the otentia to boost

eonomywie routivity growth Nioetti an aretta ,23. Moreover, stronger ometition in rout marketsmay aso have a ositive effet on emoyment. Wöfl et a.29 argue, however, that the aggregate tren maskswie ifferenes in reform aross ountries an over time.

1 igure .21 b aso inues the trens isaggre gate bytye of reguation, entry or onut. It suggests thatonut reguations have erease over time moremarkey than entry reguations. Regression anaysisonfirms that the ownwar tren is statistiay signifiantony for overa an onut reguation, not for entryreguation. In the regressions, the NMR ine is regresseon a time tren, inuing ountryrofession fie effets.The oeffiient on the time tren is negative an statistiay

signifiant. The resuts are avaiabe uon request.

2 isriminatory nonisriminatory measures affetomesti an foreign servies an servies suiersifferenty equay.

3 Other questions use to omie the Ps iniator gobeyon nationa treatment. or this reason, Ps is animerfet roy for isrimination in the sense of nationatreatment imitations GAT Artie XVII.

In artiuar, a regression of P on a time tren an the fuset of ountry fie effets gives a negative an statistiaysignifiant oeffiient. The same inues however ony 39ountries mosty O members an some argeeveoing ountries suh as razi, hina an the Russianeeration, among others for three years 199, 2 3 an2.

The overa ine inues the foowing setors with equaweights: eetriity istribution, whoesae trae, retai trae,transort, hotes an restaurants, meia, teeommuniations,banking, insurane, other finane an business servies. Theeetriity, transort an ommuniations ine ony inues

with equa weights eetriity istribution, transort anan air, with resetive subweights of one haf anteeommuniations. The rofessiona servies ine inuesega servies, aounting an auit, arhitetura serviesan engineering servies aways with equa weights.

ee aso Unite Nations onferene on Trae aneveoment UNTA 2. This stuy assifies ansores I restritions in servies setors for eveoingan transition eonomies in 2. It aso fins onsierabevariation in I restritiveness a ross ountries. Moreover, itreorts systemati ifferenes aross regions, with owereves of restritions in Latin Ameria an uroeaneonomies in transition in 2 omare with a st Asiaan the Mie ast.

7 eifiay, the ine is regresse on a time tren, withinusion of ountry fie effets to ontro for ountryseifi unobserve heterogeneity. The estimateoeffiient on the time tren is negative an statistiaysignifiant. Resuts are avaiabe uon request.

In artiuar, a regression of LP on a time tren an the fuset of ountry fie effets gives a negative an statistiaysignifiant oeffiient. The resuts a re avaiabe uonrequest.

9 The first survey inue 117 ountrie s in 1992 . Theseon inue 12 ountries in 223. The a st surveyinue 12 ountries in 27.




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The “Historia NonTariff Measures” ata use for thisreort were ownoae from the Wor ank’s WorIntegrate Trae oution WIT atabase, usingUNTA’s Trae Anaysis Information ystemTRAIN. The ata were ony ownoae in theases where the NTM assifiation was base on theo trae ontro measures TM oe before 29,sine there is no eat orresonene between oan new TM oes.

The ata were ownoae for eah ountryyear aninue information about the nomenature, therout oe at the most isaggregate eve at themost etaie ommoity eve of the nationa tariffs –for some ountries u to 12igit oes, the start year,a artia overage iniator, an the soure. Theountries were hosen on the onition that theyreorte two or more uty oes er year. Ony theountries that ha avaiabe information for at easttwo years were retaine. These ata were thenmathe with the esrition an the tye of measureorresoning to eah NTM oe.

The ata were then harmonize at the H igit eve,

1

using the foowing methooogy. A rout oes ofess than si igits were eane to inue the siigit oes beonging to the hater or heaing. Theunerying assumtion is that a routs within anH ategory are horizontay affete by a nontariffmeasure if it is reorte at ower eves ofisaggregation the orretness of this assumtionhas been verifie with the omiers of the originaata. In the ases where NTMs were reorte at aeve of isaggregation higher than H, it wasassume that the entire H ine was horizontayaffete. or instane, for an NTM aie to H

rout 111, the H ine 11 was oe asaffete. This roeure an otentiay inflate theshares of routs an trae affete by NTMs. To

obtain a sense of whether this was a rea onern, weauate iniene ratios – the number of routines reorte to be affete by NTMs over the totanumber of rout ines beonging to that siigitrout oe ownoae from the Tariff ownoaaiity of the WTO. The artia overage iniatorou not be use for auating the NTM iniene,sine there were uiate observations. Thus, thisvariabe was not use.2

When using iniene ratios, i in the formuas for the

share of trae an the share of ines affete is not aummy variabe, but an iniene ratio that an takevaues between zero an one. Resuts using inieneratios are, however, not reorte in this reort beausethey are very simiar to the ones obtaine with i as aummy variabe the orreation among the inies isas high as .9. Resuts are avaiabe uon request.

The net ste was to obtain the information about whihrouts were atuay imorte by the reorterountries, in the years for whih the NTM was reorte .Imort ata are from UN omtrae, at the siigit eve,

with the wor as trae ar tner. or the uroean Union1999, the trae ata were not avaiabe irety; thus,the gross imorts of the ountries that beonge to i t atthat time were ownoae searatey an summe u.Other ata were not irety avaiabe when thenomenature i not orreson with the years. orthese, the avaiabe imort ata were ownoae inanother nomenature, an then mathe to the atuanomenatures via orresonene tabes. The ountryyears hane in suh a way were the Phiiines199, Tunisia 1999 an the oivarian Reubi ofVenezuea 23, 2, an 2.

Data availability

The ountryyear observations avaiabe are as foows:

Appendix C.1: Data handling methodologyin the UNCTAD’s Trade Analysis

Information System (TRAINS)

Argentina 1999 21 23 2 2 2 2

Bolivia, Plurinational State of 1999 21 23 2 2 2

Brazil 1999 21 23 2 2 2

Chile 1999 21 23 2 2 2

Colombia 1999 21 23 2 2 2 2

Cuba 23 2 2 2

Ecuador 1999 21 23 2 2 2 2EU 1999 27

Japan 199 21 2




32

Mexico 1999 21 23 2 2 2

Paraguay 1999 21 23 2 2 2

Peru 1999 21 23 2 2 2 2

Philippines 199 21

South Africa 1999 2

Thailand 21 23

Tunisia 1999 22

Uruguay 1999 21 23 2 2 2 2

Venezuela, Bolivarian

Republic of 1999 21 23 2 2 2 2

Viet Nam 21 2

or the grahia reresentation of the esritive statistis, the evoution is shown of the ratios, inies, an theounts over time by averaging the yeary observations into three erios. The reasons for this were the unbaaneane, an the ometey missing years 1997 an 2.

1 The nomenature was hosen in aorane with thereorte year, as suggeste by the omiers of the originaata.

2 The same haene with uiate observations whose onyifferene was in the variabes startyear an startmonth orsoures. These variabes were aso roe from theataset.

Endnotes




133


ME A S UR E S A ND

S E R V I C E S

ME A S UR E S

Aeni Tabe .1: Coverage ratio and frequency index: intermediate-intensive sectors

SPS TBT

Coverage ratio Frequency index Coverage ratio Frequency index

1 2 3

Intermeiate intensity .22*** .991*** .97** .3***

.3 .27 .2 .2

Observations 3, 3,1 11,7 1,71

Rsquare .11 .31 .273 .31

Notes: ountryyear fie effets inue in a regressions.Robust stanar errors in arentheses. *** .1, ** ..

Appendix C.2: Regression results




34

This section discusses the trade effects of

non-tariff measures and services measures in

general before focusing on technical barriers

to trade (TBT), sanitary and phytosanitary

(SPS) measures and domestic regulation inservices. It also examines whether regulatory

harmonization and/or mutual recognition help

to reduce the trade-hindering effects caused

by the diversity of TBT/SPS measures and

domestic regulation in services.

D. The trade effects

of non-tariff measuresand services measures




135

D.T HE T R A DE E F F E C T S OF

N ON-T A R I F F ME A S UR E S

A ND S E R V I C E S ME A S UR E S

Contents 1 stimating the trae effets of NTMs an servies measures 13

2 isentanging trae effets of TT/P measures an omesti reguation in servies 13

3 Harmonization an mutua reognition 19

onusions 12

Aeni .1 17


• The contribution of non-tariff measures to overall trade

restrictiveness is significant, and in some estimates NTMs

are far more trade restrictive than tariffs.

• TBT/SPS measures have positive trade effects for more

technologically advanced sectors, but negative effects

in agricultural sectors.

• There is evidence that TBT/SPS measures have a negative effect

on export market diversification.

• The negative effects on trade caused by the diversity of TBT/SPS

measures and domestic regulation in services are mitigated

by the harmonization and mutual recognition of these measures.




36

This setion eamines the trae imat of nontariffmeasures. Unike tariffs, NTMs often vary arossountries an setors, so “a vaorem” equivaents areauate for NTMs in orer to make this omarison.viene is then resente on the trae effets of

tehnia barriers to trae TT an sanitary anhytosanitary P measures in goos an ofequivaent omesti reguation measures in servies.1

The rationae for fousing on these measures is that,ineenent of their oiy obetives, eonomitheory offers a mie iture – both negative anositive – of how these measures affet the voumean iretion of trae. or eame, stanars antehnia reguations an raise rouer osts –beause omiane is more eensive – but reueonsumer osts – beause rout quait y informationis more reaiy avaiabe. Trae wi inrease or fa

eening on whether the ositive effet on emanis greater than the negative effet on suy.

In orer to highight the ifferenes between nontariffmeasures an tariffs, this setion aso attemts toisentange the trae effets of these measures byfousing on: a the seifi hanne through whihtrae is affete the voume of trae or the eisionto eort; b their seifi imat aross ountries,setors an firms; an whether the measure itsef,or the way it is aie, onstitutes the main restritionto trae. This setion aso onsiers the egree towhih the harmonization or mutua reognition of

TT/P measures an omesti reguation inservies hes to reue any traeinhibiting effets.

1. stimating the trae effets ofNTMs an servies measures

A number of stuies attemt to quantify the effet ofnontariff measures on internationa trae. Averagingaross ountries, they fin that NTMs are amost twieas trae restritive as tariffs. They aso fin that, insevera ountries, NTMs atuay ontribute muh morethan tariffs to the overa eve of trae restritiveness.

These resuts, however, are base on NTMs ata whihhave not been uate for about ten years. Given theeine in tariff rates sine then, the reative ontributionof NTMs to overa trae restritiveness is ikey to haveinrease, erhas making them even more imortantthan tariffs in most ountries.

urthermore, eviene suggests that the reativeontribution of nontariff measures to the overa eveof rotetion inreases with the eve of GP er aita.The trae iterature aso fins that NTMs in agriutureaear to be more restritive an wiesrea thanthose in the manufaturing setor. In the ase ofservies, whie restritions to trae are generay higherin eveoing ountries than in O ountries, they onot aear to be systematiay assoiate with aountry’s eve of eveoment. The rossountry

attern of restritiveness of servies measures variesaross servies setors. It is worth noting that themethos eveoe in the iterature to estimate thesetrae effets suffer from a number of imitations whihan be trae, in art, to a ak of transareny in the

use of NTMs. In aition, they o not aress theotentia imat of goba suy hains.

a Magnitue of NTMs as restritions totrae

arier setions of the Reort have highighte thatnontariff measures an take many ifferent forms –quotas, taes, subsiies, tehnia reguations et. Inorer to faiitate a omarison between the traeeffets of these ifferent NTMs, stuies anayse theimat of NTMs on internationa trae by estimatingan “avaorem tariff equivaent AV”, i.e. the eve ofan avaorem tariff that wou have an equay traerestriting effet as the NTM in question. This enabesa omarison to be mae with tariffs, an is imortantfor any anaysis of the wefare imiations of varioustrae oiy measures. In the trae iterature, the AVof ifferent NTMs is omute using one of twoaroahes – the “rie ga” or the “eonometrisbase metho” ee o .1.

(i) Do NTMs matter?

Using ata for 91 ountries, Kee et a. 29 evauate

the trae imat of nontariff measures eonometriayfor eah of ,7 siigit ategories of the Harmonizeystem H of assifying goos where at east oneountry imoses what they ategorize as either a “oreNTM” efine as inuing rie ontro measures,quantitative restritions, monooisti measures, antiuming an ountervaiing measures an tehniareguations or “agriutura omesti suort”.2

They estimate the average AV of ore NTMs for theentire same at 12 er ent. When weighte byimorts, this number fas to 1 er ent. The numbersare muh higher – er ent an 32 er ent

resetivey – if the averages are auate ony fortariff ines affete by ore NTMs.3 In ontrast, thesime an imortweighte averages of AVs ofagriutura omesti suort are muh smaergeneray beow 1 er ent. Aoring to the authors,this is beause a sma number of routs areaffete by agriutura omesti suort in mostountries. The imortane of NTMs is reinfore byavaiabe firm survey eviene. or eame, a reentsurvey on nontariff trae osts between Arabountries reveae an average AV of er entHoekman an Zarrouk, 29.

stimates of the trae imat of nontariff measures areargey onsistent with the AVs omute. Hoekmanan Niita 211 fin that reuing the AV of NTMs byhaf, from aroun 1 er ent to er ent, wou




137




o .1: Methodology used for estimating the AVE of NTMs

Price gap method

Nontariff measures inrease the rie ai by onsumers. The basi strategy of the “rie ga” methoinvoves a omarison of ries before an after the NTM marku, where this ifferene is eresse as atariff equivaent. Making this omarison, however, is not straightforwar. Many fators unreate to NTMsaso affet osts an ries at if ferent oints in the suy hain. or instane, the “freeonboar” f.o.b.rie at the oint of eort inues the ost of transort to the oint of eort as we as the osts of oaingthe goos, whie the “ostinsuranefreight” .i.f. rie aso inues the ost of internationa transortan insurane. urthermore, the rie af ter borer roeures inues any tariffs harge on the rout.inay, whoesae an retai ries inue interna transort osts an istribution margins. These fatorsmust be remove from the observe rie ifferene before the marku an be attribute to nontariffmeasures errantino, 2.

However, ifferent NTMs our at ifferent oints in the suy hain, whih means that the rie imat of aartiuar NTM an ony be ientifie by omaring two ries at the reevant stages in the roution anistribution roess. or eame, ustoms roeures affet the ifferene between the .i.f. rie an theane utyai rie. In sum, it is ossibe but not straightforwar to measure an omare therestritiveness of ifferent tyes of NTMs errantino, 212.

Econometrics-based method

An aternative to the iret “rie ga” metho esribe above is to estimate the imat of nontariffmeasures on either rie or quantity trae flows using eonometri moes. stimating the “quantity imat”is artiuary usefu beause ata on trae flows are more easiy avaiabe at a isaggregate eve. Moreover,when the NTM is absoutey rohibitive, no ries are observe, or when the rout is highy ifferentiate,ries are not artiuary informative errantino, 212.

In muh of the trae iterature, the AVs of nontariff measures are estimate through “gravity equations”.These are eonometri moes of trae whih aquire their name from the simiarities to Newton’s theory of

gravitation. They reit that the vaue of trae between any two ountries wi be ositivey reate to thesize of their eonomies an inversey reate to the istane an other measures of trae osts betweenthem. In orer to estimate the effet of oiies suh as tarif fs an NTMs on trae, gravity equations inuemeasures, whih ature these oiy fators, as eanatory variabes.

= + ! 1 + + ! +

where “X” is a set of variabes that may aso affet trae flows. It tyiay inues GP, istane an othertrae osts. When reise ata are aking, the resene of NTMs is ature by a ummy variabe, whihassumes a vaue of one when the NTM in question aies an zero otherwise.

The gravity moe of trae enabes an estimation of the reite vaue of trae between a ountry air withan without the nontariff measures. The effet of the NTM on trae is estimate as the ifferene betweenthe two vaues. A simiar auation an be mae for the effet of a tariff omare with no tariff. The AV

of the NTM an then be erive by omaring these two reite ifferenes. More seifiay, the AV ofthe NTM is a tariff that has the same effet on the vaue of trae.

The trae iterature refers to the above as the “iret aroah”. There is aso an “iniret aroah” whihomares atua trae flows to the trae flows reite by a hyothetia fritioness benhmark senario.The eviation of atua from reite trae flows is taken to be iniative of the imat of NTMs beauseseifi eanatory variabes measuring NTMs are not inue in the estimate equation. This “iniretaroah” is artiuary usefu if iret measures of trae restritions are sarse or imreise, as is oftenthe ase for NTMs hen an Novy, 212.

inrease trae by 2 to 3 er ent. The roe of NTMs inreuing trae is further highighte by the foowingeames ite in Anriamananara et a. 2. or theaare setor, ries in the Unite tates, the uroeanUnion an anaa were 1 er ent, er ent an2 er ent higher, resetivey, ue to the resene of

NTMs. In outhast Asia, outh Asia an aan,aer routs were 7 er ent, 119 er ent an199 er ent more eensive resetivey ue to NTMs,whie NTMs on eather shoes raise their ries in aanby 39 er ent an in Meio/entra Ameria by er ent.




38

In the agriutura setor, nontariff measures onvegetabe ois an fats inrease their ries inMeio by 3 er ent, in outh ast Asia by 9 erent an in outh Afria by 9 er ent, aoring toAnriamananara et a. 2. Anaysing biatera

inustryseifi trae fows for ountries in theuroean Union, hen an Novy 211 fin thatamong the ifferent NTMs, TT measures are themost imortant fator. An anaysis of the traeeffets of TT/P measures, in artiuar, isresente in etion .2.

The resuts esribe above highight the imortaneof nontariff measures in an absoute sense. ut whato the ata revea about the signifiane of NTMs inrestriting trae reative to tariffs? Kee et a. 29fin that for er ent of tariff ines in their samesubet to ore NTMs, the AV of these ore NTMs is

higher than the tariff. imiary, in 3 er ent of tariffines subet to omesti agriutura suort, the AVof omesti agriutura suort is higher than thetariff. urthermore, aggregating ore NTMs anomesti agriutura suort aross a tariff inesuner onsieration in an overa trae restritivenessine, Kee et a. 29 fin that NTMs – averagingaross ountries – amost oube the eve of traerestritiveness imose by tariffs. In fat, in about hafof the ountries in the same, the ontribution ofNTMs to the overa eve of trae restritiveness ismuh higher than the ontribution of tariffs.

Using two inies of trae restritiveness that estimatehow trae oiies affet a ountry’s imorts – thetariff trae restritiveness ine TTRI an the overatrae restritiveness ine OTRI, where the atterinues the effet of both tariffs an nontariffmeasures – Hoekman an Niita 211 fin that,averaging aross ountries, a 1 er ent reution inthe TTRI inreases trae voumes by a it te more than2 er ent, whie the remova of NTMs inreases traeby an aitiona 1. er ent. This isussioniustrates that NTMs are an imortant restrition ontrae, even more imortant than tariffs in severaountries. Measuring restritiveness fae by

eorters in a estination markets, Hoekman anNiita 2 omare the market aess versions ofthe TTRI an the OTRI to show that the AV of NTMsis generay muh higher than eisting tariffs.

In a reent reort, UNTA 212 argues that nontariff measures ontribute muh more than tariffs toovera trae restritiveness. In artiuar, it fins thatNTMs ontribute more than twie as muh as tariffs toovera market aess trae restritivenes.7 This resutmust be viewe with aution beause unike thestuies esribe above whih omare NTMs antariff ata in 21, the UNTA reort omares21 NTM ata with 21 tariff ata – a erio overwhih tariffs have faen. Hene, the ontribution ofNTMs to overa trae restritiveness is ikey to haveinrease, assuming that NTMs i not eine uring

the same erio an that the traerestriting imatof NTMs i not fa by more than that of tariffs.

In fat, using routeve anaysis, a stuy by Hennan Mona 211 fins that whie trae flows fe

by er ent as a resut of borer measures, suh astariffs, imemente uring the reent finania risis,they fe by 7 er ent as a resut of behintheborermeasures i.e. nontariff measures. ven within theategory of borer measures, the authors fin thattariffs an other traitiona trae oiy measures haveha a reativey sma imat on trae flows, whereasNTMs suh as antiuming uties have ha asubstantia effet.

(ii) NTMs: variation across countries andsectors

Kee et a. 29 fin that the variation in the AVs ofnontariff measures aross ountries is arge. oreame, the sime average AV of ore NTMs variesfrom amost to 1 er ent, an from to 39 er entwhen imortweighte. The AVs for omesti suortare generay beow 1 er ent. The ountries with thehighest average AV of ore NTMs are a owinomeAfrian ountries, inuing Ageria, ôte ’Ivoire,Moroo, Nigeria, Tanzania, an uan. evera mieinome ountries, suh as razi, Maaysia, Meio anUruguay, aso have reativey high AVs of ore NTMs. The ountries with the highest AVs of agriuturaomesti suort are U members.9

Aoring to Kee et a. 29, when onsiering bothore nontariff measures an agriutura omestisuort, the AVs of NTMs inreases with GP eraita, athough some mieinome ountries seemto have the highest AVs of NTMs. However,igure .1 shows that there is no isernibereationshi between the AV of NTMs an the eve ofGP er aita aross ountries. This is onfirme byregression anaysis whih shows that the assoiationbetween the AV of NTMs an the eve of GPer aita is not statistiay signifianty ifferentfrom zero.1

At the same time, Hoekman an Niita 2 finthat tariffs are negativey assoiate with a ountry’seve of inome er aita. This eviene, ombinewith the resut in igure .1, suggests that theontribution of NTMs to the overa eve of rotetionis ikey to inrease with the eve of GP er aita,i.e. as ountries beome riher, the traerestritiveness of NTMs reative to tariffs inreases.The finings of UNTA 212, whih show thatNTMs are reativey more restritive in high anmieinome ountries suort this interretation.

The work by Kee et a. 29 aso reorts signifiantvariation in the AVs of nontariff measures arosstariff ines , amounting to an average eve of 27 er entfor agriutura routs omare with 1 er ent for




139



A ND S E R V I C E S ME A S UR E S manufature goos. The greater traerestriting

imat of NTMs for agriutura goos reative tomanufature routs is reinfore by the resuts ofHoekman an Niita 2. They aso show that therestritiveness of NTMs for agriutura trae iseseiay imortant in eveoe eonomies.

However, using ata for 21 to estimate the traeeffet of nontariff measures on ries irety in aneonometri moe, Anriamananara et a. 2 fin

amost no statistiay signifiant imat for theagriutura setor.11 The authors eain that this maybe attributabe to the efinition of NTMs use in thestuy, whih inues imort quotas, rohibitions, nonautomati iensing, vountary eort restraints,environmenta stanars an P measures, buteues tariffrate quotas. The atter are ikey to bethe eonomiay bining onstraints on agriuturatrae.12

Anriamananara et a. 2 ientify aare as thesetor with the argest number of signifiant NTMs.They estimate a sime average AV of NTMs of

73 er ent aross ountries. The orresoningestimate in Kee et a. 29 is 39 er ent. The higherorer of magnitue in Anriamananara et a. 2may be eaine by the fat that they euerouts for whih they foun a very sma imat ofNTMs on imorts or omesti ries. Anriamananaraet a. 2 ientify aer routs, eather routs,an vegetabe ois an fats as other setors withmutie signifiant NTMs.

b Methooogia imitations: A robem oftransareny

The revious setion outine the eisting emiriaiterature whih quantifies the imat of nontariffmeasures on trae by estimating an avaoremequivaent. It shou be note that the use of AVs – an

the hoie to moe the effets of NTMs as a negativeta for subsiies, an as a tariff for traerestritingNTMs – an be miseaing at times. or eame, theequivaene between tariffs an quotas breaks own inthe resene of market unertainty. urthermore, the

AV of NTMs oes not ature any reevant fie osts,suh as those assoiate with meeting ertain tehniareguations. eyon these imitations, quantifiation is ahaenging eerise. The methos eveoe in theiterature suffer from a number of imitations.

(i) Price gap method

A omarison of two ries to infer the trae effet ofa nontariff measure is iniative of the ak oftransareny assoiate with the use of NTMs.Unfortunatey, given insuffiient ata on ifferentries, even the estimation of a rie ga is far from

straightforwar.

The aroriate ries to omare when measuringthe rie ga attributabe to most nontariff measuresare the invoie .i.f. rie of the imorte goo anthe rie of the omesti aternative earorff antern, 199. However, in reaity, the observabeomesti rie of a goo tyia y oes not istinguishbetween omesti routs an imorts. It means thatthe atua omarison is between the invoie .i.f.rie an the rie of the goo in the omesti market,whether roue at home or imorte. This isrobemati for two reasons.

irst, at a ertain eve of aggregation, goos that areimorte into a ountry are seom ientia to “ike”goos roue omestiay. The two may be oorsubstitutes for eah other – for eame, beause ofquaity ifferenes. eony, even if the omesti animorte goo are erfet substitutes, the rie gamay be suresse to the etent that the imorts ofthe same goo from other ountries are subet to anontariff measure.

An aitiona issue reates to the hoie of omestiries to use in omuting the rie ga. Many stuies

use retai rie ata simy beause they are easier toobserve than ries at other stages of the suyhain. Retai rie ata ontain transort, whoesaean retai margins. Athough these an otentiay besearate out, they introue onsierabe unertaintyin the ientifiation of the NTM marku.13 It is asoiffiut to net out the rie inrease ue to onsumers’wiingness to ay for higher quaity.

urthermore, one a rie ga is auate for aartiuar goo in a artiuar market, it rovies asinge measure of the trae effet of nontariffmeasures. o when there is a singe, transarent NTM,the tariff equivaent reflets the effet of that oiy.However, in the ase of mutie NTMs, the singe riega or tarif f equivaent reflets the umuative effetsof a NTMs that are resent in the market. This makes

igure .1: AVEs of NTMs and economicdevelopment

5 6 7 8

Log of GDP per capita

L o g o f A V E o f N T M s

9 10 114

-4

-3

-2

-1

0

-5

-6

-7

-8

Source: Author’s estimates base on ata from Kee et a . 29




40

it iffiut to asertain the erentage of the rieinrease that is attributabe to eah of the searateNTMs. It may be that there is one NTM whih, whenremove, eiminates most of the istortion. If so, therie ga wou argey reflet the effet of this

artiuar NTM.

onversey, it may aso be true that the remova of anontariff measure oes not ermit market aess. Inthis ase, the “true” tariff equivaent of a singe oiyhange may in fat be zero even when the measuretariff equivaent of a NTMs ointy may be quite argeerrantino, 212. inay, the rie ga metho is onysuitabe for anaysing NTMs of a singe imortingountry for a few routs of artiuar interest. Theata requirements to aress NTMs aross mutieountries an routs an be unmanageabe.

(ii) Econometrics-based method

A notabe avantage of eonometri anaysis, reative tothe “rie ga” metho, is that it an be use to stuythe trae effets of mutie nontariff measures arossmutie inustries an ountries simutaneousy. Inaition, the reative abunane of ata on trae flowsmakes it artiuary attrative for anaytia uroses.However, the eonometrisbase methos haveertain shortomings as we.

irst, given the ak of transareny, observing nontariff measures reisey is iffiut. Hene, a ummy

variabe whih equas one if the measure is resent isunikey to ature severa NTMs. Using the ifferenebetween atua an reite imorts as a measure ofNTMs is aso robemati beause it may aturefators other than trae oiies.

eony, ike the “rie ga” metho, this aroahannot isentange the iniviua effets of a singenontariff measure when mutie NTMs are resent ina market. In many ases, however, ony one NTM – or asma number of NTMs – is aie to any given goo.rossountry variation in the aiation of NTMs anthen otentiay be use to isentange their trae

effets arrère an e Meo, 29. Thiry, theresuts obtaine are ikey to be sensitive to the etaisof the eonometri tehniques use.

(iii) Global supply chains

The measurement eerises isusse in the revioussubsetion o not eiity aress the avent ofinternationa roution networks. They assume ainear suy hain in whih a singe goo is movefrom ae to ae without being transforme.However, with the oation of ifferent stages ofroution in ifferent ountries, it takes many morerossborer transations to rovie a singe unit of afina goo than before. This is artiuary true formanufature goos with mutie omonents, suhas eetronis an motor vehies.

onsier the goba suy hain of rouing aomuter isk rive as isusse in Hiratsuka 2an awin 2. The isk rive is assembe inThaian, whih ats as the hub of the suy network,using 3 omonents from ten other ountries in

aition to 11 omonents roue in Thaian.Hene, there are at east ten moves aross internationaborers, an erhas more, eening on the etent towhih shiments an be bune. urthermore, sinethe isk rive wi be shie to the oation of finaomuter assemby e.g. hina, where the other maoromuter omonents are gathere, the number ofrossborer moves mutiies even further.

Imortanty, in a goba suy hain that requires semifinishe goos to move bak an forth arossinternationa borers more than one, the effets ofnontariff measures an other trae osts are

omoune. This imies that the effet of a marginainrease in trae osts is muh arger than wou bethe ase if there were a singe internationa transation.o .2 iustrates this argument with a numeriaeame. In aition, the rie inrease at eah stewou inue not ony the monetary osts of movingaong the suy hain, but the osts assoiate withthe waiting time as we errantino, 212.

ervies measures

The methooogy emoye to assess the trae imatof servies measures foows that use in goos. In

aition, the trae iterature aso eveos an aroahbase on the onstrution of ervies TraeRestritiveness Inies TRIs.1 A number of stuiesuse these inies to estimate the rie effets ofservies measures ontroing for a reevant inustryan eonomywie eterminants of eonomierformane of firms for severa servies setorsaross a arge same of ountries MGuire, 2;ranois an Hoekman, 21.

(i) Empirical estimates

or a same of 7 ountries aross four servies

setors, Wash 2 fins an average tariff equivaentof 72 er ent for servies measures.1 Anaysing atafor 11 servies setors1 aross 3 ountries, Guiin211 fins a muh ower average tariff equivaent ofaroun er ent. A omarison of these estimates,however, is not very meaningfu beause ifferentstuies use ifferent ata sames an ifferentarameters in the eonometri seifiation.

In genera, it aears that restritions to servies traeare higher in eveoing ountries than in Oountries Wash, 2; ranois et a., 23;ontagné et a., 21. At the same time, traerestritions in servies o not aear to besystematiay assoiate with a ountry’s eve ofeveoment. or eame, the work of the AustraianProutivity ommission shows that some O




141




ountries have restritions omarabe with theaverages revaiing in maor eveoing eonomies.

urthermore, Gootiiz an Mattoo 29b fin thatathough highinome ountries are quite oen overa,there is muh more variation in the restritiveness of

servies trae in eveoing ountries. The authorsshow that some owinome ountries in Asia anAfria are reativey oen. o too are some mieinome ountries in Latin Ameria, Afria an asternuroe. In ontrast, some of the most restritiveservies measures are foun in the fastgrowingeonomies of Asia as we as in the Mie ast. Otherstuies aso fin the emerging eonomies in Asia tohave reativey rotetionist servies measures Wash,2; Park, 22; MGuire, 2.

It aears that variations in the restritiveness of

servies measures aross ountries may een onthe artiuar setor uner onsieration. or instane,Inonesia’s tariff equivaent in business serviesaears to be ower than that in more eveoeountries, suh as aan an the Reubi of Korea,but higher in onstrution servies Park, 22;Guiin, 211. imiary, anaysing members of AsiaPaifi onomi ooeration AP in 1997,MGuire 2 foun that whie the Unite tateswas among the east restrite markets inteeommuniations servies, it was among the mosthighy restrite in maritime servies. At the sametime, mieinome eonomies in outh Ameria

were foun to have reativey high restritiveness inesores for finania servies, but were among the eastrestrite markets in istribution, teeommuniationsan rofessiona servies.

Aoring to a set of stuies, averaging arossountries, transort an business servies aear tobe the most oen setors, with an average tariffequivaent of 21 er ent an 2 er ent resetiveyfor servies measures. The most rotete isonstrution servies, with an average tariff equivaent

of er ent Park, 22; ontagné et a., 21;Guiin, 211. In a ifferent stuy, however, foreigniret investment an imortant moe of trae inservies in transort servies is among the mostrestrite, whie that in onstrution servies is theeast restrite UNTA, 2. The ontraitoryresuts suggest that the auray an reiabiity of theaforementione estimates of the restritiveness ofservies measures may be questionabe. This ak ofreision an onsisteny may be attributabe to anumber of methooogia imitations.

(ii) Methodological limitations

In anaysing the traerestriting effet of serviesmeasures, an estimate AV must take into aount theossibe substitution between if ferent moes of suywhen one artiuar moe is affete. or instane,there may be a swith from moe 3 trae a foreignomany setting u subsiiaries or branhes to rovieservies in another ountry to moe 2 trae onsumersor firms making use of a servie in another ountry inhigher euation servies as a resut of restritiveservies measures affeting the former ee, 21.uh intermoa substitution is ikey in the ase ofinsurane servies as we from moe 3 to moe 1,servies suie from one ountry to another.

In orer to erive a meaningfu AV, other oiyinterventions that affet the traerestriting imat of

o .2: Cumulation of trade costs in a global supply chain

uose that the tota vaueae neessary to roue a rout is equa to one. The rout is rouein stages in “n” ountries, eah of whih as (1/n) to the tota vaue of the rout. After roution, therout is eorte to a fina estination, so that it is move “n” times atogether. Let the ost of a nontariff

measure on moving the rout from one ountry to another equa “t ” on an avaorem basis. Hene, ateah stage, the ost “t ” is harge on the entire vaue of the rout roue u to that oint, inuingrevious trae osts. The tota ost of the rout roue in n stages when eivere to the finaonsumer is reresente by c(n), so that:

1 = (1 + )

2 =

!

!1+

!+

!

!(1 + )

3 =

!

!(1+ )! +

!

!(1 + )! +

!

!(1+ )

=

1

1 + !

!

!!!

uose that the AV of an NTM at eah stage is 1 er ent, i.e. “t” = .1 an c(1) = 1.1. As the goba suy

hain is fragmente further, trae osts omoun fairy quiky: c(5) = 1.33 an AV of 3.3 er ent anc(10) = 1.73 an AV of 7.3 er ent. Moreover, margina inreases in trae osts are omoune. orinstane, if the AV of NTMs “t” inreases from .1 to .2, a oubing at eah stage of the suy hain, traeosts aong the suy hain more than oube, with more omouning for more fragmente suy hains:c(5) = 1.7 an c(10) = 3.11.




42

a servies measure aso nee to be taken into aount.or eame, in the ase of internationa air servies,firms may reson to ownershi imits imose by thewithhoing auses in air servies agreementsaffeting moe 3 trae by negotiating oesharing

arrangements. Moreover, if moe 3 is the reominantmoe of trae as it is for teeommuniations, foreame, high fie osts of market entry/estabishmentwou not even be ature by the onet of a “tariffequivaent”.

In aition, the methooogia imitations assoiatewith anaysing the trae effets of nontariff measuresare aso aiabe to servies measures. or eame,given the ak of transareny, it is iffiut to observereisey ifferent servies measures. Attributing theifferene between atua an reite imortserive from an eonometri estimation to the imat

of servies measures highights this robem.urthermore, there may be mutie restraints on traein servies, an it may not be ear whih are

eonomiay bining an whih are not. Reresentingthese NTMs as an AV an thus be miseaing for thisreason as we. The use of subetive riteria to weighthe reative imortane of iverse measures whenonstruting TRIs aso iustrates the methooogia

iffiuties invove in estimating the rie effets ofservies measures.

inay, AVs of servies measures auate usingservies trae flows o not take into aount theiniret effets that these measures have on trae ingoos. uh effets are ikey to be strong beause ofthe omementarities between goos an serviessee o .3. or eame, a servies measure thatrestrits trae an ometition in transort anogistis servies has a negative imat onmerhanise trae. However, this is not taken intoonsieration when AVs of servies measures are

auate using servies trae flows ony. The roethat servies trae ays in goba suy hains makesthis an imortant robem see etion .3.17

o .3: Complementarities between trade in services and trade in goods

viene suggests that eort ometitiveness in manufaturing setors, suh as mahinery, motor vehies,hemias an eetri equiment, is ositivey assoiate with inwar foreign iret investment an imortsof business servies ranois an Woerz, 2 an negativey affete by reguations that hiner suhtrae Norås, 21. uh omementarity between trae in servies an trae in goos may be eaineby various mehanisms.

A first mehanism is onstitute by transort an ogistis inks. Transort an trave servies aount forabout haf of rossborer trae in servies an are the most imortant iret servies inut to internationa

trae in goos. or instane, Yeung et a. 212 fin that hinese manufaturing firms that make use ofthirarty ogistis suiers argey from Hong Kong, hina ten to erform better in eort markets thanfirms that o ogistis inhouse or urhase them oay. viene aso suggests that measures that restrittrae an ometition in transort an ogistis servies have a negative imat on merhanise traeerformane. Market ower in the shiing inustry, for eame, raises trae osts, artiuary foreveoing ountries Hummes et a., 29.

eony, goos an servies are often bune in fina markets. Aftersaes servies, for instane, areimortant for a host of urabe goos suh as ars. Aviation engines, rinters, vening mahines, an otherequiment are aso inreasingy rente or ease with a servies ontrat. Another reent tren is to onsiergoos mainy as a ser vies atform. Mobie teehones, for instane, are often so for a nomina amount onthe onition that ustomers sign u for a fieerio servie ontrat. When goos an servies areomementary or bune, servies measures strongy affet the trae goo in question as we Loefak,

21. viene suggests that manufaturing firms in ween an the Unite Kingom an aso mining anoi omanies in the Unite Kingom are vigorous traers in servies, an that the servies share of theirtota revenue has inrease over time Loefak, 21; reinih an risuoo, 211.

Thiry, the omementarity between trae in goos an trae in servies is inrease further by the roe ofintermeiaries retaiers an whoesaers in internationa trae.1 ernar et a. 21 fin that 3 er entof U eorters are whoesaers, aounting for 1 er ent of the vaue of U eorts. imiary, more than2 er ent of Itaian eorters are intermeiaries, aounting for 1 er ent of the vaue of Itaian eorts.19 Intermeiaries, suh as eaing mutinationa retaiers ten to soure their routs irety frommanufaturers or farmers, an tyiay have a entraize souring unit serviing a saes outets, gobay orregionay. Hene, they ten to ontribute to inrease trae in onsumer goos between their home ountryan the host ountries of their affiiates.2

Market onentration in a setor omrising intermeiaries may aso affet merhanise trae. or eame,

in the event of trae oening, retaiers with signifiant market ower may fai to ass reue trae osts onto onsumers ranois an Wooton, 21. At the same time, reguatory heterogeneity suh as ifferenesin rout stanars, abeing an reying requirements may imose onsierabe osts on retaiers byrequiring them to moify routs for eah estination.21




143




2. isentanging trae effets ofTT/P measures an omestireguation in servies

This setion fouses on TT/P measures anequivaent omesti reguation in servies, an reviewswhat we know about their effets on trae flows. Onereason to fous on this subset of measures is thateonomi theory oes not rovie sime reitionsas to their trae effets. Assessing their effets istherefore an emiria issue. In ontrast, eonomitheory rovies ear guiane as to the trae effetsof other nontariff measures – for eame, imortquotas reue imorts, eort uties reue eorts,whie eort subsiies inrease eorts.

Another seifi harateristi of these measures is

that they are ommony regare as having animortant fieost omonent, whih signifiantyifferentiates them from tariffs. or eame, to aata rout to new tehnia requirements may requirean initia investment ineenent of the eve ofeorts. The resene of a fie ost to enter a marketmay, however, have effets on trae that are ifferentfrom a tariff, an this aset eserves attention.

In artiuar, this subsetion eamines how TT/Pmeasures an omesti reguation in servies affetthe voume of trae an the eisions about whether

to eort to a ertain market. This subsetion asoonsiers whether these measures affet eveoingan eveoe ountries ifferenty an whether theseeffets iffer by setor an firm. Where ossibe, theimat of these measures on trae in inustries wherethe roution roess is fragmente is highighte.inay, an attemt is mae to istinguish between theimat of the measures themseves an the imat ofthe way in whih measures are imemente.

onomi theory an assoiate emiria researh, ingenera, o not istinguish between manatory annonmanatory TT/P measures, an the term

stanar is often use to enote both. In the abseneof a theoretia reition as to a ifferent imat of amanatory versus a nonmanatory measure – evenwhen using atabases that over ony nonmanatorystanars or ony manatory ones – the resuts areinterrete more generay as the imat of TT/Pmeasures.

miria eonomi iterature eary istinguishes,however, between nationa or ountryseifistanars stanars that are ifferent from those inanother ountry an share stanars stanars thatare ientia or equivaent between two ountries,inuing internationa an regiona stanars. Theistintion is mae to isentange the imat on traeof harmonization of TT/P measures. The review ofthe iterature in this setion foows this aroah.

As far as servies are onerne, the eonomiiterature generay ooks at overa inees of therestritiveness of omesti reguation – an inuesmeasures that go beyon the fous of this reort. Thefoowing review of the reevant stuies mainy

highights an imortant ga in the eisting emiriaiterature.

a Overa effet on trae

When eoring the effets of TT/P measures ontrae, one wou ieay ike emiria eviene toistinguish among ifferent tyes of measures. This isbeause TT/P measures affet trae throughifferent hannes.

or eame, the introution of rout safetyreguation wi inrease roution osts but an aso

serve as an imortant quaity signa, thereby heing toromote the ometitiveness of those routs thatmeet stringent stanars. Prout safety reguationsaso inrease trust in the quaity of foreign routs,thus reuing transation osts an fostering trae.Whether these effets wi transate into higherimorts or eort eens on the effet of themeasure on the reative osts of omesti an foreignrouts, an on the wiingness of onsumers to ayhigher ries for safer routs.

As a further eame, onsier the ase of omatibiitystanars. In network inustries, where the vaue of a

rout inreases with the number of onsumers anomementary goos, omatibiity stanars areikey to inrease trae. Without suh stanars, thesemarkets may oversuy varieties an the networksizes may remain too sma. tanars in these marketsare generay vountary an an he onsumersaquire information about referenes abroa, anhe rouers to oorinate their ativities moreeffiienty. This genera reition nees to bequaifie, however, sine omatibiity stanars anaso reflet antiometitive behaviour.

et for environmenta an foo safety reguation,

the eisting trae iterature oes not istinguishamong ifferent tyes of measures for eame,whether they aress a safety or omatibiity onern,or whether they efine the harateristis of a routor a testing roeure. Rather, the iterature hastene to rey on an ine of stanarization ativities– usuay the number of stanars or the number oftehnia measures maintaine by a ountry. The foushas then been on the reationshi between this broameasure of TT/P measures an trae flows, or onthe ostraising imat of these measures.

Notwithstaning these imitations, the eistingemiria iterature fins that, at the aggregate eve,TT/P measures may not be assoiate with owertrae. or eame, in a ioneer stuy on thereationshi between stanars an aggregate trae




44

erformane, wann et a. 199 foun that stanarsromote trae. They estimate that a 1 er entinrease in the number of ountryseifi stanarsas oose to “share” stanars22 inrease UKimorts from the rest of the wor by 3.3 er ent an

eorts by 2.3 er ent. With a ifferent seifiationof the moe, but the same ataset, Teme an Urga1997 foun an insignifiant effet of stanars ontrae. Athough their finings iffere, both stuieshaenge the reominant view that nationastanars restrit trae.

Literature that ooks at iensing an quaifiationrequirements an roeures an tehnia stanarsin servies is very imite. It wou aear that the onystuy that attemts to measure the effets of suhomesti reguation is Ko an Norås 27. In thefirst art of their stuy, the authors use a reonstrute

Prout Market Reguation PMR ine23 base onthe seete iniators that in their view “ome osestto overing the tyes of reguation mentione inGenera Agreement on Trae in ervies Artie VI.”,that is, omesti reguation as efine in this reort.Whie the estimate trae effet of this reonstrutePMR on overa servies trae overing moes 1 an2 an moe , iniviuas traveing from their ownountry to suy servies in another is negative, theestimate oeffiient on “ienes an ermits system”that is mosty osey reate to omesti reguationas of GAT Artie VI. is ositive, though sma.

In other wors, burensome iensing roeures arefoun to inrease servies trae. One ossibeeanation is that restritive iensing roeuresinue intermoa substitution between eort anforeign iret investment I. The fining that thestringeny of the “ienes an ermits system”iniator reues inwar an outwar I suortsthis view. In the seon art of the stuy, Ko anNorås 27 use banking reguatory ineeseveoe by the Wor ank arth et a., 2.They show that reguation aiming at ensuringaroriate stanars suh as aounting stanarsan finania statement transareny is ositivey

assoiate with rossborer trae an I in finaniaservies.2

b ifferenes aross setorsan ountries

tuies base on isaggregate trae ata show thatthe effet of TT/P measures eens on the tyeof setor. One of these stuies is by Moenius 2.Using a gravity moe2 to assess the imat ofnationa stanars on trae for a ataset overing71 setors at the fourigit tanar InternationaTrae assifiation IT eve an biatera trae for12 eveoe ountries, he fins that imortseifistanars have a negative imat on imorts inthe nonmanufaturing setors namey, foo,beverages, rue materias an minera fues, but

have a ositive imat on imorts in the manufaturingsetor inuing ois, hemias, manufaturing anmahinery.

Moenius’s interretation of the resuts is that

stanars, by roviing eorters with vauabeinformation about market referenes, reuetransation osts even if they imose aatation osts.In more ifferentiate setors, suh as ertainmanufaturing setors for eame, hightehnoogysetors, information osts may be higher. Therefore,information osts’ reuing effet outweigh aatationosts’ inreasing effet an trae inreases.

Moenius’s 2 onusions are suorte bysevera stuies. or eame, in 21 fins aositive an signifiant effet of stanars on trae in“instruments for measurement an testing”, as oes

Moenius 2 for “eetria routs”. Usinginformation on the measures notifie uner the Pan TT agreements, isier et a. 2b fin anovera negative imat of P an TT measures ontrae in agriutura routs.

ousing on notifie TT/P environmentreatemeasures RM see o ., ontagné et a. 2aso ten to fin a ositive effet of RM onmanufaturing trae, but a negative effet on trae infresh an roesse foo. More reenty, Li an eghin212 erform an anaysis of 27 aers that use gravityequations to estimate the effet of TT/P measures

on trae. They fin that estimates of the trae effets ofthese measures on agriuture an foo inustries areess ikey to be ositive than in other setors.

In ine with the genera fining of a negative effet ofTT/P measures on trae in agriutura routs,the trae iterature that uses maimum resiua evesMRLs of estiies as an iniator of the stringenyof P measures onsistenty fins negative effets ofMRLs on imorts. Otsuki et a. 21 fin a negativeeffet of the U stanar on aflatoin on Afrianeorts. In artiuar, they estimate that moving fromthe oe Aimentarius stanar, estabishe by the

UN oo an Agriuture Organization an the WorHeath Organization, to the more stringent uniformuroean ommission stanar ereases Afrianeorts of ereas, rie fruits, an nuts to uroe byU$ 7 miion. Wison an Otsuki 2 fin asimiar effet for MRLs on horyrifos on bananaseorts from Latin Ameria, Asia an Afria to Oountries.

hen et a. 2 fin a negative effet of reguationson the utiization of estiies an meiate fish feeon hinese eorts of fresh vegetabes, fish anaquati routs between 1992 an 2. Inartiuar, they fin that a 1 er ent striter measurein the eve of estiies meiate fish feeereases vegetabe fish an aquati routeorts by 2. 2.7 er ent.




145




evera stuies show that any negative effets ofTT/P measures on trae are onentrate mainyin eveoingountry eorts to eveoe ountries.In ontrast, eorts from eveoe ountries to othereveoe ountries are not signifianty imee by

these measures.2

or eame, fousing on P measures, Aners anaswe 29 fin substantiay ifferent effetsbetween eveoe an eveoing ountries. Theyestimate the trae imat of manatory “hazar anaysisan ritia ontro oints” HAP27 requirements forseafoo routs in the Unite tates between 199an 2. U seafoo imorts aross a eorterswere reue. P measures ause a oss in traevaue of between U$ 11. miion to U$ 3. miion.The imat on eveoing ountries as a grouamounte to an eort vaue reution of .9 er ent

uner HAP stanars, whie eveoe ountries asa grou gaine from the measure.

However, there is wie variation aross eveoingountries. Aners an aswe 29 fin that argerseafoo eorters gaine trae shares with the Unitetates, whie smaer eorters ost groun. eveoingountries were foun among both the gaining an theosing grou. The trae imat of P measures aearsto een in art on the size of the eorter. imiary,

eamining the trae effets of notifie P an TTmeasures aote by the Unite tates, the uroeanUnion, aan, anaa, Austraia an witzeran, isieret a. 2a fin an overa negative effet on totaeorts from Afrian, aribbean an Paifi AP, Latin

Amerian an Asian ountries. Whie AP ountryeorts aear to have been signifianty negativeyaffete by suh measures, the imat on Asianountries is not statistiay signifiant.

miria researh on omesti servies reguation hasnot eamine whether these measures have a ifferentimat on eveoe an eveoing ountries. This ismainy ue to ak of ata on servies measures foreveoing ountries. As regars ifferenes arosssetors, the abovementione stuy by Ko an Norås27 fins that reguation matters more for “otherbusiness servies” inuing ega servies, aounting,

arhiteture an engineering than for “tota servies”as measure by tota trae through moes 1, 2 an .This is onsistent with the imortant roe that businessservies ay in roution hains an how a marginainrease in trae osts an have a magnifie imat onovera trae osts when the roution roess isfragmente aross ountries see etion .1 ano .2.

o .: Environment-related measures

One of the basi onerns with environmenta reguation is that, in a wor where ountries iffer in thestringeny of their environmenta reguations an inustries iffer in their oution intensities, outionintensive firms wi oate roution in ess reguate ountries. Therefore, outionintensive routs wibe eorte by ess reguate ountries an imorte by ountries with more stringent reguation.

In their survey on the effet of environmenta reguations on U manufaturing, affe et a. 199 onuethat there was it te emiria eviene that ifferenes in environmenta reguations affete internationatrae an investment flows.

More reent stuies have attemte to eain this fining, eamining more isaggregate ata an treatingsame variations more arefuy. The genera fining is that the imat of environmenta reguation on traehanges by ountry an setor. or eame, erington et a . 2 argue that environmenta reguations

have stronger effets on the attern of trae between eveoe an eveoing eonomies than amongeveoe ountries.

Using ata for 21 O ountries an a gravity moe of trae augmente with an iniator of stritenvironmenta reguation, van eers an van en ergh 1997 fin that strit environmenta reguation oesnot inrease imorts. However, whie they o not fin that environmenta reguations in outionintensivesetors have a signifiant overa effet on eorts, they o fin that these measures have a signifiant annegative effet for those outionintensive setors that are resoure base being ess geograhiaymobie. The fining that striter environmenta stanars have a negative imat on eorts from outionintensive inustries is aso onfirme in the stuy by Otsuki et a. 21.

ousing on environmentreate measures notifie uner the P an TT agreements, ontagné et a.2 fin that for trae in fresh an roesse foo, these measures ten to restrit trae from eveoing

ountries an easteveoe ountries Ls. However, eorts from eveoe ountries are notrestrite. On the other han, for the maority of manufature routs, these environmenta reguationshave either no signifiant effet or a ositive effet, an this resut aies to ountries at a stagesof eveoment.




46

Voume of trae an eort marketsiversifiation

The eonomi iterature eamines TT/P measuresin goos an equivaent omesti reguation in

servies as ossibe fie osts of entry in a marketawin, 2 an 2, an earorff an tern,2; Ko an Leour, 2 – that is, an initia ost tobe ai to aess a market. or eame, a arge initiainvestment may be require for a firm to omy with aertain foreign stanar, but one the new tehnoogyis aquire there may be no aitiona variabe osts.2 imiary, a quaifiation or er tifiation requirement forservieroviing ersonne may invove an initia fieost of obtaining the quaifiation or ertifiation, butno aitiona variabe osts.

As isusse in etion , assuming the eistene of

fie osts to enter a ertain market, moes of traewith heterogeneous firms show that ony the mostroutive firms in an inustry wi eort. As traeosts are owere, highroutivity eorting firmsean. The most routive firms enter eortmarkets, whie owroutivity firms shrink or eit themarket. In these moes, the voume of trae betweentwo ountries hanges both beause inumbenteorting firms ean their trae thus inreasing thesoae intensive margin of trae an beause newfirms enter the foreign market thus inreasing theetensive margin of trae.29

Reativey itte is known about how TT/Pmeasures affet iniviua firms an, in ar tiuar, theireort eisions. In orer to she ight on this issue,the foowing anaysis stuies firms’ eision to eortto a market an the voume of their eorts.3 Theavantage of using firmeve ata is that it aows us toistinguish between the number of varieties eorteby firms, the number of eorting firms, an the vaueof eorts by firms.

To measure the stringeny of reguatory measures, thestuy uses the atabase on seifi trae onernsraise by WTO members in the P an TT

ommittees.31 Whie atabases tyiay use32 toature the imat of TT/P measures inue bothmeasures that restrit trae an those that o not, thisatabase ontains information ony on those measuresereive to be a otentia obstae to trae. A ountrywou not raise a onern if it i not see that measureas an obstae to trae.33

rawing on renh firms’ ustom ata3 from 199to 2, the stuy uses a gravity moe of trae toevauate the effet of P an TT measures raiseas seifi trae onerns on eort erformane byfirms. The firms’ eorts are assume to be etermineby emansie fators suh as inome, suyfators suh as setora routivity, trae ostssuh as istane an by an aitiona variabeiniating the stringeny of P an TT measures.3

Athough further researh is neee to test therobustness of resuts, reiminary finings show thatTT/P measures raise as onerns in WTOommittees are assoiate with a fa in trae. Inartiuar, TT/P measures raise as seifi trae

onerns aear to reue the vaue of eorts. Theeffet on the number of eorting firms is statistiaynot signifiant, but the sign of the oeffiient isnegative resuts of the estimations are reorte inAeni Tabes .1 an .2.

Other stuies aso fin that TT/P measures have anegative effet on eort market iversifiation. In astuy not at firm eve fousing on tetie, othingan footwear eorts, heher 27 shows that a1 er ent inrease in the tota number of UTT/P measures is assoiate with about a er ent erease in the rout variety of eorts

measure as the number of siigit H routsuner a twoigit H setor to the U.

Using ata from a Wor ank TTs survey, hen et a.2 aso fin that TT/P measures imeeeveoingountry eorters’ entry into eveoemarkets. In artiuar, hen et a. 2 estimate thatthese measures reue the ikeihoo of firmseorting to more than three markets by 7 er ent.The stuy, however, is base on a same of ony19 firms oate in 17 eveoing ountries. Themeasure of a tehnia barrier to trae is base onfirms answering “yes” to the question “Have quaity/

erformane stanars imate your abiity to eortrouts?” In other wors, this stuy fins that firmsthat aim to fin TT/P measures an obstae totrae aso ten to eort to fewer markets.3

There is aso some eviene that the effets ofTT/P measures on eortmarket iversifiationhanges eening on the tye of firms. tanarsan tehnia reguations if not harmonize aear tobe artiuary harmfu to trae for firms that imortinuts. In fat, outsouring firms aear ess ikey toiversify their eort markets than firms that o notoutsoure. The unerying reason may be that, when

inuts are roue, their utimate estination isunknown an thus they may not meet the tehniarequirements imose in the market of the finarout hen et a., 2.

In aition, TT/P measures aear to negativeyaffet market entry even more for sma firms.ousing on the eetronis setor, Reyes 211eamines the resonse of U manufaturing firms tothe harmonization of U rout stanars withinternationa norms. He fins that harmonizationinreases the entry of firms, an that the effet isstronger for U firms that areay eort to eveoeountries but not to the uroean Union. As eete,these firms are on average smaer than firms areayeorting to the uroean Union. ousing on enega,Maertens an winnen 29 show that vegetabe




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eorts have risen shary esite inreasing sanitaryrequirements, resuting in imortant inome gains anoverty reution. However, tightening foo reguationaso inue a shift in the rofie of eorters from smafarmers to argesae integrate estate roution.

Overa, firmeve stuies show a negative effet ofTT/P measures on trae, both through a owervoume of trae er firm an reue market entry.This resut may be arty eaine by the tye ofvariabe use in some of these stuies for TT/Pmeasures, whih ten to ature ony restritivemeasures. In aition, some eviene oints toTT/P measures being ar tiuary trae restritivefor sma firms an outsouring firms. However, moreresearh is neee to unerstan how these resutsvary aross setors an firms.

There is no firmeve stuy ooking seifiay at theeffets of omesti reguation narrowy efine as ofGAT Artie VI. on eortmarket entry for servies.Using aggregate ata, Ko an Norås 27 finthat the eterminants of market entry an the voumeof trae are argey the same. In artiuar, omestireguations aime at ensuring higher quaity stanarsin finania servies aounting stanars anfinania statement transareny aear to beassoiate with both higher eort vaues aninrease entry. However, eisting eviene onservies is too imite to raw genera onusions.

oes onformity assessment matterfor goos trae?

onformity assessment refers to testing, insetionan ertifiation, as we as to a suier’s earationof onformity.37 onformity assessment roeuresare neessary for ahieving imortant oiyobetives, suh as the rotetion of onsumers’ heathan safety. They an, however, aso be unneessaryobstaes to trae when they are uiative, ineffiientor aie in a isriminatory manner.

Testing, insetion an ertifying omiane with a

ertain TT/P measure entais osts. These ostsare neessary beause they assure omiane withthe require stanar. Yet, they an aso be anunneessary obstae to trae, when foreign roviersare ometent to rovie the require eve ofassurane in a osteffetive manner, but thisometene is not reognize by the imortingountry. Ieay, attestation of onformity wou bearrie out ust one in a osteffetive manner anthen reognize everywhere. Yet, even the eisteneof a wefuntioning tehnia infrastruture in manyountries oes not automatiay ea to singeonformity assessment, thus unneessariy inreasingtransation osts see etion .1.3

There are severa imensions of onformityassessment osts. It is not ust that the fees for

testing, insetion or ertifiation may beunneessariy high. Unneessary osts aso arisebeause eorters nee to omy with testing anertifiation requirements in eah of the ountries towhih they are eorting. ven if imorting ountries

rey on internationay harmonize rout stanars –or aet another ountry’s stanars as equivaent –they may sti have a searate onformity assessmentrequirement. This an substantiay inrease the ostsof eorting, not east beause eorters fae the riskthat goos are reete by the imorting ountry aftershiment.

When onformity assessment requirements iffersignifianty aross ountries, an the roeures areoaque, omanies may fae aitiona ostsassoiate with obtaining the neessary information,an reesigning routs to meet ifferent ountries’

onformity assessment stanars an requirements.

In aition, engthy onformity assessment roeuresaso imy aitiona osts assoiate with saesrevenues forgone whie the rout is uner review.or some timesensitive routs, suh as teties anothing an hightehnoogy routs with a short ifeye, time eays an have a severe imat onrofitabiity an market enetration.

onformity assessment osts have not beensystematiay quantifie. This is beause someasets, suh as the oortunity ost of ost saes, are

iffiut to measure. However, the etent to whihonformity assessment osts are ereive asobstaes to trae eary emerges from severasurveys an ase stuies see o ..

Litte is known about the imat of onformityassessment roeures on trae. ousing on asame of eveoing ountries, a stuy by hen et a.2 aims that onformity assessment issuessignifianty imee trae. On the basis of firmevesurvey ata, they fin that firms answering “yes” to thequestions “Have testing roeures imate yourabiity to eort routs?” an “o you have iffiuty

obtaining information about aiabe reguations inthe ountries iste?” aso have a signifianty owerroensity to eort. They aso fin that testingroeures are artiuary burensome for agriuturafirms.

In a ikeihoo, the imat of onformity assessmentroeures on trae varies aross setors. The O1999 survey stresses that even the nature ofonformity assessment osts varies by routaoring to their tehnia harateristis. Terminateeommuniations equiment an automotiveomonents, for eame, require an initia arova ofthe rout before it an be eorte. In the aseof airy routs, eah iniviua onsignment must beteste both rior to eort an/or at the ort of entry.Thus onformity assessment roeures are a fie




48

ost of eorting teeommuniations equiment anautomotive omonent markets – borne in avane. On

the other han, they are a variabe ost for airy eorts.

A stuy by hueter et a. 29 ooks at trae effetsof ifferent tyes of P measures imose on meatrouts. After grouing 21 tyes of measures in siasses, they fin that whereas iseasereventionmeasures, toerane imits for resiues anontaminants, an onformity assessment aninformation requirements inrease trae, routionroess requirements an requirements for haning ofmeat after saughtering restrit trae.

The aer by assarea et a. 211 ooks at the

imat of P an TT measures on eorts of outrymeat by raziian eorters to the main wor imortersin the erio 199 to 29. They fin that the imatof aggregate TT an P measures on raziian

outry meat eorts are insignifiant. However, whenmeasures are isaggregate, onformity assessment

has a negative an signifiant imat on the voume ofraziian outry meat eorts, whie akaging anabeing requirements, an/or iseasereventionmeasures regionaization or quarantine treatmenthave a ositive an signifiant imat on the voume ofraziian outry meat eorts.

This reort attemts to assess the imortane ofonformity assessment requirements reative toroutharateristis reguations on overa foo anagriutura trae.39 Reying on the atabase onseifi trae onerns regaring P measuresesribe in etion , the anaysis istinguishesbetween onerns reate to onformity assessmentsuh as ertifiate requirements, testing, insetion,an arova roeures as set out in Anne of theP Agreement, an onerns reate to other issues

o .: Reporting of conformity assessment procedures as barriers to trade: selected examples

The fat that onformity assessment osts are ereive as imortant obstaes to trae eary emergesfrom severa surveys. In the business survey on nontariff measures onute by the Internationa Traeentre see etion .2, rout ertifiation, rout testing an insetion requirements aiein imorting ountries reresent more than haf of a firms’ omaints about TT/P measures in the11 eveoing ountries anayse.

osts of ertifiation aso aear as a rominent obstae to trae in a survey on the effets of Preaterivate stanars onute by the WTO eretariat see G/P/GN/932/Rev.1. eventeen out of the22 resonents inue a referene to high ertifiation osts. The survey aso notes that eveoingountry eorters onsier omiane with rivate stanars to be a rerequisite for eorting to a argenumber of eveoeountry markets.

omiane osts for rivate stanars are high, an they are signifianty affete by the ost of ertifiation.Whie the ost of ertifiation varies eening on the setor, the eames rovie iniate that theaverage annua ertifiation fee may reah between U$ 2, an U$ , for a rivate stanar. Inaition, ountries reort signifiant osts assoiate with the timeonsuming roess of meeting rivatestanar requirements, eseiay for mirobioogia an hemia anayses, not to mention the iffiut y offining areite aboratories with aequate etetion tehniques. These osts rise signifianty when testshave to be onute abroa. Overa, these osts are eeme a signifiant imeiment to trae for smasae rouers that, as a onsequene, are eue from roution hains.

Testing an er tifiation osts aso aear to be a signifiant obstae to trae for eorts from eveoeountries. The 211 Nationa Trae stimate Reort on oreign Trae arriers NT Reort – an annuasurvey arrie out by the Unite tates Trae Reresentative to ientify foreign barriers to U eorts –offers severa eames. or instane, it aims that “Thaian imoses foo safety insetion fees in theform of imort ermit fees on a shiments of unooke meat. urrenty, imorts fae fees of baht erkiogram aroimatey $1 er ton for re meat beef, buffao meat, goat meat, amb, an ork an foroffa, an 1 baht er kiogram $32 er ton for outry meat. ees for omesti meat insetions aremuh ower an are evie in the form of a saughtering or saughterhouse fee. The fees are $ er ton for

omesti beef; $21 er ton for outry; $1 er ton for ork; an zero for offa”.Lengthy ertifiation roeures an aso be the main obstaes to trae. or eame, the 211 NT Reortreates U inustry onerns about engthy arova roeures for new harmaeutia routs in HongKong, hina, whih inhibits their abiity to market routs on a timey basis. imiary, the NT Reort raisesa onern over Paraguay’s “nonautomati imort ienses on ersona hygiene routs, osmetis,erfumes an toietries, teties an othing, insetiies, agrohemias, an outry. Obtaining a ienserequires review by the Ministry of Inustry an ommere an sometimes by the Ministry of Heath. Theroess is sow, taking u to 3 ays for goos that require a heath er tifiation. One issue, the ertifiatesare vai for 3 ays.”




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suh as requirements on isease treatment, maimumresiua eves, or the geograhia aiation of themeasure. The imat of these two tyes of onernson the robabiity that firms wi eort an on thevoume of trae is anayse using both a sime ummy

for the eistene of an P measure an a frequenymeasure.

The anaysis suggests that, in genera, P measuresimose by an imorting ountry an raise as seifitrae onerns have a negative imat on therobabiity that firms wi eort to the marketonerne resuts are reorte in Aeni Tabe .3.However, onitiona on the robabiity that firmseort that is, for firms areay in the eort market,the vaue of eorts inreases.1 In artiuar, theresuts suggest that it is onformity assessmentreatefators that have the most negative imat on the

robabiity of entering a market , whie measures reateto the harateristis of the rout eain most of theositive imat on the vaue of trae. Athough moreresearh is neee, one ossibe eanation is thatP measures, by enhaning onsumers’ trust inimorte routs, inrease trae for those eortersthat manage to overome the fie ost of entering amarket.

In sum, the emiria eviene suggests thatonformity assessment osts mosty reating to traein foo an agriutura routs are an imortantobstae to trae.

3. Harmonization an mutuareognition

The isussion in the revious subsetions suggeststhat the use of TT/P measures an omestireguation in servies by the imorting ountry anhave ambiguous effets on trae. In the event thatthey have averse trae effets, it is imerative toonsier how these harmfu trae imats may beaeviate.

Harmonization an mutua reognition of TT/Pmeasures are ommony beieve to be stes towarsmore oen trae. However, eonomi theory roviesan ambiguous answer to the question of whetherharmonization inreases or ereases trae, as we aswhether harmonization has more imat than mutuareognition on boosting trae see o .. Thissetion, therefore, reviews the emiria eviene onthese issues.

a Is harmonization trae reating?

The emiria iterature measures the etent ofharmonization of stanars in ifferent ways. omestuies onsier a stanar as harmonize if itonforms with an internationa stanar ubishe bythe Internationa Organization for tanarization

IO, the Internationa etrotehnia ommissionI, the Internationa Teeommuniation Union ITUor simiar boies. Other stuies treat stanars asharmonize if they are ommon to a grou of ountries.

Notwithstaning these ifferenes, a genera finingin the iterature is that harmonization inreases trae.or eame, using the number of biateraysharestanars reorte in the stanarsreate ata fromthe Perinorm atabase, an taking ountryseifistanars into aount, Moenius 2 fins thatshare stanars have a ositive an signifiant effeton biatera trae.

Using a gravity moe of trae for the erio 19922, ougherty an Graek 2 fin thatonformity with IO 9 in eveoing ountriesaears to enhane eorts to eveoe ountries a

simiar effet was estimate in Graek 2. Theauthors o not, however, fin that onformity with IOstanars in eveoe ountries has a signifianteffet on either eorts or imorts. ousing on traewithin the uroean Union, Vanauteren an Weiserbs2 fin that harmonization has a signifiant effeton a ountry’s eorts.2 In artiuar, they fin thatountries that have a arger than average share oftrae in setors overe by the U harmonizationiretive eort more. More reenty, using an ine ofvariations in reguation on veterinary rugs anestiies aross ountries, Gervais et a. 211estimate that ifferenes in stanars have a negative

effet on trae in ig meat an beef.

Harmonization is aso foun to have a ositive effeton the iversifiation of eort markets the soaeetensive margin of trae – that is, on the number ofeorte varieties an eort estinations. Abeitimite by the ak of firmeve ata, heher 27is the first stuy to eore the imat of harmonizationat the etensive margin of trae. ousing on theeorts of teties, othing, an footwear, he fins thatharmonization is assoiate with higher eort variety,mainy for owinome ountries’ eorts to theuroean Union.

ousing on the eetronis setor, Reyes 211eamines the resonse of U manufaturing firms tothe harmonization of U rout stanars withinternationa norms. The author uses the share of nonharmonize stanars in an inustry3 as a measure oftrae osts ue to a variety of stanars.

Reyes’ stuy fins that inreasing harmonizationinreases U eorts to the uroean Union. Inartiuar, this inrease is ue to more U firms enteringthe U market. orts from U firms areay resentin the U market before the harmonization erease.Overa, eorts inrease. Prout stanarharmonization seems to be more imortant than tariffsfor the roensity to eort. urthermore, new eortingfirms are smaer than those areay eorting to the




50

o .: Harmonization versus mutual recognition

This bo eores the ossibe roe of harmonization an mutua reognition of TT/P measures anomares their avantages an isavantages. or the uroses of this bo, TT/P measuresan omesti reguation in servies are treate together as “stanars” beause the onusions from thetheoretia iterature ay generay to goos an servies reguation.

uose that two trae artners are onfronte with the same market faiure but aress it with the use ofifferent stanars. This means that eisting eorters wi have to bear the osts of aating their routsto the requirements of the estination ountry or roue goos that meet both stanars. The ifferentstanars of reguation have a negative effet on market entry – the etensive margin of trae – as it ats asa fie market entry ost Ko an Leour, 2.

Now, onsier a ase in whih a firm oerating uner inreasing returns to sae serves the omestimarket an an otentiay eort to three foreign markets, uon aying a fie sunk market entry ost . Ifthis ost is marketseifi, the firm an ony reaize marketseifi eonomies of sae in eah of the eortmarkets. ine the two ountries have the same market faiure, an effetive soution for both ountries woube to hoose a ommon stanar or reognize eah other’s stanar.

Harmonization imies a ommon efinition of both the oiy obetive an the tehnia requirements toahieve it, whie mutua reognition refers to the reiroa aetane of the measures aie in bothountries. oth aroahes are onsiere traeenhaning as they roue eonomies of sae an ermita more effiient aoation of resoures hen an Mattoo, 2. Taking the eame of the firm esribein the revious aragrah, if the fie ost of entry is the same for a eort markets, as is the ase unermutua reognition an harmonization, the firm an reaize goba eonomies of sae, an reaize ostsavings. However, eah soution affets trae in a ifferent way an, in genera, it is not ossibe to efinewhether harmonization or mutua reognition is more traeenhaning.

In genera, harmonization is eete to boost trae more than mutua reognition for the foowing reasons.As ountries aot the same stanars, routs are more homogenous an better substitutes for bothrouers an onsumers than in a mutua reognition framework, thus reuing homebias – that is, the

genera referene for omestiayroue goos Wor Trae Organization WTO, 2b. ommonstanars ower the information osts fae by onsumers an inrease their onfiene about the quaity ofimorte routs issanayaka et a., 21. This aso aies for businesstobusiness reationshis, whereharmonization enhanes ommuniation effetiveness Graek, 2. They aso aow omatibiity betweenimorte an omestiayroue routs aer, 27.

However, it is ossibe that harmonization an have a negative imat on trae that an be avoie throughmutua reognition. Harmonization reues the number of varieties in the market for eame, harmonizationto a ertain higherquaity stanar removes from the market owerquaity routs that some onsumersmay have been wiing to buy. When eman for foreign routs is riven by ove for variety, a ower egreeof ifferentiation among routs wi iminish trae. Moreover, harmonization may generate omianeosts that vary for ifferent ountries if ertain ountries ak the eertise to take fu art in the setting ofinternationa stanars or if they ak bargaining ower. In this ase, the gains from harmonization wi not be

equay istribute among artiiating ountries.

In ontrast, mutua reognition aows an equa istribution of gains from removing TT among ountries.When this aroah is in ae, firms an se in foreign markets without bearing the ost of harmonization.Therefore, when ove for variety is imortant for trae or when osts of aatation to a new harmonizetehnoogy are high, mutua reognition shou be eete to boost trae more than harmonization.

Harmonization an mutua reognition aso take ae within regiona agreements, with ifferentonsequenes for trae with ountries that are not art of the agreement Wor Trae Organization WTO,2b; hen an Mattoo, 2; Mattoo an auvé, 23. On the one han, harmonization ereases theosts of earning about the reguation of eah member of the agreement an avois the assoiate osts ofomiane, thus benefiting rouers that are not in the agreement. On the other han, it an inreaseomiane osts for firms outsie the agreement, eseiay for firms in ess eveoe ountries, whih

often ak the infrastruture an eertise require to omy with new reguations Otsuki et a., 21. Withmutua reognition, eterna rouers an hoose to roue aoring to the stanars aote in theountry that better suit their roution avantages, imying ower osts.




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uroean Union before harmonization. These resutssuggest that working towars a harmonization ofrout rues aross markets ou assist sma anmeiumsize firms in entering new eort markets.

onomists have argue that ifferenes in reguationaross ountries oiy heterogeneity reueservies trae in the same way that it oes for goos.As isusse in o .2, Ko an Leour 2 showthat in a stanar monooisti ometition moe oftrae, ifferent stanars of reguation arossountries reue biatera trae. In suort of thistheoretia reition, emiria eviene shows thatmutua reognition or reguatory harmonization have aositive effet on trae.

e ruin et a. 2 onsier the rosetiveeffets of the U ervies iretive, roose in

2 by the uroean ommission to reue theimeiments to trae, on biatera trae in ommeriaservies. y ombining the hanges in reguatoryiversity with the emiria resuts of the gravityanaysis, they estimate that tota trae of ommeriaservies within the uroean Union inreases by anaverage of 2 er ent as a resut of the erviesiretive, as arove in 2. This rises to erent for the origina roosa by the uroeanommission, whih inue the ountry of originrinie.7 As they argue, suh arge ifferenesimiity show the eonomi benefits of mutuareognition of reguatory stanars.

In aition, KaemiOzan et a. 21 onsier theretrosetive effets that reguatory harmonizationbase on the U’s inania ervies Ation PanAP ha on rossborer banking ativities. uhativities inrease signifianty among uroeanountries that quiky aote the finania serviesiretives of the AP. Their resuts suggest thategisative harmonization in finania markets ha aositive effet on rossborer banking integrationthat is aitiona to the generay ositive effets ofeuro area membershi.

b Regiona integration

A growing number of regiona/referentia traeagreements inue rovisions on TT/P measures.The anaysis of the ontent of referentia traeagreements PTAs in ast year’s reort WTO, 211show that aroimatey er ent of the agreementsinue suh rovisions.

In artiuar, mutua reognition of onformityassessment an harmonization of tehnia reguationare among the most ommon aroahes ofintegration in the TT area. Whie the obetive offostering mutua reognition of onformity assessmenttens to be a feature that ours with equa frequenyaross severa tyes of PTAs, signifiant iffereneseist in terms of their teneny to inue

harmonization of tehnia reguations between Utye an North Ameriantye agreements. oreame, whie the agreements signe by the uroeanUnion tyiay inue harmonization rovisions, PTAsinvoving North Amerian ountries ten to inue

mutua reognition of tehnia reguations.

urthermore, ast year’s reort highights two featuresof PTAs. irst, PTAs that harmonize stanars areikey to resent “hubansoke” harateristis, withthe arger artner reresenting the hub to whosestanars the sokes onform. Therefore, the reortautions that this teneny may hiner further traeoening among maor regiona grouings. eony,“ee” PTAs that is, more ambitious PTAs in terms ofthe eth of integration of TT rovisions are moreikey between ountries at higher an simiar eves ofeveoment. Therefore, the reort warns about the

risks of moving towars a twotiere wor that woufurther marginaize eveoing ountries.

This year’s reort takes the anaysis a ste further anooks at the eviene of how harmonization an mutuareognition rovisions in PTAs affet trae.Harmonization an mutua reognition, when theyour at the regiona eve, affet ountries outsie theregion ifferenty. Whie harmonize stanars aowentry into the whoe regiona market one theharmonize stanar is aote, mutua reognitionmay not rovie aess to thir ountries. or eame,agreements invoving mutua reognition of onformity

assessment roeures are ikey to have traeiverting effets for ountries outsie the agreementif they are subet to strit rues of origin i.e. aws,reguations an aministrative roeures whihetermine a rout’s ountry of origin.

uose, for eame, that foowing an agreementbetween ountry A an ountry , ony goos mae inountry A satisfying seifi rues of origin aniruate freey in ountry after being teste anertifie in A. This riviege oes not eten torouts originating in thir ountries. Therefore, afirm oate in ountry wi have to ay twie as

muh as a firm oate in A or for onformityassessment in orer to aess markets A an . In thease of servies, suose that ountries A an havesigne an agreement roviing for mutua reognitionof quaifiation requirements. A servies rovier fromountry wiing to serve both A an markets wihave to ay twie as muh to obtain the neessaryquaifiation requirements. Mutua reognition ofonformity assessment roeures in the formereame or of quaifiation requirements in the attereame between A an when aomanie by rueof origin therefore inreases the osts for firms oatein thir ountries reative to firms oate in A an ,thus iverting trae.

Very few emiria stuies have ooke at howP/TTreate oiies in PTAs have affete trae




52

both within an outsie the region overe by theagreement. isting stuies iniate that regionaagreements on harmonization ten to ivert trae anthat trae iversion affets eorts negativey,eseiay from eveoing ountries. or eame,

aot et a. 21 show that the eistene of PTAsbetween eveoe an eveoing ountries Northouth agreements hurts trae between eveoingountries outhouth trae an imees eveoingountries’ attemts to iversify into new markets.

hen an Mattoo 2 estimate a gravity moe ofbiatera trae of 2 O ountries an 1 nonO ountries at the threeigit IT rout eve.Their anaysis iniates if two ountries have signe amutua reognition agreement MRA for a ertainsetor an the number of harmonization iretivesbetween the two ountries for a rout. The anaysis

aso iniates whether MRAs inue rues of origin.

hen an Mattoo fin that harmonization agreementsan inrease trae between ar tiiating ountries butwi not neessariy inrease trae with other ountries.In artiuar, they fin that harmonization inreaseseorts from eveoe ountries outsie the region,but it reues eorts from eveoing ountriesoutsie the region. MRAs ten to inrease trae withinthe region. MRAs aso inrease trae with ountriesoutsie the region if they are not assoiate with ruesof origin. However, when the MRAs ontain rues of

origin, trae with ountries outsie the region isnegativey affete, eseiay eorts from eveoingountries.

inay, fousing on two setors, teeommuniationsequiment an meia evies, aer 27eamines the imat of MRAs an harmonizationagreements on biatera trae among 2 Oountries an 22 nonO ountries.9 Her resutsiniate that whie MRAs inrease both the robabiityof entering a new market the etensive margin oftrae an the voume of trae the intensive margin,harmonization of stanars or tehnia reguation has

ambiguous effets. Like hen an Mattoo 2, herfinings suggest that regiona harmonization inreasestrae with eveoe ountries but hiners trae witheveoing ountries.

There is no emiria anaysis that ooks seifiay atthe isriminatory effets of MRAs onerningomesti reguation in servies. The few emiriastuies on trae iversion in the servies setor useummy variabes iniating the eistene of areferentia trae agreement between two givenountries. uh variabes o not aow us to istinguishbetween market aess an nationa treatment

ommitments i.e. the rinie of giving others thesame treatment as one’s own nationas, on the onehan, an mutua reognition of stanars anrequirements, on the other han.

As argue by ink an ansen 29, the soe forisrimination is ikey to be imite by two fators. One isthat MRAs ten to ay mosty to restritions reevantfor moe movements, a moe of trae that even at theregiona eve has not benefite from signifiant eves of

trae oening. The other fator is that MRAs ten toay to ony a sma number of rofessiona serviessetors, notaby aounting, arhitets an engineering,an ony a few MRAs feature automati reognition ofquaifiations O, 23.

To sum u, eviene suggests that regiona integrationof TT/P measures has traeiverting effets,eseiay to the etriment of eveoing ountries.This fining is onsistent with the eviene that eereferentia trae agreements in the area of TT/Pmeasures are more ikey among ountries with ahigher an more simiar eve of inome. This fining

aso highights the risk that regiona integration onTT/P measures may ea to a mutitiere worwhere ertain eveoing ountries are marginaize.

. onusions

The trae iterature estimates the egree ofrestritiveness of nontariff measures an serviesmeasures by estimating an “avaorem tariff equivaentAV”, i.e. the eve of an avaorem tariff that wouhave an equay traerestriting effet as the measuresat issue. The use of AVs to measure the trae imatof NTMs, however, resents onetua an

methooogia imitations. or eame, the equivaeneof tariffs an quotas breaks own in the resene ofmarket unertainty, or when NTMs take the form offie market entry osts, suh as those assoiate withmeeting ertain tehnia requirements.

AVs o not aequatey ature the traerestritiveimat of ertain nontariff measures when theroution roess is fragmente aross ountriesbeause they fai to take into aount the umuativeeffet of measures aong the roution hain.Aitionay, in the ase of servies measures, theestimate AVs neither aount for the ossibesubstitution between ifferent moes of suy nor forthe omementarity between trae in servies antrae in goos.

Notwithstaning these imitations, eisting emiriaeviene suggests that nontariff measures anservies measures an signifianty restrit trae. Inartiuar, NTMs an be as traerestritive as tariffs,an even more so in the ase of ertain high anmieinome ountries. In the ase of serviesmeasures, whie restritions to trae are generayhigher in eveoing ountries than in eveoeountries, they o not aear to be systematiayassoiate with a ountry’s eve of eveoment.

A omarative anaysis of the roe that various tyes ofnontariff measures ay in the overa eve of NTM




153




restritiveness oes not eist. However, it is ear thatthe imat on trae is not neessariy restritive for ameasures. TT/P measures o not unambiguousyinrease or erease trae. In genera, TT/Pmeasures have ositive effets for more

tehnoogiay avane setors, but negative effetson trae in fresh an roesse goos. As eonomitheory suggests, the introution of a new TT/Pmeasure yies a traeoff between higher osts ofaatation to new requirements for rouers anower information osts for onsumers, who an beonfient about the quaity of the rout in question.The revaene of a ositive effet of TT/Pmeasures on manufaturing goos may suggest thatinformation osts are more imortant or aatationosts ower in these setors than in nonmanufaturingsetors.

When TT/P measures have a negative effet, theimat tens to be greatest for eveoingountryeorts. There is aso eviene that TT/Pmeasures have a more negative imat on trae infoo an agriuture – mainy beause of the ostsassoiate with onformity assessment roeures. Inaition, TT/P measures aear to reue theikeihoo of eort market iversifiation. ma firms– an firms that outsoure their intermeiate inuts –aear to be most affete by TT/P measures.

Harmonization an mutua reognition of stanarsare ways in whih any negative effets of TT/P

measures an be mitigate. Harmonization is shown toenhane the resene of sma an meiumsizefirms in eort markets. However, if harmonization ormutua reognition ours within regiona traeagreements, there may be signifiant traeivertingeffets on ountries outsie the agreement. Thisaears to be eseiay the ase for eveoingountries. urthermore, as stresse in ast year’sWor Trae Reort, there is a risk of a “okin” effet,whereby the regiona harmonization of stanars mayreue inentives for further trae oening. There isaso a risk of a mutitiere reguatory wor emerging,in whih eveoing ountries are marginaize.

The eonomis iterature on omesti reguationreate to quaifiation an iensing requirements anroeures an tehnia stanars is etremeyimite. Most stuies ook at a muh wier set ofservies measures an are, therefore, not informative

for this reort. In reation to the finania serviessetor, the eisting iterature fins that reguationaime at ensuring aroriate stanars suh asaounting stanars an finania statementtransareny is ositivey assoiate with rossborer trae an foreign iret investment in finaniaservies. As with TT/P measures, there is asosome eviene that a reution in oiy iversity,arrie out through mutua reognition or onvergeneof internationa stanars, has inrease serviestrae.

Regaress of their obetive, TT/P measures an

omesti reguation in servies may or may not reuetrae. Negative trae effets, when they eist,generate negative siovers aross ountries. Thisrovies a rationae for internationa ooeration.Harmonization an mutua reognition he to reuethe unesire negative trae effets of egitimateubi oiy. However, both aroahes highight thenee for aaity buiing to aress reguatoryhaenges in eveoing ountries.

The osts reate to omiane an onformityassessment iminge artiuary on eveoingountries. This is beause they ak the tehnia

infrastruture neessary to effetivey eveo anesign tehnia reguation, stanars an onformityassessment roeures. Aso, they ak theaboratories an areite ertifiation boies to testan ertify omiane with a ertain stanar. Theseissues are the fous of etion .




54

1 This setion ony fouses on omesti reguation measuresreating to quaifiation an iensing requirements an

roeures, an tehnia stanars. This narrow set ofmeasures is the equivaent in ser vies of TT/Pmeasures in goos.

2 The agriutura setor may aso be subet to ore NTMs.

3 It is worth noting that these AVs were onstraine to betrae imeing through an eonentia transformation in theestimate equation. This takes away from the fat thatNTMs may atuay enhane trae at times.

ee o .1 for a esrition of the TTRI an OTRI.

This assumes erfet information. If, for eame, quaityifferenes between routs are signae by tehniareguations, suh NTMs ou ower ries an inrease

trae. ee o .1 for a esrition of the market aess versions

of the TTRI an OTRI.

7 As eaine in o .1, this is a measure of therestritiveness fae by eorters.

This foows a Wor ank assifiation of these ountriesaoring to ata in 2 1.

9 Using the “rie ga” metho to estimate the imat ofNTMs on trae, rafor 23 fins the AVs of NTMs tobe of the same orer of magnitue for a same ofeveoe ountries, thereby reinforing the resuts of Keeet a. 29. H owever, the former’s estimates are istintyhigher beause the stuy uses the “rie ga” metho –

AVs are measure as the ifferene between imort anretai ries, after orreting for transort an istributionosts, an hene inue more oiy restritions in theirefinition of NTMs Kee et a., 29. At the same time, it isossibe that for ertain NTMs, qua ntitybase eonometrimethos give biase estimates. In the ase of TT an Pmeasures, for instane, if omiane osts a re asse onto unit vaues, regressing the vaue of imorts on a measureof NTMs wi unerestimate their trae imat. imiary, ifthere is market ower in the imorting ountry, the omestirie wi rise by more with a quantitative restrition QRthan a tariff reuing imorts by the same amount. Hene,the AV of a QR, erive from a quantityba se estimation,wou be unerestimate.

1 Regressing the natura ogar ithm of the AV of NTMs in21 on the eve of GP er aita in 21, we foun avaue of .133.

11 The estimate trae effet reresent s the erenta geremium on routs restrite by an NTM in a ountryreative to the rie of those routs in ountries withoutNTMs.

12 This is ifferent from the imiation of “bining” in a egasense. It refers to the fat that onitiona on resene oftariffs an other NTMs, the trae effet of a artiuar NTMmay not be statistiay signifianty ifferent from zero.

13 ven the ane utyai rie may ontain whoesae anretai margins beause imorters, whoesaers, an retaiersmay share the NTM rents among themseves, eseiaysine arge retaiers are integrate into the earier stages ofthe istribution roess annister, 199; Krishna an Tan,1992.

1 ee etion for a esrition of the methooogy.

1 The four servies ategories are trave, transort,government an ommeria servies.

1 Transort, trave, ommuniations servies, onstrution,insurane, finania servies, royaties a n iene fees,omuter an information servies, other business servies,government servies an ersona, utura an rereationaservies.

17 or eveoe ountries, as muh as threequarters ofservies trae is in intermeiate inuts Mirouot et a.,29.

1 Manufaturers may hoose to eort irety or throughintermeiaries who move goos through whoesae anretai istribution networks. Ahn et a. 211 show that the

share of eort through intermeiaries is ositiveyorreate with the iffiuty of aessing estinationmarkets. This is beause when barriers to trae a re arge,reativey sma an ess routive eorters useintermeiaries to eort.

19 Aoring to ernar et a. 211, however, there are argevariations in the imortane of intermeiaries arossountries an routs.

2 Mutinationa retaiers aso ten to soure their rivateabes from eveoing ountries Norås, 2 a n thereare ases where they have rovie the sae an stabiityof eman neessary for eveoing ountry farmers toinvest in moern roution tehnoogy oan anHumhrey, 21.

21 The trae effets of reguatory heterogeneity with a fouson TT/P measures an omesti reguation in servi esare further anayse in etion .3.

22 Perinorm ontains information on a stanars eveoe inthe 21 ountries overe, inuing information on thereationshi among stanars originate in ifferentountries. This information efines whether two stanarsare ientia, equivaent or nonequivaent, on the basis ofIO/I Guie 21.

23 There is a arge iterature that stuies the effet ofreguation in servies on trae using Prout MarketReguation PMR iniators. ee for instane Nioetti anMirza 2, Lennon et a. 29 an hwenus 27.

In genera this iterature estimates a negative effet ofreguation on servies trae. However, PMR overs a rangeof measures that goes beyon omesti reguation as ofGAT Artie VI.. Therefore, they are not taken intoaount in this review. The same issue er tains aso to otherstuies suh as Ni oetti et a. 23 that use the ine ofnonmanufaturing reguations NMR an Kimura an Lee2 that use an “ onomi reeom of the Wor” Winiator.

2 The Anne on inania ervies in the GAT eiityaows ountries to take ruentia mea sures to rotetinvestors an eositors an to ensure the integrity a nstabiity of the finania system. The a naysis of Ko anNorås 27 shows that most suh measures have aositive effet on servies trae. This effet is a rger forreguation in the eorting ountry than for reguation in theimorting ountry.

Endnotes




56

Other stuies suh as Ko an Leour 2 an Ko anNorås 27 aso at temt to estimate how any negativeeffet of burensome reguation on servies trae a n bereue through harmonization or mutua reognition.However, they use iniators of reguatory heterogeneitybase on the PMR ata, mea suring heterogeneity in a muh

wier set of measures than ust omesti reguation overein this reort.

9 aer 27’s atabase ontains information on eightMRAs reevant to meia evies an 1 MRAs reevant toteeommuniations equiment. It a so ontains informationon 22 U harmonization agreements an 19 AANharmonization agreements.

Park an Park 211 ay a gravity regression ana ysis tofour maor servies setors – finania, business,ommuniations an transortation servies. They fin thatthe PTAs reate servies trae a mong members an o notivert servies trae from nonmembers. Van er Mare anheher 211 fin eviene that from a number ofsetors – transort, ommuniations, business servies,

finane, an trae servies – PTAs are not ony traereating between member ountries, but aso w ith resetto nonmembers. ranois a n Hoekman 21 is the onystuy that isoates ossibe trae iversion effets inservies, in ar tiuar within the uroean Union. In thisase, eviene of trae iversion is foun ony for businessan informatis an teeoms servies, where they estimatea 13.3 er ent inrease in trae voumes within the Ureative to thir ountries.




157




Aeni Tabe .1: Effects of SPS measures on export performances by firm

eenent variabes

Ln n. ofvarietieseorteby firms

Ln n. ofvarietieseorteby firms

Ln eortsvaue by firms


Number ofeorting firms

Number ofentry firms

OL OL OL OL Poisson Poisson

1 2 3

P , s, t1 .13*** .72*** .

.21 .1 .31

P req, s, t1 .17*** .91*** .1

.3 .197 .71

Observations

Rsquare .33 .33 .2 .2

Note: The variabe P enotes a ummy for the eistene of a measure against whih a onern was raise in the setor. The variabePreq is a ount of the onerns raise normaize by the number of routs H within an H2 setor. Resuts are obtaine using oneyear ag eanatory variabes aggregate estimation at H2 eve, the same inues ony firms eorting for at east five years uring theerio 1992. A regressions inue time, setor, estination ountry, timesetor an timeestination ountry fie effets. Robuststanar errors in arentheses. *** iniates a signifiane eve of 1 er ent.

Source: Authors’ auations using the atabase from ontagné et a. 212.

Appendix D.1




58

Aeni Tabe .2: Effects of TBT measures on export performances by firm

eenent variabes

Ln n. ofvarieties

eorte byfirms

Ln n. ofvarieties

eorte byfirms



Number ofeorting firms

Number ofentry firms

OL OL OL OL Poisson Poisson

1 2 3

TT, s, t1 .*** .1*** .193

.1 .9 .319

TT req, s, t1 .2*** .7*** .217

.23 .133 .3

Observations

Rsquare .32 .32 .2 .2

Note: The variabe TT enotes a ummy for the eistene of a measure against whih a onern was raise in the setor. The variabe

TTreq is a ount of the onerns raise normaize by the number of routs H within an H2 setor. Resuts are obtaine using oneyear ag eanatory variabes aggregate estimation at H2 eve, the same inues ony firms eorting for at east five years uring theerio 1992. A regressions inue time, setor, estination ountry, timesetor an timeestination ountry fie effets. Robuststanar errors in arentheses. *** iniates a signifiane eve of 1 er ent.

Source: Authors’ auations using the atabase from ontagné et a. 212.



1 5 9

E T R A D E E F F E C T S O F

O N - T A R I F F M E A S U R E S

D S E R V I C E S M E A S U R E S

Aeni Tabe .3: Impact of SPS measures on agricultural and food trade, 1996-2010

P Variabe: Preqit1H2

eenent Variabe: Primort itH nimortitH PrimortitH nimort itH Primort itH nimort itH

1 2 3

P measureit1H .1*** .1*** .1*** .1***. .1 . .1

P onformityit1H .39*** .73*

. .2

P harateristi it1H .19 .9***

.7 .2

ontros Y Y Y Y Y Y

ie ffets Y Y Y Y Y Y

stimate orreation rho.1 . .

.1 .1 .1

stimate seetion amba1.372 1.91 1.37

. . .

Log seuoikeihoo 77733 777232 77729

Wa hi2 9. 972.9 991.9

Observations , 2, 3 , 2, 3 , 2, 3

Note: stimation metho is the Hekman eetion Moe maimum ikeihoo. Preq is a ount of the onerns raise normaize by the number of routs H withreorte in oumns 1 to . P enotes a ummy for the eistene of a measure against whih a onern was raise in the setor resuts reorte using this variabe athe og of the rout of GPs, the og of the rout of ouations, the og of istane, aaeny, ommon anguage an oonia heritage. ommon reigion is the seeeorter, H rout, year fie effets, an mutiatera resistane MR terms à a aier an ergstran 29 are inue in a regressions. tanar errors in arenther ent, resetivey.

Source: rivei an Grösh 212.




60

The focus of this section is international

cooperation on non-tariff measures (NTMs)

and services measures. The section first

reviews the economic rationale for such

cooperation in the context of tradeagreements. It then looks at the practice of

cooperation in the areas of technical barriers

to trade (TBT), sanitary and phytosanitary

(SPS) measures and domestic regulation in

services. The third part deals with the legal

analysis of the treatment of NTMs in the

GATT/WTO system and the interpretation of

the rules that has emerged in recent

international trade disputes. The section

concludes with a discussion of the challenges

of adapting the WTO to a world where NTMs

are a growing concern.

E. International cooperation

on non-tariff measures ina globalized world




161

E .I NT E R NA T I ONA L

C O OP E R A T I ON

ONN ON-T A R I F F

ME A S UR E S

I NA GL OB A L I Z E

DW OR L D

Contents 1 The reguation of NTMs in trae agreements 12

2 ooeration in seifi oiy areas: TT/P an servies measures 17

3 GATT/WTO isiines on NTMs as interrete in isute settement 17

Aating the WTO to a wor beyon tarif fs 23 onusions 21


• WTO rules help to deal with the problem of countries replacing

tariffs with non-tariff measures, but the changing nature of trade

creates new complexities that call for deeper forms of institutional

integration.

• Countries cooperate on TBT/SPS measures and domestic regulation

in services to address information problems and to complement

market access commitments.

• Distinguishing legitimate NTMs from measures designed for

protectionist purposes has been the key issue in GATT/WTO dispute

settlement concerning NTMs and in establishing new disciplines

for domestic regulation in services.

• The tension between economic analysis and legal practice can

inform future efforts to address NTMs in the WTO system in an

evolving trading environment.




62

This setion begins by reviewing the eonomi reasonsfor internationa ooeration on nontariff measures inthe ontet of trae agreements. This theoretiaaroah rovies a framework for onsiering theeffiient esign of rues on NTMs in a trae agreement

an how they may be affete by iverse fators, suhas the eveoment of goba roution hains anthe oaque nature of various NTMs. The seon artooks at how ooeration on NTMs has taken ae inthe mutiatera traing system an within otherinternationa fora an institutions. eifiay, thefous is on tehnia barriers to trae TT, sanitaryan hytosanitary P measures regaring foosafety an anima an ant heath an serviesreguation, stressing the simiarities an theeuiarities of the unerying robems an of theways in whih ooeration has taken ae.

The thir art of the setion eas with the egaanaysis of the treatment of nontariff measures in theGATT/WTO system an the interretation of the ruesthat have emerge in reent internationa traeisutes. eia attention is given to how theagreements an the isute settement system haveeat with the istintion between egitimate anrotetionist NTMs. The setion onues with aisussion of the haenges of aating the WTO to awor where nontariff measures are a growingonern. This brings together the main insights of thereeing anaysis of the theory, eviene an evovingraties of NTMs ontaine in the ifferent setions

of the Reort, an offers some oiy observations.

1. The reguation of NTMsin trae agreements

Why o ountries ooerate on trae? Why is there anee for ooeration on nontariff measures? Howshou NTMs be reguate in a trae agreement? Thissetion anhors the isussion of internationaooeration on NTMs in a theoretia framework. Thefoowing setion rovies a seifi fous on threereevant oiy areas: TT measures, P measures

an servies measures, artiuary with reset toomesti reguation.

etion .1 first reviews the two main theories of traeagreements: the termsoftrae aroah an theommitment aroah see beow. These theoriesrovie a rationae for trae ooeration an offer aframework for onsiering the roe an esign of NTMreguation in a trae agreement, suh as the WTO’sagreements.

As isusse in more etai beow, the termsoftraearoah has a sime an owerfu resut. Ifgovernments set oiy to meet their obetives in themost effiient way ossibe, they wou not hoosenontariff measures to istort internationa trae intheir favour. Tariffs wou be the ony oiy instrument

invove. In this basi theoretia setting, governmentsset NTMs to aress egitimate ubi oiy onerns,an rues on NTMs in a trae agreement ony nee toaress otentia “oiy substitution” between tariffsan nontariff measures see etion . ffiieny

an be obtaine with a sime set of rues, suh asnationa treatment an nonvioation see etion.1b beow. This set of rues eaves substantiaautonomy to nationa governments in setting NTMs“shaow” integration.

Whie ertain features of trae agreements orresonto the basi reition of the termsoftrae aroah,atua ooeration on nontariff measures in the WTOan other arrangements artiuary referentia traeagreements goes generay beyon a “shaow” eve,enomassing “ee” forms of integration. Thissuggests that governments may be trying to aress

robems beyon substitution between tariffs anNTMs. What are these robems?

etion .1 reviews some of these aitiona rationaesfor ooeration on nontariff measures. A firsteanation may be rovie by the ommitmentaroah. In that framework, it an be shown thatertain features of WTO rues on NTMs an be

ust ifie when governments suffer reibi ity robemsvis-à-vis omesti onstituenies, suh as seiainterest grous. Another issue is that the hangingnature of internationa trae an the rise in offshoringreates new oiy eternaities that may aso romt

eeer forms of institutiona integration beyon simemarket reservation rues. inay, ooeration onNTMs in trae agreements an be motivate by someaitiona omeities that are not ature by thebasi moe, but that may be reevant in ratie. Afirst issue is that severa NTMs are highy oaque. Thissuggests that member ountries nee to ooerate toientify what onstitute an effiient an egitimate useof NTMs. Another issue is that market ators, ratherthan governments, an set de facto NTMs by aotingvountary rivate stanars.

inay, this anaysis turns to a onsieration of the

effiient esign of a trae agreement that eas withnontariff measures. eifiay, using the termsoftrae aroah as a benhmark, the ast subsetionevauates the effiieny of ertainns




163


C O OP E R A T I ON

ONN ON-T A R I F F

ME A S UR E S


DW OR L D

say about the treatment of nontariff measures intrae agreements. The termsoftrae aroah anthe ommitment aroah argue that governmentsnegotiate internationa treaties to aress ertaininternationa an omesti eternaities assoiate

with trae oiy. These effets were aso touheuon in etion . Whie the two eonomi theorieswere eveoe rimariy for eaining the use oftariffs, simiar motives might ay for ooeration onthe use of NTMs.

The ogi of the termsoftrae an ommitmentaroahes oes not rovie a satisfatory eanationof the eonomi rationae for servies traeagreements. Whie some of the insights from thesetheories are reevant to eain ertain features of theGenera Agreement on Trae in ervies GAT,eonomists reognize that there are imortant

ifferenes between trae in goos an trae inservies. A isussion of the urrent ebate oninternationa ooeration on servies trae isontaine in o .1.

(i) The terms-of-trade approach

Aoring to the termsoftrae or traitiona theory,governments are attrate to trae agreements as ameans of esaing from a termsoftrae rivenPrisoners’ iemma agwe an taiger, 1999,22, i.e. a nonooerative situation in internationa

trae oiy. The “robem” that arises in the abseneof a trae agreement an be eresse as foows.

When a government hooses the eve of a tariffuniateray, or a nontariff measure that takes theae of a tariff, it wi not onsier the wefareonsequenes for foreign eorters in its eision.etion esribes how the inentive to use traeoiy in ways that benefit omesti rouers at theeense of foreign eorters auses governments toimose high trae restritions that ater the terms oftrae i.e. the rie of eorts reative to imorts tothe avantage of the omesti eonomy. However, as

this ogi aies to a ountries an eah one seeksto raise tariffs, the resut – known as Nash equiibrium– is that the terms of trae are unaffete overa, butthe voume of trae is ineffiienty ow. This outome isthe weknown Prisoners’ iemma.

Aoring to the termsoftrae theory, the urose ofa trae agreement is to give foreign eorters a “voie”in the tariff hoies of their traing artners, so thatthrough negotiations they an make their traingartners resonsive to the osts that these traerestritions imose on foreign eorters. Inaomishing this, a trae agreement base onreiroity an nonisrimination the mostfavourenation – MN – ause naturay eas to ower tariffsan an eansion of market aess to internationayeffii ent eve sOlx<0x<FEFF000>CN0000dN[(O<<clx<FEFF000>>>BDCN()jNECN660dN[(9)-580dN[(a)-5()-()-(e)-(s)-(s)]JNSp<<cl84)]JNSp<CN040dN[(n)-4(o)-6(n)-()-5()-(-8(50dN(70dN[(9)-(t )-(R8(h)-4(e)]JNSp<<clx<FEFF000>>>BDCN0x0)-(i )-8(o)-(n)]JNSp<<clx<FEFF000>>>BDCN()j00)]JNSp<<c<FEFF000>>>BDCN()jNECN40dN[(o)-(n)]JNSp<<clx<FEFF000>>>BDCN-n)-5(Olx(0(o)]JNSp6-0dN[(a)-5jN




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o .1: Economic theories of the GATS

onomi anaysis of the GAT tens either to emhasize the eonomi avantages of effiient aniberaize servies markets or to use the theories borrowe from trae in goos to eore the ogi ofservies trae oening. Whie these aroahes have gone some way towars eoring the roe of serviestrae in the broaer eonomy an ientifying the araes between trae in goos an trae in servies,neither aroah seaks irety to the question of internationa ooeration on servies.

This bo first outines the reasons why the frameworks ai out in etion .1 are unsatisfatory forooeration in servies, an summarizes two aroahes to eaining internationa ooeration on serviestrae. The first argues that servies ommitments in internationa trae agreements rovie a reibeinstrument for anhoring uniatera oiy reforms an imiting oiy substitution. The seon sees theroess of servies trae oening as art of government resonses to hanges in the nature of routiontowars internationa suy hains.

The rinia argument for aying theories eveoe for trae oiy ooeration in goos to serviestrae is the reognition that oiymakers an suffer from the same inentive robems in both setors. Inartiuar, the internationa termsoftrae theory an the omesti ommitment theory may eten toservies measures oean an Mattoo, 2. However, the istintive features of servies may meanthat the theories use to eain the GATT may not be suffiient to eain ooeration uner the GAT. oreame, one of the main moes of servies rovision is through oa estabishment or foreign iretinvestment. This mitigates the inentive to maniuate internationa terms of trae beause with vertiaintegration, internationa firms artiay internaize the foreign osts of trae oiy anhar, 27. Inaition, Marhetti an Mavroiis 211 suggest that the GAT is fleibe to the oint that it is har to argueersuasivey that ommitment theory eains its avent.

oean an Mattoo 2 oint to another haenge of aying the termsoftrae an ommitmenttheories to trae agreements in servies. ervies ay an imortant roe in the broaer eonomy byomementing outomes in other markets. or eame, a wefuntioning finania setor transformssavings into investment an an aoate aita towars higher returns. Transort servies reuethe fritions in ehange, faiitating both omesti an internationa trae. inay, ommuniationstehnoogy oes not ust faiitate transations but may ea to the issemination an reation of knowegeoean an Mattoo, 2. These otentia effiieny gains wou motivate a government to oen uservies markets uniateray, without the nee for internationa ooeration or a servies agreement.

In aition to uniatera inentives to oen u servies markets, tehnoogia hanges have e to an eansionin servies trae, whih itsef eas governments to seek mutiatera ommitments. Aoring to Marhetti anMavroiis 211, some ountries worrie that whie the oening of servie markets was rogressing through the19s, barriers oome on the horizon. eifiay, the onern was that servies trae that was enabe bytehnoogia hange wou ea governments to reae the ost tehnoogia barriers with new oiy barriersto servies trae, akin to oiy substitution isusse with regars to goos. The threat of oiy substitution ethese ountries to avoate a mehanism to oen internationa servies trae, inuing the GAT.

On the other han, Hoekman an Kosteki 21 argue that hanges in the fragmentation of the roution

e firms to require more aess to effiient servies inuts, whih in turn enourage governments to utservies trae oening on the agena. imiary, earorff 21 fins that beause servies ay an imortantroe in faiitating internationa roution, oening trae in servies inreases the returns to trae oening ingoos. eause goba roution hains ay an imortant roe in internationa trae, enating rotetionistoiies in servies an investment may en u restriting trae in goos. Reent work on the effets assoiatewith internationa roution isusse in etion .1b may therefore rovie usefu insights.

In brief, urrent eonomi theories of the GAT rovie ony a artia iture of the ome wor of serviesnegotiations. This is somehow in ontrast to the more eveoe framework that eonomists use to anayseinternationa ooeration on trae in goos. This is an area where more eonomi researh wou haveimortant ayoffs.




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(i) Opaque instruments

etions an oument the rise in the use of nontariff measures. As onerns about foo safety, finaniastabiity an environmenta issues inrease, governments

wi rey more on NTMs to ahieve omesti oiyobetives. The wier use of NTMs, aong with theomeity an oaity of severa nontariff measures,ose three new an reate haenges for omestireguators an internationa trae negotiators. irst,there an be unertainty on what onstitutes theeffiient eve of a nontariff measure. eony,ooeration on NTMs an suffer beause enforementof agreements requires observing the omiane ofeah government, whereas some NTMs are not easiyobservabe. inay, if NTMs are oaque, they may be onyof imite use as a mehanism for seuring ommitmentsby governments uner an internationa agreement.

haow integration is effiient in a setting where thereare no information robems, as shown in the work byagwe an taiger 21. However, the ak oferfet information an itsef be a reason for eeerooeration on nontariff measures in traeagreements. eifiay, the omeity of NTMs anreate ineffiienies even if governments are erfetyinforme about their own reguatory nees an theeffets of their own oiy hoies, but o not knowthe effiient eve of NTMs for their traing artners.This is beause governments may misea theirartners about their oiy intentions, making even

mutuay benefiia ommuniation iffiut. Thisinformation asymmetry i.e. where one arty has moreor better information than the other oses robemsfor many areas of internationa ooeration, but isartiuary imortant in the ontet of omestireguation, as isagreement over ubi oiy goasan mask funamentay unooerative behaviour.

In aition, the effiient eve of a nontariff measuremay hange over time. or instane, reguatory targetseen on fators suh as the state of tehnoogy,awareness of the effets of market faiures, inustryraties an soieta nees see etion . Whennew situations arise, either governments remainunonstraine by their internationa ommitments orthey may seek new reguatory rovisions byrenegotiating their trae agreements with their artners.

Uating ommitments to reflet the new reguatorynees may affet the agreement’s eisting baane.or eame, suose two governments ome to anagreement on heath an environment insetionertifiates for airy rout imorts an hikeneorts. If there is a isovery of a new outant inheese routs that is not overe in the agreement,the airyonsuming state may seek to imosereguations not overe in the insetion agreement. Ifthe airy rouer seeks to renegotiate, they o sohaving areay mae onessions on hiken eorts.In eetation of renegotiation, both governments may

seek to avoi effiient agreements for fear that theirosition wou be eroe. Without some mehanism toaress these new ontingenies, governments’inabiity to ut a future ontingenies into a ontratreues writing an effiient agreement for the ong

run attigai an Maggi, 23.2

Another onern is that the oaity of nontariffmeasures often makes it iffiut to enfore agreements.A government an theoretiay threaten to withhofuture ooeration if a artner reneges on a ea. Thisthreat, however, eens on the abiity of eahgovernment to observe how the other is reseting theagreement. In the ase of trae, this requires monitoringof the eve of market aess. Whie aws are generayubishe for the ubi, the atua aiation of theaw may be oaque an vary aoring to the hoies ofreguatory agenies an revaiing eonomi onitions.

In an unertain eonomi environment, governmentsmay have iffiuty istinguishing whether a ro inimorts is ue to higher routivity of the imortometing setor or ue to he from the governmentthrough hien rotetion aona an erington,29. This makes enforement haenging; retaiationmay be triggere without ause, or agreement vioationsmay go ununishe. Moreover, the otentia formistaken retaiatory ations may make arties hesitantto agree to more ibera ommitments, thus harming therosets for internationa ooeration.

The oaity intrinsi to the aiation of nontariffmeasures an the haenge of ientifying their effetsmay aso eaerbate ommitment robems betweengovernments an omesti investors. Traeagreements are generay thought to he governmentsmake oiy ommitments to investors an voters.However, internationa agreements may ose theirbining ower if omesti ators are unear aboutoiy hoies. irms must eie to make osty anirreversibe investments in orer to se new goos orenter new markets. Unertainty over trae oiyreates an inentive for firms to wait an evauate theeffets of reguations before investing. This eayreues the ositive effets of trae oening anreues the ommitment effets of a trae agreement.

Haney 211 fins that unertainty over theaiation of trae oiy in Austraia reuethe eve of firm market entry after trae oening by3 er ent. In a reate stuy, Haney an Limao211 show that unertainty over trae oiysignifianty suresse Portuguese firms’ aess to markets rior to the aession of Portuga in 19.These resuts iniate that the omeity an oaityof nontariff measures may imit the effiay of traeagreements in soving ommitment robems.

(ii) Private standards

The maority of this reort fouses on measuresimose by governments to aress behaviour by




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rivate ators in the market, but the emhasis ongovernment oiy somewhat obsures the aaityfor oetive ation on the art of nongovernmentaagents. Private stanars aote by eonomi agentsan serve as nontariff measures, affeting trae an

wor wefare in the same way as governmentmeasures Robert . awin, 197. Therefore, thesame tye of robems that haraterize the use ofNTMs, an that have been isusse so far, may arisefor rivate stanars. To aress these imats,governments an sign trae agreements in whih theyommit to reguate rivate stanars an stanarsetters. o .2 rovies eames of ommony userivate stanars. This subsetion evauates theonitions uner whih governments wou eveotrae agreements that over rivate stanars invarious market onitions.

When trae is in fina goos an stanars remainvountary, rivate stanars rimariy aress marketfaiures. etion esribes onitions uner whihthese stanars an serve as a signa to the marketregaring the artiuar harateristis of the rout.

uh vountary stanars an enhane trae by aowingfirms to estabish systems that rovie onsumers withinformation about their routs without the nee for atrae agreement. onsier an eonomy with a singestanar that oens u trae. ven without governmentintervention, oaitions of firms may ater stanars tomath the nees of ifferent onsumers in eah market.Trae oening may roue harmonization “from thebottom” initiate by rivate inustry grous that avoiswastefu reiation of nationa stanars an a argernumber of seiaize internationastanar grousasea, 21.

o .2: Examples of private standardsPrivate vountary stanars are eveoe by a number of ifferent tyes of entities, inuing omanies,nongovernmenta stanarizing boies inuing regiona or internationa boies, ertifiation an/orabeing shemes e.g. the orest tewarshi ouni an the Marine tewarshi ouni shemes,setora trae assoiations orvere for flowers; the etter otton Initiative for otton, an other nongovernmenta organizations. ome boies may be both setora in nature e.g. overing forestry routsan internationa.3 Among the very many eames of rivate vountary stanars, we onsier the threeareas esribe beow for iustrative uroses.

Forests and certification

The orest tewarshi ouni , estabishe in 1993 as a resonse to onerns about eforestation,is an internationa nonrofit organization aime at roviing forest management ertifiation. The hasten rinies an assoiate riteria for resonsibe forest management; these esribe, among otherthings, how forests have to be manage to meet soia, eonomi, eoogia an utura nees – theyinue manageria asets as we as environmenta an soia requirements. Another eame is theProgramme for the norsement of orest ertifiation P, an umbrea organization that has enorsesome 3 nationa forestry ertifiation systems.

These two organizations reresent the argest stanar shemes in terms of ertifie forest area, with some1 er ent of the wor’s routive forests. Aart from forest management ertifiation, stanar shemesin the area of forestry ommony offer hainofustoy ertifiation to manufaturers an traers who onot grow an harvest trees. This tye of ertifiation is base on requirements to ensure that the wooontaine in routs originates from ertifie forests. hainofustoy ertifiations have risen raiy inreent years, refleting growing onsumer eman.

Carbon labelling

arbon footrint abeing shemes an their reate stanars aim to reflet the tota amount of greenhousegases emitte uring a rout’s ifeye, inuing its roution, transortation, sae, use an isosa.isting initiatives iffer in rationae, ontet, information isay, an assessment methooogy. Whie someabeing shemes iniate the amount of arbon emitte uring a rout’s ifeye, others mention that therouer has ommitte to reuing or offsetting its arbon footrint, or that the rout is more arboneffiient than a omarabe rout.

The first arbonabeing initiative was aunhe in 27 by the arbon Trust, an ineenent, notforrofitomany reate by the UK government; it was foowe by severa other initiatives. fforts to harmonize theunerying methooogy of arbon footrint abeing shemes are ongoing at the internationa eve.7 Aninreasing number of governments have aote, or are in the roess of eveoing, arbonabeingshemes. To ate, however, these are a vountary in nature renton et a., 29; owig an Gibbon, 29.




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On the other han, one roution eans beyonborers, governane between an within firms requiresinrease oorination an monitoring. In thisenvironment, firms inreasingy emoy rivatestanars to aress these haenges in governingtheir suy hains, with imiations for marketaess. or eame, in a wor of oa roution,rivate foo safety an quaity stanars werereominanty businesstobusiness requirements an

not a signifiant haenge to trae, but with the rise ofoffshoring, these rivate stanars have evove intooetive stanars as eaing firms have maeefforts to manage the transation osts assoiatewith their goba suy hains Henson, 2. Asthese suy hains have begun to san nationaborers, rivate stanars have beome inreasingyrevaent Hussey an Kenyon, 211.

The estabishment an aotion of a rivate stanarentais osts that have ifferent effets aross firmsan ountries. or eame, the goba aotion of astanar use in the omesti market entais osts for

foreign firms that omesti ounterarts o not faeüthe an Matti, 211. When rivate stanars haveistributiona onsequenes, governments may usetrae agreements to imit the negative traeonsequenes of internationa an omesti stanarsetting boies.

ven without a trae agreement, firms may imit theinfluene of a artiuar stanar by reating aometing rivate reguator to eveo more favouraberues. or eame, the Wor Wie un for Naturehee reate a rivate stanarsetting boy, theorest tewarshi ouni to romotesustainabe forestry. In resonse, rouers eveoeometing stanarsetting rogrammes to satisfyonsumers without unertaking the osty measuresromote by the ashore, 22.

eening on the nees of itizens an firms,governments may sign agreements to romote oronstrain ometition among stanarsetting boies.uh an agreement an signifianty ater thereguatory environment. or instane, üthe 21oints out that in the eetronis setor, theInternationa etrotehnia ommission Imanage to everage WTO reognition an its owninumbent osition to ay a entra roe in internationa

reguation. esies this eame, the eeriene ofthe uroean Union shows that the esignation orsubsequent reognition of a artiuar rivate ruemaker affete ometition afaggi an anzuk,21.

Moreover, a “rivate” stanar that beomes wieyuse may be a reursor to government reguationwhether in the form of a tehnia reguation,onformity assessment roeure or an P measure.One reent eame, reevant to the issue of arbonfootrint abeing, is rane’s Grenee 2 Law. Thisaw inues rovisions on rout arbon footrint

abeing an environmenta ifeye anaysis. omeeegations at the WTO have eresse onern inthe TT ommittee that arbonabeingrequirements ou beome manatory in the future; infat, an earier raft of the measure ha foreseenmanatory arbon footrint abeing. The uroeanUnion has arifie that the aw is not omusory: itwas esigne to introue onsumers to aitionaenvironmenta information rovie on routs.

The anaysis above eamines vountary stanarsetting an the roe of agreements in reguatingstanarsetting boies when roution is oaizein a singe ountry. However, when routionnetworks are goba an tasks are trae arossountries, firms may set stanars for their inutsuiers, estabishing an aitiona reason for

Food safety standards

In resonse to evoving eonomi onitions, inuing inrease onsumer eman for quaity, safety anroess attributes an inrease onentration in the agrofoo retai setor, rivate firms have beeneveoing a growing number of foo safety stanars Henson an Rearon, 2. These stanars are

tyiay higher than ubi manatory stanars an are integra to the ontrating obigations of firmsaong a suy hain.

Private stanars an ontribute to the governane of foo safety aross regions an setors but whenthere is a mutitue of ometing stanars, omiane osts for suiers aso inrease uoni, 2.Thus, another reent tren in the area of rivate foo safety stanars is the emergene of goba oaitionsfor setting stanars. These oaitions reresent an at temt to harmonize efforts to ahieve foo safety anmutua reognition of nationa an/or regiona stanars among foo retaiers. or eame, the Goba ooafety Initiative GI was aunhe in 2 to enourage onvergene between foo safety managementsystems through maintaining a benhmarking roess for suh systems.

Through the benhmarking roess, the GI seeks to ientify foo safety shemes that roue onsistentfoo safety resuts. Retaiers guie by GI reommenations shou be abe to ientify suiers that meetthe requirements of reevant stanars without requiring an auit. This t ye of initiative ou rovie retaierswith fleibiity to soure aross the wor an ontribute to enhane effiieny of the goba foo system.




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internationa agreements on vountary stanars. Asmentione above, firms hoose stanars to ensure aeve of quaity or to make the inut omatibe withother stages of the roution roess, often requiringinut manufaturers to urhase or iense stanars

from rivate firms. However, in inustries with ony afew inut urhasers, these firms may be abe to setstanars in ways that everage their market ower.

or eame, suose that a number of firms roueoranges for sae to one arge orange uiemanufaturer. The manufaturer an set stanars ina way that etrat rofits from the orange farmers, foreame by requiring oranges seete by a atenteorangegraing mahine, or that orange growersobtain a iense management ertifiation. If the firmis vertiay integrate, the stanar an be set toensure that rofits remain in house, effetivey shutting

out ometition for the inut. Imerfet ometitionreates onitions uner whih governments anrofitaby sign agreements to imit the etent to whihrivate stanars affet trae. If the stanarsetter isin a ifferent ountry than the inut suiers, the useof that rivate stanar ou ineffiienty ereasetrae. In this environment, the government of the inutsuiers wou refer to imit the abiity for theownstream firm to set stanars.

eause both inumbent firms an their governmentshave an inentive to influene rivate stanars so thatthey an ature markets at the eense of ometingfirms an eonomies, reiroa negotiation of rivatestanarizing organization reguations may imroveeffiieny. However, whie there are signifiant otentiawefare gains for imroving market aess for noninumbent firms, foreign eorters an their resetivegovernments, eah of whom ak influene in rivatestanarsetting, these gains may ome at the eenseof some omesti reguatory interests. or eame,whie some governments require rivate stanarizingboies to inue onsumer reresentatives in theeveoment of a stanar, in an internationaooerative environment, onsumer interests wouomete with foreign firms or governments whoseinterests are to oen markets.

In many ases, market aess onsierations are notaigne with onsumer onerns, suh asenvironmenta an safety rotetion. Moreover,beause rouer interests generay fae oweroetive ation osts, they ten to be more oitiayorganize than iffuse onsumer interests. eause ofthese oitia fores, it is ossibe that internationaooeration on rivate stanarsetting may af fet thereresentation of onsumer interests in theeveoment an goas of stanars.

(iii) Compatibility standards, technicalregulations and fixed costs

As isusse in etion , severa nontariff measuresmay iffer from tariffs in their effets in imerfety

ometitive markets. This subsetion argues thatgovernments may ooerate to imit the strategiometitive effets of NTMs uner three ifferentmarket onitions. eifiay, a rationae for NTMooeration emerges in markets with horizontay

ifferentiate goos an servies, when routsehibit quaity ifferenes, an when NTMs reatefie osts that ater firm entry an inustryomosition.

When goos an servies are not onsume inisoation an there are ifferenes in omatibiityaross tyes of routs, it may be neessary to setu rues to reue unneessary onflits betweenformats. In erfety ometitive markets, goos anservies are assume to be eonomiay ientia, butin many markets onsumers ehibit referenes forone or another variety of goos. These onsumer

referenes inue firms to ater the features of theirrout to istinguish it from those of ometitors,rouing what the eonomi iterature ashorizontay ifferentiate routs.

Moreover, eah variety an ehibit higher or owereves of omatibiity with omementary routs inthe market. To enourage omatibiity arossrouts, firms an oasionay governments mayaea to a omatibiity stanar. eause thesestanars an affet trae, internationa ooerationon suh stanars an romote both market effiieny

an onsumer wefare Wor Trae OrganizationWTO, 2b. or eame, whie there may be noobetive quaity ifferenes between two ossibeomuter orts, one of the two may interfae betterwith a ouar ortabe musi evie. A omatibiitystanar wou ensure that the ort setu inreasesthe omatibiity with the other evies avaiabe onthe market. Internationa ooeration on that stanaran ensure that foreign evies o not nee to berefitte to meet oa eman seifiations.

One onsieration to bear in min is that whieomatibiity stanars imrove wefare, the

benefiiary of this oiy reform may een on whosets the stanar. To the etent that romoters ofometing stanars an ome from ifferentountries an the winner an aim rofits from theaotion of its stanar, strategi trae oiyonsierations an ome into ay Wor TraeOrganization WTO, 2b. Governments may refrainfrom eiminating ertain nontariff measures in aneffort to romote the stanars aote by theiromesti firms. However, when roution invovesurhasing arts from foreign affiiates or unreatearties, romoting stanars reues searh ostsan roution osts. As roution beomes

inreasingy reiant on goba roution hains, thenee for eeer oiy integration beomes moreressing, owering the attrativeness of strategistanarsetting.




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A seon rationae for ooeration over nontariffmeasures is the nee to aress governments’ strategibehaviour in setting these measures. or eame, inmarkets with quaity if ferentiation, onsumers take thequaity of a rout into aount when making

urhasing eisions. If onsumers an observe quaity,eonomi theory iniates that firms that roue agoo of higher quaity reae the revious vintage ofgoos on the market, taking market share fromometing firms’ rout ines. In the short run, thetehnoogy eaer an behave as a monooist, raisingries an rofits, but not raising the rie so high as toaow ometitors to enter. Lagging firms wou have tooverome the osts of innovation as we as themonooist’s ries to se any routs Motta et a.,1997. This roess generates a aer effet, witheah new inumbent seing a higherquaity goo at ahigh rie an a other firms eiting, a henomenon

humeter terme “reative estrution”.

The main anger in suh a senario is thatgovernments may strategiay aot tehniareguations to favour omesti firms.9 Whatever firmens u rouing, the higherquaity goo reeiveshigher rofits, benefiting the host ountry angovernment LehmannGrube, 1997. This otentiaavantage has imortant imiations for omestiwefare, an reates owerfu inentives for agginginustries as we as their nationa governments to setoiies that aow omesti firms to eafrog eaingfirms an take over the market in highquaity goos

Herguera an Lutz, 199. oar an Wauthy2 esribe how governments may use nontariffmeasures in this roess to ensure that the omestifirm omes out as the quaity eaer. or eame, atehnia measure that has the effet of restriting thequantity of imorts may aow the omesti firm toeveo routs in the highquaity range whieforing the foreign firm to roue owerquaityrouts. eause the foreign firm oses its eaershistatus, the avantages of “eafrogging” ome at theost of owering foreign rofits. eause bothgovernments fae this inentive, eah may seek tomutuay tie their hans to avoi this sort of ometition

by entering into an internationa agreement on NTMs.

A thir rationae for ooeration on nontariffmeasures reates to the fat that these measuresreate a fie ost for the entry of foreign firmssee etions an . The above isussion assumesthat tehnoogy or some other fator auses imerfetometition, but NTMs an aso etermine the etentof ometition. very firm that enters a foreign marketwou have to fie aerwork, famiiarize itsef withustoms roeures, an ay iensing fees, thusinurring fie osts of oing business rather than aer unit harge. Whie aing fie osts affets theinternationa terms of trae in the same way as a tarif f,NTMs wou have an aitiona effet on market entryeisions in the foreign ountry. The arger the NTM,the more firms wi have to be abe to roue to

engage in trae. If firms are not ientia an NTMsimose fie osts, trae wi be onentrate in argeran more routive firms, whie at the same timeinreasing the number of sma, ess routive firmsNoke an Yeae, 2.

ountries have severa reasons to ooerate onreuing fie osts of market entry. or instane,governments may imit nontariff measures to reventthe overreiane of the omesti eonomy on a fewarge firms that are abe to overome the fie osts.Poiymakers may be wary of the effets of eonomishoks, whih an roagate faster an be moreiffiut to absorb when there are too few arge firms.In artiuar, if an inustry is highy onentrate,aita misaoations that wou be reue in a moreometitive market may reverberate, inreasing thefrequeny an ost of eonomi shoks. These effets

wou not ony een on reguations in the goossetor; as isusse in etion .e, roometitivereguation in the ontet of omesti reguation inservies is an imortant area of ative ooeration.

(iv) Offshoring

The roiferation of goba roution hains inreasesinternationa intereeneny an may rovie arationae for ee ooeration on nontariff measureswithin trae agreements. As isusse in et ion .1a,theories of internationa trae unti reenty ientifieone main internationa siover assoiate with trae

oiy: how it af fets terms of trae. The breaku of theroution roess aross ifferent ountries reatesnew forms of rossborer oiy siovers. Antràs antaiger 2, for instane, bui a moe where riesare etermine by biatera bargaining beauseinternationa roution invoves eusive ontratswith inut suiers. In this environment, the gains fromtrae are ivie between the two or more firmsinvove, an the ries of trae goos an serviesreflet the reative ontribution of eah noe of thesuy hain. eause roution is internationa, someof the osts of trae fritions are borne by firms inforeign states. An internationa eternaity ours

beause governments o not take into aount the fuvaue of the internationa roution hain, but ony ofits omesti omonent.

eifiay, when ries are set by bargaining, theinut rouers eeriene rentshifting i.e. shiftingrofits from the inut suier to the omestirouer, whie ownstream routs eeriene thetraitiona termsoftrae effets. To aress the newonern, a trae agreement shou ensure that traeoiies over the ater stages of roution o notistort bargaining between rouers an inutsuiers. When ries are set in a ometitive market,it is suffiient for an inuteorting ountry tonegotiate over the tariff irety tie to the inutrout. However if ries are set via bargaining, inaition to obtaining market aess, or a ower tariff




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on the imorts of the inut, governments mustaitionay negotiate the tariffs an omesti oiieswhih affet the final product . or eame, suoseountry A is seeking to eort auto arts to ountry .ountry A’s interest is no onger ony to seek

reutions in tariffs on auto arts, but aso theomesti reguations an stanars in ountry forthe sae of omete automobies. Without suh aommitment, ountry may ineffiienty reguate, taor rotet the fina goo market, knowing that art ofthe ain is suffere by auto arts manufaturers inountry A. With a rise in offshoring, these eeerommitments may beome inreasingy imortant.

The internationaization of roution eemifies whythe traitiona trae oening toobo i.e. tariffreutions fais to offer a satisfatory soution in thease of nontariff measures. onsier the onet of

reiroity. In the urrent system, this rinie isintene as reiroa market aess oening for finagoos. It is not har to see why this onet fais torovie a usefu guiing rinie for trae negotiatorsin the ontet of nontariff measures an goba vauehains. More broay, eisting trae rues were originayrafte for a wor of internationa trae in fina goos.The etent to whih this institutiona framework anaress the new forms of intereeneny assoiatewith goba roution networks is a ome matter.This issue is isusse in etion ..

ifferent aroahes to the reguation

of NTMs in trae agreements

This setion reviews the reent eonomi iterature onthe esign of isiines on nontariff measures. irst, i targues that shaow integration an ensure thatgovernments have the abiity to effiienty emoyNTMs, so ong as they o not reae boun tarif fs withnontariff measures. In artiuar, the setion eaminestwo rues that enabe the egitimate use of NTMs –nationa treatment an nonvioation rovisions – anhighights their institutiona strengths an weaknesses.These rues rey on weinforme governments, whih isat os with the omeity an oaity of many NTMs.

In ight of this, the roe of isiines to imrovetransareny in trae agreements is isusse.

eony, the setion maintains that the ifferenesbetween nontariff measures an tariffs require a newset of institutiona toos that go beyon shaowintegration. eifiay, we review the iterature onee integration an isuss the traeoffs imie bymutua reognition of omesti reguatory requirements,the oint negotiation of tariff an nontariff measures intrae agreements, an the harmonization of NTMs atthe mutiatera an regiona eve.

(i) Shallow integration

haow agreements are those that irety reguatetariffs an other borer measures, but sto short of

intervening in omesti measures beyon therequirement of nonisrimination of foreign goosan servies. As seen in revious setions, thefunamenta goa of a shaow trae agreement is toguar against the ossibiity that governments may

reae oiy measures eiity boun in a sheueof ommitments with unonstraine oiy in orer toisriminate against their trae artners. In thefoowing, we isuss two rues whih aim at imitingthis sort of nonooerative behaviour, assumingerfety informe governments. When governmentsare not erfety informe, there is a roe fortransareny rovisions whih wi be taken u furtherin etion .2 as we as in etion ..

National treatment

Aoring to eonomists, trae agreements are

inomete ontrats. y this, it is meant that no traeagreement an ossiby over the myria ways thatgovernments may wish to reguate eonomi ife an,therefore, agreements have gas. However, if not bounby agreement, governments may be temte to set nontariff measures without regar to the imiations forforeign market aess. This oses an obvious haengein the esign of trae treaties. Aing seifi rovisionsto the agreement may artiay aress some of itsgas, but eah new rue as to the omeity anenforement osts of the agreement. or this reason,trae treaties sometimes inue eiit an rigiimitations on NTMs attigai an Maggi, 23. Horn

et a. 21 show that sime an broa rues, even ifoasionay inaroriate in ertain irumstanes,may generay be more effiient.

One of the rinia onstraints on isrimination vianontariff measures is the obigation to treat foreignrouts at east as favoraby as “ike” omestirouts. This obigation for nationa treatmentaears in Artie III of the Genera Agreement onTariffs an Trae GATT, Artie 2.1 of the TTAgreement, is imie in Artie XVII of the GeneraAgreement on Trae in ervies GAT as we asArtie 3 in the Traereate Asets of Inteetua

Proerty Rights TRIP Agreement.1

Agreements inuing nationa treatment obigationsimit the use of interna measures that affet theeonomi onitions of imorte routs. Nationatreatment requires that any interna ta or reguationmust not isriminate between omesti an foreignsoures of suy an is therefore eeme not to berotetionist. uose that a ountry wante to use aheath warning abe to imit the imort of foreign aint,inreasing the saes of omesti aint manufaturers.A nationa treatment rovision requires that the abeon foreign routs wou have to be aie toomesti routs as we. eause the abe wou noonger istribute ometitive benefits, the governmentmay be issuae from using the heath measure forrotetionist reasons. As a resut, ony tariffs are eft




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to restrit trae, an uner the mostfavoure nationMN ause, those tariffs must be nonisriminatory.

Whie nationa treatment imits the use of nontariffmeasures for isriminatory uroses, some authors

have argue that in ertain ases the rue an be toobunt to meet the egitimate oiy obetive ofountries.11 Horn 2 esribes ways in whihnationa treatment an be insuffiient to imit therotetionist use of NTMs in this ase a Pigouvianomesti ta. irst, a nationa treatment rovision isony effetive when there is a “ike” omesti rout.If there are no omesti aint manufaturers, thegovernment wi not be in vioation of nationa treatmentwhatever the motives or severity of the NTM, esitethe fat that suh NTMs wou sti onfer anavantage to a ountry’s terms of trae.

eony, when a negative eternaity is assoiatewith the onsumtion of a foreign rout – forinstane, if foreign aints are more harmfu to humanheath than the omestiay roue ones, an yetare “ike” routs from the ersetive of the rue – anationa treatment rovision onstrains thegovernment’s abiity to imit the soe of a ostyreguation to ust the goos that roue theeternaity.12 This imitation on reguation requirestrae negotiators to set their tariff ommitmentsarefuy. Note, however, that whie nationa treatmentrues set a banket requirement that may onstrainreguatory authority, rigi rues erease ontrating

osts an may faiitate agreements in unertainreguatory environments Horn et a., 21.

Reent researh has suggeste that the WTO’sisute settement mehanism an ower the osts ofusing rigi nationa treatment rues whie stiaressing otentia oiy substitution by WTOmembers. attigai an Maggi 23 haraterize thework of the WTO anes an Aeate oy asroviing arbitration that imroves the effiieny ofreviousy bargaine agreements when the eiitterms of the agreement are insuffiient. The authorsargue that, whie aneists an Aeate oy

members may be ess informe about the otimaobigations of member states than the membersthemseves, the resene of an arbitrator orrets themisuse of a nontariff measure ause by the rigiaiation of a nationa treatment rue.

or eame, suose that governments negotiatemarket aess whie assuming that a omutermonitors have equa, an environmentay aetabe,amounts of merury. If foreign roution of omutermonitors swithes to a more meruryintensivemanufaturing roess, a rigiy aie nationatreatment rovision may not aow governments toreson to the hange. eause eah WTO memberan have reourse to isute settement, governmentsan effiienty fufi the obigations of the agreement onthe new rout whie maintaining nationa treatment .

o far, it has been assume that the mehanismthrough whih WTO anes an the Aeate oyimrove the effiieny of trae agreements whennationa treatment is too rigi or inomete has notbeen anayse. However, what ratia roe o WTO

anes an the Aeate oy ay in reahing a ointy effiient outome?

Maggi an taiger 211 argue that the isutesettement mehanism an ay an imortant roe inthe interretation of trae agreements when the ruesare inomete an it is iffiut to write effiientagreements. The authors onsier a variety of otentiaroes of WTO anes an the Aeate oy thatrange from fairy onservative, aying the eistingobigations to ensure enforement, to more “ativist”,in whih they may fi gas in the obigations of WTOmembers, or even going as far as to moify eisting

obigations. The authors evauate the iea soe anseifiity of the rues emboie in trae agreements,suh as nationa treatment, uner eah of thesehyothetia egrees of ourt invovement. They finthat more fleibe isiines are referabe to rigirues when it is iffiut for WTO anes an theAeate oy to orrety ientify the effiient oiy.

Non-violation

The framers of the GATT sought to assuage fears thatontrating arties might at in ways that, whie not invioation of the agreement, ou unermine

ommitments mae in the ourse of negotiations.Artie XXIII of the GATT an Artie XXIII:3 of theGAT ermit governments to seek isute settementthrough a “nonvioation” omaint. uh a omaintis aowe if one government an show that it has beenerive of an eete benefit beause of anothergovernment’s ation, or beause of any other situationthat eists. The aim is to he reserve the baane ofbenefits struk uring mutiatera negotiations. oreame, a ountry may have agree to reue it s tariffon a rout as art of a market aess ea, but ateratere its reguatory stane so that the effet on theonitions of ometition are the same as the origina

tariff. A nonvioation ase against this ountry woube aowe to restore the onitions of ometitionimie in the origina ea. This subsetion iustrateshow nonvioation omaints aress the robem oftariffs being reae by NTMs an the imitations ofthis aroah.

As esribe in etion , in a setting where the onyrossborer siover of a oiy is how it affets termsof trae an where there are no institutions to faiitateinternationa ooeration, governments wou effiientyreguate the omesti market but wou have an inentiveto set ineffiienty high trae restritions agwe antaiger, 21. The reason for this is that the onyineffiieny assoiate with uniatera oiy hoieserives from the esire to obtain a termsoftrae gain atthe eense of traing artners. eause the eternaity




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aresse by the omesti reguation oes not affet thewefare of foreign itizens, the government has noinentive to uner or over reguate from a gobawefare ersetive.

On the ontrary, when tariffs are ommitte in a traeagreement, governments may be temte toineffiienty use omesti reguatory oiy to affetthe terms of trae, atering nontariff measures to takethe ae of tariff measures. In this ontet, agwean taiger 21 show that the eistene of a nonvioation rue in a trae agreement isourages oiysubstitution. eifiay, in the resene of a nonvioation remey, governments unerstan that theyrisk a ega haenge if they maniuate theirreguations for rotetionist uroses after agreeingto a tariff bining. If a government oes nee to aterits reguation to aress a new omesti market

faiure, the nonvioation rue aows that governmentto ower its tariff to omensate traing artners forany traerestritive effet of the new measure.

A searate issue is the etent to whih the eonomiview of the nonvioation rue is reflete in the ratieof the GATT/WTO system. or instane, taiger anykes 211 argue that nonvioation aims are unikeyto be use to imit nonisriminatory reguations even ifthey istort trae. The three suessfu ases of nonvioation aims aress isriminatory borermeasures. Aoring to the authors, uner the Japan –Film ane’s interretation of the nonvioation rues,

isrimination is a rerequisite for a aim, whihrevents the use of nonvioation aims to aressmany of the reguatory baane onerns esribeabove. This interretation wou suggest that nonisriminatory hanges in reguatory oiy aear tofa outsie the soe of the GATT, a subet isussein more etai in etion .3 an ..

Another issue, whih was isusse in the Wor TraeReort 21 Wor Trae Organization WTO, 21,is whether the nonvioation otrine ou beetene to over other situations where the use ofnontariff measures grants more an not ess market

aess to traing ar tners. Uner these irumstanes,shou governments be aowe to aust bountariffs uwars one reguatory nees have hange?If suh a ossibiity is not aowe, it ou be arguethat governments may hesitate to enat effiientreguations whenever suh a oiy hangeifferentiay imats omesti rouers.

onsier a seifi eame. uose there is anegative eternaity, suh as oution, generate by aomestiay roue goo. If the governmentaresses the eternaity by tightening environmentareguations, its omesti rouers bear a routionost that foreign rouers o not, shifting marketshare away from omesti firms. In terms of eonomieffiieny, an inrease in a tariff that reserves theeve of market aess of foreign rouers at the eve

imie by the revious reguatory stane may be ust ifie in these irumstanes . The hange in oiymi in the omesti eonomy imroves wefare,beause it aows government to aress the outionrobem, whie reserving the eve of market aess

grante to foreign eorters.

Transparency

As isusse above, transareny on nontariffmeasures is a neessary onition to ahieve anenfore trae oiy ooeration. This eains whythe mutiatera traing system aims at imrovingtransareny of NTMs. The GATT, the GAT, an theP an TT agreements inue various obigations– requiring ubiation an notifiation of NTMs anservies measures – that seek to imrove transareny.These transareny obigations have been the subet

of imortant isussions in the reevant WTOommittees, an severa ations have been taken tofurther imrove transareny. or instane, uring theourth Triennia Review of the TT Agreement, theTT ommittee agree to share eerienes on gooreguatory raties. A reort by the weish Nationaoar of Trae goes as far as to argue that “gooreguatory ratie at nationa eve is the singe mostimortant aset in the efforts to avoi unneessaryTT” Kommerskoegium, 21. These efforts, aswe as simiar efforts on servies measures an Pmeasures, are isusse further in etion .2.

The rinia iea behin these efforts is thatgovernments an benefit from the tehnia knowhowan eerienes of other governments’ efforts inromoting effiient an transarent oiy. aot et a .211 argue that oumenting an unerstaningnontariff measures an their effets is the first stagein an effort to make NTMs more effiient, artiuaryin ountries that are strugging with egaies ofomiate an enaizing reguations. Governmentsmay ursue subotima oiies beause they are notfuy aware of their effets an of the eistene ofbetter aternatives.

This sai, eonomi reasoning in etion .1biniates that governments aso have an inentive touse oaque instruments to gain avantage at theeense of other governments. As wi be isusse inetion .b, governments may ak the inentive toaot transareny measures beause they aresuessfu in owering barriers to trae. Throughgovernment ommitments to notify omesti measuresan engage in goo faith isussions about reuingthe trae imat of nontariff measures, the WTOeretariat may be abe to ay an imortant roe iniuminating oaque measures oinsWiiams anWofe, 21. The eonomi roe of the notifiationroess an the effiient esign of rues to aressgovernments’ inentive robems to offer informationare areas of researh where more work wou behighy esirabe.




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(ii) Deep integration

As argue in the historia overview in etion A, thetreatment of nontariff measures in the mutiateratraing system has evove over time. Initia emhasis

was on the nee to assure that tariff reutions werenot offset by NTMs. The shaow integration aroahbuit into rues suh as nationa treatment an nonvioation isusse above foows reisey this ogi.

Over time, trae reations have evove in resonse toa number of fators, inuing the inreasingimortane of internationa roution, the eaningreguatory nees to rotet onsumers an otherbroa soieta interests, suh as ubi heath an theenvironment. These hanges have ut ressures onthe institutions governing trae, an governments haveooke for ways to go beyon shaow integrationarrangements into eeer forms of ooeration at themutiatera or regiona eve. The esign of ee traeagreements to reguate nontariff measures is thetoi of this subsetion.

There is no generay agree efinition of “ee”integration. Aoring to Lawrene 199, who firstuse this term, trae agreements that inue rues onomesti oiies that “fa insie the borer” are eeagreements. On the other han, often ee integrationis simy efine in ontrast to the shaowarrangements resente in the revious subsetion

as any agreement that imoses further imits to oareguatory autonomy. Whie the World Trade Report 211 Wor Trae Organization WTO, 211b has amore etaie isussion of the onet of eeintegration, the fous here is on three ee aroahesthat often emerge in the aaemi an oiy ebate:mutua reognition, inking tariffs an nontariffmeasures in trae negotiations an the harmonizationof omesti measures. These ifferent aroahesoffer iverse toos to ooerate on nontariff measureswithin a trae agreement.

Mutual recognition

Governments have aote rues beyon nationatreatment to imit the isriminatory use of nontariffmeasures, ranging from “reguatory ometition” to“harmonization” Hussey an Kenyon, 211. Mutuareognition of omesti reguations is one suharoah whih has been aote, most notaby by theuroean Union. eifiay, so ong as another Umember ses a rout within its borer, it isresuose to meet omesti reguatory requirementsesewhere in the Union see aso etion .3. Unermutua reognition, this means that eah governmenthas fu sovereignty over its own tehnia reguationsfor omestiay roue routs but a imite abiityto roet those oiies onto its trae artners or toetermine the harateristis of routs onsumeomestiay.

Mutua reognition has benefits an osts omarewith nationa treatment isiines isusse aboveostinot, 2. onsier a seifi eame.uose that there is an eternaity assoiate withthe onsumtion of either a omesti or foreign

rout. If there is a nationa treatment rovision angovernments are not otherwise oorinating ontehnia reguations, whatever reguation is hosenwi be etene to routs from the foreign state.There is effetivey one tehnia reguation for a“ike” routs. In this setting, the robem is that artof the osts of meeting the unifie tehnia reguationis borne by foreign rouers, whose wefare is nottaken into aount by the omesti government. Thismay resut in an eessivey stringent reguation.eause the government ony internaizes the osts ofreguations on the omesti an not on the foreignrouers, it weighs omesti onsumers’ onerns

more heaviy.

On the other han, if ountries aot mutuareognition, governments may be temte to set oosereguations, eaing to a “reguatory rae to thebottom”, beause the rues wi not aount foreternaities on the foreign market. Keeing in minthese traeoffs that haraterize nationa treatmentan mutua reognition, ostinot 2 finsonitions uner whih one aroah is suerior to theother. eifiay, the author fins that nationatreatment tens to be more effiient when the traegoos are assoiate with a high eve of rossborer

siovers.

Governments an aso ater the agreement to aresssome of the weaknesses of this aroah. A set ofrenegotiate minima stanars may serve theurose of avoiing etreme an soiay inferioroutomes. or instane, in 19 when the uroeanUnion aote mutua reognition of member states’egisation onerning routs, the U iretives setout “the essentia requirements to be fufie torovie for rotetion of ife, heath an environmentet.”, with the seifi intent of avoiing a reguatoryrae to the bottom Kommerskoegium, 21.

Linking tariffs and NTMs in trade negotiations

ommentators have eveoe two sets of argumentsthat suort the view that tariffs an nontariffmeasures, for instane omesti environmenta orabour reguations, shou be inke in traenegotiations. eow, they are referre to as the “granbargain” an the “enforement” argument.

Aoring to the “gran bargain” ersetive,ooeration on tariff an nontariff oiy is mutuaybenefiia an sefreinforing. Therefore, inkingifferent measures in a singe gran bargain, forinstane ehanging ower tariffs for new environmentareguations, may suee in ahieving mutuay wefareenhaning ooeration to a arger etent than searate




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negotiations Abrego et a., 21. Whie this argumenthas a ertain aea, inking negotiations over ifferentmeasures an iverse oiy areas aso omes at theost of inreasing omeity. The robabiity of asuessfu outome, therefore, may we aso een on

this more artiuate ontratua environment.

A seon argument to reguate an ink nontariffmeasures in a trae agreement is the ossibiity ofusing tariffs as an enforement evie erington,22; Limao, 2; agnoo, 21. In a settingwhere governments have an inentive to use omestimeasures to maniuate the terms of trae, erington22 argues that retaiation through tariffs is themost effiient way to enfore ooeration on bothtariffs an nontariff measures . y ontrast, it is nevereffiient to ermit governments to istort theirreguatory hoies for market aess uroses.

In a ifferent setting, where reguatory ooeration onnontariff measures is benefiia but suffers from anenforement robem, embeing these measures in atrae agreement may rovie a means of unishingvioators an, hene, inreasing wefare agnoo,21. On the other han, inkages may work againsttrae oening efforts. Aoring to Limao 2,inking the reguation of tariffs an NTMs may sti bewefare imroving whenever rossborer sioversare suffiienty arge i.e. when oiies are strategiomements.

Harmonization

etion efines harmonization of nontariffmeasures as the estabishment of ommon measures,suh as tehnia or safety stanars, aross ifferent

urisitions. The fous in that set ion is on the traeeffets of these ommon measures. The emhasishere is on an institutiona esign issue: uner whatonitions o ountries benefit from the harmonizationof NTMs.

onomists have eveoe a sime rinie tounerstan the osts an benefits of the harmonization

of oiies aross ifferent urisitions, known as theOates’ eentraization Theorem Oates, 1972. Thistheorem shows that there is a basi traeoff in settingommon oiies, suh as harmonize tehniareguations. The benefits een on the etent ofrossborer oiy siovers, for instane the etentto whih a ertain nationa environmenta reguationimats on the wefare of foreign itizens. The ostseen on the imortane of the ifferenes in oiyreferenes aross ountries. eifiay, foriniviua ountries the ost of harmonization of a nontariff measure is that it moves the measure away fromits referre nationa oiy i.e. a oss in nationasovereignty; the benefit is that a harmonize NTMtakes into aount how the measure imats on boththe nationa an the foreign wefare i.e. the oiysiover is internaize.

The Oates’ eentraization Theorem has a sime anintuitive reition that an serve as a guiing riniefor oiymakers. Harmonization of nontariff measuresis an effiient institutiona resonse whenever rossborer oiy siovers are onsiere to be arge an/

or ifferenes in oiy referenes aross ountriesare not imortant. or instane, irsa an Lawrene1999 argue that ee integration with avaneeonomies may reate avantages for eveoingountries that imort best reguatory raties, butthese benefits nee to be trae off with the osts togovernments of aoting ommon rues that, in ertainases, o not math nationa referenes an the neesof eveoing ountries. This theoretia framework,therefore, offers imortant insights to negotiators toientify areas where soia wefare onsierations may

ustify oiy harmonization.

A reate issue is the roer forum where thisharmonization shou take ae. Insofar as nontariffmeasures reate rossborer oiy siovers, as in thease of imate hange reate oiies or foo safetystanars, there is a nee for internationa ooeration.However, this ooeration may we be arrie out in theontet of a setorseifi agreement orstanarization boy, whih are outsie the ometeneof the WTO. rom the ersetive of a trae agreement,the question is one of internationa oherene. That is,how the environmenta measures or the foo safetystanars reate to the internationa trae rues. Weome bak on this oint in etions .2 an ..

A seon issue is whether harmonization of nontariffmeasures is more aroriate at the mutiatera eveor at the regiona/biatera eve i.e. wi thin referentiatrae agreements – PTAs. The World Trade Report2011 Wor Trae Organization WTO, 211bouments that a growing number of PTAs go beyontariff reutions an inue ommon rues on NTMs,suh as harmonize stanars or harmonizeonformity assessment roeures these ratieswere foun in more than er ent of a same of PTAs surveye. In ight of the reeing isussion ,this fining is not surrising. Members of a PTA may

share more simiar oiy referenes an/oreeriene stronger oiy siovers than the broamembershi of the mutiatera trae system. In thissense, harmonization in the regiona ontet ourovie an aroriate intermeiate eve of integrationamong ertain nations an the goba eve.

However, as isusse in the World Trade Report 2011 Wor Trae Organization WTO, 211b, PTAs asohave systemi effets through market segmentationthat ou ea to reguatory ivergene an haveaverse effets on wor wefare. or eame, animortant traeoff isusse in the iterature is thatreguatory harmonization among ountries of varyingeves of eveoment an reinfore a “hubansoke”trae struture, with the arger artner reresentingthe hub to whose stanars the sokes onform. This




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struture may arry osts. isier, ontagné, anaot 212 use a gravity moe to show that wheneveoe traing artners take stes to harmonizetheir reguations with a eveoe artner, trae withthe eveoing ountries eines.

2. ooeration in seifi oiyareas: TT/P an serviesmeasures

The revious setion rovie a theorybaseisussion of the eonomi rationae for ooerationon nontariff measures in a trae agreement. Thissetion iustrates why an how ountries ooerateover NTMs in seifi oiy areas. In artiuar, thefous is on P/TT measures an omestireguation in servies.

a ooeration on P/TT measures

This setion argues that ountries ooerate onP/TT measures to aress information robemsthat arise when governments try to baane traerestritiveness an ahievement of oiy obetives,an when seeking to foow best ratie in thereguatory roess. In this reset, ountries ooerateby eveoing, isseminating an aoting ommonaroahes to reguation. These ativities, whihromote reguatory ooeration, take ae in various

fora. or instane, this ooeration ours in theWTO’s TT an P ommittees, in reguatoryooeration arrangements, an in internationastanarizing boies. The fous here is on ooerationin imementing the eisting TT an P agreements.

(i) Why do countries cooperateon SPS/TBT measures?

ountries use P/TT measures, whih inuetehnia reguations, stanars an onformityassessment roeures, to ahieve egitimate oiyobetives, suh as rotetion of human heath an the

environment, or reventing the srea of iseases anests. In orer to ahieve their state obetives, thesemeasures invariaby have trae imats; some may be

ust ifiabe whie others ou be ha enge asisriminatory or simy unneessary to ahieve theobetive sought. Hene, the nee for isiine.

The TT an P agreements require that WTOmembers baane ahievement of egitimate oiyobetives against trae restritiveness in the esignan imementation of measures. In artiuar,members shou ensure that measures are not moretrae restritive than neessary for the oiy obetiveat han, are roortionay restritive to the risk of notmeeting the oiy obetive, are base on sientifirinies an not maintaine without suffiientsientifi eviene, an o not a rbitrariy or unustifiaby

isriminate between members where the sameonitions revai.

Members have sovereign authority in eiing how toreguate uner the P/TT agreements. However,

members o not aways have suffiient information oraaity to reguate effetivey or effiienty.Members may fae, among other haenges, twoinformation robems in this regar. irst, membersmay not know whih measure wi be most effiient instriking the aforementione baane between traerestritiveness an oiy fufiment. eon,members may not know how best to esign animement P/TT measures aross the reguatoryifeye. The fat that P/TT measures are oftenoaque an ome, as isusse in etion .1,omoun these haenges.

Inee, reguatory roesses an their imats may beiffiut to gras, an governments often faerobems unerstaning reguatory nees, or the ostsan benefits of their interventions Harrington et a.,2. Members may therefore use a artiuarP/TT measure when it is neither an effiient noreffetive instrument for their oiy obetive orgenerates unneessary hinranes to internationatrae. If members imose P/TT measures that faito effiienty strike the baane manate by theagreements, they risk being haenge in the TT orP ommittees, or utimatey, in isute settement.

etting an internationay agree benhmark of aneffiient reguation for a artiuar oiy obetive anhe aress the first sort of information robem. Thisbenhmark an be use to assess whether a P/TTmeasure aequatey reflets oiy obetives; thosemeasures that are more trae restritive than thebenhmark may raise questions. The P/TTagreements o this by strongy enouraging membersto aign their P/TT measures with reevantinternationa stanars, whih ieay are eveoeusing the wor’s best avaiabe sientifi an tehniaknowhow regaring a artiuar oiy robem.

With reset to the seon sort of informationrobem, the use of an agree set of reguatory stesthat efine an effiient reguatory intervention may bebenefiia. haring a ommon reguatory anguageinreases transareny an reitabiity of P/TTmeasures, an rovies ommon riteria against whihto uge measures. Members enourage one anotherto foow ommon aroahes, suh as “gooreguatory ratie” GRP, when rafting P/TTmeasures, an ommittee isussion rovies furtherreinforement of this.

(ii) How do countries cooperateon SPS/TBT measures?

Members ooerate to aress information robemsreate to P/TT measures in at east three




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ways: at the mutiatera eve, through isussions inthe TT an P ommittees; by using internationastanars as a basis for reguation; an, moregeneray, by using an isseminating GRPs, anengaging in reguatory ooeration.

Whie GRP is not eiit in the TT or P agreements,the isussions in both ommittees romote “reguatoryonvergene” by reuing unneessary iversity in theway governments reguate.

Good regulatory practice and regulatory

cooperation

ven when intene to aress the same oiyobetive, not a reguations are reate equa – thereare signifiant variations aross ountries. Whie someifferenes are ertainy inevitabe an may even be

neessary, some genera essons that are broayaiabe have been ientifie about how to reguateeffiienty an effetivey aross the reguatoryifeye. These essons are, essentiay, what isinororate in goo reguatory ratie GRP.

eriene an guiane on GRP have been omieby boies suh as the Wor ank, the Organisationfor onomi ooeration an eveoment an AsiaPaifi onomi ooeration AP.13 GRPemhasizes, inter aia, a eiberative roess forientifying ubi oiy robems, onsiering theosts an benefits of aternative reguatory measures

or of no reguatory intervention, using reguatoryimat assessments RIAs, reying on erformanebase reguation, effetive interna oiy oorination

vis-à-vis WTO obigations, an ensuring transarenyan oenness to faiitate stakehoer artiiation inthe reguatory roess. Thus, the use of GRP an heimrove reguatory erformane by inreasing thetransareny an oenness of the reguatory roess

an by subeting reguatory eisionmaking toimat anaysis an erioi review.

Wier issemination an use of GRP an to a ertainetent rovie a ommon, reitabe frameworkwithin whih ountries make reguatory interventions;it inues ountries to seak the same “reguatoryanguage”. This is why WTO members engage inbiatera an uriatera reguatory ooerationarrangements.1 Reguatory ooeration is a roessby whih offiias engage with their ounterarts fromifferent governments in forma an informa settings,inuing by ehanging information on rues an

rinies for reguating markets, the obetives ofwhih inue the formuation of more omatibe antransarent reguations an testing roeures,simifiation an the owering of trae barriers, anmaking it easier an ess osty for eorters toemonstrate onformity with ifferent requirementssee o .3 for some eames of reguatoryooeration in the TT area.

ames of reguatory ooeration arrangementsamong ountries inue initiatives suh as the TransPaifi Partnershi, the Transatanti onomi ouni,the UU High Leve Reguatory ooeration orum,

the TransTasman Mutua Reognition Arrangement,an work in organizations suh as the outh AsianRegiona tanars Organization, AP, the

o .3: Examples of regulatory cooperation in the TBT area15

APEC: green technologies

Members of the Asia Paifi onomi ooeration AP share oiy obetives with reset to traean environmenta rotetion, whih they seek to forwar through reguatory ooeration in emergingenvironmenta tehnoogies. The 211 AP Meeting of Ministers Resonsibe for Trae stresse thesignifiant roe of oen trae an investment in the Asia Paifi region in fufi ing the ommon obet ive ofenvironmenta rotetion. The rationae behin suh ooeration is that a reution in unneessarybarriers to trae an investment in environmenta goos an servies wou reue their osts, aninrease aess to green tehnoogy, an therefore further ahievement of the share obetive ofenvironmenta rotetion.

The AP ubommittee on tanars an onformane has worke to romote regionaooeration in green setors through information ehange, enhane transareny, an roviing a baseinefor the use of stanars, tehnia reguations an onformity assessment roeures. These initiativesinue the “oar Tehnoogies tanars an onformane Initiative”, an “Green uiings an GreenGrowth”. In the ontet of these initiatives, AP members have reognize the nee to onform withinternationa stanars, to romote mutua reognition of ertifiation, an to inrease stakehoerartiiation in the stanarssetting roess.

evera ase stuies have been unertaken on green tehnoogies uner the umbrea of these initiatives,

artiuary on “green buiings”, an in this reset work is being unertaken in ooeration with the Worank an the Wor Green uiing ouni. In this ontet, there was reognition of the nee to enhaneonsisteny in the use of terminoogy reate to green buiings in orer to inrease transareny an enaberouers to better meet requirements aross ifferent regiona artners. tanars eveoment




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Assoiation of outheast Asian Nations AAN, anthe Unite Nations onomi ommission for uroe.17

Reguatory ooeration arrangements an rovie anoortunity to influene how P/TT measures areimemente in other ountries. Promoting GRP inthese arrangements faiitates isussion aninformation ehange on the traing artner’smeasures by roviing ommon riteria an anguagefor assessing measures. ormaize, staningreguatory ooeration arrangements for eame, theTransatanti onomi ouni between the Unitetates an uroe may inrease ertainty about aartner’s reguatory resonses to future robems orrouts. Moreover, reguatory ooeration in genera

is about buiing trust among reguators with regar toreguatory systems an outomes. This hes torovie onfiene that P/TT measures anonformity assessment roeures wi strike aneffiient baane between oiy obetives an traerestrition.

There are ifferent eves of trust, formaity an egreeof engagement. The most basi ategory ofooeration is sime information ehange an trustbuiing, whih wi ower transation osts. A moreavane ategory of ooeration is mutuareognition of areitation systems an testingroeures, whih owers ost for eorts by enabingonformity assessment to the requirements of eort

work at AP on green buiings invoves both ubi an rivate stakehoers. The AP is asooaborating with the AAN onsutative ommittee on tanars an Quait y in the ontet of work ongreen buiings.

This initiative iustrates how a oiy obetive that is ommon to the AP membershi, namey aressing

market faiures with rossborer effets reate to environmenta oution, is being take throughreguatory ooeration. In aition, this eame shows how ountries are trying to engage at an eary stageon reguatory ooeration with reset to green tehnoogies to ensure that future reguatory aroahesfurther environmenta rotetion an trae.

EU-China: Toys

RAPX1hina is an onine information ehange mehanism whih seeks to enhane an reguarize thetransmission of ata on rout safety aministration an enforement between hina an the uroeanUnion. The initiative emerge from the Memoranum of Unerstaning signe in 2 between theuroean ommission iretorateGenera for Heath an onsumers G ANO an the GeneraAministration of Quaity uervision, Insetion an Quarantine of hina AQIQ. It is one eement ofreguatory ooeration between the uroean Union an hina.

The initiative omrises information ehange between G ANO an AQIQ with reset to toys ofhinese origin that have been ientifie as unsafe an therefore banne or withrawn from the uroeanmarket as notifie to the uroean ommission via RAPX. or its art, AQIQ works towars reventingfuture bans on hinese toys in the uroean market, an informs the uroean ommission of the resuts ofinvestigations onute in resonse to these notifiations, inuing any measures aote.

The initiative aims to ensure quaity an safety of onsumer routs, rotet onsumer rights an interests,an enhane onsumer onfiene in the ontet of growth of trae between hina an the uroean Union.urthermore, the initiative seeks to enhane oorination in toy stanars work at the InternationaOrganization for tanarization IO eve, an to imrove awareness in hina about aiaberequirements for toys in the uroean Union. It aso inues tehnia ooeration ativities to imroverout quaity an safety. RAPXhina hes to bui trust between reguators an onsumers, reuetrae fritions, an reate a uture of rout safety, whie maintaining an oen market between theuroean Union an hina for toys.

This eame is of interest beause it uses a nove information ehange mehanism for ooeration towarsthe ahievement of toy safety. hina an the uroean Union foow ifferent nationa reguations orstanars for toy safety, given iffering nationa referenes in this reset. Uner this arrangement,ooeration argey onerns the oneway flow of trae in toys from hina to the uroean Union. Aternat ivesto this information ehange arrangement ou be harmonization to internationa stanars or fu aignmentof tehnia requirements, but these may be unreaisti obetives for various reasons. Instea, informationehange enabes both hina an the uroean Union to work together to meet share oiy obetives byreuing information asymmetries.




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markets to be arrie out in omesti aboratoriesrior to eort. Other ategories of arrangementsinvoving sti greater eves of trust an engagementinue mutua reognition of onformity assessmentresuts, mutua reognition of tehnia reguations,

inuing through reognition of equivaene, an fuharmonization of both tehnia reguations anassoiate onformity assessment roeures.

Reaing the isussion in etion .1 on the ethof integration in iffering aroahes to aress nontariff measures, the eve of ambition for a artiuarreguatory ooeration ativity may iffer eeningon the ontets of the ountries invove.1 oreame, reguatory ooeration between two maortraing artners with strong eonomi ties may asireto fu harmonization, thereby eaing to a high eve ofonvergene. On the other han, reguatory

ooeration between two eonomies with veryifferent oitia systems, inome eves, an eves ofeveoment may have a ower eve of ambition – forinstane, to inrease unerstaning an onfienebuiing to faiitate trae.

hare reguatory traitions an institutiona struturesan make the ee forms of reguatory ooerationeasier to ahieve. ifferenes between ountries,however, are not neessariy an obstae to ooeration.In fat, ifferenes between ountries engaging inreguatory ooeration may rovie imetus forreguatory innovation that inreases effiieny an

owers osts.19

Of ourse, not a forms of reguatory ooeration an beature by these broa ategories, an manyarrangements invove asets of ifferent ategories. orinstane, reguatory ooeration on a setor basis oursbetween artners in regiona organizations suh asAP an AAN, inuing various mehanisms withrogressive eves of ambition uner the umbrea of asinge sheme. This enabes artners to ooerate to anetent aroriate to their nationa irumstanes.2

Nove ooeration between member states of the

ommon Market for astern an outhern AfriaOMA, the ast Afrian ommunity A anthe outhern Afrian eveoment ommunity Ais ourring in the form of the Triartite NonTariffarriers NT Mehanism. A webbase atformaows eorters to submit omaints about P/TTmeasures in eort markets that are reating traerobems, an then forwars omaints to resonsibenationa authorities for resoution through biateraonsutations among the member states affete, orthrough reevant regiona strutures Kaenga, 212.

oth the TT an P agreements enourage WTOmembers to ooerate. The P Agreementenourages biatera equivaene arrangements seeo . an etion , two of whih have beennotifie to the P ommittee. imiary, the TT

Agreement enourages members to reah agreementson mutua reognition of resuts of eah other’sonformity assessment roeures see etion ..These arrangements are benefiia beause they owerosts to eorters reating to the nee to monitor

otentia oiy hanges in eort markets WorTrae Organization WTO, 211b.

International standard-setting

The eveoment of internationa stanars is, byefinition, a form of mutiatera ooeration.tanarization ativities are a roess wherestakehoers, inuing governments, ooerate onmatters that may have a iret bearing on P/TTmeasures. The outome – an internationa stanar –is a tangibe resut of suh ooeration an is,essentiay an when at its best, a means of oifying

an iffusing stateoftheart sientifi an tehniaknowege reate to a artiuar rout or oiyrobem.21

oth the TT an P agreements strongy enouragethe use of internationa stanars – as we asartiiation in the eveoment of suh stanars.The agreements inue a rebuttabe resumtion thatreguations whih are in aorane with reevantinternationa stanars wi be, in the ase of the TTAgreement, “resume not to reate an unneessaryobstae to internationa trae” an in the ase of theP Agreement, “resume to be onsistent with the

… rovisions of the Agreement”.22

Internationa stanars are eveoe by governmentaboies, nongovernmenta boies inuing “rivatestanars”, or sometimes a ombination of both. Whiethe P Agreement seifiay names threeinternationa boies that eveo internationastanars whih serve as benhmarks, the TTAgreement oes not name any seifi boy in thisregar.23 However, internationa stanars are not aanaea – an the internationa stanarizationroess itsef may not aways funtion ieay; this hasbeen at the root of many isussions at the WTO, an

resents a artiuar haenge for WTO members thisis further isusse in etion ..

Conformity assessment procedures

ooeration oes not ony take ae at the stanarseveoment hase; it is aso reevant to onformityassessment, an, more seifiay, to faiitating thereognition of the resuts of onformity assessmente.g. mutua reognition arrangements, equivaeneagreements an the uier’s earation ofonformity. In other wors, atuay meeting thestanar may not be enough, it is aso neessary to beabe to emonstrate omiane to reate onfienein the quaity an safety of eorte routs formany eveoing ountries, there are aaityonstraints in this regar2. Members of the TT




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ommittee have begun to onsier the eveoment ofratia guieines on how to hoose an esign

effiient an effetive mehanisms that an assistountries in ooerating aso in the area of onformityassessment.

In this regar, both regiona an internationa systemsfor onformity assessment an ontribute to sovingthe robems reate to mutie testing anertifiation/registration for traers an inustries – ahaenge that an be artiuary iffiut to overomefor sma an meiumsize enterrises Ms.eegations in the TT ommittee have reenty beenisussing the work of the Internationa Laboratory

Areitation ooeration ILA an the InternationaAreitation orum IA as usefu eames ofinternationa ooeration in the area of onformityassessment.2

The ILA is the goba authority for aboratory aninsetion boy areitation, an the IA oversees

areitation in the fies of the ertifiation ofmanagement systems, ersonne an routs. Theobetive of both organizations is the same: oneonformity assessment resut aete in everymarket ae. The main too use by the twoorganizations is mutiatera mutua reognitionarrangements among areitation boies with ashare vision of a singe goba system of onformityassessment. This reues risks for business,reguators an the onsumer by ensuring that they anrey on areite servies. In the ongoing ithTriennia Review of the TT Agreement, romte by aroosa from the Unite tates,27 there is isussion

on how members’ eerienes in the use of these twointernationa systems for onformity assessment anserve to strengthen the imementation of the TTAgreement.

o .: Equivalence in the SPS Agreement

The P Agreement reates a framework that suorts onvergene of oiies to minimize the negativeimats of P measures on trae, whie at the same time suorting oiy iversity. To o this, the PAgreement eiity reognizes that athough measures may iffer among traing artners, this oes notimy that they o not ahieve the same eve of aroriate eve of rotetion ALOP. Inee, in terms ofthe P Agreement, traing artners are obige to aet P measures as equivaent if the eortingountry obetivey emonstrates that its measure ahieves the imorting ountry’s ALOP. quivaene anbe aete for a seifi measure or measures reate to a ertain rout or ategories of routs, or ona systemswie basis. The Agreement aso seifies that eorting ountries shou faiitate this roess byroviing imorting ountries’ aess for insetion, testing an other roeures.

ALOP an be ahieve in ifferent ways, an ountries’ measures may iverge ue to oitia an heathreate fators. The obigation to eore whether measures are equivaent reates inentives for ountriesto earn from the eeriene of their traing artners an thus may ontribute to aaity buiing. ti, giventhe tehnoogia requirements inherent in many P measures, eveoing ountries may have onernsabout aoating resoures to imroving P aaity if they o not have onfiene that their P measureswi be reognize as equivaent.

To aress the onerns of eveoing ountries regaring the imementation of equivaene, the Pommittee eveoe guieines G/P/19/Rev.2. These guieines offer more etais about the tyes ofinformation that shou be rovie by both imorting an eorting members. eifiay, the guieinesa for imorting ountries to ientify reevant risks, eain its ALOP, an rovie its risk assessment ortehnia ustifiation for its measures. The guieines aso iniate that imorting ountries shou take intoaount the history of trae with the eorting ountry sine a history of trae imies a famiiarity with theinfrastruture an measures. The three sisters – oe Aimentarius, the Wor Organization for AnimaHeath an the Internationa Pant Protetion onvention – have aso eveoe guiane in the area ofequivaene reate to their seifi areas of eertise.

Given the imortane of iaogue among traing artners in orer for the onet of equivaene to beeffetivey imemente, transareny shou ay a key roe. The P ommittee inues the issue of

equivaene as a staning item on the agena an has eveoe a notifiation temate that aturesinformation on equivaene agreements. Imorting ountries that have aete the equivaene of Pmeasures of other ountries are eete to notify the reevant measures an affete routs. To ate,ony two notifiations have been submitte. Whie the notifiations from ountries have not been forthoming,ontributions uring the P ommittee by the three sisters2 on their work rogrammes on equivaeneenhanes transareny of mutiatera efforts in this area.




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TBT and SPS committees

The TT an P ommittees rovie WTO memberswith the oortunity to isuss seifi P/TTmeasures as we as more genera issues, suh as

goo reguatory raties, internationa stanars antransareny. With reset to GRP, members shareinformation on the eveoment an aiation ofthese raties. Members have emhasize thatreguations eveoe in the sirit of GRP are moreikey to ahieve their ubi oiy obetives, an essikey to be riven by ometitiveness onsierations.2 oth ommittees ho reguar isussions oninternationa stanars, an reeive uates fromobserver boies that set suh stanars.

WTO members aso isuss seifi trae onernsTs – see etions .2 an .2 in the P/TT

ommittees. In some ases, the onern is simy amatter of arifiation about the soe or status of themeasure; in other ases, the onern reates to atuaor ereive isriminatory or traerestritive asetsof raft or aie measures. These isussionsenourage members to foow the benhmarks set byinternationa stanars, an to use GRP whenformuating measures – thus romoting reguatoryonvergene. or instane, over onethir of the33 seifi trae onerns raise in the TTommittee sine 199 have been reate, in one wayor another, to internationa stanars.

Issues that arise in the P/TT ommittees inuewhether an internationa stanar was use as a basisfor a artiuar measure, whether members haveeviate from reevant internationa stanars, anwhether reevant internationa guiane eists. Inaition, most seifi trae onerns raise in theTT ommittee are inirety reate to the use ornonuse of GRP in the ontet of a artiuar measure– for eame, with reset to the rationae for ameasure, transareny questions e.g. ubionsutation, or reguatory esign an an assessmentof its imat on trae e.g. the use of reguatory imatassessments. The isussion of seifi trae

onerns in the P ommittee over simiar themes,with the same roortion of suh onerns eiityreferring to internationa stanars. Out of the327 seifi trae onerns raise in the Pommittee sine 199, amost onethir referre tointernationa stanars. The argest roortion ofonerns about er ent have been reate toanima heath an zoonoses.29 oo safety an antheath onerns eah onstitute about a quarter of theremaining onerns.

The mutiatera review of trae onerns in theP/TT ommittees hes to she ight on otentiayrobemati P/TT measures, an enouragesWTO members to avoi unneessariy traerestritivemeasures that eee benhmarks or o not foowbest ratie. In aition, members whose measures

are haenge often rovie information or uateswhih inrease the transareny of P/TTmeasures an reguatory roesses see G/P/GN/2/series an G/TT/GN/7/series.urthermore, information about the imat that a

ertain measure has on trae an he membersientify reguatory ineffiienies an further eveoGRP. This is isusse in more etai in etion ..

oth ommittees aso give members the oortunityto highight raft P/TT measures. The TT anP agreements obige members to notify the WTOeretariat when they are rafting new P/TTmeasures that are not in aorane with reevantinternationa stanars, an that may have a‘signifiant effet on trae’. uh notifiations ontaininformation about the routs overe by themeasure, its obetives an the rationae for themeasure. They aso aow other members to ommenton the esign of measures.

ine 199, the TT an P ommittees have takeneisions an eveoe reommenations3 toeten the notifiation requirements ai out in thereevant agreements in orer to further enhane thetransareny of measures an to give members betteraess to information ontaine, or referre to, innotifiations. ome eames inue giving guianeto members about whih measures shou be notifie,eveoing reommene timeframes for notifiations

as we as omment erios minimum of ays anentry into fore minimum of si months from the enof the omment erio an estabishing roeuresfor making the fu tets of P/TT measuresavaiabe in mutie anguages. Other eisions anreommenations inue enouraging members toreson to omments an to take these ommentsinto aount when finaizing measures an eveoingweb ortas for the WTO eretariat to isseminateinformation on P/TT measures.31

b ooeration on servies measures

As eaine in etion .3, the nature of serviesmakes reguations the rinia imit to market aess.irst an foremost, the feasibiity of aying a tariff tothe internationa rovision of servies is remote. Traerotetion in servies, where it eists, wi be foun ininterna aws, reguations, rues, roeures, eisions,aministrative ations, an other suh measures.Athough servies reguations often o not rimariyhave a traereate fous, there may be ases wherereguations have unneessariy traeistortive anrestritive effets. istinguishing between thosereguations whih are egitimate an those whih are

onsiere rotetionist is fraught with iffiuties.The subsetions beow review how ountriesooerate in servies eening on the tye ofmeasure in question.




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(i) How do countries cooperate on tradein services?

To faiitate ooeration, servies trae agreements,most notaby the GAT, have istinguishe between

three tyes of servies measures, namey:

i measures restri ting market aess by settingquantitative restritions an requirements onega form i.e. restritions on the entry of, orimits on the outut by, the servies suier

ii measures whih isriminate against foreignservies an servies suiers by moifyingonitions of ometition in favour of nationaservies an servie suiers32

iii omesti reguations whih are nonisriminatory

an nonquantitative in nature.

The etent to whih ountries have been wiing toooerate on trae in servies iffers eening onthe measures invove. The GAT framework efinesmeasures in ategories i an ii as market aessan nationa treatment imitations whih are to bereue or eiminate through suessive rouns ofnegotiations. Measures in ategory iii, on the otherhan, have argey not been subete to traeisiines, aart from ertain genera obigationsuner GAT. There is, however, a manate inArtie VI: of the GAT to negotiate isiines on a

seifi set of omesti reguations, namey thosemeasures reating to iensing, quaifiations antehnia stanars. The rationae for negotiatingisiines on this artiuar set of omesti reguationsis not too ifferent from that of the TT an Pagreements, with the fous on ensuring that iensingan quaifiation roeures an requirements antehnia stanars o not onstitute unneessarybarriers to trae in servies.

Athough there are strong araes between the TT anP agreements an the tye of omesti reguationisiines being negotiate uner Artie VI: of the

GAT, the GAT framework for reguatory ooerationon servies, aart from the negotiations of seifiommitments, remains at a nasent stage. The isussionthat foows eamines the etent to whih ooeration oneah of these broa ategories of measures an be saito be taking ae in reset to the imementation anoeration of the agreement. In the ase of ategoryiii omesti reguation, it shou be note that the fousis on those measures for whih isiines are beingnegotiate as the rationae, issues an haenges arevery simiar to those enountere in the TT an Pagreements.

(ii) Cooperation on progressive liberalization

etion .3 has areay rovie a isussion ofwhy quantitative restritions an isriminatory

measures are the most trae istortive, thus roviinga stronger ase for ooeration. In rinie, suhooeration is unertaken through negotiations toremove market aess imitations an nationatreatment isrimination. The resuts of suh

negotiations are “boun” through a ega instrument,whih an a reibiity to eisting an future reformas they are osty to revoke.

In the ase of the GAT, ooeration on the measuresin ategories i an ii uminates in a WTO memberunertaking to guarantee a minimum eve of marketaess an nationa treatment for eah ommittesetor. heues for seifi ommitments in serviesthus erform a simiar funtion to tariff sheues forgoos, in the sense that they faiitate ooerationthrough reiroa bargaining. In the ase of trae inservies, this ours through requestoffer

negotiations between airs or grous of WTOmembers with ommon interests or emans, anou be thought of as a framework of ooeration.

There are goo oitia eonomi reasons why WTOmembers might have been wiing to ooerate on theremova of market aess an nationa treatmentimitations. ome of these have been isusse inetion .3 an etion .1. What is noteworthy isthat the eeriene of the GAT, as we as referentiatrae agreements, as shown by Roy et a. 27, hasmainy onerne iberaization ommitments reatingto market entry an isrimination an not other

asets of a member’s reguatory regime or onut.

Inee, suh an aroah was the intene esign ofthe GAT, whih was why a searate manate tonegotiate isiines on omesti reguation wasneessary. Thus, when a WTO member removes aimitation on the number of foreign servies suiersthat an oerate in its territory, other tyes ofreguations remain unaffete.

The reguator ou sti require that the serviessuier obtain a iene before the servie an besuie. Obtaining suh authorization ou inue

the fufiment of both substantive an roeurarequirements. moyees of the servies suier maynee to satisfy artiuar quaifiation requirements.The servies suier may nee to ensure that theservies rovie onform with ertain tehniarequirements. In aition, any business oerationwou be subet to environmenta, heath, safety anabour reguations. A of these nonisriminatorymeasures, whih are tyiay foun in iensing anquaifiation regimes, often have to be fufie beforeauthorization to suy a servie is rovie. Thus,they may have a rofoun imat on servies marketaess but wou not be subet to negotiations onrogressive iberaization.

In artiuar, omesti reguations in the form ofumbersome an/or oaque iensing an quaifiation




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roeures, subetive or artia iensing anquaifiation riteria, eessivey burensomerequirements an aministrative “re tae” an serveto obstrut trae in servies, even if they o not aearto be rimariy irete at trae. The sheer iversity of

reguatory systems an stanars in marketsinternationay an aso signifianty raise the osts ofomiane for the servies suier an at as iniretbarriers to the suy of servies, even in situationswhere there are no market aess restritions orisriminatory measures in fore. This is why the GATframework for ooeration ha to go beyon theremova of market aess an nationa treatmentimitations of the tye esribe in ategories i anii an aress artiuar asets of omestireguation.

(iii) Cooperation on domestic regulation

Whie the eonomi theory for ooeration uner theGAT is in art ifferent from the one for the GATTsee o .1, there is an imortant simiarity that isaresse here. The oiy substitution robemisusse in etion .1, with seifi referene totrae in goos, ou aso ay to trae in servies.

When WTO members make ommitments on serviesmeasures in ategories i an ii, governments mayfae inentives to ater omesti reguations or toimement them in a artiuary obstrutive manneri.e. Artie VI: measures as esribe above. In

ratie, the robem may not arise in the same way inservies trae as it oes in goos trae sine there isa arge ga between GAT binings an atuameasures. There is ess inentive to use omestireguation as an aternative way of imiting marketaess or nationa treatment, sine a member anhange its regime u to the eve of the bining.Inee, oiy substitution in servies might aso ourin reverse. Governments that ak aequate reguationsan enforement aaity might be reutant to oenmarkets an might therefore maintain market aessrestritions.

Unike the TT an P agreements, the GAT hasyet to fuy eveo a framework for ooeration onomesti reguation in servies. There is a manate inArtie VI: of the GAT to negotiate any neessaryisiines to ensure that measures reate to ertaintyes of reguations quaifiation an iensingrequirements an roeures, an tehnia stanarsare, among other things, base on transarent anobetive riteria an not more burensome thanneessary to ensure the quaity of the servies. Theeision on omesti Reguation /L/7 seifiesthree searate areas for the eveoment of anyneessary isiines. This inues: i theeveoment of generay aiabe isiines i.e.horizonta isiines to be aie to a setors;ii isiines for iniviua setors or grous thereof;an iii isiines for rofessiona servies.

In 199, the isiines on omesti Reguation in theAountany etor /L/ were aote by theWTO’s ouni for Trae in ervies. The reevantouni eision /L/3 rovies that the“aountany isiines” are aiabe ony to WTO

members with seifi ommitments in aountany.The isiines are to be integrate into the GAT,together with any new resuts that the Working Partyon omesti Reguation may ahieve in the interim, atthe en of the urrent roun of trae negotiations.

ubsequent to the Aountany isiines, WTOmembers embarke on the negotiation of “horizontaisiines” but this i not reue the ossibiity offuture work on “setora isiines”. Issues onerningthe negotiation of horizonta isiines are isusseater in this setion. It shou be note that there areareay some eisting genera obigations requiring

ooeration among members, artiuary with resetto transareny an aministrative roeures, anthat the isiines to be negotiate are eete tobui uon them. The foowing subsetions isusshow these have been use an the tye of ooerationthat wou be require by omesti reguationisiines.

Existing disciplines and mechanisms

Artie III of the GAT requires WTO members toubish a measures ertaining to or affeting theGAT. In aition, for servies whih are overe by a

member’s seifi ommitments, there is an obigationto notify a aws, reguations or aministrativeguieines signifianty affeting trae in servies.Members are aso obige to estabish enquiry ointsto rovie seifi information to other members uonrequest. Notifiations, if fuy imemente, ou be animortant avenue to imrove information sharing anto aress issues of reguatory transareny inservies. However, in ratie, obtaining omianewith the notifiation obigation has been iffiut toahieve. evera reasons for this ow omiane areisusse in etion an etion . b.

Other transareny requirements reate to thereognition of the euation or eeriene obtaine,requirements met, or ienes or ertifiations granteto a servies suier in a ar tiuar ountry. Artie VIIof the GAT oes not set any artiuar substantiverequirements on how reognition shou be unertakenbut it requires the notifiation of eisting reognitionmeasures, as we as the oening of any newnegotiations. In suh a ase, aequate oortunityshou be rovie to any member whih iniates itsinterest in artiiating. However, as with thenotifiation requirement in Artie III, omiane hasbeen imite.

Nevertheess, WTO members aote a set ofvountary guieines for mutua reognition agreementsor arrangements in the aountany setor. These




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guieines over the onut of negotiations, reevantobigations uner the GAT, an the form an ontentof agreements. The obetive is to make it easier forarties to negotiate reognition agreements an forthir arties to negotiation their aession to them, or

to negotiate omarabe ones.

Aart from transareny, ooeration is aso requireon the aministration of omesti reguation. Theserovisions, whih are ontaine in Artie VI of theGAT, have the goa of ensuring ue roess anoenness in eision making. or instane, ameasures of genera aiation affeting trae inservies, for whih ommitments have been taken, areto be aministere in a reasonabe, obetive antransarent manner. Information must be rovie onthe status of aiations for the authorization tosuy a servie. Where seifi ommitments

regaring rofessiona servies have been unertaken,aequate roeures to verify the ometene ofrofessionas of another ountry must be rovie.Whie a of these GAT rovisions suggest that WTOmembers saw a nee for ooeration on reguatorymatters affeting trae in servies, it is not ear towhat etent these eisting rovisions have beenutiize.

However, the aotion of isiines on omestiReguation in the Aountany etor /L/ by theervies ouni in eember 199 was a noteworthyahievement. These isiines are to be integrate

into the GAT, together with any new resuts that theWorking Party on omesti Reguation may ahieve, atthe en of the urrent roun of negotiations. A orefeature of the isiines is their fous on nonisriminatory reguations that are not subet tosheuing uner Artie XVI market aess anArtie XVII nationa treatment. The Aountanyisiines aso inue a rovision that wou requireWTO members to ensure that suh “measures are notmore traerestritive than neessary to fufi aegitimate obetive”. Legitimate obetives wereefine as inuing the rotetion of onsumerswhih inues a users of aounting servies an

the ubi generay, the quaity of the servie,rofessiona ometene an the integrity of therofession.

Developing new disciplines

Aart from requiring aherene to the obigationsisusse above an ometing the Aountanyisiines, the GAT has not venture muh furtherinto subeting nonisriminatory omesti reguationto trae isiines. Yet, WTO members reognize thenee to ooerate on reguatory issues by estabishinga manate on omesti reguation isiines inArtie VI. of the GAT. Reahing unerstaning onthe aroriate soe an ambition for suh isiineshas been fraught with iffiuties. A entra robemhas been how to istinguish between requirements in

ursuit of egitimate obetives an those whih areaime at restriting trae. ome members have arguein favour of a neessity test, whie others are of theview that suh a test wou be too onerous an wouunuy restrit the freeom of reguators. The

isussion in etion oints to iffiuties inanswering this question for trae in servies given thereativey imite theoretia an emiria work on thisissue.

It aso begs the question as to what etent ougovernments ooerate to minimize the negativeeffets arising from omesti reguation, amist theonsierabe reguatory iversity aross setors anountries. In this regar, the eeriene of the TT anP agreements are instrutive where ooeration isfouse on enouraging members to work towarseiminating or reuing requirements whih are not

neessary for the ahievement of the oiy obetive athan. imiar mehanisms ou be use in servies.These ou inue stronger transareny rovisions, agenera resumtion in favour of internationa stanarsan an institutiona framework for monitoring aninformation ehange. The TT an P agreementsaso ontain a neessity test, a subet of muhontention in the ontet of the omesti reguationnegotiations see etion .e iii.33

esite these simiarities, there is a ritia ifferenein that servies are intangibe an thus annot besame, teste an insete. Thus, roeures an

methos use in TT an P measures annot beeasiy aie to servies – for instane, theeveoment of sienebase stanars throughaboratory testing is muh harer or simy not feasibefor servies. This in turn suggests that evauation,verifiation an assurane of onformity an often notbe unertaken on the servie itsef but has to be onthe servie suier. ine the “rout” annot beeasiy eamine, reguatory reaution is ikey to behigher in servies than it is for goos an estabishinga ommony aetabe eve of risk toerane harerto ahieve.

eow is a esrition of the tye of issues on whihooeration among ountries is being sought in theontet of the omesti reguation negotiations. Itshou be note that servies negotiations easearatey with the issues reate to transareny,obetivity an the simifiation of roeures.

Transparency

The negotiations seek to ensure that information onreguatory requirements an roeures areaessibe to a arties onerne. This inues theubiation an avaiabiity of information onreguations an roeures, the seifiation ofreasonabe time erios for resoning to aiationsfor ienes, information on why an aiation wasreete an notifiation on what information is




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missing in an aiation. It aso inues seifiationof reasonabe time erios for resoning toaiations an information on roeures for reviewof aministrative eisions.

The new omesti reguation isiines are inteneto take aount of, an bui on, Artie III rovisions ofthe GAT on ubiation an notifiation of measuressee aso etion .. hou the transarenyrovisions be agree, it wou ontribute to reuinginformation asymmetries whih are revaent inservies setors an wou rovie greater ertaintyto servies suiers.

Impartiality and objectivity

ervies suiers tyiay want to be assure thatassessments by reguatory an suervisory authorities

for authorization to suy a servie, if suhauthorization is require, wi be onute in areasonabe, imartia an obetive manner. It is asowe reognize that effiient outomes are bestahieve when eisions are ineenent from anyommeria interests or oitia influene. In thisonnetion, the formuation of ear riteria anroeures an be vitay imortant to avoi eessiveisretion an to he ensure reasonabeness,imartiaity an obetivit y in the reguatory roess.

Simplification of procedures

Long an ome roeures for assessing anaiation for authorization to suy a servie mayisourage servies suiers to seek aess to a hostmember. uh omeity may aso serve to hierotetionist intentions. imifiation of roeureswi faiitate the ativities of servies suiers anreue the oortunities for hien rotetionism.

Nonetheess, in many servies setors, theharateristis of the servies suie may not awaysaow for very sime roeures to be aote. orinstane, severa authorities may nee to be invovein ensuring the quaity of the servie, in avoiing

negative imat on the environment or in enabingubi onsutations. The omeity of a roeurethus nees to be onsiere in its ontet. Linke tothe issue of simifiation is roeura ertainty. Itstans to reason that ser vies suiers wou eetthat assessment riteria are not moifie uring theourse of an aiation. hou this be unavoiabe,aiants wou nee to have a reasonabe timeerio to aust to amene riteria or roeures.

Recognition of equivalence

To ensure that foreign servies suiers meet thequaifiation an other stanars imose on suiersof nationa origin, reguators are often ae uon toassess the equivaene of omesti an foreignquaifiations. In many ases, they may require foreign

aiants for ienes or other bages of authority tosubmit a servie to tests or to fufi onitions toemonstrate equivaene. ine suh tests are imoseto ensure that a omesti stanar is met, they may beregare as omesti reguations. Negotiations on

Artie VI. isiines have been graing with thequestion of how to ensure that suh requirementsshou be no more burensome than neessary toensure the quaity of the servie. Reguators in thesesituations ou be obige to take aount ofquaifiations areay earne in the home ountry of theforeign servies suier an to moify aoringy anyaitiona requirements imose uon them.

The onet of equivaene has areay been use inthe quaifiation requirements setion of theAountany isiines, in Artie 2.7 of the TTAgreement an in Artie .11 of the P Agreement.

omementing this rinie, governments areenourage to negotiate agreements to aet theequivaene of quaifiations obtaine uner other

urisitions or uniateray reognize equivaene.3

International standards

Aetane of internationa stanars ou faiitatethe evauation of quaifiations obtaine abroa anhe romote servies trae. Governments invove instanarsetting at the internationa eve shou ensurethat this is one in as transarent a manner as ossibein orer to avoi “ature” by seifiinterest grous.

GAT Artie VI:b says that in etermining whetherthe requirements are omatibe with the rinies ofneessity, transareny an obetivit y, aount sha betaken of internationa stanars of reevant internationaorganizations aie by WTO members.

The term “reevant internationa organizations” refersto internationa boies whose membershi is oen tothe reevant boies of at east a members of the WTO.The TT an P agreements areay ontain astrong resumtion in favour of internationastanars. In servies, whist there is a strong inentivefor a simiar resumtion in favour of internationa

stanars, there are signifiant obstaes. or a start,internationa stanars are ess revaent in serviesas omare with goos. There are aso questionsonerning the eat nature of tehnia stanars inservies; are they reominanty rout or roessstanars, or both, an to what etent ou a traeisiine over vountary stanars, whih may beissue by nongovernmenta organizations without anyeegate authority. In the TT ontet, a istintion ismae between “stanars” as vountary measures an“tehnia reguations” as manatory. The GAT,however, makes no suh istintion.

ooeration wi not in itsef be suffiient to aressa eternaities whih might arise from reguatoryivergene. The reative sarity of internationastanars in servies, as omare with goos,




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reflets in art the ifferenes in reguatoryreferenes. In suh a situation, the reguatoryivergene between urisitions ou we be a iretonsequene of a referene for a artiuar obetiveas we as its eve of attainment. It is not obvious why

ountries wou omromise on ahieving a reguatoryobetive whih is onsiere egitimate anneessary. At best, ooeration might be sought onfining ess traerestritive means of ahieving suhan obetive or on ways to he servies suiersmeet artiuar stanars or other substantiverequirements.

ooeration on omesti reguation in servies wourequire a mi of negative integration, in terms ofommon rohibitions on artiuar raties an/oraherene to a artiuar set of rinies. It wouaso nee to be omemente by ositive ations to

imrove reguators’ unerstaning of, an onfienein, stanars an requirements with whih they maynot be famiiar.

ooeration on omesti reguation in servies maythus require ation to be taken on at east three fronts:i estabishing an aroriate framework of rues toensure that omesti reguation oes not onstitute anunneessary barrier to trae in servies; ii romotinggreater use of trae instruments for roometitivereguation; an iii suorting reguatory aaitybuiing for trae in servies. The first of these isareay being unertaken through the omesti

reguation negotiations uner the GAT Artie VI:manate. The other two ation oints a for greaterreguatory ooeration among agenies aninternationa organizations, an ou be inke with atehnia ooeration agena to aress reguatorysuysie onstraints. These haenges areisusse in greater etai in etion ..

(iv) Other forms of cooperation

ooeration among reguators has been most evientin the teeommuniations setor. Going beyon theeements ontaine in the GAT Artie VI: manate,

the Referene Paer ontaining a set of roometitive rinies was a maor ahievement of the1997 Agreement on asi Teeommuniations. TheReferene Paer has hee shae the reguatoryenvironment for teeommuniations by eaborating aset of rinies overing matters suh as ometitionsafeguars, interonnetion guarantees, transarentiensing roesses an the ineenene ofreguators.

Unike a genera obigation, this instrument enters intofore when it is attahe by a WTO member to itssheue of seifi ommitments. trity seakingthis instrument eas with a broaer set of reguatoryissues than those ontaine uner the Artie VI:manate. It is mentione here as it rovies a usefueame of reguatory ooeration whih might erhas

be emuate in other setors. The Referene Paeraroah whih is unertaken as aitionaommitments Artie XVIII ou aso serve as a moefor ooeration on other reguatory issues, inuingomesti reguation isiines uner Artie VI:.

These issues are isusse further in etion ..

The various GAT boies eaing with imementationan oeration of the Agreement aso rovie fora forooeration on other asets of servies reguations.Members an, an have raise, reguatory matters forisussion. or eame, the ouni for Trae inervies has been eamining reguatory issuesreating to internationa mobie roaming harges. Theommittee on Trae in inania ervies hasursue isussions on the finania risis anreguatory reform issues. The ommittee on eifiommitments, in aressing reguar issues suh as

the assifiation of servies, requires the interationof reguators with seifi eertise an knowegeof the inustry. That being sai, these boies – unikethe TT an P ommittees – were not rimariyesigne as fora for reguatory ooeration. The fatthat there is no suh forum is not surrising sine theGAT has yet to negotiate a set of isiines thatwou serve a simiar urose as the P an TTagreements.

Outsie of the WTO, ooeration on reguationaffeting trae in servies ours in many ifferentfora. Roy et a. 27 have foun that overa servies

iberaization ommitments in referentia traeagreements PTAs have gone beyon urrent GATommitments as we as offers tabe in the ohaRoun negotiations. There is, however, itte evieneto suggest that PTAs have gone further than the GATin eveoing isiines on omesti reguation or inestabishing new avenues for reguatory ooeration.Most PTAs have reiate the rovisions ontaine inArtie VI of the GAT. It wou seem that PTAs haveenountere the same iffiuties as at the mutiateraeve in moving this subet forwars. There are,however, some eetions.

Mattoo an auvé 21 have note the inusion of aneessity test in the witzeranaan PTA, a fuhater on omesti reguation in the AustraiaNewZeaan oser onomi Reations Agreement, anaitiona serviesseifi rovisions on transarenyin U agreements. There are aso neessity testrovisions in the TransPaifi trategi onomiPartnershi Agreement an in Merosur.

Outsie the ontet of trae negotiations, ertainregiona organizations have eveoe rinies oroes of goo reguatory raties that wouomement servies iberaization. ome of the mosteveoe of these inue the O GuiingPrinies on Reguatory Quaity an Performane anthe APO Integrate hekist on ReguatoryReform. These instruments, whih ea with a




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reguations an not ust those invoving the serviessetor, rovie nonbining rinies on how toesign reguations whih suort market oennessan ometition.

There is aso a reativey ong history of reguatoryooeration at the setora eve, suh as in osta anommuniations servies, finania servies,transortation, euation as we as ertainrofessiona servies. uh ooeration has beenneessary to ea with the effets of internationaintereenenies whih eman oorinatereguatory resonse from ifferent urisitions inorer to be effetive. ooeration has aso beenrequire to ahieve omatibiity an interoerabiitybetween ifferent systems an networks.

or eame, the Internationa eeration of

Aountants IA, the Internationa Aountingtanars ommittee IA an the InternationaOrganization of eurities ommissions IOO setinternationa stanars for the aountany setor.The Universa Posta onvention efines generaguieines on internationa osta servies anreguations on the oerations of mai servies. Thestanars eveoe by the InternationaTeeommuniation Union ITU are funamenta tothe funtioning an interoerabiity of information,ommuniation an tehnoogy IT networksgobay. In euation, the Regiona onventions of theUnite Nations uationa, ientifi an utura

Organization UNO have been the maininternationa instruments aressing the reognitionof aaemi quaifiations for aaemi ansometimes rofessiona uroses.

In the finania setor, the ase ommittee onanking uervision rovies a forum for reguarooeration on banking suervisory matters, with theobetive of enhaning unerstaning of keysuervisory issues an imroving the quaity ofbanking suervision worwie. A inania tabiityoar , whih brings together nationaauthorities resonsibe for finania stabiity in

signifiant internationa finania entres,internationa finania institutions, setorseifiinternationa grouings of reguators an suervisors,an ommittees of entra bank eerts, has asobeen estabishe. The oorinates the work ofnationa finania authorities an internationastanarsetting boies, with the aim of eveoingan romoting effetive reguatory, suervisory another finania setor oiies.

Athough not unertaken rimariy for the uroses oftrae, suh ooeration has imortant imiations, asit an enourage greater unerstaning, if notharmonization, among reguators. There are, however,risks as internationa stanar setting or reguationmay by hane or by esign serve the interests ofthose that have the resoures to artiiate in an

influene the roess. Whie suh onerns have beenvery muh at the forefront in goos trae see etion., there has been ess isussion an awareness ofit in servies trae. ome of this has to o with the fatthat the reguation of servies is ess eveoe at the

internationa eve an where suh instruments oeist, they ten to fous on ar tiuar setors.

3. GATT/WTO isiines onNTMs as interrete in isutesettement

The isussion in reeing setions of this reort haseaine that, whie some nontariff measures aremotivate riniay by a esire to rotet imortometing setors, others ursue egitimate ubioiy obetives, suh as safeguaring human an

anima heath, onsumer rotetion, or romotingenvironmenta sustainabiity. In this subsetion, weook at GATT/WTO rues, as interrete in isutesettement, with a view to unerstaning how they mayor may not reflet some of the insights rawn from theeonomi anaysis in revious setions.

More seifiay, this subsetion first isusses howGATT/WTO rues reflet the eonomi motivationsfor mutiatera ooeration that were anayse inetion .1. eony, it isusses the etent to whihGATT/WTO rues on nontariff measures take into

aount the eonomi rationaes for aoting suhmeasures, whih were anayse in etion .etion . wi then take this anaysis further byisussing some seifi issues that arise whenGATT/WTO rues are ontraste against the insightsrovie by eonomi theory.

a GATT/WTO rues on trae in goos anreasons for mutiatera ooeration

In the ase of goos, the GATT/WTO agreements imitthe oiy instruments that WTO members may use torotet imortometing inustries. Tariffs are the

ony egitimate form of rotetion that may be use.Members have negotiate maimum eves of tariffsknown as “tariff binings” an may not ay tariffsthat eee those eves see GATT Artie II. Themaimum eves of tariffs that a member may ay areset out in the member’s sheue of onessions.Members are aso rohibite from aying “a otheruties or harges of any kin imose on or inonnetion with the imortation” uness they havereserve the right to o so in their sheues ofonessions.

or many years, the rinia isiines that aie tonontariff measures were the rohibition onquantitative restritions in GATT Artie XI an thenonisrimination obigations in Artie I mostfavoure nation – MN an Artie III nationa




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treatment of the GATT. These isiines weresuemente by the ossibiity of bringing a nonvioation aim where a ontrating arty onsierethat a measure, esite being onsistent with therovisions of the GATT, nevertheess “nuifie or

imaire” any benefit aruing to it uner theAgreement.

The MN obigation aies to both interna an borermeasures. It requires WTO members to treat animorte rout from one member no ess favourabythan the “ ike” omesti rout imorte from anotherountry. The nationa treatment obigation onernsinterna measures, suh as interna taes anreguations reating to the sae of a rout. It requiresmembers to treat an imorte rout no essfavouraby than the ike omesti rout. One of thekey issues that has been isusse in GATT/WTO

isute settement in onnetion with the nationatreatment obigation is the etent to whih it forbismeasures that have a isarate imat on imorts, butan be obetivey shown to have a egitimatereguatory urose. This issue is further isusse inetion .3b.

As eaine in etion .1, the overa framework ofthe GATT is onsistent with a oiy substitutionaroah. The GATT aso ha ertain rues that wentbeyon onstraining members from reaing oneoiy suh as tariffs with another, suh as nontariffmeasures. In artiuar, the GATT inue imortant

transareny obigations that reson aso to therobem of inomete information.

ome of the Uruguay Roun agreements introueobigations that eten signifianty beyon the oiysubstitution aroah of the GATT. These have beenreferre to as “ostisriminatory” obigationsHue, 23. Of artiuar reevane to this reortare the obigations ontaine in the P an TTagreements. oth of these agreement ontain nonisriminatory obigations. However, they set outaitiona requirements that ay to nontariffmeasures within their soe. Thus, for eame, the

P Agreement aso requires that P measures bebase on sientifi rinies. or its art, the TTAgreement requires that tehnia reguations not bemore traerestritive than neessary to fufi aegitimate obetive.

One resut of this “ostisriminatory” aroah isthat the ink with the market aess onessionsrotete uner a oiy substitution aroah is moretenuous. esite the unerying oiy substitutionrationae unerying the GATT/WTO agreements,toay there oes not aear to be an overarhingrequirement that a WTO member show how its overamarket aess has been unermine when ithaenges a nontariff measure. The ony measuresfor whih there is a requirement to emonstratenegative effets as art of a aim of vioation are

ationabe subsiies. y ontrast, a memberhaenging, for instane, an avertising ban unerGATT Artie III: nee not emonstrate any traeeffets to suee in its aim. Nor is there arequirement to show trae effets when haenging

P measures or tehnia reguations either.

In sum, the isiines that ay to nontariff measuresother than ationabe subsiies are not irety tie toseifi market aess onessions. Put ifferenty, amember an haenge an NTM irresetive of whetherit has emonstrabe trae effets. Having sai that,one wou eet that members normay wi notinvest the resoures neessary to roseute aomaint uness the measure has some trae imat.

As originay frame, Artie XXIII of the GATT requirea ontrating arty haenging a measure taken by

another ontrating arty to emonstrate that suh ameasure “nuifie or imaire” a benefit eete bythat ontrating arty uner the GATT . H. akson,199. In 192, however, a GATT isute settementane etermine that where there was a “earinfringement” of a GATT rovision, “the ation wou,rima faie, onstitute a ase of nuifiation animairment…” GATT Uruguay – Recourse to Article

XXIII , ara. 1. This ega resumtion was ateroifie an is now inororate in Artie 3. of theisute ettement Unerstaning U.

The aim of nuifiation or imairment has been thesubet of isussion in eonomi iterature where ithas been ientifie as an effiient mehanism toisiine nontariff measures see etion .1 It issti ossibe for a WTO member to haenge ameasure that is not inonsistent with the GATT, butthat nonetheess “nuifies or imairs” benefits iteete to obtain uner the Agreement. However, aseaine beow, nonvioation aims are subet tostringent requirements an are seom ursue otherthan when they are “thrown in” as an aternative aimin ase the aims of vioation o not suee.

The vast maority of WTO isutes onern aegationsof vioation. No WTO member has suessfuyrebutte the resumtion of nuifiation or imairment,resuting from a fining of vioation, by showing thatthe measures ha no atua effet on trae WorTrae Organization WTO, 2.

In EC – Bananas III , the uroean ommunitiesattemte to rebut the resumtion of nuifiation orimairment with reset to the ane’s finings ofvioations of the GATT 199 on the basis that theUnite tates ha never eorte a singe banana tothe uroean ommunity, an therefore, ou notossiby suffer any trae amage. The Aeate oyreete the uroean ommunities’ argument an, inoing so, enorse the foowing reasoning by anearier ane:




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“Artie III:2, first sentene, annot beinterrete to rotet eetations oneort voumes; it rotets eetations onthe ometitive reationshi betweenimorte an omesti routs. A hange

in the ometitive reationshi ontrary tothat rovision must onsequenty beregare ipso facto as a nuifiation orimairment of benefits aruing uner theGenera Agreement. A emonstration thata measure inonsistent with Artie III:2,first sentene, has no or insignifianteffets wou therefore in the view of thePane not be a suffiient emonstrationthat the benefits aruing uner thatrovision ha not been nuifie or imaireeven if suh a rebutta were in rinie

ermitte” Pane Reort, US – Superfund ,ara . .19.

The aim of nonvioation has been esribe as an“eetiona remey” whih “shou be aroahewith aution” Pane Reort, Japan – Film, ara. 1.37an Aeate oy Reort, EC – Asbestos , ara. 1.

b GATT/WTO rues on trae in goos aneonomi rationaes for NTMs

etion eaine that nontariff measures may be

ust ifie where suh measures aress a genuinesituation of market faiure. etion further eainethat, whereas the wefare effets of an NTM thataresses a genuine market faiure are ositive, thetrae effets are ambiguous.

ine its inetion, the GATT/WTO regime hasreognize that WTO members may nee to aotnontariff measures to aress market faiures. In thisregar, GATT/WTO rues on NTMs an be unerstooas roviing “evies” that he istinguish measuresthat genuiney seek to aress a market faiurefrom those that have oortunisti motivationssee Trahtman, 199; Mareau an Trahtman,29. In some ases, GATT/WTO rues aso seek tominimize the trae imat of an NTM otherwiseaote for a egitimate oiy urose.

esite what some ritis have sai, GATT/WTO rueso not estabish a hierarhy between the traeommitments of WTO members an the ubi oiyobetives that these members may ursue throughomesti reguation. Utimatey, GATT/WTO ruesaow for the aiation of nontariff measures thatursue a egitimate nonrotetionist urose, even

where the measures have trae effets. The “evies”set out in the WTO agreements to raw the inebetween rotetionist an nonrotetionist NTMs areesribe beow.

(i) Non-discrimination and the relevanceof intent or purpose

As isusse in etion .1, the nonisriminationobigations in Arties I an III of the GATT are the

rimary evies use in the GATT to onstrain oiysubstitution. Aitiona fleibiity is rovie uner thegenera eetions in Artie XX of the GATT, whihaows ertain measures that ursue the ubi oiyobetives reognize in that rovision, suh as therotetion of human, anima, or ant ife or heath, anthe onservation of ehaustibe natura resoures.

ven with the aitiona fleibiity rovie unerArtie XX, some fear that the nationa treatmentobigation in Artie III an be too bunt an instrument ifit is aie mehaniay. Those who ho this viewavoate an interretation of the nationa treatment

obigation that oes not fous eusivey on whetherthe haenge nontariff measure has an imat onimorts that is ifferent from the imat on the “ike”omesti rout. Rather, in their view, the anaysisshou aso take aount of the intent or urosebehin the haenge measure, thereby onyonstraining those measures that o not ursue aegitimate urose.

As Lester 211 eains, three ositions have beenavoate as to the reevane of intent or urose forthe assessment of a omesti reguation uner ArtieIII. Those in the first grou onsier that intent or

urose has no roe to ay in the anaysis of nationatreatment. Instea, they onsier that intent or urosemay be reevant, if at a, where the resonent memberinvokes one of the genera eetions in Artie XX ofthe GATT. The other two grous beieve that intent orurose must neessariy be onsiere in the anaysisuner Artie III, yet if fer as to where reisey intentor urose omes into the anaysis. One grouavoates onsieration of intent or urose inetermining whether the imorte an omestirouts are “ike”. The other grou sees intent oruroses as being art of the anaysis of whether theimorte rout is being treate ess favouraby thanthe omesti rout.

Two GATT anes sought to inue onsieration ofreguatory urose in the assessment of isriminationin what beame known as the “aims an effets test”US – Malt Beverages an Canada – Provincial LiquorBoards (US). Hue esribes the “aims an effetstest” as mak ing the foowing two imrovements to thetraitiona aroah. irst, the new aroah“onsigne the metahysis of ‘ikeness’ to a esserroe in the anaysis, an instea mae the question ofvioation een rimariy on the two most imortantissues that searate bona fie reguation from traerotetion – the trae effets of the measure, an thebona fies of the aege reguatory urose behin it”.eony, “by making it ossibe for the issue ofreguatory ustifiation to be onsiere at the same




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time the issue of vioation itsef is being etermine,the ‘aim an effets’ aroah avoie both theremature ismissa of vai omaints on grouns of‘unikeness’ aone, an eessivey rigoroustreatment” Hue, 23: 2.

Regan 23 has aso avoate inuing onsierationof reguatory urose as art of the assessment of nonisrimination uner GATT Artie III. In his view, theentra inquiry in the assessment of nonisriminationuner Artie III shou be whether the measure is theresut of a rotetionist egisative urose. He arifiesthat this is not a question of the subetive motives ofiniviua egisators. Rather, it is a question at a moregenera eve about what oitia fores were resonsibefor the utimate oitia outome. Regan reognizes thatthere may be mutie uroses behin the enatment ofa reguation. In suh a ase, he suggests that the

reguation be invaiate ony if the ontribution ofrotetionist urose was a “but for” ause of theaotion of the reguation.

It is ommon unerstaning that the “aims an effets”test was reete in Japan – Alcoholic Beverages, thefirst nonisrimination isute about interna taeseie uner the WTO isute settement mehanismsee Roesser, 23. The issue aso ame u in EC –Bananas III , where the Aeate oy refuse to aythe “aims an effet” test in the ontet of anaysing aaim uner Arties II an XVII of the GAT. However,some ommentators have note that subsequent

Aeate oy reorts wou aear to reognizesome roe for reguatory urose in the assessmentuner GATT Artie III Regan, 23; Porges anTrahtman, 23.3 This is a matter of urrent ebateas a resut of the Aeate oy ’s ruings on Artie 2.1of the TT Agreement in US – Clove Cigarettes an US – Tuna II (Mexico) see beow.

oth the P an the TT agreements inue nonisrimination obigations, athough they oeratesomewhat ifferenty. The P Agreement roviesthat P measures must not “arbitrariy or unustifiabyisriminate between Members where ientia or

simiar onitions revai, inuing between their ownterritory an that of other Members”. This anguage isa reognition of the fat that, ue to ifferenes inimate, eisting ests or iseases, or foo safetyonitions, it is not aways aroriate to imose thesame sanitary an hytosanitary requirements onfoo, anima or ant routs oming from ifferentountries. P measures sometimes vary, eeningon the ountry of origin of the foo, anima or antrout onerne. Mareau an Trahtman 29ontrast this rovision with Artie III of the GATT,noting that the former oes not seem to a for a “ikerout” anaysis, but rather is fouse on the

ust ifiation for the isr imination between situat ions .

The anguage of Artie 2.1 of the TT Agreement isoser to that of Artie III of the GATT. The TT

Agreement rovies that WTO members sha ensurethat in reset of tehnia reguations, routsimorte from the territory of any member sha beaore treatment no ess favourabe than thataore to ike routs of nationa origin an to ike

routs originating in any other ountry.

As note above, the reevane of the rationae orurose of the measures has been the subet ofintense ebates in the ontet of Artie III of theGATT. The issue has now been raise in the ontet ofArtie 2.1 of the TT Agreement. It is worth reaing,in this regar, that the TT Agreement oes notinue a genera eetions rovision simiar to GATTArtie XX.

Three reent anes took iffering aroahes withreset to the reevane of intent or urose for the

assessment of ikeness uner Artie 2.1 of the TTAgreement. The ane in US – Tuna II (Mexico), referringbak to the Aeate oy’s interretation of Artie III:of the GATT in EC – Asbestos, interrete the term “ikerouts” in Artie 2.1 of the TT Agreement as reatingto the nature an etent of a ometitive reationshibetween an among grous of routs Pane Reort,US – Tuna II (Mexico), ara. 7.22. In other wors, thisane was reutant to take the intent or urose of themeasure into aount at this stage. The ane in US –COOL ertain ountry of Origin Labeing took asimiar aroah.

y ontrast, the ane in US – Clove Cigarettes, whiheamine a aim against a tobao measure thatrohibits igarettes with haraterizing flavours, otherthan tobao or mentho, refuse to unertake theanaysis of ikeness “rimariy from a ometitionersetive”. Instea, the ane was of the view thatthe weighing of the eviene reating to the ikenessriteria shou be influene by the fat that themeasure at issue was “a tehnia reguation havingthe immeiate urose of reguating igarettes with aharaterizing flavour for ubi heath reasons”. Thismeant that it ha to “ay seia notie to thesignifiane of the ubi heath obetive of a

tehnia reguation an how ertain features of thereevant routs, their enuses as we as theeretion onsumers have about them, must beevauate in ight of that obetive”.

The ane therefore onue that “the eareegitimate ubi heath obetive” of the measure atissue – that is, the reution of youth smoking – “mustermeate an inform our ikeness anaysis”. Inartiuar, the ane onsiere that the eareegitimate ubi heath obetive was reevant in theonsieration of the hysia harateristis that areimortant for the immeiate urose of reguatingigarettes with haraterizing flavours, as we as theonsumer tastes an habits riterion where theeretion of onsumers, or rather otentiaonsumers, an ony be assesse with referene to




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the heath rotetion obetive of the tehniareguation at issue Pane Reort, US – CloveCigarettes, ara. 7.119.

Another interesting aset of the ane roeeings in

US – COOL is that the arties etensivey argueabout aege atua trae effets – an whether suheffets were attributabe to the measures at issue theOOL measure or to other fators. The artiessubmitte eonomi figures an anayses, inuingeonometri stuies. or the ane this was animortant fatua matter in the isute: the anefoun it imortant to make finings on the a tua traeeffets of the OOL measure, even if, uner the egastanar it ha ientifie for Artie 2.1 of the TTAgreement, these finings were not inisensabe forthe anaysis of the omainants’ aim. Inee, theane went further, arguing that it ha the right, “an in

fat the uty, to make the fatua finings neessaryto arry out an obetive anaysis of the isute an aof the eviene before us”, an the basi funtion ofanes i not eue – an ou, in fat, neessitate– the review of eonomi an eonometri evienean arguments.

Hene, whie the ane i not atuay unertake anyeonometri anaysis of its own, it assesse therobustness of the ontraitory U an anaianstuies, stressing that the eonometri stuies, unikethe esritive anayses, were abe to isoate anquantify the ifferent fators at ay. It onue that

the anaian umner onometri tuy ha mae a prima facie ase that the OOL measure ha a robustnegative an signifiant effet on the imort sharesan rie basis of anaian ivestok. It aso onuethat this imat emonstrate by the anaian tuy,an not refute by the UA onometri tuy,onurre with its fining that the OOL measureaore ess favourabe treatment for muse utswithin the meaning of Artie 2.1 of the TT AgreementPane Reort, US – COOL, aras . 7.7..

A three ane reorts were aeae, but at the timeof writing ony the Aeate oy reorts in US –

Clove Cigarettes an US – Tuna II (Mexico) ha beeniruate.

The Aeate oy isagree with the US – CloveCigarettes ane’s interretation of the onet of “ikerouts” in Artie 2.1 of the TT Agreement, whihfouse on the uroses of the tehnia reguation atissue, as searate from the ometitive reationshibetween an among the routs. In the Aeateoy’s view, “the ontet rovie by Artie 2.1 itsef,by other rovisions of the TBT Agreement, bythe TBT Agreement as a whoe, an by Ar tie III: of theGATT 199, as we as the obet an urose ofthe TBT Agreement, suort an interretation of theonet of ‘ikeness’ in Artie 2.1 that is base onthe ometitive reationshi between an among therouts”. Reguatory onerns unerying a tehnia

reguation may be taken into aount ony to the etentthat they are reevant to the eamination of ertainikeness riteria an are reflete in the routs’ometitive reationshi.3 Utimatey, however, theAeate oy foun that the “ikeness” riteria that

the ane ha eamine suorte the ane’s overaonusion that ove an mentho igarettes are ikerouts within the meaning of Artie 2.1 of theTBT Agreement Aeate oy Reort, US – Clove

Cigarettes, aras. 1 an 1.

The Aeate oy aso aresse the ess favourabetreatment eement of Artie 2.1 of the TT Agreement,noting that a ane eamining a aim of vioation unerArtie 2.1 shou seek to asertain whether thetehnia reguation at issue moifies the onitions ofometition in the market of the reguating member tothe etriment of the grou of imorte routs vis-à-

vis the grou of ike omesti routs.

The Aeate oy further eaine that “the ontetan obet an urose of the TBT Agreement weigh infavour of interreting the treatment no ess favouraberequirement of Artie 2.1 as not rohibitingetrimenta imat on imorts that stems eusiveyfrom a egitimate reguatory istintion”. This meansthat where a tehnia reguation oes not de jure

isriminate against imorts, “the eistene of aetrimenta imat on ometitive oortunities forthe grou of imorte vis-à-vis the grou of omesti

ike routs is not isositive of ess favourabetreatment uner Artie 2.1”. Panes must furtheranayse whether the etrimenta imat on imortsstems eusivey from a egitimate reguatoryistintion rather than refleting isrimination againstthe grou of imorte routs. In oing so, anesmust arefuy srutinize the artiuar irumstanesof the ase, that is, the esign, a rhiteture, reveaingstruture, oeration, an aiation of the tehniareguation at issue, an, in artiuar, whether thattehnia reguation is evenhane, in orer toetermine whether it isriminates against the grouof imorte routs Aeate oy Reort, US –

Clove Cigarettes, aras. 112.

In the en, the Aeate oy agree with the ane’sonusion that, by eemting mentho igarettes fromthe ban on flavoure igarettes, the U measureaors to ove igarettes imorte from Inonesiaess favourabe treatment than that aore toomesti ike routs, within the meaning of Artie 2.1of the TT Agreement. The Aeate oy onsierethat the etrimenta imat of the U measure onometitive oortunities for ove igarettes i notstem from a egitimate reguatory istintion beausementho igarettes have the same rout

harateristis the flavour that masks the harshness oftobao that, from the ersetive of the stateobetive of the U measure, ustifie the rohibition ofove igarettes.




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However, the Aeate oy sought to arify that itsruing i not mean that WTO members “annot aotmeasures to ursue egitimate heath obetives suhas urbing an reventing youth smoking”. Itemhasize that, even though the measure at issue

ursue the egitimate obetive of reuing youthsmoking by banning igarettes ontaining flavours aningreients that inrease the attrativeness of tobaoto youth, “it oes so in a manner that is inonsistentwith the nationa treatment obigation in Artie 2.1 ofthe TBT Agreement as a resut of the eemtion ofmentho igarettes, whih simiary ontain flavoursan ingreients that inrease the attrativeness oftobao to youth, from the ban on flavoure igarettes”Aeate oy Reort, US – Clove Cigarettes , aras.22 an 23.

The Aeate oy aso aresse a aim uner

Artie 2.1 of the TT Agreement in US – Tuna II(Mexico). The ikeness of tuna routs of ifferentorigins was not aeae. The ebate on Artie 2.1thus was imite to the “treatment no ess favourabe”eement of Artie 2.1. The Aeate oy began byeaining that tehnia reguations are measuresthat, by their very nature, estabish istintionsbetween routs aoring to their harateristis ortheir reate roesses an roution methos.Therefore, Artie 2.1 shou not be rea to mean thatany istintions, in artiuar ones that are baseeusivey on artiuar rout harateristis or onartiuar roesses an roution methos, wou

per se onstitute “ess favourabe treatment”ara. 211.

The Aeate oy esribe the anaysis of whetherthere is ess favourabe treatment uner Artie 2.1 asinvoving the foowing two stes: i an assessment ofwhether the tehnia reguation at issue moifies theonitions of ometition to the etriment of theimorte rout as omare to the omesti ikerout or the ike rout originating in anothermember; an ii a etermination of whether theetrimenta imat reflets isrimination against theimorte rout of the omaining member.

Referring bak to its earier ruing in US – CloveCigarettes, the Aeate oy eaine that theeistene of a etrimenta effet is not suffiient toemonstrate ess favourabe treatment unerArtie 2.1; instea, a ane must further anaysewhether the etrimenta imat on imorts stemseusivey from a egitimate reguatory istintionrather than refleting isrimination against the grouof imorte routs aras. 21 an 231. TheAeate oy further sai that in this ase it wousrutinize in artiuar, whether, in the ight of thefatua finings mae by the ane an unisutefats on the reor, the U measure is evenhane inthe manner in whih it aresses the risks to ohinsarising from ifferent fishing methos in ifferentareas of the oean ara. 232.

Turning to the U “ohinsafe” abeing rovisions,the Aeate oy first foun that the ane’s fatuafinings “eary estabish that the ak of aess tothe ‘ohinsafe’ abe of tuna routs ontainingtuna aught by setting on ohins has a etrimenta

imat on the ometitive oortunities of Meiantuna routs in the U market” ara. 23. As for thequestion of whether the etrimenta imat refleteisrimination, the Aeate oy eamine whetherthe ifferent onitions for aess to a “ohinsafe”abe are “aibrate” to the risks to ohins arisingfrom ifferent fishing methos in ifferent areas of theoean, as the Unite tates ha aime. TheAeate oy note the ane’s fining that, whiethe U measure fuy aresses the averse effetson ohins inuing observe an unobserveeffets resuting from setting on ohins in theastern Troia Paifi, it oes not aress mortaity

arising from fishing methos other than setting onohins in other areas of the oean. In theseirumstanes, the Aeate oy foun that themeasure at issue is not evenhane in the manner inwhih it aresses the risks to ohins arising fromifferent fishing tehniques in ifferent areas of theoean. On this basis, the Aeate oy reverse theane’s fining that the U ”ohinsafe” abeingrovisions are not inonsistent with Artie 2.1 of theTT Agreement, an foun, instea, that the Umeasure is inonsistent with Artie 2.1.

The Aeate oy reorts in US – Clove Cigarettes

and US – Tuna II (Mexico) fouse on Artie 2.1 ofthe TT Agreement; the Aeate oy aresseArtie III: of the GATT ony as reevant ontet for itsinterretation of Artie 2.1 of the TT Agreement.Nevertheess, the reorts have given rise to ebateabout their imiations for the anaysis uner ArtieIII: of the GATT see the Internationa onomi Lawan Poiy og at: htt://wortraeaw.tyea.om.

As note earier, the TT Agreement an the GATTare struture ifferenty. The GATT inues a generaeetions rovision Artie XX that may be invoketo ustify a measure that is otherwise inonsistent with

Artie III: or another obigation in the GATT.Artie XX refers to some of the oiy obetives thatare aso mentione in the Preambe of the TTAgreement, suh as the rotetion of the environment.The Aeate oy observe, in this regar, that whiethe GATT an the TT Agreement seek to strike asimiar baane, “in the GATT 199 this baane iseresse by the nationa treatment rue in Ar tie III:as quaifie by the eetions in Artie XX, whie, inthe TT Agreement, this baane is to be foun inArtie 2.1 itsef, rea in the ight of its ontet an ofits obet an urose” Aeate oy Reort, US –Clove Cigarettes, ara. 19. This ou be rea bysome as suorting a ifferent aroah uner ArtieIII: than uner Artie 2.1 of the TT Agreement,whereuon any egitimate oiy basis for theifferentia treatment of the imorte rout an the




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ike omesti rout wou be onsiere in theassessment of the Artie XX efene an not as ar tof the assessment of whether there is isriminationuner Artie III:.

Another oint to note is that Artie XX of the GATThas a ose ist of oiy reasons that ou beinvoke to ustify an otherwise GATTinonsistentmeasure. y ontrast, the TT Agreement oes noteressy imit the oiy obetives that ou beursue through a tehnia reguation. The range ofobetives that ou ustify a measure is otentiaymore “oen” uner the TT Agreement than unerthe GATT.

Aeate roeeings in US – COOL ha notonue at the time of writing.

(ii) Appropriate level of protection

Like Artie III of the GATT, the P an TTagreements o not estabish minimum or maimumeves of reguatory rotetion. or eame, the PAgreement oes not require a WTO member toreguate in reation to a artiuar risk. Thus, a WTOmember may hoose not to reguate at a. At the sametime, the P Agreement oes not imose a eiing onthe maimum eve of reguation. The Aeate oyhas emhasize in this regar that it is the “rerogative”of a WTO member to etermine the eve of rotetionthat it eems aroriate Aeate oy Reort,

Australia – Salmon, ara. 199.

Athough WTO members have the rerogative toetermine their eve of rotetion, they must omywith the requirement of onsisteny in Artie . of theP Agreement. An P measure wou fai theonsisteny requirement of Artie . if: i the memberimosing the isute measure has aote its ownaroriate eves of sanitary rotetion against risks tohuman ife or heath in severa ifferent situations;ii those eves of rotetion ehibit arbitrary orunustifiabe ifferenes “istintions” in the anguageof Artie . in their treatment of ifferent situations;

an iii the arbitrary or unustifiabe ifferenes mustresut in isrimination or a isguise restrition ofinternationa trae. The anaysis uner Artie .roees, however, ony if the situations ehibit ifferenteves of rotetion an resent some ommon eementor eements suffiient to rener them omarabeAeate oy Reort, EC – Hormones , aras. 2121 an 217.

(iii) Scientific or technical basis

The P Agreement requires that P measures bebase on sientifi rinies an not be maintainewithout sientifi eviene. Uness the P measure istaken in an emergeny or is base on an internationastanar, it must be base on a risk assessment, whihthe Agreement efines as:

“The evauation of the ikeihoo of entry,estabishment or srea of a est or iseasewithin the territory of an imorting Memberaoring to the sanitary or hytosanitarymeasures whih might be aie, an of

the assoiate otentia bioogia aneonomi onsequenes; or the evauationof the otentia for averse effets onhuman or anima heath arising from theresene of aitives, ontaminants, toinsor iseaseausing organisms in foo,beverages, or feestuf fs”.

TT measures may aso be suorte by sientifi ortehnia stuies, athough in some ases the sientifior tehnia information may be one of severa fatorstaken into onsieration. Inee, Artie 2.2 of the TTAgreement inues avaiabe sientifi an tehnia

information among the eements that may beonsiere in assessing the risks that wou bereate if the egitimate obetive ursue by thetehnia reguation were not fufie. Whie it isfeasibe to onsier tehnia stuies roviingbaking for the nee for ertain tehnia reguationsreating to onsumer safety, the usefuness of tehniastuies for other tehnia reguations – suh asertain abeing requirements for foos subet toreigious restritions – is ess obvious. The rafters ofthe TT Agreement wou aear to have foreseenthat suh measures ou invove ome tehniaassessments in that they eiity rovie for the

ossibiity that anes reviewing suh measures inWTO isute settement ou rey on eerts“to assist in questions of a tehnia nature”see Artie 1 an Anne 2 of the TT Agreement.

The aitiona requirements of the P an TTagreements have given rise to onerns by some thatthe WTO wi interfere with egitimate emoratihoies of the itizens of the WTO members aotingthe P or TT measures. Writing about the PAgreement, Howse 2 has argue that theserequirements “o not have the effet of usuringemorati ugment about risk an its reguation an

aing these matters uner the authority of ‘siene’”.Rather, in his view, “the P Agreement brings sienein as one neessary omonent of the reguatoryroess, without making it eisive”. Howse finssuort for his views in the aroah taken by theAeate oy in EC – Hormones . He refers, foreame, to the Aeate oy’s aknowegmentthat WTO members may aot P measures even ifsientifi oinion is ivie or there is unertainty.

ykes 2 is ess otimisti. He has argue thataommoation between the P Agreement’ssientifi eviene requirement an reset for WTOmembers’ reguatory sovereignty “is eeeingyiffiut if not imossibe”. In his view, “meaningfusientifi eviene requirements funamentayonflit with reguatory sovereignty in a ases of




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serious sientifi unertainty”. He sees this as foringa hoie on the WTO “between an interretation ofsientifi eviene requirements that essentiayeviserates them an efers to nationa ugmentsabout ‘siene’, or an interretation that gives them

rea bite at the eense of the aaity of nationareguators to hoose the eve of risk that they witoerate”. A mie groun is ony ossibe “in the rareases where sientifi unertainty is remeiabequiky at ow ost ”.

Hoekman an Trahtman 21 have argue that thesientifi eviene requirement of the PAgreement oes not entai a ramati earture fromthe genera oiy of the GATT of reventingisriminatory measures unerstoo narrowy asony overing measures that have a ifferentiaimat without an aequate rationa ustifiation in

terms of ahieving a egitimate reguatory obetive.They assert that the sientifi eviene requirementmay be unerstoo as an obeti ve iniator or “roymeasure” of rotetionist intent. Hoekman anTrahtman eain that the sientifi evienerequirement inuing the requirement that Pmeasures be base on a risk assessment wouseem to evauate irety “the etent an quaity ofthe nonrotetionist aim”. Aternativey, therequirement may be unerstoo to estabish aresumtion of rotetionist aim where the Pmeasure is foun not to be base on sientifieviene. esribe in this manner, the sientifi

eviene requirement wou be mosty onernewith the robem of oiy substitution.

The onern about intruing into the reguatoryomain of nationa governments on suh sensitivematters as heath an safety measures fins refletionin the “stanar of review” that aies to the review ofsuh measures by the WTO’s auiatory boies. Thestanar of review refers to the intensity of the srutinyof omesti measures by WTO anes. As note above,P measures must be base on sientifi riniesan may not be maintaine without suffiient sientifieviene. This sometimes means that the WTO

member aying the P measures must haveonute a risk assessment in aorane withArtie .1 of the P Agreement.

A ane assessing the onsisteny of an P measurewith Artie .1 is meant to review the WTO member’srisk assessment an not to onut one itsef. TheAeate oy has autione that “where a anegoes beyon this imite manate an ats as a riskassessor, it wou be substituting its own sientifi

ugment for that of the r isk assessor an making a denovo review an, onsequenty, wou eee itsfuntions uner Artie 11 of the U”. It went on toeain that “the review ower of a ane is not toetermine whether the risk assessment unertaken bya WTO Member is orret, but rather to eterminewhether that risk assessment is suorte by oherent

reasoning an resetabe sientifi eviene an is,in this sense, obetivey ustifiabe” Aeate oyReort, US/Canada – Continued Suspension, ara.9.

It ou be suggeste that a eferentia stanar ofreview, simiar to that aie to the review of Pmeasures, wou be ustifie in reation to measuresuner the TT Agreement that are base on somekin of tehnia assessment arrie out by omestiauthorities. o far, however, the stanar of review hasnot reeive muh attention in the isutes brought tothe WTO uner the TT Agreement.

A reate issue that has been raise in onnetion withboth the P an TT agreements is whether WTOauiators have the require eve of eertise toauiate isutes that may invove ome sientifi

or tehnia ebates. The ak of suh sientifi antehnia eertise is one of the ustifiations given fora eferentia stanar of review. The P an TTagreements both rovie for the ossibiity that anesseek avie from eerts an severa anes haveone so. Panes must onsut the arties whenhoosing the eerts an must reset the arties’ue roess rights. Thus, a ane was faute foronsuting two eerts that ha artiiate in theevauation of si hormones for uroses of eveoinginternationa stanars when the aequay of thatevauation was an issue in the WTO isute Aeateoy Reort, US/Canada – Continued Suspension,

ara. 1.

Moreover, eerts annot o the ob of the arties,eseiay the omainant who bears the buren ofroof Aeate oy Reort, Australia – Salmon, ara. 222. The use of eerts must be onsistent withthe stanar of review. In the ase of P measures,the onsutations with the eerts “shou not seek totest whether the eerts wou have one a riskassessment in the same way an wou have reahethe same onusions as the risk assessor” Aeateoy Reort, US/Canada – Continued Suspension, ara. 1. In other wors, the assistane of the

eerts is onstraine by the aiabe stanar ofreview.

(iv) A less trade-restrictive requirement

As note earier, a WTO member taking a omestimeasure that is inonsistent with one of the obigationsof the GATT nevertheess may be abe to ustify it ifthe measure ursues one of the oiy obetivesreognize uner Artie XX an is otherwiseonsistent with the other requirements of thatrovision. Artie XX aows, among other things,measures that are “neessary” to rotet ubi morasor to rotet human, anima or ant ife or heath.Uner the aroah foowe by some anes uringthe GATT, a measure wou be onsiere to be“neessary” ony if there were no aternative measures




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onsistent with the GATT, or ess inonsistent with it,that the member taking the measure ou beeete to emoy to ahieve the reevant oiyobetive see GATT Pane Reort, US – Section 337

Tariff Act , ara. .2 an GATT Pane Reort, Thailand

– Cigarettes, ara. 7.

The Aeate oy has taken a more nuanearoah to neessity. The etermination of“neessity”, as artiuate by the Aeate oy,invoves a weighing an baaning of the reativeimortane of the interests or vaues furthere by thehaenge measure an other fators, whih wouusuay inue the ontribution of the measure to thereaization of the ens ursue by it an therestritive imat of the measure on internationatrae. If this anaysis yies an affirmative onusion,the neessity of the measure must be then onfirme

by omaring the measure with ossibe essrestritive aternatives. The buren of ientifying essrestritive aternatives is on the omaining arty. Toquaify as an aternative, the measure must aow theresonent member to ahieve the same eve ofrotetion an must be reasonaby avaiabe – theresoning member must be aabe of taking it anthe measure may not imose an unue buren onthat member, suh as rohibitive osts or substantiatehnia iffiuties – taking into aount the eve ofeveoment of the member onerne Aeateoy Reort, Brazil – Retreaded Tyres , aras. 13

an 1.

In aorane with Artie . of the P Agreement,a WTO member estabishing or maintaining Pmeasures to ahieve the aroriate eve of sanitaryor hytosanitary rotetion must “ensure that suhmeasures are not more traerestritive than requireto ahieve their aroriate eve of sanitary orhytosanitary rotetion, taking into aount tehniaan eonomi feasibiity”. ootnote 3 to Artie .arifies that “a measure is not more traerestritivethan require uness there is another measure,reasonaby avaiabe taking into aount tehnia an

eonomi feasibiity, that ahieves the aroriateeve of sanitary or hytosanitary rotetion an issignifianty ess restritive to trae”. The assessmentesribe in footnote 3 ou be unerstoo as a tyeof ostbenefit anaysis.

In Australia – Salmon , the Aeate oy state thatArtie . rovies a threeronge test. Theomaining arty must rove that there is anothermeasure that: i is reasonaby avaiabe, takinginto aount tehnia an eonomi feasibiity;ii ahieves the member’s aroriate eve of sanitaryor hytosanitary rotetion; an iii is signifiantyess restritive to trae than the P measureonteste. These three eements are umuative in thesense that, to estabish an inonsisteny with Artie., a of them have to be met:

“If any of the eements is not fufie, themeasure in isute wou be onsistentwith Artie .. Thus, if there is noaternative measure avaiabe, taking intoaount tehnia an eonomi feasibiity,

or if the aternative measure oes notahieve the Member’s aroriate eve ofsanitary or hytosanitary rotetion, or if itis not signifianty ess traerestritive,the measure in isute wou be onsistentwith Artie .” Aeate oy Reort,

Australia—Salmon , ara. 19.

In Australia – Apples, the Aeate oy ae that, inetermining whether the first two of these onitionshave been satisfie whether there is a measure that isreasonaby avaiabe, taking into aount tehnia aneonomi feasibiity, an ahieves the member’s

aroriate eve of sanitary or hytosanitaryrotetion, a ane must fous its assessment on theroose aternative measure. Ony in eaminingwhether the thir onition is fufie wi a ane neeto omare the roose aternative measure with theonteste P measure Aeate oy Reort,

Australia – Apples , WT/37/A/R, at ara. 337.

Mareau an Trahtman 29 suggest thatArtie . of the P Agreement, as interrete,wou seem to invove a baaning eerise simiar tothe one esouse by the Aeate oy in reation to

the assessment of neessity uner Artie XX of theGATT. One ifferene they ientify is that, unike theassessment of neessity uner Artie XX of theGATT, the evauation uner Artie . of the PAgreement wou not inue onsieration of theegree of the measure’s ontribution to the enursue.

or its art, Artie 2.2 of the TT Agreement roviesthat “Members sha ensure that tehnia reguationsare not reare, aote or aie with a view to orwith the effet of reating unneessary obstaes tointernationa trae. or this urose, tehnia

reguations sha not be more traerestritive thanneessary to fufi a egitimate obetive, taking aountof the risks nonfufiment wou reate. uh egitimateobetives are, inter alia: nationa seurity requirements;the revention of eetive raties; rotetion ofhuman heath or safety, anima or ant ife or heath, orthe environment. In assessing suh risks, reevanteements of onsieration are, inter alia: avaiabesientifi an tehnia information, reate roessingtehnoogy or intene enuses of routs”.

The anes in US – Clove Cigarettes, US – Tuna II

(Mexico) an US – COOL eah aresse aninterrete Artie 2.2 of the TT Agreement. esitethe ifferenes in the anes’ anayses, there are someommon eements that an be iserne in theiraroahes.




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A three anes interrete this rovision as requiringan enquiry regaring the foowing eements:i whether the measure at issue ursues a egitimateobetive; ii whether the measure at issue fufis, orontributes to the ahievement of, the egitimate

obetives, at the eve the member eemearoriate; an iii whether there is a ess traerestritive aternative means of ahieving the sameeve of rotetion. Moreover, in a three isutes, theUnite tates, as the resonent, onsistenty arguethat the urisruene reating to Artie XX of theGATT 199 was not reevant in interreting Artie 2.2of the TT Agreement, an that instea anes shourey on Artie . of the P Agreement an its

urisruene see above. None of the three anesaete the U argument in toto. Rather, they rewuon the Aeate oy’s urisruene on Artie XXof the GATT 199 in varying egrees, for their anaysis

uner Artie 2.2. The anes in US – Tuna II (Mexico)an US – COOL aso reie on Artie . of theP Agreement an its reate urisruene ininterreting Artie 2.2.

The three anes, however, aote ifferent stanarsfor the iniviua eements of the test. or the ane inUS – Clove Cigarettes, the first ste uner an Artie2.2 anaysis requires an eamination of whether themeasure itsef is neessary to fufi the egitimateobetives. orrowing from the Aeate oy’sinterretation of “neessary” uner Artie XX of theGATT 199, the ane observe that a measure must

make a “materia ontribution” to the fufiment of theegitimate obetive for it to be onsiere “neessary”for the uroses of Artie 2.2.

Having foun that Inonesia faie to emonstrate thatthe U measure at issue makes no “materiaontribution” to the state obetive, the ane turne tothe seon stage of its anaysis – the ientifiation of aess traerestritive aternative – aoting the testeveoe by the Aeate oy uner Artie XXb inBrazil – Retreaded Tyres. The ane onue thatInonesia, by “merey isting two ozen ossibeaternatives”, ha faie to estabish a prima facie ase.

Moreover, reying again on the Aeate oy Reort inBrazil – Retreaded Tyres, the ane sai that even if a

prima facie ase was estabishe, the Unite tatesrebutte it by highighting that severa of the a ternativesroose were areay in ae in the Unite tates.

The ane in US – Tuna II (Mexico) aote a ifferentaroah. In its view, Artie 2.2 oes not require thatthe measure itsef be neessary for the fufiment ofthe egitimate obetive. Instea, it requires that thetrae restritiveness of the haenge measure beneessary for the fufiment of the obetive. The anenote that Artie 2.2 iffers from Artie XXb an of the GATT 199, whih require that the measure beneessary. esite this observation, as a first ste, theane embarke on an assessment of the manner inwhih, an the etent to whih, the measures at issue

fufi their egitimate obetives, taking into aount theWTO member’s hosen eve of rotetion. Here,however, the ane’s anaysis iffers from the oneonute by the ane in US – Clove Cigarettes, as itfouse not on “materia ontribution”, but on the

“manner an etent” to whih the U “ohinsafe”abeing rovisions fufi the obetives ientifie bythe Unite tates.

Having foun that the measures have the aabiity toontribute to the fufiment of these obetives, theane eamine whether there is a ess traerestritive aternative measure that ahieves the sameeve of rotetion.

In US – COOL, the ane fouse eusivey onwhether the U measure fufis its state obetive,even though its interretation of Artie 2.2 envisage

other stes to be assesse, suh as an eamination ofwhether the measure at issue is “more traerestritive” than neessary base on the avaiabiity ofess traerestritive aternative measures that ouequay fufi the ientifie obetive. Here too, theane reie uon the Aeate oy’s urisrueneon Artie XX , observing that a measure an be sai toontribute to the ahievement of its obetives whenthere is a “genuine reationshi of ens an means”between the obetive an the measure. However,having foun that the measure oes not fufi theobetive it ha etermine the Unite tates to beursuing through its measure, the ane i not assess

the avaiabiity of ess traerestritive aternativemeans of ahieving that obetive.

As note above, the aeate roeeings in US –Clove Cigarettes have onue. However, the ane’sfinings on Artie 2.2 of the TT Agreement were notaeae an thus were not aresse by theAeate oy in that ase.

The Aeate oy interrete Artie 2.2 of the TTAgreement in US – Tuna II (Mexico), esribing theassessment require uner that rovision as foows.irst, a ane must assess what obetive s a member

seeks to ahieve by means of a tehnia reguation.In oing so, it may take into aount the tets ofstatutes, egisative history, an other evieneregaring the struture an oerat ion of the measure.A ane is not boun by a member’s haraterizationof the obetives it ursues through the measure, butmust ineenenty an obetivey assess them.ubsequenty, the anaysis must turn to the questionof whether a artiuar obetive is egitimate ara.31. Moreover, a ane must onsier whether thetehnia reguation “fufis” an obetive. This is aquestion onerne with the egree of ontributionthat the tehnia reguation makes towars theahievement of the egitimate obetive.onsequenty, a ane auiating a aim unerArtie 2.2 of the TT Agreement must seek toasertain to what egree, or if at a, the haenge




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Regan has what he onsiers is a more imortantobetion. He oes not beieve that the WTOauiatory boies have the authority to uge thereative imortane of various nonrotetionist goasthat WTO members might wish to ursue an onsiers

that, if this were inee one, it wou be a seriousintrusion into members’ reguatory autonomy. Reganeains that the avantage of a “ess restritiveaternative” test – the test he thinks the Aeateoy has atuay aie – is that it oes not requiremaking suh ugments, but rather is imite tobaaning the trae osts against aministrative/enforement osts as oose to the ahievement ofthe unerying goa.

(v) International standards

As isusse in etion .1 an etion .2, reguatory

ivergene may resut in higher osts for rouers,eorters an imorters. The WTO is not a stanarsetting boy. The rinia means through whih theWTO romotes reguatory onvergene is byenouraging its members to use internationastanars. Neither the TT Agreement nor the PAgreement, however, requires a WTO member to useinternationa stanars. WTO members may aotP measures or tehnia reguations that eartfrom internationa stanars.

Artie 3.1 of the P Agreement rovies that “toharmonize sanitary an hytosanitary measures on as

wie a basis as ossibe, Members sha base theirsanitary or hytosanitary measures on internationastanars, guieines or reommenations, where theyeist”. Artie 3.3, however, aows WTO members tointroue P measures whih resut in a higher eveof P rotetion than wou be otherwise ahieveby measures base on internationa stanars,rovie that there is sientifi ustifiation or as aonsequene of the eve of P rotetion that amember etermines to be aroriate.

The ega inentive for harmonization is that, unerArtie 3.2 of the P Agreement, measures base on

internationa stanars are eeme to be neessary torotet human, anima or ant ife or heath anresume to be onsistent with the reevant rovisionsof the P Agreement an the GATT. Yet, it is imortantto note that, even where a WTO member hooses not tobase its P measure on an internationa stanar, nonegative resumtion attahes to that measure. If themeasure is haenge in WTO isute settement,the omaining member must emonstrate that themeasure is inonsistent with the P Agreement. It isnot enough to show that the P measure is not baseon the internationa stanar Aeate oy Reort,EC – Hormones, aras. 12 an 171.

In the ase of tehnia reguations, Artie 2. of theTT Agreement rovies that where “reevantinternationa stanars eist or their ometion is

imminent”, WTO members “sha use them, or thereevant arts of them, as a basis for their tehniareguations”. Nevertheess, Artie 2. aows WTOmembers to eart from an internationa stanar,even when suh a stanar areay eists, if “suh

internationa stanars or reevant arts wou be anineffetive or inaroriate means for the fufiment ofthe egitimate obetives ursue, for instanebeause of funamenta imati or geograhiafators or funamenta tehnoogia robems”.

imiary to P measures, there is a ega inentivefor using an internationa stanar in rearing atehnia reguation. Artie 2. of the TT Agreementstates that, where the tehnia reguation ursuesone of the egitimate obetives reognize uner theAgreement an is in aorane with reevantinternationa stanars, it sha be rebuttaby resume

not to reate an unneessary obstae to internationatrae. As with P measures, there is no negativeresumtion when a WTO member hooses not to usean internationa stanar as a basis for a tehniareguation. If that tehnia reguation is haenge inWTO isute settement, the omaining membermust emonstrate that the internationa stanar orreevant arts wou be effetive or aroriate meansfor the fufiment of the egitimate obetives ursueAeate oy Reort, EC – Sardines , ara. 27.

The P Agreement eressy reognizes threeinternationa stanarsetting boies: the oe

Aimentarius ommission, the Internationa Offie ofizootis now ae the Wor Organization forAnima Heath – OI an the eretariat of theInternationa Pant Protetion onvention IPP. ormatters not overe by these three organizations, theP Agreement eaves oen soe for “aroriatestanars … romugate by other reevantinternationa organizations oen for membershi toa Members, as ientifie” by the WTO’s Pommittee.

The TT Agreement oes not seify whih boiesmay issue “reevant internationa stanars”. The

subet of “naming” or not naming boies uner theTT Agreement has ome u for isussion in theontet of ongoing negotiations in the oha Rounon nonagriutura market aess. Here, the WTOmembershi is ivie into two ams but for now theboies are not iste.

One grou of WTO members argues that reevantinternationa stanarizing boies shou be eiityname. ine the goa of the TT Agreement itsef isone of romoting harmonization, this very obetive, itis argue, wi be imee if mutie stanarsettingorganizations oeist, reating uiative anossiby ontraitory requirements. In a ontetwhere reguators are strongy enourage to basetheir measure on internationa stanars, ometitionbetween stanarsetting boies wi ea to




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fragmentation of markets, unneessary omianeosts an even ature of reguators by rotetionistinterests. The oosite nees to be ahieve: oseooeration, greater inusiveness an sharing ofgovernane at the internationa eve. ousing the

eveoment of stanars use for reguatoryuroses within a few internationa boies wiinentivize a broa artiiation by stakehoers, inartiuar inustry, thus ensuring market reevanean refeting tehnoogia eveoments O/MA/1 an O/MA/.

It is further argue that naming the reevantinternationa stanarsetting boies wou faiitateartiiation by eveoing ountries beause theseountries wi be better abe to rioritize sareresoures. oowing on from this, an inrease inartiiation by eveoing ountries wi he ensure

that stanars reflet the wiest interests ossibe,thus roviing greater egitimay an goba reevaneto the internationa stanar itsef O/MA/1 anO/MA/.

Another grou of WTO members argues the oosite:internationa stanarizing boies shou not bename beause whether a stanar is reevant,effetive an aroriate in fufiing a member’sartiuar reguatory or market nee eens on thestanar itsef, not on the boy that eveoe thestanar. They argue that Artie 2. of the TTAgreement inks the reevane of a “stanar” to the

obetive ursue; the term “reevant” is not inke tothe boy. urthermore, they suggest that byesignating a artiuar boy as a “reevantinternationa stanarizing boy”, WTO memberswou essentiay be enorsing a stanars that suhboies roue without reviewing their ontent, evenin ases where the stanar might not reflet theinterests of a members, or, isroortionatey refletsthose of ony a few G/TT/W/13.

It is aso argue that a imite number of name boiesannot roue the breath an iversity of stanarsneee to fufi a of the reguatory an market nees

that are the urview of the TT Agreement.37 Instea,it is the iversity of boies that wi romote innovationan he ensure that stanars are of high quaity anreson to reguatory an market nees. Greaterharmonization wi resut from inrease use of suhstanars G/TT/W/13.

It is further argue that most boies rouing marketreevant stanars that are atuay use are rivatesetor entities that nee to over their own oststhrough the sae of stanars; naming boies woueiminate this soure of revenue an onentrateroees in a few hans. inay, naming boies wourener any stanar roue by a esignate boyas “reevant”, regaress of whether that stanar infat resons to the nees of eveoing ountries,an this wou ounterat the goa of romoting the

eveoment of stanars to meet the iverse neesof eveoing ountries G/TT/W/13.

esite these ifferent views, neither “am” isutesthe imortane of using internationa stanars as a

means of reuing unneessary nontariff measures,an a WTO members agree on the imortane ofahering to the 2 TT ommittee eision thatsets out si rinies an roeures eision of theTT ommittee on Prinies for the eveoment ofInternationa tanars, Guies an Reommenationswith Reation to Arties 2, an Anne 3, G/TT/1/Rev.9, . 3.3 This eision was reenty reognizeas having interretative vaue as a “subsequentagreement” within the meaning of Artie 313a of theVienna onvention on the Law of Treaties Aeateoy Reort, US – Tuna II (Mexico, ara. 372.

An issue that ame u in WTO isute settement iswhether an internationa stanar ha to be aoteby onsensus in orer to be a “reevant internationastanar” uner Artie 2. of the TT Agreement. Theanatory Note to the efinition of “stanar” in theTT Agreement states that “stanars reare by theinternationa stanarization ommunity are base ononsensus”. It then as that the TT Agreement“overs aso ouments that are not base ononsensus”. This anguage was interrete in EC –Sardines as aying aso to internationa stanars.The Aeate oy onfirme the ane’s fining thatthe efinition of a “stanar” in Anne 1.2 to

the TT Agreement oes not require arova byonsensus for stanars aote by a “reognizeboy” of the internationa stanarization ommunity.

The Aeate oy went on to arify that its ruing wasreevant ony for the uroses of the TT Agreement.urthermore, it sai that the ruing was not intene toaffet, in any way, the interna requirements thatinternationa stanarsetting boies may estabish forthemseves for the aotion of stanars within theirresetive oerations. As the Aeate oy ut it, “thefat that we fin that the TT Agreement oes notrequire arova by onsensus for stanars aote by

the internationa stanarization ommunity shou notbe interrete to mean that we beieve an internationastanarization boy shou not require onsensusfor the aotion of its stanars. That is not for us toeie” Aeate oy Reort, EC – Sardines,aras. 222 an 227.

The question of what onstitutes an “internationastanar” for the uroses of the TT Agreement wasmore reenty isusse in US – Tuna II (Mexico). The Aeate oy note that, with reset to the tyeof entity aroving an “internationa” stanar, theIO/I Guie 2: 1991 refers to an “organization”,whereas Anne 1.2 to the TT Agreement stiuatesthat a “stanar” is to be arove by a “boy”. However,the Aeate oy observe that the TT Agreementestabishes that the efinitions in that Agreement




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revai over the efinitions in the IO/I Guie 2: 1991.onsequenty, the Aeate oy he that in orer toonstitute an “internationa stanar”, a stanar has tobe aote by an “internationa stanarizing body ” forthe uroses of the TT Agreement.

The Aeate oy further eaine that a requireeement of the efinition of an “internationa” stanarfor the uroses of the TT Agreement is the arovaof the stanar by an “internationa stanarizingboy”, that is, a boy that has reognize ativities instanarization an whose membershi is oen to thereevant boies of at east a WTO members. TheAeate oy aitionay observe that the onetof “reognition” has both a fatua an normativeimension. A boy with “reognize ativities instanarization” oes not nee to have stanarizationas its rinia funtion, or even as one of its rinia

funtions. At the same time, the fatua imension ofthe onet of “reognition” wou aear to require,at a minimum, that WTO members are aware, or havereason to eet, that the internationa boy inquestion is engage in stanarization ativities. Ineamining whether an internationa boy has“reognize ativities in stanarization”, eviene ofreognition by WTO members as we as eviene ofreognition by nationa stanarizing boies wou bereevant. A stanarizing boy wi be onsiere oenif membershi to the boy is not restrite. Thestanarizing boy must be oen to the reevantboies of at east a WTO members an on a non

isriminatory basis. urthermore, it must be oen atevery stage of stanars eveoment.

Having rovie its views on the efinition of an“internationa stanar” for the uroses of the TTAgreement, the Aeate oy net onsierewhether the ohinsafe efinition an ertifiationontaine in the Agreement on the Internationaohin onservation Program AIP quaifie asone. The Aeate oy reverse the ane’s finingan he that AIP is not an “internationastanarizing boy” for the uroses of the TTAgreement beause aeing to it requires an

invitation by the arties, a eision that must be takenby onsensus, an the Aeate oy was notersuae that being invite to oin is a mere“formaity” aras. 39399.

The ane an Aeate oy reorts in US – Tuna II(Mexico) aso aresse the issue of whether the Uohinsafe abeing measures onstitute atehnia reguation or a vountary stanar. Thefinings on this issue are isusse in etion .3vi.

(vi) Regulating private conduct

The WTO agreements rimariy reguate governmentonut. Nevertheess, as isusse in etion .1,rivate onut an sometimes have effets equivaentto those of a governmentimose nontariff measure.

The intervention of some eement of rivate onutoes not neessariy mean that a WTO member isreieve of its resonsibiity to omy with itsobigations uner the WTO agreements. Thus, foreame, in Korea – Various Measures on Beef , there

was a reution in the number of retai outets forimorte beef that foowe from eisions ofiniviua retaiers who ou hoose freey to se theomesti rout or the imorte rout. TheAeate oy, however, eaine that the eganeessity of making a hoie – between seingomesti or imorte beef – was imose by thegovernment measures itsef. In suh irumstanes,“the intervention of some eement of rivate hoiei not reieve Korea of resonsibiity uner the GATT199 for the resuting estabishment of ometitiveonitions ess favourabe for the imorte routthan for the omesti rout” Aeate oy

Reort, Korea – Various Measures on Beef , ara. 1.

A simiar situation arose in the reent US – Tuna II(Mexico) isute, where the Aeate oyonsiere whether the etrimenta imat onMeian tuna routs resute from governmentintervention or was merey the effet of the rivatehoie of U onsumers. The Aeate oy hethat the moifiation of the onitions of ometitionan, hene, the etrimenta imat on Meian tunarouts resute from the haenge Ugovernment measure – that is, the U “ohinsafe”abeing rovisions. It base its fining on the fat

that it is the government measure that estabishesthe requirements uner whih a rout an beabee “ohinsafe” in the Unite tates. Moreover,whie U onsumers’ eisions whether to urhaseohinsafe tuna routs are the resut of their ownhoies, it is the government measure that ontrosaess to the abe an irumsribes how onsumersmay eress their referenes for “ohinsafe” tunarouts ara. 239.

The TT Agreement makes some inroas intoreguating nongovernmenta stanarsetting boiesas a resut of the ommitments reating to the oe of

Goo Pratie. The aiation of the oe to nongovernmenta stanarizing boies is eaine inetion .2.

Artie 1. of the TT Agreement is an interestingrovision in terms of attribution to a WTO member ofrivate onut. It states that the isute settementrovisions of the WTO an be invoke where a memberhas not ahieve satisfatory resuts uner ertainrovisions an the interests of another member aresignifianty affete. Artie 1. goes on to statethat “in this reset, suh resuts sha be equivaentto those as if the boy in question were a Member”.

The P Agreement aso requires WTO members to“take suh reasonabe measures as may be avaiabeto them to ensure that nongovernmenta entities




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within their territories … omy with the reevantrovisions of this Agreement”. It simiary states thatmembers must not take measures whih have theeffet of, irety or inirety, requiring or enouragingsuh nongovernmenta entities to at in a manner that

is inonsistent with the Agreement.

Given their inreasing use, rivate stanars havebeome a subet of growing attention. The issue ofrivate stanars was first raise in the Pommittee in 2. ommittee isussions onrivate stanars initiay fouse on three themes:market aess, eveoment an WTO aw. In thearea of market aess, WTO members iffer in theirviews on whether stanars are an oortunity orthreat to eorters. Many members are onernethat the ost of ertifiation, sometimes for mutiesets of stanars for ifferent buyers, an be a

robem, eseiay for smasae rouers anartiuary but not eusivey in eveoingountries. Members aso have iffering views as towhether rivate stanars fa uner the urisitionof the P Agreement. The onern that theroiferation of rivate stanars ou unerminesome of the rogress mae in reguating Pmeasures through the aotion an imementationof the P Agreement is at the root of theseivergent views.

esite the ak of onsensus on whether an howrivate stanars fit into the overa framework of the

P Agreement, the issue has been on the agena ofevery meeting of the P ommittee sine une2. In aition, the WTO eretariat has organizetwo informa information sessions on the toi, an thetanars an Trae eveoment aiity, a gobaartnershi that suorts eveoing ountries inimementing internationa P stanars, he aworksho on the issue in 2. The informationsessions an worksho rovie the oortunity fortwoway euation an awarenessraising: inreasingthe knowege an unerstaning of governmentreguatory offiias about the oeration of variousrivate stanar shemes an their obetives, whie at

the same time making the oerators of the rivateshemes aware of the onerns an effets of theseon eveoing ountries.

In Marh 211, the P ommittee agree to ursuefive ratia ations reommene by an a howorking grou39 on the issue of rivate stanars seeG/P/ an G/P/R/2. Whie WTO membersremain highy ivie as to whether rivate stanarsegay fa within the soe of the P Agreement, theommittee agree to eveo a working efinition ofrivate stanars reate to P measures, an toimit any isussions to rivate stanars ientifie inthe efinition. In aition, the ommittee agree thatinformation regaring the work of the threeinternationa stanarsetting organizationsreferene in the P Agreement oe, IPP an

OI as we as reevant eveoments in other WTOounis an ommittees shou be reguary share inthe ommittee. Members agree to euate reevantrivate setor boies in their ountries so that theyunerstan the issues raise in the P ommittee

an the imortane of the internationa stanars ofoe, IPP an OI. The ommittee aso agree toeore ooeration with these three boies ineveoing information materia unerining theimortane of internationa P stanars.

As note earier, one of the istintions rawn in theTT Agreement between a tehnia reguation an astanar is that omiane with the former ismanatory, whie omiane with the atter is not. Thereent ane in US – Tuna II (Mexico) ha to eiewhether the U ohinsafe abeing measures were“tehnia reguations” within the meaning of the TT

Agreement as argue by Meio or rather a vountarystanar as avoate by the Unite tates. The anehe that “omiane with rout harateristis ortheir reate roution methos or roesses is‘manatory’ within the meaning of Anne 1.1, if theoument in whih they are ontaine has the effet ofreguating in a egay bining or omusory fashion theharateristis at issue, an if it thus prescribes orimposes in a binding or compulsory fashion that ertainrout must or must not ossess ertainharateristis, terminoogy, symbos, akaging,marking or abes or that it must or must not be roueby using ertain roesses an roution methos”.

The aneists, however, isagree as to whether theU measures are manatory. The maority of the anefoun that the U abeing requirement is manatorybeause it i is egay enforeabe an bining unerU aw it is issue by the government an inuesega santions; ii resribes ertain requirementsthat must be omie with in orer to make any aimreating to the manner in whih the tuna ontaine inthe tuna rout was aught, in reation to ohins;an iii emboies omiane with a seifi stanaras the eusive means of asserting a “ohinsafe”status for tuna routs.

The issenting aneist note that “the measures onot imose a genera requirement to abe or not to abetuna routs as ‘ohinsafe’”. Rather, the use of theabe “remains a vountary an isretionary eision ofoerators on the market to fufi or not fufi theonitions that give aess to the abe, an whether tomake any aim in reation to the ohinsafe status ofthe tuna ontaine in the rout”. The aneist furtheretermine that Meio ha faie to emonstrate thatthe measures were de facto manatory, beause Meioha not estabishe “the imossibiity of marketing tunarouts in the Unite tates without the ‘ohinsafe’abe” an that “suh imossibiity arose from fatssuffiienty onnete to the U ohinsafe rovisionsor to another governmenta ation of the Unite tates”Pane Reort, US – Tuna II (Mexico), aras. 7.1117.1.




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The Aeate oy uhe the ane maority’s finingthat the U measure is a tehnia reguation subetto the isiines of Artie 2 of the TT Agreement.The Aeate oy note that the measure haengeby Meio is omose of egisative, reguatory an

uiia a ts of the U feera authori ties an inuesaministrative rovisions. The measure sets out asinge an egay manate efinition of a “ohinsafe” tuna rout an isaows the use of otherabes on tuna routs that use the terms “ohinsafe”, ohins, oroises or marine mammas that onot satisfy this efinition. In oing so, the U measureresribes in a broa an ehaustive manner theonitions that ay for making any assertion on atuna rout as to its “ohinsafety”, regaressof the manner in whih that statement is maeara. 199.

(vii) Transparency

Transareny is an imortant eement of a WTOagreements. etion .2 esribe some of the mostimortant transareny rovisions of the P an TTagreements, an eaine the eonomi rationae ofthe ehange of information among WTO members.

Transareny obigations are not frequenty the subetof WTO isute settement. However, in a reent ase,US – Clove Cigarettes, a vioation was foun of Artie2.12 of the TT Agreement, whih rovies that “eet in those urgent irumstanes …, Members sha

aow a reasonabe interva between the ubiation oftehnia reguations an their entry into fore in orerto aow time for rouers in eorting Members, anartiuary in eveoing ountry Members, to aattheir routs or methos of roution to therequirements of the imorting Member”. In aragrah.2 of the oha Ministeria eision, WTO membersagree that “the hrase ‘reasonabe interva’ in Ar tie2.12 of the TT Agreement sha be unerstoo tomean normay a erio of not ess than months,eet when this wou be ineffetive in fufiing theegitimate obetives ursue”.

The US – Clove Cigarettes ase onerne a tehniareguation aote by the Unite tates that ame intofore three months after it ha been ubishe. Aninitia question that was raise in the ase onernethe ega status of aragrah .2 of the ohaMinisteria eision. The Aeate oy reete theontention that aragrah .2 onstitute a mutiaterainterretation of the TT Agreement aote inaorane with Artie IX:2 of the WTO Agreement.The reason for this was that aragrah .2 ha notbeen aote ursuant to a reommenation of theouni on Trae in Goos – the ouni thatsuervises the TT Agreement, as require by ArtieIX:2 of the WTO Agreement.

As the ane ha one, the Aeate oy onsierethat aragrah .2 has interretive vaue beause it

onstitutes a subsequent agreement between thearties, within the meaning of Artie 313a of theVienna onvention on the Law of Treaties, on theinterretation of the term “reasonabe interva” inArtie 2.12 of the TT Agreement. It then foun that,

rea in the ight of aragrah .2, Artie 2.12 of theTT Agreement “estabishes a rue that ‘normay’rouers in eorting Members require a erio of‘not ess than months’ to aat their routs orroution methos to the requirements of animorting Member’s tehnia reguation”.

The Aeate oy further eaine that one it isshown that the WTO member aoting a tehniareguation has not aowe a erio of at eastsi months between the ubiation an the entry intofore of that tehnia reguation, suh a memberarries the buren of emonstrating that a shorter

erio was ustifie beause i the “urgentirumstanes” referre to in Artie 2.1 of theTT Agreement surroune the aotion of thetehnia reguation; ii rouers of the omainingmember ou have aate to the requirements of thetehnia reguation within the shorter interva that itaowe; or iii a erio of “not ess than” si monthswou be ineffetive to fufi the egitimate obetivesof its tehnia reguation. In this artiuar ase, it wasfoun that the Unite tates ha faie to estabishthat any of the abovementione irumstanes ust ifie a erio shor ter than si months Aeateoy Reort, US – Clove Cigarettes , aras. 2, 2,

an 29.

Issues reating to the GAT

The rinia isiines on measures affeting traein servies are simiar to those aying to nontariffmeasures for goos trae. These servies isiinesfous on MN Artie II, market aess Artie XVIan nationa treatment Ar tie XVII. However, nationatreatment uner the GAT is signifianty ifferentfrom that in goos trae, sine it aies ony to thesetors for whih ommitments have been taken, anan be mae subet to imitations. Thus, the nationa

treatment obigation in servies annot be viewe as ameans to urb oiy substitution. Rather, by requiringthat imitations on market aess an nationatreatment be subet to sheuing, the Agreementseeks to onstrain the trae imiations of thesemeasures in the same way that tariffs are boun unerthe GATT.

The GAT has a very broa soe, whih resuts fromthe four moes of suy that onstitute trae inservies. Moreover, unike traitiona trae agreements,the GAT is rimariy onerne with internameasures. What matters in servies trae is often theovera eve of ontestabiity of the market to new aneisting entrants, an not ust its oenness to foreignsuiers. The breath of the GAT is aso reflete bythe wie range of measures within its soe. In




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assoiate with the reent finania risis an thenee to aress imate hange. ome of thehaenges are isusse beow.

The rues of the GATT were esigne for a wor in

whih internationa trae reominanty onsiste oftrae in fina goos an rimary ommoities. However,the moern eonomi environment has grown moreome as roution networks san borers. Thesehanges ose haenges for governane, as the kinsof robems that arise in a wor of offshoring requirerethinking the urrent market aess base frameworkof the mutiatera traing system.

As Antràs an taiger 211, 212 have argue, eerather than shaow integration is neee to sove thetye of oiy robems assoiate with theroiferation of goba roution hains. eifiay,

the theory outine in etion .1b suggests that ifrouers are oke into trae reationshis withforeign firms, governments must onsier not onymarket aess but aso the ustream an ownstreameffets of their measures. One ossibiity to aountfor these nees is that WTO rues ou be ameneor reinterrete to aow nonvioation omaints toover “intrafirm market aess”. This wou requireeaning nonvioation omaints to over “benefits”aruing not ony from the agree market aess, butfrom the range of oiies that affet the bargainingreationshi between the inut suier an theurhaser of those inuts. uh a hange wou

neessitate signifiant eartures from urrentratie an oen haenging questions oninstitutiona esign. Part of the haenge ies inistinguishing between those situations in whihinustries set ries through bargaining rather thanometitivey. Trae rues wou have to reflet suhsetora ifferenes.

Litte work on the theory of trae agreements uneroffshoring has attemte to evauate the substantiveimortane of rie formation through bargaining,making it iffiut to etermine the nee for aninstitutiona resonse taiger, 212. As a first ste

towars a test of the theory, etion .2 eaminesthose setors that have a higher share of trae inintermeiate goos. Whie not ientia to offshoringan biatera bargaining, the resene of intermeiategoos is iniative of the kins of internationa suyhains that wou be subet to bargaining over riesan therefore rofits.

The statistia anaysis fins, however, that the shareof intermeiate goos is negativey assoiate withthe amount of trae overe by seifi trae onernsan by etension the amount of trae affete bynontariff measures. This iniates either that theinentive to use NTMs to shift firm rofits is ominateby other onsierations suh as the esire to make anattrative environment for goba roution, orossiby that governments have areay aresse this

issue in eisting “ee integration” referentia traeagreements see Wor Trae Organization WTO,211. ven if PTAs romote ee integration, thehaenge for the WTO is to ensure oherene amongivergent reguatory regimes that in ratie may

segment markets an raise trae osts.

hanges in internationa markets o not ony arisefrom ifferenes in how businesses organize. It is asoikey that the use of nontariff measures wi beresonsive to a number of foreseeabe trens in thegoba eonomi environment. etion highightsthree areas in whih eonomi hanges reate newhaenges for the reguation of NTMs. These are theway foo is roue an onsume, the entra roeof internationa finane in the eonomy an ineonomi rises, an the funamenta haenges ofimate hange. ah of these fators is of onern for

governments seeking to romote a reguatoryenvironment that rotets broa onsumer ansoieta interests, whih may however have an imaton trae.

The inreasingy gobaize agrifoo system showshow organizing an reguating goba suy hainsinvoves business, government an onsumer interests.etion argues that as onsumers’ stanars rise,there is a greater nee for businesses to manage theirsuy hains an for governments to ensure theesire eve of quaity an safety. This effort is

omiate by the ever eaning internationaizationof foo roution, an the iffiuty in traingrouts that hange hans very quiky an traversemutie urisitions.

Internationa finane servies are simiary omean fast moving, but ay a entra roe in the gobaeonomy. In this environment, haenges to finaniamarkets threaten the stabiity of entire eonomies.When rises arrive, governments use a variety ofmeasures to ontain the systemi amage an toboost onsumer eman. At the same time, eonomirises are assoiate with inrease emans for

rotetionist oiies that stabiize the omestieonomy at the eense of other ountries, fueingeonomi tension. This haenge is artiuaryreevant in ight of the aarent institutiona faiures ofthe 2 finania risis an the subsequent gobaeonomi reession.

Whie the reession itsef reates oitia haengesfor internationa ooeration in genera, theonentration an severity of the risis in ountrieswith sohistiate reguatory regimes an oen aitaaounts may erai efforts to harmonize reguationsin the finania servies setor. As finania servies

ontinue to make u a arge ortion of the eonomy ofmany ountries, faiitating trae in these servies mayrequire aitiona mehanisms to oorinate risisresonse.




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inania rises, whie harmfu, have haene before,an have imite ifesans. imate hange, on the otherhan, auses both goba an ongasting effets. Theisussion of imate hange in etion emhasizesthe haenge of baaning egitimate onerns about

arbon eakage with an equitabe istribution of theosts of arbon ioie abatement. As governmentsinreasingy attemt to reguate arbon emissions, artof the isussion inevitaby revoves aroun the traeimiations of these measures.

b Poiy feibiity: tensions betweenaw an eonomis

When governments bin tariffs an ommit to a eve ofmarket aess, their artners may worry that measuresto aress omesti onerns may in fat irumventthe obigations in the agreement. One way that urrent

rues of the WTO enabe governments to emoy ubioiy oriente measures is by aowing nonvioationomaints, as esribe in etion .1. Nonvioationomaints aow WTO members to be “omensate”after one of their traing artners estabishes a traeatering nontariff measure by withrawing onessionsto rebaane the eve of market aess. This remeyonfers a high egree of omesti oiy fleibiity toWTO members, in ine with their internationaommitments. It might serve to enourage onfienein the vaue of a trae negotiation an isouragesgovernments from using NTMs to renege onommitments. In ratie, however, WTO members

generay o not invoke nonvioation omaints intrae isutes.

evera reasons have been avane to eain whyomaints base on nonvioation aims are rare. Oneis that the Uruguay Roun agreements reue thesoe for nonvioation ases beause GATT/WTOaw beame “more an more omrehensive anomete”, shrinking “the ega vauum aroun GATT… in artiuar with reset to subsiization”, whihwas the target of most of the nonvioation aimsursue uring the GATT years Kuier, 199.Another reason that has been ut forwar is that thereremain a number of ambiguities onerning theeements that a omainant must satisfy for its aimof nonvioation to suee.

A nonvioation omaint is usuay unerstoo torotet the eetations of a WTO member “benefitsaruing to it irety or inirety uner the reevantovere agreement” Roesser an Gaah, 2.Nevertheess, questions have been raise as toreisey whih eetations are rotete an whenthose eetations an be sai to have beenfrustrate. inay, the remey avaiabe when a nonvioation omaint is suessfu is weaker than theremeies avaiabe in ases of vioation. In the firstase, the resoning arty is not uner an obigationto withraw the measure. Instea, the resonentmember must “make a mutuay satisfatory

austment”, whih may inue omensation seeArtie 21 of the isute ettement Unerstaning.

Uner the isute ettement Unerstaning U,WTO members are not generay require to show that

a nontariff measure atuay harms market aess.Instea, members generay haenge the NTM on thebasis of the seifi rue it aegey vioates. There is,therefore, a tension between the eonomi framework,whereby rebaaning an be use to onfer oiyfleibiity, an the ega framework whih reies on“ear infringement” of a GATT rovision. Moreover, theinfringement rinie eaerbates the robemregaring the asymmetri aiation of the nonvioation rue esribe in etion .1.

Ieay, a government ou effiienty orret aomesti market faiure by using a nontariff measure

without being ause of vioating the agreement soong as this measure is baane with a tariffaustment so as not to ater overa onessions totraing artners. As interrete, however, GATT ruesreue this form of reaustment. Aressing thisasymmetry wou, at a minimum, require reinvigoratingthe nonvioation rues to over market aess, butsevera aitiona robems ou arise. taiger anykes 211 iniate that a requirement to maintainbaane in market aess, whie imiting oiysubstitution, wou isourage eonomiay esirabereguation for fear of santions by foreign governments.Whie this inentive ou be imite by aibrating the

aowe resonse, ahieving baane wou be iffiut,artiuary as the wefare effets of reguatory oiyare often iffiut to measure.

Inreasingy, the WTO membershi aresses nontariff measures an omesti reguation in servies byusing one of two toos, harmonization or mutuareognition isusse in etion an etion .1.Harmonization sets both ommon oiy obetivesan the measures neee to ahieve them, whiemutua reognition refers to the reiroa aetaneof the measures aie in both ountries.

In the oiy areas overe by either kin of agreement,harmonization an mutua reognition reue theisriminatory effets of nontariff measures, but eahhas a ifferent effet on trae. etion argues thatthe eonomi theory on the reative trae effets ofharmonization an mutua reognition oes notiniate a genera avantage of one rue over the otherin terms of trae flows. Looking to atua ratie, theemiria anaysis in Aeni of etion iniatesthat mutua reognition rovisions aear to be moretrae enhaning than harmonization rovisions.

eyon the trae effets, etion .1 iniates thatgovernments may set ooser than otima reguations ifa mutua reognition rue ensures aess to foreignmarkets. This means that, even if trae is enhane,there are otentia onsequenes for onsumer




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to enoune traing artners for fear of retaiation.Thiry, other mehanisms may have taken the ae ofreverse notifiations.2

If notifiations fa short in terms of roviing

information, what about the WTO’s Trae PoiyReview Mehanism an its monitoring reortsmentione earier? oth these transarenymehanisms rey on information from mutie souresan are thus ess eenent on the isosition of thegovernment imosing the measures. Trae oiyreviews eary reresent an imortant transarenymehanism but frequeny an omrehensiveness, inartiuar on the servies sie, are issues.3

As for the monitoring reorts, at the th WTOMinisteria onferene in eember 211, Ministersirete the monitoring mehanism to be ontinue

an strengthene. They have aso ommitte toomy with eisting transareny obigations anreorting requirements neee for the rearation ofthese monitoring reorts, an to ontinue to suortan ooerate with the WTO eretariat in aonstrutive fashion. The questions that remain to beanswere ertain to the quantity, quaity anaessibiity of the information oete for themonitoring reorts. At this stage, it is not ear howomrehensive their overage is, how muh it ou beeane an whether an when it an besystematiay oe an store in a atabase.

Another mehanism whih usefuy omementsnotifiations an the monitoring reorts is theisussion of “seifi trae onerns” in the P anTT ommittees. These isussions rovie anoortunity for mutiatera review that enhanes thetransareny an reitabiity of reguatory measuresovere by the TT an P agreements. ine theissues isusse reate to seifi measuresmaintaine by other WTO members, there is noinentive robem. Another avantage of thismehanism is that it overs onerns reate not onyto the measures themseves but aso to theirimementation.

There are two main imitations to the roe that theisussion of seifi trae onerns an ay. irstan foremost, ony P an TT measures areovere. eony, it is not ear that, even in theovere areas, a measures that vioate ommitmentswi be raise. or any onern to be raise, it firstnees to be ientifie by an eorter. It then nees tobe ommuniate to the government. inay, thegovernment nees to raise it at the WTO. This meansthat even if a onern is ientifie an ommuniateto the government, it may not be raise if, for eame,the government is afrai of rerisa.

The haenge, at this unture, is thus to imrove thequantity, the quaity, an the aessibiity of informationoete through ative an assive transareny

mehanisms, both on measures an on robemsassoiate with the measures. As far as theaessibiity is onerne, the situation wi imrovesignifianty if an when a the information notifie to,or oete by, the WTO eretariat is mae avaiabe

through the reenty aunhe Integrate TraeInteigene Porta ITIP.7

Imroving the quantity an quaity of information,however, is more iffiut. urther work in theommittees an through tehnia assistane wi nooubt ontinue to he imrove the ontribution of thenotifiation mehanism to transareny, but, given theinentive robem, this may not be enough. One otionmentione above is to emower the WTO eretariatwith the resoures neessary to ineenenty monitorgovernments an markets. Without a signifiantimrovement in the omiane an quaity of

notifiations, this wou be a very osty otion, whihwou have signifiant bugetary imiations for theWTO. The mobiization of aitiona resoures on asustainabe basis ou raise inentive issues.

Another otion, whih has hee imrove thetransareny of tariffs, is to make it easier for WTOmembers to omy with their transareny obigationsby aowing the WTO eretariat to use other reevantoffiia soures on a “no obetion” basis, if suhsoures are avaiabe. This otion, however, wi shiftthe inentive robem to other informationoetingagenies. inay, a thir otion is for members to enter

into biatera an/or uriatera negotiations over moreenforeabe transareny obigations in the same waythat negotiations have taken ae over the years torevam eisting rues or introue new ones.

eening on whih otion is aote to aress theinentive robem an to ensure that WTO mehanismsgenerate a suffiient eve of transareny, reiane oneterna soures to fi information gas may vary. Itseems ear, however, that at east in the short run, thesystem wi ontinue to benefit from other institutions’oetion efforts. As isusse, the WTO eretariatan other agenies have revame the eisting

internationa assifiation to faiitate the integrationof a avaiabe soures of nontariff measureinformation. rom this ersetive, the mutiagenyTransareny in Trae TNT initiative see etion wou have an imortant roe to ay in boosting theoetion an issemination of ata on nontariffmeasures an servies measures.

The TNT initiative ou be use by artners as anoortunity to ut in ae a sustainabe governanemehanism for transareny in nontariff measures.uh a governane mehanism wou nee to takeinto aount the entra roe that the WTO shou ayin this area. It wou rey rimariy on mutiatera anregiona institutions. Regiona seretariats anregiona banks, suh as the Latin Amerian IntegrationAssoiation ALAI or the Afrian eveoment




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ank, have areay mae substantia ontributions tothe ata oetion efforts an the InterAmerianeveoment ank has eresse interest in both ataoetion an anaytia work in the WesternHemishere. Whatever the moe aote, it wi

require substantia aaity buiing an assistane inview of the tehniaities. However, if inentives areroery taken into aount, there is no funamentareason why, in the ong run, information on NTMs anservies measures ou not be oete anisseminate in the same way as equay sensitiveinformation on other imensions of trae oiy.

The imortane of oiy rationae

As esribe in etion .3 , WTO agreements seek toisiine measures that istort trae whie reognizingWTO members’ right to take measures that ursue

egitimate ubi oiies on suh matters asenvironmenta rotetion, heath, an onsumersafety. rawing the ine between those measures thatshou be aowe an those that shou be forbienis often a iffiut eerise both with nontariffmeasures an omesti reguation in servies.

The basi aroah of the GATT is to aow omestireguatory measures rovie that they o notisriminate against the imorte routs nationatreatment obigation. One of the haenges that hasarisen in onnetion with nationa treatment onernsthe reevane an weight to be given to the rationae

or urose of the measure. or severa ommentators,whether or not the reguatory measure has arotetionist rationae or urose shou be theeisive riterion in a etermination of isriminationRegan, 23; Hue, 1993.

onsieration of the rationae for measures is a essfirmy sette aroah in the urisruene of theAeate oy, whih has mae it ear that the“broa an funamenta urose of Artie III is toavoi rotetionism in the aiation of interna taan reguatory measures” Aeate oy Reort,Japan – Alcoholic Beverages II , . 117.

The first sentene of Artie III:2 onerns tameasures that isriminate between “ike” routs. Itwou aear that there wou be itte soe foronsieration of the rationae for the measures unerthe Aeate oy’s interretation of this rovision,aoring to whih the rovision is vioate any timethe imorte rout is tae in eess of the ikeomesti rout Aeate oy Reort, Canada –Periodicals, . 19 The seon sentene of Artie III:2onerns ta isrimination between iretyometitive or substitutabe routs a broaerategory than “ike routs” uner the first sentene.

As a resut of the rossreferene to Artie III:1, theseon sentene of Artie III:2 has been interrete torequire the omaining arty to show that the imorte

an omesti ometitive or substitutabe routs arenot simiary tae “so as to affor rotetion to theomesti inustry”. The Aeate oy arifie thatthe “so as to affor rotetion” requirement “is not anissue of intent”, but rather “of how the measure in

question is aie” Aeate oy Reort, Japan – Alcohol ic Beverages II , . 272 At the same time, theAeate oy sai in the same ase that “athough itis true that the aim of a measure may not be easiyasertaine, nevertheess its rotetive aiation anmost often be iserne from the esign, thearhiteture, an the reveaing struture of the measure”Aeate oy Reort, Japan – Alcoholic Beverages II ,. 29. This referene to the “esign, the arhiteture,an the reveaing struture” of the measure has beenunerstoo by some as neessariy inuingonsierations reating to the rationae for the measure.

Artie III: onerns omesti reguatory measures. Itoes not inue a rossreferene to Artie III:1 antherefore the Aeate oy has sai that “aetermination of whether there has been a vioation ofArtie III: oes not require a searate onsierationof whether a measure “affors rotetion to omestiroution” Aeate oy Reort, EC – Bananas III ,ara. 21. Artie III: requires WTO members toaor imorte routs “no ess favourabe”treatment than that aore to ike routs ofnationa origin in reset of a omesti reguations.“No ess favourabe treatment”, in turn, has beeninterrete to mean that “the measure moifies the

onitions of ometition in the reevant market to theetriment of imorte routs” Aeate oyReort, Korea – Various Measures on Beef , ara. 137.

In a subsequent ase, EC – Asbestos, the Aeateoy mae two statements that an be rea as going inifferent iretions as to the reevane of the rationaefor the measure uner Artie III:. On the one han, theAeate oy sai that if there is ess favourabetreatment of the grou of ike imorte routs, thereis onversey “rotetion” of the grou of ike routs.This suggests that one a omainant hasemonstrate that the onitions of ometition have

been moifie to the etriment of the imorte routsthat is, “ess favourabe treatment”, there is no nee tomake a searate showing of rotetionist intent. On theother han, the Aeate oy ae that “a Membermay raw istintions between routs whih havebeen foun to be ‘ike’, without, for this reason aone,aoring to the grou of ‘ike’ imorte routs ‘essfavourabe treatment’“ Aeate oy Reort, EC –

Asbestos , ara. 1. This statement has beenunerstoo by some as aowing for istintionsbetween imorte an omesti routs that are notmotivate by rotetionist uroses.

Another evie that has been use in WTO isutesettement to assist in istinguishing ermissibe nontariff measures from imermissibe ones is a baaningtest. This test has been use in the ontet of




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assessing a resonent member’s assertion that itsmeasure is ustifie uner the genera eetions ofArtie XX of the GATT an artiuary that themeasure is “neessary” to rotet human, anima orant ife or heath uner subaragrah b.

As eveoe by the Aeate oy, the eterminationof “neessity” invoves a weighing an baaningroess that begins with an assessment of the reativeimortane of the interests or vaues furthere by thehaenge measure, an aso invoves an assessmentof other fators, whih wi usuay inue theontribution of the measure to the reaization of theens ursue by it an the restritive imat of themeasure on internationa trae. If this anaysis yies areiminary onusion that a measure is neessary,this must be then onfirme by omaring the measurewith ossibe ess restritive aternatives. The buren

of ientifying ess restritive aternatives is on theomaining arty. urthermore, in orer to quaify asan aternative, the measure must aow the resonentmember to ahieve the same eve of rotetion anmust be reasonaby avaiabe Aeate oy Reort,Brazil – Retreaded Tyres , aras. 13 an 1.

The reevane of the urose of a measure for theassessment of isrimination an of the baaning testfor assessing “neessity” have ome u in three reentisutes uner the TT Agreement. As note inetion .3, in US – Clove Cigarettes , the Aeateoy interrete Artie 2.1 of the TT Agreement as

not rohibiting etrimenta imat on imorts thatstems eusivey from a egitimate reguatoryistintion Aeate oy Reort, US – CloveCigarettes, aras. 112.

The eonomi theory reviewe in etion hasisusse a number of ways that an he to ientifysituations in whih governments may be more ikey toemoy nontariff measures for ometitivenessreasons rather than the state ubi oiy rationae.9 These inue an anaysis of the effiieny aniniene of the measure in question, an the wiersetora an oitia ontet that may aso inform the

hoie of a artiuar measure.

In etion .1, it was foun that assuming a ar tiuarubi oiy goa, ifferent measures an be ranke interms of their eonomi effiieny. Governments thatfai to use the most effiient measure may be subetto institutiona an oitia ressures that enouragethe aotion of measures for ometitiveness reasons.or eame, in orer to rovie assurane toonsumers as to the resene or absene of ertainharateristis of a rout, a ban or a abeingsheme ou be emoye. Provie theharateristis are not artiuary harmfu, the at ter issuerior from an eonomi oint of view, as it oes notartifiiay imit onsumer hoie. In ratie, the mosteffiient instrument may not aways be easy toetermine. It strongy eens on the artiuar ubi

oiy onern an market onitions, an it istherefore iffiut to estabish a genera ranking ofaternative measures. Athough quantitativerestritions rarey onstitute a firstbest oiy, animort ban may be otima if the osts of aquiring

reevant information or the risks assoiate withonsumtion of the rout are etraorinariy high.

The reative iniene of a ubi oiy measure ononsumers an rouers at home an abroa anaso be teing in reset of a ossibe ometitivenessrationae. or instane, in etion .2, it has beenmentione that rofitshifting in a situation ofoffshoring an biatera bargaining might ea agovernment to hange environmenta taes from theireffiient eves in orer to maimize nationa wefare,with the buren being share between omestionsumers an foreign rouers. In ratie, the

iniene of a oiy may be iffiut to measure, an itan be instrutive to gather eviene on the emanfor ubi oiy instea in orer to gauge the reativeinfluene of omesti rouers an to ut traeeffets into ersetive.1

ertain features of the setor in question, whie notmehanistiay etermining the revaene ofometitiveness obetives, an give an iniation ofirumstanes uner whih a ometitivenessoriente oiy benefitting the setor in question ismore ikey. The “rotetion for sae” iterature reviewein etion .12 has shown that the egree of obbying

an organization within a setor inreases theikeihoo of obtaining rotetionist measures. Otherreevant setor harateristis reate to the eve ofometition an onsumer behaviour, as eresse forinstane in the egree of imort enetration an theeve of resonsiveness of eman to rie hanges,where ower eves are assoiate with higher eves ofrotetion.3

The new trae iterature whih emhasizes ifferenesin firm harateristis heterogeneous firm theoryrovies further insights into reevant iniators. orinstane, in etion .2, it was note that even in

setors with high imort enetration an, therefore, ahigher routivity of foreign firms on average, aninentive to inrease rotetion an sti eisteening on the istribution of routivity evesaross omesti firms. irm harateristis may asohe to ientify whether the imementation of nontariff measures invoving fie ost inreases formarket entry ou be reate to the ominane ofarge, organize firms in the setor rather than a givenubi oiy goa.

inay, in etion .2, the observation was mae that aoser eamination of the oitia ontet an rovieinsights into why ertain nontariff measures may beuse to benefit rouer interest grous esite theirstate ubi oiy obetive. or eame, ertainNTMs are better suite to target oitia suorters or




10

more ikey to ersist beyon eetion erios antherefore ea to higher eves of oitia suort. Insum, whie the “iniators” mentione in etion areertainy neither ehaustive nor abe to rovie aonusive answer to the question of the true oiy

rationae of an NTM affeting foreign trae interests, itsti aears that this tye of anaysis ou usefuy beemoye in orer to narrow evientiary gas that mayarise in the eamination of ertain trae rues .

e haenges to eaning ooeration

Whie the haenges isusse above a fornegotiations, internationa ooeration on nontariffmeasures is roving to be iffiut for a number ofreasons. Here we isuss seifi areas of onern.

(i) International coherence

As mentione in etion .2, both the TT Agreementan the P Agreement give signifiant eferene togovernments foowing internationa stanars.Aitionay, GAT Artie VI:b says that eningthe ometion of isiines on omesti reguation,in etermining whether the requirements areomatibe with the rinies of neessity,transareny an obetivity, aount sha be taken ofinternationa stanars of reevant internationaorganizations aie by WTO members. Theserovisions onstitute a unique feature in the WTO: thereognition of other internationa organizations.

However, internationa stanars are not a anaea.

irst, ountries iffer with reset to risk referenesvaues an tastes. To the etent that there is anabsene of rossborer effets in suh areas as oaenvironmenta rotetion, abour stanars, orminimum rout quaity stanars, harmonization tointernationa stanars may not be a reaisti oreonomiay otima obetive Wor TraeOrganization WTO, 2; Wor Trae OrganizationWTO, 211. If a ountry hooses to foow aninternationa stanar that oes not ometeyahieve its oiy obetives or reflet its nationareferenes, that ountry may enure osts ue toinaroriate reguation, or be require to unertakefurther reguatory interventions at aitiona ost tomeet its obetives.

eony, the internationa stanarization roessmay not aways funtion ieay, with the resut that nota stanars are set equay. Inee, isussions in thereguar work of the WTO have raise onerns withreset to how stanars aime by the boies thatset them or ertain members that use them to be“reevant” or “internationa” are atuay set. Theseonerns are about issues suh as the oortunity toartiiate in an influene the stanarsettingroess an isagreement on the sientifi ortehnia ontent of the requirements stiuate in thestanar itsef. ue to ak of reguatory aaity,

eveoing an easteveoe ountries may faeartiuar haenges in influening the stanarseveoment roess.

In the area of P measures, sine the internationa

stanarsetting boies are eiity reognize in theAgreement, there are no questions about whether theyare reevant or internationa. P internationastanars are set through a mutiatera roess, witheah of the three stanarsetting boies aoting aifferent aroah to stanarsetting for moreinformation on the ifferent aroahes, see G/P/GN/111. Nevertheess, simiar onerns aboutartiiation an influene have been raise in reationto stanarsetting in oe, OI an IPP. oreame, given the information an ata requirementsfor sientifi risk anaysis, ountries that have astronger aaity to generate ata may have a greater

abiity to influene outomes in internationa stanarsetting boies akson an ansen, 21.

Thus, there is a “ine of tension” between, on the onehan, a ega obigation abeit a quaifie one to useinternationa stanars, an, on the other, the fat thatatuay using a “reevant” internationa stanar is notaways straightforwar. The reguar work of the TTan P ommittees an ertain asets of ongoingnegotiations in the oha Roun are affete by thistension.

There is another otentia “tension” between, on the one

han, the P an TT rinies an mehanismsfavouring internationa ooeration an reguatoryonvergene of stanars inuing through theresumtion of omatibiity offere to omestimeasures that omy with “reevant” internationastanars an, on the other han, WTO members’funamenta right, aso reognize in the GATT, P anTT agreements, to not use internationa stanars –either beause they are ineffetive or inaroriate forinstane, beause higher stanars are esire – an toaot an imement their own omesti stanars. It isikey that artiiation in the negotiation of internationastanars wi be most effetive when artiiants

beieve that the resuting stanars wi in fat be useby other artiiants. If members’ sovereignty may ustifya right to set asie eisting internationa stanars, theegitimate nonaiation of internationa stanars bysome members may reue the inentive for internationaooeration an negotiation of suh stanars.

In servies, whie there is a strong inentive for a simiarresumtion in favour of internationa stanars, thereare signifiant aitiona obstaes. or a start,internationa stanars are ess revaent in servies asomare with goos. Observers some ten years agowere of the view that “it is unikey that meaningfuinternationa stanars for most servies wi beeveoe any time soon” Mattoo an auvé, 23.Has anything hange sine then? One fator is thatoffshoring may have given greater inentive to rivate




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inustry to eveo ommon stanars. Another hasbeen the growing unerstaning of the reationshibetween goos an servies in goba vaue hains.ine servies are heaviy embee in goos, outhe ervasiveness of internationa rout stanars

reate an inentive for servies suiers to suortinternationa stanars? These are questions on whihfurther researh ou she ight.

Aart from the haenge of eveoing internationastanars for servies, there are aso questionsonerning the aiabiity of tehnia stanars toservies, an the etent to whih a trae isiineou over vountary stanars, whih may be issueby nongovernmenta stanarizing boies without anyeegate authority.

The WTO ega eferene to internationa stanars

romotes a form of mutiatera onvergene. Thisonvergene aows arties in the WTO to refer tostanars set by other internationa organizations,even if the requirements they are base on are traerestritive. This imroves internationa oherene.However, the haenges outine above remain,seifiay in eiing whether any artiuarinternationa organization sets “reevant” internationastanars.

(ii) Private standards

The toi of “rivate stanars” arises aross the

WTO’s reguar work in ontets as iverse as greenrotetionism, foo safety an soia resonsibiity.Whie some WTO members see no ae for thisisussion in the WTO, others are keen to engage.Obigations set out in WTO agreements are bining ongovernments, an ony governments an make egahaenges through the WTO’s isute settementsystem. onsiering that rivate stanars are nongovernmenta by efinition, this gives rise to at easttwo questions: what resonsibiity o governmentshave with reset to rivate stanars, an what roeoes – or shou – the WTO have in this regar?

efore ooking at the aw an roe of the WTO, it isusefu to rea why this has been a matter ofisussion in the WTO. Athough ast as “vountary ” innature beause they are imose by rivate entities,rivate stanars may beome de facto a neessaryonition for market aess even if not imose byaw. The magnitue of the trae effet wi een onthe market ower of the iniviua omanies requiringaherene to the stanar as we as the number thato so. Inee, the effet of a artiuar rivatestanar, if ervasive, ou be greater than that of agovernment reguation of a smaer ountry.

Moreover, a “vountary” stanar that beomes wieyuse may be a reursor to government reguation.ifferent entities are invove. They may be omanies,nongovernmenta stanarizing boies, ertifiation

an/or abeing shemes, as we as other nongovernmenta organizations. The requirements set outin the stanars eveoe by these boies aress arange of ereive or atua onsumerriven onernsthat are assoiate with routs or roess an

roution methos use. These may beenvironmentay, soiay or foo safety motivate. Theonerns that have been raise at the WTO – mainyby eveoing ountries – are that the requirementsare more stringent de facto than reguations imoseby governments, that they are roiferating, an thatthere is no reourse to isiine them.

The tets of both the P an TT agreementsontain isiines that are reevant to nongovernmenta boies.7 In ar tiuar, both agreementshave an obigation on governments to take “suhreasonabe measures as may be avaiabe to them” to

ensure that nongovernmenta boies/entities withintheir territories omy with the reevant rovisions ofthe agreements.

The P Agreement states that WTO members shou“formuate an imement ositive measures anmehanisms in suort of the observane of therovisions of the P Agreement by other thanentra government boies” – an that they memberssha take “suh reasonabe measures as may beavaiabe to them to ensure that nongovernmentaentities within their territories… omy with thereevant rovisions of this Agreement”. The TT

Agreement has simiar anguage.9 Yet, in the ase ofthe TT Agreement, there is a ifferene. It ontainsan anne Anne 3 seifiay aresse tostanarizing boies. This anne the “oe of GooPratie” is oen to aetane aso by nongovernmenta boies. This is signifiant. As mentioneesewhere in this reort, the tet of the TT Agreement– unike the P Agreement – oes not refer eiityto any artiuar internationa stanarizing boy. It istherefore u to governments to eie, on a asebyase basis, whih stanars may be a reevant basisfor reguation in ifferent situations, an this oes noteue stanars set by nongovernmenta entities.

A key question, therefore, is the eve of resonsibiitythat governments have with reset to what nongovernmenta stanarizing boies o within theirterritories. It ou be argue that the besteneavouranguage attributes to governments a ertain egreeof resonsibiity. However, the etent is not obvious: forsome WTO members, rivate stanars are seen asbeyon the gras of WTO isiines – an inee,WTO members remain ivie as to whether rivatestanars egay fa within the soe of the TT an/or P agreements.

Lega issues asie, an grante that onern aboutthe imat of rivate stanars is being voie inreevant WTO ommittees, what shou the roe of theWTO be – if, inee, it shou have one? It is notabe




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that the kins of issues that arise in isussions onrivate stanars are not nove: they revove arounsuh matters as inaequate esign, the basis of ameasure, transareny, the nee for ommonbenhmarks harmonization, an aetane that

oing things ifferenty oes not neessariy meannonomiane equivaene. ew, if any, of theseissues are funamentay ifferent from those thatarise in the ontet of P/TT measures tehniareguations or onformity assessment roeures.

In the P area, eegations are urrenty working onenhaning information ehange an inreasingunerstaning an awareness of how rivatestanars omare with or reate to stanars set byreognize internationa stanarsetting boies suhas those of the oe an governmenta reguations.The situation in the area of TT is somewhat ifferent.

The TT Agreement oes not refer eiity to anyreognize internationa stanarizing boies. In fat,governments frequenty base reguation on stanarsthat are eveoe by nongovernmenta boies, somewith internationa reah. WTO members haveeveoe a refine tookit of rues an roeuresthat are heing reguators an trae offiias inreasethe transareny of P/TT measures an to ensurethat they o not unneessariy affet trae. Thesesame rues, together with the eeriene gaine, mayaso rovie usefu guiane for the eveoment ofrivate stanars.

(iii) Disciplines on domestic regulationsin services

How best to strengthen trae isiines in servieswithout unuy urtaiing nationa reguatory freeomshas been a entra question unresove by themutiatera ommunity. The GAT framework hasfouse rimariy on the negotiation of marketoeningommitments, eaving other asets of omestireguation an ratie argey untouhe. Yet, sinethe estabishment of the WTO in 199, WTO membershave grae with the question of what aitionaisiines are require on iensing, quaifiation antehnia stanars to ensure that they are not moreburensome than neessary to ahieve egitimateoiy obetives. The ervasiveness of reguations inservies has mae it vita to ensure that market aessan nationa treatment ommitments are not imaireby unuy burensome or rotetionist raties.

esite its obvious omement to market aess, whyhas it been so iffiut for the mutiatera traeommunity to onue this set of isiines? Onereason has been the ebate over whether suhisiines shou be “setora”, affeting ony oneseifie setor, or “horizonta”, in the sense ofaying to a servies setors. Progress mae in199 on the onusion of the Aountany isiineshave e some WTO members to onue that“setora” negotiations ou otentiay be a more

ratia route to ursue as the isiines ou beshae in aorane with the seifiities of thatsetor. Others have argue that a “horizonta” aroahwou be more effiient as the rationae for reguationan the reasons for transareny, obetivity an

imartiaity in the reguatory roess are simiar arossservies setors.

A eeer onsieration of this issue wou ten tosuggest that isussions on the form an soe of theisiines hies a more funamenta tension, nameythe rinia onern that ommon rues at themutiatera eve wi resut in a oss of reguatoryfreeom to ursue nontrae obetives for servies.This begs the question why if governments have beenabe to agree to TT an P isiines to ensurethat tehnia reguations, stanars an roeureson goos o not reate unneessary obstaes to

internationa trae, has it roven so muh more iffiutin servies?

One reason, though not the ony one, may have beenthe iffiuty in esigning a “neessity test” that wouaommoate the eth an range of reguatoryreaution that WTO members aear to wish to retainfor servies. The Aountany isiines, not yet infore, ontain a “neessity test”, simiar to that in theTT an P agreements, whih requires members toensure that “measures are not more trae restritivethan neessary to ahieve a egitimate obetive”, withan iustrative ist of obetives rovie. uh a test

was esigne to eave the hoie of obetives tomembers, with the fous of the isiine on theneessity of the measure use to ahieve its avoweurose. However, it shou be ket in min that unikein the ase of TT an P measures, there is no“rout” in servies whih an be same, testean insete base on sientifi methos. Thus,reahing agreement on what wou be the aroriateriteria for etermining an evauating neessity oube inherenty more iffiut.

ou suh a “neessity test”, or a variation of it, suhas one on “isguise trae restritions”, be use in

“horizonta” omesti reguation isiines? Thenegotiations, so far, have foun no ommon view onthis issue. Yet, a reurring rini e in trae agreementsis the requirement that the measure use to ahieve aertain egitimate obetive shou be the “east traerestritive reasonaby avaiabe”. If suh a test were toeist, governments wou nee to assess, whenaoting reguations, whether they ou use anaternative measure that wou be equay abe toahieve the oiy obetive hosen, but whih woube ess trae restritive.

Unertainty remains among ertain reguators as towhether their autonomy to reguate wou beeessivey restrite by a neessity test. On the otherhan, roonents of the rinie of neessity haveargue that a test ou be esigne that oes not




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question the neessity of the oiy obetives hosen,but soey the neessity of the measure use. Manyquestions have arisen in the isussions. These reate,for eame, to the fators to be onsiere inetermining what is “neessary” an what is not an

whether the imementation of a neessity test shouaso require onsieration of whether the oiyobetive is egitimate or not.

The haenge of isiining any unesire traeeffets of reguation annot, of ourse, be reueony to the question of the “neessity” test. esiteover a eae of negotiations, muh remains to beone to imrove ooeration an awareness amongreguators, oiymakers an trae negotiators of theinks between reguatory issues an trae rinies.There are aso robems of aaity whih have maeit iffiut for negotiators to engage on issues that are

not within the traitiona ream of trae oiy.Reguatory aaity buiing, in terms of the abiity ofauthorities to formuate an enfore rues aroriateto servies trae oening may not be a new haenge,but it is erta iny one whih has yet to be aresse ina systemati an meaningfu way by the mutiateratrae ommunity.

eyon negotiating new isiines, there remains thehaenge of avaning harmonization an reognition.There is an obvious ink between mutiatera rues onomesti reguation an efforts to harmonize anreognize stanars, quaifiations, requirements an

roeures. The nee for isiines to urbunneessariy burensome omesti reguation woueary be iminishe if urisitions were to movetowars ommon reguatory raties or eveo morearrangements for reognition. These onsierationsraise the question whether internationa stanarsou be use to a greater etent in servies. ommoninternationa stanars wou nee to be set at a evean in a manner that oes not favour those with thegreatest aaity to influene the roess anoutomes. or the most art, this work wou have tobe unertaken outsie the WTO, whih is not a forumfor setting stanars.

(iv) Pro-competitive principles for servicesregulation

A unique feature of the GAT is its romotion ofometition within as we as aross borers. In a way,isiines uner Artie VI: – by urbingunneessariy burensome reguatory raties iniensing an quaifiation regimes – faiitate marketaess an thereby otentiay enhane ometition.Inee, given that omesti reguation wou ay toforeign an omesti suiers aike, any aiabeGAT isiines that resut from these negotiationswou in effet imrove market ontestabiity.

Going beyon the negotiation of omesti reguationisiines uner Artie VI:, whih ony aresses a

very artiuar set of reguatory issues, there is thequestion of how muh further an an shou a traeagreement go in requiring aherene to ertain roometitive rinies. This question has been mostrominenty answere in the teeommuniations

setor, where a “Referene Paer” whih inue roometitive rinies was negotiate an thenommitte to by a signifiant number of WTO membersin their sheues of ommitments.

The Referene Paer seifie roometitivereguatory rinies for the teeoms setor an was amaor ahievement of the 1997 Agreement on asiTeeommuniations. It has hee shae the reguatoryenvironment in this setor over the ast eae byeaborating a set of rinies overing matters suh asometition safeguars, interonnetion guarantees,transarent iensing roesses, an the ineenene

of reguators in a ommony negotiate tet. verygovernment that has aee to the WTO sine thebasi teeommuniations negotiations has aso takenon these isiines. urthermore, the fat that theReferene Paer obigations are bining hes roethe omesti reform agena neee to fuy imementthe oening of this setor to ometition.

The eeriene of the Referene Paer rovies someinteresting essons on what might be some of thefunamenta ingreients require to faiitateagreement on the aherene to ertain roometitive rinies. irst, there was a share oiy

vision for the setor onerne an of the roe thatmarketoriente reguation ou ay in imrovingeffiieny, as we as ahieving soia equit y obetives.or eame, reguators agree on the nee forgovernments to ontro the ominant inumbentsuier so as to revent it from engaging in antiometitive behaviour.

eony, the instrument estabishe a set of ommonunerstanings whih were suffiienty broa as toaow for iverse rues an raties, but at the sametime suffiienty seifi to ho governmentsaountabe to transarent, obetive an imartia

roometitive reguation. Thiry, setor reguatorswere irety invove in negotiating suh aninstrument. This was imortant sine inethunerstaning was require of how the marketfuntione, what market faiures neee to beorrete, an how suh robems might bearoriatey aresse. ourthy, the instrumentaowe for sefseetion, as it ony entere into forethrough inororation in a WTO member’s sheue ofseifi ommitments. ightytwo members ountingU member states iniviuay have, so far, attahethe Referene Paer to their sheues ofommitments.

The suess of the Referene Paer raises thequestion whether suh an instrument ou be use inother setors? Most obvious wou be those whih




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share a simiar market struture as teeommuniationsservies, with a maor suier – usuay a formermonooy – that ontros the infrastruture or networkneessary for the suy of servies. In suh asituation, the maor suier an bok new market

entrants by restriting aess to the infrastruture ornetwork, by imiting artiiation in the reevant marketthrough its ontro of essentia faiities or by the useof a ominant osition in the market. oetive ationto agree on a set of roometitive reguatoryrinies wou thus be neessary to ensure thatthere is a eve aying fie. Another feature of themarket might be that sare resoures are neee forthe eivery of servies, an the manner by whihthese are aoate wou etermine whetherartiiation is ossibe or not. etors suh as energy,ertain forms of transortation, waste an water

management, an osta an ourier servies, togreater or esser egrees, ten to share some of theseharateristis.

or suh setors, an instrument whih uses simiarreguatory rinies as those foun in the ReferenePaer ou he seify the safeguars neee torevent a maor suier from engaging in antiometitive raties. uh rinies wou nee tobe imemente by a reguatory boy whih wou besearate from, an not aountabe to, any serviessuier in the market. Whie suh instruments ou in

theory be negotiate outsie the ontet of a traeagreement, in ratie there are oitia eonomireasons why oetive ation as art of a trae ea isoften require see etion .1.

An interesting feature of the Referene Paer was thefat that it was negotiate by a grou of Members notas an anne to the GAT but as a set of rinies thatwou ony be egay bining for those Members whosubsribe to it. This rather unique feature of theReferene Paer aowe a ritia mass of Membersto eveo a set of isiines without having to haveonsensus. The oument itsef i not have anyartiuar ega status as it wou ony enter into forefor those Members who attah it to their sheues.This is ossibe beause members an unertakeaitiona ommitments uner Artie XVIII of theGAT in their sheues of seifi ommitments. Itwou be interesting to onsier whether suh anaroah ou be use for the Artie VI: omestireguation isiines.

Uner Artie XVIII, WTO members may negotiateommitments with reset to measures affeting traein servies whih are not market aess an nationa

treatment imitations, inuing those regaringquaifiations, stanars or iensing matters. Thus,omesti reguation isiines ou be unertakenas an aitiona ommitment.

f Investing in institutions

(i) Supporting regulatory capacity buildingfor trade in goods

ven rior to the estabishment of the WTO, ountriesreognize that aaity onstraints reating to thestanars of boies, tehnia infrastruture an theeveoment of reguations in genera were of onernfor eveoing ountries, an artiuary easteveoe ountries Ls. oth the WTO P anTT ommittees inue “tehnia assistane” as anagena item at every ommittee meeting. Theisussions in the P an TT ommittees havefouse on faiitating the imementation of theagreements’ rovisions on tehnia assistane.

The TT Agreement obiges WTO members to giveavie to other members on TT matters, eseiayeveoing ountry members, an to rovie othermembers with tehnia assistane on TT matters.The tet of the Agreement iustrates how theestabishment of nationa stanarizing or onformityassessment boies or institutions an a egaframework wou enabe eveoing ountry membersto fufi the obigations of membershi or artiiationin internationa or regiona systems for onformityassessment. The Agreement aso rovies avie onstes that shou be taken by eveoing ountries’rouers if they wish to have aess to systems for

onformity assessment oerate by governmenta ornongovernmenta boies. There is aso a more generaobigation to give riority to the nees of Ls.

The P Agreement ontains simiar rovisions reateto tehnia assistane. Aoring to the Agreement,WTO members agree to faiitate the rovision oftehnia assistane to eveoing ountry members,either biateray or through the aroriateinternationa organizations. Assistane may be avie,reits, onations or grants an shou aow ountriesto aust to an omy with P measures in theireort markets. In aition, when substantia

investments are neee for eveoing ountries tofufi P requirements in eort markets, membersagree to onsier roviing tehnia assistane thatwou ermit eveoing ountry members to maintainan ean market aess oortunities.

Technical assistance in the TBT area

The TT ommittee oversees the imementation ofthe Agreement’s rovisions on tehnia assistaneontaine in Artie 11, an its roe is essentiay oneof information ehange. One insight that emergesfrom the work of the TT ommittee is the nee forthe reation of asting infrastrutures, both reguatoryan hysia in nature, whih may set in ae the rightonitions for the effiient an effetive eveomentan esign of tehnia reguations, stanars an




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onformity assessment roeures. In artiuar, theak of tehnia infrastruture or inaequay ofeisting infrastruture onstrains many eveoingountry members from aessing markets. Meetingthe stanar may sometimes not be enough – it is aso

neessary to be abe to emonstrate omiane toreate onfiene in the quaity an safety of eorterouts.

Quaity infrastruture, inuing aboratories anareite ertifiation boies, is essentia foreveoing ountries’ ometitiveness. The TTommittee has enourage WTO members to rovietehnia ooeration in the area of onformityassessment seifiay aime at imroving tehniainfrastruture e.g. metroogy, testing, ertifiation, anareitation.

Technical assistance in the SPS area

In overseeing the tehnia assistane rovisions ofthe P Agreement ontaine in Artie 9, the Pommittee faiitates the ehange of informationwhere WTO members ientify seifi tehniaassistane nees whih they may have, an/or reorton any Preate aaity buiing ativities inwhih they are invove. Among the most ressingnees highighte through the work of the Pommittee, aart from information requirements, wasthe eveoment of aws an reguatory frameworksan institution buiing.

The nee for har infrastruture inuing aboratories,athough imortant, i not generay reresent themost serious obstae to an aroriateimementation of the P Agreement. In this regar,the P ommittee ontinues to enourage itsmembers to rovie targete tehnia assistanewhih resons to the ientifie nees of members.isussions within the P ommittee have asohighighte the tehnia an sientifi eertise anfuning avaiabe in other internationa organizations,whie emhasizing the nee to imrove interagenyoorination see, for eame, G/P/GN/7.

Standards and Trade Development Facility

If trae is to serve as an engine of growth an aninstrument to take overty reution, eveoingountries must have effetive systems in ae toontro their P risks an meet internationastanars. ontroing P risks wi have marketaess benefits, as we as iret benefits to omestirouers an onsumers by reuing est anisease revaene, raising roution an imrovingfoo seurity. Imrove omiane with internationaP stanars may aso ontribute to imrovebioiversity an environmenta rotetion. However,given aaity onstraints eveoing ountries maynot have aequate P systems in ae. To aressthese imeiments, notaby in the ubi setor,

sustaine ongterm ommitment to funing withinnationa government bugets an by onors wi berequire to ensure minimum eves of aaity withutimate ositive effets on market aess an humanan environmenta heath.

In 22, reognizing the signifiant benefits that anarise from investments in P aaity, fiveinternationa organizations – the oo an AgriutureOrganization of the Unite Nations AO, the WorOrganisation for Anima Heath OI, the Wor ank,the Wor Heath Organization WHO an the WTO –

ointy estab ishe the tanars an Traeeveoment aiity T.1 The T is a gobaartnershi that suorts eveoing ountries inbuiing their aaity to imement internationa Pstanars, guieines an reommenations as ameans to imrove their human, anima an ant heath

status, an abiity to gain an maintain aess tomarkets. Its manate is to: i inrease awarenessabout the imortane of P aaity buiing,mobiize resoures, strengthen oaboration, anientify an isseminate goo ratie; an ii roviesuort an funing for the eveoment animementation of roets that romote omianewith internationa P requirements.

The T ays an imortant roe in faiitatingisussion of ast , ongoing an anne Preatetehnia ooeration rogrammes an initiatives. It

ientifies rossutting tois of themati interest toartners, onors an benefiiaries an organizes ointonsutations at goba an regiona eve to furtheraress these issues. ames of suessfu Twork in the ast reate to goo ratie in Preatetehnia ooeration, the use of eonomi anaysis toinform P eisionmaking, P risks an imatehange, iniators to measure the erformane ofnationa P systems, regiona an nationa Poorination mehanisms, an ubirivateartnershis in suort of P aaity. nhaningthe awareness in eveoing ountries, notaby atoitia an eisionmaking eves, about the

imortane of P omiane an the nee foraitiona investments in this area is another entratheme in the T’s work.

Given the suess of the T in the area of Paaity buiing, some suggestions have been maethat the T moe ou aso be aote to aressstanars imementation in the area of TT. In orerfor this aroah to work, there wou nee to bearity, among other issues, regaring whih seifiinternationa stanars wou be reevant. urthermore,this tye of initiative wou require a signifiant amountof resoures in orer to be initiate an sustaine.

ti, essons earne from the T eerieneiniate that aaity buiing efforts of this naturean effiienty rovie ratia eonomi an heathbenefits to ountries.




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esigne for rotetionist uroses an how theserovisions have been interrete in atua isutes.

etion . rovies a seuative an not neessariyaenomassing view of what ies ahea for the

WTO in eaing with nontariff measures. Whie themutiatera traing system has eveoe severameans to romote ee integration, haenges anoortunities remain. These inue: i haenges infining the right mi between internationaommitments an omesti fleibiity in setting NTMsan in imroving transareny, artiuary in the faeof eonomi, soia an environmenta hange;

1 Nevertheess, a basi feature of the ommitment aroah

to trae agreements is worth emhasizing here: unike thetermsoftrae theory, whih offers a robust reason toeet that trae agreements ought to be trae iberaizing,there is no resumtion one way or the other uner theommitment theory as to w hether trae agreements shouinrease or reue trae.

2 Internationa agreements often inue rovisions that anbe aie to future ases without referene to seifiases. ea use these rovisions are genera, they wourequire interretation to ay to new iniviua ases. Thisex ante ineterminay is known in the eonomis iteratureas an “inomete ontrat”.

3 The Internationa Trae entre has eveoe a “tanars

Ma”, whih ontains information on 7 rivate stanarsshemes oerationa in over 1 ountries an overingover eonomi setors a n rout grous. It mainyovers agriutura organi, tetie an flower routs ,whih are of signifiant interest to eveoing ountries.ames inue: information on urrent an otentiageograhi istribution of rivate stanars suh asairtrae, the orest tewarshi ouni an the arbonTrust oot Printing Labe. This webbase orta aows theuser to seet stanars base on riteria suh as overage,eonomi an/or quaity requirements, tye of ertifiationroess. Athough this is not a n ehaustive atabase,it rovies usefu information. It is avaiabe at:www.stanarsma.org.

evera other vountary stanars shemes have emerge in

both eveoe an eveoing ountries sine 1992. Whiesome of these shemes are rivate initiatives, others aremanage by governments. ames of governmentshemes inue the ustainabe orest Ma nagementtanar in anaa, RLOR in razi, LI in Inonesia,the Maaysian Timber ertifiation ouni, an theustainabe orestry Initiative an the Amerian Tree armystem in the Unite tates.

More information is avaiabe at: www.fs.org.

Au et a. 2; an P onine information.

7 IO is working on a roet IO 17 that seeks toeveo an internationa stanar on quantifiation a nommuniation of greenhouse gas emissions of goos an

servies. In aition, the Wor Resoure Institute an theWor usiness ouni for usta inabe eveoment areworking on two new st anars for routs an suyhain greenhouse gas aounting an reorting.

Loi. No. 217: The Nationa ommitme nt for the

nvironment.

9 The isussion of quaity stanars an abes buis on theisussion in the World Trade Report 2 Wor TraeOrganization WTO, 2b, whih rovies etaie anthorough anaysis of goba ooeration on sta nars anreguation.

1 In aition to the arties iste here, Artie XVII ofthe GAT is where members ommit through negotiations,aong moa ines in their sheues, to eten nationatreatment to foreign servies an ser vies suiers.In this ase, nationa treatment is treate ike negotiatemarket aess rather than a genera rinie of onutas it is in Artie I II of the GATT or the other iste arties.

11 The use of the term “isriminati on” sometimes iffersaross isiines. or eonomists, any oiy thatifferentiay treats routs is isriminatory, ineenentyof the egitimay of the measure. or awyers, on the otherhan, the term isrimination often a rries a normativeimiation an is imite to those situations where a oiyifferentiay treats routs in a way that is inonsistentwith WTO rues. In this isussion, the wor isrimination isuse in its eonomi mea ning.

12 A searate ega issue is whether these tyes of onernsan be aresse w ithin the ontet of eetions, suh asthe ones ontaine in GATT Artie XX.

13 AP has one work seifiay on the imementationof the TT Agreement an GRP. The AP ommitteeon Trae an Investment’s ubommittee on tanarsan onformane has eveoe a oument that ays out therinies an raties of GRP as they reate to imrovingthe imementation of substantive obigations uner the WTOAgreement on Tehnia arriers to Trae. This stuy,“uorting the TT Agreement with Goo ReguatoryPratie: Imementation Otions for AP Members”, buisuon the reognition of the WTO TT ommit tee that use ofGRPs an make an imortant ontribution to the effetiveimementation of the TT Agreement, an to reuingunneessary tehnia barr iers to trae G/TT/W/3, 1Marh 212. The WTO eretariat has issue a “omiationof oures on Goo Reguatory Pratie GRP”, G/TT/W/31, 13 etember 211.

1 G/TT/2

1 TT Reguatory ooeration Worksho, 9 November211. ee: htt://www.wto.org/engish/trato_e/tbt_e/tbt_events_e.htm

Endnotes

ii oortunities to imrove the isute settementmehanism of the WTO through better integration ofeonomi an ega anaysis in the etermination ofegitimate NTMs; iii imrovements in the urrent ruemaking to aat the trae system to a fast evoving

wor in areas suh as rivate stanars an omestireguation in servies; iv better goba ooeration onNTMs whih an hary be ahieve without maorstes to boster reguatory aaity in eveoingountries through onrete ations.




219


C O OP E R A T I ON

ONN ON-T A R I F F

ME A S UR E S


DW OR L D

Part of the answer to these questions obviousy eens onhow muh resoures an be aoate to the monitoringeerise.

The ommittee on trae in servies aso offers members theossibiity to share information on nationa eerienes anregimes.

7 The new orta wi for eame aow users to aess anotifie information on trae, tariffs a n NTMs that reatesto a given tarif f ine in one singe query. A this informationwas reviousy store in searate sios whih ha to beaesse searatey if they were aessibe onine at a.

The eision of the Market Aess ommittee on a“ramework to enhane I N otifiations omiane” G/MA/239 of etember 29 mae it easier for theeretariat to assist members in roviing their trae antariff notifiations by aowing the use of other reevantoffiia soures.

9 ritis of “ee integration” question the aaity ofinternationa organizations to make these eterminations.or eame, Rorik 211 argues that the etermination ofegitimate or iegitimate trae measures shou arise frominforme eiberations at the nationa eve, inuing bothimorters an eorters in orer to baane ometinginterests in a transarent manner.

It shou be ket in min that the most effiient measuremay we be a isriminatory mea sure if the soure of theeternaity ies abroa. It aso eens on whether agovernment takes into aount ony omesti wefare orforeign interests as we. The atter wou be artiuaryimortant where e.g. transbounary eternaities areonerne. As mentione in e tion .1, if severa ountrieshave ommon interests, ooeration an ensure that gobawefare is maimize.

1 or eame, winnen an Vanemoortee 29 anMarette an eghin 21 ho that many ubi stanars,e.g. reating to the reguation of GMOs, are introuefoowing emans by onsumers, even though theirtraerestriting effets aso benefit some oa rouers.However, even suh an assessment may not be an easytask. avey an er ti 29 rovie a onise theoretiaframework that iustrates the iffiuties invove inisentanging rouer from onsumer interests whenientifying the aroriate eve of a minimum quaityreguation that wou aress information asymmetriessuffere by onsumers. arenter 2 eveos a moein whih new rout requirements seem to onfer aommeria avantage to estabishe firms even if the

reguator was motivate ony by reutation onerns an a ninterest to be resonsive to onsumers.

2 ee artiuary aso o ..

3 Athough it is often beieve that rotetion shou inreasewith the ratio of imort enetration, the atter resut broayreflets the iea of “sensitive” setors. A number of aers,suh as Goberg an M aggi 1999 an Gawane ananyoahyay 2, have foun ways to measure thesevariabes an emiriay onfirm the finings. The atterauthors aso emhasize that these three fators imortenetration, imort eastiity a n whether inustries areoitiay organize go a ong way in eaining the atternof rotetion an reue the nee to a nayse a arger set offators, inuing ski omosition of emoyees, average

earnings, abour shares an geograhia onentration,that have been emoye in the emiria iterature, withoutbeing erive from tightyknit theories.

isher an erra 2 highight the imortane ofanaysing the harateristis of foreign firms an marketsas we in orer to unerstan the inentives of omestifirms to obby for rotetionist measures an get a niniation of whih inustries fae higher ressure forrotetion than others. One imorta nt onsieration is, for

eame, the avaiabiity an size of aternative markets forforeign ometitors an the fie ost assoiate withrouing uner mutie rout reguations. In anetension to this aroah, Marette an eghin 21further emhasize the imortane of taking into aountfirm heterogeneity an internationa market onitions. Theyshow that a more stringent rout requirement omareto an internationa stanar may not aways resut inrotetionism, but an even be “antirotetionist” if foreignrouers are more effiient at aressing the reateeternaity than omesti rouers.

In 2, the TT ommittee agree on si rinies anroeures that shou be obser ve uring the eveomentof internationa stanars, guies an reommenations for

the rearation of tehnia reguations, onformityassessment roeures an stanars. This ommitteeeision has reenty beome the subet of isussionboth in the ommittee an in the NAMA ontet G/T T/1/Rev.1 Anne , 9 une 211, . .

or eame: , M, arbon footrint abeing, setoratrae assoiations orvere for flowers; I for otton, orin the foo setor: the Goba oo afety Initiative GI.ee eames isusse in o .2.

7 The TT Agreement efines a nongovernmenta boy asfoows: “oy other than a entra government boy or aoa government boy, inuing a nongovernmenta boywhih has ega ower to enfore a tehnia reguation”TT Agreement, Anne 1, ara . T he P Agreement

uses the term “nongovernmenta entity” but it is not efinein the Agreement.

P Agreement Artie 13 on imementation.

9 TT Agreement, in artiuar Artie .1; arties 3.1, .1 an9.2 are aso reevant.

or instane, members frequenty referre to the IO anthe I in the TT ontet; both these boies are nongovernmenta in nature.

1 More information on T an be foun at: htt://www.stanarsfaiity.org/en/ine.htm.




221

F . C ON C L U S I ON S

The range of nontariff measures an serviesmeasures is vast an we beyon the soe of a singereort. In aition to a genera anaysis of NTMs anservies measures, the reort has fouse thereforeon tehnia barriers to trae TT, sanitary an

hytosanitary P measures an omesti reguationin servies.

TT/P measures are of interest to rouers,traers an onsumers aike. They raise seifitransareny haenges. A ore question is how toaress any averse trae effets of nontariffmeasures without imeing the egitimate ursuit bygovernments of ubi oiy obetives, suh asroteting ubi heath. A reate question onernsthe roe of the WTO an other internationa traeboies in romoting reguatory onvergene as ameans of reuing unneessary trae barriers. These

haenges are very simiar to those fae by WTOmembers when they isuss what aitiona isiinesare require on omesti reguation in servies toensure that it is not more burensome than neessaryto ahieve egitimate oiy obetives.

onomi anaysis rovies some insights into whygovernments use nontariff measures an serviesmeasures. oth tyes of measure an serve egitimateubi oiy goas but they may aso be use forrotetionist uroses. Ientifying a government’sintent is inherenty iffiut, artiuary in the ase ofTT/P measures an omesti reguation in

servies. Wefare eonomis an oitia eonomyanaysis he to eain the use of artiuar measures.The anaysis aso shows how reent hanges in thetraing environment, suh as the eansion of gobaroution sharing, imate hange an the growingimortane of onsumer onerns in riher ountries,affet the use of NTMs. irumstanes an arise inthis more ome environment where rouer anonsumer interests may iverge over the nature of ameasure ientifie to efen a ubi oiy goa.

Assessing the iniene of nontariff measures anservies measures is iffiut beause of arge

information gas. ata are sarse beause of the verynature of these measures, whih are iverse an oftennot easy to quantify. Moreover, the fat thatgovernments ak the inentive to rovie suhinformation agues the oetion of offiia ata. Asfar as servies are onerne, whie ommitments inmarket aess an nationa treatment are known, veryitte information is avaiabe on the regimes that areatuay aie. ata imitations are artiuary autein the ase of omesti reguation, where the abseneof riteria that he to singe out the reguatorymeasures with a signifiant effet on trae is aomiating fator.

On the goos sie, information from offiia souresoes not aow the ientifiation of trens over time inthe reative frequeny of various nontariff measures

gobay or by region. What it shows is the revaeneof TT/P measures in the overa iniene ofNTMs. As reveae by reent business surveys, thesemeasures aso reresent the main soure of onernsfor eorters in most eveoe an eveoing

ountries. Another insight from business surveys isthat eorters generay have more robems with theway in whih measures are aie than with themeasures themseves.

The iniene of nontariff measures an serviesmeasures is ony haf of the iture, the other hafbeing their trae restritiveness. The evienereviewe in the Reort has onfirme that NTMssignifianty istort trae, ossiby even more thantariffs. This resut, however, shou be interrete withaution beause it fais to ature the reent hangesin trae brought about by the eveoment of goba

suy hains. More reisey, a genera fining is thatTT/P measures restrit trae in agriuturarouts, whie the eistene of stanars often has aositive effet on trae in manufaturing routs,eseiay in hightehnoogy setors. Moreover, thereis a reasonabe eetation that harmonization anmutua reognition of stanars wi inrease trae.

In orer to ientify the haenges that nontariffmeasures an servies measures ose for the WTO,the Reort has see out the reasons behininternationa ooeration on suh measures. Thetraitiona theory suggests that oiy substitution is a

key robem that rues on NTMs in a trae agreementnee to aress. haow integration in the form ofsime rues on transareny, nationa treatment annonvioation whereby a member may aim that it hasbeen erive of an eete benefit beause ofanother member’s ation even if a WTO agreementhas not been vioate aresses this robem.

The hanging nature of internationa trae, however,reates new oiy onsierations that may motivatethe nee for eeer forms of institutiona integration.Aso, growing onerns about TT/P measureshave brought the issue of reguatory onvergene to

the WTO, raising a number of iffiut haenges. TheReort has set out to eamine GATT/WTO isiinesas interrete in isute settement, showing thatGATT rues on NTMs are generay onsistent with ashaow integration aroah but that the TT anP agreements romote eeer integration.

In the ight of both the eonomi an the ega anaysis,the Reort has ientifie severa haenges forinternationa ooeration, an the WTO moreseifiay. irst, the transareny of nontariffmeasures an servies measures must be imrovean the WTO has a entra roe to ay with its mutietransareny mehanisms. eony, urrent WTOisiines may not aways strike the right baanebetween oiy ommitments an fleibiity. orinstane, eonomists argue in favour of a more




223

F . C ON C L U S I ON S

instane to inrease transareny or buiaaity? The seifi trae onerns mehanismin the TT an P ommittees goes beyoninformation sharing. oes it he resove onflits?hou it be use as a moe by other ommittees?




24

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36

Technical notesComposition of regions and other economic groupings

RegionsNorth America

ermua anaa* Meio* Unite tates of Ameria*Other territories in the region not esewhere seifie n.e.s.

South and Central America and the Caribbean

Antigua an arbua* hie* avaor* Netherans Anties aint Vinent anthe Grenaines*

Argentina* oombia* Grenaa* Niarag ua* uriname*

ahamas* * osta Ria* Guatemaa* Panama* Trinia an Tobago*

arbaos* uba* Guyana* Paraguay * Uruguay*

eize* ominia* Haiti* Peru* oiva rian Re.of Venezuea*

oivia, P urinationatate of*

ominian Reubi* Honuras* aint Kitts an Nevis*

razi* uaor* amaia* aint Luia*

Other territories in the region n.e.s.

Europe

Abania* zeh Reubi* Hungary* Mata* ovak Reubi*

Anorra** enmark* Iean* Montenegro* ovenia*

Austria* stonia* Irean* Netherans* ain*

egium* inan* Itay* Norway* ween*

osnia an Herzegovina** rane* Latvia* Poan* witzeran*

ugaria* YR Maeonia* Liehtenstein* Portuga* Turkey*

roatia* Germany* Lithuania* Romania* Unite Kingom*

yrus* Greee* Luembourg* erbia**


Commonwealth of Independent States (CIS)a

Armenia* Georgia*a Moova, Reubi of* Turkmenistan

Azerbaian** Kazakhstan** Russian eeration** Ukraine*

earus** Kyrgyz Reubi* Taikistan** Uzbekistan**


Africa

Ageria** ongo* Guinea* Moroo* outh Afria*

Angoa* ôte ’Ivoire* Guineaissau* Mozambique* uan**

enin* em. Re. of the ongo* Kenya* Namibia* wazian*

otswana* ibouti* Lesotho* Niger* Tanzania*

urkina aso* gyt* Liber ia , Reubi of** Niger ia* Togo*

uruni* quatori a Guinea** Libya** Rwana* Tunisia*

ameroon* ritrea Maagasar* ão Tomé an Príni e** Ugana*

ae Vere* thioia* * Maawi* enega * Zambia*

entra Afrian Reubi* Gabon* Mai* eyhe es** Zimbabwe*

ha* Gambia* Maurita nia* ierra Leone*

omoros* * Ghana* Mauritiu s* omai a

Other territories in the region n.e.s.Middle East

ahrain , Kingom of* Israe* Lebanese Reubi** aui Arabia, Kingom of* Yemen**

Iran** oran* Oman* yrian Arab Reubi**

Iraq** Kuwait, tate of* Qatar* Unite Arab mirates*


Asia

Afghanistan** Hong Kong, hina* Maaysia* Paua New Guinea* TimorLeste

Austraia* Inia* Maives* Phiiines* Tonga*

angaesh* Inonesia* Mongoia* amoa* Tuvau

hutan** aan* Myanmar* ingaore* Vanuatu**

runei arussaam* Kiribati Nea* oomon Isans* Viet Nam*

amboia* Korea, Reubi of* New Zeaan* ri Lanka*

hina* Lao Peoe’s em. Re.** Pakistan* Taiei, hinese*

ii* Maao, hina* Paau Thaian*Other territories in the region n.e.s.

*WTO members

**Observer governments

a. Georgia is not a member of the ommonweath of Ineenent tates but is inue in this grou for reasons of geograhy an simiaritiesin eonomi struture.



237

TECHNICAL NOTES

Other GrousACP (African, Caribbean and Pacific countries)

Angoa uba Haiti Niger outh Afria

Antigua an arbua em. Re. of the ongo amaia Nigeria uan

ahamas ibouti Kenya Niue uriname

arbaos ominia Kiribati Paau wazian

eize omini an Reubi Lesotho Paua New Guinea TimorLes te

enin quatoria Guinea Liberia, Reubi of Rwana Togo

otswana ritrea Maagasar aint Kitts an Nevis Tonga

urkina aso thioia Maawi aint Luia Trinia an Tobago

uruni ii Mai aint Vinent anthe Grenaines

Tuvau

ameroon Gabon Marsha Isans amoa Ugana

entra Afrian Reubi Gambia Mauritania ão Tomé an Prínie Unite Reubiof Tanzania

ha Ghana Mauritiu s enega Vanuatu

omoros Grenaa Mirones ia eyhe es Zambia

ongo Guinea Mozambi que ierra Leone Zimbabwe

ook Isans Guineaissau Namibia oomon Isans

ôte ’Ivoi re Guyana Nauru omai a

Africa

North Africa

Ageria gyt Libya Moroo Tunisia

Sub-Saharan Africa

Western Africa

enin Gambia Guineaissau Mauritania enega

urkina aso Ghana L iber ia , Reub i of N iger ie rra Leone

ae Vere Guinea Mai Nigeria Togo

ôte ’Ivoire

Central Africa

uruni entra Afrian Reubi ongo quatori a Guinea Rwana

ameroon ha em. Re. of the ongo Gabon ão Tomé an Prínie

Eastern Africa

omoros thioia Mauriti us omai a Unite Reubiof Tanzania

ibouti Kenya eyhe es uan Ugana

ritrea Maagasar

Southern Africa

Angoa Lesotho Mozambique outh Afria Zambia

otswana Maawi Namibia wazia n Zimbabwe

Territories in Afria not esewhere seifie

Asia

East Asia (including Oceania)

Austrai a Inones ia Mongoi a amoa Tuvau

runei arussaam aan Myanmar ingaore Vanuatu

amboia Kiribati New Zeaan oomon Isans Viet Nam

hina Lao Peoe’s em. Re. Paua New Guinea Taiei, hinese

ii Maao, hina Phiiines Thaian

Hong Kong, hina Maaysi a Reubi of Korea Tonga

West Asia

Afghanistan hutan Maives Pakistan ri Lanka

angaesh Inia Nea

Other ountries an territories in Asia an the Paifi not esewhere seifie

LDCs (Least-developed countries)

Afghanistan hutan entra Afrian Reubi ibouti Gambia

Angoa urkina aso ha quatoria Guinea Guinea

angaesh uruni omoros ritrea Guineaissau

enin amboia em. Re. of the ongo thioia Haiti




38

Kiribati Maives Niger oomon Isans Ugana

Lao Peoe’s em. Re. Mai Rwana omaia Unite Reubiof Tanzania

Lesotho Mauritania amoa uan Vanuatu

Liberia, Reubi of Mozambique ão Tomé an Prínie TimorLeste Yemen

Maagasar Myanmar enega Togo ZambiaMaawi Nea ierra Leone Tuvau

Six East Asian traders

Hong Kong, hina Reubi of Korea inga ore Taiei, hinese Thaian

Maaysia

Regiona Integration AgreementsAndean Community (CAN)

oivia,Purinationa tate of

oombia uaor Peru

ASEAN (Association of South East Asian Nations) / AFTA (ASEAN Free Trade Area)

runei arussaam Inonesia Maaysia Phiiines Thaian

amboia Lao Peoe’s em. Re. Myanmar ingaor e Viet Nam

CACM (Central American Common market)

osta Ria ava or Guatemaa Honuras Niaragu a

CARICOM (Caribbean Community and Common Market)

Antigua an arbua eize Guyana Montse rrat aint Vinent anthe Grenaines

ahamas ominia Haiti aint Kitts an Nevis uriname

arbaos Grenaa amaia aint Luia Trinia an Tobago

CEMAC (Economic and Monetary Community of Central Africa)

ameroon ha ongo quatoria Guinea Gabon

entra Afrian Reubi

COMESA (Common Market for Eastern and Southern Africa)

uruni gyt Libya Rwana Ugana

omoros ritrea Maagasar eyhees Zambia

em. Re. of the ongo thioia Maawi uan Zimbabweibouti Kenya Mauriti us wazi an

ECCAS (Economic Community of C entral African States)

Angoa entra Afrian Reubi em. Re. of the ongo Gabon ão Tomé an Prínie

uruni ha quatoria Guinea Rwana

ameroon ongo

ECOWAS (Economic Community of West African States)

enin ôte ’Ivoire Guinea Mai enega

urkina aso Gambia Guineai ssau Niger ierra Leone

ae Vere Ghana L iber ia , Reub i o f N iger ia Togo

EFTA (European Free Trade Association)

Iean Liehtenstein Norway witzeran

European Union (27)Austria stoni a Irean Nethera ns ain

egium inan Itay Poan ween

ugaria rane Latvia Portuga Unite Kingom

yrus Germany Lithuani a Romania

zeh Reubi Greee Luembourg ovak Reubi

enmark Hungary Mata ovenia

GCC (Gulf Cooperation Council)

ahra in , K ingom of Oman Qatar aui A rabia, K ingom of Uni te Arab mi ra tes

Kuwait, tate of

MERCOSUR (Southern Common Market)

Argentina razi Paraguay Uruguay

NAFTA (North American Free Trade Agreement)

anaa Meio Unite tates



239

TECHNICAL NOTES

SAPTA (South Asian Preferential Trade Arrangement)

angaesh Inia Nea Pakistan ri Lanka

hutan Maives

SADC (Southern African Development Community)

Angoa Lesotho Mauritiu s outh Afria Zambia

otswana Maagasar Mozambique wazian Zimbabwe

em. Re. of the ongo Maawi Namibia Unite Reubiof Tanzania

WAEMU (West African Economic and Monet ary Union)

enin ôte ’Ivoi re Mai enega Togo

urkina aso Guineai ssau Niger

WTO members are frequenty referre to as “ountries”, athoughsome members are not ountries in the usua sense of the wor butare offiiay “ustoms territories”. The efinition of geograhia another grouings in this reort oes not imy an eression of oinionby the eretariat onerning the status of any ountry or territory,the eimitation of its frontiers, nor the rights an obigations of anyWTO member in reset of WTO agreements. The oours,

bounaries, enominations an assifiations in the mas of theubiation o not imy, on the art of the WTO, any ugement onthe ega or other status of any territory, or any enorsement oraetane of any bounary.

Throughout this reort, outh an entra Ameria an the aribbeanis referre to as outh an entra Ameria. The oivarian Reubiof Venezuea; Hong Kong eia Aministrative Region of hina;the Reubi of Korea; an the earate ustoms Territory of Taiwan,Penghu, Kinmen an Matsu are referene as oivarian Re. ofVenezuea; Hong Kong, hina; Korea, Reubi of; an Taiei,hinese resetivey.

The osing ate for ata use within this reort is 12 Ari 212.




40

Abbreviations and symbolsAP Afrian, aribbean an Paifi Grou of tatesA antiumingALOP aroriate eves of rotetionAM Aggregate Measurement of uortAOA Agreement on Agriuture WTOAP Austraia Proutivity ommissionAQIQ Genera Aministration of Quaity uervision, Insetion an Quarantine of hinaAP Asia Paifi Trae AgreementAAN Assoiation of outheast NationsAP Amerian seing rieAT Amerian Tree arm ystemAV avaorem equivaent barriers to entryAI oreign Trae Information Offie of Germany bovine songiform enehaoathyT barriers to trae an investment

.i.f. ostinsuranefreightAR onsumer assistane to reye an savePR entre for onomi Poiy ResearhRLOR orest ertifiation ProgrammeI ommonweath of Ineenent tatesOMA ommon Market for astern an outhern AfriaoOP ountry of origin rinies eveoing ountriesG ANO uroean ommission iretorateGenera for Heath an onsumersP isriminatory roeuresA ast Afrian ommunityLA onomi ommission for Latin Ameria an the aribbeanMRA etria an etroni quiment Mutua Reognition ArrangementTPO etroni funs transfer at oint of sae

W onomi reeom of the WorRM environmentreate measuresAP onomi an oia ommission for Asia an the PaifiTR eetriity, gas, transort an ommuniationsTI nabing Trae IneU uroean Unionf.o.b. freeonboarAO oo an Agriutura OrganizationI oreign iret investmentR foreign equity restritionsAP inania ervies Ation Pan orest tewarshi ouniGAT Genera Agreement on Trae in erviesGATT Genera Agreement on Tariffs an TraeGI Goba oo afety InitiativeGRP Goo Reguatory PratiesGTA Goba Trae AertHAP hazar anaysis an ritia ontro ointsH harmonize systemIA Internationa Aounting tanars ommitteeI Internationa etrotehnia ommissionIA Internationa eeration of AountantsIO German Institute for onomi ResearhIM Information Management ystemsIOO Internationa Organization of eurities ommissionsIP Intergovernmenta Pane on imate hangeIPP Internationa Pant Protetion onvention

IO Internationa Organization for tanarizationIT Internationa Trae entreITIP Integrate Trae Inteigene PortaITO Internationa Trae OrganizationITU Internationa Teeommuniations Union



241

ABBREVIATIONS AND SYMBOLS

KP key foreign ersonneLs easteveoe ountriesLI Inonesian oabeing InstituteLTA LongtermarrangementMN most favoure nationMRA mutua reognition agreementMRLs maimum resiua evesMT Maaysian Timber ertifiation hemeNAMA NonAgriuture Market Aessn.e.s. not esewhere seifieNM nonmanufaturing setorsNMR nonmanufaturing reguationNT Nationa Trae stimateNTMs nontariff measuresO Organization for onomi ooeration an eveomentOI Wor Organization for Anima HeathOTR other restritionsOTRI Overa Trae Restrit iveness InePA rinia omonent anaysis

P Programme for the norsement of orest ertifiationPMR rout market reguationPI Preshiment insetionPTA referentia trae agreementRAPX Rai Aert ystem for Nonoo ProutsA outhern Afrian eveoment ommunityARO outh Asian Regiona tanars OrganizationR sreening an arova ubommittee on tanars an onformaneIT tanar Internationa Trae assifiationP sanitary an hytosanitaryTs eifi Trae onernsT tanars an Trae eveoment aiit yTs tate traing enterrises

TRI ervies Trae Restritiveness IneesTT tehnia barriers to traeTPP TransPaifi PartnershiTPR Trae Poiy ReviewTPR Trae Poiy Review oyTRAIN Trae Anaysis an Information ystemTRIP traereate asets of inteetua roerty rightsTTMR A TransTasman Mutua Reognition ArrangementTTRI Tariff Trae Restrit iveness IneUK Unite KingomUNTA Unite Nations onferene on Trae an eveomentUN Unite Nations onomi ommission for uroeUNP Unite Nations nvironmenta ProgrammeUNO Unite Nations uationa, ientifi an utura Organization

UN Unite Nations ramework onvention on imate hangeUR Uruguay RounU Unite tatesUIT Unite tates Internationa Trae ommissionUO Universa servies obigationUTR Unite tates Trae ReresentativeVAT vaueae taWHO Wor Heath OrganizationWIT Wor Integrate Trae ystemWTO Wor Trae Organization

The foowing symbos are use in this ubiation:… not avaiabe

figure is zero or beame zero ue to rouning not aiabeU$ Unite tates oars€ euro£ UK oun




44

Boxes

o .1 Methooogy for onstruting inies from UNTA TRAIN an T atabases 11

o .2 Trae restritiveness inees for servies 123

o .3 eomosition of hanges in I restritiveness 12

Appendix Table

Aeni Tabe .1 overage ratio an frequeny ine: intermeiateintensive setors 133

The trae effets of nontariff measures an servies measuresFigures

igure .1 AVs of NTMs an eonomi eveoment 139

Boxes

o .1 Methooogy use for estimating the AV of NTMs 137

o .2 umuation of trae osts in a goba suy hain 11

o .3 omementarit ies between trae in servies an trae in goos 12

o . nvironmentreate measures 1

o . Reorting of onformity assessment roeures as barriers to trae:seete eames 1

o . Harmonization versus mutua reognition 1

Appendix tables

Aeni Tabe .1 ffets of P measures on eort erformanes by firm 17

Aeni Tabe .2 ffets of TT measures on eort erformanes by firm 1

Aeni Tabe .3 Imat of P measures on agriutura an foo trae, 19921 19

Internationa ooeration on nontariff measures in a gobaize worBoxes

o .1 onomi theories of the GAT 1

o .2 ames of rivate stanars 17

o .3 ames of reguatory ooeration in the TT area 177

o . quivaene in the P Agreement 1



245

WTO MEMBERS

WTO membersAs of 1 May 212

Abania

AngoaAntigua an arbuaArgentinaArmeniaAustraiaAustriaahrain, Kingom ofangaesharbaosegiumeizeenin

oivia, Purinationa tate ofotswanarazirunei arussaamugariaurkina asouruniamboiaameroonanaaae Vereentra Afrian Reubi

hahiehinaoombiaongoosta Riaôte ’Ivoireroatiaubayruszeh Reubiemorati Reubi of the ongo

enmarkiboutiominiaominian Reubiuaorgyt avaorstoniauroean Unioniiinan

ormer Yugosav Reubi of

Maeonia YROMraneGabon

The Gambia

GeorgiaGermanyGhanaGreeeGrenaaGuatemaaGuineaGuineaissauGuyanaHaitiHonurasHong Kong, hina

HungaryIeanIniaInonesiaIreanIsraeItayamaiaaanoranKenyaKorea, Reubi of

Kuwait, the tate ofKyrgyz ReubiLatviaLesothoLiehtensteinLithuaniaLuembourgMaao, hinaMaagasarMaawiMaaysiaMaives

MaiMataMauritaniaMauritiusMeioMoova, Reubi ofMongoiaMontenegroMorooMozambiqueMyanmarNamibia

NeaNetheransNew Zeaan

Niaragua

NigerNigeriaNorwayOmanPakistanPanamaPaua New GuineaParaguayPeruPhiiinesPoanPortuga

QatarRomaniaRwanaaint Kitts an Nevisaint Luiaaint Vinent & the Grenainesamoaaui Arabia, Kingom ofenegaierra Leoneingaoreovak Reubi

oveniaoomon Isansouth Afriaainri Lankaurinamewazianweenwitzeranhinese TaieiTanzaniaThaian

TogoTongaTrinia an TobagoTunisiaTurkeyUganaUkraineUnite Arab miratesUnite KingomUnite tates of AmeriaUruguayVenezuea, oivarian Reubi of

Viet NamZambiaZimbabwe




46

Previous World Trade ReportsThe WTO and preferential trade agreements: From co-existence to coherence

211

World TradeReport 2011

The WTO and preferentialtrade agreements:

From co-existence tocoherence

7 7 7

h r- r i n n m r f r f r n ti l tr r m n t ( ) ir m in n t f t r f in t rn t i n l t r . h r l r r t

ri th hi t ri l l m n t f n th r rn t l nf r m n t . It mi n h r t l i h , t h ir n m if f t , n t h n t n t f t h r m n t th m l . F in l l itn i r th in t r t i n t n n th m lt il t r l t r i ntm.

m l t t r n in – t t h m lt il t r l , r i n l n n i l t r ll l – h r t h f r f f ri n r f rn ti l t ri ff n r

. r l t, n l m l l fr t i n f l l m r h n i t rr i r f r n n r f r nt i l t ri ff r m in li m r t nt in .

h r r t r l t h t m r n m r r i n nr f r n ti l t r i ff , i th n m r n n -t r if f r f r l t r

n t r i n i n l i n t h r m n t .

l l r t in n t r m r m ti n th m r n f t h“ ” rn n n r n f r l t r r i f rm r i m r t nt t th n t r t h n f rt h rr t i n in l rl t r if f . E n m t r i i n n t i r t t hi l in

t n r ti nn t r n .

h r r t n m in in t h h l l n th t r n t tt h m l ti l t r lt r i n t m n r n m r f t i n f ri n r i n h r n t n t h r m n t n t h t r i n

t m r l t t h .

h

n r f r n t i l t r

r

m

n t : r m

i t n

t

h r n

The evergrowing number of referentia trae agreements PTAs is a rominentfeature of internationa trae. The Reort esribes the historia eveoment ofPTAs an the urrent ansae of agreements. It eamines why PTAs areestabishe, their eonomi effets, the ontents of the agreements themseves,an the interation between PTAs an the mutiatera traing system.

Trade in natural resources

21

h rl r rt f n tr in n tr l r r ,h f l , f r t r , m in i n n fi h r i . h r t m in th

h r t r i ti f t r i n n t r l r r , th l i h ii l l t r n m nt n th r l f i n t r n t i n l r t i n ,

r ti l r l f th , in t h r r m n m n t f t r i nt hi t r .

t i n i t h t t n t n t ri i n f r m n t r i nn t r l r r . m f th i m in in t h r t i n lt h r l f tr i n r i i n t n t r l r r , th f f t

f i nt r n t i n l t r n t h t i n i l it f n t r l r r ,t h n ir n m nt l i m t f r r t r , th - l l n t r lr r r , n r r ri l t il it .

h rt m in r n f m r m l i n n t r lr r t r , h rt t , t rif f n i i , n

r i i n f rm t i n n t h i r r r n t . I t n l i n t i l t hf f t f t h l i t l n n n m n n i t tr i n r tn r .

F in ll , th rt r i n r i f h n t r l r r fi ti th in t h l l f r m r f th n i t h r in t rn t i n lr m n t th t r l t tr i n n t r l r r . n m r f

h l l n r r , in l i n th r l t i n f r t l i , tht r t m n t f i i , t r f i l it t i n , n th r l t i n hi t n

r l n t h r in t rn t i n l r m n t .

“ I e li e e t l t t t er ei s r f r t l l e e i l e t i t i t r e - f fs t t e s s

tr l resr es tre, tls t t filre t ress teseisses l e re ief r

r i t e s i i i t e r t i l t r e r el t i s . e l l e s i e t r e r l e s re k e t e s r i

t ttr eis t e s, tte rels eessr frt ett i et f jeties s s

e i r e t l r t e ti t e r e r e e t f t r l re s r e si e st i s et ti . ”

s l L , T i re t r - e er l

r

i

t r l r

r

World TradeReport 2010Trade in natural resources

The Wor Trae Reort 21 fouses on trae in natura resoures, suh asfues, forestry, mining an fisheries. The Reort eamines the harateristis oftrae in natura resoures, the oiy hoies avaiabe to governments an theroe of internationa ooeration, artiuary of the WTO, in the roermanagement of trae in this setor.

Trade policy commitments and contingency measures

29

The 29 Reort eamines the range an roe of ontingeny measures avaiabein trae agreements. One of the Reort’s main obetives is to anayse whetherWTO rovisions rovie a baane between suying governments with theneessary fleibiity to fae iffiut eonomi situations an aequatey efiningthese in a way that imits their use for rotetionist uroses.

Trade in a globalizing world

2

The 2 Reort rovies a reminer of what we know about the gains frominternationa trae an highights the haenges arising from higher eves ofintegration. It aresses the question of what onstitutes gobaization, whatrives it, what benefits it brings, what haenges it oses an what roe traeays in this wor of evergrowing intereeneny.

Sixty years of the multilateral trading system: achievements and challenges

27

L T

E

I T I

L T

E

E

T

I 7 - - 7 - 1 -

2007WORLD TRADE REPORT On 1 anuary 2 the mutiatera traing system eebrate its th anniversary.

The Wor Trae Reort 27 eebrates this anmark anniversary with an in

eth ook at the Genera Agreement on Tariffs an Trae GATT an itssuessor the Wor Trae Organization — their origins, ahievements, thehaenges they have fae an what the future hos.

Exploring the links between subsidies, trade and the WTO

2

2006WORLD TRADE REPORT

L

I

I

L

E

E

The Wor Trae Reort 2 fouses on how subsiies are efine, whateonomi theory an te us about subsiies, why governments use subsiies, themost rominent setors in whih subsiies are aie an the roe of the WTOAgreement in reguating subsiies in internationa trae. The Reort aso roviesbrief anaytia ommentaries on ertain toia trae issues.



247

PREVIOUS WORLD TRADE REPORTS

Trade, standards and the WTO

2


L

I

I

L

E

E

The Wor Trae Reort 2 seeks to she ight on the various funtions anonsequenes of stanars, fousing on the eonomis of stanars ininternationa trae, the institutiona setting for stanarsetting an onformityassessment, an the roe of WTO agreements in reoniing the egitimate oiyuses of stanars with an oen, nonisriminatory traing system.

Coherence

2


L

I

I

L

E

E

The Wor Trae Reort 2 fouses on the notion of oherene in the anaysisof intereenent oiies: the interation between trae an maroeonomioiy, the roe of infrastruture in trae an eonomi eveoment, omestimarket strutures, governane an institutions, an the roe of internationaooeration in romoting oiy oherene.

Trade and development

23


L

I

I

L

E

E

The Wor Trae Reort 23 fouses on eveoment. It eains the origin ofthis issue an offers a framework within whih to aress the question of thereationshi between trae an eveoment, thereby ontributing to moreinforme isussion.



World Trade Report 2012

The World Trade Report 2012 ventures beyond tariffs to examine otherpolicy measures that can affect trade. Regulatory measures for trade in

World Trade Report12 e

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Transcript of World Trade Report12 e