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jobsext0917.doc
JOB(09)/17 10 March 2009
Committee on Technical Barriers to Trade
The Economic Rationale for standardization
Background Note by the Secretariat
The TBT Committee agreed to hold a Workshop on the Role of International Standards in Economic Development at its meeting of 5-6 November 2008. The Workshop will consider the economics of standardization, case studies dealing with the use of international standards, ongoing efforts to build standardization capacity in developing countries and specific challenges facing developing countries, as well as ways and means of addressing these. It states that the standard is:
aimed at the achievement of the optimum degree of order in a given context [and that] it should be based on the consolidated results of science, technology and experience, and aimed at the promotion of optimum community benefits. The three descriptions set out below that describe these roles are not meant to be either exclusive or exhaustive of other descriptions in the literature; rather, by ways of example, the intention is to describe three key benefits that standards provide:
Standards provide compatibility. It is also important for the producer: if the buyer cannot distinguish between high quality and low quality before purchase – how, then, can the seller ask more for the higher quality product? The argument goes that although property rights are essential for knowledge generation and innovations because private entities need to derive benefits from their investments and R&D, if intellectual property rights holders are unwilling to licence this right at reasonable terms, the standardization process might be slowed down, even blocked – meaning that the optimal technical solution may not be used. An applied technical regulation (based on a standard) may restrict trade and reduce trade flows and this comes at a cost because the exporter may need to adapt their product (or the process used to produce it) to new requirements. In efforts to quantify the impact of regulations in developed countries on export performance of developing countries, research has shown that firms (in developing countries) that are impacted by testing procedures have an export share that is 9 per cent points lower than that of other firms, and a 16 per cent smaller export share if the firms are domestically owned. Looking specifically at the role of standards in trade, Moenius (2004) states that, on average, a one per cent increase in the number of bilaterally shared standards results in a one-third of one per cent increase in trade volume; the study notes that shared standards play a statistically significant role in promoting trade – and econometric evidence indicates that there may be room for increasing trade-volumes through harmonization for some countries. It shows that European Union product standards harmonized with international standards restrict African textiles and clothing exports less than do European Union product standards not aligned with international norms. Baller, Silja (2007), "Trade Effects of Regional Standards Liberalization – A Heterogeneous Firms Approach", World Bank Policy Research Working Paper 4124, World Bank, Washington, DC. Swann, Peter (2000), "The Economics of Standardization", Final Report for Standards and Technical Regulations Directorate, Department of Trade and Industry, Manchester Business School, University of Manchester. This document has been prepared under the Secretariat's own responsibility and without prejudice to the positions of Members and to their rights and obligations under the WTO. It is noted that as listed these conclusions are taken out of their full context; they should to be read together with their underlying assumptions. Ding Wenxing, China National Institute for Standardization ( CNIS ) , quoted in "Standardization and Economic Development: T heory, E mpirical S tudies and C ases" , by Professor YU Xinli, Standards Press of China , 2008 .
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