Reducing regulatory trade costs: why and how?

Abstract

Regulatory trade costs matter. They consist of the costs incurred by A exporters of effective market access to B due to different regulation and enforcement, in particular of ‘risk regulation’ (health, safety, environment). Stronger, negotiations for ‘deeper’ bilateral and regional trade agreements as well as estimates of tariff equivalents of ‘regulatory trade costs’ have increased the awareness that lowering of regulatory trade costs is quintessential for world trade. For middle-income and developing countries, these costs are rising secularly. This paper critically reviews the three principal ways of reducing such costs to the world economy – trade agreements, international regulatory cooperation, and global technical standardisation – and discusses how to render these more effective. Key challenges are to reduce national standards setting and to promote more effectively world standards. The European Union plays a frontrunner role in this regard, including for information and communications technology standards.