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Anne-Célia Disdier: “International trade and health and technical standards: what is at stake?”

Anne-Célia Disdier is professor at PSE and research director at the INRAE. In February 2020, she published “Mondialisation des échanges et protection des consommateurs : Comment les concilier ?” (Globalisation of trade and consumer protection: how can they be reconciled?) in the “Collection du Cepremap” (Éditions rue d’Ulm). Using findings from research conducted over 15 years, she suggests a number of courses of action, both to improve inter-country coordination of rules and to incorporate developing countries more effectively into international regulatory schemes.

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How and why did health and technical standards emerge to regulate the exchange and consumption of products?

The implementation of these standards is motivated by the protection and safety of consumers. As a result of a great many food and environmental scandals in the past few decades, customers are highly suspicious of the existing systems of information, about both the quality of products and the protection offered by public regulators. Public authorities have thus defined and introduced health and technical norms, which cover all products - from food to children’s toys with potentially toxic paint, fabric, cosmetics and household cleaning products. Statistics show significant growth over the past ten years in the number of standards introduced around the world, including in developing countries, which are adopting such measures partly in response to the norms established in developed countries.

Who determines these standards and since when?

At the international level, the standards are governed by two WTO - World Trade Organisation agreements: the SPS Agreement on Sanitary and PhytoSanitary measures, which has existed since the creation of the WTO in 1995, and the TBT Agreement on the Technical Barriers to Trade, first signed in 1980 and revived at the founding of the WTO. These agreements specify that the norms must be based on scientific evidence and that international standards must be preferred. A number of these international standards are defined in the Codex Alimentarius (1). However, countries have the right to define their own norms, which are often stricter than the international edicts.

There are several mechanisms for measuring the implementation and coordination of these standards among countries: the transparency approach, whereby states inform each other about the steps they have taken; the mutual recognition process, wherein states recognise the equivalence of their partners’ standards; and the harmonisation framework, within which the various partners adopt the same standards. Nevertheless, these standards can also serve protectionist purposes for states tempted to use them to protect not (or not only) their consumers but also their domestic producers from international competition. Then, rivalry and trade disputes emerge among states...

Which countries dominate the market and profit the most from these standards?

The two biggest players in the definition and implementation of norms are the United States and the European Union. These markets are attractive because of their size but anyone who wants to export their products to them must adhere to their standards. They have also signed many preferential trade agreements with third party countries and have thus imposed, through these agreements and by reason of their bargaining power, their own norms on the rest of the world. Yet these two states have opposing views on risk and therefore on standardisation policies. While in Europe, the precautionary principle prevails, this is not the case in the United States. In Europe, firms cannot put a product on the market if it has not been shown to be healthy and without risk. In the United States, the dominant approach is the so-called “precautionary approach”: firms can put a product on the market so long as there is no proven risk, and thus they have greater room to manoeuvre.

The United States and the European Union also have different views on risk arising from their cultural differences. Take, for example, their differing attitudes to genetically modified organisms, hormone-treated meat, and dairy products made with unpasteurised milk. These differences generate different standards but can also be a recurring source of tensions between these two partners which, through the spill-over effect, affects third party countries and international trade as a whole.

What impact do these norms have on developing countries?

Developing countries are clearly the most affected, for a number of reasons. First, because the international regulatory framework is not adapted to their situation: they have little input into the definition of standards, at either the multilateral level or in the bilateral or regional preferential trade agreements that they negotiate, especially with developed countries. They are also affected by the very high costs of making their products conform to the norms: firms in these countries cannot cope with the added costs and thus are excluded from international trade.

As well, multiple institutional and infrastructural obstacles prevent companies in developing countries from meeting the norms imposed by their trading partners or, when they can do so, from obtaining the necessary certifications. Access to information is also a problem: it is more difficult for them to know what the prevailing norms are in foreign markets. Finally, these countries are particularly affected because they are faced with the large number of standards imposed on the agricultural sector, which remains their main export sector. And so a paradox appears: in the name of development, developed countries allow reduced customs duties - even no customs duties at all - to the developing economies, but these market advantages are of little use in reality insofar as the implementation of standards significantly limits developing countries’ exports to the rest of the world.

What solutions are you proposing for a better balance, especially in the context of a health crisis such as the one we are currently living through?

To meet the challenges ahead of us, it is essential to involve the developing countries more effectively in the definition of international standards. And since the current health crisis doubles as an economic crisis, we must also improve the technical assistance they are offered in order to help them to meet the requirements imposed by the standards, and by adapting this assistance to the real needs of each of them. It would also help to establish more complementarity between private and public standards: very many private standards are imposed by the companies themselves and are therefore not subject to the international regulations. We must also demand more scientific justification for some of the norms. Finally, and again linked to the current crisis, customers must be better informed about the process of establishing standards and the health and environmental protection they are offered.

However, without question, the greatest challenge is the revival of international cooperation in regulatory matters. Multilateral negotiations over trade policy have stopped and the recent resignation of the Director-General of the WTO, Roberto Azevedo, has only aggravated the deep crisis in which the organisation has found itself in the last few years. To these difficulties, we can add the backdrop of the trade war between the US and China, and the growing protectionism in many countries. Without the WTO, it is hard to have a proactive approach to international standards and cooperation around regulations at the international level. We can expect, then, that some norms, already sometimes used to protectionist ends, will be so used even more often in the near future.

On what research results do you base your proposals in this book?

All the propositions are informed by several projects on standards that I have been researching for the past 15 years, which investigate - via various analytical methods - their impact, not only on international trade, but also on well-being. This led us, Marco Fugazza, economist at the UNCTAD (2) and me, to write up a practical guide to these norms (3), intended for public decision makers and researchers; the objective is to share knowledge, including with colleagues in developing countries so that they can assess the effects of norms on their economies, using methods now approved by various scientific publications.

(1) http://www.fao.org/fao-who-codexalimentarius/codex-texts/list-standards/en/

(2) UNCTAD, the United Nations Conference on Trade and Development, is a subsidiary body of the United Nations General Assembly whose aim is to foster growth in developing countries by helping them to integrate into the global economy.

(3) Anne-Célia Disdier, Marco Fugazza, A Practical Guide to the Economic Analysis of Non-Tariff Measures, UNCTAD-WTO, 98 p., 2020, 978-92-1-112951-9.

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