Export Standards and Export Losses in Global Trade: Need for Harmonization of Standards

Abstract

This paper looks into the effects of quality related export standards imposed by importing country which is an inevitable feature of global trade today. Export standards and regulations adopted by different countries have risen significantly over the years. This may be attributed to rising awareness among people towards safer and hygienic products which should be environmentally sound also. Imposing export standards is often looked upon as a means of restricting trade and classified under non-tariff barrier. As norms and standards usually apply to national and foreign production, they do not correspond to the classical form of protectionism. But the governments of importing countries have the ability to set standards based on domestic firms' product characteristics or technology capacity. This paper develops a simple model to show how export standards can lead to substantial increase in cost for exporters which leads to substantial loss of trade and sometimes welfare and how the difference in standards in different export markets prevent the exporting firms to accrue the benefits of economies of scale. Differences in product standards and conformity assessment procedures can greatly influence trade volumes and patterns. Regional integration can be beneficial and existing Regional Trading Agreements should be revisited, reviewed and amended to include stronger provisions for standard harmonization. This can have a positive impact on trade within the region and with third countries.