Trade Standards Compliance 2015: Meeting Standards, Winning Markets

The increasing importance of standards in international trade of agri-food products

The latest wave of globalization has been characterized by a remarkable process of market liberalization. With the completion of numerous rounds of multilateral, regional and bilateral trade negotiations, the world economy has seen a significant overall decline in tariff levels during the past couple of decades. However, despite the overall reduction in tariff levels, many developing countries have not been able to substantially increase their participation in global trade. Potential gains from tariff reductions have not been realized and in some cases even eroded due to an increased use of non-tariff barriers to trade. Among such non-tariff barriers one typically finds technical regulations and (public) standards. In addition, in recent years private standards have gained in importance and grown in number and are increasingly affecting and shaping international trade flows.

Technical standards for products and also for (production) processes are not new; they have been in existence for well over 100 years. Long before globalized trade took off, countries developed technical standards to guarantee consumer safety, increase transparency in markets, facilitate product compatibility, and ensure that products met consumer needs. In many cases, the compliance requirements placed on imported products are, in fact, simply the same as the requirements placed on domestic products. However, in the recent past, standards have been applied in international trade with growing intensity.

What are the priorities to strengthen compliance with trade standards?

Developing countries face considerable demands to enhance their SPS capacity and strengthen compliance with trade standards, as a means to boost agri-food exports or meet other policy objectives. Since resources from national budgets and development partners are generally insufficient, priorities must be established. The STDF has developed a new decision-support tool

– SPS Market Access Prioritization (SPS-MAP) – to help prioritize and make choices between competing SPS investments for market access, based on a multi criteria decision analysis approach. Effective use of the tool depends on the engagement of all relevant public and private sector stakeholders. Initial experiences have pointed to the value of this approach to, inter alia, encourage public-private dialogue, promote transparency, improve the economic efficiency of investment decisions and leverage funding. For more information, see: http://standardsfacility.org/sps-market-access-prioritization.

UNIDO’s trade standards compliance analyses: Looking back and ahead

It is against the background of this increasingly rule-based global trading system that, since 2008, UNIDO has taken the initiative to collect evidence on a regular basis about trade-related challenges and their evolution over time, in particular in the area of compliance with (quality, certification, labeling, etc.) requirements set by international markets. With funding from the Norwegian Agency for Development Cooperation (NORAD) and in partnership with the Institute of Development Studies (IDS),

UNIDO publishes since 2010 a periodical Trade Standards Compliance Report (TSCR) to systematically examine the challenges that developing countries face with regard to trade standards in the agrifood sector, and to support domestic policies and technical assistance to overcome them.

The starting point was the compilation and analysis of data on import rejections of agrifood products for two markets, the United States (US) and the European Union (EU), which were presented in the 2010 TSCR. Such import rejections give indications on the scale and root causes of compliance challenges of developing countries and allow to make estimations of the financial implications of non-compliance. Over time, UNIDO has been granted access to the data of two additional markets, Japan and Australia, which has made it possible for this second edition of the TSCR to present a comprehensive comparative analysis of import rejections of agrifood products for four major international export markets.

Against the picture of such trade standards compliance challenges, the TSCRs also assess the exporting countries’ ability to detect and prevent non-compliance and the resulting export losses. For this purpose, UNIDO has developed and applied new innovative methodological tools. The 2010 TSCR introduced a Quality Infrastructure (QI) survey and the concept of a cost-benefit model for technical assistance. The present 2015 TSCR refines the QI survey tool and adds the findings from a corporate buyers’ compliance confidence survey. Overall, this 2015 TSCR presents three measures of developing countries’ trade standards compliance capacity that will be described in the following.