Reducing regulatory trade costs: why and how?

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