IDEAS home Printed from https://ideas.repec.org/p/epr/enepwp/016.html
   My bibliography  Save this paper

Mutual Recognition in Goods and Services: An Economic Perspective

Author

Listed:
  • Jacques Pelkmans

    () (Centre for European Policy Studies)

Abstract

Mutual recognition is a remarkable innovation facilitating economic intercourse across borders. In the EU's internal goods market it has been helpful in tackling or avoiding the remaining obstacles, namely, regulatory barriers between member states. However, there is a curious paradox. Despite the almost universal acclaim of the great merits of mutual recognition, the principle has, in and by itself, contributed only modestly to the actual realisation of free movement in the single market. It is also surprising that economists have not or hardly underpinned their widespread appreciation for the principle by providing rigorous analysis which could substantiate the case for mutual recognition for policy-makers. Business in Europe has shown a sense of disenchantment with the principle because of the many costs and uncertainties in its application in actual practice. The purpose of the present paper is to provide the economic and strategic arguments for employing mutual recognition much more systematically in the single market for goods and services. The strategic and the 'welfare' gains are analysed and a detailed exposition of the fairly high information, transaction and compliance costs is provided. The information costs derive from the fact that mutual recognition remains a distant abstraction for day-to-day business life. Understandably, verifying the 'equivalence' of objectives of health and safety between member states is perceived as difficult and uncertain. This sentiment is exacerbated by the complications of interpreting the equivalence of 'effects'. In actual practice, these abstractions are expected to override clear and specific national product or services rules, which local inspectors or traders may find problematic without guidance. The paper enumerates several other costs including, inter alia, the absence of sectoral rule books and the next-to-prohibitive costs of monitoring the application of the principle. The basic problems in applying mutual recognition in the entire array of services are inspected, showing why the principle can only be used in a limited number of services markets and even there it may contribute only modestly to genuine free movement and competitive exposure. A special section is devoted to a range of practical illustrations of the difficulties that business experiences when relying on mutual recognition. Finally, the corollary of mutual recognition - regulatory competition - is discussed in terms of a cost/benefits analysis compared to what is often said to be the alternative, that is 'harmonisation', in EU parlance the 'new approach' to approximation. The conclusion is that the manifold benefits of mutual recognition for Europe are too great to allow the present ambiguities to continue. The Union needs much more pro-active approaches to reduce the costs of mutual recognition as well as permanent monitoring structures for its application to services ( analogous to those already successfully functioning in goods markets). Above all, what is required is a 'mutual recognition culture' so that the EU can better enjoy the fruits of its own regulatory ingenuity.

Suggested Citation

  • Jacques Pelkmans, 2003. "Mutual Recognition in Goods and Services: An Economic Perspective," Economics Working Papers 016, European Network of Economic Policy Research Institutes.
  • Handle: RePEc:epr:enepwp:016
    as

    Download full text from publisher

    File URL: http://www.enepri.org/Publications/WP016.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Annalisa Zezza & Federica Demaria & Maria Rosaria Pupo d'Andrea & Jo Swinnen & Giulia Meloni & Senne Vandevelde & Alessandro Olper & Daniele Curzi & Valentina Raimondi & Sophie Drogue, 2018. "Research for AGRI Committee - Agricultural trade: assessing reciprocity of standards," Working Papers hal-02787948, HAL.
    2. Galina An & Keith E. Maskus, 2009. "The Impacts of Alignment with Global Product Standards on Exports of Firms in Developing Countries," The World Economy, Wiley Blackwell, vol. 32(4), pages 552-574, April.
    3. World Bank, 2008. "Trade Issues in East Asia, January 2008 : Overcoming Trade Barriers from Standards and Technical Regulations," World Bank Other Operational Studies 19526, The World Bank.
    4. Alberto AMURGO PACHECO, 2006. "Mutual Recognition Agreements and Trade Diversion: Consequences for Developing Nations," IHEID Working Papers 20-2006, Economics Section, The Graduate Institute of International Studies, revised Jun 2007.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:epr:enepwp:016. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CEPS) The email address of this maintainer does not seem to be valid anymore. Please ask CEPS to update the entry or send us the correct email address. General contact details of provider: http://edirc.repec.org/data/eneprea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.