ABSTRACT
There has been a dramatic shift in the focus of trade policy concerns from the barriers that lie at the border to the barriers that exist ‘within the border’. 1 The WTO and many other trading arrangements have been largely successful in reducing both the levels of tariffs worldwide and the scale of other border measures such as quotas. This has revealed a new and more subtle category of measures that restrict trade – the numerous commonplace regulations that governments enact to protect the health and safety of their citizens and the environment in which they live. Such regulations vary tremendously: one nation’s bunch of grapes is another nation’s repository of carcinogenic pesticide residue. This effort to protect citizens from the hazards of everyday life has become a virtual minefi eld for trade policy-makers, as such differences can often be manipulated or exploited to protect domestic industry from international competition. 2 Even when there is no protectionist intent on the part of lawmakers, through a lack of coordination, mere differences in regulatory or standard-setting regimes can function to impede trade. It has thus become increasingly diffi cult to delineate the boundaries between a nation’s sovereign right to regulate and its obligation to the international trading community not to restrict trade gratuitously. The question of how to address this problem has received increasing attention from trade scholars. As Miles Kahler states, ‘the decades-long process of lowering trade barriers resembles the draining of a lake that reveals mountain peaks formerly concealed or (more pessimistically) the peeling of an onion that reveals innumerable layers of barriers’. 3
There has been a steady growth in the regulations that pertain to health, safety, consumer protection and the environment over the past three decades. In many respects, these regulatory trends can be viewed as part of the elaboration of the modern welfare state in much of the industrialized world, refl ecting in part the proposition that greater safety, a cleaner environment, etc. can be thought of as normal economic goods, the demand for which rises as income levels rise, so that greater prosperity (in signifi cant part engendered by trade liberalization) has been accompanied by increased demands for these kinds of domestic policies. As trade liberalization, at least with respect to border measures, has continued to advance, these ‘within-the-border’ regulatory measures require new disciplines under international trade rules, particularly in a globalizing economy which, it is argued, has a low tolerance for ‘system frictions’. 4
The allegation that regulations ostensibly designed to protect consumer health and safety are often trade barriers has substantially heightened both domestic and
international political confl icts, as trade policy and domestic policy become increasingly linked in domains previously thought to lie outside the arena of trade policy. Regulation in areas that used to be seen as purely domestic, such as food inspection, product labelling and environmental policy, are now widely acknowledged as affecting how goods cross borders. This has resulted in a polarization of domestic political interests and has drawn new domestic political constituencies into debates over trade policies in the form of consumer and environmental groups or other NGOs seeking to resist the imposition of constraints on domestic political sovereignty by international trade agreements. As David Vogel notes, free-trade advocates want to limit the use of regulations as barriers to trade, while environmentalists and consumer advocates want to prevent trade agreements from serving as barriers to regulation. While the trade community worries about an upsurge of ‘eco-protectionism’ – the justifi cation of trade barriers on environmental grounds – consumer and environmental organizations fear that trade liberalization will weaken both their own country’s regulatory standards and those of their nation’s trading partners. 5
This has become a concern in both exporting and importing countries. Domestic producer interests in countries of destination often argue that lax health and safety regulation in countries of origin constitute an implicit and unfair subsidy to foreign producers that should be neutralized, for example by countervailing duties or by insistence on foreign countries adopting policies similar to those that obtain in countries of destination. 6 This insistence of across-the-board equivalence raises a number of normative diffi culties. How can trade in all goods worldwide really be expected to occur on a level playing fi eld? This proposition seems to be at odds with the theory of comparative advantage, which is centrally predicated on nations exploiting their differences (not similarities) in international trade. Few international trade theorists believe any longer that comparative advantage is exclusively exogenously determined, but is signifi cantly shaped by endogenous government policies, including health and safety regulation. Exploiting differences in government policies is no less legitimate than exploiting differences in natural endowments (see Chapter 1 of this book).
