Strengthening the Compliance of the OIC Member States
to International Standards
11
2.2 International Standards
Historically, most standards production has taken place domestically, through national standards
agencies. The result has been differing national standards, sometimes for sound scientific or
environmental reasons, other times simply because of a past accumulation of practice in the
marketplace, or historical issues of regulatory design and approach. Divergent national standards add to
the costs faced by business, as exporters need to retool and redesign so that their products meet
relevant standards in all markets where they operate. The costs for developing country exporters can be
particularly high—high enough to keep them out of markets where they might otherwise be competitive.
For example, Czubala et al. (2009) show that standards represent a significant barrier to developing
country exports of textiles and clothing products to the EU market, and Shepherd and Wilson (2013)
find a similar result for the case of agricultural products. Both sectors are of particular importance to
developing countries in the early stages of industrialization, which highlights the importance of product
standards as a development issue.
It is important to stress that product standards add to both the fixed (paid once) and variable (per unit)
costs associated with international trade. Variable cost increases are due to the need for testing and
certification, while the investment costs required to redesign a product line to meet a foreign standard
can be substantial, even though they are only paid once. In addition, the fixed costs associated with
product standards in overseas markets can be particularly high in developing countries, where technical
expertise may not be easily available. Shepherd (Forthcoming) shows that product standards in
developed country markets can limit the ability of developing countries to diversify their export base
because of these kinds of fixed cost issues that impede the ability of firms to introduce new products.
As a result of these factors, divergent national standards have therefore come to be seen as a potential
source of trade costs in some cases, and thus as a friction that typically tends to hold back global trade. It
is important to highlight that in the vast majority of cases, the aim of a standard is not protectionist.
Rather, it is the achievement of a valid regulatory objective, like consumer protection, or protection of
the environment. What is emphasized here is the economic effect of the instrument used: the result can
be de facto market protection, even when that is not at all the aim of the standard.