How Can We Know (More) About the Trade Effects of Regulation?

Standards and regulations have externalities for other governments, citizens, and economic actors. The vector for those externalities is international trade, which is the reason that trade agreements usually contain obligations both on the substance of domestic regulations and on how standards are developed and implemented. Regulators, trade policy officials, and traders all need to understand the trade effects of regulation in order to make informed regulatory decisions, influence new regulations in other countries, and to make decisions about markets to enter. WTO transparency mechanisms are not designed for this purpose—the effect on trade is a factor triggering the need to notify, but the notification format does not require an indication of the potential effects on trade. Inadequate notifications by WTO Members can be partially mitigated by giving the Secretariat increased scope to act as the “common agent” of Members in assembling information that was or ought to have been notified. WTO committees provide an opportunity for deliberation on specific measures, although learning about the effects of one regulation is not the same as learning about the trade effects of regulations in general. If the system were more complicated, it would not work, but this paper shows how it can be improved.