While the Sustainable Development Goals (SDGs) do not explicitly mention trade, freer trade does support at least two of them: SDG 8 (Promote inclusive and sustainable economic growth, employment, and decent work for all) and SDG 12 (Ensure sustainable consumption and production patterns) are possible through the benefits of the movement of goods and services globally. Dating back to the work of Adam Smith and David Ricardo, evidence suggests that trade is beneficial and that different types of countries can gain from trade. The gains come from efficient production and expansion of consumption opportunities. Over the years, economists have provided analysis that suggests that international trade is an engine of economic growth globally. However, current political and social movements are shining a light on the challenges of globalization. Further, these movements are calling for restrictions in trade as a remedy. This protectionism may diminish the gains from trade, limiting the potential to achieve the SDGs.
These calls for restricting trade are not new. At the time of the negotiations during the Uruguay Round of the World Trade Organization’s General Agreement on Tariffs and Trade (GATT) and the Agreement on Agriculture, researchers expressed concerns that nontariff barriers (NTBs), such as labels and food safety regulations, would rise. Thus, these NTBs would limit trade and the welfare-enhancing benefits of freer trade. Specifically, the thought has been that countries, especially developed countries, would use NTBs to protect domestic industries under the guise of safety and quality. Another reason is that increased trade would increase the imports of potentially harmful products or products of lower quality. In that case, using NTBs could enhance trade at least for exporters that meet the new standards. In either case, the concern has been that the negative effects of NTBs would generate greater harm for developing countries compared with developed countries.
Are the NTBs trade limiting or trade enhancing? Further, if the intent of the policies is appropriate but they limit trade, how can trading partners deal with differences in national perspectives of expectations of quality, safety, and risk tolerance? The intent of the policies may not matter (Swinnen et al. 2015). Rather, the context of the standards (political factors, producer costs, consumer demand conditions, etc.) may shape the effect of the standard more. If the SDGs are achievable through greater trade, policy makers must manage the potential negative effects of labeling and food safety regulations, as with other NTBs, to prevent distorting trade.
Starting with the premise that the intent of the NTBs does not matter, trade policies which limit the ability of producers to benefit from trade lower growth and development of the exporting countries, particularly developing country exporters. Over time, however, the intent of the regulations can matter. Food safety regulations, created to prevent the trade of products with pathogens or excessive chemical residues, will shore up markets and potentially enhance the demand for products or enhance welfare. Food safety standards can lead to standards that are more stringent, but other factors such as the risk preferences of consumers can affect the net effects of these policies (Beghin et al. 2013; Disdier and Marette 2010; Fulponi 2006; Henson 2007; Swinnen et al. 2015; van Tongeren et al. 2010). Similarly, a label that reflects production practices that are consistent with consumer values or ideas concerning organics or animal welfare may also support consumption of the product and yield premiums for the producers. Further, these policies can enhance the productive capacities of the developing country producers by rationalizing production, enhancing efficiencies, or contributing to producer welfare. In these cases, we see “win–win” regulations. Consumers obtain their consumption goals and producers attain the economic benefit of selling products in valuable global markets.
Several studies suggest that NTBs have limited trade for developing countries (Anders and Caswell 2009; Otsuki, Wilson, and Sewadeh 2001a, b; Tran, Wilson, and Anders 2012). However, newer findings suggest that these standards have not been as detrimental as previously considered and have improved the production and employment opportunities for people in developing countries (Colen, Maertens, and Swinnen 2012; Minten, Randrianarison, and Swinnen 2009; Shepherd and Wilson 2013). Thus, no consensus holds for the effects of NTBs. Future discussions on NTBs need to take into consideration the evolving understanding of these policies. Where trade is limited, greater dialogue between trade partners through mechanisms at the World Trade Organization and other trade forums may ease differences to create win–win policies and help developing countries attain the SDGs.
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Photo: By Judgefloro (Own work) [CC BY-SA 4.0], via Wikimedia Commons
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