Who Approved that Product? Private-Sector Standards Take Lead in Global Commerce

By C.D. Howe Institute —— Bio and Archives August 29, 2012

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TORONTO, - Global commerce is experiencing a rapid shift from government- to private-sector standard-setting for everything from product safety and quality to corporate behavior abroad, according to a report released today by the C.D. Howe Institute. In "The New Multilateralism: The Shift to Private Global Regulation," respected trade lawyer Lawrence Herman identifies a broad shift to rulemaking by the private sector rather than governments that has accelerated since the collapse of the World Trade Organization (WTO) negotiations.

"This is a wake-up call for governments. While it is beneficial for the private sector to fill this need in the marketplace, there are also risks associated with the current proliferation of rules and private regulatory bodies, noted Mr. Herman. "Governments have been oblivious to this trend and need to do more to ensure private regulatory bodies operate in a fair and transparent manner, and don't stymie competition or operate as private clubs." Typically, says the author, these privately set standards help underpin cross-border exchanges, and increasingly help facilitate global trade beyond what WTO rules or other government-to-government agreements have been able to do. These standards can have major effect on trans-border acceptance of products, to the point of often determining the ability of producers to access markets, he says. As such, they have generally beneficial effects in smoothing trade, yet they can also have effects detrimental to competition. Mr. Herman argues the task for government is to encourage and assist the formulation of these business-driven norms, through informal consultations and effective articulation of the underlying public interest, and instruments such as mutual recognition agreements. The model proposed here would include promoting openness and transparency in standard-setting, encouraging the adoption of standards that span the needs of both advanced western economies and emerging or developing economies, and supporting the adoption by standard-setting bodies of core WTO principles such as non-discrimination. Canada should give this phenomenon a more explicit place in its global commerce and competitiveness strategies, he concludes. For the report go to: C.D. Howe Institute