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SINCE World War II, international trade has increased seventeenfold.
Of course there are many reasons for this; the General Agreement on Tariffs and Trade (GATT), the World Trade Organisation (WTO), and the building body of evidence proving trade is beneficial. However, there is one contributing factor that many disregard: standards.
World War II ended in 1945 and shortly afterwards, in 1946, 65 delegates from 25 countries met to discuss the future of international standardisation. The result: the International Organisation for Standardisation (ISO), which was founded in 1947.
The gains from implementing international standards are myriad and include that they:
- Facilitate market access;
- Reduce costs and allow economies of scale;
- Lower costs to consumers;
- Increase economic efficiency which generates economic benefits for the supplying industry, through increasing profits;
- Lower prices for goods and services for the consumer, and so on.
Standards in general have also been shown to increase exports and imports.
The last point should not be surprising (I will elaborate why in a moment) and is evident in the figure below. Standardised product types make up a larger portion of trade volume today than they ever did.
If we look at simple membership numbers as of March 2013, the WTO had 159 members and the ISO 161. It therefore seems apparent that the majority of WTO members, possibly all (I have not taken the time to cross-check the lists), see the benefits of standardisation and this is part of the reason why global trade has increased seventeenfold.
The simplest reason why standards increase international trade is because whether country-specific or shared, standards reduce information costs and allow for easier contracting – for all in manufactured goods.
With the bulk of global trade occurring in manufactured goods, standards are thus helping reduce information costs for the bulk of international trade.
The Uruguay Round of GATT left countries with the option of setting standards on safety and health grounds, so international trade is governed by an increasing range and variety of product and process standards.
Due to this option, standardisation policy is often used as a key instrument in non-tariff barriers.
What is my point with all of this? South Africa faces several ‘external’ constraints such as persisting labour strikes, the exchange rate and non-tariff barriers, all of which dampen growth.
However, these constraints can be mitigated, in part, through being involved in the world of standards.
- Fin24
* Geoffrey Chapman is a guest columnist and trade policy expert at the SABS. Views expressed are his own.
Of course there are many reasons for this; the General Agreement on Tariffs and Trade (GATT), the World Trade Organisation (WTO), and the building body of evidence proving trade is beneficial. However, there is one contributing factor that many disregard: standards.
World War II ended in 1945 and shortly afterwards, in 1946, 65 delegates from 25 countries met to discuss the future of international standardisation. The result: the International Organisation for Standardisation (ISO), which was founded in 1947.
The gains from implementing international standards are myriad and include that they:
- Facilitate market access;
- Reduce costs and allow economies of scale;
- Lower costs to consumers;
- Increase economic efficiency which generates economic benefits for the supplying industry, through increasing profits;
- Lower prices for goods and services for the consumer, and so on.
Standards in general have also been shown to increase exports and imports.
The last point should not be surprising (I will elaborate why in a moment) and is evident in the figure below. Standardised product types make up a larger portion of trade volume today than they ever did.
If we look at simple membership numbers as of March 2013, the WTO had 159 members and the ISO 161. It therefore seems apparent that the majority of WTO members, possibly all (I have not taken the time to cross-check the lists), see the benefits of standardisation and this is part of the reason why global trade has increased seventeenfold.
The simplest reason why standards increase international trade is because whether country-specific or shared, standards reduce information costs and allow for easier contracting – for all in manufactured goods.
With the bulk of global trade occurring in manufactured goods, standards are thus helping reduce information costs for the bulk of international trade.
The Uruguay Round of GATT left countries with the option of setting standards on safety and health grounds, so international trade is governed by an increasing range and variety of product and process standards.
Due to this option, standardisation policy is often used as a key instrument in non-tariff barriers.
What is my point with all of this? South Africa faces several ‘external’ constraints such as persisting labour strikes, the exchange rate and non-tariff barriers, all of which dampen growth.
However, these constraints can be mitigated, in part, through being involved in the world of standards.
- Fin24
* Geoffrey Chapman is a guest columnist and trade policy expert at the SABS. Views expressed are his own.
