Technical Regulations as Barriers to Agricultural Trade

Technical regulations are a form of non-tariff barrier that is becoming increasingly visible in agricultural trade disputes. A distinguishing feature of technical barriers is their legitimate use by governments to protect consumers' health, recognize citizen preferences in packaging and labeling, and protect the environment from the establishment of non-indigenous pests and diseases. When legitimate externalities or other market failures are addressed technical barriers have the potential to increase national welfare, even without consideration of terms-of-trade effects. Governments may also impose technical barriers to isolate domestic producers from international competition. In these cases under the small-country assumptions, technical barriers are welfare decreasing policies.

Despite GATT rules designed to limit the misuse of technical barriers, continued disputes indicate that this type of regulatory measure can not always be justified on the basis of unambiguous scientific evidence and suggests that governments may still widely apply technical barriers of questionable merit. Political economy is one paradigm that explains government intervention in markets, even when the result is a loss in net welfare.

The 1996 USDA Survey of Technical Barriers to U.S. Agricultural Exports provides a systematic source of primary data on technical measures which caused actual or projected export revenue losses to U.S. firms in 1996 and which might be subject to challenge under the Uruguay Round Agreements. Although no questionable technical barriers to 1996 U.S. agricultural exports were reported for 71 countries included in the Survey, there were a total of 302 barriers identified among 63 countries. The estimated trade impact of the barriers reported was $4.9 billion, or approximately seven percent of the total value of 1996 U.S. agricultural exports.

Two sets of empirical models are estimated to identify the political economy determinants of questionable technical barriers as they are applied to U.S. agricultural exports. The incidence of questionable technical barriers is measured by the presence or absence of such barriers by country. The impact of questionable technical barriers is measured by the reported estimated trade impact as a percentage of 1996 U.S. agricultural exports to that country. Results indicate that, despite strengthened GATT disciplines, political economy considerations continue to influence the incidence and impact of technical barriers in international agricultural markets.