G/SPS/GEN/1528  
 
20 October  2016 
(16-5704) Page: 1/3 
Committee on Sanitary and Phytosanitary Measures  Original: English  
 
 UPDATE ON OECD ACTIV ITIES OF INTEREST TO  THE SPS COMMITTEE  
COMMUNICATION FROM T HE OECD  
The followi ng communication, received on 19 October  2016, is being circulated at the request of 
the OECD . 
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OECD WORK ON TRADE -RELATED INTERNATIONA L REGU LATORY CO -OPERATION  
1  RECENT WORK ON INTER NATIONAL REGULATORY CO-OPERATION BY THE OEC D 
TRADE COMMITTEE AND THE OECD COMMITTEE O F AGRICULTURE  
1.1  A Theoretical Framework  
1.1.  The OECD Working Party of the Trade Committee (WPTC) has approved, at its meeting in 
early Oc tober 2016, a Theoretical Framework for Trade -Related International Regulatory Co -
operation, prepared in co -operation with the Joint Working Party on  Agriculture and Trade 
(JWPAT).  The final version  (TAD/TC/WP(2016)12/FINAL,  
http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=TAD/TC/WP(2016)12/FIN
AL&docLanguage=En ) is available at the OECD document warehouse OLIS and wi ll be formally 
published as an OECD Trade Policy Paper shortly.  
1.2.  The report acknowledges that regulatory differences across trading partners can both create 
trade costs and hence reduce or hinder trade, and reflect differences in national regulatory 
require ments and preferences. Based on this dualism, the study conceptually analyses origins and 
options for reducing three different types of trade costs. These include specification costs (arising 
from adapting products and production processes to different req uirements on export markets), 
conformity assessment costs (arising from needing to demonstrate that exported products comply 
with the destination country 's requirements), and information costs (arising from the need for 
firms to identify, gather and proces s information on the regulatory requirements for offering their 
products on the destination market).  
1.3.  While in some cases, regulatory co -operation can result in better regulation s that are both 
more effective and efficient in achieving the intended regulato ry outcomes and lower trade costs, 
domestic objectives may in other cases need to be balanced against the benefit from enhanced 
international trade. Focusing on the analysis of such trade -offs, the Framework distinguishes 
between a range of forms of IRC. T hese include the exchange of regulatory information; 
negotiations aiming to achieve regulatory convergence; recognition of equivalence in rules; the 
harmonisation or recognition of conformity assessment methods; enhanced flexibility and 
recognition of conf ormity assessment procedures; and the enhanced transparency in regulations.  
1.4.  Trade -related IRC is particularly important for new regulatory issues, for example related to 
emerging technologies. In contrast, the administrative and transitional costs can repr esent a 
significant obstacle for governments to changing long -established regulations, as they may offset 
potential gains from reduced trade costs.  
1.5.  The report shows that, depending on the relative importance of trade costs and the domestic 
effects of regul atory changes, it may be in a country 's best interest to diverge from its preferred G/SPS/GEN/1528  
 
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  regulation as the reduced trade costs due to less regulatory heterogeneity across trading partners 
may outweigh negative domestic effects due to less -than-perfect achieveme nt of the regulatory 
objective. Full knowledge about the regulations or regulatory preferences of the partner countries 
and the incorporation of this knowledge in the regulatory process generally promotes regulatory 
convergence, resulting in increased welf are. Greater gains are possible through negotiation 
processes to achieve further convergence. In some cases, the outcomes of such negotiations may 
be even more beneficial if several regulatory issues are discussed in conjunction, allowing for 
trade -offs ac ross countries.  
1.6.  Other factors being equal, smaller countries are more likely than larger ones to accept 
greater changes to their regulations. Reasons for this include the larger role trade costs often play 
for smaller countries when compared to domestic re gulatory effects, a possibly lower negotiation 
power of smaller countries and their easier compensation by bundling with other regulatory issues.  
1.7.  The recognition of equivalence in rules may be an option if different requirements are 
considered to achieve t he same regulatory objectives. It allows maintaining existing regulations 
while avoiding resulting specification costs. Equivalency agreements are most likely in well -defined 
areas, such as organic food, and between countries with similar regulatory approa ches. 
1.8.  In the context of conformity assessment procedures, assessment methods should be based 
on evidence. Technical co -operation can help to identify most appropriate methods, and to 
harmonize methods where possible.  Where diverging methods prove equally a ppropriate, mutual 
recognition of methods can reduce conformity assessment costs. When choosing conformity 
assessment systems, related trade costs need to be balanced with differences in confidence levels 
and perceived risks from non -compliant products ent ering the market. Products with a high 
damage potential generally make a more rigid conformity assessment system, although at higher 
costs for suppliers, preferable.  Co-operation can help to build confidence in foreign conformity 
assessment infrastructures , potentially allowing for mutual recognition of conformity assessment 
procedures. For products with a low damage potential, cost -saving Suppliers' Declarations of 
Compliance ( SdoCs) may be sufficient. Well -functioning market surveillance can further reduc e 
risks of non -compliant products; co -operation  can both reduce costs and increase the efficiency of 
such market surveillance.  
1.9.  Reducing regulatory heterogeneity or the recognition of equivalence in rules generally help 
reduce regulation -related information  requirements for suppliers and traders. In addition, 
dedicated communication and dissemination strategies can help to further reduce costs for 
accessing and processing the information required. Given the specific requirements of foreign 
firms, such strate gies particularly related to appropriate channels for making information available, 
and to the language of presenting the information.  
1.10.   Finally, effects of IRC outcomes on third -country trade need to be properly accounted for. 
Lower trade costs generally di vert imports away from third countries, potentially offsetting parts of 
the benefits arising from successful IRC. In addition, regulatory changes may increase or decrease 
trade costs between participating and third countries and affect the welfare of both country 
groups. In particular, if IRC outcomes are non -discriminatory, e.g. in the case of improved 
transparency, trade costs with third countries may decline, with positive welfare effects on all 
sides.  
1.2  Trade costs in regulatory cooperation: Findings from  case studies  
1.11.   Complementing the Theoretical Framework, work is under way investigating actual 
experiences with several IRC initiatives. The analysis employs a questionnaire addressed to 
governments participating in these initiatives, which range from the n egotiation of organic 
equivalence arrangements to harmonisation of energy efficiency standards for household 
appliances and vehicles and related parts and equipment. Implementation is a precondition for the 
IRC mechanisms to actually facilitate trade. Prel iminary findings suggest that initiatives involving 
fewer countries and generating binding outcomes have a better chance to achieve this. 
Questionnaire responses confirm awareness of the different types of trade costs described in the 
Theoretical Framework , which governments tend to consider when engaging in IRC initiatives. 
Systematic quantification of trade costs or the ex -post evaluation following up on the trade effects 
of IRC outcomes appear not to be common practice, however. Also, while cost and burd en G/SPS/GEN/1528  
 
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  reductions for producers, exporters and other stakeholders are widely reported, some countries 
also note increased costs and  burdens for some stakeholders.  
1.12.   A final report on the case studies is expected for the first half of 2017.  
2  RECENT WORK ON INTER NATIONAL REGULATORY CO -OPERATION UNDER THE OECD 
REGULATORY POLICY CO MMITTEE  
2.1.  Work on international regulatory co -operation by the OECD Regulatory Policy Committee 
aims to provide practical guidance on how to implement principle 12 of the 2012 OECD 
Recommendat ion of the Council on Regulatory Policy and Governance  
(http://www.oecd.org/gov/regulatory -policy/2012 -recommendation.htm ). 
2.2.  OECD (2013), International Regulatory Co -operatio n, Addressing Global Challenges  
(http://www.oecd -ilibrary.org/governance/international -regulatoryco -operation_9789264200463 -
en) identified a typology of 11 approaches to IRC. Recent work has deepened the understanding of 
how these approaches support IRC, f ocusing on:  
 The Contribution of Mutual Recognition to International Regulatory Co -operation, OECD 
Regulatory Policy Working Papers , No. 2 (2016)  (http://www.oecd.org/gov/regulatory -
policy/WP2_Contribution -of-mutual -recognition -to-IRC.pdf ); 
 International Trade and Good Regulatory Practices: Assessing The Trade Impacts of 
Regulation, OECD Regulatory Policy Working Papers , No. 4 (2016)  (http://www.oecd -
ilibrary.org/governance/international -trade -and-good-regulatory -practices_5jlv59hdgtf5 -
en;jsession id=1km1c1y879l97.x -oecd-live-03); and  
 The Role of International Organisations in Fostering Better Rules of Globalisation (report to 
be launched on 2 November 2016 at the OECD Headquarters)  
(http://www.oecd.org/gov/regulatory -policy/international -organisations -and-role-in-
irc.htm ). 
3  OECD JOINT MEETING O F THE REGULATORY POL ICY COMMITTEE AND TH E TRADE 
COMMITTEE ON TRADE A ND INTERNATIONAL REG ULATORY CO -OPERA TION  
3.1.  Having convened a first joint meeting of the two committees in November 2015, the Trade 
Committee (TC) and the Regulatory Policy Committee (RPC) will meet jointly again on 4 November 
2016. The focus of the discussions will be two -fold: How can the evi dence base on existing or 
potential trade costs associated with regulatory divergence be strengthened? And how should 
different IRC approaches be selected and tailored to effectively reduce heterogeneity -related trade 
costs and to improve countries ' welfar e in a specific country and sector context?  
4  INTERNATIONAL REGULA TORY CO -OPERATION AND TRADE:  UNDERSTANDING THE 
TRADE COSTS OF REGUL ATORY DIVERGENCE AND  THE REMEDIES  
4.1.  The joint meeting of the RPC and the TC will be the opportunity to discuss a new report 
synthesising work on IRC undertaken by the two committees. In particular, it brings together 
available evidence on heterogeneity -related trade costs and on existing tools to assess them. 
Secondly, it discusses the merits and challenges of different IRC approa ches to address trade costs 
and improve countries welfare. The draft report is not yet publically available. It will be revised 
based on the discussions at the joint meeting as well as on comments received from delegations. 
The report is expected for publi cation in early 2017.  
Contacts:  
Martin von Lampe (E -mail: martin.vonlampe@oecd.org ) 
Céline Kauffmann (E -mail: celine.kauffmann@oecd.org ) 
 
 
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