A Framework for Analyzing Technical Trade Barriers in Agricultural

Markets. By Donna Roberts, Timothy E. Josling, and David Orden. Market

and Trade Economics Division, Economic Research Service, U.S. Department

of Agriculture. Technical Bulletin No. 1876. 

Abstract

Technical trade barriers are increasingly important in the international trade of

agricultural products. Designing technical trade measures that can satisfy the

growing demand for food safety, product differentiation, environmental amenities, and product information at the lowest cost to the consumer and to the international trading system requires an understanding of the complex economics of

regulatory import barriers. This report proposes a definition and classification

scheme to frame discussion and evaluation of such measures. Open-economy

models that complement the classification scheme are developed graphically to

highlight the basic elements that affect the economic impacts of changes in

technical trade barriers. 

Keywords: technical trade barriers, sanitary and phytosanitary, agricultural

trade policy, environmental trade measures

Acknowledgments

The authors thank Philip Paarlberg, Kenneth Forsythe, Jean Kinsey, Jimmye

Hillman, Ronald Trostle, William Liefert, and Nicole Ballenger for reviewing

this document; participants in the ERS Workshop on Technical Trade Barriers,

October 8-9, 1997, for comments and suggestions; Lilia George for her assistance in assembling the document; Rachel Miller for drawing the graphs; and

Deana Kussman for her technical editing.

1800 M. Street NW

Washington, DC 20036-5831 March 1999
Contents

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .iii

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .v

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

Defining Technical Trade Barriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Prominence of Technical Trade Barriers in

Current Public Policy Debates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

A Classification Scheme for Technical Trade Barriers . . . . . . . . . . . . . . . . . . .8

Classifying Technical Trade Barriers by Policy Instrument . . . . . . . . . . . .8

Classifying Technical Trade Barriers by Scope of the Measure . . . . . . . .10

Classifying Technical Trade Barriers by Regulatory Goals . . . . . . . . . . . .11

A Matrix of Regulatory Regimes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Classification of Foreign Technical Trade Barriers

Facing U.S. Agricultural Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

A Modeling Framework for Assessing the Trade Effects of

Technical Trade Barriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

Scope of Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

The Regulatory Protection Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

The Supply-Shift Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

The Demand-Shift Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31

World Price Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

Customizing the Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34

Illustration of the Modeling Framework: The Economic Effects

of the U.S. Ban on Avocados from Mexico . . . . . . . . . . . . . . . . . . . . . . . . .35

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40

ii Analyzing Technical Barriers to Trade Economic Research Service/USDA
Summary

Technical trade barriersmeasures that restrict imports of products that fail to

meet a countrys health, quality, safety, or environmental standardsare

increasingly important in international agricultural trade. Income growth is

fueling demand for environmental amenities, food safety, product differentiation, and product information, and regulators are being asked to provide these

services when markets fail to do so. Economic analysis that can inform policy

decisions about the design of regulations and standards to satisfy these growing

demands and that improves the understanding of the trade and welfare implications of alternative policies has been slow to develop. Technical trade barriers

are a difficult conceptual and empirical topic, and it may be some time before

key questions about optimal policies are resolved. This report provides a preliminary framework for analyzing this vast array of trade-restricting measures so

as to foster research that will provide the answers to these questions. 

Specifically, this study proposes definitions and a classification scheme to:

 Provide a conceptual foundation for evaluation of technical trade barriers;

 Guide the specification of economic models used to gauge the trade and

welfare impacts of these measures; and

 Provide policymakers and analysts with an organizing framework for discussing and possibly negotiating international guidelines for their use.

Technical trade barriers are defined as regulations and standards governing the

sale of products into national markets that have as their prima facie objective

the correction of market inefficiencies stemming from externalities associated

with the production, distribution, and consumption of these products. An externality is defined by economists as a direct and unintended side effect of an

activity of one individual or firm on the welfare of other individuals or firms

(such as the use of food processing methods in foreign countries that result in

microbial contamination in food that subsequently causes consumers to fall ill).

Given such an occurrence, authorities might choose to adopt a technical trade

barrier (in the form of a process standard) if it were judged that market incentives alone had not produced the efficient amount of food safetythat is, if

consumers would have been willing to pay more (perhaps through higher food

prices caused by restricting imports from some sources) to avoid illness. Thus,

technical trade barriers can be welfare-enhancing, a feature generally absent

from other trade-restricting measures. The words prima facie in the definition

acknowledge that technical trade measures have sometimes been used to shield

domestic producers from international competition.

A classification scheme is proposed to set up the economic analysis of these

measures in a systematic framework. Technical barriers are first classified by

policy instrument and by scope, which provides a basis for evaluating these

measures as if they were standard trade barriers. They are then classified by

regulatory goal, to further understanding of how their effects might differ from

standard barriers.

Economic Research Service/USDA Analyzing Technical Barriers to Trade iii
The classification criteria are then used to analyze the results of a U.S.

Department of Agriculture (USDA) survey of foreign technical barriers to U.S.

agricultural exports. A rating of the relative importance of different regulatory

goals emerges from this analysis. The regulatory objectives of most of the barriers identified in the survey were protection of commercial crops and livestock

(62 percent) and food safety (22 percent). Conservation or protection of the natural environment from harmful non-indigenous species were objectives for only

a few of the trade barriers. The classification also permits examination of the

distribution of the most trade-restrictive measures across regulatory goal categories. The analysis indicates that import bans constitute 27 percent of the

measures used to protect crops and livestock, a higher percentage than for any

other regulatory goal category. 

Models that complement the classification scheme are developed graphically to

highlight three basic elements that affect the economic impacts of changes in

technical measures in an open economy framework: the case where there is no

valid rationale for the barrier, and supply shifts and demand shifts that might

result from changes in policy if the barrier has a significant technical basis.

In addition to modeling the effect of the technical barrier on the parameters of

supply and demand in the market in question, a full analysis of the trade impacts

of a technical measure requires consideration of its scope. That is, does the barrier apply to all exporters or only to particular exporters, and are such barriers

applied by only one importer or by many importers? These distinctions essentially govern the incidence of the cost of compliance with import regulations.

The trade and welfare effects of different technical trade barriers are analyzed

from both the importer and exporter perspective in these models. 

An application of this analytical framework is illustrated by an assessment of

the price, quantity, and welfare effects of alternative phytosanitary measures that

would allow imports of Mexican avocados into the United States. The effects

on American producers and consumers are examined under different assumptions about the probability of a pest infestation affecting domestic production

and about the costs of an infestation in terms of pest-control expenses and

reduced yields. The analysis indicates that, in certain scenarios, technical barriers that restrict trade to minimize the probability of trade-related pest infestations can create welfare losses that exceed the domestic costs arising from these

infestations. 

iv Analyzing Technical Barriers to Trade Economic Research Service/USDA
Glossary

AMSAgricultural Marketing Service, USDA

APHISAnimal and Plant Health Inspection Service, USDA

CODEXCodex Alimentarius Commission

EUEuropean Union

FSISFood Safety and Inspection Service, USDA

GATTGeneral Agreement on Tariffs and Trade

GIPSAGrain Inspection, Packers and Stockyards Administration, USDA

HNISHarmful Non-Indigenous Species

IPPCInternational Plant Protection Convention

NAFTANorth American Free Trade Agreement

NTBNon-tariff Trade Barrier

OECDOrganization for Economic Cooperation and Development

OIEOffice International des Epizooties (International Office of Epizootics)

PPMProduction and Processing Methods

SPSSanitary and Phytosanitary

TBTTechnical Barriers to Trade

WTOWorld Trade Organization

Economic Research Service/USDA Analyzing Technical Barriers to Trade v
Introduction

The deepening integration of world markets in recent

decades has blurred the lines of the formerly sharp

distinctions between domestic and international

policies. In the past, the predominant view was that

domestic policies should be determined by the preferences of a nations citizens, with little regard to any

effects the policies might have on other countries.

More recently, the exponential growth in worldwide

trade flows has led to closer international scrutiny of

the differences among some domestic policies that

were formerly overlooked. Of the domestic polices

now subject to such scrutiny, technical trade barriersmeasures that sometimes restrict imports to prevent entry of products that fail to meet the health,

quality, safety, or environmental standards of importing countrieswere among the first to attract attention. The enforcement mechanism of these policies,

which is to restrict entry of unsatisfactory imports,

often made them indistinguishable from explicit trade

policies that likewise limited entry of goods at the

border. 

Although economists have found it difficult to evaluate the effects of technical trade barriers or to assess

their relative importance in the world trading system,

the consensus has been that these measures can significantly impede trade. Consequently, disciplines on

technical trade barriers were adopted by the

Contracting Parties to the original General

Agreement on Tariffs and Trade (GATT) in 1947,

while multilateral trade rules for other domestic

policies such as investment, services, and intellectual property measures were left to future negotiations.

The fact that disciplines on the use of technical barriers were subsequently expanded and strengthened in

multilateral trade negotiations that took place during

the 1973-1979 Tokyo Round and again in the 1986-

1993 Uruguay Round is further evidence of the broad

recognition that these measures can effectively thwart

the commercial opportunities created by other trade

liberalization policies. 

Technical trade barriers exist in most industries, but

are particularly important in the international

exchange of primary and processed agricultural products. Agricultural exporters may be required to

demonstrate that native plant species or human health

are not endangered by their products, while simultaneously complying with standards that stipulate

everything from ingredients to packaging materials.

The regulatory environment for agricultural and

agroindustrial producers is expected to become more

complex, even though reform initiatives aimed at

reducing the number and rigidity of regulations faced

by the private sector are currently underway in many

countries. Income growth is fueling demand for

environmental amenities, food safety, product differentiation, and product information in developed and

developing countries alike. Regulators are increasingly being asked to provide these services when

markets fail to do so.

Designing technical trade measures that can provide

nonmarket goods and attributes at the lowest cost to

the consumer and to the international trading system

requires an understanding of the complex economics

of regulatory import barriers. Technical barriers are a

difficult conceptual and empirical topic, and it may

be some time before key questions about optimal regulatory trade regimes for agricultural and agroindusEconomic Research Service/USDA Analyzing Technical Barriers to Trade 1

A Framework for Analyzing

Technical Trade Barriers in

Agricultural Markets

Donna Roberts

Timothy E. Josling

David Orden
trial products are resolved. The objective of this

report is to strengthen the conceptual basis for understanding technical trade barriers as a distinct class of

non-tariff barriers (NTBs) that are becoming increasingly important to trade in agricultural products.

To achieve this objective, this report discusses alternative terminology found in the literature about technical trade barriers, proposes definitions that appear

to be most useful for the study of these barriers in

agricultural markets, examines why technical barriers

are becoming an increasing focus of public policy

debates, and suggests classifications for the myriad

individual barriers that are observed. These classification schemes focus on characteristics of technical

trade barriers related to the policy instrument used,

the scope of the measure, and the regulatory goal.

The report then turns to empirical and theoretical

evaluation of the prevalence and economic effects of

technical trade barriers. Results of a 1996 USDA

survey of foreign technical barriers to U.S. agricultural exports are examined using the proposed classification criteria. In the following section, models are

developed graphically to highlight three basic elements that affect the economic impacts of changes in

technical measures:

1. The case where there is no valid rationale for the

barrier,

2. Supply shifts that might result from changes in

policy if the barrier has a significant technical

basis, and

3. Demand shifts that might result from changes in

policy if the barrier has a significant technical

basis.

An application of this analytical framework is illustrated by an assessment of the price, quantity, and

welfare effects of modifications to the quarantine

rules for importing Mexican avocados into the United

States.

2 Analyzing Technical Barriers to Trade Economic Research Service/USDA
Defining Technical Trade Barriers

There are differing views on what constitutes a technical trade barrier. Earlier literature recognized quarantine policies and an amorphous array of other

measures that restricted or delayed entry of products

at the border as technical barriers. More recently,

agricultural technical barriers have been viewed as a

subset of environmental regulations (Hillman). We

define technical barriers as regulations and standards

governing the sale of products into national markets

that have as their prima facie objective the correction

of market inefficiencies stemming from externalities

associated with the production, distribution, and consumption of these products. These externalities may

be regional, national, trans-national, or global. This

definition centers the analysis of technical trade barriers on the economic concept of market failure

rather than on a mutable list of policy instruments.

Technical trade barriers may be adopted in instances

when:

 a countrys regulators conclude that market

mechanisms alone will fail to prevent or correct

negative externalities that arise when imported

goods may be accompanied by pests or diseases

that may reduce domestic output and/or increase

production costs;

 regulators or industry representatives believe

that information about the health, hedonistic, or

ethical attributes of agricultural products is

either unknown or asymmetrically distributed

between producers and consumers, and the

transaction costs of obtaining this information

are prohibitively high for consumers;

 coordination costs and free-rider behavior in an

industry prevent development of compatibility

standards that could increase firms potential for

realizing economies of scale; or

 regulatory authorities judge that markets fail to

provide optimal amounts of unowned or commonly owned environmental resources.

We use prima facie in our definition to acknowledge

the existence of regulatory capture, when domestic

groups with a vested interest in limiting competition

successfully lobby for technical measures having

questionable legitimacy and that potentially represent

a net cost to a country.

In this report, a standard is a technical specification

or set of specifications related to characteristics of a

product or its manufacturing process. From this perspective, standards can be either voluntary or established by government fiat.1 Several authors have

pointed out that voluntary standards can effectively

bar imports if they become standard business practice

in the importing country, especially if they are

accepted as a legal defense against product liability

claims (Bredahl and Zaibet; Sykes). However, our

primary focus is on command and control measures,

the most prevalent type of technical barrier in markets for primary and processed agricultural goods. 

This view of technical trade barriers is both broader

and narrower than previous perspectives. We

exclude incentive measures such as taxes and subsidies, even though these measures may have been

established to address externalities. For example, our

definition would not include a product packaging tax

with rates that varied with the degradability of the

packaging material, incorporating the social costs of

disposal into firms private costs. Our definition also

excludes other regulatory NTBs, such as quotas or

domestic content regulations, whose primary objective is redistribution, not efficiency. However, this

view of technical barriers is broader than others in

that it comprises more than just a small set of border

measures, such as import bans, which often dominate

discussion of agricultural technical barriers. It also

includes measures ranging from maximum residue

standards for pesticides on fresh horticultural products to eco-labeling requirements for processed

foods.

Given this definition, technical trade barriers can be

characterized as a subset of social regulations

(OECD, 1997; Viscusi et al.). Social regulations are

all of those measures adopted by a country to achieve

health, safety, quality, and environmental objectives;

technical trade barriers can help realize these policy

Economic Research Service/USDA Analyzing Technical Barriers to Trade 3

1 See OECD (1998) for an extensive discussion of alternative definitions of the term standard.
objectives by restricting entry of unsatisfactory products at the border (fig.1). By limiting imports, these

measures might result in substantial regulatory protectionism for domestic producers, although (absent

political economy considerations) this is not their primary intent. As noted above, technical barriers are

potentially welfare enhancing, a feature generally

absent from other NTBs, such as those that are a

subset of economic regulations (fig. 1). A key point

from the theory of distortions and welfare is that the

optimal policy will correct the market failure as close

as possible to the source of the distortion (Bhagwati). 

Although the public-good dimensions associated with

legitimate technical barriers are universally acknowledged, even well-intentioned measures can create

impediments to trade that lower net welfare, often as

a byproduct of different bureaucracies in different

countries autonomously developing national standards. This regulatory heterogeneity imposes costs

for producers who must comply with multiple regulatory regimes. Harmonizing regulations among countries would help limit the unintended trade-restrictive

consequences of legitimate technical standards. But

achieving such harmonization is itself complicated by

differences among nations in tastes and income, or,

absent such factors, may be too costly. Regulatory

heterogeneity can also result from differences in

objectively assessed risk factors such as the presence

of host organisms in some, but not all, importing

countries as well as differences in trans-scientific factors such as risk attitudes rooted in different cultural

norms and experiences. Thus, a certain amount of

regulatory heterogeneity is inevitable in international

markets. More problematic is the widespread

acknowledgment that agricultural technical barriers

have often provided an attractive pretext for regulatory protectionism (Kramer; Roberts and Orden).

4 Analyzing Technical Barriers to Trade Economic Research Service/USDA

Figure 1: Trade measures viewed as subsets of regulations

Source: USDA, Economic Research Service, adapted from OECD.

Economic Regulations

Includes measures that

affect pricing, competition,

and market entry or exit

Social Regulations

Includes measures that protect public interests such as

health, safety, the environment, and social cohesion

Administrative Regulations

Includes paperwork and

other administrative formalities (i.e., "red tape")

Examples:

 Food safety measures

 Environmental trade

measures

 Quality standards

Examples:

 Quotas

 Contingent protection

measures

 Domestic content

requirements

Examples:

 Customs valuation,

classification and

clearance procedures

 Liberal licensing

requirements
Prominence of Technical Trade

Barriers in Current Public Policy

Debates

The focus on technical trade barriers in the 1990s

stems from a number of developments in both the

public and private sectors. The single most important

factor behind the rising interest in these measures has

likely been the Uruguay Round multilateral trade

negotiations, which culminated in the 1994

Agreement Establishing the World Trade

Organization (the WTO Agreement). The WTO

Agreement continues the historical progression of

multilateral trade negotiations that periodically augmented and steadily reinforced rules for the use of

technical trade barriers over the past 50 years

(Roessler). 

Most of the principal multilateral disciplines on the

use of technical trade barriers are found in the WTO

Agreement on the Application of Sanitary and

Phytosanitary Measures (SPS Agreement) and the

WTO Agreement on Technical Barriers to Trade

(TBT Agreement).2 Another annexed Agreement, the

Agreement on Agriculture (Agriculture Agreement),

contains no disciplines on the use of technical measures, but rather provides a key motivation for adoption of disciplines on regulatory measures.

Negotiators recognized that the reinstrumentation of

policies under the Agriculture Agreement, and subsequent lowering of the level of protection provided by

tariffs and many NTBs, would increase the relative

and absolute importance of existing and potential

technical barriers in international markets. The new

trade regime was especially important in agricultural

markets, since the use of most agricultural NTBs

had not been disciplined before the Uruguay Round.

By reducing the ability of governments to protect

domestic producers through various other border and

domestic support measures, negotiators feared that

the Agriculture Agreement would inadvertently create

an incentive to replace former NTBs with new technical barriers. The new disciplines in the SPS and

TBT Agreements were viewed as critical to prevent

governments from resorting to regulatory compensation to appease domestic interests.

The most significant of these new disciplines on

technical measures that affect trade in primary and

processed agricultural goods are in the new SPS

Agreement. The agreement defines SPS measures as

regulations adopted by a nation to protect human,

animal, or plant life and health within its territory

from certain enumerated biological and toxicological

risks. The new substantive requirements in the SPS

Agreement suggest a normative basis for technical

barriers, while new procedural obligations facilitate

decentralized policing of such measures (Roberts,

1998a). In broad terms, the SPS Agreement recognizes the right of each WTO member to adopt measures that provide any chosen level of health and environmental protection for its citizens, but requires

such measures to be based on a scientific assessment

of the risks and to be applied only to the extent necessary to achieve its public health or environmental

goals. The principal procedural obligation in the SPS

Agreement is the requirement to notify trading partners of changes in SPS measures that could affect

trade. Together, the substantive and procedural

requirements of the SPS Agreement have generated a

broad-based regulatory review among WTO members as major agricultural exporters and importers

determine whether they and their trading partners are

in compliance with the new disciplines (Thiermann).

Most of the principal substantive and procedural provisions of the Uruguay Round TBT Agreement are

Economic Research Service/USDA Analyzing Technical Barriers to Trade 5

2 Although the new SPS Agreement and the revised TBT

Agreement establish most of the current multilateral rules

for the use of technical trade barriers, other Uruguay

Round legal instruments discipline the use of these measures as well (GATT, 1994). The Agreement on TradeRelated Aspects of Intellectual Property Rights (TRIPS),

for example, establishes rules for the use of geographical

indications to differentiate products in the market. Even

the General Agreement on Trade in Services contains provisions related to technical trade barriers: Article XIV

allows WTO Members to adopt restrictions on trade in

services (such as tourism or shipping) if necessary to protect human, animal or plant life or health. Some of the

WTO rules for the use of technical trade barriers remain

unchanged from the Tokyo Round, most significantly

GATT Article XX, which disciplines the use of measures

related to the conservation of exhaustible natural

resources, or protection of animal, plant, and human health

in circumstances not covered by other agreements.
unchanged from the Tokyo Round. Countries are

still permitted to adopt technical measures to realize

legitimate objectives (inter alia, the quality of

exports, protection of the environment, and the prevention of deceptive practices) as long as imported

products are treated no less favorably than like

domestic products. However, three key revisions in

this agreement will affect the multilateral legal environment for technical measures related to trade in

agricultural products. First, the TBT Agreement was

converted from a plurilateral to a multilateral agreement so that all WTO members must comply with

the terms of the treaty. Second, the legal definition

of technical regulation now includes measures that

regulate related processes and production methods,

which the Tokyo Round Agreement had omitted.

Finally, although the Uruguay Round TBT

Agreement continues to discipline the use of many

technical measures that affect agricultural trade, it

explicitly notes that its provisions no longer apply to

health and environmental measures that the SPS

Agreement defines as SPS measures.

The new multilateral rules on technical trade barriers,

together with strengthened dispute settlement procedures,3 have increased requests for WTO panels to

review technical restrictions, which has heightened

their profile. Two of the most prominent cases have

been the U.S./Canadian complaint against the

European Unions (EU) ban on imports of hormonetreated beef and the complaint by several Asian countries against the U.S. prohibition on imports of

shrimp caught with nets lacking turtle extruder

devices. Other formal complaints have led to negotiated settlements, such as South Koreas change in

policy regarding government-mandated shelf-life

standards. The U.S. Government questioned the scientific basis for uniform shelf-life requirements during formal WTO consultations in 1995, after which

South Korea agreed to allow manufacturers of frozen

foods and vacuum-packed meat to set their own useby dates. Public debate over GATT/WTO jurisprudence on technical barriers has raised provocative

questions about issues such as the use of trade measures to protect the global commons, downward harmonization of standards, and recognition of the

precautionary principle as a justification for technical barriers (Farber and Hudec; GATT, 1995). 

Regional trade liberalization agreements have also

put technical barriers in the public policy spotlight.

When nations within a region try to harmonize their

technical regulations so as to permit the free intraregional movement of goods, their external trading

partners frequently face new technical requirements

for gaining entry to the unified market. These external regulatory changes, or even proposed regulatory

changes, can create trade conflicts. New regional

trade alliancesas well as the enlargement and deeper integration of older alliances have been one of

the most important factors in the increase in technical

barriers that have been brought to the attention of

U.S. policymakers by exporters who face either new

requirements or uncertainty about potential requirements.

Incipient regulatory reform initiatives in some developed countries have likewise brought technical barriers to the fore of trade policy, particularly in the

United States (Roberts, 1998b). These initiatives aim

to improve the quality of regulatory decisions, primarily by establishing guidelines for assessing costs and

benefits of measures, as well as guidelines for the

subsequent use of such assessments as a normative

basis for decisions. These reform efforts have led to

a widespread reexamination of health and environ6 Analyzing Technical Barriers to Trade Economic Research Service/USDA

3 The new WTO Understanding on Rules and Procedures

Governing the Settlement of Disputes (known as the

Dispute Settlement Understanding) provides the legal

infrastructure for enforcement of the provisions of the

WTO Agreement. It establishes rules for all legal proceedings, from initial consultations to the final review of a

ruling by the Appellate Body. If formal consultations do

not result in a mutually agreeable solution between the

parties to a dispute, a member can request a WTO panel to

rule whether the measure is in compliance with the disciplines set forth in the agreement. The panel submits its

recommendations for consideration by the WTO Dispute

Settlement Body, where all WTO member countries are

represented. If a panel finds that a measure violates one

or more provisions of the WTO Agreement, the member is

obliged to implement the panels recommendations and to

report on how it has complied, unless the DSB decides by

consensus not to adopt the panels report, or unless one of

the parties appeals the decision. Appeals are limited to

issues of law and legal interpretation by the panel. It is no

longer possible, as it was before the Uruguay Round, for a

single country to block DSB adoption of a report.
mental regulations, including those that affect trade

(OECD, 1997). A few recent studies of agricultural

technical barriers have raised the prospect that this

reexamination has been overdue (Orden and

Romano; MacLaren; Paarlberg and Lee). Another

study notes that most countries national quarantine

policies pay virtually no attention to the effect of SPS

trade restrictions on consumer prices, and further that

SPS policy assessment currently is about where

environmental policy assessment was two or three

decades ago (James and Anderson). Regulatory

reform initiatives have prompted substantial debate

among elected officials and regulatory authorities as

injunctions to weigh the costs and benefits of technical barriers and other health and environmental measures often run counter to the longstanding practice of

promulgating measures that reduce risks to negligible

levels (Kopp, Krupnick, and Toman).

However, the current prominence of technical barriers does not arise solely from recent public-sector

policy events. Changes in regulatory policies that

track private sector innovations in products, production and processing technology, and pathogen detection and control are routine, and these changes continue to spawn disagreements between importers and

exporters. Bio-engineered products, for example,

have been at the center of perhaps the most prominent debate over technical trade barriers in recent

years, as importing countries consider whether these

products pose a risk to consumers or to biodiversity,

or violate ethical norms. Trade officials are drawn

into public debate when exporters believe that

lengthy regulatory review of new products or new

pathogen-reducing technology might be motivated by

a desire to protect the commercial interests of domestic producers, rather than by public health or environmental concerns. There is no reason to expect that

the number of agricultural product and technology

innovationsor the number of measures to regulate

their entry into importing countrieswill diminish.

Technical trade barriers will therefore remain an

important topic of discussion in both the international

regulatory and trade policy venues well into the foreseeable future.

Economic Research Service/USDA Analyzing Technical Barriers to Trade 7
A Classification Scheme for

Technical Trade Barriers

The specificity of individual technical barriers to particular risk-related or non-risk-related public externalities creates a diverse array of measures. This

diversity makes it appear difficult to systematically

examine the use and proliferation of technical barriers. For this reason, it is useful to structure the array

of technical barriers along various functional dimensions. The objectives of such taxonomies are to provide a conceptual foundation for evaluating technical

barriers; to guide the specification of economic models used to gauge the trade and welfare effects of

these measures; and to provide policymakers and

analysts with an organizing framework for discussing

and possibly negotiating international guidelines for

their use. We first classify technical barriers by policy instrument and by scope, which provides a framework for evaluating these measures as if they were

standard trade barriers. Technical barriers are then

classified by regulatory goal, to further understanding

of how their effects might differ from such standard

barriers. Finally, we propose a matrix of technical

trade barrier regimes that takes into account both regulatory goals and policy choice among instruments. 

Classifying Technical Trade Barriers by

Policy Instrument

A large and increasing number of policy instruments

are available to governments to correct perceived

market failures (OECD, 1997). The search for ameliorative measures broadly entails governments in the

roles of lawmaker, tax collector, and/or regulator.

Regulatory trade measures are generally preferred by

governments when risks associated with generic

products are great, delayed, or imperfectly known,

and when an efficient legal system is missing (i.e.,

when citizens find it impossible, costly, or slow to

prosecute claims related to imported goods under

property or product liability laws) (Mahè). These

concerns (in addition to political economy factors)

explain governments extensive recourse to technical

barriersin the form of bans, mandatory technical

specifications, or information requirementsto remedy failures in markets for agricultural and agroindustrial goods (table 1). 

Import bans, the first broad category of technical

measures, might be adopted when great risks or

uncertainties are posed by a hazard (a substance,

activity, or event that can cause potential harm), and

alternative measures to effectively reduce the risk are

technically infeasible (for example, if current monitoring and detection technology cannot distinguish

between hazardous and nonhazardous products, or

effective treatments or eradication programs do not

exist). A total ban, the most restrictive type of technical barrier, is most frequently used to protect crops,

herds, and/or native species of flora and fauna from

foreign pests and diseases. Examples include a prohibition on imports of pork from a country with

endemic hog cholera, or imports of horticultural

products from a country with large and widely distributed fruit fly populations. Import bans have also

been adopted to protect globally endangered species

(Krissoff et al., 1996; Hudec). For example,

Germany unilaterally banned importation of frogs

from Indonesia after unsuccessful attempts to gain

multilateral consensus on adding several frog species

to the list of protected species of the Convention on

International Trade in Endangered Species of Wild

Fauna and Flora (CITES).4 Other countries have

banned entry of products intended for industrial uses

that authorities fear could be deflected into the

domestic food chain, violating religious proscriptions.

Partial bans include seasonal or regional bans that do

not entirely prohibit entry of a given product from

the exporting country. These measures are also used

extensively to protect animal and plant health, typically when regulatory authorities understanding of

risk factors is more comprehensive, and when a targeted ban can effectively reduce the risks to acceptable levels. For example, regulatory authorities may

implement a seasonal ban that allows imports of certain horticultural products for part of the year if they

have detailed knowledge about the effects of climatological factors on the biology of identified quarantine

8 Analyzing Technical Barriers to Trade Economic Research Service/USDA

4 Parties to CITES agree not to import or export endangered species and products made therefrom. CITES, as

well as other international environmental agreements that

require or authorize trade restrictions among signatories,

can be viewed as a waiver of any conflicting GATT disciplines that might prohibit such measures (Hudec).
pests, together with an understanding of how the host

status of the commodity might vary over the growing

season. Regional bans are perhaps the most common type of partial ban.5

Technical specifications, the second broad category

of policy instruments (table 1), stipulate technically

feasible requirements that exports must meet to gain

entry to the home country market. In principle, any

firm in any country willing to expend resources to

meet these conditions can export to the home country, although, in practice, some firms may be prevented from doing so in the absence of satisfactory private- or public-sector certification services. It is an

empirical question whether standards are more trade

restrictive than partial bans. Exporting firms may

find that complying with a foreign standard is too

costly if the standard is stringent or varies significantly from a domestic or international standard.

Standards can also be written to favor domestic producers by requiring the use of an input that is more

widely available in the home country than in potential exporting countries. An infamous example of the

latter type of measure was Italys pasta purity regulations, which allowed only products made entirely

with durum wheat (grown throughout southern Italy,

but found in few other areas in Europe) to be marketed under the generic term pasta. 

Technical specifications are partitioned into three

types of standards relevant to primary and processed

agricultural goods in table 1. Packaging standards

regulate a broad range of container attributes, from

dimensions to biodegradability of packaging material, to realize a wide range of regulatory goals.

Process standards (sometimes referred to as production standards) dictate the means (inputs and/or production technology) by which firms are to realize different regulatory targets. Product standards specify

the ends (characteristics of a product related to its

size, weight, or any number of other product attributes). A product standard for imported lumber, for

example, might state that the product must be free of

any trace of pinewood nematodes (Bursaphelenchus

Xylophohilus), a status that could be objectively verified by phytosanitary authorities in the importing

country by means of tests on shipments at the border.

A process standard might alternatively stipulate that

all lumber must be kiln-dried at a specific temperature for a certain time to exterminate pests.

Economists usually argue that product standards are

more efficient regulatory tools than process standards, since the former allow heterogeneous firms to

choose the technology that minimizes the resource

costs of achieving a specific regulatory target while

the latter does not (Antle). However, as MacDonald

and Crutchfield point out in the context of food safety regulations, process standards can sometimes be

the optimal regulatory option. They note that a

Hazard Analysis and Critical Control Point (HACCP)

system, which includes flexible process standards

designed to reduce microbial contamination in food,

might be superior to specific product standards, given

the expense of microbiological tests and the recurrent

nature of the pathogen hazard. The costs of enforceEconomic Research Service/USDA Analyzing Technical Barriers to Trade 9

Table 1--Classification of technical barriers by

policy instrument

Import bans

Total bans

Partial bans

Technical specifications

Process standards

Product standards

Information remedies

Packaging standards

Labeling requirements

Controls on voluntary claims

5 The use of regional bans may increase given the WTO

Agreement disciplines on SPS measures. The SPS

Agreement requires countries to consider imports from

sub-national areas that the exporting country claims are

free of diseases or pests, or where the prevalence of diseases or pests is low (GATT, 1994). A prominent example

of the consequences of this new provision is the U.S.

action to allow animal and animal product imports from

regions where the scientifically assessed risk of transmitting a particular disease, such as foot-and-mouth disease,

is negligible. This change in U.S. regulatory policy represents a significant departure from the longstanding practice of only recognizing entire countries as free or not

free of a particular disease (Ahl and Acree).
ment and the degree of administrative discretion in

enforcement are also important considerations in any

evaluation of the relative efficiency of process or

product standards. 

Informational remedies are the third broad category

of technical trade barriers (table 1). When market

failures stem from information failures, information

remedies may be preferred over other fiat measures

to redress the inefficiencies that arise. In recent years,

regulatory authorities have given more consideration

to these tools as a means of influencing economic

behavior (Caswell and Mojduszka). Two different

policy instruments, labeling requirements and controls on voluntary industry claims, when combined

with credible certification institutions, can transform

an experience or credence attribute of a food product

into a search attribute;6 the purchasing patterns of

well-informed consumers will then be sufficient

incentive for producers to provide the range of quality that consumers are willing to pay for without further government intervention. Information requirements, such as mandatory safe-handling labels, are

also increasingly being proposed to increase food

safety, although usually as complements, not substitutes, for other safety standards (OECD, 1997).7

Information remedies have generally been viewed as

the least onerous form of government regulation,

although Sykes points out that if requirements vary

from market to market, manufacturers must incur not

only the costs of producing different labels, but also

possibly substantial costs of maintaining distinct

inventories for each market. Manufacturers concerns about heterogeneous labeling requirements,

however, are not always limited to the label and

inventory control expenses. Recent controversies

have centered on proposed labeling regimes for bioengineered products, which manufacturers believe

could unjustifiably stigmatize their products, thereby

substantially reducing consumer purchases. One

argument is that public policy should not inadvertently create the impression that a health risk is associated with consumption of products, if scientific evidence does not support that conclusion (World Bank).

At the other end of the spectrum, the argument is that

consent criteria and minority rights imply that public

policy should permit individuals to avoid the consumption of food that they perceive as possibly

unsafe (Thompson). Regulatory authorities in different countries have adopted different positions on this

science versus consumer sovereignty issue, resulting in trade frictions over mandatory labeling

regimes.

Classifying Technical Trade Barriers

by the Scope of the Measure

A feature of some technical measures which distinguishes them from other trade policy instruments is

that they may increase costs for domestic as well as

foreign producers. This type of technical measure

(e.g., a new product standard that is mandatory

regardless of source) is classified as uniform (table

2). Increased compliance costs associated with uniform measures will shift the aggregate domestic supply curve up/back, as well as potentially affecting

foreign excess supply curves. The magnitudes of the

upward or leftward shifts, if any, in the excess supply

curves depend on whether the new measure differs

substantially from international norms or standards in

the exporting countries.

Other technical measures are applied only to imported goods. The scope for legitimate use of universal

technical barriers, which apply to all imported goods

but not domestically produced goods, is narrow

under the WTO Agreement. Examples of acceptable

universal technical barriers are a maximum residue

level (MRL) for a particular pesticide that is widely

10 Analyzing Technical Barriers to Trade Economic Research Service/USDA

6 Consumers can establish the quality or characteristics of

a search good or attribute (e.g., color, size) before purchase through examination or research. Without information remedies, consumers cannot determine experience

attributes of food products (e.g., taste, shelf life) until after

purchase, while credence attributes (e.g., free-range,

organic) cannot be determined even after purchase and

consumption. 

7 Kinsey notes, however, that rising incomes may counterbalance this regulatory trend. She points out that the

microeconomics of time allocation and household technology suggest that consumers will be more willing to pay

others to assure the safety of their food than to produce it

themselves. Rising incomes and the higher opportunity

costs of time may imply that consumers are increasingly

willing to pay for a reduction in health risks by means of

increasingly exigent safety standards, administered by regulatory authorities.
used in countries that export a given product but is

not registered for use in the importing country, or a

process standard (such as a required treatment) that

reduces the risk of introducing a pest that is present

in every exporting country but not in the importing

country. 

Frequently, technical measures applied only to

imports are limited to imports from certain sources,

in contrast to most-favored-nation (MFN) trade policy instruments.8 These specific technical barriers are

most commonly used to mitigate different levels of

risk posed by imports from different sources. Under

a regime of specific technical barriers, an importing

country will have multiple measures, which may

range from routine border inspections to a complete

ban, to mitigate the risks associated with importing

one product from different sources.

Whatever the measure, the scope of a technical measure has implications for where the cost of the barrier

will be borne. Four stylized cases illustrate these

effects. Assuming that the actions of any one specific country have little or no effect on the world market

(the usual small country assumption), when one

importer imposes a barrier against one exporter,

either one can avoid the costs by choosing alternative

sources (for the importer) or outlets (for the

exporter). Costs of a regulation imposed by one

importer on all exporters are borne by the importer

alone. Conversely, should all importers target a specific exporter for compliance with a given technical

barrier, then the cost of the regulation is borne by the

exporter. Finally, when all importers impose a regulation on all exporters, the small country assumption

breaks down. The cost of the regulation is shared by

exporters and importers as the price received by suppliers falls and the price paid by consumers rises. 

This potentially complex web of technical barriers

for agricultural products poses substantial challenges

for economists. These barriers may segment international markets in some instances, fundamentally

altering the nature of the competition. Technical barriers may transform a small country into a large

country in international markets, facilitate product

differentiation, or create market power on the part of

individual firms (Sumner and Lee). There is an

extensive literature on the incentives for producers to

lobby for socially sub-optimal measures that may

even raise their own unit costs (identified as uniform

measures above) if such regulations limit competition. The incentives for such behavior vary with the

number and relative size of firms, production technologies, and the type of good (Thilmany and

Barrett; Hoekman and Leidy).

Classifying Technical Trade Barriers

by Regulatory Goals 

Knowledge of the type of policy instrument chosen

by regulatory officials, together with information on

the scope of the measure, provide two criteria by

which to classify technical trade barriers. Absent any

changes in domestic demand and supply due to externalities associated with trade, these criteria may be

sufficient to gauge the effects of a technical barrier.

Technical trade barriers can further be classified by

the regulatory goal by which they are justified. This

classification begins to address the question of how

and why domestic demand and supply schedules

could change as a result of the success or failure of a

technical measure in correcting the market inefficiency. These potential changes can determine whether a

measure is welfare-reducing or welfare-enhancing. 

Economic Research Service/USDA Analyzing Technical Barriers to Trade 11

Table 2--Classification of technical trade barriers by scope

Uniform Border (universal) Border (specific) 

Measure directly affects:

Domestic production Yes No No

Imports Yes Yes Some 

8 Most-favored-nation trade policy instruments are applied

equally to the products of all exporting countries by the

importing country, in accordance with Article I of GATT

1994. A tariff is the most common example of an MFN

policy instrument.
A classification of regulatory goals emerges from

first recognizing three broad societal objectives of

technical measures that restrict trade: protecting the

economic interests of producers, protecting the health

and economic interests of consumers, and protecting

the environment. These broad objectives can be further segregated into those that reduce biological and

toxicological risks, and those that do not but which

serve some other public goal (table 3). Commercial

Animal and Plant Health Protection and

Compatibility measures potentially protect crops and

livestock from pests and diseases or increase the efficiency of marketing channels, respectively. Food

Safety measures potentially reduce involuntary risks

associated with the consumption of foodstuffs;

Quality Attribute measures may aid consumers in

making prudent or informed choices with respect to

experience and credence attributes of goods in the

marketplace. Measures that protect the natural environment from harmful non-indigenous species

[HNIS] regulate stochastic mishap associated with

biological hazards, while Conservation measures

alter the intertemporal utilization of natural resource

stocks.

This classification highlights some relevant distinctions in the evaluation of technical trade barriers.

Commercial Animal and Plant Health Protection and

Compatibility measures could likely be analyzed

largely on the basis of observable market data for

prices and quantities of private goods. An evaluation

of a measure in these two categories would gauge

whether losses in consumer surplus caused by

restricting trade were offset by the prevention of negative external effects of foreign production on

domestic production, in the first case, or attainment

of economies of scale, in the second. The next two

categories (Food Safety and Quality Attribute) comprise measures that could prompt or prevent demand

shifts that counterbalance the losses (gains) associated with restricting (liberalizing) trade. An evaluation

of environmental measures in the last two categories

(HNIS Protection and Conservation) must consider

whether the losses from restricting trade exceed the

benefits from providing non-excludable environmental amenities, for which market prices are generally

unavailable.9

Risk-Reducing Measures

The first column of table 3 identifies risk-reducing

measures. Here, we define risk as the product of

the quantified likelihood and magnitude of the

adverse consequences, should they occur (USDA).

Regulatory authorities around the world use a wide

variety of trade-restricting measures to mitigate the

diverse public risks associated with imported agricultural goods. Public risks are risks that are centrally produced or mass-produced, broadly distributed, often temporally remote, and largely outside the

individual risk bearers direct understanding and control (Huber). Thus, public risks are in a sense involuntary. These risks potentially threaten commercial

crops and herds, human health, and/or the natural

environment. The array of measures that have been

adopted to mitigate two different forms of public

12 Analyzing Technical Barriers to Trade Economic Research Service/USDA

Table 3--Classification of technical trade barriers by regulatory goal

Societal interests Risk-reducing measures Non-risk reducing measures

Producers/processors Commercial animal and plant health protection Compatability

Consumers Food safety Quality attributes

Natural environment Protection of natural environment from Conservation 

harmful non-indigenous species

9 A non-excludable good is a good for which there is no

mechanism that can ration or control consumption (i.e.,

someone can consume the good without paying a price).

Environmental amenities are typically non-excludable

goods that can be rival (consumption by one precludes

consumption by another), non-rival (consumption by one

does not preclude consumption by another) or congestible

(the good is non-rival for some number of users, while

rivalness sets in as the number of consumers increases)

(Randall).
riskhigh-probability, low-consequence risks (e.g.,

some food additives) and low-probability, high-consequence risks (e.g., pest infestations)account for a

great deal of regulatory heterogeneity in the international trading system (May; Sykes; Kinsey).

Commercial Animal and Plant Health Protection

measures protect crops and livestock from biological

stressors such as pests, diseases, and disease-causing

organisms. Viewed from the perspective of the physical sciences, measures that protect crops and livestock could, in most cases, be considered together

with those measures in the HNIS Protection category

that safeguard native flora and fauna. From an economic perspective, however, a key distinction is that

measures in the first category protect private goods,

while those in the latter category protect public

goods. As noted above, this distinction fundamentally alters the economic methodology one would use to

assess whether the measure is optimal in an openeconomy framework.

Food Safety measures reduce risks from both biological stressors, such as microbial contaminants, as well

as chemical stressors, such as food and feed additives, to protect consumers from involuntary risks.

When health effects are known (e.g., possible hazards

associated with voluntary consumption of raw oysters), the demand curve for the product implicitly

reflects risks associated with consumption of that

product. When formerly unknown or new risks are

made public, consumers may adopt private riskreducing strategies that shift or rotate the domestic

demand curve (van Ravenswaay and Hoehn).

Strategies include product avoidance (reducing purchases of food associated with a contaminant) and

brand-switching (selection of a close substitute that

differs in the amount of the contaminant and related

quality factors). Food Safety measures that successfully mitigate public risks associated with food consumption will reduce the frequency and magnitude of

private risk-reduction strategies that can seriously

disrupt agricultural markets. 

Sources of International Heterogeneity

for Risk-Reducing Measures

Heterogeneity in risk-reducing regulations among

countries stems from differences in actual risk factors; the degree of uncertainty or ambiguity about

risk factors; and differences in risk tolerances that

might reflect variation in, among other things,

incomes, experiences, and tastes. The trade restrictiveness of a countrys regulatory regime can be

expected to vary directly with the degree of risk or

uncertainty, and inversely with the degree of a societys willingness to accept risk.

Differences in risk factors. Differences in import

protocols based on assessments of risks associated

with imports of primary and processed agricultural

goods have had a profound impact on the pattern

of trade in these products (Bredahl and Forsythe).

One prominent example is the emergence of a segmented beef market over the past decades, with different markets for fresh and frozen beef from exporting countries that are free of foot-and-mouth disease,

exporting countries where vaccination occurs, and

exporting countries that have experienced outbreaks

of this disease (Forsythe and Bredahl). 

For any technical measure, an assessment of risk

includes identification of a hazard, an estimate of the

probability of introducing the hazard, and an evaluation of the consequences of the hazard. Few disagreements generally arise over the identification of

hazards for well-known risks, a process that has been

aided by the efforts of the International Organization

of Epizootics (OIE), the International Plant

Protection Convention (IPPC), and the Codex

Alimentarius Commission (CODEX) to disseminate

relevant scientific information on hazards associated

with food, beverages, and feedstuffs. The identification of hazards associated with recent technology and

product innovations, such as bio-engineered products,

can be more controversial. It takes years to develop

international standards, and, in the interim, regulatory

authorities in some importing countries may refuse to

allow the entry of products that have been approved

for sale in others.

The probability of the transmission of the hazard

depends on factors that may vary among exporters

(source variation), as well as factors in the importing

country (destination variation). These factors include

Economic Research Service/USDA Analyzing Technical Barriers to Trade 13
the incidence and distribution of the hazard in the

exporting country, and elements such as the presence

(or absence) of a host organism in the importing

country. Evaluation of the consequences of the hazard includes consideration of several factors that

determine exposure to the hazard, such as husbandry

practices, average daily intakes, climate, and spatial

distribution of production or natural habitats. An

importing country may therefore adopt measures of

varying degrees of trade restrictiveness to mitigate

the risks associated with one product from different

foreign sources. It is equally possible that one

exporting country can face import barriers of varying

degrees of stringency at different borders to mitigate

the risks associated with exports of just one product.

Objectively assessed risks and understanding of risk

factors also change over time, with investments in

basic science and advances in detection and eradication technology. These changes in some instances

lead to increasingly trade-restrictive measures. In

other instances, advances in science or in technology

permit regulatory authorities to design less traderestrictive measures that still effectively target the

hazard. The United States, for example, replaced its

83-year ban on imports of Mexican avocados in 1997

with a process standard based, in part, on the results

of a new risk assessment by USDAs Animal and

Plant Health Inspection Service (APHIS). APHIS

scientists and regulators concluded that the risks

associated with importing Mexican Hass avocados

were lower than when last reviewed in the 1970s

because of innovations in chemical controls and cultural practices in Mexico, and recent research results

that indicated that the Hass avocado variety displayed

a natural resistance to fruit fly infestations (Roberts,

1997). This assessment facilitated a policy decision

to partially ease the longstanding ban.

Uncertainty. In response to the WTO Agreement

and domestic regulatory reform initiatives, many

countries are trying to formalize the risk assessment

process used by their regulatory authorities, with

quantitative models supplanting heuristic decision

trees in some instances. Emphasis is increasing on

documentation of sources, transparency of assumptions, and provision for public input and comment.

Even so, risk-reducing import protocols inevitably

are designed based on information characterized by

different degrees of uncertainty, where decisionmakers are unsure of the probability distribution of the

identified hazard(s). At one end of the spectrum are

issues such as the human health risks associated with

long-studied and widely used food preservatives that

do not vary significantly by country; at the other end

are issues such as risks posed by HNIS, where, in

many instances, there is immature science to either

defend or refute the use of trade measures to protect

the environment (Ervin). 

Ambiguity or uncertainty about the magnitude of

unmitigated risks associated with imports may stem

from different expert opinions about the interpretation of available evidence or the need to collect additional information. Estimates of mitigated risks

under different import protocolswhich provide key

information for the policy decisionmakerlikely

involve further uncertainty. These estimates can

draw on the results of controlled laboratory experiments and other countries experiences (as reported,

for instance, to international standards-setting organizations and/or their regional counterparts) but may

still require judgment about the probability and consequences of events that have never been observed in

the importing country. There is substantial scope for

disagreement among scientists and between trading

partners. In these situations, ambiguity averse

behavior on the part of regulators may lead to conservative import protocol decisions. These conservative

decisions result from perceptions that the economic

and political costs of lost opportunities (e.g., lower

costs for consumers, reciprocal liberalization) are less

than the economic and political costs of a mistake

(i.e., importation of hazards) (MacLaren).10

14 Analyzing Technical Barriers to Trade Economic Research Service/USDA

10 Some results from experimental economics, such as the

fact that ambiguity can affect a difference in an individuals willingness to pay to avoid a risk or the required

payment to take on a risk, violate the assumptions upon

which well-known normative theories of rational choice in

non-deterministic situations (e.g., expected utility, subjective expected utility) are based. Ambiguity aversion may

be an especially relevant descriptive theory for sanitary

and phytosanitary decisionmaking, which involves lowprobability, high-consequence outcomes.
Differences in risk tolerances. In some instances,

the import protocols of different countries vary substantially even though there is strong international

consensus about the risks posed by high probability,

low consequence hazards that do not significantly

vary by country. An example is differences in allowable levels of a food additive that has been in use by

some processing industries for decades, been extensively studied, and for which a long-standing

CODEX standard exists. In such cases, different

countries decisions to accept, accept with deviation,

or not accept the international standard could stem

from differences in incomes, as food safety attributes

are viewed as normal goods in the familiar Lancaster

model of consumer demand. 

Differences among income levels may explain some,

but not all, of the observed variation in import protocols. There are several prominent examples of

nations with comparable levels of income and facing

comparable levels of risk which have made starkly

different risk-management decisions. This variation

may in part be accounted for by differences in the

shared experience of a countrys citizens. For example, a low-probability, high-consequence event may

cause the publics estimate of the probability of the

re-occurrence of the event to be biased upward,

fomenting demand for stricter regulations. The influence of the emotional dimensions of risk on public

policy decisions is well documented (Camerer and

Kunreuther). Although experts, focused on the statistical measurement of risk likelihood, may not concur

with public opinion about the need for revision of

technical measures in such circumstances, regulators

in some such instances have decided to design policies that reflect public risk perceptions, defending

their choices by pointing to the democratic foundations of their actions.11 The EUs decision to ban production and imports of bovine animals and animal

products treated with growth-promoting hormones is

an oft-cited example of the science versus consumer

sovereignty dilemma that periodically faces regulators.12

National differences in tolerances for risk associated

with certain products may also be rooted in different

cultural norms. Traditional foods that have figured

importantly in the diets and/or ceremonies of different countries for centuries or decades may nonetheless be rejected by regulatory authorities in importing

countries because of the presence of substances that

could constitute chronic (or, more unusually, acute)

health hazards. And geographically isolated countries (often islands) in many instances have adopted

sanitary and phytosanitary that are very conservative

relative to choices made by other countries at comparable income levels. This practice, in the view of

their trading partners, reflects a fortress mentality

on the part of regulatory authorities who implicitly

impute a very high shadow price to every hazard.

Non-Risk-Reducing Measures

Non-risk-reducing technical measures affecting producers, consumers, and the environment are identified in the second column of table 3. Compatibility

refers to the capacity of products to function in association with others, such as mandatory dimensions

for produce containers that ensure compatibility with

handling equipmenet. Some product incompatibilities may in fact enhance welfare if they emerge from

the development of superior technology that leads to

Economic Research Service/USDA Analyzing Technical Barriers to Trade 15

11 And because of the small sample of occurrences of lowprobability, high-consequence events, experts and the public may never reconcile differences in their views.

12 In the early 1980s, European authorities first proposed

the ban in part to allay public anxieties that emerged following widely publicized reports of an estrogen scandal

in Italy when residues of the illegal growth promotant

DES were found in manufactured baby food. The ban was

eventually adopted in 1988, but consumer fears were

heightened once more following subsequent reports of the

significant illegal use of hormonal substances in

European countries. The European Parliament established

a Committee of Enquiry into the Problem of Quality in the

Meat Sector, which issued a report that endorsed continuation of the ban in 1989 because, among other reasons, the

ban was the only way to restore consumer confidence in

the meat sector. The EU maintained the ban although

assessments by experts over the past four decades, including those by European experts, have indicated that there is

no evidence that the hormones at issue pose risks to

human health when used according to good animal husbandry practices. (The six hormones evaluated by these

experts do not include DES, which has been widely

banned since the 1970s.) In 1997, a WTO dispute panel

found the EU ban not in compliance with the disciplines

in the SPS Agreement and, in 1998, the WTO Appellate

Body upheld the judgment (WTO, 1997, 1998).
16 Analyzing Technical Barriers to Trade Economic Research Service/USDA

Table 4--Examples of regulatory regimes that affect trade in agricultural and agroindustrial products

Risk-reducing measures

Regulatory goal/ Food safety Commercial animal and Protection of natural 

policy instrument plant health protection environment from HNIS1

Import bans

 Total ban Ban on ingestible products Ban on imports to exclude Ban on imports to minimize

harmful to human health quarantine pests2 and diseases risk of introduction of pests 

or diseases that threaten 

native flora or fauna

 Partial ban Ban on imports of individual Seasonal ban on imports to Regional ban on imports to 

varieties or species of minimize risk of introduction minimize risk of introduction

ingestible products harmful of quarantine pests and diseases of pests or diseases that

to human health threaten native flora or fauna

Technical specifications

 Process Measures that require specific Required treatments for Ban on imports of biostandard time/temperature regimes for products to prevent introduction engineered products because

imported foods of quarantine pests in of potential risks to native 

production areas flora and fauna

 Product Measures that specify Standards that establish Standards that establish 

standard maximum residue levels threshold levels for presence threshold levels for presence 

for specified pesticides on of disease-causing organisms of disease-causing organisms 

horticultural products that threaten crops or livestock that threaten indigenous

species

 Packaging Specifications for packaging Sealed container requirements Sealed container requirements 

standard technology that minimize for imported products to for imported products to 

probability of microbial minimize probability of minimize probability of 

contamination infestation of production areas introduction of harmful

non-indigenous species 

Information remedies

 Labeling Requirements for labels that Required labeling of individual Required labeling for safe

requirements indicate safe handling items of produce or containers handling of bio-engineered

procedures or whether to minimize probability of commodities and products so

product poses risks for infestation of production areas that they are not distributed

sensitive sub-populations by illegally transshipped outside circumscribed

imports marketing channels

 Controls on Measures that govern use NA NA

voluntary of voluntary hygiene claims

claims

1 Harmful non-indigenous species.

2 A quarantine pest is defined by the North American Plant Protection Organization as a pest of potential economic

importance to the area endangered thereby and not yet present there, or present but not widely distributed and 

being officially controlled.

NA = not applicable
Economic Research Service/USDA Analyzing Technical Barriers to Trade 17

Non-risk-reducing measures

Quality attribute Compatibility Conservation

Ban on imports of products proscribed NA Ban on imports of animal products

by state religion (e.g., meat and eggs) that threaten global

stocks of endangered species

Ban on imports of inferior breeds NA Seasonal ban on imports that threaten

or varieties of agricultural products global stocks of endangered species 

Animal welfare measures NA Required harvesting techniques for imports

of renewable resource-based products

Measures that regulate size, appearance, NA Measures that requires harvested product

and other attributes of agricultural (e.g., lobsters) to reach a certain size to

products prevent depletion of natural resource stocks

Regulations that prohibit misleading Mandatory dimensions for Requirement that packaging materials

or fraudulent packaging wholesale and/or retail are biodegradable

containers to facilitate

handling/transportation in

marketing channels 

Measures that mandate labels that NA Mandatory eco-labels

indicate nutritional profile or whether

the product contains bio-engineered

ingredients 

Measures that govern use of claims NA Measures that establish rules for claims that

on labels, such as fresh, genuine, products are produced using renewable

free-range, and low-fat resources 
product differentiation, or in response to heterogeneity in consumer preferences. Other product incompatibilities, however, result from autonomously

developed, divergent national standards, which can

increase production costs and reduce variety in the

marketplace. Manufacturing different products for

different markets may prevent firms from realizing

economies of scale in the production of these products, which may lead some firms to choose to exit

some markets.

Although enormously important for trade in products

of the industrial sector, compatibility measures are

far less important in the trade of primary and

processed agricultural products.13 Governments have

sometimes justified restrictions on container or package dimensions at the wholesale or retail level as the

solution to a collective action problem, where the

market provides insufficient incentives for producers

or manufacturers to establish standards that ensure

container compatibility with handling, transport,

and/or storage equipment to increase the efficiency of

the marketing channel for products. However, these

instances are relatively rare, as governments in most

instances prefer to allow firms to adapt to innovations in transport and storage technology or respond

to shifts in consumer preferences.

Quality Attribute refers to any characteristic of a

product other than safety that might enter a consumers utility function. These characteristics

include health (e.g., nutrition, energy), hedonistic

(e.g., fresh, genuine), and ethical (e.g., free-range)

attributes. A markets ability to satisfy diverse preferences regarding quality is an important virtue since

not all consumers are willing to pay the same for particular product attributes. Absent effective reputation

mechanisms (often the case for unbranded foodstuffs), the market may not supply optimal amounts

of quality. Consumers willingness to pay will not

adjust to improvements in quality if they do not

know, and cannot cheaply ascertain, the experience

or credence attributes of what they buy. Because

quality is generally costly to produce, poor-quality

products can outcompete high-quality products, and

the market equilibrium may entail the production of a

suboptimal share of low-quality products (Akerlof).

Information regulations or standards that lower the

transaction costs of obtaining relevant product information could potentially correct market failures that

stem from imperfect information about health, hedonistic, or ethical characteristics of agricultural products. 

Conservation measures are aimed at preserving natural resources through technical trade barriers.

Measures in this category have been at the center of

some prominent international trade disputes (Hudec).

These multilateral or unilateral trade measures aim to

curb economic activity, such as trade in wildlife or

wildlife products, thought to threaten the biosphere

the basic stock of plant and animal life on the planetthat some regard as part of the global commons.

Requirements that packaging materials for imported

and domestic products be either recyclable or

biodegradable so as to preserve resources for future

generations also fall into this category. Regulatory

authorities may adopt these measures when consumers and/or external agents willingness-to-pay

(whether ascertained informally or formally by

means of revealed preference or stated preference

methodologies) is judged to exceed the producer and

consumer surplus generated by international

exchange. Measures in this category have been

extensively examined in the environmental literature

(Anderson).

A Matrix of Regulatory Regimes

The three classification criteria considered above

suggest the multi-dimensional characteristics of technical trade barriers that make their economic quantification and evaluation particularly time-intensive

and complex. One useful two-dimensional classifi18 Analyzing Technical Barriers to Trade Economic Research Service/USDA

13 In manufacturing, good examples are divergent voltage/hertz standards that hinder international trade in electrical appliances, and different broadcast formats that segment the international market for televisions. Many

incompatibilities emerged as historical accidents, predating extensive international trade or modern international

standardization efforts. In recent decades, however,

incompatibilities have sometimes stemmed from strategic

choices made by governments to foster domestic industrial

development.
cation of technical barriers partitions these measures

into a set of distinct regulatory regimes, taking into

account both the goal of the measure and the policy

instrument (table 4).14 Each column of this policy

regime matrix indicates that a variety of instruments

may be available to achieve the same regulatory goal.

For example, for Quality Attribute measures, labels

are only one option for remedying instances where

information about the experience and credence attributes of a product are asymmetrically distributed

between producers and consumers. Bans or standards may be chosen over information remedies

when regulators judge that consumers cognitive failures would lead to the imprudent purchase of a product that is inferior in some respect.

The rows of table 4 reinforce the point that one type

of policy instrument can be used to accomplish a

wide range of regulatory goals, a fact that is sometimes overlooked. For example, labels may be

required as a component of a quarantine policy

designed to reduce the risk of entry and spread of

harmful arthropods, to warn susceptible individuals

of the risks of consuming a product that has been

judged to be safe for the general population, or to

provide a food products nutritional profile so that

consumers can make informed choices about the

composition of their diet. Thus, the range of regulatory goals for different types of policy instruments

can reduce the scope for meaningful generalizations about classes of measures. A qualitative

assessment of the effect on a market equilibrium of

one type of policy instrumentfor example, packaging standardsmay require knowledge of the regulatory goal. Standards that mandate the use of

biodegradable packaging materials (Conservation

goal) might affect domestic and foreign firms marginal costs only, while adoption of a standard that

prohibits fraudulent packaging of a product (Quality

Attribute goal) could produce both demand and supply shifts. 

Economic Research Service/USDA Analyzing Technical Barriers to Trade 19

14 A variation of this two-dimensional classification can be

found in Hooker and Caswell, who examine food quality

regulations in terms of regimes (i.e., policy instruments)

and regulatory targets (i.e., product attributes or characteristics).
Classification of Foreign

Technical Trade Barriers

Facing U.S. Agricultural Exports

In 1996, the U.S. Department of Agriculture (USDA)

asked field personnel in its Foreign Agricultural

Service (FAS), who collectively cover 132 countries,

to identify questionable foreign measures that threatened, constrained, or blocked U.S. exports of primary

and processed agricultural, forestry, and fishery products. Each producer group that participated in the

FAS Cooperator Program was also asked to identify

foreign technical trade barriers.15 This information

was subsequently vetted by scientists and analysts in

USDAs regulatory agencies,16 who recommended

deletion of identified barriers in the data set that were

judged to be in conformity with international legal

commitments, such as the WTO and NAFTA SPS

Agreements.

The USDA survey results provide the most comprehensive view to date of regulatory regimes facing an

important agricultural exporting nation.17 The results

confirm the importance of technical barriers in international agricultural markets. Questionable technical

barriers were reported for 62 countries. Over 300

market restrictions were identified that threatened,

constrained, or blocked an estimated $5.0 billion of

U.S. agricultural, forestry, and fishery exports, 7.1

percent of the $69.7 billion total exported in 1996.

Market retention issues accounted for 61 percent of

the estimated export revenue losses, with market

expansion issues (24 percent) and market access

issues (15 percent) accounting for the remainder.18 A

wide range of products was affected by these measures, but four commodity groups accounted for most

of the estimated export revenue losses: processed

products (26 percent), grains and oilseeds (24 percent), animal products (19 percent), and horticultural

products (13 percent). The restrictions identified in

the survey were dominated by risk-reducing measures, particularly those addressing commercial plant

and animal heath issues (210 measures, which produced estimated export revenue losses equal to 61

percent of the total) and food safety (76 measures,

which resulted in estimated export revenue losses

equal to 48 percent of the total).19

The survey data on foreign technical barriers are

classified by the regulatory regimes identified in the

preceding matrix, both to permit examination of the

distribution of measures likely to be most traderestrictive and to provide perspective on the relative

importance of measures that fall in different regulatory goal categories (table 5). The proportion of the

observations that fall in the category of risk-reducing

20 Analyzing Technical Barriers to Trade Economic Research Service/USDA

15 The Cooperator Program at FAS includes approximately

40 groups representing specific U.S. commodity sectors

such as horticultural products, feed grains, wheat, soybeans, and rice. These groups are funded by their members, primarily agricultural producers and processors.

FAS and the cooperators share in the cost of overseas market-development activities.

16 These agencies include the Animal and Plant Health

Inspection Service (APHIS), the Food Safety and

Inspection Service (FSIS), the Agricultural Marketing

Service (AMS), and the Grain Inspection, Packers and

Stockyards Administration (GIPSA).

17 Prior to USDAs 1996 survey, the only institutional

attempt known by the authors to systematically identify

technical barriers has been the United Nations Committee

on Trade and Developments (UNCTADs) Trade Control

Measure (TCM) database. In addition to technical barriers, the TCM database records the use of other NTBs,

such as quotas, licensing measures, price controls, and

monopolistic practices. The shortcomings of this database

are widely recognized, such as the lack of any information

on health or safety regulations in most EU countries

(Ndayisenga and Kinsey). The fact that the TCM database

indicated that the United Kingdom employed only one

kind of NTBbilateral quotasillustrates the piecemeal

nature of the data collected.

18 Market retention issues involve regulations under consideration by a foreign government in 1996 that could

have prevented or curtailed ongoing U.S. exports of a

product or products. Market expansion issues are those

where a foreign regulation imposes restrictions on allowable varieties, breeds, or provenance of U.S. agricultural

exports. Expansion issues also include instances where a

foreign countrys rigorous conformity assessment requirements impede, but do not preclude, U.S. exports. Market

access issues include those foreign regulations that prohibit any entry of U.S. exports.

19 The percentages sum to more than 100 because some

measures span regulatory goals. Details of the survey

design as well as summary descriptive statistics of foreign

technical barriers to U.S. agricultural exports can be found

in Roberts and DeRemer (1997). Summaries of the

aggregated survey results are also provided in Thornsbury,

Roberts, DeRemer, and Orden (forthcoming).
measuresjust over 86 percentis striking. The

number of measures with the cited rationale of protection of commercial production (62 percent) and

protection of human health (22 percent) accounted

for nearly all of the risk-reducing measures.20

Closer examination of the observations in the three

risk-reducing regulatory goal categories (table 5)

indicates that the number of measures aimed at the

reduction of risk presented by biological stressors

such as noxious weeds, yield-reducing arthropods, or

food-borne microbial pathogens was far greater than

the number of measures that target risks posed by

chemical stressors such as food and feed additives.

All of the 210 measures in the Commercial Animal

and Plant Health Protection category are justified on

the basis of reducing risks posed by biological hazards. More than half (47) of the 76 measures in the

Food Safety category also target biological stressors.

The principal differences between chemical and biological stressors are that biological organisms grow,

reproduce, and may multiply; actively and passively

disperse; interact with ecosystems in unpredictable

ways; and randomly evolve (Powell, citing

Simberloff and Alexander). Powell notes that the

principles, methods, data, and conventions for chemical risk assessments are far more advanced than for

the assessment of risks associated with biological

stressors and that, in many cases, there may be

large, irreducible uncertainties in assessing the

potential consequences of biological hazards (op. cit.,

p. 8). Recalling the discussion above (p. 14) about

ambiguity-averse behavior by regulatory authorities,

it is perhaps not surprising that the large majority of

the most trade-restrictive measures, import bans, mitigate risks posed by biological hazards that fall in the

Commercial Animal and Plant Health Protection category. A less charitable view of the large number of

trade-restrictive measures in this category is that the

large uncertainties and relatively immature state of

risk assessment for biological hazards offer, in some

instances, a convenient veil for regulatory protectionism. 

Economic Research Service/USDA Analyzing Technical Barriers to Trade 21

20 A small number of observations could not be classified,

a fact which perhaps should not be unanticipated in view

of the fact that the survey targeted questionable barriers.

In some instances, the rationale for import restrictions is

unclear, either because the foreign government provides

no explanation or provides conflicting explanations for the

policy. In other cases, the prima facie regulatory goal is

clear, but the policy instruments could not be clearly identified because of erratic enforcement of de facto measures

that had never been formally promulgated by the foreign

government.

Table 5--Classification of technical trade barriers to U.S. agricultural exports identified in USDA survey

Risk-reducing measures Non-risk-reducing measures

Regulatory Food Commercial Protection Quality Compatibility Conservation Nongoals/policy safety animal and of natural attributes classifiable

instruments plant health environment

protection from HNIS1 Total

number of barriers

Import bans 12 56 3 1 0 0  72

Partial bans 0 21 0 0 0 0  21

Input standards 0 0 0 0 0 0  0

Process standards 32 78 1 15 0 0  126

Product standards 26 33 0 13 0 0  72

Package standards 1 0 0 2 5 0  8

Label requirements 2 2 2 7 0 1  14

Controls on 

voluntary claims 0 0 0 1 0 0  1

Non-classifiable 3 20 0 0 0 0 2 25

Total 76 210 6 39 5 1 2 339 

* The 1996 USDA survey of questionable foreign technical barriers to U.S. agricultural exports identified 302 market restrictions

in 62 countries. The number of entries in this table exceeds that total primarily because some identified barriers were comprised of more than one policy instrument. A small number of individual measures spanned regulatory goals. For example, a

product standard that was justified on the basis of preventing entry of zoonoses (viruses that are communicable between animals and humans) was classified as both a food safety and animal health measure.

1 Harmful non-indigenous species
The relatively small number (six) of risk-reducing

measures aimed at protecting the natural environment

from HNIS might be explained by the fact that regulators typically examine the potential harm to native

flora and fauna only after an evaluation indicates that

the proposed imports present negligible risks to commercial crops and livestock. Consequently, some

measures justified only on the basis of reducing the

biological risks to crops and livestock likely protect

native flora and fauna as well. The U.S. ban on entry

of commercial cultivars of the genus Rhododendron

in growing media illustrates this point. For years the

ban was rationalized on the basis of protecting

domestic nursery stock. APHISs reexamination of

the risks posed by allowing entry of Rhododendron

spp. in the early 1990s led to a determination that

these imports posed negligible risks to the domestic

industry if imported under the proposed risk management protocol. However, the measure remained in

place because the agency had insufficient information

to conclude that the proposed imports did not threaten wild Rhododendron spp., which are protected by

the Endangered Species Act (Romano and Orden).

Most of the nearly 14 percent of measures identified in

the three non-risk-reducing regulatory goal categories

were Quality Attribute measures. A review of the survey responses in this category indicates that, in many

instances, Quality Attribute measures were identified

as barriers because of the administration or enforcement of the measure, rather than the measure per se.

For example, compliance with the grading regimes of

foreign countries was sometimes difficult or impossible for exporters of perishable products in view of the

importing countrys conformity assessment requirements. Other Quality Attribute measures spanned a

wide range of issues, from government-mandated

shelf-life periods to bans on inferior breeds of livestock. The number of measures identified in the

Compatibility category, as anticipated, was small.

Four of the five identified measures established

dimensions for fresh produce containers that were

mandatory for imports but not enforced nationally. 

The identification of only one Conservation measure

is somewhat surprising in view of the prominent controversies over the use of import restrictions to

achieve environmental goals in the 1980s and 1990s

(Esty, McDorman). One hypothesis is that while foreign environmental measures such as container-recycling requirements might have increased costs for

U.S. exporters of agroindustrial products, they were

not viewed by USDA field personnel and U.S. producer groups as questionable measures if domestic

firms were obliged to comply with the requirements

as well. There could be two explanations for why

survey respondents did not identify more foreign

trade restrictions (adopted either unilaterally or as a

part of a multilateral coalition) which were aimed at

preventing environmental harm outside the importing

country. The first is that the United States is often a

member of these multilateral coalitions, and usually

enforces its obligations under treaties, such as the

International Convention for the Regulation of

Whaling, to place restrictions on domestic production

practices related to preservation of the global biosphere. Thus exports of products that might be denied

entry to foreign markets because they deplete stocks

of globally endangered species, for example, are likely not produced by the United States, either for

domestic consumption or export. A second reason

emerges from a recent study of the use of trade measures against foreign environmental practices. Hudec

notes that only a few GATT Members have both the

power and the inclination to make significant use of

unilateral trade restrictions for environmental purposes (op.cit., p. 145). The EU and the United States

most frequently adopt these kinds of measures,

Hudec observes, but no other government comes

close to matching the volume of U.S. legislation that

authorizes or mandates the use of externally directed

trade restrictions. This may change over time, of

course, but survey respondents identified only one

foreign Conservation trade barrier in the 1996 USDA

study.

More generally, evaluation of the data requires that

the results be examined within the context of the survey design. For example, a broader sample that

included major food manufacturers would likely have

led to the identification of more measures in the Food

Safety and Quality Attribute categories, even though

the estimated export revenue losses attributed to technical barriers for processed agricultural products in

the 1996 survey were already greater than for any

other product category (Roberts and DeRemer).

22 Analyzing Technical Barriers to Trade Economic Research Service/USDA
Also, since only questionable barriers were targeted

in the survey, the distribution of policy instruments

could be skewed toward toward those that are generally more trade restrictive (the top of table 5).

Twenty-six percent of the measures used to protect

commercial production agriculture are bans; had

respondents identified all technical measures limiting

or potentially limiting U.S. exports rather than only

questionable ones, this proportion might well be

smaller. And finally, it is not known how robust the

profile of regulatory regimes that emerges from the

survey results is across countries (see box). A different country could face a substantially different distribution of questionable regulatory regimes if the commodity composition of its exports varies from that of

the United States. The destination of exports is also

likely to be a relevant factora country that exports

primarily to developing countries may face different

regimes than one that ships to markets in North

America, Japan, and Europe. 

It should also be noted that the estimated trade

impacts reported in the survey were expert consensus

estimates of U.S. producer revenue losses resulting

from a restricted quantity of U.S. exports at a fixed

world price. These estimates were not derived from

formal economic modelsa difficult task in view of

the fact that restrictions were identified for products

ranging from grass seed to goats but nonetheless

aided USDAs program agencies in identifying priorities by providing an order-of-magnitude indication of

the economic significance of these measures to U.S.

producers. The profile of technical barriers that

emerged from the survey estimates thus provided

USDA with a starting point for targeting technical

assistance funding; developing proposals to spur

effective multilateral implementation of the WTO

SPS and TBT Agreements; and crafting U.S. strategies for participation in international standards-setting organizations. Formal empirical models can be

used to corroborate or challenge the estimated trade

impacts reported in the survey, but clearly these tools

can also be used to furnish policymakers with other

important information. For example, models can be

used to assess the welfare costs of current measures

as well as to evaluate proposed alternatives, thereby

enabling a ranking of regulatory options. Models can

also provide estimates of the distributional effects of

alternative measures, information which is sometimes

regarded as an important factor in regulatory decisions. 

Economic Research Service/USDA Analyzing Technical Barriers to Trade 23
24 Analyzing Technical Barriers to Trade Economic Research Service/USDA

U.S. Technical Trade Barriers 

In 1997, ERS expanded its efforts to widen the information base on technical trade barriers by collecting data on

U.S. import policies that foreign exporters had raised for discussion with U.S. officials. These measures were

identified in interviews with officials in the regulatory agencies of the Executive Branch that are responsible for

enforcing regulations and standards that affect imports, as well as individuals in USDAs Foreign Agricultural

Service. The regulatory agencies include four USDA agencies (Animal and Plant Health Inspection Service; Food

Safety and Inspection Service; Agricultural Marketing Service; Grain Inspection, Packers and Stockyards

Administration), the Environmental Protection Agency, and the Food and Drug Administration. 

Individuals in these 7 agencies reported that representatives from 14 countries had collectively identified 63 contentious U.S. measures. These data were then classified by regulatory goal, using the same taxonomy as the one

developed for foreign technical barriers (the data were not sufficiently detailed to further classify the measures by

policy instrument). The results of this classification indicate that the distribution of U.S. and foreign technical

trade across regulatory goals are approximately the same. Risk-reducing measures dominate the identified U.S.

barriers, as they dominate the identified foreign barriers. Quality Attribute measures represent the largest category

of non-risk-reducing measures in both samples. Further examination of the data on U.S. barriers indicates that the

development status of the foreign country is correlated with the number of identified measures. 

Table--U.S. technical barriers to imports

Risk-reducing measures Non-risk-reducing measures Total

Food Commercial Protection Quality Compatability Conservation

Regulatory safety animal and of natural attribute

goal/measure plant health environment

identified by: protection from HNIS1

Number of measures

Developed

countries 5 17 1 8 0 2 33

Upper middle

income countries 1 15 0 4 0 4 24

Lower middle

income countries 1 8 0 0 0 0 9

Least developed

countries 0 2 1 0 0 0 3

Total* 7 42 2 12 0 6 69

1 Harmful non-indigenous species

* The total number of measures classified by regulatory goal (69) exceeds the total number of identified measures

(63) because some measures spanned regulatory goals.
A Modeling Framework for

Assessing the Trade Effects of

Technical Trade Barriers

The quantification of the trade effects of the types of

technical measures identified and classified above

poses several problems for trade policy analysts.

That trade is affected by such regulations is clear.

But the magnitudes of these trade effects are in

doubt, as are the consequent effects on the gains from

trade; few studies have attempted to quantify these

magnitudes. Without such information one cannot

know how significant technical barriers are in international agricultural markets or how best to modify

existing technical barriers to reduce unwanted trade

effects. Considerably more information is needed to

assess the trade effects of technical trade barriers

than is needed to assess the effects of standard tariffs

and non-technical NTBs. Unlike standard trade barriers, the effects of technical barriers on international

flows of goods is mainly indirect, through the additional cost of compliance that producers or traders

face. Moreover, to the extent that these regulations

affect production functions and consumption decisions, the import demand and export supply curves

themselves can shift if such measures are imposed or

rescinded.

The task of assessing the effect of technical regulations on trade flows requires detailed knowledge of

the regulations themselves, the process by which

companies or individuals meet those regulations, and

the implications of not conforming to the rules. To

put this technical information to use requires a simple

economic framework that should be easily understood yet comprehensive enough to satisfactorily

answer a range of questions. The framework should

yield a modeling structure into which to place empirical data for the calculation of the trade impacts and

welfare effects. The framework proposed here is

based on a synthesis of the different approaches

taken in five papers published since 1996, each of

which emphasizes one aspect of the relevant issues.

Considering these approaches as separate aspects

within the commonality of technical barriers allows

them to be combined in any empirical case. This

framework, which complements the classification of

technical trade measures, integrates the five

approaches in a flexible and general model that can

be customized to specific measures. The classification criteria illustrated that technical trade barriers

must be treated as bundles of characteristics related

to goals, instruments, and scope; accordingly, the

goals, instruments, and scope can be modeled separately and combined in studying specific cases. 

The contributions of the five recent approaches to

modeling technical trade barriers can be summarized

as follows. Krissoff, Calvin, and Gray examine the

tariff and technical trade barriers facing U.S. apples

in three different markets, Japan, Korea, and Mexico,

and calculate the tariff-equivalent of the technical

(phytosanitary) measures that constrain exports.

With these estimates, they calculate how much trade

is impeded by the phytosanitary measures in addition

to the standard trade barriers. Their model is a static

partial equilibrium analysis of the three apple markets. Although the authors acknowledge that the

technical measures may be justified, the model does

not estimate any effect on production in the importing country of removing the trade restrictions.

Sumner and Lee develop a model pitched primarily

at the problem of Asian import regulations facing

U.S. vegetables. The papers emphasis is on the different ways in which the regulations can impose

costs at different points in the marketing chain. In a

trade model this can affect foreign and domestic

price levels and foreign exchange flows as well as

quantities traded. Although Sumner and Lee mention

the possibility of shifts in the supply and demand

curves, they do not pursue the matter in their analytical model. Compliance costs are added like tariffs to

the relevant excess supply curves in an otherwise

conventional trade analysis.21

Economic Research Service/USDA Analyzing Technical Barriers to Trade 25

21 Josling laid out a similar model, using compliance costs

of environmental regulations differentiated by whether the

producer was a domestic or a foreign supplier. The trade

effects were shown to be sensitive to the incidence of the

relative costs of compliance with regulations, and to be

similar to the trade effects of tariffs representing the difference between foreign and domestic compliance costs.

However, this model also allowed for no supply shifts,

though there was provision for consumer gains from the

information value of the regulation.
Shifts in the supply curve when trade introduces pests

or diseases is at the heart of the justification for many

SPS trade barriers. Orden and Romano develop a

model that focuses directly on the effect of imported

pests on domestic production costs. Referring to the

U.S. ban on avocado imports from Mexico (since partially rescinded), they model a market for avocados in

the United States where domestic supply shifts backwards/upwards when imports are allowed into the

country, if the imports result in a pest infestation. As

the ban has a consumer cost, the welfare effect of

removing it is a combination of trade gains from

cheaper avocados and resource losses as the cost of

producing any given quantity of avocados at home

increases. Compliance costs, such as border inspections, do not play an explicit role in the model.

The consumer reaction to a technical barrier, as

opposed to effects on supply, is central to a model of

information externalities developed by Thilmany and

Barrett. They emphasize the role of regulation of

imports in giving consumers confidence in buying a

product, thus avoiding the problem of lemons or

unreliable goods bought by the unsuspecting consumer from foreign producers who may not have to

rely on reputation for repeat business. If a regulation

requires the provision of information that does not

inform consumer choice, there is a welfare loss, but

informative regulations can correct market failures

and add to social welfare. The authors use the dairy

trade between the U.S. and Mexico as an example.

The fifth recent study of technical trade barriers, by

Paarlberg and Lee, addresses foot-and-mouth disease

(FMD) and trade in beef from countries where the disease is endemic. Using the language of tariff theory,

the authors calculate the optimum tariff that, when

placed differentially on imports from the infected country, would maximize the difference between the gains

from trade and the costs to the domestic industry from

the spread of the disease. The costs are related to the

number of outbreaks, which in turn are related to the

volume of imports. By using the concept of an optimum tariff, the authors emphasize that SPS issues

involve a trade-off between standard commercial considerations and health and technical considerations,

though most countries ban products from infected

sources rather than taxing them at the border.

Our framework includes three different but combinable components drawn from the five studies

described above. The first component is the element

of regulatory protection, the fact that a regulation

gives some rents to the domestic sector. A purely

protective regulation is a special case: most barriers

have at least a minimal technical justification. A

variant of this model, compensatory protection,

assumes that a regulation similar to that faced by

domestic producers is imposed on imports solely to

keep the playing field level: the import regulation

has no effect on the domestic supply and demand

curves. Such protection is likely to be contrary to

multilateral trade rules, however.

The second component of the framework developed

herein is a supply-shift element that focuses on the

effects of imports on the domestic supply and the

costs of enforcing compliance at the border (or in the

supplying country), which will eliminate the threat of

infestation. The supply-shift element introduces the

rationale for the trade barrier, though of course it

does not follow that the particular measure chosen is

always appropriate for the circumstances. The task

of the model is to make that calculation.

The third component of the framework for economic

evaluation of technical trade barriers is a demandshift element. If the effects of the regulation on

imports, in addition to the cost involved, is to impart

information, it may increase consumer demand for

the product. The information can be related to quality (that the imported product meets a particular standard) or to geographical origin (which gives consumers additional knowledge about expected characteristics).22 The same approach may be used when

the technical measures cover areas such as packaging

that are presumably intended to lower the cost of distribution. An important use of the model covers the

case where unregulated imports would have a nega26 Analyzing Technical Barriers to Trade Economic Research Service/USDA

22 The analysis in this report assumes that the imported

product sells for the same price as the domestic product on

the importers market. Thus the increase in demand for

imports with the provision of information is not captured

by an increase in the relative price of imports. The goods

are perceived as perfect substitutes by the consumer once

the information imparted by the regulation has been

absorbed.
tive impact on consumption, if not through actual

harm to consumers then by causing consumers to

reevaluate their consumption patterns. The information imparted by the regulation causes consumers to

increase demand for the product.

The first of these components, regulatory protection,

is similar to the traditional analysis of tariffs where

the intervention is assumed to have no other purpose

than to protect producers at the expense of consumers. By contrast, the supply-shift and demandshift components allow for the regulation to have a

beneficial impact, even if overdone at times, and

again susceptible to political capture of the regulatory

process.

Scope of Measures

In addition to modeling the effects of the technical

barrier on the parameters of supply and demand in

the market in question, a full analysis of the trade

effects requires consideration of the scope of those

regulations. This is particularly important in the calculation of the incidence of the burden of such regulations. For each of the model elements, we need to

consider the situation from the viewpoint of both the

exporter and the importer, taking into account the

range over which the measures operate. In the classification, we distinguished between technical measures that apply to all exporters (exporter-universal)

and those that only apply to particular exporters

(exporter-specific). In making economic assessments, technical measures that are applied only by

one importer (importer-specific) and those that are

generally applied (importer-universal) need to be distinguished as well. These distinctions essentially

govern the incidence of the cost of compliance with

the import regulations.23 Table 6 illustrates four possible combinations of scope for the regulations.

The Regulatory Protection Model

The simple small-country model of regulatory protection postulates a situation where the foreign supplier

of the good is required to comply with some form of

regulation as a condition of importationessentially

the model used by Krissoff, Calvin, and Gray.

Compliance with this regulation is assumed to

involve a cost, which acts like a tariff on the quantity

of trade (but without tariff revenue). As a result, the

importing country suffers a loss, essentially forgoing

some of the potential gain from trade. Domestic producers gain and consumers pay both for the producer

gain and for the cost of the useless regulation.

Consumers also pay indirectly for the distortion in

consumption and production decisions, the traditional

welfare triangles of deadweight losses. The regulatory protection model can be used to gauge the

effects of different policy regimes characterized in

table 4. One can analyze, for example, the effects of

Economic Research Service/USDA Analyzing Technical Barriers to Trade 27

23 Similar issues would be relevant in the case of export

regulations, but are not pursued here. An exporter may

produce to different standards depending upon the import

market. In the models that follow, any regulation imposed

by an exporter is merely a manifestation of the importers

regulation. The exporter authorities are acting in proxy for

the importer authorities. The distinction between specific

and universal application of a regulation is not the same as

that of few or many suppliers or buyers in the market

(conditions of competition). The competition issue is

addressed below as a part of the discussion on the world

price effects of technical barriers. The incidence of the

burden of the technical measure is analytically separate

from that of the world price (terms of trade) effect,

although both are relevant to the trading countries.

Table 6--Scope of measure from importer and exporter perspective

Regulation imposed on one exporter Regulation imposed on all exporters

(specific) (universal) 

Regulation imposed by Either can avoid compliance costs by selling Importer bears cost of compliance as this 

one importer (specific) to or buying from other markets. Potential cost becomes built in to selling price by all

rather than actual trade impediment. exporters.

Regulation imposed by Targeted exporter bears cost of Importers and exporters share the cost of

all importers (universal) compliance as importers can compliance as the world market price

choose to buy from other sources. adjusts to the cost. Price to buyers goes

up and to sellers goes down. 
a (superfluous) process standard which has the prima

facie objective of protecting domestic crops. In the

regulatory protection model, there are no actual phytosanitary risks associated with imports of the product; the process standard simply exists to raise costs

for foreign producers.

Importer Perspective

The trade and welfare effects in a regulatory protection model that are seen in figure 2 reflect the following assumptions: (1) the regulation applies to all

countries exporting to the importing country

(exporter-universal), (2) only this importer applies

the regulation (importer-specific), and (3) the level of

imports is small relative to the total world market

(the small country case). A prohibitive regulation on

imports, such as a total ban, would lead to trade volume at zero or M0. Trade in the absence of the regulation would lead to import volume M1, with the

usual gains from trade. With the non-prohibitive regulation imposed on imports, the price of those

imports rises and trade shrinks (M2), reducing the

gains from trade by areas E + F. Note that the welfare loss is not just the triangle familiar from tariff

analysis but also the rectangular area that depends on

the total level of imports and the height of the regulatory compliance cost. Thus we can say with reasonable certainty that the potential welfare losses from

unwarranted regulatory protection exceed those from

tariffs, which would result in a tariff-inclusive product price equal to Pw + C in the importing country,

as tariffs at least generate tariff revenue.

The easiest way to characterize the trade effects of

regulatory protection policies is to use the concept of

a tariff equivalent (as chosen by Krissoff, Calvin, and

Gray). This can be defined as the tariff that would

restrict trade to the same extent as the regulatory protection. In the simple example given here, the tariff

equivalent is equal to the cost of compliance. This

28 Analyzing Technical Barriers to Trade Economic Research Service/USDA

This figure illustrates the trade and welfare effects in the regulatory protection model, viewed from the perspective of the importing country. Assume the "small-country" case for the importer, with domestic producers and consumers facing the world price,

PW. At this price, the quantity demanded by consumers is QD1 , the quantity supplied by domestic producers is QS1, and the

difference between these two amounts is the quantity imported (seen as QD1 - QS1 in the left-hand panel and M1 in the right

hand panel). When this importer alone adopts a universal border regulation intended solely to protect domestic producers, the

price in the importing country increases. In this scenario, imports fall to M2 (seen as QD2 - QS2 in the left hand panel), determined by the intersection of the excess demand curve ED and the new compliance cost-inclusive product price PW + C.

Consumer surplus also falls, by the area A + B + C + D, while producer surplus increases by A. The regulation therefore results

in net welfare losses (or a reduction in the gains from trade relative to the free trade equilibrium at the intersection of ED and

PW) equal to the area E + F.
gives a fair indication of the price support provided

to domestic producers. With knowledge of elasticities of supply and demand, the effects on the trade

volume of the regulation can be computed. It should

be remembered, however, that the welfare effect of a

technical trade barrier can be much greater than a tariff equal to C.24 It follows from the discussion of the

incidence of the burden that if all importers impose

the same regulation (importer-universal), then the

increase in the compliance cost inclusive price, PW +

C, will be less, as the cost of compliance is shared

with exporters through the world price change.

Exporter Perspective

Exporters in general should not notice the effect of

the technical measure if the technical measure is

imposed only by one importer, and if the world market price is not affected by the importer policy. In

this case, the world market shrinks, but by an amount

too small to be noticeable, as other importers will be

willing to buy the displaced goods.25 Bilateral trade

flows are modified and individual firms can be disadvantaged, but the aggregate impact is small (fig. 3a).

Although the exporter may protest, there is little real

economic cost to the exporting country if other market outlets exist.26

Economic Research Service/USDA Analyzing Technical Barriers to Trade 29

24 An important implication of this is that the tariff equivalent is appropriate only for comparing trade volume

effects (not the welfare effects) of technical and standard

trade barriers of different types.

This figure illustrates the trade and welfare effects in the regulatory protection model, viewed from the perspective of the exporting country. In the importer-specific, exporter-specific case (3a), one importer adopts a regulation targeted at a single exporter

in a small-country case. The exporter continues to export X1 (the open economy equilibrium at the intersection of the exporter's

excess supply curve ES and the world price PW) by simply shipping the product to other destinations. In the case where all

importers adopt a regulation (3b) that targets a single exporter, the compliance costs are borne by the exporter. In this scenario, the exporter faces the world price of PW - C , exports decline to X2, and the gains from trade decline by area A. 

25 Exporters may still experience costs in searching for

alternative markets, even if such markets, by assumption,

do exist.

26 In practice, exporters usually are observed to care when

even small markets are denied. For each firm wishing to

get into the market each barrier appears significant, even

though the actual ex post effect on total export earnings

may be insignificant. Thus exporter concern may be a

political reality even if an economic illusion.
Alternatively, if the technical barrier is differentially

applied, aimed by all importers at one exporter alone,

the targeted exporter cannot merely switch supply to

another market. The exporter alone will bear the

compliance costs of the (exporter-specific, importeruniversal) regulation because importers can simply

buy from other exporting countries at the world price

(fig. 3b). This reinforces the importance of knowing

whether any particular technical trade barrier applies

to all other exporters, or whether other importers also

use the same barrier applied to a certain exporter.

The incidence of the barrier will depend on these two

aspects of universality versus specificity.

The Supply-Shift Model

Many SPS trade barriers purport to protect the

domestic farm and food sector from unwanted pests

or diseases that might accompany imports. An

importing country might initially maintain a ban on

the importation of a good from other countries on the

grounds that a pathogen is endemic in those countries. Importing the pathogen, along with the traded

product, would lead to the spread of the disease

domestically. The pathogens effect on domestic production would increase production costs (shift up the

supply curve) or cut production from a part of the

country (shift back the supply curve).27 Assume that

the importing country is small in terms of the world

market for the product, so its trade volume will not

affect the world price; that there are no pathogen-free

suppliers, so the same regulations apply to all

exporters; and that testing at the border will assure

conformity with a product standard (e.g., disease-free

status). These assumptions provide the basis for a

simple partial-equilibrium model from which the

trade and welfare effects of alternative technical

measures can be derived. This analysis provides a

means for comparing two regulatory regimes characterized in table 4: a total ban versus a product standard to protect commercial crops or livestock. 

Importer Perspective

The supply-shift model can be used to compare two

potential SPS policy instruments (fig. 4). In this

case, testing is less trade-distorting than a banwhen

the importer uses testing rather than a ban to mitigate

risks, the quantity imported is M1 instead of M0. To

quantify these effects, assuming the market parameters (supply and demand elasticities) are known,

requires additional technical information about the

extent to which testing raises the cost of imports, and

the extent to which the import of the pathogen would

shift the domestic supply curve. With this market

and technical information, one could assess the

impact on domestic price and trade volume of the

alternative SPS measures, as well as the welfare

gains and losses from each instrument. 

Exporter Perspective 

The effect on the exporter in the case of supply shifts

associated with pathogens depends on whether the

SPS measure is specific or universal, and hence on the

incidence of the cost of compliance. In the example

discussed here, the testing is assumed to be exporteruniversal, so no one exporter faces all the costs. And

if it is assumed that just one importing country imposes the regulation, then the cost will be absorbed by

that importer. Therefore, the effect on any (small)

exporter is insignificant. The importer makes the calculations, bears the costs, and reaps the benefits. The

exporter rationally would just absorb the measure as a

quirk of this particular import market, much like characteristics of consumer taste. Alternatively, if the regulation affects only one exporter (exporter-specific)

and is applied by all importers (importer-universal)

then the calculation is different. The targeted exporter

would bear the compliance costs, with an economic

loss to the exporting country. If all importers impose

the same regulations on all exporters then once again

30 Analyzing Technical Barriers to Trade Economic Research Service/USDA

27 The externalities arising from imports can be measured

by the cost of avoiding the pathogen by domestic action

(such as vaccination), rather than as the effect on production or demand of the domestic release of the pathogen per

se. There may indeed be many alternative ways of intervening, each of which should be analyzed separately.

However, in each case there will be a change in the relation between price and quantity supplied, i.e. it can be represented by a shift in the supply curve. Paarlberg and Lee

decompose the relationship between imports and domestic

supply into that between imports and outbreaks of FMD

and that between outbreaks and production loss. Such disaggregation is a useful way of formulating the technical

information needed to estimate the relationship.
the cost of compliance is shared between importers

and exporters through the changes in market price.

The Demand-Shift Model

The analysis in the supply shift model was based on

the existence of a link between imports of a product

and domestic supply conditions. If instead the link

were between trade and domestic demand through

information imparted by the import regulation,

demand would shift outward (as in Thilmany and

Barrett) as consumers benefit from knowing what to

expect from the imported good as the result of the

regulation. In effect, the initial demand curve is

assumed to reflect limited information about foreign

supplies. This demand shift model could be used to

analyze a Quality Attribute/mandatory labeling

regime as depicted in table 4for example, a regulation requiring the identification of the production

technology (e.g, confined feeding or free-range) on

product labels. 

Importer Perspective

In this model, not conforming with the regulation

would cause some consumer confusion and, on this

account, would lower trade volumes, rather than the

spread of disease and higher imports. But there also

will usually be a cost of conforming to the regulations, which will have much the same analytical

effect as the cost of testing in the supply-shift case

(fig. 5).28 The net welfare effect of the technical

trade regulation (versus trade without the regulation)

is ambiguous. The producers at home gain, but on

Economic Research Service/USDA Analyzing Technical Barriers to Trade 31

S1 represents the supply curve in the absence of trade. With the ban in place, domestic equilibrium is at PA. The corresponding hypothetical import demand curve is ED1, which assumes no shift in supply if imports occurred. Opening up to trade (and

not testing) instead will shift the supply curve up (or back) to S2, corresponding to an import demand curve of ED2 and imports

of M2. The domestic price level is now PW, the world price. There is an apparent gain from trade, but this must be offset by the

loss due to the pathogen, which is a negative externality that shifts the supply curve adversely. Testing for the pathogen at the

border removes this externality but raises the domestic price by the cost of compliance, C. This in essence corrects the externality, so that PW + C represents the world price for the product without the pathogen. Excess demand for imports is ED1

again, reflecting the supply that obtains in the absence of the pathogen, and the quantity imported under this import protocol is

M1. This gives a gain from trade equal to A. (Note that the intersection of PW + C and ED2 has no meaning as an equilibrium.)
this occasion there is no presumption of distortion:

the question is whether the consumer benefits from

the information are greater than the cost of providing

that information.

The implied assumption made above is that information makes the import more useful to the consumer.

This allows one to interpret the model as one of

reacting to perceived negative externalities associated

with the unregulated import good. If the true

demand for the product is at the higher level D2, then

imports entering unregulated cause the demand to

drop to D1 as uncertainty spoils the market for both

domestic and foreign products. Regulation of

imports, through standards or information remedies,

restores consumer confidence and, hence, the demand

curve returns to its previous level. Thus, the analysis

of regulations that relate to trade in agricultural products can take account of consumer scares. Whether

or not there is any credible scientific justification

behind the consumer reaction, the demand for food

and agricultural products can certainly be affected by

such sentiment.

Exporter Perspective

The analytical model for the exporter in the demandshift case is similar to that of the supply-shift case.

When an exporter-universal introduction of information regulations by one country (importer-specific)

does not change the world price, then again it has no

measurable effect on the exporters; the compliance

costs are borne by the importing country. If all

importers impose the informative regulation on just

32 Analyzing Technical Barriers to Trade Economic Research Service/USDA

Trade in the absence of the informative regulation is given by M1, corresponding to the import demand curve ED1, in turn

derived from domestic demand D1 and supply S. Enforcing the regulation raises the demand to D2, but incurs the cost of compliance C, which raises the domestic price in the importing country to PW + C. This leads to trade of M2, which can be above or

below M1. The domestic supply curve does not shift, as the regulation does not change the cost of domestic production. The

gains from trade are now unambiguously larger (area A + B) than if the compliance costs had been borne with no shift in

demand (area A), as would occur in the case of regulatory protection.

28 For convenience we assume that the cost of conforming

is constant per unit sold. Other functional forms for the

costs under each of these models can be accommodated

with appropriate changes in specification.
one exporter (importer-universal, exporter-specific),

then that exporter will have to bear the cost. 

World Price Effects

The models above assume that no country is, by

itself, large enough to influence world prices by its

actions. If a country changes the world price by its

decision to adopt a measure that affects the quantity

of the product it imports, or if importers uniformly

impose a barrier against all exporters, then the small

country assumption is not appropriate. A terms-oftrade effect, which will affect the gains from trade,

must then be included in the analysis. The terms-oftrade effect can be thought of as apportioning the

cost of compliance (figs. 6a and 6b). When a single

importer is assumed to face a single exporter, the cost

of compliance becomes a wedge between the price

that the importer pays and the price that the exporter

receives, net of compliance costs. The incidence is

therefore simply determined by the ratio of the elasticities of excess supply and excess demand. The

less flexible side of the market bears the larger part

of the cost.

Does the large country case raise the possibility of

strategic games to maximize welfare? It is always possible that a country might use its technical barriers to

gain a terms-of-trade advantage for the nation as a

whole, as opposed to profits for protected sectors,

though this seems unlikely. The Paarlberg and Lee

case of foot-and-mouth disease assumes a large country, as appropriate for the U.S. case that they explore.

However, they postulate the use of tariffs for SPS purposes, rather than the more common use of command

and control measures for SPS policy purposes. The

crucial difference between tariffs and technical regulations is that the cost of the regulations involves a real

resource outlay rather than a financial transfer. Thus

the terms-of-trade gain is much less likely to offset the

distortion loss, as this loss is much larger than the efficiency loss triangle of tariff theory.

For a demand-shift model, if new import regulations

cause the world price to change (e.g., the effect on

Economic Research Service/USDA Analyzing Technical Barriers to Trade 33
demand increases world price) then there might be

some terms of trade effect as well. In general, the

effect on world price of informational regulations is

likely to be small. This is not always going to be the

case where consumer confidence, as opposed to marginal convenience, is concerned.

One possible market structure is monopolistic competition. Products in such markets are differentiated

by some characteristic. Assuming such

Armingtonian conditions, each supplier has a monopoly on selling a particular differentiated product.29

Consumers in the importing country will consequently be more affected by their own targeted import regulations as the range of suppliers decreases. If, however, all importers impose the same regulation on one

supplier, then, as before, the cost is borne by the supplier who has to meet the importers standards.

Customizing the Model

Several additional aspects can be incorporated in

these basic models of technical trade barriers to make

them more specific to particular examples. Two such

aspects are the location of testing and the issue of

risk assessment.

Testing Location

One aspect of the modeling framework that can

affect the incidence of the burden of technical trade

barriers is the location of testing.30 If testing were

done by the foreign producer rather than at the border

(essentially requiring the foreign producer to adapt

all production, not just the amount exported), then

foreign consumers would be affected as well. They

would not be able to escape the testing costs on

output retained at home. This testing location

requirement would not have any effect in the small

country case but would influence the exporters

excess supply curve, and hence modify the terms-oftrade change if the importer is a large country. The

point at which the cost is imposed affects foreign

exchange flows, as pointed out by Sumner and Lee.

If the cost is borne by the importer, the foreign

exchange cost of the imports is less than if the

exporter has to bear the costs.

Probabilities and Risk Assessment

Most situations of pest and disease control or food

contamination involve probabilities of infestation

rather than certainties. Uncertainty about an outcome

makes it necessary to couch the analysis in terms of

expected values. When the risks of producer or consumer effects are slight, the shifts in the supply or

demand curves can be reinterpreted as worst-case

scenarios and the calculations must take into

account that, in many instances, the effects will be

nil. The costs and benefits from the various SPS policy instruments may then be expressed in terms of

means and variances rather than as simple point estimates. Much of the skill in modeling SPS barriers

will be in the translation of scientific knowledge of

animal and plant health effects into probabilities of

loss and valuations of that loss.

34 Analyzing Technical Barriers to Trade Economic Research Service/USDA

29 The Armington assumption, often used in spatial and

general equilibrium models, is that the domestic and

imported goods are close but not perfect substitutes.

30 This issue is not unrelated to the equivalency issue

(whether a production or processing method regulation

can substitute for a product standard) and the question of

mutual recognition of testing methods (whereby regulatory authorities accept the results of each others tests).
Illustrating the

Modeling Framework:

The Economic Effects of the U.S.

Ban on Avocados from Mexico

Orden and Romanos work on the economic effects

of an SPS regulation provides a useful example to

illustrate our modeling framework. To evaluate the

economic effects of full or partial easing of a longstanding ban on U.S. importation of avocados from

Mexico, they examined the effects on American producers and consumers under alternative assumptions

about the probability of a pest infestation affecting

domestic production and about the costs of an infestation in terms of pest-control expenses and reduced

yields. An initial equilibrium representing the U.S.

avocado market was calculated for various estimated

supply and demand functions.31 For Mexican supply,

Orden and Romano assumed that export availability

was perfectly elastic at the wholesale price

($878/ton) for delivery of avocados from Mexico to

New York as calculated by the industry (Garoyan).

The assumption of a perfectly elastic supply is analytically plausible for a partial easing of the import

ban, as approved by USDA in 1997, but would be an

oversimplification for an evaluation of the effects of

the quarantine being removed completely, since the

expanded trade would then put upward pressure on

the Mexican price. 

Estimates of the probabilities of pest infestations

have been pivotal to the dispute over the legitimacy

of the U.S. avocado ban. Firko estimated the traderelated pest infestation probabilities that were used

by APHIS. Among four potential pests (fruit flies,

seed weevil, stem weevil, and seed moth), he estimated that the maximum probability of an infestation

occurring in the United States for partial easing of

the import ban under a systems approach to risk mitigation was πAM = 0.00345, the probability of a pest

infestation associated with the introduction of stem

weevil. Firko estimated that the probability of infestation of stem weevil had a minimum value πAm =

1.35x10-6. 

Firkos estimates of the probabilities of pest infestations have been considered too low by the domestic

industry. Nyrop estimated that the time expected to

pass before an infestation of stem weevils occurred

under the proposed partial lifting of the ban ranged

from less than 1 year to 20 years. Orden and

Romano treated the corresponding probabilities of

pest infestation due to stem weevils in a particular

year as πNM = 1.0 and πNm = 0.05. The four alternative probability estimates from Firko and Nyrop were

used to characterize the range of risks of pest infestation (from essentially zero to certainty) that might be

associated with complete removal or partial easing of

the avocado import ban.

The final parameters affecting the economic analysis

were estimates of the costs associated with a pest

infestation, which were modeled as a proportional

leftward shift in the domestic supply function (as in

figure 4). The magnitude of the shift depends on the

increase in production costs caused by the pests.

Evangelou et al. estimated that weevil infestation

would cause a 41-percent increase in marginal cost

due to increased application of pesticides and a 20-

percent reduction in yield, but considered that those

estimates somewhat overstated the likely increase in

production costs. Thus, to provide a range of possible results, Orden and Romano considered three possible effects on production costs of a pest infestation

centered on the estimates by Evangelou et al. The

largest effects were assumed to involve a 60-percent

increase in marginal costs and a 20-percent reduction

in yield.

For a partial lifting of the U.S. ban on importation of

avocados from Mexico, Orden and Romano divided

the domestic market into submarketsthe northeastern winter regional market (for which the ban was

lifted) and the national aggregate for all other regions

and seasons. The domestic price in the northeastern

winter regional market was assumed to fall to the

Economic Research Service/USDA Analyzing Technical Barriers to Trade 35

31 Orden and Romano derived estimates of a linear U.S.

avocado supply function that is inelastic in the short run

(0.28, when lagged quantity is held constant) and elastic in

the long run (1.18, when quantity is in a steady state).

Linear estimates of demand were inelastic (-0.45), but

reestimation of a nonlinear Box-Cox transformation

demand specification (Carman and Cook) yielded a price

flexibility of -0.65, corresponding to an elasticity of -1.53.

Thus, the estimated supply and demand functions gave

point estimates that spanned a range from inelastic to elastic behavioral responses.
free-trade level for imports from Mexico, inducing

greater consumption than at past domestic prices. An

aggregate price for the rest of the U.S. market was

determined by an equilibrium of domestic supply and

demand with the northeastern regional demand

excluded.

Tables 7 and 8 present some alternative estimates of

the economic effects of lifting the avocado ban using

a long run model with elastic supply and demand.

The initial equilibrium with avocado imports prohibited occurs at a domestic price of $1,385 per ton and

output of 132,340 tons. Consumer surplus is $134.4

million and producer surplus is $91.6 million. When

trade is completely liberalized and no pest infestation

occurs, the domestic price falls to $878, consumption

increases 68 percent (to 222,722 tons), and domestic

production declines 47 percent (to 83,904 tons) (table

7). Consumer surplus rises by $87.5 million, producer surplus falls by $55.2 million, and the net welfare

gain is $32.3 million (14 percent of initial consumer

plus producer surplus). Consumers benefit, but free

trade resulting in decreased domestic output has a

devastating effect on the domestic industry because it

eliminates higher domestic prices sustained by the

import ban.

36 Analyzing Technical Barriers to Trade Economic Research Service/USDA

Table 7--Expected economic effects of avocado imports from Mexico, long-run model with free trade

Domestic Domestic Domestic Import Consumer Producer Net

price output consumption values surplus surplus welfare

Total Gain Total Transfer Infestation gain

to loss

consumer

$/short ton thousand short tons Million dollars

Autarchy 1,385 132.34 132.34 134.38 91.64

Free Trade (no risk) 878 83.90 222.72 121.88 221.93 87.55 36.83 55.19 0 32.36 

Free trade (no risk)

NM(πNM=1) 41.95 158.72 18.42 18.42 13.94

Nm(πNm=.05) 79.91 125.39 35.08 1.75 30.60

AM(πAM=.00345) 83.62 122.14 36.71 0.13 32.23

Am(πAm=1.35E-06) 83.90 121.88 36.83 0.05 32.36 

Table 8--Expected economic effects of avocado imports from Mexico, long-run model with limited trade

Domestic Domestic Domestic Import Consumer Producer Net 

price* output consumption values surplus surplus welfare

Total Gain Loss Total Gain Loss gain1

$/short ton thousand short tons Million dollars

Autarchy 1,385 132.34 132.34 134.38 91.64

Limited Trade

(no risk) 1,368 130.73 137.15 5.64 139.10 4.72 89.41 2.22 2.49

Limited trade (no risk)

NM(πNM=1) 1,795 85.75 92.18 93.35 2.53 43.55 76.95 31.13 45.82 -55.72

Nm(πNm=.05) 1,396 127.07 133.50 135.46 2.53 1.45 88.71 1.43 4.36 -1.85

AM(πAM=.00345) 1,370 130.46 136.89 138.84 4.46 89.36 2.27 2.18

Am(πAm=1.35E-06) 1,368 130.72 137.15 139.10 4.72 89.41 2.22 2.49 

* Average national domestic price (excluding the northeastern winter regional market, when limited trade occurs).

1 - implies loss.
A pest infestation associated with imports would

have a further negative effect on domestic avocado

producers, and would reduce the net welfare gain

from free trade. In the worst case scenario of certain

infestation and highest costs, producer surplus falls

by an additional $18.4 million in the long run model.

A net welfare gain remains even in this case,

although it is reduced to $13.9 million. Thus, in this

example, even when a pest infestation occurs with

certainty and causes maximal damage (so free trade

is bad phytosanitary policy), trade raises net national

welfare. For probabilities of pest infestation at

Nyrops minimum or lower, the effect of an infestation on expected producer surplus (taking the probability of an infestation into account) is less than $2

million, and the expected net welfare gain remains

above $30 million.

The partial easing of the import ban, which opens the

market in the northeastern United States to imports

for 3 winter months, has smaller economic effects

than free trade when no pest infestation occurs (table

8). The domestic price (for the aggregate market

excluding northeastern winter regional demand) falls

by 1.2 percent (from $1,385 to $1,368), as domestic

consumption displaced from the northeastern winter

market is absorbed by a combination of expanded

consumption elsewhere and reduced domestic supply.

Consumer surplus increases by $2.2 million outside

of the northeast (not shown separately in the table)

and producer surplus falls by a similar amount (the

net welfare gain is only $33,337 outside of the northeastern winter market). In the northeastern region,

winter consumption increases and consumer surplus

rises by $2.5 million as the price falls to that of

imports from Mexico. The net national welfare gain

is $2.5 million (about 1 percent of initial total consumer plus producer surplus). Thus, the limited

opening of trade under the 1997 partial easing of the

import ban has positive effects on northeastern winter

consumer surplus, limited positive effects on other

consumers and net welfare, and slightly lowers

domestic output and the profits of domestic producers.

A pest infestation associated with imports substantially affects the domestic market when only limited

trade is allowed under partial easing of the import

ban. In the worst case, increased marginal costs and

lowered yields reduce producer surplus by $45.8 million, far exceeding the price effect of limited trade

without pest infestation. The reduced total supply

also pushes the equilibrium domestic price (excluding the northeastern winter regional market) up from

$1,385 to $1,795 in the long-run model. The

increased price offsets $31.1 million of the loss of

producer surplus, leaving a net producer surplus loss

of $14.7 million, still almost seven times as large as

the loss from limited trade alone. 

An economic effect of the pest infestation also

affects consumers outside of the northeastern winter

market. With the increased domestic price caused by

pest damage, consumer surplus falls by $43.5 million. Thus, most of the economic effect of pest risk

is borne by consumers outside the northeastern winter market, not by producers, when trade is opened

only to the limited extent adopted in 1997.

Economic Research Service/USDA Analyzing Technical Barriers to Trade 37
Conclusions

When approaching the economic analysis of technical trade barriers, a set of questions arises. The most

fundamental refers to the nature of the barrier. Is it

related to plant and animal health, food safety, or

conservation? The answer will give a preliminary

indication of the relevant economic model to use for

analysis, although since many regulations have multiple objectives, the appropriate model may combine

elements from those described earlier.

The second broad question is to ask what policy

instruments are used. Does the importer establish

product standards (together with conformity assessment requirements), or are there geographical restrictions on the source of the product? Are there special

labeling, package dimension or production method

requirements? The translation of such instruments

into variables, equations, and constraints in economic

models requires imagination and experimentation.

But all policy instruments have some measurable

effect on markets, through their cost of compliance or

their restriction on prices or quantities. Any analysis

that fails to account for such costs and impacts is crucially incomplete.

The next set of questions involves the effect of the

implementation (or non-implementation) of the regulation on market behavior. This effect is different

from the effect on the market of the instrument used.

The essence of a technical trade barrier is that it

potentially changes the conditions of supply or

demand (or both) as well as imposing a direct compliance cost. In the example discussed above, the

effect of allowing potentially pest-infested avocados

into the United States is quite clearly different from

the cost of a ban on Mexican avocados.32 What

would happen to domestic supply if the regulation

were not in force? Would the domestic supply curve

be shifted by the importation of unregulated goods?

What would this do to domestic costs? How could

the infestation be controlled, and at what expense? A

wealth of technical information is needed to estimate

such effects and put them in a form usable for an

economic model. But without such estimates, however crude, there is no way to judge whether the regulation is justified, whether it has trade implications,

and whether there are better (and less trade-distorting) ways to achieve the same level of protection for

plant, animal, or human health.

The same question needs to be asked with respect to

the impact on consumption. Are there implications

for consumer behavior of regulations on imports?

Would consumers lose confidence if the product were

not held to specific standards? Would consumers be

able to recognize qualities of products without the

help of regulations? What is the net effect of the regulations on the consumer demand curve? Addressing

these questions entails estimation that may be even

more difficult than for supply-shifting regulations.

We know little about how consumers react to information, and hence to regulations that require labeling

and origin specification. But if regulations are to be

defended on their ability to inform the consumer, and

if these regulations treat domestic and foreign products differently, there is little alternative to attempting

such analysis.

Another issue is the relative position of particular

exporters and importers in the marketplace. Are the

regulations common to all importers, implying that

there is no unregulated market available to exporters?

Do the regulations apply to all exporters or is there

differentiation by source? Knowledge of the regulations of all countries would be ideal, but, in practice,

some indication of the behavior of competitors is

needed to be able to estimate the incidence of the

burden of complying with regulations.

Finally, it is worth considering the structure of the

market in which the goods are sold. Does either the

importer or the exporter have any market power? Is

the market characterized by competition or could

dominant players influence the world price through

their action? This requires some indication of the

nature of the world market for the commodity in

question, in order to impute the terms-of-trade effect

of the regulations under study.

These and similar questions define the challenges

facing those who seek to bring economic analysis to

38 Analyzing Technical Barriers to Trade Economic Research Service/USDA

32 To put it another way, both the opportunity cost and the

monetary cost of the regulation are needed.
bear on policy decisions about technical trade barriers. This report provides an initial framework in

which to place such an inquiry. The suggested classification scheme sets up the economic analysis. The

analysis prompts the researcher for answers to particular questions. The questions, as often as not, will

serve to demonstrate how little information we have

in a systematic and usable form to address these

issues. Case studies are needed, as others have recognized. But case studies are more useful if framed

in a classification system such as we have proposed.

And these case studies in turn can become examples

of various types of economic models such as those

discussed above, and can be built on by others.

We have not dealt with the issue of the political

economy of such trade barriers, nor with the ways in

which international regulations can be improved to

prevent tensions in the world (and regional) trade

system. But the classification and quantification of

technical barriers is a necessary first step in any further analysis. Policy issues with respect to these barriers will be increasingly important in the future. The

benefits of sound economic analysis of current technical trade barriers and the consideration of pertinent

policy options will therefore increase as well.

Economic Research Service/USDA Analyzing Technical Barriers to Trade 39
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