The analysis also shows that firms in developing countries are generally not in a position to take advantage of such reductions in fixed export costs. They are seldom partners to MRAs or fully implemented harmonization initiatives and also do not seem to be benefiting from the market integrating effects of harmonization in other regions. One reason for their absence from international standards agreements is that the type of integration described in this paper relies heavily on enforcement by the individual member countries, for which institutions and capacities are often lacking in developing countries. Industrialized countries have therefore been reluctant to negotiate MRAs or harmonization agreements with developing countries.

Developing countries could follow a gradual approach to remedy this situation, first building the laboratory and accreditation infrastructure to facilitate MRAs. Since MRAs for testing procedures only apply to the export sector, their enforcement will be less costly than the enforcement of a certain harmonized standard in an entire sector. Support and technical assistance from industrialized countries in this respect has been forthcoming and it is important that this continues to encourage MRAs between developing and industrialized countries as well as among developing countries. Deeper forms of integration such as the actual harmonization of product standards could follow at a later stage.

# **Conclusions**

This paper contributes to the existing literature on TBT liberalization in several ways. Most empirical papers on the topic to date have lacked sound theoretical underpinnings. This paper attempts to correct this by using recent trade theory and the empirical framework linked to it and developing the model to accommodate the issue at hand. It looks at trade effects from TBT liberalization for members of the liberalizing region as well as two separate groups of excluded countries, industrialized and developing respectively. In order to conduct a meaningful analysis a dataset of more than 40,000 observations was compiled and the most recent econometric research was taken into account.

The study finds compelling evidence that Mutual Recognition Agreements for testing procedures have a strong impact on both export probabilities and bilateral trade volumes. The evidence is less compelling for harmonization. In the case of harmonization, three cases need to be considered: the effect on parties to the harmonization agreement, on industrialized third parties and on developing third parties. The harmonization variable for partners is systematically insignificant or negative across specifications and stages which seem puzzling at first, yet economic justifications are presented above. For excluded countries, results are very much in line with theory. The order of the effect is mostly consistent across specifications, the effect on industrialized countries generally being more positive than that on developing countries. Results for changes in developing country trade flows are mixed, being positively significant only for telecoms in the second stage and negligible for others. In general, results are robust across different time periods and sectors.

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