This study, which resulted from a research project commissioned by the German Federal Ministry for Economic Cooperation and Development (BMZ), aimed to assess the impacts that quality services contribute to improve the understanding at the political, entrepreneurial and academic levels about the relevance of quality infrastructures to the functioning of innovation systems, how they enhance the performance of economic agents and improve the outcomes of social, economic and environmental policies.

The key objectives aimed to identify the following positive areas:

• the identification of the range of positive and negative effects that they have in societies;
• to advise policy makers on how the accomplishment of their strategic goals may be facilitated through the development of quality services;
• To raise awareness of consumers, firms and industries about the existence of such an institutional complex, i.e. how it shall be used as a platform where various economic agents are to participate and interact in order to address to a multitude of social, economic and environmental challenges;
• to learn ways of improving the functioning of the existing quality infrastructure.

A copy of the report is available on the Physikalisch-Technische Bundesanstalt (PTB) website.

Standardisation and standards have often been perceived as a contradiction to innovation. This report provide conceptual arguments and empirical evidence that standardisation as such and standards can be used as to promote innovation especially in three different areas. After a brief section on the general economic functions of standards, the relationship between research and standardisation is examined by first showing both standardization as a technology transfer channel and standards as enablers and facilitators for research. The second area focuses on the difficult but promising issue of transferring intellectual property rights (IPR) into standards, and shows how this can be beneficial both for IPR holders and standards implementers. The third newly emerging field concerns the role of standards and standardization in procurement processes, which are more and more forced to address and promote innovation. In the final chapter, the results are summarised and recommendations for policy makers are derived.

A copy of the report is available on the National Endowment for Science, Technology and the Arts (NESTA) website.

Author: Knut Blind, TU Berlin, Rotterdam School of Management and Fraunhofer FOKUS

A publication titled “Good practices: Experience in the Market Surveillance of ISO 9001 quality management systems” has been released by the United Nations Industrial Development Organization (UNIDO).

The report presents the lessons learnt and good practices in applying Market Surveillance methodology to monitor the effectiveness of ISO 9001 certification in manufacturing enterprises and to evaluate the performance of respective accredited certification bodies.

The report concludes that the proper use of ISO 9001–based quality management systems assists developing countries in promoting sustainable trade, thereby helping them achieve inclusive and sustainable industrial development and the 2030 development agenda.

A full copy of the report can be downloaded from the UNIDO website.

Reducing unnecessary trade costs is an important aspect of International Regulatory Co-operation (IRC). But trade costs are only one of the many considerations that countries take into account when engaging in bilateral, plurilateral or multilateral efforts to address non-tariff measures that are related to differences in regulations. They are also concerned about pursuing domestic regulatory objectives. This report develops an analytical framework to help understand the trade-offs between trade costs and domestic regulatory objectives that will determine outcomes of IRC. It shows the possible scope and landing zones of IRC initiatives, ranging from simple information exchange to negotiations to harmonize regulations between countries. The analytical approach is based on economic game theory and provides a basis for regulators and trade negotiators to determine which specific IRC approach would be promising to pursue.

The report states that the ILAC and IAF global arrangements provide the platform for trade cost reductions. A full copy of the report is available from the OECD website.

ILAC and IAF, the global accreditation associations, have contributed to research conducted by OECD to analyse the impact of international organisations (IOs) in supporting regulatory co-operation. The research identified that International organisations (IOs) play a growing role as standard setting bodies in supporting regulatory co-operation with evidence showing that IOs contribute to International Regulatory Co-operation (IRC) by:

• offering platforms for continuous dialogue on regulatory issues;
• facilitating the comparability of approaches and practices;
• providing member countries with flexible mechanisms to identify and adapt to new and emerging regulatory areas or issues;
• contributing to the development of a common regulatory language
• developing international legal and policy instruments.

The OECD gathered unique evidence from 50 international organisations on their governance, operational modalities, rule-making practices and approaches to assessing implementation and impacts, which is presented in the report International Regulatory Co-operation: the Role of International Organisations in Fostering Better Rules of Globalisation (launched 2 November 2016). This comparative analysis takes into account the diversity of mandates, expertise and strengths of the 50 participating IOs.

By establishing the international accreditation arrangements based on the mutual recognition of certificates and reports issued by conformity assessment bodies, the development of common rules and policies, and the harmonising of accreditation practices, the report identified that ILAC and IAF play a growing role in supporting regulatory co-operation.

This OECD work on IRC and IOs is part of a broad study into the various mechanisms available to governments to promote regulatory co-operation, and their benefits and challenges. A full copy of the report is available from the OECD website.

While there is a substantial body of literature on the economic theory of international standards, and their presumed effects, much less is known about how international standards work in practice. This paper surveys empirical studies investigating the relationship between international standards and trade. The main focus is on econometric studies using secondary data on international standards and trade, but surveys and some of the literature investigating the relationship between standards and other economic measures, such as productivity, growth and welfare are also summarised.

The paper sets out some conclusions that can be drawn from the econometric studies that have sought to estimate the relationship between international standards and trade:

• In most studies, when exporting countries use international standards, this has in most cases a positive (or at least neutral) effect on their export performance.
• When exporting countries use national standards (i.e. standards specific to country x), that may lead to superior export performance by x.
• When the importing countries also adopt international standards, the most common effect is also to increase imports. The exceptions can in part be explained.
• When the importing country uses national standards, the results are more diffuse. For studies that relate exclusively to voluntary standards, the effects are distributed quite evenly. For studies that relate to regulations (i.e. mandatory standards), the effects on imports tend to be negative.

A full copy of the report is available from the OECD website.

This report provides a comprehensive account of quality systems for private sector development: what works on the ground and what doesn’t, and why. It explains why quality and standards matter for export growth, productivity, industrial upgrading, and diffusion of innovation, all central ingredients in improving economic growth and generating real gains in poverty reduction. The report examines the diversity of institutions, linkages, and arrangements involved in quality systems, identifying success factors and obstacles in the quality strategies of particular countries. A portion of the volume is devoted to experiences in Latin America and the Caribbean, a region with a great deal at stake in the drive to improve quality. Policy makers in Latin America and throughout the developing world will find Quality Systems and Standards for a Competitive Edge to be a valuable tool for meeting the challenges of building trade competitiveness in the new global economy.

A full copy of the report is available on the World Bank website.

In many countries in Eastern Europe and Central Asia (ECA), the National Quality Infrastructure (NQI) does not support business competitiveness, though this is one of its functions in organization for economic co-operation and development countries. In most of the Commonwealth of Independent States (CIS) countries, it even impedes competitiveness. The most common economic benefits of adopting standards include increased productive and innovative efficiency. Standards lead to economies of scale, allowing suppliers to achieve lower costs per unit by producing large, homogeneous batches of products. Standards spur and disseminate innovation, solve coordination failures, and facilitate the development of profitable networks. Participation in world trade increasingly requires that suppliers comply with standards determined by lead buyers in global value chains. The nature of participation in the global economy has changed dramatically over the past two decades. Rarely do producers turn raw materials into final products and sell them directly to customers. Improving the quality of goods and services and diversifying into sectors where quality matters can be a sustainable source of global competitiveness. Some of the productive tasks associated with high-quality goods have high learning and technological externalities. In those sectors, producers tend to form tight relationships with global buyers who transfer their knowledge and support the producers’ quality-upgrading processes. Diversifying into a broad range of sectors also reduces macroeconomic volatility, but quality upgrading becomes necessary to enter new sectors that compete on quality.

A full copy of the report is available on the World Bank website.

Citation  “Racine, Jean-Louis. 2011. Harnessing Quality for Global Competitiveness in Eastern Europe and Central Asia. World Bank. © World Bank. https://openknowledge.worldbank.org/handle/10986/2305 License: CC BY 3.0 IGO.”

National Quality Infrastructure (NQI) reforms are an important part of broader efforts aimed at enhancing trade and investment opportunities, opening markets for new innovative products, and improving the business environment. As demand to access new markets and compete with higher quality products rises, the World Bank Group is committed to supporting government’s efforts to build a more harmonized and integrated NQI. This leaflet sets out how the World Bank can support the development of standards, accreditation and metrology systems to boost economic performance and cross-border investment decisions.

A full copy of the leaflet is available here. World Bank NQI Leaflet

Standards define how products, processes, and people interact with each other and their environments. They enhance competitiveness by offering proof that products and services adhere to requirements of governments or the marketplace. When used effectively, they facilitate international trade and contribute to technology upgrading and absorption. This brief discusses the importance, the central elements, and constraints to success of national quality infrastructure.

A full copy of the policy document is available on the World Bank website.

This report draws on UNECE assessment models and incorporates the lessons learnt from the needs assessment studies on Belarus and Kazakhstan, carried out by the UNECE secretariat in 2010 and 2011, respectively. The methodology is meant to bring to the fore:

• A common understanding of key regulatory and procedural barriers to trade. While actors may have a broadly shared intuitive view of such obstacles, they may differ at the technical level when it comes to attributing causes to each obstacle and to estimating the magnitude of its impact.
• A common approach to addressing the identified barriers in a manner that is responsive to the specific needs of each country and every actor in the international trade supply chain.
• Conflicting policy objectives related to trade development and trade facilitation.
• Procedures and regulations that could be improved through systematic:
  • Simplification – the elimination of all unnecessary elements and duplication in formalities, processes and procedures;
  • Harmonization – the alignment of national formalities, procedures, documents, information, and operations with acceptable international commercial norms, practices and recommendations.
  • Standardization – the implementation of internationally recognized formats for procedures, as well as documentary and information requirements.
• Capacity shortfalls in the existing trade support institutional framework (understood as comprising infrastructure, trade support organizations and state agencies, including those involved in supporting quality control), which could be improved through targeted investments.
• Shortcomings in existing public-private sector consultative mechanisms related to the development and implementation of regulatory policies

A special focus is also given to assessing national standardization policies, technical regulations, quality assurance, accreditation and metrology (SQAM) system, in terms of its capacity to contribute to a conducive trading environment where regulatory and procedural barriers are reduced to a minimum.

A full copy of the report is available on the UNECE website.

This report gathers together OECD working papers on the tools, governance and institutions of better regulation and their impact on policy outcomes. It includes both technical and analytical material, prepared by staff and experts in the field. Together, the papers provide valuable context and background for OECD publications on regulatory policy and governance.

The paper relies on an empirical stocktaking of mutual recognition agreements (MRAs) among selected OECD countries, the systematic review of mutual recognition clauses in trade agreements, case studies of the specific experience of the EU internal market, the Trans-Tasman arrangement, and the MRA between the US and the EU, and an extensive review of the literature. The report references the ILAC MRA and the IAF MLA as case studies.

A full report is available on the OECD website.

Authors:

Anabela Correia de Brito, Céline Kauffmann, Jacques Pelkmans

This paper investigates the influence of sustainable business development on manufacturing plant operations. Among the three pillars of sustainability consisting of environmental, social and economic longevity and foresight of a firm, we focus on the environmental component. Specifically, basing our arguments on the resource-based view of the firm, we hypothesize the impact of environmental management on plant performance. Environmental initiatives considered include ISO 14000 certification, pollution prevention, recycling of materials, and waste reduction; plant performance is assessed with the dimensions of the four competitive capabilities of quality, delivery, flexibility, and cost.

Further, building on the theory of performance frontiers, we investigate these relationships across plants located in different economic regions of the world (plants are classified into emerging, developing and industrialized regions). We suggest that recent emphasis on these environmental initiatives has been greatest among plants located in emerging economies, compared to their counterparts in industrialized and developing nations. In addition, we contend that the influence of these initiatives is greatest for plants located in emerging and developing economies when compared to plants in industrialized nations. These notions are tested with data collected from 1211 plants located in these three economic regions. Overall, this study contributes to the investigation of strategies for sustainable business development, highlighting important implications for both theory and practice.

Author

Tobias Schoenherr, The Eli Broad Graduate School of Management, Michigan State University, Department of Supply Chain Management, USA

Citation

‘The role of environmental management in sustainable business development: A multi-country investigation‘, International Journal of Production Economics, Volume 140, Issue 1, November 2012, Pages 116–128

The World Trade Organization (WTO) Economic Research and Statistics Division produced the report ‘International Standards and the WTO TBT Agreement: Improving Governance for Regulatory Alignment‘ (Erik Wijkström and Devin McDaniels, WTO, 19 March 2013), with some key points on the value of key conformity assessment tools such as ISO standards and ILAC accreditation.

Of particular interest as regards conformity assessment is 3.1.1, the section on Specific Trade Concerns, ‘One of the core functions of the TBT Committee is acting as a forum to address trade issues – these are referred to as “Specific Trade Concerns” (STCs). These are concerns that one or several Members have with the design or implementation of another Member’s measure. An analysis of the TBT (Technical Barriers to Trade) Committee’s records shows that about one third of all STCs raised in the TBT Committee are associated in one way or another with the subject of international standards. By “associated” we mean that international standards have been mentioned by a delegation in the discussion of a particular trade concern – either by reference to a specific body or organization, or through general reference to the existence (or non-existence) of some source of international guidance.’

‘While over forty different bodies or organizations are mentioned, a number of them recur frequently in discussion. The International Organization for Standardization (ISO) is mentioned in 30% of STCs associated with international standards; the International Laboratory Accreditation Cooperation (ILAC) in 10%.’

The report gives a number of examples of the kind of problem, including: ‘Lead in pottery. The European Union objected to a Mexican draft standard for glazed pottery, ceramics and porcelain, which mandated more stringent lead and cadmium limits than those laid down in the relevant international ISO standards (ISO 6486-1/2). Specifically, the European Union was concerned that Mexican authorities would no longer accept test results accompanying EU ceramic tableware conducted in compliance with these ISO standards. Mexico explained that while its draft standard was partially based on ISO standards, it deviated in certain aspects due to a greater level of health protection required by Mexico, and due to the circumstances of Mexico as a developing country.’

The conclusion of this kind of problem is that ‘The vast majority (around 90%) relate to some form of “challenge” on international standards (from one Member to another). The tone of the discussions may range from a polite request for clarification about the use or non-use of international standards in a measure, to a direct accusation that a Member is not following a specific (and in their view relevant) international standard and therefore violating a WTO discipline.’

The use of  international standards and systems in world trade, such as ISO and ILAC which stick to the ‘Six Principles’ of Transparency, Openness, Impartiality and Consensus, Effectiveness and Relevance, Coherence and Development Dimension, would reduce the instances of the STCs.

Click here for further details, including access to the full report

The Central America region is a small market. The region contains around 43 million inhabitants (0.6 percent of total world population) who generate around 0.25 percent of the world’s Gross Domestic Product (GDP). While the region has successfully embarked on a regional integration agenda and has strong commercial links with the US, extra-regional trade-mainly with large fast-growing emerging economies-remains a challenge. Export performance is analyzed along three dimensions that, together, give a fairly comprehensive picture of competitiveness:

1) the composition, orientation and growth of the export basket;

2) the degree of export diversification across products and markets; and

3) the level of sophistication and quality of their main exports.

This analysis allows exports dynamics at the different margins of trade (intensive, extensive, and quality) to be evaluated and individual countries’ to be benchmarked with peers in the Central American region. The results of this report allow policy makers to identify key areas to explore in the overall discussion of export competitiveness in the Central American region. This paper relates to the literature on challenges and opportunities that trade liberalization can bring to the Central American region. Much of the recent literature focuses on the role of the free trade agreement negotiated by Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua, with the US.

Given the importance quality infrastructure plays in advancing the trade agenda, greater priority should be given to developing accreditation, standards, and metrology and obtaining international recognition to unlock their export potential.

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Companies use standards as a tool to signal their investments in quality upgrading and performance. The authors argue that the impact of this signal depends on the trust in the accreditation system and the development status of a country. Representing the workhorse of research in international trade, the authors use a gravity model to examine the trade effects of ISO 9000 diffusion and cooperation in accreditation. The model is estimated by applying a country-pair fixed effects regression approach with instrumental variables and multilateral resistance terms to a panel data set covering a 13-year period from 1999 to 2012. This allows them to test their hypotheses with respect to the moderating role of international cooperation in accreditation on the trade effects of ISO 9000 diffusion. They show that certification promotes trade and that signatories to the Multilateral Recognition Arrangement of the International Accreditation Forum (IAF MLA) trade significantly more. The IAF MLA is of particular importance to the trade among developing countries. For policy makers, our results highlight the importance of support for accreditation institutions in developing countries.

A full copy of the report is available from the Research Gate website.

Authors: Axel Mangelsdorf, Knut Blind, Jakob Pohlisch