International Regulatory Co-operation and Trade
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International Regulatory Co-operation and Trade

Understanding the Trade Costs of Regulatory Divergence and the Remedies

Regulatory differences across jurisdictions can be costly for traders. While these costs may reflect variations in domestic conditions and preferences, they may also be the result of rule-making processes working in isolation and of a lack of consideration for the international environment. Thus, some of the trade costs of regulatory divergence may be avoided without compromising the quality of regulatory protection. Building on lessons learnt from OECD analytical work and the experiences of OECD countries in regulatory policy and trade, this report proposes a definition of trade costs of regulatory divergence and analyses various approaches to addressing them, including unilateral, bilateral and multilateral approaches. It focuses on the contribution of good regulatory practices, the adoption of international standards, and the use of cross-border recognition frameworks and trade agreements. Based on this, the report provides indications for policy makers on how to reduce trade costs through international regulatory co-operation.
 

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OECD

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Regulatory differences across jurisdictions can be costly for traders. They may involve the costs of: i) gathering information on regulatory requirements in target markets, ii) adjusting the specification of goods and services to comply with different regulatory requirements; and iii) undertaking various conformity assessment procedures to demonstrate compliance. While these costs may reflect variations in domestic conditions and preferences, they may also be the result of rule-making processes working in isolation without consideration for the international environment. In this context, it is likely that some of the trade costs of regulatory divergence are avoidable without compromising the quality of regulatory protection.

 
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