From a recent speech by WTO DG Pascal Lamy:
This morning I will address the multilateral trading system and regional economic cooperation. The title is well chosen in the sense that the multilateral reference is to trade, while at the regional level the title refers to economic cooperation. What this conveys is that we are not exactly comparing alternative approaches that have identical objectives. Regional initiatives are often broader and more encompassing than the more focused concerns of the WTO.
Deep integration, global value chains and non-tariff measures
An analysis of the contents of the more far-reaching preferential trade agreements that have emerged in recent years would suggest a marked tendency for these agreements to go more deeply into policy areas that have been addressed less profoundly, or not addressed in the WTO. This relates both to a range of non-tariff measures (NTMs), such as product standards, and to other areas, such as investment and competition policy.
The characteristics of NTMs and their motivations
If we understand preferential trade agreements, at least in some measure, as a desire to support and facilitate global value chains, and tariffs are not the real story behind them, we must then look towards non-tariff measures — NTMs — to analyse the significance of the relationship between multilateral and preferential approaches towards trade cooperation.
NTMs encompass a very broad range of policies — simply any measure that is not a tariff. A broad distinction for our purposes is between NTMs that could be tariffs and NTMs that serve specific public policy objectives, such as health, safety or the quality of the environment. NTMs that simply replace tariffs are largely frowned upon by the WTO rules because they will often be protectionist in intent and they can largely be treated as a market access issue.
Those NTMs intended to address public policy matters raise altogether different considerations. Governments are obviously not going to eliminate such measures in the name of promoting international competition. On the contrary, they will consider the attainment of public policy objectives of paramount importance. The question then is how these measures are designed and how they are implemented. In effect, the danger from a trade policy perspective is that they may be designed or implemented in ways that unjustifiably restrict trade. When NTMs become dual purpose instruments in this manner, we are forced back to classic trade policy concerns about interventions that influence the conditions of competition within a market.
The distinction between legitimate and less legitimate NTMs in trade policy discussions is highly complex and challenging. This is compounded by the reality that not all nations share the same priorities, either because of distinct social and cultural perspectives, or because different levels of income and development affect the capacity of countries to pursue particular objectives. Whichever the reason, we are living in a world where diversity is a reality and we have to walk a fine line between respecting that diversity and trying to eliminate it.
My concluding thought is this: as an international community, we must continue to fight protectionism, but in the WTO in particular, we must also fight policy fragmentation.
I'm sure I've made this point before, but I'm going to make it again. I don't think the distinction between "tariff measures" and "non-tariff measures" is a particularly important one. To me, the key distinction is between discriminatory measures, on the one hand, and measures that do not discriminate, on the other. Tariffs are one form of discriminatory measure, but not the only one.
Lamy hints at this when he refers to the distinction between "NTMs that could be tariffs and NTMs that serve specific public policy objectives" and between "legitimate and less legitimate NTMs." But I just wanted to emphasize that the problem arises in part from treating non-tariff measures as a single category, which, in my view, they are not (or should not be, anyway). And while I don't mean to suggest that the problem of distinguishing different kinds of NTMs is easy, I don't think it is as "highly complex and challenging" as he thinks.
In relation to "policy fragmentation," when trade agreement rules focus on rooting out discrimination, they do not do much policy-making at all. However, when the rules expand beyond trying to catch discriminatory measures, they end up having a big impact on domestic policy-making. In effect, policy-making gets pushed up to the international level. And when different groups of countries push different policies, you get policy fragmentation.
But it's not regulation of "non-tariff measures" that are the cause of this. It's the rules that go beyond non-discrimination, either through creating positive obligations or prohibiting measures that are not discriminatory.
That's my view, anyway. Feel free to disagree in the comments.