While world trading institutions such as GATT and its successor, the WTO, have made significant progress in addressing tariff barriers as well as some non-tariff barriers, trade disputes over product standards appear to be increasing in number and intensity. Product standards refer to measures governments take to ensure that products sold in their home market meet health, safety, and quality requirements consistent with the public interest. The longstanding controversy between the European Union and the United States over the export of hormone treated beef is used as a case study to illustrate the difficulty of resolving product standards disputes.
Product standards are regulations designed to protect public health and safety or to ensure product quality (Cateora and Graham 1999). When used for the legitimate purposes, product standards play a critical role in consumer protection. For example, government testing requirements can ensure that food and drug products can be safely consumed and emissions requirements can help consumers breathe cleaner air. However, it has become clear that governments can also use product standards as a trade barrier under the guise of consumer protection. When used in an unduly stringent or discriminatory way, standards can operate as an effective barrier to trade (Quintillan 1999). For example, Germany's longstanding laws banning the use of preservatives in beer sold within its borders (only recently overturned by the EU) and Japan's restrictions on the size of knotholes in plywood do not appear to have provided much protection for the public but have substantially reduced imports (Cateora and Graham 1999).
Studying trade disputes over product standards is timely for two reasons. First, when used as a trade barrier as opposed to a mechanism to protect the public, product standards can harm the public by forcing them to pay higher prices for goods and reducing the selection of goods available to consumers. As will be discussed, trade barriers can artificially inflate prices to a level where consumers cannot afford to buy items, thereby posing a threat to the consumer interest. Second, as the World Trade Organization continues to make progress in reducing other types of non-tariff barriers to trade, standard-based disputes are likely to increase, as they are more difficult to mediate.
The purpose of this study is to examine how disputes over product standards can be harmful to consumers. The paper is also intended to contribute to the literature by demonstrating the extreme difficulty in solving standards disputes. The recent dispute between the U.S. and the European Union over beef standards is used as a case study to illustrate the points above. In conjunction with the case analysis, the paper will analyze the process by which the EU makes trade policy in order to assess whether consumer protection is at the forefront of the decision-making process and to provide insight on how EU policy on standards has evolved. The paper will also describe and assess the process by which the World Trade Organization attempts to resolve this type of dispute. A suggested framework for improving this process will be provided.
PRODUCT STANDARDS AS A TRADE BARRIER
While many standards reflect legitimate public health and safety concerns, experts have acknowledged that standards can be used to restrict trade if they are designed to discriminate against foreign goods or if their impact tends to discriminate against imports for reasons unrelated to the health and welfare of the local population (Bauerschmidt et al. 1985; Cao 1980; Graham and Meloan 1996). Standards can also operate as a trade barrier if a higher standard is applied to a foreign good (i.e., if standard disparities exist), if more stringent testing methods are applied to foreign goods, or if packaging, labeling, and marking requirements are applied to imports in "an unduly stringent and discriminatory way" (Jain 1996, p. …