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11 Jun 2013    Working Papers
Aerni, Philipp


Do Private Standards encourage or hinder trade and innovation?

Working Paper No 2013/18 By Philipp Aerni

Abstract
Humankind shares a common interest in the safety of the products it uses and consumes and an increasing interest in the way the product has been produced. In a globalized world, private standards play a role in ensuring the safety and sustainability of products and production methods. The co-management of the public good ‘food safety’ by the public and the private sector is not new from a historical point of view. The industrial revolution in the 19th century was characterized by the emergence of new industries that made use of science and technology to create new products and services and it was industry itself that started the creation and enforcement of private standards through independent non-for-profit standards organizations. The experience thus gained was later integrated into the design of national and international public standards. Such private standards are intended to ensure the safety of products made available through trade and innovation and as such would be in line with the WTO principle of non-discrimination. Yet the recent emergence of process-oriented international private standards may not always be in line with this principle. Buyer-driven private standards, especially if they are related to business-to-consumer (B2C) labels, are often more about corporate reputation management than sustainability. The present paper reviews the impact of such buyer-driven private standards on trade and innovation by looking at the governance of global value chains (GVC) by private standards. The conclusion is that business-to-business (B2B) private standards may indeed encourage more sustainable producer practices and reduce uncertainty in GVCs, but they are costly and often not sufficiently responsive to local challenges. B2C-based private standards need to become less influenced by advocacy groups in affluent societies that see private standards primarily as a tool to inhibit trade and innovation.

Do Private Standards encourage or hinder trade and innovation?