The governments erect trade barriers to protect domesticindustries by limiting or banning the imports of specific products. These can be categorized into two separate classes: tariff and non-tariff barriers. There has been a consistent decrease in the average tariff rate in the world as the number of free trade agreements have increased rapidly since the 1990s. This has led to an increasing number of countries that are beginning to use non-tariff barriers instead of tariffs. One of the more common and frequently-used non-tariff barriers is the technical barriers to trade (TBT).
Technical regulations are set in accordance with specific characteristics of a product concerning human and animal safety, environmentalprotection, national security and etc. Since technical regulations vary from country to country due to different social, geographical and cultural backgrounds, they can create unnecessary obstacles to trade. It forces exporters to incur additional costs of investigating foreign regulations, testing whether final products would meet those regulations, and building additional production facilities. The term TBT refers to these technical regulations which impede international trade.
The WTO requires its member countries to notify the WTO TBT committee of their new technical regulations beforethose regulations enterinto force. The total annual number of TBT notifications shows that the number of technical regulations has increased rapidly since 2004, implying that they are becoming increasingly useful instruments of protectionism.
Recently, there were greater increases in TBT notifications in developing countries than in developed countries. There are differences as to the major objectives of technical regulations: in developed countries, the motive seems to beenvironmental protection and application of new technology, while those in developing countries are adoption to new international standards and improvement in quality. As the former objectives of technical regulations are based to a greater degree on social, cultural and geographical backgrounds of nations, they have greater potential for turning into trade barriers.
Many problems related to TBT between WTO members have been raised at WTO TBT committee meetings. Specific trade concerns (STCs) refer to consultations on TBT between members at the meeting. The total annual number of STCs has been on the increasesince 2005, implying that there are more technical regulations becoming trade barriers. In addition, greater numbers of technical regulations with objectives of environmental protection and application of new technology are becoming subjects of STCs. Hence, we can hypothesize that a negative relationship between technical regulation and trade would be more prominent in developed countries and during the recent period.
Therefore, utilizing country-level data of the World Development Indicators (WDI) from the World Bank, we shall test empirically if technical regulations are indeed negatively correlated with international trade during the period 1995-2008, especially in developed countries and during the last 5 years. The empirical results will show that technical regulations are negatively correlated with international trade. In addition, we find that the negative relationship between technical regulations and international trade was even more prominent in developed countries and during the period 2004-2008. Hence the empirical results are consistent with our forecasts concerning the relationship between technical regulations and international trade, specifically in developed countries and during the recent period.
As a result, we are able to elicit four specific implications for Korea's trade policy on TBT: the necessity of further research on TBTs of main trading partners, the organization of a TBT experts group, the unification of three inquiry points and the acquisition of prior occupation in international standards.