Mutual recognition is a useful tool for international liberalization in particular contexts. However, it has two types of limit, and to the extent that it may exceed these limits, it poses two important types of risk.
The first limit of mutual recognition is set by the degree and importance of achievement of the relevant regulatory goal: the degree to which the foreign regulation achieves the goals of the domestic regulatory scheme, and the importance of meeting these goals. Thus, the first risk is that mutual recognition is implemented in a way that sacrifices important regulatory goals without adequate justification – without ‘sufficient’ achievement of the regulatory goal. States may, at times, accept compromises of their regulatory goals, but they should not do so unless they are compensated with enhanced welfare from free trade or from other sources. The second limit of mutual recognition relates to the material capacities of developing countries. The risk is that mutual recognition is established by developed countries in a way that disadvantages services exports of developing countries.