The nature of the problem

There has been a dramatic shift in the focus of trade policy concerns in recent years from the barriers that lie at the border to the barriers which exist “within the border.” The General Agreement on Tariffs and Trade/World Trade Organization (GATT/WTO) and other regional trading arrangements have been largely successful in reducing both the levels of tariffs worldwide and the scale of other border measures such as quotas. This has revealed a new and more subtle category of measures which restrict trade – the numerous regulations which governments enact to protect the health and safety of their citizens and the environment in which they live. Such regulations vary tremendously across borders: one nation's bunch of grapes is another nation's repository of carcinogenic pesticide residue. These efforts to protect citizens from the hazards of everyday life have become a virtual minefield for trade policy makers, in part because such differences can often be manipulated or exploited to protect domestic industry from international competition, and in part because even when there is no protectionist intent on the part of lawmakers, through a lack of coordination, mere differences in regulatory or standard-setting regimes can function to impede trade through increasing multiple compliance costs. It has thus become increasingly difficult to delineate the boundaries between a nation's sovereign right to regulate and its obligation to the international trading community not to restrict trade.