How Do Differing Standards Increase Trade Costs? The Case of Pallets

The pallet is a platform used for storing, handling, and transporting products. There are hundreds of different pallet sizes around the world. Raballand and Aldaz-Carroll examine the case of pallets to illustrate the impact of multiplicity of standards on trade costs. They select this case because pallets are used all around the world, pallet standards are not too sophisticated, and data on the impact of pallet standards are to some extent available. The authors examine why there are so many different pallet sizes, the associated trade costs, and the reasons why countries have not harmonized pallet sizes to eliminate such costs. They then present options for exporters to mitigate the adverse effects of standards multiplicity while complying with destination markets' standard requirements. The range of options is limited in the case of exporters from less developed countries because of the lack of rental and exchange pallet markets. To mitigate the costs of this multiplicity of standards, the World Bank's strategy should be divided in two directions: To develop awareness of costs related to the multiplicity of standards and to support actively harmonization at the global level (within International Organization for Standardization) and at the regional level (within regional cooperation agreements). This paper - a product of the International Trade Department, Poverty Reduction and Economic Management Network - is part of a larger effort in the network to analyze the impact of standards on trade