Understanding Grades and Standards: and how to apply them

With the expanding globalization of trade, grades and standards help to set the ‘rules of the game’ and their implications for developing countries are becoming increasingly relevant. While they are clearly important to trade, their formation and utilization is also undergoing a shift from being neutral market lubricants to also being tools of product differentiation. This implies a fundamental shift in the role of standards from just reducing transaction costs of commodity market participants, to serving as strategic tools for market penetration, system coordination, quality and safety assurance, brand complementing, and product niche definition. The issues of who is forming standards, their privatization, motivations, and the impacts on various market participants and poor people must all inform the strategic responses to the changes in the roles and nature of standards. The definition of their usefulness and value goes beyond the sometimes artificial distinctions between quality and safety to more current distinctions between process and characteristics. All of these distinctions are predicted to become more relevant than ever as industries and governments, even in the most developed countries, are faced with a new sort of food security issue. In terms of international trade, standards are becoming the hot topic of political economics in much the same way that tariffs were in the 1990s, with profound implications for regional and international agreements, particularly in terms of sanitary and phytosanitary (SPS) and technical barriers to trade(TBT).