Suppose two nations are seeking to expand their commercial relations. What options do they have in terms of addressing conflicts in standards? Describe each and what conditions might favor different approaches to setting standards
What will be an ideal response?
With harmonization of standards, the nations create a mutually acceptable common standard. With mutual recognition of standards, each nation keeps its own standards, but accepts the other nation's standard as equally valid and acceptable. With separate standards, each nation keeps its own standards, and any products flowing into the nation must meet that nation's individual standards. Adoption of a common set of standards gives a competitive advantage to firms that are already producing to that standard. Wide variation in world incomes means that economic conditions and living standards are vastly different between low-income and high-income countries, which might make separate standards a better choice. Sharing standards creates a larger, more unified market and creates greater efficiency. If, however, an inferior standard is adopted, it might lock in place a less efficient solution and harm future development. It may also be difficult for low-income countries to have the administrative, scientific, and technological capacity to design and enforce standards, much less have the same priorities as high-income countries.
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