It's Not All About BARRIERS, TARIFFS, AND TAXES.

• Position: Brief Article

As inevitable as globalization seems to be, the shift toward intangible, high-technology products has made reaching international trade agreements more difficult than ever before, according to economist David Hummels, Purdue University, West Lafayette, Ind. "Viewing world trade through the narrow focus of tariffs and taxes misses the point." At least as important is What he terms "deep integration"--harmonizing differences in product and environmental standards between and among nations. These do not just exist between the U.S. and China or other developing nations, he says. "The U.S. and Europe have major differences."

In a simple trade example, the U.S. may export grain to Europe and import BMWs from Germany without violating either country's product standards. What if that grain becomes genetically modified, though, and what if the BMWs don't pass California's pollution control standards? "The question is whether different views of products, production, or environmental standards are legitimate health and safety issues or a mask for protectionism" Hummels indicates. "These disagreements can be intractable. It is much easier to tell countries what they can do at their borders than within national boundaries."

Seldom are the contentious issues black and white. "Nations arrive at differences for very good reasons," he points out. For instance, in the case of genetically modified crops, U.S. officials say the crops are safe until it can be proved otherwise, while their European counterparts maintain that genetic modification is unsafe until proved otherwise.

Another important topic often left out of discussions about international trade is investment liberalization. "If a company wants to locate in India, there could be restrictions in terms of a required license. And non-native owners...