Final answer:
Mutual recognition of standards is when one trading partner acknowledges another's standards as valid. This practice is supported by WTO guidelines, which emphasize a science-based, non-discriminatory approach towards the establishment of safety and quality standards for goods in international trade.
Step-by-step explanation:
Mutual recognition of standards refers to the acceptance of a trading partner's standards as valid and sufficient by another trading partner. In the context of international trade, such recognition facilitates smoother transactions and reduces trade barriers. Under World Trade Organization (WTO) rules, standards must be based on science and should not discriminate arbitrarily between countries that have identical or similar conditions. For instance, it's legitimate for the United States to require all food products sold within its borders to meet safety standards set by U.S. laws, even if these standards differ from those of other countries. However, standards should not be different for domestic and foreign goods without a scientific basis, and they should equally apply to goods imported from different regions.
Trade associations like the European Union (EU) have taken steps beyond mutual recognition of standards by harmonizing regulations and creating a common market with a shared currency, the euro, demonstrating an advanced stage of economic integration that seeks not only to standardize regulations but also to eliminate barriers to the free movement of goods, labor, and capital.