Working Paper: CEPR ID: DP13903
Authors: Gene M. Grossman; Phillip McCalman; Robert W. Staiger
Abstract: What incentives do governments have to negotiate "new trade agreements," i.e., agreements that constrain not only governments' choices of tariffs, but also their domestic regulatory policies? We focus on horizontal product standards, i.e., those that impose requirements along a horizontal dimension of product differentiation. We introduce differences in ideal products across countries and consider cases in which product choices do not and do confer externalities on other national consumers. In addition to characterizing the features of the optimal new trade agreement in each environment, we ask whether detailed negotiations about regulatory rules are needed for global efficiency or whether an "old trade agreement" augmented by some "policeddecentralization" of regulatory procedures can achieve the same outcomes.
Keywords: International trade agreements; regulation; harmonization; firm delocation
JEL Codes: F13; F15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| trade agreements (F13) | regulatory policies (G18) |
| regulatory cooperation (L59) | trade efficiency (F14) |
| regulatory heterogeneity (L59) | inefficiencies in international markets (F69) |
| differences in product standards (L15) | trade efficiency (F14) |
| new trade agreement (NTA) (F15) | global efficiency (D61) |
| harmonization of standards (L15) | competition (L13) |