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A Comparative Institutional Analysis of Agreements on Product Standards

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  • Costinot, Arnaud

Abstract

The WTO and EU have chosen two differernt agreements on product standards. While the WTO's approach is primarily based on a "National Treatment" (NT) principle, the EU's approach crucially relies on a principle of "Mutual Recognition" (MR). This paper offers a first look at the comparative performance of these two principles. We show that standards are imposed for levels of externalities that are too low under NT and too high under MR. This suggests that NT should be preferred to MR when the amount of trade in goods characterized by high levels of externalities is large.

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Bibliographic Info

Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number qt09f6660d.

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Date of creation: 01 Mar 2008
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Handle: RePEc:cdl:ucsdec:qt09f6660d

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Keywords: product standards; trade agreements; incomplete contracts; national treatment; mutual recognition;

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References

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  1. James Brander & Paul Krugman, 1980. "A "Reciprocal Dumping" Model of International Trade," Working Papers 405, Queen's University, Department of Economics.
  2. Suwa Eisenmann, Akiko & Verdier, Thierry, 2002. "Reciprocity and the Political Economy of Harmonization and Mutual Recognition of Regulatory Measures," CEPR Discussion Papers 3147, C.E.P.R. Discussion Papers.
  3. Kala Krishna & Marie Thursby, 1988. "Optimal Policies with Strategic Distortions," NBER Working Papers 2527, National Bureau of Economic Research, Inc.
  4. James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
  5. Baldwin, Richard, 2000. "Regulatory Protectionism, Developing Nations and a Two-Tier World Trade System," CEPR Discussion Papers 2574, C.E.P.R. Discussion Papers.
  6. Pierpaolo Battigalli & Giovanni Maggi, 2003. "International agreements on product standards: an incomplete-contracting theory," Working Papers 229, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  7. Horn, Henrik, 2006. "National Treatment in the GATT," Working Paper Series 657, Research Institute of Industrial Economics.
  8. Bagwell,K. & Staiger,R.W., 1998. "An economic theory of GATT," Working papers 15, Wisconsin Madison - Social Systems.
  9. Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
  10. Fischer, Ronald & Serra, Pablo, 2000. "Standards and protection," Journal of International Economics, Elsevier, vol. 52(2), pages 377-400, December.
  11. repec:cup:cbooks:9780521855266 is not listed on IDEAS
  12. Gandal, N. & Shy, O., 1996. "Standardization Policy and International Trade," Papers 12-96, Tel Aviv - the Sackler Institute of Economic Studies.
  13. Kyle Bagwell & Robert W. Staiger, 2001. "Domestic Policies, National Sovereignty, And International Economic Institutions," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 519-562, May.
  14. Daniel Sturm, 2006. "Product standards, trade disputes, and protectionism," Canadian Journal of Economics, Canadian Economics Association, vol. 39(2), pages 564-581, May.
  15. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
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Cited by:
  1. Toulemonde, Eric, 2013. "A welfare analysis of the principle of mutual recognition," European Economic Review, Elsevier, vol. 60(C), pages 1-16.
  2. Henrik Horn & Giovanni Maggi & Robert W. Staiger, 2006. "Trade Agreements as Endogenously Incomplete Contracts," NBER Working Papers 12745, National Bureau of Economic Research, Inc.
  3. Katia Berti & Rod Falvey, . "Does Trade Weaken product Quality Standards?," Discussion Papers 11/24, University of Nottingham, GEP.
  4. T.Huw Edwards, 2009. "Regulatory Protection When Firms Move First," Discussion Paper Series 2009_19, Department of Economics, Loughborough University, revised Nov 2009.
  5. Robert W. Staiger & Alan O. Sykes, 2009. "International Trade and Domestic Regulation," NBER Working Papers 15541, National Bureau of Economic Research, Inc.
  6. Vitor Trindade & Johannes Moenius, 2007. "Networks, Standards and Intellectual Property Rights," Working Papers 0705, Department of Economics, University of Missouri.

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