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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. Ronald Fischer & Pablo Serra, 1998. "Standards and Protection," Documentos de Trabajo 45, Centro de Economía Aplicada, Universidad de Chile.
  2. Gandal, N. & Shy, O., 1996. "Standardization Policy and International Trade," Papers 12-96, Tel Aviv - the Sackler Institute of Economic Studies.
  3. James Brander & Paul Krugman, 1982. "A 'Reciprocal Dumping' Model of International Trade," Working Papers 513, Queen's University, Department of Economics.
  4. Krishna, Kala & Thursby, Marie, 1991. "Optimal policies with strategic distortions," Journal of International Economics, Elsevier, vol. 31(3-4), pages 291-308, November.
  5. Horn, Henrik, 2006. "National Treatment in the GATT," CEPR Discussion Papers 5450, C.E.P.R. Discussion Papers.
  6. 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.
  7. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
  8. Daniel M. Sturm, 2001. "Product Standards, Trade Disputes and Protectionism," CEP Discussion Papers dp0486, Centre for Economic Performance, LSE.
  9. Bagwell,K. & Staiger,R.W., 1998. "An economic theory of GATT," Working papers 15, Wisconsin Madison - Social Systems.
  10. Eaton, Jonathan & Grossman, Gene M, 1986. "Optimal Trade and Industrial Policy under Oligopoly," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 383-406, May.
  11. repec:cup:cbooks:9780521855266 is not listed on IDEAS
  12. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
  13. Baldwin, Richard, 2000. "Regulatory Protectionism, Developing Nations and a Two-Tier World Trade System," CEPR Discussion Papers 2574, C.E.P.R. Discussion Papers.
  14. 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.
  15. 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.
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Citations

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Cited by:
  1. Vitor Trindade & Johannes Moenius, 2007. "Networks, Standards and Intellectual Property Rights," Working Papers 0705, Department of Economics, University of Missouri.
  2. Robert W. Staiger & Alan O. Sykes, 2009. "International Trade and Domestic Regulation," NBER Working Papers 15541, National Bureau of Economic Research, Inc.
  3. T.Huw Edwards, 2009. "Regulatory Protection When Firms Move First," Discussion Paper Series 2009_19, Department of Economics, Loughborough University, revised Nov 2009.
  4. Henrik Horn & Giovanni Maggi & Robert W. Staiger, 2010. "Trade Agreements as Endogenously Incomplete Contracts," American Economic Review, American Economic Association, vol. 100(1), pages 394-419, March.
  5. Katia Berti & Rod Falvey, . "Does Trade Weaken product Quality Standards?," Discussion Papers 11/24, University of Nottingham, GEP.
  6. Toulemonde, Eric, 2013. "A welfare analysis of the principle of mutual recognition," European Economic Review, Elsevier, vol. 60(C), pages 1-16.

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