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Does Trade Weaken product Quality Standards?

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  • Katia Berti
  • Rod Falvey

Abstract

In this paper we investigate the interrelationships between trade and national minimum quality standards. We employ a simple partial equilibrium model in which national regulators set a minimum quality standard for a product whose quality is unobservable to consumers prior to purchase. Both producers and consumers can benefit from a minimum standard, but the former prefer a lower standard to the latter. Because producers are organised and consumers are not, the standards set by national regulators may tend to unduly favour producer interests. We focus on two specific issues: first, how the weight given to producer interests affects the outcomes in autarky and the open economy; and, second, how outcomes differ when the effects of standards on trade are explicitly taken into account or ignored in standard setting in the open economy.

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File URL: http://www.nottingham.ac.uk/gep/documents/papers/2011/11-24.pdf
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Paper provided by University of Nottingham, GEP in its series Discussion Papers with number 11/24.

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Handle: RePEc:not:notgep:11/24

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Keywords: Product standards; political economy; asymmetric information;

References

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  1. Stéphan Marette & John C. Beghin, 2007. "Are Standards Always Protectionist?," Center for Agricultural and Rural Development (CARD) Publications 07-wp450, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  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. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-50, September.
  4. Costinot, Arnaud, 2008. "A Comparative Institutional Analysis of Agreements on Product Standards," University of California at San Diego, Economics Working Paper Series qt09f6660d, Department of Economics, UC San Diego.
  5. Fischer, Ronald & Serra, Pablo, 2000. "Standards and protection," Journal of International Economics, Elsevier, vol. 52(2), pages 377-400, December.
  6. Bommer, Rolf & Schulze, Gunther G., 1999. "Environmental improvement with trade liberalization," European Journal of Political Economy, Elsevier, vol. 15(4), pages 639-661, November.
  7. Jeffrey A. Frankel, 2003. "The Environment and Globalization," NBER Working Papers 10090, National Bureau of Economic Research, Inc.
  8. Rauscher, Michael, 1991. "National environmental policies and the effects of economic integration," European Journal of Political Economy, Elsevier, vol. 7(3), pages 313-329, October.
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Cited by:
  1. Li, Yuan & Beghin, John C., 2012. "Protectionism Indices for Non-Tariff Measures: An Application to Maximum Residue Levels," Staff General Research Papers 35276, Iowa State University, Department of Economics.
  2. Beghin, John C., 2013. "Non-Tariff Measures with Market Imperfections: Trade and Welfare Implications," Staff General Research Papers 35923, Iowa State University, Department of Economics.
  3. Xiong, Bo & Beghin, John C., 2012. "Stringent Maximum Residue Limits, Protectionism, and Competitiveness: The Cases of the US and Canada," Working Papers 142384, International Agricultural Trade Research Consortium.
  4. Li, Yuan & Xiong, Bo & Beghin, John C., 2013. "The Political Economy Of Food Standard Determination: International Evidence From Maximum Residue Limits," Staff General Research Papers 36181, Iowa State University, Department of Economics.

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