Product regulation or protectionism?

Product regulation has become a principal means of intervention in international trade. There is a debate, however, on its intent. Gründler and Hillman (2021) propose that half of regulatory restrictions on imports may protect producers, when formally the regulations are intended to protect consumers. The idea that regulation might protect producers rather than consumers goes back to Peltzman (1976) for the regulation of price and appears as a political trade-off in choice of a tariff in Hillman (1982). We provide a theoretical analysis that underpins the puzzle in intent of regulatory restrictions on imports, allowing for ex-ante or ex-post inspection by the regulator (before or after the product is purchased). Our results suggest that under certain circumstances all firms, even importers, prefer ex-ante inspection, which is surprising, given that ex-ante inspection discriminates importers. We also show that ex-ante inspection may be harmful for public safety, because it harms local producers' incentive to make effort, and therefore must be complemented by ex-post inspection.