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Mutual Recognition Agreements and Trade Diversion: Consequences for Developing Nations

This paper presents a baseline model that illustrates the implications of Mutual Recognition Agreements (MRAs) for excluded nations. The model shows that MRAs can harm third country exports because of a trade-diversion effect. We use highly disaggregated trade data from developed and developing nations to test whether or not MRAs have a negative effect on exports from excluded nations. In particular, we focus on the impact of a North-North MRA on the South. We find empirical evidence in support of the model; the MRA between the EU and the USA has harmed exports from Canada and the group of developing countries included in the study.

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Paper provided by Economics Section, The Graduate Institute of International Studies in its series IHEID Working Papers with number 20-2006.

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Length: 30
Date of creation: 26 Oct 2006
Date of revision: Jun 2007
Handle: RePEc:gii:giihei:heiwp20-2006
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  1. Maggie X. Chen & Aaditya Mattoo, 2008. "Regionalism in Standards: Good or Bad for Trade?," Working Papers 2009-14, The George Washington University, Institute for International Economic Policy.
  2. John C. Harsanyi, 1967. "Games with Incomplete Information Played by "Bayesian" Players, I-III Part I. The Basic Model," Management Science, INFORMS, vol. 14(3), pages 159-182, November.
  3. Maskus, Keith E. & Wilson, John S. & Tsunehiro Otsuki, 2000. "Quantifying the impact of technical barriers to trade : a framework for analysis," Policy Research Working Paper Series 2512, The World Bank.
  4. Riezman, Raymond, 1991. "Dynamic tariffs with asymmetric information," Journal of International Economics, Elsevier, vol. 30(3-4), pages 267-283, May.
  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. Harsanyi, John C., 1994. "Games with Incomplete Information," Nobel Prize in Economics documents 1994-1, Nobel Prize Committee.
  7. Lutz, Stefan, 1996. "Trade Effects of Minimum Quality Standards with and without Deterred Entry," CEPR Discussion Papers 1384, C.E.P.R. Discussion Papers.
  8. Alberto Amurgo Pacheco, 2006. "Institutions and Deep Integration," IHEID Working Papers 07-2006, Economics Section, The Graduate Institute of International Studies.
  9. Jacques Pelkmans, 2003. "Mutual Recognition in Goods and Services: An Economic Perspective," Economics Working Papers 016, European Network of Economic Policy Research Institutes.
  10. Richard Baldwin & Daria Taglioni, 2006. "Gravity for Dummies and Dummies for Gravity Equations," NBER Working Papers 12516, National Bureau of Economic Research, Inc.
  11. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
  12. Bagwell,K. & Staiger,R.W., 1998. "An economic theory of GATT," Working papers 15, Wisconsin Madison - Social Systems.
  13. 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.
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