IDEAS home Printed from https://ideas.repec.org/p/hhs/sdueko/2014_023.html
   My bibliography  Save this paper

Harmonization versus Mutual Recognition: Some pitfalls for the coordination of product standards under imperfect competition

Author

Listed:

Abstract

The present paper examines trade liberalization driven by the coordination of product standards. For oligopolistic firms situated in separate markets that are initially sheltered by national standards, mutual recognition of standards implies entry and reduced profits at home paired with the opportunity to start export sales. In contrast, harmonization, in particular the prospect that one's own national (but not the foreign) standard becomes the only globally accepted standard, opens the foreign market without balancing entry at home. We study these scenarios in a reduced form lobby game with two countries and three firms, where firms first lobby for the policy coordination regime (harmonization versus mutual recognition), and subsequently, in case of harmonization, the global standard is auctioned among the firms. We discuss welfare effects and conclude with policy implications. In particular, harmonized standards may fail to harvest the full pro-competitive effects from trade liberalization compared to mutual recognition; moreover, the issue is most pronounced in markets featuring price competition.

Suggested Citation

  • Jørgensen, Jan Guldager & Schröder, Philipp J.H., 2014. "Harmonization versus Mutual Recognition: Some pitfalls for the coordination of product standards under imperfect competition," Discussion Papers of Business and Economics 23/2014, University of Southern Denmark, Department of Business and Economics.
  • Handle: RePEc:hhs:sdueko:2014_023
    as

    Download full text from publisher

    File URL: http://static.sdu.dk/mediafiles//0/4/4/%7B0449AF91-9468-45DE-98A9-EA4E704E9690%7Ddpbe23_2014.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Maggie Xiaoyang Chen & Aaditya Mattoo, 2008. "Regionalism in standards: good or bad for trade?," Canadian Journal of Economics, Canadian Economics Association, vol. 41(3), pages 838-863, August.
    2. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, pages 691-751.
    3. Maggie Xiaoyang Chen & John Wilson & Tsunehiro Otsuki, 2008. "Standards and export decisions: Firm-level evidence from developing countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, pages 501-523.
    4. Daniel Sturm, 2006. "Product standards, trade disputes, and protectionism," Canadian Journal of Economics, Canadian Economics Association, vol. 39(2), pages 564-581, May.
    5. Gianluca Orefice & Nadia Rocha, 2014. "Deep Integration and Production Networks: An Empirical Analysis," The World Economy, Wiley Blackwell, vol. 37(1), pages 106-136, January.
    6. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, pages 833-850.
    7. Derek Bunn & Georg Zachmann, 2010. "Inefficient arbitrage in inter-regional electricity transmission," Journal of Regulatory Economics, Springer, vol. 37(3), pages 243-265, June.
    8. Huw Edwards & Joanna Poyago-Theotoky, 2013. "Regulatory Protection When Firms Decide First on Technical Collaboration and R&D," Review of International Economics, Wiley Blackwell, pages 750-764.
    9. Jacques Pelkmans, 2012. "Mutual Recognition: Economic and Regulatory Logic in Goods and Services," Chapters,in: Research Handbook on the Economics of European Union Law, chapter 6 Edward Elgar Publishing.
    10. Limão, Nuno & Tovar, Patricia, 2011. "Policy choice: Theory and evidence from commitment via international trade agreements," Journal of International Economics, Elsevier, pages 186-205.
    11. Gabriel Felbermayr & Benjamin Jung, 2011. "Sorting It Out: Technical Barriers to Trade and Industry Productivity," Open Economies Review, Springer, pages 93-117.
    12. Gabriel Felbermayr & Benjamin Jung, 2011. "Sorting It Out: Technical Barriers to Trade and Industry Productivity," Open Economies Review, Springer, pages 93-117.
    13. Chen, Natalie, 2004. "Intra-national versus international trade in the European Union: why do national borders matter?," Journal of International Economics, Elsevier, pages 93-118.
    14. Limão, Nuno & Tovar, Patricia, 2011. "Policy choice: Theory and evidence from commitment via international trade agreements," Journal of International Economics, Elsevier, pages 186-205.
    15. Chen, Natalie, 2004. "Intra-national versus international trade in the European Union: why do national borders matter?," Journal of International Economics, Elsevier, pages 93-118.
    16. Jacques Pelkmans, 2012. "Mutual Recognition: economic and regulatory logic in goods and services," Bruges European Economic Research Papers 24, European Economic Studies Department, College of Europe.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Standard regimes; harmonization; technical trade barriers; NTBs; Cournot competition; Bertrand competition;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:sdueko:2014_023. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lene Holbæk). General contact details of provider: http://edirc.repec.org/data/okioudk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.