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Gains from Harmonizing US and EU Auto Regulations under the Transatlantic Trade and Investment Partnership

Author

Listed:
  • Caroline Freund

    (Peterson Institute for International Economics)

  • Sarah Oliver

    (Peterson Institute for International Economics)

Abstract

Regulatory standards protect consumers from defective products, but they impede trade when they differ across countries. The Transatlantic Trade and Investment Partnership (TTIP) seeks to reduce distortions in the automobile and other industries. Freund and Oliver evaluate the equivalence of automobile regulations in the United States and the European Union in terms of catastrophe avoidance and estimate the trade gains from harmonization. The UN 1958 Agreement on automobiles, which harmonizes regulations among signatories, is used to quantify the trade effect of regulatory convergence. The removal of regulatory differences in autos is estimated to increase trade by 20 percent or more. The effect on trade from harmonizing standards is only slightly smaller than the effect of EU accession on auto trade. The large economic gains from regulatory harmonization imply that TTIP has the potential to improve productivity while lowering prices and enhancing variety for consumers.

Suggested Citation

  • Caroline Freund & Sarah Oliver, 2015. "Gains from Harmonizing US and EU Auto Regulations under the Transatlantic Trade and Investment Partnership," Policy Briefs PB15-10, Peterson Institute for International Economics.
  • Handle: RePEc:iie:pbrief:pb15-10
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    References listed on IDEAS

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    2. Perkins, Richard & Neumayer, Eric, 2012. "Does the ‘California effect’ operate across borders? trading- and investing-up in automobile emission standards," LSE Research Online Documents on Economics 42097, London School of Economics and Political Science, LSE Library.
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    Cited by:

    1. McCalman, Phillip, 2020. "International trade, product lines and welfare: The roles of firm and consumer heterogeneity," Journal of International Economics, Elsevier, vol. 126(C).

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