Keeping Imports Safe: A Proposal for Discriminatory Regulation of International Trade

Abstract:     
The benefits of overseas outsourcing have come at a cost. Americans enjoy unprecedented levels of safety and security in the domestically-produced goods they use, food and drugs they ingest, and services they employ. Yet as U.S. firms offer better price-quality combinations by contracting with foreign companies, the mix of economic, legal, and societal forces that serve to protect consumers changes. Though international trade in goods and services provides clear economic benefits, it can also frustrate consumer protection efforts.

This article provides a conceptual framework for understanding the mix of regulatory elements that govern domestic production of goods and services, and the ways in which international trade changes that mix. It distinguishes between two types of domestic regulation - the first targeting the process by which goods are produced and services provided, and the second mandating particular outcomes. Foreign production disables the first type of regulation and weakens the second. Protecting domestic consumers in a globalized market, then, will frequently require the development of "substitutes" - including regulation by foreign governments and private regulators - for domestic forms of governance that are ineffective abroad.

To address the threat posed by foreign production, we propose that the best "substitute" for domestic regulation will often be oversight of safety issues by U.S. partners in global trade. To provide incentives to domestic firms, U.S. regulators should make those firms legally accountable for harmful products that make it to the United States. Furthermore, regulators should impose higher penalties for violations of safety norms when production has taken place abroad.

Number of Pages in PDF File: 43

Keywords: imports, safety, international trade, regualtion, international law

JEL Classification: K33

Accepted Paper Series