International Trade and Domestic Regulation
Robert W. Staiger
Stanford University; University of Wisconsin - Madison - Department of Economics; National Bureau of Economic Research (NBER)
Alan O. Sykes
Stanford University - Law School
Stanford Law and Economics Olin Working Paper No. 387
Stanford Public Law Working Paper No. 1504913
Existing formal models of the relationship between trade policy and regulatory policy suggest the potential for a regulatory race to the bottom. WTO rules and disputes, however, center on complaints about excessively stringent regulations. This paper bridges the gap between the existing formal literature and the actual pattern of rules and disputes. Employing the terms-of-trade framework for the modeling of trade agreements, we show how large "nations" may have an incentive to impose discriminatory product standards against imported goods once border instruments are constrained, and how inefficiently stringent standards may emerge under certain circumstances even if regulatory discrimination is prohibited. We then assess the WTO legal framework in light of our results, arguing that it does a reasonably thorough job of policing regulatory discrimination, but that it does relatively little to address excessive nondiscriminatory regulations.
Number of Pages in PDF File: 49
Keywords: international trade, regulation, national treatment, technical barriers to trade
Date posted: November 13, 2009 ; Last revised: December 4, 2009
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