Regulatory Reform and International Trade Policy

Abstract

As direct trade barriers have fallen, regulatory policy has become an increasingly important source of remaining trade distortions and international trade disputes. The purpose of this paper is to set forth why regulatory policy can create important trade distortions, and to argue how international agreements to coordinate regulatory reforms can ameliorate both problems. The paper describes the nature of the problem in the context of the rapid growth of electronic commerce, presents a simple economic example of regulation-induced trade distortion, examines the kinds of regulatory reforms that are efficiency enhancing both in their own right and because they improve the operation of international markets, and examines how nations should approach international regulatory negotiations to minimize the likelihood of anticompetitive outcomes.

JEL Classification: F13, L50