Gains from Convergence in US and EU Auto Regulations Under the Transatlantic Trade and Investment Partnership

37 Pages Posted: 22 Sep 2015

See all articles by Caroline Freund

Caroline Freund

Peter G. Peterson Institute for International Economics

Sarah Oliver

United States International Trade Commission (USITC)

Date Written: September 1, 2015

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. This paper evaluates the equivalence of automobile regulations in the United States and the European Union in terms of catastrophe avoidance and estimates the trade gains from improved regulatory coherence. The UN 1958 Agreement on automobiles, which offers a framework for harmonizing 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.

Keywords: Regulatory harmonization, difference-in-differences, trade agreement

Suggested Citation

Freund, Caroline and Oliver, Sarah, Gains from Convergence in US and EU Auto Regulations Under the Transatlantic Trade and Investment Partnership (September 1, 2015). Robert Schuman Centre for Advanced Studies Research Paper No. RSCAS 2015/59. Available at SSRN: https://ssrn.com/abstract=2663554 or http://dx.doi.org/10.2139/ssrn.2663554

Caroline Freund (Contact Author)

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Sarah Oliver

United States International Trade Commission (USITC) ( email )

500 E St SW
Washington, DC 20436
United States

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