No Double Standards: Quantifying the Impact of Standard Harmonization on Trade

68 Pages Posted: 6 Sep 2019

See all articles by Julia Schmidt

Julia Schmidt

Banque de France

Walter Steingress

Government of Canada - Bank of Canada

Date Written: September 2019

Abstract

Product standards are omnipresent in industrialized societies. Though standardization can be beneficial for domestic producers, divergent product standards have been categorized as a major obstacle to international trade. This paper quantifies the effect of standard harmonization on trade flows and characterizes the extent to which it changes the cost and demand structure of exporting. Creating a novel and comprehensive database on crosscountry standard equivalences, we identify standard harmonization events at the document level. Our results show that the introduction of harmonized standards increases trade through a larger sales volume of existing exporters (intensive margin) and more entry (extensive margin). These findings are consistent with a multi-country heterogeneous firm model featuring endogenous standard adoption. Because of additional demand, standard harmonization raises firms’ incentives to produce varieties in accordance with the standard despite high sunk investment costs. Firms’ export sales expand and entry into foreign markets is encouraged.

Keywords: non-tariff barriers, international trade, standardization, harmonization

JEL Classification: F13, F14, F15, L15

Suggested Citation

Schmidt, Julia and Steingress, Walter, No Double Standards: Quantifying the Impact of Standard Harmonization on Trade (September 2019). Banque de France Working Paper No. 729, Available at SSRN: https://ssrn.com/abstract=3449148 or http://dx.doi.org/10.2139/ssrn.3449148

Julia Schmidt (Contact Author)

Banque de France ( email )

Paris
France

Walter Steingress

Government of Canada - Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

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