Horizontal Regulatory Barriers in International Trade: Evidence from Electric Plugs
58 Pages Posted: 5 Dec 2022 Last revised: 27 Oct 2023
Date Written: October 27, 2023
Domestic policies that regulate the horizontal dimensions of product differentiation can impede international trade and have become a major concern in contemporary trade negotiations. We estimate trade frictions associated with incompatible designs of electric plugs, a well-known example of a horizontal regulatory barrier. We find that fewer electronic devices are exported to destinations with incompatible electric plugs, and this effect operates through both the extensive (i.e., the number of trading firms) and the intensive (i.e., the average sales per firm) margins of exports. In addition, incompatible plugs reduce the average quality of affected electronic devices, providing evidence that the horizontal regulatory barrier can indirectly affect the vertical dimension of product differentiation. Finally, with a tractable trade model we illustrate the mechanism through which horizontal regulatory barriers can influence international trade.
Keywords: non-tariff barriers, product quality, horizontal product standards
JEL Classification: F13, F14, L51
Suggested Citation: Suggested Citation