Regionalism in Standards: Good or Bad for Trade?
35 Pages Posted: 26 Feb 2007
Date Written: November 2006
Regional agreements on standards have been largely ignored by economists and unconditionally blessed by multilateral trade rules. Using a constructed panel data that identifies the different types of agreements at the industry level, we find that such agreements increase both the likelihood and volume of trade between participating countries but not necessarily with the rest of the world. Harmonization of standards boosts exports of excluded developed countries to the region but may reduce exports of excluded developing countries - possibly because they are hurt more by an increase in the stringency of standards and benefit less from economies of scale in integration. Mutual Recognition Agreements (MRAs) are more uniformly trade promoting unless they contain restrictive rules of origin, in which case intra-regional trade increases at the expense of imports from other, especially developing, countries. Addressing the potential endogeneity of agreements on standards through either the Instrument Variable or the Propensity Score Matching approach does not lead to any significant change in our results.
Keywords: regionalism, standard, harmonization, MRA, rules of origin
JEL Classification: F12, F13, F15
Suggested Citation: Suggested Citation