Does trade weaken product standards?

Research paper by Katia Berti, Rod Falvey

Indexed on: 23 Jan '18Published on: 22 Jan '18Published in: Review of International Economics


We investigate the effects of trade on national minimum quality standards for a product whose quality is unobservable to consumers prior to purchase. Two standard-setting regimes are considered: (1) where the regulatory authority takes the trade share as given; and (2) where the regulatory authority takes full account of its ability to influence the trade share. We find that standards are not a protectionist instrument in this model, the usual gains from trade apply if standards are maintained at their autarky values, trade can cause private standards to be adjusted in a welfare reducing way, and the welfare of a country is higher if its regulatory authority adopts regime (2) rather than (1).