The “New” Economics of Trade Agreements: From Trade Liberalization to Regulatory Convergence?

Abstract

What incentives do governments have to negotiate trade agreements that constrain their domestic regulatory policies? We study a model in which firms design products to appeal to local consumer tastes, but their fixed costs increase with the difference between versions of their product destined for different markets. In this setting, firms' profit‐maximizing choices of product attributes are globally optimal in the absence of consumption externalities, but national governments have unilateral incentives to invoke regulatory protectionism to induce firm delocation. An efficient trade agreement requires commitments not to engage in such opportunistic behavior. A rule requiring mutual recognition of standards can be used to achieve efficiency, but one that requires only national treatment falls short. When product attributes confer local consumption externalities, an efficient trade agreement must coordinate the fine details of countries' regulatory policies.

A Theory of Economic Disintegration

“…Contrary to tariffs, these nontariff policy dimensions embrace no government revenue-collection motive while still affecting the terms of trade and the spatial distribution of economic activity. Thus, our article adds to the growing literature on the economics of deep integration, moving beyond the notion of tariff-oriented trade agreements (see Grossman et al, 2021;Staiger and Sykes, 2021).…”

A World Trading System for the Twenty-First Century

“…Indeed, this may be true even for rich countries: for example, after describing the labor market policies and programs that are available in the United States, Kletzer (2019, p 171) concludes that "Despite the array of US programs, there is considerable evidence that these labor market interventions are inadequate." 58 A second hurdle is to demonstrate that the proposed tari¤ increases would actually have the intended e¤ect on income inequality. This demonstration is complicated by the fact that technology as well as factor endowments within the industrialized countries have changed dramatically over the period that income inequality has risen, and it is therefore almost certainly true that "turning back the clock" with tari¤s to achieve the trade patterns and volumes that a country experienced in an earlier time would not bring back the income distribution that the country had experienced at that time.…”

“…Reforming the SCM Agreement to reinstate Article 8 in some form would help to remove WTO legal barriers that could have the e¤ect of precluding the use of subsidies over tari¤s for purposes of addressing income inequality concerns, and on these general grounds would be supported by the targetingprinciple logic. See, for example, Charnovitz (2014), who makes similar arguments for the reinstatement of Article 8 in some form as that article relates to environmental subsidies 58. That said, it should be noted that Kletzer (2019) advocates for implementing a program of wage insurance in the United States, not the use of tari¤s 59.…”

What You Don’t Know About the Codex Can Hurt You: How Trade Policy Trumps Global Health Governance in Infant and Young Child Nutrition

“…Harmonization of standards can help eliminate unnecessary hindrances to trade, preventing discrimination against imports and leading to efficiency gains. 36 This is also why the Codex , the CAC Committees that craft its provisions, and the CAC itself as their governing body create an area of overlap between the global health regime and the trade policy regime. Explicit reference to the Codex in the WTO SPS agreement, combined with WTO jurisprudence that treats the Codex as one of the sets of standards implicitly referenced in the WTO TBT agreement, made the CAC the main arbiter of science for food standards, including manufacture and marketing of CMF, in trade policy.…”