Does trade weaken product standards?

Katia Berti and Rodney Falvey

Review of International Economics, 2018, vol. 26, issue 4, 852-868

Abstract: 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).

Date: 2018
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