Trade and the intensity of product regulation

Mattia Di Ubaldo, Michael Gasiorek, Barry Reilly and Aldo Sandoval-Hernandez
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Michael Gasiorek: University of Sussex
Barry Reilly: University of Sussex
Aldo Sandoval-Hernandez: Innovation, Science and Economic Development Canada
Authors registered in the RePEc Author Service: Aldo Sandoval Hernández

Working Paper Series from Department of Economics, University of Sussex Business School

Abstract: Regulatory requirements are an important determinant of production and thus trade patterns. The effects can be complex as the requirements with which firms and/or products have to comply can either hinder or stimulate international trade. We use machine learning and text-analysis tools on a core set of EU Regulations and Directives to construct a novel set of indices of EU ‘regulatory intensity’ at the HS 6-digit level along three dimensions: technical production requirements, compliance, and conformity assessment. We then test the responsiveness of EU imports from EU and non-EU countries to regulatory intensity by estimating a gravity model with a stringent set of fixed effects. Distinguishing between the areas of regulation is crucial to understand the its impacts on trade: higher production requirements stimulate EU imports, while higher compliance and conformity assessment requirements affect EU imports negatively, mainly from non-EU countries. The trade effects are driven by products characterised by higher complexity, and countries for which the EU is a less relevant export-destination.

Keywords: Non-tariff Measures; EU Single Market; regulatory intensity; imports (search for similar items in EconPapers)
JEL-codes: F13 F14 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:sus:susewp:0325

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