Quality Regulation Creates and Reallocates Trade

Lucas Zavala, Ana Margarida Fernandes, Ryan Haygood, Tristan Reed and Jose Daniel Reyes

No 10601, Policy Research Working Paper Series from The World Bank

Abstract: Quality regulation has become the dominant instrument of trade policy. Panel evidence shows that regulations classified as sanitary and phytosanitary measures and technical barriers to trade both increase trade on average. Other non-tariff measures like quotas decrease trade. Sanitary and phytosanitary measures reallocate trade from lower-income exporting countries to higher-income exporting countries, while technical barriers to trade measures do the opposite. Sanitary and phytosanitary and technical barriers to trade measures increase the sales concentration of exporting firms from lower-income countries, but do not affect the concentration of exporting firms from higher-income countries or importing firms. The costs of quality regulation are primarily borne by exporting firms, especially in lower-income countries.

Date: 2023-11-09
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