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

70 Pages Posted: 20 Aug 2019

See all articles by Gene M. Grossman

Gene M. Grossman

Princeton University - Princeton School of Public and International Affairs; Princeton University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Phillip McCalman

University of Melbourne

Robert W. Staiger

Stanford University; University of Wisconsin - Madison - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: August 2019

Abstract

What incentives do governments have to negotiate "new trade agreements," i.e., agreements that constrain not only governments' choices of tariffs, but also their domestic regulatory policies? We focus on horizontal product standards, i.e., those that impose requirements along a horizontal dimension of product differentiation. We introduce differences in ideal products across countries and consider cases in which product choices do not and do confer externalities on other national consumers. In addition to characterizing the features of the optimal new trade agreement in each environment, we ask whether detailed negotiations about regulatory rules are needed for global efficiency or whether an "old trade agreement" augmented by some "policed decentralization" of regulatory procedures can achieve the same outcomes.

Keywords: firm delocation, harmonization, international trade agreements, regulation

JEL Classification: F13, F15

Suggested Citation

Grossman, Gene M. and McCalman, Phillip and Staiger, Robert W., The 'New' Economics of Trade Agreements: From Trade Liberalization to Regulatory Convergence? (August 2019). CEPR Discussion Paper No. DP13903, Available at SSRN: https://ssrn.com/abstract=3439456

Gene M. Grossman (Contact Author)

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Phillip McCalman

University of Melbourne ( email )

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Robert W. Staiger

Stanford University ( email )

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