Regionalism in Standards: Good or Bad for Trade?

Regional agreements on standards have been largely ignored by economists and unconditionally blessed by multilateral trade rules. It is theoretically and empirically found that such agreements increase trade between participating countries but not necessarily with the rest of the world. Adopting a common standard in a region, i.e. harmonization, boosts exports of excluded developed countries to the region but reduces exports of excluded developing countries - possibly because developing country firrms are hurt more by an increase in the stringency of standards and benefi…t less from economies of scale in integrated markets. Mutual Recognition Agreements (MRAs) are more uniformly trade promoting unless they contain restrictive rules of origin, in which case intra-regional trade increases at the expense of trade with other, especially developing, countries. This paper proposes a modi…fication of international trade rules to strike a better balance between the interests of integrating and excluded countries.

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Published:2005
Classification:Publications with Economic / Trade Focus
AuthorsAaditya Mattoo (World Bank), Maggie Chen (University of Colorado, USA)
Other bibliographical information:Previous version published in 2004 by World Bank, Policy Research Working Paper Series, WPS 3458.