Discussion Paper Details

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Title: Free Trade and Evolving Standards

Author(s): Alessandra Casella

Publication Date: July 1995

Keyword(s): Coalition Formation, Free Trade, Harmonization and Standards

Programme Area(s): International Trade and Regional Economics

Abstract: Because standards and regulations respond to a society's demand for specific public goods, we expect them to be shaped by preferences, endowments, technologies - the fundamental determinants of this demand. There is no a priori reason why standards should be equal in different societies. This paper studies the interaction between standards and international trade. It shows that although standards can be used to manipulate trade flows, there is no logical connection between standards harmonization and gains from trade. Moreover, standards themselves will be modified by the opening of trade and under reasonable assumptions harmonization will be one of the outcomes of free trade. The empirical evidence suggests that industry groups are assuming an increasing role in shaping government regulations. In this perspective, standards need not be automatically identified with national policies, and the possibility of international alliances of industry groups must be considered. The result of market integration is then international harmonization together with increased differentiation across industries.

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Bibliographic Reference

Casella, A. 1995. 'Free Trade and Evolving Standards'. London, Centre for Economic Policy Research.