DP3147 Reciprocity and the Political Economy of Harmonization and Mutual Recognition of Regulatory Measures

Author(s): Akiko Suwa Eisenmann, Thierry Verdier
Publication Date: January 2002
Keyword(s): mutual recognition, standards, trade policy
JEL(s): F13, L50
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3147

This Paper discusses the issue of regulatory protectionism and its implication for reciprocity and international bargaining on regulation. In a simple two way trade model a la Brander and Spencer, we take into account the three following features of regulatory measures: a) a regulation raises the cost not only of foreign producers but also of domestic producers; b) a regulation also creates a fixed cost which is entirely supported by foreign exporters; c) a regulation may provide a welfare gain valued per se by individuals or to correct some market failure. In this context, we investigate the political economy forces for unilateral regulatory protectionism and the effectiveness of various intra-sectorial bargaining schemes (negotiated reciprocal regulation setting, harmonization or mutual recognition agreements) to ensure reciprocal market access.