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CEP discussion paper

Product Standards, Trade Disputes and Protectionism


Trade disputes over national product standards are a growing source of tension in the international trading system. The usual pattern is that a country introduces a new product standard for all sales of a good in its local market, which is justified as necessary for consumer or environmental protection. Importers into the local market, however, challenge the standard as a 'disguised barrier to trade' or 'green protectionism'. The paper develops a two country political economy model to explain such disputes. It is shown how the political process can lead to a 'political failure' which takes the form of either too many or too few product standards and disagreement between politicians in different countries over the optimal policy. In a second step the model is used to evaluate whether two common proposals to settle or avoid such disputes, mutual recognition of standards and harmonization, can improve the political process.


Daniel M. Sturm

January 2001     Paper Number CEPDP0486

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