International Trade and Domestic Regulation.pdf

International Trade and Domestic Regulation Robert W. Staiger and Alan O. Sykes Stanford University June 2009 Staiger and Sykes (Stanford University) Trade and Domestic Regulation June 2009 1 / 32 Introduction Existing formal models of the relationship between trade policy and regulatory policy suggest the potential for a regulatory race to the bottom: (e.g., Markusen, 1975, Copeland, 1990, Ederington, 2001 and Bagwell and Staiger 2002, chapter 9). Nations might lower their regulatory standards to advantage their Örms against foreign competitors. Ederington (2009) surveys the recent body of empirical research that lends some support to the concerns emphasized by these models. Staiger and Sykes (Stanford University) Trade and Domestic Regulation June 2009 2 / 32 Introduction (contíd) The existing models highlight an important potential concern for the world trading system. WTO rules and disputes, however, center on complaints about excessively stringent regulations. Legal obligations that explicitly address national regulatory policies ñ GATT Article III, TBT,SPS ñ do not place legal constraints on nations that wish to lower domestic regulatory standards. Rather, they restrict the ability of member governments to impose regulations on foreign suppliers. Likewise, virtually all pertinent WTO disputes regarding national regulations (e.g., beef hormones, asbestos, sardines, Korean beef) involve complaints about excessive regulation by importing nations. Staiger and Sykes (Stanford University) Trade and Domestic Regulation June 2009 3 / 32 Introduction (contíd) This paper bridges the gap between the existing formal litera