Does Trade Weaken Product Quality Standards?

Abstract

In this paper we investigate the interrelationships between trade and national minimum quality standards. We employ a simple partial equilibrium model in which national regulators set a minimum quality standard for a product whose quality is unobservable to consumers prior to purchase. Both producers and consumers can benefit from a minimum standard, but the former prefer a lower standard to the latter. Because producers are organized and consumers are not, the standards set by national regulators may tend to unduly favor producer interests. We focus on two specific issues: first, how the weight given to producer interests affects the outcomes in autarky and the open economy; and, second, how outcomes differ when the effects of standards on trade are explicitly taken into account or ignored in standard setting in the open economy.