How do mutual recognition agreements influence trade?

Abstract

AbstractThis paper empirically tests how the magnitude of trade promotion effects of mutual recognition agreements (MRAs) varies with various mediums. The main rationale for the research is that because an MRA eliminates technical barriers to trade (TBT), the trade promotion effects of MRAs are inversely much stronger if TBT originally restricted trade before their entry into force. Using data on MRAs and international trade in 34 countries and 22 manufacturing sectors covering 1995 to 2009, the paper empirically shows that the trade promotion effects of MRAs can be much stronger, depending on the type of contract, time period after the entry into force, components of exports, and country and industry characteristics such as technology level and global competitiveness. The results will provide insight for policy makers and stakeholders who cooperate with foreign countries in various regulations, especially in developing countries that have low levels of technology, competitiveness, and regulatory governance capacity.