Regulatory Protectionism Research Articles

The “New” Economics of Trade Agreements: From Trade Liberalization to Regulatory Convergence?

What incentives do governments have to negotiate trade agreements that constrain their domestic regulatory policies? We study a model in which firms design products to appeal to local consumer tastes, but their fixed costs increase with the difference between versions of their product destined for different markets. In this setting, firms' profit‐maximizing choices of product attributes are globally optimal in the absence of consumption externalities, but national governments have unilateral incentives to invoke regulatory protectionism to induce firm delocation. An efficient trade agreement requires commitments not to engage in such opportunistic behavior. A rule requiring mutual recognition of standards can be used to achieve efficiency, but one that requires only national treatment falls short. When product attributes confer local consumption externalities, an efficient trade agreement must coordinate the fine details of countries' regulatory policies.

Unification, Harmonisation and Competition in European Company Forms

The main tools for the convergence of company law are full legal unification, mere harmonisation, and regulatory competition. The article uses this framework to study both the existing and the proposed European company forms (ECFs): the European Company, the European Cooperative Company, the European Private Company and the Single Member Company. All ECFs aim at legal unification, but none of them are endowed with comprehensively unified legal regimes; their regulation is patchy and stratified and suffers from heavy referencing to national law in crucial areas such as corporate governance and corporate groups. It is therefore no surprise that ECFs have failed to win the favour of European entrepreneurs, and the data on the diffusion of ECFs are not encouraging: a large proportion of the few registered ECFs are in fact only shell companies, and most of the operating ECFs are found only in selected parts of central Europe. This failure is the result of high setup, legal and reputational costs, not offset by sufficiently important benefits. The roots of the fiasco go deeper, however, as regulatory protectionism impedes the adoption of attractive supranational company forms. While acknowledging that forcing further cooperative convergence could be not only costly but also ineffective, it must be noted that to some extent non-cooperative convergence is already occurring, at least with reference to national company forms suitable for small companies. Here, in contrast with the cooperative/supranational level, the non-cooperative mechanism of regulatory competition needs not inevitably turn into regulatory protectionism but can instead be a positive source of emulation, causing the diffusion of effective national company forms and leading ultimately to spontaneous legal convergence without supranational intervention. EU company law makers should consider that in the field of ECFs no law might be better than bad law, thus avoiding the path of cooperative adaptation and trusting the uniforming force of regulatory competition instead.

The Cost of Regulation

Tighter regulation inevitably carries a cost, but must be weighed against the benefits of greater financial stability. Estimating net benefits is, however, a complex exercise and while consensus is that in aggregate these remain positive, gains could be made by improving efficiency and addressing leakages. Moreover, structural reform, and not least completing the European Banking and Capital Markets Unions, would do much to alleviate downside risks and lift growth. History teaches that ensuring economic prosperity and financial stability over time requires more than a set of regulatory safety margins. The revival of macroprudential regulation aims to address past errors with a flexible and forward-looking approach. These tools are still largely untested and at risk of unintended costs. Overall optimisation of the net benefits from regulation requires an iterative and co-ordinated approach. The potentially most damaging costs stem from regulatory protectionism. Recent trends are worrying and could, if confirmed, also forewarn of a less co-ordinated G20 response to the next crisis.

SPECYFIKA PROTEKCJONIZMU REGULACYJNEGO WE WSPÓŁCZESNYM HANDLU MIĘDZYNARODOWYM

In this research work, the author focuses on the analysis of the problem of specificity the regulatory protectionism in contemporary foreign trade policy. It has been emphasized that the talks between EU and USA will make reducing regulatory barriers. New agreements to remove trade barriers aim at reducing dead-weight costs and at increasing net social gains from international trade. The article examined the impact of investor-state dispute resolution mechanisms in reducing the power of national governments to regulate and elimination of market inequality. The article offers examples of successful regulatory cooperation efforts in the hope that it will shed light on possible approaches to addressing regulatory divergences. Ideally, the best way to address problems arising from regulatory divergence would be on a multilateral basis. The main aim of the article is the presentation of the specificity of the regulatory protectionism in contemporary foreign trade policy

Unification, Harmonisation and Competition in European Company Forms

The main tools for the convergence of company law are full legal unification, mere harmonisation, and regulatory competition. The article uses this framework to study both the existing and the proposed European company forms (ECFs): the European Company, the European Cooperative Company, the European Private Company and the Single Member Company.All ECFs aim at legal unification, but none of them have been endowed with comprehensively unified legal regimes; their regulation is patchy and stratified and suffers from heavy referencing to national law in crucial areas such as corporate governance and corporate groups. It is therefore no surprise that ECFs have failed to win the favour of European entrepreneurs, and the data on the diffusion of ECFs are not encouraging: a large proportion of the few registered ECFs are in fact only shell companies, and most of the operating ECFs are found only in selected parts of central Europe. This failure is the result of high setup, legal and reputational costs, not offset by sufficiently important benefits. The roots of the fiasco go deeper, however, as regulatory protectionism impedes the adoption of attractive supranational company forms.While acknowledging that forcing further cooperative convergence could be not only costly but also ineffective, it must be noted that to some extent non-cooperative convergence is already occurring, at least with reference to national company forms suitable for small companies. Here, in contrast with the cooperative/supranational level, the non-cooperative mechanism of regulatory competition needs not inevitably turn into regulatory protectionism but can instead be a positive source of emulation, causing the diffusion of effective national company forms and leading ultimately to spontaneous legal convergence without supranational intervention.Until there is a true political Union, EU company law makers should realise that in the field of ECFs no law is better than bad law, avoiding the path of cooperative adaptation and trusting the uniforming force of regulatory competition instead.

A ‘New Haven’ Look at ASEAN’s Promotion of Transparency in Agri-food Trade

In a region where agriculture is the ‘backbone’ of national economies, where an annual gross domestic product (GDP) growth is estimated at over 5% and where potential consumers represent one fifth of the world population, sanitary and phytosanitary (SPS) measures of the Association of Southeast Asian Nations (ASEAN) tend to be employed not only for public health protection purposes, but also for advantaging national industries. To minimize abusive uses of such measures, it is necessary to have a clear picture of applicable SPS requirements and regulations. From a policy-oriented perspective, the paper examines ASEAN’s contributions to the promotion of transparency in agri-food trade under the World Trade Organization (WTO) regime and clarifies problems likely to cause regulatory protectionism. Considering the current trend of cooperation, it also reviews SPS-related transparency provisions in free trade agreements (FTAs), before suggesting that ASEAN’s decision-makers have a closer look at the Japanese FTA model for inspiration, with a view to establishing provisions having non-discriminatory effects on third parties in their future agreements.

Risk Regulation, Endogenous Public Concerns, and the Hormones Dispute: Nothing to Fear But Fear Itself?

The dispute between the United States and the European Union (EU) regarding the EU ban on meat imports treated with hormones raises the question: How should regulators respond to public fears that are disproportionate to the risks as evaluated by experts in risk assessment? If regulators cannot eliminate public fears through education, then there is some social benefit from regulations that reduce the feared risks and thereby reduce public anxiety and distortions in behavior flowing from that anxiety. These considerations imply that we cannot simply ignore public fears that technocrats would deem irrational. On the other hand, there is the danger that special interests may seek to generate consumer anxiety and lobby for regulations that serve their interests. I explore an approach that takes public fears seriously as social costs but also treats them as endogenous variables. I use this framework to evaluate risk regulations in terms of economic efficiency and suggest that the danger of inefficient regulation is most acute when domestic industries promote or sustain fears regarding imported products. From this perspective, the World Trade Organization ruling against the EU in the hormones dispute, based on the risk assessment requirements in the Agreement on Sanitary and Phytosanitary Measures, may represent a reasonable approach to guarding against the danger of regulatory protectionism, understood broadly to describe inefficient regulations that the importing country would not have adopted but for the foreign nationality of the producers disadvantaged by those regulations.

Consumer Information on GM-Food in Switzerland and WTO Law

The WTO's objective is to provide for sustainable market liberalization, thus, allowing for the integration of markets to the benefit of producers and consumers alike. On first sight, harmonization of domestic regulatory measures would be the foremost objective of the two agreements. The elimination of illegitimate, regulatory measures covered by the TBT Agreement would contribute to greater market harmonization, larger economies of scale and thus higher consumer and producer benefits. Unlike for tariffs, the evaluation of the trade restrictiveness of domestic regulatory measures is complicated by uncertainties over their effects. Common sense suggests that regulatory protectionism occurs. However, distinguishing between protectionist and non-protectionist domestic regulations raises questions of legitimacy and adequate standards of review (subsidiarity) to a much larger extent than for border measures. There can be no doubt that the WTO Agreements do not prohibit the taking of domestic regulatory measures per se. Rather, the Agreements' objectives are to prevent that regulatory measures are taken for protectionist (i.e. illegitimate) purposes and are neither discriminatory nor impair trade more than necessary. Besides the EU Switzerland is one example of a WTO Member who has implemented legislation both on GM-food safety and labelling. Switzerland was one of the first countries establishing a mandatory labeling regime for GM-food in 1995. The scheme has been modified several times and a major revision is planned to enter into force on January 1 2005. The latest revision will bring Swiss GM-food labeling more in line with recent EC legislation on GM food and feed adopted in 2003. This paper will review the existing and planned Swiss labelling scheme for GM-food. It will compare it with analogous EC legislation and provide an analysis of pertinent issues relating to the WTO Agreements.

OGM et relations commerciales transatlantiques

Trade-related issues in the regulation of genetically-modified organisms This paper examines some of the trade-related aspects of the transatlantic conflict over agricultural biotechnology regulation. We first review the notion of "regulatory protectionism" and the difficulties arising in its definition. We also discuss its economic rationale in the light of the strategic trade policy literature. Next, we turn to an empirical assessment of the trade effects of EU biotechnology regulations, verifying the evidence in support of US claims that those regulations have hurt US agricultural exports. Preliminary econometric results at a disaggregated level seem to indicate that there was no shock on US exports of corn seeds for planting in the years 1997-2000. Evidence for soybeans points to a price effect. The paper then turns to a comparison of GMO regulation in the US and EU, assessing the importance of trade vs non-trade issues.

Regulatory Protectionism, Developing Nations, and a Two-Tier World Trade System

Regulatory Protectionism, Developing Nations and a Two-Tier World Trade System* ‘Regulatory protection’ or technical barriers to trade (TBT) are two names for the myriad of cost-raising, behind-the-border measures that substantially inhibit trade. This Paper argues that TBTs are important and their liberalization will continue. This liberalization will involve ‘hegemonic harmonization’ or mutual recognition of rules and test. Such liberalization will almost surely entail preferential arrangements among rich nations, creating in essence, a two-tier system of market access with developing nations in the second tier. Importantly, this discrimination will be higher for advanced products (which are naturally subject to more regulations and standards), so the discrimination may have an ‘escalating’ feature, much as tariffs did in the early post-war period. Consequently, the WTO should address the potentially discriminatory aspects of regional TBT liberalization initiatives. In particular, rules of origin should not be allowed. JEL Classification: F13 and F15

Regulatory Protectionism and the Law of International Trade

A wide array of policy instruments can protect domestic firms against foreign competition. Regulatory measures that raise the costs of foreign firms relative to domestic firms are exceptionally wasteful protectionist devices, however, with deadweight costs that can greatly exceed those of traditional protectionist instruments such as tariffs and quotas. This article develops the welfare economics of regulatory protectionism and a related political economy of the national and international legal systems that must confront it, including the WTO, the NAFTA, the European Union, and the United States federal system. It explains why regulatory measures that serve no purpose other than to protect domestic firms against foreign competition will generally be prohibited in politically sophisticated trade agreements, even when other instruments of protection are to a degree permissible. It further suggests why regulatory measures that serve honest, non protectionist objectives will be permissible in sophisticated trade agreements even though their regulatory benefits may be small and their adverse effect on trade may be great -- that is, it explains why trade agreements generally do not authorize balancing analysis akin to that undertaken in certain dormant commerce clause cases under U.S. law.

Preliminary assessment of the effects of the WTO agreement on sanitary and phytosanitary trade regulations

Sanitary and phytosanitary (SPS) measures that regulate movement of products across international borders are necessary to protect public health or the environment, but may also be used to protect domestic producers from international competition. The recent WTO Agreement on the Application of SPS Measures aims to create a set of multilateral trade rules which allows the legitimate use of trade regulations for health and environmental protection, while disallowing their use for mercantilist regulatory protectionism. This paper examines WTO jurisprudence, negotiated settlements of formal complaints, and unilateral implementation of Agreement's provisions since its entry into force to evaluate whether and how the Agreement has served the interests of the world trading system. Copyright 1998 by Oxford University Press.