Tariff liberalization and product standards: Regulatory chill and race to the bottom?

Abstract

Does tariff liberalization cause regulatory chill by putting downward pressure on health, safety, and environmental standards? Or does it cause a race to the top as governments seek to use standards as nontariff barriers to trade? There remains remarkably little empirical evidence to answer these long-debated questions. We seek to address this lack by analyzing annual country-by-industry data on notifications of changes in sanitary and phytosanitary standards by world trade organization members. Our results suggest that the impact of increased trade pressure depends on whether domestic producers are likely to gain or lose from a change in standards. Regulatory chill is the dominant response in most countries, but countries in which producers can adapt to standards relatively cheaply appear to race to the top. Consequently, tariff liberalization encourages divergence in standards across countries. Show more