NATIONAL REGULATION IN THE GLOBAL ECONOMY

NATIONAL REGULATION IN THE GLOBAL ECONOMY

D. Vogel

Trading Up: Consumer and Environmental Regulation in a Global Economy pp. 1-23

 A Summary

In a Nutshell

Regulation is shaped by forces outside the state. Alliances between protectionist producers and NGO have become commonplace and are important sources of opposition to trade liberalization.

 The WTO has played an important role in preventing the use of unilateral trade restrictions for the purpose of promoting regulation both domestically and internationally. And whilst such agreements and treaties have limited the role of national regulations, trade liberalization can just as easily be achieved by forcing national with lower standards to raise them as it can by forcing countries with higher standards to lower them. The former is the consequence of what has been called the California effect where there is one wealthy green jurisdiction which promotes a race to the top amongst their trading partners. This is because stricter standards represent a source of comparative advantage to such states in part because their producers find it easiest to comply with the regulations. Such firms can compete against foreign competitors by increasing their standards. Thus exporters to such a state need in to raise their own standards, and there is a knock-on effect of their trading partners then needing to do so as well…. and so on.

 Such an effect is likely to be confined to product standards rather than standards that affect how goods are produced. Trade liberalization is most likely to strengthen consumer and environmental protection when a group of nations has agreed to reduce the role of regulations as trade barriers and the most powerful among them has domestic constituencies that support stronger regulatory standards.

 It is only recently that non-tariff barriers such as regulations have become continuing sources of conflict. This is due to the increased drive for economic integration, the growth in the amount of regulation, and the expansion of trade itself (by bringing new consumers into contact with foreign products, as well as the negative effects of the physical act of trade itself).

 

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