Departmental Bulletin Paper Determination and Harmonization of Product Standards in a Free Trade Agreement

Yanase, Akihiko  ,  Kurata, Hiroshi

(E17-1) 2017-04 , 名古屋大学大学院経済学研究科附属国際経済政策研究センター
This study considers endogenous domestic standards on products to control negative consumption externalities in a three-country model of international oligopoly with a possible free trade agreement (FTA). We examine how the level of standards and welfare effects of FTA are affected and what is caused by harmonization of standards. We find that if asymmetries in preference or transboundary externalities are not too strong, an FTA makes the standards more stringent, and it may or may not make the FTA members better off, while the non-member countries better off. We also demonstrate that harmonization of standards between the FTA members makes the FTA more favorable.

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