Are Trade Agreements Good for You?

In this paper we examine international regulatory agreements that are negotiated under  lobbying pressures from producer groups. The way in which lobbying influences the cooperative setting of regulatory policies, as well as the welfare impacts of international agreements, depend crucially on whether the interests of producers in different countries are aligned or in conflict. The former situation tends to occur for product standards, while the latter tends to occur for process standards. We find that, if producer lobbies are strong enough, agreements on product standards lead to excessive de-regulation and decrease welfare, while agreements on process standards tighten regulations and enhance welfare.

back