Harmonization and mutual recognition: What are the effects on trade?

This paper analyses the effect of harmonization and mutual recognition of standards on trade flows. Although harmonization and mutual recognition are commonly believed to reduce trade costs towards freer trade, their impact on trade is more complex, and little is known about their actual effects. In order to assess which approach has the greatest impact on trade, this paper looks at the evidence stemming from regional trade agreements. Not all regional trade agreements cover TBT area and among those that do, some favour harmonization, others favour mutual recognition. Using a gravity model, we estimate the effects on trade of harmonization and mutual recognition on the patterns of trade. Results show that standards harmonization and mutual recognition enhance trade. Moreover, mutual recognition has a higher positive effect on trade than harmonization, and this is due to mutual recognition of conformity assessment. These results are robust to endogeneity.