تحلیلی رفاه از اصل شناسایی متقابل

Countries set norms to protect consumers against ill-functioning products. In the absence of coordination, countries can set different norms and still achieve the same level of consumer protection. Such differences in specifications create barriers to trade because exporting firms incur adaptation costs. The principle of mutual recognition addresses the problem by ensuring that products lawfully manufactured in one country are acceptable in other countries, even without adaptation. The principle shifts the transaction costs of adapting to several norms from firms to consumers. We identify the winners and the losers, and we show that this principle is a source of disparity.

Countries can choose to set norms to protect consumers against ill-functioning products and services. In pursuing the same general objectives when setting their norms, two countries can reach the same level of consumer protection. However in the absence of coordination, legislation developed in each country may differ, yielding different norms. Therefore, a company wishing to export must adapt its product to the norms of the export market. Adaptation is expensive even if the non-adapted product provides consumers with the same level of protection as an adapted product.

The principle of mutual recognition ensures that products lawfully manufactured in one country may be sold without adaptation in another country if both countries pursue the same general objectives regarding health, safety, environmental protection and consumer protection. By using the principle of mutual recognition, firms save the costs of adapting their product to local norms. As a result more firms enter into the market. However, the principle of mutual recognition shifts the transaction costs of adapting to several norms from firms to consumers because consumers suffer either from consuming a good that is not perfectly adapted or from learning foreign norms.