Gains from Harmonizing US and EU Auto Regulations under the Transatlantic Trade and Investment Partnership


July 1, 2015, 12:00 AM EDT
Peterson Institute for International Economics, Washington, DC

Event Summary

Senior Fellow Caroline Freund presented her Policy Brief, Gains from Harmonizing US and EU Auto Regulations under the Transatlantic Trade and Investment Partnership, coauthored with Research Analyst Sarah Oliver, on July 1, 2015, at the Peterson Institute. At a time when there is much dispute over trade deals, the study provides an important reminder of the potential gains from economic integration. Senior Fellow William R. Cline moderated a discussion with the two authors following the presentation.

Regulatory standards protect consumers from defective products, but they also impede trade when they differ across countries. The Transatlantic Trade and Investment Partnership (TTIP) seeks to reduce distortions in the automobile and other industries. Freund and Oliver evaluate the equivalence of automobile regulations in the United States and the European Union in terms of catastrophe avoidance and estimate the trade gains from harmonization. The removal of regulatory differences in autos is estimated to increase trade in the sector by 20 percent or more. The effect on trade from harmonizing transatlantic standards would be only slightly smaller than the effect of EU accession on auto trade. The large economic gains from regulatory harmonization imply that TTIP has the potential to improve productivity while lowering prices and enhancing variety for consumers.

Caroline Freund, senior fellow at the Peterson Institute since May 2013, was chief economist for the Middle East and North Africa at the World Bank from 2011 to 2013. Prior to that she was lead economist from 2009 to 2011 and senior economist during 2002–09 in the research department of the World Bank. She was also senior economist at the International Monetary Fund during 2006–07 and economist at the Federal Reserve Board from 1997 to 2003.

Event Materials

Presentation [PDF]