Transparency as Trade Policy: The Value of Advance Notifications in Technical Regulations

Abstract

Can transparency mitigate the trade costs of regulation? Using newly compiled notification and implementation timelines for WTO-contested technical regulations, matched to French firm–product–destination export data (1995–2007), I show that nearly half of these regulations entered into force before being notified. This lack of transparency has substantial consequences: advance notification more than halves the decline in export participation associated with new regulations, from 7 to 3 percentage points, by reducing temporary exits and encouraging entry, particularly among smaller firms. Strikingly, even when notification arrives after a regulation has taken effect, export participation rebounds once information becomes available. This pattern points to regulatory uncertainty, rather than adjustment time alone, as a key mechanism, consistent with a real-options model of exporting. The estimated tariff equivalent of timely notification ranges from 8 to 28 percentage points, highlighting the substantial trade benefits of regulatory transparency.