NON TARIFF MEASURES IN THE TRANSATLANTIC FINANCIAL SERVICES INDUSTRY

The financial crisis in 2008 was seen as a possibility by politicians to align financial regulation on both sides of the Atlantic. Indeed, differences in financial regulation have always been large. However, despite their apparent willingness to harmonize their sets of rules, politicians in US and EU still focus mostly on policies within their own boundaries. It is believed that – despite attempts and efforts of several committees and working groups – instead of convergence during the crisis, independently carried out domestic policies have caused divergence in financial regulations instead; i.e. the size of Non-Tariff Measures (NTMs) has increased. This research finds, using our own calculations and the simulation model of Francois and Hall (2003), that differences between financial regulations have actually increased overall since 2008, even though also some divergences have been addressed. This divergence has led to negative welfare effects on both sides of the Atlantic. In different types of scenario calculations we find that worldwide production, bilateral trade and net welfare (production- and consumer surplus) respond negatively to the increase regulatory divergence.