Impacts of International Regulatory Frameworks on Global Trade Practices

Abstract

This study provides insights into how international regulations affect MNCs in their global trade practices by bridging the research gap through both cross-industry and cross-country comparisons. This study addresses regulation stringency, tariff and non-tariff barriers as key determinants of compliance costs, trade performance, and profitability, and how firm size and type act as moderating factors that affect a firm's capabilities to deal with the complexity of regulations. Quantitative research design is applied through merging secondary data of trade data from WTO and UN Comtrade with survey data on firm-level variables in the manufacturing, technology, and service industries. Multiple regression analysis and structural equation modeling are used to analyze direct, indirect, and moderating effects of regulations on compliance cost and firm trade performance, in an effort to reveal relationships between regulations, compliance cost, and trade performance. It reveals that regulatory stringency significantly contributes to compliance costs (β = 0.42, p < 0.01). Both tariff and non-tariff barriers impact the firms' global trade performance. Tariff and non-tariff barriers have a significant negative effect on trade volume (β = -0.21, p < 0.05) and a positive effect on firm strategy changes (β = 0.35, p < 0.01), respectively. Moderating effects of firm size (β = 0.18, p < 0.05) and industry type (β = 0.15, p < 0.05) on the negative impact of regulation complexity are found. Compared with emerging (70) and developing (60) economies, the developed economy receives the highest score (85) on global trade performance. The findings offer relevant recommendations to managers and policymakers in order to deal with the regulatory environment. It also has implications for academics and suggests that harmonious regulations, compliance strategy, and industry-specific approach could enhance global trade performance. It combines three theories: institutional theory, global value chain, and transaction cost economics, and shows the importance of proactive and collaborative regulation management and harmonized regulations in improving global trade performance.