The U.S. regulatory environment and international trade: Lessons from the electricity sector

Regulation has been frequently blamed for the decline of U.S. international competitiveness. This article examines the alleged link between regulation and trade within the context of electric utility policies implemented since 1970. Under an alternative electricity future in which the regulatory burden is reduced and regulatory inefficiencies are minimized, electricity prices are shown to fall by at least 30%. This reduction in the price of a key factor input is shown to lead to reductions in the prices of U.S. export- and import-competing goods and, ultimately, to a modest reduction in the U.S. trade deficit.