Quality standards for used durables: An indirect subsidy?

We construct a theoretical framework to study the impact of quality standards for used durable goods on trade [fl]ows, pro[fi]ts and consumer welfare. We show that asymmetric quality standards generate trade in used goods from high- to low-standard countries while at the same time reducing trade in new goods. Producers in the exporting country bene[fi]t from this change while consumers lose. In the importing country consumers are better off but domestic industry is hurt. These [fi]ndings suggest that quality standards on used goods may be a powerful policy tool whose use should be monitored by the WTO.