The challenge of the international organic certification: a new opportunity for agricultural trading?

The successful literature about gravitational models stresses that bilateral trade flows among countries is influenced by GDP factors and transaction costs. In other words the mass of bilateral trade would be related to the typical demand-supply factors which explain the quantity of traded goods in perfect competition models and a wide series of variables which express transaction costs whose role is strongly highlighted by institutional economists. If compared to the previous literature our paper shows a twofold novelty. First it is the first attempt to analyse the bilateral trade of specific agricultural goods for Italy by a cross country and panel analysis and second it provides an original specification for transaction costs. In particular, we assume that the level of organic certification standards harmonisation between Italy and extra-European countries could represent a good "proxy" for the cultural, political and social affinity in bilateral trading. Interestingly we find that the absence of specific import harmonisation rules between Italy and other extra-European countries decreases the level of bilateral trade for all the agricultural produce. A plausible explanation could be that harmonisation of organic standards is a signal of low transaction costs. In this context for a specific country the awareness of a high harmonisation level of organic standards towards another region could represent affinity in the trading activities for the whole agricultural produce. The policy agenda about the harmonisation of the agricultural standards should be tackled in the context of a more complex agenda concerning the affinity of political, cultural and social practices among different regions in the agricultural and in all the other economic sectors.