Product standards and margins of trade: Firm level evidence

In order to address the trade effect of restrictive product standards on the extensive and the intensive margin of trade this paper matches a detailed dataset of French firms exports for the period 1995-2005 with a new database on specific trade concerns raised in the TBT and SPS committees at the WTO. The advantage of using specific trade concerns as an index of the degree of restrictiveness of product standards is that it focuses only on those product standards that are perceived to represent a barrier to trade, thus overcoming a measure limitation of existing measures of non-tariff measures. We analyse the effects of product standards on three trade related aspects: (i) probability to export (firm-product extensive margin), (ii) value exported (firm-product intensive margin) and (iii) pricing strategy (upgrading versus pricing to market). Moreover we look at how firms’ market shares, orientation of exports, and comparative advantage modify the effect of SPS. We find that SPS concern discourages the presence of French exporters in SPS-imposing foreign markets, this effect is amplified for big firms. On the other hand, intensive margin is not significantly affected.