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Disentangling Demand-Enhancing and Trade-Cost Effects of Maximum Residue Regulations

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Maximum residue levels (MRLs) regulations in plant products can create unnecessary trade barriers on one hand and enhance demand via risk mitigation or quality assurance on the other. We stipulate a generalized gravity equation model to disentangle the effects of MRLs on the import demand and foreign exporters’ supply. Applying the framework to the MRLs on pesticides imposed by high-income OECD countries, we find that the MRLs jointly enhance the import demand and hinder foreign exporters’ supply. In addition, exporters from the less and least developed countries are more constrained by the MRLs than their competitors from the developed world.

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Paper provided by Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University in its series Food and Agricultural Policy Research Institute (FAPRI) Publications with number 13-wp544.

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Date of creation: Nov 2013
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Handle: RePEc:ias:fpaper:13-wp544

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Keywords: maximum residue level; sanitary and phytosanitary; food safety; nontariff barriers; gravity model. JEL classifications: F14; Q17;

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Cited by:
  1. Xiong, Bo & Beghin, John C., 2012. "Stringent Maximum Residue Limits, Protectionism, and Competitiveness: The Cases of the US and Canada," Working Papers 142384, International Agricultural Trade Research Consortium.
  2. Otsuki, Tsunehiro & Michida, Etsuyo & Nabeshima, Kaoru & Ueki, Yasushi, 2014. "Estimating the effect of chemical safety standards on firm performance in Malaysia and Vietnam," IDE Discussion Papers 455, Institute of Developing Economies, Japan External Trade Organization(JETRO).

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