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The effect of product standards on agricultural exports from developing countries

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  • Ferro, Esteban
  • Wilson, John S.
  • Otsuki, Tsunehiro

Abstract

The authors create a standards restrictiveness index using newly available data on maximum residue levels of pesticides for 61 importing countries. The paper analyzes the impact that food safety standards have on international trade of agricultural products. The findings suggest that more restrictive standards are associated, on average, with a lower probability of observing trade. However, after controlling for sample selection and the proportion of exporting firms in a gravity model, the analysis finds that the effect of standards on trade intensity is indistinguishable from zero. This is consistent with the assumption that meeting stringent standards increases primarily the fixed costs of exporting. Once firms enter the market, however, standards do not impact the level of exports. The analysis also finds a greater marginal effect of BRICS (Brazil, Russia, India, China, and South Africa) standards on the probability of trade, relative to other countries'standards, keeping in mind however that on average BRICS standards are less restrictive. The analysis also suggests that exporters in low-income countries are more adversely affected by stricter standards.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6518.

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Date of creation: 01 Jun 2013
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Handle: RePEc:wbk:wbrwps:6518

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Related research

Keywords: Free Trade; Economic Theory&Research; Labor Policies; Food&Beverage Industry; Trade Law;

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  1. Keith Head & John Ries, 2001. "Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of U.S.-Canada Trade," American Economic Review, American Economic Association, vol. 91(4), pages 858-876, September.
  2. Otsuki, Tsunehiro & Wilson, John S. & Sewadeh, Mirvat, 2001. "Saving two in a billion: : quantifying the trade effect of European food safety standards on African exports," Food Policy, Elsevier, vol. 26(5), pages 495-514, October.
  3. Li, Yuan & Beghin, John C., 2014. "Protectionism indices for non-tariff measures: An application to maximum residue levels," Food Policy, Elsevier, vol. 45(C), pages 57-68.
  4. Leamer, Edward E, 1974. "The Commodity Composition of International Trade in Manufactures: An Empirical Analysis," Oxford Economic Papers, Oxford University Press, vol. 26(3), pages 350-74, November.
  5. Wilson, John S. & Otsuki, Tsunehiro & Majumdar, Baishali, 2003. "Balancing Food Safety And Risk: Do Drug Residue Limits Affect International Trade In Beef?," 2003 Annual meeting, July 27-30, Montreal, Canada 21971, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  6. Xiong, Bo & Beghin, John C., 2010. "Does European Aflatoxin Regulation Hurt Groundnut Exporters from Africa?," Staff General Research Papers 31595, Iowa State University, Department of Economics.
  7. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 441-487, 05.
  8. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
  9. 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.
  10. Chunlai Chen & Jun Yang & Christopher Findlay, 2008. "Measuring the Effect of Food Safety Standards on China’s Agricultural Exports," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 144(1), pages 83-106, April.
  11. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
  12. Bergstrand, Jeffrey H, 1989. "The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 143-53, February.
  13. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
  14. Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
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