Quantifying the Trade and Welfare Effects of EU Aflatoxin Regulations on the Dried Fruit Industry

Increased concerns on food contaminants draw special attention to food safety regulations. These regulations may have direct impact on food trade. The aim of the paper is to assess the impact of regulations concerning aflatoxin maximum residue limits (MRL) on dried fruits trade. The empirical method we adopt combines both gravity and welfare methodologies in a partial equilibrium context. Findings reveal that the EU regulations act as barriers to trade. Results indicate that the tighter the aflatoxin MRL regulations adopted by the export destinations (importing country), the poorer becomes the export performance of the exporting country. In addition, the results of welfare analysis show that tighter standards impose a burden on foreign producers. While producers of EU enjoy larger producer profits, both domestic and international welfare increase as a result of tighter MRL standards. The findings provide further evidence on the fact that the welfare effect of MRLs is positive and significant, although the effect on trade may be negative. In addition, wider regulatory heterogeneity is found to decrease the value of trade among trading nations.