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Do foreign product standards matter? Impacts on costs for developing country exporters

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  • Keith E. Maskus
  • Tsunehiro Otsuki
  • John S. Wilson

Abstract

We estimate the impact on production costs of firms in developing countries from conforming to regulations imposed by major importing countries, using firm-level data from 16 developing countries. The findings indicate that standards increase variable production costs by requiring additional labor and capital. A 1% increase in initial investment to meet foreign compliance costs raises variable costs by between 0.06 and 0.13%. Fixed costs of compliance are non-trivial, averaging about 4.7% of annual variable costs. The cost impacts might be an important determinant of export success for firms in developing countries. The results may provide one indication of the potential barriers to trade facilitation that technical regulations can pose.

Suggested Citation

  • Keith E. Maskus & Tsunehiro Otsuki & John S. Wilson, 2013. "Do foreign product standards matter? Impacts on costs for developing country exporters," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 20(1), pages 37-57, March.
  • Handle: RePEc:taf:raaexx:v:20:y:2013:i:1:p:37-57
    DOI: 10.1080/16081625.2013.744685
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    References listed on IDEAS

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    1. Wilson, John S. & Otsuki, Tsunehiro, 2004. "To spray or not to spray: pesticides, banana exports, and food safety," Food Policy, Elsevier, vol. 29(2), pages 131-146, April.
    2. Clougherty, Joseph A. & Grajek, Michał, 2014. "International standards and international trade: Empirical evidence from ISO 9000 diffusion," International Journal of Industrial Organization, Elsevier, vol. 36(C), pages 70-82.
    3. John S. Wilson & Victor O. Abiola, 2003. "Standards and Global Trade : A Voice for Africa," World Bank Publications, The World Bank, number 15131, May.
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    Cited by:

    1. Calza, Elisa & Goedhuys, Micheline, 2018. "Domestic quality certification and growth of Vietnamese MSMEs," MERIT Working Papers 026, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    2. Neda Trifkovic, 2016. "Private standards and labour productivity in the food sector in Viet Nam," WIDER Working Paper Series 163, World Institute for Development Economic Research (UNU-WIDER).
    3. repec:bla:worlde:v:41:y:2018:i:11:p:3098-3129 is not listed on IDEAS
    4. Trifkovic Neda, 2015. "Spillover Effects of International Standards: Work Conditions in Vietnamese Small and Medium Enterprises," WIDER Working Paper Series 047, World Institute for Development Economic Research (UNU-WIDER).
    5. Stefan Borsky & Andrea Leiter & Michael Pfaffermayr, 2018. "Product quality and sustainability: The effect of international environmental agreements on bilateral trade," The World Economy, Wiley Blackwell, vol. 41(11), pages 3098-3129, November.
    6. Otsuki, Tsunehiro & Honda, Keiichiro & Michida, Etsuyo & Nabeshima, Kaoru & Ueki, Yasushi, 2015. "Effects of RoHs and REACH regulations on firm-level production and export, and the role of global value chains : the cases of Malaysia and Vietnam," IDE Discussion Papers 526, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    7. Julien Berthoumieu & Viola Lamani, 2016. "Vertical Differentiation, Uncertainty, Product R&D and Policy Instruments in a North-South Duopoly," Working Papers hal-01285559, HAL.

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