Regulating Quality for Export: Evidence from an Agricultural Export Promotion Program in Chin

Attention toward quality has been exacerbated by the recent significant increase in the demand for high quality products. Among firms trading internationally, quality shocks about one firm’s products may damage the group’s reputation. The ongoing debate on how government interventions in food safety capacity can address these issues. This study examines the effectiveness of China’s Export Quality and Safety Demonstration (EQSD) program, a policy initiative designed to improve products’ quality in the agricultural sector by imposing strict regulations during domestic agri-food value chain. Utilizing firm-product-destination level data from 2009 to 2015, we employ a difference-in-differences approach to evaluate the program’s impact on exports. Our findings reveal that EQSD significantly enhances export performance, with heterogeneous effects across different ownership types, various products and counties. Furthermore, the program’s effectiveness is more pronounced in countries with better economic development, stricter regulations, or more homogeneity. We identify three key mechanisms driving these effects: cost reduction, quality improvement and trade facilitation. Surprisingly, we found that this export promotion policy also benefits industrial upgrading. This research contributes to the literature on export promotion, NTMs and industrial upgrading, offering valuable insights for policymakers in designing targeted interventions to boost agricultural exports amid complex global trade barriers.