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ISO 9000: New form of protectionism or common language in international trade?

  • Joseph A. Clougherty

    (ESMT European School of Management and Technology)

  • Michal Grajek

    (ESMT European School of Management and Technology)

International standards have the potential to both promote and hinder international trade. Yet empirical scholarship on the standards-trade relationship has been held up due to some methodological challenges: measurement problems, varied effects, and endogeneity concerns. We are able to surmount these challenges while considering the impact of one particular standard on the country-pair trade flows between 91 nations over the 1995-2005 period. To deal with these challenges, we measure the degree of standardization via the penetration of ISO 9000 in individual nations, allow ISO diffusion to manifest via multiple (quality-signaling, information/compliance-cost, and common-language) effects, and use instrumental variable and panel data techniques to overcome endogeneity concerns. We find strong evidence in support of ISO 9000 involving a common-language effect that enhances country-pair trade; yet, the evidence is more mixed with regard to the quality-signaling and information/compliance-cost effects. While we find ISO-rich nations (most notably European) to clearly benefit from the worldwide diffusion of standardization, ISO 9000 represents a de facto trade barrier for nations (e.g., the US and Mexico) lagging behind in terms of adoption.

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File URL: http://static.esmt.org/publications/workingpapers/ESMT-09-006.pdf
File Function: First version, 2009
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Paper provided by ESMT European School of Management and Technology in its series ESMT Research Working Papers with number ESMT-09-006.

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Length: 56 pages
Date of creation: 15 Sep 2009
Date of revision:
Publication status: Published in International Journal of Industrial Organization 36(5):70-82
Handle: RePEc:esm:wpaper:esmt-09-006
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