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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

Author

Listed:
  • Otsuki, Tsunehiro
  • Honda, Keiichiro
  • Michida, Etsuyo
  • Nabeshima, Kaoru
  • Ueki, Yasushi

Abstract

This paper uses firm-level data to examine the impact of foreign chemical safety regulations such as RoHS and REACH on the production costs and export performance of firms in Malaysia and Vietnam. This paper also investigates the role of global value chains in enhancing the likelihood that a firm complies with RoHS and REACH. We find that in addition to the initial setup costs for compliance, EU RoHS (REACH) implementation imposes on firms additional variable production costs by requiring additional labor and capital expenditures of around 57% (73%) of variable costs. We also find that compliance with RoHS and REACH significantly increases the probability of export and that compliance with EU RoHS and REACH helps firms enter a greater variety of countries. Furthermore, firms participating in global value chains have higher compliance with RoHS and REACH regulations, regardless of whether the firm is directly exporting, when the firm operates in upstream or downstream industries of the countries' supply chain.

Suggested Citation

  • 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).
  • Handle: RePEc:jet:dpaper:dpaper526
    as

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    File URL: https://ir.ide.go.jp/?action=repository_action_common_download&item_id=37652&item_no=1&attribute_id=22&file_no=1
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    References listed on IDEAS

    as
    1. 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.
    2. 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;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 144(1), pages 83-106, April.
    3. Bo Xiong & John Beghin, 2017. "Disentangling Demand-Enhancing And Trade-Cost Effects Of Maximum Residue Regulations," World Scientific Book Chapters,in: Nontariff Measures and International Trade, chapter 6, pages 105-108 World Scientific Publishing Co. Pte. Ltd..
    4. Fontagné, Lionel & Orefice, Gianluca & Piermartini, Roberta & Rocha, Nadia, 2015. "Product standards and margins of trade: Firm-level evidence," Journal of International Economics, Elsevier, vol. 97(1), pages 29-44.
    5. Catherine Ragasa & Suzanne Thornsbury & Satish Joshi, 2011. "Are Food Certification Costs Misestimated? Exporter‐Perspective on the European Standard," Journal of Agricultural Economics, Wiley Blackwell, vol. 62(3), pages 669-689, September.
    6. Otsuki, Tsunehiro & S. Wilson, John, 2003. "Food Safety and Trade: Winners and Losers in a Non-Harmonized World," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 18, pages 266-287.
    7. Maertens, Miet & Swinnen, Johan F.M., 2009. "Trade, Standards, and Poverty: Evidence from Senegal," World Development, Elsevier, vol. 37(1), pages 161-178, January.
    8. Miet Maertens & Liesbeth Colen & Johan F. M. Swinnen, 2011. "Globalisation and poverty in Senegal: a worst case scenario?," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 38(1), pages 31-54, March.
    9. Niven Winchester & Marie-Luise Rau & Christian Goetz & Bruno Larue & Tsunehiro Otsuki & Karl Shutes & Christine Wieck & Heloisa L. Burnquist & Maurício J. Pinto de Souza & Rosane Nunes de Faria, 2012. "The Impact of Regulatory Heterogeneity on Agri-food Trade," The World Economy, Wiley Blackwell, vol. 35(8), pages 973-993, August.
    10. Drogué, Sophie & DeMaria, Federica, 2012. "Pesticide residues and trade, the apple of discord?," Food Policy, Elsevier, vol. 37(6), pages 641-649.
    11. Koh, S.C.L. & Gunasekaran, A. & Tseng, C.S., 2012. "Cross-tier ripple and indirect effects of directives WEEE and RoHS on greening a supply chain," International Journal of Production Economics, Elsevier, vol. 140(1), pages 305-317.
    12. Tien Manh Vu & Hiroyuki Yamada & Tsunehiro Otsuki, 2014. "The rise and fall of multinational enterprises in Vietnam: survival analysis using census data during 2000-2011," OSIPP Discussion Paper 14E001, Osaka School of International Public Policy, Osaka University.
    13. Honda, Keiichiro, 2012. "The effect of EU environmental regulation on international trade : restriction of hazardous substance as a trade barrier," IDE Discussion Papers 341, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Malaysia; Vietnam; International Trade; Productivity; Regulation; Costs; Trade; RoHS; REACH; Cost Function; Market Access; Supply Chain;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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