Publication: Standards and Export Decisions: Firm-Level Evidence from Developing Countries
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Date
2008
ISSN
09638199
Published
2008
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Abstract
Standards and technical regulations set in importing countries have become a rising concern to exporters, especially to those in developing countries. This paper examines the importance of various types of standards in developing-country firms' export decisions. Drawn from the World Bank Technical Barriers to Trade (TBT) Survey database, we find that different types of standards exhibit sharply distinct relations with firms' intensive and extensive margins of exports. Quality standards are positively correlated not only with firms' average export volume across markets and products but also their export scope, measured by the number of export markets and products. A similar relationship is found between labeling requirements and export scope. Certification procedures, however, are associated with a significant decline in the number of export markets and export products. Our results suggest that different approaches should be taken to address each type of technical regulations. Not all standards need to be negotiated away to boost trade, but negotiations on certification procedures with the aim of reaching Mutual Recognition Agreements (MRAs) can help firms improve economies of scale and scope.
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Publication Do Standards Matter for Export Success?(World Bank, Washington, DC, 2006-01)Standards and technical regulations are an increasingly prominent part of the international trade policy debate. In particular, there has been considerable discussion of whether standards and regulations affect trade costs and export prospects for developing countries. In this paper the authors examine how meeting foreign standards affects firms' export performance, reflected in export propensity and market diversification. The analysis draws on the World Bank Technical Barriers to Trade Survey database of 619 firms in 17 developing countries. The results indicate that technical regulations in industrial countries adversely affect firms' propensity to export in developing countries. In particular, testing procedures and lengthy inspection procedures reduce exports by 9 percent and 3percent, respectively. Furthermore, in the model, the difference in standards across foreign countries causes diseconomy of scale for firms and affects decisions about whether to enter export markets. The empirical analysis presented here implies that standards impede exporters' market entry, reducing the likelihood of exporting to more than three markets by 7 percent. In addition, the authors find that firms that outsource components are more challenged by compliance with multiple standards.Publication The Effect of Product Standards on Agricultural Exports from Developing Countries(World Bank, Washington, DC, 2013-06)The authors create a standards restrictiveness index using newly available data on maximum residue levels of pesticides for 61 importing countries. The paper analyzes the impact that food safety standards have on international trade of agricultural products. The findings suggest that more restrictive standards are associated, on average, with a lower probability of observing trade. However, after controlling for sample selection and the proportion of exporting firms in a gravity model, the analysis finds that the effect of standards on trade intensity is indistinguishable from zero. This is consistent with the assumption that meeting stringent standards increases primarily the fixed costs of exporting. Once firms enter the market, however, standards do not impact the level of exports. The analysis also finds a greater marginal effect of BRICS (Brazil, Russia, India, China, and South Africa) standards on the probability of trade, relative to other countries' standards, keeping in mind however that on average BRICS standards are less restrictive. The analysis also suggests that exporters in low-income countries are more adversely affected by stricter standards.Publication The Cost of Compliance with Product Standards for Firms in Developing Countries : An Econometric Study(World Bank, Washington, DC, 2005-05)Standards and technical regulations exist to protect consumer safety or to achieve other goals, such as ensuring the interoperability of telecommunications systems, for example. Standards and technical regulations can, however, raise substantially both start-up and production costs for firms. Maskus, Otsuki, and Wilson develop econometric models to provide the first estimates of the incremental production costs for firms in developing nations in conforming to standards imposed by major importing countries. They use firm-level data generated from 16 developing countries in the World Bank Technical Barriers to Trade (TBT) Survey Database. Their findings indicate that standards do increase short-run production costs by requiring additional inputs of labor and capital. A 1 percent increase in investment to meet compliance costs in importing countries raises variable production costs by between 0.06 and 0.13 percent, a statistically significant increase. The authors also find that the fixed costs of compliance are nontrivial-approximately $425,000 per firm, or about 4.7 percent of value added on average. The results may be interpreted as one indication of the extent to which standards and technical regulations might constitute barriers to trade. While the relative impact on costs of compliance is relatively small, these costs can be decisive factors driving export success for companies. In this context, there is scope for considering that the costs associated with more limited exports to countries with import regulations may not conform to World Trade Organization rules encouraging harmonization of regulations to international standards, for example. Policy solutions then might be sought by identifying the extent to which subsidies or public support programs are needed to offset the cost disadvantage that arises from nonharmonized technical regulations.Publication Regionalism in Standards: Good or Bad for Trade?(2008)Regional agreements on standards have been largely ignored by economists and blessed by multilateral trade rules. Using a constructed panel data that identifies the different types of agreements at the industry level, we find that such agreements increase the trade between participating countries but not necessarily with the rest of the world. Harmonization of standards may reduce the exports of excluded countries, especially in markets that have raised the stringency of standards. Mutual recognition agreements are more uniformly trade promoting unless they contain restrictive rules of origin, in which case intra-regional trade increases at the expense of imports from other countries.Publication Dirty Exports and Environmental Regulation: Do Standards Matter to Trade?(World Bank, Washington, D.C., 2002-03)How to address the link between environmental regulation and trade was an important part of discussions at the World Trade Organization Ministerial in Doha, Qatar in November 2001. Trade ministers agreed to launch negotiations on trade and the environment, specifically clarification of WTO rules. The authors address an important part of the background context for deciding whether or how to link trade agreements to the environment from a developing country perspective. The authors ask whether environmental regulations affect exports of pollution-intensive or "dirty" goods in 24 countries between 1994 and 1998. Based on a Heckscher-Ohlin-Vanek (HOV) model, net exports in five pollution-intensive industries are regressed on factor endowments and measures of environmental standards (legislation in force). The results suggest that, if country heterogeneity such as enforcement of environmental regulations is controlled for, more stringent environmental standards imply lower net exports of metal mining, nonferrous metals, iron, and steel and chemicals. The authors find find that a trade agreement on a common environmental standard will cost a non-OECD country substantially more than an OECD country. Developing countries will, on average, reduce exports of the five pollution-intensive products by 0.37 percent of GNP. This represents 11 percent of annual exports of these products from the 24 studied countries.
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