Publication: The Effect of Product Standards on Agricultural Exports
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Published
2015-01
ISSN
0306-9192
Date
2014-12-16
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We introduce a standards restrictiveness index to analyze the impact that food safety standards have on international exports of agricultural products. Our new measure of standards restrictiveness is created using maximum residue levels of pesticides for 61 importing countries and 66 different products. The index accounts for both the number of pesticides regulated for each product and the allowable level for those pesticides by each importer. 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 in most cases is indistinguishable from zero. This is consistent with the assumption that meeting stringent standards increases primarily the fixed cost to export to a destination. Once a firm adjusts its production to comply with the standards of a foreign market, those standards do not impact the intensity of exports to that market. Finally, our results suggest that exports from developing countries are particularly constrained by stricter standards.
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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 Product Standards and Firms’ Export Decisions(World Bank, Washington, DC, 2015-06)The paper estimates the effect of product standards on firms’ export decisions using two novel datasets. The first covers all exporting firms in 42 developing countries. The second covers pesticide standards for 243 agricultural and food products in 63 importing countries over 2006–12. The analysis shows that product standards significantly affect foreign market access. More restrictive standards in the importing country, relative to the exporting country, lower firms’ probability of exporting as well as their export values and quantities. The relative restrictiveness of standards also deters exporting firms from entering new markets and leads to higher exit rates from those markets. Moreover, firm characteristics mediate the effect of product standards on firms’ export decisions. Smaller exporters are more negatively affected in their market entry and exit decisions by the relative stringency of standards than larger exporters. Positive network effects of exporters from the same country may help reduce the burden of importing countries’ standards on firms’ decisions to enter new markets.Publication A Race to the Top? A Case Study of Food Safety Standards and African Exports(World Bank, Washington, DC, 2001-03)Growing concern over health risks associated with food products is at the forefront of trade policy debate. At the heart of this debate is the "precautionary principle," which holds that precautions should be taken against health, safety, and environmental risks even when science has not established direct cause-and-effect relationships--as with, for example, the EUropean ban on hormone-treated beef. The authors quantify the impact on food exports from African countries of new EUropean Union standards for aflatoxins, structurally related toxic compounds that contaminate certain foods and lead to the production of acute liver carcinogens in the human body. The authors estimate the impact of changes in differing levels of such protection based on the EU standards (and suggested by international standards) for 15 EUropean countries and 9 African countries between 1989 and 1998. The results suggest that implementation of the EU's new aflatoxin standards will significantly hurt African exports to EUrope of nuts, cereals, and dried fruits, which are highly sensitive to the aflatoxin standards. The EU standards would reduce health risks by only about 1.4 deaths per billion a year but would cut African exports by 64 percent, or $670 million, compared with their level under international standards.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.Publication Product Standards and Firms’ Export Decisions(Published by Oxford University Press on behalf of the World Bank, 2019-06)Two novel datasets are used to estimate the effect of product standards on firms’ export decisions. The first covers all exporting firms in 42 developing countries. The second covers pesticide standards for 243 agricultural and food products in 80 importing countries over 2006–2012. The analysis shows that product standards affect significantly foreign market access. An increase in the stringency of standards in the destination country, relative to the exporting country, lowers firms’ probability of exporting, deters exporters from entering new markets, and fosters exit from existing markets. Smaller exporters are more affected in their market entry and exit decisions by the relative stringency of destination standards than larger exporters. Networks of other exporters from the same country can help overcome the negative effects of the relative stringency of destination standards on exporter entry and exit.
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