Economics and politics of food standards, trade, and development#

Abstract

Standards have played an important role in food trade for a very long time. Their rapid growth in recent years has triggered vigorous debates on their impacts on international trade and development, with many arguing that standards are "non-tariff barriers" to trade and that standards are marginalizing the poor. I present conceptual frameworks and review empirical evidence on the equity and efficiency effects and the political economy of standards. Models which incorporate essential aspects of standards yield complex theoretical results and nuanced conclusions. Careful empirical analyses support such nuanced arguments and find complex effects. For trade, standards can create welfare gains but also involve rent redistribution which induces lobbying by interest groups to set the standards at their preferred level. This makes it difficult to distinguish socially desirable standards from those resulting from political rent-seeking. For development, it is crucial to explicitly account for (a) the endogeneity of the institutional organization of value chains and (b) both smallholder contracting and employment creation on large scale farms when considering the impact of standards on development and poverty.

Estimating Ad Valorem Equivalents of Non-Tariff Measures

“…A review of some of the literature can be found in Ederington and Ruta (2016) and the review prepared for the Working Party of the Trade Committee (TAD/TC/WP(2017)4). See also Swinnen (2016) for a comprehensive discussion of the trade and development issues.…”

The political economy of regulations and trade: Wine trade 1860–1970

“…Finally, tariffs may also be preferred by politicians when there are information imperfections in political markets. 37 The choice to complement or substitute tariff interventions with other regulations, such as standards, including labelling and prohibitions, on the wine production process and the use of certain inputs, can be motivated both by economic and political considerations (Marette & Beghin, 2010;Swinnen, 2016). Labelling and the restrictions of certain inputs (such as the use of raisins in wine production or the blending of French wine with imported North African wine) can reduce asymmetric information for consumers or undesirable externalities.…”

On the impact of non-tariff measures on trade performances of the African agri-food sector

“…The new equilibrium price is higher than the pre-NTM price (from p to p') (figure 2) and increases consumers' expenditures and producers' revenue. The net effect on domestic welfare depends on the magnitude of gain in utility (for consumers) and revenue (for producers), compared to the size of (negative) effect on consumption expenditures and implementation costs: the higher the consumers' utility, the higher the willingness to pay a higher price; the lower the implementation costs, the higher the gain in revenue (Swinnen 2016).…”