The Heterogeneous Effects of Standards on Agricultural Trade Flows

Abstract

This article uses a theory‐based translog gravity model to investigate the heterogeneous effects of food standards on aggregate agricultural trade. We revisit the ‘standards‐as‐barriers‐to‐trade’ debate with a distinctive twist. In contrast to existing works, we show that standards reduce trade but even more so for countries that trade smaller volumes. Our identification strategy exploits the within‐country variation in specific trade concerns. We confirm that stricter importer standards are indeed trade‐restrictive. However, the estimated trade cost elasticity varies depending on how intensively two countries trade. Specifically, it decreases in magnitude with an increasing import share of the exporter in the importing country's total imports. The reason is simple but intuitive; bigger trading partners find it more profitable to invest in meeting the costs of importer‐specific standards. This work is novel in showing that the standards–trade debate misses out on an important heterogeneity driven by existing import shares. Liberalising non‐tariff measures will favour smaller trading partners more than well‐established ones.

Trade Costs and Demand-Enhancing Effects of Agrifood Standards: Consequences for Sub-Saharan Africa

“…Nevertheless, in a recent study on the dual trade effects of SPS and TBT measures on Chinese pork imports, Peci and Sanjuán (2020) arrive at similar conclusions when using the count measure and the simple dummy. A similar conclusion is reached in Fiankor et al (2021) for specific trade concerns raised on SPS measures. 8 An alternative to the "interaction or route approach" is to limit the sample to only SSA exporters and OECD importers.…”

“…However, we see a trade enhancing effect for vegetables, a null trade effect for fruits, and a trade-reducing effect for nuts. These findings reflect the state of the empirical literature: the standards-trade effect is largely an empirical question that may vary along different dimensions including products, country income classes, and export shares (Santeramo and Lamonaca, 2019a;Fiankor et al, 2021).…”

“…Heterogeneous effects across countries cannot be estimated within our model specification. Yet, the trade effects and especially the cost effects are expected to vary across countries (Xiong and Beghin, 2014;Rial, 2014) or to depend on market shares (Fiankor et al, 2021). It may also be misleading to consider AVEs of NTMs as a pure trade-cost effect.…”

“…Contrary to the price regressions, negative estimates in the quantity regression are not aberrations. NTMs are expected to restrict trade because of the associated trade costs (see, e.g., Fiankor et al, 2020Fiankor et al, , 2021. Positive estimates would imply that country pairs trade more in the presence of standards.…”

“…In the end, the standards-trade effect is an empirical question. 2 The existing empirical evidence reflects this ambiguity: 3 standards enhance (Crivelli and Gröschl, 2016;Shingal et al, 2021), impede (Fiankor et al, 2020(Fiankor et al, , 2021, or have no effect (Xiong and Beghin, 2012;Schuster and Maertens, 2015) on trade.…”