Abstract
ABSTRACTWe examine the impact of formal standards on trade in global value chains (GVCs) in Europe. Using a gravity model approach for panel data, we estimate the influence of national, European and international standards on trade in value-added and gross trade flows within Europe. We find that national standards on their own hamper trade in European value chains while European and international standards foster trade. European standards have greater influence on trade in inner-European value chains whereas international standards have positive effects on imports into Europe from third countries. European standards therefore reduce information asymmetries between market actors in the value chains of the European Single Market. International standards serve as a means of global communication between international trade partners. In addition, we find a positive effect of an interaction term between national and European standards in European value chains confirming the necessity of national standardization. Furthermore, we consider our findings not only within international political economy's theoretical literature regarding the governance of GVCs but also, the subsequent policy implications of our findings in terms of economic growth and development.
Highlights
Research on global value chains (GVCs) is evolving in international trade and innovation economics literature (Baldwin, 2013; Kaplinsky, 2010; World Trade Organisation, 2014)
We focus our research in this study on the role of voluntary standards as key component of the ‘tripartite standards regime’ consisting of standards-setting, accreditation and certification defined by Loconto and Busch (2010) for the development of GVCs in the European Single Market, but exclude obligatory technical regulations released by the European Commission or national governments
We examine the effects of standards on trade in value-added and gross trade flows in Factory Europe
Summary
Research on global value chains (GVCs) is evolving in international trade and innovation economics literature (Baldwin, 2013; Kaplinsky, 2010; World Trade Organisation, 2014). National standards show a significant negative effect on trade flows for the exporting country, no matter if we measure trade in value-added or gross exports This shows that within Europe, national standards act as barriers to trade as assumed in Hypothesis 1 for the exporter. In contrast to European standards, the effect is larger when gross exports are measured, which means that the use of international standards especially fosters trade when value from third countries is included in the good or service. State entities could monitor that certifications, standards and codes are being respected and followed (Gereffi, 2014)
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