Trade, price and quality upgrading effects of agri-food standards

Dela-Dem Doe Fiankor,Daniele Curzi,Alessandro Olper

doi:10.1093/erae/jbaa026

Dela-Dem Doe Fiankor, Daniele Curzi + Show 1 more

Open Access

https://doi.org/10.1093/erae/jbaa026

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Abstract

Abstract This paper assesses how cross-country differences in public mandatory food standards affect trade, prices and product quality upgrading in the agri-food sector. We estimate different gravity-type models that exploit the bilateral difference in maximum residue limits (MRLs) over the period from 2005 to 2014 for 145 products across 59 countries. Our findings show that cross-country differences in MRLs restrict trade. However, conditional on trading, they increase product prices—even when we adjust prices for quality—with null effects on estimated product quality. These effects are pronounced for South–North trade but not for exports to the South.

Highlights

How standards affect bilateral trade flows is topical in the agricultural trade literature
The pattern and sign remain consistent with the extensive margin
In column (5) we estimate the effect of maximum residue limits (MRLs) on observed trade flows including zeroes using the Poisson-pseudo maximum likelihood (PPML) estimator

Summary

Introduction

How standards affect bilateral trade flows is topical in the agricultural trade literature. Food safety standards shape trade flows and determine who is successful in many high-value export markets. As a result, they are often seen as non-tariff barriers to trade, with different political economy implications (Swinnen, 2016). Empirical findings depict standards as either catalysts or barriers to trade (Disdier et al, 2008; Maertens and Swinnen, 2009; Disdier and Marette, 2010; Drogué and DeMaria, 2012; Peterson et al, 2013; Curzi et al, 2018, Fiankor et al, 2020) They may have no effects on trade (Xiong and Beghin, 2012; Schuster and Maertens, 2015). Despite the increasing number of empirical estimates, the effect of standards on agri-food trade remains ambiguous and heterogeneous (Santeramo and Lamonaca, 2019)

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