This paper assesses how bilateral distance affects within-firm-product variation in free- on-board (FOB) export prices across destinations. I estimate linear models that regress firm-product-destination-time FOB unit values on distance, …
Agrifood standards impede trade by increasing compliance costs, but they can also enhance trade by signalling quality. This paper disentangles the trade costs and demand-enhancing effects of two important standards—technical barriers to trade, and sanitary and phytosanitary measures—on (i) global agricultural trade flows and (ii) fruit, nut, and vegetable trade between sub-Saharan Africa and high-income OECD countries. Combining estimates fromunit value and trade value regressions set within structural gravity frameworks, we show that trading standards increase trade costs—which exporters pass on to consumers in the form of higher prices—but they also increase trade volume. For agrifood exports from sub-Saharan Africa, compliance with standards guarantees market access at higher prices to high-value OECD markets.
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.
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.
In global agricultural value-chains, private food standards are proliferating. Yet, their trade effects remain poorly understood. This paper assesses the effect of GlobalGAP certification on exports of apples, bananas and grapes. We estimate a structural gravity model using a global dataset of certified producers and the share of certified land area in total harvest area. While our results confirm GlobalGAP standards as catalysts to trade, we find that the trade-enhancing effect varies across products and destination markets. Furthermore, the trade effect is driven more by growth in the area of certified farms than by new certified producers.
The empirical evidence that institutional differences across countries affect bilateral trade is robust. The crucial question remains how countries can enhance trade amid these differences. In this article, we measure the degree to which governance and institutions differ between countries as “governance distance.” Using a sample of EU/EFTA imports, we examine how adopting private agrifood safety standards modify the effect of governance distance on exports of fruits and vegetables, in particular apples, bananas, and grapes, within a structural gravity framework. Our results show that while increasing governance distance hinders bilateral trade, the interaction of standards and the governance distance is positively associated with exports, hence partially offsetting the direct trade-inhibiting effects of the latter. GlobalGAP certified countries see the trade-inhibiting effects of governance distance on their exports reduced by about 50%, ceteris paribus.