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http://journals.cambridge.org Downloaded: 17 Jul 2012 IP address: 132.205.7.55
Food standards and exports: evidence
for China
AXEL MANGELSDORF
BAM Federal Institute for Materials Research and Testing, Germany, and
Technical University Berlin, Chair of Innovation Economics
ALBERTO PORTUGAL-PEREZ
World Bank
JOHN S. WILSON
World Bank
Abstract: Using a new database on standards in China, we estimate the impact of
voluntary and mandatory standards –either harmonized to international norms or
purely domestic –on Chinese food exports. The dataset covers seven Chinese
products over the period 1992–2008. We find that standards have a positive effect
on China’s export performance, as the benefits to standardization in terms of
reducing potential information asymmetry and signaling enhance food safety, and
quality in foreign markets seem to surpass compliance costs. Our estimation
results show that the positive effect of Chinese standards is larger when they are
harmonized to international measures. The results suggest that there are clear
benefits to China’s steps to base their domestic standards and regulations on
international measures.
1. Introduction
China has become a major player in international food exports. The value of
Chinese exports in agricultural products more than tripled from 9.7 billion US$ in
1992 to 30.1 billion US$ in 2008 as revealed from COMTRADE data. At the same
time, food safety issues have been a primary focus of the media due to the
recurrence of food safety incidents.
1
Unsafe food remains a serious threat for
Chinese food sales to foreign markets. Indeed, according to the Asian Development
Bank (2007), weak regulatory infrastructure and low standards and regulations in
China are responsible for recurring incidence of unsafe food and border rejections
in foreign markets. For instance, the European Union’s Rapid Alert System for
Food and Feed (RASFF) reports that Chinese agricultural and food commodities
1 Incidents include infant deaths from fake milk powder in 2004; recurrent food poisonings in Chinese
school cafeterias; the sale of meat from animals that were sick or died from illness; and the death of six
children in 2008 after consuming milk adulterated with the industrial chemical melamine (Gale and Buzby,
2009).
World Trade Review (2012), 11: 3, 507–526
©Axel Mangelsdorf, Alberto Portugal-Perez and John S. Wilson doi:10.1017/S1474745612000195
507
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reaching the EU were rejected 85 times between 2008 and 2010, the largest number
of rejections when compared to other countries.
2
Continuous incidents of this type
cut Chinese producers’revenues due to the rejection and subsequent destruction of
Chinese food products. Problems in meeting food safety standards also generate
health-related concerns and a drop in foreign consumers’confidence which could
act to lower, over time, imports from China.
Generally considered as best practice, international food standards can be a
powerful tool in addressing food safety problems. The existence of standards is
assumed to be trade promoting compared to a situation where standards are absent
(Swann et al.,1996). Standards published by national or international standard
setting bodies are commonly described as public goods. Publically available
standards based on scientific evidence adopted by domestic firms and referenced in
mandatory regulations increase transparency and reduce information asymmetries,
especially between producers and foreign customers (Blind and Jungmittag, 2005).
Standards can, however, act as barriers to trade. Compliance with standards
imposes significant costs to producers in developing countries with constrained
financial capacity, and can restrict their ability to export (Czubala et al.,2007;
Portugal-Perez et al.,2010).
Chinese authorities implement and introduce mandatory standards –also known
as technical regulations –whereas the private sector, often in collaboration with
government agencies, develops voluntary standards. China’s accession to the
World Trade Organization (WTO) in 2001 and its commitment to base domestic
regulations and standards on international measures created room for increased
harmonization of Chinese standards with international norms. Although com-
pliance with voluntary standards is not mandatory from the legal perspective,
commercial practices or consumer demands can often blur the distinction between
voluntary and mandatory standards in practice, particularly if voluntary standards
are harmonized to international norms.
Does the introduction of mandatory and voluntary standards affect Chinese
exports significantly? What is the effect of international harmonization on
agricultural products? The aim of this paper is to attempt to answer these questions
by assessing econometrically China’s development of mandatory and voluntary
standards on its exports of agricultural products, using data that link Chinese food
standards for seven groups of agricultural products (meat, fish, vegetables, cereals,
milk, tea, and sugar) to trade data. The debate over details specific to approaches to
harmonization and the structures through which these best occur are beyond the
scope of this paper. Our analysis simply addresses the question of whether
harmonization effects Chinese exports, and if harmonization does have an impact
on exports, does it expand or reduce exports.
2http://ec.europa.eu/food/food/rapidalert/index_en.htm
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Our research contributes to the existing empirical literature in at least three
innovative ways. First, we focus on standards implemented by the exporting
country for its produced goods, whereas previous empirical studies mainly focused
on standards used by the importing countries. Second, we analyze the impact of
standards harmonization in a developing country. Due to data availability,
research on the impact of standards harmonization has been so far limited to
industrialized countries. To our knowledge, there is no empirical study estimating
the impact of national product standards and harmonization in exports from
developing countries. Third, our dataset allows differentiating between mandatory
and voluntary standards, whereas the differentiation is not possible in previous
studies because of data limitation. In addition, each type of standard can be
identified as being harmonized to international norms or not.
We use an extended gravity model to examine the impact of food standards in
China on its agricultural exports. Although estimates vary slightly across products,
the results confirm the export-promoting effect of standards. This is particularly
true in regard to mandatory standards. In particular, based on our analysis, we
confirm the positive impact of standards harmonization. The impact of an
additional standard that is based on international measures, we find, has a larger
impact than the marginal impact of purely Chinese domestic standards. Our results
provide new evidence on the positive impact of standards, especially standards
harmonized to international norms, on export performance.
The rest of the paper is structured as follows. In the next section, we briefly
review the literature on the trade effects of standards in general, with a focus on
the Chinese case. Section 3 discusses the institutional background and recent
developments in China’s standardization system for food products. In Section 4, we
present our data, descriptive statistics, and empirical strategy, We conduct the
empirical analysis and present the effects of standards and regulations in Section 5.
Finally, we summarize our results and give with some policy implications, and
conclude briefly.
2. Literature review
Standards and trade
Standards can be differentiated by the freedom of choice regarding compliance
(Henson, 2004). Mandatory standards are established by public regulators
and compliance is obligatory, whereas voluntary standards are often set by
standards development organizations, such as the International Organizations of
Standardization (ISO) or the Codex Alimentarius Commission, or national
standards bodies in a formal process that involves multiple stakeholders, such
as industry and trade associations or consumer organizations. Although their
application is not legally binding, voluntary standards can become a ‘commercial
imperative’or ‘de facto mandatory’, when producers require suppliers to
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comply with such standards. A large part of previous literature on standards and
trade do not differentiate between mandatory and voluntary standards (Swann,
2010).
The literature on standards and trade differentiates the impact of standards set in
the importing countries from standards set in the exporting country. The former
argue that standards in the importing country can act as barriers to trade. With the
reduction in tariffs and quotas, governments increasingly use standards to protect
their domestic industries. Developing countries are concerned that domestic
standards in importing countries –especially in developed countries –increase the
cost of compliance and restrict or even prevent market access (Henson and Jaffee,
2008). Empirical studies show that the costs of compliance can be important. For
instance, Otsuki et al. (2001) estimate a gravity model to show that stringent
standards for maximum allowable contamination in fruit and nuts imposed in the
European Union lead to significant export losses for African exporters. At the firm
level, Maskus et al. (2004) show that producers from developing countries face
substantial investment costs in order to adapt their production processes in
compliance with standards in export markets. International trade agreements
encourage harmonization of standards across countries. Both the WTO Agreement
on Technical Barriers to Trade (TBT) and the Agreement on Sanitary and
Phytosanitary Measures (SPS) promote harmonization under the assumption that
harmonized standards reduce compliance costs for exporters. Evidence on the trade
promoting effect of international harmonization is provided, for instance by
Wilson et al. (2003) for beef products. The authors find empirical evidence that if
standards were harmonized according to Codex Alimentarius standards, inter-
national trade value would rise by more than 50% compared to the non-
harmonized scenario and developing countries would benefit from harmonization
of standards. Portugal-Perez et al. (2010) provide similar evidence for electronic
products.
Most studies on the impact of standards in the exporting country find a positive
trade effect for the exporting country. By providing information on safety levels
and signaling quality, standards can help to overcome incomplete or asymmetric
information between producers and consumers (Leland, 1979). Hudson and Jones
(2003) argue that it is particularly difficult for developing countries to signal the
quality of their products to consumers. Developing countries can overcome the
reputation problem by applying standards. In this sense, standards serve as quality
signals and show consumers that producers in developing countries are able to
meet stringent standards and provide safe food products. In a gravity model for
agricultural products, Moenius (2006) estimates the impact of domestic and
harmonized standards on the exporting country. He finds that the overall effect of
domestic standards in the exporting country is to increase trade but the impact of
standards harmonization is ambiguous. He argues that the overall effect depends
on the balance between reduced compliance costs from harmonization, and the
variety reducing effect of harmonization.
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Standards and trade in China
The literature on the trade effects of standards in China largely focuses on
standards in countries importing Chinese products. For instance, Chen et al. (2008)
examine the impact of maximum residual standards for pesticides imposed by
importing countries on Chinese exports for vegetables and aquatic products. Using
a gravity model, the authors find a negative effect of safety standards on imports.
Yue et al. (2010) analyze the impact of maximum pesticide residue standards for
tea imposed by the European Union. The authors find that the introduction of the
stringent EU standard significantly decreases exports from developing countries,
including China. They also argue that the WTO should push the EU to harmonize
their standards for tea with international Codex Alimentarius standards.
Songa and Chen (2010) differentiate the impact of food regulations in the short
run and in the long run. Current food safety regulations notified to the WTO under
the WTO SPS Agreement
3
are used to capture the impact of standards in the short
term, whereas two-year lagged regulations capture the impact in the long run. In
the short run, regulations in importing countries have a negative effect on Chinese
agriculture exports, whereas their impact is positive in the long run. Chinese
exporters can cope with foreign regulations in the long run as they increase
significantly investment in new testing equipment, training and use voluntary
standards to meet certification requirements in order to become competitive. The
empirical analysis is, however, limited to aggregated exports and a small number of
observations.
Bai et al. (2007) and Jin et al. (2008) confirm that Chinese food producers use
increasingly voluntary standards. Based on surveys of Chinese firms, the authors
argue that improved product quality and safety, and access to foreign markets are
the main incentives to use voluntary standards and apply for certifications. In next
section, we briefly introduce the institutional background on standardization in
China.
3. Food safety standardization in China
A number of government agencies are involved in regulating food safety in China:
the Ministry of Agriculture, the Administration of Quality Supervision, Inspection
and Quarantine (AQSIQ), the Food and Drug Administration, the Ministry of
Health, and the Administration for Industry and Commerce, and the
Standardization Administration of the People’s Republic of China (SAC). The
large number of agencies with regulatory responsibilities in this area has been
3 The Agreement on the Application of Sanitary and Phytosanitary Measures of the WTO (the SPS
Agreement) contains provisions to ensure transparency in the development and application of SPS
measures. The provisions include the publication –or notification –of such measures on the WTO website
to inform other members of potential trade impacts.
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subject to criticism as it has been suggested sometimes to lead to an uncoordinated
and confusing system (Asian Development Bank, 2007). Other problems often
cited include low levels of enforcement of standards and regulations by food safety
officials and a lack of inspectors supervising an ever-increasing number of food
producers (Broughton and Walker, 2010).
SAC is the agency responsible for approving and publishing Chinese standards
and adopting international standards, including food standards. According to
Wang Ping, the Executive Governor of Science and Technology Committee of the
China National Institute of Standardization, standardization in SAC takes place in
450 national technical committees in which stakeholders from government
agencies, industry and research organization participate. SAC nominates the
participants, and the technical committees are jointly run by SAC and some
ministries (Ping, 2010). SAC also represents Chinese interests in international
organizations. China is actively involved in the Codex Alimentarius Commission
(CAC), the organization responsible for setting international standards for food
products. For instance, SAC hosts the CAC sector committees for pesticide studies
and food additives (WHO, 2011). Setting food safety standards is a general priority
of the Chinese government. In the Eleventh Five-year Plan of Standardization
development, agriculture and food safety were named key areas for standardization
activities, and the Chinese standardization strategy encourages the adoption of
international standards (Ping et al.,2010).
China’s accession to the WTO in 2001 and the signing of the Agreement on
Technical Barriers to Trade (TBT Agreement) and the Agreement on Sanitary and
Phytosanitary Measures (SPS Agreement) gave further incentives to harmonize
domestic standards. Both Agreements incorporate international standards.
According to Article 2.4 of the TBT Agreement and Article 3.1 of the SPS
Agreement WTO, members are obliged to use international standards where they
exist. Domestic standards that are harmonized to international standards are
automatically presumed to comply with other obligations of the agreements
and are immune from trade disputes in the WTO Dispute Settlement Body. China
and other WTO members can decide not to base their domestic standards on
international standards. In case a member implements standards considered highly
protectionists, it must provide specific justifications for the deviation according to
the SPS agreement
4
(Du, 2010). Thus, the TBT Agreement and SPS Agreement do
not mandate the use of international standards but provide strong incentives for
China and other WTO members to harmonize their domestic standards.
Despite the incentives to adopt international standards, the number of Chinese
standards based on international measures remains low compared to other
countries. From the total number of standards in our database only 14% are
based on international measures. In addition, China tends to use international
4 Article 2.4 of the TBT Agreement and Article 3.3 of the SPS Agreement.
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standards partially –70% of all harmonized standards in our database are
modified versions of international standards, but only 30% is identical to
international standards. In the next section, we analyze empirically the impact of
standardization and harmonization on Chinese food exports.
4. Empirical model and results
Data sources and descriptive statistics
In this section, we describe our dataset and provide descriptive statistics. Export
volumes are compiled from the COMTRADE database at the Harmonized System
(HS, 1992) and tariffs are compiled from the TRAINS data base. Consumption
variables are computed from the Food and Agriculture Organization of the United
Nations’statistical database FAOSTAT.
5
Our dataset covers seven product groups
which are a frequently a target of strict food standards and heavy regulation (Chen
et al.,2008): meat (HS-02), fish (HS-03), vegetables (HS-07), cereals (HS-10)), milk
(HS-0401 and HS-0402), tea (HS-0902), and sugar (HS-1701 and HS-1702).
Chinese exports in agricultural and food products are increasing. Between 1992
and 2008, total agricultural exports rose from 9.7 to 30.1 billion US$. Exports in
the seven product categories represent about 40% of Chinese agricultural exports,
and went up from 5.1 billion US$ in 1992 to 12.1 billion US$ in 2008.
The evolution of Chinese exports in the seven product categories is shown
in Figure 1. Exports seem to increasingly follow China’s comparative advantage in
labor-intensive products (Fang and Beghin, 2000). Labor-intensive products –such
as vegetables and tea –register large growth rates especially after China’s accession
to the WTO in 2001. In contrast, exports of land-intensive products –such as
sugar, cereal and meat –have increased to a lesser extent. In 2008, China’s
agriculture exports accounted for about 10% of all agriculture exports from low-
and middle-income countries.
Data on mandatory and voluntary standards are compiled from the Standards
Administration of the Peoples Republic of China (SAC), the Chinese official
national standards body.
6
Chinese standards developed in SAC are accessible
through an online database: the SAC National Standards Query (SAC, 2011b). The
database has been recently used in Mangelsdorf (2011). To ensure reliability and
completeness, the standards have been cross checked with the ‘Chinese Bulletin of
Standards’(SAC, 2011a) and the German–Chinese Standards Portal (DIN and
SAC, 2011). The Chinese National Standards Query provides information on the
date the standard came into effect, the date the standard was withdrawn, or
replaced by newer version. Each standard is classified according to the
5http://faostat.fao.org/
6 SAC obtained legal recognition by the Chinese government through the Standardization Law of the
People’s Republic of China from 1988 (source: ISO, 2009).
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International Classification of Standards (ICS) nomenclature, which allows
matching standards to trade data. The database allows differentiation between
Chinese standards harmonized to international norms, such as Codex
Alimentarius, and standards that are unique to China.
7
A concordance table
between the seven-digit ICS categories and the trade data in HS codes can be found
in Table A.1 in the Appendix. The database allows us to construct four different
standards variables according to two criteria: (i) mandatory vs. voluntary
standards, and (ii) domestic vs. international harmonized standards.
Table 1 provides some examples to illustrate the different types of standards. The
first example, the standard GB/T 19838–2005 for fish and fishery products is
a voluntary domestic Chinese standard. It makes companies accountable for
analyzing potential hazards regarding the product and establishes control points to
ensure food safety (Caswell and Hooker, 1996). The standard GB 14939-1994
‘Hygienic standard for canned fish’is a mandatory performance standard equivalent
to the international Codex Standard 70. Besides process and performance
standards, a number of standards are testing standards. For instance, GB/T 22388-
2008 is a voluntary testing standard that determines the content of melamine, and
GB/T 23376-2009 specifies testing methods for pesticide residuals in tea.
We construct a frequency measure for the four types of standards, which counts
the number of standards directly linked to agricultural commodities. Frequency
Figure 1. Chinese exports in agriculture and food products
Value of exports in billion US$
012345
Meat
Fish
Milk
Vege tables
Cereal
Tea
Sugar
2005-2008 2001-2004 1997-2000 1992-1996
Source: COMTRADE Database, authors calculation
7 SAC develops mandatory and voluntary standards. The prefix‘GB’indicates mandatory standards
and voluntary standards are prefixed ‘GB/T’.
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measures or count variables are often used to measure the impact of standards and
regulations on trade. The advantage of frequency measures is that they are
relatively easy to construct. Yet, these measures may suffer from the so-called
‘mixed bag’problem, where each standard regulating food safety may differ in the
level of stringency and have a different impact on trade. For instance, the ‘hygienic-
performance’standards might have a larger effect on exports than the ‘testing
standards’, or vice versa. Due to the absence of variables indicating the complexity
or stringency of the standards, we believe that the number of standards represents a
good proxy for the level of regulatory intensity in China and has been widely used
in the literature estimating the impact of standards on trade (see for instance Swann
et al.,1996; Blind and Jungmittag, 2005; Moenius, 2004,2006; Portugal-Perez
et al.,2010; Otsuki et al.,2001).
Figure 2 depicts the evolution of the number of standards in the seven Chinese
food products. The stock of active standards is computed as the initial stock before
1992 plus the standards published each year minus withdrawn standards. The
total number of standards increases over time. Voluntary standards increased
substantially after China’s WTO accession in 2001. The dotted lines in Figure 2
reveal that the share of mandatory harmonized international standards decreased
from 10.4% in 1992 to 8.9% in 2008, whereas the share of voluntary international
harmonized standard increased from 9.8% in 1992 to 15.0% in 2008.
Table 1. Examples of Chinese standards
Product
group Standard Standard name
Adopted
international
standard
Application
degree
Fish GB/T
19838−2005
Hazard Analysis and Critical
Control Point (HACCP) system
and guidelines for its application
to fish & fishery products
––
Fish GB
14939−1994
Hygienic standard for canned fish CAC 70:1995 NEQ
Cereal GB
2715−2005
Hygienic standard for grains ––
Meat GB
19303−2003
Hygienic practice of cooked meat
and meat-products factory
CAC/
RCP13−1976
MOD
Milk GB/T
22388−2008
Determination of melamine in raw
milk and dairy products
––
Tea GB/T
23376−2009
Determination of pesticides
residues in tea –GC/MS method
––
Vegetables GB
2714−2003
Hygienic standard for preserved
vegetables
––
Sugar GB
13104−2005
Hygienic standard for sugars CAC 212:1999 NEQ
Source: Authors’calculations based on SAC National Standards Query.
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Regarding harmonization differences between product groups, Table 2 shows
the percentage of Chinese standards that are harmonized to international norms
or not. In 1992, for instance, 90.6% of Chinese standards for meat products are
domestic standards and the remaining 9.4% are harmonized to international
standards. China seems to be relying more on international standards, as the
percentage of Chinese domestic standards is decreasing over time.
Empirical strategy
In this section, we present the empirical model used to estimate the impact of
voluntary and mandatory standards on China’s exports. The data allow
differentiating between harmonized standards and Chinese domestic standards.
We base our empirical model in an extended gravity model widely used in the trade
literature (Anderson and van Wincoop, 2003; Anderson, 2011; Anderson and
Yotov, 2011).
Similar to Moenius (2006), we focus on a country-specific stock of standards in
the exporting country and a stock of international standards. Our specification
differentiates between mandatory and voluntary standards, which in turn are
differentiated between country-specific and international standards. Analogous to
Anderson and Yotov (2011), we use domestic consumption as a proxy of sectoral
output to capture the potential demand for Chinese agricultural and food products.
More specifically, we estimate the equation:
lnXikt =β0+β1StMDkt +β2StMIkt +β3StVDkt
+β4StVIkt +β5Tariffikt +β6lnConsikt
+δit +δkt +δik +εikt
(1)
Figure 2. Stock of voluntary and mandatory Chinese food standards
0
100
200
300
400
500
600
700
800
900
1992 1994 1996 1998 2000 2002 2004 2006 2008
0%
2%
4%
6%
8%
10%
12%
14%
16%
Mandatory Standards
Voluntary Standards
Percentage of harmonized mandatory standards (right hand scale)
Percentage of harmonized voluntary standards (right hand scale)
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where:
X
ikt
is the value of Chinese exports of product kto country iin year tin dollars;
StMD
kt
and StMI
kt
are the stocks of mandatory purely domestic (non-harmonized)
and international harmonized standards for product kthat are active in year t;
StMD
kt
and StVI
kt
are the stocks of voluntary domestic (non-harmonized) and
international harmonized standards for product kin year t;
Tariff
ikt
is the tariff imposed by country ion Chinese exports of product kin year t.
lnCons
ikt
is the domestic consumption of product kin country iin year t, measured
in dollars;
8
δ
it
,δ
kt
,δ
ik
are interaction terms of importer–year dummies, product–year dummies
and importer–product dummies;
ε
ikt
is an error term.
Three dummy interactions terms are incorporated in the baseline model.
The interaction of importer and product dummies (δ
ik
) control for invariable
characteristics specific to the food sector in a given importer. Importer–year fixed
effects (δ
it
) control for shocks experienced by an importer a given year, such as
political shocks. Product–year fixed effects (δ
kt
) control for shocks specific to world
markets of a product in a given year.
9
As noted before, previous empirical evidence shows that an increase in the
number of standards in an exporting country is positively associated to exports, as
information and signaling benefits seem to offset compliance costs. Indeed,
standards in the exporting country reduce information asymmetries between
Table 2. Percentage of Chinese domestic standards 1992–2008
Product 1992 1996 2000 2004 2008
Meat 90.6 91.4 92.2 92.1 88.9
Fish 100.0 100.0 100.0 100.0 97.0
Vegetables 88.9 84.6 83.7 86.9 83.0
Cereals 100.0 98.9 99.0 98.6 88.7
Milk 73.6 75.4 75.4 75.0 80.5
Tea 100.0 100.0 100.0 75.0 74.3
Sugar 100.0 100.0 100.0 100.0 86.7
Source: Authors’calculations based on SAC National Standards Query.
8 We computed the consumption of product kin country iand year tas: C
ikt
=(S
ikt
+M
ikt
−X
ikt
)·P
ikt
,
where S
ikt
the domestic supply of product kin country iin year tin tonnes, M
ikt
[X
ikt
] stands for import
[exports] of product kin country iin year tin tonnes, and P
ikt
is the import price of product kin country iin
year tin dollars.
9 A similar strategy of incorporating dummy interaction terms to control for unobserved effects is
adopted by Harding and Javorcik (2011) and Ferro et al. (2011).
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producers in China and importers abroad regarding quality and safety levels of
food products. Therefore, we expect positive signs in the coefficients of Chinese
standards variables with, a priori, a larger impact of mandatory standards
compared to voluntary standards as compliance with the later is optional.
Internationally harmonized standards applied by Chinese producers are
expected to have a positive impact on exports for two reasons. First, compliance
with international standards can be a strong signal that Chinese producers meet
safety and quality criteria that are widely recognized. Second, compared to national
standards, the informational and signaling benefits of complying with internation-
ally harmonized standards are expected to be larger than complying with national
standards.
The coefficient of tariffs is expected to be negative. As a proxy of demand for
each product group in each importing country, we include the total domestic
consumption for each country and its sign is expected to be positive, as higher
domestic demand is expected to increase the demand for imports from China.
Results
The estimation is carried out in a panel covering Chinese agricultural exports
to 132 countries over the period 1992–2008. Table 3 summarizes descriptive
statistics. Notice that there are fewer observations for consumption and tariffs, as
data for these variables are sometimes not reported for some goods in an importing
country. Yet, coefficient estimates for standards do not change significantly when
these variables are excluded from regressions, as shown below.
Table 4 reports OLS estimates for our specification. Standard errors are clustered
by product groups. Column 1 reports estimates from the baseline model (equation
(1)). As consumption and tariff data have missing observations for some sectors in
some countries, we exclude these variables from the baseline specification (column
2). In order to control for characteristics specific to products, importer, and years,
we include the interaction of product–year dummies, importer–product dummies
and importer–year dummies. Columns 1 and 2 include all three interaction
variables and in columns 3 and 4 we only include the interaction of product–year
Table 3. Descriptive statistics
Model variable Observations Mean Standard deviation
Bilateral exports lnX
ikt
7,646 5.98 2.99
Mandatory international standards StMI
kt
7,646 1.12 1.50
Mandatory domestic standards StMD
kt
7,646 14.42 9.36
Voluntary international standards StVI
kt
7,646 4.77 6.22
Voluntary domestic standards StVD
kt
7,646 42.32 37.03
Consumption lnCons
ikt
6,848 19.82 2.88
Tariff Tariff
ikt
6,089 0.13 0.16
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dummies and importer–product dummies. The coefficient for mandatory inter-
nationally harmonized standards has the expected positive sign in all models.
Voluntary internationally harmonized standards also have the expected positive
sign but the coefficient is insignificant when excluding consumption and tariffs.
Regarding the relative impact, internationally harmonized mandatory standards
seem to have the largest impact on Chinese exports. The impact of domestic
standards is less clear. Mandatory domestic standards exert a negative influence on
exports in columns 2 to 4 but have no significant effect in column 1. Similarly,
voluntary internationally harmonized standards are positively correlated with
exports in column 3 but have no impact on exports in the other models. Thus,
standards exert a positive impact on exports when they are harmonized with
international norms.
Further robustness checks are reported in Table 5. We keep the three interaction
terms from the baseline model in the next estimates. First, we aim to measure
whether the effect of standards is different when the importer is a high-income
country and constrain the sample to include only high-income importers. The
results are qualitatively similar to the baseline model. As shown in columns 1 and 2,
Table 4. Baseline results
Model variable 1234
base base base base
Mandatory international standards StMI
kt
1.538 1.480 0.497 1.214
[0.203]*** [0.217]*** [0.025]*** [0.462]**
Mandatory domestic standards StMD
kt
−0.047 −0.310 −0.06 −0.112
[0.040] [0.103]** [0.005]*** [0.038]**
Voluntary international standards StVI
kt
0.192 0.115 0.021 0.006
[0.056]** [0.121] [0.004]*** [0.021]
Voluntary domestic standards StVD
kt
0.002 0.035 0.003 0.001
[0.013] [0.027] [0.001]** [0.004]
Consumption (log) lnCons
ikt
0.122 0.127
[0.046]** [0.022]***
Tariff Tariff
ikt
0.083 −2.585
[0.655] [1.408]
Constant −0.847 6.862 2.834 2.661
[0.630] [1.269]*** [0.308]*** [1.391]
Observations 5,555 5,278 5,555 7,646
R
2
0.85 0.86 0.75 0.69
Importer–product dummies Yes Yes Yes Yes
Product–year dummies Yes Yes Yes Yes
Importer–year dummies Yes Yes No No
Notes: The dependent variables are bilateral exports. Robust standard errors are clustered by product
groups and are reported in brackets. The asterisks represent the level of significance: * significant at
10%; ** significant at 5%; *** significant at 1%.
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Table 5. Robustness checks
Model variable 12345
High
income
High
income
2-year
lagged
standards
3-year
lagged
standards
ET-
Tobit
Mandatory
international
standards
StMI
kt
1.313 1.527 0.640
[0.317]*** [0.157]*** [0.090]***
Mandatory
domestic
standards
StMD
kt
−0.578 −0.276 0.030
[0.089]*** [0.071]*** [0.010]***
Voluntary
international
standards
StVI
kt
−0.430 0.053 0.020
[0.070]*** [0.150] [0.010]**
Voluntary
domestic
standards
StVD
kt
0.166 0.024 0.001
[0.017]*** [0.018] [0.000]
Consumption lnCons
ikt
0.390 0.071 0.068 0.070
[0.170]* [0.069] [0.062] [0.030]***
Tariff Tariff
iki
3.865 0.401 −0.039 −2.940
[3.497] [0.800] [0.777] [0.300]***
Mandatory
international
standards (lagged)
StMI
kt-2
0.868
[0.134]***
Mandatory domestic
standards (lagged)
StMD
kt-2
0.013
[0.046]
Voluntary
international
standards (lagged)
StVI
kt-2
0.552
[0.072]***
Voluntary domestic
standards (lagged)
StVD
kt-2
−0.087
[0.008]***
Mandatory
international
standards (lagged)
StMI
kt-2
1.381
[0.125]***
Mandatory domestic
standards (lagged)
StMD
kt-3
−0.477
[0.051]***
Voluntary
international
standards (lagged)
StVI
kt-3
0.039
[0.086]
Voluntary domestic
standards (lagged)
StVD
kt-3
0.011
[0.017]
Constant −6.979 2.483 6.862 7.846 0.170
[4.476] [0.668]*** [1.269]*** [2.034]*** [1.15]
Observations 2,073 2,579 5,278 5,076 10,752
R
2
0.90 0.87 0.86 0.87
Notes: The dependent variables are bilateral exports. Robust standard errors are clustered by product
groups and are reported in brackets. All estimates include importer–year dummies, product–year
dummies and importer–product dummies.
The asterisks represent the level of significance: * significant at 10%; ** significant at 5%;
*** significant at 1%.
520 AXEL MANGELSDORF ET AL.
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the impact of mandatory standards is positive and significant for high-income
importers, whereas the effect of voluntary harmonized standards is much
smaller and only significant with the inclusion of consumption and tariffs.
Domestic mandatory standards clearly exert a negative influence on exports
and the effect of voluntary standards is positive but smaller than the effect of
harmonized standards. The results suggest that high-income importers value
harmonized standards –mandatory in particular –as more important than dom-
estic standards.
Standardization could also be influenced by exporters in a particular sector
through lobbying, potentially leading to endogeneity of standards due to reverse
causality. Previous empirical literature on standards acknowledges the potential
problem of endogeneity and the difficulty of finding a good instrument to
circumvent it. However, in the case of Chinese standards, it is unlikely that they
are set in response to unexpected surges in food imports demand from a single
country in a single year, given the complexity and the high number of Chinese
agencies involved in making standards. Moreover, standards generation is a time-
consuming process. It requires the coordination of preferences from various
interests groups. In international standardization, the time between the first
proposition of a new standard and the final publication can take more than five
years (Blind and Jungmittag, 2005). In China, the average time to for generating a
new standard is 4.7 years (Ping, 2010). Yet, as another robustness check, we
include alternately in our regressions two-year and three-year lagged standards
variables and report estimates in columns 3 and 4. Qualitatively, results are the
same, standards exert a positive impact on exports, with the highest effect for
mandatory harmonized standards.
10
Finally, we run the threshold-Tobit type of model applied by Eaton-Tamura
(1994) among others, in the context of gravity models. Indeed, Eaton and Tamura
(1994) proposed to estimate a variation of the Tobit model in which the dependent
variable is ln(av +X
ikt
), where av is a parameter to be added to exports before the
log, and the maximum likelihood (ML) function is modified to endogenize the
choice of the av parameter. Then the ML estimator includes an estimate of the value
of av among the set of estimates which means that the dependent variable will be
censored at the value ln(av) (see Eaton and Tamura (1994) or de Melo and
Portugal-Perez (2012) for more details on the estimator). Column 5 in Table 5
reports estimates of the threshold-Tobit. As the estimated value for av is close to
zero (av = 0000458), estimates are very close to the baseline estimates using OLS.
Yet, we keep OLS estimates as our baseline estimates for the sake of parsimony.
10 As an additional robustness check, we perform a Durbin–Wu–Hausman test of endogeneity of our
standard variables in on our baseline model, using the ivregress command in STATA. Accordingly, we
instrument the standards variables with one-lagged standards variables, and the test results show that we
cannot reject the null hypothesis for exogeneity at the 1% level. Estimates of the IV regression are not
reported here but can be made available upon request.
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Table 6 reports estimates for the seven product groups. The impact of standards
seems to vary to some extent but the impact on exports is positive. Mandatory
international standards for fish, vegetables, cereals, and tea were excluded from the
model because of mulitcollinearity with dummy variables. In the other estimates,
however, the variable shows the expected positive sign and is statistically significant
for sugar. Domestic mandatory standards are also positive and significant for most
product groups. As in the baseline model, the marginal effect for mandatory
international standards is larger than the impact of domestic mandatory standards.
In other words, one additional international standard leads to more exports than
one additional domestic standard. The impact of voluntary standards is less clear.
Domestic voluntary standards are positively correlated with Chinese exports for
most product groups but the impact of voluntary international standards is
ambiguous. The impact of international standards is positive and highly significant
for vegetables and sugar but negative and significant for tea and fish. A plausible
explanation for the low impact of voluntary standards is the lack of implemen-
tation by Chinese farmers and food producers. Although there is no data on the
implementation of voluntary standards, the China Statistic Yearbook of
Certification and Accreditation (cited in Jin et al., 2008) shows that in 2005 the
number of voluntary food safety standards for hazard analysis and critical control
point (HACCP) was implemented by only 21.9% of the food industry. Assuming
that this figure is representative for implementation of voluntary standards in
general, the low impact of voluntary standards in our model can be explained by
the low implementation of voluntary standards.
5. Conclusion
The paper provides the first empirical evidence on the impact of Chinese standards
for the export of agricultural goods. Whereas past literature on the trade impact of
standards for developing countries has focused on standardization in the importing
(developed) country, we argue that the effect of standards in the exporting country
has to be taken into account. In particular, we show that standards harmonization
in China has a positive effect for China’s exports success.
Our results can be summarized as follows. First, based on new data, our results
confirm the trade-enhancing potential of standards, outlined in previous studies
(see for instance Swann (2010)). We find that a larger stock of standards in China is
associated with expanding exports.
Second, we can show that the push effect of standards is larger when they are
based on international standards such as Codex Alimentarius. Our estimation
suggests that one additional internationally harmonized standard in China is
associated with an increase in agricultural exports ranging between 0.5% and
1.54%.
Third, the effect on trade of standards is different for voluntary and mandatory
standards. The impact of mandatory standards is generally positive and statistically
522 AXEL MANGELSDORF ET AL.
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Table 6. Results for products
Model variable 1234567
Meat Fish Vegetables Cereals Milk Tea Sugar
Mandatory international standards StMI
ikt
0.165 −†−†−†0.468 −†3.480
[0.246] [0.505] [0.602]***
Mandatory domestic standards StMD
ikt
0.001 0.055 0.016 −0.185 0.213 0.013 0.191
[0.057] [0.015]*** [0.017] [0.102]* [0.169] [0.016] [0.342]
Voluntary international standards StVI
ikt
0.049 −0.993 0.041 −0.097 −0.862 −0.115 −†
[0.064] [0.191]*** [0.017]** [0.076] [0.860] [0.044]***
Voluntary domestic standards StVD
ikt
−0.003 0.060 0.020 0.045 0.101 0.072 −0.162
[0.014] [0.010]*** [0.006]*** [0.025]* [0.097] [0.017]*** [0.099]
Consumption lnCons
ikt
−0.259 0.161 0.189 0.025 0.150 −0.051 0.103
[0.387] [0.167] [0.209] [0.398] [0.119] [0.053] [0.092]
Tariff Tariff
ikt
0.035 0.432 −0.425 −4.397 −7.696 0.495 −0.213
[0.928] [1.183] [0.754] [1.410]*** [4.156]* [0.473] [0.870]
Constant 7.442 −4.786 −2.839 5.001 15.792 6.106 −0.986
[7.794] [3.043] [2.996] [6.308] [12.681] [0.951]*** [2.756]
Observations 644 768 1209 784 243 1,006 901
R
2
0.68 0.84 0.84 0.69 0.67 0.88 0.70
Notes: The dependent variables are bilateral exports. The asterisks represent the level of significance: * significant at 10%; ** significant at 5%; *** significant
at 1%. Standard errors in brackets. All estimates include importer dummies and time dummies. †The variable for mandatory international harmonized standards
were dropped because of multicollinearity with dummy variables.
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significant for both purely domestic and international harmonized standards. The
trade impact for voluntary standards is less clear. Although voluntary domestic
standards have a positive impact on Chinese exports in most model specifications,
the impact is either smaller or statistically not significant compared to mandatory
standards. Among other factors, this may be due to mandatory regulations
affecting many more aspects of food products along supply chains.
As we explain, the positive impact of standards is also due to its contribution to
reduce information asymmetries. Standards –whether voluntary or mandatory –
increase the transparency of the food products by providing information such as
maximum levels of pesticides to consumers. The impact on trade of international
harmonized standards is larger than the impact of purely domestic standards, and
this is particularly true for international harmonized mandatory standards. It can
be explained with the signaling effect of standards regarding quality and food
safety. Producers have an incentive to apply standards as they are a signal for the
producers’investment in high-quality products. In the case of Chinese food
products, international mandatory standards seem to have a larger signaling effect
than purely domestic standards. Foreign customers seem to acknowledge the
producers decision to invest in compliance with international standards.
We conclude the paper by providing the following policy suggestions. First, our
results show a larger trade impact of harmonized standards compared to purely
domestic standards. Chinese authorities should increase their efforts to harmonize
domestic food standards. This holds not only for mandatory but also for voluntary
standards. Harmonization of food standards is in particular important when
Chinese producers want to access foreign markets, especially in developed
countries. Second, China and other developing countries should continue to
expand participation in international standards setting organizations, such as
Codex Alimentarius Commission. Participation in international organizations
allows Chinese stakeholders to include specific national preferences in international
norms and may facilitate adoption at the national level. Third, under the WTO,
TBT, and SPS Agreements member countries should use international standards
where they exist but are free to set domestic standards to fulfill regulatory objectives
such as food safety. When developing domestic standards, authorities in emerging
economies can leverage incentives in WTO obligations to expand trade –to the
benefit of both their countries and the global consumers.
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Appendix
Table A.1 Concordance table between harmonized commodity description and
coding system (HS 1992) and International Classification of Standards (ICS)
Product
name
HS 1992
chapter
International Classification
of Standards Title
International Classification
of Standards (ICS) Code
Meat 02 Meat and meat products 67.120.10
Fish 03 Fish and fishery products 67.120.30
Vegetables 07 Vegetables and derived
products
67.080.20
Cereals 10 Cereals, pulses and derived
products
67.060
Milk 0401, 0402 Milk and processed milk
products
67.100.10
Tea 0902 Tea 67.140.10
Sugar 1701,1702 Sugar and sugar products 67.180.10
526 AXEL MANGELSDORF ET AL.
