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Mutual Recognition of Accreditation: Does it Matter to Trade?
1
Mutual Recognition of Accreditation: Does it Matter to Trade?
- Evidence from the Food, Beverage and Tobacco Industry -
Knut Blind
1,2
Axel Mangelsdorf
1,3
and
John S. Wilson
4
1
Berlin Institute of Technology, Chair of Innovation Economics
2
Fraunhofer Institute for Open Communication Systems (FOKUS)
3
BAM Federal Institute for Materials Research and Testing, Germany
4
The World Bank
Running head: Mutual Recognition of Accreditation: Does it Matter to Trade?
Abstract
We examine how third party certification with quality management standards and mutual
recognition of certification through international agreements of accreditation bodies creates
trust between trading partners and increases bilateral trade. We focus on the food, bever-
age and tobacco industry and use augmented gravity models for the 2000-2008 period. Our
results show that quality management certifications are positively correlated with bilateral
trade. Certifications help to reduce information asymmetries and signal commitment to
quality production processes. Moreover, our results show that mutual recognition of certi-
fication has a positive and significant effect on trade. Members of the mutual recognition
agreement for quality management standards have higher bilateral trade flows than non-
members. Mutual recognition is in particular beneficial for markets access in high-income
countries. We conclude that technical cooperation programs for developing countries’ con-
formity assessment services might be effective means to increase trade performance of
developing countries.
Keywords: Standardization, Certification, Accreditation, International Trade, Gravity
Model, Mutual Recognition
JEL Classification: F14, F15, L15, Q17,Q18
Mutual Recognition of Accreditation: Does it Matter to Trade?
2
1. Introduction
The global market for food products is undergoing rapid changes. Markets are characterized by
quality competition, internationalization, longer supply chains and a shift of responsibility for
food safety and quality regulation from governments to private actors (Hatanaka & Busch, 2008;
Henson & Jaffee, 2008). Private actors develop standards in formal standards setting organiza-
tion or industry consortia which are applied by firms in the food sector. Independent third party
certification bodies verify the correct application of standards. National accreditation bodies --
often part of the public sector infrastructure -- secure the competence of certification bodies
(Henson & Humphrey, 2010).
Firms in the food processing industry have an incentive to apply private standards and
certifications. The possession of an internationally recognized certificate increases the reputation
of the firm, helps to reduce information asymmetries, and increases the performance in interna-
tional markets (Hudson & Jones, 2003). A number of authors provide empirical evidence on the
trade creating effect of international standards (Knut Blind & Jungmittag, 2005; Clougherty &
Grajek, 2011; Mangelsdorf, 2011; Swann, 2010). However, even if not intended to discriminate
against foreign producers, standards, certification requirements, and technical measures can rep-
resent Non-Tariff Measures (NTMs), especially for firms from developing countries in agricul-
tural and food industries (Chen & Mattoo, 2008; Li & Beghin, 2012; Mattoo, 2001; Otsuki,
Wilson, & Sewadeh, 2001; Stephenson, 1997)). In fact, a recent survey on trade barriers in de-
veloping countries shows that technical measures to trade - including certification requirements -
are a major concerns for the surveyed exporters, regardless of the export destination (Mimouni,
Averbeck, & Skorobogatova, 2009).
Mutual Recognition of Accreditation: Does it Matter to Trade?
3
In this chapter, we analyze the trade effects of the most widely used international stand-
ard for certification -- the ISO 9000 standard for quality management systems -- in the food,
beverage and tobacco industry. In this study, we chose to focus on the food, beverage and tobac-
co industry for a variety of reasons. Namely, this industry is particularly subject to quality stand-
ards. Countries are generally highly sensitive to the quality and standards of inspection for agri-
cultural imports and other goods for direct consumption. Further, because goods from this indus-
try are comparatively more important to the economies of low income developing countries (and
generally occupying a larger portion of their overall export composition), by focusing on the
food, beverage and tobacco industry, we will better understand the broader development implica-
tions of establishing and accrediting trusted certification bodies. Accreditation of certification
bodies plays an important role in creating trust in international trade relationships. A lack of trust
in foreign accreditation competencies and the non-acceptance of certification, however, together
represent a trade barrier.
1
Recent efforts to mutually recognize accreditation and certification
schemes via international agreements aim to avoid such trade barriers. Are these agreements suc-
cessful? We hypothesize that international agreements will increase the trust in the competencies
of foreign certification bodies. More trust in the certification competencies will increase the
reputation of the certified firm and reduce information asymmetries. Using broad trade data from
the manufacturing sector, Blind and Mangelsdorf (2012) provide empirical evidence that cooper-
ation in accreditation reduces information asymmetries and increases bilateral trade.
Our chapter is organized in five sections. The next section explains the institutional sys-
tem of standardization, certification and accreditation in general and the role of quality manage-
ment certifications in the food, beverage and tobacco industry in specific. In the third section we
1
In terms of the MAST classification of Non-Tariff Barriers, we deal with classifications B 321 “Lack of acceptance
of internationally recognized accredited conformity assessment bodies” and B 322 “Lack of acceptance of certifi-
cates of conformity assessment bodies issued in the country of origin.”
Mutual Recognition of Accreditation: Does it Matter to Trade?
4
use a gravity model to analyze the impact of quality management standards and mutual recogni-
tion of accreditation services on bilateral trade in the food, beverage and tobacco sector. We dis-
cuss out results in the fourth section and conclude with policy recommendations in the last sec-
tion.
2. Standardization, certification and accreditation in the food processing industry
Standardization, certification and accreditation
Standards for quality management -- such as the ISO 9000 standard -- are developed in formal
standards development organizations (SDOs) -- such as the International Standardization Organ-
ization (ISO) -- or by private consortia. Third party certification bodies are responsible for evalu-
ating whether an organization meets the quality claims of standards. Certification bodies are can
be private for-profit, private non-profit organizations or in some cases public organizations. They
can small companies operating at the domestic market or large multinational companies.
(Hatanaka & Busch, 2008). For instance, the Swiss based SGS Group is the world’s leading in-
spection, verification, testing and certification company with more than 70,000 employees.
2
Cer-
tification bodies certify private and public standards ranging from private labor standards (e.g.
Fair-trade) to public food safety standards (e.g. Codex) to quality management standards
(Hatanaka, Bain, & Busch, 2005).
Whether or not certifications represent an advantage in international markets depends on the
stringency of audits and the reputation of the certification body (Hudson & Jones, 2003). In other
words, the quality signaling effect of certifications is questioned when there is doubt in the audit-
ing competencies of the certification body. In fact, reputation and image of the certification body
is the most important factor in how firms choose the certification body (Magd, 2006). The de-
2
http://www.iioc.org/
Mutual Recognition of Accreditation: Does it Matter to Trade?
5
mand for trustful certification processes led to the creation of national accreditation bodies. An
accreditation body is an organization that confirms the auditing competency of conformity as-
sessment bodies (Busch, 2010).
The international network of accreditation bodies ensures that national accreditation bod-
ies can be trusted. Today, two international accreditation organizations are responsible to support
the global system of certification and accreditation. The International Accreditation Forum (IAF)
organizes the competence assessment for certification bodies with the aim to create worldwide
acceptance of certifications. The International Laboratory Accreditation Cooperation (ILAC) has
national laboratory accreditation bodies as members and aims to harmonize laboratory and in-
spection accreditation services (Busch, 2011). Both organizations seek to create multilateral
recognition agreements among its members. IAF established a ‘multilateral recognition arrange-
ment’ (MLA) for the ISO 9000 quality management system standard (henceforth the ‘IAF-
MLA’). Accreditation bodies can become signatories of the MLA when their operations are suc-
cessfully evaluated by peer multinational evaluation teams (Sarin, 2001). The teams visit domes-
tic accreditation bodies and write evaluation reports that document the organizations’ compliance
with relevant international standards and IAF rules. The reports provide formal acknowledge-
ment that the international network of accreditation bodies have confidence in the service of the
domestic accreditation body (Brough-Kerrebyn, 2004). Once an accreditation body is successful-
ly evaluated and becomes a signatory of the IAF-MLA, ISO certificates issued by accredited
certification body of the signatory country will gain international acceptance.
Mutual recognition of accreditation services creates trust between trading partners and lowers
export costs (WTO, 2012). Certification bodies which are accredited by IAF-MLA signatory
accreditation bodies improve their ability to conduct high quality auditing services and certifi-
Mutual Recognition of Accreditation: Does it Matter to Trade?
6
cates issued from such certification bodies should enjoy a better reputation and trade-enhancing
effect compared to certificates from non-accredited certification bodies. Therefore, we assume in
our chapter that firms from less developed countries stand to capture greater gains from quality
certifications (as shown later in this paper) and it follows that these countries should especially
benefit from the MLA.
ISO 9000 certifications in the food processing industry
ISO management standards are developed with international consensus on good management
practices and aim to ensure that the delivery of goods or services meet customer requirements.
ISO management standards are generic, i.e. they can be applied in any type of public or private
organization (Aggelogiannopoulos, Drosinos, & Athanasopoulos, 2007). ISO 9000 is the most
successful international management standard issued by the International Organization for
Standardization (ISO). By the end of 2008, almost one million certificates have been issued in
176 countries (ISO, 2008). The standard can be the foundation for third party certification. In
order to obtain certification, firms require an audit by a certification body (King, Lenox, &
Terlaak, 2005).
Despite the success of ISO certificates, surprisingly little research focuses on trade ef-
fects. Clougherty and Grajek (2008) examine the effect of ISO 9000 diffusion on trade for the
period 1995-2002. They find that ISO 9000 has a ‘push’ effect for exports from developing
countries to developed countries. However, the same authors come to contrary results using a
long times series from 1995 to 2005 (Clougherty & Grajek, 2011). The authors find that ISO
standards reduce exports from developing or transition countries to developed countries which
suggests that ISO 9000 can have a trade hindering effect when costs related to certification out-
weigh trade promoting effects.
Mutual Recognition of Accreditation: Does it Matter to Trade?
7
A number of firm level studies focus on performance effects of ISO 9000 application in
the food processing industry. Turner et al. (2000) analyze the adoption of ISO quality manage-
ment standards in South African agribusiness firms. More than two thirds of the firms in the
sample were certified and certification is more likely for large firms aiming to access markets in
developed countries. Grigg and McAlinden (2001) analyze the food and beverage industry in the
Europe in relation to quality management standards. About forty percent of the surveyed firms
were certified. The firms report advantages of ISO 9000 certification including improved inter-
national competitiveness and the ability to improve customer requirements. More recently,
Fotopoulos et al. (2010) examine the motivation to adopt the ISO 9000 standard in the Greek
food industry. Main motivations for certification are related to external benefits such as im-
proved company image and increased exports and market share. Only few authors deal with ISO
9000 certification in developing countries. Masakure, Henson, and Cranfield (2009) use firm
level data from Pakistan to assess the impact of certification on export sales. About half of the
surveyed firms are ISO certified and ISO 9000 is the most common quality management stand-
ard in the domestic food processing industry. They authors find that firms’ decision to certify has
positive impacts on export sales. ISO 9000 certification and the commitment to comply with
international standards increases firms’ reputation especially for firms without prior export expe-
rience and established market position.
In sum, the firm level studies provide evidence that ISO certification is widely applied in
the food processing industry. Benefits for companies include increased export sales and market
share. Macro level evidence by Clougherty and Grajek (2008, 2011), however, shows that certi-
fication can also act as a non-tariff barrier. Surprisingly, no study empirically examines the role
accreditation and international cooperation in accreditation, even though the WTO (2012) re-
Mutual Recognition of Accreditation: Does it Matter to Trade?
8
gards mutual recognition of accreditation systems as trade fostering, and Magd (2006) shows that
reputation is the most important factor in how firms choose certification bodies. In the next sec-
tion we examine the effects of ISO certifications and mutual recognition of accreditation systems
in a gravity model.
2. Econometric model
Summary statistics
We base our empirical analysis on bilateral exports in the food, beverage and tobacco sectors
over the years 2000 to 2008. We use information from 96 exporters and 64 importers in our
model.
3
Descriptive statistics for export volumes are shown in Figure 1. Exports in the time peri-
od between 2000 to 2008 rose from about 1 billion US Dollar to more than 500 billion.
Figure 1: Exports of Food, Beverage and Tobacco Products 2000-2008
Source: COMTRADE Database
3
The full list of countries included can be found in Table A 1 in the Appendix.
0
100
200
300
400
500
600
2000
2001
2002
2003
2004
2005
2006
2007
2008
Exports in Billion US Dollar
Mutual Recognition of Accreditation: Does it Matter to Trade?
9
We follow Clougherty and Grajek (2008, 2011) and Potoski and Prakesh (2009) and build
stock variables for the number of ISO certifications. Data on ISO 9000 certifications per country
and sector are compiled from the 2000 to 2008 issues of ‘The ISO Survey of Certifications’. The
survey is published by the ISO secretariat on an annual basis and compiles data from ISO nation-
al member institutes, accreditation and certification bodies (ISO, 2008). The survey uses the Eu-
ropean co-operation for Accreditation (EA) code system for industry classification. We build a
concordance table between EA code and the trade data which is provided in two-digit Interna-
tional Standard Industrial Classification (ISIC) in order to link certification to trade data (see
Table A2 in the Appendix). Figure 2 shows the evolution of certifications in the sector from
2000 to 2008.
Figure 2: Number of ISO 9001:2000 Certifications 2000-2008
0
5000
10000
15000
20000
25000
30000
35000
2000
2001
2002
2003
2004
2005
2006
2007
2008
No. of ISO 9001:2000 Certificates
Mutual Recognition of Accreditation: Does it Matter to Trade?
10
Source: Authors calculation based on ISO Survey of Certifications
Besides the effects of ISO certification, we are interested in the effect of global coopera-
tion in accreditation. As explained in the second section, after successful evaluation by multina-
tional peer-evaluation teams, accreditation bodies become members of the IAF-MLA for Quality
Management Systems and, eventually, ISO certificates issued in signatory countries are globally
accepted. The IAF-MLA was initially signed in January 1998 by 14 accreditation bodies and
increases to 40 signatories in 2008 (Figure 3).
Figure 3: Number of IAF-MLA Signatories 2000-2008
Source: www.iaf.nu
0
5
10
15
20
25
30
35
40
45
2000
2001
2002
2003
2004
2005
2006
2007
2008
No. of Signatories
Mutual Recognition of Accreditation: Does it Matter to Trade?
11
Econometric Strategy
Our empirical approach consists of three steps. First, trade effects of certifications and accredita-
tion are analyzed in a baseline model for developed and developing countries. In the second step
we provide evidence of our results in robustness tests. In the third step we differentiate the data
in developed and less developed countries exporters and importers. We use an extended gravity
model (Anderson & van Wincoop, 2003) and apply it to the food, beverage and tobacco sector.
In analogy to Newton’s Law of Gravitation, bilateral trade in gravity models depends positively
on countries’ economics “masses” and negatively on the distance between countries (van
Bergeijk & Brakman, 2010). Against this background, we estimate equation (1) in logarithm
form:
ijttjtit
jt12it11ijt10
ijt9ij8ij7ij6ij5
ij4ijt3jt2it10ijt
9000β9000ββ
βββlnβlnβ
lnββ lnβlnββln
isoisoiafmla
rtasmccollagcon
distariffconsconsx
(1)
Variables x
ijt
are the exports in the food, beverage and tobacco sector from country i to country j
at time t in US Dollars; cons
it
and cons
jt
represent the consumption of food, beverage and tobac-
co products in country i or j, respectively, in year t in US dollars. Variable
tariff
ijt
is the tariff
imposed by country i on country j’s exports in year t. Variable dis
ij
is the geographical distance
between country i and country j. con
ij
is a dummy variable indicating whether country i and
country j are contiguous. is a dummy variable indicating whether country i and country j share a
common language. col
ij
is a dummy variable indicating whether country i was a colony of coun-
try j. smc
ij
indicates whether country i and j were once part of the same country. rta
ijt
is a dummy
Mutual Recognition of Accreditation: Does it Matter to Trade?
12
variable indicating whether country i and country j are in the same regional trade agreement in
year t. iafmla
ijt
is a dummy variable indicating whether country i and country j are signatories of
the IAF-MLA in year t. iso9000
it
and iso9000
jt
are the number of ISO 9000 certifications in
country i and j, respectively, in year t. δ
it
, δ
jt
and δ
t
are importer-year dummies, exporter-year
dummies and time dummies and ε
ijt
is the error term.
We use domestic consumption of food production in the importing and exporting country
as proxies for sectoral output to capture the demand and supply effects for food, beverage and
tobacco products (see Anderson and Yotov (2011)).
4
Data to compute domestic consumption is
taken from the Food and Agriculture Organization of the United Nations’ statistical database
FAOSTAT (http://faostat.fao.org/). Data on tariffs are sourced from the World Integrated Trade
Solution data base (WITS-TRAINS). Data for common gravity variables (geographical distance,
contiguity, common language, colony, and same country) are taken from the CPPII Dataset pro-
vided by the Centre d’Etudes Prospectives et d’Information Internationales (CEPII). Finally, the
World Trade Organization’s Regional Trade Agreements Information System (RTA-IS) makes
information on regional trade agreements available. Table 1 presents the descriptive statistics of
the variables.
Table 1: Descriptive Statistics
Variable
Observations
Mean
Standard
Deviation
Min
Max
Log of exports
35000
6.21
3.65
-7.33
15.86
Log of cons importer
35000
8.66
1.67
4.65
13
Log of cons exporter
35000
8.53
1.56
3.95
13
Tariff
35000
-6.69
1.05
-25.64
-2.67
Log of Distance
35000
8.55
0.95
4.39
9.89
4
We calculated the domestic consumption of product food products in country i and year t as:
ititit
XMS C
it
,
where
it
S
the domestic production value of food production in country i in year t in U.S. Dollars;
it
M
[
it
X
] stands for
import [exports] of product food products in country i and year t in U.S. Dollars.
Mutual Recognition of Accreditation: Does it Matter to Trade?
13
Contiguity
35000
0.04
0.2
0
1
Common language
35000
0.15
0.36
0
1
Colony
35000
0.02
0.15
0
1
Same country
35000
0.01
0.12
0
1
RTA
35000
0.17
0.38
0
1
MLA for ISO 9000
35000
0.18
0.38
0
1
ISO 9000 Imp
35000
3.65
2.01
0
9.32
ISO 9000 Exp
35000
4.05
2.05
0
9.32
We estimate the gravity model using ordinary least square (OLS) with standard errors ro-
bust to heteroskedasticity. To control for characteristics specific to importers and exporters in a
given year, such export subsidies, we include importer and exporter dummies and interact them
with time dummies. Finally, time dummies control for common macroeconomic shocks.
3. Results
Table 2 reports the results of the baseline specification defined in equation (1). In the baseline
model we use simple ordinary least square (OLS) regression analysis. As data on consumption
and tariffs is missing for some years and countries we exclude both variables in columns 2 and 4.
Besides importer-time, exporter-time and time dummies, we include in columns 3 and 4 dummy
variables for sectors (i.e. food and beverage sector or tobacco processing industry) interacted
with importer and exporter dummies to control for characteristics at the sector and import-
er/exporter level.
Table 2: Baseline Model
1
2
3
4
Baseline
Baseline
Baseline
Baseline
Log of cons importer
0.048
0.172
(1.06)
(4.28)
***
Log of cons exporter
0.336
0.379
(7.29)
***
(9.37)
***
Mutual Recognition of Accreditation: Does it Matter to Trade?
14
Tariff
-0.145
-0.155
(7.47)
***
(8.78)
***
Log of Distance
-1.203
-1.132
-1.262
-1.203
(51.34)
***
(68.47)
***
(60.08)
***
(80.98)
***
Contiguity
0.562
0.543
0.525
0.512
(6.54)
***
(8.92)
***
(6.83)
***
(9.42)
***
Common language
0.709
0.648
0.84
0.726
(14.29)
***
(17.26)
***
(19.13)
***
(21.57)
***
Colony
0.691
0.942
0.783
0.903
(6.69)
***
(15.29)
***
(9.04)
***
(16.79)
***
Same country
0.222
0.466
0.16
0.35
(1.68)
*
(4.47)
***
(1.34)
(3.74)
***
RTA
0.451
0.563
0.389
0.599
(9.94)
***
(18.21)
***
(9.37)
***
(21.20)
***
MLA for ISO 9000
0.347
0.197
0.683
0.626
(6.02)
***
(4.81)
***
(14.38)
***
(18.43)
***
ISO 9000 Imp
0.495
0.426
0.621
0.63
(12.03)
***
(22.87)
***
(17.81)
***
(40.77)
***
ISO 9000 Exp
0.288
0.389
0.41
0.559
(8.09)
***
(20.85)
***
(13.56)
***
(36.57)
***
Constant
9.844
13.042
8.895
13.298
(18.94)
***
(77.09)
***
(19.46)
***
(88.31)
***
Observations
35000
66082
35000
66082
R-squared
0.57
0.57
0.66
0.65
Exporter-year, Importer-
year, Product-year and
Year dummies
YES
YES
YES
YES
Product-importer and
Product-exporter dum-
mies
NO
NO
YES
YES
Notes: The dependent variables are bilateral exports. The asterisks represent the level of signifi-
cance: * significant at 10%; ** significant at 5%; *** significant at 1%. Robust t statistics in paren-
theses.
All coefficients have the expected sign and are statistically significant. Consumption in
the importing and exporting country is positively related to exports and tariffs and distance are
negatively correlated. Countries that share a common border and language trade significantly
more with each other. The same is true for countries with a past colonial relationship or that used
Mutual Recognition of Accreditation: Does it Matter to Trade?
15
to be one country or are both members of the same regional trade agreements Regarding the var-
iable that captures the effect of membership in the IAF-MLA we observe in all four columns a
positive and highly significant effect. Including sector-importer and sector-exporter dummies in
columns 3 and 4 increases the trade impact of the IAF-MLA. Becoming a signatory of the IAF-
MLA increases bilateral trade in manufacturing products between 0.20 and 0.62 percent.
The impact of ISO certificates on bilateral trade is positive in all models. A one percent
increase of the number of certificates in the exporting country increases exports between 0.30
and 0.60 percent. ISO certificates in the importing country are also positively related to bilateral
exports. The variable is positive in all models and a one percent increase of the number of certif-
icates in the importing country is associated with an increase of exports between 0.40 and 0.60
percent. Thus, we can confirm that the ISO 9000 certificates in the importing and exporting
country reduce information asymmetries between buyers and sellers and have a trade enhancing
effect. ISO certificates can help firms to reduce search costs and signal quality investments to
potential customers.
In order to test the robustness of our results we conduct additional estimates (Table 3).
Recent literature of gravity models has pointed to the importance of including zero-trade flows in
the analysis. Gravity models are usually estimated in logarithm form but dropping zero observa-
tion may lead to biased estimates (Baldwin & Taglioni, 2006). One way to solve the zero-trade
problem is to apply Poisson pseudo-maximum-likelihood (PPML) technique developed by San-
tos-Silva and Tenreyro (2006). The authors show that the PPML estimator produces consistent
estimates when zero-trade values are present. When using PPML the dependent variable is in
levels and not in logarithmic form as in OLS estimates. The results for the PPML estimations are
shown in column 1 and 2 in Table 3. The PPML estimates for our variables of interest are similar
Mutual Recognition of Accreditation: Does it Matter to Trade?
16
to the OLS estimations in Table 2. Mutual recognition of accreditation (IAF-MLA) is positively
correlated with exports and increases bilateral trade by around 0.60 percent. ISO certificates in
the importing and exporting country are also positively correlated with exports and are highly
significant. The marginal effects of the PPML estimations are slightly smaller than the OLS es-
timation in Table 2.
Mutual Recognition of Accreditation: Does it Matter to Trade?
17
Table 3: Robustness Tests
1
2
3
4
PPML
PPML
OLS lagged
OLS lagged
Log of cons importer
0.16
-0.077
(2.05)
**
(0.55)
Log of cons exporter
0.544
-1.471
(8.03)
***
(2.42)
**
Tariff
-0.098
-0.135
(3.96)
***
(6.89)
***
Log of Distance
-0.849
-0.657
-1.445
-1.36
(26.47)
***
(37.92)
***
(62.66)
***
(82.11)
***
Contiguity
0.194
0.355
0.338
0.316
(2.39)
**
(9.67)
***
(4.12)
***
(5.42)
***
Common language
0.264
0.402
0.945
0.789
(4.94)
***
(10.11)
***
(19.55)
***
(21.40)
***
Colony
0.747
0.659
0.742
0.88
(12.85)
***
(15.55)
***
(8.07)
***
(15.45)
***
Same country
-0.075
0.003
0.063
0.376
(0.71)
(0.05)
(0.47)
(3.70)
***
RTA
0.231
0.583
0.393
0.521
(4.42)
***
(15.22)
***
(8.61)
***
(16.88)
***
MLA for ISO 9000
0.599
0.673
0.388
0.293
(7.03)
***
(11.61)
***
(7.71)
***
(7.85)
***
ISO 9000 Imp
0.361
0.337
(5.77)
***
(12.78)
***
ISO 9000 Exp
0.214
0.434
(6.11)
***
(22.42)
***
ISO 9000 Imp (2 year
lag)
0.78
0.322
(7.77)
***
(2.65)
***
ISO 9000 Exp (2 year
lag)
-0.287
0.342
(-0.90)
(4.82)
***
Constant
7.707
11.916
25.868
13.349
(9.51)
***
(62.25)
***
(5.75)
***
(27.61)
***
Observations
40386
79505
25704
49133
R-squared
0.68
0.67
Notes: The dependent variables are bilateral exports. The asterisks represent the level of signifi-
cance: * significant at 10%; ** significant at 5%; *** significant at 1%. Robust t statistics in
parentheses.
Mutual Recognition of Accreditation: Does it Matter to Trade?
18
As an additional robustness test we include lagged variables for ISO certificates. In theo-
ry, the direction of causality between ISO certificates and exports may be reversed. Large vol-
umes of bilateral trade might lead domestic firms to demand ISO certification for foreign suppli-
ers. To avoid the possible reverse causality we use two year lagged ISO certification variables in
columns 3 and 4 of Table 3. The impact of lagged ISO certificates in the importing country re-
mains positive and significant, and the impact of exporting country certificates is positive and
significant when we drop missing observations for consumption and tariffs (column 4). Using
two year lags and accounting for reverse causality confirms the results of the baseline models.
Finally, we want to know if cooperation on accreditation services has different impacts
for developed countries and developing countries. Therefore, we segment our data in four sub-
samples. In the first subsample both exporters and importers of food, beverage and tobacco
products are from developed countries and in the second subsample bother exporters and import-
ers are from less developing countries. In the other two subsamples we focus on the trade be-
tween developed and developing countries. In the third subsample exporters are from developed
countries and importers from developing countries and in the fourth subsample vice versa. We
use the Gross Nation Income per capital to determine whether or not a country is considered as
developed or developing country. High-income countries with a per capita income of more than
12,476 US Dollar per year are for our purposes regarded as developed countries and countries
the remaining middle income and low income countries as developing countries.
Table 4 reports the results of the country models. We drop consumption and tariffs since
we do not have enough observations for those variables. The coefficients of the gravity variables
have the expected sign and reasonable magnitude. Distance between countries has a negative
impact on bilateral trade and contiguity, common language, former colonial links and same
Mutual Recognition of Accreditation: Does it Matter to Trade?
19
country increase trade. Members of regional trade agreement significantly trade more with each
other. Interestingly, the magnitude of regional trade agreements is similar in all four models re-
gardless of whether the exporter or importer is a developed or developing country. Trade be-
tween two countries increases by about 0.70 percent when importer and exporter are in the same
regional trade agreement.
In contrast, the coefficient for the IAF-MLA variable varies considerably in the four
models. The impact is largest when developing countries want to access market in developed
countries (column 3) and smallest when developed countries export to developing countries (col-
umn 2). The coefficient is between the two extremes when both the exporter and the importers
are from developed countries or developing countries, respectively (column 1 and 4). Obviously,
organizations in developed countries are more concerned about the auditing competencies of
certification bodies in developing countries whereas developing countries have a higher level of
trust in certification bodies from developed countries.
Becoming a signatory of the IAF-MLA signals an improvement of the auditing practices
which is mostly acknowledged by importers from developed countries. Further, the demand for
high quality food products seems to be larger in developed countries than in developing countries
which explains the larger impact of the IAF-MLA when the importer is a developed country. Our
results regarding the impact of the IAF-MLA are different from those in Blind and Mangelsdorf
(2012). Using a larger dataset on trade in the manufacturing sector, the authors find no impact of
the MLA when the exporter comes from a developed country and smaller impacts when export-
ers are from developing countries. Obviously, delivering confidence in quality management cer-
tification through mutual acceptance is more important in the food, beverage and tobacco sector
compared to the broad manufacturing sector.
Mutual Recognition of Accreditation: Does it Matter to Trade?
20
Finally, ISO certificates in the importing and exporting country have a positive trade ef-
fect in all four models. The magnitude of the impact is comparable with the baseline model: a
one percent increase of the number of certificates in the importing country increases bilateral
exports between 0.50 and 0.90 percent and a one percent increase of certificates in the exporting
country increases trade between 0.40 and 0.60 percent.
Table 4: Country Models
1
2
3
4
Developed
Countries
Developed
Countries
Developed
Countries
Developing
Countries
Developing
Countries
Developed
Countries
Developing
Countries
Developing
Countries
Log of Distance
-1.123
-1.227
-1.556
-1.423
(34.84)
***
(29.76)
***
(41.22)
***
(46.68)
***
Contiguity
0.589
0.456
0.325
0.175
(8.12)
***
(2.19)
**
(2.01)
**
(1.73)
*
Common language
0.613
0.627
0.703
1.022
(8.80)
***
(8.33)
***
(10.77)
***
(15.56)
***
Colony
0.891
0.688
0.671
1.26
(10.55)
***
(5.69)
***
(7.70)
***
(6.54)
***
Same country
0.356
-0.312
1.829
0.275
(2.62)
***
(0.82)
(6.74)
***
(1.95)
*
RTA
0.762
0.738
0.718
0.719
(11.53)
***
(6.89)
***
(7.29)
***
(11.79)
***
MLA for ISO 9000
0.856
0.221
1.262
0.782
(11.86)
***
(3.14)
***
(13.14)
***
(8.73)
***
ISO 9000 Imp
0.561
0.921
0.547
0.900
(18.70)
***
(22.95)
***
(17.32)
***
(22.07)
***
ISO 9000 Exp
0.374
0.619
0.577
0.614
(13.93)
***
(20.82)
***
(14.98)
***
(14.25)
***
Constant
13.19
13.147
16.403
14.235
(42.25)
***
(34.61)
***
(46.89)
***
(45.72)
***
Observations
15821
15575
17986
16700
R-squared
0.75
0.72
0.63
0.60
Notes: The dependent variables are bilateral exports. All estimates include exporter-year
Mutual Recognition of Accreditation: Does it Matter to Trade?
21
dummies, importer-year dummies and year dummies. The asterisks represent the level of
significance: * significant at 10%; ** significant at 5%; *** significant at 1%. Robust t
statistics in parentheses.
4. Conclusion
Overall, our results show the importance of voluntary certification and accreditation for export
success in the food, beverage and tobacco industry. The analysis shows that ISO 9000 certifica-
tions in the importing and exporting country have a positive effect on bilateral trade. We inter-
pret these findings as indication that ISO certificates reduce information asymmetries between
potential buyers and sellers. The positive trade effect of ISO certificates is independent from per
capita income of the importing or exporting country which suggests that developed and develop-
ing countries benefit from the ISO 9000 standard.
Regarding the impact of mutual recognition of accreditation results via the IAF-MLA for
quality certification, we find that signatories of the agreement significantly trade more with each
other. Becoming a signatory of the MLA means that other accreditation bodies must recognize
the accreditation schemes of the signatory as equivalent to their own accreditations. Consequent-
ly, ISO certified firms from signatory countries gain access to international markets because cer-
tifications are recognized by foreign partners. Mutual recognition of accreditation services pro-
motes the trust between trading partners. Further, our findings reveal interesting differences re-
garding the magnitude of the IAF-MLA. Dividing our data in four subsamples shows that mutual
recognition of accreditation services is beneficial for all countries -- i.e. the IAF-MLA variable is
positive and significant in all models -- but the impact is largest for developing countries that
want to access markets in developed countries. Signatories of the IAF-MLA enjoy increased lev-
els of trust in the auditing competencies of certification bodies which increases the trust in ISO
9000 certifications. This result is particularly poignant given the relative importance of the food,
Mutual Recognition of Accreditation: Does it Matter to Trade?
22
beverage, and tobacco industry in the economies (and export competitiveness) of developing
countries. In fact, food, beverage, and tobacco exports in our sample represent 13.7% of total
trade in goods in developing countries, whereas the contribution of the sector to total trade in
goods amounts to 9.1% in developed countries.
From a development policy perspective, our results support the importance of investing in
the ‘quality infrastructure’ of developing countries. The quality infrastructure of a country is the
system of institutions responsible for ensuring that products meet predefined requirements. The
institutions include metrology, standardization, and accreditation organizations and the system of
conformity assessment (Gonçalves & Peuckert, 2011). A number of case studies in the Aid-For-
Trade framework show that technical capacity building projects supported developing countries’
institutions to become part of the international accreditation system, allowing domestic firms
improved access to international markets (WTO/OECD, 2011). For instance, in a three year pro-
ject, the Swedish International Development Cooperation Agency (Sida) provided assistance to
the Sri Lanka Accreditation Board for Conformity Assessment (SLAB). Through courses and
consultancies supported by the staff of the Swedish accreditation organization the project helped
to develop the necessary infrastructure for technical regulations in Sri Lanka. The cooperation
allowed SLAB to gain international recognition for its accreditation schemes which should help
Sri Lank firms to market their products in worldwide markets (SIDA, 2011). The results of our
model show that, international recognition of accreditation schemes will likely help Sri Lanka
boost exports, especially into developed markets.
Mutual Recognition of Accreditation: Does it Matter to Trade?
23
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Mutual Recognition of Accreditation: Does it Matter to Trade?
27
Appendix
Table A1: Countries includes in the gravity model
Albania
Costa Rica
Indonesia
Morocco
Slovenia
Algeria
Croatia
Ireland
Mozambique
South Africa
Argentina
Cyprus
Israel
Namibia
Spain
Armenia
Czech Re-
public
Italy
Netherlands
Sri Lanka
Australia
Denmark
Jamaica
New Zealand
Sudan
Austria
Dominican
Republic
Japan
Nicaragua
Sweden
Azerbaijan
Ecuador
Jordan
Niger
Switzerland
Bangladesh
El Salvador
Kazakhstan
Nigeria
Thailand
Barbados
Estonia
Kenya
Norway
Togo
Belarus
Ethiopia
Latvia
Pakistan
Trinidad and Toba-
go
Belgium
Finland
Lebanon
Panama
Tunisia
Belize
France
Lithuania
Peru
Turkey
Bosnia and
Herzegovina
Georgia
Luxembourg
Philippines
Ukraine
Brazil
Germany
Madagascar
Poland
United Kingdom
Bulgaria
Greece
Malaysia
Portugal
United States
Cameroon
Guinea
Maldives
Qatar
Uruguay
Canada
Honduras
Mali
Romania
Chile
Hungary
Malta
Russian Federation
China
Iceland
Mauritius
Saudi Arabia
Colombia
India
Mexico
Singapore
Table A2: Concordance between EA Code and International Standard Industrial Classification
(ISIC)
EA Code
ISIC
3 Food products, beverage and tobac-
co
15 Manufacture of Food Products and Beverages
16 Manufacture of Tobacco Products
