Stringency and dissimilarity of Maximum Residue Levels affect bilateral agri-food trade stability

Abstract

Food standards are rising in both prevalence and stringency. They protect consumers and may enhance demand stability but also pose compliance challenges to producers, with ambiguous effects on the stability of trade relationships. We analyze the impact of importers' Maximum Residue Levels (MRLs) along with bilateral MRL dissimilarity between trade partners, on trade duration and volatility. We find that stricter MRLs in importing countries enhance trade stability, whereas MRL dissimilarities reduce it. The results suggest that importers with less strict MRLs than their trade partners can improve trade stability by reducing MRL dissimilarities. However, when importers have stricter MRLs, they might face a trade-off between the benefits of lowering discrepancies for trade stability and the downsides of reduced stringency for food safety.