Food safety standards and international trade: The impact on developing countries’ export performance

Abstract

The expansion of food safety standards in regulations has introduced new complexity in trade policy dialogues and efforts to expand trade in agricultural products. A loss of competitiveness due to the costs required to comply with these standards has arisen concern among exporting firms, particularly those in developing countries. This chapter reviews and synthesizes existing studies that quantify the impact of food safety standards with particular attention to developing countries’ access to international markets. Based on the empirical studies using country-level data such as those using the gravity models, food safety standards have an adverse effect on trade in general. Furthermore, this adverse trade effect is likely to be greater for developing countries than developed countries. The firm-level studies generally demonstrate the adverse effect of food safety standards to impose direct/indirect and one-time/recurring costs on exporting firms in developing countries. In contrast, some of the country- and firm-level studies suggest the presence of the demand-enhancing effect of standards. However, the net effect of tightened food safety standards on developing countries appears to be generally negative according to the studies to assess the demand and supply impact of food safety standards because the tradecost effect tends to outweigh the demand-enhancing effect. Given this extensive literature review, this chapter highlights the importance of a concerted effort between developed and developing countries to reduce the trade-cost effect and to leverage the demand-enhancing effect. Such an effort would include setting reasonable level of food safety standards as well as raising the capacity of exporting firms in meeting the consumer’s demand for reasonable level of quality and safety of food products.