Product Standards and Export Diversification

Shepherd, Ben

doi:2015.30.2.300

The Journal of Economic Integration 2015 June;30(2) :300-333.
DOI: https://doi.org/10.11130/jei.2015.30.2.300

Product Standards and Export Diversification

Ben Shepherd,

Developing Trade Consultants, New York, USA

Corresponding Author: Ben Shepherd ,Tel: +1 6468459702, Fax: +1 6463500583, Email: Ben@Developing-Trade.com

ABSTRACT

This paper examines the impact of voluntary standards on trade studying textiles, clothing, and footwear sectors. It hypothesizes that internationally harmonized standards can reduce the fixed cost burden facing exporting firms, thus encouraging greater market entry and a corresponding increase in product variety on the import side. The data bear out this contention, providing the first evidence on the links between international harmonization and extensive margin trade growth. Moreover, the income level of the exporting country—as a proxy for its ability to adapt to foreign standards—has a major impact on the effect of standards. For an average low income country, a 1% reduction in the total number of European Union standards is associated with a 0.6% increase in export variety, while a 1% increase in the proportion of European Union standards that are internationally harmonized leads to a 0.8% increase in export variety. These effects are weaker, and even reversed, for high income countries.

JEL Classification

F13: Trade Policy; International Trade Organizations
F14 : Empirical Studies of Trade