SPS barriers as a bridge to cross

 This research assesses the effects of aflatoxins standards - (SPS) standards by introducing a new concept, bridge to cross (BTC). The BTC is the regulatory gap between the exporting and importing countries. The gap is what needs to be bridged to access markets Implies same standard means different things to different exporters- the standard is an effective barrier only when it exceeds the standard in the domestic market of the exporting country.

 “. . . a World Bank study has calculated that the European Union regulation on aflatoxins costs Africa $750 million each year in exports of cereals, dried fruit and nuts. And what does it achieve? It may possibly save the life of one citizen of the European Union every two years . . . Surely a more reasonable balance can be found”. UN Secretary-General Kofi Annan at the Third United Nations Conference on the Least Developed Countries , May 2001

10 years down the line the nose dive should have happened. It has not – why? Methods  Always remember that aflatoxins is one problem out of many  Theoretically the model was mis-specified because ▪ Trade barriers have to be included as a multi-lateral term (Australia and New Zealand trade a lot with each other not only because they are near to each other but also because they are so far away from the Rest of the world) ▪ Zero trade is information , ignoring it gives wrong estimates ▪ They included very few explanatory variables Coverage  Trade only within a selected group of countries  Valid to answer questions related to trade effects on a particular trading relationship ▪ Not valid for quantifying the trade losses in numbers because of market reallocation

 The effect vanishes Other study also finds the same thing  Xiong and Beghin (2010) from Iowa state university Does it means that aflatoxins regulations do not matter  Our argument is that it matters but in a different way  It matters as a bridge to cross

 BTC (Bridge to cross): the difference between importing country standard and exporting country standard.  Where there is a regulatory gap – the difference between the importing standard and exporting standard is important  If a country has high contamination, it has a tougher job in achieving either standard – the BTC is high  We find using the BTC, aflatoxins regulations matter when the average size of farms is smaller in a country

 Where no domestic standards, the BTC is the difference between actual contamination and importing standards If contamination levels are low, countries could export- i.e. there is a smaller bridge to cross Bridges are long for many countries Domestic markets  Raise the speed on the bridge  Cushion the fall

 In maize a 10%  In groundnut we increase in BTC continue work to look reduces 0.9% in trade at BTC as regulation globally, 1.4% among contamination gap. poor countries and by 2.5% in African country sample for countries with small landholdings

 Even if Otsuki et al (2001  Though not explicitly figures are believed, stated aflacontrol project changing regulation is a aims to bring down the hard nut to crack level of btc. Reducing domestic contamination and improving domestic standards are actionable measures

 Non trading pairs more important in groundnuts Bridge to cross in groundnuts comparatively longer for African and poor countries

 Regulation is a variable hard to alter In that case effort will pay off best (in trade) by reducing contamination – also see improvements in health Most countries do not export because bridges, are far too long - especially where no domestic standards exist Bridge to cross should be a key factor in explaining zero trade.

 Data a significant problem Collected based on internet searches and grey literature A highly labor intensive process that runs the risk of not being exhaustive, representative or imperfectly matching

SPS barriers as a bridge to cross

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