Standards harmonization in Morocco had a positive effect on the export performance of incumbent firms. Harmonizing domestic standards with international standards increased exports and enabled incumbent firms exporting affected products to exploit economies of scale. It also promoted the entry of incumbent firms into exporting harmonized products. The effects varied based on destination demand and were sustained over time, suggesting standards harmonization conferred competitive advantages in high-income markets and promoted portfolio expansion.

1. Standards Harmonization as Export
Promotion
Marion Dovis
University of Aix-Marseille
Mélise Jaud
The World Bank
Policy Seminar on Firm-level and export diversification in the ERF Region
March 21, 2014
Cairo, Egypt

2. Motivation I
• Increasing role of non-tariff measures (NTMs)
– as tariffs continue to fall
– Increasing number of Regional Integration Agreements involve NTM
harmonization, e.g. Morocco
• Effect of NTM harmonization on trade is complex
– Unlike tariff: not necessarily welfare-reducing or discriminatory
– Affects access to both foreign and domestic markets
• Limited evidence on the impact of NTMs harmonization on firms’
export performance
=> We examine the effect of NTM harmonization on developing
countries domestic firms’ export performance.

3. Motivation II
• What are we talking about?
– NTMs are requirements on product characteristics labeling, price control
and quantity, and conformity assessment, that define conditions for
access to a given market
– NTMs harmonization btw 2 countries adopt a common standard which
may be one of theirs or a third one (regional, i.e. new, or existing
international)
– Morocco: vigorous effort to modernize and harmonize with international
standards - largely mandated under the Association Agreement with the
EU and WTO agreements

4. This Paper I
• Q: How do NTM harmonizations affect firm’s export performance?
• What’s new?
1. Data :
• unique merged NTM-customs dataset for Morocco (2002-2010)
• Measure of import competition at HS6 digit: NTM harmonization
1. Estimation strategy:
• DiD approach: we relate a change in non-tariff protection associated with
NTM harmonization with change in domestic firms exports
– Exploit waves of NTM harmonization - with dates that vary across products and estimate the
within firm-product effect of harmonization
• Focus on incumbent firms
– isolate import competition channel
• Identification issues: reverse causality, omitted variable bias

5. This Paper II
• Underlying assumptions:
1. Change in non-tariff measures have important impact on the
competitive pressure faced by domestic firms
• Harmonization translated into implementation of stricter standard relative the
one previously in place
• Exporters sell on the domestic market: over 60% of exporting manufacturing
firms are active on the domestic market (census data), drop MNC, ZF
1. Incumbent firms are already compliant.
– Firm that export a given product to harmonized destination markets
throughout the sample period: 75% of incumbent transactions are with HIC
– Not affected by compliance cost of stricter domestic standard
– Export cost unaffected
=> Change in the non-tariff protection may affects incumbent firms’ export
performance through changes in level of competition they face on the
domestic market and/or through the reaction of foreign demand.

6. At aggregate level:
Positive effect of standard harmonization on trade flows
 lack of harmonization of standards and technical regulations is detrimental to
trade (Otsuki, Wilson and Sewadeh, 2001; Gebrehiwet, Ngqangweni and Kirsten,
2007; Fontagné et al., 2005)
 Harmonization of domestic food standards on international ones had a positive
and significant impact on exports (Mangelsdorf, Portugal-Perez and Wilson,
2012)
Harmonization and market structure
 Chen and Mattoo (2004) harmonization on regional standards improves market
access for out-of-bloc exporters from industrial countries, while reducing it if they
were from developing countries.
 Harmonization of developing countries on developed countries standards as part
of regional agreements reinforce hub-and-spoke trade structures at the expense
of South-South trade (Disdier et al., 2012).
At the firm-level
 Reyes (2012) impact of EU harmonization on US firms export performance:
 positive impact on firms’ ability to enter the EU market
 crowding out of developing countries’ producers.
 Augier, Cadot and Dovis (2013) harmonization of Moroccan domestic standards
with international ones: positive impact of firms’ profitability and productivity. 6
Existing Literature

7. 7
What should we expect
• Possible impacts:
1. Competition effect on the domestic market
• Limit competition from low income producers
• the standard is tougher to meet for foreign producers than for
domestic ones. Exit of firms from export.
• Increase competition from High-income producers
• the trade cost of foreign exporters remains unchanged. Entry of
firms from exports.
2. Return to scale effect
• Enable incumbent firms to exploit economies of scales through the
introduction of their product on the domestic market
3. Reputation effect
• Selling harmonized product will give the opportunity for firms to
benefit from a reputation effect on high-income markets

8. 8
Data
1. Moroccan customs:
– All annual export transaction flows between 2002-2010
– HS 10-digits level, in a four-dimensions panel: firm-year-product-partner
(No data on firms characteristics)
2. NTM data: New database from World Bank
– National inventories of all trade regulations
– For each HS6 products whether a NTM is in place codes and whether it
is harmonized with international regulations
=> Merged customs and NTM data at the product HS 6- digit level

9. 9
NTM Data I
• Harmonization took place in waves
• NTM harmonized with an international standard represent for
14% of NTMs adopted in the Moroccan economy over the period
Year # NTM
domestic
# NTM
harmonized
Type NTM
A B D E F P
2002 1024 31 537 506 12
2003 154 91 60 91 94
2004 313 0 313
2005 164 25 189
2006 250 147 91 161 69 76
2007 67 5 72
2008 11 15 11 15
2009 38 32 11 30 29
2010 17 2 4 12 3
2011 1024 31 817 241 1 80
2012 154 91 30 14 10 3

10. 10
• In aggregate and at the firm level : harmonized products represent a
growing share in the number of product exported and the share of
exports.
Customs-NTM Data, 2002-2010
Year N products Total export N firms Average firm
N products Export
Count
Harmonize
d product
(%)
Value
(million
USD)
Harmonize
d product
(%)
Count
Harmoniz
ed product
(%)
N
destination
s
Count
Harmonized
product (%)
Value
(thousan
d USD)
Harmonized
product
(%)
2002 2246 1% 6994 0% 4562 2% 2.3 5.1 1% 1534 1%
2003 2145 3% 7924 2% 4566 6% 2.4 4.9 5% 1737 3%
2004 2174 3% 8754 3% 4797 6% 2.3 4.6 6% 1826 3%
2005 2235 3% 9265 4% 4839 9% 2.3 4.5 7% 1916 4%
2006 2379 8% 10373 6% 4761 19% 2.4 4.9 17% 2180 8%
2007 2462 8% 12129 7% 4749 20% 2.5 5.2 18% 2556 7%
2008 2520 9% 15343 6% 4789 21% 2.5 5.1 18% 3206 8%
2009 2479 9% 11018 9% 4617 22% 2.4 4.8 21% 2388 9%
2010 2509 9% 13714 8% 4563 22% 2.5 4.7 22% 3007 9%
Note: Harmonized products are products that underwent harmonization. Firms exporting harmonized products are defined as firms exporting at least one products affected by harmonization.

11.  Estimate effect of product-specific treatment on firms’ export performance across
destinations, with firm-product and time effects
 Investigate import-competition channel :
 focus on incumbent firms
 export a given product to harmonized destination markets throughout the sample
period
 Not affected by compliance cost of stricter domestic standard
⇒ Change in the non-tariff protection affects incumbent firms’ export performance
through changes in level of competition they face on the domestic market.
 Yfdpt = log export quantity in kg or log export UV or a dummy variable coding alternately
(i) firm-product entry taking value 1 if firm f enters the export market with product p in year t,
and (ii) product creation taking value 1 if firm f exports a new product p in year t
11
Empirical Strategy
Yfdpt =α+β1NTM pt−1
harm
+β2NTM pt
mor
+γX fdpt +ϕfp +ϕd +ϕt +ωfdpt (1)
or
Yfdpt =α+β1NTM pt−1
harm
* Incumbentfp +β2NTM pt−1
harm
* NonIncumbentfp +β3NTM pt
mor
+γX fdpt +ϕfp +ϕd +ϕt +ωfdpt (2)

12. 12
Export quantity Unit Value
(1) (2) (3) (4)
NTMharm
t-1 0.0713* -0.0268
(0.0377) (0.0190)
NTMharm
t-1*Incumbent 0.1700*** -0.0538*
(0.0606) (0.0311)
NTMharm
t-1*NonIncumbent -0.0102 -0.0045
(0.0563) (0.0204)
NTMmor
-0.0440 -0.0453 -0.0033 -0.0029
(0.0395) (0.0394) (0.0216) (0.0216)
Nbexporters 0.4107*** 0.4105*** -0.0154*** -0.0153***
(0.0105) (0.0105) (0.0031) (0.0031)
Tarifft-1 -0.0273*** -0.0274*** -0.0132*** -0.0131***
(0.0099) (0.0099) (0.0039) (0.0039)
Import 0.2380*** 0.2387*** 0.0005 0.0004
(0.0183) (0.0183) (0.0072) (0.0072)
Constant 7.1944*** 7.1970*** 2.9615*** 2.9608***
(0.1739) (0.1738) (0.1129) (0.1129)
Fixed Effects
product-firm
year
destination
Observations 289.496 289.496 289.496 289.496
R-squared 0.819 0.819 0.925 0.925
Robust standard errors in parentheses clustered by product-year. * significant at 10%; **
significant at 5%; ***significant at 1%.
Main Result: Standards Harmonization, Import
Protection and Firm Exports

13. 13
Destination Income Effect: Proxy for Demand for
Harmonized Products

14. 14
Standards Harmonization Promotes Existing Firms
Entry into Harmonized Products’ Export

15. 15
Standards Harmonization : by sectors

16. 16
Standards Harmonization and Spillover Effects
• Promotes Existing Firms Entry into non-harmonized Products’ Export
Within Same Sector

17. 17
Standards Harmonization Effects Persist Over Time

18. 18
Export quantity
Unit
value
All
High
income
No high
income
All
High
income
No high
income
(1) (2) (3) (4) (5) (6)
Excluding firms in top & bottom 1% (total export)
NTMharm
t-1*Incumbentfp 0.1283** 0.1476** 0.0450 -0.0513 -0.0692* 0.0171
(0.0583) (0.0706) (0.0983) (0.0315) (0.0358) (0.0414)
NTMharm
t-1*No
Incumbentfp -0.0079 -0.0301 0.0195 -0.0038 -0.0118 0.0547
(0.0555) (0.0647) (0.0957) (0.0205) (0.0233) (0.0416)
Observations 286.475 246.128 40.347 286.475 246.128 40.347
R-squared 0.815 0.812 0.880 0.924 0.925 0.937
Robust standard errors in parentheses clustered by product-year. * significant at 10%; ** significant at
5%; ***significant at 1%.
Robustness Checks I : Intensive Margin
• Excluding top and bottom 1% of firms in our sample

19. 19
Entry firm-product Product creation
All
High
income
Non-
high
income
All
High
income
Non-
high
income
(1) (2) (3) (4) (5) (6)
All sectors
NTMharm
t-1 0.0131 0.0061 0.0028 0.0364*** 0.0384*** -0.0017
(0.0185) (0.0209) (0.0288) (0.0113) (0.0131) (0.0151)
Observations 286.475 246.128 40.347 286.475 246.128 40.347
R-squared 0.737 0.733 0.812 0.758 0.753 0.849
Observations 286.475 246.128 40.347 286.475 246.128 40.347
R-squared 0.204 0.198 0.344 0.181 0.181 0.295
Robust standard errors in parentheses clustered by product-year. * significant at 10%; **
significant at 5%; ***significant at 1%.
Robustness Checks I : Extensive Margin
• Excluding top and bottom 1% of firms in our sample

20. 20
Robustness Checks II : Import tariffs

21. 21
Robustness Checks III : Cumulated number

22. 22
Mean
coefficient
Mean S.E
Mean t-
stat
Replication
number
Dependent Variable (1) (2) (3) (4)
Export quantity
Baseline 0.025 0.078 0.321 1000
Incumbent 0.082 0.137 0.599 1000
Incumbent and high income sample 0.224 0.182 1.231 1000
Export growth of quantity
Baseline 0.052 0.154 0.338 1 000
Incumbent 0.206 0.171 1.205 1000
Incumbent and high income sample 0.164 0.194 0.845 1000
Unit value
Baseline 0.043 0.088 0.489 1000
Incumbent 0.021 0.136 0.154 1000
Incumbent and high income sample 0.035 0.149 0.235 1000
Product creation
Baseline -0.013 0.020 -0.650 1000
high income sample -0.050 0.052 -0.961 1000
No high income sample 0.003 0.059 0.051 1000
Robustness Checks III : Placebo

23. • Estimate the within firm-product effect of standard harmonization on
firms’ exports
1. Harmonization of domestic NTM affect the export performance of
domestic firms through changes in the level of competition they face
and increasing return to scale.
• Increased exports of incumbent firms and reduced their marginal production cost
• At the extensive margin expansion of portfolio towards harmonized products
1. Effect vary with destination demand for harmonized product suggesting
a reputation effect:
• Standard harmonization only confers exporters with a competitive edge in high
income destination markets where demand for harmonized products is high
• Similarly at the extensive margin.
1. Effect is sustained over time
• Harmonization of developing countries’ domestic standards with
stricter international regulations may serve as a policy instrument to
promote domestic firms’ exports.
Concluding Remarks

24. 24
Disentangle more precisely effects : distinguishing competition
effect versus return to scale effect versus reputation effect
Next Steps

25. 25
Thank You