Xiong, Bo; Beghin, John C.

WP #11019, October 2011 (Revised on February 26, 2013)
Former title: DISENTANGLING THE DEMAND-ENHANCING EFFECT AND TRADE-COST EFFECT OF TECHNICAL MEASURES IN AGRICULTURAL TRADE AMONG OECD COUNTRIES. This revised version uses an improved empirical measure of MRL stringency

Abstract: Maximum residue levels (MRLs) regulations in plant products can create unnecessary trade barriers on one hand and enhance demand via risk mitigation or quality assurance on the other. We stipulate a generalized gravity equation model to disentangle the effects of MRLs on consumers’ import demand and foreign exporters’ supply. Applying the framework to the MRLs on pesticides imposed by high-income OECD countries, we find that the stringency of MRLs jointly enhances consumers’ demand and hinders foreign exporters’ supply of plant products. Further, exporters from the less-developed countries are more constrained by the MRLs than their competitors from the developed world.

JEL Classification: F1, F14, Q17

Keywords: MRL, sanitary and phytosanitary, SPS, standards, TBT, protectionism, maximum residue level, technical barriers, gravity model

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