Mobile Edition
Print
Get the Mag
Weekly UpdatesAs one of the world's largest producers and importers of fishery products, the issue of seafood safety is of particular concern to the United States. The risks associated with domestic and imported products motivated the introduction of a mandatory Hazard Analysis Critical Control Points (HACCP) approach to food safety regulation in seafood processing in 1997.
In considering the effect of higher food safety standards, such as HACCP, the conventional wisdom in the literature held that such standards in developed countries amount to "standards as barriers" to trade that are frequently used as protectionist tools that disadvantage developing countries. A more recent and less pessimistic view emphasizes the opportunities provided by emerging food safety standards and the possibility that developing countries could use them to increase their competitive advantages. This "standards as catalysts" view argues that compliance with new food standards may provide incentives for countries to modernize their export-oriented sectors, as well as to strengthen the levels of food and health standards at the national level.
We evaluate these two hypotheses by analyzing the impact of mandatory HACCP measures introduced in 1997 on imports to the United States by the thirty-five largest seafood exporting countries, of which twenty-six are developing and nine developed countries. The data set includes the pre-HACCP period 1990-97 and the post-HACCP period 1998-2004. We test the hypotheses by analyzing the overall impact of HACCP adoption on U.S. seafood imports and whether there was a differential effect for developed and developing country exporters over time. We then test for HACCP trade effects at the individual country level, allowing for differential effects not categorized by development status. Our results contribute to the discussion of the impact of changing food safety standards on the competitiveness of developing countries in international trade.
Food Safety and Trade: Empirical Evidence
There is a fairly extensive literature on the general effects of food safety standards and the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) under the World Trade Organization (WTO) on developing countries. For example, Jaffee and Henson (2004) and the World Bank (2005) argue that standards can act to impede trade flows by explicit bans but more probably through prohibitive costs of compliance, particularly for poorer countries. The investment and recurrent "costs of compliance" to penetrate high-income markets could undermine the competitive position of many developing countries or narrow the profitability of high-value food exports.
However, Jaffee and Henson (2004) and the World Bank (2005) highlight potential opportunities arising from developments in standards. Certain countries may be able to use the new standards environment to their competitive advantage and increase their market shares in trade. This possibility depends on the modernization of supply chain structures in export-oriented industries in developing countries. Jaffee and Henson conclude that the simple black and white argument between food safety "standards as barriers" and "standards as catalysts" is more complex in reality. The issue requires close analysis of the dynamics of particular standards, markets, products, and countries.
To date, only a few studies have used empirical data to estimate the impact of national and international food safety regulations on trade flows (Paarlberg and Lee 1998; Calvin and Krissoff 1998; Otsuki, Wilson, and Sewadeh 2001; Wilson and Otsuki 2004; Maskus, Otsuki, and Wilson 2005; Peterson and Orden 2005). A common result is that more stringent food safety standards set by developed countries tend to deter trade supporting the view of "standards as barriers." Overall, changes in trade patterns related to standards take place within the context of broader changes. For example, Carrere (2006) finds that the effects of regional trade agreements on trade flows have become quite powerful in explaining changing patterns of food trade.
Seafood markets have attracted less attention even though seafood consumption accounts for a disproportionate share of foodborne illnesses in the United States (U.S. GAO 2001) and other OECD countries (Cato and Lima dos Santos 1998). Martinez-Zaroso and Nowak-Lehmann (2004) explore the export potential of MERCOSUR countries in a liberalized European Union (EU) market. Panel model results suggest strong correlations between the overall level of EU market protectionism and the growth rate of MECOSUR exports. In particular, the authors found the category of fishery products faced high barriers to trade from EU protection.
Debaere (2005) empirically investigates the impact of changing trade policies, in particular the EU zero tolerance policy for antibiotics, on the global shrimp market. He shows that the EU policy, mainly the loss of Thailand's preferential status in the EU, enforced differences in international safety standards leading to a disruption of trade flows from Europe toward the United States. This led to a significant decrease in U.S. shrimp prices and caused a U.S. antidumping case against six Asian shrimp exporting countries. Finally, Peridy, Guillotreau, and Bernard (2000) apply a panel model to analyze the economic factors affecting seafood imports into France. However, the influence of food safety standards is not central because the impact of trade barriers is reflected in a very broad manner that does not account for safety regulations.
Whether food safety standards operate predominantly as barriers or catalysts is largely unresolved in the empirical work to date. The analysis here estimates the magnitude of import changes emerging from stricter food safety standards in the form of mandatory HACCP requirements and provides direct tests of the hypotheses of "standards as barriers" versus "standards as catalysts" for developing country exports.
U.S. Seafood Trade, International Food Safety, and HACCP
Although the United States is one of the world's largest exporters of seafood, its annual trade deficit in fishery products has been rising to nearly $8 billion in the past fifteen years (NMFS 2005b). Seafood from foreign countries is filling a growing share of the U.S. seafood market, which has grown over 50% since 1980.
By 1998 imported seafood comprised 63% of U.S. consumption. The share of imports reached a peak of 76% of edible seafood consumption in 2002 (NMFS 2005b). Import volume has increased from 1997 to 2004 for both developing and developed countries. Out of the largest thirty-five seafood exporters that supplied approximately 95% of the U.S. imports from 1996 to 2004, twenty-six are developing countries (1) that account for 71% of edible seafood imports (USDA/FAS 2004) and nine are developed countries. (2) The net foreign exchange receipts derived from fish in developing countries increased from $11.6 billion in 1992 to $17.4 billion in 2002. In 2002, developing countries accounted for more than 49% of the total worldwide value of seafood exports (FAO 2004).
In 1997, a mandatory HACCP requirement was adopted for the seafood industry in the United States. We hypothesize that, all else equal, the introduction of mandatory HACCP had a negative effect on U.S. seafood imports. If standards act as barriers for developing country exporters, there should be a differential negative effect for these countries when compared to developed countries. However, if standards act as catalysts for developing countries as a group, we would expect no differential negative effect due to HACCP for these countries. Alternatively, it may be that standards operate as a barrier or catalyst at the country level independent of development status. In this case, we would expect to see differential effects on exports for countries based on country characteristics such as the size of the export industry and whether they already had relatively high food safety standards, could mobilize to meet HACCP requirements, or had lower compliance costs. Further, we examine whether these effects differ in the short run immediately after the new standards went into effect versus the longer term.
The Panel Model Approach to Analysis of HACCP Trade Impacts
Different methodological approaches have been applied to disentangle the complicated trade effects of food safety standards. Maskus, Wilson, and Otsuki (2001) summarize alternative approaches to estimating the impact of standards in general on trade. Previous studies by Swann, Temple, and Shurmer (1996), van Beers and van den Bergh (1997), Peridy, Guillotreau, and Bernard (2000), and Wilson and Otsuki (2004) discuss the advantages of econometric methods, especially the gravity equation approach, for the analysis of standards in international trade.
Our model uses a variant of the classic gravity equation to analyze the effects of the U.S. HACCP food safety standard on logarithms of bilateral trade flows. The general gravity model
is specified as
(1)
In [Imports.sup.x.sub.it]
= [[alpha].sub.0] + [[alpha].sub.1] (Time.sub.1) + [[alpha].sub.2]([HACCP.sub.it])
+ [[alpha].sub.3] ln ([GDP.sub.t]) + [[alpha].sub.4] ln([Size.sub.it])
+ [[alpha].sub.5] ln([Exchange.sub.it]) + [[alpha].sub.6] ln ([Distance.sub.i])
+ [[alpha].sub.7] ([MERCOSUR.sub.i])+ [[alpha].sub.8] ([NAFTA.sub.i])
+ [[alpha].sub.9] ln([ASEAN.sub.i]) + [[alpha].sub.10] ln([APEC.sub.i])
+ [[alpha].sub.11] ln([ANDEAN.sub.i]) + [[alpha].sub.12] ln([GEO.sub.i]) + [[epsilon].sub.i].
Table 1 presents definitions and descriptive statistics of the dependent and independent variables. [Import.sup.x.sub.it] denotes the imports of seafood from country i to the United States in a particular year t for the years 1990-2004 (NMFS 2005a, 2005b). Superscript x stands for either the volume of imports ([Imports.sup.Q.sub.it]) or the dollar value of imported seafood ([Imports.sup.$.sub.it]). The error [[epsilon].sub.i] is assumed to be normally distributed with mean zero. Trade data for Korea and Vietnam were incomplete and dropped, yielding a panel data set of the thirty-three leading exporters to the United States.
FEED