Food Safety Regulations And Agrifood Trade Patterns

This study aims to provide new evidence on the effect of food safety standards measured in terms of Maximum Residue Limits on food products exports:of China, across the development spectrum of economies, and implemented by high income, upper middle income, lower middle income and low income economies. Different studies are presented in this regard.First study takes the example of melamine incident in China to show the impact of food safety incident on domestic production and international trade. The study finds that frequent occurrences of food safety issues have tarnished the "Made in China" labeled product. Of these, the melamine incident of baby formula milk powder jolted the growth of dairy sector in China. The results of pre- and post-melamine event analysis show that the melamine incident has statistically significantly affected milk production, number of livestock and export and import of cream and milk except import of concentrated and sweetened milk and cream. The incident affected trust of consumers both in domestic and foreign countries and resultantly the dairy industry incurred huge economic losses. Import for concentrated and sweetened milk and cream has experienced compound rate of growth of-1.98%. However, a sky rocketing increase has been observed during the post-melamine period with compound rate of growth of 99.77%. Import for milk and cream neither concentrated nor sweetened has increased at the compound rate of growth of 3.46% during the pre-melamine period while increasing at the instantaneous rate of growth of 26.20% and compound rate of growth of 29.95%.The second study portrays the effect of food safety incident on trade patterns of China. This study estimates the gravity model to show the effects of food safety (melamine) issue on dairy sector in China. Results indicate that melamine issue affected milk production, number of livestock, and dairy exports. However, ban on dairy products insignificantly affected exports, because ban was mostly imposed by countries who accounted for a meager share of China’s dairy exports. Results of the study show that per capita economic size, common official language, common border and regional trade arrangements significantly positively affected dairy exports. While dairy exports significantly decrease with increase in dairy production in importing country and if the trading partner is a land locked country.Third and fourth studies use different estimation techniques to show the effects of Maximum Residue Limits imposed by importing countries on major agricultural exports of China. Third study estimates impact of maximum residue limits on food exports from China using annual bilateral trade data from 2009 to 2013. Gravity model is estimated for apples, garlic, kidney beans, mandarins, meat of swine, and tea. Results show that all the standard gravity-type variables carry signs according to prior expectations. This study concludes that maximum residue limits have no effect on exports of all commodities except pork. The fourth study aims to show the response of Maximum Residue Limits adopted by importing countries on exports of selected food commodities from China. The study estimates gravity model using Ordinary Least Squares, Poisson and Negative Binomial Regression estimators. According to results of the study, Maximum Residue Limits has a trade enhancing effect on exports of selected food commodities from China. This trade enhancing impact may be due to the current government policies to put a cut on food safety issues, ensure safe food for all and adopting a protectionist policy in terms of Maximum Residues Limits for selected commodities.The fifth and sixth study show the effect of Maximum Residue Limits adopted by higher income, upper middle income, lower middle income and low income importing countries on exports of selected food commodities from higher income, upper middle income, lower middle income and low income countries. It makes clear that the standards and regulations adopted by developed countries are more stringent and have trade impeding effects on the selected agrifood products. This research makes three major contributions to literature:considers all the major food products; all the pesticides; and uses index recently developed by Li and Beghin (2014) for calculating Maximum Residue Limits (MRLs) to empirically show the impact of food safety standards and regulation on food exports.This research concludes that MRLs imposed by importing countries have a trade enhancing effect on exports of selected food commodities of China. Similarly, adopting stringent regulations may also help in smoothening exports of China as consumers will find the product safe and save search cost of the importers for a certain minimum expectations for a particular commodity. However, this research is based on two years data covering selected food products because of the inability of the researchers to access MRL values for more years. Therefore, further research along this line covering a wider range of products over a period of time is highly suggested for a better understanding of the trade effects of NTMs and to generalize the findings.