Author
Ana I. Sanjuan, George Philippidis, Hugo Ferrer Pérez, Pilar Gracia de Rentería.
Date
September 2023
Published in
Food Policy Journal
Abstract
With its influence on the world stage, the EU’s Farm to Fork initiative seeks to extend sustainable and fair food
production practises globally, in part, by encouraging convergence with EU food standards (i.e., sanitary and
phytosanitary measures-SPS). Harmonisation clauses have been found empirically to encourage trade, but no
quantifiable estimates exist on the trade effects of SPS regulatory convergence. This paper examines this issue for
the dairy industry, a highly regulated sector with significant sustainability concerns attached. Furthermore, the
cost-saving effects arising from closer regulations and ‘experience’ (i.e., accumulated years of foreign trade trackrecord), are compared. Employing a 3-year interval panel starting in 2010, a structural gravity equation that
includes domestic trade is estimated with a flexible empirical approach that evinces asymmetric trade impacts for
specific bilateral trade routes. Results indicate a trade depressing effect for SPS measures, estimated as a global
average 10.4% Ad-valorem Equivalent (AVE). Moreover, at the global level, converging regulatory frameworks
generate larger trade gains than experience, where a 1% rise in regulatory convergence is equivalent to 5 years of
positive trade and a 14% reduction of the AVE. The reduction of trade frictions prompted by harmonisation and
experience does not, however, outweigh SPS trade costs. Exporters to the EU face a higher SPS AVE than that
faced by the EU (10.1% vs 9.3%). On average, exporters to the EU also benefit from a 9% saving due to experience, although cost savings from regulatory convergence are only reported for larger exporters to the EU, whose
consolidated position in EU markets also grants them even greater than average benefits from years of accumulated experience