Deal The Problem of Agricultural Product Standards for Small Traders

Countries apply some agricultural product standards, like food safety standards to protect the health of domestic consumers. It's good reason, but domestic food safety standards often deviate from international ones. From an exporter’s point of view, such agricultural product standards are likely to be seen as barriers to entry. Producers must modify production processes in order to meet each individual market’s product regulations, which raises the cost of the product for consumers. Economists and policy-makers are hungry for micro-level evidence on the effects of such standards on trade.

New World Bank Group make a research (Fernandes, Ferro, Wilson 2015) offers a first look at how a specific set of agricultural product standards—the study case, the maximum pesticide residue permitted on unprocessed food—impacts traders. Novel firm-level data for exporters from 42 developing countries from 2006-2012 were analyzed along with data on pesticide standards for 243 agricultural and food products in 63 importing countries. New World Bank Group found that pesticide standards differ greatly across countries.

The result of research shows that agricultural product standards have impress individual producers’ decisions to enter foreign markets, as well as their eventual success in those markets. The more restrictive the standards in the importing country make lower a producer’s probability of exporting.

Restrictive agricultural product standards also cut exporters’ product values and the quantities sold in foreign markets. The relative restrictiveness of standards deters traders from entering new markets and leads to higher exit rates.

The research also shows that smaller traders are more negatively affected by restrictive national standards compared to larger ones. Larger exporters tend to be more productive and are therefore able to more easily to deal compliance costs and enter new markets. These findings have clear implications for developing countries trying to reduce poverty by expanding agricultural trade.

Differences in regulatory standards for agricultural and food products across countries are likely to remain in place since full global harmonization is not worth— the agreement of Sanitary and Phytosanitary (SPS) has created no more than a presumption in favor of the international Codex Alimentarius standards. For developing countries excluded from trade agreements like the Trans-Pacific Partnership (TPP), one issue of concern is whether within the agreements such regulatory standards will be harmonized (through the adoption of a common standard) or mutually recognized (through acceptance of one another’s standards) and whether this recognition will be extended to third countries.

So, How to Deal The Problem of Agricultural Product Standards for Small Traders?.

There are ways in which non-member governments can help small exporters expand their markets, even if deep trade agreements such as TPP create new challenges. As the new World Bank Group research suggests, governments can give education how to best practices in food safety and foreign product regulations for potential traders. They can also make a support producer associations. The knowledge acquired from one exporter can be beneficial for other producers hoping to export.

Investing for profit in trade facilitation is also needed. Exporters can verify their products on well-equipped testing facilities have an important impact on the success of an agriculture-focused development strategy.

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