Standards Harmonization as Export Promotion

Transcription

1 Standards Harmonization as Export Promotion Marion Dovis University of Aix-Marseille Mélise Jaud The World Bank Non-Tariff Measures: Economic Analysis and Policy Appraisal, CEPII, PSE July 1, 2014 Paris, France

2 Motivation I Increasing role of non-tariff measures (NTMs) as tariffs continue to fall Increasing number of Regional Integration Agreements involve NTM harmonization, e.g. Morocco Effect of NTM harmonization on trade is complex Unlike tariff: not necessarily welfare-reducing or discriminatory Affects access to both foreign and domestic markets Limited evidence on the impact of NTMs harmonization on firms export performance => We examine the effect of NTM harmonization on developing countries domestic firms export performance.

3 Motivation II Morocco a laboratory for other countries: vigorous effort to modernize and harmonize with international standards - largely mandated under the Association Agreement with the EU and WTO agreements Article 51 of the E.U.-Morocco Association Agreement: [t]he Parties shall cooperate in developing: (a) the use of Community rules in standardisation, metrology, quality control and conformity assessment; (b) the updating of Moroccan laboratories, leading eventually to the conclusion of mutual recognition agreements for conformity assessment; (c) the bodies responsible for intellectual, industrial and commercial property and for standardisation and quality in Morocco. First country to get Advanced Status (since 2008) Morocco s regulations prior to harmonization were largely outdated and unevenly enforced, there is a reasonable presumption that new (harmonized) regulations were stricter, de jure or de facto, than the old ones they replaced.

4 Existing Literature At aggregate level: Positive effect of standard harmonization on trade flows lack of harmonization of standards and technical regulations is detrimental to trade (Otsuki, Wilson and Sewadeh, 2001; Gebrehiwet, Ngqangweni and Kirsten, 2007; Fontagné et al., 2005) Harmonization of domestic food standards on international ones had a positive and significant impact on exports (Mangelsdorf, Portugal-Perez and Wilson, 2012) Harmonization and market structure Chen and Mattoo (2004) harmonization on regional standards improves market access for out-of-bloc exporters from industrial countries, while reducing it if they were from developing countries. Harmonization of developing countries on developed countries standards as part of regional agreements reinforce hub-and-spoke trade structures at the expense of South-South trade (Disdier et al., 2012). At the firm-level : Reyes (2012) impact of EU harmonization on US firms export performance: positive impact on firms ability to enter the EU market crowding out of developing countries producers. Augier, Cadot and Dovis (2013) harmonization of Moroccan domestic standards with international ones: positive impact of firms profitability and productivity. 4

5 This Paper I Q: How do NTM harmonizations affect firm s export performance? What s new? 1. Our focus is on domestic rather than third party (eg the EU) standard harmonization. 2. Data : unique merged NTM-customs dataset for Morocco ( ) Measure of import competition at HS6 digit: NTM harmonization 3. Estimation strategy: DiD approach: we relate a change in non-tariff protection associated with NTM harmonization with change in domestic firms exports Exploit waves of NTM harmonization - with dates that vary across products and estimate the within firm-product effect of harmonization Identification issues: reverse causality, omitted variable bias

6 This Paper II Underlying assumptions: 1. Change in non-tariff measures have important impact on the competitive pressure faced by domestic firms - Harmonization translated into implementation of stricter standard relative to the one previously in place - Exporters sell on the domestic market: over 60% of exporting manufacturing firms are active on the domestic market (census data) 2. Some firms are not affected by compliance costs of stricter domestic standard as they are already compliant. Export cost unaffected

7 What should we expect 1. Market access NTM harmonization reduces the relative cost of exporting to harmonized market. - Positive effect on exporter expansion at the extensive margin and ambiguous effect at the intensive margin. 2. Competition effect on the domestic market Limit competition from developing non-harmonized countries - Exit of firms from export. Increase competition from developed harmonized countries - Entry of firms from export. 3. Quality signaling NTM harmonization reduces information asymmetries between producers and consumers. - Positive effect on firm s ability to expand their export at the intensive margin and perhaps at the extensive margin. 7

8 Data 1. Moroccan customs: All annual export transaction flows between HS 10-digits level, in a four-dimensions panel: firm-year-product-partner (No data on firms characteristics) 2. NTM data: New database from World Bank National inventories of all trade regulations For each HS6 products whether a NTM is in place codes and whether it is harmonized with international regulations Merged customs and NTM data at the product HS 6-digit level 3. Data cleaning: Drop HS 25 to HS 27 products, ZF, trade flows (firm-product) with only 1 observation in the dataset, flows <1000$. 8

9 NTM Data I Harmonization took place in waves NTM harmonized with an international standard represent for 14% of NTMs adopted in the Moroccan economy over the period Year # NTM # NTM Type NTM domestic harmonized A B D E F P

10 NTM Data II An average firm exports 4.6 products to 2.6 destinations. Over time the number of harmonized products in firms portfolio grew from 0.4 to 8%. # harmonized products Average firm Year # firms # destinations # products Export (thousand USD) All years # destinations # products # harmonized products 10

11 Empirical Strategy I Baseline specifications: Y fdpt 0 1 H p,t 1 D p,t X fdpt fp dt fdpt (1) Estimate the effect of product-specific harmonization on firms export performance and dynamics. Yfdpt = log export quantity in kg or log export UV or a dummy variable coding alternately (i) firm-product entry taking value 1 if firm f enters the export market with product p in year t, (ii) product creation taking value 1 if firm f exports a new product p in year t. Hpt-1 = treatment variable equal 1 one year after and all subsequent years following any NTM harmonization of product p in year t, 0 otherwise. Dpt = equal to 1 the year and all subsequent years following any domestic and non-harmonized NTM of product p in year t, 0 otherwise. Xfdpt = the number of competing firms exporting product p to destination d in time t, a dummy variable equal to 1 if the firm both import and export the same product p in year t, 0 otherwise. 11

12 Empirical Strategy II Domestic market competition: Y fdpt 0 1 H p,t 1 2 H p,t 1 p D p,t X fdpt fp dt fdpt (2) with p = either p DC or p OED 1 if initial import share from DC (High OECD countries) p 0 otherwise We set λ at the 75th percentile of the cross-sectoral distribution. Quality signaling: Y fdpt 0 1 H p,t 1 2 H p,t 1 fp D p,t X fdpt fp dt fdpt (3) with θ a dummy variable equal to one for firm-product flows that are active throughout the entire period and 0 otherwise. 12

13 Main Result: Standards Harmonization and Firm Export Promotion 13

14 Standards Harmonization across main sectors 14

15 Standards Harmonization across type of NTM 15

16 Domestic market competition effect : intensive margin 16

17 Domestic market competition effect : extensive margin 17

18 Standards Harmonization and quality signaling: intensive margin 18

19 Standards Harmonization and quality signaling: extensive margin 19

20 Standards Harmonization: product or firm effect? 20

21 Robustness Checks I : Standards Harmonization Effects Persist Over Time 21

22 Robustness Checks II : Cumulated number 22

23 Robustness Checks III : Placebo 23

24 Concluding Remarks Estimate the within firm-product effect of standard harmonization on firms exports 1. Harmonization of domestic NTM affect the export performance of firms through changes in the level of competition they face. In sectors with high import penetration from high income countries, harmonization strongly raises firms probability to export harmonized products. The pro-competitive effect dominates. 2. Regulatory harmonization promotes Moroccan firms competitiveness by reducing informal market failures through quality signaling. Standard harmonization only confers exporters with a competitive edge in high income destination markets where demand for harmonized products is high Similarly at the extensive margin. 3. The signaling benefits of harmonization extend across a firm s export portfolio. Firms are more likely to expand their export portfolio with products when similar products have been harmonized.

25 Concluding Remarks Harmonization of developing countries domestic standards with stricter international regulations may serve as a policy instrument to promote domestic firms exports.

26 Thank You 26