Effects of Food Safety Regulatory Standards on Seafood Exports to US, EU and Japan

Abstract

This thesis examines the effects of the enhanced food safety standards imposed in developed countries on seafood exports to these country markets. New impositions of food safety regulations in three major markets are analyzed, including Hazard Analysis Critical Control Points (HACCP) in the US (1997), Minimum Required Performance Limits (MRPLs) in the EU (2002), and the Food Safety Basic Law in Japan (2003). The paper employs a gravity model with bilateral pairs and country-by-time fixed effects to estimate panel data from the UNCOMTRADE database for the period 1992-2005. The results show that the stringency of food safety regulations caused a loss of markets for seafood exporting countries. Among three investigated markets, the Japanese policies were estimated to be the most stringent with an average annual reduction of 79.6% of seafood export value to the country, holding other factors constant. The US HACCP was associated with 58.9% reduction in average annual seafood export to the US, while the reduction caused by the EU MRPL was 57.8%, everything else equal. Using trade data disaggregated at product level, this study found that different food safety standards had differential effects on seafood products. The enforcement of the Japanese laws, the US HACCP, the EU MRPL caused a respective average loss of 91.1%, 81.2%, and 71.6% to fresh fish trade in these markets. The Japanese policies also caused a reduction of 73.3% of annual export value of crustacean and mollusks to the country. However, dried fish was not significantly hurt by the standards in all three markets, under the studied period. Additionally, the US HACCP was estimated to have cumulative effects on trade, with greater elasticity in the long run (-60.1%) relative to that in the short run (-44.7%). Finally, findings in this paper suggested that addressing omitted variables and endogeneity in the gravity equation are important to avoid underestimating the effects of policy variables.