The impact of sanitary and phyto-sanitary measures on India’s exports to USA – an analysis at the firm level
Student name: Ms Disha Mendiratta
Guide: Dr Seema Sangita
Year of completion: 2016
Host Organisation: Centre for WTO Studies, IIFT
Supervisor (Host Organisation): Dr Murali Kallummal
Abstract: The international trade in agricultural commodities has expanded rapidly over time. There has been a spurt in demand for packaged and other food products owing to urbanization accompanied with higher incomes and improvement in transportation. The developed countries are major importers of agricultural and food products from developing countries. There has also been growing consciousness on the part of the consumer about the quality of imported food products. In this regard, the WTO members are authorized to impose Sanitary and Phyto-Sanitary measures, or food standards on the imported products so as to ensure that the imports are free from pesticides and disease-causing organism and are safe for human, animal and plant kingdom.
The compliance with the SPS standards is challenging for firms in the developing countries since they do not have the technological capabilities to meet these standards. In an attempt to analyse how SPS measures impact the performance of the producers, the study uses data on Indian firms and the SPS measures imposed by the United States of America on Indian products. We examine the impact of SPS measures on two trade-related aspects of the firms: their probability to participate in the export market and their export earnings.
We find that the presence of standards prohibit the firms to participate in the export market. However, bigger firms are seen to be more productive, and they are able to absorb the impact of SPS measure and continue participating in the export market even in the presence of these measures. The SPS measures did not have a significant impact on the export earnings of the firms. The size of the firm emerged as the most important factor affecting these trade measures, which indicates that size/scale is a key determinant of these export measures even in presence of barriers to trade.
Keywords: Non-tariff Barriers, Standards, firm heterogeneity, Melitz model, export market participation, export earnings
