Fixed export costs and international product standards

Empirical evidence that mutual recognition agreements better reduce the fixed cost of exporting associated with product standards than aligning domestic regulations with international standards from Galina An and Keith Maskus:

Complying with global standards and technical norms can be costly, making them potential impediments to trade, but it can also expand export opportunities. Two policies available to governments are alignment of domestic technical regulations with international standards and entry into mutual recognition agreements (MRAs). We study the effects of such decisions on the volume of exports to developed markets by firms in developing countries, using data from a World Bank firm-level survey of awareness of global product norms. Both standards alignment and MRAs are associated with more exports to developed countries, but only MRAs significantly promote exports. This finding is consistent with theoretical predictions that MRAs should reduce the fixed costs of exporting more than standards alignment, permitting more firms to enter export markets in higher volumes. Governments in developing countries hoping to encourage exports may wish to favour the negotiation of mutual recognition of testing and certification procedures with major trading partners as a more affirmative avenue to expanding international sales.

[“The Impacts of Alignment with Global Product Standards on Exports of Firms in Developing Countries,” The World Economy, 32(4): 552-574. DOI: 10.1111/j.1467-9701.2008.01150.x]

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