Quantification of the economic impact of EU aflatoxin standards on developing and

tion raised the importance of food safety and quality concerns. Developed coun de disputes at WTO however evidences cases of abuse of s Globalisa tries implement precautionary food regulation policies to protect their affluent consumers from unsafe food imported from developing and transition countries. The countries are strongly encouraged by the World Trade Organisation (WTO) to adopt internationally recommended standards, but they are also allowed to implement policies, setting even stricter standards. The alarming number of tra uch policies. The fear is that the dwindled traditional trade barriers could be substituted and even surpassed by Food Regulatory Measures (FRM). While claims on protectionist nature of FRM are valid in principle, there is little empirical evidence about their economic effects. The question of quantification of trade impact of FRM is absolutely essential for the new trade agenda. This problem is on focus of trade policy debate for developing countries, yet it is not considered seriously for transition countries. Such a research for these recently liberalised markets gains a special significance due to their active participation in world trade. Their exports to developed countries include cereals, fruits and vegetables, which are especially exposed to natural toxin (e.g. aflatoxin) hazards and often face stringent food standards. This research aims at understanding the role of developed countries’ aflatoxin standards al policy makers in designing new glob ackground and Problem Statement de has greatly increased the importance of effec is harmonizing standards for levels of aflatoxin, a substance that may in dynamics of exports from developing and transition countries, by assessing the trade patterns and quantifying the effects on trade between 11 importing (developed) countries and 20 exporting (developing and transition) countries. Some countries appear in the list of importing as well as exporting countries: therefore, we have altogether 15 importing and 31 exporting countries in our dataset. The study adopts the principles of the Gravity Equation Model. The results of cross-country analysis prove the hypothesis that the stringency level of food regulations on aflatoxin is negatively associated with trade flows from developing and transition countries. The results of the research will assist internation al trade agenda. B The rapid growth of international tra tive regulation of standards at the international level1. Product standards, or rules of governing the characteristics of goods, are critical to the effective functioning of markets and provide important support to the trade system. Product standards in the international trade system do, however, raise difficult issues for developing, and most recently, transition countries. Currently the EU cause liver cancer, in food products. The new standard, which is more stringent, has the potential for substantially reducing exports of cereals from developing countries into Europe (OTSUKI, WILSON, and SEWADEH, 2000). Few developing countries have the technology to evaluate the dangers of aflatoxin, nor do they have the capabilities in scientific analysis to address the new EU standard, and hence and to bring disputes when standards are used to discriminate against their exports. The Uruguay Round brought about the Agreement on Sanitary and Phytosanitary Standards (SPS), which 1 Unpublished Proofs. Standards, Developing Countries, and the Global Trade System. Global Economic Prospects. was designed to address some of the issues related to tariffs, quotas and subsidies as well as product standards restrictions to trade (World Bank, 2000). Though having clear advantages of reducing entry barriers by lowering inspection and testing costs (MOENIUS, 2000), mandatory standards can act as non-tariff barriers to trade, whether or not the intent is discriminatory. Transitions and developing countries, which have relatively looser regulatory requirements, suffer a significant compliance costs. Given differences in historical experiences, levels of development, and risk preferences, differences in product standards among transition and developing countries from the one hand, and the developed countries on the other hand, will remain an important feature of the trade system. Few attempts have been made to measure the general impact of product standards on trade flows. Therefore, in this article, our focus is at the consequences (or effects) of different standards’ stringency on the trade flows of 11 importing (developed) countries and 20 exporting (developing and transition) countries taking the example of cereals’ trade. Objective This article aims at understanding the role of developed countries’ aflatoxin standards in dynamics of exports from developing and transition countries, by assessing the trade patterns and quantifying the effects on trade between these countries. Method and Analysis The study adopts the principles of the Gravity Equation Model. We undertook a cross-country econometric analysis for identification of impacts of MRL-s on international trade flows. The specification of gravity model is as follows: