Trade effects of sustainability standards : a review of literature.
Date: 2024-01-04
Institutions: Joint Research Centre
Subjects: agri-foodstuffs, agricultural economics, economic consequence, food systems, research report, standard, sustainable development, trading operation

ISSN 1831-9424 

JRC TECHNICAL REPORT 

Trade effects of sustainability standards – 
a review of literature 

Schaefer, K. A., Nes, K. 

2023 

EUR 31227 EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
 
 
 
 
 
 
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Contact information  
Name: Kjersti Nes 
Address: C/Inca Garcilaso 3, 41092 Seville (Spain) 
Email: kjersti.nes@ec.europa.eu 

EU Science Hub 
https://joint-research-centre.ec.europa.eu 

JRC130596 

EUR 31227 EN 

PDF 

ISBN 978-92-76-57032-5 

ISSN 1831-9424 

doi:10.2760/41744  KJ-NA-31-227-EN-N 

Luxembourg: Publications Office of the European Union, 2023 

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How to cite this report: Schaefer, K.A. and Nes, K., Trade effects of sustainability standards – a review of literature, Publications Office of 
the European Union, Luxembourg, 2023, doi:10.2760/41744, JRC130596. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contents  

Executive summary .......................................................................................................................................................................................................................................... 3 

1 

2 

Introduction..................................................................................................................................................................................................................................................... 5 

Insights from previous review studies .................................................................................................................................................................................. 7 

3  Overview of sustainability standards .................................................................................................................................................................................... 8 

4  Market failures addressed by sustainability standards .................................................................................................................................... 10 

4.1  Addressing externalities ..................................................................................................................................................................................................... 10 

4.2  Addressing information asymmetries .................................................................................................................................................................. 11 

5  Mandatory public sustainability standards and trade ........................................................................................................................................ 13 

5.1  Aggregate (net) effects of standards ................................................................................................................................................................... 13 

5.2  Heterogeneous effects of standards .................................................................................................................................................................... 14 

5.3  Border enforcement of sustainability standards ....................................................................................................................................... 17 

5.4  Harmonisation of standards .......................................................................................................................................................................................... 18 

5.5  Political economy of standard setting ................................................................................................................................................................. 19 

6  Voluntary sustainability standards ....................................................................................................................................................................................... 21 

6.1  Trade effects of adopting voluntary standards .......................................................................................................................................... 21 

6.2  Trade effects of non-adoption of private standards ............................................................................................................................. 22 

6.3 

Interaction between voluntary standards and public standards ................................................................................................ 23 

7  Conclusions .................................................................................................................................................................................................................................................. 24 

8  References .................................................................................................................................................................................................................................................... 25 

List of abbreviations and definitions ........................................................................................................................................................................................... 29 

List of figures ..................................................................................................................................................................................................................................................... 30 

List of tables ........................................................................................................................................................................................................................................................ 31 

i 

 
 
 
 
 
Authors 

K. Aleks Schaefer, JD PhD, Department of Agricultural Economics, Oklahoma State University 

Kjersti Nes, Joint Research Centre, European Commission, Sevilla, Spain 

2 

 
Executive summary  

The European Commission set forth the farm-to-fork (F2F) strategy in May 2020, which provides a vision for 
the  sustainable  transformation  of  the  food  system  through  intensified  standards  for  health,  environmental 
stewardship and animal welfare. The Commission  is considering a trade policy environment that safeguards 
EU  production  capacity  and  promotes  the  transition  towards  sustainable  food  systems  globally.  Products 
imported into the EU market could be subject to sustainability standards in line with the F2F  strategy. In an 
effort to inform current EU agri-food trade policy debates, the aim of this report is to provide a review of the 
literature evaluating the impacts of sustainability standards on international agri-food trade. 

Sustainability  standards  fall  into  the  broad  category  of  trade  policy  instruments  referred  to  as  non-tariff 
measures (NTMs) affecting trade. A broad array of policy instruments fall under these agreements, including 
product standards, process standards, border control measures, and packaging and labeling requirements. The 
World  Trade  Organization  (WTO)  categorises  standards  that  impact  trade  under  two  agreements,  which 
provide  exceptions  to  rules  barring  NTMs:  the  Agreement  on  the  Application  of  Sanitary  and  Phytosanitary 
Measures (the SPS Agreement) and the Agreement on Technical Barriers to Trade (the TBT Agreement). 

Sustainability  standards  may  generate  two  opposing  effects  on  trade  flows  between  the  importer adopting 
the  standard  and  an  affected  exporter.  First,  to  the  extent  a  standard  leads to  an  increase  in  the  marginal 
costs of producing a given product in the exporting country, the standard may lead to a  reduction in trade. 
Conversely, to the extent the standard leads to an increase in the demand for the product in the importing 
country,  the  standard  may  lead  to  an  increase  in  trade.  The  net  effect  on  trade,  which  depends  on  the 
relative  magnitude  of  the  two  factors  and  the  international  scope  of  the  standard  (i.e.  whether  it  is 
implemented multilaterally, regionally, bilaterally, or unilaterally). 

The general consensus in the literature appears to be that the trade-reducing effects of standards typically 
dominate  the  trade-enhancing  effects  of  standards.  However,  in  certain  situations,  the  trade-enhancing 
effects can mitigate or even reverse these negative effects. There are several factors (summarised in Table 1) 
that can tip the balance of these effects toward catalysing international trade, including: 

—  the type of standard at issue; 

—  the type of product at issue; 

—  the development status of the relevant traders; 

—  the size and experience of the affected traders; 

—  the number of traders affected; 

—  whether the trader is currently operating in the market. 

The trade effects of sustainability standards extend beyond the point of adoption. A body of literature looks 
at the effects of application of standards through testing and inspection at the border and the implications 
for future trade flows of rejection for non-conformity with the requirements of standards. Previous literature 
has also focused on the determinants of import refusals and the implications of border rejections for trade 
and supplier concentration. Moreover, unilateral changes to a country’s trade policy do not occur in a vacuum. 
If  an  exporting  country  (or  group  of  exporting  countries)  feels  that  its  stakeholders  have  been  injured  by 
sustainability  standards  applied  in  the  EU,  the  aggrieved  exporting  country(ies)  may  choose  to  retaliate 
against the EU. 

A critical factor for whether sustainability standards (either mandatory or  voluntary) are trade-enhancing is 
the  extent  to  which  these  standards  are  harmonised.  Harmonisation  can  occur  across  various  dimensions, 
including: 

—  harmonisation of rules among exporting and importing countries; 

—  harmonisation of rules across several importing countries; 

—  harmonisation of public standards with those defined with private standard setting bodies; 

—  harmonisation of mandatory or voluntary standards with guidelines set by international standard setting 

bodies. 

Harmonisation reduces stakeholder costs of complying with multiple standards set in several countries (or by 
several bodies) and allows for desegregation of supply chains across harmonised markets, thereby allowing 
stakeholders to benefit from any economies of scale across the supply chain. 

3 

 
In  addition  to  government-mandated  public  standards  designed  to  enhance  the  sustainability  of  the  global 
agri-food  system,  private  importing  companies  and  exporting  farmers  also  have  the  option  to  voluntarily 
adopt  sustainability  standards –  such  as  the  GlobalGAP,  FairTrade,  Certified  Organic,  and  Red  Tractor –  to 
improve and ensure the sustainability of their own supply chains. Such standards include voluntary standards 
developed  by  governments,  private  firms  and  independent  (non-governmental)  standard-setting  bodies. 
Generally  speaking,  voluntary  standards  tend  to  be  more  stringent  than  mandatory  public  standards.  While 
private  adoption  of  voluntary  standards  is  increasing  rapidly,  coverage  remains  limited  relative  to  the 
footprint of the global agri-food system. The trade effects of voluntary sustainability standards tend toward 
‘trade  enhancing’  outcomes  as  opposed  to  ‘trade  reducing’  outcomes  because –  unlike  mandatory  public 
standards –  adoption  of  private  sustainability  standards  is  entirely  optional  for  both  firms  in  the  importing 
country and farms in exporting countries. Thus, firms usually adopt such standards when doing so is Pareto 
improving (i.e. both parties are at least equally well off). 

Finally,  the  interaction  between  private  and  public  standards  in  the  international  marketplace  is  not 
straightforward.  Literature  shows  that,  in  some  cases,  private  standards  and  regulations  should  not  be 
considered as distinct entities, but rather as operating side-by-side. In these circumstances, private standards 
can be seen as a reaction to public regulation. 

4 

 
1 

Introduction1 

The  European  Green  Deal  was  presented  in  2019  and  provides  a  roadmap  for  making  the  EU’s  economy 
sustainable  (European  Commission,  2019).  The  Green  Deal  aims  to  position  Europe  as  the  first  climate-
neutral  continent  by  2050,  foreseeing  a  sustainable  and  inclusive  growth  strategy,  embracing  not  only  a 
greener economy, but a healthier planet with higher quality-of-life standards for its inhabitants. As part of the 
Green Deal, the EU set forth the F2F strategy in May 2020 (European Commission, 2020), which provides a 
vision  for  the  sustainable  transformation  of  the  food  system  through  intensified  standards  for  health, 
environmental stewardship and animal welfare. 

Current EU regulations lack  general provisions to consider sustainable diets and food  systems in relation to 
international  trade.  The  EU  is  currently  the  world’s  largest  exporter  and  third  largest  importer  of  agri-food 
products (European Commission, 2021). Some commentators contend that implementing measures necessary 
to  achieve  F2F  strategy  goals  may  affect  the  competitiveness  of  EU  producers  in  the  international 
marketplace  (Matthews,  2022;  Beckman,  Ivanic,  Jelliffe,  Baquedano,  &  Scott,  2020).  Several  recent  studies 
have used simulation modelling to assess the impacts of the F2F  strategy ex ante (Beckman, Ivanic, Jelliffe, 
Baquedano, & Scott, 2020; Henning & Witzke, 2021; Bremmer, et al., 2021; Barreiro Hurle, et al., 2021). These 
studies make a variety of assumptions about the trade policy environment, ranging from the assumption that 
F2F  requirements  apply  only  to  EU  producers  (Bremmer,  et  al.,  2021;  Barreiro  Hurle,  et  al.,  2021)  to  the 
assumption  that  requirements  are  adopted  globally  (Beckman,  Ivanic,  Jelliffe,  Baquedano,  &  Scott,  2020). 
Notwithstanding  the  wide  range  of  trade  policy  assumptions,  these  studies  find –  across  the  board –  that 
implementation of the F2F strategy will result in a reduction in EU production and net trade positions and an 
increase in EU prices. 

Thus,  the  European  Commission  is  considering  a  trade  policy  environment  that  safeguards  EU  production 
capacity by ensuring that EU producers compete with imports on a level playing field. Moreover, because the 
sustainability of food systems is a global issue, the EU seeks to leverage access to the EU market to promote 
the  transition  towards  sustainable  food  systems  globally.  Products  imported  into  the  EU  market  could  be 
subject  to  sustainability  standards  in  line  with  the  F2F  strategy,  either  through  a  combination  of  newly 
negotiated multilateral or bilateral sustainability standards for imported products, enhanced enforcement of 
existing international sustainability standards or unilateral application of F2F standards on imported products 
(i.e. mirror clauses). 

In an effort to inform current EU agri-food trade policy debates, the aim of this report is to provide a review 
of  the  literature  evaluating  the  impacts  of  sustainability  standards  on  international  agri-food  trade.  In  the 
next section, we discuss insights drawn from previous review studies and explain our contribution. Section 3 
provides an overview of sustainability standards, including their categorisation under WTO rules, a description 
of the types of instruments classified as standards and a discussion of the potential scope of such standards. 
Section 4 – looking from an economic policy perspective – discusses how sustainability standards can be used 
to address two types of market failures: (i) externality problems; and (ii) information asymmetries in product 
markets. 

In  Sections 5.1  and  5.2,  we  summarise  empirical  estimates  of  ‘aggregate’  or  net  effects  of  sustainability 
standards  on  total  trade  volume,  looking  across  a  wide  array  of  public  standards,  including  sanitary  and 
phytosanitary (SPS) standards, pesticide maximum residue limits (MRLs), aflatoxin MRLs and animal welfare 
standards.  We  then  discuss  factors  identified  in  the  literature  that  may  weigh  in  favour of  (or  against)  the 
theory that standards can serve as a catalyst to trade. 

Section 5.3  reviews  the  body  of  literature  focused  on  understanding  the  trade  effects  of  sustainability 
standards extending beyond the point of adoption, including the effects of application of standards through 
testing  and  inspection  at  the  border  and  the  implications  for  future  trade  flows  of  rejection  for  non-
conformity with the requirements of standards. In Section 5.4, we discuss harmonisation of standards across 
various  dimensions.  Section 5.5  discusses  the  political  aspect  of  standard-setting  and  literature  on  the 
potential that exporters aggrieved by sustainability standards applied in the EU  seek  retaliation against the 
EU.  Section  6  reviews  literature  on  the  trade  effects  of  voluntarily  sustainability  standards  (e.g.  GlobalGAP, 
FairTrade,  Certified  Organic  and  Red  Tractor),  including  voluntary  standards  developed  by  governments, 
private firms and independent (non-governmental) standard setting bodies. Section 7 is the conclusion. 

1 The authors are solely responsible for the content of the report. The views expressed are purely those of the authors and may 

not in any circumstances be regarded as stating an official position of the European Commission. 

5 

 
 
 
We do not consider the legal feasibility of applying EU health, environmental and animal welfare standards to 
imported  agri-food  products,  which  is  evaluated  by  European  Commission  (2022).  Moreover,  we  do  not 
discuss the implications of applying EU health, environmental and animal welfare standards to imported agri-
food  products  for  the  UN  sustainable  development  goals.  This  is  discussed  in  detail  in  Matthews  (2022). 
Finally, the application of sustainability standards to imported products is not the only approach to achieving 
EU  sustainability  objectives.  Other  strategies  being  considered  by  the  EU  include  the  introduction  of 
legislation  addressing 
autonomous  measures  such  as  the  Carbon  Border  Adjustment  Mechanism, 
deforestation  and  forest  degradation  and  sustainable  corporate  governance, 
including  mandatory 
environmental,  human  and  labour  rights  due  diligence.  While  these  initiatives  are  important  aspects  of  EU 
trade policy debates, they are not the focus of the current report. 

6 

 
 
2 

Insights from previous review studies 

In reviewing literature on sustainability standards and international agri-food trade, we draw on the insights 
from  several  previous  review  studies.  Li  &  Beghin  (2012)  provide  an  early  review  on  the  trade  effects  of 
NTMs. The authors conduct a meta-analysis to explain the variation in estimated trade effects of these NTMs, 
using estimates from the early literature and accounting for data sampling and methodology differences. The 
authors find that NTMs tend to impede agri-food markets more substantially than other sectors, and primarily 
for trade from developing country exporters to high-income importers. MRLs in particular represent a major 
trade barrier. Santeramo and Lamonaca (2019) provide an updated review and meta-analysis of the effects 
of public standards on agri-food trade. In contrast to Li & Beghin (2012), Santeramo & Lamonaca (2019) find 
that  the  trade  effects  of  public  standards  tend  to  be  less  negative  (on  average)  than  for  other  NTMs.  Of 
course,  both  meta-analyses  may  suffer  from  selection  bias  with  respect  to  those  standards  researchers 
choose  to  study  and –  perhaps  more  significantly –  they  may  be  affected  by  biases  in  the  academic 
publication world to publish statistically significant and ‘counterintuitive’ results. Beghin, Maertens, & Swinnen 
(2015) review the literature on the trade effects of both public and private standards, with special attention 
to  the  ‘North–South’  context.  The  authors  conclude  that  the  evidence  is  mixed  regarding  standards  as  a 
catalyst for or impediment against trade and development.  Most  recently,  Meemken  et al. (2021) provide a 
narrative review of the effects of voluntary sustainability standards across different supply chain actors and 
crops.  However,  the  authors  devote  little  time  to  the  trade  impacts  of  such  standards.  Similarly,  Baylis, 
Heckelei,  &  Hertel  (2021),  in  their  review  of  the  relationship  between  agricultural  trade  and  environmental 
sustainability, also devote only passing attention to the trade effects of voluntary standards. 

Here, we focus on the empirical studies that are most relevant to the types of sustainability standards being 
considered in the EU as part of the F2F strategy. Like Beghin, Maertens, & Swinnen (2015), we consider both 
mandatory  and  voluntary  standards,  but  expand  the  analysis  of  voluntary  standards  to  include  not  only 
private standards, but also those developed by governmental bodies, as in Meemken et al. (2021) and Baylis, 
Heckelei, & Hertel (2021). Further, we extend the scope of our review beyond each of the previous studies to 
look  beyond  standard  adoption  effects.  We  also  examine  the  body  of  literature  focusing  on  application  of 
standards (i.e. border inspection, testing and refusal) and literature focusing on the risks of retaliation due to 
unilateral adoption of public standards. Our goal is to inform current EU policy debates. 

7 

 
 
3  Overview of sustainability standards 

Sustainability standards in the food and agriculture sector are regulations adopted by national governments 
where unregulated markets are not yielding sustainable outcomes. These measures are put in place to ensure 
that  imported  products  meet  domestic  requirements  and  societal  interests  related  to  climate,  environment, 
social  and  animal  welfare  (Matthews,  2022).  As  such,  they  fall  into  the  broad  category  of  trade  policy 
instruments referred to as NTMs affecting trade (Gourdon, Stone, & van Tongeren, 2020). 

The WTO categorises standards that impact trade under two agreements (Ahn, 2002): the Agreement on the 
Application  of  Sanitary  and  Phytosanitary  Measures  (the  SPS  Agreement)  and  the  Agreement  on  Technical 
Barriers  to  Trade  (the  TBT  Agreement).These  agreements  provide  exceptions  from  rules  barring  NTMs  for 
regulatory measures that satisfy conditions on justification and scope of use. SPS measures are implemented 
on  the  basis  of  animal,  plant  and  human  health  protection,  whereas  the  TBT  Agreement  covers  technical 
regulations related to products or processes and production methods. 

A broad array of policy instruments fall under these agreements, including the following (Ahn, 2002). 

—  Product  standards.  These  are  specifications  and  criteria  for  the  characteristics  of  final  products  (as 

opposed to processes of production). 

—  Process  standards.  These  are  requirements  or  criteria  for  the  way  products  are  made.  Process 
standards  can  be  management  system  requirements  or  performance  standards.  Management  system 
standards  set  criteria  for  monitoring  and  evaluation,  whereas  performance  standards  set  verifiable 
requirements for factors related to production methods. 

—  Border  control  measures.  These  are  measures  to  monitor  and  regulate  the  movement  of  people, 
animals and goods across maritime borders. Border measures include testing, inspection, certification and 
approval procedures. They also include quarantine requirements for animals and plants. 

—  Packaging  and  labelling  requirements.  These  are  text  or  symbols  indicating  that  compliance  with 
standards  has  been  verified  and/or  requirements  ensuring  that  product  information  provided  to 
consumers is consistent across the range of marketed products. 

Standards  targeting  sustainability  primarily  relate  to  process  standards  (as  opposed  to  product  standards) 
(Matthews,  2022).  Examples  of  relevant  standards  include  thresholds  for  the  adventitious  presence  of 
unapproved biotech traits in seed or grain or MRLs for pesticides or veterinary medicines in food products. In 
the  animal  welfare  arena,  countries  may  restrict  the  import  of  certain  animal-sourced  foods  based  on 
confinement conditions or slaughter practices associated with the derivate animal. 

Critically,  the  magnitude  of  the  trade  effects  generated  by  a  sustainability  standard  depends  on  the 
international scope of the standard (European Commission, 2022). Has the standard been implemented on a 
multilateral basis, on a regional or bilateral basis, or is the standard applied unilaterally? 

—  Multilateral  measures.  Multilateral  measures  refer  to  best  practice  guidance  set  by  international 

standard-setting bodies or the negotiation of multilateral agreements relating to sustainability. 

—  Regional  or  bilateral  measures.  Regional  or  bilateral  measures  refer  to  sustainability  terms  in  free 

trade agreements negotiated among two or more member countries. 

—  Unilateral measures. Unilateral measures (i.e. mirror clauses) refer to interventions solely by importing 
countries mandating that countries seeking to access their market must comply with certain standards. 

From the perspective of an importing country that chooses to adopt and apply a given sustainability standard, 
the greater the number of other importing countries that also adopt the standard, the smaller the chance of 
adverse trade effects. This is because – from the perspective of an exporting firm – the incentive to comply 
with  the  standard  increases  with  the  number  of  potential  markets  for  the  standard-compliant  good,  and 
(equally  importantly)  the  lack  of  potential  markets  for  non-compliant  goods  (Nes,  Schaefer,  &  Scheitrum, 
2022).  Accordingly,  multilateral  implementation  of  a  standard  is the  most  effective  way  to  accomplish  any 
sustainability  objectives  on  a  global  scale.  However,  speaking  practically,  the  probability  of  successful 
negotiation of meaningful sustainability standards falls as the number of member countries increases. 

Accordingly,  the  remainder  of  this  report  focuses  on  sustainability  standards  negotiated  at  the  regional  or 
bilateral  level  and  those  implemented  unilaterally.  In  the  short-  to  medium-term,  regional  or  bilateral 
negotiation of standards represents a more realistic mechanism by which to promote internationalisation of 
sustainability standards. This is particularly important because all free trade agreements negotiated by the EU 

8 

 
since  2011  contain  ‘trade  and  sustainable  development’  (TSD)  chapters,  which  aim  to  leverage  trade  to 
achieve progress on key sustainability issues, such as environmental protection and climate change mitigation 
(Matthews, 2022). These TSD provisions are seen by commentators as vague in terms of their commitments 
and  they  do  not  contain  explicit  enforcement  mechanisms.  However,  commentators  have  suggested  that 
existing TSD provisions could serve as the impetus through which the EU increases sustainability requirements 
for imported agri-food products (Matthews, 2022; Bronckers & Gruni, 2021). 

9 

 
4  Market failures addressed by sustainability standards 

From an  economic  policy  perspective,  sustainability  standards  can  be  used  to  address  two  types  of  market 
failures (Gourdon, Stone, & van Tongeren, 2020): 

—  measures can be used to address externality problems; 

—  measures can reduce or resolve information asymmetries in product markets. 

4.1  Addressing externalities 

Externality  problems  arise  in  situations  where  the  full  cost  of  production  or  consumption  of  a  good  is  not 
factored into the price of the good. And, thus, an unregulated market creates over- or under-consumption of 
the good relative to the social welfare maximum. Sustainability standards can bring market outcomes closer 
to the social welfare optimum by requiring that products on the market use desirable production practices. In 
other  words,  these  standards  can  eliminate  or  reduce  the  external  costs  associated  with  production  and 
consumption of the good. These outcomes are illustrated graphically in Figure 1. 

Let  segment  𝐷𝐸𝑈  in  panel (a)  of  Figure 1  represent  the  demand  for  a  marketed  food  product  from  EU 
consumers. This demand can be satisfied by sourcing the product from EU farmers or by importing the food 
product from abroad. Let segment 𝑆𝐸𝑈 represent the supply (and marginal cost) of the product sourced from 
EU farms. Because (in this hypothetical setting) EU farmers use sustainable practices, domestic production is 
not associated with an externality. In other words, the marginal private cost of EU production is equal to the 
marginal social cost of EU production. 

Figure 1. Sustainability standards and trade with externalities 

NB: The figure illustrates how – in light of negative production externalities abroad – sustainability standards can bring market outcomes 
closer  to the  social  welfare  optimum  by  requiring  that import  products  satisfy requirements  related to  production  practices.  Segments 
𝐷𝐸𝑈 and 𝑆𝐸𝑈 in panel (a) respectively represent the demand from EU consumers and supply by EU producers for a marketed food product. 
In  an  unregulated market  environment,  segment 𝐸𝑆𝑅𝑂𝑊
  in  panel (b)  represents  the  supply  of  imports  of  the  product  into  the  EU  from 
abroad, where we assume that – in contrast to EU farmers – production of the good abroad involves untaxed carbon emissions. Thus, the 
marginal  social  cost  of  production  (characterised  by  segment  𝑀𝑆𝐶0)  is  higher  than  the  marginal  private  cost  of  production  (𝐸𝑆𝑅𝑂𝑊
). 
 =𝑀𝑆𝐶1 in panel (b) represents the supply of imports of the product into the EU from abroad in light of EU sustainability 
Segment 𝐸𝑆𝑅𝑂𝑊
standards  requiring  imported  food  products  to  be  produced  using  sustainable  practices.  Segment  𝐸𝐷𝐸𝑈  represents  the  demand  for 
imports by EU consumers. 

0

0

1

0

Let segment 𝐸𝑆𝑅𝑂𝑊
 in panel (b) of Figure 1 represent the supply of imports of the product into the EU from 
abroad, where we assume that – in contrast to EU farmers – production of the good abroad involves untaxed 
carbon  emissions.  Thus,  the  marginal  social  cost  of  production  (characterised  by  segment  𝑀𝑆𝐶0)  is  higher 
). Segment 𝐸𝐷𝐸𝑈 represents the demand for imports by 
than the marginal private cost of production (𝐸𝑆𝑅𝑂𝑊

0

10 

 
 
EU  consumers  (derived  by  subtracting  the  total  EU  demand  in  panel (a)  from  the  total  EU  supply,  i.e. 
𝐸𝐷𝐸𝑈  =  𝐷𝐸𝑈  −  𝑆𝐸𝑈). 

0

We derive equilibrium in an unregulated market environment by equating EU excess demand (𝐸𝐷𝐸𝑈) with the 
import supply (𝐸𝑆𝑅𝑂𝑊
). This equilibrium occurs at price P0, at which EU consumers consume C0 units of the 
food  product,  EU  producers  supply  S0  units  of  the  product  and  M0  units  of  the  food  product  are  imported 
from abroad. Due to the negative externalities associated with the production technologies used abroad, this 
unregulated  equilibrium results  in  overconsumption  of  the  food  product  relative  to  the  social  optimum.  The 
welfare  maximising  outcome  falls  where  EU  excess  demand (𝐸𝐷𝐸𝑈)  is  equal  to  the  marginal  social  cost  of 
production (𝑀𝑆𝐶0). 

Now suppose the EU implements a standard requiring imports from abroad to be produced using sustainable 
practices. This requirement increases the marginal costs of production for imported products, thus vertically 
shifting the import supply curve from 𝐸𝑆𝑅𝑂𝑊
. However, the requirement also eliminates the carbon 
emissions  associated  with  production  abroad.  Thus,  the  marginal  social  cost  of  production  is  equal  to  the 
marginal private cost of production (𝐸𝑆𝑅𝑂𝑊

  =  𝑀𝑆1). 

 to 𝐸𝑆𝑅𝑂𝑊

0

1

1

Again,  we  derive  market  equilibrium  by  equating  EU  excess  demand  with  the  import  supply.  As  shown  in 
Figure 1, the imposition of a sustainability standard increases EU domestic prices and prices for imports from 
P0 in the unregulated scenario to P1. This results in a reduction of imports from M0 to M1. With the increased 
domestic  price,  EU  producers  expand  production  from  S0  in  the  unregulated  scenario  to  S1  in  light  of  the 
sustainability  standards.  Moreover,  the  higher  prices  cause  consumers  to  scale  back  from  C0  to  C1,  i.e.  to 
reduce  the  consumption  and  (therefore)  reduce  the  external  costs  associated  with  consumption  of  the 
product. 

Although empirical evidence is limited, existing studies suggest that, in practice, standards can be effective at 
improving sustainability outcomes in agri-food value chains (Baylis, Heckelei, & Hertel, 2021; Meemken, et al., 
2021).  Baylis,  Heckelei,  &  Hertel  (2021)  note  that  few  studies  have  directly  estimated  environmental 
outcomes associated with sustainability standards and instead measure the adoption of sustainable practices. 
Meemken  &  Qaim  (2018),  in  reviewing  literature  on  the  environmental  outcomes  associated  with  organic 
versus  conventional  agriculture,  find  positive  environmental  effects  associated  with  organic  agriculture – 
about one-third lower greenhouse gas emissions per hectare, lower nutrient leaching per hectare and about 
one-third higher species richness per hectare. Similarly, voluntary sustainability standards have been found to 
contribute to safer agrochemical usage in Kenya (Asfaw, Mithöfer, & Waibel, 2010) and Côte d’Ivoire (Sellare, 
Meemken, & Qaim, 2020). 

4.2  Addressing information asymmetries 

In  addition  to  addressing  externalities,  sustainability  standards  can  also  reduce  or  resolve  information 
asymmetries  in  product  markets  by  removing  (or  allowing  consumers  to  distinguish  via  labelling)  imported 
products that are not supportive of health outcomes, environmental stewardship or animal welfare. This can 
enhance demand in the market by providing assurances to consumers about the quality and sustainability of 
marketed products (Nes & Ciaian, 2022). 

The  economics  literature  distinguishes  between  search  attributes,  experience  attributes  and  credence 
attributes of a good. Search attributes can be evaluated and verified by physical inspection of the good. These 
are  things  like  the  colour  and  size  of  the  product  and  the  extent  to  which  the  product  has  observable 
blemishes. Experience attributes cannot be evaluated through physical inspection, but are verified through use 
of  the  product,  like  the  taste  of  a  product.  Credence  attributes,  on  the  other  hand,  cannot  be  evaluated  or 
verified by consumers even after use. The environmental practices and animal welfare aspects of production 
of  the  product  fall  into  the  category  of  credence  attributes.  In  the  absence  of  regulation  or  certification 
procedures, consumers of an agricultural good or food product cannot evaluate or verify whether sustainable 
production practices were used in its production. When imported products differ in this respect, sustainability 
standards  can  overcome  the  information  deficit  and  convey  a  signal  that  a  product  conforms  to  a  certain 
standard, encouraging demand. 

To  see  how  sustainability  standards  can  reduce  or  resolve  information  asymmetries  in  product  markets, 
suppose a good imported into the market is produced by two types of producers. The first group of producers 
uses sustainable production  practices, whereas the  second  group does not. Further suppose that the use of 
sustainable practices is associated with a higher marginal cost of production relative to producers who do not 
use sustainable practices. If consumers are unable to distinguish sustainably produced items from those that 

11 

 
are not produced using sustainable production methods, the consumers may be less willing to operate in this 
market, even if they desire and are willing to pay a premium for such goods. 

In this situation, the price on the market reflects the average ‘quality’ of the products, where quality refers to 
the sustainability of production. Therefore, the sustainably produced products will be under-valued. Because 
marginal  production  costs  are  higher  for  these  products,  producers  will  reduce  the  usage  of  sustainable 
production  practices, further  driving  down  average  quality  until  only  low-quality  products  (i.e.  those  that  do 
not  use  sustainable  practices)  (Akerlof,  1978).  Accordingly,  this  information  asymmetry  problem  leads  to 
socially undesirable market outcomes. 

Two  types  of  sustainability  standards  can  be  used  to  improve  market  outcomes  in  this  situation:  process 
standards and labelling requirements. 

—  Resolving information asymmetries via process standards. Mandating that imported products are 
subject  to  process  standards  resolves  the  information  asymmetry  in  the  market  by  ensuring  that  only 
sustainably  produced  products  are  sold  on  the  market.  Thus,  the  Akerlof  (1978)  ‘quality  deterioration’ 
problem  does not  occur.  This  provides assurances to  consumers about  the  quality  and sustainability  of 
marketed products. 

—  Resolving  information  asymmetries  via  labelling  requirements.  Requirements  that  product 
packaging  contains  appropriate  labelling  regarding  the  use  (or  non-use)  of  sustainable  production 
practices resolves the asymmetry of information by transforming product sustainability from a credence 
attribute into a search attribute (Carter & Schaefer, 2018). In other words, when products are fixed with 
credible  labels,  consumers  can  check  whether a  product  is sustainably  produced  prior  to  purchase. This 
allows consumers to purchase the goods that best match their preferences. 

12 

 
5  Mandatory public sustainability standards and trade 

The  market  forces  described  in  Section 3  suggest  that  sustainability  standards  may  generate  two  opposing 
effects  on  trade  flows  between  the  importer  adopting  the  standard  and  an  affected  exporter  (Anders  & 
Caswell, 2009). First, to the extent that a standard leads to an increase in the marginal costs of producing a 
given  product  in  the  exporting  country,  the  standard  may  lead  to  a  reduction  in  trade.  Conversely,  to  the 
extent  that  the  standard  leads  to  an  increase  in  the  demand  for  the  product  in  the  importing  country,  the 
standard  may  lead  to  an  increase  in  trade.  While  some  authors  have  developed  empirical  methods  to 
disentangle these effects (Xiong & Beghin, 2017; Cadot, Gourdon, & Van Tongeren, 2018; Gourdon, Stone, & 
van  Tongeren,  2020),  most  of  the  empirical  literature  provides  estimates  of  the  net  effect  on  trade,  which 
depends on the relative magnitude of the two factors. The general consensus in the literature appears to be 
that  the  trade-reducing  effects  of  standards  typically  dominate  the  trade-enhancing  effects  of  standards. 
However,  in  certain  situations,  the  trade-enhancing  effects  can  mitigate  or  even  reverse  these  negative 
effects. 

Of course, a finding that a given sustainability standard is trade-reducing does not imply that such a standard 
has a negative impact on aggregate economic welfare. As discussed in Section 3, sustainability standards are 
designed  to  correct  market  failures.  To  the  extent  that  agricultural  markets  generate  negative  externalities, 
such  as  environmental  pollution  or  greenhouse  gas  emissions,  unregulated  equilibrium  may  lead  to 
overconsumption  and  higher  trade  volumes  than  are  socially  desirable.  In  such  instances,  trade-reducing 
sustainability standards can bring markets closer to socially optimal outcomes. 

In this section, we first summarise estimates of ‘aggregate’ or net effects of sustainability standards on total 
trade volumes. In doing so, we look across a wide array of public standards, including SPS standards, pesticide 
MRLs, aflatoxin MRLs and animal welfare standards. Then, in Section 5.2 we discuss factors identified in the 
literature that may weigh in favour of (or against) the theory that standards can serve as a catalyst to trade. 
These  include  the  type  of  standard  at  issue,  the  type  of  product  at  issue,  the  development  status  of  the 
relevant traders, the size and experience of the affected traders, the number of traders affected and whether 
the traders are currently operating in the market or merely seeking to enter it. 

Section 5.3 analyses the body of literature focused on the trade effects of sustainability standards extending 
beyond the point of adoption, through testing and inspection at the border and  rejection for non-conformity. 
Section 5.4 discusses special considerations related to standard harmonisation along a variety of dimensions, 
which  can  reduce  stakeholder  costs  and  increase  scale  economies.  Finally,  in  Section 5.5  we  discuss  risks 
associated  with  the  use  of  standards  as  a  political  tool –  either  by  limiting  imports  from  abroad  or  via 
retaliation against other countries. 

5.1  Aggregate (net) effects of standards 

Cadot,  Gourdon,  &  Van  Tongeren  (2018)  and  the  follow-up  analysis  by  Gourdon,  Stone,  &  van  Tongeren 
(2020) use econometric modelling to disentangle trade–cost effects associated with a wide variety of public 
standards from potential demand-enhancing effects that come from reducing information asymmetries and 
strengthening consumer confidence in imported products. Both  Cadot, Gourdon, & Van Tongeren (2018) and 
Gourdon,  Stone,  &  van  Tongeren  (2020)  consider  a  range  of  traded  goods  and  export  and  destination 
countries.  Cadot,  Gourdon,  &  Van  Tongeren  (2018)  conclude  that,  typically  but  not  always,  public  standards 
reduce trade volumes. The findings in Gourdon, Stone, & van Tongeren (2020) (discussed below) are slightly 
more nuanced. Santeramo & Lamonaca (2019) conduct a meta-analysis of the effects of public standards on 
agri-food trade. Their findings are consistent with those of Gourdon, Stone, & van Tongeren (2020) and Cadot, 
Gourdon, & Van Tongeren (2018). Other studies have focused on specific types of public standards. 

Sanitary and phytosanitary standards 

Peterson  et  al.  (2013)  match  data  on  American  phytosanitary  measures  to  47  fresh  fruit  and  vegetable 
product imports from 89 exporting countries over the 1996–2008 period. The authors estimate a product-line 
gravity  equation  that  accounts  for  zero  trade  flows  to  investigate  the  trade  impact  of  different  pest-
mitigation  measures.  The  authors  find  that  phytosanitary  treatments  generally  reduce  aggregate  trade 
volumes. Using a different approach and in a different country context, Melo et al. (2014) assess the impact 
of SPS standards by estimating a gravity model for Chilean fresh fruit exports that incorporates a stringency-
perception  index  associated  with  the  standard.  Their  results  suggest  that  an  increase  in  stringency  has  a 
negative and substantial effect on exported volumes. 

13 

 
Using  data  on  specific  trade  concerns  (STCs)  on  SPS  measures  filed  at  the  WTO,  Crivelli  &  Gröschl  (2016) 
estimate gravity models with HS-4 aggregated data to estimate the impacts of SPS measures on trade. The 
authors find that aggregated SPS measures constitute obstacles to agricultural and food trade consistently to 
all exporters. Yue & Beghin (2017) econometrically estimate the tariff equivalent and forgone trade effects of 
Australian phytosanitary regulations imposed on imports of New Zealand apples because of the alleged risk 
of introducing fire blight in Australian orchards. The authors find that the forgone apple trade associated with 
the  standard  amounts  to  about  50 million  metric  tonnes  valued  at  around  USD 35–40 million.  The  implied 
welfare  loss  of  the  policy  was  around  USD 50 million  annually  for  Australian  stakeholders.  More  recently, 
Medin (2019) and Fiankor, Haase, & Brümmer (2021) also empirically estimate the effects of SPS standards 
and find that standards reduce trade. 

Pesticide maximum residue limits 

Using a similar approach to Melo et al. (2014), Ferro, Otsuki, & Wilson (2015) use a standards restrictiveness 
index  to  analyse  the  impact  of  pesticide  MRLs  for  61  importing  countries  and  66  different  products.  Their 
index accounts for both the number of pesticides regulated for each product and the allowable level for those 
pesticides  by  each  importer.  The  findings  suggest  that  more  restrictive  standards  are  associated –  on 
average – with a negative effect on trade. 

Fernandes,  Ferro,  &  Wilson  (2019)  use  firm-level  data  for all  exporting  firms  in  42  developing  countries to 
estimate the effects of pesticide MRLs on firms’ export decisions across 243 agricultural and food products in 
80  importing  countries  for  the  2006–2012  period.  The  authors  find  that  an  increase  in  the  stringency  of 
standards in the destination country lowers the firms’ probability of exporting, deters exporters from entering 
new markets and fosters exits from existing markets. 

Aflatoxin maximum residue limits  

Otsuki, Wilson, & Sewadeh (2001) employ a gravity model to estimate the impact of changes in EU aflatoxin 
standards on trade flows of groundnut products between Europe and Africa from 1989 to 1998. The authors 
find that a 10 % tighter aflatoxin standard in EU countries reduces edible groundnut imports from Africa by 
11 %.  The  authors  conclude  that  revised  EU  regulations  on  aflatoxins  result  in  a  63 %  reduction  in  trade 
relative  to  a  counterfactual  world  in  which  the  EU  adheres  to  Codex  Alimentarius  international  standards. 
Interestingly,  Xiong  &  Beghin  (2012)  provide  an  ex  post  econometric  examination  of  the  impacts  of  EU 
changes in aflatoxin MRLs on African exports of groundnut products. In contrast to Otsuki, Wilson, & Sewadeh 
(2001),  Xiong  &  Beghin  (2012)  find  no  evidence  that  EU  MRLs  had  a  significant  negative  trade  impact  on 
these exports. 

Animal welfare standards 

Within the animal welfare arena, there are few examples of standards implemented at the international level 
that  allow  for  empirical  study.  However,  state-level  initiatives  in  the  United  States  are  informative  in  this 
respect.  In  2015,  for  example,  California  implemented  a  standard  banning  imports  of  eggs  produced  from 
laying  hens  housed  in  conventional  enclosures.  Mullally  &  Lusk  (2018)  and  Carter,  Schaefer,  &  Scheitrum 
(2021)  study  the  impacts  of  this  animal  welfare  standard  on  interstate  trade  in  the  United  States.  Both 
Mullally  &  Lusk  (2018)  and  Carter,  Schaefer,  &  Scheitrum  (2021)  find  that  the  volume  of  egg  imports into 
California  was  expanding  in  the  years  leading  up  to  the  implementation  of  the  regulation.  However,  in  the 
wake of the standard, California egg imports levelled off and then declined somewhat. 

5.2  Heterogeneous effects of standards 

Although  the  trade  barrier  effect  of  sustainability  standards  tends  to  dominate  the  trade-enhancing  effect, 
there  are  several  factors  that  can  tip  the  balance  of  these  effects  toward  catalysing  international  trade, 
including: 

—  the type of standard at issue, 

—  the type of product at issue, 

—  the development status of the relevant traders, 

—  the size and experience of the affected traders, 

—  the number of traders affected, 

—  whether the trader is currently operating in the market. 

14 

 
These factors are summarised in Table 1. Below we discuss them in turn. 

Types of standards 

Consistent  with  theory,  empirical  studies  that  attempt  to  disaggregate  the  effects  of  specific  types  of 
standards tend to support the finding that standards that place restrictions on the types of products that can 
enter  the  market  reduce  trade,  while  standards  that  serve  to  provide  information  to  consumers  facilitate 
trade. For example, Schlueter, Wieck, & Heckelei (2009) use a non-linear panel data gravity model to analyse 
the trade effects of different regulatory measures that are imposed in the meat sector. They find that policy 
measures  targeting  animal  health  are  identified  as  being  significantly  trade-enhancing,  whereas  other 
measures  have  a  significant  negative  effect.  Crivelli  &  Gröschl  (2016)  find  that  SPS  measures  related  to 
conformity assessment hamper market entry, while SPS measures related to product characteristics increase 
bilateral trade flows, conditional on meeting the standard. 

Most recently, Gourdon, Stone, & van Tongeren (2020) attempt to identify the specific elements of SPS and 
TBT measures that are trade-enhancing versus those that are trade-reducing. They consider 34 types of SPS 
measures and 24 types of TBT measures. The authors find that technical measures tend to increase import 
prices  for  agricultural  products  by  nearly  15 %  on  average.  Most  of  these  increases  are  driven  by  trade-
reducing mechanisms like restrictions or special authorisations, such as registration requirements. In contrast, 
the  authors  find  that  labelling  and  packaging  requirements  tend  to  elicit  trade-enhancing  effects  with 
relatively low trade costs. 

We  note  that  the  findings  in  Santeramo  &  Lamonaca  (2019)  are  somewhat  inconsistent  with  Crivelli  & 
Gröschl (2016) and Gourdon, Stone, & van Tongeren (2020) and the economic theory presented in Section 4. 
Santeramo  &  Lamonaca  (2019)  conduct  a  meta-analysis  of  the  effects  of  public  standards  on  agri-food 
trade,  including  TBT  and  SPS  measures,  MRLs  and  STCs.  In  contrast  to  expectations,  the  authors  find  that 
trade effects associated with TBT and SPS measures are less likely to be negative than for other measures (2). 
Of course, in the meta-analysis setting, there are many explanations for these findings beyond the real-world 
effect of any given measure. 

Types of products 

In  addition  to  the  types  of  measure  being  considered,  trade  in  certain  products  may  be  more  or  less 
vulnerable  to  imposition  of  a  standard.  Medin  (2019),  for  example,  estimates  the  effects  of  foreign  SPS 
standards on Norwegian seafood exports. She finds that – while standards generally have a negative impact 
on exports – there is a positive counteracting effect for fresh products relative to more processed products. 
The meta-analysis in Santeramo & Lamonaca (2019) also provides some evidence that standards targeting 
cereals  and  dairy  may  elicit  more  negative  treatment  effects,  whereas  standards  targeting  meat  products 
may be associated with smaller (or more positive) treatment effects. Unsurprisingly, Santeramo & Lamonaca 
(2019)  also  find  that  the  more  aggregate  the  level  of  analysis  in  terms  of  product  description  (e.g.  HS-6 
versus  HS-4  versus  HS-2  digit),  the  smaller  (or  more  positive)  the  magnitude  of  the  estimated  treatment 
effect. This is consistent with the analysis in De Frahan & Vancauteren (2006). 

Development status 

A  major  focus  of  the  literature  has  been  whether  standards  affect  producers  and  traders  in  developing 
countries  differently  than  those  in  developed  countries.  The  finding  in  the  literature  appears  to  be  a 
resounding yes: trade originating from developing regions is the most negatively affected by standards. While 
the  discussion  regarding  public  standards  and  development  status  began  with  the  analysis  of  EU  aflatoxin 
regulation and African groundnut producers in Otsuki, Wilson, & Sewadeh (2001), Anders & Caswell (2009) is 
perhaps the most well-known in this line of literature. Anders & Caswell (2009) find that the American Hazard 
Analysis Critical Control Points food safety standards for seafood elicit a positive trade effect for developed-
country exporters, but a negative effect for developing-country exporters. 

Several  studies  have  confirmed  that  public  standards  affect  developing  countries  and  developed  countries 
differently. Xiong & Beghin (2017) find that exporters from the less- and least-developed countries are more 
constrained by pesticide MRLs than their competitors from the developed world. Melo et al. (2014) find that– 

(2) 

Santeramo  &  Lamonaca  (2019)  also  investigate  the  extent  to  which  different  empirical  methodologies  may  lead  to  trade- 
enhancing  versus  trade-reducing  estimates  of  standards.  For  example,  a  dummy  variable  approach  is  associated  with  a  more 
negative trade effect than a continuous variable approach to measuring the impacts of standards on trade. 

15 

 
 
 
Table 1. Heterogeneous effects of standards 

Category 

Trade-enhancing factors 

Trade-reducing factors 

Type of standard 

Animal health policies (Schlueter, Wieck, & Heckelei, 2009) 

Conformity assessment policies (Crivelli & Gröschl, 2016) 

Labelling requirements (Gourdon, Stone, & van Tongeren, 2020) 

Special authorisations (Gourdon, Stone, & van Tongeren, 2020) 

Packaging requirements (Gourdon, Stone, & van Tongeren, 2020) 

Registration  requirements  (Gourdon,  Stone,  &  van  Tongeren, 
2020) 

Type of product 

Fresh products (Medin, 2019) 

Processed products (Medin, 2019) 

Meat products (Santeramo & Lamonaca, 2019) 

Cereal products (Santeramo & Lamonaca, 2019) 

Dairy products (Santeramo & Lamonaca, 2019) 

Development status 

High  income  exporter  (Otsuki,  Wilson,  &  Sewadeh,  2001;  Anders  & 
Caswell, 2009; Xiong  &  Beghin, 2017; Melo, Engler, Nahuehual, Cofre, 
& Barrena, 2014; Ferro, Otsuki, & Wilson, 2015; Jongwanich, 2009) 

Developing  country  exporter  and  high  income  importer  (Otsuki, 
Wilson,  &  Sewadeh,  2001;  Anders  &  Caswell,  2009;  Xiong  & 
Beghin, 2017; Melo, Engler, Nahuehual, Cofre, & Barrena, 2014; 
Ferro, Otsuki, & Wilson, 2015; Jongwanich, 2009) 

Size and experience of traders 

Large-volume exporter (Fiankor, Haase, & Brümmer, 2021; Fernandes, 
Ferro, & Wilson, 2019) 

Small-volume  exporter  (Fiankor,  Haase,  &  Brümmer,  2021; 
Fernandes, Ferro, & Wilson, 2019) 

Established traders (Fernandes, Ferro, & Wilson, 2019; Peterson, Grant, 
Roberts,  &  Karov,  2013;  Ferro,  Otsuki,  &  Wilson,  2015;  Crivelli  & 
Gröschl, 2016) 

New  entrants  (Fernandes,  Ferro,  &  Wilson,  2019;  Peterson, 
Grant,  Roberts,  &  Karov,  2013;  Ferro,  Otsuki,  &  Wilson,  2015; 
Crivelli & Gröschl, 2016) 

Number of traders 

Networks of traders (Fernandes, Ferro, & Wilson, 2019) 

Concentrated export sector (Carter, Schaefer, & Scheitrum, 2021) 

16 

 
 
 
 
while SPS standards have a negative effect on trade for exporters across the board – higher stringency SPS 
standards  elicit  a  larger  reduction  for  developing  countries  and  if  the  stringency  increases  in  developed 
countries.  This  result  is  supported  by  the  standards  restrictiveness  index  in  Ferro,  Otsuki,  &  Wilson  (2015). 
Jongwanich (2009) estimates an empirical model of the impacts of food safety standards on processed food 
exports in developing countries. The author finds that food safety standards imposed by developed countries 
impede processed food exports from developing countries. The author attributes this to a combination of poor 
transparency (relative to tariffs and quotas) for SPS standards and limited supply-side capacity in developing 
countries  to  meet  the  standards  (Xiong  &  Beghin,  2012),  especially  in  terms  of  resources,  manpower  and 
institution. 

Size and experience of traders 

The  literature  also  suggests  that  the  size  of  the  affected  exporter  and  the  ‘experience’  of  the  exporter 
(evaluated  in  terms  of  the  duration  of  historical  trade  between  the  standard  adopting  importer  and  the 
exporter)  are  important  determinants  for  the  effects  of  standards  on  trade.  At  the  country  level,  Fiankor, 
Haase, & Brümmer (2021) find that standards reduce trade, but even more so for countries that trade smaller 
volumes.  The  authors  attribute  this  to  the  fact  that  bigger  trading  partners  may  find  it  more  profitable  to 
invest in meeting the costs of importer-specific  standards. Thus, increasing sustainability standards favours 
larger trading partners over smaller trading partners. Similarly, at the firm-level, Fernandes, Ferro, & Wilson, 
(2019)  show  that  smaller  exporters  are  more  affected  by  the  relative  stringency  of  destination  standards 
than larger exporters. Moreover, standards deter exporters from entering new markets. 

Peterson  et  al.  (2013)  find  that –  while  phytosanitary  treatments  generally  reduce  trade –  the  actual 
restrictiveness  of  these  measures  diminishes  dramatically  as  exporters  accumulate  experience,  and  it 
vanishes  when  exporters  reach  a  certain  threshold.  Ferro,  Otsuki,  &  Wilson,  (2015)  find  that –  once  a  firm 
adjusts its production to comply with the standards of a foreign market – those standards do not impact the 
intensity  of  exports  to  that  market.  The  authors  attribute  this  to  the  fact  that  meeting  stringent  standards 
increases  primarily  the  fixed  cost  to  export  to  a  destination.  Similarly,  Crivelli  &  Gröschl  (2016)  find  that – 
even  though  SPS  measures  constitute  obstacles  to  trade –  conditional  on  an  exporter’s  market  entry,  trade 
flows are positively affected by SPS measures. 

Number of traders 

The literature suggests  that  there is also an important association between the concentration of the export 
market  and  the  effects of  sustainability  standards.  Using  country-level  data,  Medin  (2019)  shows  that  SPS 
standards reduce the number of exporters, leading to a more concentrated export market. This finding holds 
at  the  firm-level  in  the  animal  welfare  arena,  where  Carter,  Schaefer,  &  Scheitrum  (2021)  show  that 
California  laying-hen  enclosure  requirements  led  to  fewer  traders  and  a  more  concentrated  eggshell  trade. 
However, Fernandes, Ferro, & Wilson (2019), also using firm-level data, show that networks of other exporters 
from  the  same  region  can  help  overcome  the  negative  effects  of  the  relative  stringency  of  destination 
standards on exporter trade. 

5.3  Border enforcement of sustainability standards 

Importantly,  the  trade  effects  of  sustainability  standards  extend  beyond  the  point  of  adoption.  A  body  of 
literature looks at the effects of application of standards through testing and inspection at the border and the 
implications  for  future  trade  flows  of  rejection  for  non-conformity  with  the  requirements  of  standards. 
Previous  literature  has  focused  on  the  determinants  of  import  refusals  and  the  implications  of  border 
rejections  for  trade  and  supplier  concentration.  Political  pressure  and  product  risk  profiles  are  the  primary 
determinants  of  border  rejections  (Jouanjean,  Maur,  &  Shepherd,  2015;  Baylis,  Martens,  &  Nogueira,  2009; 
Nes  &  Schaefer,  2018;  Grundke  &  Moser,  2019).  Jouanjean,  Maur,  &  Shepherd  (2015)  argue  that  certain 
export categories have a higher risk profile than others. Using American data on import refusals, they argue 
that the history of compliance with food safety regulations of a given country and product indicates the risk 
profile  of  an  exporter–product  pair.  A  prior  refusal  of  an  exporter–product  pair  therefore  has  a  positive 
association  with  future  refusals.  The  authors  argue  that  the  reputation  of  a  product  also  depends  on  the 
history  of  compliance  of  the  given  product,  regardless  of  the  exporter,  and  the  history  of  compliance  of 
countries  neighbouring  the  exporting  country.  Protectionism  and  political  pressure  in  the  importing  country 
also  drive  import  refusals.  Baylis,  Martens,  &  Nogueira  (2009)  show  that  lobbying  expenditures  and  the 
initiation of anti-dumping proceedings increase the number of import refusals in the United States.  Grundke 
and  Moser  (2019)  argue  that  the  frequency  of  American  import  refusals  is  consistent  with  protectionist 
reactions to fluctuations in the business cycle. 

17 

 
Import  refusals  affect  the  concentration  of  the  export  sector  and  the  value  of  bilateral  trade.  A  border 
rejection  into  the  EU  market  affects  concentration  among  exporting  countries  (Jaud,  Cadot,  &  Suwa-
Eisenmann,  2013)  and  among  exporting  firms  within  an  exporting  country  (Beestermöller,  Disdier,  & 
Fontagne, 2018). Jaud, Cadot, & Suwa-Eisenmann (2013) argue that border rejections concentrate imports on 
a few reliable suppliers, thereby increasing the supplier concentration for exports into the EU market. A similar 
pattern can be seen within an exporting country. Beestermöller, Disdier, & Fontagne (2018) study the impacts 
of border rejections into the European market on exports from Chinese firms. A rejection decreases the total 
number of firms exporting and increases the size of the surviving firms. 

Several  papers  have  looked  at  the  effect  of  import  refusals  on  trade  (Beestermöller,  Disdier,  &  Fontagne, 
2018; Baylis, Nogueira, & Pace, 2010; Schaefer, Scheitrum, & Nes, 2018). Beestermöller, Disdier, & Fontagne 
(2018) show that when controlling for product characteristics at the HTS 4-digit level, border rejections into 
the European market  have a negative effect on the intensive margin of trade  with Chinese exporting firms. 
Schaefer, Scheitrum, & Nes (2018) show that after the 2013 EU horsemeat scandal, food fraud alerts from 
the Rapid Alert System for Food and Feed reduced bilateral trade flows by an average of 10 % per incident. 
Border  rejections  also  generate  spillover  effects  on  other  countries.  Using  data  on  seafood  trade,  Baylis, 
Nogueira,  & Pace (2010) show that EU refusals significantly decrease trade into the EU, but increase trade 
with other high-income importers outside the EU. Similarly, Grant & Anders (2010) show that American import 
refusal of seafood increases trade with other major seafood importers. 

5.4  Harmonisation of standards 

One critical factor for whether sustainability standards (either mandatory or voluntary) are trade-enhancing is 
the extent to which these standards are harmonised (Nes & Ciaian, 2021). Harmonisation reduces stakeholder 
costs  of  complying  with  multiple  standards  set  in  several  countries  (or  by  several  bodies)  and  allows  for 
desegregation  of  supply  chains  across  harmonised  markets  (Chen  &  Mattoo,  2008),  thereby  allowing 
stakeholders to benefit from any economies of scale across the supply chain. Harmonisation can occur across 
various dimensions, including: 

—  harmonisation of rules among exporting and importing countries (Frahan & Vancauteren, 2006); 

—  harmonisation of rules across several importing countries (Frahan & Vancauteren, 2006); 

—  harmonisation  of  mandatory  standards  with  guidelines  set  by  international  standard-setting  bodies 

(Otsuki, Wilson, & Sewadeh, 2001; Mangelsdorf, Portugal-Perez, & Wilson, 2012). 

The literature suggests that harmonisation of standards is trade-enhancing in each of these dimensions. Early 
literature  on  harmonisation  of  standards  in  agri-food  trade  focuses  on  aflatoxin  MRLs.  Otsuki,  Wilson,  & 
Sewadeh  (2001)  find  that  the  EU  relaxing  aflatoxin  MRLs  to  align  with  Codex  Alimentarius  international 
standards would increase trade in groundnuts from Africa by 63 %. In contrast, we note that Xiong & Beghin 
(2012) find no evidence of the EU MRL having a significant negative trade impact on groundnut exports from 
Africa.  Wilson  &  Otsuki  (2003)  examine  the  impact  of  adopting  international  food  safety  standards  and 
harmonisation  of  standards  on  global  food  trade  patterns.  The  authors  estimate  the  effect  of  aflatoxin 
standards in 15 importing (4 developing) countries on exports from 31 (21 developing)  countries. They find 
that  world  exports  would  rise  by  USD 38.8 billion  if  international  Codex  standards  were  adopted  in  all 
countries, compared to the current divergent national standards in place. 

More  recent  literature  suggests that  harmonisation  can  promote  trade  in  a  variety  of  ways.  De  Frahan  and 
Vancauteren  (2006)  study  the  effects  of  harmonisation  of  EU  food  regulations  on  intra-EU  trade  between 
1990 and 2001 and conclude that harmonisation of food regulations has increased intra-EU trade. 

The potential welfare effect of harmonisation for developing countries was discussed by Disdier, Fontagné & 
Cadot (2015). Increasing the stringency of a standard set in a developing country to match a standard set by, 
for  instance,  the  EU,  may  lead  to  a  cost  increase  for  producers  in  developing  countries,  but  a  reduction  of 
negative  external  costs  associated  with  production.  Disdier,  Fontagné  &  Cadot  (2015)  show  that  the 
harmonisation  indeed  increases  trade  to  the  EU; however,  the  increased  production  costs make  the  product 
less  competitive  in  other  markets  and  impair  trade  with  other  developing  countries.  The  welfare  effects  of 
standard harmonisation for developing countries are therefore ambiguous. 

Finally, Lambin & Thorlakson (2018) observe that – in reality – harmonisation is not the norm. Rather, there is 
currently a proliferation of parallel standards developed by different stakeholder groups, which compete with 
each other for market share. This lack of harmonisation can lead to a negative effect on trade (Nes, Schaefer, 
& Scheitrum, 2022). 

18 

 
5.5  Political economy of standard setting 

Section 4.1  discusses  the  economic  concepts  behind  sustainability  standards.  It  shows,  among  other  things, 
that  a  standard  set  on  imports  from  abroad  can  reduce  external  costs  associated  with  production  and 
consumption  of  a  given  product.  The  ideal  standard  depends  on  the  level  of  cost  in  complying  with  the 
standard, how much the standard reduces negative external costs and the extent to which higher prices lead 
to reductions in demand. A body of literature has focused on determining whether the standards can be used 
as political tools – either by limiting imports from abroad or as retaliation against other countries. 

Trade costs and protectionism 

Theoretical papers have  discussed the relationship between trade costs and protectionism. Fisher and Serra 
(2000) use a two-country framework with identical costs with respect to a standard. Their model shows that a 
social planner that only  considers the welfare of  their own country tends to set a protectionist standard.  In 
contrast,  when  costs  of  complying  with  a  standard  are  heterogeneous  among  countries,  Marette  &  Beghin 
(2010)  argue  that  the  standard  may  not  be  protectionist  if  compliance  is  lower  for  the  foreign  country. 
Swinnen  &  Vandemoortele  (2011)  developed  a  small,  open  economy  model  containing  lobbyists  for  both 
consumers  and  producers.  They  argue  that  standards  can  be  both  barriers  and  catalysts  to  trade  and  the 
standard may be too low or too high compared with the social optimum, depending on various factors. They 
argue  that  these  findings  imply  that  standards  should  be  examined  on  a  case-by-case  basis  to  determine 
whether the standard serves as a protectionist instrument. 

In particular, Swinnen & Vandemoortele (2011) argued that producers might lobby for a standard set higher 
than the social optimum if they are relatively better suited for complying with the standard than their foreign 
competitors –  i.e.  increasing  their  rivals’  costs.  This  argument  was  more  practically  discussed  in  Matthews 
(2022).  Different  countries  face  different  exposures  to  certain  pest  and  disease  risks,  along  with  different 
agronomic  and  climate  conditions.  Thus,  countries  may  face  unequal  burdens  (and  unequal  benefits)  from 
complying  with  a  given  sustainability  standard.  This  unequal  burden  can  give  rise  to  standards  that  are 
justified – on their face – based on sustainability concerns, but that – in practice – serve as subterfuge for a 
protectionist  barrier  to  trade  (Salop  &  Scheffman,  1983;  McWilliams,  Fleet,  &  Cory,  2002).  For  example, 
suppose  the  EU  implemented  a  zero  tolerance  maximum  residue  threshold  on  all  agricultural  and  food 
products  for  a  given  pesticide  used  to  treat  a  pest  prevalent  in  sub-tropical  climates.  Because  most  EU 
agriculture does not occur in subtropical areas, the standard would not constitute a significant cost from the 
perspective  of  domestic  farmers.  However,  the  standard  could  constitute  a  de  facto  ban  on  some  products 
from countries like Chile, China and Vietnam. 

Using standards as a substitution for other political tools 

During  the  last  decade,  international  trade  agreements  have  focused  on  reducing  tariffs,  especially  for 
developing countries. The decrease in tariffs coincides with an increase in SPS and TBT measures. Baylis et al. 
(2022) show that, within seafood imports into the EU, when trade agreements generate a decrease in tariffs, 
there  is  an  increase  in  import  notification  (rejections),  holding  trade  volume  constant.  They  argue  that  this 
result implies that although non-tariff barriers are used to avoid health risk, it is also correlated with demand 
for domestic protection. 

Risk of retaliation 

Unilateral changes to a country’s trade policy do not occur in a vacuum. If an exporting country (or group of 
exporting  countries)  feels that  its  stakeholders  have  been  injured  by  sustainability  standards  applied  in  the 
EU, the aggrieved exporting country(ies) may choose to retaliate against the EU (Matthews, 2022). Retribution 
can  be  sought  in  a  number  of  ways.  First,  the  WTO  has  established  informal  forums,  known  as  the  SPS 
committee and the TBT  committee, in which countries negatively affected  by specific  SPS or TBT measures 
can discuss such standards, request clarifications from the adopting country and signal that they believe the 
true  purpose  of  the  standard  is  protectionism.  These  complaints  are  referred  to  as  STCs.  In  the  first  two 
decades of the WTO, more than 400 STCs were raised at the SPS Committee and 333 STCs were raised at the 
TBT Committee (Nes & Schaefer, 2022; Feinberg, Nes, Reynolds, & Schaefer, 2023). If these discussions are 
unfruitful from the perspective of the aggrieved exporter, they can bring legal action against the instigating 
country through the WTO Dispute Settlement Mechanism (Bronckers & Gruni, 2021). 

Of  course,  retaliation  in  the  international  policy  arena  can  also  occur  outside  the  WTO  dispute  settlement 
mechanism  (Martin  &  Vergote,  2008;  Dluhosch,  2016).  Nes  and  Schaefer  (2022)  construct  a  dataset  that 
matches  notification  of  SPS  standards  between  1995  and  2015  with  SPS  committee  data  on  STCs  and 
annual,  bilateral  trade  flows  to  test  whether  (i)  countries  targeted  with  a  public  standard  that  negatively 

19 

 
affects trade respond with a trade barrier of their own and (ii) if such a response exists, whether the response 
follows  a  pattern  consistent  with  retaliation.  The  authors  find  that  SPS  measures  imposed  by  one  country 
against another increase the probability that the country targeted by the original measure will respond with 
an SPS measure of its own. The authors observe that this type of retaliatory behaviour commonly occurred 
outside the product group of the original measure and for economically strategic goods. At the HS two-digit 
level,  their  results  suggest  that  about  1 000  bilateral  trade  flows  globally –  or  just  over  USD 11.8 billion  in 
trade – were subject to retaliatory standards in 2015. 

20 

 
 
 
 
6  Voluntary sustainability standards 

In  addition  to  government-mandated  public  standards  designed  to  enhance  the  sustainability  of  the  global 
agri-food  system,  private  importing  companies  and  exporting  farmers  have  the  option  to  voluntarily  adopt 
sustainability standards –  such as the  GlobalGAP, FairTrade, Certified Organic, and Red Tractor – to improve 
and  assure  the  sustainability  of  their  own  supply  chains  (Meemken,  et  al.,  2021).  Such  standards  include 
voluntary standards developed by governments, private firms and independent (non-governmental) standard-
setting  bodies.  These  standards  tend  to  be  heterogeneous  in  type  and  scope.  For  instance,  Hobbs  (2010) 
argues that firms may require private standards for various purposes. 

- 

- 

Product differentiation. These standards may enhance product differentiation if a logo or labelling 
is communicated to the consumer (Hobbs, 2010). 

Enhance  supply  chain  management.  Private  standards  may  be  set  to  enhance  supply  chain 
management  by  reducing  transaction  costs  and  improve  information  in  the  supply  chain  (Hobbs, 
2010).  In  an  international  market,  Henson  (2008)  argues  that  private  standards  allow  firms  to 
identify and preserve product and process characteristics throughout the supply chain and function. 

-  Reduce  liability/protect  reputation.  Hobbs  (2010)  argues that  private  standards  can  also  serve 
as a tool to minimise potential negative reputational effects caused by a food safety incident, as well 
as reduce liability in case such event occurs.   

Some  private  standards  may  fulfil  some  or  all  of  these  purposes.  For  instance,  Hobbs  (2010)  argues  that 
proprietary  business-to-business  standards  such  as  Tesco’s  ‘Nature  Choice’  label  can  be  used  for  product 
differentiation,  supply  chain  management  and  to  reduce  liability.  On  the  other  hand,  private  collective 
standards  such  as  GlobalG.A.P  are  normally  not  used  for  product  differentiation,  but  for  supply  chain 
management and protection of reputation and liability (3). 

Generally speaking, voluntary standards tend to be more stringent than mandatory public standards (Fulponi, 
2006).  While  private  adoption  of  voluntary  standards  is  increasing  rapidly  (Tayleur,  et  al.,  2017),  coverage 
remains limited relative to the footprint of the global agri-food system. According to Meemken et al. (2021), 
approximately  2 %  of  the  global  small-scale  farm  population  (10 million  farmers)  and  agricultural  land 
(80 million hectares) are  certified under a voluntary  sustainability scheme. Most  farm  certification occurs in 
low-income countries and for a small number of commodities, such as cocoa, tea, coffee and palm. Around 
10 % of the total global production area is certified for each of these commodities (Tayleur, et al., 2017). 

6.1  Trade effects of adopting voluntary standards 

Theoretically  speaking,  the  trade  effects  of  voluntary  sustainability  standards  should  tend  toward  trade- 
enhancing outcomes as opposed to trade-reducing outcomes for adopting firms because – unlike mandatory 
public  standards –  the  adoption  of  private  sustainability  standards  is  entirely  optional  for  both  firms  in  the 
importing country and farms in exporting countries (Matthews, 2022). Thus, one would expect firms to adopt 
such standards if doing so would be Pareto improving (i.e. if it would make both parties at least equally well 
off).  There  is  some  evidence  to  support  this  outcome –  both  from  the  perspective  of  standard-adopting 
companies  in  importing  countries  and  standard-certified  farmers  in  exporting  countries.  Baylis,  Heckelei,  & 
Hertel  (2021)  discuss  literature  examining  importing  companies’  motivation  to  adopt,  develop  and  promote 
voluntary standards. They find that companies use private standards to increase quality control, reduce risks, 
avoid brand reputation damage (Thorlakson, Hainmueller, & Lambin, 2018) and attract customers (Dauvergne 
&  Lister,  2012).  Meemken  (2020)  reviews  95  studies and  finds  that  smallholder  farmers  certified  by  some 
sustainability  standards  receive  20–30 %  higher  prices  and  earn  16–22 %  higher  income  than  their 
noncertified counterparts. Other analyses find more moderately positive economic effects of certified farmers 
(DeFries, Fanzo, Mondal, Remans, & Wood, 2017; Oya, Schaefer, & Skalidou, 2018). However, not all evidence 
is  positive.  Even  if  private  standard  adoption  increases  prices  for  exporting  country  farmers,  such  schemes 
also  create  additional  transaction  costs  to  monitor,  certify  and  track  compliance  with  sustainable  practices 
along  complex  international  supply  chains  (Fischer  C.  ,  2010).  Such  costs  may  be  prohibitive,  especially  for 
credit-constrained smallholders. Of course, opportunities for group-based certification can lower logistics and 
certification costs (Bolwig, Gibbon, & Jones, 2009; Snider, Gutiérrez, Sibelet, & Faure, 2017). 

(3) 

Products certified with the GloabalG.A.P standard are normally not labelled as such to the end consumer. 

21 

 
 
 
The lion’s share of evidence looking at the direct relationship between voluntary sustainability standards and 
trade  suggests  that  these  standards  are  trade-enhancing.  This  includes  both  studies  looking  at  the  country 
level  and  the  firm  level.  At  the  country  level,  Mangelsdorf,  Portugal-Perez,  &  Wilson  (2012)  estimate  the 
impacts of voluntary standards on Chinese food exports between 1992 and 2008 and find a positive effect of 
standards  on  Chinese  export  performance.  Vural  and  Akgungor  (2015)  estimate  the  effect  of  ISO 22000 
diffusion  on  fresh  produce  exports  by  developing  countries,  using  data  for  22  importing  and  24  exporting 
countries over the 2007–2011  period. The authors find that ISO 22000 certification in developing countries 
has a profound positive impact on their export performance of vegetables and fruits. Diffusion of ISO 22000 
certification  in  developing  countries  tends  to  increase  their  exports  of  vegetables  and  fruits  by  37 %  and 
53 %,  respectively.  Latouche  &  Chevassus-Lozza  (2015)  use  firm-level  data  on  French  agri-food  firms 
certified  with  two  European  private  British  Retail  Consortium  standards.  They  find  that  French  firms  that 
adopt  these  standards  experience  increased  access  (and  lower  entry  costs)  to  EU  markets.  Ehrich  & 
Mangelsdorf (2018) estimate the effects of International Featured Standard (IFS) certification using data on 
the number of food processing firms of 87 countries from 2008 to 2013 that are IFS certified. The authors 
find  that  IFS  increases  bilateral  exports  on  an  average  of  seven  agricultural  product  categories  in  both 
specifications.  The  authors  note  that  the  effects  are  strongest  for  high-income  and  middle-income  country 
exporters  and  statistically  insignificant  for  low-income  exporters.  Moreover,  at  the  sector  level,  trade-
enhancing  effects  are  statistically  significant  only  for  the  bakery,  dairy  and  beverage  sectors.  Andersson 
(2019) analyses the relationship between GlobalGAP private food standard certification on  EU-15 imports of 
fresh fruits and vegetables at the product level. She finds that certification to GlobalGAP has a positive effect 
on  both  the  extensive  and intensive  margins  of  trade. Fiankor et  al.  (2020)  assess  the  effect  of  GlobalGAP 
certification on exports of apples, bananas and grapes, using a global dataset of certified producers and the 
share of certified land area in the total harvest area. Their results confirm GlobalGAP standards as catalysts 
to trade, but suggest that the trade effect is driven more by growth in the area of certified farms than by new 
certified producers. 

We note that there is evidence to the contrary.  Shepherd & Wilson (2013) match data from the World Bank 
EU Standards Database on voluntary standards in force in the EU over the 1995–2003 period with country-
level trade flow data at the HS four-digit level. The authors find that voluntary product standards in EU food 
and agriculture markets are trade-reducing for all countries and for goods that are raw or lightly processed. 
Also  surprisingly,  the  authors  conclude  that  EU  standards  may  have  hurt  developed  countries  more  than 
developing countries. Schuster & Maertens (2013) estimate the impact of certification to private standards on 
companies’  sourcing  strategies  in  the  Peruvian  asparagus  export  sector.  The  authors  combine  firm-level 
export data between 1993 and 2011 with information on the evolution of certification to private standards 
for  87  export  firms.  They  find  that  certification  leads  to  vertical  integration  and  significantly  reduces  the 
share  of  produce  that  is  sourced  from  external  producers,  with  a  larger  effect  for  small-scale  producers. 
When  distinguishing  between  production  and  processing  standards  and  between  low-level  and  high-level 
standards,  the  authors  find  that  especially  high-level  production  standards  have  a  negative  impact  on 
sourcing from (small-scale) producers. 

Mangelsdorf,  Portugal-Perez,  &  Wilson  (2012)  find  that  the  trade-enhancing  effect  of  mandatory  and 
voluntary  standards  on  Chinese  export  performance  increases  when  such  standards  are  harmonised  to 
international  measures.  Shepherd  &  Wilson  (2013)  find  that  voluntary  product  standards  in  EU  agri-food 
markets are often trade-reducing. However, when those standards are harmonised with international norms, 
they can be trade-enhancing. 

6.2  Trade effects of non-adoption of private standards 

Finally,  we  acknowledge  that  in  reality,  these  types  of  sustainability  standards  are  more  appropriately 
characterised  as  lying  on  a  continuum  between  truly  voluntary  on  one  hand  and  effectively  binding  on  the 
other,  as  described  in  Smith  (2009).  In  some  situations,  a  trader  seeking  to  export  a  given  product  to  an 
importing country may find that no market exists for the product unless it meets the ‘voluntary’ standard. In 
these circumstances, the trade effects of the standard may tend toward trade-reducing outcomes like those 
for  mandatory  standards,  rather  than  the  trade-enhancing  effects  generally  experienced  by  voluntary 
standards. Moreover, the early adopters of a given voluntary standard in an exporting country are likely to be 
those producers and traders for whom adoption is most beneficial. Thus, even if empirical evidence suggests 

22 

 
that adoption of voluntary standards generates higher prices, farmer incomes and increased trade volumes, 
the incremental effects on these outcomes from additional adoption may be substantially lower (4). 

6.3 

Interaction between voluntary standards and public standards 

The interaction between private and public standards can be complex. Henson & Humphrey (2010) argue that 
private standards and regulations should not be considered as distinct entities, but rather as operating side-
by-side.  In  particular,  private  standards  can  also  been  seen  as a  reaction  to  public  regulation.  After several 
food scares in the 1990s, the General Food Law was adopted by the European Commission in 2002. This law 
shifted the responsibility for enforcement of the law from national authority to the food business (Rouvière & 
Latouche,  2014;  der  Meulen,  2013).  This  shift  contributed  to  the  emergence  of  private  standards.  Some 
private  standards  can  therefore  be  seen  as  a  governance  tool  by  the  food  business  in  the  supply  chain,  to 
ensure that products sourced from various countries meet all EU requirements. For instance, in interviews with 
retailers, Fulponi (2006) states that avoiding potential liability issues with non-compliance of food regulations 
for their sourced products was cited as a reason for 70 % of retailers requiring private standards from their 
suppliers. 

Section 5.4  discusses  how  harmonisation  of  standards  can  be  trade-enhancing  and  likewise,  harmonisation 
between private and public standards can be trade enhancing: 

—  harmonisation of public standards with those defined with private standard-setting bodies (Shepherd & 

Wilson, 2013; Lambin & Thorlakson, 2018), and/or 

—  harmonisation of voluntary standards with guidelines set by international standard-setting bodies (Otsuki, 

Wilson, & Sewadeh, 2001; Mangelsdorf, Portugal-Perez, & Wilson, 2012). 

Mangelsdorf,  Portugal-Perez,  &  Wilson  (2012)  showed  that  private  standards  can  enhance  trade  if  it  is 
harmonised with private standards. Private standards can therefore also function as a harmonisation tool in 
cases  where  public  standards  are  not  harmonised  across  importing  countries.  For  instance,  Bain  (2010) 
argues that the ChileG.A.P standard, a benchmark standard to the GlobalG.A.P standard, was developed as a 
standard  to  ensure  that  Chilean  producers  complied  with  both  American  and  EU  food  safety  regulations  to 
reduce transaction cost when exporting to both markets. 

(4) 

For instance, Henson (2008) argues that some private standards can in fact be considered as  de facto mandatory in the supply 
chain.  Note  that  the  estimation  of  the  trade  effects  of  private  standards  in  the  previous  section  tends  to  compare  countries  or 
firms with high adoption of the standard with firms or countries with low adoption of the standards. This differs from the public 
standards literature that tend to compare before and after the public standard was introduced – i.e. estimating the net effect of 
the  standard.  If  a  private  standard  is  de  facto  mandatory,  it  is  important  to  note  that  non-adoption  of  a  private  standard  may 
imply a negative trade effect due to a loss of market access. This loss of trade may be shifted to adopting firms or countries with 
firms more suitable for adopting the standard or it may lead to a trade loss. This distributional effect between the adopting or non-
adopting firms affects the empirical measurement of the net trade effect of the standard, but is not necessarily analysed directly. 

23 

 
 
 
 
7  Conclusions 

This report reviews the literature evaluating the impacts of sustainability standards on international agri-food 
trade  in  an  effort  to  inform  current  EU  agri-food  trade  policy  debates  regarding  the  F2F  strategy. 
Sustainability standards fall into the broad category of trade policy instruments referred to as NTMs affecting 
trade. A broad array of policy instruments fall under these agreements, including product standards, process 
standards, border control measures and packaging and labelling requirements. 

Sustainability  standards  may  generate  two  opposing  effects  on  trade  flows  between  the  importer adopting 
the standard and an affected exporter. The net effect on trade depends on the relative magnitude of these 
two opposing forces and the international scope of the standard (i.e. whether it is implemented multilaterally, 
regionally,  bilaterally  or  unilaterally).  The  general  consensus  in  the  literature  appears  to  be  that  the  trade-
reducing  effects  of  standards  typically  dominate  the  trade-enhancing  effects  of  standards.  However,  in 
certain situations, the trade-enhancing effects can mitigate or even reverse these negative effects. The trade 
effects  of  sustainability  standards  extend  beyond  the  point  of  adoption  to  the  application  of  standards, 
including testing and inspection at the border. Previous literature has focused on the determinants of import 
refusals and the implications of border rejections for trade and supplier concentration. 

In  addition  to  government-mandated  public  standards  designed  to  enhance  the  sustainability  of  the  global 
agri-food  system,  private  importing  companies  and  exporting  farmers  have  the  option  to  voluntarily  adopt 
sustainability  standards  to  improve  and  assure  the  sustainability  of  their  own  supply  chains.  Voluntary 
standards tend to be more stringent than mandatory public standards, but the coverage of these standards 
remains limited. In  contrast to mandatory standards, the  trade effects of  voluntary sustainability standards 
tend toward trade-enhancing outcomes as opposed to trade-reducing outcomes. 

A final critical factor for whether sustainability standards (either mandatory or voluntary) are trade-enhancing 
is the extent to which these standards are harmonised. Harmonisation reduces stakeholder costs of complying 
with multiple standards set in several countries (or by several bodies) and allows for desegregation of supply 
chains  across  harmonised  markets,  thereby  allowing  stakeholders  to  benefit  from  any  economies  of  scale 
across the supply chain. 

24 

 
 
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28 

 
 
List of abbreviations and definitions  

F2F 

MRL 

NTM 

SPS 

STC 

TBT 

TSD 

farm-to-fork 

maximum residue limits 

non-tariff measures 

sanitary and phytosanitary standards 

specific trade concerns 

technical barriers to trade 

trade and sustainable development 

WTO 

World Trade Organization 

29 

 
 
List of figures  

Figure 1. Sustainability standards and trade with externalities ...................................................................................................... 10 

30 

 
 
List of tables  

Table 1. Heterogeneous effects of standards ............................................................................................................................................ 16 

31 

 
 
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