are important though recurring costs of compliance tend to be lower.<sup>9</sup> The inability to comply with standards is costly not only for individual firms but also for a country’s reputation as it can ultimately result in trade restrictions such as import bans for specific products from specific countries.<sup>10</sup> More broadly, regulatory standards can impede trade if used in a protectionist way, being more stringent than what scientists determine as acceptable. On the other hand, standards can act as trade facilitators by signaling that products are safe to the consumer (which is valuable under asymmetric information) and by providing the incentives for developing countries to modernize the supply chain structure in their export sectors (e.g., increasing investments in quality assurance), enabling them to improve their competitiveness while also strengthening the standards domestically. Maertens and Swinnen (2009) show that foreign standards acted as a catalyst for production upgrading in Senegal.

Most studies on product standards and trade examine how aggregate trade flow are affected by technical regulations in a gravity regression framework.<sup>11</sup> Disdier et al. (2008) show a trade-impeding effect from a higher number of SPS and TBT regulations imposed by OECD countries that significantly reduce exports by developing countries.<sup>12</sup> Anders and Caswell (2009) find a significantly negative impact of stricter food safety standards on U.S. seafood imports especially from developing countries, while Tran et al. (2011) find a significantly negative impact of a zero tolerance for a drug residue standard on crustacean imports by Canada, the EU15, Japan, and the U. S. from major Asian exporters. In contrast, Xiong and Beghin (2010) examine the effect of the tightening of an EU SPS standard on aflaxotin in 2002 and find that it had no effect on African exports of groundnuts, which were instead hampered by domestic supply constraints. Ferro et al. (2015)—who compiled the standards restrictiveness index based on data on MRLs of pesticides imposed by importing countries that we use—show that more restrictive standards are associated with a lower probability of observing a positive trade flow but do not affect trade volumes per se. They interpret this finding as indicating that meeting stringent

> 9 Using firm-level data from the World Bank Technical Barriers to Trade Survey for 16 developing countries, Maskus et al. (2005) show that fixed costs represent on average 425,000 U.S. dollars per firm (or 4.7 percent of value added) but the elasticity of firm variable production costs to standards and technical regulations is only in the 0.06%-0.13% range. Case study evidence for shrimp exports from Nicaragua shows that fixed costs to comply with quality and safety standards represent less than 3% of total annual exports while costs to maintain compliance represent less than 1% of that total (Cato et al., 2005).

> 10 For example, the EU ban on fish imports from Kenya decreased the country’s export earnings by 37% (Henson et al. 2000). 11 See Cadot and Malouche (2012) for a review of the role of standards and technical regulations for trade. 12 Other examples of trade-impeding effects are Otsuki et al. (2001a, 2001b) who show lower edible groundnuts exports by African countries resulting from tightening an SPS standard and Wilson et al. (2003) who show lower bovine meat imports in countries imposing more stringent food safety standards.

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