To test these results empirically I merge two newly available datasets: the Linked/Longitudinal Firm Trade Transaction Database (LFTTD), which links individual trade transactions to firms in the US, and the World Bank EU Electrotechnical Standards Database (EUESDB), which provides an inventory of the stock of active standards published by CENELEC and their link with standards issued by the IEC. The LFTTD spans 13 years from 1992 to 2004 and allows the researcher to use information from the Censuses of Manufactures (CM) of the Longitudinal Research Database (LRD) of the U.S. Census Bureau to pin down additional firm characteristics on a quinquennial basis. The EUESDB covers the period 1990-2007 and classifies product standards according to the International Classification of Standards (ICS). See Bernard et al. (2009) and Portugal-Perez et al. (2010) for a complete description of each database, respectively. A key contribution of my analysis is the linking of firm level U.S. manufacturing data to industry level measures of EU product standards. Since there is currently no official concordance mapping from ICS codes to any product or industry classification system, I develop a concordance method between 5-digit ICS codes and 4-digit SIC industries for the Electronic sector.

Results are largerly consistent with theoretical implications. First, I confirm that U.S. industries with relatively high harmonization exhibit relatively high export value to the EU. Furthermore, I show that product standards harmonization increases the probability that higher-productivity firms enter the EU market —the extensive margin of trade. Second, I find that this impact is more relevant for U.S. firms that were already exporters serving developing countries than for firms entering the export activity —the extensive margin of trade composition. Third, I show that this impact is negative for the intensive margin of trade: the change in the value of U.S. goods that are already exported to the EU within surviving trade relationships, e.g., the same firm exporting the same product to Europe throughout the time span. Overall, the impact at the extensive margin outweighs the impact at the intensive margin. The empirical findings suggest that EU product standards harmonization to international norms contributes significantly to explain the export entry patterns observed in my sample of U.S. manufacturing firms.

These results have an important policy implication. The U.S. National Export Initiative laid down in 2010 seeks to double exports over the next five years by enhancing small and medium sized firms’ ability to enter export markets and by actively reducing barriers to trade. The results obtained in this paper suggest that working towards a reduction in the differences of product requirements across markets could be a supportive policy to encourage firm entry into export markets.

The remainder of the paper is structured as follows. The next section develops the theoretical model. Section 3 describes the data set and presents summary statistics. Section 4 presents the empirical strategy and report results from testing the main theoretical results. Concluding remarks are offered in section 5. Finally, appendix 1 contains theoretical derivations and appendix 2 presents details of the data set.

5