costs ( _τt_<sup>_i_and</sup><sup>_NH_</sup> _t_<sup>_i_).21IalsoincludethefractionofU.S.firmsinindustry</sup><sup>_i_thatexporttocountry</sup> _j_ in year _t_ ( _Wjt_<sup>_i_)asacontrolfortheself-selectionoffirmsintoexportmarkets.22Anindustryis</sup> a SIC4 code and countries are the original EU-15 members.<sup>23</sup> _Dj_ is the distance between the U.S. and country _j_ whereas _Yjt_ is the GDP of country _j_ in year _t_ . Finally, _γt_ and _γi_ are sets of year and industry fixed effects and robust standards errors are adjusted for clustering at the country level.<sup>24</sup> Table 5 reports the results of estimating specification 11 from 1992 to 2004. The first and third column use the propensity to export<sup>25</sup> as the dependent variable, so the sample comprises all industry-country-year cells including those with zero trade. The second and fourth column focus on the U.S. export value, and the sample is all observations with positive exports. Columns three and four control for the non-random selection of observations with positive export value using the Heckman two-stages procedure. The two stages are separately identified by the functional form and the instrumental variable from the second-stage regression. An appropriate instrument is a variable that is correlated with the probability of export but largely uncorrelated with the export volume. At this high level of disaggregation, the only potential instrument is the lagged decision to export.<sup>26</sup> I find an important role for European product standards harmonization on both the export value and the propensity to export: the negative coeffients on _NHt_<sup>_i_and</sup><sup>_τ i_</sup> _t_<sup>indicatethatfalling</sup> trade costs are followed by an increase in the propensity to export as well as in the export value within industry-country-year bins. Interestingly, product standard harmonization seems to be more important than tariffs for the propensity to export. Henceforth, I make use of detail firm level data to show that the impact of harmonization on trade flows is due to the entry of new exporters —the extensive margin— rather than an increase in the export value of established exporters —the intensive margin.

An issue to be addressed is the possible endogeneity of my measure of product standards harmonization ( _NHt_<sup>_i_)duetoreversecausality:IfhigherU.S.exportvaluetotheEUtriggersharmo-</sup>

> 21Note that an increase in harmonization of standards —a reduction in an NTB to international trade— implies a reduction in _NHt_<sup>_i_.</sup>

> 22Helpman et al. (2008) estimate _Wjt i_<sup>asapredictedcomponentfromaprobitregressiononthepropensityto</sup> export. I compute it from the underlying firm level data. Details of the construction of the variables are in appendix 2.

> 23Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, and United Kingdom.

> 24Year fixed effects control for observable and unobservable characteristics that change across years and are common to countries and industries; like exchange rates and other type of European trade policy tool. Industry fixed effects control for characteristics that vary across industries but not across years or across countries.

> 25The propensity to export is a dummy variable which is equal to one if there are positive export flows at the industry-country-year level.

> 26The lagged decision to export is represented by a dummy variable that is equal to one if there were U.S. exports in industry _i_ to country _j_ in the preceding period.

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