Empirical evidence of the trade impact of voluntary sustainability standards multiplicity in agricultural products

• Grant number: 22/06230-7
• Support Opportunities: Scholarships abroad - Research
• Effective date (Start): January 03, 2023
• Effective date (End): July 02, 2023
• Field of knowledge: Applied Social Sciences - Economics - International Economy
• Principal Investigator: Rosane Nunes de Faria
• Grantee: Rosane Nunes de Faria
• Host Investigator: Michael Gasiorek
• Host Institution: Centro de Ciências em Gestão e Tecnologia (CCGT). Universidade Federal de São Carlos (UFSCAR). Campus de Sorocaba. Sorocaba , SP, Brazil
• Research place: University of Sussex (US), England

Abstract

The international food trade system has been witnessing a large number of voluntary sustainability standards (VSS) interacting in a given sector, a phenomenon known as standard multiplicity or standard fragmentation (Fiorini et al., 2017; Fransen et al., 2019; UNFSS, 2018). In highly fragmented markets, producers must comply with multiple standards, which are likely to create additional trade costs such as implementation and certification costs. In this respect, the standard multiplicity could potentially impact international trade flows. However, to our knowledge, this effect has not yet been addressed in the literature. We aim at filling this gap by addressing the following research questions: what are the trade impacts of VSS multiplicity across countries and products? Why and in which circumstances do VSS multiplicity act as catalysts or barriers to trade? Rather than focusing on the trade effects of a single VSS, we aim at generating empirical evidence on the impact of VSS fragmentation on trade flows and investigate the channels that lead VSS multiplicity to act as barriers to trade in certain circumstances and catalysts in others. We borrow heavily from Hidalgo (2021) to establish our conceptual framework in which the interactions that happen under VSS multiplicity scenarios (cooperation, overlap and competition) impact international trade flows through their effects on trade costs. We characterize the landscape of standard multiplicity on country-product markets through three indices HIS, HIID and SOI and the cooperation strategies which are proxies for competition, overlap, and cooperation, respectively. We focus on seven agricultural products: bananas, cocoa, coffee, palm oil, soy, sugarcane, and tea. Finally, to evaluate the VSS multiplicity trade effects, we augment our structural theory-based gravity model with the landscape of the multiplicity in the exporting countries. We expect our results to overcome some methodological shortcomings of the literature on the trade impact of standards. We intend to use extensive cross-country-product data, so we will be to render cross-sector comparisons that are rare in the literature. Furthermore, modeling the interaction of many VSS schemes and their impact on trade flows is imperative.