Trade effects of MRL harmonization in the EU
Working paper by Liliana Foletti & Anirudh Shingal
Combining original data on Maximum Residue Levels (MRLs) in pesticides with bilateral trade and standard gravity variables over 2005-11, this paper identifies the effect of the complete harmonization of MRLs across EU member states on inter- and intra-EU agri-food trade at both margins. We make an empirical contribution to the impact assessment of standards literature by identifying the trade effects of two different harmonization dynamics in health-related standards: complete harmonization of domestic and foreign regulation (intra-EU members) and harmonization of standards between a large number of foreign markets (non EU-members). Significantly, we find that the harmonization of MRL standards may have led to greater trade at both margins for all different sub-samples, even those including developing country exporters. Our results also suggest that having different MRL regulations is mostly costly at the extensive margin; this is found to be especially true for intra-EU15 agri-trade.