Trade effects of food regulations and standards: Assessing the impact of SPS measures on market structure

World trade has increased tremendously over the past two decades as the result of a substantial decline in tariffs and landmark improvements in storage and transportation technologies. However, trade continues to be hindered by various non-tariff-measures. In this paper, we assess the impact of Sanitary and Phytosanitary measures, the most common forms of non-tariff measures and public standards, on trade and export market structure in developed countries. We focus on vegetables and fruits, the food product most affected by SPS, and combine data on trade from the UNCOMTRADE and SPS-related measures from the WTO over the period 1995-2014. We use panel fixed-effect regression to address unobserved heterogeneity among exporting countries and control for various import shifters. We find that increased use SPS measures crowds out imports of vegetables and fruits from developing countries but is favorable to high-income countries. Therefore, SPS measures increase the concentration of suppliers and make the export market less competitive. Taken together, our findings suggest that, public regulations by developed countries distort trade and is especially unfavorable to developing countries. Given that export of high-value products to developed countries is essential income generating activities for developing countries, it is important that these countries receive the support to comply with SPS measures and improve their competitiveness.