• NTS and SPS

NTS and Sanitary and Phytosanitary Measures

The United States (US) is a large net exporter of corn seeds. This paper econometrically investigates the determinants of world demand for US corn seeds. The paper notes that there has been a rising use of standards and technical regulations as instruments of commercial policy in world agri-food trade, as tariff and quota barriers continue to decline. Among non-tariff measures, sanitary and phytosanitary (SPS) regulations and technical barriers to trade (TBT) are of increasing importance as impediments to agri-food trade. The US seed industry faces significant problems satisfying SPS regulations. The increasing concerns about food safety result in stricter SPS requirements in trade, and thus competitiveness in export markets.

Pointing to the absence of formal analyses of seed trade determinants, the paper addresses the following question:

• what does actually determine seed trade among a list of presumed relevant factors
• what is their relative importance

The paper's investigation relies on a gravity-equation-type model. The model is grounded in intermediate demand, considering that many agricultural products are indeed intermediate demand of other industries. The export data are obtained from the United State Department of Agriculture (USDA). The paper states that its dataset collected for the investigation is novel in its SPS component and the development of the SPS count variable.

Focusing on the impact of associated SPS regulations, the paper clarifies that all countries require a phytosanitary certificate, except Canada, while Australia and China have a seed import ban. However, the paper indicates that over time, most countries have streamlined their SPS regulations. Argentina and Chile have a low SPS count. The paper deems that the most radical simplifications have occurred in some East European countries which have now become the members of European Union (EU). Nonetheless, Egypt, Zimbabwe, and surprisingly Brazil, have very high SPS counts.

The paper main findings are:

• tariffs on agricultural goods remain important although they have decreased with the World Trade Organisation (WTO) and with regional trade agreements
• tariffs on seed trade have been moderate
• the high response of corn seed exports to tariffs suggests that tariffs remain a substantial barrier which could be reduced
• the importance of trade costs induced by SPS regulations raises the issue of sorting which of these regulations are legitimate (science based0, and those which are not could be eliminated
• distance, which is irreducible, matters the least among other sources of trade cost

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