GlobalGAP Certification and International Trade Flows

GlobalGAP is an important private standard in the food sector. Our work consists of two essays. First essay investigates into geographic diffusion of GlobalGAP. We use a panel from 2008 to 2012 for 170 FAO member countries to analyze GlobalGAP diffusion in the agricultural sector as a whole as well as in the crops subsector. So far, studies on standards have mostly dealt with farm level data and a select few consider the case of macroeconomic determinants of diffusion, although only in the case of public standards. Conversely, we consider the case of a private standard, namely GlobalGAP and estimate the macroeconomic determinants of GlobalGAP diffusion. For estimation, a Heckman two-stage model is applied using the number of GlobalGAP certified producers as well as the hectares of area harvested under GlobalGAP as dependent variables. We analyze the impact of network ties and historical relations among countries, and various macroeconomic conditions prevailing in courtiers on diffusion of certification. The study finds that diffusion is positively related to common language, presence of domestic auditing facility and better infrastructure. We also find that countries with higher relative proportions of fruits and vegetables in the agriculture sector, and with more exports of fruits and vegetables to the EU states have higher coverage of GlobalGAP.  In the second essay, adopting a gravity framework and using data from 2010 to 2012 for 74 countries, we investigate whether the intensity of GlobalGAP standard adoption has a positive impact on EU banana import values. Intensity is measured by using the number of GlobalGAP certified producers and hectares harvested under GlobalGAP certification. Using random and fixed effect estimation, we find that the intensity of certification, in terms of producers and hectares is associated with higher banana imports. However the estimated elasticities of imports in all models are less than 1, indicating an inelastic response of imports to GlobalGAP certification intensity. This also indicates that the small farmers in developing countries who find it difficult to comply with the GlobalGAP standard requirements are driven out of the international banana market. For the gravity variables, distance is found to have a negative impact, but banana production in the exporting countries and the presence of a common language and RTA between the trading countries improves trade.