Standard Harmonization as Chasing Zero (Tolerance Limits): The Impact of Veterinary Drug Residue Standards on Crustacean Imports in the EU, Japan and North.

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Standard Harmonization as Chasing Zero (Tolerance Limits): The Impact of Veterinary Drug Residue Standards on Crustacean Imports in the EU, Japan and North America

Purpose This paper investigates the impact of stricter drug residue (chloramphenicol) standards on crustacean imports to Canada, the EU15, Japan, and the United States from all exporters with a particular focus on China and other Asian exporters.

Chloramphenicol Chloramphenicol (CAP) is a broad-spectrum antibiotic which was used as a veterinary drug, and it is currently used in human treatment. However, chloramphenicol is a banned substance in animal products, so no chloramphenicol should be present in food.

Science and Technology Testing for zero is impossible because of limitations in science and technology. As the science and technology improve to detect fewer parts per billion of a substance, governments can adjust the standards to reflect the new techniques. The end result is more stringent standards as a function of technology.

Research Questions What has been the effect of tightening chloramphenicol standards on import rejections? What is the impact of these standards by export status? Do developing countries, especially Asian exporters, face higher barriers to trade from more stringent chloramphenicol standards?

U.S. FDA Import Refusals of Crustaceans Shipments

U.S. FDA Crustacean Import Refusals Charged for Drugs

U.S. FDA Import Detentions for Reasons of Chloramphenicol

Model Specification

We address the potential issue of heteroskedasticity with a panel fixed effects. We take into account zero-trade flow with the Heckman sample selection model (maximum likelihood estimation).

Data

Data Sources Gravity data are from the UNCOMTRADE and CEPII (2009) databases.2009 Chloramphenicol standards come from Disdier and Marette (2010), Debaere (2005), the EC (2002), and Japanese Ministry of Health, Labor, and Welfare Oxytetracycline standards are from Chen, Yang, and Findlay (2008).2008

Base Model Variables OutcomeSelection Ln(Distance)-0.569***-0.526*** (0.109)(0.038) Chloramphenicol (CAP)0.035***0.011*** (0.007)(0.002) Oxytetracycline2.062***0.643*** (0.212)(0.063) Contiguous1.411***0.630*** (0.253)(0.119) Colony0.574***0.343*** (0.209)(0.076) EU **0.846*** (0.334)(0.098) NAFTA1.648***0.872* (0.508)(0.487) Language0.152* (0.060) Top30*CAP0.014*0.006** (0.008)(0.003)

Country Model Variables OutcomeSelection Ln(Distance)-0.563***-0.525*** (0.111)(0.038) Chloramphenicol (CAP)0.041***0.013*** (0.006)(0.002) Oxytetracycline2.055***0.641*** (0.212)(0.063) Contiguous1.417***0.634*** (0.253)(0.119) Colony0.551***0.336*** (0.208)(0.077) EU **0.833*** (0.335)(0.098) NAFTA1.616***0.857* (0.507)(0.486) Language0.153** (0.060)

Country Model Variables OutcomeSelection China*CAP0.028**0.002 (0.012)(0.004) India*CAP0.016***0.004 (0.006)(0.003) Indonesia*CAP *** (0.008)(0.003) Malaysia*CAP-0.025***-0.006** (0.009)(0.003) Thailand*CAP-0.020*0.006 (0.012)(0.004) Vietnam*CAP (0.008)(0.004)

Marginal Effects Variable Dummy Values Trade Cond. Trade Uncond. Prob. of trade Top30 Exporters00.028***0.008***0.001*** (0.006)(0.001)(0.000) ***0.028***0.003*** (0.006)(0.003)(0.001) China00.033***0.013*** (0.005)(0.002) ***0.037*** (0.011)(0.005) India00.034***0.013*** (0.005)(0.002) ***0.033*** (0.005)(0.003)

Marginal Effects Variable Dummy Values Trade Cond. Trade Uncond. Prob. of trade Indonesia00.002*** (0.000) *** (0.001) Malaysia00.034***0.013***0.002*** (0.005)(0.002)(0.000) **0.001** (0.009)(0.003)(0.000) Thailand00.034***0.013*** (0.005)(0.002) *** (0.011)(0.005) Vietnam0 1

Conclusions Stronger negative effects for China and India on the intensive margin and the marginally negative effects for Indonesia on the extensive margin are in line with the standards-as-barriers argument commonly found in the gravity model literature.

Conclusions We also find evidence of that the top exporters are more strongly affected by the standards than other exporters. Seafood shipments from Asian countries (e.g., China, India, and Indonesia) are frequently “flagged” for inspection under the US FDA’s food safety monitoring and rapid alert system.

Conclusions However, our empirical results call for further examination regarding the differential effects of stricter food safety standards on developing countries.