The Implication of European Union’s Food Regulations on Developing Countries: Food Safety Standards, Entry Price System and Africa’s Export

We examine the impact of two important non-tariff measures presumed to simultaneously affect firms’ decisions to export to the European Union (EU). As a novelty to the literature, we analyse the impacts of EU pesticide standards on African exports alongside a complementary non-tariff measure in the form of a minimum entry price control measure which aims to protect EU growers of certain fruits and vegetables against international competition. We represent these trade costs in the context of a Melitz firm heterogeneity framework using Helpman, Melitz and Rubenstein (2008) method. Analysis was based on Africa’s exports of tomatoes to the EU from 2008 to 2013, using the gravity model of trade. Our results show that at both the extensive and intensive margins of trade, the high stringency of EU pesticide standard prevents new entry into the EU market, drives less productive firms away, and discourages existing exporters from expanding their market base. Furthermore, we find the EU entry price system acts like an export tax, inhibiting tomatoes export to the EU, but only at the intensive margin