Border inspections by developed nations are an essential export barrier to developing countries. Import refusals, in particular, not only exhibit dynamic impacts on exporters’ performance in the refused destination but may also spill over into exports toward third markets. Using a panel structural vector autoregression model, the complete dynamics of China’s agricultural export in response to United States Food and Drug Administration (FDA) import refusals is estimated at the monthly level. Despite notable heterogeneities across sectors, negative and positive reactions that last mostly less than a year are revealed respectively for the quantity and price of China’s exports to USA on average. The impact of idiosyncratic component dominates that of common component in the refusal shock, highlighting the sensitivity of exports to sector-specific border inspections. Relative to other refusal charges, larger export contractions tend to follow adulteration charges. The trade effect of FDA refusals spills over into other main export destinations of China. While non-adulteration charges result in trade deflections on average, a contagious export reduction is observed in most non-US markets. These results provide insights for exporters to make strategies with a focus on specific sectors, charges, third markets and especially on the short run to cope with import refusals.
agricultural exports; import refusals; panel structural vector autoregression; spillover effects
Anders S., Caswell J. (2009): Standards as barriers versus standards as catalysts: assessing the impact of HACCP implementation on U.S. seafood imports. American Journal of Agricultural Economics, 91: 310–321. https://doi.org/10.1111/j.1467-8276.2008.01239.x
Baylis K., Nogueira L., Pace K. (2010): Food import refusals: evidence from the European Union. American Journal of Agricultural Economics, 93: 566–572. https://doi.org/10.1093/ajae/aaq149
Beestermöller M., Disdier A.C., Fontagné L. (2018): Impact of European food safety border inspections on agri-food exports: evidence from Chinese firms. China Economic Review, 48: 66–82. https://doi.org/10.1016/j.chieco.2017.11.004
Bojnec Š., Fertő I., Fogarasi J. (2014): Quality of institutions and the BRIC countries agro-food exports. China Agricultural Economic Review, 6: 379–394. https://doi.org/10.1108/CAER-02-2013-0034
Bojnec Š., Fertő I. (2017): Quality upgrades of EU agri-food exports. Journal of Agricultural Economics, 68: 269–279. https://doi.org/10.1111/1477-9552.12204
Bown C.P., Crowley M.A. (2007): Trade deflection and trade depression. Journal of International Economics, 72: 176–201.
China’s International Trade Data (2019): Development Research Centre of the State Council. Available at http://trade.drcnet.com.cn/web/login.aspx
FDA (2017): Regulatory Procedures Manual, Chapter 9: Import Operations And Actions. FDA. Available at https://www.fda.gov/ICECI/ComplianceManuals/RegulatoryProceduresManual/default.htm (accessed March 26, 2019).
Grant J., Anders S. (2011): Trade deflection arising from U.S. import refusals and detentions in fishery and seafood trade. American Journal of Agricultural Economics, 93: 573–580.
Grant L.E., Potoski M. (2015): Collective reputations affect donations to nonprofits. Journal of Policy Analysis and Management, 34: 835–852.
Grundke R., Moser C. (2019): Hidden protectionism? Evidence from non-tariff barriers to trade in the United States. Journal of International Economics, 117: 143–157. https://doi.org/10.1016/j.jinteco.2018.12.007
Hao N., Pedroni P., Colson G., Wetzstein M. (2017): The linkage between the U.S. ethanol market and developing countries’ maize prices: a panel SVAR analysis. Agricultural Economics, 48: 629–638. https://doi.org/10.1111/agec.12362
Hong C. (2015): Unit values in international trade and product quality. Journal of Economic & Financial Studies, 3: 67–79.
Import Refusal Report (IRR) (2019): U.S. Food and Drug Administration Import Refusal Reports for OASIS. Available at https://www.accessdata.fda.gov/scripts/importrefusals/
Jaffee S., Henson S. (2005): Agro-Food Exports from Developing Countries: The Challenges Posed by Standards. The World Bank, Washington DC: 91–114.
Jaud M., Cadot O., Suwa-Eisenmann A. (2013): Do food scares explain supplier concentration? An analysis of EU agri-food imports. European Review of Agricultural Economics, 40: 873–890. https://doi.org/10.1093/erae/jbs038
Jouanjean M.A., Maur J.C., Shepherd B. (2015): Reputation matters: spillover effects for developing countries in the enforcement of US food safety measures. Food Policy, 55: 81–91. https://doi.org/10.1016/j.foodpol.2015.06.001
Leland H.E. (1979): Quacks lemons and licensing: a theory of minimum quality standards. Journal of Political Economy, 87: 1328–1346. https://doi.org/10.1086/260838
Pedroni P. (2013): Structural panel VARs. Econometrics, 1: 180–206. https://doi.org/10.3390/econometrics1020180
Schott P.K. (2008): The relative sophistication of Chinese exports. Economic Policy, 23: 5–49. https://doi.org/10.1111/j.1468-0327.2007.00195.x
Tran N., Wilson N.L.W., Anders S. (2012): Standard harmonization as chasing zero (tolerance limits): the impact of veterinary drug residue standards on crustacean imports in the EU Japan and North America. American Journal of Agricultural Economics, 94: 496–502. https://doi.org/10.1093/ajae/aar079