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The impact of private food standards on trade and development: Evidencefrom Peru

Book - Dissertation

Standards are increasingly governing international food production and trade. While public standards are set by public authorities, private standards are set by private companies and non-state actors. Private food standardsnbsp;to emerge at the end of the 1990s, mainly in response to consumer concerns in high-income countries about food safety and quality, and later expanded to address environmental and ethical concerns. Due to the expansion of agricultural trade between industrialized and developing countries, private standards have quickly become a global phenomenon, influencing developing countriesnbsp;markets, producers and employees. Understanding the impact of private food standards onnbsp;countries isnbsp;as agricultural and food exports are a fundamental component of low- and middle-income countries’ development and entail the potentialnbsp;reduce rural poverty. To date, the literature on the implication of private standards is still scarce and affected by methodological shortcomings. There is no agreement on whether private food standards act as non-tariff barriers or asnbsp;to trade for developing countries or whether they exclude the poorest farmers,nbsp;are unable to comply with new stringent requirements. In addition, very few studies look at the effect of private standards on workers.In this dissertation, I build on and add to the scarce literature on private standards by providing empirical evidence from the Peruvian horticultural export sector. Due to the size and history of the sector, it represents an ideal case-study to analyze the trade and welfare effects of food standards. I use a combination of two original datasets. The first dataset includes information from Peruvian horticultural high-value export farms and companies, and is constructed from secondary data sources and an own company survey. The second dataset contains panel-data information on workers in the horticultural export industry and who are employed by the surveyed companies. The data were collected by myself and contain information on the workers’ socio-demographic background, economic and employment situation. The two datasets or a combination of both are used throughout the analysis of the entire dissertation.In chapter 2 I analyze the impact of private food standards on the export performance of Peruvian asparagus export firms. I use 18-year panel data from 87 firms and apply fixed effects and GMM models. I do notnbsp;any evidence that certification to private standards in general and to specific individual private standards, has an effect on firms’ export performance, neither at the extensive margin nor at the intensive margin, and neither on export volumes nor on export values. The case-study results imply that private standards do not act as a catalyst to trade.In chapter 3 I contribute to the debate on the effectnbsp;private standards on the inclusion of small-scale farmers in export supply chains, by addressing methodological shortcomings and gaps in the existing literature. I describe export dynamics using a unique firm level dataset on 567 Peruvian asparagus export firms from 1993 to 2011 and the evolution of certification to private standards using own survey data from a stratifiednbsp;sample of 87nbsp;firms. I use an unbalanced panel of the surveyed companies on 19 years and several methods, including fixed effects and GMM estimators, to estimate the causal impact of certification to private standards on companies’ sourcing strategy.nbsp;find that certification leads to vertical integration and significantly reduces the share of produce that is sourced from external producers, with a larger effect for small-scale producers. When distinguishing between production and processing standards, andnbsp;low-level and high-level standards, I find that especially high-level production standards have a negative impact on sourcing from (small-scale) producers.Chapter 4 examines how effective private standards, and in particular ethical and social standards, are in improving employment conditions in global food supply chains. Using panel data fromnbsp;and worker surveys and different econometric techniques, I analyze how the adoption of a variety of private standards, that differnbsp;respect to their focus on labor standards, influences employment conditions in production, processing and exporting companies in the horticultural export chain in Peru. I find that workers employed in companies adopting private labor standards are more likely to be paid a minimum wage, to have a contract and to receive training but there is no effect of private standards on the level of the wage and on the employment period. I concludenbsp;private labor standards contribute to the enforcement of national labor laws but have no beneficial effect beyond legal employment entitlements; and that despite the enactment of labor regulations at the national level and the wide spread of private labor standards, ethical labor concerns remain an issue in the Peruvian horticultural export sector.In Chapternbsp;I look at the effects of labor standards on employeesnbsp;knowledge on theirnbsp;rights and agency to improve these rights. I use panel data from company and worker surveys and adopt a difference-in-difference propensity score matching approach on several treatment and comparison groups. The evidence shows that employment in companies adopting stringent labor standards positively affects worker empowerment. Innbsp;workers are more aware about their own labor rights and the actions they cannbsp;to improve these rights.The findings from this dissertation have specific implications for policy makers, involved in reforms relating tonbsp;trade and aiming at stimulating economic development and poverty reduction. I provide an in-depth analysis of the trade and welfare effects of private standards in developing countries, but cast doubts on the beneficial effects of standards on different actors of the value chain. From a policy perspective, I question the sustainability of donor supported programs assisting the adoption of standards. From a scientific perspective I call for more in-depth research with betternbsp;and methodologies to further disentangle thenbsp;link between standards, trade and welfare.
Publication year:2015