Are Minimum Quality Standards Imposed by Federal Marketing Orders Acting as Nontariff Trade Barriers?

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ABSTRACT

As the pressure to liberalize agricultural trade both regionally and globally increases, the regulation and control of nontariff trade barriers becomes of paramount concern. The legislation regulating federal marketing orders in the United States allows these producer organizations to propose minimum quality standards (MQS) on domestic production, as well as imports, raising the possibility of using MQS as a nontariff trade barrier (NTB). Industry proposals, however, are subject to approval by the federal government. This paper presents an analytical model that examines domestic producers’ incentives and opportunities to use MQS as a NTB and government's incentives to approve or reject such regulations. In the first empirical investigation of the hypothesis that MQS act as NTB, a modified gravity equation model is used to examine the impacts of MQS on imports into the U.S. Results provide little support for the claims that MQS are acting as NTB. [JEL Codes: Q18, F13]

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