By Hoda El-Enbaby (Senior Research Assistant, IFPRI) and Chahir Zaki (Assistant Professor, Department of Economics, Faculty of Economics and Political Science, Cairo University)
Countries generally have high incentives to protect their people from all different types of risks that can affect them. Yet, in some instances, this protection comes at other costs. In terms of external trade, countries are allowed to adapt non-tariff measures for different reasons, one of which is to protect humans, animals and plants. According to the World Trade Organization (WTO) standards, countries can apply technical barriers to trade (TBT) and sanitary and phyto-sanitary (SPS) measures to make sure that trade partners are meeting a certain level of quality. In more detail, SPS measures deal with food safety and animal plant health, while TBT ensure technical regulations and standards. Even though the main aim of these measures is consumer health and life protection, they can be trade restricting, as they often obstruct market access to exporters unless they comply with the SPS and TBT measures. By taking Egypt as a case study, El-Enbaby, Hendy and Zaki (2015) study the effect of SPS measures on margins to trade in Egypt.
Globally, countries have been increasingly resorting to non-tariff measures (NTMs), by raising specific trade concerns (STCs) in the TBT and SPS committees at the WTO. SPS and TBT measures in particular are imposed more by developed nations compared to developing nations. By focusing on our case study, as Figure 1 shows, the number of SPS measures imposed on Egypt increased exponentially during the period of study, from 18 in 2006 to 888 in 2012 as shown in the figure below. The five highest imposing countries of SPS measures on Egypt are either developed countries, such as Japan and Canada, or emerging economies, such as Brazil, Ukraine and China. Yet, some of these countries impose SPS measures on Egypt but on products that Egyptian firms do not export. By matching SPS measures with Egyptian exports, the study finds that SPS measures on products exported by Egyptian firms are all imposed by European countries.
Figure 1: Number of SPS measures imposed on Egypt between 2006 and 2012
Source: El-Enbaby et al. (2015) using the WTO SPS-IMS.
Most of these SPS measures are imposed on food products, given the risks they pose on human health. The highest number of SPS measures is imposed on edible vegetables, as shown in Figure 2. SPS measures on vegetables are actually more than triple those on meat and meat offal, and live animals, the second and third largest SPS-targeted products, respectively.
Figure 2: Number of SPS measures imposed on Egypt by sector (at the HS-2 level)
Source: El-Enbaby et al. (2015) using the WTO SPS-IMS.
Note: HS-2 refers to the first two-digits of the Harmonized Commodity Description and Coding Systems (HS) classification
Using a gravity model, the authors study the impact of SPS measures on trade in terms of, first, the probability to export (firm-product extensive margin), and second, the value exported (firm-product intensive margin). The study utilizes two unique and newly-produced data sets; the first is firm-level trade data coming from the General Organization For Export & Import Control (GOEIC), at the Egyptian Ministry of Industry and Foreign Trade, and the second is a new database on specific trade concerns raised in the TBT and SPS committees at the WTO between 2006 and 2012. The main findings show that SPS measures imposed on Egyptian exporters have a negative impact on the probability of exporting a new product to a new destination. By contrast, the value of exports is not significantly affected by such measures.
Given these results, governments should support firms, particularly in the agriculture and agri-business sectors, to increase their quality and productivity in order to comply with the SPS measures; to be able to export. Indeed, increasing the number of accredited and recognized laboratories or certification bodies in Egypt is important to facilitate the access of Egyptian products in foreign markets. Improved quality will not only encourage SPS-imposing countries to remove their SPS measures, but would also allow exporting firms to sell their products to new destinations that have high-quality standards. In addition, firms will be able to export new varieties to the existing destinations, as well as new ones. Finally, complying with SPS measures can boost economic growth, especially in regions like Upper Egypt, where there is high potential for the agribusiness and food sector.
