The impact of food safety standards on rice exports from vietnam

VIETNAM – NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS THE IMPACT OF FOOD SAFETY STANDARD ON RICE EXPORT FROM VIETNAM By BUI MINH KHOI MASTER OF ARTS IN DEVELOPMENT ECONOMICS Ho Chi Minh City, November 2015 ABSTRACT This paper investigates the impact of food safety standard on rice export from Vietnam The study covers 154 countries in the UN Comtrade data website from 2003 to 2013 and uses aflatoxin B1 to present for food safety standard The findings confirm that there is a negative impact of food safety standard on rice export from Vietnam Moreover, there is an existence of self – selection bias in the data Although Vietnam has exported rice to 154 countries in all over the world, there are some countries that not import rice of Vietnam In other words, Vietnam does not export to those countries The reasons for this problem could be that those countries set low maximum allowable of aflatoxin B1 or the citizens of those countries not eat low – value rice from Vietnam Besides, high-income countries will import less rice compared to lower income countries The reason for this issue could be that rice is a staple goods and the demand of rice depends on culture and habit of people in importing countries Another finding is that joining WTO or signing FTA could lead Vietnam to export more rice to other countries However, this is only a signal, this issue should be considered in depth in future researches by using higher econometric methodologies Keywords: food safety standard, rice export, Vietnam i ACKNOWLEDGEMENT Foremost, I would like to sincerely and gratefully thank Dr Tran Tien Khai, my supervisor, for his great support, crucial advice and precious during my thesis finish Without his guidance, I am unable to finish this thesis Besides, I would like to thank Dr Truong Dang Thuy, who also gave me useful advice when I got stuck in doing thesis More special thanks to the Vietnam – Netherlands Programme, especially professors and staffs for their help during my thesis process Furthermore, I would like to thank all my friends, including my high school friends, my university friends, my group and some brothers in K20 All of them always beside me to encourage, help me when I got stuck in doing thesis and want to give up Without them, I cannot finish this thesis Last but not least, I would like to thank my family for their sacrifices for supporting me not only in doing thesis but also in my life ii ABBREVIATIONS ASEAN The Association of Southeast Asian Nations CEPII The Centre d’Études Prospectives et d’Informations Internationales EEC European Economic Community EFTA European Free Trade Association EU The European Union FAO Food Agricultural Organization FMD Foot – and Mouth – Disease FTA Free Trade Agreement GATT General Agreement on Tariffs and Trade HACCP Hazard Analysis Critical Control Point MRLs Maximum Residue Limits of Pesticides NTBs Non – Tariff Barriers SPS Sanitary and Phytosanitary TBT Technical Barriers to Trade TRAINS The UNCTAD Trade Analysis Information System UN Comtrade The United Nations Commodity Trade Statistics Database WTO World Trade Organization iii TABLE OF ABSTRACT ACKNOWLEDGEMENT ABBREVIATIONS TABLE OF CONTENTS LIST OF TABLES LIST OF FIGURES CHAPTER 1: INTRODUCTION 1.1 Problem Statement 1.2 Research Objectives 1.3 Research Questions 1.4 Data and Methodology 1.5 Thesis Structure CHAPTER 2: LITERATURE REVIEW 2.1 Some Concepts 2.1.1 Food Safety S 2.1.2 Aflatoxin B1 2.2 Theoretical Literature 2.2.1 Food safety st 2.2.2 Theory of Gra 2.3 Empirical Literature 2.4 Hypothesis Testing CHAPTER 3: DATA AND METHODOLOGY 3.1 Data Source 3.2 Model Specification 3.2.1 Constructing D 3.2.2 Model iv 3.3 Estimation Strategy and Correction Model 29 3.3.1 Panel Data Method 29 3.3.2 Heckman Sample Selection Bias Method 32 CHAPTER 4: OVERVIEW OF VIETNAMESE RICE EXPORT, FOOD SAFETY STANDARD FOR RICE, AND EXPORT’S DETERMINANTS 36 4.1 Overview about the Posture of Vietnamese Rice Export 36 4.2 Food Safety Standard Applied for Rice 40 4.3 Determinants of Vietnamese Rice Export 43 4.3.1 Regression Results of OLS, FE, RE, and Driscoll – Kraay Standard Errors 43 4.3.2 Regression Results of Heckman Sample Selection Bias Model .48 CHAPTER 5: CONCLUSION .54 5.1 Main Findings 54 5.2 Policy Implications 55 5.3 Limitations and Future Research .55 REFERENCES .57 APPENDICES 61 v LIST OF TABLES Table 4.1: Regression Results of OLS, FE, RE, Driscoll – Kraay Standard Errors for OLS and FE 46 Table 4.2: Regression Results of Heckman Maximum Likelihood, Heckman Two – Steps and Heckman Maximum Likelihood with Clustered 52 vi LIST OF FIGURES Figure 2.1: Tariff and NTBs 14 Figure 2.2: Analytical Framework of Trade and Determinant Factors 22 Figure 4.1: Average Export Quantity of Vietnamese rice 37 Figure 4.2: Average Export Value of Vietnamese Rice 38 Figure 4.3: Average Export Quantity of Vietnamese Rice to Continents in 2003 – 2013 39 Figure 4.4: Average Allowable Level of Aflatoxin B1 of Continents in 2003 – 2013 40 Figure 4.5: Food Safety Standard and Export Quantity of Vietnamese Rice to Continents 41 Figure 4.6: Average GDP per capita and Export Quantity of Vietnamese Rice .42 vii CHAPTER 1: INTRODUCTION 1.1 Problem Statement Food safety standard is an emerging issue in recent years Especially, imposing food safety standards could be a signal for consumers that product is safe, but in parallel, if this is a protectionist way of importing countries (developed countries), it could impede trade (Disdier et al., 2008) The latter is more concerned regarding developing countries compared to the former Most of importing countries (developed countries) use food safety standard as a tool to protect their domestic producers Thus, developing countries face many challenges to export food to developed countries as well as meet the requirements of food safety standards imposed by importing countries In the perspective of global trade, goods of a country have to compete with many other countries’ Therefore, consumers are faced with importing foods that are supplied by unclear suppliers These problems are real, but in parallel, this could lead to an impediment in trade (van Veen, 2005) The weakness in physical infrastructure and high possibility to be infected by disease could make developing countries that face more challenges than developed countries (Henson & Jaffee, 2008) Thus, developing countries should view food safety standards not just as a tool for impeding imports of developed countries but as an opportunity to enhance the quality of foods (Jongwanich, 2009) However, he also argues that developing countries are hard to meet the requirements of food safety standard imposed by developed countries compared to developed countries There are many papers that measure the effect of food safety standards on food export from developing countries such as Jongwanich (2009), Ferro et al (2013) or from African countries like Otsuki et al (2001a, 2001b) and Wilson and Otsuki (2001) However, doing research about food safety standards for Asia, ASEAN are very rare, especially for Viet Nam Thus, it is necessary to analyze this problem in the case of Vietnam when Vietnam is an agricultural country In this study, the impact of food safety standard on rice export from Vietnam is the main research objective Although there are several papers that studied the food safety standard for agricultural goods of Vietnam, those studies are for fish products such as Henson et al (2000) There is practically no research that measure the impact of food safety standard on rice export from Vietnam Many papers such as Otsuki et al (2001a, 2001b), Wilson and Otsuki (2001), Disdier et al (2008), Jongwanich (2009) and Ferro et al (2013) that find a negative relationship between food safety standard and export from developing countries However, those studies have never applied for Vietnamese case Hence, by measuring the impact of food safety standard on rice export from Vietnam, this study could be a shed light to the situation of Vietnamese rice export By drawing the results, this research aims to give a better understanding about the food safety standard and export from developing countries like Vietnam From there, future studies could research for a different type of Vietnamese agricultural products to help Vietnamese agricultural goods could export more to high quality as well as stickiness markets such as EU, USA or Japan 1.2 Research Objectives The objective of this study is to find out the impact of food safety standard on rice export from Vietnam 1.3 Research Questions For reaching research objective, this study focuses only one research question: Does food safety standard have a negative impact on rice export from Vietnam? 1.4 Data and Methodology This study uses the manually collected panel data of 154 countries on UN Comtrade from 2003 to 2013 The quantity of rice is collected from UN Comtrade website, rice is coded by Harmonized System - HS 1006 Besides, the data of food safety standard is obtained from an FAO publication: “Worldwide Regulations for Mycotoxins (2003): A Compendium” Moreover, GDP per capita and openness are collected annually from World Bank Further, CEPII and FAO websites provide the data of distance and domestic consumption of rice, respectively The data of tariff is gathered from TRAINS database WTO and FTA are referred from World Trade Organization and Asia Regional Integration Center websites The OLS, Fixed Effects (FE), Random Effects (RE), Driscoll – Kraay Standard Errors for OLS and FE, Heckman Maximum Likelihood and Heckman Two – Steps will be used to estimate the impact of food safety standard on rice export from Vietnam The results of Heckman Maximum Likelihood and Heckman Two – Steps are considered the main results While the OLS, FE, RE, and Driscoll – Kraay Standard Errors for OLS and FE will be used as the comparative results Cluster – Robustness Check will be used to strengthen the findings we could find another contaminant applied for rice or collect data of MRLs from Agrobase – Loligram’s Homologa website to present for food safety standard Besides, since this research only measures the food safety standard applied for rice, in future researches, we could measure food safety standard for other types of agricultural products The third limitation of this study is the endogenous relationship of trade and GDP per capita As we know, GDP per capita could effect on trade and conversely, the trade could also impact on GDP per capita However, exploring this problem is not the aim of this study, so that this problem could be seen as an issue which could be investigated in future researches The fourth limitation of this thesis is that this thesis does not control the consumption behavior of consumers in different countries In other words, there are some countries that have eaten rice habit, while some countries eat more wheat and potato instead However, because of the limitations of the food safety standard dataset, this thesis is unable to solve this problem In particular, since aflatoxin B1 does not change after 2003, except some cases of the European Union members, groups of countries could not be separated to run a regression and improve the estimation results Therefore, in future research, a new database of food safety standard should be considered to deal with this problem Last but not least, in this research, we could see signals of joining WTO or signing FTA could lead to a higher rice export from Vietnam to other countries However, to measure these problems in depth, we should use another method such as the difference in difference (DID), treatment effects, etc By that way, we will have a clarified investigation about whether joining WTO or signing FTA could lead to a higher rice export from Vietnam to other countries 56 REFERENCES Aitken, N D (1973) The effect of EEC and EFTA on European trade: A temporal cross-section analysis The American Economic Review, 881-892 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Wilson, J S., & Otsuki, T (2001) Global trade and food safety: winners and losers in a fragmented system (Vol 2689) World Bank Publications 60 APPENDICES Regression Results  The Pooled OLS Model 61  The FE Model 62  The RE Model 63  Driscoll – Kraay Standard Errors for OLS Model 64  Driscoll – Kraay Standard Errors for FE Model 65  Heckman Maximum Likelihood Model 66  Heckman Two – Steps Model 67  Heckman Maximum Likelihood with Clustered Model 68 Results of Tests  F – Test for Pooled OLS and FE Model  Breusch – Pagan LM Test for Pooled OLS and RE Model  Hausman Test for FE and RE Model 69  VIF  Autocorrelation Test  Heteroscedasticity Test 70 ... constructed for studying one research objective: The impact of food safety standard on rice export from Vietnam For analyzing the impact of food safety standard on rice export from Vietnam, a panel data... measure the impact of it on the quantity of rice export from Vietnam Cons is domestic consumption quantity of rice of country i in time t (kg) , computed by the author Thus, the sign of this... the appropriate condition of weather, climate, geography and good soils created an ideal environment for the production of rice, then make rice becomes one of the largest export quantity of Vietnamese