The impact of food safety standards on rice exports from vietnam

UNIVERSITY OF ECONOMICS

INSTITUTE OF SOCIAL STUDIES

HO CHI MINH CITY

THE HAGUE

VIETNAM

NETHERLANDS

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 do 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 do 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

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TABLE OF CONTENTS
ABSTRACT ................................................................................................................................ i
ACKNOWLEDGEMENT ......................................................................................................... ii
ABBREVIATIONS .................................................................................................................. iii
TABLE OF CONTENTS .......................................................................................................... iv
LIST OF TABLES .................................................................................................................... vi
LIST OF FIGURES ................................................................................................................. vii
CHAPTER 1: INTRODUCTION .............................................................................................. 8
1.1.

Problem Statement ...................................................................................................... 8

1.2.

Research Objectives .................................................................................................... 9

1.3.

Research Questions ..................................................................................................... 9

1.4.

Data and Methodology ................................................................................................ 9

1.5.

Thesis Structure ......................................................................................................... 10

CHAPTER 2: LITERATURE REVIEW ................................................................................. 11
2.1.

Some Concepts .......................................................................................................... 11

2.1.1.

Food Safety Standards ....................................................................................... 11

2.1.2.

Aflatoxin B1....................................................................................................... 11

2.2.

Theoretical Literature ................................................................................................ 12

2.2.1.

Food safety standards ......................................................................................... 12

2.2.2.

Theory of Gravity Model ................................................................................... 17

2.3.

Empirical Literature .................................................................................................. 18

2.4.

Hypothesis Testing .................................................................................................... 23

CHAPTER 3: DATA AND METHODOLOGY ..................................................................... 24
3.1.

Data Source ............................................................................................................... 24

3.2.

Model Specification .................................................................................................. 24

3.2.1.

Constructing Dependent Variable ...................................................................... 25

3.2.2.

Model ................................................................................................................. 25
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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

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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 5 Continents in 2003 – 2013 ... 39
Figure 4.4: Average Allowable Level of Aflatoxin B1 of 5 Continents in 2003 – 2013......... 40
Figure 4.5: Food Safety Standard and Export Quantity of Vietnamese Rice to 5 Continents . 41
Figure 4.6: Average GDP per capita and Export Quantity of Vietnamese Rice...................... 42

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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
8


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 do
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.

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1.5. Thesis Structure
The following section is the literature review. The third section will be data and
methodology. The fourth one is an overview of Vietnamese rice export, food safety standard for
rice and export’s determinants. The last one is the conclusion, policy implications, and limitations.

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CHAPTER 2: LITERATURE REVIEW
2.1. Some Concepts
2.1.1. Food Safety Standards
“Food safety standard is a scientific discipline describing handling, preparation,
and storage of food in ways that prevent foodborne illness. This includes a number of routines that
should be followed to avoid potentially severe health hazards” (Department of Agriculture, 2009).
Recent years, there is a reduction in tariffs and quantitative restrictions in developed and
developing countries. Instead, NTBs have been growing to impede trade from developing
countries. One of the NTBs is SPS Agreement under the WTO which could hamper trade in
agricultural and food products. Essentially, developed countries impose food safety standard to
control the potential risks of food export from developing countries. However, the main purposes
of imposing food safety standard by developed countries are to protect their domestic producers
and to impede trade from developing countries. 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.
2.1.2. Aflatoxin B1
Aflatoxins are a group of toxic combinations that contaminate in foods and cause cancer
in human body. There are some kinds of aflatoxins: B1, B2, G1 and G2 that could be found in
foodstuffs. In four categories, aflatoxin B1 is the most toxic. Aflatoxins are commonly in cereals,
nuts, fruits and vegetables. According to van Egmond et al. (2003), a serious effect on humans and
animals health by mycotoxins, particularly aflatoxins will lead to many countries to impose
regulations on aflatoxins in foodstuffs and feedstuffs to protect human health. In the late 1960s,
the first limit for aflatoxins was set. Until 2003, there are approximate 100 countries that set the
regulations on aflatoxins on foodstuffs and feedstuffs.

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2.2. Theoretical Literature
2.2.1. Food safety standards
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. Moreover, standards that are imposed by importing countries lead to an increase in
compliance cost and limit or prevent market access (Henson & Jaffee, 2008). Henson et al. (2000)
also find that SPS requirements, especially in EU, become one of the most impediments to trade
in agricultural and food products under the considering of a number of developing countries.
Vietnamese fish export to EU decreases remarkably since there was a new sanitary regulatory
announced by EU in 1991 and a compliant requirement in 1997 (Henson et al., 2000). Roberts et
al. (1876) claim that technical barriers to trade are used to protect the domestic producers in
international competition. Hillman (1996) and Thornsbury (1999) argue particularly that NTBs are
seen as an evolution in protecting domestic production, in other words, also known as “new
protectionism”. However, countries have the right to establish their own standards as long as these
standards based on science and do not violate GATT, SPS agreement.
In order to control food export from developing countries, many governments establish a
food standard as known as HACCP system. HACCP is known as a food system which is
established in food industries to produce safe foods. Unnevehr and Jensen (1999) claim that
standards could impede trade from developing countries that do not meet the requirements of

HACCP. According to Unnevehr and Jensen (1999), although establishing HACCP brings benefits
that could reduce food foodborne illness, there are some difficulties. In practice, mandating
HACCP does not mean reducing the risk of foodborne illness. Besides, a standard that could
balance marginal costs and marginal benefits is very difficult to find. Henson et al. (2000) also

12


argue that SPS agreement is one of the impediments to trade in agricultural and food products from
developing countries to developed countries, especially in the case of European countries. Most of
developing countries are poor and they have to face the requirements of food standards imposed
by developed countries. Thus, problems of complying with SPS standards are difficult to have
experienced scientists in food field and technical scientific skills.
Besides, Thornsbury et al. (1997) state that technical barriers cause barriers in respect to
international trade in agricultural products. These barriers have existed in most of the industries,
but it is especially important in primary agricultural goods and processed goods (Roberts et al.,
1876). Importing countries commonly require exporters that not only prove their products do not
cause dangers to human health but also meet their requirements of standards about nutrition,
package, and label. Developed countries normally set up the requirements to exporters such as
enhancing food standards and protecting resources in the Earth. However, policy makers also
realize that except above reasons, using technical barriers is not transparent. The purpose of
establishing these barriers is to protect domestic producers of importing countries. Sum up,
although the purpose of setting up a food safety regulation is to protect the human health, to reduce
the risks of morbidity and death, the main aim is to establish a shield to protect domestic producers.
By establishing the standards of contaminants, the risks of morbidity and death could be decreased,
these are the benefits of food safety regulations (Antle, 1999). Furthermore, Hillman (1966) and
Thornsbury et al. (1997) have the same point of view that a country should not create an SPS safety
standard if it is not based on empirical studies about science. Roberts and Orden (1995) also argue
that food safety standard could be used as a shield for domestic producers in international
competition.

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Trade Barriers
Tariffs
Non – tariff
Ad valorem

Barriers

Seasonal

(NTBs)

Specific
Paratariffs

Contingent

Quantitative

Subsidies and

Protection

Restrictions

Taxes

Measures

Quotas

Products

Safeguard measures

Voluntary export

Inputs

Countervailing

constraints

Trade
Restricting
Regulations

duties
Anti – dumping
duties

Technical Barriers

Government
procurement

Domestic

Foreign Direct

Content

Investment

Regulations

Regulations

Figure 2.1: Tariff and NTBs
Source: Thornsbury et al. (1997).
According to Beghin and Bureau (2001), there are several methods to measure the NTBs
to trade such as Price – Wedge Approaches, Inventory – Based Approaches, Survey – Based
Approaches, Gravity – Based Approaches, Risk – Assessment – Based Cost – Benefit Measures,
Stylized Microeconomic Approaches, and Quantification Using Sectoral or Multi – market Models.
Each of method has advantages and disadvantages, and could be applied in specific cases.
14


Price – Wedge Approaches: this method is the method that is used to compare the domestic
price to importing price in order to measure NTBs. Campbell and Gossette (1994) uses this method
for a large number of sectors, including food and agriculture. Besides, Calvin and Krissoff (1998)
studied a research which estimates tariff equivalents to quantify the phytosanitary barriers to the
U.S. apple exports to Japan. They used domestic wholesale price compared to CIF prices (landed
prices plus insurance and freight costs). Although there are several studies that use this method to
measure the impact of NTBs on trade, this method remains some limitations. First, we can measure
the effect of NTBs on trade, but we could not know exactly what those NTBs are. Second, this
method is only valid when the imported goods are perfect substitutes. Third, if there is a price

difference in exporting firms, not only NTBs will be reflected, but also rents are reflected more
than NTBs by the price – wedge method. Finally, the main limitation of this method is data lacking.
Inventory – Based Approaches: this method is used for both quantitative and qualitative
analysis. We could collect data from three sources: data on regulations, data on the frequency of
detentions and data on complaints from the industries that are imposed regulatory. Swann et al.
(1996) used a variable which is frequency indicators of standards to present for a number of
voluntary national and international standards of United Kingdom and Germany in the period 1985
– 1991. Analyzes of border detentions in the U.S. were applied to measure the impact of import
procedures and border inspection on EU exports and the impact of detained shipments on
processed food exports from developing countries (Lux & Henson, 2000; Jongwanich, 2009).
However, there are some limitations of this method. For example, a number of regulations will be
a poor proxy to reflect the effect on trade because different standards will have different effects.
Although actual detention is a good proxy for measurement, the data is limited, except the case of
the United States.
Survey – Based Approaches: the scope of the analysis will be narrowed down as well as
the relevant issues could be concentrated on are the aims of this method. Thornsbury et al. (1997)
and Thornsbury (1999) estimated the impact of questionable technical barriers on the U.S.
agricultural exports. Although researchers use this method to measure NTBs that are difficult to
estimate, the survey result could be biased. One of the reasons causes bias result is the information
being used for policy purposes.
Gravity – Based Approaches: Gravity model is based on the Newton’s “Law of Universal
Gravitation”. The Law says that attractive force has a positive relationship with the masses of two
15


objectives and negative relationship with their distances. Similarly, economists introduced gravity
model in economic in the 1960s. The first studies that used gravity model are Tinbergen (1962),
Pöyhönen (1963) and Aitken (1973). Year after year, gravity model is used to measuring the
bilateral trade but lack of theoretical foundations. Until 1979, Anderson presented a theoretical –
based gravity model. Several papers have results consistent with the monopolistic competition

when using gravity model (Bergstrand, 1989; Deardoff & Stein, 1998). Otsuki et al. (2001a, 2001b)
and Wilson and Otsuki (2001) used a gravity model to estimate the impact of food safety standards
on trade. In the main, gravity – based approaches, combined with inventory – or survey – based
methods, could be a good method to measure the bilateral trade.
Risk – Assessment – Based Cost – Benefit Measures: Although NTBs are hard to measure
by risk – assessment analysis, this method is combined with costs – benefits analysis and could
explain partly the effect of regulations or NTBs. In the case of pest infestation, Bigsby et al. (2001)
introduced a methodology to measure both of economic effects and probability aspects of risks.
This method is a promising method in the measurement of the effect of NTBs. The only limitation
of this method is that it is hard to quantify exactly the level of risks and economic consequences.
Stylized Microeconomic Approaches: The basic idea of this method is measuring the effect
of regulations on supply and demand by using cross – sectional or panel data with the cost or profit
functions econometrically. Marette, Bureau and Gozlan (2000) find that whether consumers
evaluate the quality of products or the time period when they assess are to determine differently
the welfare effects of regulations. Due to regulations, trade, as well as the preferences of consumers,
could be measured by the econometric method.
Quantification Using Sectoral or Multi – Market Models: In respect to partial equilibrium
models’ property, compared to gravity models, instead of estimating the effect of regulations on
trade flows, it could also measure the impact of regulations on welfare. On the other hand, it
provides more quantitative effects in comparison with stylized micro-economic approaches which
only concentrate on qualitative results. The effect of regulations on production, consumption, trade,
and welfare could be estimated in large – scale models, which focus on both tariff and regulations.
Calvin and Krissoff (1998) presents a study that combined price – wedge method with partial
equilibrium model. Another combining research between risk – based approach and partial
equilibrium model is Paarlberg and Lee (1998). Their study investigates the impact of the U.S.

16


tariff on beef exports from countries may have FMD. This method is one of the promising methods

which narrows down the gap between stylized micro-economic method and its own.
After considering all potential methods that could measure the effect of regulations on
bilateral trade and referring consistent literature studies (Otsuki et al., 2001a; Otsuki et al., 2001b;
Wilson & Otsuki, 2001; Mangelsdorf et al., 2012; Ferro et al., 2013), gravity model is the most
appropriate model to estimate the impact of food safety standard on bilateral trade.
2.2.2. Theory of Gravity Model
The gravity model is a famous and successful model over decades. According to Frankel
and Wei (1997), the gravity model of bilateral trade is a functional form that measures trade
between two countries by including a directly proportional per capita income of each country and
negatively in respect to the distance between them into the model. Gravity model was introduced
firstly by Tinbergen (1962), which estimated the bilateral trade among countries. Furthermore, one
of the first papers which mentioned gravity model is the research of Pöyhönen (1963). Pöyhönen
(1963) observed the bilateral trade among ten European countries. In his research, he included
national income of both exporting and importing countries, transport cost is presented by the
distance between exporting and importing country. Besides, Aitken (1973) also based on the
Tinbergen’s trade flow model, or in other words, gravity model to estimate a cross – sectional trade
flows among countries. He also used main variables of gravity model such as national income,
population, distance. Furthermore, he added dummy variables such as EEC and EFTA into the
model in order to analyze whether the effect of EEC and EFTA on trade flows if countries join
EEC and EFTA.
Although gravity model was developed and used successfully to explain bilateral trade, a
lack of theoretical foundation should be considered. Anderson (1979) mentioned a problem of
gravity model that policy variable such as border taxes is put into the model, there is no theoretical
justification. Thus, his paper’s aim is to provide a theoretical background for gravity model which
applied for all commodities. The difference of his research compares to previous studies is that he
included tariff into the gravity model since tariff could hamper trade. Besides, although income
which has a positive effect on trade is an important foundation, Helpman (1987) and some other
authors do not see distance as a vital role which could affect trade. Thus, this could be seen a lack
of theoretical for a full gravity model. Until 1985, Bergstrand (1985) argues that incomes, distances
17

are variables made gravity model. However, price and exchange rate also play an important role
and impact trade flows. The model which included price terms was called generalized gravity
model.
An analytical framework for realizing the gravity model which was provided by Bergstrand
(1989). It is consistent with theories of inter – industry and intra – industry. Units of capital and
capital – labor endowment ratios of the country could be seen as national income through exporter
income and per capita income, respectively. Besides, the taste preferences and the change of
expenditure capacity could be presented by per capita income and importer income. Bergstrand
(1990) uses a gravity model to measure the relationship between the share of intra – industry trade
and inequality in national incomes, per capita incomes, capital – labor endowment ratios and tariffs
of countries. He found that lower inequalities of two countries’ per capita income would lead to a
more intra – industry trade between them. Although three types of research’ objectives of
Bergstrand are different, per capita income, price, tariff, national income and exchange rate were
included in gravity model.
Although the gravity model is mainly based on three trade theories: Heckscher – Ohlin,
monopolistic competition and Ricardian technologies, three of them have the same functional form
(De Frahan & Vancauteren, 2006). In addition, Anderson and van Wincoop (2003) introduce a
theory – based gravity model that includes income, distance, and price as main variables. In sum,
all papers based on theory gravity model that also included national income or per capita income,
distance. These variables are the main variable of the gravity model. Higher average national
income or per capita income shows the higher level of economics development, this could lead to
an increase in demand for products. Besides, a higher capital – labor endowment ratio is caused
by higher average national income or per capita income (Helpman & Krugman, 1985). In addition,
the higher distance between exporting and importing countries, the trade flow between two
countries will be less. Furthermore, in theory – based gravity model, tariff and price play a
prominent role in influencing trade flows and they should be included into the gravity model
(Bergstrand, 1989; Bergstrand, 1990).
2.3. Empirical Literature

Calvin and Krissoff (1998) studied a research that measure the impact of SPS on the US –
Japanese apple trade. They estimated descriptive statistics results for the US – Japanese apple trade
18


in three periods: 1994 – 1995, 1995 – 1996 and 1996 – 1997. In their research, they only use
descriptive statistics to measure the short – run and long – run change in Japan’s Fuji Apple
Imports with the elimination of trade barriers. They did not use econometric to estimate the impact
of SPS on the US – Japanese apple trade. The results of their research show that when eliminating
the trade barriers, the Japanese imports will increase.
Using foods that are contaminated could increase risks of morbidity and death. The benefit
of food safety regulation is a decline of those (Antle, 1999). Besides, Mangelsdorf et al. (2012)
and Disdier et al. (2008) believe that food safety standards could reduce asymmetric information
and transparency could be improved by signaling to consumers that products are safe. However,
Antle (1999) also points out that the costs of food safety regulation are compliance cost of industry
and administration cost. A gravity model was applied by Otsuki et al. (2001a) to estimate that the
stringent requirements for the maximum allowable contaminant in groundnuts imposed by the
European Union lead to a decrease in exports from African countries. In that paper, they use the
data of trade between Europe and Africa in the period 1989 – 1998. By applying fixed effects
method, Otsuki et al. (2001a) find that a 10% increase in the maximum allowable level of
aflatoxins B1 will lead to an 11% increase in edible groundnuts imports of European from Africa.
Besides, with the same applying method of gravity model and fixed effects, Otsuki et al. (2001b)
finds that a high restriction of new EU standards will lead to a decrease in African exports of
cereals, dried nuts and nuts to Europe. Nevertheless, those are cases that measure the standards
imposed by importing countries.
In addition, Wilson and Otsuki (2001) finds the results that aflatoxin B1 standard has an
adverse effect on trade in cereals and nuts. They use the data of 15 importing countries and 31
exporting countries. Besides, due to the lack of data, Disdier et al. (2008) have to use crosssectional method for 2004 to estimate the impact of SPS and TBT on agricultural trade.
Nonetheless, a difference of Disdier et al. (2008) from the studies of Otsuki et al. (2001a, 2001b)
and Wilson and Otsuki (2001) is that they use tariff barrier as an independent variable. The reason

of including this variable in the gravity model is that we could separate the different effect between
NTBs, i.e. SPS and TBT, and tariff barriers on agricultural trade.
Furthermore, De Frahan and Vancauteren (2006) used a gravity model to measure the
effect of harmonization of EU food regulations on intra – EU in the period 1990 – 2001. They
claim that the stricter in EU harmonization of food safety regulations, the more trade in intra – EU.
19


Besides, Jongwanich (2009) defines the food safety standard through SPS by a number of detained
shipments. Although the way to measure the food safety standard is different from other papers,
the result is still the same. That means the standard imposed by importing countries will hamper
processed food export from developing countries. He also includes openness variable into the
model, the result shows that openness has the positive impact on the processed food export from
developing countries.
Commonly, most of the papers studied about food safety standard use a data that have a
pair of exporting countries and a pair of importing countries. Besides, researchers ordinarily use
gravity model and estimate the food safety standard imposed by importing countries. Nevertheless,
there is one research which is the research of Mangelsdorf et al. (2012) measures the food safety
standard of exporting country, China. Although they use a gravity model to estimate the impact of
food standard on export from China, they do not include distance into the model. This could be
seen as a limitation of this research. However, there are some differences compared to other studies:
they use four types of standards: voluntary, the mandatory domestic standard of China and
voluntary, mandatory international standard. This is a new way to present the food safety standard.
They also use a new method to estimate the relationship between food standards and export from
China. Instead of using only fixed effects method, they use Heckman two – steps and threshold
Tobit to measure the impact of food standards on Chinese export. Furthermore, the finding result
is interesting in comparison with other papers’, i.e. they find that the standards have the positive
effect on Chinese export. Besides, using domestic consumption of a product as an independent
variable is remarkable.
Another research of Ferro et al. (2013), which has a new way to introduce food safety

standard. They use the database of MRLs to present the food safety standard. This is a new
database which could collect from Agrobase – Loligram’s Homologa website. However, this
database is not free to access. According to Ferro et al. (2013), the advantages of this database
which compare to other previous studies are more products and more contaminants that are used.
In comparison with some other papers such as Otsuki et al. (2001a, 2001b) and Wilson and Otsuki
(2001), those studies only use one contaminant to measure the impact of food safety standard on
food export. Besides, a new method which is Heckman sample selection bias was applied to
estimate the effect of food safety standard on agricultural exports from developing countries. The
result of this research shows that there is a negative relationship between MRLs and agricultural
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exports from developing countries, i.e. more MRLs or a higher number of pesticides imposed by
importing countries, less agricultural exports from developing countries.
An analytical framework will be presented below in order to show the determinants that
impact the trade, i.e. the rice export from Vietnam in the scope of this research.

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Income

Distance

Price

Domestic
Consumption

Openness

Gravity variables

WTO

FTA

Other control variables

Trade

Regulations variables

Food
Safety
Standard

Tariff

Figure 2.2: Analytical Framework of Trade and Determinant Factors.

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2.4. Hypothesis Testing
Previous studies such as Otsuki et al. (2001a, 2001b), Wilson and Otsuki (2001), De Frahan
and Vancauteren (2006), Disdier et al. (2008), Jongwanich (2009) and Ferro et al. (2013) provide
argument that food safety standards imposed by importing countries have a negative impact on
export from developing countries.
H1: Food safety standard has a negative effect on rice export from Vietnam.

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CHAPTER 3: DATA AND METHODOLOGY
3.1. Data Source
The data covers 154 listed 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. Finally, the data sample contains 1069 observations for 154 countries.
3.2. Model Specification
The thesis is 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
model is built up.


Impact of food safety standard on rice export from Vietnam is measured by
equation:
ln⁡(𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦)𝑖𝑡 = 𝛼1 + 𝛼2 ⁡ln(𝑝𝑟𝑖𝑐𝑒 ∗ 𝑑𝑖𝑠𝑡)𝑖𝑡 + 𝛼3 ln⁡(𝑓𝑠𝑠)𝑖𝑡 + 𝛼4 ln⁡(𝑔𝑑𝑝𝑝𝑐)𝑖𝑡 +
𝛼5 ln⁡(𝑐𝑜𝑛𝑠)𝑖𝑡 + 𝛼6 tariff𝑖𝑡 + 𝛼7 𝑜𝑝𝑒𝑛𝑖𝑡 + 𝛼8 𝑑𝑢𝑚_𝑤𝑡𝑜 +
𝛼9 𝑑𝑢𝑚_𝑓𝑡𝑎 + 𝜀𝑖𝑡

The reason to check whether the sample selection bias exists in data sample is although
Vietnam exports rice to 154 countries from 2003 to 2013, there are some countries that do not
import rice from Vietnam in this time period. Thus, sample selection bias could be a problem. For

checking whether the sample selection bias exists in data sample, a Heckman sample selection bias
model is constructed. Actually, to deal with sample selection bias, there are two main
methodologies: Heckman sample selection model and treatment effects. However, there is an
important difference in both of them:

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