Quantifying the Trade Effect of Sanitary and Phytosanitary Regulations of OECD Countries on South African Food Exports

Abstract

Stringent sanitary and phytosanitary standards (SPS) have proliferated in the aftermath of the Uruguay Round Agreement on Agriculture (URAA). These standards are currently becoming a major stumbling block in agricultural trade for developing countries. Limited by inadequate resources and expertise, among other things, these countries also have poor participation rate in discussions related to SPS that impedes the representation of their interests and concerns in setting international standards for agricultural products. Using a gravity model, this paper estimates the trade effect of total aflatoxin level set by five OECD countries (Ireland, Italy, Sweden, Germany and USA), on South African food exports. The findings support the hypotheses that stringent SPS standards are limiting trade markedly. The trade elasticity of aflatoxin standard is 0.41 and statistically significant. Moreover, the simulation result based on the assumption that these five OECD countries adopt the total aflatoxin level recommended by CODEX, shows that South Africa would have gained an estimated additional amount of US$ 69 million per year from food exports to these countries from 1995 to 1999.

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