ISO 9000: New Form of Protectionism or Common Language in International Trade?
Joseph A. Clougherty
University of Illinois at Urbana-Champaign; Centre for Economic Policy Research (CEPR)
ESMT European School of Management and Technology
September 15, 2009
ESMT Working Paper No. 09-006
International standards have the potential to both promote and hinder international trade. Yet empirical scholarship on the standards-trade relationship has been held up due to some methodological challenges: measurement problems, varied effects, and endogeneity concerns. We are able to surmount these challenges while considering the impact of one particular standard on the country-pair trade flows between 91 nations over the 1995-2005 period. To deal with these challenges, we measure the degree of standardization via the penetration of ISO 9000 in individual nations, allow ISO diffusion to manifest via multiple (quality-signaling, information/compliance-cost, and common-language) effects, and use instrumental variable and panel data techniques to overcome endogeneity concerns. We find strong evidence in support of ISO 9000 involving a common-language effect that enhances country-pair trade; yet, the evidence is more mixed with regard to the quality-signaling and information/compliance-cost effects. While we find ISO-rich nations (most notably European) to clearly benefit from the worldwide diffusion of standardization, ISO 9000 represents a de facto trade barrier for nations (e.g., the US and Mexico) lagging behind in terms of adoption.
Number of Pages in PDF File: 56
Keywords: international trade, standards, technical trade barriers, ISO 9000, networks
JEL Classification: F13, L15, C51working papers series
Date posted: September 22, 2009 ; Last revised: February 13, 2013
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