ISO 9000: New Form of Protectionism or Common Language in International Trade?

56 Pages Posted: 22 Sep 2009 Last revised: 13 Feb 2013

See all articles by Joseph A. Clougherty

Joseph A. Clougherty

University of Illinois at Urbana-Champaign

Michal Grajek

ESMT European School of Management and Technology

Date Written: September 15, 2009

Abstract

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.

Keywords: international trade, standards, technical trade barriers, ISO 9000, networks

JEL Classification: F13, L15, C51

Suggested Citation

Clougherty, Joseph A. and Grajek, Michal, ISO 9000: New Form of Protectionism or Common Language in International Trade? (September 15, 2009). ESMT Working Paper No. 09-006, Available at SSRN: https://ssrn.com/abstract=1476290 or http://dx.doi.org/10.2139/ssrn.1476290

Joseph A. Clougherty

University of Illinois at Urbana-Champaign ( email )

1206 S. Sixth Street
330 Wohlers Hall, MC-706
Champaign, IL 61820
United States

Michal Grajek (Contact Author)

ESMT European School of Management and Technology ( email )

Schlossplatz 1
Berlin, 10178
Germany

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