DP9047 International Standards and International Trade: Empirical Evidence from ISO 9000 Diffusion

Author(s): Joseph A. Clougherty, Michal Grajek
Publication Date: July 2012
Keyword(s): Networks, Standards, Technical Trade Barriers
JEL(s): C51, F13, L15
Programme Areas: Industrial Organization, International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9047

Empirical scholarship on the standards-trade relationship has been held up due to methodological challenges: measurement, varied effects, and endogeneity. Considering the trade-effects of one particular standard (ISO 9000), we surmount methodological challenges by measuring standardization via national penetration of ISO 9000, allowing standardization to manifest via multiple (quality-signaling, information/compliance-cost, and common-language) channels, and using instrumental variable, multilateral resistance and panel data techniques to overcome endogeneity. We find evidence of common-language and quality-signaling augmenting country-pair trade. Yet, ISO-rich nations (most notably European) benefit the most from standardization, while ISO-poor nations find ISO 9000 to represent a trade barrier due to compliance-cost effects.