The Impact Of ISO 9000 Standards On International Trade

In the past few decades, as traditional trade restrictions such as tariffs have declined, global product markets are undergoing profound changes involve interrelated shifts in multiple elements of export supply chains. Standards and certification become more important in international trade as the supply chains become more global. While there is a large literature on the economic theory of standards and trade, most of them focus on country-specific standards which create barriers to trade. How do international standards impact on international trade? Do they help or hinder trade? The literature reviewed does not provide a satisfied answer and there is limited work about the impact of interantioanl standards on the performance of developing country's trade.As quality international standards, ISO9000 standards have a wide application regardless of company size and activity sector. China is the biggest country involved ISO9000 adoptions, but the effects of ISO9000 diffusion on trade have gone understudied. This paper explores the impact of ISO9000 standards as international quality management standards on the performance of trade. There are three main problems at present:How do international quality management standards impact trade? What is the mechanism of export and ISO9000 diffusion in conceptual framework? Is the key finding of empirical data line with theory conclusions?In theory, this dissertation analyzes the mechanism of ISO9000 diffusion and export based on new institutional economics. We consider the economic impact of ISO 9000 adoption on country-pair economic relationships and supporting ISO9000 as representative of international voluntary institution. ISO9000 adoption providing dependable and efficient frameworks for international economic exchange.ISO 9000 standards via their quality-signaling, common-language, and conflict-settling property alter the costs involved with trade. In short, ISO 9000 as an international institution may reduce the transaction costs and information asymmetries between businesses from different nations, then enhance trade. We make a comprehensive analysis by using the minimum quality standards model with imperfect consumer's information to show that ISO 9000 standards changes the consumer's perception of produced qualities and increase equilibrium trade. The influence of ISO9000 standards is decreasing in the degree of substitutability between the two goods and increasing in the proportion of uninformed consumers.Empirically, the paper tests five proposition involve the impact of ISO9000 standards on trade. First, the paper uses a gravity model of bilateral trade between 36 countries in 2008 to test the effect of home-nation and host-nation diffusion of ISO 9000 on trade, and focuses on the difference between developed nation and developing nation. There is an important difference across the export from developed nation to developed nation, the export from developed nation to developing nation, the export from developing nation to developed nation and the export from developing nation to developing nation. Second, the paper employs panel data of China over the 2001-2008 period to estimate the different sector's effects. We select fifteen sectors including mineral fuels, food, beverages& tobacco, processing of petroleum, coking, textile, leather, paper, chemical products, rubber & plastic, non-metallic mineral products, metal products, medicines, machinery &equipment, electrical products. The paper focuses on the difference between primary products sectors and manufacturing industries sectors. Third, based on the survey data of 101 textile firms in the northern Zhejiang Province, We assess the contribution of ISO 9000 adoption to the performance of export sales. It is possible that the firms of larger size, with greater productive resource and more export experience will be more likely to certify because these firms can recover additional costs of certification. As there is "self-selection into treatment" in certifications, we apply the treatment effect model and Kernel Propensity Score Matching Difference-In-Differences (PSM-DID) methods to estimate the causal effect of certification on the change in firms'export sales during short period (one year after certification) and long period(three years after certification).The key point in this paper is that it creatively analyzes the impact of internatinal quality standards on trade based on new institutional economics, which offers new theoretical framework for the empirical research. This paper uses data from nations,sectors and firms to attains fruitful conclusions. Especially, we use ATE to assess the effects of ISO 9000 certification on firms'export sales. The main findings are as follows:First, from the macro-foundations, home-nation and host-nation diffusion of ISO 9000 certification are both likely to enhance exports, but the impact of home-nation diffusion is more robust than the impact of host-nation diffusion. Second, according to developing nations often experience institutional void, the export- pull effect of ISO9000 certification is to be most robust in developing nations. Third, the export-pull effect of ISO9000 certification is to be more robust in manufacturing industries than primary products sectors. Forth, from the micro-foundation, ISO 9000 certification will enhance firm's export sales and the treatment effect of certification on the change in firms'export sales during short period is more robust than long period.Based on the above analysis, the paper presents the corresponding policy and expects export- pull mechanism of international quality standards to fully function in China.