UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM NETHERLANDS VIETNAM – NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS THE IMPACT OF FOOD SAFETY STANDARD ON RICE EXPORT FROM VIETNAM By BUI MINH KHOI MASTER OF ARTS IN DEVELOPMENT ECONOMICS Ho Chi Minh City, November 2015 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABSTRACT This paper investigates the impact of food safety standard on rice export from Vietnam. The study covers 154 countries in the UN Comtrade data website from 2003 to 2013 and uses aflatoxin B1 to present for food safety standard. The findings confirm that there is a negative impact of food safety standard on rice export from Vietnam. Moreover, there is an existence of self – selection bias in the data.
Although Vietnam has exported rice to 154 countries in all over the world, there are some countries that do not import rice of Vietnam. In other words, Vietnam does not export to those countries. The reasons for this problem could be that those countries set low maximum allowable of aflatoxin B1 or the citizens of those countries do not eat low – value rice from Vietnam. Besides, high-income countries will import less rice compared to lower income countries.
The reason for this issue could be that rice is a staple goods and the demand of rice depends on culture and habit of people in importing countries. Another finding is that joining WTO or signing FTA could lead Vietnam to export more rice to other countries. However, this is only a signal, this issue should be considered in depth in future researches by using higher econometric methodologies. Keywords: food safety standard, rice export, Vietnam.
i LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ACKNOWLEDGEMENT Foremost, I would like to sincerely and gratefully thank Dr. Tran Tien Khai, my supervisor, for his great support, crucial advice and precious during my thesis finish. Without his guidance, I am unable to finish this thesis. Besides, I would like to thank Dr.
Truong Dang Thuy, who also gave me useful advice when I got stuck in doing thesis. More special thanks to the Vietnam – Netherlands Programme, especially professors and staffs for their help during my thesis process. Furthermore, I would like to thank all my friends, including my high school friends, my university friends, my group and some brothers in K20. All of them always beside me to encourage, help me when I got stuck in doing thesis and want to give up.
Without them, I cannot finish this thesis. Last but not least, I would like to thank my family for their sacrifices for supporting me not only in doing thesis but also in my life. ii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABBREVIATIONS ASEAN The Association of Southeast Asian Nations CEPII The Centre d’Études Prospectives et d’Informations Internationales EEC European Economic Community EFTA European Free Trade Association EU The European Union FAO Food Agricultural Organization FMD Foot – and Mouth – Disease FTA Free Trade Agreement GATT General Agreement on Tariffs and Trade HACCP Hazard Analysis Critical Control Point MRLs Maximum Residue Limits of Pesticides NTBs Non – Tariff Barriers SPS Sanitary and Phytosanitary TBT Technical Barriers to Trade TRAINS The UNCTAD Trade Analysis Information System UN Comtrade The United Nations Commodity Trade Statistics Database WTO World Trade Organization iii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TABLE OF CONTENTS ABSTRACT. iii TABLE OF CONTENTS.
iv LIST OF TABLES. vi LIST OF FIGURES. vii CHAPTER 1: INTRODUCTION. Data and Methodology.
10 CHAPTER 2: LITERATURE REVIEW. Food Safety Standards. Food safety standards. Theory of Gravity Model.
23 CHAPTER 3: DATA AND METHODOLOGY. Constructing Dependent Variable. 25 iv LUAN VAN CHAT LUONG download : add luanvanchat@agmail. Estimation Strategy and Correction Model.
Panel Data Method. Heckman Sample Selection Bias Method. 32 CHAPTER 4: OVERVIEW OF VIETNAMESE RICE EXPORT, FOOD SAFETY STANDARD FOR RICE, AND EXPORT’S DETERMINANTS. Overview about the Posture of Vietnamese Rice Export.
Food Safety Standard Applied for Rice. Determinants of Vietnamese Rice Export. Regression Results of OLS, FE, RE, and Driscoll – Kraay Standard Errors. Regression Results of Heckman Sample Selection Bias Model.
Limitations and Future Research. 61 v LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF TABLES Table 4.1: Regression Results of OLS, FE, RE, Driscoll – Kraay Standard Errors for OLS and FE .2: Regression Results of Heckman Maximum Likelihood, Heckman Two – Steps and Heckman Maximum Likelihood with Clustered. 52 vi LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF FIGURES Figure 2.1: Tariff and NTBs .2: Analytical Framework of Trade and Determinant Factors.1: Average Export Quantity of Vietnamese rice .2: Average Export Value of Vietnamese Rice .3: Average Export Quantity of Vietnamese Rice to 5 Continents in 2003 – 2013 .4: Average Allowable Level of Aflatoxin B1 of 5 Continents in 2003 – 2013.5: Food Safety Standard and Export Quantity of Vietnamese Rice to 5 Continents .6: Average GDP per capita and Export Quantity of Vietnamese Rice. 42 vii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER 1: INTRODUCTION 1.
Problem Statement Food safety standard is an emerging issue in recent years. Especially, imposing food safety standards could be a signal for consumers that product is safe, but in parallel, if this is a protectionist way of importing countries (developed countries), it could impede trade (Disdier et al. The latter is more concerned regarding developing countries compared to the former. Most of importing countries (developed countries) use food safety standard as a tool to protect their domestic producers.
Thus, developing countries face many challenges to export food to developed countries as well as meet the requirements of food safety standards imposed by importing countries. In the perspective of global trade, goods of a country have to compete with many other countries’. Therefore, consumers are faced with importing foods that are supplied by unclear suppliers. These problems are real, but in parallel, this could lead to an impediment in trade (van Veen, 2005).
The weakness in physical infrastructure and high possibility to be infected by disease could make developing countries that face more challenges than developed countries (Henson & Jaffee, 2008). Thus, developing countries should view food safety standards not just as a tool for impeding imports of developed countries but as an opportunity to enhance the quality of foods (Jongwanich, 2009). However, he also argues that developing countries are hard to meet the requirements of food safety standard imposed by developed countries compared to developed countries. There are many papers that measure the effect of food safety standards on food export from developing countries such as Jongwanich (2009), Ferro et al.
(2013) or from African countries like Otsuki et al. However, doing research about food safety standards for Asia, ASEAN are very rare, especially for Viet Nam. Thus, it is necessary to analyze this problem in the case of Vietnam when Vietnam is an agricultural country. In this study, the impact of food safety standard on rice export from Vietnam is the main research objective.
Although there are several papers that studied the food safety standard for agricultural goods of Vietnam, those studies are for fish products such as Henson et al. There is practically no research that measure the impact of food safety standard on rice export from Vietnam. Many papers such as Otsuki et al. (2001a, 2001b), Wilson and Otsuki (2001), Disdier et al.
(2008), Jongwanich (2009) and Ferro et al. (2013) that find a negative relationship between food safety standard and export from developing countries. However, those studies have never 8 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com applied for Vietnamese case. Hence, by measuring the impact of food safety standard on rice export from Vietnam, this study could be a shed light to the situation of Vietnamese rice export.
By drawing the results, this research aims to give a better understanding about the food safety standard and export from developing countries like Vietnam. From there, future studies could do research for a different type of Vietnamese agricultural products to help Vietnamese agricultural goods could export more to high quality as well as stickiness markets such as EU, USA or Japan. Research Objectives The objective of this study is to find out the impact of food safety standard on rice export from Vietnam. Research Questions For reaching research objective, this study focuses only one research question: Does food safety standard have a negative impact on rice export from Vietnam? 1.
Data and Methodology This study uses the manually collected panel data of 154 countries on UN Comtrade from 2003 to 2013. The quantity of rice is collected from UN Comtrade website, rice is coded by Harmonized System - HS 1006. Besides, the data of food safety standard is obtained from an FAO publication: “Worldwide Regulations for Mycotoxins (2003): A Compendium”. Moreover, GDP per capita and openness are collected annually from World Bank.
Further, CEPII and FAO websites provide the data of distance and domestic consumption of rice, respectively. The data of tariff is gathered from TRAINS database. WTO and FTA are referred from World Trade Organization and Asia Regional Integration Center websites. The OLS, Fixed Effects (FE), Random Effects (RE), Driscoll – Kraay Standard Errors for OLS and FE, Heckman Maximum Likelihood and Heckman Two – Steps will be used to estimate the impact of food safety standard on rice export from Vietnam.
The results of Heckman Maximum Likelihood and Heckman Two – Steps are considered the main results. While the OLS, FE, RE, and Driscoll – Kraay Standard Errors for OLS and FE will be used as the comparative results. Cluster – Robustness Check will be used to strengthen the findings. 9 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.
Thesis Structure The following section is the literature review. The third section will be data and methodology. The fourth one is an overview of Vietnamese rice export, food safety standard for rice and export’s determinants. The last one is the conclusion, policy implications, and limitations.
10 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER 2: LITERATURE REVIEW 2. Food Safety Standards “Food safety standard is a scientific discipline describing handling, preparation, and storage of food in ways that prevent foodborne illness. This includes a number of routines that should be followed to avoid potentially severe health hazards” (Department of Agriculture, 2009). Recent years, there is a reduction in tariffs and quantitative restrictions in developed and developing countries.
Instead, NTBs have been growing to impede trade from developing countries. One of the NTBs is SPS Agreement under the WTO which could hamper trade in agricultural and food products. Essentially, developed countries impose food safety standard to control the potential risks of food export from developing countries. However, the main purposes of imposing food safety standard by developed countries are to protect their domestic producers and to impede trade from developing countries.
Especially, imposing food safety standards could be a signal for consumers that product is safe, but in parallel, if this is a protectionist way of importing countries (developed countries), it could impede trade (Disdier et al. The latter is more concerned regarding developing countries compared to the former. Most of importing countries (developed countries) use food safety standard as a tool to protect their domestic producers. Thus, developing countries face many challenges to export food to developed countries as well as meet the requirements of food safety standards imposed by importing countries.
Aflatoxin B1 Aflatoxins are a group of toxic combinations that contaminate in foods and cause cancer in human body. There are some kinds of aflatoxins: B1, B2, G1 and G2 that could be found in foodstuffs. In four categories, aflatoxin B1 is the most toxic. Aflatoxins are commonly in cereals, nuts, fruits and vegetables.
According to van Egmond et al.