Product Standards, Harmonization, and Trade: Evidence from the Extensive Margin

I use a new database of EU product standards in the textiles, clothing, and footwear sectors to present the first empirical evidence that international standards harmonization is associated with increased partner country export variety. For an average low income country, the elasticity of export variety with respect to EU standards is -0.8 and the harmonization elasticity is 0.2, while for an average high income country the corresponding figures are 0.4 and approximately zero. Standards and harmonization thus have the potential to exert an important impact on export variety growth in the developing world. These results are robust to the use of alternative samples, and instrumental variables estimation. Simulations show that they are consistent with a heterogeneous firms model of trade in which harmonization is beneficial at the extensive margin provided that any increases in compliance costs are not too large.