Investigating the impact of SPS standards on trade using a VES model

This study employs a novel nested variable elasticity of substitution (VES) utility model to investigate the impacts of food safety standards on international trade and social welfare. The nested VES utility model is applied to investigate the impact of the European Union (EU) Hazard Analysis Critical Control Point (HACCP) standard on EU orange juice (OJ) trade and social welfare. Our results show that the standards impact on trade and welfare is underestimated when the elasticity of substitution is restricted to be constant. Our findings indicate that the implementation of the EU HACCP standard increases EU OJ imports as well as consumer welfare. We also find that the EU HACCP standard has a greater impact on intra-EU OJ imports than on extra-EU OJ imports.