Processed Food Exports from Developing Countries: Patterns, Determinants, Policy Issues

Abstract

ABSTRACT

Over the past few decades, food products exported in processed form ('processed food') have expanded faster than traditional (unprocessed) food in world agricultural trade. The purpose of this thesis is to examine the increasing importance of processed food, a high-value set of agricultural products, as an export opportunity especially for agriculturally resource-rich developing countries. Following a stage-setting survey of the patterns of processed food trade, the thesis contains three self-contained chapters on demand for processed food imports, issues of food safety compliance, and drivers of inter-country differences in export performance.

The first core chapter (Chapter 3) addresses the issue of whether the global market conditions are conducive for placing policy emphasis on promoting processed food exports. The methodology involves estimating price and income elasticities of demand for processed food exports from developing countries using a new quarterly panel dataset for the United States, the major market for these products. The findings indicate that the demand for processed food imports from developing countries has a high-income elasticity combined with a low-price elasticity, implying that an expansion of processed food imports could be driven by income growth which counterbalances any possible negative impact of an increase in relative prices.

Chapter 4 examines food safety compliance by processed food exporters of developing countries by analyzing data on import refusals recorded by the U.S. Food and Drug Administration (FDA). Supply-side factors including economic development, export experience, and foreign direct investment in a processed food sector are found to play important roles in improving the ability to meet food safety standards. At the same time, demand for trade protection from producers in the U.S. seems to impact the stringency of monitoring food safety compliance by the FDA.

Chapter 5 explores the drivers of processed food exports from developing countries, focusing on the impact of international food safety compliance by estimating a trade equation derived from a standard gravity modeling framework. The findings indicate that ability to comply with international food safety standards plays a crucial role in explaining inter-country differences in processed food export performance. However, food safety requirements are not a binding constraint on exporting to developing country markets.

The final chapter summarizes the key findings and their implications for policymakers of developing countries wishing to promote processed food exports.