Do foreign product standards matter? Impacts on costs for developing country exporters

We estimate the impact on production costs of firms in developing countries from conforming to regulations imposed by major importing countries, using firm-level data from 16 developing countries. The findings indicate that standards increase variable production costs by requiring additional labor and capital. A 1% increase in initial investment to meet foreign compliance costs raises variable costs by between 0.06 and 0.13%. Fixed costs of compliance are non-trivial, averaging about 4.7% of annual variable costs. The cost impacts might be an important determinant of export success for firms in developing countries. The results may provide one indication of the potential barriers to trade facilitation that technical regulations can pose.