CONSUMER EFFECTS OF HARMONIZING INTERNATIONAL STANDARDS FOR TRADE IN ORGANIC FOODS

Even if governments agree on equivalency of organic standards across countries, consumers may still believe domestically produced organic foods are superior to imports. We simulated a partial equilibrium model of trade in organic wheat between the United States and Germany to illustrate the welfare gains and losses associated with international harmonization of organic standards. Six cases were examined - no equivalency in standards (the status quo), equivalency of standards with complete and incomplete import acceptance, exporters certifying in importing country with complete and incomplete import acceptance, and exporters paying educational costs, with incomplete import acceptance. Results demonstrate that importing country consumers are better off if they are willing to accept imports as equivalent to domestically produced organic foods. Strategies to reduce resistance such as educational programs or foreign certification add costs to production that reduce quantity traded and impose welfare losses on exporting country producers and importing country consumers.