Pesticide residues and trade,the apple of discord?

In this paper we study the impact of the regulations on Maximum Residue Levels (MRLs) of pesticides on the trade of apples and pears and related processed products with the aim of understanding how their similarity (or dissimilarity) affect trade. Most studies investigate the impact of sanitary regulations introducing directly in the analysis the MRL put in force in the importing country. They introduce in the analysis the level of the regulation in the importing country without taking into account the rule in force in the exporting country. Rather than focusing on a particular pesticide we take into account the entire list of substances set out by the various regulations. We then build a similarity index and introduce it into a gravity equation to assess the impact of the differences in MRL of pesticides on trade. Results suggest that the differences between regulations matter and may, in some case, hinder trade.