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Trade Restrictiveness Indices in Presence of Externalities: An Application to Non-Tariff Measures

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  • Beghin, John C.
  • Disdier, Anne-Celia
  • Marette, Stephan

Abstract

We extend the trade restrictiveness indices (TRIs) approach to the case of market failures and domestic regulations addressing them, in presence of arbitrary tariffs and other domestic price policy distortions. We focus on standard-like non-tariff measures (NTMs) affecting cost of production and potentially enhancing domestic demand by increasing product quality or reducing negative externalities. The impact of NTMs on trade is ambiguous depending on the relative strength of the supply cost and demand enhancing effects. We apply the framework to the NTM database of Kee, Nicita, and Olarreaga (2009) and derive ad valorem equivalents for NTMs and other policy distortions. These equivalents are then used to compute TRIs. 10% of the NTM ad valorem equivalents at the 6-digit level of the Harmonized System are negative indicating a net trade-enhancing effect of these NTMs in those sectors. Consequently, TRIs computed without a protectionist presumption are smaller than their constrained counterparts not allowing for trade enhancements effects of NTMs. Accounting for externalities and anti-protective effects significantly reduces the measure of trade policy restrictiveness for most countries.

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Bibliographic Info

Paper provided by International Agricultural Trade Research Consortium in its series Working Papers with number 142386.

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Date of creation: Nov 2012
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Handle: RePEc:ags:iatrwp:142386

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Keywords: Non-tariff measures; externalities; ad valorem equivalents; trade restrictiveness indices; International Relations/Trade; Research Methods/ Statistical Methods; F13;

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  1. Kee, Hiau Looi & Nicita, Alessandro & Olarreaga, Marcelo, 2006. "Estimating trade restrictiveness indices," Policy Research Working Paper Series 3840, The World Bank.
  2. Hiau Looi Kee & Nicita, Alessandro & Olarreaga, Marcelo, 2004. "Import demand elasticities and trade distortions," Policy Research Working Paper Series 3452, The World Bank.
  3. Ronald Fischer & Pablo Serra, 1998. "Standards and Protection," Documentos de Trabajo 45, Centro de Economía Aplicada, Universidad de Chile.
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  5. Anne-Célia Disdier & Lionel Fontagné & Mondher Mimouni, 2008. "The Impact of Regulations on Agricultural Trade: Evidence from the SPS and TBT Agreements," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(2), pages 336-350.
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  9. John C. Beghin & Jean-Christophe Bureau & Sung Joon Park, 2003. "Food Security and Agricultural Protection in South Korea," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(3), pages 618-632.
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  14. Peter Lloyd & Donald MacLaren, 2007. "A Trade Restrictiveness Index of theLevel of Protection in Australian Manufacturing," Department of Economics - Working Papers Series 1024, The University of Melbourne.
  15. Liesbeth Colen & Miet Maertens & Johan Swinnen, 2012. "Private Standards, Trade and Poverty: GlobalGAP and Horticultural Employment in Senegal," The World Economy, Wiley Blackwell, vol. 35(8), pages 1073-1088, 08.
  16. Copeland Brian R., 1994. "International Trade and the Environment: Policy Reform in a Polluted Small Open Economy," Journal of Environmental Economics and Management, Elsevier, vol. 26(1), pages 44-65, January.
  17. Chau, Nancy H. & Fare, Rolf & Grosskopf, Shawna, 2007. "Trade Restrictiveness and Pollution," Working Papers 127016, Cornell University, Department of Applied Economics and Management.
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Cited by:
  1. Bo Xiong & John C. Beghin, 2013. "Disentangling Demand-Enhancing and Trade-Cost Effects of Maximum Residue Regulations," Center for Agricultural and Rural Development (CARD) Publications 13-wp544, Center for Agricultural and Rural Development (CARD) at Iowa State University.

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