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The Tariff Equivalent and Forgone Trade Effects of Prohibitive Technical Barriers to Trade

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  • Yue, Chengyan
  • Beghin, John C.

Abstract

We derive a method to econometrically estimate the tariff equivalent and foregone trade effects of a prohibitive technical barrier to trade (TBT) based on Wales and Woodland's Kuhn-Tucker approach to corner solutions in consumer choice. The method overcomes the lack of observed data on bilateral trade flows and accounts for differentiated goods by place of origin. We apply the derived random utility model to international trade in apples to identify the tariff equivalent of prohibitive nontariff trade barriers imposed by Australia on potential imports of New Zealand apples. We estimate the forgone apple trade between the two countries, the implied trade injury imposed by Australia on New Zealand, and the welfare loss to Australia. The removal of the TBTs would induce net welfare gains around US$50 million annually for Australia.

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File URL: http://www.econ.iastate.edu/sites/default/files/publications/papers/p1870-2007-10-01.pdf
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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12852.

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Date of creation: 01 Oct 2007
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Publication status: Published in American Journal of Agricultural Economics, November 2009, vol. 91 no. 4, pp. 930-941
Handle: RePEc:isu:genres:12852

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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Web page: http://www.econ.iastate.edu
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Keywords: Corner solution; Kuhn-Tucker model; New Zealand apples; nontariff barrier; NTB; prohibitive; random utility; TBT; technical barrier to trade; SPS; phytosanitary;

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Cited by:
  1. Sampath Jayasinghe & John C. Beghin & GianCarlo Moschini, 2009. "Determinants of World Demand for U.S. Corn Seeds: The Role of Trade Costs," Center for Agricultural and Rural Development (CARD) Publications 09-wp484, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  2. Beghin, John C. & Melatos, Mark, 2012. "The Trade and Welfare Impact of Australian Quarantine Policies: The Case of Pigmeat," Staff General Research Papers, Iowa State University, Department of Economics 34134, Iowa State University, Department of Economics.
  3. Tena-Junguito, Antonio & Lampe, Markus & Fernandes, Felipe Tâmega, 2012. "How Much Trade Liberalization Was There in the World Before and After Cobden-Chevalier?," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 72(03), pages 708-740, September.
  4. Winchester, Niven, 2009. "Is there a dirty little secret? Non-tariff barriers and the gains from trade," Journal of Policy Modeling, Elsevier, Elsevier, vol. 31(6), pages 819-834, November.

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