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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 Iowa State University, Department of Economics in its series Staff General Research Papers with number 35578.

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Date of creation: 17 Oct 2012
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Handle: RePEc:isu:genres:35578

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
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Web page: http://www.econ.iastate.edu
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Keywords: Non-tariff measures; externalities; ad valorem equivalents; trade restrictiveness indices;

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References

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  1. James E. Anderson & J. Peter Neary, 1998. "The Mercantilist Index of Trade Policy," Boston College Working Papers in Economics 416, Boston College Department of Economics.
  2. 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.
  3. Jouanjean, Marie-Agnès, 2012. "Standards, reputation, and trade: evidence from US horticultural import refusals," World Trade Review, Cambridge University Press, vol. 11(03), pages 438-461, July.
  4. J Anderson & J.P. Neary, 1993. "A New Approach to Evaluating Trade Policy," CEP Discussion Papers dp0173, Centre for Economic Performance, LSE.
  5. Hoekman , Bernard & Nicita, Alessandro, 2008. "Trade Policy, Trade Costs, and Developing Country Trade," Policy Research Working Paper Series 4797, The World Bank.
  6. J Anderson & J.P. Neary, 1994. "Measuring the Restrictiveness of Trade Policy," CEP Discussion Papers dp0186, Centre for Economic Performance, LSE.
  7. 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.
  8. Chau, Nancy H. & Fare, Rolf & Grosskopf, Shawna, 2007. "Trade Restrictiveness and Pollution," Working Papers 127016, Cornell University, Department of Applied Economics and Management.
  9. 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.
  10. Beghin, John C. & Bureau, Jean-Christophe & Park, Sung Joon, 2003. "Food Security and Agricultural Protection in South Korea," Staff General Research Papers 2006, Iowa State University, Department of Economics.
  11. Kee, Hiau Looi & Nicita, Alessandro & Olarreaga, Marcelo, 2006. "Estimating trade restrictiveness indices," Policy Research Working Paper Series 3840, The World Bank.
  12. Hiau Looi Kee & Nicita, Alessandro & Olarreaga, Marcelo, 2004. "Import demand elasticities and trade distortions," Policy Research Working Paper Series 3452, The World Bank.
  13. Anne-Célia Disdier & Stéphan Marette, 2010. "The Combination of Gravity and Welfare Approaches for Evaluating Nontariff Measures," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 713-726.
  14. James E. Anderson & J. Peter Neary, 2005. "Measuring the Restrictiveness of International Trade Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012200, December.
  15. Ronald Fischer & Pablo Serra, 1998. "Standards and Protection," Documentos de Trabajo 45, Centro de Economía Aplicada, Universidad de Chile.
  16. Disdier, Anne-Celia & Fontagne, Lionel & Mimouni, Mondher, 2008. "AJAE Appendix: The Impact of Regulations on Agricultural Trade: Evidence from the SPS and TBT Agreements," American Journal of Agricultural Economics Appendices, Agricultural and Applied Economics Association, vol. 90(2), May.
  17. Beghin, John C. & Roland-Holst, David & Van der Mensbrugghe, Dominique, 1997. "Trade and Environment Linkages: Piecemeal Reform and Optimal Intervention," Staff General Research Papers 1478, Iowa State University, Department of Economics.
  18. Peter Lloyd & Donald MacLaren, 2008. "An Estimated Trade Restrictiveness Index of the Level of Protection in Australian Manufacturing," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 41(3), pages 250-259, 09.
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Cited by:
  1. Xiong, Bo & Beghin, John C., 2013. "Disentangling Demand-Enhancing And Trade-Cost Effects Of Maximum Residue Regulations," Staff General Research Papers 34393, Iowa State University, Department of Economics.

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