Production‐weighted Estimates of Aggregate Protection in Rich Countries Towards Developing Countries

A challenge in the development of aggregate indexes of trade protection is weighting individual tariffs in ways that (a) reflect their importance and (b) are not endogenous to the protection being measured. The most obvious basis for weights is actual imports; but these may be highly endogenous. Various authors have worked to correct this endogeneity. For example, in the Bouët et al. (2004) ‘MAcMap’ data set, weights are based on imports of reference groups of countries. But eliminating the endogeneity is difficult in product areas where protection is high and widespread. I develop a new set of estimates of overall protection in rich countries with respect to developing ones that eschews import weights as much as possible in favour of weights based on the value of exporter's total production. The results are generally higher than those of Bouët et al. Product areas in which protection is high and widespread seem systematically de‐emphasised when using MAcMap weights, especially in agriculture. I also estimate tariff equivalents of trade‐distorting subsidies by country and commodity. Agricultural tariffs dominate subsidies in trade‐distorting effect, and agricultural protection in turn dominates goods protection generally. Japan is most protective, largely because of rice tariffs near 900 per cent, followed by Norway and Switzerland. Because of their greater reliance on agriculture, the poorest countries face the highest barriers, despite tariff preferences.