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Domestic Distortions and International Trade

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  • J Anderson
  • J.P. Neary

Abstract

In this paper, we investigate techniques for measuring the trade policy equivalent of domestic distortions, using a distance function approach. Our measure, the Trade Restrictiveness Index, is shown to equal the uniform tariff which is welfare-equivalent to a given pattern of domestic taxes and subsidies. We extend the Index to incorporate taxes in markets for non-traded goods and factors of production and illustrates its operationality with an application to liberalisation in Mexican agriculture. We conclude that our Index has considerable potential in empirical work and as an aid to trade negotiations.

Suggested Citation

  • J Anderson & J.P. Neary, 1993. "Domestic Distortions and International Trade," CEP Discussion Papers dp0179, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0179
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    References listed on IDEAS

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    1. James E. Anderson & J. Peter Neary, 1996. "A New Approach to Evaluating Trade Policy," Review of Economic Studies, Oxford University Press, vol. 63(1), pages 107-125.
    2. Neary, J Peter, 1995. "Trade Liberalisation and Shadow Prices in the Presence of Tariffs and Quotas," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(3), pages 531-554, August.
    3. Anderson, James E & Neary, J Peter, 1992. "Trade Reform with Quotas, Partial Rent Retention, and Tariffs," Econometrica, Econometric Society, vol. 60(1), pages 57-76, January.
    4. Diewert, W. E., 1985. "A dynamic approach to the measurement of waste in an open economy," Journal of International Economics, Elsevier, vol. 19(3-4), pages 213-240, November.
    5. Anderson, James E. & Bannister, Geoffrey, 1992. "The trade restrictiveness index : an application to Mexican agriculture," Policy Research Working Paper Series 874, The World Bank.
    6. James E. Anderson, 1988. "The Relative Inefficiency of Quotas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511789.
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    9. Jones, Ronald W. & Peter Neary, J., 1984. "The positive theory of international trade," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 1, pages 1-62, Elsevier.
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    20. Corden, W. Max & Falvey, Rodney E., 1985. "Quotas and the second best," Economics Letters, Elsevier, vol. 18(1), pages 67-70.
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    Cited by:

    1. Hiau LooiKee & Alessandro Nicita & Marcelo Olarreaga, 2009. "Estimating Trade Restrictiveness Indices," Economic Journal, Royal Economic Society, vol. 119(534), pages 172-199, January.
    2. Ker, Alan P., 2000. "Modeling Technical Trade Barriers Under Uncertainty," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(1), pages 1-23, July.
    3. John C. Beghin & Bo Xiong, 2016. "Economic Effects of Standard-Like Nontariff Measures: Analytical and Methodological Dimensions," Center for Agricultural and Rural Development (CARD) Publications 16-wp569, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    4. Maria Cipollina & Luca Salvatici, 2008. "Measuring Protection: Mission Impossible?," Journal of Economic Surveys, Wiley Blackwell, vol. 22(3), pages 577-616, July.
    5. John Christopher Beghin & Anne-Célia Disdier & Stéphan Marette, 2017. "Trade restrictiveness indices in the presence of externalities: An application to non-tariff measures," World Scientific Book Chapters, in: John Christopher Beghin (ed.), Nontariff Measures and International Trade, chapter 5, pages 81-104, World Scientific Publishing Co. Pte. Ltd..
    6. James E. Anderson & J. Peter Neary, 2003. "The Mercantilist Index of Trade Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 627-649, May.
    7. John Christopher Beghin & Anne-Célia Disdier & Stéphan Marette, 2017. "Trade restrictiveness indices in the presence of externalities: An application to non-tariff measures," World Scientific Book Chapters, in: John Christopher Beghin (ed.), Nontariff Measures and International Trade, chapter 5, pages 81-104, World Scientific Publishing Co. Pte. Ltd..
    8. James E. Anderson, 1994. "Effective Protection Redux," Boston College Working Papers in Economics 273., Boston College Department of Economics.
    9. John Christopher Beghin & Anne-Célia Disdier & Stéphan Marette, 2017. "Trade restrictiveness indices in the presence of externalities: An application to non-tariff measures," World Scientific Book Chapters, in: John Christopher Beghin (ed.), Nontariff Measures and International Trade, chapter 5, pages 81-104, World Scientific Publishing Co. Pte. Ltd..
    10. Anderson, James E., 1998. "The Uruguay Round and welfare in some distorted agricultural economies," Journal of Development Economics, Elsevier, vol. 56(2), pages 393-410, August.
    11. Chi-Chur Chao & Eden Yu, 1998. "Optimal pollution and foreign-investment taxes in a small open economy," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 7(1), pages 71-85.
    12. Hamid Beladi & Chi‐Chur Chao, 2006. "Mixed Ownership, Unemployment, and Welfare for a Developing Economy," Review of Development Economics, Wiley Blackwell, vol. 10(4), pages 604-611, November.
    13. Antoine Bouët, 2000. "La mesure des protections commerciales nationales," Working Papers 2000-15, CEPII research center.
    14. Christos Pantzios, 2000. "Trade Restrictiveness in the Presence of 'New' Goods," Open Economies Review, Springer, vol. 11(1), pages 93-101, January.
    15. Jean-Christophe Bureau & Youssef Chahed & Sophie Drogue & Luca Salvatici, 2001. "Protection du secteur agricole dans les pays tiers : un outil pour les négociations du Millenium Round," Working Papers hal-02827128, HAL.
    16. Salvatici, Luca & Carter, Colin A. & Sumner, Daniel A., 1997. "The Trade Restrictiveness Index and its Potential Contribution to Agricultural Policy Analysis," 1997 Conference, August 10-16, 1997, Sacramento, California 197065, International Association of Agricultural Economists.
    17. Peter J. Lloyd & Johanna L. Croser & Kym Anderson, 2010. "Global Distortions to Agricultural Markets: Indicators of Trade and Welfare Impacts, 1960 to 2007," Review of Development Economics, Wiley Blackwell, vol. 14(2), pages 141-160, May.
    18. John Christopher Beghin & Anne-Célia Disdier & Stéphan Marette, 2017. "Trade restrictiveness indices in the presence of externalities: An application to non-tariff measures," World Scientific Book Chapters, in: John Christopher Beghin (ed.), Nontariff Measures and International Trade, chapter 5, pages 81-104, World Scientific Publishing Co. Pte. Ltd..
    19. Salvatici, Luca & Carter, Colin A. & Sumner, Daniel A., 1997. "The Trade Restrictiveness Index: The Potential Contribution To Agricultural Policy Analysis," 1997 Annual meeting, July 27-30, Toronto, Canada 21028, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    20. Feenstra, Robert C., 1995. "Estimating the effects of trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 30, pages 1553-1595, Elsevier.
    21. Anderson, James E., 1998. "Effective protection redux1," Journal of International Economics, Elsevier, vol. 44(1), pages 21-44, February.
    22. Anderson, James E, 1998. "Trade Restrictiveness Benchmarks," Economic Journal, Royal Economic Society, vol. 108(449), pages 1111-1125, July.
    23. Hans Gersbach & Hans Haller, 2007. "Hierarchical Trade and Endogenous Price Distortions," CER-ETH Economics working paper series 07/72, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    24. John Christopher Beghin & Anne-Célia Disdier & Stéphan Marette, 2017. "Trade restrictiveness indices in the presence of externalities: An application to non-tariff measures," World Scientific Book Chapters, in: John Christopher Beghin (ed.), Nontariff Measures and International Trade, chapter 5, pages 81-104, World Scientific Publishing Co. Pte. Ltd..
    25. Pantzios, Christos J. & Taylor, Timothy G., 1998. "Trade Liberalization And Japanese Agricultural Import Policies," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(2), pages 1-13, December.

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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F10 - International Economics - - Trade - - - General

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