IDEAS home Printed from https://ideas.repec.org/p/oxf/wpaper/847.html
   My bibliography  Save this paper

Choked by Red Tape? The Political Economy of Wasteful Trade Barriers

Author

Listed:
  • Peter Neary
  • Giovanni Maggi
  • Monika Mrázová

Abstract

Red-tape barriers (RTBs) are an important source of trade costs, but have received little scholarly attention. Here we take a first step toward a theory of RTBs, and show that their implications are very different from those of more traditional trade barriers. Our model highlights that RTBs have important impacts on the extensive margin of trade, and yields rich predictions on how changes in the political-economic environment and product characteristics affect RTBs. Taking into account the endogenous response of RTBs is crucial to understanding the impact of reductions in tariffs and natural trade costs on the extensive and intensive margins of trade, as well as on welfare. Moreover, the availability of RTBs affects in important ways the tariff commitments that are specified in a trade agreement.

Suggested Citation

  • Peter Neary & Giovanni Maggi & Monika Mrázová, 2018. "Choked by Red Tape? The Political Economy of Wasteful Trade Barriers," Economics Series Working Papers 847, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:847
    as

    Download full text from publisher

    File URL: https://ora.ox.ac.uk/objects/uuid:3fb9c731-7bf7-4f6f-99b3-38a62e0b3de2
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lionel Fontagné & Gianluca Orefice & Roberta Piermartini, 2020. "Making small firms happy? The heterogeneous effect of trade facilitation measures," Review of International Economics, Wiley Blackwell, vol. 28(3), pages 565-598, August.
    2. Bhagwati, Jagdish N, 1982. "Directly Unproductive, Profit-seeking (DUP) Activities," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 988-1002, October.
    3. Maria Persson, 2013. "Trade facilitation and the extensive margin," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(5), pages 658-693, August.
    4. 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.
    5. Zhaohui Niu & Chris Milner & Saileshsingh Gunessee & Chang Liu, 2020. "Are nontariff measures and tariffs substitutes? Some panel data evidence," Review of International Economics, Wiley Blackwell, vol. 28(2), pages 408-428, May.
    6. Monika Mrázová & J. Peter Neary, 2017. "Not So Demanding: Demand Structure and Firm Behavior," American Economic Review, American Economic Association, vol. 107(12), pages 3835-3874, December.
    7. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    8. Simeon Djankov & Caroline Freund & Cong S. Pham, 2010. "Trading on Time," The Review of Economics and Statistics, MIT Press, vol. 92(1), pages 166-173, February.
    9. Henrik Horn & Giovanni Maggi & Robert W. Staiger, 2010. "Trade Agreements as Endogenously Incomplete Contracts," American Economic Review, American Economic Association, vol. 100(1), pages 394-419, March.
    10. Davies, Ronald B., 2013. "The silver lining of red tape," Journal of Public Economics, Elsevier, vol. 101(C), pages 68-76.
    11. Ray, Edward John, 1981. "The Determinants of Tariff and Nontariff Trade Restrictions in the United States," Journal of Political Economy, University of Chicago Press, vol. 89(1), pages 105-121, February.
    12. Susan E. Feinberg & Michael P. Keane, 2009. "Tariff effects on MNC decisions to engage in intra-firm and arm's-length trade," Canadian Journal of Economics, Canadian Economics Association, vol. 42(3), pages 900-929, August.
    13. Gordon, Roger & Li, Wei, 2009. "Tax structures in developing countries: Many puzzles and a possible explanation," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 855-866, August.
    14. Robert C. Feenstra & Hong Ma, 2014. "Trade Facilitation and the Extensive Margin of Exports," The Japanese Economic Review, Japanese Economic Association, vol. 65(2), pages 158-177, June.
    15. Allen Dennis & Ben Shepherd, 2011. "Trade Facilitation and Export Diversification," The World Economy, Wiley Blackwell, vol. 34(1), pages 101-122, January.
    16. Staiger, Robert W., 2012. "Non-tariff measures and the WTO," WTO Staff Working Papers ERSD-2012-01, World Trade Organization (WTO), Economic Research and Statistics Division.
    17. Bown, Chad P. & Tovar, Patricia, 2011. "Trade liberalization, antidumping, and safeguards: Evidence from India's tariff reform," Journal of Development Economics, Elsevier, vol. 96(1), pages 115-125, September.
    18. Nuno Limão & Patricia Tovar, 2018. "Policy choice: Theory and evidence from commitment via international trade agreements," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 6, pages 179-198, World Scientific Publishing Co. Pte. Ltd..
    19. Mostafa Beshkar & Ahmad Lashkaripour, 2017. "Interdependence of Trade Policies in General Equilibrium," CAEPR Working Papers 2017-003, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    20. Ben Shepherd, 2013. "Trade times, importing and exporting: firm-level evidence," Applied Economics Letters, Taylor & Francis Journals, vol. 20(9), pages 879-883, June.
    21. Brian R. Copeland, 1990. "Strategic Interaction among Nations: Negotiable and Non-negotiable Trade Barriers," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 84-108, February.
    22. Beverelli, Cosimo & Neumueller, Simon & Teh, Robert, 2015. "Export Diversification Effects of the WTO Trade Facilitation Agreement," World Development, Elsevier, vol. 76(C), pages 293-310.
    23. Manuel Amador & Kyle Bagwell, 2013. "The Theory of Optimal Delegation With an Application to Tariff Caps," Econometrica, Econometric Society, vol. 81(4), pages 1541-1599, July.
    24. Debaere, Peter & Mostashari, Shalah, 2010. "Do tariffs matter for the extensive margin of international trade? An empirical analysis," Journal of International Economics, Elsevier, vol. 81(2), pages 163-169, July.
    25. Devashish Mitra, 2016. "Endogenous political organization and the value of trade agreements," World Scientific Book Chapters, in: The Political Economy of Trade Policy Theory, Evidence and Applications, chapter 2, pages 23-35, World Scientific Publishing Co. Pte. Ltd..
    26. Hillman, Arye L, 1982. "Declining Industries and Political-Support Protectionist Motives," American Economic Review, American Economic Association, vol. 72(5), pages 1180-1187, December.
    27. Giovanni Maggi & Andres Rodriguez-Clare, 1998. "The Value of Trade Agreements in the Presence of Political Pressures," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 574-601, June.
    28. Ferdinand Eibl & Adeel Malik, 2016. "The Politics of Partial Liberalization: Cronyism and Non-Tariff Protection in Mubarak's Egypt," CSAE Working Paper Series 2016-27, Centre for the Study of African Economies, University of Oxford.
    29. Baldwin, Richard, 1987. "Politically realistic objective functions and trade policy PROFs and tariffs," Economics Letters, Elsevier, vol. 24(3), pages 287-290.
    30. Jerónimo Carballo & Alejandro Graziano & Georg Schaur & Christian Volpe Martincus, 2016. "Endogenous Border Times," IDB Publications (Working Papers) 94638, Inter-American Development Bank.
    31. Robert A. Pollak, 1971. "Additive Utility Functions and Linear Engel Curves," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 38(4), pages 401-414.
    32. repec:wsr:wpaper:y:2015:i:137 is not listed on IDEAS
    33. Hildegunn Kyvik Nordås & Enrico Pinali & Massimo Geloso Grosso, 2006. "Logistics and Time as a Trade Barrier," OECD Trade Policy Papers 35, OECD Publishing.
    34. Carballo, Jerónimo & Graziano, Alejandro & Schaur, Georg & Volpe Martincus, Christian, 2016. "Endogenous Border Times," IDB Publications (Working Papers) 7685, Inter-American Development Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lionel Fontagné & Gianluca Orefice & Roberta Piermartini, 2020. "Making small firms happy? The heterogeneous effect of trade facilitation measures," Review of International Economics, Wiley Blackwell, vol. 28(3), pages 565-598, August.
    2. Ornelas, Emanuel & Turner, John L., 2024. "The costs and benefits of rules of origin in modern free trade agreements," Journal of International Economics, Elsevier, vol. 147(C).
    3. Kamei, Keita & Inomata, Kentaro, 2022. "Wasteful Trade Barriers in Oligopoly," MPRA Paper 114541, University Library of Munich, Germany.
    4. Neary, Peter & Carrère, Céline & Mrázová, Monika, 2020. "Gravity without Apologies: The Science of Elasticities, Distance, and Trade," CEPR Discussion Papers 14473, C.E.P.R. Discussion Papers.
    5. Céline Carrère & Monika Mrázová & J Peter Neary, 2020. "Gravity Without Apology: the Science of Elasticities, Distance and Trade," The Economic Journal, Royal Economic Society, vol. 130(628), pages 880-910.
    6. Ornelas, Emanuel & Tovar, Patricia, 2022. "Intra-bloc tariffs and preferential margins in trade agreements," Journal of International Economics, Elsevier, vol. 138(C).
    7. Krenz, Astrid & Prettner, Klaus & Strulik, Holger, 2021. "Robots, reshoring, and the lot of low-skilled workers," European Economic Review, Elsevier, vol. 136(C).
    8. Lorz, Oliver, 2020. "Investment in trade facilitating infrastructure: A political-economy analysis," European Journal of Political Economy, Elsevier, vol. 65(C).
    9. Chien-Jung Ting & Yi-Long Hsiao, 2020. "Exploring Solutions for the Trade Barriers in Taiwan," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 10(5), pages 1-2.
    10. Dale-Olsen, Harald, 2023. "The Impact of New Free Trade Agreements on Incumbent Firms and Workers," IZA Discussion Papers 16649, Institute of Labor Economics (IZA).
    11. Yuan Mei, 2024. "Regulatory Protection And The Role Of International Cooperation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(2), pages 817-850, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kyle Bagwell & Chad P. Bown & Robert W. Staiger, 2016. "Is the WTO Passé?," Journal of Economic Literature, American Economic Association, vol. 54(4), pages 1125-1231, December.
    2. Staiger, Robert & Bagwell, Kyle & Bown, Chad, 2015. "Is the WTO Passé?," CEPR Discussion Papers 10672, C.E.P.R. Discussion Papers.
    3. Olper, Alessandro, 2017. "The political economy of trade-related regulatory policy: environment and global value chain," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 5(3), February.
    4. Maggi, Giovanni, 2014. "International Trade Agreements," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 317-390, Elsevier.
    5. Nuno Limão & Patricia Tovar, 2018. "Policy choice: Theory and evidence from commitment via international trade agreements," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 6, pages 179-198, World Scientific Publishing Co. Pte. Ltd..
    6. Christian Volpe Martincus, 2016. "Out of the Border Labyrinth: An Assessment of Trade Facilitation Initiatives in Latin America and the Caribbean," IDB Publications (Books), Inter-American Development Bank, number 96856, February.
    7. Brou Daniel & Ruta Michele, 2013. "A Commitment Theory of Subsidy Agreements," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 13(1), pages 239-270, January.
    8. David J. Kuenzel, 2023. "Non‐tariff measures: What's tariffs got to do with it?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(1), pages 133-163, February.
    9. James Lake & Maia Linask, 2016. "Domestic political competition and pro-cyclical import protection," Review of International Economics, Wiley Blackwell, vol. 24(3), pages 564-591, August.
    10. Kuenzel, David J., 2020. "WTO tariff commitments and temporary protection: Complements or substitutes?," European Economic Review, Elsevier, vol. 121(C).
    11. Harald Oberhofer & Michael Pfaffermayr & Richard Sellner, 2021. "Revisiting time as a trade barrier: Evidence from a panel structural gravity model," Review of International Economics, Wiley Blackwell, vol. 29(5), pages 1382-1417, November.
    12. Maggi, Giovanni, 2020. "Anti-lobbying gains from international agreements," Journal of Monetary Economics, Elsevier, vol. 109(C), pages 20-34.
    13. Imad Kareem Alaamshani & Hanny Zurina Hamzah & Shivee Ranjanee Kaliappan & Normaz Wana Ismail, 2021. "Impact of Trade Facilitation on Extensive Margin," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 131-147.
    14. Ruckteschler, Christian & Malik, Adeel & Eibl, Ferdinand, 2022. "Politics of trade protection in an autocracy: Evidence from an EU tariff liberalization in Morocco," European Journal of Political Economy, Elsevier, vol. 71(C).
    15. Volpe Martincus, Christian, 2016. "Out of the Border Labyrinth: An Assessment of Trade Facilitation Initiatives in Latin America and the Caribbean," IDB Publications (Books), Inter-American Development Bank, number 7994, November.
    16. Nuno Limão, 2016. "Preferential Trade Agreements," NBER Working Papers 22138, National Bureau of Economic Research, Inc.
    17. Kemal Türkcan & Socrates Kraido Majune, 2022. "Logistics infrastructure and export survival in European Union countries," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 49(2), pages 509-535, May.
    18. Lorz, Oliver & Thede, Susanna, 2024. "Tariff overhang and aid: Theory and empirics," Journal of Development Economics, Elsevier, vol. 166(C).
    19. Kyle Bagwell & Robert W. Staiger, 2016. "The Design of Trade Agreements," NBER Working Papers 22087, National Bureau of Economic Research, Inc.
    20. Beverelli, Cosimo & Neumueller, Simon & Teh, Robert, 2015. "Export Diversification Effects of the WTO Trade Facilitation Agreement," World Development, Elsevier, vol. 76(C), pages 293-310.

    More about this item

    Keywords

    International trade policy; Non-Tari Measures; Political economy; Red tape barriers; Trade agreements;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oxf:wpaper:847. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Anne Pouliquen (email available below). General contact details of provider: https://edirc.repec.org/data/sfeixuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.