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Revisiting the Trade-Creating Effects of Non-Tariff Barriers

Author

Listed:
  • Gabriel Felbermayr

    (Austrian Institute for Economic Research (WIFO), Vienna University of Economics and Business (WU), CESifo, GEP)

  • Feodora Teti

    (ifo Institute, LMU Munich, CESifo)

Abstract

Modern regional trade agreements focus on promoting bilateral exchange mostly by lowering non-tariff barriers to trade. But do existing regional trade agreements actually deliver what they promise? This paper argues that existing results in the literature are upward biased because of measurement error in a crucial control variable: tariff rates. Using a novel data set of high-quality tariff information, the paper shows that, on average, non-tariff barriers reductions in deep regional trade agreements boost services trade but not goods trade. Estimating separate non-tariff barrier effects for each regional trade agreement reveals strong heterogeneity: only 23 percent of all regional trade agreements seem to lower non-tariff barriers. For most regional trade agreements, we fail to find any significant effect, while 9 percent appear to reduce trade, possibly because a more balanced regulation evens out comparative advantages. The trade agreements that foster trade the most include non-discriminatory trade policy changes.

Suggested Citation

  • Gabriel Felbermayr & Feodora Teti, 2023. "Revisiting the Trade-Creating Effects of Non-Tariff Barriers," Rationality and Competition Discussion Paper Series 459, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:459
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    References listed on IDEAS

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    2. Mattoo,Aaditya & Rocha,Nadia & Ruta,Michele, 2020. "The Evolution of Deep Trade Agreements," Policy Research Working Paper Series 9283, The World Bank.
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    4. Yoto Yotov, 2021. "The Variation of Gravity within Countries," School of Economics Working Paper Series 2021-12, LeBow College of Business, Drexel University.
    5. Gabriel Felbermayr & Jasmin Gröschl & Thomas Steinwachs, 2018. "The Trade Effects of Border Controls: Evidence from the European Schengen Agreement," Journal of Common Market Studies, Wiley Blackwell, vol. 56(2), pages 335-351, March.
    6. Borchert, Ingo & Larch, Mario & Shikher, Serge & Yotov, Yoto V., 2021. "The International Trade and Production Database for Estimation (ITPD-E)," International Economics, Elsevier, vol. 166(C), pages 140-166.
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    Keywords

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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