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Trade policy uncertainty as barrier to trade

Author

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  • Osnago, Alberto
  • Piermartini, Roberta
  • Rocha, Nadia

Abstract

This paper studies the effects of trade policy uncertainty on the extensive and the intensive margins of trade for a sample of 149 exporters at the HS6 digit level. We measure trade policy uncertainty as the gap between binding tariff commitments under trade agreements (multilateral and regional agreements) and applied tariffs- what is also known as tariffs' water. Our results show that trade policy uncertainty is an important barrier to export. On average the elimination of water increases the probability of exporting by 12 percent. A one percent decrease of water also increases export volumes by one percent. We also find that the negative impact of trade policy uncertainty is higher for countries with low quality of institutions and in the presence of global value chains. Finally, our findings show that on average trade policy uncertainty is equivalent to a level of tariffs between 1.7 and 8.7 percentage points.

Suggested Citation

  • Osnago, Alberto & Piermartini, Roberta & Rocha, Nadia, 2015. "Trade policy uncertainty as barrier to trade," WTO Staff Working Papers ERSD-2015-05, World Trade Organization (WTO), Economic Research and Statistics Division.
  • Handle: RePEc:zbw:wtowps:ersd201505
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    References listed on IDEAS

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    1. Valeria Groppo & Roberta Piermartini, 2014. "Trade Policy Uncertainty and the WTO," Discussion Papers of DIW Berlin 1437, DIW Berlin, German Institute for Economic Research.
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    6. Nuno Limão & Giovanni Maggi, 2015. "Uncertainty and Trade Agreements," American Economic Journal: Microeconomics, American Economic Association, vol. 7(4), pages 1-42, November.
    7. Kyle Handley & Nuno Limão, 2015. "Trade and Investment under Policy Uncertainty: Theory and Firm Evidence," American Economic Journal: Economic Policy, American Economic Association, vol. 7(4), pages 189-222, November.
    8. Handley, Kyle, 2014. "Exporting under trade policy uncertainty: Theory and evidence," Journal of International Economics, Elsevier, vol. 94(1), pages 50-66.
    9. Matthieu Crozet & Pamina Koenig & Vincent Rebeyrol, 2008. "Exporting to Insecure Markets: a Firm-Level Analysis," Working Papers 2008-13, CEPII research center.
    10. Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 52-102, February.
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    Cited by:

    1. repec:spr:jecstr:v:7:y:2018:i:1:d:10.1186_s40008-018-0109-z is not listed on IDEAS
    2. repec:eee:chieco:v:48:y:2018:i:c:p:66-82 is not listed on IDEAS
    3. Piermartini, Roberta & Yotov, Yoto, 2016. "Estimating Trade Policy Effects with Structural Gravity," School of Economics Working Paper Series 2016-10, LeBow College of Business, Drexel University.
    4. Beestermöller, Matthias & Disdier, Anne-Célia & Fontagné, Lionel, 2018. "Impact of European food safety border inspections on agri-food exports: Evidence from Chinese firms," China Economic Review, Elsevier, vol. 48(C), pages 66-82.
    5. Roy, Martin, 2019. "Elevating services: Services trade policy, WTO commitments, and their role in economic development and trade integration," WTO Staff Working Papers ERSD-2019-01, World Trade Organization (WTO), Economic Research and Statistics Division.
    6. repec:eee:inecon:v:115:y:2018:i:c:p:259-276 is not listed on IDEAS
    7. Douch, Mustapha & Edwards, T.Huw & Soegaard, Christian, 2018. "The Trade Effects of the Brexit Announcement Shock," The Warwick Economics Research Paper Series (TWERPS) 1176, University of Warwick, Department of Economics.

    More about this item

    Keywords

    binding overhang; tariffs; policy space; non-tariff barriers; World Trade Organization;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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