Document Type

Working Paper

Publication Date

2-24-2014

Working Paper Number

WP #12023, October 2012 revised February 2014

Abstract

We extend the trade restrictiveness indices (TRIs) approach to the case of market failures and domestic regulations addressing them, in presence of arbitrary tariffs and other domestic price policy distortions. We focus on standard-like non-tariff measures (NTMs) affecting cost of production and potentially enhancing domestic demand by increasing product quality or reducing negative externalities. The impact of NTMs on trade is ambiguous depending on the relative strength of the supply cost and demand enhancing effects. We apply the framework to the NTM database of Kee, Nicita, and Olarreaga (2009) and derive ad valorem equivalents for NTMs and other policy distortions. These equivalents are then used to compute TRIs. 10% of the NTM ad valorem equivalents at the 6-digit level of the Harmonized System are negative indicating a net trade-enhancing effect of these NTMs in those sectors. Consequently, TRIs computed without a protectionist presumption are smaller than their constrained counterparts not allowing for trade enhancements effects of NTMs. Accounting for externalities and anti-protective effects significantly reduces the measure of trade policy restrictiveness for most countries.

Publication Status

Published in Canadian Journal of Economics, Vol. 47 no. 3 (August 2014): 697-719.

JEL Classification

F13, F18, Q56

File Format

application/pdf

Length

37 pages

File Function

Revised: February 2014 (Previous drafts: October 2012 and July 2013). Revised draft with new estimation, plots, and text using technical measures NTMs.

Included in

Economics Commons

Share

COinS