Estimating the Price Effects of Non-Tariff Barriers

Abstract

As multilateral negotiations focus more on reductions and removal of non-tariff barriers (NTBs), the importance of quantifying the impact of these barriers has increased. Recent studies have derived ad valorem equivalents for NTBs for a large number of countries and/or products, but the derivation has been indirect, due to either lack of price data or NTB incidence measures. This paper uses city level retail price data to directly estimate the average impact of core NTBs on prices of 47 consumer products, grouped into four separate sectors, for more than 60 countries in 2001. The analysis uses both government self-reported data and a new database of private sector complaint data to assess NTB incidence. A differentiated products model is used to capture imperfect substitutability between products. With city level price data—including both inter- and intra-country price differences—a more precise distinction can be made between the impact of NTBs and the impact of local distribution costs in raising price. The model is estimated using an instrumental variables approach to incorporate the endogeneity of NTBs. Results suggest that core NTBs are still highly restrictive in many countries and for many traded goods. While NTBs appear to be complements to tariffs, in some sectors the presence of a tariff reduces the price impact of the NTB. Results also suggest that in some sectors, the restrictiveness of NTBs is highly correlated with country income.

Tariffs and Non-Tariff Measures: Substitutes or Complements. A Cross-Country Analysis

“…Both papers argue that import penetration, or its growth, is positively correlated with the willingness of policymakers to impose NTMs. Dean et al (2009), in their cross-country analysis, find that in the case of fruits and vegetables, as well as for apparel products, the joint use of tariffs and NTMs significantly reduces the impact of NTM on price. They use city level retail price data to directly estimate the average impact of core NTMs on the prices of 47 consumer products grouped into four separate sectors for more than 60 countries in 2001.…”

Pulling back the curtain on 'behind the border' trade costs: The case of EU-US agri-food trade

“…A cursory examination of the literature reveals that the quantity based method appears to be the more popular, in large part due to easy access to detailed public databases of trade (Berden & Francois, 2015). Examining the price-approach, Bradford (2003Bradford ( , 2005 calculates (rather than estimates) the implicit non-tariff impact on prices (indirect method), whilst Dean et al (2009) andCadot &Gourdon (2014), employ an explicit non-tariff variable (i.e., direct method) to estimate its price rising effect.…”

“…Another method of data extraction employs questionnaire responses on traders' perceptions of market access. ECORYS (2009) In contrast to the direct approach, which can isolate the trade restrictiveness resulting from specific, or groups of non-tariff restrictions, the indirect or implicit approach is better attuned to examining the collective trade restricting impact of all trade barriers which may otherwise be hidden (Dean et al, 2009). Thus, indirect methods start by acknowledging that trade barriers imposed by the importer country cause distortions in trade, reducing import quantities (i.e.…”

“…Although this is not as straightforward in the indirect approach (Dean et al, 2009), it is still possible (see next section). A further observation when inferring trade costs (i.e., AVEs) using quantities, is the sensitivity of the AVE estimate to the value of the chosen import demand elasticity and/or elasticity of substitution.…”

Are Non-Tariff Measures a Substitute for Tariffs in Agricultural Trade?

“…With Δ, we refer to the five-year differences between the logarithms of the tariffs, where the final year is the year for which the NTEs were available. Specific product effects Z j are represented through dummies that correspond to the fixed effects for groups of products to capture product specificities, following the suggestion by Dean et al (2009). These groups are defined as belonging to Section I (Live animals and animal products), HS chapters 01 to 05 (j = 1), and Section II (Vegetal products), HS chapters 06 to 14 (j = 2).…”