The Combination of Gravity and Welfare Approaches for Evaluating Nontariff Measures

Abstract

This article explores the link between gravity and welfare frameworks for measuring the impact of non-tariff measures. First, an analytical approach suggests how to combine a gravity equation with a partial equilibrium model to determine the welfare impact of nontariff measures. Second, an empirical application focuses on the effects of a standard capping antibiotic residues in crustaceans in the United States, the European Union, Canada and Japan. While the econometric estimation of the gravity equation reports a negative impact on imports, welfare evaluations show that, in most cases, a stricter standard leads to an increase in both domestic and international welfare.

Maximum residue limits and agrifood exports of China: choosing the best estimation technique

“…The MRL indicators support the statement, Table 3 shows that the MRL indicators for all the selected products (except apples which is almost at par with the Codex value) is greater than that of the Codex (L ij > 1) i.e., the country has adopted a protectionist policy. According to Disdier and Marette (2010), the stringent regulations lead to an increase in the domestic as well as international welfare. This is also applicable in our case as the consumers (both domestic and international) have access to safe and healthy food.…”

“…To the contrary, Disdier and Marette (2010) found an increase in both the domestic and international welfare because of the imposition of the regulations/ standards. Moenius (2004) analyses the impact of environmental and technical standards on trade.…”

“…Their findings show a negative effect of the food safety standards on the export of agricultural products of China in the shortrun and a positive effect in the long-run. Disdier and Marette (2010) working on the non-tarrif measures investigate the association between the gravity and welfare frameworks. They found a negative impact of the NTMs on imports in the gravity framework and an increase in both the domestic and international welfare in the welfare context.…”

Protectionism indices for non-tariff measures: An application to maximum residue levels

“…Evaluating the protectionist component of these numerous qualitative policies into a protectionist score is likely to remain a challenge. For quantitative NTM policies, we show that aggregation is a much more manageable task Individual NTMs have been used empirically in a disaggregated fashion (Disdier and Marette (2010); Wilson and Otsuki (2004)). For qualitative standards, dummies are usually used to indicate the existence of such a standard.…”

“…However, it is increasingly recognized that market imperfections such as asymmetric information and production and consumption externalities abound and NTM policy interventions could increase welfare and may be trade-impeding or trade enhancing while increasing welfare (Beghin et al 2012, Carrère andDe Melo, 2011;Disdier et al, 2008;and Disdier and Marette, 2010). NTMs may also be protectionist of course.…”