Trade Policy Substitution: Theory and Evidence from Specific Trade Concerns

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Manuscript date: 29 October 2014Disclaimer: This is a working paper, and hence it represents research in progress. The opinions expressed in this paper should be attributed to its authors. They are not meant to represent the positions or opinions of the WTO and its Members and are without prejudice to Members' rights and obligations under the WTO. Any errors are attributable to the authors. Trade Policy Substitution:Theory and Evidence from Specific Trade Concerns * Cosimo BeverelliMauro Boffa Alexander Keck AbstractWe investigate to what extent the probability that a Specific Trade Concern (STC) is raised in the WTO against a Member in a given sector is affected by past reductions in applied tariffs. Employing an identification strategy based on 'new measures', we find evidence of a substitution of non-tariff measures for tariffs both in the sample of TBT and in the sample of SPS concerns. While in the SPS sample this result holds both among developed and developing economies, in the TBT sample such 'trade policy substitution' only occurs when the country maintaining the measure at issue is economically developed.These results are consistent with our theoretical model, which predicts policy substitution between tariffs and standards in economies where meeting such standards is relatively less costly and in sectors where meeting such standards is relatively more important from the perspective of producers.

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

“…Using data on specific trade concerns (STCs), Beverelli, Boffa and Keck (2014) find clear substitutability between past reductions in applied tariffs and SPS measures in both developed and developing economies, and same negative correlation between tariffs and TBTs only in developed countries. In line with these results, however, from the exporting country perspective, Orefice (2015) shows that lowering tariff by 10% corresponds to a 0.18% and 0.36% higher probability of observing an STC on SPS and TBT respectively.…”

Are nontariff measures and tariffs substitutes? Some panel data evidence

“…The intuition behind this absence of strong priors on the relationship can be illustrated by the theoretical work of Beverelli et al (). They take product standards as the available NTM and in their base model assume that NTMs such as product standards are unambiguously (marginal) cost increasing .…”

“…Another stream of this empirical literature examines NTMs as specific trade concerns for technical barriers to trade (TBT) and sanitary and phytosanitary measures (SPS). Beverelli et al () show that policy substitution between tariffs and SPS is observed for both developed and developing world, but in the TBT sample this holds only in developed countries. Orefice () reports that as a consequence of tariff cuts, SPS and TBT measures are used to restrict trade.…”

“… Several studies use tariff “changes” as their main explanatory variable (see Herghelegiu, ; Moore & Zanardi, ; Orefice, ), with some solely focused on tariff “reduction” (see Beverelli et al, ; Feinberg & Reynolds, ; Ketterer, ), while others use tariff “levels” (see Kee et al, ; Ronen, ; WTO, ). …”

Protecting health or protecting imports? Evidence from EU non-tariff measures

“…There have been a few, but insightful number of studies investigating whether NTMs are increasingly used as protectionist tools (Beverelli, Boffa, and Keck, 2014;Calo-Blano and Naya, 2005;Grundke and Moser, 2014;Kee, Neagu, and Nicita, 2008;Nordas and Ragoussi, 2015). Nonetheless, little is known on whether EU's usage of pesticide standards have protectionist intent.…”