Policy choice: Theory and evidence from commitment via international trade agreements

Limão, Nuno; Tovar, Patricia

doi:10.1016/j.jinteco.2011.06.002

Cited by 85 publications

(38 citation statements)

References 34 publications

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“…This approach allows the authors to establish a causal impact of the required tariff changes on the use of NTMs, providing evidence of policy substitution. Limão and Tovar (2011) also find that the likelihood and restrictiveness of Turkish NTMs increases with the stringency of tariff commitments made.…”

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confidence: 77%

Trade Policy Substitution: Theory and Evidence from Specific Trade Concerns

Beverelli,

Boffa,

Keck

2014

SSRN Journal

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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.

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confidence: 77%

Trade Policy Substitution: Theory and Evidence from Specific Trade Concerns

Beverelli,

Boffa,

Keck

2014

SSRN Journal

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“…And in particular, the …ndings of Brou and Ruta can provide a rationale for the need to pursue deep integration with regard to behind-the-border NTMs. 27 26 Limao and Tovar (2011) also study the role of trade agreements as commitment devices when governments have both tari¤s and behind-the-border NTMs at their disposal, but their focus is on the possibility that international commitments to lower tari¤s will impact the use of behind-the-border NTMs, and on whether tari¤ agreements can still be attractive to governments when these impacts are present. Unlike Brou and Ruta (2013), Limao and Tovar do not consider the possibility that international commitments might be extended to cover behind-the-border NTMs, and the way in which this extension might best be designed.…”

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confidence: 99%

Non-Tariff Measures and the WTO

Staiger

2012

SSRN Journal

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In this paper I sketch out the rough contours of the challenge faced by the WTO in dealing with non-tari¤ measures (NTMs) as seen from the economic theories of trade agreements. The key questions for the WTO -the answers to which largely dictate the choice between shallow and deep approaches to integration -appear to be two: (1) Is it the terms-of-trade problem or the commitment problem that WTO member governments seek to solve with their WTO membership?; and (2) Is it market clearing or o¤shoring/bilateral bargaining that is now the most prominent mechanism for the determination of international prices? I suggest that evidence on the …rst question points to the terms-of-trade theory and hence toward shallow integration, but that answering the second question may be the key to identifying the best way forward on NTMs for the WTO. Along the way I provide a terms-of-trade interpretation of the WTO's Trade Facilitation Agreement. JEL: D62, F13, F55, H21 and H23.

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“…Prusa and Teh (2010) find that PTAs that include anti-dumping provisions reduce filings between members by 33-55% but increase them against nonmembers by 10-30%. Limão and Tovar (2011) find that the external tariff constraints that Turkey had to accept when it formed a customs union with the EU increased the probability and AVE of Turkish NTBs. Further work on this topic is important.…”

Section: Additional Dimensions Of Interdependencementioning

confidence: 92%

“…If we relax R2 to allow for other policies, e.g. non-tariff barriers, then the PTA also provides a way for the government to commit to its optimal redistribution policy when bargaining with lobbies, as shown in Limão and Tovar (2011). 71 …”

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Preferential Trade Agreements

Limão¹

2016

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A large and growing number of countries participate in multiple preferential trade agreements (PTAs), which increasingly entail broad cooperation over policies extending far beyond trade barriers. I review the traditional and non-traditional motives for PTAs and their empirical determinants as well as their impacts on trade and on multilateral liberalization. I argue that the broad nature of modern PTAs, their substantial creation of bilateral trade and their modest effects on members' tariffs, require us to augment the economic and policy structure of traditional models of PTAs as a static preferential tariff reduction. Throughout I draw lessons from the existing literature and point towards many interesting paths for future research, to advance our understanding of the causes of modern PTAs and their impacts on trade related outcomes and beyond. Nuno Limão Department of Economics University of Maryland 3105 Tydings HallCollege Park, MD 20742 and NBER limao@econ.umd.edu A data appendix is available at http://www.nber.org/data-appendix/w22138 A Online data and programs is available at http://terpconnect.umd.edu/~limao/handbook_pta 1 IntroductionIn 2010 the number of preferential trade agreements (PTAs) in force was four times higher than in 1990. The participation in PTAs is widespread: in 2010 each member of the World Trade Organization also participated in an average of 13 PTAs, up from only 2 in 1990 (WTO, 2011). This trend, the negotiation of mega-agreements by the U.S. and Europe and the evidence discussed below, indicate that PTAs are the most important source of trade policy reform in the last 20 years for most countries.In figure 1 we see that the proliferation of PTAs has continued after the creation of the World Trade Organization (WTO) in a period when non-preferential MFN tariffs were declining. Some of the largest growth has occurred in the last five years even though average MFN tariffs are at their lowest, averaging less than 8% in 2009. The traditional Vinerian view of PTAs, and most of the economic analysis, treats them as a static reduction in tariffs with respect to a preferential partner. But if the initial tariffs are already low then so is the preferential tariff margin, which raises two basic questions. What explains the formation and proliferation of so many PTAs and what are their basic trade and welfare effects on members? Figure 1: Preferential and Multilateral LiberalizationTo answer these two questions I first provide some stylized facts about the importance and evolution of trade between PTA members. Their share of world trade almost tripled between 1965-2010, with "deeper" PTAs becoming increasingly more important. A detailed examination of the provisions of modern PTAs in 2011 reveals policy cooperation far beyond reductions in applied tariffs. I provide a taxonomy of PTAs in terms of policy depth and breadth, where the latter includes economic and noneconomic provisions. Some of these provisions also evolved over time in the context of the GATT/WTO and others go far beyon...

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Policy choice: Theory and evidence from commitment via international trade agreements

Cited by 85 publications

References 34 publications

Trade Policy Substitution: Theory and Evidence from Specific Trade Concerns

Trade Policy Substitution: Theory and Evidence from Specific Trade Concerns

Non-Tariff Measures and the WTO

Preferential Trade Agreements

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