Tariff Equivalent and Forgone Trade Effects of Prohibitive Technical Barriers to Trade

Abstract

We derive a method to econometrically estimate the tariff equivalent and forgone trade effects of a prohibitive technical barrier to trade (TBT) based on Wales and Woodland’s Kuhn-Tucker approach to corner solutions in consumer choice. The method overcomes the lack of observed data on bilateral trade flows and accounts for differentiated goods by place of origin. We apply the derived random utility model to international trade in apples to identify the tariff equivalent of prohibitive phytosanitary barriers imposed by Australia on potential imports of New Zealand apples. We estimate the forgone apple trade between the two countries, the implied trade injury imposed by Australia on New Zealand, and the welfare loss to Australia. The removal of the Australian policy would induce net welfare gains around US$50 million annually for Australia. Copyright 2009, Oxford University Press.

The Trade and Welfare Impacts of Australian Quarantine Policies: The Case of Pigmeat

“…The combination of negligible tariffs and restrictive quarantine is a characteristic of several agricultural and food markets in Australia. Indeed, quarantine measures are the most important class of NTMs imposed on several agricultural products (James and Anderson, 1998;Yue and Beghin, 2009). While Australia's relative geographic isolation ensures that distance is a potentially substantial source of (physical) trade cost and natural protection, the country's unique ecology magnifies concern over the risk of importing non-indigenous pests and disease.…”

A political economy approach to measuring EU food standard enforcement and their implications on agri-food trade.

“…The analysis of NTMs is still considered a difficult and challenging task due to the lack of detailed information on these measures across countries and products. NTMs are possibly used to address market failures, to ensure high quality and compliance with technical standards (Mahé et al, 1997;Disdier et al, 2015), but also for protectionist purposes (Yue & Beghin, 2009;Nimenya et al, 2012). Another line of discussion refers to the political economy behind the implementation of NTMs in different countries.…”

“…The number of studies that focus on investigating the trade effect of NTMs on agri-food trade is significantly increasing (Yue and Beghin, 2009;.…”

“…Therefore, to ascertain the trade-enhancing or trade-deterrent role of NTMs, some recent researches have investigated how NTMs affect the agri-food trade Yue and Beghin, 2009). A point to stress is that limited access to consistent and updated information and various methodology limitations make the estimation of the NTM impacts on the agri-food trade a hard task.…”

“…On one hand, NTMs have been used as frequent instruments that aim at the protection of food safety, human, plant and animal health, and the natural environment. On the other hand, the other side of these regulations may have a protectionist behavior which allows developed countries to effectively control their domestic markets and reduce imports (Yue & Beghin, 2009;Nimenya et al, 2012;Disdier et al, 2015). According to Bacchetta & Beverelli (2012) (Vogel, 1995;Messerlin & Zarrouk, 2000) that goes beyond the aforementioned protection of public goods.…”