The trade effects, protectionism, and political economy of non-tariff measures

Yuan Li

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: Non-tariff measures (NTMs) have become increasingly present in markets whereas border tariffs have been reduced from successive rounds of General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO). This emergence of NTMs, especially standards like NTMs, has been also motivated by concerns about market imperfections to address asymmetric information and external effects. Sorting protectionism from legitimate market intervention has been difficult and attempts have lack formalism. In addition, the empirical evidence on the impact of these NTMs on trade flows has been cluttered with few obvious implications for policy design. The first essay takes a meta-analysis approach to rationalize the systematic variations in the estimated NTM effects on trade in the current literature. The second essay proposes simple yet formal indices to quantify protectionism. The indices are then applied to a large Maximum Residue Limits (MRL) dataset, and provide comprehensive measurements and insights on protectionism across countries, and sectors in food and agricultural industries. The third essay addresses the political economy of NTMs. It proposes a parsimonious model of NTM determination using a partial equilibrium trade model with an externality corrected by a NTM standard in presence of rent-seeking activities. Then a derived reduced form of NTM determination is explored econometrically using the dataset of the second essay.

Date: 2013-01-01
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