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Trade policy substitution: theory and evidence

Cosimo Beverelli (), Mauro Boffa () and Alexander Keck ()
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Mauro Boffa: European University Institute
Alexander Keck: World Trade Organization

Review of World Economics (Weltwirtschaftliches Archiv), 2019, vol. 155, issue 4, No 5, 755-783

Abstract: Abstract With the help of a political economy model, we show that the extent of ‘trade policy substitution’—namely, substitution of tariffs with non-tariff measures (NTMs)—depends on the cost differential between domestic and foreign firms in complying with product standards. The model suggests the prevalence of trade policy substitution in developed economies, where the costs of compliance are relatively low. We test and validate this prediction using a database on NTMs that identifies actual trade restrictions. We further examine the possible protectionist use of trade policy substitution exploiting information on the end of the Multifibre Arrangement (MFA) and on WTO notifications.

Keywords: Import; International trade agreements; Non tariff; Tariff; WTO (search for similar items in EconPapers)
JEL-codes: F13 F14 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s10290-018-00338-7

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Handle: RePEc:spr:weltar:v:155:y:2019:i:4:d:10.1007_s10290-018-00338-7