DEEP REGIONAL INTEGRATION AND NON-TARIFF MEASURES: A METHODOLOGY FOR DATA ANALYSIS

Olivier Cadot, Alan Asprilla, Julien Gourdon, Ralph Peters and Christian Knebel

No 69, UNCTAD Blue Series Papers from United Nations Conference on Trade and Development

Abstract: In this paper we develop "tools" for policymakers to advance "deep" regional integration with respect to non-tariff measures (NTMs). First, we develop a regulatory distance indicator to measure the similarity of NTM policies across countries and sectors. A quantitative approach which makes use of official NTM data to compare regulatory patterns is complemented by case-study approaches for a more detailed analysis. Policymakers can use these tools to assess the status quo of NTM-related regional integration and to benchmark progress. Secondly, we employ a price-gap based technique to estimate the price increasing effect of NTMs. Worldwide averages of ad-valorem equivalents (AVEs) for all NTM types combined vary between 5 and 27 per cent across sectors; with the highest AVEs in the animal and vegetable sectors. SPS and TBT measures account for the bulk of these AVEs, especially in Europe. Other NTMs like quantitative restrictions remain relevant in Asia, Latin America and Africa, especially in food-related products and in some industrial sectors. We also look at the estimation residuals to trace back from AVEs to more concrete and specific cases. Where the actual traded price of a product is higher than predicted by the model, a more-than-average restrictiveness of specific NTMs or monopolistic/oligopolistic markets are likely explanations. This approach may help to "flag" suspicious cases, but then requires going into deeper "on the ground" facts to find explanations. Furthermore, we explore the question about who pays the price for trade costs arising from NTMs. We derive anecdotal evidence from a specific example where the importer and foreign exporter can pass on the higher price to the final consumer or downstream producer in a value chain. This implies a low motivation for the actual trading partners to reduce certain trade barriers. Lastly, we link AVEs to Kenyan household survey data on consumption patterns in order to evaluate welfare impacts. NTM-related costs increase the average cost of living by about 8 per cent. Furthermore, this impact is stronger for poorer people and weaker for richer people. This distributional effect is caused by the higher share of food items in the consumption basket of the poor.

Date: 2015
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Citations: View citations in EconPapers (30)

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