Trade Restrictiveness Indices in Presence of Externalities : An Application to Non-Tariff Measures

John Christopher Beghin (1) , Anne-Célia Disdier (2, 3) , Stéphan Marette (4)

1 ISU - Iowa State University
2 PSE - Paris-Jourdan Sciences Economiques
3 PSE - Paris School of Economics
4 ECO-PUB - Economie Publique

We extend the trade restrictiveness index approach to the case of market imperfections and domestic regulations addressing them. We focus on standard-like non-tariff measures (NTMs) affecting cost of production and potentially enhancing demand by increasing product quality or reducing negative externalities. We apply the framework to the database of Kee et al. (2009) and derive ad valorem equivalents (AVEs) for NTMs. Half of the product lines affected by NTMs exhibit negative AVEs, indicating a net trade-facilitating effect of NTMs. Accounting for these effects significantly reduces previous measures of countries' trade policy restrictiveness obtained while constraining NTMs to be trade reducing.

Keywords: Non-tariff measures; Externalities; Ad valorem equivalents; Trade restrictiveness indices

Domains: Economics and Finance

John Christopher Beghin, Anne-Célia Disdier, Stéphan Marette. Trade Restrictiveness Indices in Presence of Externalities : An Application to Non-Tariff Measures. 2014. ⟨hal-00961727v2⟩