The Tariff Equivalent and Forgone Trade Effects of Prohibitive Technical Barriers to Trade
36 Pages Posted: 1 May 2008
Date Written: April 24, 2008
Abstract
We derive a method to econometrically estimate the tariff equivalent and foregone 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.
Keywords: Corner solution, Kuhn-Tucker model, New Zealand apples, nontariff barrier, NTB, prohibitive, random utility, TBT, technical barrier to trade, SPS, phytosanitary
JEL Classification: Q17, F13
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Estimating Trade Restrictiveness Indices
By Marcelo Olarreaga, Hiau Looi Kee, ...
-
Estimating Trade Restrictiveness Indices
By Hiau Looi Kee, Marcelo Olarreaga, ...
-
Import Demand Elasticities and Trade Distortions
By Hiau Looi Kee, Marcelo Olarreaga, ...
-
Import Demand Elasticities and Trade Distortions
By Marcelo Olarreaga, Hiau Looi Kee, ...
-
The Mercantilist Index of Trade Policy
By James E. Anderson and J. Peter Neary
-
Trade Barriers and Trade Flows Across Countries and Industries
By Jong W. Lee and Phillip Swagel
-
Measuring Effects of Trade Policy Distortions: How Far Have We Come?
By Kym Anderson