Trade Policy Substitution: Theory and Evidence

Geneva School of Economics and Management Working Paper Series WPS 14-12-2

25 Pages Posted: 18 Dec 2014 Last revised: 19 Dec 2014

See all articles by Cosimo Beverelli

Cosimo Beverelli

World Trade Organization (WTO); European University Institute

Mauro Boffa

University of Geneva

Alexander Keck

World Trade Organization (WTO)

Date Written: December 1, 2014

Abstract

We build a political-economy model of 'trade policy substitution' – namely, substitution of tariffs with non-tariff measures – as a function of differentials between domestic and foreign firms in the costs of complying with product standards. Our model suggests trade policy substitution in developed countries, where the costs of compliance are relatively low, but not in developing economies. We test and validate empirically the predictions of the model using a database on NTMs that identifies actual trade restrictions. For the subset of developed countries, we use the end of the Multifibre Arrangement (MFA) as a 'quasi- experiment' to examine the protectionist use of trade policy substitution.

Keywords: Import, International Trade Agreements, Non Tariff, Tariff, WTO

JEL Classification: F13, F14

Suggested Citation

Beverelli, Cosimo and Boffa, Mauro and Keck, Alexander, Trade Policy Substitution: Theory and Evidence (December 1, 2014). Geneva School of Economics and Management Working Paper Series WPS 14-12-2. Available at SSRN: https://ssrn.com/abstract=2539061 or http://dx.doi.org/10.2139/ssrn.2539061

Cosimo Beverelli (Contact Author)

World Trade Organization (WTO) ( email )

Rue de Lausanne 154
Geneva, 1202
Switzerland

European University Institute ( email )

Villa Schifanoia
133 via Bocaccio
Firenze (Florence), Tuscany 50014
Italy

Mauro Boffa

University of Geneva ( email )

102 Bd Carl-Vogt
Genève, CH - 1205
Switzerland

Alexander Keck

World Trade Organization (WTO) ( email )

154 Rue de Lausanne
CH-1211 Geneva 21
Switzerland

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