Tariff equivalent and forgone trade effects of prohibitive technical barriers to trade

Chengyan Yue, John C. Beghin

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

We derive a method to econometrically estimate the tariff equivalent and forgone 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.

Original languageEnglish (US)
Title of host publicationNontariff Measures and International Trade
PublisherWorld Scientific Publishing Co. Pte Ltd
Pages139-150
Number of pages12
ISBN (Electronic)9789813144415
ISBN (Print)9789813144408
DOIs
StatePublished - Nov 28 2016

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Keywords

  • Corner solution
  • Kuhn-tucker model
  • New zealand apples
  • Phytosanitary
  • Prohibitive barrier
  • Technical barrier to trade

Cite this

Yue, C., & Beghin, J. C. (2016). Tariff equivalent and forgone trade effects of prohibitive technical barriers to trade. In Nontariff Measures and International Trade (pp. 139-150). World Scientific Publishing Co. Pte Ltd. https://doi.org/10.1142/9789813144415_0008