The price-wedge method yields a tariff-equivalent estimate of technical barriers to trade (TBT). An extension of this method accounts for imperfect substitution between domestic and imported goods and incorporates recent findings on trade costs. We explore the sensitivity of this revamped TBT estimate to its key determinants (substitution elasticity, preference for home good, and trade cost). We use the augmented approach to investigate the recent Japan-U.S. apple trade dispute and find that removing the Japanese TBT would yield limited export gains to the United States. We then draw policy implications of our findings.
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We thank two referees and Ian Sheldon for their constructive criticism, Linda Calvin, Bill Foster and conference participants at the 2005 Meetings of the Australian Agricultural and Resource Economics Society, the American Agricultural Economics Association, and the 2005 Congress of the European Association of Agricultural Economists for comments and discussions. Beghin and Yue acknowledge support from the Marlin Cole Endowment at Iowa State University.
- Technical barriers