This paper studies the relationship between tariffs and non-tariff measures (NTMs) to understand the recent trade tensions with governments mixing trade policies, such as the European Union imposing NTMs on top of the tariffs on China's electric vehicles. Results based on the latest bilateral-product-level NTMs show that overall tariffs and NTMs are policy substitutes. The substitutions are higher for high-income importing countries, low-income exporting countries, country pairs with deep trade agreements, and products with consumption externalities. A simple terms-of-trade model demonstrates how the welfare-maximizing government may mix trade policies to reduce consumption externalities from imports. Structural estimations confirm the results.
Authors
- DOI
- https://dx.doi.org/10.1596/1813-9450-10855
- Disclosure Date
- 2024/07/17
- Disclosure Status
- Disclosed
- Doc Name
- Trade Policies Mix and Match : Theory and Evidence
- Originating Unit
- Off of Sr VP Dev Econ/Chief Econ (DECVP)
- Pages
- 36
- Product Line
- Advisory Services & Analytics
- Published in
- United States of America
- Rel Proj ID
- 3A-Integrating Africa Forward: From Threads To Hubs -- P502145
- Series Name
- Policy Research working paper; PROSPERITY;
- Unit Owning
- Office of the Chief Economist (AFECE),DECRG: Trade & Intl. Integration (DECTI)
- Version Type
- Final
- Volume No
- 1
Table of Contents
- Introduction 4
- Data and Stylized Facts 8
- Data 8
- Stylized Facts 8
- Stylized Fact 1: Shift toward Regional Trade Agreement 9
- Stylized Fact 2: Decreasing Tariffs and Increasing NTMs 10
- Empirical Strategies 11
- Instrumental Variables 12
- Empirical Results 13
- Baseline Results: The Overall Relationship between Tariffs and NTMs 13
- Further Analysis: What Factors Determine the Relationship between NTMs and Tariffs 14
- Given Importer-Product, Which Exporter Characteristics Matter? 14
- Given Product, Which Importer-Exporter Characteristics Matter? 15
- Given Importer-Exporter, Which Product Characteristics Matter? 16
- Given Exporter-Product, Which Importer Characteristics Matter? 17
- Model 20
- Structural Estimation 25
- Relating Structural Estimation to Reduced-Form Results 27
- Conclusions 30
- Variables Definitions and Data Sources 34
- Model Derivation 35
