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Trade policy substitution: theory and evidence

  • Cosimo Beverelli
  • Mauro BoffaEmail author
  • Alexander Keck
Original Paper

Abstract

With the help of a political economy model, we show that the extent of ‘trade policy substitution’—namely, substitution of tariffs with non-tariff measures (NTMs)—depends on the cost differential between domestic and foreign firms in complying with product standards. The model suggests the prevalence of trade policy substitution in developed economies, where the costs of compliance are relatively low. We test and validate this prediction using a database on NTMs that identifies actual trade restrictions. We further examine the possible protectionist use of trade policy substitution exploiting information on the end of the Multifibre Arrangement (MFA) and on WTO notifications.

Keywords

Import International trade agreements Non tariff Tariff WTO 

JEL Classification

F13 F14 

Notes

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Copyright information

© Kiel Institute 2019

Authors and Affiliations

  1. 1.World Trade OrganizationGenevaSwitzerland
  2. 2.Robert Schuman Centre for Advanced StudiesEuropean University InstituteFlorenceItaly

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