RESEARCH AND ANALYSIS: WORKING PAPERS

Trade Policy Substitution: Theory and Evidence from Specific Trade Concerns

We investigate to what extent the probability that a Specific Trade Concern (STC) is raised in the WTO against a Member in a given sector is a ected by past reductions in applied tariffs. Employing an identification strategy based on “new measures”, we find evidence of a substitution of non-tariff measures for tariffs both in the sample of TBT and in the sample of SPS concerns.

While in the SPS sample this result holds both among developed and developing economies, in the TBT sample such “trade policy substitution” only occurs when the country maintaining the measure at issue is economically developed. These results are consistent with our theoretical model, which predicts policy substitution between tariffs and standards in economies where meeting such standards is relatively less costly and in sectors where meeting such standards is relatively more important from the perspective of producers.

 

No: ERSD-2014-18

Authors: Cosimo Beverelli (Economic Research Division, WTO) — Mauro Boffa (GSEM, University of Geneva) — Alexander Keck (Economic Research Division, WTO)

Manuscript date: October 2014

Key Words:

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

JEL classification numbers:

F13, F14, F15

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Disclaimer 

This is a working paper, and hence it represents research in progress. The opinions expressed in this paper are those of its authors. They are not intended to represent the positions or opinions of the WTO or its members and are without prejudice to members' rights and obligations under the WTO. Any errors are attributable to the authors.

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