Non-tariff barriers in a non-tariff world

With ever diminishing tariffs, especially in developed countries’ markets, the focus of trade policy makers and analysts is logically turning towards non-tariff barriers. There much remains to be done, both in terms of policy decisions to dismantle these barriers – the current WTO negotiations have hardly touched upon the subject –, and in analysing the impact of this on the economy, where arguably more has been attempted. It is well know that tackling non-tariff barriers poses many additional challenges for the analyst because of their diverse and complex nature, and the lack of available evidence, which all make modelling their effects more complicated. This poses also particular difficulties to Computable General Equilibrium (CGE) modelling, traditionally more comfortable in dealing with policies that have direct effects on prices. This paper contributes to fill up this analysis gap. It provides a quantification of the impact of liberalisation of non-tariff barriers (NTBs) at the global level, using recent data from the World Bank and UNCTAD. The model used is significantly larger than in previous studies, using a 27-sector and 26-region aggregation based on the GTAP 6 database. However, this research essentially focuses on methodological questions related to the treatment of NTBs in CGE models with a focus on the GTAP model. The main message is that serious modelling efforts remain to be undertaken in order to make CGE modelling a useful policy tool to analyze NTBs. A promising route that could be pursued is the one opened by recent trade models offering a treatment of the extensive margin of trade.