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Revisiting the Trade-Creating Effects of Non-Tariff Barriers

Author

Listed:
  • Gabriel Felbermayr

    (Austrian Institute for Economic Research (WIFO), Vienna University of Economics and Business (WU), CESifo, GEP)

  • Feodora Teti

    (ifo Institute, LMU Munich, CESifo)

Abstract

Modern regional trade agreements focus on promoting bilateral exchange mostly by lowering non-tariff barriers to trade. But do existing regional trade agreements actually deliver what they promise? This paper argues that existing results in the literature are upward biased because of measurement error in a crucial control variable: tariff rates. Using a novel data set of high-quality tariff information, the paper shows that, on average, non-tariff barriers reductions in deep regional trade agreements boost services trade but not goods trade. Estimating separate non-tariff barrier effects for each regional trade agreement reveals strong heterogeneity: only 23 percent of all regional trade agreements seem to lower non-tariff barriers. For most regional trade agreements, we fail to find any significant effect, while 9 percent appear to reduce trade, possibly because a more balanced regulation evens out comparative advantages. The trade agreements that foster trade the most include non-discriminatory trade policy changes.

Suggested Citation

  • Gabriel Felbermayr & Feodora Teti, 2023. "Revisiting the Trade-Creating Effects of Non-Tariff Barriers," Rationality and Competition Discussion Paper Series 459, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:459
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    References listed on IDEAS

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    1. Head, Keith & Mayer, Thierry, 2014. "Gravity Equations: Workhorse,Toolkit, and Cookbook," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 131-195, Elsevier.
    2. Mattoo,Aaditya & Rocha,Nadia & Ruta,Michele, 2020. "The Evolution of Deep Trade Agreements," Policy Research Working Paper Series 9283, The World Bank.
    3. Yotov, Yoto, 2021. "The Variation of Gravity within Countries," School of Economics Working Paper Series 2021-12, LeBow College of Business, Drexel University.
    4. Tristan Kohl & Steven Brakman & Harry Garretsen, 2016. "Do Trade Agreements Stimulate International Trade Differently? Evidence from 296 Trade Agreements," The World Economy, Wiley Blackwell, vol. 39(1), pages 97-131, January.
    5. Ingo Borchert & Mario Larch & Serge Shikher & Yoto V. Yotov, 2021. "The International Trade and Production Database for Estimation (ITPD-E)," International Economics, CEPII research center, issue 166, pages 140-166.
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    More about this item

    Keywords

    RTAs; non-tariff barriers; trade policy; tariffs;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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