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Abstract
We extend the trade restrictiveness indices (TRIs) approach to the case of market failures and
domestic regulations addressing them, in presence of arbitrary tariffs and other domestic price
policy distortions. We focus on standard-like non-tariff measures (NTMs) affecting cost of
production and potentially enhancing domestic demand by increasing product quality or reducing
negative externalities. The impact of NTMs on trade is ambiguous depending on the relative
strength of the supply cost and demand enhancing effects. We apply the framework to the NTM
database of Kee, Nicita, and Olarreaga (2009) and derive ad valorem equivalents for NTMs and
other policy distortions. These equivalents are then used to compute TRIs. 10% of the NTM ad
valorem equivalents at the 6-digit level of the Harmonized System are negative indicating a net
trade-enhancing effect of these NTMs in those sectors. Consequently, TRIs computed without a
protectionist presumption are smaller than their constrained counterparts not allowing for trade
enhancements effects of NTMs. Accounting for externalities and anti-protective effects
significantly reduces the measure of trade policy restrictiveness for most countries.