The Tariff Equivalent and Forgone Trade Effects of Prohibitive Technical Barriers to Trade

We derive a method to econometrically estimate the tariff equivalent and foregone trade effects of a prohibitive technical barrier to trade (TBT) based on Wales and Woodland’s Kuhn-Tucker approach to corner solutions in consumer choice. The method overcomes the lack of observed data on bilateral trade flows and accounts for differentiated goods by place of origin. We apply the derived random utility model to international trade in apples to identify the tariff equivalent of prohibitive nontariff trade barriers imposed by Australia on potential imports of New Zealand apples. We estimate the forgone apple trade between the two countries, the implied trade injury imposed by Australia on New Zealand, and the welfare loss to Australia. The removal of the TBTs would induce net welfare gains around US$50 million annually for Australia.

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Conference Paper/ Presentation
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JEL Codes:
F13; Q17
Replaced by revised version of paper 05/05/08. (Former title: How to Estimate a Technical Barrier to Trade When There Is No Trade)
Series Statement:
Selected Paper 174220

 Record created 2017-04-01, last modified 2018-01-22

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