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Abstract
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.