Import-Reducing Effect of Trade Barriers: A Cross-Country Investigation

IMF Working Papers, December 1, 2001

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Import-Reducing Effect of Trade Barriers: A Cross-Country Investigation

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Bibliographic details

• Authors: Qing Wang
• Published: December 1, 2001
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451954692.001

Summary

• A comprehensive empirical investigation is carried out to ascertain the import-reducing effect of trade protection barriers.
• Both tariff and non-tariff barriers (NTBs) are found to be quite significant in restricting imports.
• The study uses disaggregated cross-country, cross-industry data on manufactured goods and covers a broad range of countries—more than 70 in total, including Group of Seven countries and Bangladesh.
• The analysis is based on a monopolistic competition trade model and 1994 cross-country data on trade barriers, trade flows, and production.

Methodology

• Theoretical framework: monopolistic competition trade model.
• Empirical specification: an econometric model that captures stylized facts and generates sensible estimates.
• Econometric framework: designed to control for the simultaneous determination (simultaneity problem) of trade flows, trade barriers, and production.
• Key model components referenced in the source: NTBs equation, protection equation, rank correlation, regime yield.

Data and Sample

• Year of primary cross-country data: 1994.
• Coverage: disaggregated cross-country, cross-industry data on manufactured goods.
• Sample size: more than 70 countries ranging from highly developed (Group of Seven) to the least developed (Bangladesh).

Key Findings and Results

• Both tariff and NTBs are statistically significant and have substantial import-reducing effects.
• The empirical model and econometric framework produce estimates consistent with the stylized facts of trade protection and trade flows.
• The study provides a statistical summary of the status of global trade protection, incorporating both tariff rates and NTBs coverage ratios.

Policy Implications and Interpretations

• Trade protection in the form of tariffs and NTBs meaningfully restricts import penetration and trade flows.
• Addressing both tariffs and NTBs is important for policies aimed at increasing import openness and trade integration.
• The simultaneity between trade barriers, trade flows, and production implies that policy evaluation should account for endogenous interactions among these variables.

Qing Wang. "Import-Reducing Effect of Trade Barriers: A Cross-Country Investigation", IMF Working Papers 2001, 216 (December 1, 2001).

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