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Welfare costs and benefits of non-tariff measures in trade: a conceptual framework and application

Published online by Cambridge University Press:  06 July 2012

JOHN BEGHIN ,
ANNE-CÉLIA DISDIER ,
STÉPHAN MARETTE  and
FRANK VAN TONGEREN
JOHN BEGHIN
Affiliation:
Iowa State University and INRA, UMR Economie Publique INRA-AgroParisTech
ANNE-CÉLIA DISDIER
Affiliation:
Paris School of Economics, INRA UMR PSE
STÉPHAN MARETTE
Affiliation:
INRA, UMR Economie Publique INRA-AgroParisTech
FRANK VAN TONGEREN*
Affiliation:
OECD, Trade and Agriculture Directorate
*
*Email: [email protected].
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Abstract

This paper provides a systematic welfare-based approach to analyze the impact of non-tariff measures (NTMs) on trade and welfare in the presence of market imperfections. It focuses on standard-like measures such as technical barriers and sanitary and phytosanitary regulations. The approach overcomes the shortcomings of the mainstream approach based on the analysis of foregone trade caused by trade costs. The latter ignores market imperfections, and welfare is found to increases when NTMs are reduced and trade expands. We explain how to account for external effects and market failures in trade-focused welfare analysis, leading to a more balanced overall assessment of measures despite a potential reduction of trade flows. The relationships between trade, welfare, and NTMs are complex, and generalizations are best avoided. Very often, the optimum NTM is not the absence of regulation. An application to shrimp trade illustrates the feasibility of the proposed approach. The illustration shows that the reinforcement of a food safety standard can be socially preferable to the status-quo situation, both domestically and internationally.

Type
Review Article
Information
World Trade Review , Volume 11 , Issue 3: Symposium Issue: Standards and Non-Tariff Barriers in Trade , July 2012 , pp. 356 - 375
Copyright
Copyright © John Beghin, Anne-Célia Disdier, Stéphan Marette and Frank Van Tongeren 2012

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