Tariff equivalent and forgone trade effects of prohibitive technical barriers to trade

Chengyan Yue, John C. Beghin

Research output: Contribution to journalArticlepeer-review

24 Scopus citations

Abstract

We derive a method to econometrically estimate the tariff equivalent and forgone 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 phytosanitary 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 Australian policy would induce net welfare gains around US$50 million annually for Australia.

Original languageEnglish (US)
Pages (from-to)930-941
Number of pages12
JournalAmerican Journal of Agricultural Economics
Volume91
Issue number4
DOIs
StatePublished - 2009

Keywords

  • Corner solution
  • Kuhn-Tucker model
  • New Zealand apples
  • Phytosanitary
  • Prohibitive barrier
  • Technical barrier to trade

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