Macro-analysis of the trade effectsof Non-Tariff Measures

This chapter first provides a conceptual discussion on the effects of non-tariff measures (NTMs) on macroeconomic dimensions such as quantities exchanged domestically and internationally or prices either domestic or prevailing on international markets. For that purpose, a basic supply and demand theoretical framework and its graphically representation are used. It then surveys the main existing empirical analyses. It is crucial to keep in mind that trade analysis does not disentangle the impact of NTMs on each agent (consumers, producers, etc.). To obtain this specific impact, a welfare analysis should be conducted as discussed in chapter 5. To date, perhaps as a result of the rise in trade complaints related to NTMs, many empirical assessments have been mercantilist in nature, assuming that NTMs had necessarily a dampening impact on trade flows. Indeed, they focus on measuring the extent of forgone trade rather than attempting to identify the effects of NTMs on other macroeconomic dimensions (e.g. prices). This chapter reviews the different approaches used to assess these price effects either directly or indirectly discussing in detail any possible weakness and limitation of each of them. Ad valorem equivalents of NTMs (i.e. their price effect equivalent) must be used with extreme caution especially in the context of simulations with Applied General Equilibrium models.29 The chapter offers the possibility to verify practically all these elements with a set of computational exercises described in detail.

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