A classification of trade barriers

1

• A classification of trade barriers
• Taxonomy
• Breakdown of effects
• Equivalence and non-equivalence of tariffs QRs
• Perfect competition
• Monopoly
• World price volatility
• QR administration licence allocation and
  efficiency
• QRs incidence measurement issues
• QR cost estimates a few examples
• Quality upgrading
• Using the gravity equation to assess the effect
  of QRs

2

• A Classification of trade barriers
• Taxonomy

Trade barriers
Dissipative barriers
Foreign-capture barriers
Domestic-capture barriers
Quotas
VERs

• Contingent tariffs
• antidumping
• countervailing
• safeguard clauses

Sanitary Phytosanitary standards
Technical Barriers to Trade
Price undertakings

• Noncontingent tariffs
• MFN
• Preferential

Quantitative Restrictions (QR)
Non-tariff barriers (NTB)
3

• Equivalence and non-equivalence of tariffs QRs
• Perfect competition
• Tariff under competition

Prices
Domestic demand
Marginal cost
World price
Quantities
4

• Equivalence and non-equivalence of tariffs QRs
• Perfect competition
• Quota under competition

Prices
Domestic demand
Residual (after-quota) demand
Marginal cost
Domestic price
A
C
World price
B
D
Quantities
Quota
5
Equivalence and non-equivalence of tariffs
QRs 2. Monopoly Tariff under monopoly
Prices
Domestic demand
Marginal revenue
Marginal cost
Quantities
6
Equivalence and non-equivalence of tariffs
QRs 2. Monopoly Quota under monopoly
Prices
Domestic demand
Residual (after-quota) domestic demand
Marginal cost
Domestic price
World price
Quantities
7
Use of Non-Tariff Barriers (NTBs)
(a) Ad-valorem equivalent of core NTBs, by
GDP/capita of using country
(b) AVE of agricultural price-support measures
Source Kee, Nicita Olarreaga 2006a
8
Equivalence and non-equivalence of tariffs
QRs 3. World price volatility Tariff at low price
Prices
Domestic demand
Marginal cost
Tariff
Low world price
Quantities
9
Equivalence and non-equivalence of tariffs
QRs 3. World price volatility Tariff at high
price
Prices
Domestic demand
Marginal cost
Tariff
High world price
Quantities
10
Equivalence and non-equivalence of tariffs
QRs 3. World price volatility Quota at low price
Prices
Domestic demand
Marginal cost
Domestic price
Low world price
Quantities
Quota
11
Equivalence and non-equivalence of tariffs
QRs 3. World price volatility Quota at high price
Prices
Domestic demand
Marginal cost
High world price domestic price
Quantities
Quota (not binding)
Actual imports
12
Overall protection OTRI and MA-OTRI
Define Overall Trade Restrictiveness Index (OTRI)
as uniform tariff that gives same level of
imports as all current barriers
OTRI
Existing barriers (tariffs AVE of NTBs)
Source Kee, Nicita Olarreaga 2006a
13
OTRI and MA-OTRI by level of income
(a) OTRI
(b) MA-OTRI
14
Overall protection OTRI and MA-OTRI in
agriculture
Source Kee, Nicita Olarreaga 2006a
15
QRs incidence and measurement issues 2. Using
the gravity equation to assess the effect of
QRs Bananas
16
Rent-sharing
(a) (tariff-quota)
/ton
SEU
SACP
pEU
S(t)
Total rents
S
p t
p
DEU
Rents to US companies
Million tons
Rents to European companies
QEU
Q 2.65
QACP 0.85
17
(b) (tariff only at rate tPG)
/ton
SACP SEU
SACP
SACP SEU S (tPG)
pEU
tPG
S
DEU
(b) (tariff only at rate tPG)
/ton
SEU
SACP
S (tPG)
pEU
tPG
S
DEU
Million tons
Q lt 2.65
QACP gt 0.8
QEU
18
Tariffication of a quota EU bananas
19
The gravity model of international trade
Distant
Large country
Large country
Close by
Small country
Distant
Distant
Large country
20
Estimating the price effect of QRs bananas 2.
Interpreting the gravity estimates
trade-reduction effect of QR
21
Estimating the price effect of QRs bananas 2.
Interpreting the gravity estimates tariff
equivalent of QR
22
Tariffication of a quota EU bananas Gravity
estimation