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Chapter 8: TARIFF EQUIVALENT AND FORGONE TRADE EFFECTS OF PROHIBITIVE TECHNICAL BARRIERS TO TRADE

Departments of Horticultural Science and Applied Economics, University of Minnesota—Twin Cities USA

The authors thank two referees, Jeff Dorfman, Joe Herriges, Cathy Kling and participants at the 2007 American Agricultural Economics Association Annual Meetings, and the 2007 Australian Conference of Economists for discussions and comments. Yue acknowledges support from the Bachman Chair Endowment and Beghin from the Marlin Cole Professorship.

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JOHN C. BEGHIN

Iowa State University and chercheur–associé with the Public Economics Unit of Inra–AgroParistech, France

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https://doi.org/10.1142/9789813144415_0008Cited by:0 (Source: Crossref)

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-Thcker 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.

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