Hidden Protectionism: Non-Tariff Barriers and Implications for International Trade

Tasks

The global economic crisis in 2008 triggered a debate about increasing protectionism. Global leaders are increasingly under pressure to protect their domestic industries. The scope to increase tariffs is rather limited under the WTO regulations. In this study we analyze whether the latter developments might have led to an increasing usage of non-tariff barriers as protectionist instruments. The study exploits the level of hidden protectionism since 2009. It builds on a recently updated version of the Global Trade Alert database.

In a first step, the study illustrates the development of non-tariff barriers between 2009 and 2016. It points out, which types of non-tariff barriers were implemented. Six larger groups of non-tariff barriers are distinguished: (1) capital controls and exchange rate policies, (2) export and import policy instruments, (3) subsidies and state aid measures, (4) public procurement policies, (5) localization policies and (6) other instruments, including SPS and TBT. Furthermore, cross-country differences are worked out. The descriptive analysis shows that large trading economies are the most often affected nations by implemented non-tariff barriers. In addition, the study illustrates sectoral specific trends. Hidden protectionism turns out to be concentrated in very specific sectors.

In a second step, the study presents estimated trade effects caused by non-tariff barriers. A structural gravity model is estimated using an OLS estimator. Effects of non-tariff barriers are estimated at the three-digit product level. 

Methods

Structural gravity equation.

Data sources

Non-tariff barrier data (Global Trade Alert initiative),
Trade data (BACI),
Tariff data (WITS database, IDB).

Results

The study predicts an average trade reducing effect of about 12%, if at least one non-tariff barrier is implemented. Using an ad-hoc approximation procedure, we conclude that non-tariff barrier are responsible for about 16% of the missing global trade caused by the observed global trade slowdown over the past decade.

Publication