Hiau Looi Kee and Enze Xie (Development Research Group, World Bank)
Title: Tariff and Non-Tariff Measures: Trade Policies Mix and Match
Since the early 1990s, tariffs have been declining in most countries, while non-tariff measures (NTMs) have been featured in many trade agreements. This paper studies the trade policy roles of tariff and NTMs of developed and developing countries, using on the estimates of the ad valorem equivalent (AVEs) of NTMs from Kee and Nicita (2022), which is based on the UNCTAD-WB NTM database.
Alessandro Nicita (UNCTAD)
Title: The heterogeneous effects of trade policy on trade resilience during the 2020 trade downturn
The COVID-19 pandemic resulted in large and varying declines in bilateral trade flows. This study investigates whether these diverse effects can be explained by differences in trade costs as measured by pre-existing trade policies (e.g. tariffs, non-tariff measures and trade agreements). Results indicate that trade flows subject to higher trade costs declined more than average during 2020. The results also show that trade costs have heterogeneous effects depending on the thickness of trade relationships, with small exporters being relatively more affected by the presence of trade costs. We interpret the results as evidence that the fall in demand during 2020 caused higher-cost and less-established suppliers to be squeezed out of international markets.
Devaki Ghose (Development Research Group, World Bank)
Title: Fertilizer import ban, agro-exports, and welfare: Evidence from Sri Lanka
Joint with Eduardo Fraga, Ana Fernandes, Gonzalo Varela
We study the effects that a sudden disruption in the availability of chemical fertilizer due to an import ban had on agricultural production, exports, and welfare across different regions of Sri Lanka. Using new firm-level monthly trade data, detailed agricultural ground production data combined with remotely sensed yield data, and state-of-the-art event study designs, we find that the fertilizer ban led to dramatic declines in agricultural production and fertilizer-intensive exports. These declines were driven by fall in the quantities of fertilizer imports and fertilizer-intensive exports, while the import prices of fertilizers spiked. Using a quantitative trade model, we find that welfare effects differed across regions, depending on the propensity of the region to grow fertilizer-intensive crops and whether households were net consumers or producers.
Lucas Zavala (DIME, World Bank)
Title: Market Access Regulations and the Reallocation of Trade
Joint with Ana Margarida Fernandes, Tristan Reed, Jose-Daniel Reyes, and Ryan Haygood
Market access regulations including product standards and production process requirements have become more prevalent following the secular decline in tariffs. This heterogeneous set of non-tariff measures (NTMs) can encourage trade by providing consumers more information about product quality, but they can also deter trade by imposing fixed costs. We estimate the effect of NTMs on trade, accounting for the heterogeneity of regulations and the channels through which they operate. A key challenge is the lack of data on the introduction of NTMs over time and the market structure of imports. We overcome this by combining a new panel of NTMs imposed by 18 importing countries in Latin America with product-level data on bilateral trade flows and market concentration from all exporting partners. We find that Sanitary and Phytosanitary measures (SPS) deter trade and reallocate demand from low-income exporters to high-income exporters. On the other hand, Technical Barriers to Trade (TBT) encourage trade and reallocate demand from high-income exporters to low-income exporters. This reallocation is consistent with SPS measures imposing requirements which are relatively costly for low-income exporters, and TBTs providing information which is relatively beneficial to low-income exporters. The reallocation effects of SPS measures are stronger for homogeneous products, where information is less salient, while the effects of TBT measures are stronger for differentiated products, where information is more salient. SPS measures lead to less concentrated import markets, while TBT measures lead to more concentrated import markets. This suggests that many firms from high-income countries can comply with market access regulations, compared to a select few from low-income countries.
Angella Faith Montfaucon (MTI Global Practice and East Asia and Pacific Region, World Bank)
Title: A Time-varying Dataset on NTMs in Indonesia
Joint with Massimiliano Cali, Bayu Agnimaruto, Jana Mirjam Silberring, Csilla Lakatos, Mochamad Pasha, Agnesia Adhissa Hasmand, Nabil Rizky Ryandiansyah, Muhammad Hazmi Ash Shidqi, Aufa Doarest, and Wisnu Harto Adiwojoyo
The World Bank Indonesia has constructed and published the first comprehensive high-frequency panel dataset on the universe of NTMs applied in Indonesia. The data has been built in collaboration with the Indonesian government, and launched with support from UNCTAD. The data expands and improves on existing data on NTMs in Indonesia collected by UNCTAD and ERIA by covering a broader source base, increasing the frequency of updates (annual), customizing some measures in the data, having a higher time frequency (monthly), and linking it to policy such as NTMs put in place in response to COVID-19. Using this data and related analysis, the World Bank continues to have a vibrant policy dialogue with various counterparts of the Indonesian government and other stakeholders, including through technical assistance, capacity building, knowledge transfer events and inputs into operations.
Mochamad Pasha (East Asia and Pacific Region, World Bank)
Title: Nutritional Impacts of Trade Policies
Joint with Massimiliano Cali, Francis Addeah Darko, Sudarno Sumarto, Taufik Hidayat, and Sailesh Tiwari
In spite of economic progress malnutrition persists in many developing countries. The limited affordability and availability of nutritious food is often a driving factor behind poor nutritional outcome. We examine to what extent non-tariff measures (NTMs) imposed on imports affects nutrition by increasing the domestic price of food. We focus on Indonesia, which suffers from one of the highest stunting rates among middle-income countries, and leverages a new time-varying database on NTMs at a highly disaggregated level. The analysis first documents significant price increasing effects of NTMs on the 153 most consumed food items. It then zooms in on the most distortive measures and analyzes the impact of streamlining three of them and removing another three. Finally it links the simulated price changes due to NTMs to household consumption data with a demand system accounting for both income and substitution effects. The findings suggest that the proposed NTM reforms could reduce food prices by between 2 and 40 percent, which in turn translate into significant reductions in undernourishment rate (from 8.26 percent to between 1 and 7 percent, depending on which NTM is reformed).
Fabio Artuso (MTI Global Practice, World Bank)
Title: Streamlining NTMs through a Theory of Chance in a fragile policy environment: the case of the Turkish Cypriot Community
Pervasive licensing requirements and inspections in the Turkish Cypriot economy put an excessive burden both on the administration and the business community, distorting prices and deteriorating domestic competitiveness. The Bank econometric analysis found that, for the same variety, the average price of goods imported in the Turkish Cypriot Community is 20.1% higher compared to a counterpart variety imported in benchmark economies and that this is motivated by a pure compositional effect: exporting to the TC economy involves additional costs with respect to the other benchmark economies, and firms likely pass through the costs on the market price. NTMs imposed by TC authorities appear to play a major role in determining such a wedge in import prices, while logistics costs and exchange rates have a much lower impact. Out of each 100 additional euros paid for imported products in the TC economy, 27 euros are due to import restrictions and 14.3 euros are due to the exchange rate. Only 8.7 euros are due to additional logistics costs and distance. TC imported varieties protected by import bans are 26.6% more expensive than the comparable varieties imported by the benchmark economies.
These findings generated significant interest at technical level in several agencies of the TC administration. In particular, both the ‘Ministry of Agriculture’ and the ‘Ministry of Health’ have actively engaged to design a pilot risk management system, envisioning to start the regulatory simplification for low risk categories of products. The presentation will focus on the operation modalities of the engagement and on the significance of relying on solid analysis to develop a Theory of Change in consultation with the beneficiaries of a Bank intervention.
Souleymane Coulibaly (EFI Global Practice Group, World Bank)
Title: Green Goods Trade in the Philippines: The Role of Policies and Impacts on the Labor Market
Joint with Angella Montfaucon, Regina Seri Atsebi, and Natnael Simachew Nigatu
The wave of technological change unleashed by renewable and other green technologies opens new windows of opportunity for countries to build resilience against threats, grow stronger and more diversified economies and move to better development trajectories with a smaller burden for the environment. We assess the level of green good trade in the Philippines, policies that possibly constrain access to green technologies from foreign markets and labor market implications of reforming these policies. We find that the share of green goods trade is relatively low, partly due to high incidence of non-tariff measures on imports of green goods. Non-tariff measures on these green good imports are higher in the Philippines than in other countries and impose significant cost. Reforms would increase the imports of green goods and we find suggestive evidence this increase would potentially narrow the gender employment gap within industries. However, not all workers stand to gain, and other policies facilitating the transition following trade reform would be needed in the short-run.
Hiau Looi Kee (Development Research Group, World Bank)
Title: Domestic Value Added, Non-Tariff Measures and Green Products: Firm Evidence from China
Joint with Daria Taglioni and Enze Xie
This paper studies the rising domestic value added ratio (DVAR) of exports, based on the custom transaction data of China. We show that much of the increase in the Chinese DVAR is due to their processing exports, which faced no import tariffs, provided that the non-tariff measures (NTMs) are satisfied. Results show that while the DVAR of non-processing exports is mainly affected by tariffs, NTMs are more important in determining the DVAR of processing exports, particularly for the green products.