This paper aims to analyze the substitution relationship between the two policy tools: tariffs and non-tariff measures. The empirical part will also compare the substitutability among developed and developing countries, as well as among various industries in an economy. The role of tariff binding overhang as a mediator that influences how non-tariff measures are used in place of tariffs will also be discussed.
Lastly, an outlook on the global progress towards free trade will inevitably have an impact on the wider health and environmental aspects. Therefore, the last part of this paper will discuss how the substitution of tariffs to NTMs can link to these broader dimensions, as well as what additional changes are necessary to ensure that a country’s economic goal aligns with its aim towards environmental protection.
Table of Contents
1. Introduction
2. Theoretical Part
2.1. The Standard Trade Model
2.2. Tariffs
2.3. Non-Tariff Measures (NTMs)
2.4. Tariffs-NTMs Relationship
3. Empirical Part
3.1. Comparison Across Countries
3.2. Comparison Across Industries
3.3. Tariff Binding Overhang
4. Health and Environmental Discussion
5. Conclusion and Implication
Research Objectives and Thematic Focus
This thesis aims to investigate the substitution relationship between two primary trade policy tools: tariffs and non-tariff measures (NTMs). The analysis examines how countries, categorized by their economic development status and specific industrial sectors, shift between these policy instruments, particularly in response to tariff liberalization and the mediation of tariff binding overhang.
- The role of tariff binding overhang as a mediator in trade policy substitution.
- Empirical comparison of trade policy substitutability between developed and developing nations.
- Sector-specific analysis of trade protectionism in agricultural versus manufacturing industries.
- The link between trade policy tools and broader health and environmental policy dimensions.
Excerpt from the Thesis
3.3. Tariff Binding Overhang
When discussing the substitutability between tariffs and non-tariff measures, the tariff binding overhang is a significant mediator that affects the substitution relationship. Kuenzel (2021) defines tariff binding overhang as “[…] the difference between WTO members’ bound and applied tariff rates […]”. He also argues that it is the appropriate threshold for detecting an NTM-tariff tradeoff because countries that have lower tariff overhang will have lower flexibility in controlling their trade policy (Kuenzel, 2021). As a result, they will be more likely to use other protectionist measures like NTMs to replace tariffs. Beshkar and Bond (2016) support this finding by showing that safeguard measures such as SPS and TBT measures are more prevalent in countries with lower tariff binding overhang.
Summary of Chapters
1. Introduction: Presents the global movement toward free trade and the persistent use of protectionist tools, establishing the goal to analyze the substitution relationship between tariffs and NTMs.
2. Theoretical Part: Establishes the standard trade model as a framework and defines tariffs and NTMs, while exploring the theoretical dynamics of their relationship.
3. Empirical Part: Provides a data-driven analysis of how countries and industries substitute NTMs for tariffs, highlighting the role of tariff binding overhang in this decision-making process.
4. Health and Environmental Discussion: Discusses the implications of trade policy substitution on non-economic objectives, specifically regarding consumer health standards and environmental conservation.
5. Conclusion and Implication: Summarizes the findings on trade policy evolution and provides recommendations for integrating environmental policy into trade agreements.
Keywords
International Economics, Trade Policy, Tariffs, Non-Tariff Measures, NTMs, Tariff Binding Overhang, Free Trade Agreement, Protectionism, Import Quotas, WTO, Economic Development, Substitution Effect, Environmental Policy, Industrial Policy, Trade Liberalization.
Frequently Asked Questions
What is the primary focus of this research?
The paper examines the substitution dynamics between tariffs and non-tariff measures (NTMs) used by governments to regulate international trade.
What are the main thematic areas covered?
The study covers trade theory, empirical analysis of trade barriers across countries and industries, the role of tariff binding overhang, and the intersection of trade policies with health and environmental goals.
What is the central research goal?
The goal is to analyze whether and why countries use NTMs as a substitute for tariffs, especially as global pressure leads to lower tariff rates.
Which scientific methods are employed?
The author employs a review of trade theory and utilizes existing empirical panel data and regression analysis (specifically PPML and tobit models) to measure the substitutability between trade policy instruments.
What is treated in the main body?
The main body covers the standard trade model, definitions of policy tools, comparative empirical data on developed and developing countries, industry-specific analysis, and the mediating role of tariff binding overhang.
Which keywords best characterize this work?
Key terms include International Economics, Tariffs, NTMs, Tariff Binding Overhang, and Trade Liberalization.
What is the significance of the "tariff binding overhang"?
It acts as a crucial mediator; countries with lower tariff overhang have less flexibility to adjust tariffs, making them more likely to implement NTMs to achieve desired levels of protection.
How does the COVID-19 pandemic influence the findings?
The author suggests that future trade barriers may be influenced by health-related regulations (like TBT measures) which might alter the cost-benefit analysis of substituting NTMs for tariffs.
- Quote paper
- Jessia Khalis Tanujaya (Author), 2021, Substituting policy tools. Tariffs and Non-Tariff Measures, Munich, GRIN Verlag, https://www.grin.com/document/1196294
