Estimating the price effects of non-tariff measures

As multilateral negotiations focus more on reductions and removal of non-tariff barriers, the importance of quantifying the impact of these barriers has increased. While progress has been made recently, direct estimates of the impact of NTMs on prices has not been possible. This paper makes two contributions. First, price effects of NTMs are estimated directly, for many products in many countries. Second, explicit data on NTM incidence are drawn from two complementary databases—UNCTAD TRAINS data and a new NTM database compiled by the USITC. A simple differentiated product model of retail prices is developed to specify the direct relationship between NTMs and prices. From this model, a price gap specification is derived and estimated using retail price data for about 115 cities and 47 consumer products from the EIU CityData for 2001. The estimation yields both cross-country averages and country-specific estimates of the effects of NTMs, for more than 60 countries and four product groups in which NTM protection is of major importance: fruits and vegetables, bovine meats, processed food, and apparel.