An Analysis of the Tariff and Non-tariff Barrier on Global Cottonseed Oil Trade

Abstract

This study is conducted to estimate the effect of both tariff and non-tariff barriers on global crude cottonseed oil, refined cottonseed, and cottonseed oil. This effect is estimated for a sample of developed and developing countries using data over the period 2005 to 2015. The study employed three maximum residue limits (MRL) indices, namely Li and Beghin, Actual Heterogeneous Index (AHI) and Heterogeneous Index (HI) as well as two estimation techniques, Poisson and Ordinary Least Square method (OLS). Marginal effects are obtained by using the Poisson technique. Estimated parameters such as distance, common border, PTAs, are found significant and according to prior expectations. The role of tariffs is more substantial in the oilseed trade compared to the trade in cottonseed crude oil. It is also found that the estimated elasticity by using Poisson technique is highly elastic as compared to OLS method. However, the aggregation of commodities at a higher level, as in the case of cottonseed oil, shows that the effect of the tariff on trade becomes statistically insignificant. Further, cottonseed crude oil is a major commodity affected by tariffs, particularly in the case of trade between North-North and North-South countries. Finally, the effect of tariffs on cottonseed refined oil trade was found insignificant.