Assessing the Price-Raising Effect of Non-Tariff Measures in Africa

Abstract

Ample anecdotal evidence summarized in, inter alia, Gillson (2011) and Charalambides and Gillson (2011) suggests that non-tariff measures (NTMs), whether protectionist in intent or not, raise trade costs and inhibit regional trade in Africa.1 Beyond old-style quantitative restrictions (QRs) and bans, even measures that could be potentially justified by market failures like Sanitary and Phytosanitary (SPS) measures or product standards are often ill-suited to both consumer protection needs and State monitoring capabilities, generating unnecessary hurdles. The result is, potentially, higher prices hurting low-income households. The product lines can also be weighted by the amount of imports. However, this tends to understate the importance of restrictive NTMs since imports will be reduced where they are most restrictive. Similarly, if a particular NTM becomes more restrictive and reduces imports then the coverage indicator may actually fall the opposite of what should happen. Making the NTM more restrictive may then reduce the coverage ratio, which is the opposite of what a coverage ratio is supposed to pick up. This is a well-known problem which affects weighted-average tariffs as well. As for the NTMs' effect on trade (their severity), an important strand of the literature has focused on the variation in trade flows induced by the presence of NTMs to infer their ad-valorem equivalents (AVEs), i.e. the rate at which tariffs would have the same effect on trade flows. As for the NTMs' effect on trade (their severity), an important strand of the literature has focused on the variation in trade flows induced by the presence of NTMs to infer their ad-valorem equivalents (AVEs), i.e. the rate at which tariffs would have the same effect on trade flows.