Non-tariff measures: a methodology for the quantification of bilateral trade effects of policy measures at a product level

Abstract

ABSTRACT Trade negotiators are confronted with the policy challenge of determining which non-tariff measures (NTMs) and products to focus on, particularly in the agriculture and food sectors, which face a prevalence of NTMs. Quantitative advice on the trade effects of different measures can inform one aspect of a negotiator’s multifaceted prioritization process. Despite well-established methods for the quantification of trade policies at an aggregate bilateral trade level, the product-level literature suffers from a general misapplication of economic theory, leaving much of it divergent from microeconomic foundations. Furthermore, the literature generally makes compromises that inhibit the ability to draw useful insight on importer-specific policy variables like NTMs. In light of this gap in the literature, we propose an approach that leads to a proof-of-concept quantification methodology for bilateral product-level analysis, fulfiling a need in the body politic to defensibly identify trade effects of NTMs at a bilateral and product level. International grains markets are used as an example to demonstrate the proof-of-concept.