Abstract
This article estimates the effects of TBT/SPS measures on Brazilian exports, based on the recent literature of gravity models. A Heckman selection model - theoretically grounded on the seminal Melitz model of heterogeneous firms - highlights the role played by zero trade flows as well as firm heterogeneity for estimations using gravity equations, two factors usually omitted in standard specifications. We show that both extensive and intensive margins of Brazilian exports are, on average, negatively affected by pre-existing TBT and SPS measures. Moreover, we contribute to the empirical literature by providing comprehensive evidence of the sectoral effects of such measures over domestic exports. We find that TBT/SPS measures - though predominantly harmful - can foster exports in several sectors of the Brazilian economy.
Highlights
An important trend in trade policy in recent decades is the remarkable reduction of tariff barriers imposed on international trade
When it comes to firm heterogeneity at the intensive margin of trade, we show that Brazilian exports are hardly influenced by this variable
According to the World Trade Organization (WTO), Sanitary and Phytosanitary (SPS) measures may be defined as any measures applied: (1) “to protect human or animal life from risks arising from additives, contaminants, toxins or disease-causing organisms in their food; (2) to protect human life from plant or animal - carried diseases; (3) to protect animal or plant life from pests, diseases, or disease-causing organisms; (4) to prevent or limit other damage to a country from the entry, establishment or spread of pests”
Summary
An important trend in trade policy in recent decades is the remarkable reduction of tariff barriers imposed on international trade. This pattern is both a result of several trade liberalization rounds at the GATT/ WTO level and, more recently, the consequence of the sharp increase of regional trade agreements worldwide. Our estimations suggest that information contained in zero trade flows should be take into consideration in order to avoid possible bias on the estimated coefficients, a clear drawback of the traditional OLS approach When it comes to firm heterogeneity at the intensive margin of trade, we show that Brazilian exports are hardly influenced by this variable
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