In this paper, we develop techniques for measuring the trade policy equivalent of domestic distortions, using a distance function approach. Our measure, the Trade Restrictiveness Index, is shown to equal the uniform tariff which is welfare equivalent to a given pattern of domestic taxes and subsidies. We extend the index to incorporate taxes in markets for nontraded goods and factors of production and illustrate its operationality with an application to liberalisation in Mexican agriculture. We conclude that our index has considerable potential in empirical work and as an aid to trade negotiators. It is widely appreciated that government policies of a purely domestic nature can have major implications for a country's international trade. To give just one example, such implications were widely discussed in the context of the recent GATT round, in which U.S. negotiators insisted that intra-EC agricultural policy should be viewed as trade distorting. However, analysts and negotiators have not hitherto had access to a conceptual framework which would allow the trade effects of domestic policies to be measured in a consistent way. In this paper, we propose such a framework and show how it may be implemented empirically. Of course, other attempts have been made to quantify the overall distortionary effects of domestic policies. These have involved constructing empirically based indexes such as producer or consumer subsidy equivalents.2 However, such measures have no theoretical foundation. Moreover, since they use the shares of different sectors in production or consumption as weights, they are likely to be systematically biased: for example, sectors whose output levels are reduced by high taxation are assigned low weights whereas their true weights should be higher. By contrast, we show below that our approach is based firmly on welfare economics and correctly uses marginal rather than average production and consumption shares as weights. The approach we propose draws on recent work by two of the authors (Anderson and Neary 1990, 1992b) which dealt with trade distortions only. That work developed a scalar index, the Trade Restrictiveness Index or TRI, which equals the equiproportionate rate of trade restriction which is equivalent (in welfare terms) to