74147535 tariff and non tariff eco

8/12/2019 74147535 Tariff and Non Tariff Eco

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CHAPTER 1: INTRODUCTION

This report examines tariff and non-tariff policies that restrict trade between

countries in agricultural commodities. Many of these policies are now subject to

important disciplines under the 1994 GTT agreement that is administered by the !orld

Trade "rgani#ation $!T"%. The paper is organi#ed as follows. &irst' tariffs' import

(uotas' and tariff rate (uotas are discussed. Then' a series of non-tariff barriers to trade

are examined' including )oluntary export restraints' technical barriers to trade' domestic

content regulations' import licensing' the operations of import *tate Trading +nterprises

$*T+s%' and exchange rate management policies. &inally' the precautionary principle' an

en)ironment-related rationale for trade restrictions' and sanitary and phytosanitary

barriers to trade are discussed.

1.1 BACKGROUND

Tariffs and Tariff Rate Quotas

Tariffs' which are taxes on imports of commodities into a country or region' are

among the oldest forms of go)ernment inter)ention in economic acti)ity. They are

implemented for two clear economic purposes. &irst' they pro)ide re)enue for the

go)ernment. *econd' they impro)e economic returns to firms and suppliers of resources

to domestic industry that face competition from foreign imports.

Tariffs are widely used to protect domestic producers, incomes from foreign competition.

This protection comes at an economic cost to domestic consumers who pay higher prices

for importcompeting goods' and to the economy as a whole through the inefficient

allocation of resources to the import competing domestic industry. Therefore' since

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they were able to capture economic benefits through higher prices for their exports in the

importing country,s mar3et.

1. I!!UE!

2n the 0ruguay round of the GTT;!T" negotiations' members agreed to drop the use

of import (uotas and other non-tariff barriers in fa)or of tariff-rate (uotas.


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agreement. Thus' if the 0.*. honors its GTT commitments' the utili#ation of new non-

tariff barriers to trade is not really an option for the ://: &arm 6ill.

Do#esti$ Content Re%uire#ents

Go)ernments ha)e used domestic content regulations to restrict imports. The intent is

usually to stimulate the de)elopment of domestic industries. ?omestic content

regulations typically specify the percentage of a product,s total )alue that must be

produced domestically in order for the product to be sold in the domestic mar3et

$


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gain' as is the case with other trade barriers' it seems unli3ely that introducing domestic

content rules to enhance domestic demand for 0.*. agricultural commodities is a )iable

option for the ://: &arm 6ill.

1.& I'PORT (ICEN!E!

2mport licenses ha)e pro)ed to be effecti)e mechanisms for restricting imports. 0nder an

import licensing scheme' importers of a commodity are re(uired to obtain a license for

each shipment they bring into the country. !ithout explicitly utili#ing a (uota

mechanism' a country can simply restrict imports on any basis it chooses through its

allocation of import licenses. =rior to the implementation of 5&T' for example'

Mexico re(uired that wheat and other agricultural commodity imports be permitted only

under license. +limination of import licenses for agricultural commodities was a critical

objecti)e of the 0ruguay ound of GTT negotiations and thus the use of this

mechanism to protect 0.*. agricultural producers is unli3ely an option for the ://: &arm

6ill.

I#)ort !tate Tradin* Enter)rises

2mport *tate Trading +nterprises $*T+s% are go)ernment owned or sanctioned agencies

that act as partial or pure single buyer importers of a commodity or set of commodities in

world mar3ets. They also often enjoy a partial or pure domestic monopoly o)er the sale

of those commodities.


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and &oodstuffs 2mport and +xport


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)iolate !T" pro)isions that re(uire countries to treat imports and domestic products

e(ui)alently and not to ad)antage products from one source o)er another' e)en in indirect

ways.

gain' howe)er' these issues will li3ely be dealt with through bilateral and multilateral

trade negotiations rather than through domestic &arm 6ill policy initiati)es.

1., E-CHANGE RATE 'ANAGE'ENT PO(ICIE!

*ome countries may restrict agricultural imports through managing their exchange rates.

To some degree' countries can and ha)e used exchange rate policies to discourage

imports and encourage exports of all commodities. The exchange rate between two

countries, currencies is simply the price at which one currency trades for the other. &or

example' if one 0.*. dollar can be used to purchase 1// Bapanese yen $and )ice )ersa%'

the exchange rate between the 0.*. dollar and the Bapanese yen is 1// yen per dollar. 2f

the yen depreciates in )alue relati)e to the 0.*. dollar' then a dollar is able to purchase

more yen. 1/ percent depreciation or de)aluation of the yen' for example' would mean

that the price of one 0.*. dollar increased to 11/ yen. "ne effect of currency depreciation

is to ma3e all imports more expensi)e in the country itself. 2f' for example' the yen

depreciates by 1/ percent from an initial )alue of 1// yen per dollar' and the price of a

ton of 0.*. beef on world mar3ets is F:'///' then the price of that ton of beef in Bapan

would increase from ://'/// yen to ::/'/// yen. policy that deliberately lowers the

exchange rate of a country,s currency will' therefore' inhibit imports of agricultural

commodities' as well as imports of all other commodities. Thus' countries that pursue

A


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deliberate policies of under)aluing their currency in international financial mar3ets are

not usually targeting agricultural imports.

*ome countries ha)e targeted specific types of imports through implementing multiple

exchange rate policy under which importers were re(uired to pay different exchange rates

for foreign currency depending on the commodities they were importing. The objecti)es

of such programs ha)e been to reduce balance of payments problems and to raise

re)enues for the go)ernment. Multiple exchange rate programs were rare in the 199/s'

and generally ha)e not been utili#ed by de)eloped economies. &inally' exchange rate

policies are usually not sector-specific. 2n the 0nited *tates' they are clearly under the

pur)iew of the &ederal eser)e 6oard and' as such' will not li3ely be a major issue for

the ://: &arm 6ill. There ha)e been many calls in recent congressional testimony'

howe)er' to offset the negati)e impacts caused by a strengthening 0* dollar with

counter-cyclical payments to export dependent agricultural products.

Te Pre$autionar/ Prin$i)0e and !anitar/ and P/tosanitar/ Barriers to Trade

The precautionary principle' or foresight planning' has recently been fre(uently proposed

as a justification for go)ernment restrictions on trade in the context of en)ironmental and

health concerns' often regardless of cost or scientific e)idence. 2t was first proposed as a

household management techni(ue in the 19/s in Germany' and included elements of

pre)ention' cost effecti)eness' and ethical responsibility to maintain natural systems

$",iordan and


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0.5.


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These phony technical barriers were just an excuse to 3eep out competiti)e products. The

current !T" agreement re(uires that whene)er a technical barrier is challenged' a

member country must show that the barrier has solid scientific justification and restricts

trade as little as possible to achie)e its scientific objecti)es. This re(uirement has resulted

in a number of barriers being relaxed around the world.

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CHAPTER : NON TARI TRADE BARRIER! AND

NE2 PROTECTIONI!' (EARNING OUTCO'E!

.1 ARGU'ENT! OR REE TRADE

The important arguments in fa)our of free trade are as follows

$i% &ree trade leads to the most economic utilisation of the producti)e resources of the

world because under free trade each country will specialise in the production of those

goods for which it is best suited and will import from other countries those goods which

can be produced domestically only at a comparati)e disad)antage.

$2ii% s there will be intense competition under free trade' the inefficient producers are

compelled either to impro)e their efficiency or to (uit.

$2)% &ree trade helps to brea3 domestic monopolies and free the consumers from

exploitation.

$)% &ree trade benefits the consumers.in different ways. 2t enables them to obtain goods

from the cheapest source. &ree trade also ma3es a)ailable large )arieties of goods.

$) i% &urther' under free trade there is no much scope for corruption which is rampant

under protection. H Cnow 5on tariff Trade 6arriers and =rotectionism H 2dentify the fall

and rise of protectionism ree Trade 3ersus Prote$tion &ree trade refers to the trade

that is free from all artificial barriers to trade li3e tariffs' (uantitati)e restrictions'

exchange controls' etc. =rotection' on the other hand' refers to the go)ernment policy of

according protection to the domestic industries from foreign competition. There are a

number of arguments for and against both free trade and protection. $ii% 0nder free trade'

di)ision of labour occurs on an international scale leading to greater specialisation'

efficiency and economy in production.

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&urther' it is )ery difficult for a go)ernment to identify an industry that deser)es infant

industry protection. KThe infant industry argument. boils down to a case for the remo)al

of obstacles to the growth of the infants. 2t does not demonstrate that a tariff is the most

efficient means of attaining the objecti)e.K B

$ii% ?i)ersification rgument 2t is necessary to ha)e a di)ersified industrial structure for

an economy to be strong and reasonably self-sufficient. n economy that depends on a

)ery limited number of industries is subject to many ris3s. depression or recession in

these industries will seriously affect the economy. country relying too much. on

foreign countries runs a number of ris3s.


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$ix% Cey 2ndustry rgument 2t is also argued that a country should de)elop its own 3ey

industries because the de)elopment of other industries and the economy depends a lot on

the output of the 3ey industries. Ience' if we 4/ not ha)e our own source of supply of

3ey inputs' we will be placing oursel)es at the mercy of the foreign suppliers. The 3ey

industries should therefore be gi)en protection if that is necessary for their growth and

sur)i)al. $i)% 2mpro)ing 6alance of =ayments This is a )ery common ground for

protection. 6y restricting imports' a country may try to impro)e its balance of payments

position. The de)eloping countries' especially' may ha)e the problem of foreign

exchange shortage. Ience' it is necessary to control imports so that the limited foreign

exchange will be a)ailable for importing the necessary items. 2n de)eloping countries'

generally' there is a preference for foreign goods. 0nder such circumstances it is

necessary to control unnecessary imports lest the balance ofi payments position become

critical. The arguments mentioned abo)e ha)e been generally regarded as serious. There

are' howe)er' a number of other arguments also which ha)e been branded as nonsense'

fallacious' special interest' etc.


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$x% Ceeping Money at Iome This argument is well expressed in the form of a remar3

falsely attributed to braham Dincoln K2 do not 3now much about the tariff' but 2 3now

this much !hen we buy manufactured goods abroad we get the goods and the foreigner

gets money. !hen we buy the manufactured goods at home we get both the goods and

the moneyK. s 6e)eridge rightly reacted' this K...argument has no meritsL the only

sensible words in it are the firsteight word.K The fact that imports are ultimately paid for

by exports clearly shows that the 3eeping money at home argument for protection has no

sense in it.

$xii% *i#e of the Iome Mar3et 2t is argued that protection will enlarge the mar3et for

agricultural products because agriculture deri)es large benefits not only directly from the

protecti)e duties le)ied on competiti)e farn1 products of foreign origin but also'

indirectly from the increase in the purchasing power of the wor3ers employed in

industries similarly protected. 2t may be pointed out against this that protection of

agriculture will harm the non-agriculturists due to the high prices of agricultural products

and the protection of industries will harm agriculturists and other consumers due to high

prices encouraged by protection.

$xiii% +(ualisation of


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is the elimination of trade between nations. Thus' the e(ualisation of costs of production

argument for protection is utterly fallacious and is one of the most deceitful e)er

ad)anced in support of protection.

$xi)% *trategic Trade =olicy *trategic trade policy which ad)ocates protection and

go)ernment cooperation to certain high-tech industries in the de)eloped countries is

somewhat similar to the infant industry argument applied to the de)eloping countries.

The argument is that go)ernment support should be ac-corded to gain comparati)e

ad)antage in the high technology industries which are crucial to the future of the nation

such as semiconductors' computers' telecommunications' etc. 2t is also argued that *tate

support to certain industries become essential to pre)ent mar3et monopolisation. &or

example' outside the former *o)iet 0nion' only three firms build large passenger jets. 2f

+uropean go)ernments do not subsidise the irbus 2ndustries' only the two merican

companies' 6oeing


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to successfully nNlrture them. *econdly' since most leading nations underta3e strategic

trade policies at the same time' their efforts are largely neutralised so that the potential

benefits to each may be small. Thirdly' when a country does achie)e substantial success

with strategic trade policy' this comes at the expense of other countries $i.e.' it is a

beggar-thy-neighbour policy% and so' other countries are li3ely to retaliate.

The following defects are generally attributed to protection

$i% =rotection is against the interest of consumers as it increases price and reduces )ariety

and choice.

$ii% =rotection ma3es producers and sellers less (uality conscious.

$iii% 2t encourages domestic monopolies.

$i)% +)en inefficient firms may feel secure under protection and it discourages

inno)ation.

$)% =rotection lea)es the arena open to corruption.

$)i% 2t reduces the )olume of foreign trade.

.& A(( AND RI!E O PROTECTIONI!'

The period of o)er two-and-a-half decades until the early 19A/s witnessed rapid

expansion of the world output and trade. !orld trade' in fact' grew much faster than the

output. fter the *econd !orld !ar' there was a progressi)e trade liberalisation until the

early se)enties. Than3s to the efforts of GTT' the Ktariff reductions in the industrial

countries continued e)en after this. The a)erage le)els of tariff on manufactures in

industrial countries is now about per cent compared to 4/ per cent in 194A.

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.+ DE'ERIT! O PROTECTION

$)ii% =rotection leads to uneconomic utilisation of worlds resources' lthough the period

until the early 19A/s was characterised by trade liberalisation in general' there were

se)eral exceptions. 2n the de)eloped countries' hea)y protection was gi)en to the

agricultural sector through import restrictions and domestic subsidies. &urther' in

manufactured goods' textiles and clothe ing were subject to hea)y protection. There was

also protection associated with regional trade agreements li3e the ++


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de)eloping countries to open up their mar3ets for goods' ser)ices and in)estments of the

industrial countries.

s mentioned earlier' the 5T6s affect the exports of de)eloping countries much more

than those of the de)eloped ones. 2n other words' the main target of the de)eloped

country import restrictions in the last two decades' or so' has been the de)eloping

countries. 6y 19A' 5T6s were estimated to ha)e affected almost a third of "+


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s the industrial countries face more competition' they increase protectionism. This

encourages one to thin3 that they wanted free trade only as long as they enjoyed a

dominant positionL when their dominance is challenged they increase the trade barriers

gi)ing one or another reason. "ne should not be surprised if tomorrow they restrict the

imports from de)eloping countries arguing that the cost ad)antage of the de)eloping

countries is because of the injustice done to the labour by paying wages lower than that

in the 0* or other industrial countriesO 2ronically' industrial countries are increasing trade

restrictions while the de)eloping countries are liberalising trade.

Trade restrictions pro)e costly not only for the affected exporting country but also for the

importing country restricting the trade. The consumers often pay a hea)y price for

protection. 2t is estimated that o)erall the merican consumers pay as much as F A@

billion a year more for goods on account of import fees and restrictions-a sum roughly

e(ui)alent to about a sixth of the 0* import bill. 2n


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CHAPTER &: DOHA ROUND O NEGOTIATION!

The ?oha ?e)elopment genda $??% of the !orld Trade "rganisation $!T"% was

launched in ://1 at ?oha' atar to be completed by ?ecember ://4. 6ut' the

?e)elopment ound could not be completed by the targetted date as member countries

failed to arri)e at a consensus on core issues in the ound. The Iong Cong Ministerial

meeting of the !T" in ?ecember ://@ ended with a new deadline of completing the

?oha ound by ?ecember ://E. The negotiations were' howe)er' deadloc3ed in Buly

://E. 2n Banuary ://A at ?a)os' *wit#erland / trade ministers including 2ndia met and

decided to ta3e the ?oha genda forward and get bac3 to the negotiating table.

5egotiations then began from &ebruary ://A and major players commenced intense

discussions in the core areas of agriculture' industrial goods and ser)ices besides

discussions on rules and trade facilitation. *ince Banuary :// there has been a sense of

urgency among the negotiators to conclude the ound this year since they belie)e that

this is the last window of opportunity a)ailable if they want the ?oha ound to succeed.

ny delay now may lead to the ound being suspended for atleast a couple of years.

*ince March-pril :// there has been significant progress in the negotiations and

countries seem to be interested in stri3ing a deal. The ?irector General of !T"' Mr

=ascal Damy has used all platforms a)ailable to him to push the 3ey member countries

towards a consensus. There are indications that Mr Damy may con)ene a Ministerial

meeting in end-May :// to finali#e a deal.

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&.1 CII AND THE DOHA ROUND


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The ?? is )ery explicit on the principle of 7less than full reciprocity8 commitments and

7*pecial and ?ifferential Treatment8 that is a)ailable to de)eloping countries and it is an

important component of the negotiations on 5M. They may exempt up to 1/ percent

of their tariff lines from the agreed reductions or 3eep up to fi)e percent of their tariff

lines unbound. The least de)eloped countries do not ha)e to ma3e any tariff reductions at

all' but are expected to substantially increase their le)el of binding. 2ndustrial countries

are in return to remo)e tariffs and (uotas for all industrial goods from the least de)eloped

countries.

*ince the Iong Cong Ministerial meeting in ?ecember ://@' member countries of !T"

ha)e agreed on the following main areas in 5M

ll member countries would adopt a *wiss &ormula with different coefficients for

de)eloped and de)eloping countries. s per the formula the coefficient adopted for a

country will be the tariff le)el of that country.

The coefficients that ha)e been discussed as per the last paper in &ebruary :// from the

chairperson of the negotiating group' Mr ?on *tephenson' the de)eloped countries would

ha)e a coefficient of -9 and de)eloping countries would ha)e a coefficient of 19-:.

Members agreed that P*pecial and ?ifferential, treatment for de)eloping countries

including flexibilities and Pless than full reciprocity, in tariff reductions will be an

integral part of the modalities.

2t was decided to extend duty and (uota free access for at least 9A percent of products

for the least de)eloped countries $D? mandatory.

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This means that the countries decided that any initiati)e to eliminate customs duties on

specific sectors should not be binding on countries. Iowe)er' it was also decided that

sectorals would be decided on the basis of a critical mass of countries joining these

negotiations.


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de)eloping countries.


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Iowe)er' the offers on the table for liberali#ing the ser)ices regime in most countries'

especially the de)eloped ones' ha)e been mainly below expectations.

This is one area of negotiations that has not witnessed progress despite se)eral reminders

and statements by ministers and senior negotiating officials.

?uring the negotiations it has been decided that

=rogressi)e liberalisation will be achie)ed through negotiation with appropriate

flexibility for members.

There will be plurilateral re(uests in addition to the bilateral re(uest-offer approach.

Groups of Members presenting plurilateral re(uests to other Members should submit

such re(uests by : &ebruary ://E or as soon as possible thereafter.

CII Position

Mode 4 $mo)ement of professionals% and Mode 1 $trans-border supply% is of particular

interest to


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The negotiations are to ensure special efforts to support capacity building in de)eloping

countries' and to promote cooperation between customs and other authorities. ?e)eloping

countries are expected to ma3e reasonable contributions and the least de)eloped countries

are only to be re(uired to ma3e contributions consistent with their own needs and

capabilities. The negotiations ha)e come off to a good start' and there is good hope of

ha)ing a substantial agreement on trade facilitations as a substantial part of the ?oha

ound pac3age.

The trade facilitation agreement is important to the establishment of an impro)ed and

more efficient management process for international trade in goods on a global basis.

CII Position


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CHAPTER +: TARI AND NON"TARI BARRIER!

BENEIT DE3E(OPING COUNTRIE! " NE2 !TUD6

There is considerable e)idence for the hypothesis that under certain conditions'

restrictions on trade can promote growth' especially of de)eloping countries' according to

a study published in the Bournal of ?e)elopment +conomics.

The study by Ialit Sani33aya' an academic at the


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The study finds a contrary e)idence and says 7our estimation results from most

specifications $of tariff and trade barriers% show a positi)e and significant relationship

between trade barriers and growth8.

7+(ually important'8 the study adds' 7these results are essentially dri)en by de)eloping

countries' and thus consistent with the predictions of the theoretical growth literature that

certain conditions' de)eloping countries can actually benefit from trade restrictions.8

*e)eral empirical studies of the P/s and P9/s pro)ided an affirmati)e answer for the

)iew that 7open economies8 grew faster than closed ones' and that 7outward-oriented8

economies ha)e consistently higher growth rates than 7inward-oriented8 ones. These led

to a strong bias in fa)our of trade liberalisation and under-pinned the !orld 6an3;2M&

policy conditionalities and ad)ice to de)eloping countries and the !ashington


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different time-periods 6ut when the same yardstic3s were used and o)er the same time-

periods' the results showed that fast growth had ta3en place in some of the countries with

higher trade restrictions $2ndia and


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)arious measures on trade )olumes' which indicate a positi)e and significant association

between openness and growth' and is in line with conclusions of empirical and theoretical

growth literature.

Iowe)er' the estimation results for )arious measures for trade barriers' contradicts the

con)entional )iew on the growth effects of restrictions' and suggests 7an ad)erse

association between trade barriers and growth. The estimation results from most

measures of trade restrictions show a positi)e relationship between trade barriers and

growth' a result dri)en by de)eloping countries.

These results are consistent with the predictions of theoretical growth literature' namely'

that under certain conditions' de)eloping countries can actually benefit from trade

restrictions.

2n a sur)ey of the literature' the study finds that international trade theory $based on static

trade gains% pro)ides little guidance to the effects of international trade on growth and

technical progress' the new trade theory argues that gains from trade can arise from

se)eral fundamental sources differences in comparati)e ad)antage and economy-wide

increasing returns.

!hile there are many studies about the effects of trade policies on growth - during the

failed import substitution strategies of the 19/s and the export-promotion policies - there

is a lac3 of clear definition of Ptrade liberali#ation, or Popenness,.

The most difficult has been measuring Popenness,. n ideal one would be an index that

includes all trade barriers distorting international trade' such as a)erage tariff rates and

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indices of non-trade barriers. *uch an index' incorporating effects of both tariff and non-

tariff measures has been de)eloped by B.+.nderson and B.=.5eary. 6ut it is not a)ailable

for a large number of economies. "ther studies' li3e those by ?ollar and' *achs and

!arner used a)ailable data.

2f the growth engine is dri)en by inno)ation and introduction of new products' then

de)eloping countries should benefit more by trading with de)eloped countries than with

other de)eloping countries. Iowe)er' the Sani33aya study results do not support this'

both pro)iding growth regressions positi)ely and significantly.

The study finds that a de)eloping country benefits through technology diffusion by

trading with a de)eloped country' and since the 0* is the leader in technology'

de)eloping countries benefit through this bilateral trade. lso' countries with higher

population densities tend to grow faster than those with lower densities.

2n using measures of trade restrictions - se)eral of whom it ac3nowledges are not free

from measurement errors - the study reaches some )ery different conclusions than

con)entional trade theory suggests. Thus' it finds that trade barriers in the form of tariffs

can actually be beneficial for economic growth.

2n the current context $of the ?oha ound and the dri)e of +urope and the 0* to tear

down and harmonise de)eloping country tariffs%' this is a significant and telling result'

pro)iding support for the )iewpoint of de)eloping countries in these tal3s. The

framewor3 for modalities for tariff liberalisation in industrial products in the 5M

negotiations put forward by the chairman $and !T" secretariat% is misguided and needs

@


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to be opposed and jettisoned. !hen export taxes and total taxes on international trade are

used as a measure of trade restrictions' the study finds that sa)e for fixed effect estimates'

there is a 7significant and positi)e association8 between trade barriers and growth. This is

similar to the results for a)erage tariffs.

"n non-tariff barriers' there are difficulties of estimation because of data limitationsL

hence these are excluded in most empirical studies. 6ut studies by B.+dwards $cited in the

Sani33aya study% found such restrictions ha)ing an insignificant relationship with

growth' and came to the )iew that 5T6s are poor indicators of trade orientation' since a

broad co)erage of 5T6s did not necessarily mean a higher distortion le)el.

0sing se)eral new measures of trade openness and restrictions now a)ailable' and

applying them on a framewor3 model explained in details $but needs econometric

3nowledge for the lay trade person to test and see%' the Sani33aya study' says that there is

7considerable e)idence for the hypothesis that trade restrictions can promote growth'

especially in de)eloping countries' under certain conditions.8 The study ma3es clear that

it has no intention of establishing a simple and straightforward positi)e association

between trade barriers and growth' but rather to show that 7there is no such relationship

between trade restrictions and growth.8 *uch a relationship depends mostly on the

characteristics of a country. estrictions can benefit a country depending on whether it is

de)eloped or de)eloping $a de)eloped one seems to lose%' whether it is a big or small

country' and whether it has comparati)e ad)antage in sectors recei)ing protection

E


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CHAPTER ,: CA!E !TUD6

NON"TARI BARRIER! !TU'P PHAR'A E-PORT! TO CHINA:

ICCI

2ndia,s exports of pharmaceuticals could ma3e a significant dent in the


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sector is about EQ. 2n contrast' in the last three years 2ndia,s exports to


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the two nations. 2t is for the


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CONC(U!ION

!hen export taxes and total taxes on international trade are used as a measure of

trade restrictions' the study finds that sa)e for fixed effect estimates' there is a

7significant and positi)e association8 between trade barriers and growth. This is similar

to the results for a)erage tariffs. "n non-tariff barriers' there are difficulties of estimation

because of data limitationsL hence these are excluded in most empirical studies. *uch

restrictions ha)ing an insignificant relationship with growth' and came to the )iew that

5T6s are poor indicators of trade orientation' since a broad co)erage of 5T6s did not

necessarily mean a higher distortion le)el.

0sing se)eral new measures of trade openness and restrictions now a)ailable' and

applying them on a framewor3 model explained in details $but needs econometric

3nowledge for the lay trade person to test and see%' the Sani33aya study' says that there is

7considerable e)idence for the hypothesis that trade restrictions can promote growth'

especially in de)eloping countries' under certain conditions.8

The study ma3es clear that it has no intention of establishing a simple and

straightforward positi)e association between trade barriers and growth' but rather to show

that 7there is no such relationship between trade restrictions and growth.8

*uch a relationship depends mostly on the characteristics of a country.

estrictions can benefit a country depending on whether it is de)eloped or de)eloping $a

de)eloped one seems to lose%' whether it is a big or small country' and whether it has

comparati)e ad)antage in sectors recei)ing protection.

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REERENCE! AND !UGGE!TED READING!

BOOK! AND 7OURNA(!

Carbaugh, Robert J. International Economics, South-Western, 1995.

Cross, Fran !. "ara#o$ical "erils o% the "recautionar& "rinci'le,( Re)ision

*51,

Washington an# +ee ome "age, olume 5/, 1990.

e2 "rinci'le to "rotect uman ealth an# the En)ironment,( ealth 3lert,

Earth 4uar#ian, CS, 1999.

67Rior#an, 8im an# James Cameron. Inter'reting the "recautionar&

"rinci'le,( Earthscan "ublications, +t#., Islan# "ress, 199.

INTERNET 2EB!ITE!

htt'/::222.%arm%oun#ation.org:;


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74147535 tariff and non tariff eco

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