Quantifying the Trade Effects of Technical Barriers to Trade: Evidence from China

Technical barriers to trade（TBT）are now widespread and have increasing impacts on international trade. Different from any other trade measures, TBT have both trade promotion and trade restriction effects. Due to their theoretical complexity and data scarcity, TBT have been considered as “one of the most difficult NTBs imaginable to quantify”. In this paper, we construct a TBT database from 1998 to 2006 to examine how TBT imposed by China influence the country’s bilateral trade. The empirical study is based on the gravity model. First, we calculate a series of frequency ratio at 4-digit-level of the Harmonized System and aggregate them into import coverage ratio at HS2. We show that TBT in China mainly appear in agriculture, agri-products and processing food sectors. Second, we find that those TBT-rocked industries have negative trade impacts while the results for the other industries are ambiguous. Third, we show that TBT are complementary to tariff now in China, whereas they are expected to become a substitute to tariff in the later period. Fourth, by comparing to other studies, we find that the TBT effects on trade are different between developed and developing countries. Finally, we draw policy implications based on the empirical findings. This paper makes important contributions to the literature on trade policy and has a number of features. First, in contrast to the existing empirical studies which exclusively focus on developed countries TBT, this paper focuses on a developing country, China. Second, this paper uses disaggregated data so that it can identify the sectors/products with predominant negative impacts on trade. Third, tariff data and quotas are included as additional explanatory variables which allow us to compare the impacts of traditional barriers and those of TBT.