Quantitative Approaches to Trade-Barrier Analysis

A point that must be addressed before any analyses can be undertaken is to define what constitutes a ‘nontariff barrier’. This problem is complicated by the fact that different definitions have previously been advanced. Robert Baldwin (1970), for example, suggests that a nontariff trade distortion is ‘any measure (public or private) that causes internationally traded goods and services, or resources devoted to the production of these goods and services, to be allocated in such a way as to reduce potential real world income’. Potential world income is defined as that level attainable if resources were allocated in the most economically efficient manner. Clearly difficulties exist for applications of this definition since it requires an estimate of ‘potential real world income’ or, at a minimum, knowledge of directional movements in income under alternative policy measures. While there may be agreement on the directional movement for removal of (say) a rigorously enforced quota there are measures whose effects may be more difficult to assess. For example, it may be difficult to determine if removal of some sanitary requirements for imports would increase or decrease income if the resulting trade expansion was accompanied by a decline in health standards and rising medical costs.