Consistency in gravity‑model valuations of non‑tariff measures in agro‑food trade

Abstract

To assess the economic impact of non-tariff measures (NTMs), prior studies measured ad valorem tariff equivalents (AVEs) using gravity models. However, questions persist about the extent to which product- and country-specific AVE estimates are consistent across studies, because AVEs depend on parameters estimated from different data and models. This study compared product- and country-specific AVEs estimated in two studies (World Bank 2019; Kravchenko et al. 2022) and evaluated the reliability of NTM reduction effects and policy implications using a global computable general equilibrium (CGE) model with the estimated AVEs. The findings revealed the following: First, AVEs estimated by the two studies were consistent at approximately 10% considering the total average (all products and countries worldwide), but values for products and countries differed significantly. Second, the global CGE assessment showed that products and countries affected by NTM reductions varied substantially when different AVEs were applied. Third, NTM reductions for products or countries with unknown AVEs resulted in negative export changes due to trade substitution. If the missing AVEs were 10%, the positive direct effect outweighed the substitution effect. Finally, the effects of NTM reductions—measured using AVEs of previous studies—were not significantly greater than those of tariff reductions. Given the questionable reliability of AVE estimates for NTMs, policymakers should recognize that the effectiveness of NTM reductions in agro-food trade remains uncertain. To derive reliable policy implications for NTMs, it is essential to examine the extent to which exporting companies in each country incur additional costs compared to domestic producers.