The Substitution Effect of Preferential Tariffs on Nontariff Measures: Evidence from Vietnam

Abstract

This study empirically investigates the effects of ASEAN Trade in Goods Agreement (ATIGA) tariffs on nontariff measures (NTMs) in Vietnam from 2012 to 2018. Our findings reveal the following: First, our gravity estimation demonstrates that although the reduction of ATIGA tariffs increases Vietnam's imports, the introduction of certain NTM types, particularly price control and finance measures, decreases them. Second, the reduction of ATIGA tariffs tends to introduce price control measures in particular. Third, when ATIGA tariffs decrease, the pre-shipment inspection, nonautomatic licensing, and finance measures are more likely to be eliminated for products in which Vietnam has high export competitiveness. Fourth, both ATIGA tariffs and ASEAN+1 free trade agreement tariffs have significant effects on the introduction of NTMs in Vietnam. Finally, we found that the reduction in ATIGA tariffs also results in decreasing most favored nation tariffs.