Advertisement

The impact of Chinese technical barriers to trade on its manufacturing imports when exporters are heterogeneous

  • Mahdi GhodsiEmail author
Article

Abstract

In the past few decades, China has put substantial efforts into liberalising its trade and economy that accelerated after its accession to the World Trade Organisation (WTO) in December 2001. In this period, China has significantly reduced its tariffs on manufacturing imports. However, the proliferation of non-tariff measures imposed by China has made it the country notifying the second largest number of technical barriers to trade (TBTs) to the WTO after the USA. Nevertheless, there has been no case in the dispute settlement mechanism of the WTO against China violating the TBT agreement. This paper investigates the heterogeneous impact of Chinese TBTs on the imports of manufacturing products at the 6-digit level of the Harmonised System during 2002–2015. Heterogeneity of exporting firms, sample selection bias, multilateral resistances, and endogeneity bias are controlled for according to the recent strands of gravity modelling. Using the disaggregated data and controlling for these problematic issues in the estimations, paper finds no significantly overall impact of Chinese TBT on imports in comparison with earlier studies in the literature. However, the impact differentiated across exporting countries hints at prohibitive effects against few exporters. The impact on traded prices and quantities provide more insights on how these TBTs affect different exporters. The imposed standards and regulations embedded in these trade policy measures allowed the Chinese economy to gain better access to larger exporters from the more developed economies who could easily comply with TBTs without increasing prices but substituting those exporters who did not comply with TBTs, leading to an overall insignificant net impact on imports values to China.

Keywords

World Trade Organisation Trade liberalisation Trade policy Technical barriers to trade 

JEL Classification

F13 F14 

Notes

Acknowledgements

I am obliged to two anonymous referees and the coordinating editor of the journal of Empirical Economics, Robert M. Kunst and to my colleague Robert Stehrer (wiiw) for their reviews and constructive comments to the work. Thanks should also go to the participants of the 10th FIW Research Conference on International Economics in Vienna, and the participants of the workshop at the Institute for Management and Planning Studies in Tehran (https://www.imps.ac.ir/).

Compliance with ethical standards

Conflict of interest

The author declares that he has no conflict of interest.

Human and animal rights

This article does not contain any studies with human participants or animals performed by any of the authors.

Supplementary material

181_2019_1690_MOESM1_ESM.docx (321 kb)
Supplementary material 1 (DOCX 321 kb)

References

  1. Anderson JE (1979) A theoretical foundation for the gravity equation. Am Econ Rev 69(1):106–116Google Scholar
  2. Anderson TW, Rubin H (1949) Estimation of the parameters of a single equation in a complete system of stochastic equations. Ann Math Stat 20(1):46–63Google Scholar
  3. Anderson JE, van Wincoop E (2003) Gravity with gravitas: a solution to the border puzzle. Am Econ Rev 93(1):170–192Google Scholar
  4. Autor DH, Dorn D, Hanson GH (2016) The China shock: learning from labor-market adjustment to large changes in trade. Annu Rev Econ 8:205–240Google Scholar
  5. Baltagi BH, Egger P, Pfaffermayr M (2003) A generalized design for bilateral trade flow models. Econ Lett 80(3):391–397Google Scholar
  6. Bao X (2014) How do technical barriers to trade affect China’s imports? Rev Dev Econ 18(2):286–299Google Scholar
  7. Bao X, Chen WC (2013) The impacts of technical barriers to trade on different components of international trade. Rev Dev Econ 17(3):447–460Google Scholar
  8. Bao X, Qiu LD (2010) Do technical barriers to trade promote or restrict trade? Evidence from China. Asia-Pac J Account Econ 17(3):253–278Google Scholar
  9. Bao X, Qiu LD (2012) How do technical barriers to trade influence trade? Rev Int Econ 20(4):691–706Google Scholar
  10. Barisitz S, Ghodsi M, Havlik P, Urban W (2016) Monthly Report No. 10/2016 (No. 2016-10). The Vienna Institute for International Economic Studies, wiiwGoogle Scholar
  11. Beghin JC, Disdier AC, Marette S (2015) Trade restrictiveness indices in the presence of externalities: an application to non-tariff measures. Can J Econ/Revue canadienne d’économique 48(4):1513–1536Google Scholar
  12. Bingzhan S (2011) Extensive margin, quantity and price in China’s export growth. China Econ Rev 22(2):233–243Google Scholar
  13. Blind K (2001) The impacts of innovations and standards on trade of measurement and testing products: empirical results of Switzerland’s bilateral trade flows with Germany, France and the UK. Inf Econ Policy 13(4):439–460Google Scholar
  14. Blind K, Jungmittag A (2005) Trade and the impact of innovations and standards: the case of Germany and the UK. Appl Econ 37(12):1385–1398Google Scholar
  15. Bora B, Kuwahara A, Laird S (2002) Quantification of non-tariff measures (No. 18). United Nations PublicationsGoogle Scholar
  16. Bouët A, Decreux Y, Fontagné L, Jean S, Laborde D (2004) A consistent, ad-valorem equivalent measure of applied protection across the world: the MAcMap-HS6 database. CEPII working paper no. 2004-22. Available at SSRN: https://ssrn.com/abstract=702888
  17. Bratt M (2017) Estimating the bilateral impact of nontariff measures on trade. Rev Int Econ 25(5):1105–1129Google Scholar
  18. Bureau JC, Salvatici L (2004) WTO negotiations on market access in agriculture: a comparison of alternative tariff cut proposals for the EU and the US. Top Econ Anal Policy 4(1):1–35Google Scholar
  19. Caporale GM, Sova A, Sova R (2015) Trade flows and trade specialisation: the case of China. China Econ Rev 34:261–273Google Scholar
  20. Chandra P (2016) Impact of temporary trade barriers: evidence from China. China Econ Rev 38:24–48Google Scholar
  21. Chaney T (2008) Distorted gravity: the intensive and extensive margins of international trade. Am Econ Rev 98(4):1707–1721Google Scholar
  22. Chen C, Yang J, Findlay C (2008) Measuring the effect of food safety standards on China’s agricultural exports. Rev World Econ 144(1):83–106Google Scholar
  23. Davidson R, MacKinnon J (1993) Estimation and inference in econometrics. Oxford University Press, OxfordGoogle Scholar
  24. de Almeida FM, da Cruz Vieira W, da Silva OM (2012) SPS and TBT agreements and international agricultural trade: retaliation or cooperation? Agric Econ 43(2):125–132Google Scholar
  25. Disdier AC, Fontagné L (2010) Trade impact of European measures on GMOs condemned by the WTO panel. Rev World Econ 146(3):495–514Google Scholar
  26. Disdier AC, Fontagné L, Mimouni M (2008a) The impact of regulations on agricultural trade: evidence from the SPS and TBT agreements. Am J Agric Econ 90(2):336–350Google Scholar
  27. Disdier AC, Fekadu B, Murillo C, Wong SA (2008b) Trade effects of SPS and TBT measures on tropical and diversification products. ICTSD project on tropical products, Issue paper no. 12. International Centre for Trade and Sustainable Development, Geneva, SwitzerlandGoogle Scholar
  28. Eaton J, Kortum S (2002) Technology, geography, and trade. Econometrica 70(5):1741–1779Google Scholar
  29. El-Enbaby H, Hendy R, Zaki C (2016) Do SPS measures matter for margins of trade? Evidence from firm-level data. Appl Econ 48(21):1949–1964Google Scholar
  30. Essaji A (2008) Technical regulations and specialization in international trade. J Int Econ 76(2):166–176Google Scholar
  31. Fontagné L, Mayer T, Zignago S (2005) Trade in the triad: how easy is the access to large markets? Can J Econ/Revue canadienne d’économique 38(4):1401–1430Google Scholar
  32. Fontagné L, Orefice G, Piermartini R, Rocha N (2015) Product standards and margins of trade: firm-level evidence. J Int Econ 97(1):29–44Google Scholar
  33. Gao Y, Whalley J, Ren Y (2014) Decomposing China’s export growth into extensive margin, export quality and quantity effects. China Econ Rev 29:19–26Google Scholar
  34. Ghodsi M, Gruebler J, Stehrer R (2016) Estimating importer-specific ad valorem equivalents of non-tariff measures (No. 129). The Vienna Institute for International Economic Studies, wiiwGoogle Scholar
  35. Ghodsi M, Grübler J, Reiter O, Stehrer R (2017) The evolution of non-tariff measures and their diverse effects on trade (No. 419). The Vienna Institute for International Economic Studies, wiiwGoogle Scholar
  36. Head K, Mayer T (2014). Chapter 3—gravity equations: workhorse, toolkit, and cookbook. In: Gopinath G, Helpman E, Rogoff K (eds) Handbook of international economics, vol 4. Elsevier, Amsterdam, pp 131–195.  https://doi.org/10.1016/B978-0-444-54314-1.00003-3, ISSN 1573-4404, ISBN 9780444543141
  37. Heckman JJ (1979) Sample selection bias as a specification error. Econometrica 47(1):153–161Google Scholar
  38. Helpman E (1987) Imperfect competition and international trade: evidence from fourteen industrial countries. J Jpn Int Econ 1(1):62–81Google Scholar
  39. Helpman E, Melitz M, Rubinstein Y (2008) Estimating trade flows: trading partners and trading volumes. Q J Econ 123(2):441–487Google Scholar
  40. Ianchovichina E, Martin W (2006) Trade impacts of China’s world trade organization accession. Asian Econ Policy Rev 1(1):45–65Google Scholar
  41. Imbruno M (2016) China and WTO liberalization: imports, tariffs and non-tariff barriers. China Econ Rev 38:222–237Google Scholar
  42. Jie L, Larry DQ, Qunyan S (2003) Interregional protection: implications of fiscal decentralization and trade liberalization. China Econ Rev 14(3):227–245Google Scholar
  43. Jin X, Li DD, Wu S (2016) How will China shape the world economy? China Econ Rev 40:272–280Google Scholar
  44. Kee HL, Nicita A (2016) Trade frauds, trade elasticities and non-tariff measures. In: 5th IMF-World Bank-WTO trade research workshop, vol 30, Washington, DCGoogle Scholar
  45. Kee HL, Nicita A, Olarreaga M (2008) Import demand elasticities and trade distortions. Rev Econ Stat 90(4):666–682Google Scholar
  46. Kee LH, Nicita A, Olarreaga M (2009) Estimating trade restrictiveness indices. Econ J 119(534):172–199Google Scholar
  47. Lee HH, Park D, Wang J (2013) Different types of firms, different types of products, and their dynamics: an anatomy of China’s imports. China Econ Rev 25:62–77Google Scholar
  48. Li Y, Beghin JC (2012) A meta-analysis of estimates of the impact of technical barriers to trade. J Policy Model 34(3):497–511Google Scholar
  49. Melitz MJ (2003) The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica 71(6):1695–1725Google Scholar
  50. Melitz MJ, Ottaviano GI (2008) Market size, trade, and productivity. Rev Econ Stud 75(1):295–316Google Scholar
  51. Overholt WH (2016) China and the evolution of the world economy. China Econ Rev 40:267–271Google Scholar
  52. Park S (2009) The trade depressing and trade diversion effects of antidumping actions: the case of China. China Econ Rev 20(3):542–548Google Scholar
  53. Semykina A, Wooldridge JM (2010) Estimating panel data models in the presence of endogeneity and selection. J Econ 157(2):375–380Google Scholar
  54. Taylor JB (2016) The role of the Chinese economy in the world economy: a US perspective. China Econ Rev 40:281–285Google Scholar
  55. Tinbergen J (1962) Shaping the world economy; suggestions for an international economic policy. Twentieth Century Fund, New YorkGoogle Scholar
  56. Trienekens J, Zuurbier P (2008) Quality and safety standards in the food industry, developments and challenges. Int J Prod Econ 113(1):107–122Google Scholar
  57. Upadhyaya S (2013) Country grouping in UNIDO statistics. Development policy, statistics and research branch-UNIDO. Working Paper, vol 1Google Scholar
  58. Wilson JS, Otsuki T (2004) Standards and technical regulations and firms in developing countries: new evidence from a World Bank technical barriers to trade survey. World Bank, WashingtonGoogle Scholar
  59. Wilson JS, Otsuki T, Majumdsar B (2003) Balancing food safety and risk: do drug residue limits affect international trade in beef? J Int Trade Econ Dev 12(4):377–402Google Scholar
  60. Yousefi A, Liu M (2013) The impact of technical barriers to trade: the cases of trade between China, Japan, Korea, and the US. In: Chuan P, Khachidze V, Lai I, Liu Y, Siddiqui S, Wang T (eds) Innovation in the high-tech economy. Contributions to economics. Springer, Berlin, pp 23–34.  https://doi.org/10.1007/978-3-642-41585-2_3 Google Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.The Vienna Institute for International Economic Studies (wiiw)ViennaAustria

Personalised recommendations