2020-4 The Net Effect of Technical Non-Tariff Measures in OECD countries on African Exports of Plant Products

In this paper, we theoretically analyze the net effect of technical non-tariff measures (TNTMs) on bilateral trade and suggest a robust empirical approach to evaluate this effect. We assess the impediment, enhancement and net effects of the TNTMs in force in OECD countries on African exports of plant products. Our theoretical findings highlight that the net effect of the TNTMs on aggregate bilateral trade depends not only on the elasticity of substitution and the elasticity of marginal cost with respect to the TNTMs but also the shape parameter of the distribution of marginal costs which depends on the technology. In addition, we find that for a given elasticity of substitution, only firms or countries characterized by a lower marginal cost than a cutoff marginal cost and higher productivity than a threshold productivity level will experience a positive net effect of trade to a given destination. For our empirical investigation, we estimate a sectoral gravity equation using the non-tariff measures (NTMs) database released by UNCTAD and WITS combined with cross-sectional trade data for 2017 from the UN COMTRADE/WITS database. The data cover 53 African countries exporting 40 Harmonized System (HS) 4-digit plant products to 35 OECD member countries. Our empirical results show both impediment (decrease of 3.099%) and enhancement (increase of 2.056%) effects of the TNTMs in force in OECD countries on African exports of plant products. Together, these effects yield a negative and significant net effect, which indicates that the TNTMs in force in OECD member countries are obstacles for African exporters of plant products.