Ad valorem equivalents of non-tariff measures in ASEAN

Abstract

To measure Ad valorem tariff equivalents (AVEs) of non-tariff measures (NTMs), we propose a new alternative that relies on the estimation of bilateral trade flows on two-way panels at the HS 2-digit level with importer, exporter, and product fixed effects and interaction terms between NTM variables and a full vector of country-specific characters. Our results show AVEs for technical barriers to trade measures on manufactured products, for ASEAN countries and the whole sample are 4.5% and 5%, respectively. The AVEs for sanitary and phytosanitary measures on agricultural and food products for ASEAN countries and the whole sample are 6.5% and 6.7%, respectively. It should be noted that AVEs can mean very different things depending on whether they play as correction of a market failure. This depends on the technical capabilities of domestic regulatory agencies.