The Impacts of Technical Barriers to Trade on Different Components of International Trade

• Date: 01 August 2013
• DOI: http://doi.org/10.1111/rode.12042
• Published date: 01 August 2013
• Author: Xiaohua Bao,Wei‐Chih Chen

The Impacts of Technical Barriers to Trade on

Different Components of International Trade

Xiaohua Bao and Wei-Chih Chen*

Abstract

This research studies the impacts of technical barriers to trade (TBT) on trade performance of 103 coun-

tries over the period 1995–2008. The paper analyzes how TBT influences the trade probability, trade

volume and trade duration. The trade volume is further decomposed into the number of products traded

(extensive margin) and the trade value of each product (intensive margin). It is found that TBT imposes

inconsistent impacts on the different components of trade, and that the effects differ by country. First, TBT

reduces trade probability, but increases the volume and duration of existing trade relationships. Second, the

positive effect of TBT on trade volume is mainly driven by an increase in the extensive margin, and the

effect on the intensive margin is not statistically significant. Finally, TBT raised by developed countries

have a stronger negative impact on trade probability, while TBT implemented by developing countries

have a greater positive effect on trade volume.

1. Introduction

As the World Trade Organization (WTO) has successfully cut tariff rates and reduced

traditional non-tariff trade barriers, the remaining barriers, including technical barri-

ers to trade (TBT), have become more visible and of greater relevance in the system

of global trade. According to WTO statistics, 106 WTO members made 9913 TBT

notifications to the WTO from 1995 to 2008. Over the period, the number of TBT

notifications has greatly increased, from 365 in 1995 to 1251 in 2008. When we observe

the data by country, we find that while developed countries were the main users of

TBT in the early years, in recent years developing countries introduced an almost

equal number of TBT. TBT are now considered a real trade problem in the 21st

century (Chen and Mattoo, 2008).

Unlike other traditional trade barriers, TBT may have both trade restriction and

trade promotion effects. First, having to comply with varying standards and techno-

logical regulations of importing countries will generate additional costs of production

(Fischer and Serra, 2000). Thus, TBT can restrict international trade volumes, par-

ticularly if they discriminate against foreign producers. Second, the imposition of TBT

can provide additional information such as the quality of products, which may lead to

a trade promotion effect. Finally, TBT can influence competition among existing and

potential exporters. The higher compliance cost may discourage potential exporters

from entering the market, or may even drive less productive firms to leave the

* Chen: Shanghai University of Finance and Economics, Shanghai, China, 200433. Tel: +86-21-6590-7841;

Fax: +86-21-6590-7458; E-mail: wei.chihchen@mail.shufe.edu.cn. Bao: Shanghai University of Finance and

Economics, Shanghai, China, 200433. The authors are grateful to two anonymous referees and participants

at the 2011 IEFS China Annual Meeting (Beijing) for their helpful comments. They also would like to

acknowledge financial support from the Natural Science Foundation of China (70703021 and 71273161),

the Ministry of Education of China (NCET-10-0537), and the Fok Ying Tung Education Foundation

(121085).

Review of Development Economics, 17(3), 447–460, 2013

DOI:10.1111/rode.12042

© 2013 John Wiley & Sons Ltd