Alessandro Nicita

Estimating Trade Restrictiveness Indices

The objective of this paper is to provide indicators of trade restrictiveness that include both measures of tariff and nontariff barriers for 91 developing and industrial countries. For each country, the authors estimate three trade restrictiveness indices. The first one summarizes the degree of trade distortions that each country imposes on itself through its own trade policies. The second one focuses on the trade distortions imposed by each country on its import bundle. The last index focuses on market access and summarizes the trade distortions imposed by the rest of the world on each countrys export bundle. All indices are estimated for the broad aggregates of manufacturing and agriculture products. Results suggest that poor countries (and those with the highest poverty headcount) tend to be more restrictive, but they also face the highest trade barriers on their export bundle. This is partly explained by the fact that agriculture protection is generally larger than manufacturing protection. Nontariff barriers contribute more than 70 percent on average to world protection, underlying their importance for any study on trade protection.

Import Demand Elasticities and Trade Distortions

To study the effects of tariffs on gross domestic product (GDP), one needs import demand elasticities at the tariff line level that are consistent with GDP maximization. These do not exist. The authors modify Kohlis (1991) GDP function approach to estimate demand elasticities for 4,625 imported goods in 117 countries. Following Anderson and Neary (1992, 1994) and Feenstra (1995), they use these estimates to construct theoretically sound trade restrictiveness indices, and GDP losses associated with existing tariff structures. Countries are revealed to be 30 percent more restrictive than their simple or import-weighted average tariffs would suggest. Thus, distortion is nontrivial. GDP losses are largest in China, Germany, India, Mexico, and the United States.

Trade and Production, 1976-99

The authors have prepared this paper as a companion to the Trade and Production database, which contains trade, production, and tariff data for 67 industrial and developing countries at the industry level for 1976-99. The sector disaggregation in the database follows the International Standard Industrial Classification (ISIC), with data provided at the three-digit level (28 industries) for all 67 countries and at the four-digit level (81 industries) for 24 of these countries. The production data are from the United Nations Industrial Development Organizations Industrial Statistics Database at the three- and four-digit level of ISIC. They include value added, total output, average wages, capital formation, number of employees, number of female employees, and number of firms. The trade data are from the United Nations Statistics Divisions Commodity Trade (Comtrade) database (through the World Banks World Integrated Trade Solution, or WITS, software) and include imports and exports. Data on mirror exports (reported by trading partners) were obtained using WITS. The trade data are aggregated by region and income group, as defined by the World Bank. A separate data set provides bilateral trade flows (by partner) at the industry level. The data on average tariffs (most favored nation) are from the Trains database maintained by the United Nations Conference on Trade and Development and from the World Trade Organizations Trade Policy Reviews and Integrated Database. The database also provides an input-output table for each country using data from version 4 of the Global Trade Analysis Project (GTAP) database. The database is available on request on CD-ROM in a series of ASCII files and Microsoft Excel worksheets. It is also available on the Web at http://www.worldbank.org./research/trade.

Who Benefited from Trade Liberalization in Mexico? Measuring the Effects on Household Welfare

This study performs an ex-post analysis of the effects of the trade liberalization in Mexico between 1989 and 2000, taking into account regional differences in the Mexican economy. The effects of trade liberalization are first translated into changes in regional prices and wages. Those estimates are plugged into a farm-household model to estimate the effect on householdswelfare. The findings suggest that trade liberalization has affected domestic prices and labor income differently both across income groups and geographically across the country, hence producing diverse outcomes on different households. Regarding prices, the results indicate that trade liberalization haslowered relative prices of most non-animal agricultural products and, while reducing the cost of consumption, has reduced householdsagricultural income, widening the income gap between urban and rural areas. The findings also show that trade liberalization has had diverse effects on wage rates. Skilled workers, for which trade liberalization has produced an increase in wages, have benefited relative to unskilled workers. Wages of unskilled workers have in many regions decreased as a result of trade liberalization. Similar differences are found in the geographic distribution of the benefits of trade liberalization, with the states closest to the U. S. border gaining threefold more relative to the least developed states in the south. Therefore trade liberalization, although beneficial, has contributed to an increase in inequality between the south and the north of the country, urban and rural areas, and skilled and unskilled labor. From a poverty perspective, the trade liberalization that occurred between 1989 and 2000 has had the direct effect of reducing poverty by about 3 percent, therefore lifting approximately 3 million individuals out of poverty.

Is Protectionism on the Rise? Assessing National Trade Policies During the Crisis of 2008

To understand the role of trade policies in the crisis of 2008, this paper constructs the overall trade restrictiveness indices for a wide range of countries using their tariff schedules in 2008 and 2009. The index summarizes the trade policy stance of a country, taking into account the share of each good in trade as well as its corresponding import demand elasticity. Results show that there is no widespread increase in protectionism via tariff policies since the global financial crisis has unfolded. While many countries have adjusted tariffs upward on selected products, only a handful of countries, such as Malawi, Russia, Argentina, Turkey and China focus on products that have significant impacts on trade flows. The United States and the European Union, by contrast, rely mainly on anti-dumping duties to shield domestic industries. Overall, while the rise in tariffs and anti-dumping duties in these countries may have jointly caused global trade to drop by as much as US

Assessing the Doha Round: Market access, transactions costs and aid for trade facilitation

43 billion during the crisis period, it explains less than 2 percent of the collapse in world trade.

Trade Reform and Poverty: The Case of Mexico

This paper compares the predicted trade impacts of a successful Doha Round with the trade effects of actions aimed at reducing domestic trade costs for traders in developing countries and the world as a whole. We show that a relatively small reduction in trade costs will generate trade impacts that are larger than what is likely to emerge even from a relatively ambitious Doha Round market access outcome. This illustrates the importance of complementing market access commitments with measures to reduce trade costs in developing countries – which is the objective of the trade facilitation negotiations in the Doha Round – and additional aid for trade to assist countries in covering the costs of improving trade-related procedures and processes.

Trade Reform and Household Welfare: The Case of Mexico

We use a two-step computationally simple procedure to analyse the effects of Mexicoss potential unilateral tariff liberalisation on real incomes. First, we use the CGE model provided by the Global Trade Analysis Project (GTAP) as the new price generator. Second, we apply the price changes to Mexican household data in order to assess the effects of the policy simulation on poverty and income distribution. Although Mexico widely liberalised most of its imports by the mid 90s, one salient feature is its membership in the North American Free Trade Agreement (NAFTA) with Canada and United States. By choosing GTAP as the price generator, we are able to model the differential tariff structure. Even starting with a low level of tariff protection, simulation results show that the impact of tariff reform on welfare will be positive in general for all expenditure deciles. We find that, when we assume non-homothetic individual preferences, trade liberalisation benefits people in the poorer deciles more than those in the richer ones. Copyright Blackwell Publishers Ltd 2002.

Who Benefits and How Much? How Gender Affects Welfare Impacts of a Booming Textile Industry

The authors use a two-step, computationally simple procedure to analyze the effects of Mexicos potentially unilateral tariff liberalization. First, they use a computable general equilibrium model provided by the Global Trade Analysis Project (GTAP) as the new price generator. Second, they apply the price changes to Mexican household data to assess the effects of the simulated policy on poverty and income distribution. By choosing GTAP as the price generator, the authors are able to model Mexicos differential tariff structure appropriately: almost zero for North American Free Trade Agreement (NAFTA) members and higher tariffs for nonmembers. Even starting with low tariff protection, simulation results show that tariff reform will have a positive effect on welfare for all expenditure deciles. Under an assumption of nonhomothetic individual preferences, trade liberalization benefits people in the poorer deciles more than those in the richer ones.

Multilateral Trade Liberalization and Mexican Households: The Effect of the Doha Development Agenda

Exports of textile products originating from Sub-Saharan African countries have grown dramatically in the past decade. Recent trade initiatives, such as theAfrican Growth Opportunity ActandEverything but Arms,along with low labor costs and improved integration into world markets, are giving further stimulus to the growth of the textile and apparel industry in Sub-Saharan African countries. Nicita and Razzaz explore the extent to which the poor are also beneficiaries of the export-led growth of particular economic sectors, or whether the poor are unable to reap any of the benefits and therefore fall further behind. They use a methodology that combines the matching methods literature (to identify individuals more likely to fill the new jobs of the expanding sector) with the industry wage premium literature (to quantify the gains of the individuals that move into the expanding sector). The results indicate that a sustained export-driven growth in Madagascars textile and apparel industry will lead to a substantial increase in the income of poor households, with a consequent decrease in poverty. In a scenario simulating five years of expansion of the textile sector, the authors estimate that more than one million individuals will directly or indirectly receive some benefit. On average, households in which one or more members work in the textile sector get an increase in purchasing power of about 24 percent or US