The Effect of Non-Tariff Measures on Global Value Chain Participation

ABSTRACT

This study takes a novel approach by using an additional compliance requirement indicator as a relative proxy for non-tariff measures (NTMs) to measure the impact of NTMs on global value chain (GVC) participation. We conduct a cross-sectional analysis at the industry level, spanning 30 countries with 19 industrial sectors in the year 2015. Our analysis finds that both NTMs and tariffs have negative impacts on backward GVC participation, and the impact of NTMs is greater than that of tariff measures. Therefore, policies that reduce trade costs from policy barriers, especially NTMs, can help promote participation in GVCs.

KEYWORDS:

• Additional compliance requirement indicator (ACRI)
• global value chain (GVC)
• input imports
• non-tariff measures (NTMs)
• regulatory distance indicator

JEL Classification:

• F13
• F14
• F63

Acknowledgements

The authors would like to express their sincere appreciation to Dr Doan Thi Thanh Ha (ERIA), Dr Shujiro Urata (ADBI), Dr Kaoru Nabeshima (GSAPS), Dr Qizhong Yang (Aoyama Gakuin University), and other participants in the ERIA workshops on Economic Impact of NTMs for their valuable input and comments. The opinions expressed in this paper are the sole responsibility of the authors and do not reflect the views of ERIA and their respective affiliations.

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Data Availability Statement

The data that support the findings of this study are available from the corresponding author, U.K., upon reasonable request.

Notes

1 The countries are selected from the sample used in the main analysis to represent different income groups, based on classifications by the World Bank.

2 According to World Integrated Trade Solutions, goods are categorised into four different groups according to their stage of processing, namely raw materials, intermediate goods, capital goods, and final goods. For more details, see: https://wits.worldbank.org/ProductMetadata.aspx?lang=en

3 For more details on the theoretical discussion and previous literature, see Beghin, Maerterns, and Swinnen (2015) and Fugazza (2013).

4 For more details on TRAINS, see: https://unctad.org/en/PublicationsLibrary/ditctab2017d3_en.pdf

5 NTMs that were effective from 2016 onwards account for only five per cent of the total number of NTMs in TRAINS.

6 For more details on OECD-ICIO, see: https://www.oecd.org/sti/ind/tiva/TiVA2018_Indicators_Guide.pdf

7 For more details on the calculation of ACRI, see Nabeshima and Obashi (2019).

8 For more details on the calculation of FVA and DVX, see Urata and Baek (2020).

9 For more discussion on GVC participation, see Korwatanasakul, Baek, and Majoe (2020).

Additional information

Funding

This research was conducted as part of the project of Economic Research Institute for ASEAN and East Asia (ERIA) under research grant from the project, ‘Economic Impact of Non-tariff Measures (NTMs)’.