How Do Technical Barriers to Trade Influence Trade?

Abstract

This paper empirically estimates the trade effects of technical barriers to trade (TBT) based on all TBT notifications from 105 World Trade Organization (WTO) countries during 1995-2008. The paper adopts a modified two-stage gravity model to control for both sample selection bias and firm heterogeneity bias. It was found that a country's TBT notifications decrease other countries' probability of exporting, but increase their export volumes. The result can be explained by the TBT's differential effects on the fixed and variable cost of export, and consumer confidence. It was further found that (i) a developing country's TBT have significant effects on other developing countries' exports, but no significant effects on the developed countries' exports, (ii) a developed country's TBT have significant effects on the exports from both types of countries, and (iii) exports from developed countries are affected by a developed country's TBT more seriously than a developing country's TBT. © 2012 Blackwell Publishing Ltd.