Measuring trade strategy in the presence of non-tradeables: Theory and some evidence for the caribbean

Abstract

This article models trade policies in the presence of non-tradeables, and investigates trade strategy interventions and outcomes where the price of non-tradeables endogenously adjusts to trade interventions. Trade regime bias and neutrality issues are examined within a three-sector, open economy model. The theoretical framework is operationalised using empirical evidence for Trinidad and Barbados. The robustness of partial equilibrium measures of protection for classifying trade strategies is challenged and evidence on alternative general equilibrium or 'true' measures of protection is reported. 'True' or revealed trade strategies are shown to differ from those apparently intended by policy-makers.