Non-tariff Measures in the Presence of Global Value Chains and their Impact on Productivity

There are certain legitimate motives for the imposition of non-tariff measures (NTMs). When a foreign imported product potentially harms the domestic consumers’ health, safety, animal health, environmental quality, etc. countries are allowed to restrict or regulate the importation of that product. Specifically, non-discriminatory standards are regulated across trading partners by qualitative NTMs such as sanitary and phytosanitary (SPS) measures, and technical barriers to trade (TBTs) to assure certain standards and characteristics of imported products. Such regulations affect trade flows and prices of products at different stages of production in various ways. For instance, chemicals used in the first stages of production can be the focus of a prohibitive TBT, which can influence the cost of production for downstream products where this product is used as intermediary input. In contrast, some market efficiency regulations such as mandatory labelling set within TBTs can improve the transparent information to the consumers and producers who can utilize the intermediates to their production with lower transaction costs.