A country's stance on international trade is an important component of its economic welfare. Yet relatively little theoretical attention has been paid to developing accurate methods to assess trade policies, leaving practitioners and policy makers with ad hoc solutions that lack theoretical foundation. In this book, James Anderson and Peter Neary present a new approach to gauging trade restrictiveness. Extending the standard theory of index numbers that apply to prices, output, or productivity, Anderson and Neary develop index numbers that apply directly to policy variables. Their theoretical work builds on, and extends, the standard theory of policy reform in open economics; their empirical findings illustrate how the new indexes can be applied and show the resulting difference in the assessment of trade restrictiveness. Thus their book will be of interest to both theorists and practitioners.
After giving a nontechnical introduction to the topic, which includes a discussion of the theoretical and practical failings of other methods of measurement, Anderson and Neary propose two new indexes, the welfare-equivalent uniform tariff and the import-volume-equivalent uniform tariff, and present the theoretical foundation for these methods. The empirical work that follows applies the new approach to a range of issues, including the trade restrictiveness of domestic distortions and the use of a computable general equilibrium model to calculate the proposed measures of trade restrictiveness.
About the Authors
James E. Anderson is Neenan Professor of Economics at Boston College.
J. Peter Neary is Professor of Political Economy at University College Dublin.
"The essays in this volume present some of the most recent thinking and evidence on the role of reciprocity in freeing trade. I recommend this book highly to anyone interested in this important and controversial subject."--Robert W. Staiger, Professor of Economics, University of Wisconsin -- Madison
"Anderson and Neary have produced a work of originality and importance, tackling the difficult problem of measuring the restrictiveness of trade arising from multiple instruments. It should wind up on the reading lists of all serious courses on commercial policy."--Jagdish Bhagwati, University Professor, Economics and Law, Columbia University
"Anderson and Neary's theoretical analysis and empirical applications are invaluable for serious students of trade policy. We can expect their results to lay the foundation for the cross-country measurement of the distorting effects of tariffs and quotas."--Robert Feenstra, Professor, Department of Economics, University of California, Davis
"In this volume, two of the finest minds in international trade theory bring together in a single place and within a coherent framework the many contributions they have made in recent years to the theory of measuring trade restrictiveness, and they also move that discussion in new directions. This will be an essential resource for both theoretical and empirical work on trade policy."--Alan V. Deardorff, Department of Economics, University of Michigan
"Anderson and Neary have succeeded in making the measurement of trade-policy restrictiveness accessible and clear to a wide audience. In tackling this complex issue, they provide the technical apparatus and the intuition necessary to make both theory and applications comprehensible. This book will be an important reference for academics and trade-policy practitioners alike."--Robert W. Staiger, Professor of Economics, University of Wisconsin -- Madison