Nontariff Barriers and Trade Liberalization

This article shows that governments have no incentive to introduce nontariff barriers (NTBs) when they are free to set tariffs but they do when tariffs are determined cooperatively. Quotas are preferred to antidumping restrictions so that the model is consistent with a progression from using tariffs only to quotas and then to antidumping constraints (when quotas are eliminated). There is a corresponding narrowing of the range of industries affected by trade restrictions. Simulating the model, the degree of tariff liberalization and of replacement of tariffs by NTBs are shown to depend on industry characteristics in line with stylized facts.