China's Non-tariff Measures And Its Impact On Imports

Except for the rising traditional trade protectionism,new restricting policies including countervailing duty(CVD),safeguards and China-specific transitional safeguards(CSG)are also surging(Bown,2010).Trade remedy measures have also expanded into manufacturing from agriculture,mainly including iron and steel,machinery,textiles,plastics,rubber,wood and vehicles.Moreover,the current widely use of measures by developing countries has made it increasingly a "South-South" Phenomenon(WTO,2010a).It is pointed out that China,as the large "South" developing nation,has promulgated more non-tariff measures(hereinafter referred to as NTMs)compared with developed countries such as Japan and the 15 EU countries(EU 15)(Worasakyothin and Tiranutti,2007;OECD,2010a)either due to the retaliation towards the countries which impose similar actions or as a quid pro quo for tariff liberalization to protect domestic industries(Park,2009).The most commonly used type of NTM,technical barriers to trade(TBT)measures,subjecting approximately97% of total imports(Bao and Qiu,2009).The effects of NTMs on trade in literature from both theoretical and empirical perspective show ad hoc,whatever the actions are implemented for economic factors,environmental factors,social factors,political factors or a combination of them.That is to say,NTMs could have restrictive or promotive effect on trade performance and the interation between the two is quite complex.On the other hand,with the global tariff levels decreasing year by year while the number of NTMs surging globally,large data on NTMs is difficult to obtain which makes the studies on the impacts of NTMs on trade rare and tenuous,let alone the specific research for China.Furthermore,there is no unifying statistical method to quantify NTMs' impacts,because each country has heterogeneous standards and regulations which encompass vast information.For many cases,the required data are either not available or are incomplete(Korinek et al.,2008).Some studies use a self-constructed index(Fontagne etc.,2005;Disdier et al.,2007),such as frequency and coverage ratios to measure the extent or scope of NTMs,while some other studies select a direct indicator of aparticular standard or regulations,such as the maximum residual levels(Otsuki et,2001;Wilson et,2003;Wilson and Otsuki,2004).There are few studies on Chinese NTMs,and what's more,mostly are on specific measures or products.In recent years,systemic studies on Chinese TBT measures using official Chinese NTM data are seen in the literature(Bao and Qiu,2010 and2012;Bao and Chen,2013).The official Chinese NTM data are indexed at detailed HS8 level,but it has only 21 measures.Using the same NTM data,Devadasonet al(2014)extend the study to China-ASEAN trade.In reviewing the literature,they cite unpublished research findings that China's SPS measures help with imports of Washington State apples(Nogueira et al,2007),but are stringent enough to be barriers to South African fruitexporters(Sandrey et al,2008).This is consistent with our belief that high income countries tend to have stringent NTMs that become binding factors in restricting imports from low-income countries but NTMs in developing countries normally do not constitute real barriers for firms in advanced nations.Devadasonet al(2014)estimates the impact of Chinese NTMs on ASEAN exports to China in a gravity model.They find that Chinese NTMs do have negative impact on overall imports from ASEAN,but sectoral effects are mixed.The 8 ASEAN countries in Devadasonet al(2014)are the right membership makeup for the time period covered(1998-2006),which include Cambodia and Vietnam,but not Myanmar and Laos.What are the patterns of China's NTMs for the world,the developed or the developing regions and particularly for ASEAN countries and other main regions? This research will explore the detailed China's NTM data to reveal the patterns that can help identify priority areas in NTM reform and capacity building for low-imcome countries.Preliminary analysis of the data show that,in the end of 2012,24,006 pieces of non-tariff measures coexist.By sorting the measures each time one by one,we find out that these measures are implemented throughout the 35 years from 1978 to 2012.Subsequently,we classify them according to UNCTAD(2012),the latest classification method and find following characteristics for China's NTMs.First,about 60%measures are initiated after 2001.Particularly,the number of newly established actions surge significantly in 2002,2005,2007 and 2009 than that in other years.Secondly,the majority of actions are distributed in the sanitary and phytosanitary measures(SPS),technical barriers to trade(TBT)and quantity control measures.In particular,TBT account for 87% of the total regulations,SPS is 3.90%.Thirdly,there is obvious seasonal effect that 90% regulations in China are first initiated in September,October and December.Moreover,two-thirds of the measures are concentrated in manufacturing,followed by health and social work sector,culture,sports and entertainment,as well as agriculture,forestry,animal husbandry and fishery.Last but not least,97.06% measures are common for all countries,non-discriminatory.In addition,1.13% are taken only for the OECD countries in developed regions reached,followed by 0.98% only for developing countries or regions.Next,we match the NTMs database with the HS8 product import data from the China's customs and control for the product-level tariff to do regressions.It is shown that the trade policies of non-tariff measures on product are positively related to product imports.NTMs significantly promote the performance of imports,which is inconsistent with expectations.We believe that this is due to the reason that product imports and trade policies are endogenous.The more a sort of product being imported,the larger possibility of suffering NTMs for it and the greater number of measures it may encounter.Therefore,the decision of China's trade policy is not strictly exogenous,but largely depends on the imports performance of products.Therefore,the study of the impact of NTMs on imports needs to address the endogenous problem.This paper use the length of implementation time of NTMs a product encounters as the proxy variable replacing the three variables of NTMs dummy,frequency and coverage ratio of product to measure NTMs at the HS8 product level,and we find that the endogeneity problem is solved and a more credible conclusion is drawed that the longer the NTMs' implementation time a product encounters is,the lesser it imports.The negative effects are hold even for total imports,processing trade and general trade imports.More interesting is that,the impact of NTMs' execution time on import performance also depends on product categories and economic developement levels of exporting countries.Specifically,agricultural products have "learning effect" with respect to the manufacturing and the middle and low-income countries have "learning effect" relative to the high-income OECD countries.That is to say,for agricultural product,the longer a measure it suffers,the better for its import performance.Similarly,the longer a measure a poor exporting country encounter,the weaker the negative effect of the measure on ists export.While,the "learning effect" does not either exist in manufacturing or rich countries.