Non-tariff Measures on the Production Network: Analysis on the Forward and Backward Participation in Global Value Chains

Abstract

Unlike the sound purposes of the NTMs to shape the necessary protection to ensure consumers and environmental safety, the majority of the past literature often addressed the adverse impact of NTMs on international trade. Among the past literature, only a handful of studies dealt with the relationship between non-tariff measures and participation in global value chains. We address two research questions. First, what are the impacts of technical regulations on participation in global value chains? Second, does the impact of technical regulations differ across the sectors? With the recently published non-tariff measures data from UNCTAD-TRAINS, this study constructs the Additional Compliance Requirement Indicator to test whether technical regulations facilitated or sabotaged the backward and forward participation in global value chains. The results indicate that additional burdens for exporters hamper global value chain participation through both backward and forward participation. Moreover, technical regulations in the agriculture sector seem to be more harmonized compared to the manufacturing sector. As technical regulations often serve as sound measures to shape the necessary protection for consumers and environmental safety, harmonization of the technical regulations is preferred rather than mere eradication.

KEYWORDS:

• Additional compliance requirement indicator
• backward and forward participation
• global value chains
• non-tariff measures
• Poisson pseudo maximum likelihood
• pooled ordinary least squares

SUBJECT CLASSIFICATION CODES:

• F13
• F14

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1 Although UNCTAD (2019) incorporates more NTMs chapters as non-technical regulations, we adopt chapters E, F, G, H, and I as non-technical measures due to data unavailability.

2 We manually constructed four-digit NTMs from the two- or three-digit NTMs from the UNCTAD classification for uniformity. See UNCTAD (2019) for detailed explanations on each NTMs classification codes.

3 Including both trade openness and tariff may result in multicollinearity issue but our analysis on the correlation of the variables do not show significant nor high correlation ratio. Correlation table is presented upon request.

4 See https://wits.worldbank.org/product_concordance.html for more details. Appendix 2 describes the industry

5 Tariff rates here refers to the world average Most Favoured Nation (MFN) tariff rates.

6 Some also concern that investments in the agriculture sector correspond with selling land to foreign countries or firms.