Technical barriers to trade and China’s exports: firm-level evidence

Abstract

This paper studies the trade-restriction and trade-promotion effects that technical barriers to trade (TBTs) have on export performances of Chinese firms over the period 2001–2006. Different from tariffs and most traditional non-tariff measures, TBTs can impose both positive and negative impacts on exports. On the one hand, TBTs increase the compliance costs and have the trade-restriction effect. On the other hand, TBTs improve product quality and mitigate uncertainty, which enhances demand and promotes trade. We investigate how TBTs influence the extensive and intensive margins of a firm’s exports and how the impact varies with the size, productivity, and ownership of a firm. Specifically, we look into a firm’s entry and exit decisions, export value, unit price, and quantity. The estimated results show that TBTs decrease both the extensive and intensive margins of small firms, and they improve the export performances of large firms. The finding indicates that while small firms that cannot meet the technical standards will leave their markets, large firms will stay in their markets and expand their export volumes. The trade effects of TBTs also change by characteristics of the importing country and sector.

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