A new approach to evaluating trade policy

Abstract

This paper introduces a new measure, the Trade Restrictiveness Index, which measures the restrictiveness of a system of trade protection. The index is a general equilibrium application of the distance function and answers the question: "What uniform set of trade restrictions is equivalent (in welfare terms) to the initial protective structure?" The index is applicable to both tariffs and quotas and allows international and intertemporal comparisons. The index is operational and we provide an empirical example to illustrate its applicability and to show its superiority to commonly used measures