Adam Smith and other economists have defended free trade as an ideal which trade policy should adhere to. Smith did not consider government control to be of particular importance for the economy, favoring instead a laissez faire approach (according to which individuals determine their own objectives and actions within the boundaries defined by the law). In this context, the government’s role would be limited to ensuring that the market remains free and unimpeded, removing any barriers for the effective operation of the market’s “invisible hand” (Appleyard and Field 2003).
The Ricardian Trade Model is a useful tool to examine the rationale underlying trade and the effects of international trade on national well-being. Regarding commercial policy, groups and stakeholders that do not conduct profitable trade transactions often pressure their governments to protect their interests by restricting trade. As such, import restrictions are a clear example of politics’ influence on international trade (Krugman and Obstfeld 2008).
According to classical economics, the value of goods and services is determined by the cost of the factors of production. Conversely, in neoclassical economics, value is determined by goods and services’ utility for consumers, as well as by their relative scarcity; as such, factors’ supply and demand determine price and rent. Regarding commerce, in classical economics, the basic prediction of the Ricardian Trade Model (that countries tend to export goods whose productivity is relatively high) has been confirmed by various studies. However, neoclassical theory is currently the most widely accepted school of thought in the field of economics; it posits free trade as the main force behind economic development and as a means to capitalize on countries’ specific advantages (Gallardo 2005).
When a given market does not allow for the efficient allocation of resources, it has failed. Some reasons for this failure include monopolization, monopolistic competition, and oligopolization; these market structures lead to improper resource allocation, as they cause marginal values (prices) to exceed marginal costs. However, markets may fail for reasons other than their structures’ lack of competitiveness. Additionally, while subsidies aim to ensure for the efficient allocation of resources in specific markets, there is no guarantee of their success in accomplishing this objective. Moreover, subsidies require public revenue usually obtained through taxation, however, taxes themselves tend to diminish the system’s efficiency (Emery 1994).
However, globalization cannot take place in a political vacuum; international economic integration has only occurred because governments have made it possible. Beyond the scope of specific political decisions, economists must consider the institutional context in which decisions are made. Societies’ legal, political, social, cultural, ethical, and religious structures determine whether a given environment is conducive to economic prosperity and stability (Feenstra and Taylor 2012).
There are many ways in which the state can influence trade; for instance, some governments may restrict imports indirectly. Several tariffs, import fees, and other measures of trade policy may be established to protect the interests of specific groups. As such, politicians may support certain policies to protect national interests. Another argument for restricting trade that it may allow policymakers prevent nationwide market failures. For instance, the global trade of agricultural products is highly regulated, as it is relatively easy for policymakers to create obstacles for trade, such as sanitary and customs-related security protocols (Krugman and Obstfeld 2008).
Following the 2008 global economic crisis, several countries tightened protectionist regulations on imports, thereby damaging overall trade as well as various industries and countless consumers worldwide, in clear violation of international agreements. The enactment of these regulations has an underlying political component, as some governments issued these restrictions to answer the demands of unions, industry leaders, and companies (both private and public), limiting the rate at which their competitors’ products overtake the market. Further, although these protectionist policies have also been issued in Europe and Asia, Latin American countries stand to lose the most as a result (Camacho 2012). While the WTO and various countries have denounced these policies, many of them are still in place.
Bain (1956), as well as Caves and Porter (1977), among other scholars mentioned by Yao (1988), posit that excessive costs comprise a barrier to entry, that is, they preclude newcomers from entering certain industries. Helble et al. (2007) showed that transparency between importers and exporters may be crucial factor in the liberalization of tariff and non-tariff barriers for APEC-member countries. They considered transparency as comprising two dimensions: predictability (reducing the costs related to uncertainty) and simplification (by reducing the costs related to information) (Helble et al. 2007).
The implementation and renovation of certifications are considered useful tools in promoting international trade, as they allow for agricultural products’ incursion into new markets, leading to an increase in exports. Further, acquiring certifications is often seen as a development opportunity for the agricultural industry within the context of global trade. However, these certifications often serve as NTBs, given that they often originate from protectionist policies (as is the case for some of Mexico’s trade partners), rather than from a willingness to engage in open trade, which could benefit all nations involved (Deardorff 2012; United Nations Economic and Social Commission for Asia and the Pacific 2019; UNCTAD 2021).
Further, within the context of the global economy, internal conflicts of interest in certain countries may lead to economic policies that affect other nations. Therefore, it is important to elucidate whether non-tariff measures promote or restrict the exports of Mexico’s agricultural industry, and to examine the trade relationships between APEC-member countries.
If, from a theoretical standpoint, governments’ profits comprise the most important aspect of the global economy, the never-ending struggle between free trade and protectionism would be the most important topic to analyze from a political perspective. Since the origin of modern nation states in the XVI century, governments have been concerned with the impact of international competition on the prosperity of their national industries, and have tried to protect them from foreign competitors, whether by imposing restrictions on imports or by subsidizing exports. Thus, international economics research has focused on analyzing the effects of such protectionist policies, frequently (but not always) criticizing protectionism, and highlighting the advantages of free trade (Yao 2019; Baldwin 1970; Carrère et al. 2011).
After World War II, various advanced democracies (led by the US) adopted a consistent policy of eliminating all barriers to international trade, thereby highlighting the idea that free trade was a force not only for prosperity but for world peace as well. Additionally, in the first half of the 1990s, several important free trade agreements were signed between nations. However, in the late 1990s, the debate on the limits of free trade began to shift in a new direction.
For Bahri (2018), over the last 25 years, advances in communication and general technological improvements have influenced the progress of globalization. Regarding the benefits of globalization, it posits that if goods do not cross borders, soldiers will, and that the international exchange of goods brings world peace, jobs, and economic growth, while also increasing quality of life. Conversely, the main reason underlying protectionism is the threat that trade poses for nations’ local industries. Thus, protectionist policies aim to avoid the loss of jobs, citizens’ health, public policy, national security, and self-sufficiency. Thus, according to this perspective, unfettered international free trade would only increase the wealth gap among individuals and among nations; thus, regulation and legislation are needed.
Therefore, regulatory barriers aim to protect trade. Stiglitz (2002) pointed out that although the US advocates for free trade, when poorer countries introduce goods or services to the market in a bid for exporting them to the US, the latter adopts protectionists policies to favor their own interests. Consequently, to protect union-related and business-related interests, fair-trade laws (which may be perceived as the opposite by potential business partners) are frequently invoked to protect national interests, establishing a barrier against imports.
This topic became highly relevant in economics research during the 1960s (e.g., Macario 1960; Soligo and Stern 1965). Macario (1960) studied Latin American countries’ protectionist systems, highlighting that their restrictions were not caused by high taxation, but by their tariff structure.
Scholars have developed a theoretical framework of effective economic protection to study the impact of protectionism (and its changes) on economic activity. The literature on economic development and international trade has emphasized topics such as the protection of national industries, import substitution, the benefits of restricting trade through tariffs, and the potential decrease of well-being as a result of the inappropriate implementation of these restrictions. This viewpoint considers that the nominal tariff applied to a given merchandise’s import does not reveal the impact of protection on national industries that rely on imported supplies for their productive processes. The effective rate of protection is defined as the percentual change in added value for national industry as a result of the implementation of tariffs and other protection measures on products and supplies. This is the main indicator of protection’s effect on resource allocation.
Table 3 presents the studies that have supported the idea that NTBs have a negative impact on the exports of the agricultural industry. Most of these studies emphasize that one of governments’ main priorities is protecting their internal markets, including those from countries in the APEC. They present consistent concerns regarding the negative consequences of NTBs, such as increases in transaction costs and restrictive regulations in the food industry. The main way for stakeholders to overcome said NTBs is to obtain international certifications. Acquiring certifications implies incurring additional expenses that increase products’ price, which decreases their competitiveness in the market. That is, these certifications sometimes have no other purpose than to serve as NTBs for imports. This is an especially poignant issue for nations that are at a disadvantage when they enter the market to compete with better-established economies in the foreign trade landscape. It is also noteworthy that some of the studies mentioned in Table 3 highlight the importance of participating in economic and trade forums, such as the APEC, for which there is scarce evidence regarding the benefits that it brings its members.
Table 3. Works that have explored factors associated with non-tariff barriers
Variables/non-tariff barrier-associated factors
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Helble, Shepherd, and Wilson 2007
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Melo. et al. 2014
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Okumura 2015
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Shepherd 2016
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APEC Business Advisory Council, 2016
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Cadot and Gourdon 2016
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Zhaohui Niu, Liu, Gunessee, and Milner 2018
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Olanike Kareem. et al. 2018
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Santeramo and Lamonaca 2019
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Kinzius et al. 2019
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Santeramo and Lamonaca 2020
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Khan, 2021
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The food industry’s import dependency.
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Trade facilitation
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Transaction costs
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Free trade agreements
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APEC
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Source: Author’s own creation.
Some scholars such as Barragan, et al (2021) and Goedhuys, et al (2016) have found that certifications have a positive impact on internationalization, as they help stakeholders gain credibility in developed markets. Moreover, some measures have been associated with exports’ success, such as obtaining approval from the US government’s Federal Drug Administration. Similarly, some studies have pointed out the need to increase food safety tests, considering the dangers inherent to international trade regarding the use of dangerous substances in food products.
However, the theoretical and empirical studies mentioned in this paper show that strict regulation has a negative effect on trade, as exporters perceive imbalances in the severity of regulations on international trade. The most commonly required international certifications include sanitary and phytosanitary standards, as well as technical and quality requirements. These studies also show that non-tariff measures are on the rise in the APEC region, making the trade of food products a much more complicated and drawn-out process.