The Impact of TBT and SPS Measures on Japanese and Korean Exports to China

Abstract

(1) Background: As countries with troubled histories, China, Japan, and Korea have, in recent times, attempted to overcome political and economic differences in a bid to forge strong trade relationships. However, Non-Tariff Measures (NTMs) have emerged in recent times, which has the potential to complicate matters. (2) Method: Our study analyzes the impact that two forms of NTM, technical barriers to trade (TBT) and sanitary and phytosanitary measures (SPS), have on Japanese and Korean exports to China. In order to effectively measure their impact, we utilize a modified version of the Gravity model and the Poisson Pseudo Maximum Likelihood method (PPML). Using three measures (coverage ratio, frequency index, and the dummy variable) to determine their impact, our study displayed a range of findings. (3) Results: The key results from our study showed that from a coverage ratio perspective, our research clearly demonstrates that Chinese TBT measures, reduce Japan and Korea’s manufacturing and total exports as a whole, while Chinese SPS measures encourage Korean agricultural exports. Moreover, the frequency index results and dummy variable estimations in the main also supported the coverage ratio findings with SPS measures promoting Korean agricultural goods exports. (4) Conclusions: Our research highlights the important role the TBT measures have played to shelter China’s emerging industrial sector from the rigors of highly competitive Korean and Japanese exporters. In doing so, the Chinese government is able to actively pursue some of its key sustainable development strategies such as “Made in China 2025” and “Industrial 4.0”.