Poverty Reduction through Regional Integration : Technical Measures to Trade in Central America

Despite the widespread tariff reductions sparked by the Dominican Republic-Central America Free Trade Agreement, anecdotal evidence suggests that borders in the region remain thick, with many hurdles standing in the way of regional integration. This paper uses a newly collected dataset to quantify the incidence of sanitary and phytosanitary measures and technical barriers to trade in the region. The results indicate that Central America has the lowest prevalence of technical non-tariff measures in the world. However, substantial heterogeneity is observed among countries. The paper estimates that the impact of sanitary and phytosanitary measures on border prices is equivalent to an ad-valorem tariff of 11.6%. This effect is further investigated by looking in detail at the effect on the prices of beef, chicken meat, bread, and dairy products in Guatemala. The impact is estimated to be equivalent to an ad-valorem tariff of 68.4%, 51.4%, 22.0%, and 5.0%, respectively. The paper shows that efforts to streamline key sanitary and phytosanitary measures affecting these products by, for example, reducing the cost and time required to obtain sanitary registries, would likely reduce the Guatemalan urban extreme poverty rate from 5.07% to 4.91%.