SPS and TBT measures through the lens of bilateral and GVC-related regulatory distance

The regulatory framework of international trade is complex and multifaceted, with many countries adopting unilateral measures characterised by unique features and differing in type and objectives. When countries implement measures with diverse goals, trade flows are likely weakened. Dynamics are more complex when commercial relationships are interlinked and involve the entire Global Value Chain (GVC). We compare the impacts of bilateral regulatory distance with those accumulated along the GVCs on bilateral trade. While bilateral regulatory distance tends to lower trade, a higher distance along the GVC is associated with larger trade flows. Moreover, the GVC effects offset those of bilateral distance.