Value Added Trade Restrictiveness Indexes. Measuring Protection within Global Value Chains

Production and trade are increasingly organized within Global Value Chains (GVCs) and therefore assessing who effectively pays the cost of protection is not straightforward. Since exports rely on imported inputs, the evaluation of trade policies requires the use of new trade metrics on a value-added base in order to assess in which country the value embedded in trade has been actually produced. We define a new set of trade policy indexes in the spirit of the protection indexes introduced by Anderson and Neary, based on the value added in trade: the Value Added Trade Restrictiveness Indexes (VATRIs). VATRIs are theoretically sound protection measurements that make use of the trade flow decomposition proposed by the recent value added in trade literature. We compute the direct and indirect components of trade protection by computing the VATRIs using the Global Trade Analysis Project computable general equilibrium model.