A gravity model to account for vertical linkages between markets with an application to the cattle/beef sector

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This paper examines the magnitudes of border effects on Canada's beef exports, and assesses the prospects for market access. The empirical analysis relies on a gravity model derived from a supply‐based framework, and implements different econometric methodologies. It covers the conventional measurement of border effects that is determined relative to the intranational trade baseline. Also, it sets alternative baselines to estimate the wedge between the border effects on beef exports of Canada and those of other countries. The estimated parameters are used to carry out different scenarios to examine the tariff‐related and nontariff border effects, and to evaluate the impacts of trade preferences for Canada's bilateral beef exports. The results reveal significant trade impediments facing Canada's bilateral beef exports to many large markets (e.g., EU‐15, Japan, Republic of Korea, China, and Russia), and they often indicate that the effects of tariff reductions become considerably larger when coupled with reductions in nontariff impediments. Also, they underscore the significance of North American Free Trade Agreement (NAFTA)’s preferential market access for Canada's beef exports. The export opportunities for the Canadian beef industry that are generated through lower trade barriers would, however, decrease when trade barriers facing other beef‐exporting countries are reduced.

Section: Introductionmentioning

confidence: 99%

Canada's beef exports: Border effects and prospects for market access

Ghazalian

2018

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“…The gravity model is commonly used in the agricultural and food trade literature (e.g., Koo et al ; Ghazalian and Furtan ; Sarker and Jayasinghe ; Olper and Raimondi ; Lambert and McKoy ; Sun and Reed ; Baylis et al ; Ghazalian ; Haq et al ). Given that the implications of the suspension agreements would cover trade in fresh tomatoes and trade in vertically related processed tomato products, this study adapts a gravity model for vertically related products following earlier studies by Tamini et al () and Ghazalian et al (). The empirical analysis is performed using various estimators as advocated by the recent advances in the estimation methods of the gravity model.…”

Section: Introductionmentioning

confidence: 99%

“…Tamini et al () and Ghazalian et al () found that the estimated CES parameter for beef trade is around 2.2.…”

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confidence: 98%

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The New Tomato Suspension Agreement: What Are the Implications for Trade Flows?

Ghazalian

2014

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This paper examines the implications of the new tomato suspension agreement (signed on March 4, 2013, by the U.S. government and Mexican tomato producers) for trade in fresh tomatoes and processed tomato products. The empirical analysis is performed through a gravity model that accounts for vertical linkages between primary and processed goods. The estimated gravity parameters are used to implement suspension agreement scenarios. The results show that the new suspension agreement leads to considerable decreases in Mexico's exports of fresh tomatoes to the United States. These decreases are accompanied with various trade diversion and deflection effects. There are increases in Mexico's exports of processed tomato products to the United States and other countries, and in Mexico's exports of fresh tomatoes to non-U.S. destinations. These increases do not amount, however, to considerable compensations of the decreases in Mexico's fresh tomato exports to the United States. The results also suggest that the initial 1996-based suspension agreement has significantly smaller impacts on trade flows over the period that preceded the implementation of the new suspension agreement. Dans le présent article, nous traitons des répercussions du nouvel accord de suspension (conclu le 4 mars 2013 entre le gouvernement desÉtats-Unis et les producteurs de tomates du Mexique) touchant le commerce des tomates fraîches et des produits de tomates transformées. Nous avons effectué l'analyse empiriqueà l'aide d'un modèle gravitaire qui tient compte des liens verticaux entre les produits primaires et les produits transformés. Nous avons utilisé des paramètres gravitaires estimatifs pourélaborer des scénarios d'accord de suspension. Selon les résultats de notre analyse, ce nouvel accord de suspension cause une baisse considérable des exportations de tomates fraîches du Mexique vers lesÉtats-Unis ainsi qu'un déplacement deséchanges. Les exportations de produits de tomates transformées du Mexique vers lesÉtats-Unis et d'autres pays ainsi que les exportations de tomates fraîches du Mexique vers des destinations autres que lesÉtats-Unis augmentent. Toutefois, ces hausses ne compensent pas la baisse des exportations de tomates fraîches du Mexique vers lesÉtats-Unis. Les résultats de notré etude permettent de penser que l'accord de suspension initial conclu en 1996 a eu des répercussions beaucoup moins considérables sur le flux deséchanges pendant la période qui a précédé la mise en oeuvre du nouvel accord de suspension.

“… Using a static gravity model, Ghazalian et al () found that under the partial liberalization scenario, Canada cattle imports would decrease by 21%. For beef, the imports would increase, respectively, by 14.7%.…”

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confidence: 99%

Analyzing Trade Liberalization Effects in the Egg Sector Using a Dynamic Gravity Model

Tamini

Doyon

Simon

2015

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The objective of the paper is to explore potential changes in trade induced by a liberalization scenario when taking into account persistence in trading partners. Our approach is based on the development of a gravity model that takes into account the dynamics at the extensive margin of trade as well as the persistence effect of the intensity of trade. Our empirical contribution is on the egg sector, where the persistence in trading partners is acute. Our results indicate that the use of static models underestimate imports of table eggs by more than 50% in Canada, when compared with the use of panel dynamic specification. The dynamic specification helps explain why trade liberalizations often increase trade creation between countries that had already been trading partners, while new trading partnerships remain scarce following trade liberalization. Our results also confirm the importance of sunk cost and their negative impact on the probability of export market participation for developing countries. Those results raise questions regarding the benefit of trade liberalization for developing countries, in terms of accessing new market, if they do not benefit from special treatments. L'objectif de cetteétude est d'explorer un scénario de libéralisation du commerce qui prend en considération l'effet de persistance des partenaires commerciaux. Nous développons un modèle de gravité qui prend en considération la dynamique de la marge extensive et la persistance des partenaires commerciaux. Notre contribution empirique est au niveau du secteur des oeufs. Nos résultats indiquent que l'utilisation de modèle statique sous-estime l'impact de scénarios de libéralisation. Ainsi, les importations d'oeufs de table au Canada suivant un tel scénario sont sous-estimées de plus de 50% par rapport au modèle dynamique. La spécification dynamique permetégalement d'expliquer pourquoi la libéralisation du commerce augmente souvent leséchanges entre pays déjà partenaires commerciaux, alors que les gains au chapitre de la marge extensive sont modestes. Les résultats confirmentégalement l'impact négatif des coûts fixes sur la probabilité des pays en développement de participer aux marchés de l'exportation. Ces résultats soulèvent donc des questions quant aux bénéfices de la libéralisation deséchanges pour les pays en développement, en termes d'accès au marché en absence de traitements spécifiques. * Chaire de rechercheéconomique sur l'industrie des oeufs.