Bilateral Import Protection, Free Trade Agreements, and Other Factors Influencing Trade Flows in Agriculture and Clothing

Abstract

"Many factors shape the global network of bilateral trade including fundamental forces of supply and demand factors and government policies. This study uses the generalised gravity framework to distinguish among the different drivers that either deter or aid partner trade in land-intensive agriculture and labour-intensive clothing. The dataset used in the analysis includes bilateral trade among 70 countries in 1995, 2000 and 2005. Collectively, the 70 countries account for 85% of the world's trade in agriculture and 96% of its GDP. Empirical results lend support to the Heckscher-Ohlin explanation of trade, namely that relative factor endowments motivate cross-border trade. Results also show that tariffs are not always binding and bilateral free-trade agreements more often divert rather than create trade." Copyright (c) 2009 The Agricultural Economics Society. No claim to original US government works.

Capturing zero‐trade values in gravity equations of trade: an analysis of protectionism in agro‐food sectors

“…In three sectors (pfb, ocr, and ctl), however, statistically significant negative effects are found. Vollrath et al (2009) find a similar result for aggregate agricultural trade in 1995 and 2000. This result, in part, reflects the conclusion in Lambert and Mckoy (2009) that the impacts of PTAs on trade are inconclusive.…”

“…Our tariff results represent an improvement on previous cross‐sectional studies (Kuiper and van Tongeren, 2006; Philippidis et al, 2007), which found examples of nonsignificant and positive tariff parameter values across agro‐food sectors. Vollrath et al (2009) also employ cross‐sectional data with a double logarithmic gravity equation restricted to nonzero trade observations for three agro‐food products (and aggregate agro‐food trade) across three years (1995, 2000, and 2005). The authors greatly reduce the number of (spurious) positive tariff parameter estimates, although the statistical significance of tariff impacts on trade volumes is limited (including aggregate agricultural trade across all three years) 10 .…”

“…In attempting to quantify policy‐induced trade gains, it is acknowledged (Vollrath et al, 2009) that gravity studies need to accommodate measures of trade protection on a commodity by commodity basis. Although there exist a number of recent gravity studies which explore this issue (e.g., de Frahan and Vancauteren, 2006; Ghazalian et al, 2009; Raimondi and Olper, 2011; Tamini et al, 2010; Vollrath et al, 2009), in all cases (except the latter) the commodity coverage is limited to two or three sectors, whereas none of the above extends the definition of protectionism to explicitly account for export refunds.…”

“…11 11 Employing trade data for the same year (i.e., 2005), the significance of tariffs for “bovine meat” in Ghazalian et al (2009) is not supported by Vollrath et al (2009). This may be due to either the estimation procedure employed, and/or the degree of aggregation of the red meat sector. …”

“…12 12 Examining Raimondi and Olper (2011), Tamini et al (2010), Ghazalian et al (2009), and Vollrath et al (2009), it also appears to be the case that the relative importance of these rival measures is a function of the product under discussion. …”