Bilateral Exports Research Articles

Trade effects of trade facilitation revisited

This paper is the first to evaluate the effect of trade facilitation measures on bilateral exports considering intra-national trade. The measures used are based on the United Nations Global Survey on Digital and Sustainable Trade Facilitation for 2015, 2017, and 2019. The methodology consists of estimating a structural gravity model that includes domestic sales in addition to international trade, which allows identification of country-specific trade facilitation effects, while fully accounting for multilateral resistances to trade and for globalization effects. The findings show a positive effect of trade facilitation measures on bilateral trade. The effects are heterogeneous and vary with the level of development of the exporters, generally being stronger for non-OECD countries.

Re-examining the trade competitiveness between USA and China: Empirical evidence from prominent international trade measures

The study re-examined the pattern of bilateral trade and extent of trade competitiveness between USA and China. Since both countries seem to be the largest bilateral trading partners in the world and the two largest economies in terms of gross domestic product, it is imperative to re-examine the bilateral trade relationship between them empirically. Previous studies have employed non econometric approaches to examine the effects of trade competitiveness on the volume and structure of bilateral exports between USA and China. However, this study adopts prominent international trade measures such as Revealed Comparative Advantage Index, Export Similarity Index and an econometric technique, the Gravity-Autoregressive Distributive Lag model to empirically analyze data spanning from 1992 to 2020 sourced from World Integrated Trade Solution (WITS) database. The results revealed that USA and China export similar but differentiated products and it is the product differentiation that explains the huge volume of trade between them despite export similarity. Furthermore, the study discovered that there exists a moderate trade competitive but great trade complementary relationship between USA and China. Meanwhile, the study also found that a decrease in the extent of trade competitiveness between China and USA will significantly lead to an increase in the volume of bilateral exports between USA and China while an increase in the extent of trade competitiveness between China and USA will significantly lead to a decrease in the volume of bilateral exports between USA and China. Therefore, both countries will substantially benefit from trade if they cooperate rather than compete.

Comparative advantages in the digital era–A Heckscher-Ohlin-Vanek approach

This paper revisits the Heckscher-Ohlin-Vanek (HOV) theorem and investigates its fit for digital tasks and ICT capital, which both represent endowment factors that are expected to shape the digital transformation. We use a theory-consistent methodology for calculating the measured net factor content of trade (Trefler and Zhu, . The structure of factor content predictions) and apply it to a unique dataset on digital and non-digital tasks performed in detailed occupations, as well as recent data on ICT capital stocks. Equipped with these data we provide new evidence on the factor-based trade patterns for 25 EU countries and use it to test the HOV theorem. Overall, the performance of the sign test and the rank test is good if not impressive. In 83% of the cases countries are net exporters of those factors with which they are abundantly endowed, with a higher score achieved for digital tasks than for ICT capital. The relevance of digital tasks and ICT capital are corroborated by a gravity model which indicate that higher endowments with these factors foster bilateral exports.

The nexus between product sophistication and export survival: Evidence from China

This study investigates the survival of China's bilateral export flows at the six-digit HS level over the period 2002–2020. The results reveal that export relationships defined as product-destination pairs are highly dynamic and short-lived. Most export spells last no longer than five years, with a median duration of only two years. Product sophistication is a crucial determinant in establishing and stabilizing export relationships. This conclusion remains robust even after accounting for various measures for product sophistication, alternative definitions of export spells, and potential biases arising from simultaneity, sample selection, and data aggregation. Further analyses demonstrate that comparative advantage plays a positive role in moderating the nexus between product sophistication and export survival. In contrast, destination income poses a reverse U-shaped moderating effect on the relationship. The per capita income corresponding to the maximum moderating effect is US$ 6996.94, or the 56th percentile of the variable. Income distance accounts for the nonlinear effect of per capita destination income on export survival. These findings provide insights into China's rapid export growth and have significant implications for policymakers in China and other emerging economies striving for global trade success.

International trade and Ukraine's pursuit of self‐determination

AbstractIn this research, we assess the international trade implications of Ukraine's pursuit of self‐determination through the lens of the EU–Ukraine Association Agreement and the contemporaneous war with Russia in the years preceding the 2022 Russian Invasion. To do so, we construct a dataset with annual, bilateral export and import flows for Ukraine and a set of comparator countries at the 6‐digit level of the Harmonised Tariff Schedule (HS) for years 2000–2019. Using this data, we nest a difference‐in‐difference design within a series of econometric gravity models to estimate the effects on the sectoral and geographic composition of Ukrainian trade. Our results indicate a major re‐direction of exports towards the EU and away from Russia. Trade outcomes are one of many considerations that led to Ukraine's pursuit of EU integration.

The effect of non-tariff measures (NTMS) on Indonesian pulp and paper exports

<span lang="EN-US">Non-Tariff Measures (NTMs) are likely applied by some major trading countries. The NTM policy mostly applies Sanitary and Phytosanitary (SPS) and Technical Barrier to Trade (TBT). Pulp and Paper commodities are some of Indonesia’s potential exports facing NTM barriers by a number of major destinations countries. This study is aimed to evaluate the effects of NTMs upon Indonesian pulp and paper export in the main destinations. NTMs are represented by coverage ratio of SPS and coverage ratio of TBT. The effect of NTMs imposition to pulp and paper between Indonesia and its main trade partners is estimated by using a panel data gravity model that is constructed by disaggregated data on bilateral export trade flow of pulp and paper between Indonesia and its main trade partners for the period from 2005 to 2019. The gravity model is estimated by a fixed effects model, Poisson Pseudo Maximum Likelihood, and Hausman Taylor model. The results indicated that the imposition of SPS and TBT of destination countries presented a positive and significant impact upon the Indonesian export of pulp. However, the imposition of SPS and TBT of destination countries presented a negative and significant impact upon the Indonesian export of paper.</span>

Evaluating the effect of ICT on trade and economic growth from the perspective of Eastern African belt and road countries

ABSTRACT This study employs the new panel data structural gravity approach to investigate the overarching effect of ICT on bilateral trade flows and economic growth, by using a panel of 65 Belt and Road initiative (BRI) countries. This comprises of twenty-seven (27) sub-Saharan African countries from the period 2000 to 2019. The empirical results indicate that greater access to ICT deepens bilateral export and growth among participating countries. Essentially, the results demonstrate a positive correlation between ICT growth and economic development in the BRI countries. Overall, the findings reveal that ICT and infrastructural growth have provided the East African Community (EAC) a lot of opportunities to boost intra-regional trade. However, the BRI countries need to invest more heavily in ICT infrastructure to foster a continuous and sustainable economic development paradigm within the enclave.

Impacts of climate change on global agri-food trade

Climate change and trade are closely related. Climate may alter the comparative advantages across countries, which may in turn trigger changes in trade patterns. Trade itself may constitute an adaptation strategy, moving excesses of agri-food supply to regions with shortages, and this in turn may explain changes in land-use. We investigate these linkages, showing that the changes in climate affect counties’ trade value and contribute to reshaping trade patterns. First, we quantify the long-term impacts of climate on the value of agri-food exports, implicitly considering the ability of countries to adapt, and show that higher marginal temperatures and rainfall levels tend to be beneficial for countries’ exports. Following a gravity model approach, we then link the evolving trade patterns to climate change adaptation strategies. We find that the larger the difference in temperatures and rainfall levels between trading partners, the higher the value of bilateral exports. Furthermore, while developed and developing exporters are both sensitive to climate change and to cross-countries heterogeneity in climate, we found their responses to changes in climate to be quite diverse.

The Intensive Margin in Trade: How Big and How Important?

In benchmark trade models that feature a constant trade elasticity, bilateral exports vary entirely on the intensive margin (exports per firm) or entirely on the extensive margin (number of firms). Our empirical analysis documents that roughly one-half of this variation occurs along each margin, implying that the trade elasticity is not constant. We estimate a generalized Melitz model with a joint log-normal distribution for firm productivity, fixed costs, and demand shifters. Using exact-hat algebra, we quantify how trade costs affect trade flows and welfare. Welfare effects are similar to those in the Melitz-Pareto model, but implied trade flows differ significantly. (JEL D22, D24, D43, F12, F14, L13)

Are preferential agreements beneficial to EU trade? New evidence from the EU–South Korea treaty

AbstractThis paper empirically investigates the effect of the EU–South Korea free trade agreement (FTA) on manufacturing trade flows. By applying a state‐of‐the‐art structural gravity model with intra‐national (i.e. domestic) trade and using disaggregated data, we quantify both the trade impact and the observed heterogeneity in the FTA estimates. In line with literature, we find that the EU–South Korea FTA exerted asymmetric effects in bilateral exports across directions of trade. Compared to previous studies, our findings suggest a different explanation for the poor performances of Korean exports to the EU in the post‐FTA period, namely offshoring patterns in electronics and a broad‐based decline in the shipbuilding industry. When we drop these two export categories from the analysis, we show that the FTA exerted a large effect on trade in both directions, increasing bilateral exports by about 30%. We then investigate the substantial observed heterogeneity in pair‐industry‐specific estimates of the FTA. The main source of variation is represented by asymmetries in ex‐ante trade barriers across sectors, with a prominent role for non‐tariff instruments. Stronger pre‐FTA regulatory intensity is associated to a high liberalisation potential, favouring larger FTA estimates. Tariffs instead do not explain the heterogeneity in the trade effects.

Export capacity and capital stock augmentation through imports: Evidence from Sub‐Saharan African countries

AbstractThis paper investigates the capital goods imports of Sub‐Saharan African (SSA) countries from 2002 to 2017. The composition of capital goods imports has become less diverse over time in more than half of the countries studied. Colonial ties no longer determine the sourcing of capital goods as China is now the top source. Trade gravity regressions using the Poisson pseudo‐maximum‐likelihood estimator show that bilateral exports of non‐primary products by SSA countries and their low‐income peers are associated with increased net stock of imported general‐purpose capital goods. Additionally, there is evidence that the net stock of some types of imported equipment and machinery is associated with increased non‐primary exports of items utilising these capital goods with elasticity estimates ranging from 0.10 to 1.10. Thus, there is some form of economic restructuring in the region gleaned from increased exports of non‐primary products brought about by capital stock augmentation through imports.

방위산업 수출에 있어 네트워크 효과에 관한 연구

The main purpose of this study is to contribute to the investigation of explanatory variables and networks effect on exports in the defense industry. In particular, it attempts to examine the role of two channels of economic and non-economic networks in the gravity equation of exports; economic networks are trade, FDI and FTA, non-economic networks are military expenditure and military alliance. The basic and the augmented gravity models are estimated with an annual cross-section data set of year 2020 for 44 countries.
 The estimation results demonstrate that military expenditures explain the bilateral export in the defense industry better than GDP does as an economic scale variable in the equation. Also the evidence of the effect of FDI is statistically significant in the estimation, whereas no evidence for effects of trade and FTA have been found. In addition, there is no further evidence for the role of military alliance between trade partners for exports in defense industry.
 The results imply that military expenditure of import country and FDI relation has a strong relationship with export in the defense industry. Thus, it also emphasizes the policy implication for taking into account of the linkage between export and FDI activity in promoting export of defense industry.

Trade restrictions on digital services and the impact on manufacturing exports

In the digital age, digital services not only provide important intermediate inputs for manufacturing but they also affect the availability of other potentially ICT-enabled high-quality services as intermediate inputs. Therefore, it is particularly important and meaningful to explore the relationship between the liberalization of trade in digital services and manufacturing exports. This paper uses a panel dataset of bilateral exports of 15 manufacturing sectors in 54 countries, from 2014 to 2018, to examine the impact of digital services trade policy restrictions on exports of manufactured goods. The main results suggest that the impact of trade policy restrictions on manufacturing exports is mixed but mainly negative. Moreover, regulatory differences in digital services industries between bilateral country pairs also have a significant negative impact on the export performance of manufacturing industries. In addition, we further examine the heterogeneity of this impact mechanism across different policy areas, manufacturing sectors, and bilateral country-pair groups.

Growth and risk: A view from international trade

This paper studies the cross-country patterns of risky innovation and growth through the lens of international trade. We use a simple theoretical framework of risky quality upgrading by firms under varying levels of financial development to derive two predictions. First, the mean rate of quality growth and the corresponding cross-sectional variance of quality growth in a country are positively correlated. Second, both the mean and variance of quality changes are positively correlated with the country's level of financial development. We then test these two hypotheses using data on disaggregated (HS10) bilateral exports to the United States. The patterns in the data are consistent with the theory. The mean and the variance of quality growth are strongly positively correlated with each other. Countries with greater financial depth are systematically characterized by higher mean and higher variance in the growth of product quality. Our findings suggest a mean-variance trade-off in product quality improvements along the development path. Increases in financial depth do not imply lower variability of changes in the product space.

Trade effects of non-economic provisions in trade agreements

We assess the relationship between non-trade provisions (NTPs) pertaining to labor standards and the environment in preferential trade agreements (PTAs) and bilateral exports of environment and labor-intensive products between PTA partners, controlling for aid-for-trade, development assistance for labor and environment-related projects, and the enforceability of NTPs. NTPs are associated with greater exports of environment- and labor-intensive goods from high-income PTA members, while there is a negative relationship between NTPs and labor-intensive exports from developing countries. Bilateral exports of donors granting aid for trade are strongly associated with a higher propensity of recipients to participate in deep PTAs. Results are consistent with arguments that NTPs may increase trade costs for developing countries and that NTPs in part reflect commercial interests of high-income countries.

The effect of the informal economy on bilateral exports from sub‐Saharan African countries

AbstractThe purpose of this study is to analyse the impact of the informal economy on bilateral exports in sub‐Saharan African countries. We use a gravity model, to which we add indicators of the informal economy and indicator variables for different economic regions. The study used Pseudo‐Poisson Maximum Likelihood (PPML) and Heckman estimation techniques on data from the period 2002–2018. The results show that the informal economy has a negative impact on bilateral inter‐community exports and a positive impact on bilateral intra‐community exports. These results thus support the idea that the informal economy can accelerate the integration of regional economic communities and ultimately facilitate the establishment of bilateral export free trade areas at the continental level.

Growing older and growing apart? Population age structure and trade

PurposeThis paper explores the empirical relationship between population age structure and bilateral trade.Design/methodology/approachThe author includes age structure in both log and Poisson pseudo-maximum likelihood (PPML) formulations of the gravity equation of trade. The author studies relative age effects, using differences in the demographic structure of each country-pair.FindingsThe author finds that a relatively larger share of population in working age increases bilateral exports. This is robust to various estimation models, as well as to changes in the method of specifying the demographic controls. Old-age shares have a negative, but less robustly estimated impact on trade. Estimating instead the balance of trade between trading partners produces similar results, with positive effects of age structure peaking later in working life.Practical implicationsGlobal populations are poised to undergo a massive transition. Trade a crucial way that the demographic deficits of one country may be offset by the dividends of another as comparative advantages shift along with the size and strength of their underlying workforce.Originality/valueThe author’s work is among the first to quantify the effect of relative age structure between two countries and their bilateral trade flows. Focusing on the aggregate flows, relative age shares and PPML estimates of the trade relationship, this paper provides the most comprehensive picture to date on how age structure affects trade.

Export Competence of Cultural Goods: A Structural Gravity Analysis of the BRICS Trade

The BRICS economies contribute a substantial portion of global trade. However, the share of cultural export in their total exports has been declining over the past two decades. In this context, the current study examines cultural exports of BRICS compared to their aggregate exports using structural gravity model. For empirical estimation, we apply Poisson Pseudo-Maximum Likelihood High Dimensional Fixed Effects (PPMLHDFE) estimator for annual bilateral exports data. The results show that, as compared to non-cultural aggregate exports, exports of creative industries are more sensitive to geographical distance between countries. Nevertheless, positive effect of the similarity between trading partners in terms of language commonality, colonial relationship and shared border is more pronounced in case of cultural exports. Furthermore, we find that while the regional trade agreements promote exports in general, they remain inconsequential in case of cultural exports of BRICS. Additionally, the study uses cultural exports as a proxy for cultural proximity and finds that bilateral cultural exports facilitate the exports of non-cultural exports.

Deep preferential trade agreements and export efficiency in Ghana: Do institutions matter?

Preferential trade agreements with environmental provisions (Deep PTAs) have introduced a new layer of costs to bilateral trade. For a country seeking to grow its exports to generate sufficient foreign exchange for economic transformation, it is essential to investigate the effects of the expanded preferential trade area on its export efficiency. Therefore, this paper, employs the stochastic frontier gravity model to investigate Ghana's bilateral export efficiency using a panel of 44 of her export destination countries for the period 2007 to 2019. The paper finds that Ghana’s bilateral export trade is inefficient, implying huge potential exists. It further reveals that PTAs with environmental provisions reduce Ghana’s export efficiency. The reduction in export efficiency lessens with improvement in institutional quality. The paper recommends that the regulatory roles of Ghana Standards Authority and the Environmental Protection Agency should be strengthened to ensure that exporters meet target market regulations to continue to benefit from the bilateral PTAs. Given the negative effect of the exchange rate on export efficiency, the Bank of Ghana and the Ministry of Finance should urgently enhance macroeconomic stability to provide a stable platform which should promote the country’s export value and volume.

Industria automotriz en la región del TLCAN. Un análisis del valor agregado en las exportaciones bilaterales

The objective of this document is to decompose the gross value of bilateral exports of the automotive sector in the NAFTA region, according to the source and destination of its value added. A multi-country input-output model is utilized. The results indicate that Canada and Mexico are highly dependent on U.S. inputs to produce automotive exports while the U.S. records the highest content of domestic value-added. Besides, the U.S. has formed production chains that supply Canada and Mexico with production inputs that after processing return to the U.S. or are re-exported to third countries, whereas Canada and Mexico are limited to supplying final and intermediate goods to the U.S. Trade between the two countries is minor.