Bilateral Trade Data Research Articles

The mystery of misreported trade: A novel method to identify distorted trade figures

AbstractThis research shows that misreporting of trade is rampant, which markedly reduces the quality of reported bilateral trade data. We devise a novel methodology to correct for misreported bilateral trade while accounting for the composition of product types and for trading partners. Based on bilateral data for 196 countries in the world at the product level over the period 1996–2017, we find that (i) our corrected trade data are significantly more reliable than reported data; (ii) our corrected data are significantly more reliable than data based on conventional misreporting correction methods; (iii) corrected trade balances are often quite distinct from their reported counterparts; (iv) capital flight is the most important source of misreporting and (v) the misreporting propensity tends to cluster geographically, with the main offenders often deviating from common perceptions in the literature. Based on estimates of the gravity model, we show that geographical characteristics are more influential than institutional variables in explaining misreporting.

A mixed methods approach in analyzing the perspective of Croatia’s economic relations with the U.S., Russia, and China

This study explores the relationship between Croatia and the U.S., Russia, and China, providing a comparative qualitative analysis of trade and investment flows between these countries. Using a Mixed Methods approach combined with a literature review, evaluation of a range of data sources, analysis of bilateral trade data and foreign direct investment flows, and other economic indicators, the study analyzes the drivers of and implications for economic ties between Croatia and these countries. The study also examines the impact of economic sanctions on Croatia's relationship with Russia. The research finds that the U.S. is Croatia's largest trading partner, while Russia and China are important sources of foreign direct investment. Finally, the study provides recommendations for future research, highlighting the need for a greater focus on trade in services, investment flows, and comparative analysis with other countries in the Balkans region. Overall, the study contributes to understanding the complex economic relationship between Croatia and the U.S., Russia, and China and offers recommendations for greater diversification of Croatia's trade and investment partners and the importance of monitoring the political and economic risks in economic cooperation.

Evolution and Impacting Factors of Global Renewable Energy Products Trade Network: An Empirical Investigation Based on ERGM Model

Global trade of renewable energy products has increased significantly in recent years. This paper constructs an analytical framework of a global trade network for renewable energy products based on bilateral trade data between 2009 and 2019. It analyses its structural evolution at the global and local levels and investigates the influencing factors of the network with the Exponential Random Graph Model. The empirical results indicate that countries in the trade network have become more closely connected, featuring a core-periphery and increasing reciprocity relationship. China, Germany, and Japan have remained in the position of core countries; China has especially been prominent among core countries. Our empirical results verify that the sender-receiver effects can explain the evolution of this global trade network. The empirical results also indicate that the climate change agreement network and the common border network have positive effects on the formation of the trade network. As regards political implications, the core countries in the trade network should optimize the layout of renewable energy development and improve infrastructure accordingly. Countries should also jointly build a more fair and reasonable multilateral system that fulfills their responsibilities.

Economic and environmental impacts of agricultural non-tariff measures: evidence based on ad valorem equivalent estimates

Non-tariff measures as hidden barriers to agricultural trade would not only result in production and welfare distortions due to the international relocation of activities along the agricultural value chain, but also yield subsequent consequences to both the scale and distribution of carbon emissions from the agri-food system. This paper estimates ad valorem equivalents of non-tariff measures using a gravity model in combination with detailed bilateral trade data of 2001-2019, and incorporates the estimations in the Global Trade Analysis Project model and a multi-regional input-output table of Eora26 to quantify economic and environmental impacts of non-tariff measures. We show that while tariff equivalents are on average positive for all types of non-tariff measures, there are substantial heterogeneities across countries and products. The extra trade barriers imposed by these measures would increase the scale of domestic agriculture-related sectors for most agriculture importing countries, and vice versa for major exporters. Meanwhile, they would reduce the global welfare at amount of 16 millions US dollars on average and in particular, the welfare of key imposers and targeting markets of non-tariff measures. Carbon emissions from the agri-food system tend to increase about 1% around the world, especially due to the larger food processing industry in developed countries. Our paper confirms that non-tariff measures lead to both welfare distortions and carbon emissions in the agri-food system. It thus calls for urgent needs to promote further reforms of the agricultural trade regime and the policy coordination across countries to facilitate agri-food system transformation with more integration and sustainability.

Visualizing economic drivers of virtual land trade: A case study of global cereals trade

Exploring virtual land trade (VLT) embodied in the global agricultural trade enables us to uncover potential risks to economy, environment, and food security within the trade structure. Using the bilateral trade data for the periods of 1988–1990, 1998–2000, 2008–2010, and 2018–2020, we created halfcircle diagrams depicting how virtual land of cereals is traded between countries of different income levels. The diagrams show that the global trend of virtual land in cereal products was being exported from high-income to low-income countries. Initially, a few wealthy countries dominated exports, and in later periods, middle-income countries joined major exporters. There has been a significant increase in the number of countries participating in VLT. Halfcircle diagrams are a useful tool for visualizing overall trends of VLT in relation to a potential driver.

Structural properties and evolution of global photovoltaic industry trade network.

As resource shortages and environmental problems keep coming up, economies urgently need renewable energies as the new driving force for development. As one of the representatives of renewable energy, the photovoltaic (PV)'s trade has received much attention from all walks of life. Based on bilateral PV trade data, complex network methods and exponential random graph models (ERGM), this paper constructs global PV trade networks (PVTNs) during 2000-2019, describes detailed evolution features and verifies the influencing factors of the PVTNs. We find that (1) PVTNs have obvious characteristics of the small-world network, accompanied by disassortativity and low reciprocity. (2) Asia, North America, and Europe are the top 3 leading regions in the PVTNs. (3) China is the largest exporter, and the US is the leading recipient. Germany is an essential importer as well as exporter of PVTNs. (4) The formation and evolution of the PVTNs are significantly affected by transitivity, reciprocity, and stability. PV trade is more possible when economy-pairs are WTO members, located on the same continent, or with asymmetrical urbanization rates, industrialization rates, technological level or environmental supervision strength. Specifically, economies with higher industrialization rates, technological levels, stricter environmental regulations or lower urbanization rates are more likely to import PV. Economies with higher economic development, larger area, and greater trade openness are more inclined to trade PV. Besides, economic partners that share a religion or language, have common historical colonial ties or geographic borders or sign regional trade agreements are more likely to trade PV.

Dominant currencies and the export supply channel

The dominant currency paradigm (DCP) predicts negligible effects of exchange rate changes on export volumes through the expenditure-switching channel (Gopinath et al., 2020). However, exports can still adjust through other supply-side channels. With bilateral trade data at the HS2-product level, panel fixed-effects regressions and an instrumental variables (IV) approach, this paper presents several novel findings: (i), a depreciation of an exporter’s currency against the US-dollar increases total nominal exports between non-US countries, whereas bilateral exchange rates matter very little. (ii), the export response is primarily driven by an increase in export unit values in the exporter’s currency, whereas less than a third of the impact is driven by an increase in export volumes. (iii), there is no statistically significant increase in average export volumes per firm (the intensive margin), while the increase in export volumes is solely driven by entry of exporting firms (the extensive margin). These results are robust across econometric specifications, estimators and definitions of entry and highlight how export supply can adjust to exchange rate changes in a world with dominant currencies and deepens our understanding of aggregate export adjustment.

The impact of regional trade agreements on trade efficiency in East Asia: a stochastic frontier gravity approach

ABSTRACT This paper aims to investigate how selected regional trade agreements (RTAs) affect trade efficiency in East Asia, which is measured by the ratio of actual exports to their maximum potential export value. To achieve this, we use a stochastic frontier gravity model and bilateral trade data of 16 countries from 1990 to 2018. Our results indicate that RTAs generally improve trade efficiency between member countries. Moreover, we distinguish between intra-bloc and extra-bloc trade, and found that export diversion due to RTAs is rare in East Asia. On the other hand, our result shows that the imports of ASEAN countries tend to divert away from non-members.

The impact of logistic performance on intra-ASEAN trade

ASEAN has gone a long way in deepening its regional economic cooperation, particularly its trade liberalization. However, ASEAN has comparatively less intraregional trade than the European Union, whose economic integration model they aspire to emulate. As reducing tariffs was no longer an efficient way to increase trade, this study analyzes logistics performance as another factor that may affect trade. Using the gravity model with bilateral trade data from 10 ASEAN member states from 2007 to 2018 with gaps, the results show that the majority of improvements in logistics performance, by both the private sector and government alike, have positive and significant impacts on export value. This finding implies that the collaboration between the private sector and government agencies to improve logistics performance in each ASEAN member state is imperative to foster ASEAN intra-regional trade further.

Firms’ entry choices across export products and markets, and the consequences of trade in an open economy: Evidence from China

We outline a model of endogenous choices of market entry and product scope in a partial-equilibrium model of heterogeneous firms with arbitrary productivity. Firms’ choices of interest depend on market characteristics including variable trade and fixed market-entry costs. Conditional on fixed costs, the extent to which firms respond to shocks depends on their (potentially nonparametric) density around the zero-profit threshold. Accordingly, identical changes in, e.g., variable trade costs per product and market can lead to vastly different responses across not only markets and products but also firms. We shed light on the heterogeneity of these responses by estimating parameters and otherwise calibrating the model to firm-and-product-level bilateral trade data for China.

Assessing the effects of hard and soft infrastructure on traditional vs supply-chain trade: the case of Central and Eastern EU member states (CEMS)

ABSTRACT The aim of this paper is to assess the role of hard and soft infrastructure in trade, distinguishing between traditional trade and supply-chain trade. Using factor analysis, we construct four aggregate trade facilitation indicators where we measure hard infrastructure as physical and ICT infrastructure, while soft infrastructure accounts for border efficiency and institutional efficiency. For traditional trade, we use bilateral trade data from UN Comtrade. Supply-chain trade is measured in terms of domestic value-added (DVAFX) embodied in foreign gross exports and foreign value-added (FVA) embodied in domestic gross exports obtained from Eora MRIO database. We use panel data regression analysis with an empirical model specification based on a gravity model and covering the 2000–2019 period. We estimate model with the Poisson Pseudo-Maximum Likelihood Estimator (PPML). To control multilateral trade-resistance terms (MRT), we included reporter and partner fixed effects along with country pair fixed effects. The results confirm a statistically significant relationship between hard and soft infrastructure and trade. ICT and border efficiency have the strongest impact on both types of trade. Supply-chain trade responds most intensely to improvements in institutional efficiency. Results imply that ICT infrastructure and border efficiency might hold even greater importance for CEMS’s traditional and supply-chain trade.

Technology Gaps, Trade, and Income

This paper quantifies the contribution of technology gaps to international income inequality. I develop an endogenous growth model where cross-country differences in R&D efficiency and cross-industry differences in innovation and adoption opportunities together determine equilibrium technology gaps, trade patterns, and income inequality. Countries with higher R&D efficiency are richer and have comparative advantage in more innovation-dependent industries. I calibrate R&D efficiency by country and innovation dependence by industry using R&D, patent, and bilateral trade data. Counterfactual analysis implies technology gaps account for one-quarter to one-third of nominal wage variation within the OECD. (JEL D21, D24, D31, F14, O31, O33, O47)

Modeling marine cargo traffic to identify countries in Africa with greatest risk of invasion by Anopheles stephensi

Anopheles stephensi, an invasive malaria vector native to South Asia and the Arabian Peninsula, was detected in Djibouti’s seaport, followed by Ethiopia, Sudan, Somalia, and Nigeria. If An. stephensi introduction is facilitated through seatrade, similar to other invasive mosquitoes, the identification of at-risk countries are needed to increase surveillance and response efforts. Bilateral maritime trade data is used to (1) identify coastal African countries which were highly connected to select An. stephensi endemic countries, (2) develop a prioritization list of countries based on the likelihood of An. stephensi introduction through maritime trade index (LASIMTI), and (3) use network analysis of intracontinental maritime trade to determine likely introduction pathways. Sudan and Djibouti were ranked as the top two countries with LASIMTI in 2011, which were the first two coastal African countries where An. stephensi was detected. With Djibouti and Sudan included as source populations, 2020 data identify Egypt, Kenya, Mauritius, Tanzania, and Morocco as the top countries with LASIMTI. Network analysis highlight South Africa, Mauritius, Ghana, and Togo. These tools can prioritize efforts for An. stephensi surveillance and control in Africa. Surveillance in seaports of identified countries may limit further expansion of An. stephensi by serving as an early warning system.

Trade policies in Central Asia after EAEU enlargement and after Russian WTO accession: regionalism and integration into the world economy revisited

ABSTRACT This paper revisits the question of choice between regionalism and multilateralism in trade relations of Central Asia introduced by Pomfret (2005). Our study is motivated by a significant restoration of economic links between the former Soviet republics following Russian accession to the World Trade Organization (WTO), the creation of the Eurasian Economic Union (EAEU), and the formation of new trade ties with Vietnam, Iran, and Serbia. Above all, there have been substantial commitments made by the three Central Asian republics of Tajikistan, Turkmenistan, and Uzbekistan toward a multilateral system under the WTO rules. To this end, we apply a multi-region gravity model with interdependent trade flows using bilateral trade data of Tajikistan and Uzbekistan to study the ex-ante effects of economic integration with various bilateral, plurilateral, and multilateral partners. Our findings indicate the existence of considerable gains if the aforementioned economies would ascend to the EAEU in comparison to integration with China or Iran. We also document the presence of shared economic links between Tajikistan, Central Asia, and Turkey.

Global value chains and external adjustment: Do exchange rates still matter?

The exchange rate has traditionally been regarded as a key mechanism of external adjustment because its movement induces changes in exports and imports by affecting the price of tradable goods relative to domestic goods. However, the relevance of this mechanism has been questioned with the rise of global value chains (GVCs), because exporters increasingly use imported inputs, which implies that exchange rates affect both the price and production costs of exports. This paper studies how a country's trade balance responds to exchange rate changes in the presence of GVCs. It uses bilateral trade data for 37 economies over 2000–14, exploiting information in global input-output tables to measure countries' integration into GVCs. The results indicate that GVC integration dampens the exchange rate elasticity of export and import volumes but also leads to larger trade flows in proportion to output. Overall, the findings suggest that exchange rates remain relevant for external adjustment. • With global value chains, the impact of exchange rates on trade flows is different. • Global value chains dampen the exchange rate elasticity of trade flows. • Both, short and medium-term elasticities are lower with global value chains. • But global value chains lead to greater trade flows in proportion to GDP. • Exchange rates remain a key mechanism for external macroeconomic rebalancing.

Immunization of systemic risk in trade–investment networks

By constructing trade–investment networks and modeling the contagion of systemic risk in trade and investment channels within different countries, we design three immune strategies, namely, Random Immune, Target Immune, and Neighbor Immune, and compare the inhibitory effect of these strategies on the shock contagion of multilayer networks. Using bilateral trade and portfolio investment data between China and OECD countries from 2003 to 2019, results show that first, independent of the source of contagion, the network system with a self-healing capability always reaches the steady state after a certain period of the risk transmission process. The investment network is more resilient to systemic risk than the trade network. Second, Random Immune is inferior in intervening on important countries and currently provides weaker protection for trade–investment​ networks than two other types of immunization strategies because of the high concentration of trade and investment events in the networks. Third, Target Immune aiming at controlling the most important country, the US, is not optimized for improving risk resistance of countries cooperating scarcely with the US, but its optimization efficiency continues to increase as the significance of the US in the system keeps rising. Fourth, among the four Neighbor Immune approaches, Asset-Neighbor Immune provides the superior and consistently enhanced protection for the trade–investment networks, and Liability-Neighbor Immune has the dominant position in terms of the enhancement for risk resistance of each country’s trade and investment channels. Investment Asset-Neighbor Immune or Investment Liability-Neighbor Immune, which effectively reduces the negative impact of systemic risk on the whole system and all countries, is proposed to be implemented in trade–investment networks.

Facilitating trade in intermediate goods

A side effect of economic globalisation and new information and communication technologies is the increasing fragmentation of the production process across different countries and continents, contributing to the rise of trade in intermediate goods, which has increased to almost 2/3 of total world trade. Most of this trade, i.e., intermediate goods, are transported by sea. Maritime trade is one of the most economical but also complex ways of trading and transporting goods, requiring good coordination, various stops and controls, transhipments, storage, ICT technology to track the cargo, etc. Therefore, the objective of this paper is to quantify the impact of trade facilitation on trade in intermediate goods on the sample of EU28 countries, using biennial data for the period 2010-2018. We estimate augmented gravity model on bilateral trade data using a Poisson Pseudo Maximum Likelihood (PPML) estimator. Our results suggest that, as expected, logistics, and in particular ICT development, has a significant and positive effect on trade in intermediate inputs, when controlling for other variables in the gravity model such as GDP of trading partners, distance, contiguity, existence of a free trade agreement, exchange rate, and common cultural proxies. Our results support the global trend of development and investment in logistics, and, in particular, new ICT technologies, which can not only contribute to the continued growth of trade in intermediates, but also help mitigate the negative effects of recent global economic shocks.

Assessing impacts to maritime shipping from marine chokepoint closures

Global supply chain disruptions caused by the six-day blockage of the Suez Canal in March 2021 and the reduction in shipping through the Bosporus Strait since the onset of the Ukraine War in February 2022 are recent demonstrations of the critical importance of marine chokepoints to international trade and thus global economic security. To better understand and anticipate effects of a chokepoint closure on global trade, we combine GIS data of international shipping lanes with 2019 bilateral trade data to estimate how the closure of each of eleven chokepoints could change trade flows through other chokepoints and between countries. Estimates from the closure scenarios reveal alternate-shipping route linkages between seven chokepoints whereby if one were closed for an extended period, trade through one or more of the others would change significantly. The estimates also underscore the economic importance of the Danish Straits, the Bosporus Strait, the Strait of Hormuz, and the South China Sea and East China Sea to those countries that must rely on these chokepoints for access to maritime trade. Moreover, the estimates project delays and shifts in coastal seaport activity that could lead to knock-on effects that disrupt global supply chains long after a chokepoint blockage is cleared.

Revisiting the ‘Cobden-Chevalier network’ trade and welfare effects

This study revisits the trade and welfare effects of 19th century bilateralism exploiting the latest developments in structural gravity models, including the consideration of domestic trade. Using bilateral trade data between 1855 and 1875, I show that the Cobden-Chevalier network, i.e. a system of bilateral trade agreements including the Most Favored Nation clause, has large, positive and significant effects on members’ trade. These, however, are heterogeneous at the treaty-level. I then calculate its general equilibrium effects on total trade and welfare. They are considerable, while trade diversion effects are negligible. These results reshape the understanding of the Cobden-Chevalier network, helping in further rationalizing the “free trade epidemic” of the 1860s and 1870s.

Major powers make the call? Review of 70 years engagement of major powers with Myanmar

AbstractIt is commonly assumed that smaller powers are prone to getting trapped and lost in the game of contrasting powers; however, the story of six major powers and their relations with Myanmar over the past 70 years has shown that the smaller party does not always take a passive, victimised position in these relations but can achieve an active, relatively independent position. Myanmar accomplished this position by shielding itself from sanctions from the United States, UK, and Japan using China's assistance; implementing selective trade and investment; and diversifying its weapon suppliers, including Russia and other players in the arms market. In this paper, the data on 70 years of arms transfer are analysed to exemplify the defence policy of Myanmar towards major powers, the bilateral trade and foreign direct investment (FDI) data are used for economic policy, and the three indicators provide a simplified but concise picture of Myanmar's long‐term relations with world major powers. Myanmar is a relatively small power in the global landscape of larger powers, but it has maintained its independence in policy making and has made full use of the competition for power among major powers for its own benefit. Thus, it is not the big fish but the small one that has helped shape Myanmar's relations with major powers.