Trade Destruction Research Articles

US agricultural exports and the 2022 Mississippi River drought

AbstractThis paper investigates the impact of the 2022 Mississippi River drought on agricultural trade using counterfactual evaluation methods and detailed trade data at the US port level. The study examines how the drought disrupted agricultural shipments out of Louisiana ports and whether the disruption led to trade diversion to other ports. Our findings reveal that shipments out of Louisiana ports were 3.9% or $560 million below the counterfactual between July 2022 and January 2023. In addition, the dynamic treatment estimates provide evidence of immediate trade recovery after the drought receded in October 2022, indicating that the impact of the drought was short‐lived. Wheat exports were the most affected, experiencing a reduction in shipments from Louisiana ports of $150 million and being diverted to US ports on the West Coast. In contrast, corn and soybeans did not experience lasting trade destruction or diversion to other ports. Our analysis also reveals that export prices increased significantly above the counterfactual level at Louisiana ports, suggesting that the drought impacted the supply and export dynamics of agricultural commodities. In conclusion, this paper provides valuable insights into the short‐run implications of natural disasters on agricultural trade. [EconLit Citations: F14, Q17].

Trade Destruction and Trade Deflection: A Quasi-Natural Experiment Based on the US Additional Tariffs

Trade Destruction and Trade Deflection: A Quasi-Natural Experiment Based on the US Additional Tariffs

Assessing the Seafood Trade Diversion Arising from Economic Sanctions: Evidence from Russia and Western Countries.

Since 2014, economic sanctions between Russia and Western nations have significantly altered the global seafood trade. The consequent decline in bilateral trade also had spillover effects on the rest of the world (ROW). According to earlier studies, economic sanctions appear to negatively impact bilateral trade and income. However, few studies examine how Russian sanctions affect the world as a whole and estimate their effects on the fisheries industry. This study seeks to close this gap by quantifying the extent to which Russian sanctions have impacted trade in terms of trade deflection, trade destruction, trade depression, and trade creation. To this end, panel data from 185 countries were created for the years from 2005 to 2020. With trade policy variables that account for changes in trade channels, a structural gravity trade model was specified. Based on calculations using the Poisson pseudo-maximum likelihood (PPML) fixed effect model, economic sanctions led to a 119.28% surge in Russia's seafood imports from the rest of the world (ROW), alongside a 39% decline in imports from Western countries. The extent of trade deflection, which includes the exports of Western nations diverted from Russia to the ROW markets, increased by 5.49%. The results demonstrate that trade between sanctioned states, as well as global trade, is significantly impacted by economic sanctions.

Trade Destruction and Trade Diversion of Indian Anti-dumping Duties Against Bangladesh

In this study, we investigate Indian anti-dumping (AD) duties imposed on eight products (Harmonized System classification) from Bangladesh over the period 1998–2020. Using the Poisson pseudo-maximum likelihood method, panel regression analysis is applied to examine the relationship between Indian AD duties and goods imported from Bangladesh. Our results provide weakly suggestive significant evidence of trade destruction in the full sample, though statistical significance is enhanced for all product groups other than lead-acid batteries at the product-level investigation. We also provide suggestive evidence for trade diversion from AD duties. Overall, our results show Indian AD duties to be correlated with a decrease in imports from Bangladesh, and an increase in imports of goods from other, unnamed countries. This suggests that India’s protectionist measures may have been ineffective in protecting local producers, as any adverse effects of protectionism on Bangladesh may be offset by import diversion to other foreign suppliers. We also discuss the policy implications of these findings.

Exporters’ productivity and margins of trade deflection: theory and micro-evidence

This paper examines how firm heterogeneity plays a role in trade deflection effects when exporters exit trading partners’ markets with trade-restrictive measures and deflect exports toward third markets with less stringent ones. We develop a Cournot-type three-country theoretical framework that highlights the role of firm productivity in trade deflection effects of trade-restrictive measures and empirically examine research hypotheses using a firm–product–destination level panel data of Korean exporting firms during the 1996–2010 period. We find that highly productive firms facing higher tariffs are more likely to deflect export to new third-country markets with lower tariffs as alternatives. However, once they enter the third destination, the positive effect of tariffs on the deflection of trade volume is less prominent for highly productive firms due to a lower trade destruction effect for them. Our results imply that the magnitude of trade deflection at both the intensive and extensive margins can be heterogeneous across firm productivity and multi-destination status.

The impact of maritime shipping disruptions on US tree nut exports and inventories

AbstractThis paper assesses the impact of the 2021/22 maritime shipping disruptions on US tree nut exports and domestic inventories. Using detailed trade data for almonds, pistachios, and walnuts and counterfactual empirical methods that account for treatment dynamics, we estimate the trade response to maritime shipping disruptions at the US port and commodity level. We find that tree nut shipments were 457 million pounds or $943 million below the counterfactual between May 2021 and July 2022. Almonds experienced the brunt of those trade losses, while pistachio and walnut exports recorded smaller losses and recovered faster. Our estimates imply that maritime shipping disruptions are a primary driver of surging tree nut inventories. Without the trade destruction caused by maritime shipping disruptions, the almond inventory could have been 38.7% lower and close to the long‐run average in the 2021/22 marketing year. [EconLit Citations: F14, Q17].

Can citizen reporting apps plug the data gap in the Himalayan wildlife trade?

The Himalayan region is particularly susceptible to biodiversity loss because it is ecologically rich, highly susceptible to climate change and natural hazards, and its governance is fragmented across multiple inter- and intra-national boundaries. Citizen reporting tools might provide an impetus for improving information-based management of wildlife trade that is lacking in the current regional political structure. Investment in citizen reporting tools could improve the availability of data on the status of existing species’ populations and trade of their commercial product. We outline how this recently-emerged tool is being used in the region and describe the challenges for and potential contribution of a citizen reporting app for combating illegal wildlife trade in the Himalayan region. Tweetable abstractCitizen reporting tools could reduce biodiversity loss in the Himalayas by reducing illegal and destructive trade.

WHAT ARE THE THREATS TO THE FUTURE OF THE WTO?

Today we are witnessing a serious crisis that could lead to the collapse of the World Trade Organization (WTO). This crisis is the consequence of the uncooperative behavior of the triad: the United States, the European Union and East Asia. When there is a confrontation between these three most powerful regional blocs, there is inevitably a blockage and a destructive trade war similar to that of the 1930s. In these times of crisis, each country tries to save its economy by relying on the strategy of protectionism. The negotiation and regulatory functions of the WTO are paralyzed: the Dispute Settlement Body is seriously affected by the refusal of the United States, since 2016, to renew the members of the Appellate Body (AB) whose mandates were expiring. This jeopardizes international rules negotiated since 1947, when the General Agreement on Tariffs and Trade (GATT) was created. The existence of liberalization fatigue and a growing rejection of globalization raises questions about the future of the WTO.

China‐U.S. trade dispute and its impact on global agricultural markets, the U.S. economy, and greenhouse gas emissions

AbstractChina is a major importer of agricultural products and we examine retaliatory tariffs imposed by China on U.S. pork, soybeans, corn, and wheat. We use an agricultural trade model to determine the impacts on agricultural commodity markets and combine our results with an input‐output model to measure economic effects in the United States. In addition, we calculate global greenhouse gas (GHG) emissions from land‐use change. The consequences of retaliatory tariffs are both trade destruction (lower overall trade) and trade diversion (trade diverted away from the U.S. and to other exporting countries). By the end of the projection period, total U.S. pork exports decline by 4.7%. Total soybean and wheat exports decrease by 31.2% and 0.5%, respectively whereas corn exports increases by 4.0%. Domestic U.S. retail pork prices decline by 0.8% and commodity farm prices decrease by 4.2%, 5.1%, and 15.8% for corn, wheat, and soybeans, respectively. The decline in foreign demand reduces U.S. production and welfare. Key among these impacts are a loss of nearly 15,400 jobs and a fall in labor income by $1.35 billion due to a $3.70 billion decline in national output at the beginning of the projection period. By the last year of the projection, the impacts grow to almost 30,000 fewer jobs and $2.31 billion less labor income. The U.S. economy experiences a loss of slightly under $6.80 billion in national output. Changes in trade due to the tariffs result in a reduction of GHG emissions from land‐use change of up to 83.7 teragram (Tg) of CO2‐equivalent.

Destruction and Deflection: Evidence from American Antidumping Actions against China

With a decrease in tariffs around the world, antidumping duties, as an important part of temporary trade barriers, have increased dramatically to take their place. China and the United States (US) are the two heaviest targets and users of antidumping investigations respectively. In this paper, using Chinese annual transaction-level export data from 2000 to 2017, we study the trade destruction effect and the trade deflection effect of all antidumping investigations initiated by the US against China. We find strong evidence of both destruction and deflection effects. American antidumping actions reduce China's exports to the US, while increasing exports to non-US countries. Critically, the trade destruction and deflection effects are long-lived, and industry indicators (including industry employment, industry concentration and capital intensity) play significant roles in deflecting trade. In general, the impact of antidumping actions could be greater than what the direct effect alone might suggest.

Withering Globalization? The Global Value Chain Effects of Trade Decoupling

The paper analyses the interindustry spillover effects of bilateral trade conflicts using the example of the 2018-2019 China-USA bilateral trade war. Empirical results are produced using a new heuristic method based on hypothetical extraction and substitution in an International Input-Output model. This model tracts a series of direct and indirect sectoral effects and provides an intuitive and computationally tractable way of mapping the potential gains and losses affecting other trade partners. It sheds light on some intricate inter-industry implications that are not obvious when considering traditional trade models. A large share of the negative impacts may be felt by third countries through two separate trade channels. Firstly, because the production of a final product in one country relies on importing intermediate goods from other trade partners, who may be negatively impacted by the trade destruction effects of the trade embargo. Secondly, because trade embargoes lead to trade substitution in order to fill the gaps left by embargoed products, and to trade deflection. Deflection occurs when the trade belligerents redeploy their unsold exports towards third countries, increasing competition for market shares. This situation is an additional threat for the Multilateral Trade Governance as large-scale trade deflection may induce a cascade of Tit-for-Tat protectionist measures, in a situation where the COVID-19 pandemics has fanned the industrial nationalism, trade protectionism and geo-political tensions which were already perceptible since the global crisis of 2008-2009.

Trade destruction and deflection effects of US‐China trade frictions on China’s tariff‐targeted products

AbstractThis paper probes into the impacts of US‐China trade rows on China's exports of products covered under the applicable tariff lines. We scrutinise the monthly trade data of China with the US and third‐party markets from January 2017 to June 2019, employing the DID model. It is found firstly that the US levy of tariffs on $50 billion and $200 billion worth of Chinese products have produced a significant and adverse trade destruction effect on China's exports to the US. Meanwhile, the tariffs levied on these products have played a significant and positive role in deflecting China's export to third‐party markets. Second the US additional tariffs on $50 billion of China's products have produced greater trade destruction and deflection effects on China's export of tariff‐targeted products to the US, whereas only the US additional tariffs on $200 billion of China's products have caused a net trade destruction effect. Third, it is confirmed that the trade destruction effects of US additional tariffs on Chinese products exported to the US are mainly concentrated on high tech‐intensive manufactures and primary goods, while the trade deflection effect of China's export to third‐party markets is concentrated on differentiated products. The findings render crucial policy implications.

International Trade Norms in the Age of Covid-19 Nationalism on the Rise?

Simultaneous with the rise of trade protectionism in the twenty-first century has been a resurgence in nationalist politics, most notably in the USA, the UK, and parts of the EU. These developments in international and US trade policy, including Washington’s launch of a full-fledged trade war against China in March 2018, have converged disastrously with the outbreak of the novel coronavirus in November 2019 and the onset of a worldwide pandemic. Given the status of the USA as the world’s hegemon since 1945, what is new here is the effort of the Trump administration to abdicate US leadership, jettison longstanding alliances, and turn back the clock on the country’s close integration with the world economy. Already, greatly reduced flows of goods, services, and people have translated into radically reduced global growth, widespread business disruptions, and high unemployment. Remarkably, the White House has refused to recognize the severity of the pandemic and has undermined the precautions of the US science community. We argue that these multiple shocks constitute a major critical juncture on par with what the world community faced in 1945. However, in the twenty-first century we have seen that high levels of economic uncertainty and political instability have superseded the long-held notion that international interdependence would pull the world community through tough times such as these. Could the triple whammy of a destructive trade war, deadly pandemic, and secular decline of US leadership trigger a new generation of policy innovation and institution building on par with the post-1945 era? In terms of the global trade regime, it would be difficult to imagine a buoyant recovery of the world economy in the absence of a serious reckoning with the pattern of norm erosion that we identify here.

Who benefits from China’s coal subsidy policies? A computable partial equilibrium analysis

Using a computable partial equilibrium model with monopolistic competition and based on global coal production, trade and consumption data in 2014, this study simulates the economic and welfare impacts of China’s coal subsidies at the industry level. Simulation results show that, first, the government’s subsidies have greatly promoted China's coal output, but may aggravate the overcapacity in China’s coal industry. Second, China's coal subsidies have significant trade destruction effects and its coal imports fall by more than 20% annually. Third, if considering the environmental cost, China's coal subsidies cause not only huge net welfare loss to China, but also harm to the global environment, thus no country benefits from China's coal subsidies.

Arising of Trade Disputes among the G20: Evaluation of US-China Trade Relations in the Context of World Trading System

Trade policy among the G20 has emerged as one of the challenges the group faces during the last decade after the 2008 global financial crisis. This paper aims at analyzing the current trade disputes between China and the United States and the efforts the G20 has taken to settle these disputes. The fundamental questions this study attempts to answer are as follows: (1) what the US–China trade dispute means for the world trading system? (2) what the G20 can do to prevent destructive trade wars? We confront this view by critically examining a large body of evidence on the effects of trade policy on economically important outcomes. We begin with a discussion of the role of G20 in stabilizing world economy. We show the G20’s recent economic and trade development challenges and measurements of trade policy and identification of its causal effects. We present the trade balance between the United States and China. We also illustrate the efforts made by the G20 in promoting the development of China–US trade cooperation. Data were collected from different sources. Data are collected from the World Bank, the World Trade Organization (WTO) publications, and the G20 summits’ reports. The results show that the United States has a trade deficit with China, and the global growth would be notably curtailed as investment and consumer spending fall back. The G20 should focus on supporting the WTO, being upfront about the mixed effects of trade and investment, and improving G20 measures to tackle protectionism.

Ivory trade: Policy and law change

Against a backdrop of consistent NGO pressure, countered by an unrelenting and increasingly transnational organised crime-framed poaching effort, the Secretary of State for the Environment Food and Rural Affairs moved to enact legislation which will significantly curtail what remains of the market for ivory products in the UK. The Ivory Bill, at the time of writing going through its parliamentary stages, will sidestep the majority of the current exemptions, premised on the antiquity of a worked item, to the usual prohibition on the trade of raw or worked ivory which owes its existence to the Convention on the International Trade in Endangered Species of Wild Fauna and Flora 1973 (CITES) and the Treaty’s domestic implementing measures. The accelerated illegal killing of charismatic species such as elephants has prompted legal responses at international and local levels in both range and destination-market states. Laws targeting both the supply and demand sides of the trade have been undermined by the trade in antique ivory: a shadow, parallel market of imitation antiques has existed for some time to launder poached ivory through the exemptions to the CITES system. This short article will introduce the mechanics of the Ivory Bill, set in the context of the drivers which have prompted it, and will evaluate its potential contribution to curtailing this destructive trade.

Who Benefits from Antidumping and Countervailing? An Analysis Using a Computable Partial Equilibrium Model

ABSTRACT The world economy has witnessed a rise use of antidumping (AD) and countervailing (CV) duties in recent years. Using a computable partial equilibrium model, this article simulates the economic and welfare impacts of the US’s AD/CV duties on photovoltaic (PV) products imported from China and Taiwan China in 2015. The result shows that the AD/CV duties have significant trade destruction and trade diversion effects, relatively moderate trade deflection and depression effects. In the context of globalization, the AD/CV duties have limited remedial effect on the US PV industry, but the United States bears the biggest welfare loss for its AD/CV duties.

Do Anti-dumping Duties Still Matter? The Curious Case of Aluminum Foil

AbstractIn 2009, the EU imposed anti-dumping duties on aluminum foil imported from Armenia, Brazil, and China for five years. The final determination resulted in the imposition of definitive anti-dumping duties of 13.4% (Armenia), 17.6% (Brazil), and 6.4–30% (China). This paper quantifies the direct and indirect effects of the EU anti-dumping duty on EU and US imports from targeted and unaffected countries using detailed data for the years 2006 through 2012, and controlling for exports of all products within the aluminum sheet, plate, and foil manufacturing industry from all countries. The findings point to the trade destruction, trade depression, trade diversion, and trade deflection effects typically found in the existing literature. However, the uniqueness of this case lies in the fact that the Armenian exporter is a subsidiary of a Russian firm. And as Armenia's exports to the EU declined, they expanded rapidly to the US. At the same time, the US imports from Russia, a country not directly touched by the anti-dumping ruling, declined dramatically, and were diverted to the EU. This points to the potential ineffectiveness of anti-dumping duties in the presence of multinational corporations with production facilities located across countries differentially impacted by anti-dumping duties.

Trade Destruction and Trade Diversion: Evidence from China

AbstractOver the past three decades, we have seen a dramatic increase in the incidence of temporary trade barriers such as antidumping duties and countervailing duties. China has been at the receiving end of a large number of such measures. In this paper, we study how China's exports to its major trade partners have been affected when its major trade partners have used these measures either against China or against other countries. We find that Chinese exports to the country that imposed an antidumping duty decreased by approximately 35 percent. At the same time, an antidumping duty used by the importing country that was directed towards other countries but not against China led to an approximate 30‐percent increase in China's exports to the policy‐imposing country. These results remain robust across various specifications. Our findings have important policy implications. In particular, the magnitude of these effects highlights why it is important to curb the recent widespread use of these barriers.

Do Anti-Dumping Duties Still Matter? The Curious Case of Aluminum Foil

In 2009, the EU imposed anti-dumping duties on aluminum foil imported from Armenia, Brazil and China for five years. The final determination resulted in the imposition of definitive anti-dumping duties of 13.4% (Armenia), 17.6% (Brazil) and 6.4-30% (China). This paper quantifies the direct and indirect effects of the EU anti-dumping duty on EU and US imports from targeted and unaffected countries using detailed data for the years 2006 through 2012, and controlling for exports of all products within the aluminum sheet, plate and foil manufacturing industry from all countries. The findings point to the trade destruction, trade depression, trade diversion, and trade deflection effects typically found in the existing literature. However, the uniqueness of this case lies in the fact that the Armenian exporter is a subsidiary of the Russian firm. And as Armenia’s exports to the EU declined, they expanded rapidly to the US. At the same time, the US imports from Russia, a country not directly touched by the anti-dumping ruling, declined dramatically, and were diverted to the EU. This points to the potential ineffectiveness of anti-dumping duties in the presence of multinational corporations with production facilities located across countries differentially impacted by anti-dumping duties.