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Geopolitical interests and preferential access to U.S. markets

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Author Info
Lederman, Daniel
Ozden, Caglar

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Abstract

The United States imports around 25 percent of its merchandise under some form of preferential trade regime. The authors examine both the origins and consequences of U.S. trade preferences in the context of the gravity model of international trade. First, they provide estimates of the impact of preferential trade regimes in terms of access to U.S. markets while controlling for geo-strategic interests that determine the countries that are offered commercial preferences. Second, the authors consider not only country eligibility but also the extent of utilization of these programs. Third, they provide new estimates of the impact of transport and transactions costs beyond distance. In the standard gravity estimation, the authors find that beneficiaries of these preferences, except GSP, export 2-3 times more than the excluded countries, after controlling for country and product characteristics. Nonetheless, the estimated effects of these programs are lower when controlling for utilization ratios and selection biases due to the correlation between geopolitical interests and the standard explanatory variables used in the gravity model of trade, such as countries'geographic distance from the United States.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3531.

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Date of creation: 01 Mar 2005
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Handle: RePEc:wbk:wbrwps:3531

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Keywords: Trade and Regional Integration; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Economic Theory&Research; Trade Policy; Environmental Economics&Policies;

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  1. Coe, David T & Hoffmaister, Alexander W, 1999. "North-South Trade: Is Africa Unusual?," Journal of African Economies, Oxford University Press, vol. 8(2), pages 228-56, July.
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  2. Greenaway, David & Milner, Chris, 2002. "Regionalism and Gravity," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 574-85, December. [Downloadable!] (restricted)
  3. Aitken, Norman D, 1973. "The Effect of the EEC and EFTA on European Trade: A Temporal Cross-Section Analysis," American Economic Review, American Economic Association, vol. 63(5), pages 881-92, December. [Downloadable!] (restricted)
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  7. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March. [Downloadable!]
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  8. Feenstra, Robert C, 2002. "Border Effects and the Gravity Equation: Consistent Methods for Estimation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 491-506, December. [Downloadable!] (restricted)
  9. Robert C. Feenstra & James R. Markusen & Andrew K. Rose, 2001. "Using the gravity equation to differentiate among alternative theories of trade," Canadian Journal of Economics, Canadian Economics Association, vol. 34(2), pages 430-447, May. [Downloadable!] (restricted)
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  11. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September. [Downloadable!] (restricted)
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  12. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September. [Downloadable!] (restricted)
  13. repec:att:wimass:199713 is not listed on IDEAS
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  15. Soloaga, Isidro & Alan Wintersb, L., 2001. "Regionalism in the nineties: what effect on trade?," The North American Journal of Economics and Finance, Elsevier, vol. 12(1), pages 1-29, March. [Downloadable!] (restricted)
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  1. Vincent Vicard, 2009. "On trade creation and regional trade agreements: does depth matter?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 145(2), pages 167-187, July. [Downloadable!] (restricted)
  2. Cong S. Pham & Mary E. Lovely & Devashish Mitra, 2009. "The Home-Market Effect and Bilateral Trade Patterns: A Reexamination of the Evidence," Economics Series 2009_12, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance. [Downloadable!]
  3. Martin, Will & Pham, Cong S., 2008. "Estimating the Gravity Equation when Zero Trade Flows are Frequent," MPRA Paper 9453, University Library of Munich, Germany. [Downloadable!]
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