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Geopolitical interests and preferential access to U.S. markets

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  • Lederman, Daniel
  • Ozden, Caglar

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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Bibliographic Info

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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Cited by:
  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.
  2. Cooke, Edgar F. A., 2012. "Is the impact of AGOA heterogeneous?," MPRA Paper 43277, University Library of Munich, Germany.
  3. Carlos Felipe Jaramillo & Daniel Lederman & Maurizio Bussolo & David Gould & Andrew Mason, 2006. "Challenges of CAFTA : Maximizing the Benefits for Central America," World Bank Publications, The World Bank, number 7127, January.
  4. Bernhard Herz & Marco Wagner, 2011. "The Dark Side of the Generalized System of Preferences," Review of International Economics, Wiley Blackwell, vol. 19(4), pages 763-775, 09.
  5. Cooke, Edgar F. A., 2011. "A matching approach to study the impact of agoa on Sub-Saharan African countries," MPRA Paper 34670, University Library of Munich, Germany.
  6. 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.
  7. Emily Blanchard & Xenia Matschke, 2010. "U.S. Multinationals and Preferential Market Access," Research Papers in Economics 2010-08, University of Trier, Department of Economics.
  8. Calì, Massimiliano & te Velde, Dirk Willem, 2011. "Does Aid for Trade Really Improve Trade Performance?," World Development, Elsevier, vol. 39(5), pages 725-740, May.

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