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How Effective are Trade Barriers? An Empirical Analysis of Trade Reduction, Diversion, and Compression

Author

Listed:
  • Jon D. Haveman

    (Public Policy Institute of California)

  • Usha Nair-Reichert

    (Georgia Institute of Technology)

  • Jerry G. Thursby

    (Emory University)

Abstract

We analyze the effects of trade barriers using highly disaggregated data. The level of disaggregation allows us to separate the effects of tariffs and nontariff barriers (NTBs) into reduction, diversion, and compression effects. We find that multilateral tariffs significantly reduce trade flows and that trade preferences have a significant diverting effect. We also find that higher multilateral tariffs tend to shift trade towards larger exporters, suggesting that the desire to minimize fixed costs associated with trading dominates any preference for variety. In the case of NTBs, we find that, as often as not, the imposition of an NTB leads to an increase in the value of trade; in industries with low import demand elasticities, the influence of rising prices outweighs the decline in quantity. © 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Jon D. Haveman & Usha Nair-Reichert & Jerry G. Thursby, 2003. "How Effective are Trade Barriers? An Empirical Analysis of Trade Reduction, Diversion, and Compression," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 480-485, May.
    • Handle: RePEc:tpr:restat:v:85:y:2003:i:2:p:480-485
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    Cited by:

    1. de Sousa, José & Mayer, Thierry & Zignago, Soledad, 2012. "Market access in global and regional trade," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 1037-1052.
    2. Buono, Ines & Lalanne, Guy, 2012. "The effect of the Uruguay round on the intensive and extensive margins of trade," Journal of International Economics, Elsevier, vol. 86(2), pages 269-283.
    3. Maria Bas & Ivan Ledezma, 2007. "Trade integration in manufacturing: the Chilean experience," PSE Working Papers halshs-00587677, HAL.
    4. Lionel Fontagné & Thierry Mayer & Soledad Zignago, 2005. "Trade in the Triad: how easy is the access to large markets?," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1401-1430, November.
    5. repec:dau:papers:123456789/6912 is not listed on IDEAS
    6. Lionel Fontagne & Soledad Zignago, 2007. "A Re-evaluation of the Impact of Regional Agreements on Trade Patterns," Economie Internationale, CEPII research center, issue 109, pages 31-51.
    7. Yuan Li & John C. Beghin, 2017. "A meta-analysis of estimates of the impact of technical barriers to trade," World Scientific Book Chapters, in: John Christopher Beghin (ed.), Nontariff Measures and International Trade, chapter 4, pages 63-77, World Scientific Publishing Co. Pte. Ltd..
    8. Ingo Borchert, 2009. "Trade diversion under selective preferential market access," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(4), pages 1390-1410, November.
    9. repec:spo:wpecon:info:hdl:2441/10187 is not listed on IDEAS
    10. Alessandro Olper & Valentina Raimondi, 2008. "Explaining National Border Effects in the QUAD Food Trade," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(3), pages 436-462, September.
    11. Jon D. Haveman & Howard J. Shatz, 2003. "Developed Country Trade Barriers and the Least Developed Countries: The Economic Results of Freeing Trade," WIDER Working Paper Series DP2003-46, World Institute for Development Economic Research (UNU-WIDER).
    12. repec:hal:spmain:info:hdl:2441/10187 is not listed on IDEAS
    13. repec:hal:spmain:info:hdl:2441/10189 is not listed on IDEAS
    14. Alessandro Olper & Valentina Raimondi, 2008. "Market Access Asymmetry in Food Trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 144(3), pages 509-537, October.
    15. Ines Buono & Guy Lalanne, 2010. "La réaction des entreprises françaises à la baisse des tarifs douaniers étrangers," Économie et Statistique, Programme National Persée, vol. 435(1), pages 13-29.
    16. Johannes Van Biesebroeck & Yingting Yi & Elena Zaurino, 2022. "Trade liberalisation and the extensive margin of differentiated goods: Evidence from China," The World Economy, Wiley Blackwell, vol. 45(9), pages 2724-2747, September.
    17. Ecochard, Pierre & Fontagné, Lionel & Gaulier, Guillaume & Zignago, Soledad, 2005. "Intra-industry trade and regional integration," MPRA Paper 44182, University Library of Munich, Germany.
    18. Miao, Zhuang & Wu, Xiaokang & Yu, Jinping, 2018. "Direct and Relative Effects of the Import Tariff: Method and Application Using the Industrial Level Data," MPRA Paper 86779, University Library of Munich, Germany.
    19. Ghazalian, Pascal & Tamini, Lota & Larue, Bruno & Gervais, Jean-Philippe, 2007. "A Gravity approach to evaluate the significance of trade liberalization in vertically-related goods in the presence of non-tariff barriers," MPRA Paper 2744, University Library of Munich, Germany.
    20. Van Marrewijk, Charles & Berden, Koen G., 2007. "On the static and dynamic costs of trade restrictions for small developing countries," Journal of Development Economics, Elsevier, vol. 84(1), pages 46-60, September.
    21. Jugurnath, Bhavish & Stewart, Mark & Brooks, Robert, 2007. "Asia/Pacific Regional Trade Agreements: An empirical study," Journal of Asian Economics, Elsevier, vol. 18(6), pages 974-987, December.
    22. repec:hal:wpspec:info:hdl:2441/10187 is not listed on IDEAS
    23. de Sousa, José & Mayer, Thierry & Zignago, Soledad, 2012. "Market access in global and regional trade," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 1037-1052.
    24. Srivastava, Nidhi, 2023. "Trade in critical minerals: Revisiting the legal regime in times of energy transition," Resources Policy, Elsevier, vol. 82(C).

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