Disaggregated bilateral trade and trade policy: Spain's reciprocal trade agreements and the Great Depression, 1928-1935

Using disaggregated trade data for the interwar period, specifically 1928 and 1931-1935, we analyze the changes in Spain’s exports and imports at the product-country level by matching the categories of the original sources with those of the International Standard Classification of Foreign Trade (SITC). In 1928, Spain mainly exported agricultural goods and raw materials (around 60 and 13 percent of total exports, respectively) and mainly imported manufacturing goods and raw materials (45 and 31 percent of total imports, respectively). We calculate the margins of trade for imports and exports to determine the extent to which the Great Depression and trade policy contributed to the collapse in trade in the 1930s. Since Spain was not a member of either a formal or informal trading bloc, it was under pressure to negotiate bilateral trade agreements based on conditional most-favored nation clauses, whereby access to Spain's market was offered in exchange for Spanish agrarian exports, starting in late 1931. As a result, conditional MFN by product and country reduced fixed costs to trade and trade policy played a non-negligible role. The share of intra-industry trade was around 15-19 percent (at 3-digit SITC level) over the period: the Great Depression negatively affected it, whereas trade agreements had a positive effect from 1932 on. Moreover, Spain’s comparative advantages in fruit increased, but declined in wine and olive oil.