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What Goes Around Comes Around: Export-Enhancing Effects of Import- Tariff Reductions

Author

Listed:
  • Kazunobu Hayakawa

    (Institute of Developing Economies)

  • Jota Ishikawa

    (Faculty of Economics, Hitotsubashi University and the Research Institute of Economy, Trade and Industry)

  • Nori Tarui

    (Department of Economics, University of Hawaii at Manoa and the University of Hawaii Economic Research Organization)

Abstract

In international trade, transportation requires a round trip for which a transport firm has to commit to the shipping capacity to meet the maximum shipping volume. This may cause the “backhaul problem.†Trade theory suggests that facing the problem, transport firms with market power adjust their freight rates strategically when import tariffs change. As a consequence, a country reducing its import tariffs may experience an increase in exports as well as imports. Using worldwide data during 2000-2007, we find evidence that supports these predictions. These findings indicate a new mechanism through which import-tariff reductions lead to export expansions.

Suggested Citation

  • Kazunobu Hayakawa & Jota Ishikawa & Nori Tarui, 2018. "What Goes Around Comes Around: Export-Enhancing Effects of Import- Tariff Reductions," Working Papers 201808, University of Hawaii at Manoa, Department of Economics.
    • Handle: RePEc:hai:wpaper:201808
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    2. Ron Yang, 2022. "(Don’t) Take Me Home: Home Preference and the Effect of Self-Driving Trucks on Interstate Trade," NBER Chapters, in: Economics of Artificial Intelligence, National Bureau of Economic Research, Inc.
    3. Fabio Gaetano Santeramo & Emilia Lamonaca, 2022. "On the trade effects of bilateral SPS measures in developed and developing countries," The World Economy, Wiley Blackwell, vol. 45(10), pages 3109-3145, October.
    4. Gnangnon, Sèna Kimm, 2021. "WTO membership, the membership duration and the utilization of non-reciprocal trade preferences offered by the QUAD Countries," EconStor Preprints 247265, ZBW - Leibniz Information Centre for Economics.
    5. Gu, Bingmei & Liu, Jiaguo, 2022. "Determinants of dry bulk shipping freight rates: Considering Chinese manufacturing industry and economic policy uncertainty," Transport Policy, Elsevier, vol. 129(C), pages 66-77.
    6. Ishikawa, Jota & Tarui, Nori, 2021. "You can’t always get what you want: Protectionist policies with the transport sector," Economics Letters, Elsevier, vol. 207(C).
    7. Gnangnon, Sèna Kimm & Iyer, Harish, 2021. "Effect of Aid for Trade and Foreign Direct Investment Inflows on the Utilization of Unilateral Trade Preferences offered by the QUAD countries," EconStor Preprints 238211, ZBW - Leibniz Information Centre for Economics.

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    More about this item

    Keywords

    Transport firm; freight rates; tariffs; backhaul problem;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

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