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Backfiring with Backhaul Problems: Trade and Industrial Policies with Endogenous Transport Costs


  • ISHIKAWA, Jota
  • TARUI, Norio


Trade barriers due to transport costs are as large as those due to tariffs. This paper incorporates the transport sector into a standard model of international trade and studies the effects of trade and industrial policies. Transport firms need to commit to a shipping capacity sufficient for a round trip, with a possible imbalance of shipping volumes in two directions. This imbalance is known as the “backhaul problem.” As transport firms attempt to avoid this problem, a tariff in one sector may affect other independent import and/or export sectors. In particular, domestic tariffs may backfire: domestic exports may also decrease, harming domestic export sectors and the domestic economy. This finding contributes to the literature on how import liberalization may generate a positive effect on the liberalizing country’s exports by identifying a new channel through endogenous changes in transport costs given the backhaul problem.

Suggested Citation

  • ISHIKAWA, Jota & TARUI, Norio, 2017. "Backfiring with Backhaul Problems: Trade and Industrial Policies with Endogenous Transport Costs," Discussion paper series HIAS-E-57, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
  • Handle: RePEc:hit:hiasdp:hias-e-57

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    References listed on IDEAS

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    More about this item


    Transport sector; transport cost; backhaul problems; international shipping; tariffs;

    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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