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Liberalizing air cargo services in APEC

Author

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  • Geloso Grosso, Massimo
  • Shepherd, Ben

Abstract

This study aims at assessing the link between a more liberal air cargo regime and increased bilateral merchandise trade in the Asia Pacific region, under the auspices of APEC. Using the gravity model and employing the Air Liberalisation Index (ALI) developed by the WTO Secretariat, this paper finds strong support for two hypotheses. First, more liberal air services policies are positively, significantly and robustly associated with higher bilateral trade in merchandise. The results also show that air transport policy matters more for some sectors than for others. A particularly strong relationship is found between bilateral liberalisation and trade in manufactured goods, time sensitive products, and parts and components. Considering the sector found to be most sensitive to the degree of aviation liberalisation, the estimates imply that a one point increase in the ALI is associated with an increase of 4% in bilateral parts and components trade, prior to taking account of general equilibrium effects. These findings have important policy implications. In particular, economies actively seeking greater integration in international production networks could greatly benefit from a more liberal aviation policy regime.

Suggested Citation

  • Geloso Grosso, Massimo & Shepherd, Ben, 2009. "Liberalizing air cargo services in APEC," MPRA Paper 17781, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:17781
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    File URL: https://mpra.ub.uni-muenchen.de/17781/1/MPRA_paper_17781.pdf
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    References listed on IDEAS

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    8. Piermartini, Roberta & Rousová, Linda, 2008. "Liberalization of air transport services and passenger traffic," WTO Staff Working Papers ERSD-2008-06, World Trade Organization (WTO), Economic Research and Statistics Division.
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    Cited by:

    1. Borchert, Ingo & Gootiiz, Batshur & Grover, Arti & Mattoo, Aaditya, 2012. "Landlocked or policy locked ? how services trade protection deepens economic isolation," Policy Research Working Paper Series 5942, The World Bank.
    2. Anushka Wijesinha & Deshal de Mel, 2012. "Liberalization of Air Services in South Asia: Prospects and Challenges," Chapters,in: Regional Integration and Economic Development in South Asia, chapter 5 Edward Elgar Publishing.

    More about this item

    Keywords

    Aviation; international trade in services; liberalization; international trade in goods; parts and components trade; production networks; APEC.;

    JEL classification:

    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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