IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/2743.html
   My bibliography  Save this paper

Domestic support and tariff reductions in the presence of non-tariff barriers: A gravity model for primary and processed agricultural products

Author

Listed:
  • Tamini, Lota
  • Ghazalian, Pascal
  • Gervais, Jean-Philippe
  • Larue, Bruno

Abstract

Agricultural trade liberalization negotiations are currently at a crossroads. Progress was made to eliminate export subsidies, but small open economies’ demand for lower domestic support and tariffs on agricultural goods do not find much support among large policy active countries. Many non-tariff barriers still also impede agricultural trade. This paper presents the theoretical foundations of a gravity model to explain trade flows of both primary agricultural commodities and processed foods. At the consumer level, commodities are differentiated according to their country of origin while primary agricultural goods are homogenous from the buyers’ perspective. However, primary goods can not be substituted costlessly across destinations from the sellers’ perspective due to differences in technical and sanitary regulations between countries. These assumptions yield well-behaved import demand functions at the consumer level and export supply functions at the producer level. Imperfect substitutability at the consumption and production levels is summarized in two important structural parameters. The role of these parameters in explaining bilateral trade patterns is illustrated for a three-country world market using a numerical example. The simulation investigates whether it is more important for a small open economy that large policy active countries reduce agricultural tariffs or domestic support. It also addresses the implications of tariff escalation on trade flows.

Suggested Citation

  • Tamini, Lota & Ghazalian, Pascal & Gervais, Jean-Philippe & Larue, Bruno, 2006. "Domestic support and tariff reductions in the presence of non-tariff barriers: A gravity model for primary and processed agricultural products," MPRA Paper 2743, University Library of Munich, Germany, revised 01 Dec 2006.
  • Handle: RePEc:pra:mprapa:2743
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/2743/1/MPRA_paper_2743.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Joseph Francois & Will Martin, 2003. "Formula Approaches for Market Access Negotiations," The World Economy, Wiley Blackwell, vol. 26(1), pages 1-28, January.
    2. Leamer, Edward E. & Levinsohn, James, 1995. "International trade theory: The evidence," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 26, pages 1339-1394, Elsevier.
    3. Feenstra, Robert C. & Rauch, James E., 1999. "Symposium on business and social networks in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 1-1, June.
    4. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
    5. Simon J. Evenett & Wolfgang Keller, 2002. "On Theories Explaining the Success of the Gravity Equation," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 281-316, April.
    6. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    7. Touhami Abdelkhalek & Jean-Marie Dufour, 1998. "Statistical Inference For Computable General Equilibrium Models, With Application To A Model Of The Moroccan Economy," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 520-534, November.
    8. Geraci, Vincent J & Prewo, Wilfried, 1982. "An Empirical Demand and Supply Model of Multilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 64(3), pages 432-441, August.
    9. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, vol. 53(1), pages 1-27, February.
    10. Keeny, Roman & Hertel, Thomas, 2005. "GTAP-AGR: A Framework for Assessing the Implications of Multilateral Changes in Agricultural Policies," Technical Papers 283422, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    11. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-481, August.
    12. Alvarez, Fernando & Lucas, Robert Jr., 2007. "General equilibrium analysis of the Eaton-Kortum model of international trade," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1726-1768, September.
    13. Debaere, Peter, 2005. "Monopolistic competition and trade, revisited: testing the model without testing for gravity," Journal of International Economics, Elsevier, vol. 66(1), pages 249-266, May.
    14. Marion Desquilbet & Hervé Guyomard, 1998. "Agricultural Export Subsidies and Intermediate Goods Trade: Comment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(2), pages 422-425.
    15. Dean A. DeRosa & John P. Gilbert, 2005. "Predicting Trade Expansion under FTAs and Multilateral Agreements," Working Paper Series WP05-13, Peterson Institute for International Economics.
    16. Stephen S. Golub & J.M. Finger, 2002. "The Processing of Primary Commodities: Effects of Developed-Country Tariff Escalation and Developing-Country Export Taxes," Chapters, in: Institutions and Trade Policy, chapter 5, pages 45-63, Edward Elgar Publishing.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dennis Novy, 2013. "Gravity Redux: Measuring International Trade Costs With Panel Data," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 101-121, January.
    2. Cafiso, Gianluca, 2007. "The Geographic Space in International Trade: from Gravity to New Economic Geography," MPRA Paper 20269, University Library of Munich, Germany.
    3. James E. Anderson, 2011. "The Gravity Model," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 133-160, September.
    4. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    5. Yilmazkuday, Hakan, 2009. "Distribution of Consumption, Production and Trade within the U.S," MPRA Paper 16361, University Library of Munich, Germany.
    6. Jacqueline Karlsson & Helena Melin & Kevin Cullinane, 2018. "The impact of potential Brexit scenarios on German car exports to the UK: an application of the gravity model," Journal of Shipping and Trade, Springer, vol. 3(1), pages 1-22, December.
    7. Gabriel J Felbermayr & Wilhelm Kohler, 2014. "Exploring the Intensive and Extensive Margins of World Trade," World Scientific Book Chapters, in: European Economic Integration, WTO Membership, Immigration and Offshoring, chapter 4, pages 115-148, World Scientific Publishing Co. Pte. Ltd..
    8. Jacks, David S. & Meissner, Christopher M. & Novy, Dennis, 2011. "Trade booms, trade busts, and trade costs," Journal of International Economics, Elsevier, vol. 83(2), pages 185-201, March.
    9. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, vol. 53(1), pages 1-27, February.
    10. Yilmazkuday, Hakan, 2009. "How Important is Technology? A Counterfactual Analysis," MPRA Paper 16838, University Library of Munich, Germany.
    11. Yilmazkuday, Hakan, 2012. "Understanding interstate trade patterns," Journal of International Economics, Elsevier, vol. 86(1), pages 158-166.
    12. Daniel J. Henderson & Daniel L. Millimet, 2008. "Is gravity linear?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(2), pages 137-172.
    13. Arsalan Ahmed & Qi Jian Hong & Hassan Tahir, 2021. "Analysis of Pakistan–China FTA by propensity score matching with difference in differences," SN Business & Economics, Springer, vol. 1(7), pages 1-29, July.
    14. Gert-Jan M. Linders & Henri L.F. de Groot & Raymond J.G.M. Florax & Peter Nijkamp, 2011. "Persistent Distance Decay Effects in International Trade," Chapters, in: Miroslav N. Jovanović (ed.), International Handbook on the Economics of Integration, Volume II, chapter 14, Edward Elgar Publishing.
    15. Felipa de Mello-Sampayo, 2017. "Competing-destinations gravity model applied to trade in intermediate goods," Applied Economics Letters, Taylor & Francis Journals, vol. 24(19), pages 1378-1384, November.
    16. Tamaş Anca, 2020. "Why should the gravity model be taught in business education?," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 14(1), pages 422-433, July.
    17. Scott L. Baier & Amanda Kerr & Yoto V. Yotov, 2018. "Gravity, distance, and international trade," Chapters, in: Bruce A. Blonigen & Wesley W. Wilson (ed.), Handbook of International Trade and Transportation, chapter 2, pages 15-78, Edward Elgar Publishing.
    18. Juan Felipe Mejía Mejía & Andrés Ramírez Hassan, 2013. "Solving the Puzzle: A New Measure of Trade Distance In The Gravity Equation," Documentos de Trabajo de Valor Público 11556, Universidad EAFIT.
    19. Baier, Scott L. & Bergstrand, Jeffrey H., 2009. "Estimating the effects of free trade agreements on international trade flows using matching econometrics," Journal of International Economics, Elsevier, vol. 77(1), pages 63-76, February.
    20. 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.

    More about this item

    Keywords

    Agri-food trade liberalization; Gravity models; tariffs; domestic support; tariff escalation;
    All these keywords.

    JEL classification:

    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:2743. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.