Luca Salvatici

Reciprocal Trade Agreements in Gravity Models: A Meta-Analysis

The gravity model is a workhorse tool applicable in a wide range of empirical fields. It is regularly used to estimate the impact of reciprocal trade agreements (RTAs) on trade flows between partners. The studies report very different estimates since there is a significant difference in datasets, sample sizes, and independent variables. This paper combines, explains, and summarizes a large number of results using a meta-analysis approach. We provide pooled estimates, obtained from fixed and random effects models of the RTAs’ effect size on bilateral trade: the hypothesis that there is no effect of RTAs on trade is robustly rejected at standard significance levels. The information collected on each estimate allows us to test the sensitivity of the results to alternative specifications and differences in the control variables considered, as well as the impact of the publication selection process.

Measuring Protection: Mission Impossible?

In the international trade literature there seems to be some confusion between openness and protection measures. The aim of this paper is to bring together the state of the art in quantifying trade policy measures, so we focus on the extent of the protection granted by policies rather than on the degree of openness of the economy. Given the huge size of literature dealing with these issues, we limit our review as follows. On the one hand, we focus on trade policies implemented at the border: accordingly, we do not consider all the other possible public interventions influencing trade flows. On the other hand, we take into account only indexes explicitly adopting a metric expressed in a scalar aggregate (tariff- and quota-equivalent measures, or an index in a closed interval). We distinguish between indexes that aggregate across products (same barrier for more products) and indexes that aggregate across instruments (more barriers for the same product). Finally, in order to classify the large number of indexes covered in our review, we propose a typology based on three categories: incidence, outcome and equivalence.

The trade impact of European Union agricultural preferences

We assess the impact on agricultural trade of European Union (EU) trade policies, using a gravity model based on disaggregated trade flows from 161 developing countries (DCs) to 15 EU member countries. We use a sample selection framework to account for potential selection bias of positive trade flows and provide an explicit measure for relative preference margins. From a policy perspective, our results debunk some of the most widespread criticisms of preferential policies: EU preferences matter and have a positive impact on DCs agricultural exports at both the extensive and intensive margins, although with significant differences across sectors.

WTO NEGOTIATIONS ON MARKET ACCESS IN AGRICULTURE: A COMPARISON OF ALTERNATIVE TARIFF CUT PROPOSALS FOR THE EU AND THE US

Abstract This paper provides a summary measure of the possible new commitments in the area of agricultural market access undertaken by the European Union and the United States, using the Trade Restrictiveness Index (TRI) as the tariff aggregator. We take the 2001 bound tariffs as the starting point and attempt to assess how much liberalization in agriculture could be achieved in the European Union and the United States as a result of the present negotiations. We compute the index for 20 agricultural commodity aggregates under the actual commitments assuming a specific functional form for import demand. We compare the present levels of the TRI with three hypothetical cases: a repetition of the same set of tariff cuts commitments of the Uruguay Round according to a EU proposal prior to the 2003 WTO ministerial meeting, a uniform 36% reduction of each tariff, an harmonization ( Swiss ) formula based on the initial US proposal.

Bargaining coalitions in the WTO agricultural negotiations

This paper aims to understand the structural features of bargaining coalitions in the Doha Round of the WTO. We provide an empirical assessment of the preferences of each negotiating actor considering general economics indicators, development levels, structure of agricultural sectors and trade policies. Bargaining coalitions are analysed by grouping countries using a cluster analysis procedure. The clusters are compared with existing coalitions in order to assess their degree of internal homogeneity as well as their common interests. Such a comparison allows the identification of possible defectors, i.e. countries that, according to their economic conditions and policies, seem to be relatively less committed to the positions of the coalition they join. In addition, the ex-post analysis of the counterfactual coalitions sheds light on the distance between different coalitions as well as between individual countries and the best alternative group available. Empirical results confirm our research hypothesis: clusters of structurally homogeneous countries well represent existing bargaining coalitions. In particular, the G-20 shows a high degree of internal coherence, which, in our framework, may provide a clue to the sustainability of this coalition and to its relevance in the Doha Round negotiations. Copyright 2007 The Authors Journal compilation Blackwell Publishing Ltd. 2007 .

EU Trade Policies: Benchmarking Protection in a General Equilibrium Framework

This paper deals with the EUs trade policy with two objectives: on the one hand, we study the performance of EUs preferential agreements in granting their partners improved market access; on the other hand, we assess the extent to which domestic sectors are effectively protected. As far as the first objective is concerned, we construct bilateral indicators of protection based on the applied tariffs faced by each exporter. In order to do this, an index of trade policy restrictiveness is computed, using the Mercantilistic Trade Restrictiveness Index as the tariff aggregator. We also analyze the protection granted to each sector by the existing tariff structure. In this report, we compute effective rates of protection that overcome the well-known theoretical shortcomings of the traditional definition (Output Effective Rate of Protection). The analysis is based on a comparative static applied general equilibrium model (Global Trade Analysis Project) and on the most recent version (release 6) of the related database. Results are obtained with reference to the situation existing in 2001, but the assessment of protection is carried out for the enlarged EU. Overall, it appears that notwithstanding the rhetoric about preferential access, several developing countries are the ones facing the highest hurdles in getting into the EU markets. Both bilateral protection and effective protection rates are broadly consistent with the evolution of the WTO negotiations: the strongest demands from developing countries in terms of market access in the EU have less to do with the overall applied MFN tariffs on industrial products than the reduction of distortions affecting trade in agriculture.

Bargaining Coalitions in the Agricultural Negotiations of the Doha Round: Similarity of Interests or Strategic Choices? An Empirical Assessment

The paper aims at understanding the structural features of the bargaining coalitions in the Doha Round of the WTO. We provide an empirical assessment of the preferences of each negotiating actor looking at general economics indicators, development levels, structure of the agricultural sectors, and trade policies for agricultural products. Bargaining coalitions are analyzed by grouping countries through a cluster analysis procedure. The clusters are compared with existing coalitions, in order to assess their degree of internal homogeneity as well as their common interests. Such a comparison allows the detection of possible “defectors”, i.e. countries that according to their economic conditions and policies seem to be relatively less committed to the positions of the coalition they join.

Trade Impact of European Union Preferences

This chapter assesses the impact on trade of European Union (EU) trade policies, using a gravity model based on disaggregated trade flows from 169 Developing Countries (DC) to 25 EU member countries. It uses a sample selection framework to account for potential selection bias in positive trade flows and provides an explicit measure for relative preference margins. The results serve to debunk some of the most widespread criticisms of preferential policies: EU preferences matter, and have a positive impact on developing countries’ exports at the intensive margin, and an ambiguous impact at the extensive margin with significant differences across sectors.

Agricultural Trade Policies and Food Security: Is There a Causal Relationship?

The aim of this paper is to assess the causal impact of trade policy distortions on food security. The added value of this work is twofold: i) its use of a non-parametric matching technique with continuous treatment, namely the Generalised Propensity Score (GPS) to address the self selection bias; ii) its analysis of heterogeneity in treatment (by commodities) as well as in outcome (i.e. different dimensions of food security). The results of our estimates clearly show that trade policy distortions are, overall, significantly correlated with the various dimensions of food security analysed. Both discrimination against agriculture and excessive support lead to poor performances in all dimensions of food security (availability, access, utilisation and stability).

European Union Preferential Margins: Measurement and Aggregation Issues

The main goal of this chapter is to define and measure the intensity of tariff preferences. Several definitions are feasible and have been used in the literature. Once the tariff margin is defined, it can be expressed in absolute or relative terms. These are not alternatives because they provide different information about trade policy. Nevertheless, however the tariff margin is defined and expressed, in the context of trade policy there are problems related to aggregation. Building on Anderson and Neary’s (Measuring the restrictiveness of international trade policy, MIT Press, Cambridge, MA, 2005) work on theoretically grounded trade policy indexes, we define an aggregate measure (Mercantilistic Trade Preference Index – MTPI) of trade preferential margins. Because it focuses on export volumes, the MTPI enables a method of aggregation that is consistent with the main objective of preferential policies. We compute sectoral MTPI for European Union (EU) preferences granted to 167 exporters, to assess how preferential market access differs across sectors.