The Impact of Services Trade Restrictiveness on Food Trade

Zongo, Amara (2020): The Impact of Services Trade Restrictiveness on Food Trade.

Abstract

International trade in goods requires service inputs such as transport, banking and financial services for production and transportation. Trade in goods and services are now closely linked and contribute to the growth of international trade. The goal of this study is to investigate the effects of restrictions in the banking, accounting, transportation and logistics sectors (cargo handling and custom brokerage) on food trade. We use a gravity model with panel data from 2014 to 2018 for 36 OECD countries, the OECD indices of individual country restrictions and regulatory difference by country pair to capture the level of restrictions in these sectors. Our results suggest that importing and exporting country restrictions have non-significant effects on aggregate food exports, but negative and significant impacts on exports of agricultural raw materials and perishable products (meat, dairy products, eggs, etc.). The regulatory disparity between countries in logistics and banking sectors emerge as the main barrier for food exports. However, these results can be mitigated through regulatory cooperation or harmonization of regulations.

• Item Type: MPRA Paper
• Language: English
• Keywords: Food trade, service sector, heterogeneity of standards, gravity model
• Subjects: F - International Economics > F1 - Trade > F13 - Trade Policy ; International Trade Organizations; F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade; K - Law and Economics > K2 - Regulation and Business Law > K23 - Regulated Industries and Administrative Law; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q17 - Agriculture in International Trade

References

[1] Amiti, Mary and David E. Weinstein. (2011). "Exports and Financial Shocks". The Quarterly Journal of Economics, 126 (4), 1841-1877. [2] Anderson, J. E. and Van Wincoop, E. 2003. "Gravity with gravitas: A solution to the border puzzle". The American Economic Review. [3] Anderson, J. E. and Van Wincoop, E. 2004. "Trade costs". Journal of Economic Literature. [4] Anderson, J. E. and Yotov, Y. V. 2012. "Gold standard gravity". Technical report, National Bureau of Economic Research. [5] Ariu, A. 2016. "Services Versus Goods Trade: A Firm Level Comparison". Review of World Economics 152 (1), 19-41. [6] Ariu, A. Mayneris, F. and Parenti, M. 2018. "One way to the top: How services boost the demand for goods". Technical report, CEPR Discussion Papers. [7] Baier, Scott L., and Jeffrey H. Bergstrand. 2007. "Do Free Trade Agreements Actually Increase Members’ International Trade?" . Journal of International Economics, 71(1): 72-95. [8] Baier, Scott L., and Jeffrey H. Bergstrand. 2009. "Estimating the effects of free trade agreements on international trade flows using matching econometrics" . Journal of International Economics, vol. 77, issue 1, 63-76 . [9] Baldwin, R., Skudelny, F. and Taglioni, D. 2005. "Trade Effects of the Euro, Evidence from Sectoral Data". Frankfurt am Main: European Central Bank. [10] Baldwin, R. and Taglioni, D. 2006. "Gravity for dummies and dummies for gravity equations". NBER Working Paper No 12516. [11] Baltagi, B.H., Egger, P., Pfaffermayr, M. 2003. "A generalized design for bilateral trade flow models". Econom. Lett. 80, 391-397. [12] Ben Shepherd. 2010." Dealing with Reverse Causality". ARTNeT Capacity Building Workshop for Trade Research: Gravity Modeling. [13] Beverelli, Cosimo; Fiorini, Matteo ; Hoekman, Bernard. 2017. "Services trade policy and manufacturing productivity: The role of institutions". Journal of International Economics, Elsevier, vol. 104(C), pages 166-182. [14] Borchert, Ingo; Mattoo, Aaditya. 2016. "The trade reducing effects of restrictions on liner shipping". Journal of Comparative Economics, Elsevier, vol. 44(2), pages 231-242. [15] Borchert, I. Batshur, G. and Aaditya, M. 2012. "Guide to the Services Trade Restrictions Database". World Bank Policy Research Working Paper WPS6108. [16] Borchert, Ingo; Gootiiz, Batshur and Mattoo, Aaditya. 2012. "Policy barriers to international trade in services : evidence from a new database". Policy Research Working Paper Series 6109, The World Bank. [17] Breinlich, H. , Criscuolo, C. 2011. "International trade in services: a portrait of importers and exporters". Journal of International Economics 84 (2), 188-206 . Electronic copy available at: https://ssrn.com/abstract=3644987 [18] Bricongne, J.C., Fontagné, L., Gaulier, G., Taglioni, D., Vicard, V. 2010. "Firms and the global crisis: French exports in the turmoil". Journal of International Economics, 87(1),134-146. [19] Carrere, Celine and de Melo, Jaime and Wilson, John S. 2013. "The Distance Puzzle and Low-Income Countries": An Update". Journal of Economic Surveys, Vol. 27, Issue 4, pp. 717-742, 2013. [20] Carsten Fink, Aaditya Mattoo, Ileana Cristina Neagu. 2002. "Trade in International Maritime Services: How Much Does Policy Matter?". The World Bank Economic Review, Volume 16, Issue 1, June 2002, Pages 81-108. [21] CEPII. 2005. "Geographic and Bilateral Distance Database". Paris: Centre d’Etudes rospectives et d’Informations Internationales. [22] Chaney, T. 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade" . American Economic Review 2008, 98:4,1707-1721. [23] Chor, Davin and Manova, Kalina. 2012. "Off the cliff and back? Credit conditions and international trade during the global financial crisis". Journal of International Economics, Elsevier, vol. 87(1), pages 117-133. [24] Claessens, S., O. Hassib, and N. Van Horen. 2017. "The role of foreign banks in trade". CEPR Discussion Papers 11821. [25] Conti, G. , Turco, A.L. , Maggioni, D. 2010. "Exporters in services: new evidence from Italian firms". Applied Economics Quarterly 56 (1), 73-98 . [26] Copeland, B. and A. Mattoo. 2007. "The Basic Economics of Services Trade in the Handbook of International Trade in Services". Oxford University Press [27] Crozet, Matthieu; Milet, Emmanuel and Mirza, Daniel. 2016. "The impact of domestic regulations on international trade in services: Evidence from firm-level data". Journal of Comparative Economics, Elsevier, vol. 44(3), pages 585-607. [28] Deardorff, Alan V. and Robert M, Stern. 2007. "Empirical Analysis of Barriers to International Services Transactions and the Consequences of Liberalization". Chapters, in: John R. Bryson and Peter W. Daniels (ed.), The Handbook of Service Industries, chapter 13, Edward Elgar Publishing. [29] Disdier, A.-C. and Head, K. 2008. "The Puzzling Persistence of the Distance Effect on Bilateral Trade". Review of Economics and Statistics 90[1], 37-48. [30] Eaton, J and Kortum, S. 2002. "Technology, Geography, and Trade". Econometrica ,vol.70, no5, 1741-1779. [31] Fabrice Morel. 2010. "Credit insurance in support of international trade Observations throughout the crisis". Export Credit Insurance Report. [32] Feenstra, Robert, James Markusen, and Andrew Rose. 2001." Using the Gravity Equation to Differentiate Among Alternaive Theories of Trade". Canadian Journal of Economics, vol.34, p.430-47. [33] Feenstra, R. 2004. "Advanced International Trade: Theory and Evidence". Princeton University Press, Princeton, N.J. [34] Fontagné Lionel, Amelie Guillin and Cristina Mitaritonna. 2011. "Estimation of Tariff Equivalents for the Services Sectors" . CEPII working paper, no2011-24. Electronic copy available at: https://ssrn.com/abstract=3644987 [35] Fontagné, L. Mitaritonna, C. and Signoret, J. 2016. "Estimated Tariff Equivalents of Services NTMs". CEPII Working Paper. [36] Fukunari KimuraHyun-Hoon Lee. 2006. "The Gravity Equation in International Trade in Services". Review of World Economics, Volume 142, pp 92 - 121. [37] Gary, H and Sherry S. 2007. "Services Trade: Past Liberalization and Future Challenges". Journal of International Economic Law, Volume 10, Issue 3, September 2007, Pages 605-630. [38] Gaulier, G. , Milet, E. , Mirza, D. 2011. "Les Firmes Françaises dans le Commerce International de Services". Economie et Statistique 435-436, 125-147. [39] Geloso Grosso M. and al. 2015. " Services Trade Restrictiveness Index (STRI): Scoring and Weighting Methodology ". OECD Working Papers on Trade Policy, no177, OECD Publishing, Paris. [40] Gooris, J and Mitaritonna, C .2015. "Which import restrictions matter for trade in services ?". CEPII Working Paper, no2015-33, december 2015. [41] Guillin, A. 2013. "Assessment of Tariff Equivalents for Services Considering the Zero Flows". World Trade Review, 12, 3, 549-75. [42] Head, K. Mayer, T. and Ries, J. 2009. "How remote is the offshoring threat?". European Economic Review 53(4), 429-444. [43] Head, K. and Mayer, T. 2014. "Gravity equations: Workhorse, toolkit, and cookbook". Handbook of International Economics, Vol. 4, eds. [44] Heckman J. 1979: "Sample Selection Bias as a Specification Error ". Econometrica, 47(1): 153-161. [45] Helpman, E., Melitz, M., and Rubinstein, Y. 2008. "Estimating trade flows: Trading partners and trading volumes". The Quarterly Journal of Economics, 123(2):441487. [46] Hoekman, B. and Shepherd, B. 2015. "Services, firm performance, and exports. The case of the East African Community". International Growth Centre, Working paper. [47] Hofmann Claudia, Alberto Osnago, and Michele Ruta. 2017. "Horizontal Depth: A New Database on the Content of Preferential Trade Agreements". Policy Research Working Paper Series 7981, World Bank, Washington, DC [48] IMF. 2017. "Promoting Inclusive Growth". IMF Annual Report 2017. [49] Jacks, D. S., Meissner, C. M. and Novy, D. 2008. "Trade costs, 1870-2000". American Economic Review: Papers and Proceedings 98(2): 529-34. [50] Jafari, Y and Tarr, D. 2015. "Estimates of ad valorem equivalents of barriers against foreign suppliers of services in eleven services sectors and 103 countries ". The World Economy, Vol. 40, Issue 3, pp. 544-573. [51] James E. Anderson. 1979. "A Theoretical Foundation for Gravity Equation". American Economic Review, 69(1):106-16. [52] Jeffrey Bergstrand. 1989. "The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade". The Review of Economics and Statistics, vol. 71, issue 1, 143-53. Electronic copy available at: https://ssrn.com/abstract=3644987 [53] Jong Woo Kang and Suzette Dagli. 2018. "International trade and exchange rates". Journal of Applied Economics, 21:1, 84-105. [54] Joseph Francois and Bernard Hoekman. 2010. "Services Trade and Policy". Journal of Economic Literature. [55] Kee, Hiau Looi, Alessandro Nicita and Marcelo Olarreaga. 2009. "Estimating Trade Restrictiveness Indices". The Economic Journal, 119 (534), pp. 172-199. [56] Kox, Henk L.M. and NordÅs, Hildegunn Kyvik. 2007. "Services trade and domestic regulation". OECD Trade Policy Papers 49, OECD Publishing. [57] Kox, H. and H.k. Nordàs. 2009. "Regulatory Harmonization and Trade in Services: Volume and choice of mode". FREIT Trade Working Paper No. 040, 2009. [58] Krugman, P. 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade". The American Economic Review, Vol. 70, pp. 950-959. [59] Lennon, C., D. Mirza and G. Nicoletti. 2009. "Complementarity of Inputs across Countries in Services Trade". Annals of Economics and Statistics, 93-94, 1-23. [60] Manning W. and J., Mullahy. 2001. "Estimating log models: to transform or not to transform?". Journal of Health Economics, 20 (4), 461-494. [61] Martìnez-Zarzoso I, Nowak-Lehmann F, Vollmer S. (2007). "The log of gravity revisited (in revision)". CEGE Discussion Paper 64, University of Gottingen. [62] Mayer, T and Zignago, S. 2011. "Notes on CEPII’s distances measures: The GeoDist database". CEPII, Working Paper, 2011-25. [63] Melise Jaud and Madina Kukenova. 2011. "Financial development and survival of African agri-food exports". World Bank Policy Research Working Paper No. 5649. [64] Moore, M. 2000. "Financial services and the WTO". Speech Delivered at the Bank for International Settlements. World Trade Organisation (WTO) (September 11, Base l). [65] Niepmann, Friederike and Tim Schmidt-Eisenlohr. 2013. "No Guarantees, No Trade: How Banks Affect Export Patterns". Staff Report 659, Federal Reserve Bank of New York 2013. [66] NordÅs, H. K. 2010. "Trade in goods and services: Two sides of the same coin?". Economic Modelling, vol. 27, no2, pp. 496-506. [67] NordÅs, HK and Rouzet, D. 2016. "The Impact of Services Trade Restrictiveness on Trade Flows". The World Economy, Volume 40, Issue 6, 1155-1183. [68] NordÅs, HK. 2016. "Services Trade Restrictiveness Index (STRI): The Trade Effect of Regulatory Differences". OECD Trade Policy Papers, no189, OECD Publishing, Paris. [69] Novy, D. 2009. "Gravity redux: measuring international trade costs with panel data". University of Warwick- Department of Economics. [70] Paravisini, Daniel, Veronica Rappoport, Philipp Schnabl, and Daniel Wolfenzon. 2014. "Dissecting the Effect of Credit Supply on Trade: Evidence from Matched Credit-Export Data". Review of Economic Studies. [71] Park, S.C. 2002. "Measuring Tariff Equivalents in Cross-Border Trade in Services". Trade Working Papers no353. East Asian Bureau of Economic Research. Electronic copy available at: https://ssrn.com/abstract=3644987 [72] Piermartini, Roberta, and Yoto Yotov. 2016. "Estimating Trade Policy Effects with Structural Gravity". WTO Working Paper ERSD-2016-10 [73] Riker, D. 2015. "Domestic Regulations and U.S. Exports". U.S. International Trade Commission, Office of Economics, Research Division. [74] Rouzet, D. and F. Spinelli. 2016. "Services Trade Restrictiveness, Mark-Ups and Competition". OECD Trade Policy Papers, no194. OECD Publishing, Paris. [75] Rouzet, D and al. 2014. "Services Trade Restrictiveness Index (STRI)": Financial Services. OECD Publishing. [76] Santos Silva, J and Silvana Tenreyro. 2006. "The Log of Gravity". The Review of Economics and Statistics, 88(4): 6416-658. [77] Santos Silva, J.M.C.and Tenreyro, S. 2009. "Trading Partners and Trading Volumes: Implementing the Helpman-Melitz-Rubinstein Model Empirically". Oxford bulletin of economics and statistics. [78] Santos Silva, J and Silvana Tenreyro. 2011. "Further simulation evidence on the performance of the Poisson pseudo-maximum likelihood estimator". Economics Letters, vol. 112, issue 2, 220-222. [79] Tamar Khachaturian. 2015. " Services Trade Restrictions and Company Profits: Telecommunications". United States International Trade Commission: Office of Industries Working Paper ID-042 November 2015. [80] Tamar Khachaturian. 2018. "Trade Restrictions and Modes of Supply in Services Trade". Office of Industries Working Paper ID-05. [81] Tinbergen, J. 1962. "Shaping the World Economy: Suggestions for an International Economic Policy". American Journal of Agricultural Economics, Volume 46, Issue 1, February 1964, Pages 271-273. [82] UNCTAD. 2010. "Employment, globalization and development". Trade and development report, United Nations. [83] UNCTAD. 2013. "Non-Tariff Measures to Trade: Economic and Policy Issues for Developing Countries". New York and Geneva: United Nations. [84] UNCTAD-WTO. 2014. "A Practical Guide to Trade Policy Analysis". World Trade Organization. [85] Van der Marel, Erik and Shepherd Ben. 2013. "Services Trade, Regulation and Regional Integration: Evidence from Sectoral Data". The World Economy36, no11 (2013): 1393-1405. [86] Walsh, K. 2008. "Trade in Services: Does Gravity Hold?". Journal of World Trade 42 (2), 315-334 . [87] Walter, P., Dell’mour, R. 2010. "Firm Level Analysis of International Trade in Services". Irving Fischer Committe on Central Bank Statistics Working Papers 4. [88] Whalley, J. 2004. "Assessing the Benefits to Developing Countries of Liberalisation in Services Trade". The World Economy. [89] Westerlund, J. and F. Wilhelmsson. 2009. "Estimating the gravity model without gravity using panel data". Applied Economics 43(6): pp. 641-649. Electronic copy available at: https://ssrn.com/abstract=3644987 [90] World Trade Organization . 2005. "Analysis of the links between trade, trade standards and the WTO". World Trade Report, WTO. [91] Yildirim B. 2009. "A Key Element of Economic Growth. Transport for a Global Economy. Challenges Opportunities in the Downturn". International Transport Forum, OECD. pp. 8-10. [92] Yotov, Y.V., Piermartini, R., Monteiro, J-A., Larch, M. 2016. "An advanced guide to trade policy analysis: The structural gravity model". United Nations and World Trade Organization. Geneva.