Bilateral Import Protection, Free Trade Agreements, and Other Factors Influencing Trade Flows in Agriculture and Clothing

Authors

  • Thomas L. Vollrath,

  • Mark J. Gehlhar,

  • Charles B. Hallahan

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      Thomas L. Vollrath and Mark J. Gehlhar are economists with the Economic Research Service (ERS) of the US Department of Agriculture (USDA) and Charles B. Hallahan is a mathematician with ERS, USDA in Washington, DC. Note, the views expressed here are those of the authors, and may not be attributed to ERS or USDA. E-mail: thomasv@ers.usda.gov, mgehlhar@ers.usda.gov or hallahan@ers.usda.gov for correspondence. The authors thank the editor, David Harvey, and two anonymous reviewers for their constructive comments while absolving them from any errors or omissions.


Abstract

Many factors shape the global network of bilateral trade including fundamental forces of supply and demand factors and government policies. This study uses the generalised gravity framework to distinguish among the different drivers that either deter or aid partner trade in land-intensive agriculture and labour-intensive clothing. The dataset used in the analysis includes bilateral trade among 70 countries in 1995, 2000 and 2005. Collectively, the 70 countries account for 85% of the world’s trade in agriculture and 96% of its GDP. Empirical results lend support to the Heckscher–Ohlin explanation of trade, namely that relative factor endowments motivate cross-border trade. Results also show that tariffs are not always binding and bilateral free-trade agreements more often divert rather than create trade.

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