Abstract: This paper investigates how rules of origin influence firm-level export behavior. Rules of origin specify the minimum amount of local content required for a product to qualify for reduced tariffs under a preferential trade agreement. However, in countries where there exist limited opportunities to source inputs locally, rules of origin undermine access to preferential trade agreements for final-goods exporters. I show that liberalizing rules of origin in a multi-product firm setting not only affects input sourcing decisions and preference utilization rates but also product output mix. I study the 2011 revision to the rules of origin associated with the EU’s Generalized System of Preferences. This revision allowed apparel producers in least-developed countries to use internationally-sourced textiles in apparel exports. Using transaction-level data on Bangladeshi apparel firms, and a triple-difference empirical framework, I find the 2011 rules of origin revision increased export revenue, product diversification, export-participation, and product quality. At the industry level, the most productive incumbent firms gained market share after the rules of origin liberalization.
Abstract: The resilience of trade to natural disasters is a growing policy concern. Most of the current literature focuses on how natural disasters affect national-level trade and tend to find small effects. I examine the effect of natural disasters at the port-level. Specifically, I analyze the response of monthly exports from Eastern U.S. ports to hurricanes. To do this, I derive an empirical model from a discrete choice model of port choice that aggregates to a structure resembling the gravity model of trade. I then estimate the model using data on port-level export flows and hurricane tracks between 2003 and 2015. I find that hurricanes lead to a persistent decline in export value, and that the persistence in the effect results in large cumulative losses over time. The lost trade value is not recovered, even two years after the incidence of a storm. Using spatial-econometric techniques, I find that hurricanes also divert exports. While exports from affected ports fall, exports from neighboring ports rise after hurricanes. This diversion helps reconcile the small effects found in the existing literature. The effect is larger for ports in areas with less historical experience with hurricanes. I find evidence that the composition of exported goods changes following a hurricane as well. The results shed light on the role that ports play in the flow of trade in the face of natural disasters.
Stitched Together: The Role of Rules of Origin in Trade Preference Utilization
Abstract: Least developed countries (LDCs) are often granted preferential market access to industrialized countries through reduced tariff rates. These preferential tariff rates are designed to encourage economic growth and promote industrialization through export industries in LDCs. In this paper, I show that relaxing rules of origin that require specified amounts of local content in exported products significantly increase the utilization of preferential tariff rates. Using the revision of the rules of origin for apparel products under the EU's GSP as a natural experiment, I find that utilization of the GSP increased by roughly 50 percent for LDCs. Further, the gains in market access for LDCs through the rules of origin revision did not result in changes within the EU's apparel production industry. The results highlight the trade-offs between reduced tariff rates and restrictive rules of origin and underscore the relevance of rules of origin within debates over market access for developing countries.
Abstract: This paper investigates the indirect effect of hurricanes on global consumers through international trade. Predictions that hurricane intensity will increase over the next century due to climate change have resulted in numerous studies analyzing the direct effect of these storms on trade flows, however the potential spillover effects remain less understood. Given the reliance of trade on coastal ports, many of which lie in hurricane prone regions, localized disruptions due to hurricanes will result in global consumer welfare loss if trade flows are unable to adjust accordingly. I use detailed US export data, coupled with hurricane tracking data to estimate the welfare loss for global consumers due to hurricane activity around US ports of exit between 1998 and 2006. I estimate that importers of US goods would have been willing to pay 1.2% of current GDP, on average, to have avoided all hurricane activity over the sample period. Then, I simulate potential welfare loss for global consumers under projected hurricane intensity by 2100. The magnitude of the projected welfare loss depends on the degree to which US ports can be substituted for one another in the event of a hurricane. Overall, the results shed light on the importance of well-functioning transport networks in mitigating the potential impacts of stronger hurricanes due to climate change.
Work in Progress:
Port Choice and International Trade in Agricultural Products (with Wesley W. Wilson)
Abstract: In this paper, we analyze the role of ports in the flow of international trade. To do this, we derive a model in which ports are chosen based on port-specific attributes and spatial characteristics of global demand. We estimate the parameters of the model using data on US port-level exports of agricultural commodities between 2003 and 2017 and external shipping distances. We find that port-level market shares respond negatively to shipping distances, but respond positively to the shipping distances from competing ports. Over the sample time period, port-level market shares have become less responsive to shipping distances. Heterogeneity in the results indicate that shipping distances matter most for corn exports, and least for exports of sorghum. On average, a ten percent increase shipping distance has an equivalent effect on port-level market share as a 2.5% tariff on agricultural commodities.