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: This paper investigates the impact of hurricane intensity at customs ports on bilateral trade flows. I use detailed US export data, coupled with hurricane tracking data to estimate (i) the effect of hurricanes on port-level trade, and (ii) the welfare loss for global consumers due to hurricanes. I estimate that a Category 1 storm hitting a port has a similar effect on bilateral trade volume as a 6% tariff. Using the structure of the theoretical model, I estimate that importers of US goods would have been willing to pay over $6 billion to have avoided the 2005 hurricane season. Overall, the results shed light on the role of transport networks in mitigating the potential impacts of stronger hurricanes due to climate change.
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: 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.
Work in Progress:
Port Choice and International Trade in Agricultural Products (with Wesley W. Wilson)
Abstract: Ports are a critical feature in the logistics of international trade. There is considerable research that examines trade between countries, but surprisingly little that examine the choice of ports through which trade occurs. In this paper, we develop and estimate a choice model in which importers of products choose the port(s) from which they receive imports from the US. This choice is made based on port level import prices and port attributes. We estimate the parameters of the model using data on global imports of US agricultural commodities between 2003 and 2017, US port attributes, and shipping costs. We use the results to calculate own- and cross-price elasticities for prices and port attributes as well as the willingness of importers to pay for improvement in port attributes.