Regional trade in Latin American Southern Cone ( ): the negative effect of high trade costs among neighbouring countries

Transcription

1 Regional trade in Latin American Southern Cone ( ): the negative effect of high trade costs among neighbouring countries Marc Badia-Miró and Anna Carreras-Marin Departament d Història i Institucions Econòmiques Universitat de Barcelona 14 de junio de 2013 Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

2 Outline 1 Motivation 2 An estimation of trade costs in South America Data Trade costs 3 Decomposing Regional Trade into its main drivers 4 Conclusions and further research Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

3 Motivation Motivation Natural experiment: Externals shock ( ) an opportunity for the expansion of regional trade? Regional Trade South America ($US constant prices 1926) 350,0 300,0 250,0 200,0 150,0 100,0 50,0 0, Total intraregional Exports Total intraregional Imports Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

4 Motivation Motivation Did they really have enough manufacture to sell to its neighbours? The begging of industrialization before the ISI in South America is still an open debate: Williamson (2011) and Palma (1979) vs. Bértola and Ocampo (2011) Share of industrial GDP in SA, c.1930 Country Year Share of GDP Argentina Brazil Chile Peru Source: (Bulmer-Thomas, 2003, pp ) Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

5 Motivation Motivation Which was the role played by trade costs into a period of de-globalization? Openness ratio in South America 60,0% 50,0% 40,0% 30,0% 20,0% 10,0% 0,0% Chile Bolivia Perú Brasil Argentina Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

6 An estimation of trade costs in South America An estimation of trade costs in South America - Data Data Data Official trade statistics of South American countries Peres Cajias, J., Badia-Miro, M., & Carreras-Marin, A. (2012). Intraregional trade in south america, economic linkages before institutional agreements. Documents de Treball. Facultat Economia i Empresa. Universitat de Barcelona, 270. Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

7 An estimation of trade costs in South America Trade costs An estimation of trade costs in South America To obtain a proxy for trade costs we have followed the work done by (Jacks et al., 2011). Their work is derived from a gravity equation proposed by (Anderson and vanwincoop, 2003): x ij = y iy j y W ( tij Π i P j ) 1 σ (1) where x ij is the bilateral trade among country i and country j, y i is the output for country i, y j is the output for country j, y W is the output for the whole World, t ij is the bilateral trade cost factor, π i is the outward multilateral trade resistance and P i is the inward multilateral trade resistance or an average trade barriers. Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

8 An estimation of trade costs in South America Trade costs An estimation of trade costs in South America We define τ ij as the trade costs between country i and country j, and then we obtain: Considering: ( ) 1 si (GDP i x i ) s j (GDP j x j ) 2(σ 1) τ ij = 1 (2) x ij x ji t ij = t ji (non-asymmetric trade costs) Domestic trade: x ii = s i (GDP i x i ) Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

9 An estimation of trade costs in South America Trade costs An estimation of trade costs in South America Bilateral trade and total exports figures comes from (Peres et al., 2013). GDP in constant $US from Argentina, Brazil, Chile, Peru, UK and USA comes from (Maddison, 2010). GDP figures from Bolivia come from (Peres Cajías and Herranz, 2011). We consider the same values as (Jacks et al., 2011), s = 0,8 and σ = 8, assuming that the share is the same for all the countries. Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

10 An estimation of trade costs in South America Trade costs An estimation of trade costs in South America Trade costs among SA countries vs. between SA and Core economies, Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

11 An estimation of trade costs in South America Trade costs An estimation of trade costs in South America Difference between trade costs between Latin America and the core economies and among Latin American countries, (in percentage) Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

12 An estimation of trade costs in South America Trade costs An estimation of trade costs in South America Trade cost differences among South America and between South America and their main trade partners, Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

13 Decomposing Regional Trade into its main drivers Decomposing Regional Trade into its main drivers According to Jacks et al (2011), we decompose trade cost in four factors: 1 = 2 ln(y i + y j ) ln(x ij x ji ) + (s is j ) ln(x ij x ji ) + 2(1 σ) ln(1 + τ ij) + ln(x ij x ji ) ( ) xii x ln jj y i y j ln(x ij x ji ) (3) Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

14 Decomposing Regional Trade into its main drivers Decomposing Regional Trade into its main drivers The first component is the contribution linked with the GDP growth. The second component is the one connected with the income similarity which foster trade of the countries under analysis, in line with (Helpman, 1987). The third component is the one related with trade costs. The fourth and the last component is a sort of multilateral factors which influenced the evolution of trade. Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

15 Decomposing Regional Trade into its main drivers Decomposing Regional Trade into its main drivers Drivers of bilateral trade among Argentina and South American Countries and with US and UK, GT EG IS TC Others ARG - SA % % -0.2 % % % ARGENTINA - BOLIVIA 59.9 % % % % 53.5 % ARGENTINA - BRASIL % % -0.3 % % % ARGENTINA - CHILE % % 12.9 % % % ARGENTINA - PERÚ % 27.2 % 0.9 % 62.0 % 10.0 % ARGENTINA - UK % % % % % ARGENTINA - EUA % % % % % Source: GT: Growth trade; EG: Economic Growth; IS: Income similarity; TC: Trade costs; O: Others. Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

16 Decomposing Regional Trade into its main drivers Decomposing Regional Trade into its main drivers Drivers of bilateral trade among Bolivia and South American Countries and with US and UK, GT EG IS TC Others BOL - SA % % 18.5 % % % ARGENTINA - BOLIVIA 59.9 % % % % 53.5 % BOLIVIA - BRASIL 51.0 % % % % 48.1 % BOLIVIA - CHILE % % 0.0 % % -2.0 % BOLIVIA - PERU 95.8 % 98.8 % -9.1 % % 21.2 % BOLIVIA - UK % -8.9 % % % -7.9 % BOLIVA - EUA % % -7.3 % % -6.3 % Source: GT: Growth trade; EG: Economic Growth; IS: Income similarity; TC: Trade costs; O: Others. Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

17 Decomposing Regional Trade into its main drivers Decomposing Regional Trade into its main drivers Drivers of bilateral trade among Brazil and South American Countries and with US and UK, GT EG IS TC Others BRA - SA % % -2.3 % % % ARGENTINA - BRASIL % % -0.3 % % % BOLIVIA - BRASIL 51.0 % % % % 48.1 % BRASIL - CHILE % 71.9 % -7.5 % 21.2 % 14.4 % BRASIL - PERU % 43.8 % 0.0 % 44.4 % 11.8 % BRASIL - UK % % % 0.0 % % BRASIL - EUA % % % 0.0 % % Source: GT: Growth trade; EG: Economic Growth; IS: Income similarity; TC: Trade costs; O: Others. Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

18 Decomposing Regional Trade into its main drivers Decomposing Regional Trade into its main drivers Drivers of bilateral trade among Chile and South American Countries and with US and UK, GT EG IS TC Others CHI - SA % % 8.7 % % % ARGENTINA - CHILE % % 12.9 % % % BOLIVIA - CHILE % % 0.0 % % -2.0 % BRASIL - CHILE % 71.9 % -7.5 % 21.2 % 14.4 % CHILE - PERÚ % % -1.5 % % -6.0 % CHILE - UK % -8.2 % % % -3.5 % CHILE - EUA % % % % -9.4 % Source: GT: Growth trade; EG: Economic Growth; IS: Income similarity; TC: Trade costs; O: Others. Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

19 Decomposing Regional Trade into its main drivers Decomposing Regional Trade into its main drivers Drivers of bilateral trade among Peru and South American Countries and with US and UK, GT EG IS TC Others SA trade % % -5.4 % % % PERU - SA % % % % % ARGENTINA - PERÚ % 27.2 % 0.9 % 62.0 % 10.0 % BOLIVIA - PERU 95.8 % 98.8 % -9.1 % % 21.2 % BRASIL - PERU % 43.8 % 0.0 % 44.4 % 11.8 % CHILE - PERÚ % % -1.5 % % -6.0 % PERU - UK 3.1 % % % % % PERU - EUA 13.9 % % % % % Source: GT: Growth trade; EG: Economic Growth; IS: Income similarity; TC: Trade costs; O: Others. Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

20 Decomposing Regional Trade into its main drivers Decomposing Regional Trade into its main drivers Main drivers of regional trade by countries Source: own elaboration Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

21 Decomposing Regional Trade into its main drivers Decomposing Regional Trade into its main drivers Main drivers of trade between SA and the core economies, by countries Source: own elaboration Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

22 Conclusions and further research Conclusions and further research We present an estimation of South American trade costs during the inter-war period ( ) External shocks were an opportunity for the manufacture sector but the higher level of trade costs brake it The de-composition of trade factors shows the importance of trade cost but also, the importance of economic growth (or decrease) Despite this factor, one question remains still open... why these countries had higher trade costs among them than with the core economies (US and UK) Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23

23 Conclusions and further research Conclusions and further research Further research: Determinants of trade costs Freight factors Tariffs Net Barter Terms of Trade Fixed costs Finances War and diplomatic disputes Relative Factor Endowments Badia-Miró and Carreras-Marín (UB) Regional trade costs in LA 14 de junio de / 23