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What Goes Around Comes Around: Export-Enhancing Effects of Import- Tariff Reductions

Kazunobu Hayakawa (), Jota Ishikawa () and Nori Tarui ()
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Jota Ishikawa: Faculty of Economics, Hitotsubashi University and the Research Institute of Economy, Trade and Industry

No 201808, Working Papers from University of Hawaii at Manoa, Department of Economics

Abstract: In international trade, transportation requires a round trip for which a transport firm has to commit to the shipping capacity to meet the maximum shipping volume. This may cause the “backhaul problem.†Trade theory suggests that facing the problem, transport firms with market power adjust their freight rates strategically when import tariffs change. As a consequence, a country reducing its import tariffs may experience an increase in exports as well as imports. Using worldwide data during 2000-2007, we find evidence that supports these predictions. These findings indicate a new mechanism through which import-tariff reductions lead to export expansions.

Keywords: Transport firm; freight rates; tariffs; backhaul problem (search for similar items in EconPapers)
JEL-codes: F12 F13 R40 (search for similar items in EconPapers)
Date: 2018-08
New Economics Papers: this item is included in nep-int and nep-tre
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