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

Kazunobu Hayakawa, Jota Ishikawa and Nori Tarui

No 202009, 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 shipping capacity that is sufficient 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 covering 1995-2007, we find evidence that supports these predictions: a 1% reduction in an importer’s tariffs increases the import freight rates by around 0.8%; decreases the export freight rates by around 1.1%; and increases the export quantity by 0.6% to 1%. 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: 2020-04
New Economics Papers: this item is included in nep-gen and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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http://www.economics.hawaii.edu/research/workingpapers/WP_20-09R.pdf First version, 2020 (application/pdf)

Related works:
Journal Article: What goes around comes around: Export-enhancing effects of import-tariff reductions (2020)
Working Paper: What Goes Around Comes Around: Export-Enhancing Effects of Import- Tariff Reductions (2018)
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