Market knowledge: Evidence from importers

Previous firm-level literature established that there are substantial costs of entry into new export markets. Chaney (The American Economic Review, 104, 2014, 3600) opens the black-box of entry costs by building a dynamic network model of international trade where firms acquire customers in new destinations through their existing customers in other destinations. Following his conjecture, this paper examines whether firms use their existing suppliers in a destination to find their first clients in those markets. I use a disaggregated data set on Turkish firms' exports and imports for the 2003–08 period, and investigate the effect of import experience on export entry. By identifying import experience using instrumental variables, and shutting down productivity channels with firm-year fixed effects, I find that having a supplier in the destination country raises the probability of starting to export to that country by 5.5 percentage points on average, revealing a “market knowledge” phenomenon. The paper's main contribution to the literature is finding that firms' country-specific import experience increases the likelihood of export-market entry. Digging further to explore heterogeneous effects, I find that this effect does not exist when trading with low-income countries, but it increases with the destination country's size, proximity, language similarity and the size of its Turkish immigrant community. Moreover, the strength of the firm's relationship with its supplier as proxied by several variables such as the share of imported products that are differentiated increases the probability of export-market entry

Two worlds apart? Export demand shocks and domestic sales

This paper, using a rich dataset on Turkish firms for the 2005–2014 period, analyzes the relationship between firm-product sales in different markets to identify the channels that link exports and domestic sales. First, I use an instrumental variables strategy and establish that an exogenous 10% rise in exports increases a firm’s domestic sales by 2.6% on average. Second, I do an analogous exercise at the firm-product level, and find coefficients that are almost twice as large, hinting to the importance of product-specific scale effects. Moreover, I propose a novel approach to isolate the production versus non-production factors that influence firm dynamics by focusing on non-produced (or carry-along trade, CAT) exports. I find that CAT exports also affect domestic sales positively, suggesting that spillovers at the firm level such as the easing of liquidity constraints play a role. In the process, I reveal that export demand shocks influence firms’ expansion in terms of employment, wages, and investment. Finally, my quantification exercise indicates that export demand shocks explain about 1.4% of the annual variation in Turkish domestic sales on average. This figure, which shows heterogeneities at the sector level, rises to 4.6% during the Great Recession in 2009, when demand in Turkey’s key export partners collapsed

Trade intermediation by producers

This paper shows that Turkish manufacturing exporters export goods that they have not pro-duced and thus also act as trade intermediaries. This exporting of “sourced” products is ubiquitous across firms, products, and destinations. Beyond these facts, the main contribution of the paper is to show that sourced exports are more sensitive to gravity determinants than produced exports at the aggregate level, but at the firm level, this relationship is reversed. We rationalize these findings by allowing producers to act as intermediaries in a model where profitability at the product-destination level is stochastic and correlated across markets. We provide empirical evidence for the model’s core mechanism

Trade protection along supply chains: how antidumping measures against China hurt downstream industries

Production processes are often no longer confined to a single country; supply chains can be fragmented across great distances. By contrast, tariffs are often used by individual countries to protect certain industries. In new research, which studies the effects of US antidumping duties applied against China, Chad P. Bown, Paola Conconi, Aksel Erbahar and Lorenzo Trimarchi find that these protectionist [...

Trade protection along supply chains

During the last decades, the United States has applied increasingly high trade protection against China. We combine detailed information on US antidumping (AD) duties— the most widely used trade barrier — with US input-output data to study the effects of trade protection along supply chains. To deal with endogeneity concerns, we propose a new instrument for AD protection, which combines exogenous variation in the political importance of industries with their historical experience in AD proceedings. We find that tariffs have large negative effects on downstream industries, decreasing employment, wages, sales, and investment. Our baseline estimates for 1988-2016 indicate that, due to AD protection against China, around 1.8 million US jobs were lost in downstream industries, with no significant job gains in protected sectors. When we extend the analysis to measures introduced under President Trump, we find that around 500,000 jobs were lost during the first two years of his term. We also provide evidence of the mechanisms behind the negative effects of protection along supply chains: AD duties decrease imports and raise production costs for downstream industries

Cascading trade protection: Evidence from the US

In a world with increasingly integrated global supply chains, trade policy targeting upstream products has unintended consequences on their downstream industries. In this paper, we examine whether protection granted to intermediate manufacturers leads to petition for protection by their downstream users. We first provide a simple model based on the quantitative framework of Ossa (2014) which identifies the key factors and their interactions that cause cascading protection to motivate our empirical analysis. Then, we test our model by identifying the input-output relationships among the time-varying temporary trade barriers of the US using its detailed input-output tables. As predicted by the theory, we find that measures on imported inputs increase the likelihood of their downstream users' subsequent trade remedy petition over the 1988–2013 period. Moreover, our simulation exercise shows that cascading protection can cause additional welfare losses, and hence we propose that trade policy investigations should take vertical linkages into account

Trade intermediation by producers

This paper shows that manufacturing exporters export goods that they have not produced and thus also act as trade intermediaries. The geographical dimension of the data reveals that almost half of these exports of “sourced” products are purely intermediated: to many destinations, firms export sourced products only. We find that this type of intermediation is ubiquitous across firms, products, and destinations, and is robust to a battery of alternative definitions. These findings show that trade intermediation by producers (TIP) is not solely driven by carry-along trade, where produced and sourced products are bundled when exported. Our decomposition of TIP highlights that trade intermediation should be identified at the firm-product-destination level. The prevalence of pure intermediation for all manufacturing exporters, including the largest ones, suggests that intermediation plays an important role in firms' participation and success in international markets

Circumvention of anti-dumping : a law and economics analysis of proportionality in EU rules

This paper deals with one of the controversial trade issues on the agenda for negotiations in the WTO since the Uruguay Round.Anti-circumvention rules (AC) allow the application of trade remedies to products that would fall outside the scope of the trade remedy regulation. The rationale is that some practices allow circumvention of the extra duties and so lessen the effective application of remedies.In this article,we argue that,in order to avoid protectionist abuses,these AC rules should only extend trade measures to those goods that both effectively circumvent and undermine those remedies, meaning the tests included in AC investigations must lead to the proportional application ofAC measures.More specifically,we use a law and economics approach to analyse the proportionality of AC rules in the context of the largest AC user, the EU, who, according to our estimations, have extended its existing anti-dumping coverage by an additional annual import value of USD 2 billion via newAC measures imposed in 1995–2013

Circumvention of anti-dumping : a law and economics analysis of proportionality in EU rules

This paper deals with one of the controversial trade issues on the agenda for negotiations in the WTO since the Uruguay Round.Anti-circumvention rules (AC) allow the application of trade remedies to products that would fall outside the scope of the trade remedy regulation. The rationale is that some practices allow circumvention of the extra duties and so lessen the effective application of remedies.In this article,we argue that,in order to avoid protectionist abuses,these AC rules should only extend trade measures to those goods that both effectively circumvent and undermine those remedies, meaning the tests included in AC investigations must lead to the proportional application ofAC measures.More specifically,we use a law and economics approach to analyse the proportionality of AC rules in the context of the largest AC user, the EU, who, according to our estimations, have extended its existing anti-dumping coverage by an additional annual import value of USD 2 billion via newAC measures imposed in 1995–2013