Country‐Specific Determinants of Horizontal and Vertical Intra‐industry Agri‐food Trade: The Case of the EU New Member States

Intra‐industry trade (IIT) has become a widespread phenomenon with a growing role in international trade, though agricultural trade is usually neglected in empirical works. This article identifies the determinants of horizontal and vertical intra‐industry agri‐food trade between New Member States (NMS) and the EU‐27 in 1999–2010, by applying static and dynamic models with different specifications to panel data. Results show that IIT is mainly of a vertical nature in the NMS, though the majority of NMS export low quality agri‐food products to EU‐27 markets. Factor endowments are negatively related to agri‐food horizontal intra‐industry trade (HIIT), but positively to vertical intra‐industry trade (VIIT). Economic size is positively and significantly related to both types of IIT, while distance and IIT are found to be negatively related in both cases. Results also suggest that HIIT and VIIT are greater if a New Member State exports agri‐food products to another NMS while EU accession has had positive and significant impacts on both HIIT and VIIT, suggesting that economic integration fosters IIT.     

Drivers of vertical intra‐industry trade: the case of the Hungarian agri‐food sector

This article investigates the drivers of vertical intra‐industry trade (VIIT) in Hungarian agri‐food trade with the European Union (EU). It identifies three possible ways to measure intra‐industry trade (IIT) flows (GHM, FF, and N methods) and defines six hypotheses to test for the drivers of VIIT with three panel data models (static, dynamic, and FEVD). The results suggest that factor endowments are negatively, while economic size is positively and significantly related to VIIT. Distance and VIIT were found to be negatively related as is commonly the case in the standard gravity model. It was also found that VIIT is greater if a New Member State (NMS) is exporting agri‐food produce to an NMS, while EU accession has ambiguously influenced the share of VIIT. In general, it seems that our results are independent from model estimations and interestingly they do not differ considerably as we a priori expected. Moreover, our results seem surprisingly robust across various measurements of ITT.     

Role of international politics on agri‐food trade: Evidence from US–Canada bilateral relations

A well‐functioning trade relationship between Canada and the United States is crucial to the economic vitality of the Canadian agri‐food industry. However, agri‐food trade is more susceptible than other sectors to political interventions. The Trump presidency has strained Canada–US relations and his trade policy actions have significantly increased trade restrictions and trade policy uncertainty and undermined the rules‐based global trading system. We examine the pattern of agri‐food trade between the two countries and find that the upward trajectory of bilateral agri‐food trade ended in 2013. Although this flatlining predates the Trump administration, we show that Trump increased trade policy uncertainty starting in 2017 and likely impacted further expansion of trade. We examine what might change under the Biden presidency and argue that the new administration is likely to restore strong relationships with allies and work to rebuild important international institutions such as the World Trade Organization (WTO). Although protectionist forces will continue to impact bilateral agri‐food trade, we expect closer political ties between a Biden administration and the Canadian Prime Minister. This should have a positive effect on the Canadian agri‐food industry by reducing trade uncertainties, thereby increasing agri‐food trade between Canada and the United States.     

Effects of Regional Trade Agreements on Trade in Agrifood Products: Evidence from Gravity Modeling Using Disaggregated Data

The recent proliferation of regional trade agreements (RTAs) has intensified the debate on their merits. This study contributes to this debate by analyzing trade creation and diversion effects of the North American Free Trade Agreement (NAFTA) on trade in six important agrifood products. An extended gravity model is estimated using pooled data and generalized least squares methods. The result shows that the share of intraregional trade is growing within NAFTA and that NAFTA has displaced trade with the rest of the world. While NAFTA has served to boost trade among its members, it reduced the degree of openness to trade with nonmembers.     

Vertically Differentiated Trade and Differences in Factor Endowment: The Case of Agri‐Food Products between Hungary and the EU

The paper investigates the relationship between factor endowment and vertical intraindustry trade (IIT)in agri‐food products between Hungary and the EU. Intra‐industry trade is separated into its horizontal and vertical components on the basis of differences in unit values. Three different approaches to measuring IIT are employed and these are then tested using panel regression models. Results show vertical type trade is predominant in total IIT for agri‐food products. In order to achieve more general results, we consider different types of productive factors: land, human and physical capital. Using Flam and Helpman type vertically differentiated trade models, we find a positive relationship between factor endowment and vertical IIT. More importantly, using a measure of IIT that reflects the level of trade produces better regression results than those based on the degree or share of IIT.     

The impact of EU trade preferences on the extensive and intensive margins of agricultural and food products

In this article, we study the trade creation effects of EU preferential trade agreements (PTAs) in the agriculture and food sectors for a large sample of developing countries in the period 1990–2006. We investigate the extent to which the PTAs affect trade through the extensive margin—number of exported products—or the intensive margin—volume of existing products. We use a gravity framework in a panel data setting, and different estimators to deal with the issues of zero trade flows and the presence of an upper bound in the dependent variable. The results show that EU PTAs positively affect the extensive margin in agricultural trade, but not in processed foods. As regards the intensive margin, the effect is driven by the role of tariffs alone, whereas the other provisions of PTAs do not exert any other significant impact on agricultural or food products.     

Brexit,Trade Agreements and CAP Reform

Although a number of reforms have significantly changed the Common Agricultural Policy (CAP ) over the past two decades, a defining characteristic of the policy is its prohibitively high import tariffs on a number of key commodities as tariff cuts have not formed part of CAP reform. These high tariffs, whilst protecting EU producers, complicate the EU 's attempts to negotiate Free Trade Area (FTA ) agreements around the world, and will likewise be problematic for agri‐food trade with a post‐Brexit UK , particularly over the politically sensitive border between the EU ‐27 and the UK on the island of Ireland. An open border could be more easily secured if the UK 's tariff barriers on CAP products matched those of the EU ‐27. This, however, implies either that the UK will have to abandon its plans to pursue ‘free‐trade’ policies with other countries around the world, or that the EU ‐27 needs to complete its reform of the CAP by unilaterally reducing its tariff barriers. It seems highly unlikely that the challenges posed by Brexit would prompt the EU to unilaterally reduce its excessively high CAP tariffs.     

European Agriculture after Brexit: Does Anyone Benefit from the Divorce?

The UK exited the EU on 31 January 2020, with a transition period agreed as part of the Withdrawal Agreement. During this transition period the UK and the EU will decide on their future trading relationship. No matter what form this relationship takes, there will be disturbances to agri‐food markets. This study analyses four different scenarios with increasing barriers to trade, ranging from a very close relationship similar to the European Economic Area to a distant relationship in which the UK and EU trade on Most Favoured Nation terms, using the EU focused global agricultural sector model CAPRI. In the UK, food prices will increase in all scenarios, making consumers in the UK the biggest losers. Only in a free trade agreement scenario does the UK show an unambiguous positive net welfare gain in just the agri‐food sector. In the case of the European Economic Area scenario, which assumes continued access to the single market, the net welfare impact would depend on the size of the UK’s continued contribution to the EU. In the EU, declining food prices would benefit consumers but the sum of the loss in farmers’ incomes and the UK’s EU CAP contribution would be much greater than the consumer’s gain. These impacts in agricultural markets under different future trade arrangements will also be influenced by the UK’s agricultural policy changes in direct payments as well as by possible further UK trade liberalisation after the end of the transition period.     

Quality Upgrades of EU Agri‐Food Exports

We investigate determinants of quality upgrades in EU agri‐food exports using panel data models for the period 2000–2011. By employing highly disaggregated data we show that the unit value of exports is positively correlated to level of economic development and size of population. Our results highlight the negative impacts of comparative advantage and trade costs on upgrades in export quality. Our analysis partly confirms the role of income distribution in quality specialisation, that greater income inequality increases specialisation in quality upgrades. Findings are robust when applied to alternative subsamples, including vertically specialised and final agri‐food products.     

Avian influenza,non‐tariff measures and the poultry exports of China

This paper focuses on the direct impact of avian influenza outbreaks and the impact of the consequent non‐tariff measures (NTMs) on the international poultry trade. Using monthly export data from China and its 122 poultry importing countries, a random‐effect gravity model has been adopted. Emphasising the agri‐food trade in a global value chain context, the research analysis distinguishes between ‘agri‐food goods’ (mostly uncooked poultry products) and ‘processed goods’ (mostly cooked poultry products). The results show that domestic avian influenza outbreaks have a significant negative impact on a country's poultry imports compared with such outbreaks in exporting countries. Moreover, NTMs induced by avian influenza reduce the uncooked poultry trade but temporarily increase the cooked poultry trade. However, with a time‐lag, the cooked poultry trade may soon face increasing NTMs. The results also imply that developing countries that attempt to export agri‐food products to developed countries should increase and enhance processed food production.     

Brexit and Tariff Rate Quotas on EU Imports: A Complex Problem

Tariff rate quotas (TRQ s) are a means by which non‐EU suppliers of agri‐food products can be given preferential access to EU markets within a regulated framework of quotas at tariff rates below the Most Favoured Nation rates bound in the GATT . TRQ s are common in governing trade in the meat and dairy sectors of the EU , although they apply to a wide range of other agricultural commodity and processed agri‐food products. Brexit poses a complex set of problems regarding TRQ s in terms of how the respective parties should divide up jointly undertaken commitments within the WTO , since TRQ s have been negotiated by the Commission on behalf of all EU Member States. Whilst individual quota allocations can be allocated to specific third country suppliers, individual Member States receive no specific allocation of the global product TRQ either in total, or from any named preferential supplier. The article outlines the nature of TRQ s in the meat and dairy sectors of the EU , and how a simple partitioning of existing quotas between the EU ‐27 and the UK is unlikely to resolve the complex issue of access rights of third countries to both markets. Possible solutions are explored, including the potential need for reciprocal EU ‐27–UK TRQ s post Brexit.     

Geographical indication regulation and intra‐trade in the European Union

Protection of indications of geographical origin (GIs) can reduce information asymmetry between producers and consumers, and potentially enhance trade. However, GIs can also possibly divert trade. We rely on panel data about agri‐food trade among the 27 countries of the European Union to investigate these issues using variations of estimators proposed by Head and Mayer ( 2000 ) and Santos Silva and Tenreyro ( 2006 ). Our findings suggest that the protection of GIs creates trade when the importing and exporting countries have GI‐protected products. There is also empirical evidence regarding a trade‐diverting effect when the importing country does not have GIs and a border enlargement effect arising from European GI‐protection.     

Russian Roulette at the Trade Table: A Specific Factors CGE Analysis of an Agri‐food Import Ban

In the summer of 2014 Russia imposed a ban on most agri‐food products from countries enforcing Ukraine‐related sanctions against Russia. We use a specific factors computable general equilibrium (CGE) model to simulate the short‐run impact of this retaliatory policy. The baseline is carefully designed to isolate the impacts of the ban on the European Union (EU), Russia itself and a selection of key trade partners. The modelling of the ban follows a novel approach, where it is treated as a loss of established trade preferences via reductions in consumer utility in the Armington import function. Not surprisingly, the results indicate that Russia bears the highest income loss (about €3.4 billion) while the EU recovers part of its lost trade through expansion of exports to other markets. An ex‐post comparison between simulation results and observed trade data reveals the model predictions to be broadly accurate, thereby validating the robustness of the modelling approach.     

Trade Creation and Diversion Effects of Preferential Trade Associations on Agricultural and Food Trade

Agricultural market distortions remain a major focus of contention in world trade negotiations. Estimates of the effects of liberalising current agricultural trade restrictions indicate an approximately $385 billion increase in global welfare, with the disproportionate share of the benefit being enjoyed by developing countries. In response to difficulties in adopting agricultural trade reforms, individual groups of countries have formed multiple bilateral and regional preferential trade agreements (PTA) to enhance trade among members. Few sectoral analyses exist of the effects on agricultural and food product trade of PTAs. This research uses a gravity model to isolate the effects of various PTAs on both intra‐ and extra‐bloc agricultural and food product trade for three time periods: 1995, 2000 and 2004. Findings strongly support PTA benefits in terms of increased intra‐bloc trade in both sectors. The findings also generally support trade creation in agricultural products. PTA membership was also associated with food trade creation in most cases, although diversion was observed for several associations composed primarily of developing countries.     

The Role of Income in Trading-Differentiated Agri-Food Products: The Case of Canada, the United States, and Selected EU Countries

This study investigates the role of income in determining the agri‐food exports of a subset of EU countries, Canada, and the United States by estimating per capita bilateral trade flows for 42 individual products categorized into nine product sectors across 52 countries for the period 1990–2000. About 43% of the total observations of bilateral trade flows for the selected regions and products are zero. Therefore, the fixed‐effects Heckman Maximum Likelihood estimation procedure is used to account for the zero observations. The results show that, in general, the three regions (Canada, the EU countries, United States) face statistically significant and positive income elasticities from developing countries. However, only Canadian and United States’ exports of agri‐food products benefit from elastic income elasticities. Middle‐income developing countries are the growth market of the future as growth in their expenditures on agri‐food imports outpaces the growth in their per capita incomes. Homotheticity is consistently rejected for Canada and the EU and less often for the United States. Thus, income plays an important role in agri‐food trade; however, further investigation is needed to better understand the forces that generate rather widely divergent results across countries and products. Dans la présente étude, nous avons examiné le rôle du revenu sur les exportations agroalimentaires de certains pays de l’Union européenne (UE), du Canada et des États‐Unis en estimant les échanges commerciaux bilatéraux par habitant de 42 produits issus de neuf secteurs de production dans 52 pays, pour la période allant de 1990 à 2000. Environ 43 p. 100 des observations d’échanges commerciaux bilatéraux pour les pays et les produits choisis étaient égales à zéro. Nous avons utilisé la méthode d’estimation du maximum de vraisemblance d’Heckman pour tenir compte des échanges nuls. Les résultats ont montré que, en règle générale, les trois zones (Canada, pays de l’UE et États‐Unis) sont confrontées aux élasticités?revenu positives et statistiquement significatives des pays en développement. Toutefois, seules les exportations canadiennes et étatsuniennes de produits agroalimentaires bénéficient d’une élasticité‐revenu élevée. Les pays en développement à revenu intermédiaire sont les marchés en expansion de l’avenir puisque la croissance de leurs importations agroalimentaires dépasse la croissance de leur revenu par habitant. L’homothéticité est systématiquement rejetée dans le cas du Canada et l’UE, et l’est moins souvent dans le cas des États‐Unis. Le revenu joue un rôle important dans le commerce agroalimentaire; toutefois, il faudrait effectuer des recherches supplémentaires afin de mieux comprendre les forces qui génèrent des résultats fort divergents entre les pays et les produits.     

China's agriculture,smallholders and trade: driven by the livestock revolution?*

China's sustained rapid economic growth and development has contributed to the surge in consumption and production of livestock in that country  termed the livestock revolution. Consumption trends are first reviewed, and changes in food consumption patterns include a marked shift away from grains and towards meats and dairy products. A question is to what extent this rapid increase in demand for livestock products is reflected in China's agri‐food trade statistics? While her agri‐food imports have dramatically increased since China's accession to the WTO, livestock products have not made a noticeable contribution, although the import of certain animal feedstuffs has. This implies China's continuing self‐sufficiency in most livestock products. The paper next considers developments in China's livestock farming sector and policies that have been contributing to these supply‐side developments. The paper concludes with an examination of issues that may be important to the future development of China's, and the world's, livestock situation;  this includes future demand developments, and the question of whether future demand growth in China might be met with local production, imports of final product, and/or imports of feedstuffs.     

Impacts of Australia’s free trade agreements on trade in agricultural products: an aggregative and disaggregative analysis

The importance of free trade agreements (FTAs) has been increasing as such agreements help reduce barriers to trade. This paper estimates the agricultural trade creation and export diversion effects of Australia’s free trade agreements (FTAs) at the aggregate and disaggregate levels, using the Poisson pseudo‐maximum‐likelihood (PPML) estimator. It includes 24 of Australia’s major trading partner countries comprising FTA and non‐FTA members and covers 22 years from 1996 to 2017. The heteroscedasticity robust regression error specification test (RESET) confirms the relevance of PPML over the Ordinary Least Square (OLS) estimator. Results showed that China–Australia, Korea–Australia, Australia–USA and Japan–Australia have larger trade creation effects in the agricultural sector. At the commodity level, variation in trade creation effects is estimated from the different trade agreements. Among the selected commodities, the larger effects were generated in trade in sugar and wine by the implementation of the majority of the trade agreements. Overall, the trade creation was greater than the export diversion of the FTAs. The findings of the study have implications for Australia’s future trade agreements.     

Do stronger intellectual property rights induce more agricultural trade?: a dynamic panel data model applied to seed trade

Do stronger intellectual property rights (IPRs) induce more agricultural trade? Based on panel data for 60 countries during 1990–2000 and using a dynamic panel data model, this article assesses whether and how national differences in IPRs affect the trade flow of planting seeds imports from the United States. The empirical results show that whether or not a country adheres to IPRs agreements has no discernible impact on planting seeds that are imported from the United States, implying that the strengthening of IPRs seems not to induce more agricultural trade. This result sheds some light on the debate in the theoretical literature on the importance of IPRs and trade.     

Economic Integration Reconsidered*

Economic integration refers to the various types of agreements coordinating economic policies and regulations between countries. There has been a rapid increase in the number of regional trade agreements (RTAs) since the mid 1990s and appetite for deep integration was reflected in the growth of European Union (EU) membership. However, the rejection of the Trans‐Pacific Partnership by the United States and the United Kingdom's rejection of the EU common market are symptomatic of a new anti‐integration wave. In this address, I discuss the roots of anti‐integration sentiments and I review the economics of integration, the measurement and sources of the gains from trade, and trade policy. Canada has much to gain from securing RTAs with large countries like the United States, the EU, and, eventually, with Japan and China. The North American Free Trade Agreement made winners and losers, but long‐run gains more than made up for short‐run pains. Thus, there is no economic justification for maintaining interprovincial and international trade barriers in some of Canada's agri‐food industries. L'intégration économique implique la coordination de politiques économiques et règlementations par le biais d'accords régionaux (ARs). Le nombre d'ARs a augmenté rapidement depuis le milieu des années 90 et la croissance du nombre de membres de l'Union Européenne (UE) reflète une tendance d'intégration profonde. Toutefois, le rejet du partenariat transpacifique par les États‐Unis et la sortie du Royaume‐Uni du marché commun européen sont le reflet d'une nouvelle vague anti‐intégration. Mon texte discute des facteurs qui ont contribué à cette vague et passe en revue les analyses sur l'intégration économique, la mesure et les sources des gains du commerce et les politiques commerciales. Une petite écononmie ouverte comme celle du Canada a beaucoup à gagner d'ARs avec de gros pays comme les États‐Unis, l'UE, et éventuellement, le Japon et la Chine. L'accord de libre échange nord‐américain a fait des gagnants et des perdants, mais les gains à long terme ont plus que compensé pour les pertes de court terme. Par conséquent, il n'y a pas d'argument économique justifiant le maintien de barrières aux commerces interprovincial et international dans certaines industries agroalimentaires.     

Brexit Impacts on Irish Agri‐food Exports to the UK

The Irish agri‐food sector is particularly exposed to the consequences of the UK's departure from the EU given that the UK is the destination for 37 per cent of its exports. This article discusses the main channels whereby Brexit may impact this trade. They include the impact of possible further depreciation of sterling and the loss of the protected market status that Irish exporters currently enjoy on their sales on the UK market. There is the possibility that tariffs may be imposed on trade flows between the two countries as well as higher trade costs when either exporting to or importing from the UK. There would also be potential disruption of supply chains on the island of Ireland and the particular difficulties of policing the land border between the North and South of Ireland. Solutions to address some of these problems are available, but will take time to negotiate. Even if the worst outcomes can be avoided, Brexit is likely to have significant structural implications for Irish agriculture. The erosion of the value of privileged access to the UK market will require structural adjustments both in terms of market diversification as well as farm‐level production.