tariff liberalization since 1980. This scenario covers the impact of preferential, unilateral, and multilateral
tariff liberalization. Scenario 3 gives the impact of transportation cost declines since 1980. Scenario 5
gives the impact of NTB liberalization. Table 21 summarizes these scenarios as gauged by the partial and
general equilibrium analyses. In table 21, we calculate the impact of income growth and unidentified
technologies on trade as the residual left after the results from the three scenarios are subtracted from US
trade growth between 1980 and 2004.19
In both the partial equilibrium analysis (goods only) and the general equilibrium analysis
(goods and services) we estimate that roughly 25 percent of US two-way trade growth is due to policy
liberalization (figures 1 and 2). Tariff and NTB liberalization contribute roughly equal shares to the 25
percent. A much smaller share of two-way trade growth, roughly 3 percent, is due to transportation cost
declines. Income growth and unidentified technologies explain the rest, anywhere from 72 to 74 percent.
In terms of one-way trade growth, policy liberalization plays a much larger role (35 to 40 percent)
in export growth than in import growth (roughly 20 percent). This is to be expected, since US partner
trade barriers have descended from higher levels since 1980 than US barriers. The impact of the decline
in transportation costs contributed about 3 percent for both US export and import growth. Calculated
as a residual, income growth and unidentified technologies have played a much larger role in US import
growth than in US export growth.
Baier and Bergstrand (2001) found similar results when they examined the sources of global trade
growth between the late 1950s and late 1980s. Using a gravity model of trade—another widely used
empirical model—the authors found that roughly 25 percent of world trade growth is due to lower
trade barriers, 8 percent is due to lower transportation costs, and the remaining 67 percent is due to
income growth. The larger role for transportation in Baier and Bergstrand’s (2001) analysis than in the
analyses presented here can largely be explained by the movement of transportation costs over the two
data periods. Baier and Bergstrand (2001) estimate that, in the late 1950s, the average tariff equivalent of
transportation costs was 8.2 percent, while in the late 1980s it fell to 4.3 percent. We calculate a smaller
change for the later period, with an average tariff equivalent of transportation costs for imports by the
United States in the early 1980s of roughly 4.3 percent, compared with roughly 3.2 percent in 2003.
CONCLUSION
Using two different methods, we conclude that roughly 25 percent of US merchandise trade growth since
1980 is due to policy liberalization. This result is strikingly similar to Baier and Bergstrand (2001), who
attributed policy liberalization with 25 percent of world trade growth between 1960 and 1990. The other
19. Earlier, in the partial equilibrium discussion, we took a different approach. We analyzed the role of GDP growth on
trade directly, using econometrically estimated income elasticities of trade. Here we use the residual approach for the
partial equilibrium analysis to conform to the approach we must take using the general equilibrium results. However,
using the income elasticity approach for the partial equilibrium analysis would result in roughly equal numbers.
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