Intra-Industry Trade, Multilateral Trade Integration, and Invasive Species Risk
Anh Tu, John C. Beghin
December 2006 [06-WP 439]
Tu, A. and J.C. Beghin. 2006. "Intra-Industry Trade, Multilateral Trade Integration, and Invasive Species Risk." Working paper 06-WP 439. Center for Agricultural and Rural Development, Iowa State University.
We analyze the linkage between protectionism and invasive species (IS) hazard in the context of two-way trade and multilateral trade integration, two major features of real-world agricultural trade. Multilateral integration includes the joint reduction of tariffs and trade costs among trading partners. Multilateral trade integration is more likely to increase damages from IS than predicted by unilateral trade opening under the classic Heckscher-Ohlin-Samuelson (HOS) framework because domestic production (the base susceptible to damages) is likely to increase with expanding export markets. A country integrating its trade with a partner characterized by relatively higher tariff and trade costs is also more likely to experience increased IS damages via expanded domestic production for the same reason. We illustrate our analytical results with a stylized model of the world wheat market.
Keywords: exotic pest, intra-industry trade, invasive species, liberalization, trade cost, trade integration, trade protection, two-way trade.