Tariff Changes and the Margins of Trade: A Case Study of US Agri-Food Imports

Recent contributions to the theoretical and empirical trade literature underscore the channels by which exporting occurs, either through increasing the intensity of existing trade flows or by establishing new trade relationships. However, less is known about the extent to which trade liberalization influences the likelihood of trade along these channels. In this paper we develop a multinomial logit model to assess how tariff changes on agri-food imports affect the probability that country-commodity pairs will enter, exit, or maintain a presence in the U.S. agri-food import market. Using detailed bilateral tariff and trade data between 1996 and 2006, the results suggest that while U.S. tariff reductions provide a small but statistically significant increase on the probability of maintaining existing trade relationships, the magnitude of the impact on new exports is twice as large as the impact on continuously traded goods and the likelihood of disappearing products. The results have important policy implications regarding the channels by which imports change in conjunction with changes in U.S. agri-food import tariffs.