DOMESTIC TRADE AND TRANSPORTATION COSTS AS BARRIERS TO INTERNATIONAL-TRADE

Available evidence indicates that costs of non-traded services in domestic transportation, wholesaling, and retailing (domestic margins) are higher if a good is shipped in international trade than if it is shipped from domestic producers to domestic consumers. Consequently, domestic margins appear to act as natural barriers to trade in the same manner as international transport costs do. This paper presents estimates of the barriers that the domestic margins impose against U.S. imports and shows that they exceed the barriers imposed by tariffs and international transport costs combined.