Vox column on falling trade costsTuesday 16 Oct 2012
Trade barriers such as transportation costs and tariffs reduce international trade. But when these trade barriers come down, do they increase international trade equally among countries? Dennis Novy, in this Vox Column, presents evidence from OECD countries that trade costs have a differential impact depending on the trade intensity of the countries involved. When they already trade a lot, country pairs hardly benefit. But bilateral trade grows faster when the initial trade relationship was thin.