Progress 09/01/08 to 08/31/09
Outputs
OUTPUTS: In this study, we have developed alternative empirical models of export shares and environmental risk factors. The models are used to evaluate the effects of endowment factors, prices, and environmental risk factors on vegetable exports and trade. The models are applied to state level agricultural export data and environmental risk data since 1973 through 2006. They are also used to determine the impact of NAFTA on the environmental risk factors and the impact of pollution factors, and pollution abatement costs on the state agricultural exports and trade. A system of structural equations of agricultural export shares and environmental risk index models were specified and estimated following Harrigan (1997), Antweiler et al. (2001), and (RATS 2008). The risk factors include state pesticide components in ground and surface water, the risk to human health from agricultural presides leaching into ground waters, the risk to human health from agricultural pesticides runoffs into surface water, the risk to fish life form exposure to pesticide leaching into ground waters, the risk to fish life from exposure to pesticides runoffs into surface waters. State level data on C02 and SO2 were collected and used as pollution indexes. Consistent with arguments in Carraro and Siniscalco (1992); and Copeland and Taylor (2003), the results support the hypothesis that states may lose a comparative advantage by stringent environmental regulations especially in pollution intensive industries. While the evidence suggests a positive NAFTA impact on the environment, the effect is not significant and varies by the environmental risk factor. A structural analysis of vegetable import from Mexico was conducted to determine trade creation and trade diversion of NAFTA in the vegetable export and trade. PARTICIPANTS: Dr. David Karemera as the Principal Investigator /Project Director oversees all project activities. He convened weekly meetings with Dr. Paul Munnicha and Kermit Rose, the computer programmer. During meetings we reviewed completed activities and made plan for new assignments. Mr. Kermit Rose is a computer programmer for the project. His vast experience as a programmer at Florida State University Computer Center has proved to be a valued asset for the project. His duties include using large scale databases, setting up data matrix, completing model estimation, and generating running computer outputs for the PI Students: Michelle Nelson is a Business Economics major worked on the project as a student research assistant. She collected data for the project and conducted literature searches for the project references Brittany Hardy is a Business Economics major worked on the project as a student research assistant. She collected data for the project and conducted literature searches for the project references. Collaborations a. Dr. Won Koo, Professor of Economics and Director of the Center of Agricultural and Trade Studies, CAPTS; at North Dakota State University. As a co-PI, he kindly visited South Carolina State University School of Business and held discussion with the PI on the execution of the project. We explored and discussed methodology to analyze the impact of NAFTA on the environment. Dr. Koo is participating in the design and analysis of results of the impact of NAFTA on the environment and environmental factors on vegetable trade flow. b. Dr. Dave Weatherspoon is Professor of agribusiness at Michigan State University. He is a CO-PI and participated at meetings held at SC State College of Business. He is responsible for the evaluation of trade creation and trade version effects attributable to NAFTA on the vegetable trade. Presentations and Workshops Dr. Karemera presented a research paper at the Hawaii Annual conference on Global Business in May 2009. In March 2009, Dr. Karemera led a delegation to Burundi to conduct to a Needs Assent for a partership between SC State and Ngozi University, in Burundi to strengthen education standards and rural development. In December 2009, Dr. Karemera taught 2 agribusiness courses at Ngozi University to spearhead a new program in Agribusiness at this University. The program seeks so introduce new vegetable varieties in Burundi. TARGET AUDIENCES: The topic of trade and environment is a hotly debated issue. The main audiences include professionals interested in the agricultural trade and environment studies. The results might be of interest to trade and policy officials and may prove useful for future trade negotiations related to sectorial trade studies, the environment, and free trade issues. We will communicate the results by continued publications of research results in professional journals, brochures, bulletins, academic and professional meetings; and seminars. PROJECT MODIFICATIONS: We finally are getting data information on Canadian pollution factors by province. We have problems getting environmental data for Mexico provinces.
Impacts
A system of structural equations of agricultural export shares and environmental risk response models were specified and estimated following Harrigan (1997) and Antweiler et al. (2001) and used to address the causal relationship between trade and the environment. The findings suggest that states may lose a comparative advantage by stringent environmental regulations especially in pollution intensive industries. Most estimated elasticity values are less than 1.0 in absolute values and suggest that the export shares are not sensitive to changes in the environmental risk factors. However pollutions indexes such C02 and pesticides are sensitive to change in crop prices but they are neither sensitive to changes in gross domestic product from the farm sector nor to per capita gross domestic product. As expected, the increases in pollution abatement costs are associated with reduced amount of pollution and increases in exports. The estimated vegetable import demand from Mexico suggests that trade flows are insensitive to changes in both per capita income and prices. Preliminary results reveal that the amount of trade creation is relatively greater than the amount of trade diversion for most vegetables included in the analysis.
Publications
- David Karemera (with John Cole), Fractional Integration, Unit Root, and Market Efficiency Tests in Emerging Exchange Rate Markets, accepted for publication in the Review of Pacific Basin Financial Markets and Policies, May 2009.
- David Karemera, The Impact of Exchange Rate Volatility on Vegetable Trade Flows, Applied Economics, Vol. P1-10, 2009 David Karemera, (Paul Rienstra-Munnicha and Jo Onyeocha), Free Trade Effects of NAFTA and the Impact of Exchange Rate Volatility on Vegetable & Fruit Trade Flows, forthcoming in the Journal of Economics Integration, vol.24 no1 pp:116-134, 2009.
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Progress 09/01/07 to 08/31/08
Outputs
OUTPUTS: A modified gravity model has been used to identify determinants of specific vegetable trade flows among the Organization for Economic Cooperation (OECD) countries. The study demonstrates that gravity models can be effectively parameterized to identify the determinants of single commodity trade flows and perform comparative statics. Based on the data from 1996 to 2002, we found that the determinants of aggregate trade flows apply to single commodity flows. Per capita income of countries and per capita production are seen as significant factors enhancing vegetables flows. The importers' per capita production elasticities seem to reflect the importance of the items in the importing country's import composition while the exporter's population elasticities suggest variations based on domestic consumption patterns. The results show that, while the exchange rate uncertainty significantly reduces trade in the majority of commodity flows, there is evidence that both short-term and long-term volatility have positive effect on trade flows of specific commodities. Thus, the impact of exchange rate volatility may not be uniform but rather appears to be commodity specific. This finding is contrary to the findings of Cho et al. (2002) in sectorial trade studies. It is, however, consistent with DeGrauwe and Skudelny (2000) and Bacchetta and van Wincoop (2000) who argued that not only exchange rate uncertainty may vary across sectors, but it also may vary by commodity. This study has also developed alternative empirical models of export shares to evaluate the effects of endowment factors, prices, and environmental risk factors on the exports. The models are applied to state level agricultural export data since 1973 - 2006. They are used to determine the impact of NAFTA on the environmental risk factors and the impacts of pollution control on the state agricultural exports and free trade. A system of structural equations of agricultural export shares and environmental risk response models were specified and estimated following Harrigan (1997) and Antweiler et al. (2001) and estimated by use of the econometric technique of system estimation by three stages least squares and nonlinear system estimation. The risk factors are state pesticide components in ground and surface water, the risk to human health from agricultural presides leaching into ground waters, the risk to human health from agricultural pesticides runoffs into surface water, the risk to fish exposure to pesticide leaching into ground waters, the risk to fish exposure to pesticides runoffs into surface waters. While the evidence suggests a positive NAFTA impact on the environment, the effect is not significant and varies by the environmental risk factor. Factor endowments, output prices and technological changes are found to be major determinants of export shares. Most estimated elasticities are less than 1.0 in absolute values. Specifically, the environment risk elasticities are less than 1.0 suggesting the export shares are not sensitive to changes in the environmental risk factors. Work on this subject is continuing with longer period of study and application of new estimation methodologies. PARTICIPANTS: a. Dr. David Karemera as the Principal Investigator /Project Director oversees all project activities. He convenes weekly meetings with Dr. Paul Munnicha and Kermit Rose, the computer programmer. During meetings we reviewed completed activates and make plan for new assignments. b. Dr. Paul Rienstra-Munnicha is an assistant professor at South Carolina state University School of Business and worked on the project. Dr. Rienstra-Munnicha is contributing to modeling of export shares and environmental response variables. c. Mr. Kermit Rose is a computer programmer for the project. His vast experience as a programmer at Florida State University Computer Center has proved to be a valued asset for the project. His duties include using large scale databases, setting up data matrix, completing model estimation, and generating running computer outputs for the PI PARTNERSHIP AND COLLABORATIONS a. Dr. Won Koo, Professor of Economics and Director of the Center of Agricultural and Trade Studies, CAPTS; at North Dakota State University. He kindly visited South Carolina State University School of Business and held discussion with the PI on the execution of the projects. We explored and discussed methodology to analyze the impact of NAFTA on the environment. b. Dr. Dave Weatherspoon is Professor of agribusiness from Michigan State University. He participated at meeting held at SCSU College of Business. We explored and discussed methodology to analyze the impact of NAFTA on the environment. I organized several project meetings involving Dr. Koo of North Dakota State University and Dr. Weatherspoon of Michigan State University, Dr. Paul Rienstra-Munnicha of SCSU in the College of Business and Applied Professional Sciences at SCSU on October 16-19 2008. We were able to discus and specify model to address impacts of NAFTA on the environment in the three NAFTA countries Students: Amber Gauthier, Accounting Major worked as a research assistant for the project. She performed data collection activities and collection of reference materials. Leonard Coaxum worked on the project. He helped in data collection and management database used in the project. Michelle Nelson is a Business Economics major worked on the project as a student research assistant. She collected data for the project and conducted literature searches for the project references. Brittany Hardy is a Business Economics major worked on the project as a student research assistant. She collected data for the project and conducted literature searches for the project references. Amy Chen is providing editorial and typing assistance. Dr. Karemera attended a conference in August 2008 in Maryland. The conference was organized by the USDA- CSREES. Dr. Karemera attended the ARD conference in Memphis in June 2008. Dr. Karemera presented a research paper at the Hawaii Annual conference on Global Business in May 2008. Dr. Karemera attended a meeting of the SER group to represent South Carolina State in the international trade study group and present a state report on research accomplishments. TARGET AUDIENCES: The main audiences include professionals interested in the agricultural trade research and studies. The results might be of interest to trade and policy officials and may prove useful for future trade negotiations related to sectorial trade issues and the environment and free trade issues. We will communicate results by continued publications of results in professional journals, brochures, bulletins and academic and professional meetings. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.
Impacts
The study has demonstrated that aggregate gravity models can be effectively parameterized to identify the determinants of single commodity trade flows and perform comparative statics. Using data from 1996 to 2002, we found that the determinants of aggregate trade flows apply to single commodity flows. Per capita income and per capita production in trading countries are generally found to be major determinants of the vegetable trade flows in OECD countries. Traditional gravitational factors, free trade variables are significant determinants of the trade flows. Our results suggest that vegetable trade flows are insensitive to changes in both per capita income and production in the exporting and importing countries. However, the population elasticities reveal that the flows are generally sensitive to population changes in exporting countries. While most free trade variables enhance trade flows, the APEC variable seems to elucidate more trade creation then the NAFTA and EU counterparts. The amount of trade creation is relatively greater than the amount of trade diversion for most vegetables included in the analysis. A system of structural equations of agricultural export shares and environmental risk response models were estimated following Harrigan (1997) and Antweiler et al. (2001) and used to address the causal relationship between trade and the environment. Preliminary findings support the hypothesis that states may lose a comparative advantage by stringent environmental regulations especially in pollution intensive industries. Most elasticity values are less than 1.0 in absolute values and suggest that the export shares are not sensitive to changes in the environmental risk factors. The increased free trade under NAFTA did not result in environmental deterioration as shown by signs and significance of risk factors elasticities. Some early estimation results suggest that free trade may be beneficial to the environment.
Publications
- Karemera, D., Managi, S., Reuben, L., and Spann, O. (2009). The Impact of Exchange Rate Volatility on Vegetable Trade Flows, forthcoming in Applied Economics,
- Karemera, D., Rienstra-Munnicha, P., and Onyeocha, J. (2009). Free Trade Effects of NAFTA and the Impact of Exchange Rate Volatility on Vegetable & Fruit Trade Flows, forthcoming the Journal of Economics Integration.
- Karemera, D., Sykes, V., and Reuben, L. (2007). Trade Creation and Trade Diversion in Vegetable and Fruit Trade, World Review of Science, Technology and Sustainable Development, 3 (2):142-158.
- Karemera, D., and Kim, B. (2006). Assessing the Forecasting Accuracy of Alternative Models of Nominal Exchange Rates: The Case of Long Memory, The Journal of Forecasting, 25: 369-380,
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Progress 09/01/06 to 08/31/07
Outputs
Since the North American Free Trade Agreement (NAFTA) was signed in January 1994, commodity trade flows have steadily increased across US, Canada, and Mexico. According to the international trade theory, commodity flows are generally determined on the basis of comparative advantage in a free trade system. The flows are affected by natural and artificial factors affecting the commodities in the origin country and the destination country. However, trade flows might be not only enhanced or distorted by government intervention measures but also exchange rate changes. Early results suggest that, in a commodity specific gravity model for selected vegetables, the trade flows are significantly enhanced by the income of trading countries while they are negatively affected by distance among trade partners. The impact of exchange rate volatility may not be uniform but rather appears to be commodity specific. Furthermore, per capita production elasticities of different vegetable
trade flows seem to depend upon the importance of the items in the importing country's import composition. Exporter's population elasticities suggest variations based on domestic consumption patterns. While NAFTA is a seen a major factor enhancing vegetable trade among the NAFTA countries, in the majority of the commodities analyzed, the APEC trade creation is greater the NAFTA and EU trade creation, respectively. Contrary to previous findings, at least in the vegetable categories, the impact of exchange rate volatility is not uniform across crops but varies by commodity. The specification of the bilateral relationships among the NAFTA countries is complete while computation of the amounts of import trade creation and export trade diversion is still ongoing. Modeling the impacts of NAFTA on the environment and environmental impacts on agricultural trade flows is progressing. We have established relationships between pollution indexes in an exporting NAFTA country and a set of
pollution determinants factors including pollution control and abatement costs and a set of regressors with additional export determinant factors included. Data collection for final system specification and econometric estimation issues are still being worked out. The estimation of productivity changes and efficiency changes arising from NAFTA in the agricultural production in the three countries is also continuing. We want to estimate and evaluate the technological improvement and efficiency gains under free trade and NAFTA.
Impacts
Trade flows of commodities generally are determined on the basis of the principle of comparative advantage in a free trade system. Since trade flows may be enhanced or distorted by various government interventions, determinants of vegetable exports, trade flows, and their economic effects are not clearly known. Using a gravity model of trade and OECD level data, this study evaluates factors affecting vegetable trade flows to determine the effects of trade enhancing and resisting factors in the vegetable trade flows. In addition to traditional gravitational factors, free trade variables are significant determinants of the trade flows. Our results suggest that vegetable trade flows are insensitive to both per capita income and production in the exporting and importing countries. However, the population elasticities reveal that the flows are generally sensitive to population changes in exporting countries. While most free trade variables enhance trade flows, the APEC
variable seems to elucidate more trade creation than the NAFTA and EU counterparts. The amount of trade creation is relatively greater than the amount of trade diversion for most vegetables included in the analysis.
Publications
- Karemera, D.; M. Managi; and L. Reuben. 2007. The Impact of Exchange Rate Volatility on Vegetable Trade is in second editorial review for the journal Applied Economics.
- Spann, O.; D. Karemera; P. Sweat; and W. Koo. 2007. The Effects of Mexican Agricultural Exports on Selected US Commodity prices, forthcoming World Review of Science, Technology and Sustainable Development.
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