Explaining national border effects in the QUAD food trade

Using a ‘structural’ gravity-like model, this paper first provides estimates of bilateral ‘border effects’ in food trade among the Quad countries (the US, Canada, Japan and the EU) at the ISIC 4-digit. It then investigates the underlying reasons of border effect, assessing the role played by policy barriers (tariffs and NTBs) with respect to barriers unrelated to trade policy, such as information and cultural proximity. In contrast with several previous findings, our results show that tariffs and NTBs are part of the story in explaining national border effects. Interestingly, in both the EU and the US NTBs significantly dominate the trade reduction effect induced by tariffs. However, the results show that elements linked to information related costs, and ‘home bias’ in preference, matter a great deal in explaining the magnitude of border effects. These findings have implications for the economic and welfare significance of national borders.