Ryan Lee, assistant professor of economics, presented “The Effects of Trade Agreements on Trade Margins: Firm-Level Evidence from Colombia,” before 15 community members Tuesday at the Quay Davis Executive Board Room.
Lee opened his lecture by explaining that although his talk would touch on the topic of the effects of trade agreements on trade margins, it would deal with more about how the effects of the trade agreements are calculated on ATT software.
ATT is the “average treatment effect of the treated,” which basically means that they are the changes in outcomes that are attributable to the treatment. Treatments are any intervention intended to improve a community. Treatments in his lecture are trade agreements.
Lee defined trade as the generalized system of preferences, or GSP, in the United States, meaning that trade was easier depending on factors such as international relations and the prosperity of countries. In other words, circumstances such as being a poorer or a developing country meant some products could be exported without a tariff.
He gave the example of Argentina and its exports in 2012 and its loss of GSP eligibility because for many years they failed to pay a fine to U.S. companies after a trade dispute. This increased exporting tariffs because GSP has to be renewed every few years.
“It does make sense that (Colombia) trading with the U.S. should be better than trading with Iceland,” Lee said. “Iceland is far away, and they don’t make as much as Americans. The treatment effect just by looking at the U.S will be different than Iceland, not because the trade agreement has different effects, but because they are very different from the U.S. We don’t want what are the effects of trade agreements in the U.S., we want the results for what are the effects of trade agreements in general.”
Lee said the average between Iceland and U.S. exports is very skewed because it is much larger than Iceland which leads to more exports in trading naturally. This then leads to an inaccurate average since both countries produce such a stark difference in exports to begin with, that attempting to find an average between the two would mean only finding a number dead center between the two and not an average.
Lee gave the example of voting drop-off box locations to explain ATT and how the results of the voting may be skewed because of where specifically they are put. If there are more drop-off boxes, there will be more voting. However, if the drop boxes are located in less populated areas, the voting will only increase slightly.
He continued to explain that other factors, such as placing drop-off boxes in Claremont Village, would increase voting but that the population there is already more likely to vote than if the boxes were placed in other areas like Pomona. The results would be skewed more in favor of wealthier folks because although an equal amount of drop boxes are added in each location, there is already data that states that there is less voting per capita in less wealthy areas or with different demographics.
Lee said that the Bз equation he used in his research, a two period binary treatment estimator used to predict trade effects, had been used throughout history. He gave the example of when it was used in the 1990s to calculate changes in employment due to minimum wages between New Jersey and Pennsylvania.
Lee’s research confirmed that trade agreements do increase trade. No matter how small the effect of preferential tariff cuts seemed before, it was far larger than previously thought. Where before it was less than 1%, that number increased to 10% in export volume. Lee’s new method for calculating was more efficient by excluding outliers.
“I think it’s really important for us to have someone like Lee who can look at those data and all those implications, those data versus just seeing the bottom line of whatever we read,” Deborah Olson, professor of management, said.
Olson said that there is so much data and statistics, especially for someone not familiar with the mathematics of the implied results of the data involved that sometimes the bias in some of the research methodologies is undermined.
“The old ways aren’t necessarily working so you have to be willing to change,” Liyah Ferris, sophomore biology major, said. “It’s important to understand the statistics because it will be affecting our future.”
Jordan Ihrig, sophomore psychology major, said that he found preferential tariffs interesting and the idea that remaining at zero could actually cause an increase in exports.
Liliana Castañeda can be reached at firstname.lastname@example.org.
Liliana Castañeda, a senior communications major, is the Fall 2022 news editor of the Campus Times. She has previously served as editorial director, arts editor, copy editor and a staff writer.