A Study on Factors Affecting U.S. Bilateral Trade with Her Major Trading Partners

Abstract

The objective of this study is to analyze factors affecting U.S. bilateral trade with her major trading partners, including exchange rate, GDP, economic structure, market openness, and free trade agreements. Six commodity groups included in this study are agriculture, low technology, mid-low technology, mid-high technology, high technology, and overall trade. This research employs Bayesian econometric procedure to solve cross-sectional heterogeneity problem in estimating the bilateral trade model with the U.S. major trading partners for six commodity groups.

Estimation results show that capital-labor ratio is more influential in U.S. bilateral trade with her major trading partners than exchange rate. In addition, U.S. trade is largely intra-industry trade except agricultural goods, which are based on resource endowments.