ASSESSING THE IMPACT OF LEBANON’S TRADE

AGREEMENTS ON TERMS OF TRADE AND

WELFARE

TECHNICAL REPORT
FINAL DRAFT

Jad Chaaban and Alban Thomas ∗

November 2003

UNITED NATIONS DEVELOPMENT PROGRAMME

∗
ST International Consultants, UNDP Lebanon Project. Authors are respectively Doctoral
Researcher and Director of Research at INRA, University of Toulouse, France.

1
Table of contents

Table of contents ........................................................................................................................2

Executive Non-Technical Summary...........................................................................................3
Abstract.......................................................................................................................................5
Acknowledgments ......................................................................................................................6
1. Introduction ...................................................................................................................7
2. Economic Analysis of Preferential Trade Agreements ..................................................8
2.1 Preferential Trade Agreements (PTAs): Some definitions.....................................8
2.2 The debate over PTAs ............................................................................................9
2.3 Theoretical assessment of PTAs...........................................................................10
2.4 Empirical evaluation of the effects of PTAs ........................................................11
3. PTAs and Lebanon’s trade policy ............................................................................13
3.1 Lebanon’s trade policy: an overview...................................................................13
3.2 A regional comparison of trade patterns...............................................................14
3.3 Measuring and positioning Lebanon’s protectionism ..........................................22
3.4 Trade analysis: Structural change and comparative advantage ............................31
3.5 Lebanon’s trade agreements: Past, present and future .........................................36
4. An empirical evaluation of PTAs .................................................................................41
4.1 The model and the estimation procedure..............................................................41
4.2 The data ................................................................................................................46
4.3 An empirical assessment of the Preferential Trade Agreement with the EU .......62
4.4 Country specific analysis: The PTA with Egypt ..................................................73
4.5 A structural model of bilateral trade.....................................................................79
5. Conclusion ....................................................................................................................88
6. Bibliography .................................................................................................................90
APPENDICES ..........................................................................................................................93
APPENDIX 1: LEBANON’S INTERNATIONAL TRADE AGREEMENTS ...................93
APPENDIX 2: TRADE INDEXES ....................................................................................100
APPENDIX 3: IMPORT SHARE ESTIMATION RESULTS ..........................................101
APPENDIX 4. BILATERAL TRADE WITH EGYPT - ESTIMATION RESULTS .......123

2
Executive Non-Technical Summary
The analysis of Preferential Trade Agreements (PTAs) - which are defined as bilateral or
multilateral agreements which lower tariffs among the member countries while maintaining
member protection against non-member trading partners – has taken recently a central role
both for trade economists and policy makers. This is mostly due to an important debate
concerning these agreements : PTAs’ proponents argue that their proliferation will lead like a
domino mechanism to worldwide free trade in goods and services ; while multilateralists
argue that PTAs fragment the world trading systems and are harmful to further trade
liberalization on a global level. The importance of PTAs is particularly relevant for
developing countries, as there exists a belief that targeted decreases in tariffs within free trade
agreements can lead to trade creation, boosting exports and therefore contributing to a
country’s economic growth.

In this study, we evaluate the structure and the effect of PTAs by looking at the specific case
of a developing country, Lebanon. This approach has the advantage of allowing a more
detailed examination of the consequences for a developing country to sign PTAs with trading
partners, especially that the analysis in this paper is mostly based on highly disagregated data
on trade flows which was gratefully provided by the Lebanese Customs Administration.

This report begins by an overview of Lebanon’s trade policy, with a particular emphasis on its
bilateral and multilateral trade agreements and their contribution to increased openness and
growth in the Lebanese economy. It is noticed that the Lebanese Government was (and still
is) particularly active in the post-war years in articulating and implementing its trade policy,
with major recent achievements being the acceleration of the WTO accession process and the
signature of the Association Agreement with the European Union.

Empirical evidence is then examined in order to better position Lebanon’s trade patterns with
respect to other countries. A first observation is the fact that the Middle East region still
occupies a modest place in the world’s trade flows, with oil products as main exports and a
significant trade deficit in manufactured products. Within this context, the Lebanese economy
had performed rather well, with exports increasing by two-digit percentages in the last few
years, thus reducing a trade deficit that remains one of the highest in the region. Given this,
Lebanon’s trade patterns are very much similar to regional and Arab countries, especially that
most North African Arab countries share with Lebanon the fact of having the EU as the main
trading partner. Commodity trade structure comparison shows also how Lebanon is facing
tough competition from Arab and other regional countries, who compete to export similar
products and import similar product categories.

Having described and evaluated the somewhat competitive environment the Lebanese
economy is operating in, we next move to study Lebanon’s protectionism by evaluating tariff
and non-tariff barriers. Our study shows that tariffs witnessed significant decreases in the last
few years, with tariffs on agricultural products remaining higher than those on manufactures.
It is interesting to note here that Lebanon applies one of the lowest tariffs on manufacturing
products on a worldwide level, and this clearly shows the Lebanese Government’s policy
towards increased liberalization. Non-tariff barriers however still remain quite high,
especially when compared to those in other developing countries.

3
The central part of this study is then concerned with evaluating Lebanon’s PTAs. First we
begin with a descriptive analysis, exploring trade patterns under free trade agreements in the
last few years and conducting a detailed category-based comparative assessment between the
agreements that Lebanon engaged in with Syria and Egypt. We find that these two bilateral
agreements led to trade creation (in the form of increased imports) at lower import prices,
which is beneficial for local Lebanese consumers. Little trade diversion was observed, and we
found that Lebanon’s terms of trade increased within the agreement with Syria and decreased
within the one with Egypt.

Second, a detailed empirical study is conducted, using original econometric estimation

techniques to evaluate and simulate some of Lebanon’s PTAs. The welfare consequences
following a PTA (trade creation and/or diversion) are evaluated within an import setting,
where a beneficial PTA would involve higher imported quantities at lower import prices. The
first model we estimate is a source-differentiated flexible import demand model, which allows
the evaluation of the changes in import prices and quantities after a PTA from the following 4
sources: the European Union (EU), Arab and Regional countries (AR), North America and
South America (AM) and the Rest of the World (ROW). The estimated import demand model
allowed looking at changes in import patterns on the HS1 product code level. Import own and
cross price elasticities were also computed for products originating in the above 4 defined
blocks. Own-price elasticities were found to be large in general, and cross-price elasticities
showed. For a majority of commodities, the estimated cross-price elasticities were higher
between EU/ROW, AR/ROW and AM/ROW than for EU/AR, AR/ROW and EU/AM.

The above estimated demand model allowed conducting simulation experiments on the
impact of the Lebanon-EU PTA (the Association Agreement) on trade patterns. The trends
depicted by these simulations were clearly in favor of an overall increase in the share of
European imported products, which are mainly focused on high-value added products
(imports of agricultural and food products from the EU decreased in our simulations). As for
the other competing blocks, their expected import shares following the Lebanon-EU
agreement were either an increase or a decrease depending on commodities. The importance
(and the novelty) of this study and its subsequent simulations relies on the fact that our
estimated demand system allowed the evaluation of trade creation and trade diversion
following a PTA on a commodity level, and our results show that a PTA could be beneficial
or not depending on the product category.

Another PTA is also evaluated econometrically, namely the bilateral free trade agreement
between Lebanon and Egypt. The estimation of a complete commodity-based import demand
system allowed examining the impact of the agreement with Egypt on Lebanese import
prices. We found that in 13 commodity groups out of 19 the implementation of the PTA has
had a significant effect since 1999 in terms of own-price elasticity for Egyptian imports. The
PTA with Egypt also had mitigated effects on other country blocks depending on the sections.

This study concludes with the estimation of a structural model of bilateral trade, were we
augment the import demand analysis with a formal treatment of the supply side (regional
partner exports). We apply this analysis to the Iron and Steel import category, imported from
Egypt, the European Union (EU) and North America and South America (AM). The structural
trade model estimated helps, for the first time to our knowledge, to explain simultaneously
export and import patterns following PTAs, and to better evaluate supply-side behavior of
exporting firms within these agreements.

4
Abstract

This study empirically evaluates the effects of Preferential Trade Agreements (PTAs) on the
terms of trade and welfare of Lebanon. To this end, the report takes advantage of an
exceptional, highly disagregated, trade data set on Lebanese import and export transactions
for 1997-2002. Beginning with an overall competitive positioning assessment of the country’s
trade policy in light of various free trade agreements, the study then proceeds to estimate a
flexible import demand system (the Source Differentiated AIDS model) on Lebanese import
categories, allowing us to compute own and cross (source differentiated) import demand
elasticities. Results show that import price and quantity movements following a PTA, both for
partner and non-partner country blocks, depend on the commodity level. This study is
therefore the first to show that it is possible empirically to disentangle the trade creation/trade
diversion effects of a PTA on a product category level. Various simulations of the Lebanon-
EU PTA are also conducted, along with an estimation of a system of demand equation on
Egyptian imports, in order to evaluate the impact of the PTA between Lebanon and Egypt.
The last part of this analysis is concerned with estimating a structural Conjectural Variation
econometric model on a particular commodity, Iron and Steel imports, where it is shown that
is it possible, for the first time to our knowledge, to explain simultaneously export and import
patterns following PTAs, and to better evaluate supply-side behavior of exporting firms
within these agreements.

Keywords: trade policy, preferential trade agreements, tariffs, non tariff barriers, welfare,
Lebanon, import demand elasticities, AIDS model, structural econometrics

Journal of Economic Literature classifications: F13, F14, F15, F17, D4, D12

5
Acknowledgments

We would like to thank the Lebanese Ministry of Economy and Trade and the UNDP for their
support in the undertaking of this project. We are particularly indebted to Dr. Marwan
Hamadeh, Dr. Fadi Makki and Dr. Joey Ghaleb for their great support. We are also
particularly grateful to Dr. Basil Fuleihan for his continuous encouragement, and to Mazen
Hanna, Hazar Caracalla and Nada Sweidan for providing us with valuable information and
key documents. Academics and industry representatives also provided great comments and
suggestions at a round table organized by the Ministry of Economy. We would also like to
thank the Lebanese Customs Administration, and especially Selim Balaa and Hassan Hneine,
for providing us with the exceptional data set and for their great help and insightful
information. This work also benefited from very helpful comments of Cpt. Hassan Chaaban at
the Lebanese Ministry of Transport. Our warm regards also extend to Randa Abou Al-Hosn,
Michel Khawam and the UNDP staff in Lebanon for their great organization of this project.
The views expressed in this document and all remaining errors are solely those of the authors.

6
1. Introduction

The analysis of Preferential Trade Agreements (PTAs) - which are defined as bilateral or
multilateral agreements which lower tariffs among the member countries while maintaining
member protection against non-member trading partners – has taken recently a central role
both for trade economists and policy makers. This is mostly due to an important debate
concerning these agreements : PTAs’ proponents argue that their proliferation will lead like a
domino mechanism to worldwide free trade in goods and services ; while multilateralists
argue that PTAs fragment the world trading systems and are harmful to further trade
liberalization on a global level. The importance of PTAs is particularly relevant for
developing countries, as there exists a belief that targeted decreases in tariffs within free trade
agreements can lead to trade creation, boosting exports and therefore contributing to a
country’s economic growth.

In this study, we evaluate the structure and the effect of PTAs by looking at the specific case
of a developing country, Lebanon. This approach has the advantage of allowing a more
detailed examination of the consequences for a developing country to sign PTAs with trading
partners, especially that the analysis in this paper is mostly based on highly disagregated data
on trade flows which was gratefully provided by the Lebanese Customs Administration.

This report aims to provide a comprehensive approach to evaluate trade policies, and
especially those related to trade liberalization. The report therefore contains a first part which
summarizes Lebanon’s trade policy and positions its trade patterns relative to other countries.
Lebanon’s protectionism is also evaluated, by looking at tariff and non-tariff barriers, and
then an exploration of trade patterns under free trade agreements in the last few years is
conducted. All this descriptive analysis is crucial to better understand Lebanon’s recent trade
situation and the impact of trade agreements on terms of trade.

Second, a detailed empirical study is conducted, where we use original econometric

estimation techniques to evaluate and simulate some of Lebanon’s recent PTAs. The first
model we estimate is a source-differentiated flexible import demand model, which allows the
evaluation of the changes in import prices and quantities after a PTA from the following 4
sources: the European Union (EU), Arab and Regional countries (AR), North America and
South America (AM) and the Rest of the World (ROW). The estimated import demand model
allows looking at changes in import patterns on the HS1 product code level. Import own and
cross price elasticities are also computed for products originating in the above 4 defined
blocks. Simulation experiments on the impact of the Lebanon-EU PTA (the Association
Agreement) on trade patterns are also conducted. Then another PTA is also evaluated
econometrically, namely the bilateral free trade agreement between Lebanon and Egypt. The
estimation of a complete commodity-based import demand system allowed examining the
impact of the agreement with Egypt on Lebanese import prices.

This study concludes with the estimation of a structural model of bilateral trade, were we
augment the import demand analysis with a formal treatment of the supply side (regional
partner exports). The structural trade model estimated in this paper helps, for the first time to
our knowledge, to explain simultaneously export and import patterns following PTAs, and to
better evaluate supply-side behavior of exporting firms within these agreements.

7
2. Economic Analysis of Preferential Trade Agreements

2.1 Preferential Trade Agreements (PTAs): Some definitions

A PTA lowers tariffs among the member countries, while maintaining member
protection against non-member trading partners. PTAs are formed of two kinds of
agreements: Free Trade Agreements (FTAs), which allow individual countries to maintain
their own tariff against outside countries (like NAFTA), and Customs Unions (CUs), where
member countries adopt a common external tariff (like the EU).
PTAs are also referred to as RTAs (Regional Trade Agreements), and are opposed in the trade
literature to multilateral broad liberalization agreements (such as WTO accession). During the
last 50 years, RTAs increased substantially in number around the world (Figure 1).

FIG. 1. EVOLUTION OF REGIONAL TRADE AGREEMENTS IN THE WORLD,

1948-2002

200

180

160

140

120
Establishment of the WTO

100

80

60

40

20

0
1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000

Source: WTO Secretariat

As detailed in Anderson (2001), consumers benefit from lower price imports after a PTA, and
producers lower their costs by using cheaper imported inputs. However, producers who
compete with these imports might loose due to stiffer competition, and the government looses
revenue when tariffs are reduced or eliminated. Thus when free trade increases a country’s
welfare, it relates to the gains of this free trade policy exceeding the losses.

8
2.2 The debate over PTAs

There exists a considerable debate among trade economists with respect to PTAs: on
one side there are the proponents of this kind of agreements, who argue that their proliferation
will lead eventually, like a domino mechanism, to worldwide free trade in goods and services.
Multilateralists, on the other side, argue that these agreements fragment the world trading
system, becoming “stumbling blocks” rather than “building blocks” towards worldwide trade
liberalization. Jagdish Bhagwati and Arvind Panagariya, two prominent defenders of
multilateral liberalization, argue (Financial Times, 1996) :

While consistent with Article 24 of the General Agreement on Tariffs and Trade, there
are now so many Preferential Trade Arrangements (PTAs) such as the North American
Free Trade Agreement and the European Union's numerous FTAs with other countries,
that a virtual "spaghetti bowl" of crisscrossing preferential trade barriers has arisen, with
different duties applying depending on which country the product being imported is
assigned to. We are therefore in danger of reproducing the chaos created by the absence
of most favored nation status during the 1930s, produced then by protectionism but now,
ironically, by free-trade intentions.

Trade diversion appears to be the main concern for the opponents of PTAs. They fear that
these agreements will harm the evolution towards global free trade because we run the risk of
witnessing a world dominated by a few trading blocks who engage in tariff wars and neo-
protectionism against each others. In addition to this, multilateralists raise problematic issues
like the rules of origin which harm competition between member and non member countries,
and the room for potential trade conflicts created by the presence of overlapping Free Trade
Areas.
Given this, many economists are rather wary of accelerated multilateral liberalization. The
argument they raise is that developing countries face the tough challenge of rapid import
liberalization and uncertain export earnings, leading to the worsening of their terms of trade in
a context where developed economies continue to show tariff and non-tariff barriers in sectors
where developing countries have a comparative advantage. As argued in a study of the Third
World Network (2001), the quick multilateral liberalization dictated by mainstream trade
theory will worsen the economic situation in developing countries because of the presence of
several obstacles: 1) Many of the existing agreements are imbalanced against developing
countries’ preferences; 2) Developed countries have failed to fulfill their commitments in
expanding market access in textile and agriculture and in providing special treatment and
assistance; 3) Developing countries face many obstacles in implementing WTO rules; 4) They
face intensive pressure to accept new obligations at each round; 5) The decision making
process within WTO is less than transparent or fair and makes developing countries’
participation in decision making rather limited.
Some economists go even further. Kaushik Basu states (Project Syndicate, March 2002) :
The perception that the WTO is largely an instrument of the powerful, industrialized
nations is broadly correct. To oppose it on all fronts, however, is wrong. A more
sophisticated approach towards the WTO (and the North in general) is needed. (...) The
WTO says that it is a democratic organization run on the principle of one country, one
vote. Anybody who follows the WTO knows that rich countries get around this `nuisance'
democratic formality by lobbying behind the scenes to fix the agenda in advance.
This attitude opposing multilateral trade liberalization reflects increased doubt that trade
liberalization may not be by itself a growth engine. There is in fact no robust evidence that

9
countries that opened their economy more quickly witnessed increased growth. Add to the
fact that in most instances the causal relationship may not be quite clear: increased growth can
also lead to increased trade flows. However, what is commonly admitted is that trade
liberalization, when accompanied by sound macroeconomic policy with equitable income
redistribution objectives, can lead to better economic development.
This cautious attitude towards multilateral trade liberalization can explain why some
developing countries have shown a preference to conduct PTAs with their trading partners.
These agreements can be negotiated on a case-by-case level, and allow better monitoring and
dispute settlements than in broader agreements. In addition to this, small countries feel that
they have decision-making power when it comes to bilateral or regional free trade areas, a
situation which is far from being achieved within the WTO’s negotiations.

2.3 Theoretical assessment of PTAs

Bhagwati and Panagariya (1996) present a thorough exposition of the various

theoretical currents concerned with PTA analysis. The one we are focusing on, and under
which the empirical evaluation of PTAs has been mostly done, is the static analysis.
First, under the "Vinerian" approach (named according to Jacob Viner (1950) who pioneered
the static analysis of PTAs), free-trade areas (FTAs) and customs unions (CUs) can have
positive or negative welfare impacts, both for the member countries and the rest of the world.
PTAs could be "trade diverting" or "trade creating". A PTA is trade creating for member
countries, as demand is increased for partner products, which normally raises their prices,
while the opposite occurs for imports from non-partners. Thus, from the point of view of an
excluded country, trade diversion in the form of loss of exports to the PTA can be a welfare
deterioration. Moreover, PTA member countries see their trade diverted from low-cost outside
suppliers to high-cost within-union suppliers.
More recent is the argument of "natural trading partners", who by forming a PTA will both
benefit from trade creation which might outweigh the trade diversion effects; with "natural
partners" defined with regards to a high initial volume of trade among them. This argument
also relies on the idea that low transport costs between neighbour countries leads to the
desirability of PTAs. However, many counter-arguments are presented against this view (see
Panagariya (1999)).
Second, a more optimistic view of Custom Unions comes from the Kemp-Wan theorem
(1976), which shows that it is always possible to form a welfare improving CU among any
subset of countries, with no reduction in the non-members' welfare. But this remains a
possibility theorem. Third, the Cooper-Massell-Johnson-Bhagwati proposition, which states
that CU can be a policy measure used to minimize the cost of industrialization in developing
countries.
Other theoretical developments reviewed in Panagariya (2000) include political economy
models of trade liberalization bargaining and dynamic evolution models towards tariff
elimination, based mainly on general equilibrium tools.

10
2.4 Empirical evaluation of the effects of PTAs

Traditional empirical approaches

The empirical assessment of PTAs (Preferential Trade Agreements) has taken two
approaches: First, counter-factual analyses, based on partial or general equilibrium models,
with model calibration and simulation. Second, ex-post studies of the arrangements to
measure the extent of trade creation and trade diversion. The typical approach here is to
estimate a “gravity” equation which represents bilateral trade flows as a function of incomes
and populations of trading partners, distance between them and membership in a common
regional arrangement 1. An extensive overview of these applied methods for trade policy
analysis can be found in François and Reinert (1997).
An example of the first approach is the paper by Hoekman and Konan (1998), where a
competitive, constant returns to scale computable general equilibrium model is used to
explore the magnitude of the potential gains from deeper integration within a PTA between
the EU and Egypt. Given the fact that Egypt already has duty-free access to the EU for
manufactured products, the authors find that the loss in tariff revenues that will be incurred
outweighs any trade creation that will result. They also establish that large welfare gains from
an EU FTA are conditional upon the elimination of regulatory barriers and red tape.
The second type of the empirical evaluation of PTAs has been mainly devoted to answer the
following questions:
- First, do PTAs contribute to increased trade among member countries? Frankel (1997), by
estimating several bilateral gravity equations, answered positively this question. More
recently, Soloaga and Winters (1998) applied a gravity model to annual non-fuel imports data,
using dummy variables to capture the effects of PTAs. These dummies reflected intra-bloc trade
as well as, separately, bloc imports and bloc exports. These bloc-related coefficients were
statistically tested for changes “before and after” blocs revival/formation. When allowing for
gravity and overall trade effects, the authors found no indication that PTAs boosted intra-bloc
trade significantly. When testing intra-bloc trade “before and after” years of bloc
revamping/creation the authors found no statistically significant change in the propensity for intra-
bloc trade.
- Second, do PTAs cause significant trade diversion? Frankel (1997) argues that NAFTA and
the EU caused a great amount of trade diversion, but not enough to harm non-members
countries. Soloaga and Winters (1998) found that among most PTAs around the world, only
the EU and EFTA showed convincing evidence of trade diversion. Using a similar approach,
Cernat (2001) estimated a number of regional trade arrangements among developing countries
and explored the gross trade creation and diversion effects resulting from RTA formation. The
author found evidence in favor of the idea that South-South RTAs, and African RTAs in
particular, are not more trade diverting than other RTAs.
- Third, should a closed economy open its trade to all countries or limit itself to participation
in regional trade agreements (RTAs)? Vamvakidis (1999) is one of the rare studies to tackle
this issue. Based on time-series evidence for a data set for 1950–92, the author estimates and
compares the growth performance of countries that liberalized broadly and that of those that
joined an RTA. He finds that economies grew faster after broad liberalization, in both the
short and the long run, but slower after participation in an RTA. Economies also had higher
investment shares after broad liberalization, but lower ones after joining an RTA.

1
Gravity models that have been used to evaluate trade patterns among Arab and Mashreq countries include the
papers of Blavy (2001) and Al-Atrash and Yousseff (2000).

11
 These approaches suffer from serious problems, raised in Panagariya (2000): the first
one (Computable General Equilibrium modeling and calibration) for example suffers from the
fact that it is easy to manipulate the model’s functional forms and parameter values to obtain
one’s desired results. The second approach has involved mainly the calculation of total
quantities of trade creation and trade diversion, which are insufficient to infer the welfare
effects of PTAs. In addition to this, the specification of the distance as an explanatory
variables is quite problematic in the gravity trade model, as it cannot explain why in many
empirical findings distant countries experience intensive trade levels. Panagariya (2000, pp.
326) establishes a necessary solution to these problems:

We need to know trade creation and trade diversion by sector and, in each case, use the
information on the decline in the prices of imports to evaluate the benefit from trade
creation and the height of trade barriers to measure the damage from trade diversion.

A modern approach: evaluating price effects

One recent approach, developed by Winters and Chang (2000), measures the terms of
trade effects of regional integration, by looking mainly at the price effects of PTAs. The paper
tries to trace the effects of creating a regional trading arrangement on export and import
prices. It offers the first ex post empirical exercise of this kind, by exploring the effects of
Spanish accession to the EC on the prices of imports from major OECD suppliers.
Although this paper offers the first evaluation of terms of trade after a PTA, it still suffers
from some disadvantages: the reduced form model employed is very simplified ; there is no
detailed form for import demands, and therefore parameter estimates could be biased.
One paper that tries to solve these problems, along with introducing a structural model
for imports by sector and from each country-block, is the paper by Thomas and Chaaban
(2003). It offers an approach alongside the above proposed solution of Panagariya, by giving
a framework that allows to estimate trade creation and trade diversion by sector, by looking at
the changes in import prices and the quantities imported.
In this present paper, we chose to use two approaches to evaluate the impact of PTAs on a
country’s terms of trade. First, we use a flexible demand model, the AIDS model, to estimate
import elasticities by sector for the Lebanese economy, by identifying imports from major
trading blocks. The estimation of a system of flexible import demand equations allows
examining the effects of a PTA on each sector’s import quantities and prices, along with an
evaluation of sector specific trade creation and trade diversion effects. This study is the first to
our knowledge to present such detailed empirical analysis of PTAs, and this was made
possible thanks to a highly disaggregated, transaction based, dataset that was obtained from
the Lebanese Customs Administration.
Another estimation we undertake is a structural model of trade, where we build on the
framework elaborated in Thomas and Chaaban (2003) to evaluate structural demand and
supply parameters to some specific sectors where Lebanon has engaged in PTAs. This
estimation procedure allows to refine demand side estimates and to evaluate the extent of
international competition in sectors that experience trade liberalization.

12
3. PTAs and Lebanon’s trade policy

3.1 Lebanon’s trade policy: an overview

The Lebanese Republic could be easily, and justifiably, described as a fairly open
economy. Lebanon enjoys free investment policies, unrestricted capital mobility, complete
foreign exchange convertibility and extensive links with the developed world in practically all
economic activities. Going back in time, Lebanon was one of the 23 original signatories of the
GATT 1947 agreement. Since then successive Lebanese governments have maintained a
generally non-interventionist stance toward private investment, and public ownership has
generally been limited to infrastructure and utilities. There are no restrictions on the
movement of capital and goods by residents and non-residents of the Republic, including
entry or exit of firms or access to foreign exchange.

The civil war that hit the country between 1975 and 1990 had profound devastating
effects on the Lebanese economy, requiring from successive governments great efforts in the
reconstruction of physical and social infrastructure, along with the modernization of civil
services. During the past few years, the Lebanese government has adopted an economic
structural reform strategy that aims to implement a comprehensive set of economic measures
that will further reform, liberalize and deregulate the economy in order to instigate growth and
solve the structural rigidities of the budget and the economy as a whole. Trade policy
objectives have been directed towards further liberalization of Lebanon’s trade regime and a
more comprehensive approach to integrating Lebanon into the global economy (Ministry of
Economy and Trade (MOET), 2003). In particular, Lebanon adopted a Law on Patents and a
Decree Law on Customs in 2000, adopted a Law on Copyrights in 1999, implemented a major
tariff program in the agricultural sector in 1999, eliminated import restrictions on many food
products and drastically reduced import duties in 2000, adopted the Harmonized System HS
96 and the Single Administrative Document (SAD) for customs declaration, and installed
ASYCUDA system for customs processing in 1996.

As stated by the MOET (2003), Lebanon’s present trade policy objectives are:

1- Moving forward with WTO accession

2- Concluding negotiations over the Association Agreement with the European Union

3- Joining the Greater Arab Free Trade Area and implementing its executive program

4- Multiplying efforts to conclude and implement several bilateral free trade areas aimed
at enhancing Lebanon’s economic cooperation with main trading partners, and
especially Arab countries.

In February 1999, Lebanon submitted its request for accession to the WTO. In April
1999, observer status was granted and a working party was formed. The government of
Lebanon adopted an implementation framework to reform Lebanon’s policy, legal, and
regulatory environment to conform to the WTO agreements and enable a prompt accession to
the WTO. The Interim Agreement with the EU entered into force on March 1 2003, and it
covers trade and trade-related components of the Association Agreement with the EU. It will
allow concessions on tariff quotas and reductions set out in the accord to begin from this date.

13
Details of the Association Agreement with the European Union, the Greater Arab Free Trade
Area, and Lebanon’s various bilateral and cooperation agreements are reviewed in Appendix
1. Section 3.5 below discusses the effects of Lebanon’s existing bilateral and multilateral
trade agreements on the flow of imports and on Terms of Trade.

It becomes interesting, in light of the stated trade policy targets of the Lebanese
republic, to position Lebanon’s trade flows with regards to regional and international patterns.
We tackle this issue in the following section.

3.2 A regional comparison of trade patterns

Middle East trade picture

We first start by looking at some key trade figures concerning the Middle East region.
Table 1 shows that in 2001 total Middle East exports to the world market totaled 237 billion
USD, and its imports 180 billion USD. The main area of destination for Middle Eastern
exports was Asia with 47.3% of total exports, and the region’s main import partner was
Western Europe with a share of 39.8%. The Middle Eastern region exported in 2001
predominantly mining products, with a share of 73.8% ; and imported mostly manufactured
products (75.2% of total imports). These export and import shares reflect the region’s
endowments, especially oil, along with its mostly under developed industrial sector compared
to the world market, causing reliance on imports to cover domestic demand for manufactured
products.

TABLE 1. MERCHANDISE TRADE OF THE MIDDLE EAST BY REGION

AND BY MAJOR PRODUCT GROUP, 2001
(Billion dollars and percentage)
Source : WTO
Value Share

Exports Exports Imports

Total 237 100.0 100.0

Region
North America 39 16.5 12.6
Latin America 3 1.3 2.4
Western Europe 39 16.3 39.8
C./E. Europe/Baltic States/CIS 2 0.7 4.7
Africa 9 3.9 1.8
Middle East 18 7.5 10.9
Asia 112 47.3 27.8
Product group
Agricultural products 8 3.3 13.4
Mining products 175 73.8 8.1
Manufactures 52 21.8 75.2

Note: Import shares are derived from the WTO Secretariat's network of world
merchandise trade by product and region.

14
 Table 2 shows that in 2001 the Middle East’s exports represented only 4% of the
world’s merchandise trade, while its imports accounted for 2.9%. Merchandise exports rose
sharply in 1999 and 2000, then to decline in 2001; while imports showed lesser dynamism in
the past twenty years. Several reasons could explain this poor performance: political
uncertainty, high real exchange rates, trade restrictions that are relatively higher than in other
developing regions, and especially the region’s heavy reliance on oil exports. Oil trade has
played a central role in shaping the Middle East’s trade structure and levels. Petri (1997)
argues justifiably that high foreign exchange earnings directly or indirectly related to oil have
diminished the region’s international competitiveness outside the oil sector, due to an upward
pressure on factor of production prices in the tradeables sector, leading to a shift in these
factors to non-traded sectors such as services. Heavy reliance on oil exports thus concealed a
lagging structural problem in the region’s trade patterns and competitiveness.

TABLE 2. MERCHANDISE TRADE OF THE

MIDDLE EAST, 2001
(Billion dollars and percentage)
Source : WTO
Exports Imports

Value 237 180

Share in world merchandise
trade 4.0 2.9
Annual percentage change
1980-85 -14 -3
1985-90 6 2
1990-01 5 5
1999 30 3
2000 42 13
2001 -9 4

These facts can also be further explored by taking a closer look at leading merchandise
exporters and importers in the Middle East. Table 3 confirms how two oil exporting countries,
Saudi Arabia and the United Arab Emirates, head the region’s exporters’ list with a common
share of around 61% in 1980 and 48% in 2001 in the region’s exports.

15
TABLE 3. LEADING MERCHANDISE EXPORTERS AND IMPORTERS
IN THE MIDDLE EAST, 2001
(Billion dollars and percentage)
Source : WTO
Value Share Annual percentage change

2001 1980 1990 1995 2001 1990-01 1999 2000 2001

Exporters
Middle East 236.8 100.0 100.0 100.0 100.0 5 30 42 -9
Saudi Arabia 68.2 51.3 31.9 33.0 28.8 4 31 53 -12
United Arab Emirates 42.9 10.3 16.9 18.3 18.1 6 11 28 -2
Israel 29.0 2.6 8.7 12.6 12.3 8 12 22 -8
Iran, Islamic Rep. of 25.3 6.6 13.9 12.1 10.7 2 60 35 -11
Kuwait 16.1 9.2 5.1 8.4 6.8 8 28 59 -17
Iraq 15.9 12.4 8.9 0.3 6.7 2 132 62 -23
Oman 11.1 1.8 4.0 4.0 4.7 7 31 50 2
Qatar 10.9 2.7 2.8 2.4 4.6 10 43 61 -6
Bahrain 5.5 1.7 2.7 2.7 2.3 4 27 38 -3
Syrian Arab Republic 4.5 1.0 3.0 2.3 1.9 1 20 34 -3
Importers
Middle East 180.0 100.0 100.0 100.0 100.0 5 3 13 4
United Arab Emirates 41.7 8.5 10.8 15.7 23.2 13 15 15 9
Israel 35.1 9.5 16.2 22.2 19.5 7 13 14 -7
Saudi Arabia 31.2 29.3 23.2 21.1 17.3 2 -7 8 3
Iran, Islamic Rep. of 17.5 11.9 19.6 10.4 9.7 -1 -11 13 22
Iraq 11.0 13.6 7.4 0.5 6.1 3 85 37 -1
Kuwait 7.7 6.4 3.8 5.8 4.3 6 -12 -6 8
Lebanon 7.3 3.6 2.4 5.5 4.1 10 -12 0 17
Oman 5.8 1.7 2.6 3.2 3.2 7 -18 8 15
Jordan 4.8 3.4 2.5 2.8 2.7 6 -3 22 7
Syrian Arab Republic 4.3 2.3 2.3 3.5 2.4 5 -2 0 13

Note: Recent figures for a number of significant traders in the region have been estimated by the WTO
Secretariat.

Positioning Lebanon’s trade patterns

Lebanon has enjoyed between the year 2000 and 2001 a 22% rise in exports, a growth
rate which exceeds that of most countries in the region for the same period. This rate also
exceeds average export growth rate levels for developing as well as developed countries
(Table 4). This good performance of Lebanese exports comes after an average post-war
growth rate in exports of around 4% (1990-2000), while the same rate including some of the
wartime years yields a decrease of around 1% (1980-2000), a value clearly indicating the
effects of the war on economic trade performance. From 1990 to 2000, Iraq, Kuwait, Qatar

16
and Yemen showed growth rates in exports higher than the average of developing countries.
Over a longer period, only Turkey figures among regional countries as a relatively dynamic
exporter (around 11% increase in exports from 1980 to 2000).
Turning to import dynamics, Lebanese imports grew at positive rates during the past twenty
years, but this rate was lower than that of developing countries and some developed countries.
However, during 2000-2001, Lebanese imports rose by almost 17%, placing Lebanon
immediately after Iran in the region’s top growth rates in imports (Table 4).

TABLE 4. GROWTH RATES OF EXPORTS AND IMPORTS

Source: UNCTAD Handbook of Statistics 2002

PERIOD 1980-2000 1990-2000 2000-2001

FLOW Exports Imports Exports Imports Exports Imports
COUNTRY_GROUP
Bahrain 1.77 1.24 2.91 0.33 -2.78 -8.00
Cyprus 4.96 7.63 1.39 4.31 2.28 2.38
Iran, Islamic Rep. of 5.41 0.95 1.21 -6.46 -6.32 20.64
Iraq -9.12 -6.10 29.37 10.34 -23.31 -1.37
Jordan 6.50 2.37 6.59 5.01 20.85 5.88
Kuwait -0.17 0.87 16.15 5.49 -10.89 2.34
Lebanon -1.12 5.41 4.09 8.90 21.76 17.07
Oman 6.59 5.11 5.31 6.06 14.69 11.94
Qatar 1.69 5.18 9.54 7.40 -0.86 -15.52
Saudi Arabia -0.29 -0.51 3.07 0.82 -4.29 3.26
Syrian Arab Republic 4.93 0.60 1.27 4.15 14.29 14.93
Turkey 10.69 10.67 8.94 10.25 4.48 -20.58
United Arab Emirates 4.01 8.80 4.00 11.16 0.78 4.00
Yemen 8.18 -0.06 20.63 0.63 -5.57 16.34
Developing countries 7.73 8.20 9.05 8.33 -5.14 -3.00
Countries in Eastern Europe 0.93 1.64 8.76 8.73 6.87 11.12
Developed countries: America 7.51 7.95 7.51 9.12 -6.34 -6.39
Developed countries: Europe 7.35 6.70 5.05 4.24 0.28 -1.84
South Africa 2.41 3.46 2.53 5.83 -2.33 -4.35
Developed countries: Asia 7.14 6.19 4.40 4.79 -15.29 -7.93
Developed countries: Oceania 6.54 6.52 4.78 6.24 -0.03 -9.60
Note: Calculation of annual average growth rates: In general, they are defined as the trend, using standard
methods of regression analysis. Since all observations in a period are incorporated, the resulting growth rates
reflect trends that are not unduly influenced by exceptional values (UNCTAD 2002)

These almost parallel movements in exports and imports patterns reflect a more
persistent trade picture for the Lebanese economy. Table 5 shows how Lebanon continuously
suffered a deficit in the balance of trade in the last ten years. Compared to regional countries,
Lebanon ranked third as to the amount of trade deficit in 1990 (2 billion USD), and ranked

17
first with respect to trade deficit expressed as percentage of imports (-80%). In 2001 Lebanon
ranked second behind Turkey as to the amount of trade deficit (Cyprus and Jordan figured
also among the regional countries with trade deficits, but with much lower values than the
Lebanese figure). Lebanon ranked first in 2001 with respect to the percentage value of its
trade deficit (-88%), a figure exceeding that of Cyprus, Jordan and Turkey; while all other
countries in the region enjoyed a positive balance of trade. This figure also exceeded that of
LDCs (-20% in 2001). It is however interesting to note, as we will see in a later section, that
Lebanon’s trade deficit decreased by 21% between 2001 and 2002.

Moukarbel (2000) puts forward two reasons behind Lebanon’s poor exporting
performance and thus its huge trade deficit. First, the Lebanese industrial and agricultural
productions are developed mainly to meet the domestic demand, where they enjoy a
substantial protection, the level of which would vary according to the particular need of each
activity. Second, since the end of 1992, Lebanon adopted an exchange-rate-based nominal
anchor policy, which resulted in an increase of its real effective exchange rate by 68% during
the period 1992-1999.

Taking a closer look at exports of Arab and regional countries to major destinations
(according to UNDTAD’s classification, these include the EU, USA and Canada, Japan,
Eastern Europe and OPEC countries), one can see in Table 6 how Lebanon seems to compete
with most countries in the Mashreq2 region for exports to the European Union. In fact,
Lebanon exported 30% of its total exports to the EU in 2001, and all countries in the Mashreq
except Jordan have their greatest export’s share going to the European market. One finds the
same facts in North African countries, where most of these countries export predominantly to
the EU (Libya having the highest share of 82% of its total exports in 2001). As for Gulf
countries, most of them have Japan as their main export market.
We can therefore infer based on these observations that Lebanese exports to its main trading
partners actually experience tough competition from regional and other Arab countries, and
this competition may even rise as the EU is negotiating more free trade agreements with
countries in the Southern Mediterranean.
Another evaluation of Lebanon’s competitive trade position can be done by looking at the
trade structure by commodity groups. Table 7 shows data for 2000 for selected regional and
Arab countries. One can notice that both Lebanese exports and imports consisted mainly of
manufactured goods, and a similar fact can be found for Jordan, Turkey, Cyprus, Israel,
Tunisia and Morocco. Oil and gas exporting countries such as Iran, Bahrain, Oman, Saudi
Arabia and Algeria have fuels as their main exports and manufactured goods as their main
imports. The similarity in the structure of trade for most of Lebanon’s surrounding countries
makes it difficult for the Lebanese economy to compete on a regional level, dictating further
specialization of the Lebanese industry into high value-added and quality oriented products.
Tough competition on world markets can also be expected from oil producing countries, who
invested massively in the recent decades to develop their agriculture and industrial sectors,
and thus became for example exporters of food and agricultural products, a fact that was
almost unimaginable 30 years ago in these countries were rough climate decision traditionally
hampered agricultural development. High oil revenues thus made gulf countries serious trade
competitors for small economies with almost no natural resources like Lebanon.

2
Mashreq countries include here Lebanon, Syria, Iraq, Jordan, Cyprus, Iran, Israel and Turkey.

18
TABLE 5. VALUE OF TRADE BALANCE
Source: UNCTAD Handbook of Statistics 2002
YEAR 1990 1995 2000 2001
Trade Trade Trade Trade Trade
balance balance Trade balance balance Trade balance balance Trade balance balance
(millions (% of (millions (% of (millions (% of (millions (% of
COUNTRY_GROUP USD) imports) USD) imports) USD) imports) USD) imports)
Bahrain 48.9 1.32 397.1 10.69 1070 23.09 1281.9 30.07
Cyprus -1618.2 -63 -2463.5 -66.69 -2892.8 -75.21 -2962.6 -75.23
Iran, Islamic Rep. of -1017 -5 4478 32.26 14049 98.27 9307.8 53.97
Iraq 3788 58.04 -1854 -78.89 9450 84.73 4800 43.64
Jordan -1536.4 -59.09 -1928.2 -52.15 -2641.4 -58.19 -2513 -52.29
Kuwait 3070.6 77.31 4995.4 64.13 10999.1 153.69 8854.4 120.89
Lebanon -2031.1 -80.44 -6108.9 -90.31 -5515.4 -88.53 -6423.4 -88.07
Oman 2827 105.43 1820.5 42.86 5469.4 108.53 6411.7 113.66
Qatar 1598.1 94.29 83.3 2.45 6830 210.01 7248.5 263.82
Saudi Arabia 20347.2 84.54 21949.3 78.14 47345.7 156.58 43028.7 137.81
Syrian Arab Republic 1812 75.5 -1145.6 -24.33 682.5 15.88 752.5 15.23
Turkey -9343 -41.89 -14072 -39.41 -26927.4 -50.33 -14729.8 -34.67
United Arab Emirates 12344.6 110.23 3104.4 14.79 3006 7.88 1803.1 4.55
Yemen -879 -55.95 363.4 22.98 1755.1 75.53 1148.1 42.47
Developing countries 16511.6 2.03 -87095.8 -5.78 134612.9 7.11 87059.6 4.74
Countries in Eastern Europe -14975 -8.48 -8955.2 -4.57 18615.5 7.95 9964.2 3.83
LDC -8629.8 -34.39 -11542.6 -34.51 -5989.9 -15.09 -8634.4 -19.68
Developed countries: America -119010 -18.59 -161953 -17.25 -446326 -29.67 -417247.7 -29.64
Developed countries: Europe -52846.5 -3.2 99971.5 4.79 28764 1.22 78654.6 3.4
South Africa 5169.3 28.1 -2692.5 -8.81 287.3 0.97 879.2 3.1
Developed countries: Asia 46995 18.64 96701.5 26.46 99738 24.27 54210.6 14.33
Developed countries: Oceania -2339.8 -4.54 -8483.7 -11.28 -8300.2 -9.72 -120.3 -0.16
Note: The regional trade balances are the sums of the reported trade balances for the relevant individual countries. A negative sign indicates a deficit of the trade balance
(UNCTAD 2002)

19
TABLE 6. EXPORTS OF ARAB & REGIONAL COUNTRIES TO MAJOR DESTINATIONS
Source: UNCTAD Handbook of Statistics 2002

YEAR 1990 2000 2001

PARTNER EU USA Japan Eastern OPEC EU USA Japan Eastern OPEC EU USA Japan Eastern OPEC
COUNTRY & Canada Europe & Canada Europe & Canada Europe

Lebanon 26 6 1 1 36 20 8 1 1 33 30 11 1 1 22
Syria 42 1 0 34 10 61 4 0 1 8 62 4 0 1 7
Iraq 24 30 8 2 2 35 44 4 0 0 26 57 1 0 0
Jordan 4 1 2 3 39 4 5 1 1 36 8 15 4 1 20
Cyprus 51 2 0 5 8 36 2 0 13 9 57 3 0 7 6
Iran 41 2 21 3 1 26 1 18 0 8 21 1 18 0 8
Israel 36 30 7 1 1 27 38 3 2 0 27 39 3 2 0
Turkey 54 8 2 6 13 50 12 1 7 6 50 11 0 8 6

Kuwait 24 7 19 1 5 15 15 25 0 5 14 14 28 0 ..
Bahrain 2 2 2 .. 6 5 4 3 0 5 5 5 2 0 5
Saudi Arabia 18 25 19 1 4 18 18 17 0 5 15 19 16 0 5
Oman 12 4 2 0 62 2 2 18 0 11 2 4 21 0 11
Qatar 2 2 60 .. 6 1 4 45 0 6 4 4 43 0 5
UAE 9 4 38 0 5 5 2 33 0 5 6 3 29 0 5
Yemen 57 24 5 0 2 1 6 2 0 4 2 6 1 0 2

Egypt 39 9 3 20 7 48 14 2 1 5 46 15 1 1 6
Tunisia 77 1 0 3 10 78 1 0 0 8 79 1 0 1 7
Algeria 70 20 1 2 0 66 16 0 1 0 65 17 0 1 0
Libya 84 0 0 5 0 85 0 0 0 0 82 0 0 0 0
Morocco 61 2 4 2 9 62 6 4 2 2 70 4 3 1 3
Sudan 38 3 6 7 9 10 0 16 1 7 11 0 14 1 7
Note: the unit used is the percentage of total exports

20
TABLE 7. TRADE STRUCTURE BY COMMODITY GROUPS FOR SELECTED COUNTRIES, 2000
Source: UNCTAD Handbook of Statistics 2002. Unit: millions of USD.

Total All food Agricultural Fuels Ores and Manufactured Chemical Other man. Machinery & Unallocated
(SITC 0 to 9) items raw materials metals goods products goods transport
Lebanon Exports 714 131 13 2 49 471 94 290 87 48
Imports 6,227 1,106 103 1,030 133 3,484 617 1,511 1,356 372
Jordan Exports 958 153 5 0.21 140 661 240 345 76 0
Imports 4,013 850 91 194 100 2,645 472 877 1,295 134
Turkey Exports 27,485 3,519 307 297 711 22,320 1,013 15,667 5,640 330
Imports 54,150 2,126 1,979 7,555 2,141 38,194 7,226 10,631 20,336 2,155
Cyprus Exports 388 138 3 25 20 202 65 111 26 0.07
Imports 3,846 717 37 491 45 2,496 320 1,099 1,077 60
Iran Exports 27,771 817 115 24,616 218 1,982 337 1,516 129 23
Imports 13,626 2,585 355 321 335 9,969 1,938 3,232 4,799 60
Israel Exports 31,407 802 358 228 384 29,571 3,817 14,589 11,166 64
Imports 35,742 1,920 358 3,602 661 29,036 3,124 13,491 12,421 165
Bahrain Exports 5,623 39 3 3,992 988 601 132 429 40 0.09
Imports 4,612 446 38 2,109 312 1,707 208 764 735 1
Oman Exports 10,852 387 2 8,952 94 1,347 81 365 901 71
Imports 5,039 1,118 37 83 149 3,462 307 977 2,178 191
Saudi Arabia Exports 77,208 451 44 71,088 109 5,507 4,159 1,087 262 8
Imports 30,237 5,363 288 59 908 22,124 2,825 7,458 11,841 1,495
Tunisia Exports 5,850 510 39 707 90 4,505 609 3,125 771 0.09
Imports 8,566 706 261 906 212 6,461 731 2,972 2,758 20
Morocco Exports 7,432 1,595 150 272 650 4,761 892 3,048 821 4
Imports 11,533 1,584 352 2,043 292 7,254 972 3,119 3,164 7
Algeria Exports 22,031 36 11 21,610 56 319 162 111 46 ..
Imports 9,152 2,578 237 131 110 6,096 1,043 1,909 3,145 0.02
Note: Countries that appeared in the previous table and not in this one had missing trade allocation among commodity groups. SITC: UNCTAD commodity classification

21
3.3 Measuring and positioning Lebanon’s protectionism

One method used to measure the degree of protectionism within an economy is the
average tariff rate 3. Since tariffs generally reduce imports of foreign products, the higher the
tariff, the greater the protection afforded to the country's import-competing industries. At one
time, tariffs were perhaps the most commonly applied trade policy. Many countries used
tariffs as a primary source of funds for their government budgets. However, as trade
liberalization advanced in the second half of the twentieth century, many other types of non-
tariff barriers became more prominent.
We will take a closer look at Lebanon’s level of protectionism by examining tariff and non-
tariff barriers to trade successively.

Tariff barriers

According to the Customs Administration at the Lebanese Ministry of Finance, the updated
tariff nomenclature is structured as follows:

Types of Duties

Types of Duties Percentage of Total Tariff Groups

Ad valorem 93.98
Specific (unit of measure – weight or volume) 0.16
Combined (Specific & ad valorem) 5.72
Bracket Based 0.14

The total number of tariff groups is 5,661. Most tariff groups are at the six digit levels with
subdivision as follows:

Breakdown of Tariff by Digits

HS Level Number of Tariff Groups

4 digits 276
6 digits 4,400
8 digits 985
Total 5,661

Ad valorem import duties range from 0 per cent to 90 per cent; the number of ad
valorem tariff brackets is 14 as follows:

3
The available measures of “average” tariffs are: a) Average, weighted by the share of goods in a country’s
imports to take into account the relative importance of different goods (measure used by the WTO); b) Simple unweighted
average (used by the OECD); c) Average weighted by OECD averages rather than the country’s own (used by OECD). The
degree of protection attained is deeply affected by the method used. For Example. In 1996 estimates of the OECD, Canada’s
import-weighted average tariff was 5.7%, its simple average was 9.2% and its production-weighted average was 12.1%.

22
 Breakdown of Imports by Duty Collection Methods

Duty Calculation Method Customs Number of

Percentage of Total
Duty rate Tariff Groups
Ad valorem 0% 2094 36.99
5% 2612 46.14
6% 10 0.18
10% 86 1.52
15% 172 3.04
18% 2 0.04
20% 188 3.32
23% 1 0.02
25% 68 1.2
30% 44 0.78
35% 23 0.41
40% 16 0.28
70% 4 0.07
90% 6 0.11
Bracket 8 0.14
Specific 5 0.12
Combined 322 5.69
Total 5,661 100.00

Several observations could be made regarding Lebanon’s trade tariff structure :

a) More than 83 per cent of customs tariff lines have duties equal or below 5 per cent.
b) Bracket based calculation applies only for used cars. Used cars whose value is below
LBP 20 Million are charged a specific duty of LBP 500,000. Brackets above LBP 20
Million are charged 5 per cent.
c) The average trade-weighted import duty rate is around 8 per cent based on 1999
import data. Tariff rates apply on a MFN basis. Lebanon does not grant any
preferences under the Generalized System of Preferences (GSP). Tariff preferences
are provided as follows:
- Preferential customs duties (0 per cent for industry and 5 per cent for agriculture) are
provided for imported items used as raw materials and input in production.
- Hotel establishments benefit from 5 per cent tariff rates on imported equipment and
apparatus under the condition the same product is not produced locally (Ministry of
Finance Decision No. 92 dated 30 August 1999). New cars imported for use as taxis or
car rentals as well as imported buses for use as tour buses benefit also from preferential
customs duties
- Tariff preferences are provided to goods originating in Arab countries members of the
Greater Arab Free Trade Area (GAFTA).
- Tariff preferences are provided to goods originating in Egypt, Kuwait, and Syria
according to bilateral free trade agreements with these countries.
- Tariff preferences are provided to goods originating in Jordan, Iraq, Saudi Arabia, Sudan,
and Syria (1953 agreement) according to bilateral agreements with these countries.

With respect to tariff quotas and exemptions, Lebanon does not maintain any tariff quota
system. Lebanon maintains partial tariff exemptions (5 per cent applies) and full exemptions
(0 per cent applies) in accordance with Articles 295-320 of the Decree Law on Customs of
2000. The Council of Ministers has the authority to issue decrees or decisions exempting
goods imported by certain persons from customs duties in accordance with the authority to
legislate in the customs field delegated from the Lebanese Parliament.

23
 As shown in figure 2 below, average import tariff in Lebanon rose from 1997 to 1999,
and then declined after to attain around 15%. Budgetary necessities can be placed behind the
increase in tariffs, and then after the year 2000 Lebanon actively entered a global strategy of
liberalizing foreign trade through decreasing tariff barriers.

FIG. 2. AVERAGE TARIFF EVOLUTION, LEBANON (unweighted tariff)

Source: Ministry Of Finance - Customs Administration - Customs Information System NAJM- Lebanon

25%

20%

15%

10%

5%

0%
1997 1998 1999 2000 2001 2002 2003

This fact can also be seen by looking at simple average unweighted tariffs for the year 2000
(Table 8), where one can notice the great difference between a 34% rate applied on
agricultural imports and a 5% on manufactures; for an overall tariff rate of around 20% for all
goods. Regionally this places Lebanon second behind Turkey as having the highest tariff rates
on agricultural goods, but with respect to manufactures Lebanon enjoys one of the lowest
rates in the region. Globally, Lebanese unweighted rates seem to be quite high compared to
the Middle East and North Africa region, and also higher than the average of developing
countries. This is not case when looking at manufactures rates, where Lebanese rates are less
than those applied in all regions around the globe, but slightly higher than the average of
industrialized countries (Table 8). This decrease can also be seen by looking at UNCTAD’s
average applied import tariff rates on manufactured goods, ores and metals imports (Table 9).
Lebanon passed from a 15.86% rate in 2000 to 6.23% in 2001, one of the lowest tariffs among
Arab and Middle Eastern countries. This rate still remains higher than the one applied in
developed countries such as the United States, Canada and the European Union. Nevertheless,
this evolution confirms Lebanon’s policy towards lower tariff protection especially in the
manufacturing sector.

Another indicator of Lebanese openness to global economic activity is Foreign Direct

Investment (FDI) inflows, which totaled 250 million USD in 1999. Lebanon has attracted
more investments than other equally sized economies such as Cyprus and Oman; slightly
lower than Bahrain. Yet these FDI inflows are still much lower than other countries in the
region and in North Africa, and also much lower than developing countries’ averages. Despite
great efforts by the Lebanese authorities to attract foreign investments, these still remained
low, and this is mainly due to the region’s political instability and the absence of major
industrial development opportunities in the Lebanese economy, which is primarily based on
the service sector.

24
 To sum up on Lebanon’s protectionism with respect to tariff barriers, we can ascertain that
there has been a major evolution towards lowering rates on manufactures imports, within an
overall policy of tariff reductions. Tariff rates on agriculture products still remain quite high,
and this could be due to the fact that the Lebanese government would like to encourage and
protect the agriculture sector in rural areas to maintain their development and to lower internal
migration towards big cities such as Beirut, which concentrates nowadays almost 50% of the
Lebanese population.

TABLE 8. AVERAGE TARIFF RATES BY SECTOR AND FDI INFLOWS FOR

SELECTED COUNTRIES IN RECENT YEARS
Sources: WTO, IDB CD ROM 2000 and Trade Policy Review, various issues, 1993-2000; World Bank, World
Development Indicators, 2000; and UNCTAD, World Investment Report 2000. Data for Lebanon were
completed from the World Bank and the Ministry of Finance.
Tariff Rate (unweighted%) Net FDI Inflow ($ Million)
Region Country Year All Goods Agriculture Manufactures 1997 1998 1999
1 China 1998 16.8 16.5 16.9 44,236 43,751 40,400
1 Korea 1999 8.7 12.8 7.8 3,088 5,215 10,340
1 Malaysia 1997 7.1 6.0 7.5 6,513 2,700 3,523
2 India 1999 32.2 30.5 32.4 3,577 2,635 2,168
4 Lebanon 2000 20.0 34 5 150 200 250
4 Algeria 1998 24.2 21.8 24.9 7 5 6
4 Bahrain 2000 7.7 7.5 7.8 329 181 300
4 Cyprus 1998 8.4 26.1 4.8 68 56 65
4 Egypt 1998 20.5 22.7 20.2 888 1,077 1,500
4 Israel 1998 7.6 19.9 5.7 1,622 1,850 2,256
4 Morocco 1997 22.1 28.9 21.3 1,079 329 847
4 Oman 1997 4.8 4.0 4.9 53 106 70
4 Saudi Arabia 1999 12.6 12.2 12.6 3,044 4,289 4,800
4 Tunisia 1998 29.9 31.0 29.6 366 670 368
4 Turkey 1998 12.7 47.9 5.4 805 940 783
7 Canada 1999 4.6 4.6 4.5 11,761 21,705 25,061
7 European Union 1999 5.0 10.0 4.2 128,574 248,615 305,058
7 Japan 1999 5.2 11.0 3.7 3,200 3,192 12,741
7 United States 1999 4.8 8.7 4.3 105,488 186,316 275,533

1-6 Average/Total LDCs (96) 1993-99 13.1 17.0 12.4 194,014 189,155 223,166
7 Average/Total INDs (23) 1998-99 4.0 6.4 3.5 269,790 478,165 632,808

1 East Asia (15) 1994-99 9.8 13.9 9.4 88,412 83,488 92,915
2 South Asia (5) 1996-99 27.7 26.3 28.0 4,889 3,668 3,183
3 Sub-Saharan Africa (26) 1993-99 16.5 19.2 16.0 7,409 3,954 4,934
4 Middle East & N. Africa (11) 1995-99 14.4 20.8 13.2 8,426 9,776 11,806
5 Transition Europe (15) 1996-99 9.6 15.7 7.8 20,630 21,235 23,128
6 Latin America (24) 1995-99 10.1 13.8 9.5 64,248 67,034 87,200

25
TABLE 9. AVERAGE APPLIED IMPORT TARIFF RATES ON NON-AGRICULTURAL AND NON-FUEL PRODUCTS
Source: UNCTAD Handbook of Statistics 2002
YEAR 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
MARKET
Lebanon .. .. .. .. .. .. .. .. .. .. .. 12.20 15.86 6.23
Jordan .. .. .. .. .. .. .. .. .. .. .. .. 19.74 13.21
Turkey .. .. .. .. .. 5.12 .. 6.91 .. 5.55 .. 5.13 .. ..
Iran .. .. .. .. .. .. .. .. .. .. .. .. 3.78 ..
Israel .. .. .. .. .. 4.33 .. .. .. .. .. .. .. ..
Saudi Arabia .. .. .. .. .. .. 11.54 .. .. .. .. 11.50 11.38 ..
Bahrain .. .. .. .. .. .. .. .. .. .. .. 8.95 .. 8.95
Oman .. .. .. .. 5.44 .. .. .. .. 4.92 .. .. .. ..
Sudan .. .. .. .. .. .. .. .. 4.02 .. .. .. .. ..
Egypt .. .. .. .. .. .. .. 21.88 .. .. 17.16 .. .. ..
Libya .. .. .. .. .. .. .. .. 25.12 .. .. .. .. ..
Morocco .. .. .. .. .. 53.57 .. .. .. 19.05 .. .. 25.44 24.55
Algeria .. .. .. .. .. 18.64 .. .. .. 19.38 18.55 .. .. 16.74
Tunisia .. .. 28.10 .. 28.27 .. .. 30.16 .. .. 27.77 .. .. ..
United States .. 4.02 4.02 4.04 4.04 3.90 .. 2.96 2.79 2.73 2.92 1.98 1.87 1.87
Canada .. 6.53 .. .. .. 3.84 .. 6.80 5.17 1.55 0.93 0.85 0.87 0.93
EU 4.05 4.25 5.61 5.11 4.55 4.28 4.72 5.03 3.00 2.76 2.78 2.77 1.74 2.82
China .. .. .. .. 34.81 32.14 29.84 .. 17.75 14.25 14.24 13.49 13.12 12.58
Japan 2.71 2.37 1.91 1.93 2.06 2.13 2.07 1.78 1.63 1.47 1.33 1.25 1.14 1.62

Note: the type of duty is the effectively applied rate (AHS). The indicator is a weighted average on Manufactured Goods, Ores and Metals imports (UNCTAD 2002).

26
Non-Tariff Measures NTMs 4

None of the trade measures imposed in Lebanon is adequately defined in the Lebanese
legal regime. There is however a common understanding among ministries regarding the
meaning of each of these measures and related requirements. Lebanon is currently assessing
the conformity all the imposed NTMs, and intends to eliminate remaining unjustified
measures prior to WTO accession. Lebanon is also evaluating its licensing regime and is
preparing a licensing legislation that will be in conformity with the WTO Agreement on
licensing. The types of NTMs applied by the Lebanese administrations are:

Quotas: Lebanon maintains quotas on the import of potato seeds according to Ministry
of Agriculture Decision No. 1/265 dated 23 November 2000.

Prohibitions: Lebanon prohibits the import of around 326 goods or groups of goods
(primarily at the 4 and 6 digit levels). Certain goods are unconditionally prohibited; other
goods are prohibited if imported from specific countries, by parcel post, through road
transport means, or other conditions. Some of these prohibitions are for health reasons; others
are for safety or environmental reasons. Furthermore, a number of legislation regulates the
import of drugs and require that certain drugs may only be imported if permitted for sale and
use in the country of origin (e.g. Ministry of Public Health Decision No. 114 dated 18 June
1991; Ministry of Agriculture Decision No. 29/1 dated 7 February 1995; and Ministry of
Agriculture Decision No. 99/1 dated 29 February 1996), and in certain cases if sold in
developed countries. Last, Ministry of Public Health Decision No. 9/1 dated 6 January 1999
prohibits the import for commercial purpose of used medical equipment and apparatus
including radioactive ones. Exceptions are the following: (1) physicians may import their
own used equipment and apparatus, provided they submit a certificate from the country origin
proving that such equipment is the property of the physician and was used in his/her practice
and (2) public welfare institutions may also import used equipment and apparatus acquired
through grants.

Licensing: Lebanon requires import licensing (license and advance license) for around
79 tariff groups (primarily at the 4 and 6 digit level).

In addition to license and advance license, Lebanon maintains the following additional
border measures that have effects similar to import licensing: permit, advance permit,
approval, and post approval. There are around 182 goods or categories of goods subject to
such controls. Lebanon is in the process of examining the list of goods subject to such
controls.

Other Border Measures with Effects Similar to Import Licensing

Number of Tariff groups

Type of Measures
(at the 4 and 6 digit levels)
Permit5 93
Advance Permit 84
Approval 2

4
This section is based on the “Survey of Non-Tariff Measures on Trade”, MOET, March 2003, mimeo.
5
No permits or advance permits are required from the Ministry of Economy and Trade if the invoice value is
below LBP 1 Million according to the Ministry of Economy and Trade Decision No. 127/1/AT dated August 23,
1997.

27
 Post Approval 3

In addition to all aforementioned controls, Lebanon requires Visa for around 459 tariff
groups primarily at the 4 and 6 digit levels and Advance Visa for 1 tariff group. A Visa
(referred to in one case as an advance visa) is a signature of customs documents by a relevant
ministry indicating its approval that imported goods meet certain technical requirements and
standards and may clear customs. Often times, visas are issued based on importers’
documents (e.g. health certificate, veterinary certificate, industrial certificate). In case the
relevant ministry or Customs suspects non-compliance of imported good (usually food-related
products) with applicable requirements, testing is conducted. The Visa is then issued on the
basis of test results. A visa is issued for each shipment. More than one visa from different
state bodies may be needed for the import of a single product. This is usually the case for
food-related products

The following table summarizes Lebanon’s applied NTMs classified by type and by
administration :

Number of Groups of Goods subject to

Trade Measures at 4 and 6 digits levels.
Administration Import Export Import Export Visa Advance
Prohibitions Prohibitions License License Approval6
Ministry of Agriculture 66 4 12 2 0 0
Ministry of Defense 0 0 0 0 75 63
Ministry of Economy and 1 0 82 76 120 0
Trade
Ministry of Environment 130 0 0 0 94 0

Ministry of Energy and 3 0 17 12 17 0

Water
Ministry of Finance 8 0 0 0 0 0
Ministry of Industry 4 0 45 11 0 0
Ministry of Interior 0 0 0 0 75 55
Ministry of Post and 8 7 7 0
Telecommunications
Ministry of Public Health 9 1 9 1 35 0
Total 229 5 172 102 423 118

It is useful at this point to compare Lebanon’s non-tariff barriers to other developing

countries. Following Michalopoulos (1999), we construct a measure of Lebanon’s NTMs
which excludes those applied for health, security and environmental purposes (which are
usually justified with reference to article XX in the GATT). Michalopoulos gives a
representation of NTMs as a frequency ratio in percentage of all HS 2-digit product
categories. This assumes that if a NTM is applied at an HS4 or HS6 product definition level,
it counts for one NTM under the HS2 level. It could be argued justifiably that this measure of
nontariff barriers is not perfect, but it is one of the rare indicators on the evolution of trade
regimes in developing countries (as a decrease in the percentage of NTMs indicates a possible
decrease in protectionism). As argued by Michalopoulos (1999), these frequency ratios can
provide an overall impression of the various trade regimes in place around the world, however
a more accurate evaluation of a country’s relative protectionism requires a much more
elaborate quantitative assessment.
6
Advance Approval are required prior to issuance of license for certain goods

28
Given this, we present in the following table our calculations of the frequency of nontariff
measures imposed by the Lebanese government for reasons other than health protection,
security and environmental regulation:

NTMs Frequency

Type HS2 codes % of HS2

Import Prohibition 06, 25, 95, 96 4
Import Licence 05, 10, 11, 19, 20, 23, 25, 27, 50, 62, 74, 76, 84, 85 14
Visa on Imports 27, 84, 85 3
Advance Approval 0 0

Inserting these values in Table 10 below, which is adapted from Michalopoulos (1999), we
can establish a tentative benchmarking for Lebanon’s NTMs with regards to other developing
countries. Lebanon applies core NTMs on 18% of all HS 2-digit product categories, a
proportion that is quite high when compared with other regional countries, but that remains
lower than global levels. This indicates that further effort is required to eliminate these “red
tape” barriers to trade that hinder Lebanon’s integration into global markets, and possibly
replace them in the medium term by more flexible tariff barriers.

29
 TABLE 10. NON-TARIFF MEASURES FOR ALL PRODUCTS IN DEVELOPING COUNTRIES, 1989-98 (IN %)
Source: Constantine Michalopoulos, Trade Policy and Market Access Issues for Developing Countries, World Bank PRWP No. 2214, October 1999.
Data for Lebanon is based on information from the Ministry of Economy and Trade and on Authors’ calculations.

Non-auto Import Var. Min.

Region Core NTMs Licensing Prohibition Quotas Tariff Quotas Monitoring Pricing
Code Country 1989-94 1995-98 1989-94 1995-98 1989-94 1995-98 1989-94 1995-98 1989-94 1995-98 1989-94 1995-98 1989-94 1995-98
Hong Kong,
1 China 2.1 2.1 2.0 2.0 0.0 0.0 0.0 0.0 0.0 0.0 16.0 0.0 0.0 0.0
1 Indonesia 53.6 31.3 53.0 31.0 5.0 0.0 3.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0
1 Korea 50.0 25.0 32.0 0.0 0.0 0.0 3.0 0.0 26.0 25.0 0.0 0.0 0.0 0.0
1 Malaysia 56.3 19.6 55.0 20.0 4.0 14.0 2.0 2.0 0.0 7.0 0.0 0.0 0.0 0.0
1 Singapore 1.0 2.1 1.0 1.0 0.0 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 ..
1 Thailand 36.5 17.5 36.0 11.0 0.0 6.0 2.0 1.0 0.0 12.0 2.0 0.0 3.0 0.0
2 India 99.0 93.8 99.0 94.0 3.0 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2 Pakistan 17.7 .. 0.0 .. 17.0 .. 1.0 .. 0.0 .. 0.0 .. 0.0 ..
2 Sri Lanka .. 22.7 .. 23.0 .. 0.0 .. 0.0 .. 0.0 .. 0.0 .. 0.0
3 Cameroon 8.2 .. 8.0 .. 0.0 .. 0.0 .. 0.0 .. 0.0 .. 0.0 ..
3 Cote d' Ivoire .. 30.9 .. 31.0 .. 0.0 .. 5.0 .. 0.0 .. 0.0 .. 0.0
3 Ghana 3.1 .. 0.0 .. 3.0 .. 0.0 .. 0.0 .. 0.0 .. 0.0 ..
3 Kenya 86.6 .. 87.0 .. 0.0 .. 0.0 .. 0.0 .. 0.0 .. 0.0 ..
3 Nigeria 14.4 11.5 0.0 2.0 14.0 9.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
3 South Africa 36.5 8.3 36.0 5.0 0.0 0.0 0.0 3.0 0.0 0.0 0.0 0.0 0.0 ..
4 Lebanon .. 18.0 .. 14.0 .. 4.0 .. 0.0 .. 0.0 .. 3.0 .. 0.0
4 Cyprus .. 21.6 .. 1.0 .. 0.0 .. 0.0 .. 21.0 .. 0.0 .. 0.0
4 Egypt 57.3 .. 14.0 .. 53.0 .. 0.0 .. 0.0 .. 0.0 .. 0.0 ..
4 Morocco 58.3 13.4 51.0 13.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 24.0 0.0
4 Tunisia 54.2 .. 54.0 .. 0.0 .. 0.0 .. 0.0 .. 0.0 .. 2.0 ..
4 Turkey 5.2 19.8 5.0 0.0 0.0 0.0 0.0 8.0 0.0 11.0 0.0 0.0 0.0 0.0
5 Argentina 3.1 2.1 3.1 1.0 0.0 0.0 2.0 1.0 0.0 0.0 0.0 0.0 0.0 1.0
5 Brazil 16.5 21.6 10.0 11.0 7.0 11.0 0.0 1.0 0.0 0.0 100.0 0.0 0.0 1.0
5 Mexico 27.8 13.4 28.0 6.0 0.0 1.0 2.0 0.0 0.0 7.0 0.0 0.0 2.0 0.0

Note: Core NTMs include licensing, prohibitions, quotas and administered pricing.

.. Not available

30
3.4 Trade analysis: Structural change and comparative advantage

The trade analysis literature contains several indices to assess the evolution and the
structure of an economy’s trade flows. One index to measure structural changes is the
Laurence Index LI. This index gives a value that ranges from zero to one, and the index
indicates a complete upheaval if it is close to unity, otherwise indicates little change if it is
close to zero. We give the mathematical formulation of this index in the Appendix.
We also computed two indices which assess trade specialization for Lebanon. These are the
Michaely Index MI and the Trade Specialization Index TSI. The Michaely Index is the more
traditional index, whose value ranges from zero to unity, with a value closer to one indicating
a greater degree of trade specialization. The Trade Specialization Index gives an improved
version of the Michaely Index. In this case, the degree of specialization in each sector is
weighted by its relative importance in the country’s total trade. This index also ranges
between zero and one, and the value of one implies a complete specialization in trade.
Table 11 shows the values of all these indices for Lebanon for the period 1993-2002. Notice
that the low and almost stable LI value shows that Lebanon didn’t experience a significant
structural change in trade for this period. MI values show that Lebanese trade is not that
specialized, while TSI values show greater (although decreasing) specialization.

TABLE 11. STRUCTURAL CHANGE AND TRADE SPECIALIZATION INDICES

Source: Ministry Of Finance - Customs Administration - Customs Information System NAJM- Lebanon
& Authors’ calculations

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
LI 0.09 0.10 0.16 0.11 0.06 0.10 0.09 0.10 0.09
MI 0.27 0.30 0.35 0.28 0.28 0.26 0.29 0.30 0.31 0.29
TSI 0.83 0.84 0.85 0.82 0.84 0.82 0.80 0.79 0.78 0.72

LI: Laurence Index (structural change)

MI: Michaely Index (trade specialization)
TSI: Trade Specialization Index

Other types of indices are computed by UNCTAD to evaluate trade patterns around
the world. Two widely used indices are the concentration index and the diversification index
7
. Both indices range between 0 and 1, with a value closer to 1 indicating full concentration of
exports say and high diversification across product categories in export patterns.
Table 12 shows values of the above-mentioned indices of exports for selected countries, for
1990 and 2000. Values for Lebanon show relatively high diversification in Lebanon but low
concentration. Mashreq countries have relatively high degrees of diversification for their
imports, while concentration (except for Syria and Iran), is relatively low. Gulf countries
show high patterns of diversification and concentration in exports, while North African
countries experience high diversification and medium concentration. These exports
characteristics further point at the highly competitive environment for the Lebanese economy
as it experiences similar patterns in exports with neighboring and other Arab countries.

7
Additional information on these indices can be found in UNCTAD’s Handbook of Statistics 2002. The
concentration index measures absolute deviation of a country’s export share from world structure, while the
diversification index is a normalized Herfindahl-Hirschmann index computed over a country’s export categories.

31
TABLE 12. CONCENTRATION AND DIVERSIFICATION INDICES OF EXPORTS
FOR SELECTED COUNTRIES
Source: UNCTAD Handbook of Statistics 2002

Diversification Concentration
INDICATOR index index
YEAR 1990 2000 1990 2000
COUNTRY
Lebanon .. 0.66 .. 0.12
Jordan 0.74 0.65 0.37 0.16
Syria 0.78 0.81 0.36 0.68
Cyprus 0.77 0.73 0.21 0.16
Israel 0.57 0.57 0.27 0.30
Iran .. 0.84 .. 0.86
Turkey 0.66 0.58 0.12 0.09
Saudi Arabia 0.85 0.86 0.75 0.79
Kuwait 0.85 .. 0.92 ..
Bahrain .. 0.81 .. 0.51
Qatar 0.70 .. 0.78 ..
Oman 0.83 0.76 0.88 0.79
UAE 0.69 .. 0.32 ..
Egypt 0.70 .. 0.24 ..
Algeria 0.86 0.87 0.57 0.58
Libya 0.58 .. 0.82 ..
Morocco 0.75 0.74 0.16 0.17
Tunisia 0.66 0.67 0.20 0.20

We have also explored what are Lebanon’s exports that are relatively more
competitive than other on the world market. One way to do that is by calculating the Revealed
Comparative Advantage (RCA) index for each product category for Lebanese exports. As
defined by Balassa (1979), the RCA index compares the export share of a given sector in a
country with the export share of that sector in the world market. We give in the Appendix the
detailed formula for RCA calculations.
As shown in Table 13, the top 15 Lebanese products with regards to their RCA index value
had scores for this index ranging from 0.07 to 0.37. The reason we have included two RCA
classification (the second one excluding the gold category) is because gold is imported and
then re-exported from Lebanon without any value added processing, and these gold trade
exchanges tend to distort overall trade classifications 8.
The first remark about these RCA values is that they are really low (all values are lower than
0.5), indicating that Lebanon does not have a substantial comparative advantage in its exports.
However, products such as tobacco, cement, textile fabrics and chemical products have a high
RCA among other exports, indicating that these might be contribute potentially to further
growth in Lebanese exports.

8
Gold is imported and re-exported possibly for financial hedging purposes.

32
TABLE 13. REVEALED COMPARATIVE ADVANTAGE (RCA), 2000
Source: COMTRADE and Authors’ calculations

Top 15
SITC RCA EX. share %
897 Gold, silver ware, jewellery 0.31 10.70
121 Tobacco, unmanufactd, refuse 0.30 2.83
661 Lime, cement and building prdts 0.28 4.89
269 Waste of textile fabrics 0.26 0.62
883 Developed cinema film 0.23 0.14
522 Inorg chem elmnt, oxides, etc 0.23 6.15
971 Gold, non-monetary nes 0.20 6.75
288 Non-ferrous metal scrap nes 0.19 2.58
062 Sugar preps non-chocolate 0.15 0.99
282 Iron and steel scrap 0.14 1.64
056 Vegtb etc prsrvd, preprd 0.13 1.27
057 Fruit, nuts, fresh, dried 0.10 4.20
423 Fixed vegetable oils, soft 0.09 1.16
892 Printed matter 0.09 3.69
211 Hides skins, exc furs, raw 0.07 0.58

Top 15 excluding Gold (SITC 897 &

971)
SITC RCA EX. share %
121 Tobacco, unmanufactd, refuse 0.37 3.43
661 Lime, cement and building prdts 0.34 5.92
269 Waste of textile fabrics 0.32 0.75
883 Developed cinema film 0.28 0.17
522 Inorg chem elmnt, oxides, etc 0.27 7.45
288 Non-ferrous metal scrap nes 0.23 3.12
062 Sugar preps non-chocolate 0.18 1.20
282 Iron and steel scrap 0.17 1.99
056 Vegtb etc prsrvd, preprd 0.16 1.54
057 Fruit, nuts, fresh, dried 0.12 5.08
423 Fixed vegetable oils, soft 0.11 1.41
892 Printed matter 0.10 4.47
211 Hides skins, exc furs, raw 0.09 0.71
554 Soap, cleansing, etc preps 0.08 1.60
562 Fertilizers, manufactured 0.07 1.66

Turning to a more detailed examination of trade patterns, one notices in Table 13 that
imports increased between 1997 and 2002 mostly from countries as the Russian Federation,
Egypt, China, Turkey, Korea, Romania, Saudi Arabia and the Netherlands ; while
interestingly enough imports from Italy (Lebanon’s main trading partner) decreased by 29%
for the same period.
As for Lebanese exports sorted by country of destination, data in Table 14 shows that the
greatest increases were for exports to Switzerland, Spain, Belgium, Qatar, Syria, Egypt, the

33
UAE, Jordan, Turkey and Kuweit to mention only a few. The interesting fact is that exports
increased towards countries that signed a bilateral trade agreement with Lebanon (Syria,
Egypt, UAE, Jordan and Kuweit), and this indicates a somewhat positive effects of these
agreements on the growth in Lebanese exports.
Table 15 shows exports and net exports evolution by countries (net exports are defined
as exports minus imports). Countries are sorted by increasing order in net exports’ variation.
A high negative value for this evolution is considered as a beneficial evolution, as exports
grow more than imports for a given country.
We notice first that Lebanese exports increased by 62% between 1997 and 2002, and this is
can be viewed as a rather remarkable increase. With total imports decreasing by 14% over the
same period, one sees net exports decreasing by 21%. Although Lebanon still has a relatively
high trade deficit in 2002 (-5400 Mn USD), this deficit has decreased by 21% relative to its
level in 1997. The greatest decreases were for trade with Switzerland, Syria, the USA and
Italy to mention a few, while trade deficit grew with countries such as Egypt and the Russian
Federation. The trade agreement with Syria lead therefore to a decrease in Lebanon’s trade
deficit with that countries, while the agreement with Egypt worsened this deficit. In the
following section we examine in more details the effects these bilateral agreements had on
prices and terms of trade for the Lebanese economy.

TABLE 14. IMPORTS EVOLUTION BY COUNTRY, 1997- 2002

Source : Ministry Of Finance - Customs Administration - Customs Information System NAJM- Lebanon

(Mn USD) 1997 Share 2002 Share % var IMP

Russian Fdr. 89 0.01 246 0.04 176
Egypt* 58 0.01 134 0.02 131
China 238 0.03 435 0.07 83
Turkey 154 0.02 259 0.04 68
Korea 55 0.01 77 0.01 40
Romania 48 0.01 57 0.01 19
Saudi Arabia 123 0.02 139 0.02 13
Netherlands 131 0.02 147 0.02 12
Spain 180 0.02 175 0.03 -3
Belgium 143 0.02 137 0.02 -4
Other Countries 1222 0.16 1114 0.17 -9
Germany 648 0.09 582 0.09 -10
UK 327 0.04 253 0.04 -23
France 709 0.09 517 0.08 -27
Japan 302 0.04 217 0.03 -28
Ukraine 142 0.02 102 0.02 -28
Brazil 76 0.01 54 0.01 -29
Italy 987 0.13 693 0.11 -30
USA 685 0.09 464 0.07 -32
Taiwan 95 0.01 63 0.01 -34
Syria* 326 0.04 207 0.03 -37
Switzerland 493 0.07 267 0.04 -46
Greece 133 0.02 72 0.01 -46
Sweden 93 0.01 34 0.01 -63
Total Imports 7457 6445 -14
*Trade Agreement

34
TABLE 15. EXPORTS EVOLUTION BY COUNTRY, 1997-2002
(Mn USD) 1997 Share 2002 Share % var EXP
Switzerland 16 0.02 132 0.13 726
Spain 6 0.01 17 0.02 179
Belgium 9 0.01 22 0.02 148
Other Countries 122 0.19 299 0.29 145
Qatar 7 0.01 15 0.01 116
Syria* 38 0.06 76 0.07 99
Egypt* 16 0.02 28 0.03 73
UAE* 58 0.09 95 0.09 63
Jordan* 25 0.04 35 0.03 41
USA 39 0.06 54 0.05 37
Turkey 27 0.04 32 0.03 19
Kuwait* 29 0.05 32 0.03 12
Italy 21 0.03 23 0.02 8
Cyprus 8 0.01 8 0.01 4
UK 20 0.03 21 0.02 4
Germany 14 0.02 14 0.01 1
Bulgaria 1 0.00 1 0.00 0
Japan 4 0.01 4 0.00 0
Saudi Arabia 97 0.15 96 0.09 -1
Netherland 17 0.03 16 0.01 -8
France 46 0.07 20 0.02 -57
Libya 14 0.02 4 0.00 -71
Russian Fdr. 4 0.01 1 0.00 -75
Romania 5 0.01 1 0.00 -80
Total Exports 643 1045 62
* Trade Agreement

TABLE 16. EXPORTS (EX) & NET EXPORTS (NE) COMPARISON, 1997-2002
1997 Share 2002 Share % var %var NE NE %var
(MnUSD) EX IMP 1997 2002 NE
Switzerland 16 0.02 132 0.13 726 -46 -477 -135 -72
Syria* 38 0.06 76 0.07 99 -37 -288 -131 -54
USA 39 0.06 54 0.05 37 -32 -646 -410 -36
Italy 21 0.03 23 0.02 8 -30 -966 -670 -31
Japan 4 0.01 4 0.00 0 -28 -298 -213 -29
Other Countries 122 0.19 299 0.29 145 -9 -1100 -815 -26
France 46 0.07 20 0.02 -57 -27 -663 -497 -25
UK 20 0.03 21 0.02 4 -23 -307 -232 -24
Belgium 9 0.01 22 0.02 148 -4 -134 -115 -14
Germany 14 0.02 14 0.01 1 -10 -634 -568 -10
Spain 6 0.01 17 0.02 179 -3 -174 -158 -9
Netherlands 17 0.03 16 0.01 -8 12 -114 -131 15
Romania 5 0.01 1 0.00 -80 19 -43 -56 30
Saudi Arabia 97 0.15 96 0.09 -1 13 -26 -43 65
Turkey 27 0.04 32 0.03 19 68 -127 -227 79
Egypt* 16 0.02 28 0.03 73 131 -42 -106 153
Russian Fdr. 4 0.01 1 0.00 -75 176 -85 -245 188
Total EX & NE 643 1045 62 -14 -6814 -5400 -21
* Trade Agreement

35
3.5 Lebanon’s trade agreements: Past, present and future

Import dynamism under free trade agreements

The disaggregated data on Lebanese trade figures obtained from the Lebanese
Customs Administration covering the period 1997-2002 allows a closer examination of trade
patterns under the preferential trade agreements that Lebanon is already part of. Particularly,
we can analyze one multilateral free trade agreement that Lebanon engaged in, the GAFTA
(Greater Arab Free Trade Area), and several other bilateral trade agreements with individual
Arab countries. Table 17 summarizes these patterns. One can see that the share of total
imports conducted under these agreements evolved from 3.69% in 1997 to 4.34% in 2002, a
share which remains quite low and that is expected to be boosted upward after the Association
Agreement with the European Union, Lebanon’s main trading partner, comes into effect in
2007.

TABLE 17. TRADE PATTERNS UNDER PTAs, 1997-2002

Source : Ministry Of Finance - Customs Administration - Customs Information System NAJM- Lebanon

(MnUSD) 1997 1998 1999 2000 2001 2002 Agreements

AC 27.2 0.2 56.7 75.1 60.7 59.6 AC GAFTA
EG 13.4 0.0 16.2 67.7 67.6 90.8 EG Egypt
JO 29.4 29.1 23.8 37.8 17.9 13.7 JO Jordan
SA 36.8 43.6 44.2 42.3 13.2 11.1 SA Saudi Arabia
SD 13.8 9.2 16.4 14.7 14.3 10.2 SD Soudan
SY 154.5 103.9 81.6 73.8 100.2 86.0 SY Syria
KW 0 0 6.2 12.9 3.4 3.5 KW Kuweit
IQ 0 0 0 0.4 0.3 0.2 IQ Iraq
AE 0 0 0 0 0 4.7 AE Arab Emirats
TOTAL 275.1 186.1 245.1 324.6 277.5 279.8
TOT. IMP. 7456 7060 6206 6228 7291 6445
SHARE % 3.69 2.64 3.95 5.21 3.81 4.34

Another observation concerning trade agreements is that imports under GAFTA

remained lower than two major bilateral trade agreements that Lebanon signed with Syria and
with Egypt respectively. Imports from Syria represented the highest amount among all other
bilateral agreements in 1997, yet in 2002 imports from Egypt under the free trade agreement
came into the first position. Figure 3 shows how imports evolved from Lebanon’s major free
trade partners. Imports from Syria declined sharply between 1997 and 2002, while those from
Egypt were on the rise; especially between 2001 and 2002 where global imports were
decreasing and Egyptian imports were experiencing the reverse evolution.
One reason that could explain this difference between the dynamism of imports under the
agreement with Egypt and other agreements like the GAFTA or the one with Syria is that the

36
Egyptian agreement called for an immediate zero tariff rates starting 1-1-1999, with some
exceptions mainly in agricultural products; while the agreement under GAFTA stipulates a
10% annual reduction starting 1998, and the Syrian agreement imposed that tariff rates on
industrial goods would only be reduced by 25% annually starting January 1, 1999, while other
goods were subject to 50 per cent initial reduction followed by 10 per cent annually over a
period of 5 years. In addition to this, many agricultural products were not covered under the
agreement between Lebanon and Syria. The free trade agreement with Egypt thus appears as
the most flexible with regards to imports, and this could explain why imports from Egypt
grew at a fast rate between 1999 and 2002.

FIG. 3. EVOLUTION OF TRADE UNDER PTAs

160

140

120
AC
100 EG
Mn USD

JO
80 SA
SD
60 SY
TOT IMPx100
40

20

0
1997 1998 1999 2000 2001 2002

TOT IMP: total imports, unit: 100 million USD.

The free trade agreements with Syria and Egypt : a comparative assessment

Taking a closer look at Lebanon’s existing bilateral trade agreements with Syria and
Egypt, we conducted a general analysis where we explored import patterns, average prices 9
and terms of trade for 1997 and 2002, including the United States as an example of an
“outside” trade partner to explore issues of trade creation and possible trade diversion that
might have been caused by the bilateral agreements. Table 18 shows imports from and
average prices for Egypt, Syria and the United States, classified by HS1 sections. We can see
that in 2002 imports from Egypt and Syria rose in total and for a majority of sections, while
imports from the USA rose in total yet decreased for a number of sections. As for average
imports prices for these countries, one notices that they decreased in the sections 1, 2, 4, 7, 10,
11, 13, 15 and 19 for Egypt; 2, 4, 5, 9, 10, 11, 13, 15 and 16 for Syria; 1, 2, 3, 4, 5, 10, 12, 15
and 16 for the USA. These changes in import quantities and prices may be considered as a
somewhat general evidence of trade creation for most of the sections under the agreements
with Egypt and Syria, a trade which is mostly occurring at lower prices than the pre-

9
Average prices are computed as the ratio of imports’ dollar value over the imports’ total weight in each section.

37
agreement stage. This is considered as beneficial regarding consumer welfare as import prices
are lower, provided of course that this border price decrease is passed through to the final
consumer, without importers and intermediaries realizing solely extra profits because of this
increased trade.
As for the possible trade diversion caused by these bilateral agreements, we notice that
imports from the USA decreased for the same period for some sections, and this may be due
to the fact that more trade is shifted away from American products towards now cheaper ones
covered by the trade agreements. The negative effects of trade diversion can be seen by
looking at section HS1 in Table 18 (Live animals and animal products), where prices in
USD/kg were in 1997 4.07, 3.27 and 3.2 for Egypt, Syria and the USA respectively. In 2002
imports from Egypt and Syria increased for this section, however imports from Syria were
now realized at higher prices (3.33 USD/kg), a price above that of the USA for this section.
This possibly shows that because of preferential trading with Syria, there occurred a diversion
away from cheaper US products. This illustrates a common concern for PTAs, namely the fact
that they might distort trade relations away from the most efficient partners.
In general, trade creation must outweigh trade diversion in order that PTAs be judged as
suitable for a given country. This seems to be the case for Lebanon’s agreements with Egypt
and Syria, where imports experienced for most of the sections a decrease in price.

Another way to evaluate bilateral trade agreements is done by looking at Lebanon’s

terms of trade, before and after engaging in these agreements. Table 19 shows each section’s
terms of trade Tn for Egypt, Syria and the United States for 1997 and 2002. Tn is a ratio of two
indexes: (1) the average price of a country’s exports (Pe), which can be approximated by
dividing an index of export volume into an index of export revenue, and (2) the average price
of its imports (Pm), determined for imports by the same method as Pe. The commodity terms
of trade rise if export prices rise relative to import prices.
Overall, the agreement with Syria seems to have been better than the one with Egypt, given
that Lebanon’s terms of trade decreased in 2002 relative to 1997 levels for Egypt and rose for
Syria. As for the effects on the USA, one notices that overall terms of trade declined for the
same period.
A more detailed examination shows that regarding the agreement with Egypt, section-specific
terms of trade increased for the following sections: 2, 6, 7, 10, 11, 13 and 15 ; and decreased
for the section 16. With Syria, terms of trade increased for the sections 4, 5, 9, 10, 15, 16 and
20 ; and decreased for the sections 7, 11 and 13. Regarding the USA, terms of trade increased
only for the sections 14 and 18. These observations show that to properly evaluate the benefits
of PTAs one need to look at each product category, as terms of trade might increase or
decreased depending on the section under consideration.
At this point we can conclude that the bilateral agreements with Egypt and Syria were
mostly beneficial for the Lebanese economy, both in having lower average import prices and
increased terms of trade. Effects with regards to trade diversion on “outside” or “non
member” countries such as the USA were rather limited to a few sections.
Following this general analysis, we now turn in the next sections into conducting an
econometric evaluation of trade agreements in a more detailed approach than the previous
one.

38
 T18. IMPORTS COMPARISON TONS NET AV. PRICES (USD/Kg)
Egypt, Syria and USA 1997 2002 1997 2002
HS1 Class EG SY US EG SY US EG SY US EG SY US
1 Live animals; animal products 246 1,222 938 1,605 3,907 671 4.07 3.27 3.20 2.49 3.33 2.98

2 Vegetable products 55,727 65,920 397,422 85,823 51,613 398,025 0.34 1.85 0.19 0.24 0.79 0.15

3 Animal or vegetable fats and oils 154 2,154 3,255 11,370 464 5,743 0 2.79 1.23 0.62 0 0.87

4 Prepared foodstuffs; beverages, tobacco 2,550 18,536 53,456 6,061 25,291 28,953 3.92 0.65 3.93 1.98 0.43 3.49

5 Mineral products 12,017 1,121,416 49,546 201,158 1,099,665 367,759 0.08 0.15 0.18 0.11 0.10 0.14

6 Products of the chemical or allied industries 3,688 1,186 8,625 16,587 6,989 6,022 0.54 0.84 4.64 1.33 0.86 7.80

7 Plastics and articles thereof; rubber 778 1,183 6,816 2,033 2,816 2,853 2.57 0.85 2.35 1.48 1.07 2.80

8 Raw hides and skins, leather, furskins 6 40 58 5 379 24 0 0 17.24 0 2.64 0

Wood and articles of wood; wood charcoal;
9 cork
229 3,383 7,425 25 3,661 4,269 0 0.30 1.35 0 0.27 1.64

10 Pulp of wood; paper and paperboard 1,950 215 21,737 4,882 2,611 21,737 1.54 4.65 0.92 1.23 0.77 0.74

11 Textiles and textile articles 1,846 1,522 11,010 729 3,023 2,525 4.33 1.97 1.63 2.74 1.65 3.56

12 Footwear, umbrellas, artificial flowers 3 17 212 1 336 81 0 0 14.15 0 2.98 12.35

13 Articles of stone, plaster, cement, glass 2,911 19,546 4,007 3,113 47,255 817 0.34 0.15 1.00 0.32 0.11 1.22

14 Pearls, precious stones and metals 2 2 5 1 0 2 0 0 400 0 2000

15 Base metals and articles of base metal 2,499 3,123 2,230 63,917 4,446 1,495 2.40 1.60 6.28 0.45 0.90 3.34

16 Machinery;electrical instruments 1,694 1,140 12,417 443 1,318 8,070 1.77 2.63 9.99 4.51 1.52 9.05
Vehicles, aircraft, vessels, transport
17 equipment
29 92 12,722 74 148 4,740 0 0 7.31 0 0 8.02
Optical, photographic,medical, musical
18 instruments
14 23 386 10 15 293 0 0 67.36 0 0 98.98

19 Arms and ammunition; parts and accessories 38 0 27 0 37.04

20 Miscellaneous manufactured articles 374 0 1,565 609 1,564 1,134 5.35 9.58 3.28 1.92 6.17
21 Works of art, collectors' pieces and antiques 0 580 5 3 1 4 1.72 0 0 0 0
Total 86,718 1,241,301 593,875 398,448 1,255,501 855,244 0.67 0.26 1.15 0.34 0.16 0.54

39
 TABLE 19. TERMS OF TRADE 1997 2002
HS1 HS1 EG SY US EG SY US
Live animals; animal products 0 0 0 0 0 0 Increase
1
Vegetable products 0.84 0 30.34 1.47 0 28.83 Decrease
2
3 Animal or vegetable fats and oils 0 2.12 0 1.62
Source:NAJM
4 Prepared foodstuffs; beverages, tobacco 0 0 0.93 0 0.56 0.65
& Authors’
5 Mineral products 0 0.67 0 0 0.90 0 calculations

6 Products of the chemical or allied industries 0.55 0 1.08 0.57 0 0.65

7 Plastics and articles thereof; rubber 0 2.05 0 1.38 1.12 0

8 Raw hides and skins, leather, furskins 0 0

9 Wood and articles of wood; wood charcoal; cork 0 0 1.80 0

10 Pulp of wood; paper and paperboard 0 0.10 0 0.69 0.67 0

11 Textiles and textile articles 1.82 2.80 3.20 2.18 1.80 1.15

12 Footwear, umbrellas, artificial flowers 0 0 0

13 Articles of stone, plaster, cement, glass 0 2.74 0 2.13 2.35 0.65

14 Pearls, precious stones and metals 1.11 0.63

15 Base metals and articles of base metal 0 0 0 5.01 1.56 0

16 Machinery;electrical instruments 2.42 0.96 2.40 0.94 3.14 0.78

17 Vehicles, aircraft, vessels, transport equipment 8.83 0

Optical, photographic,medical, musical
18 instruments 0 10.10

19 Arms and ammunition; parts and accessories 0

20 Miscellaneous manufactured articles 0 0.89 0 1.02 0

21 Works of art, collectors' pieces and antiques 0

Total 0.87 1.05 3.68 0.81 1.83 0.91

40
 4. An empirical evaluation of PTAs

We have exposed in the general discussion in the first part of this paper the way economists
concerned with the empirical evaluation of PTAs have generally proceeded. The two known
empirical methods, namely General Equilibrium (GE) models and “Gravity” equations, suffer
from many disadvantages. GE models always contain calibrations that are often highly
debatable, and involve complex numerous equations that are highly demanding from a data
perspective. Gravity based models can only explain aggregate trade creation and diversion
following a PTA, and fail to explain how distant countries have increasing trade among each
others. All in all, these models have ignored a serious bias when evaluating PTAs, namely the
fact that the effects of these agreements is highly dependent on trade sections.

The model we propose in the following sections offers an answer to these problems. We are
able to evaluate trade creation and diversion following a PTA by section and for each group
of countries under consideration. Moreover, the flexible demand system we provide allows
the straightforward aggregation or disaggregation of the estimation procedure, which allows
to identify the effects of a PTA on demand for imports on many levels on the product
classification schedule. The demand system model also allows us to carry simulation studies
to evaluate the future effects of a PTA on the growth of import quantities and prices,
differentiated by sections and country groups. In the final part of this section we also augment
the demand model with the supply behavior of exporting representative firms, and this will
prove as shown below to be of considerable importance in the proper evaluation of the terms
of trade effects of a PTA.

These two models we develop only allow to look at the welfare impacts of a PTA on import
patterns: a beneficial PTA affects consumer welfare (both on the final and intermediate goods
levels). The reason why exports are left out is that we lack detailed data on the import patterns
of the countries Lebanon is signing agreements with, and this is crucial to the estimation of a
complete terms of trade evaluation. Moreover, Lebanon is a very small exporting country, and
the major effects of PTAs will come through the import channel.
We start by highlighting the demand model that we will estimate.

4.1 The model and the estimation procedure

The Almost Ideal Demand System (AIDS)

The most practical way of modelling expenditures in consumer or international economics is

to specify a demand system that would satisfy basic economic assumptions on consumer
behavior. This demand system should also be simple enough to estimate, and its nature should
allow for direct and straightforward inference on consumer reaction to prices. At the same
time, an important requisite that has gained much attention in the past decade is that such a
demand system be consistent with aggregation. In other words, the final demand for a given
good on a market should be obtained by direct aggregation of individual consumer demands.

The Almost Ideal Demand System (AIDS) developed by Deaton and Muellbauer (1980) has
become one of the most popular demand system in the economic literature. The purpose of

41
this section is to present a brief exposition of its theoretical foundations, and to derive an
estimable system of equations that is suited for the problem at hand.

In the economic literature on demand analysis, it is usual to specify a cost or expenditure

function for a representative consumer (household or country) as a mathematical expression
involving a system of prices for the goods, and the utility (degree of satisfaction) attained
when consuming a given set of commodities. For the import demand model, we need to be
more explicit on the representation of the price system. Let the subscripts i and j denote
distinct imported goods (food, textiles, machinery…), and the subscripts h and k denote
sources (regions from which the goods are imported: European Union, North America,…).
For each good, the number of sources is not necessarily the same. Let pih denote the unit
producer (exporter) price of good i exported from country h.

Denoting p the vector (set) of prices and u the utility level of the consumer, the PIGLOG
(Price-Independent Generalized Logarithmic) cost function reads
log C (u , p ) = (1 − u ) log A( p ) + u log B (p),

where A(p) and B(p) are parametric expressions of prices:

log A( p ) = α 0 + ∑ ∑ log p ih + 1 / 2 ∑∑∑∑ γ *ih jk log pih log p jk ,

i h i j h k

and

log B( p) = log A( p) + β 0 ∏∏ pih ih .

β

i h

Differentiating the (logarithmic) cost function above with respect to p and u and rearranging,
it can be shown that the share of demand for good i from source h, denoted wih, is

wih = α ih + ∑∑ γ ih jk log p jk + β ih log( E / P*),

j k

where

γ ih jk = 1 / 2(γ *ih jk +γ * jk ih )

and

log p * = α 0 + ∑ ∑ log p ih + 1 / 2 ∑∑∑∑ γ *ih jk log pih log p jk .

i h i j h k

Hence, the proportion of imports of good i imported from source j is a function of the price of
all other goods from all sources (pjk in the expression above), and also a function of total
expenditure divided by an overall price index: E/P*.

The price index P* is typically involving all prices from all possible sources, and it can be
computed as a weighted price index using as weights the shares in total demand of the goods.
0 0
Let p ih and w ih respectively denote the base-year (or the empirical mean) of the price and

42
 T
import share of good i from source h. We can then replace P* by the Tornqvist price index P
whose expression is as follows:

log P T = 1 / 2∑∑ ( wih + wih0 ) log( pih / pih0 ).

i h

The share equations defined above are valid under very general circumstances for a wide
variety of goods. Parameter γihjk for instance captures the sensitivity of the import share of
good i from source h with respect to the price of any good j from any source k. Of course,
when i=j and h=k, we can measure the reaction of relative demand for a given good to its
own price.

If we were to use this equation directly, the number of parameters would be tremendous, as it
increases both with the number of goods and the number of import sources. A way round this
problem is to impose parametric restrictions to the model, by excluding the influence of the
price of some goods (or sources) on some other goods (or sources).

Imposing restrictions on the AIDS system

An interesting reference for restricted AIDS models applied to trade is Andayani and Tilley
(1997), who estimate trade diversion elasticities on Indonesian fruit import data.

A first restriction concerns source differentiation.

Restriction 1. Cross-price effects are not source differentiated between products, but are
source differentiated within a product:
γ ih jk = γ ih j ∀k ∈ j ≠ i.

For example, the Lebanese demand for European dairy products may have a source-
differentiated cross-price effect for dairy products from other sources (North America, Rest of
the World), but cross-price responses to non-dairy products are not source-differentiated. This
restriction implies an absence of substitutability between products of different nature and
different origin.

With this restriction, the model is denoted RSDAIDS (Restricted Source Differentiated AIDS)
and reads:

wih = α ih + ∑ γ ihk log p ik + ∑ γ ih j log p j + β ih log( E / P T ),

k j ≠i

where γihk denotes the price coefficients of good i from different source h, and pj is a
Tornqvist weighted price index for all goods other than i. We construct this price index as

log p j = ∑ ( w jk + w 0j ) log( p jk / p 0j ),
k

0 0
where p j and w j respectively denote the base-year (or the empirical mean) of the price and
the import share of good j over all sources.

43
With Restriction 1, the share of good i imported from source h is seen to depend on prices of
the same good from all sources (coefficients γihk), but also on price indexes for all other
goods. This may create problems during estimation if the number of goods is prohibitive.
Moreover, there are reasons to believe the substitutability patterns between goods may be
limited in many cases (for instance, food and machinery, precious stones and chemical
products,…). For this reason, we further restrict the model for import shares to be estimated.

Restriction 2. Cross-price effects are source differentiated within a product, but are not
differentiated across different products. We have the final specification for the share

wih = α ih + ∑ γ ihk log pik + β ih log( E / P T ).

k
equations:

It should be noted that, although price effects for goods other than i in the share equation are
not explicitly accounted for, their impact still remained, albeit at a much more aggregated
T
level, through the total expenditure term, log(E/P ).

A last set of restrictions does not actually depend on restrictions imposed above on
differentiation patterns, but are typically imposed to be consistent with the definition of the
expenditure function C defined above. First, coefficients for cross-price effects should be
symmetric across equations. For instance, the marginal impact of a change in the price of
good i from source h on the share of good i imported from source k should be the same as the
marginal impact of a change in the price of good i from source k on the share of good i
imported from source h.

Restriction 3. Symmetry.
γ ihk = γ ikh ∀i, h, k .

Second, although the latter is specified within the AIDS framework as a flexible functional
form, it is immediate that the total expenditure should vary in the same proportion as a
uniform change in all prices. For example, if prices for imported goods from all sources
increase by 10 percent, we should also have the total expenditure increase by exactly 10
percent. To impose this homogeneity in price for the expenditure function C, we impose
parametric restrictions as follows:

Restriction 4. Homogeneity in prices.

∑α
h
ih = 1 ∀i, ∑γ
k
ihk = 0 ∀i, h.

44
Inference for demand analysis

Once the parametric share equations are estimated, it is possible to infer many substitutability
patterns and price effects (see Green and Alston, 1990 for a survey on elasticities in the AIDS
model). The most obvious one is given by the so-called Marshallian own-price elasticity,
measuring the change in the quantity demanded for good i from source h resulting from a
change in its own price:

Definition 1. Own-price elasticity of demand.

ε ihih = − 1 + γ ihh / wih − β ih .

The second one is the so-called Marshallian cross-price elasticity, measuring the change in the
quantity demanded for good i from source h resulting from a change in the price of the same
good but from a different source, k:

Definition 2. Cross-price elasticity of demand.

( )
ε ihik = − 1 + γ ihk / wih − β ih wik / wih .

The third and last one concerns the expenditure elasticity, i.e., the percent change in total
demand for good i when total expenditure on all goods changes:

Definition 3. Expenditure elasticity.

η ih = 1 + β ih / wih .

The own-price and cross-price elasticities are the central objects of our empirical analysis.
With the former, we can predict the change in the quantity demanded for any given
commodity from any source, when its price increases or decreases. With the latter, it is
possible to assess the degree of trade diversion patterns associated with each good. For
instance, an increase in the price of imported European goods relative to North American
ones is likely to lead to an increase in imports from North America and a decrease in imports
from Europe, but it may also have an impact on goods imported from Arab countries or from
the rest of the world. This is because, among other things, an additional revenue is obtained
because of this decrease in the price of imported goods from Europe, and imports from the
rest of the world of competing goods that were not considered for importing may also
increase.

45
4.2 The data

Data are made available from the Customs database, for the years 1997-2002 (6 years). Raw
data records consist of daily transactions (both exports and imports) and contain information
on:
- day, month and year of the transaction
- country of origin (imports) or destination (exports)
- preferential or trade agreement tariffs
- net quantity of commodity imported/exported (either net weight or number of units)
- amount (in Lebanese pounds).

After selecting imports only from the database, we compute unit prices for each transaction
by dividing amount paid by the number of units when applicable, or by net weight. These unit
prices free of customs tariffs are then converted to unit prices net of customs duties, using
average weighted tariff rates. The table below reports values for these tariff rates, based on the
1999 import values.

TABLE 20. TRADE-WEIGHTED AVERAGE IMPORT TARIFF RATES

(1999 IMPORT DATA)

Chapter. Title AWR (%)

1 Live animals 0.09
2 Meat and edible meat offal 5.01
3 Fish and crustaceans, molluscs and other aquatic invertebrates 5.00
4 Dairy products; birds' eggs; natural honey 13.68
5 Products of animal origin, not elsewhere specified or included 0.04
6 Live trees and other plants 9.45
7 Edible vegetables and certain roots and tubers 37.92
8 Edible fruit and nuts 15.12
9 Coffee, tea, mate and spices 5.01
10 Cereals 0.94
11 Products of the milling industry 1.69
12 Oil seeds and oleaginous fruits 3.88
13 Shellac; gums, resins and other vegetable saps and extracts 1.53
14 Vegetable plaiting materials 2.74
15 Animal or vegetable fats and oils 12.92
16 Preparations of meat, of fish or of crustaceans, molluscs 6.04
17 Sugars and sugar confectionery 9.45
18 Cocoa and cocoa preparations 18.77
19 Products from cereal, flour, starch or milk; pastry products 13.98
20 Processed products made from vegetables, fruit nuts, … 29.73
21 Miscellaneous edible preparations 6.91
22 Beverages, spirits and vinegar 24.65
23 Residues and waste from the food industries 5.00
24 Tobacco and manufactured tobacco substitutes 88.23
25 Salt; sulphur; earths and stone 2.35
26 Ores, slag and ash 0.00
27 Mineral fuels, mineral oils and products 9.63

46
Chapter. Title AWR (%)
28 Inorganic chemicals 1.13
29 Organic chemicals 0.95
30 Pharmaceutical products 5.00
31 Fertilizers 5.00
32 Tanning or dyeing extracts 7.44
33 Essential oils and resinoids; perfumery, cosmetic or toilet preparations 13.69
34 Soap, organic surface-active agents 18.09
35 Albuminoidal substances 3.95
36 Explosives; pyrotechnic products 5.00
37 Photographic or cinematographic goods 4.50
38 Miscellaneous chemical products 4.38
39 Plastics and articles thereof 3.29
40 Rubber and articles thereof 4.88
41 Raw hides and skins and leather 13.67
42 Articles of leather 21.24
43 Furskins and artificial fur 20.33
44 Wood and articles of wood 2.31
45 Cork and articles of cork 5.00
46 Manufactures of straw 5.00
47 Paper products from wood pulp or other fibrous cellulosic material 0.00
48 Paper and paperboard 7.67
49 Printed books, newspapers and other products of the printing industry 2.60
50 Silk 0.00
51 Wool, fine and coarse animal hair 0.00
52 Cotton 0.00
53 Other vegetable textile fibber 0.00
54 Man-made filaments 0.00
55 Man-made staple fibbers 0.00
56 Wadding, felt and nonwoven materials 0.00
57 Carpets and other textile floor-coverings 13.81
58 Special woven fabrics 0.00
59 Impregnated, coated, covered or laminated textile fabrics 0.00
60 Knitted or crocheted fabrics 0.00
61 Articles of apparel and clothing accessories, knitted or crocheted 14.98
62 Articles of apparel and clothing accessories, not knitted or crocheted 15.00
63 Other finished textile articles 9.75
64 Footwear, gaiters and the like 25.00
65 Headwear and parts thereof 20.00
66 Umbrellas and parts thereof 4.72
67 Prepared feathers and down 5.00
68 Articles of stone, plaster, cement 14.59
69 Ceramic products 13.50
70 Glass and glassware 10.22
71 Natural or cultured pearls, precious stones, precious metals 0.33
72 Iron and steel 7.98
73 Articles of iron or steel 6.71
74 Copper and articles thereof 1.02
75 Nickel and articles thereof 1.68
76 Aluminium and articles thereof 4.38
78 Lead and articles thereof 2.64

47
Chapter. Title AWR (%)
79 Zinc and articles thereof 1.46
80 Tin and articles thereof 1.50
81 Other base metals 0.17
82 Tools, implements, cutlery, spoons, forks of base metal 4.17
83 Miscellaneous articles of base metal 5.14
84 Nuclear reactors, boilers, machinery and mechanical appliances 6.29
85 Electrical machinery and equipment 4.68
86 Railway or tramway locomotives, rolling-stock and parts thereof 5.00
87 Vehicles and parts 5.00
88 Aircraft, spacecraft and parts thereof 0.00
89 Ships, boats and floating structures 2.06
90 Optical, photographical instruments, etc. 4.90
91 Clocks and watches and parts thereof 5.00
92 Musical instruments 5.00
93 Arms and Ammunition 7.10
94 Furniture; bedding and the like 24.04
95 Toys, games and sporting goods 5.00
96 Miscellaneous manufactured articles 4.98
97 Works of art, collectors’ pieces and articles 8.96

Next, we construct indicator variables for the region from which the commodity has been
exported to Lebanon. The four regions are the following:

- EU (European Union): Andorra, Austria, Belgium, Germany, Denmark, Spain,

Finland, France, Great-Britain, Guadeloupe, Gibraltar, Greece, Ireland, Italy,
Luxemburg, Martinique, The Netherlands, Portugal, Réunion, Sweden;

- AR (Arab and Regional countries): Algeria, Morocco, Tunisia, Libya, Iraq, Jordan,
Kuwait, Arab Emirates, Bahrain, Brunei, Egypt, Iran, Oman, Qatar, Saudi Arabia,
Sudan, Syria, Turkey;

- AM (North and Latin America): United States of America, Canada, Argentina,

Bolivia, Brazil, Bahamas, Chile, Colombia, Costa Rica, Dominican, Ecuador,
Guatemala, Honduras, Mexico, Panama, Peru, Paraguay, Trinidad and Tobago,
Uruguay, Venezuela;

- ROW (Rest of the World).

These regions are defined in a narrow economic sense in the case of the European Union, and
in a more geographic sense for AR (Arab and Regional countries) and AM (North and Latin
America).

The following table presents statistics on the number of observations and average tariff rates,
by region and by year.

48
TABLE 21. NUMBER OF RECORDED IMPORT TRANSACTIONS,
BY YEAR AND REGION, 1997-2002

Region Observations Relative Average tariff rate

frequency (in percent)
1997
EU 301,639 52.85 8.8636
AR 78,205 13.70 18.2032
AM 67,566 11.84 7.6848
ROW 123,305 21.61 8.1870
Total 570,715 100.00 9.8577
1998
EU 298,099 53.65 9.1610
AR 66,785 12.02 15.5690
AM 61,640 11.09 7.9192
ROW 129,156 23.24 8.5629
Total 555,680 100.00 9.6544
1999
EU 268,371 53.13 9.2844
AR 56,093 11.10 17.0140
AM 50,424 9.98 7.8161
ROW 130,278 25.79 8.7306
Total 505,166 100.00 9.8533
2000
EU 27,051 52.71 9.2979
AR 61,459 11.98 18.1759
AM 46,244 9.01 7.8256
ROW 134,954 26.30 9.0570
Total 513,175 100.00 10.1652
2001
EU 330,131 51.86 9.6074
AR 75,403 11.84 16.1090
AM 49,965 7.85 7.8292
ROW 181,082 28.45 9.2420
Total 636,581 100.00 10.1340
2002
EU 339697 50.16 9.8344
AR 83641 12.35 15.6368
AM 49540 7.32 8.0024
ROW 204295 30.17 9.6306
Total 677173 100.00 10.3556

The daily observations on price and quantity are then aggregated by computing monthly
equivalents of price and quantity. To do this, we define the HS8 (Harmonized System 8 Digit)
level as the base unit for the empirical analysis. This choice is motivated by the need to
preserve a reasonable level of homogeneity for commodities. For each good defined as a
specific HS8 level, we compute the monthly average of daily unit prices, and the monthly
level of imports as the sum of quantities imported over all days of the month.

49
Monthly import shares by region are computed by dividing import value from each region by
total expenditure for the same good and the same month. For commodity j imported from
source k at time (month) t, we have

w jk t = p jk t Q jk t / ∑∑ piht Qih t = p jk t Q jk t / Et .
i h
By construction, the sum of shares over all four regions is 1 for each and every good, and any
time period.

The following table and graphs present average import shares by region and year.

TABLE 22. IMPORT SHARES (IN PERCENT)

BY SECTION AND YEAR, IN PERCENT, 1997-2002.

Section Year European Arab North Rest of the

Union countries America World
1. Live animals, animal products
1997 28.6340 21.6253 9.0516 40.6889
1998 23.5471 25.4833 12.2306 38.7388
1999 27.9779 15.5857 18.4258 38.0104
2000 32.8545 12.1967 12.4303 42.5184
2001 29.1975 20.2917 12.9550 37.5557
2002 29.3116 29.0342 10.8473 30.8067
2. Vegetable products
1997 28.2029 28.6232 16.4764 26.6974
1998 27.2481 26.4752 18.3532 27.9233
1999 25.1633 29.7048 15.9741 29.1577
2000 20.2848 27.0306 18.4848 34.1996
2001 20.2360 35.8936 18.5946 25.2756
2002 19.1943 34.1672 21.2474 25.3909
3. Animal and vegetable fats
1997 33.8716 29.7053 19.9339 16.4890
1998 35.9218 25.2054 17.3378 21.5347
1999 29.2599 29.0075 17.7316 24.0008
2000 22.2924 36.7753 16.7228 24.2093
2001 20.1748 38.2215 17.3826 24.2209
2002 17.4350 40.1710 14.3214 28.0724
4. Prepared foodstuffs
1997 44.5027 23.5982 12.9711 18.9278
1998 42.6166 22.7866 11.8532 22.7434
1999 43.7611 24.4917 12.7600 18.9870
2000 39.3647 26.8576 14.9723 18.8052
2001 41.1498 24.2999 12.8942 21.6559
2002 42.6739 24.3064 12.4294 20.5902

50
Section Year European Arab North Rest of the
Union countries America World
5. Mineral products
1997 45.4503 30.4081 12.3046 11.8369
1998 53.0076 23.3017 12.7500 10.9405
1999 48.0912 27.9652 10.2853 13.6581
2000 42.9583 33.1380 15.5541 8.3494
2001 43.8524 32.8099 7.63807 15.6995
2002 36.9156 34.0687 14.6170 14.3985
6. Chemical products
1997 54.3172 13.7078 12.9129 19.0620
1998 55.6144 14.3329 11.0037 19.0489
1999 53.1894 18.6312 10.7859 17.3934
2000 48.9702 21.8122 12.1039 17.1135
2001 49.5969 21.5292 12.3583 16.5153
2002 49.4582 22.5502 9.9799 18.0116
7. Plastics
1997 44.4544 15.1729 9.2156 31.1570
1998 45.7831 16.2483 7.9053 30.0632
1999 42.1062 20.5448 7.7787 29.5701
2000 40.1004 20.2215 7.5102 32.1677
2001 40.7635 19.4770 8.0995 31.6598
2002 42.1432 22.0445 7.6979 28.1142
8. Skins
1997 33.9015 10.7033 7.1173 48.2777
1998 31.1452 10.2080 4.7709 53.8757
1999 31.7691 9.6178 6.4233 52.1896
2000 30.8809 7.7287 6.5459 54.8442
2001 35.4140 11.3987 6.5207 46.6664
2002 34.3893 14.9293 7.3691 43.3121
9. Wood
1997 34.4079 7.7725 15.2734 42.5460
1998 39.0239 7.2955 13.5631 40.1174
1999 31.1158 10.084 13.6203 45.1789
2000 38.3515 8.6958 13.0532 39.8993
2001 30.3967 7.2852 18.5201 43.7978
2002 36.7726 7.6772 13.1600 42.3899
10. Wood pulp and cellulose
1997 45.2376 16.3450 11.9000 26.5172
1998 45.2341 20.1268 11.5955 23.0435
1999 44.3172 22.7428 12.2434 20.6965
2000 41.3193 23.9854 11.4995 23.1956
2001 44.9822 23.8119 8.13967 23.0660
2002 43.2158 27.4588 9.74258 19.5827
11. Textiles
1997 33.8089 14.5244 10.9641 40.7024
1998 35.4034 12.4755 11.4117 40.7093
1999 34.1226 11.8016 12.6180 41.4576
2000 32.9077 12.5735 13.1761 41.3425
2001 32.7304 12.9909 13.5277 40.7508
2002 34.6583 12.9130 12.7338 39.6947

51
Section Year European Arab North Rest of the
Union countries America World
12. Footwear
1997 28.5922 6.8152 13.1630 51.4293
1998 29.8189 6.1439 12.0379 51.9991
1999 28.4798 6.2277 12.9159 52.3764
2000 28.6564 6.7848 9.54799 55.0106
2001 29.0739 5.8388 14.6636 50.4235
2002 28.4327 9.1253 6.99181 55.4501
13. Stone, plaster, cement
1997 38.5319 18.7564 8.5560 34.1556
1998 36.6690 19.4068 8.1648 35.7593
1999 34.7264 21.4107 5.9917 37.8710
2000 33.1917 22.4973 7.6218 36.6890
2001 33.2422 25.1998 6.0839 35.4739
2002 35.1494 21.4441 8.2480 35.1584
14. Pearls, precious stones
1997 28.5839 11.0966 10.2083 50.1110
1998 33.0232 17.0729 5.4702 44.4335
1999 28.3968 8.5120 9.7526 53.3384
2000 21.8920 9.1333 7.7004 61.2742
2001 25.3429 13.5782 8.7946 52.2840
2002 24.0521 17.2890 6.9107 51.7480
15. Base metals
1997 45.9949 12.9016 8.8160 32.2873
1998 45.3056 13.5558 9.39724 31.7412
1999 42.4050 13.6579 11.4387 32.4982
2000 45.3940 13.2535 10.0316 31.3207
2001 45.4486 14.3712 8.7651 31.4149
2002 44.6992 15.2772 9.4613 30.5621
16. Machinery, mechanical appliances
1997 43.4658 7.2793 11.7836 37.4711
1998 42.5099 7.7249 11.6390 38.1260
1999 40.5094 9.3035 12.6991 37.4878
2000 41.2267 10.5799 11.7518 36.4415
2001 40.2401 10.5322 12.1219 37.1056
2002 41.6174 11.4806 11.8022 35.0996
17. Vehicles, aircrafts
1997 43.9520 10.1372 13.7198 32.1908
1998 43.0407 8.6280 10.4017 37.9295
1999 38.6115 10.2975 11.3695 39.7213
2000 36.6440 8.8448 13.9999 40.5112
2001 37.7241 10.8539 9.9301 41.4917
2002 34.889 10.7268 8.0243 46.3595
18. Optical, photographical products
1997 35.1436 5.8846 12.7222 46.2495
1998 43.4534 5.2250 12.2949 39.0265
1999 50.0207 7.4438 17.4069 25.1285
2000 48.5202 9.5783 12.6638 29.2375
2001 46.4375 10.8126 10.6746 32.0752
2002 45.6019 12.0779 14.5244 27.7956

52
Section Year European Arab North Rest of the
Union countries America World
19. Arms and ammunition
1997 56.0625 4.4834 0.2069 39.2471
1998 45.8911 11.4532 11.1269 31.5286
1999 53.3133 11.6975 1.4038 33.5852
2000 48.1673 7.6025 28.3256 15.9045
2001 20.1890 13.5991 18.1647 48.0470
2002 29.7054 9.6345 32.1257 28.5343
20. Miscellaneous manufactured articles
1997 43.8047 10.4059 11.9191 33.8702
1998 45.6253 9.1121 11.2777 33.9847
1999 42.8704 11.5188 11.3505 34.2601
2000 41.4798 10.5765 11.0966 36.8469
2001 42.2326 10.9938 11.4576 35.3159
2002 44.9728 12.1435 11.3814 31.5022

21. Works of art

1997 44.7206 2.6821 16.8425 35.7546
1998 51.2614 3.8205 12.4288 32.4892
1999 40.7783 15.6746 8.9083 34.6386
2000 36.9750 7.9696 15.3397 39.7156
2001 46.8551 7.5298 18.0532 27.5618
2002 63.4744 3.0537 9.21932 24.2525

FIGURE 4. IMPORT SHARES - 1997

100%

90%

80%

70%

60%
Relative share

ROW
AM
50%
AR
EU

40%

30%

20%

10%

0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Section

53
 FIGURE 5. IMPORT SHARES - 1998

100%

90%

80%

70%

60%
Relative share

ROW
AM
50%
AR
EU

40%

30%

20%

10%

0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
S e c tio n

FIGURE 6. IMPORT SHARES - 1999

100%

80%

60%
Relative share

ROW
AM
AR
EU

40%

20%

0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Section

54
 FIGURE 7. IMPORT SHARES - 2000

100%

80%

60%
Relative share

ROW
AM
AR
EU

40%

20%

0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Section

FIGURE 8. IMPORT SHARES - 2001

100%

80%

60%
Relative share

ROW
AM
AR
EU

40%

20%

0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Section

55
 FIGURE 9. IMPORT SHARES - 2002

100%

90%

80%

70%

60%
Relative share

ROW
AM
50%
AR
EU

40%

30%

20%

10%

0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Section

The share of European commodities in Lebanese imports has experienced minor relative
changes over the time period, for some commodities. Food products (sections 1 to 4) have
been decreasing in relative terms from 1997 to 2002, as well as vehicles and aircrafts (section
17), and arms and ammunition (section 19). On the other hand, some sections have been
characterized by major changes in relative import shares: works of art (section 21) in
particular.

More interestingly, the share of Arab and Regional countries (region AR) in total imports has
increased significantly for a majority of commodities. This is especially true for sections 2
(vegetable products), 3 (animal and vegetable fats), 6 (chemical products), 8 (skins), 10
(wood pulp and cellulose), 16 (machinery), and 18 (optical and photographical products).

Also, imports from the Rest of the World (ROW region) are still the most important in
relative terms. Some examples are sections 1 (live animals, 30 percent in 2002), 8 (skins, 43
percent in 2002), 9 (wood, 42 percent in 2002), and 12 (footwear, 55 percent in 2002).

Finally, we need to compute regional price indexes in order to capture differences in price
levels among export regions (EU, AR, AM and ROW). For each good j (defined at the HS8
level) and month t, we construct an import-share-weighted Tornqvist price index as follows:

log p jt = ∑ ( w jk t + wk0 ) log( p jk t / p k0 ),

k

where wjkt denotes the share of good j imported from source k (EU, AR, AM or ROW) at time
0 0
t, pjkt is the price of good j imported from source k; w k and p k are the average (over all time
periods) import share and price for source k, respectively.

56
Table 23 below presents price indexes by section and year, using 1997 as the base (100) year.

TABLE 23. PRICE INDEX BY SECTION, SOURCE AND YEAR,

1997-2002. BASE 100 IN 1997.

Year European Arab North Rest of the

Union countries America World
1. Live animals, animal products
1997 100 100 100 100
1998 110.9393 103.3146 96.3883 105.7836
1999 108.2902 109.1728 87.5577 108.5186
2000 107.2792 115.7675 97.6436 108.0528
2001 107.8281 107.9419 97.0550 110.7922
2002 108.4252 101.8718 101.0748 119.7655
2. Vegetable products
1997 100 100 100 100
1998 100.4552 103.6907 100.0567 99.7678
1999 104.0845 102.5984 99.6165 98.5545
2000 109.1199 105.1635 101.5858 103.3365
2001 107.7924 103.8467 102.0908 103.3459
2002 107.9048 107.9337 99.7464 103.8012
3. Animal and vegetable fats
1997 100 100 100 100
1998 103.3338 109.0845 100.2617 98.4442
1999 113.3786 106.3895 100.8605 94.5571
2000 120.1598 108.4405 100.9907 102.5056
2001 115.8067 114.3285 98.5161 102.9456
2002 113.4702 111.2943 98.9123 97.3026
4. Prepared foodstuffs
1997 100 100 100 100
1998 102.8954 100.5851 101.3559 97.4004
1999 103.1513 100.8529 101.995 101.0674
2000 103.839 98.8155 100.127 100.246
2001 107.3518 102.9575 103.0222 98.2795
2002 105.4919 102.2019 102.2336 98.8821
5. Mineral products
1997 100 100 100 100
1998 97.6953 103.3293 99.6071 98.3744
1999 101.3779 110.0897 101.2576 96.5515
2000 102.7897 101.1457 98.7933 99.6355
2001 98.6087 97.0378 99.8491 97.8228
2002 108.9068 116.2197 100.7776 98.6317
6. Chemical products
1997 100 100 100 100
1998 101.3651 100.0727 102.1666 100.2515
1999 105.4361 97.2993 102.612 101.8161
2000 102.8016 91.3439 100.6194 99.5723
2001 107.73 94.1886 101.5499 101.8598
2002 109.762 92.7555 103.9026 101.4783

57
Year European Arab North Rest of the
Union countries America World
7. Plastics
1997 100 100 100 100
1998 99.6940 97.6501 100.5883 100.1543
1999 100.8331 92.3610 99.9417 98.8361
2000 99.5683 92.0886 99.5262 96.2945
2001 103.9768 93.7664 100.3764 98.3670
2002 105.2107 94.1911 101.8763 105.0849
8. Skins
1997 100 100 100 100
1998 92.6551 98.1811 100.9551 77.6045
1999 90.5403 99.9539 98.7362 78.3324
2000 89.0017 101.8768 97.2011 71.84801
2001 89.2222 97.2247 99.3640 91.3410
2002 101.5311 98.62077 100.0742 109.8708
9. Wood
1997 100 100 100 100
1998 97.1449 100.1124 101.0707 103.6986
1999 106.7261 99.3238 102.1698 94.2971
2000 98.6038 100.4653 102.6667 108.9517
2001 101.8851 100.1204 96.0164 97.0725
2002 103.0506 101.329 103.4744 102.8043
10. Wood pulp and cellulose
1997 100 100 100 100
1998 103.4779 96.8920 101.4994 104.1692
1999 104.5796 94.0225 100.4414 108.1407
2000 102.5 91.4725 100.6546 102.8859
2001 101.947 91.7261 103.7529 103.2871
2002 104.7003 91.3143 103.1333 107.9852
11. Textiles
1997 100 100 100 100
1998 90.4697 98.17288 96.5159 91.4798
1999 90.8522 98.88074 94.2031 87.7379
2000 96.0975 99.61554 95.0287 91.3711
2001 98.4777 100.5483 95.6393 95.5218
2002 108.3023 105.217 100.4564 110.6899
12. Footwear
1997 100 100 100 100
1998 80.73438 96.5830 94.1745 74.7257
1999 82.42648 96.0012 92.0138 71.2312
2000 82.75696 95.7094 96.9376 69.5686
2001 93.47491 99.1151 97.3803 90.8731
2002 112.5744 99.3022 111.5333 112.5764
13. Stone, plaster, cement
1997 100 100 100 100
1998 95.2869 95.6336 96.6929 91.5336
1999 96.8642 93.7255 99.6667 92.1017
2000 99.1420 95.2311 98.979 92.3443
2001 103.3876 94.9233 101.2385 97.4224
2002 104.6735 99.9729 100.5448 99.6092

58
Year European Arab North Rest of the
Union countries America World
14. Pearls, precious stones
1997 100 100 100 100
1998 82.8504 83.7967 107.3459 99.4320
1999 85.6495 100.4888 94.7323 74.5541
2000 106.2111 99.8115 100.2852 59.0640
2001 92.6799 89.3921 98.7778 71.6926
2002 104.5932 88.5585 104.3333 82.6484
15. Base metals
1997 100 100 100 100
1998 97.1318 98.8464 97.6802 100.9415
1999 101.0384 97.8764 96.8302 99.6373
2000 95.1478 97.9439 97.6134 98.2762
2001 98.1967 97.7479 99.5529 101.9618
2002 101.2664 97.6975 100.1455 103.4256
16. Machinery, mechanical appliances
1997 100 100 100 100
1998 84.1234 95.3699 94.2348 83.6830
1999 82.9643 91.8225 90.4017 81.1531
2000 81.0985 88.8153 93.0372 81.8161
2001 89.4533 90.8358 94.9516 87.5478
2002 99.4075 93.4564 99.1451 99.9793
17. Vehicles, aircrafts
1997 100 100 100 100
1998 100.521 102.3969 104.8763 92.1223
1999 107.1051 101.4438 101.9581 89.7744
2000 110.2006 103.0903 99.5541 89.4560
2001 114.337 99.3225 105.7693 90.7425
2002 121.6035 101.9137 109.3070 88.1721
18. Optical, photographical products
1997 100 100 100 100
1998 77.8186 98.9198 96.3869 105.0726
1999 57.0563 92.2851 85.4127 127.9439
2000 64.9949 89.0247 92.0004 115.4215
2001 72.0402 87.1901 100.6756 121.8181
2002 86.4361 91.7709 97.2513 142.4702
19. Arms and ammunition
1997 100 100 100 100
1998 80.5270 77.8352 80.9863 99.8606
1999 27.9157 67.2812 94.0904 50.2530
2000 71.2033 87.0602 52.6683 120.7191
2001 162.7686 79.7753 74.1308 76.9514
2002 145.9618 89.1910 59.1457 128.2713
20. Miscellaneous manufactured articles
1997 100 100 100 100
1998 82.4344 97.3975 95.9975 88.2561
1999 86.6024 92.9363 96.5850 88.7701
2000 83.8570 94.1963 96.0377 82.5022
2001 92.7224 95.9511 97.9050 93.7637
2002 99.9401 97.3392 101.9547 104.2299

59
Year European Arab North Rest of the
Union countries America World
21. Works of art
1997 100 100 100 100
1998 77.2821 93.7512 97.4545 84.4864
1999 108.1526 84.9438 106.42 91.3549
2000 94.3656 89.9305 94.6500 75.9218
2001 79.5959 89.3102 92.5741 91.2665
2002 61.3185 97.5051 104.3795 94.9341

Demand model estimation procedure

We saw above that individual goods are defined at the HS8 (Harmonized System, 8 Digit)
level. But since there are not enough monthly observations for each good to consistently
estimate parameters of the RSDAIDS model, we need to further restrict model specification.
More precisely, we impose parameters in the share equations to be the same for all goods
within each section. The latter represents a broader category of commodities, also denoted
HS1 (Digit 1): there are 21 sections for 97 HS2 (chapter) levels, and 5666 HS8 levels.

The share equations corresponding to the Restricted Source Differentiated AIDS demand
system imply not only price indexes for various import sources as explanatory variables, but
T
also the logarithm of expenditure over the overall price index, log(E/P ). This expenditure is
an endogenous variable in the statistical and economic sense, as it depends on the whole price
system including region-specific import unit price indexes. For this reason, it is common
practice in applied demand analysis to replace discounted expenditure by a prediction
computed from instruments such as time dummies and a selection of prices. In a first step, we
T
regress the term log(E/P ) on monthly dummy variables and region-wise price indexes. The
linear prediction is then used in place of the original variable in the share equations. With
such a procedure, parameter estimates are expected to be consistent.

We also include in the share equations a set of yearly dummy variables from year 1998 to
year 2002 (the first year, 1997, is dropped from the equation because these dummies would
sum to 1). This allows one to control for any trend in demand that might affect regional share
levels.

The full system of equations to be estimated is the following one:

wiEUt = β 0 EU + β EUEU log piEUt + β EUAR log piARt + β EUAM log piAMt + β EUROW log piROWt
+ γ 1EU log( Et / PtT ) + 1998 t γ 2 EU + 1999 t γ 3 EU + ... + 2002 t γ 6 EU
wiARt = β 0 AR + β EUAR log piEUt + β ARAR log piARt + β ARAM log piAMt + β ARROW log piROWt
+ γ 1 AR log( Et / PtT ) + 1998t γ 2 AR + 1999 t γ 3 AR + ... + 2002 t γ 6 AR
wiAMt = β 0 AM + β EUAM log piEUt + β AMAM log piARt + β AMAM log piAMt + β AMROW log piROWt
+ γ 1 AM log( Et / PtT ) + 1998t γ 2 AM + 1999 t γ 3 AM + ... + 2002 t γ 6 AM

60
wiROWt = β 0 ROW + β EUROW log piEUt + β ARROW log piARt + β AMROW log piAMt + β ROWROW log piROWt
+ γ 1ROW log( Et / Pt T ) + 1998 t γ 2 ROW + 1999 t γ 3 ROW + ... + 2002 t γ 6 ROW

Note that in the system above, only differentiation restrictions (Restrictions 1 and 2) and
symmetry conditions (see Restriction 3 above) are apparent; for example, parameter
associated with log piARt in the EU share equation is the same as the one associated with log
piEUt in the AR equation. The system of share equations is estimated by the SURE (Seemingly
UnRelated Equations) method, imposing the linear homogeneity condition on the cost
function (Restriction 4).

Appendix 3 presents estimation results for each section, where we report parameter estimates
for the 4 share equations, and goodness-of-fit statistical measures. We can see that the
RSDAIDS model performs very satisfactorily in terms of statistical fit. Also, parameters
associated with price indexes are in a majority of cases significantly different from 0. On the
contrary, parameters associated with log of expenditure are in most cases not significantly
different from 0.

Based on these parameter estimates, we compute own-price and cross-price elasticities (see
Definitions 1 and 2) between sources (regions). These values are reported in Table 24 below,
for each section, and regions EU, AR and AM. It can be seen that own-price elasticities are
rather large in absolute value, and that in a majority of cases, demand for imports from source
AR and AM is more reactive to its own price than goods from the EU and ROW regions.

TABLE 24. IMPORT OWN-PRICE AND CROSS-PRICE ELASTICITIES.

Section EU AR AM ROW EU EU EU AR AR AM
/AR /AM /ROW /AM ROW /ROW
1 -3.67 -3.73 -5.33 -2.49 0.82 0.88 0.96 0.85 0.73 1.02
2 -2.81 -2.56 -3.68 -2.89 0.61 0.60 0.60 0.51 0.60 1.06
3 -2.87 -2.45 -3.74 -3.46 0.64 0.69 0.50 0.23 0.71 1.17
4 -1.98 -3.23 -5.05 -3.71 0.38 0.27 0.33 0.81 0.80 1.64
5 -1.96 -1.71 -3.62 -4.33 0.26 0.29 0.39 0.12 0.27 1.27
6 -1.76 -3.38 -4.84 -3.66 0.23 0.20 0.26 0.84 0.85 1.50
7 -2.10 -3.14 -5.77 -2.10 0.37 0.33 0.38 0.83 0.47 0.99
8 -2.11 -3.98 -5.75 -1.61 0.35 0.31 0.44 1.12 0.72 1.26
9 -2.49 -5.31 -3.94 -2.02 0.53 0.42 0.53 1.12 0.78 1.26
10 -2.18 -3.21 -5.80 -3.33 0.38 0.37 0.42 0.78 0.72 1.65
11 -2.10 -3.56 -3.85 -1.82 0.32 0.35 0.42 0.98 0.68 0.82
12 -1.95 -4.52 -3.34 -1.48 0.22 0.28 0.44 1.64 0.79 0.63
13 -1.97 -2.70 -4.25 -1.96 0.41 0.18 0.36 0.37 0.59 1.19
14 -1.82 -2.62 -3.43 -1.46 0.25 0.22 0.35 0.47 0.59 0.81
15 -1.91 -3.53 -4.82 -2.22 0.27 0.26 0.35 0.89 0.71 1.31
16 -1.65 -3.67 -3.19 -1.67 0.17 0.18 0.23 1.13 0.70 0.62
17 -1.65 -3.72 -3.45 -1.79 0.12 0.13 0.38 1.40 0.70 0.76
18 -1.62 -4.22 -3.20 -1.84 0.16 0.20 0.25 1.32 1.03 0.76
19 -1.71 -3.01 -2.28 -1.94 0.09 0.27 0.33 0.69 0.80 0.35
20 -1.65 -3.76 -3.68 -1.89 0.14 0.16 0.30 1.31 0.77 0.76
21 -1.56 -5.75 -3.41 -1.92 0.09 0.17 0.28 2.63 1.24 0.58

61
Columns 2 to 5 report own-price elasticities of imports from different sources: European
Union (EU), Arab and Regional countries (AR), America (AM), and the Rest of the World
(ROW).

These figures are to be used as follows: they express the relative change in import quantity
following a change in price. For example, a 10 percent increase in the price of European
imports for Section 1 would lead, all other things being equal, to a decrease in the quantity
demanded for these imports of 36.7 percent.

European own-price elasticities are larger in absolute value for sections 1, 2, 3, 7, 8 and 9, and
lower for sections 6, 16, 17, 18, 19, 20 and 21. For AR region, own-price elasticities are
higher for sections 9, 12, 18, 21 and lower for sections 3, 5, 13 and 14. As for the Rest of the
World, sections for which own-price elasticities are higher are 3, 4, 5, 6 and 10, and those for
which own-price elasticities are lower are sections 8, 11, 12, 14 and 16.

Columns 6 to 11 present cross-price elasticities between different regions. For example, a 10

percent increase in the price of European imports for Section 1 would lead to an increase in
the quantity demanded of 8.2 percent for AR imports, 8.8 percent for AM imports, and 9.6
percent for ROW imports. For a majority of commodities, these cross-price elasticities are
higher between EU/ROW, AR/AM and AM/ROW than for EU/AR, AR/ROW and EU/AM.
They are also higher for agricultural and food products (sections 1 to 4) than for manufactured
goods in the case of European imports. This trend does not seem to remain valid for the case
of commodities from the AR region, however.

4.3 An empirical assessment of the Preferential Trade Agreement with the European
Union

The PTA with the European Union is expected to come into effect in year 2007 with a 12
percent decrease in a majority of tariffs in the first year. As was seen above, trade diversion is
expected to be significant with other trade regions, because cross-price elasticities are indeed
significant for most commodities. In other terms, a reduction in the net price index (after
tariffs reduction) for European goods will definitely have important consequences on trade
flows Lebanon has with other partners (Arab countries, North and South America, Rest of the
World).

We use the estimated demand system described above to give an empirical assessment of the
impact of the PTA with the EU on Lebanese import patterns. Based on fitted share equations,
it is straightforward to predict the change in import shares given any price change for all
trade regions. The only caveat is that, since the restricted version of the AIDS is used in our
case, the total expenditure (overall import demand in value) also enters share equations. As a
consequence, it is necessary to base our empirical evaluation on predictions for future
expenditure levels.

It is important to bear in mind that the impact of the implementation of the PTA with the
European Union is likely to have a strong impact for commodities associated with a relatively
higher customs duty rate, and also a relatively important own-price elasticity. Indeed, a 12

62
percent decrease in customs tariffs for the first year of the PTA is likely to modify import
patterns only slightly if the tariff rate is close to 0. On the other hand, some commodities may
be associated with a high cross-price elasticity with respect to other regions. For these goods,
a moderate change in the price of European imports (including tariffs) may have a not-so-
moderate consequence in terms of trade diversion. Therefore, it is important to analyse the
sensitivity of imports from a moderate change in European import prices.

A first simulation is undertaken, to explore the sensitivity of the model to European price
changes. To do so, we impose a uniform price decrease of 10 percent on all commodities,
leaving import prices from other regions unchanged. We also consider the same expenditure
level as the actual ones that are used in estimation. Results for import shares are given in
Table below, and the predicted import values in Table 26.

TABLE 25. ACTUAL AND PREDICTED 1997-2002 AVERAGE IMPORT SHARES

(IN PERCENT).

Scenario: 10 percent decrease in European import prices (no tariff change)

Actual import share (in percent) Predicted 2007 import share (in percent)
Section EU AR AM ROW EU AR AM ROW
1 0.2836 0.2128 0.1282 0.3752 0.3777 0.1867 0.1076 0.3423
2 0.2306 0.3089 0.1844 0.2760 0.2806 0.2948 0.1700 0.2615
3 0.2630 0.3329 0.1716 0.2323 0.3118 0.3143 0.1567 0.2177
4 0.4229 0.2440 0.1296 0.2033 0.4722 0.2265 0.1202 0.1902
5 0.4489 0.3029 0.1229 0.1252 0.5061 0.2904 0.1042 0.1046
6 0.5172 0.1892 0.1150 0.1783 0.5624 0.1778 0.1074 0.1650
7 0.4253 0.1905 0.0802 0.3038 0.4832 0.1751 0.0715 0.2819
8 0.3303 0.1087 0.0647 0.4961 0.3768 0.1030 0.0617 0.4760
9 0.3490 0.0813 0.1455 0.4240 0.4184 0.0677 0.1298 0.3968
10 0.4403 0.2259 0.1075 0.2261 0.5029 0.2067 0.0954 0.2051
11 0.3399 0.1295 0.1231 0.4073 0.3868 0.1208 0.1174 0.3887
12 0.2887 0.0676 0.1180 0.5255 0.3242 0.0709 0.1153 0.5082
13 0.3540 0.2131 0.0751 0.3577 0.3969 0.1979 0.0731 0.3405
14 0.2689 0.1328 0.0809 0.5172 0.2976 0.1270 0.0782 0.5052
15 0.4490 0.1382 0.0961 0.3165 0.4970 0.1280 0.0915 0.2979
16 0.4173 0.0931 0.1194 0.3700 0.4473 0.0956 0.1169 0.3562
17 0.3965 0.0987 0.1144 0.3902 0.4294 0.1009 0.1120 0.3707
18 0.4347 0.0815 0.1322 0.3514 0.4678 0.0804 0.1258 0.3374
19 0.3844 0.1016 0.2095 0.3043 0.4160 0.0983 0.2056 0.2946
20 0.4360 0.1075 0.1142 0.3420 0.4688 0.1099 0.1125 0.3263
21 0.4779 0.0644 0.1373 0.3202 0.5173 0.0611 0.1276 0.3104

63
TABLE 26. ACTUAL AND PREDICTED 1997-2002 IMPORTS (IN MILLION 2002
USD).

Scenario: 10 percent decrease in European import prices (no tariff change)

Actual imports (in Million USD) Predicted 2007 imports (in Million USD)
Section EU AR AM ROW EU AR AM ROW
1 122.1219 56.3775 30.1371 127.7735 135.6373 48.0707 27.2817 98.3630
2 29.6358 25.3316 24.6448 38.6765 30.5863 29.3046 20.5263 27.5759
3 118.835 69.8334 40.7381 45.4937 81.0842 75.1323 38.4023 55.7417
4 81.7646 39.3939 41.3231 43.4652 86.9148 34.6453 30.4961 36.6018
5 119.4275 122.041 102.4047 61.8266 177.735 105.2479 41.6062 45.5718
6 84.4691 27.7793 15.5619 28.3550 94.5395 20.8830 10.8556 20.3247
7 37.8919 18.2624 9.1881 38.2207 39.7903 13.8668 7.4400 35.4903
8 8.8676 3.6829 1.80318 16.0927 9.50332 2.9619 1.5234 14.3768
9 23.2271 5.6735 14.8758 27.8240 23.5119 4.1872 13.8756 25.8537
10 32.1882 24.7031 8.5728 23.1616 35.54316 20.9821 8.0482 16.5677
11 12.4347 5.7693 4.9668 19.4173 13.3570 5.1401 4.4457 16.5351
12 18.8427 4.4909 7.9872 33.5808 18.9125 3.5473 6.6311 31.7707
13 24.7469 16.7108 5.7852 28.6461 27.4449 13.8888 5.1234 23.8577
14 79.5205 54.1536 10.4899 74.9001 78.3700 44.1193 8.6223 75.4372
15 31.2770 10.3649 5.7397 18.5876 30.8129 8.5429 5.7312 16.3558
16 36.2816 8.3926 9.6492 44.6687 36.4913 7.5801 8.6099 40.0202
17 41.1347 9.5724 15.1031 41.5454 45.1930 7.45111 12.9782 36.4807
18 26.7914 5.0060 7.2659 18.5409 27.1536 4.1168 5.7632 16.2715
19 48.7965 13.1232 22.4221 42.5481 47.3036 10.9884 22.4576 37.2939
20 25.1086 7.1178 6.1681 20.8559 25.0473 6.1471 5.5409 18.4309
21 21.6525 2.9038 4.7224 17.8588 20.6967 2.3112 4.2102 17.4000

Results from this first simulation experiment indicate that import shares of European products
increase in all cases when their price decrease, which is expected because expenditure level is
constant. Had the latter not been held constant, we could have experienced a different pattern,
because a rise in total expenditure (resulting, e.g., from an increase in disposable revenue) has
heterogeneous effects on import shares, through the expenditure effect. In this first simulation
experiment however, this effect is neutral. In most cases also, the share of AR commodities
decrease slightly, except for sections 12, 16, 17 and 20. As for imports from AM and ROW
regions, import shares decrease for all sections with respect to the reference case.

Let us now turn to the actual PTA implementation experiment. The approach to simulate the
impact of a reduction in customs duties consists in, first computing predicted expenditure
levels over a 5-year horizon. We thus compute the expected value of total expenditure for
each section. The way to fit the prediction model for expenditure was explained in the
previous section. We assume that price indexes for all regions but for a given section
(category of goods) are characterized by a common inflation rate over the 2002-2007 period,
i.e., the discounted value for all import values will be the same. Since the demand system is
estimated by imposing the price homogeneity restriction, this means that import share
estimates will be consistent. On this 5-year period, the cumulated price increase is set to 1.16
(3 percent annual price increase).

64
We then replace the European price index by the corresponding expected price for the year
2007, applying the proposed 12 percent reduction in tariffs on all goods. With this new price
for the European Union only, we obtain new import shares for each section and each trade
region. Finally, by multiplying these predicted shares by the expected total import
expenditure, we obtain the future import value.

Tables 27 and 28 report simulation results under these assumptions.

TABLE 27. ACTUAL 1997-2002 AVERAGE SHARES AND PREDICTED 2007

IMPORT SHARES (IN PERCENT).

Scenario: Uniform 12 percent decrease in tariffs on imported European commodities

Actual import share (in percent) Predicted 2007 import share (in percent)
Section EU AR AM ROW EU AR AM ROW
1 0.2836 0.2128 0.1282 0.3752 0.1465 0.0834 0.0535 0.7956
2 0.2306 0.3089 0.1844 0.2760 0.2523 0.3079 0.2057 0.2393
3 0.2630 0.3329 0.1716 0.2323 0.3124 0.3211 0.2724 0.1019
4 0.4229 0.2440 0.1296 0.2033 0.4023 0.2302 0.1186 0.2568
5 0.4489 0.3029 0.1229 0.1252 0.4693 0.3008 0.1304 0.1045
6 0.5172 0.1892 0.1150 0.1783 0.4879 0.1644 0.1080 0.2513
7 0.4253 0.1905 0.0802 0.3038 0.4829 0.2097 0.1125 0.2036
8 0.3303 0.1087 0.0647 0.4961 0.4198 0.1394 0.1023 0.3451
9 0.3490 0.0813 0.1455 0.4240 0.4487 0.1255 0.2022 0.2352
10 0.4403 0.2259 0.1075 0.2261 0.4160 0.2012 0.0980 0.2935
11 0.3399 0.1295 0.1231 0.4073 0.4312 0.1868 0.1749 0.2214
12 0.2887 0.0676 0.1180 0.5255 0.4096 0.1184 0.1923 0.2872
13 0.3540 0.2131 0.0751 0.3577 0.4392 0.2546 0.1144 0.2026
14 0.2689 0.1328 0.0809 0.5172 0.4744 0.2504 0.2084 0.1328
15 0.4490 0.1382 0.0961 0.3165 0.5721 0.1996 0.1662 0.1098
16 0.4173 0.0931 0.1194 0.3700 0.5038 0.1176 0.1572 0.2380
17 0.3965 0.0987 0.1144 0.3902 0.5628 0.1775 0.2010 0.1105
18 0.4347 0.0815 0.1322 0.3514 0.5472 0.1301 0.1966 0.1621
19 0.3844 0.1016 0.2095 0.3043 0.2672 0.0368 0.1201 0.6257
20 0.4360 0.1075 0.1142 0.3420 0.4852 0.1296 0.1344 0.2656
21 0.4779 0.0644 0.1373 0.3202 0.5690 0.0756 0.1762 0.1999

65
 TABLE 28. ACTUAL 1997-2002 IMPORTS AND PREDICTED 2007 AVERAGE
IMPORTS.

Scenario: Uniform 12 percent decrease in tariffs on imported European commodities

Actual imports (in Million USD) Predicted 2007 imports(in Million USD)
Section EU AR AM ROW EU AR AM ROW
1 122.1219 56.3775 30.1371 127.7735 57.6561 15.1846 10.6695 240.1603
2 29.6358 25.3316 24.6448 38.6765 27.5637 30.6815 24.5173 25.1634
3 118.835 69.8334 40.7381 45.4937 78.3303 78.5602 67.8870 26.4216
4 81.7646 39.3939 41.3231 43.4652 73.7629 35.3282 30.2004 49.1908
5 119.4275 122.041 102.4047 61.8266 163.0754 109.1466 51.8337 45.6510
6 84.4691 27.7793 15.5619 28.3550 84.7512 19.3191 10.8889 32.0834
7 37.8919 18.2624 9.1881 38.2207 39.7557 16.9581 11.2282 28.1271
8 8.8676 3.6829 1.8031 16.0927 10.6804 3.9293 2.5974 10.7861
9 23.2271 5.6735 14.8758 27.8240 25.1862 7.5333 18.4797 15.7602
10 32.1882 24.7031 8.5728 23.1616 28.5576 20.5109 8.2583 23.7312
11 12.4347 5.7693 4.9668 19.4173 15.0883 7.6385 6.5659 10.0864
12 18.8427 4.4909 7.9872 33.5808 23.9976 5.7968 10.6236 19.0970
13 24.7469 16.7108 5.7852 28.6461 30.1902 17.6029 7.6833 14.9523
14 79.5205 54.1536 10.4899 74.9001 114.635 65.7228 29.2757 19.1292
15 31.2770 10.3645 5.7397 18.5876 35.1480 12.7970 10.0896 5.4204
16 36.2816 8.3926 9.6492 44.6687 41.2410 9.4124 11.7939 29.7700
17 41.1347 9.5724 15.1031 41.5454 58.2676 13.3083 21.1663 11.4042
18 26.7914 5.0060 7.2659 18.5409 31.2324 6.4184 9.2970 7.6242
19 48.7965 13.1232 22.4221 42.54811 32.1166 3.5977 12.9978 74.1316
20 25.1086 7.1178 6.1681 20.8559 25.9169 7.1816 6.6500 15.2362
21 21.6525 2.9038 4.7224 17.8588 24.5796 2.2349 5.3780 12.6497

The situation is now rather different from what was found in the previous experiment,
because of the expenditure (income) effect: as total expenditure is expected to vary from year
2002 to year 2007, the pattern of consumption is not the same. With a change in income
resulting in a proportional change in total expenditure, the consumption share of each
category of commodities is expected to vary. Estimated parameters associated to total
expenditure (in log) in the share equations account for this income effect. We can see from
Table 27 that the import share on European goods will increase for some sections, but will
decrease for others. But comparing both tables (for import shares and import values), it is
clear that an increasing import share is not equivalent to a rise in imported value. This is
because, as total expenditure changes over time, even when an import share increases when
import price decreases, if the income effect is negative for this commodity, then the resulting
import value may be lower.

For example, an inferior good is characterized by a diminishing consumption when income

rises. If the price of such a good drops, this generates additional revenue that can be used to
buy more goods of a superior nature, i.e., good whose consumption increases with income.

Table 29 below summarizes the different trends in import value by section and region. For a
majority of cases (15 out of 21), the European import share is predicted as increasing in value.
The AR import share will increase in 13 cases from its 2002 reference level, the AM import

66
share in 14 cases, and the ROW share in 5 cases out of 21. Hence, imports from the Rest of
the World are likely to be more affected as far as their share in total trade with Lebanon is
concerned. Moreover, sections for which European share will in fact decrease with respect to
their 2002 level are mostly sections consisting of food-related products (1 to 4), Wood pulp
(10) or very special products (arms and ammunition: 19). For primary products such as
sections 1 to 4, and 10, value-added in exports is likely to be less important than for industrial
products. As a result, the trend depicted by these simulations is clearly in favor of an overall
increase in the share for European imported products, which also focus more on high-value
added products (other than agricultural and food, wood pulp products).

TABLE 29. EXPECTED TRENDS IN IMPORT VALUES, FOR PREDICTED 2007

AVERAGE IMPORTS.

Scenario: Uniform 12 percent decrease in tariffs on imported European commodities

Section Predicted Trend in value

-: decrease ; +: increase
EU AR AM ROW
1. Live animals, animal products - - - +
2. Vegetable products - + - -
3. Animal and vegetable fats - + + -
4. Prepared foodstuffs - - - +
5. Mineral products + - - -
6. Chemical products + - - +
7. Plastics + - + -
8. Skins + + + -
9. Wood + + + -
10. Wood pulp and cellulose - - - +
11. Textiles + + + -
12. Footwear + + - -
13. Stone, plaster, cement + + + -
14. Pearls, precious stones + + + -
15. Base metals + + + -
16. Machinery, mechanical appliances + + + -
17. Vehicles, aircrafts + + + -
18. Optical, photographical products + + + -
19. Arms and ammunition - - - +
20. Miscellaneous manufactured articles + + + -
21. Works of art + - + -

The second simulation experiment concerns the final impact of the Preferential Trade
Agreement, namely the abolishment of all tariffs on European commodities. We construct the
predicted expenditure level as before, over the 2007-2012 time horizon, and replace European
import price indexes by their equivalent in 2012, when all customs tariffs on EU imports are

67
set to 0. Results are presented in Tables 30 and 31, for predicted import shares and import
values respectively.

TABLE 30. ACTUAL 1997-2002 AVERAGE SHARES AND PREDICTED 2012

IMPORT SHARES (IN PERCENT).

Scenario: Abolishment of all tariffs on imported European commodities

Actual import share (in percent) Predicted 2007 import share (in percent)
Section EU AR AM ROW EU AR AM ROW
1 0.2836 0.2128 0.1282 0.3752 0.0955 0.0578 0.0355 0.9435
2 0.2306 0.3089 0.1844 0.2760 0.2572 0.3183 0.2139 0.2162
3 0.2630 0.3329 0.1716 0.2323 0.3286 0.3433 0.2937 0.0607
4 0.4229 0.2440 0.1296 0.2033 0.3890 0.2255 0.1148 0.2790
5 0.4489 0.3029 0.1229 0.1252 0.4731 0.3075 0.1348 0.0920
6 0.5172 0.1892 0.1150 0.1783 0.4703 0.1575 0.1015 0.2839
7 0.4253 0.1905 0.0802 0.3038 0.5037 0.2253 0.1273 0.1578
8 0.3303 0.1087 0.0647 0.4961 0.4566 0.1630 0.1256 0.2632
9 0.3490 0.0813 0.1455 0.4240 0.4864 0.1468 0.2333 0.1625
10 0.4403 0.2259 0.1075 0.2261 0.3994 0.1948 0.0918 0.3244
11 0.3399 0.1295 0.1231 0.4073 0.4689 0.2162 0.2044 0.1453
12 0.2887 0.0676 0.1180 0.5255 0.4621 0.1471 0.2305 0.1799
13 0.3540 0.2131 0.0751 0.3577 0.4742 0.2816 0.1320 0.1338
14 0.2689 0.1328 0.0809 0.5172 0.5660 0.3188 0.2782 0.0237
15 0.4490 0.1382 0.0961 0.3165 0.6243 0.2319 0.1997 0.0570
16 0.4173 0.0931 0.1194 0.3700 0.5412 0.1366 0.1818 0.1725
17 0.3965 0.0987 0.1144 0.3902 0.6359 0.2141 0.2417 0.0421
18 0.4347 0.0815 0.1322 0.3514 0.5956 0.1633 0.2368 0.0959
19 0.3844 0.1016 0.2095 0.3043 0.2136 0.0163 0.1010 0.7382
20 0.4360 0.1075 0.1142 0.3420 0.5050 0.1399 0.1460 0.2247
21 0.4779 0.0644 0.1373 0.3202 0.6088 0.0900 0.1994 0.1326

68
 TABLE 31. ACTUAL 1997-2002 IMPORTS AND PREDICTED 2012 AVERAGE
IMPORTS.

Scenario: Abolishment of all tariffs on imported European commodities

Actual imports (in Million USD) Predicted 2012 imports(in Million USD)
Section EU AR AM ROW EU AR AM ROW
1 122.1219 56.3775 30.1371 127.7735 36.5366 8.5550 7.2948 289.9148
2 29.6358 25.3316 24.6448 38.6765 28.0886 31.8114 25.4350 22.6271
3 118.835 69.8334 40.7381 45.4937 82.3805 84.1049 73.2324 14.9115
4 81.7646 39.3939 41.3231 43.4652 71.2638 34.4557 29.4519 53.3832
5 119.4275 122.041 102.4047 61.8266 164.4484 111.6458 53.4683 40.5595
6 84.4691 27.7793 15.5619 28.3550 82.3487 18.5343 10.1509 36.6897
7 37.8919 18.2624 9.18816 38.2207 41.6784 18.3252 12.5884 23.6100
8 8.8676 3.6829 1.8031 16.0927 11.6976 4.5383 3.2077 8.4770
9 23.2271 5.6735 14.8758 27.8240 27.4587 8.7452 20.5106 11.3697
10 32.1882 24.7031 8.5728 23.1616 27.2147 19.9786 7.7338 26.2234
11 12.4347 5.7693 4.9668 19.4173 16.5429 8.7541 7.6587 6.9327
12 18.8427 4.4909 7.9872 33.5808 27.0909 7.4177 12.8493 12.5884
13 24.7469 16.7108 5.7852 28.6461 32.5005 19.3603 8.8023 10.5320

Actual imports (in Million USD) Predicted 2012 imports(in Million USD)
Section EU AR AM ROW EU AR AM ROW
14 79.5205 54.1536 10.4899 74.9001 132.6506 79.3621 43.1650 5.3797
15 31.2770 10.3645 5.7397 18.5876 38.2411 14.7133 12.0417 2.6465
16 36.2816 8.3926 9.6492 44.6687 44.492 10.9062 13.7660 23.6261
17 41.1347 9.5724 15.1031 41.5454 65.3439 16.5187 25.1241 3.9841
18 26.7914 5.0060 7.2659 18.5409 33.6349 8.1080 11.3845 4.4620
19 48.7965 13.1232 22.4221 42.5481 26.2795 1.5339 11.2194 85.9820
20 25.1086 7.1178 6.1681 20.8559 26.9751 7.7168 7.2340 13.0872
21 21.6525 2.9038 4.7224 17.8588 26.2713 2.7290 6.2468 9.9716

Total 2050.0316 530.6835 389.54916 812.0392 1043.1387 517.8145 402.5656 706.9582

As can be seen from Table 31 above, the value of European imports over the 2012 horizon is
divided by almost a factor of 2, whereas imports from the Arab world, Iran and Turkey
decrease only slightly. Finally, import values from North and South America increase, while
those from the Rest of the World decrease sharply. This trend in Lebanon trade partners is
due, not only to trade diversion (as European imports become relatively cheaper than those of
regional competitors, quantity increases but at lower prices), but also to the fact that total
expenditure will evolve between 2002 and 2012. This expenditure (income) effect for
imported goods has an important impact on the value of predicted future imports for Lebanon.

In this simulation experiment again, the situation is rather contrasted across regions and
commodity groups. Table 32 below summarizes the different trends in import value by

69
section and region. The pattern for European imports is similar to what was found in the
second experiment (the first-year 12 percent decrease in customs tariffs). Food products,
wood pulp-cellulose, and arms and ammunition have a decreasing import value; but in this
case, compared with the previous simulation, European chemical products (section 6) also see
their import value decrease. Interestingly, imports from Arab countries, Iran and Turkey,
North and South America, benefit from this customs policy as well, with their imports
increasing in a majority of cases.

TABLE 32. EXPECTED TRENDS IN IMPORT VALUES, FOR PREDICTED 20012

AVERAGE IMPORTS.

Scenario: Abolishment of all tariffs on imported European commodities

Section Predicted Trend in value

-: decrease ; +: increase
EU AR AM ROW
1. Live animals, animal products - - - +
2. Vegetable products - + - -
3. Animal and vegetable fats - + + -
4. Prepared foodstuffs - - - +
5. Mineral products + - - -

Section Predicted Trend in value

-: decrease ; +: increase
EU AR AM ROW
6. Chemical products - - - +
7. Plastics + + + -
8. Skins + + + -
9. Wood + + + -
10. Wood pulp and cellulose - - - +
11. Textiles + + + -
12. Footwear + + + -
13. Stone, plaster, cement + + + -
14. Pearls, precious stones + - + -
15. Base metals + + + -
16. Machinery, mechanical appliances + + + -
17. Vehicles, aircrafts + + + -
18. Optical, photographical products + + + -
19. Arms and ammunition - - - +
20. Miscellaneous manufactured articles + + + -
21. Works of art + - + -

The following figures (Figures 10 to 13) present the expected trend in import shares for EU,
AR, AM and ROW imports respectively, with the last simulation experiment (abolishment of
all customs duties on European commodities).

70
FIGURE 10. IMPACT OF PTA ON EU IMPORT SHARES – TOTAL ABOLISHMENT
OF CUSTOMS DUTIES ON EU GOODS

0,7

0,6

0,5

0,4

Import share (in %)

EU share before PTA
0,3 EU share after PTA

0,2

0,1

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Section

FIGURE 11. IMPACT OF PTA ON AR IMPORT SHARES – TOTAL ABOLISHMENT

OF CUSTOMS DUTIES ON EU GOODS

0,35

0,3

0,25

0,2

Import share (in %)

AR share before PTA
0,15 AR share after PTA

0,1

0,05

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Section

71
FIGURE 12. IMPACT OF PTA ON AM IMPORT SHARES – TOTAL
ABOLISHMENT OF CUSTOMS DUTIES ON EU GOODS

0,3

0,25

0,2

Import share (in %) 0,15

AM share before PTA
AM share after PTA

0,1

0,05

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Section

FIGURE 13. IMPACT OF PTA ON ROW IMPORT SHARES – TOTAL

ABOLISHMENT OF CUSTOMS DUTIES ON EU GOODS

0,9

0,8

0,7

0,6

Import share (in %) 0,5

ROW share before PTA
ROW share after PTA
0,4

0,3

0,2

0,1

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Section

72
 4.4 Country specific analysis: The PTA with Egypt

The impact of regional integration through Preferential Trade Agreements is a rather new
subject in the economics literature. Available models are often very simplistic and rely on
predictions of aggregate trade flows using macroeconomic variables for a pair of countries
(gravitational models), or concentrate on a very limited number of commodities and countries
(see Winters and Chang, 2000). With the empirical analysis proposed here, we consider a
more general framework, in which the impact of regional integration can be assessed not only
on a broad and aggregate import basis, but also at a more detailed level. To do this, the
demand model specification described in the previous section (the RSDAIDS model) is used
to capture the relationship between import prices and import shares, but with the inclusion of
a specific country trade partner, with which Lebanon has recently signed a Preferential Trade
Agreement. We choose Egypt as a country for which such an agreement has recently been
implemented in practice. If the Preferential Trade Agreement has had any impact on trade
flows between Egypt and Lebanon, we should detect systematic deviations from current
import trade after the implementation of the trade agreement (i.e., increase in Egyptian import
shares, all other things being equal). Furthermore, it is likely that more profound changes
have occurred, in the form of a structural break in the demand model parameters. Such a
break, with the first year of the agreement as the change point, might indicate that the
behavior of Lebanese importers of Egyptian goods has been modified in a more structural
manner, and can take the form of a change in the price elasticities of the import demand
model.

As the PTA (Preferential Trade Agreement) between Egypt and Lebanon has been
implemented in January 1999, a significant decrease should be experienced in the price of
imported goods from Egypt, provided of course exporter prices (before customs tariffs) are
left unchanged. To assess the impact of this trade agreement, we first compute relative shares
of Egyptian imports both before and after the implementation of the PTA.

A word of caution at this stage: since we are dealing with Egypt as a distinct trade partner, the
analysis can only be done for commodities that are imported from all regions of interest
including Egypt. This means that goods (HS classification, 8 Digit) that are not imported from
each of those regions cannot be considered for analysis. Hence, because Egypt is a smaller
trade partner than the other regional blocks (EU, America, Arab countries with Iran and
Turkey, America, Rest of the World), many commodities are excluded when computed price
indexes and average import share. As a result, the number of observations available is smaller
than what was used in the previous empirical analysis. Also, the Egyptian import share is
much higher than what is found in aggregated terms, because it is relevant in this case only
for goods that Egypt actually exports to Lebanon. In other terms, if the import share for a
given section (category of similar commodities) is on average 15 percent for Arab countries
(with Iran and Turkey) but the value of the Egyptian share is 30 percent, this means that
Egyptian exports are concentrated within this category on a selection of goods only. Hence,
the contribution of Egypt may be only a minor percentage of the total Arab countries exports
on average, but it may be much higher for the selection of goods exported by Egypt (and
possibly, not by a majority of other Arab countries).

Figure 14 depicts Egyptian import shares by year for each section.

73
 FIGURE 14. EGYPTIAN IMPORT SHARES, 1997-2002

0 ,4

0 ,3 5

0 ,3

0 ,2 5

Im p o r t s h a re (in % ) 0 ,2 1997
1998
1999
0 ,1 5
2000
2001
0 ,1 2002

0 ,0 5

0
1 2 2001
3 4 5 6 7 8 1999
9 10 11 12
S e c t io n 13 14 1997
15 16 17 18 19 20

To have a more precise view of the way trade between Egypt and Lebanon has been affected
by the PTA, we also present in Figure 15 the average import share of Egyptian goods before
and after the Agreement has been implemented (January 1, 1999). It can be seen that in a
majority of instances (sections in our case), the Egyptian import share has dramatically
increased after the PTA implementation. This is especially true for sections 3 (animal and
vegetable fats), 4 (prepared foodstuffs), 5 (mineral products), 6 (chemical products), 10 (wood
pulp and cellulose), 14 (pearls, precious stones), 16 (machinery) and 20 (miscellaneous
manufactured products).

74
 FIGURE 15. EGYPTIAN IMPORT SHARES, BEFORE AND AFTER THE 1999 PTA

0,18

0,16

0,14

0,12

0,1

Import share (in %)

Before PTA
0,08 After PTA

0,06

0,04

0,02

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Section (HS1)

A more detailed analysis entails estimation of the full demand system, as before, but
incorporating the structural change as a consequence of the PTA. To do this, we decompose
the price index of Egyptian imports into two components: the first one is the pre-1999 price,
and is not affected by the reduction in tariffs. The second component is the price index of
these Egyptian imports after 1999 only. If the PTA has already had a significant impact on
trade patterns between Lebanon and its trade partners, we should detect a difference in
estimated parameters associated with these two price indexes in our demand system. Indeed,
slope parameters in the share equation, associated with separate price indexes, indicate the
relative sensitivity of import share to price. If the demand behavior has been unchanged since
the PTA was enforced, estimation results should indicate no significant statistic difference
between the two estimated parameters.

In the case of Egyptian export patterns to Lebanon, a particular attention has to be paid to
exchange rate considerations10. The nominal exchange between the Lebanese and the
Egyptian pound has experienced major changes throughout our period of analysis. Figure 16
below presents the value of the Lebanese pound (LL) against the Egyptian currency. It can be
seen that a first devaluation of the Egyptian pound has occurred in December 1992, followed
by a gradual convergence to the initial level, from 1993 to end 2002.

10
We would like to thank round-table participants at the Lebanese Ministry of Economy for highlighting to us
the importance of this fact.

75
FIGURE 16. EXCHANGE RATE BETWEEN LEBANON AND EGYPT, IN NOMINAL
TERMS. JANUARY 1990-JANUARY 2003.

Nominal exchange rate: LL / 1 Egyptian Pound

900
800
700
600
500
400
300
200
100
0
1/1/90

1/1/91

1/1/92

1/1/93

1/1/94

1/1/95

1/1/96

1/1/97

1/1/98

1/1/99

1/1/00

1/1/01

1/1/02

1/1/03

To account for a possible exchange rate effect in trade patterns between Egypt and Lebanon,
we have to include the exchange rate variation in the demand equation for Egyptian imports.
Moreover, as seen above, total expenditure is an endogenous variable which needs to be
instrumented by price levels among others. Hence, when computing the predicted total
expenditure value for each time period, we need to include the exchange rate in the
expenditure equation. The reason we do not include a similar exchange rate variable in the
other equations is that for the period under consideration the USD and the Euro remained
relatively stable.

The system of equations to be estimated is the following:

wij = β0j + β1 PEUi + β2 PARi + β3 PAMi + β4 PEGi + β5 PEG2i + β6 PROWi

+ γ1 EXPENDi + γ2 1998 + γ3 1999 + γ4 2000 + γ5 2001 + γ6 2002
for regions AM, AR, EU and ROW,

wij = β0j + β1 PEUi + β2 PARi + β3 PAMi + β4 PEGi + β5 PEG2i + β6 PROWi

+δ EXRTi + γ1 EXPENDi + γ2 1998 + γ3 1999 + γ4 2000 + γ5 2001 + γ6 2002
for Egypt,

where

76
 • i: index of commodity (HS8 classification);
• j: region index (EU, AR, AM, EG and ROW);
• wij : share of region j in expenditure on commodity i;
• PEUi, PARi, PAMi, PROWi: logarithm of price index for commodity i from region EU, AR,
AM and ROW respectively;
• PEGi, PEG2i: logarithm of price index for commodity i from Egypt, respectively before
and after implementation of the Preferential Trade Agreement (1999);
• EXPENDi: total expenditure (in logarithm) on commodity i (on imports from all
regions);
• EXRTi: Nominal exchange rate (in log) between Lebanon and Egypt;
• 1998, 1999, 2000, 2001 and 2002: indicator (dummy) variables, equal to 1 for the
corresponding year, and 0 otherwise.

Appendix 4 presents estimation results for the import demand model when Egypt is explicitly
treated as an individual trade partner (and is therefore excluding from the AR region, as
opposed to the previous analysis).

The following table (Table 33) summarizes the categories of goods for which a significant
difference in the estimated parameters, associated with Egyptian import prices before and
after the Preferential Trade Agreement, does or does not occur. By significant difference, we
mean a) either a difference in sign of estimated slopes, when both estimates are significantly
different from 0, or b) a significant slope estimate in one case only (either before or after the
PTA).

Consider the case of the Egyptian share equation, for which there is a significant difference in
the elasticity associated with Egyptian price for 6 categories of commodities out of 20: 1-
Live animals, 5-Mineral products, 8-Skins, 12-Footwear, 14-Pearls & precious stones, 17-
Vehicles & aircrafts (see Appendix 4): In the case of sections 1, 5 and 8, the own-price effect
on the Egyptian share is significant and negative (as expected) before the PTA, and not after
the PTA. In the case of sections 12, 14 and 17, this is the opposite: a change in the price of an
Egyptian import significantly affects the share of Egyptian imports only after the PTA.

When no change in sign occurs, the sensitivity of Egyptian import shares to their own price is
greater after the PTA for sections 2, 4, 6, 7, 9, 10, 13, 16, 20 and 21. This is the opposite for
sections 11, 15 and 18, where the sensitivity of Egyptian import shares to their own price is
greater before the PTA. Therefore, we can conclude that in 13 cases (sections 2, 4, 6, 7, 9, 10,
12, 13, 14, 16, 17, 20 and 21) out of 19 (all categories less section 3 for which no price effect
is detected either before or after the PTA), the implementation of the PTA has had a
significant effect since 1999 in terms of own-price elasticity for Egyptian imports. In these
cases indeed, the sensitivity of demand for Egyptian goods with respect to Egyptian price has
increased (in absolute value), or has become significant after 1999, while it was not before the
PTA. This effect can be regarded as an indicator of possible trade creation with Egypt in
selected sectors due to the PTA.

With respect to trade diversion, our results in Table 33 show that depending on the import
section other country groups are affected or not by the PTA with Egypt. Notice for instance
that the AR group has 10 sections witnessing a change in the estimated parameter following
the PTA, a number much higher than other groups. Moreover, not all country groups see the

77
demand for their products affected in the same way: some sections are affected for some
groups but not for others.
For this, the contribution of this type of PTA empirical analysis is to highlight the way trade
creation and diversion are highly dependent on the underlying sections of trade. An aggregate
analysis of the overall effects of PTAs would thus be inadequate and would lead to bad policy
evaluation.

TABLE 33. DIFFERENCES IN ESTIMATED PARAMETERS ASSOCIATED WITH

EGYPTIAN IMPORT PRICES BEFORE AND AFTER THE PTA.

Equation EU AR AM ROW EG
Section
1. Live animals, animal products Yes No No No Yes
2. Vegetable products No Yes Yes Yes No
3. Animal and vegetable fats No Yes No Yes No
4. Prepared foodstuffs Yes No No No No
5. Mineral products No No No Yes Yes
6. Chemical products Yes Yes No No No
7. Plastics No Yes No Yes No
8. Skins Yes No Yes Yes Yes
9. Wood Yes Yes Yes No No
10. Wood pulp and cellulose No Yes No No No
11. Textiles Yes No No Yes No
12. Footwear No No Yes Yes Yes
13. Stone, plaster, cement Yes Yes No Yes No
14. Pearls, precious stones Yes Yes No Yes Yes
15. Base metals Yes No No No No
16. Machinery, mechanical appliances Yes No No Yes No
17. Vehicles, aircrafts No Yes Yes Yes Yes
18. Optical, photographical products No Yes Yes No No
19. Arms and ammunition Not enough observations
20. Miscellaneous manufactured articles Yes No No Yes No
21. Works of art Yes Yes No Yes No

Note: A difference is understood here as either a difference in sign of estimated slopes, when both
estimates are significantly different from 0, or a significant slope estimate in one case only (either
before or after the PTA).

78
4.5 A structural model of bilateral trade

We present in this section a structural model of trade flows between Lebanon as an importing
country, and a selection of competing, exporting countries. We concentrate on Egypt as an
important partner for Lebanon, and apply in the following the model to the case of a particular
commodity, namely the iron and steel section (HS1 code 15).

Empirical studies of strategic price behavior in import markets are but very few. Kadiyali et
al. (2001) present the main analytical tools used in the field of industrial organization, to deal
with such issues. The main contribution of this section is to augment the import demand
analysis with a formal treatment of the supply side (regional partner exports). In the preceding
sections, it was assumed that demand for imports was conditioned on a price system,
including customs duties and tariffs, but no attention was paid to strategic price policies by
exporters. This section intends to explore more thoroughly this aspect.

The theoretical model we introduce runs as follows: We assume that each country is
represented by a firm setting its price for exports, while competing with other firms
(countries). The model developed is a generalization of Dhar et al. (2002). Each firm from
country h produces a good i, and maximizes the following profit function:

Πih = (pih – cih) qih

with respect to price, where pih and cih are supply unit price and unit cost respectively, and qih
is output quantity. Note that the latter is a function of unit prices from other firms for the same
good, and unit prices for other goods. The first-order condition associated to the firm’s
problem is

 ∂q ∂q ∂p ∂q ∂p jh ∂qih ∂p jk 
q ih + ( p ih − cih )  ih + ∑ ih ik + ∑ ih + ∑  = 0,
 ∂pih k ≠ h ∂pik ∂p ih j ≠i ∂p jh ∂p ih j ≠ i , k ≠ h ∂p jk ∂p ih 


where index j denotes a good different from i, and index k denotes a representative firm from
a different country from h.

Notice that, in the equation above, price responses to changes in the price of firm h and good i
are introduced in three different places. The first term in brackets expresses the reaction of
import quantity to its own price (region and commodity category). The second term depends
on variations in prices of the same good but from different sources (countries indexed by k).
The third term introduces the price reaction for other goods produced within the same country
(indexed by j and h), and the fourth term considers the way a change in price pih affects the
price of other goods with different sources (indexed by j and k). These terms are denoted
Conjectural Variations (CV), and denote firm i conjecture about competitors’ price responses.
Let us introduce notation for these three CVs:

∂pik ∂p jh ∂p jk
η ik ,ih = , η jh ,ih = , η jk ,ih = .
∂pih ∂pih ∂pih

79
As in well known in the economics literature, a CV equal to 1 indicates a cooperative
behavior between importers from different regions and for the same commodity. When the
Conjectural Variation is strictly positive but different from 1, then the price level of
competitors is a significant factor in a representative country’s pricing strategy.

The first-order condition above can be written in terms of own- and cross-price elasticities.
Dividing throughout by total expenditure on product i, and after some manipulations, we have
the expression for the optimal pricing policy for good i of a representative firm from region h:

 p p piht 
wiht + wiht × miht ε ih ,iht + ∑ ε ih ,ikt iht η ih ,ik + ∑ ε ih , jht iht η jh ,ih + ∑ε ih , jkt η jk ,ih  = 0,
 k ≠h p ikt j ≠i p jht j ≠i , k ≠ h p jkt 

where
wiht is the import share of commodity i for region (country) h;
miht is the unit mark-up for commodity i in region (country) h;
εih,iht is the own-price elasticity of commodity i in region (country) h;
εih,ikt is the cross-price elasticity of commodity i between region h and region k;
εih,jht is the cross-price elasticity between commodity i and commodity j, for region h.

As in the full demand system presented above, it is not possible to consider estimation of such
equation with any number of commodities, as the number of parameters increases rapidly
with the number of goods and countries. For this reason, we concentrate on a single
commodity group, the iron and steel products (Section 15 of the Harmonized System), and
consider a aggregate commodity for all other goods. More precisely, we assume that there is
no distinct substitution pattern between the commodity of interest (Iron and Steel) and any
other good, and that the price of all other goods can be considered having the same role as
total expenditure.

Furthermore, we impose the same restriction as before on source differentiation, i.e., firms
make non source-differentiated conjectures between products:

γ ih , jk = γ ih , j and η jh ,ih = η ih , j .

Dividing the price policy equation by wiht x miht, and rearranging, this equation gives the
relative price ratio for two firms h and k, and for commodity i:

 p iht   1  p   p iht  
  = − [ε ih , ikt η ih , ik ]−1  + ε ih , iht + ε ih , bt  iht  η ih , b + ∑ ε ih , ik 't   η ih , ik ' 
 p ikt   m iht  p bt  k '≠ i , k '≠ k  p ik 't  

where cross-price and income elasticities are written as

γ ih ,ik wikt γ γ
ε ih ,ikt = − γ ih , ε ih ,bt = 1 + ih , ε ih ,iht = ih ,ih − γ ih − 1,
wiht wiht wiht wiht

80
and where i is the index of the main commodity (Iron and Steel product), b is the index of the
aggregate good, with associated price index pbt. For the latter, this price index is equivalent to
the general price index over all commodities, PT. In particular, the cross-price elasticity εih,bt
measures the reaction to changes in total import expenditures in the demand for good i. It is
interesting to note that, when country k is taken as the reference in the system of demand
equations, we obtain a direct way of expressing relative prices (between i and k) as a function
of other relative prices and mark-ups. Hence, our structural model provides a simple treatment
of price endogeneity (as a decision of the country or firm) in a demand system.

We compute import shares and price indexes in the same way as presented above, for the
regional import demand system of equations, for the considered commodity group: Iron and
Steel products. This category of goods is selected because it represents an important import
share of Egyptian exports to Lebanon, and because competitors from Europe and America are
numerous. In practice, we need to have, for each single Egyptian export to Lebanon in the
Iron and Steel commodity section from 1997 to 2002, the corresponding (monthly) price
indexes for other regions of the world, as well as mark-up indexes. The total number of
observations is 109, i.e., the number of Egyptian export transactions to Lebanon for which we
have matching monthly data for other trade partners.

The unit monthly mark-up for Iron and Steel products is computed from the UNIDO 2002
Industrial Statistics Database (4-digit level of ISIC, converted to HS classification), which
contains country and sector-wise information on value-added, wage and capital cost, and
output value. Total import expenditure is the corresponding monthly import value for
Lebanon. As already described above in the section on Egyptian imports, we control for
endogeneity of this variable by regressing it on month and year dummies, and price indexes.
Moreover, to accommodate a possible real exchange rate effect, we also include in the
instrumenting equation for total expenditure 3 measures of real exchange rates: between the
Lebanese pound and the Egyptian pound, US dollar and European Currency Unit (Euro from
2001).

Table 34 below presents descriptive statistics for the sample. We reiterate here the word of
caution stressed earlier in this study: average import shares for different exporting regions are
computed on the basis of HS8 goods when they are positive for all regions. Therefore, the
Egyptian import share, which is on average 14 percent of the total for the Iron and Steel
category, is over-represented in our case, as HS8 commodities used to compute this average
and for which Egyptian exports do not exist are excluded.

81
 TABLE 34. DESCRIPTIVE STATISTICS FOR THE IRON AND STEEL SECTION

Variable Mean Standard Minimum Maximum

Deviation
EU Mark-up 0.3312 0.0405 0.2878 0.3867
AR Mark-up 0.2557 0.0831 0.1345 0.3805
AM Mark-up 0.5320 0.0081 0.5204 0.5429
ROW Mark-up 0.3485 0.0138 0.3348 0.3768
EG Mark-up 0.2914 0.0059 0.2849 0.3021
EU Price index 0.6671 0.1129 0.2915 0.9695
AR Price index 0.8693 0.0973 0.4985 1.0000
AM Price index 0.9148 0.0729 0.6086 0.9926
ROW Price index 0.6980 0.1110 0.4165 0.9984
EG Price index 0.8491 0.1027 0.4761 0.9863
EU Import share 0.3818 0.1109 0.0377 0.7529
AR Import share 0.0916 0.0671 0.0024 0.4154
AM Import share 0.0825 0.0667 0.0060 0.3752
ROW Import share 0.3041 0.1223 0.0005 0.6291
EG Import share 0.1397 0.0893 0.0080 0.4280

Observations : 109.

We then estimate an augmented version of the structural model above, by considering several
competitors to Egypt: European Union (EU), North and South America (AM), Arab and
Regional countries (AR), and the Rest of the World (ROW). To reduce the number of
parameters to be estimated, we group together Arab and Regional countries with the Rest of
the World. The full system of equations to be estimated consists of price policy equations
(involving Conjectural Variations terms) and the import demand share equations. For the
latter, import price indexes are written in relative form, where price for goods imported from
the Rest of the World are used as reference. As import prices are now considered endogenous,
that is, determined by the firm optimal policy on export markets, this must be accounted for to
avoid simultaneity bias in estimation. Instruments used are lagged values of import shares for
the three different regions, and year dummy variables.

The complete system of equations is written

wiEUt = β 0 EU + β EUEU log( piEUt / piROWt ) + β EUAM log( piAMt / piROWt )

+ β EUEG log( piEGt / piROWt ) + γ E ,EU log( Et / PtT ),
wiEGt = β 0 EG + β EUEG log( piEUt / piROWt ) + β EGAM log( piAMt / piROWt )
+ β EGEG log( piEGt / piROWt ) + γ E , EG log( Et / PtT ),
wiAMt = β 0 AM + β EUAM log( piEUt / piROWt ) + β AMAM log( piAMt / piROWt )
+ β EGAM log( piEGt / piROWt ) + γ E , AM log( Et / PtT ),

82
  1  p  
 + ε EU , EUt + ε EU , bt  EUt η EU , b 
 p iEUt  m EUt  p bt 
  = − [ε EU , ROWt η EU , ROW ] 
−1  
,
 p iROWt   p   p 
 + ε EU , AMt  EUt η EU , AM + ε EU , EGt  EUt η EU , EG 
  p   p  
 AMt   EGt 
 1  p  
 + ε AM , AMt + ε AM , bt  AMt η AM , b 
 p iAMt  m AMt  p bt 
  = − [ε AM , ROWt η AM , ROW ] 
−1  ,

 p iROWt   + ε AM , EUt  p AMt η AM , EU + ε AM , EGt  p AMt η AM , EG 
  p   p  
 EUt   EGt 
 1  p  
 + ε EG , EGt + ε EG , bt  EGt η EG , b 
 p iEGt  m  p bt 
  = − [ε EG , ROWt η EG , ROW ]−1  EGt 
.
 p iROWt   + ε EG , AMt  p EGt η EG , AM + ε EG , EUt  p EGt  
 p   p η EG , EU
  AMt   EUt  

Note that, since the ROW price index is taken as reference when imposing homogeneity in
price to the demand system, we do not estimate cross-price parameters associated with ROW.
But from the parametric homogeneity conditions one can replace these coefficients in the last
3 equations by their theoretical counterparts, as functions of other parameters for AM, EG and
EU.

The full system of equations is estimated by the GMM (Generalized Method of Moments)
procedure, using as instruments to control for endogeneity bias, lagged import price indexes
and yearly dummy variables. For a total number of 24 parameters, there are 24
overidentifying restrictions, because the total number of orthogonality conditions used to
construct the GMM criterion is 48 (8 instruments for each of the 6 equations).

Estimation results are given in Table 35. As can be seen from this table, parameter estimates
for the demand side of the model (coefficients associated to own and cross prices) are
significant and have the expected sign, with the exception of the parameter γAM,EG, measuring
the reaction of American import share to Egyptian price, which is not significantly different
from 0. The magnitude of these parameters is also somewhat different from what was found
in the previous application of demand analysis to Egypt, for the same section. However, the
sample used and the number of observations for estimation is not the same.

As far as total expenditure is concerned, parameters γE,EG and γE,EU are significantly different
from 0, but parameter γE,AM is not, meaning that there is a positive income effect for Egyptian
and European imports, but not for American ones. The value of these parameters, moreover,
is higher than what was estimated in the previous sections.

Turning now to Conjectural Variations terms, we note first that the impact of a change in
overall price level on export prices is not significantly different from 0, for AM, EG and EU.
Cross-price terms ηAM,ROW, ηEG,ROW, ηEU,ROW, and ηEU,EG have the expected sign and are
significant at the 5 percent level. Other CV parameters are not significantly different from 0,
whether positive or negative. Parameter ηAM,EU is positive and almost significant (at the 10
percent level). When choosing to base statistical inference at the 95 percent confidence level,

83
we can conclude that American, Egyptian and European firms in the iron and steel industry
are price-takers with respect to export prices to Lebanon from the rest of the world.
Furthermore, and this result may seem more surprising, European iron-and-steel exporters
take into account Egyptian price variations when designing their own price policies.

On the other hand, apart from the prices of Rest of the World countries (including Regional
countries), no other regional prices seem to influence the level of Egyptian prices for this
category of goods. From the discussion on CV terms above, we can conclude that a collusive
(or cooperative) behavior does not exist between Egyptian and European exporters for the
Iron and Steel commodities, although the Conjectural Variation exists and is significant. The
test statistic for the cooperation assumption (CV=1) between European and Egyptian
exporters indicates that this assumption is rejected at the 5 percent level.

TABLE 35. STRUCTURAL MODEL ESTIMATION RESULTS

Parameter Estimate Std. Error T stat. P-value

β0,AM -0.0506 1.3442 -0.04 0.9700
β0,EG -10.9533 1.7717 -6.18 0.0000
β0,EU -11.7373 3.4780 -3.37 0.0011
γE,AM 0.0149 0.0663 0.23 0.8222
γE,EG 0.5568 0.0878 6.34 0.0000
γE,EU 0.5871 0.1722 3.41 0.0010
γAMAM -0.4876 0.0464 -10.51 0.0000
γAMEG 0.0030 0.0138 0.22 0.8267
γAMEU 0.1792 0.0397 4.51 0.0000
γEGEG -0.6678 0.0963 -6.93 0.0000
γEGEU 0.4667 0.0743 6.28 0.0000
γEUEU -1.1218 0.1728 -6.49 0.0000
ηAM,b -3.96E-7 0.0007 -0.00 0.9996
ηAMEG -18.4019 81.7630 -0.23 0.8224
ηAMEU 0.4031 0.2501 1.61 0.1104
ηAMROW 0.1602 0.0251 6.38 0.0000
ηEG,b -0.00004 0.00005 -0.76 0.4476
ηEGAM 2.0364 8.8889 0.23 0.8193
ηEGEU -0.1067 0.2830 -0.38 0.7070
ηEGROW 0.3683 0.0843 4.37 0.0000
ηEU,b 0.00005 0.0001 0.49 0.6272
ηEUAM -0.0739 0.0473 -1.56 0.1221
ηEUEG 0.0064 0.0022 2.88 0.0050
ηEUROW 0.4934 0.1423 3.47 0.0008

Observations 109. Estimation method: GMM (Generalized Method of Moments).

Hansen test of over identifying restrictions: 20.8843 (p-value: 0.6455).
Instruments: (peu,t-1, prow,t-1, pam,t-1, peg,t-1, 1999, 2000, 2001, 2002).

84
It is interesting to compare our estimation results for the structural model, in which export
prices are assumed endogenous, to estimates obtained under the alternative assumption that
the latter are exogenous. In this case, we simply estimate the usual demand system for the 3
import share equations, i.e., dropping the last 3 equations in the system above. As price are
assumed exogenous, the estimation method is SURE (Seemingly Unrelated Regressions).
Estimation results are presented in Table 36 below.

TABLE 36. USUAL MODEL ESTIMATION RESULTS

Parameter Estimate Std. Error T stat. P-value

β0,AM 4.0244 1.6514 2.44 0.0165
β0,EG -0.1585 2.6353 -0.06 0.9522
β0,EU -1.9802 2.6827 -0.74 0.4621
γE,AM -0.1904 0.0815 -2.34 0.0213
γE,EG 0.0160 0.1300 0.12 0.9020
γE,EU 0.1112 0.1324 0.84 0.4027
γAMAM -0.4243 0.0253 -16.74 0.0000
γAMEG 0.1937 0.0200 9.67 0.0000
γAMEU 0.1012 0.0156 6.50 0.0000
γEGEG -0.3655 0.0318 -11.49 0.0000
γEGEU 0.1171 0.0219 5.34 0.0000
γEUEU -0.4453 0.0251 -17.74 0.0000

Observations 109. Estimation method: SURE (Seemingly Unrelated Regressions), assuming

exogenous prices.

To test for the validity of the usual demand model, we compute the Hausman exogeneity test,
based on the difference between demand-side parameter estimates only, in both cases. The
test statistic is 143.22 with 12 degrees of freedom, hence we strongly reject exogeneity of
prices. As a result, for the iron and steel industry, accounting for supply-side effects in the
model is a more consistent approach. Because the Hausman specification test is known to
have poor power in small samples, we check for this result by employing an alternative, more
robust test procedure. Known as the augmented regression test, it consists in computing
residuals from the 3 price equations in the system of structural equations, and estimating the 3
demand equations by incorporating these computed residuals as explanatory variables. By
testing for the significance of parameters associated with the three residuals, we can check
whether relative prices are indeed endogenous or not. Student t-statistics are 6.47, 2.91 and
3.78 for parameter in demand equations AM, EG and EU respectively, indicating the
endogenous nature of all three price ratios. Furthermore, a Wald test for the joint significance
of these 3 residuals is equal to 82.21, with a p-value of 0.0001. Hence, these test results
strongly confirm the rejection of the exogeneity assumption of relative price ratios.

Finally, we use our parameter estimates to evaluate the change in import shares which can be
attributed to the trade policy between Lebanon and Egypt. To do this, we replace the Egyptian
price, after 1999 only (implementation of the PTA), by a new price including the tariff rate
(which was effective before this date). Hence, for the simulated values in the experiment,

85
Egyptian prices appear as if no PTA had taken place. The interesting aspect of this simulation
experiment is to allow for export prices of trade partners (EU, AM and ROW) to adjust for the
change in the relative price of Egyptian exports. Hence, with our structural model, the impact
of a change in relative prices for a given trade region or country comes not only through the
import share equation (as was the case in the preceding sections for EU and Egypt), but also
through Conjectural Variations. As the Egyptian export prices are modified when
commodities reach the Lebanese market, after the implementation of the PTA in 1999, this is
accounted for by other trade partners (competing with Egypt on the Lebanese market) when
designing their own export price policy.

Results are presented in Table 37, where we report the actual and simulated shares, together
with the rate of change in import shares for the following trade partners: Egypt, European
Union, America and the Rest of the World. For the sake of comparison, we also report the
same computations based on the usual demand model (AIDS), where prices are assumed
exogenous.

As expected, the Egyptian import share has increased due to the PTA (prices are lower after
1999, and the associated coefficient in the Egyptian share equation is negative), and this
increase is rather significant (about 30 percent). Moreover, we also note an increase in the
import shares for North and South America, but a decrease for the Rest of the World (recall
this trade region now includes Arab and Regional countries, excluding Egypt), and the
European Union. Although the impact of the PTA with Egypt is rather limited as far as ROW
is concerned, the effect is more significant for AM, with an increase of more than 100 percent.
This may be explained by the fact that the import share for AM was the lowest, both before
and after 1999.

Comparing these rates of change with those obtained from the usual demand model one can
see that there are major differences for the European Union and especially America. For the
latter, the effect of the PTA is predicted as being relatively moderate (an increase of about 4
percent in the import share due to the PTA), whereas it is much more pronounced in our
structural model. Hence, overlooking the fact that trade competition may lead regions to adapt
their export price policy depending on adoption of PTA by Lebanon, leads to a serious
underestimation of the effect of the PTA in the case of AM, and to a large overestimation bias
as far as the European Union is concerned.

86
TABLE 37. ACTUAL AND PREDICTED SHARES UNDER THE NO-PTA CASE, FOR
YEARS 1999 TO 2002

ShareActual Predicted Mean, Predicted Mean, Rate of change Rate of change

Mean, with no PTA, no PTA, (percent), (percent),
PTA structural model usual demand structural usual demand
model model model
WEU 0.3207 0.3725 0.3269 -13.90 -1.89
WROW 0.4651 0.4917 0.4874 -5.41 -4.57
WAM 0.1033 0.0504 0.0994 104.96 3.92
WEG 0.1107 0.0853 0.0861 29.77 28.57

To summarize, the major contribution of this section is to show how predictions about trade
creation and trade diversion following a PTA can be dramatically different when one takes
into account the ‘structural framework’ of the problem at hand: that is to include both demand
side and supply (export) side effects, the latter being captured through the rich framework of
Conjectural Variations.

87
5. Conclusion

This study aimed to provide the decision-maker and, more generally, officials involved in
trade policy developments, with an analytical tool for assessing Preferential Trade
Agreements in the case of Lebanon. Starting with an extensive detailed description of
Lebanon’s trade situation, the report contained various empirical estimations and simulations
that lead to the following results:
First, the evaluation of the PTA with the EU through the simulation of its impact on trade
creation and the possible diversion of imports from other country blocks allows the Lebanese
government to present many arguments in favor of this agreement: it can defend it based on
the fact that trade creation allows lower import prices for consumers and firms importing
intermediary products, and it can argue that trade diversion is highly correlated with specific
sections: the agreement can harm some countries (who see their exports crowded-out by
European products) in some product categories but not in others. So in our opinion the
novelty of the approach used here is that it can offer a tool for category-specific negotiations
when governments engage in PTAs or even multi-lateral liberalization at a broader level.
Moreover, the same type of analysis was carried out with the PTA with Egypt, and similar
conclusions were found regarding the dependence of terms of trade changes on categories.

One of the central findings of this paper is that predictions about trade creation and trade
diversion following a PTA can be dramatically different when one takes into account the
‘structural framework’ of the problem at hand: that is to include both demand side and supply
(export) side effects, the latter being captured through the rich framework of Conjectural
Variations. We found that in the case of the Iron and Steel commodity the PTA with Egypt
yields different trade diversion estimations (in the form of reduced export shares to Lebanon
from the EU and the Americas) under the original structural model than the usual demand
model. This result has profound implications both for trade economists and policy-makers.

While trying to preserve consistency with economic foundations of international economics

and demand analysis, we feel that the statistical methods and economic modeling developed
in this work should not be seen as the only contribution to the debate on the impact of trade
agreements on welfare. More than a series of quantitative results on predicted future trade
patterns of Lebanon with its partners, this report provides the reader with a methodology that
could be used in a variety of situations. For instance, in the negotiation on future bilateral
agreements between Lebanon and other countries, the predicted import patterns for selected
commodities if customs tariffs are modified, could be used for temporary protection purposes.
In this case, it is particularly important to have a quantitative vision not on broad trade flows,
but rather, at a very disaggregated level. Also, as far as local producers (industrialists) are
concerned, the impact of trade agreements on the price of imported intermediate goods over
an entire period of time could also be simulated. In each case, separate analyses can be
performed by concentrating on a single (or a selection of) commodity(ies), and/or on a single
trade partner (or import region).

Given the generality of the methodology proposed in this study, and the wide range of
prediction possibilities, an all-purpose prediction tool would be difficult to construct, except
by means of a user-friendly software application.

88
Given this, possible research extensions include, but are not limited to, the treatment of non-
tariff barriers to imports in Preferential Trade Agreements, and a test for homogeneity in
commodity quality for imports from different sources. For instance, non-price factors could
also play a role in the decision-making of Lebanese importers (country-specific reputation
effects, product differentiation).

89
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APPENDICES

APPENDIX 1: LEBANON’S INTERNATIONAL TRADE AGREEMENTS

Source : Ministry of Economy and Trade, Lebanon, and Official Publications.

List of Foreign Trade Agreements

- Goods

Bilateral Trade and Economic Agreements

Trade and Economic Agreements

Countries/Regions Signed Ratified
GAFTA (Arab countries) 18 February 1997 4 May 1998
Algeria 20 April 1967 10 September 1968
Armenia 1 May 1995 5 November 1998
Australia 11 March 1997 5 November 1998
Azerbaijan 11 February 1998 31 March 1999
Cameroon 19 October 1962 19 February 1964
Chile 26 November 1997 23 February 1999
China 13 June 1996 28 February 1997
Cuba 14 December 1995 23 February 1999
The Czech Republic 7 October 1994 15 May 1995
Egypt 10 September 1998 23 February 1999
European Union 3 May 1977 7 November 1997
Greece 24 July 1997 5 November 1998
Iran 27 October 1997 5 November 1998
Iraq 9 April 1967 8 June 1967
5 December 1999 24 May 2000
Jordan 1 October 1992 4 January 1993
5 September 2002
Kuwait 10 January 1996 24 July 1996
Malaysia 23 May 1995 24 July 1996
Morocco 10 March 1972 23 March 1973
Nigeria 29 March 1968 28 August 1969
Poland 27 May 1993 24 April 1994
Romania 8 October 1994 8 December 1995
Russia 31 March 1995 24 July 1996
7 April 1997 23 February 1999
Saudi Arabia 11 November 1971 20 December 1971
Senegal 29 May 1963 6 March 1964
Sudan 26 April 1969 27 February 1971
Syria 16 September 1993 22 February 1994
Taysir (Arab countries) 22 February 1981 1 April 1995
Turkey 10 October 1991 14 April 1992
Ukraine 25 March 1996 28 February 1997
United States of America Agriculture agreement: 22 February 1979
23 March 1978
Yemen 25 November 1999 24 May 2000
Yugoslavia 28 July 1953 23 July 1954

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- Services

Avoidance of Double Taxation and the

Prevention of Fiscal Evasion Agreements

Country Signed Ratified

Armenia 16 September 1998 23 February 1999
Bulgaria 1 June 1999 25 October 1999
Canada 29 December 1998 Not ratified
The Czech Republic 28 August 1997 14 June 1999
Egypt 17 March 1996 24 July 1996
France 24 July 1962 23 August 1963
Iran 22 October 1998 23 February 1999
Italy 22 November 2000 Not ratified
Malta 23 February 1999 25 October 1999
Poland 26 July 1999 Not ratified
Romania 28 June 1995 24 July 1996
Russia 7 April 1997 23 February 1999
Syria 12 January 1997 24 July 1997
Tunisia 24 June 1998 23 February 1999
United Arab Emirates 17 May 1998 23 February 1999

Investments Promotion and Protection Agreements

Country Signed Ratified

Armenia 1 May 1995 16 March 1998
Azerbaijan 11 February 1998 3 March 1999
Bulgaria 1 June 1999 30 December 2000
Canada 11 April 1997 31 March 1999
Chile 13 October 1999 24 May 2000
China 13 June 1996 28 February 1997
Cuba 14 December 1995 5 November 1998
The Czech Republic 19 September 1997 14 June 1999
Egypt 1 March 1996 24 July 1996
Finland 25 August 1997 14 June 1999
France 28 November 1996 31 March 1999
Germany 28 March 1997 5 November 1998
Greece 24 July 1997 31 March 1999
Iran 28 October 1997 31 March 1999
Italy 7 November 1997 31 March 1999
Luxembourg 7 October 1997 6 September 1999
Malaysia 26 February 1998 31 March 1999
Morocco 3 July 1997 14 June 1999
OPEC 23 September 2000 Not ratified
Romania 19 October 1994 6 June 1996
Russia 7 April 1997 Not ratified
Spain 22 February 1996 23 April 1997
Switzerland 3 March 2000 30 December 2000
Syria 12 January 1997 24 July 1997
Tunisia 24 June 1998 31 March 1999
United Kingdom 16 February 1999 30 December 2000
Ukraine 25 March 1996 24 July 1996
United Arab Emirates 17 May 1998 31 March 1999
Yemen 25 November 1999 24 May 2000

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Free Trade Agreements

- Taysir:

Agreement for Facilitating and Developing Trade Exchanges among Arab Countries
(Taysir); signed on 22 February 1981; ratified on 1 April 1985. No specific lists exist.
Implementation is articulated under GAFTA.

- GAFTA:

The Executive Programme of the Agreement for Facilitating and Developing Trade
Exchanges among Arab Countries-The Greater Arab Free Trade Area (GAFTA); signed 18
February 1997; ratified 4 May 1998;

The main elements of the executive programme may be summarized as follows:

- The removal of tariffs on all goods exchanged between the signatories, according
to a progressive liberalization with an annual reduction of 10% in the tariffs applied on 1-1-
98, to reach zero tariff on 31-12-2007
- The treatment of goods included in the programme as national goods.
- The necessity for Arab goods to be treated according to the programme to fulfill the norms
of origin; which specifies 40% of the added value.
- The exclusion of some agricultural products (a maximum of ten) from tariff exemption
during the harvest period (a maximum of seven months), which should disappear at the end of
the transition period of the GAFTA.
- Tariff-like charges and taxes to be treated as normal tariffs.
- The respect for international norms (safeguards, subsidies, etc).
- Countries can go beyond what the programme stipulates and exchange further
tariff exemptions.
- No Arab goods exchanged within the programme should be subject to non-tariff barriers. An
action programme was set up in order to eliminate or reduce NTBs and a negotiating
committee will establish a common list of goods it is prohibited to import for religious,
health, environmental or national security reasons. A reciprocity principle for unjustified
NTBs was agreed on.
- Member countries draw up a list of exceptions for restructuring (report on impact).
- Special treatment of the less developed Arab countries (according to the UN classification,
plus Palestine).

In addition to these provisions:

- More than 300 groups of goods are not subject to the GAFTA agreement for religious,
health, environment, and national security reasons. These categories are in chapters 1, 2,
5, 12, 13, 15, 16, 22-29, 31, 34, 36, 38-41, 56, 68, 70-72, 81, 85, 87, 90, 92, 93, and 95.
- GAFTA’s temporary exemptions (until 16 September 2002): 47 groups of goods in
chapters 25, 69, 74, 76, 85, and 94
- GAFTA’s temporary agricultural agenda (until 16 September 2002): 11 groups of goods
in chapters 7 and 8.
- Lebanon’s temporary exemptions from GAFTA (until 16 September 2002): 41 groups in
chapters 25, 69, 74, 85, and 94

95
- Egypt:

The Executive Programme to Enhance Trade Exchange between the Lebanese

Republic and the Egyptian Arab Republic within the Framework of Taysir Agreement; signed
10 September 1998 and ratified on 23 February 1999. This agreement calls for zero duties as
of January 1, 1999, with the following exceptions:

- Free trade does not apply on 9 groups of goods of Egyptian origin when imported into
Lebanon. Such goods are however subject to GAFTA agreement reductions. These are in
chapter 6, 16, 24, 769, 84, and 94.
- Free trade does not apply on 7 groups of goods of Lebanese origin when imported into
Egypt. These are in chapters 2, 22, 24, 25, 50, 63, 74, 76, 85, and 87.
- For 6 groups of agricultural goods of Egyptian origin, free trade applies during a certain
period of the year when such goods are imported into Lebanon. During the remaining
period of the year, such products are prohibited from importation into Lebanon. These are
in chapters 7 and 8.
- For 4 groups of agricultural goods of Lebanese origin, free trade applies during a certain
period of the year when such goods are imported into Egypt. During the remaining period
of the year, such products are prohibited from importation into Egypt. These are in
chapter 8.
- Sixteen groups of agricultural goods of Egyptian origin are prohibited from import into
Lebanon. These are in chapters 1, 2, 4, 7, 8, 11, 15, and 20.
- Ten groups of goods of Lebanese and Egyptian origins are subject to gradual reductions
(25 per cent per year) starting 1 January 1999 leading to free trade for these groups of
goods within 4 years. These are in chapters 4, 7, 8, 17, 20, 22, and 32.
- Five groups of goods of Egyptian origin are subject to prior permit when imported into
Lebanon. These are in chapters 25, 74, 76, and 85.

- European Union 11:

- Cooperation Agreement between the European Economic Community and the

Lebanese Republic; signed 3 May 1977; ratified 7 November 1977. No specific lists exist.

- Association Agreement: Signed on 17 June 2002, the Association Agreement has

been ratified by the Lebanese and European Parliaments. The Interim Agreement, which
entered into force on March 1 2003, covers trade and trade-related components of the
Association Agreement. It will allow concessions on tariff quotas and reductions set out in the
accord to begin from this date.

The main provisions of the Association Agreement are:

• Political dialogue, human rights: The Agreement formalizes political contacts between
Lebanon and the Union at all levels, from officials to government ministers. It binds
Lebanon to respect for the principles of human rights and democracy.
• Agriculture: For Lebanon, it offers important concessions in agricultural exports to
EU. EU has agreed full liberalization (no duty, no quota) for all Lebanese agricultural
products, with a list of exceptions covering sensitive areas of EU domestic agriculture.
This list (for the main part: olives, olive oil, table grapes, wine, potatoes, pears, apples,

11
More information on the Lebanon-EU Association agreement can be found at :
www.europa.eu.int and www.economy.gov.lb

96
 garlic, tomatoes) sets out individual zero duty tariff quotas for each product group,
with an annual increase. These concessions apply immediately the Agreement comes
into force. For the EU, Lebanon has granted a range of reciprocal concessions in the
form of tariff reductions. These are particularly important where high tariffs
(generally, from 35% to 70%) are currently applied. The EU will thus gain from lower
duties on such items as meat, milk, eggs, cheese, potatoes, tomatoes, garlic, various
vegetables and fruits, and quality wine. The tariff reductions will take place five years
after entry into force of the Agreement. The situation will be reviewed five years after
entry into force of the Agreement.
• Processed agricultural products (PAP): Each side is to make significant reductions in
duties. EU is to remove duties completely and immediately, on entry into force of the
Agreement, on a wide range of food and other processed farm products from Lebanon,
and has maintained the agricultural element only on a restricted list of goods
(including buttermilk, cream yogurt, sweet corn, margarine, fructose, some malt, flour
and cocoa products; pasta; tapioca; ice cream, certain alcohols). Lebanon is to remove
duties completely on some 120 product groups from EU, and to make 30% tariff cuts
to some 100 product groups (such as yogurt, margarine, chewing gum, sweets, cocoa,
chocolate, biscuits, sweet corn, certain potato products, ice cream, mineral water,
beer). Tariffs on most EU cheeses are to be reduced to 20%. These tariff reductions
are to be phased gradually, from year six to year 12 of the transition period, after entry
into force of the Agreement (as for industrial products).
• Free trade in industrial products: While EU markets have been duty and quota free to
Lebanese industrial products since the 1978 Co-operation Agreement, the new
Agreement will see a gradual reduction in Lebanese tariffs on EU industrial products,
over a twelve year period, beginning immediately on entry into force of the
Agreement, with a five year standstill. Thus, tariffs will be reduced from years six to
twelve, when they will all be zero. At this point, free trade will exist in industrial
products.
• Trade legislation: The Agreement contains commitments on the adoption of modern
international-standard economic legislation on competition (by five years after entry
into force), intellectual property protection, on anti-dumping and anti-subsidy, and on
public procurement. It requires the two sides to begin discussions on improved market
access arrangements for services one year after entry into force.
• Rules of origin and regional accumulation: The Agreement makes it possible for
Lebanon’s trade partners to share production and to market jointly-produced goods in
the EU while maintaining preferential access, according to specific rules agreed by the
two sides. The Agreement grants Lebanon exemption from these rules for eleven
products.
• Economic and sector co-operation: The EU undertakes to assist Lebanon in various
forms of co-operation to implement the Agreement, and to offset the short-term effects
of economic restructuring. This may involve modernizing the customs authority,
competition legislation, trade enhancement, strengthening the trade administration
needed to implement the Agreement, and to prepare for WTO accession, for
improvement to intellectual property agencies, and capacity-building in the area of
standards and norms.
• The Agreement also contains commitments on judicial co-operation and respect for
the rule of law, and requires parties to respect international rules on money laundering,
on combating organized crime and illicit drugs, and on migration and re-admission

97
 issues (for Lebanese and third country nationals). The Agreement does not include co-
operation on counter-terrorism. This subject is covered by a separate exchange of
letters between Lebanon and the EU, which makes reference to the context of the
Agreement, and which enters into force at the same time as the Agreement.
- Kuwait:

Agreement of Trade Cooperation between the Government of the Lebanese Republic

and the Government of the State of Kuwait; signed 10 January 1996; ratified 24 July 1996.
Two lists exist:

- As of January 1, 1999, no duties apply on all agricultural products, products of animal

origin and natural resources originating from both contracting parties.
- List of Lebanese industrial goods exempt from import duties when imported into Kuwait:
140 groups in chapters 4, 7, 8, 15-22, 25, 28, 30, 33, 36, 39, 40, 42, 44, 45, 48, 51, 52, 54-
56, 59, 60-65, 69, 71-76, 83-85, 93, and 94.
- List of Kuwaiti industrial goods exempt from import duties when imported into Lebanon:
50 groups in chapters 3, 4, 7, 11, 16, 17, 19, 20, 22, 25, 27-29, 31, 32, 39, 68, 70, and 73.

- Other industrial products (which are not included in the above mentioned lists) benefit
from a gradual reduction of 25% yearly, as of January 1, 1999, leading to free trade for
these groups of goods within 4 years.

- Syria:

Agreement of Economic and Social Cooperation and Coordination between the

Lebanese Republic and the Syrian Republic; signed 16 September 1993; and ratified 22
February 1994. Two lists exist:

- Tariff rates on industrial goods are reduced by 25% annually (free trade in 4 years for
industrial products) starting January 1, 1999.
- Goods subject to 50 per cent initial reduction followed by 10 per cent annually over a
period of 5 years: 21 groups in chapters 1, 2, 4, 7, 8, 15, 16, and 20
- Agricultural goods not subject to free trade: 280 groups in chapters 1-10, 12, and 14

Trade Agreements Containing Preferential Trade Provisions

- Iraq:

Economic Agreement between the Lebanese Republic and the Iraqi Republic; signed 9
April 1967; ratified 8 June 1967.

- Exempt from customs duties, when imported into Lebanon, are 90 categories of goods
(Iraqi origin) in chapters 1-10, 12, 13-15, 17, 18, 20, 22-27, 40, 41, 43-46, 49-53, 71, 75,
76, 78-81, and 84.
- Reduced customs duties (15 per cent-75 per cent reductions from normal rates) apply on 171
categories of goods (Iraqi origin), when imported into Lebanon, in chapters 15, 17-20, 22,
25, 27, 28, 30-35, 37-42, 44, 48, 49, 51-64, 66, 68-74, 76, 82-87, 94, and 96.

Free trade agreement, entered into effect June 7 2002. Calls for zero tariffs and
customs duties on goods exchanged between the two countries.

98
- Jordan:

Trade Agreement between the Government of the Lebanese Republic and the
Hashemite Kingdom of Jordan; signed 1 October 1992; ratified 4 January 1993.

Three lists exist with Jordan:

- Exempt from customs duties, when imported into Lebanon, are 21 categories of goods
(Jordanian origin) in chapters 4, 7, 23, 30, 31, 39, 46, 48, 49, 52, 70, 71, and 84.
- Reduced customs duties (1/3 reduction from normal rates) apply on 124 categories of
goods (Jordanian origin), when imported into Lebanon, in chapters 20, 21, 25, 30-36, 38-
40, 42, 44, 48, 49, 51, 56-58, 61-64, 67-70, 72-74, 76, 78, 82-85, 87, 90, 94, and 96.
- Exempt from customs duties, when imported into Lebanon and sold during period of
exhibitions, are 51 categories of goods (Jordanian origin) in chapters 20, 25, 33, 36, 38,
39, 42, 51, 56, 61-64, 67, 68, 70, 73, 76, 83-85, 87, 90, 94, and 96.
- Thirty agricultural goods (Jordanian origin) are provided seasonal preferences (zero duties
and no advance permit) in accordance with agricultural agenda. No HS code was
specified.

Free trade agreement signed 5/9/2002, calls for zero tariffs on all goods, except on a
specific agricultural goods list subject to a seasonal calendar of tariff exemptions.

- Saudi Arabia:

Trade and Economic Agreement between the Saudi Kingdom and the Lebanese
Republic; signed 11 November 1971; ratified 20 December 1971.

- Exempt from customs duties, when imported into Lebanon, are 86 categories of goods
(Saudi origin) in chapters 1, 4-8, 14, 15, 19-22, 25, 26-30, 33, 35, 38-41, 44, 48, 51, 52,
57, 61, 66, 69, 73, 76, 83 and 84.
- Reduced customs duties (1/3 of normal rates) apply on 23 categories of goods (Saudi
origin), when imported into Lebanon, in chapters 21, 33, 51, 53-55, 57, 62, 63, 70, 73, 74,
84, 85 and 96.

- United Arab Emirates:

Free trade agreement, effective starting 23 August 2001. 50% reduction tariffs starting
1/1/2001, 75% reduction starting 1/1/2002 and 100% reduction starting 1/1/2003. Some goods
are subject to immediate full reduction in tariffs, specified in separate lists.

- Sudan:

Trade Agreement between the Lebanese Republic and the Sudanese Republic; signed
21 April 1969; ratified 27 February 1971.

- Exempt from customs duties, when imported into Lebanon, are 75 categories of goods
(Sudanese origin) in chapters 1-10, 12-15, 18, 20, 22, 25-27, 40, 41, 43-45, 50-53, 71, 74-
76, and 78-81.
- Reduced customs duties (50 per cent-75 per cent reduction from normal rates) apply on 24
categories of goods (Sudanese origin), when imported into Lebanon, in chapters 4, 8, 15,
20, 21, 23, 32, 41, 42, 48, 52, 58, 73, and 84.

99
APPENDIX 2: TRADE INDEXES

Laurence Index:
n
X i ,t
Computed as LI = (1 / 2)∑ si , t − si , t −1 where si ,t = , that is si,t is the share of sector
i =1 ∑X
i
i,t

i’s exports in total exports of the country at year t. For more details see Sapir (1996).

Michaely Index:
n
Xi Mi
Defined as MI = (1 / 2)∑ − , where Xi and Mi are, respectively, exports and
i =1 ∑ Xi ∑ Mi
i i

imports of sector “i” in a given year (Amable, 2000).

Trade Specialization Index:

 
n
 Xi − Mi 
Defined as MI = ∑   . See Bender (2001) for additional details.
i =1  ∑ ( X i + M i ) 
 i 

Revealed Comparative Advantage Index:

X i, j
∑X i, j
Equal to RCAi = i
with Xij the exports of sector “i” at country “j”;
∑j
X i, j

∑ ∑Xj i
i, j

∑X i
i, j the total exports of country “j”;

∑X
j
i, j the “world” exports of sector “i” (sum of countries sector’s “i” exports); and

∑ ∑X
j i
i, j the total “world” exports.

100
APPENDIX 3: IMPORT SHARE ESTIMATION RESULTS

The system of equations is

wij = β 0 j + β1 PEUi + β 2 PARi + β 3 PAMi + β 4 PROWi

+ γ 1 EXPENDi + γ 2 1998 + γ 3 1999 + γ 4 2000 + γ 5 2001 + γ 6 2002

where

i: index of commodity (HS8 classification);

j: region index (EU, AR , AM and ROW);

wij : share of region j in expenditure on commodity i;

PEUi, PARi, PAMi, PROWi: logarithm of price index for commodity i from region EU, AR, AM
and ROW respectively;

EXPENDi: total expenditure on commodity i (on imports from all regions);

1998, 1999, 2000, 2001 and 2002: indicator (dummy) variables, equal to 1 for the
corresponding year, and 0 otherwise.

For each section:

• the first table reports, for each regional equation, the number of observations (i.e., goods
classified under HS8 for the corresponding section), the Root Mean Square Error (RMSE,
interpreted as the relative prediction error of the model), and the significance coefficient
2
(R , measuring the goodness of fit of the model).

• the second table presents parameter estimates associated with explanatory variables (see
the system of equations above), the standard error (Std. Error, a measure of parametric
estimation precision), the Student test statistic (T stat, the ratio of parameter estimate over
its standard error) and the associated probability value (p-value).

Interpretation:
2
• a R coefficient close to 1 indicates a satisfactory goodness of fit; a value of 0 indicates no
explanatory power, a value of 1 indicates perfect fit of the model.

• the Student test statistic should be greater than 1.96 in absolute value if the hypothesis of
no statistical significance of the parameter estimate is valid (with a 5 percent error level).
Hence, a parameter estimate is significantly different from 0 if the Student statistic is
greater than 1.96 in absolute value or, equivalently, if the probability value is less than 5
percent (0.05).

101
Section 1. Live animals, animal products

Equation Obs RMSE R2

weu 232 .0975925 0.9287
war 232 .1097547 0.8708
wam 232 .0831015 0.8440
wrow 232 .1090844 0.9353

Estimate Std. Error Z P value

weu Intercept .234984 .0173497 13.54 0.000
P_EU -.7574932 .0229246 -33.04 0.000
P_AR .2334388 .0168235 13.88 0.000
P_AM .2493777 .0162097 15.38 0.000
P_ROW .2746766 .0169722 16.18 0.000
EXPEND. .0000561 .0004465 0.13 0.900
1998 .0337106 .023155 1.46 0.145
1999 .0703758 .0227403 3.09 0.002
2000 .0770493 .0261191 2.95 0.003
2001 .037824 .0218621 1.73 0.084
2002 .0358585 .0224631 1.60 0.110
war Intercept .0142828 .1618806 0.09 0.930
P_EU .2334388 .0168235 13.88 0.000
P_AR -.5790217 .0217088 -26.67 0.000
P_AM .183128 .0153567 11.92 0.000
P_ROW .162455 .0166421 9.76 0.000
EXPEND. .0168765 .012194 1.38 0.166
1998 .0291655 .026312 1.11 0.268
1999 -.0248111 .0270177 -0.92 0.358
2000 -.0356019 .0301421 -1.18 0.238
2001 -.0194926 .0279555 -0.70 0.486
2002 -.0130022 .0284665 -0.46 0.648
wam Intercept .4420828 .1383532 3.20 0.001
P_EU .2493777 .0162097 15.38 0.000
P_AR .183128 .0153567 11.92 0.000
P_AM -.5579713 .0210343 -26.53 0.000
P_ROW .1254656 .0156047 8.04 0.000
EXPEND. -.0166704 .0104236 -1.60 0.110
1998 -.0228143 .0202327 -1.13 0.259
1999 -.0334952 .0213335 -1.57 0.116
2000 -.0412862 .0232585 -1.78 0.076
2001 -.0154175 .022036 -0.70 0.484
2002 -.0050478 .0222713 -0.23 0.821
wrow Intercept .3086504 .1828843 1.69 0.091
P_EU .2746766 .0169722 16.18 0.000
P_AR .162455 .0166421 9.76 0.000
P_AM .1254656 .0156047 8.04 0.000
P_ROW -.5625972 .0225399 -24.96 0.000
EXPEND. -.000199 .0137749 -0.01 0.988
1998 -.0400868 .0263219 -1.52 0.128
1999 -.0121326 .0273182 -0.44 0.657
2000 -.0002164 .0302144 -0.01 0.994
2001 -.002996 .0287217 -0.10 0.917
2002 -.0178907 .0291264 -0.61 0.539

102
Section 2. Vegetable products

Equation Obs RMSE R2

weu 657 .168276 0.7167
war 657 .1935443 0.7689
wam 657 .1315622 0.7631
wrow 657 .1740015 0.7616

Equation Variable Estimate Std. Error T statistic P value

weu Intercept .2730248 .0163998 16.65 0.000
P_EU -.4195856 .020888 -20.09 0.000
P_AR .1409123 .0156036 9.03 0.000
P_AM .1387983 .0140888 9.85 0.000
P_ROW .139875 .0168088 8.32 0.000
EXPEND. -.0000294 .000519 -0.06 0.955
1998 -.0204053 .0233311 -0.87 0.382
1999 -.0146832 .0240469 -0.61 0.541
2000 -.0445511 .0247014 -1.80 0.071
2001 -.0537991 .0221957 -2.42 0.015
2002 -.066451 .0214206 -3.10 0.002
war Intercept .3623133 .1954605 1.85 0.064
P_EU .1409123 .0156036 9.03 0.000
P_AR -.4842381 .0222435 -21.77 0.000
P_AM .157661 .0134404 11.73 0.000
P_ROW .1856647 .0177137 10.48 0.000
EXPEND. -.0081647 .0140075 -0.58 0.560
1998 .0028135 .0273155 0.10 0.918
1999 .0221093 .0279249 0.79 0.429
2000 -.02525 .029003 -0.87 0.384
2001 .0687731 .0256589 2.68 0.007
2002 .075393 .0246495 3.06 0.002
wam Intercept .1656261 .1337099 1.24 0.215
P_EU .1387983 .0140888 9.85 0.000
P_AR .157661 .0134404 11.73 0.000
P_AM -.4936489 .0172835 -28.56 0.000
P_ROW .1971896 .0149381 13.20 0.000
EXPEND. .0021605 .0095816 0.23 0.822
1998 .0160186 .01859 0.86 0.389
1999 -.0181125 .0190116 -0.95 0.341
2000 -.0011336 .0197677 -0.06 0.954
2001 .0040162 .0174796 0.23 0.818
2002 .0102191 .0168168 0.61 0.543
wrow Intercept .1990358 .169946 1.17 0.242
P_EU .139875 .0168088 8.32 0.000
P_AR .1856647 .0177137 10.48 0.000
P_AM .1971896 .0149381 13.20 0.000
P_ROW -.5227293 .0238301 -21.94 0.000
EXPEND. .0060023 .0121784 0.49 0.622
1998 .0015859 .0245377 0.06 0.948
1999 .0106866 .0251007 0.43 0.670
2000 .0709328 .0260563 2.72 0.006
2001 -.0189886 .0230733 -0.82 0.411
2002 -.0191548 .0221765 -0.86 0.388

103
Section 3. Animal or vegetable fats

Equation Obs RMSE R2

weu 220 .1939742 0.6890
war 220 .1493345 0.8492
wam 220 .1112582 0.7442
wrow 220 .1626173 0.7362

Equation Variable Estimate Std. Error T statistic P value

weu Intercept .2896248 .0343859 8.42 0.000
P_EU -.4906398 .0643372 -7.63 0.000
P_AR .1727316 .0416807 4.14 0.000
P_AM .1845457 .0373921 4.94 0.000
P_ROW .1333625 .0421497 3.16 0.002
EXPEND. .0066992 .0053492 1.25 0.210
1998 .0287983 .044433 0.65 0.517
1999 .0270023 .04685 0.58 0.564
2000 -.0288853 .0471066 -0.61 0.540
2001 -.0730123 .0449569 -1.62 0.104
2002 -.1010808 .0453225 -2.23 0.026
war Intercept .3132668 .1925245 1.63 0.104
P_EU .1727316 .0416807 4.14 0.000
P_AR -.4857058 .0468867 -10.36 0.000
P_AM .0777706 .0346496 2.24 0.025
P_ROW .2352036 .0341901 6.88 0.000
EXPEND. -.004451 .0138669 -0.32 0.748
1998 -.0026653 .0357901 -0.07 0.941
1999 .0206791 .0371074 0.56 0.577
2000 .0647493 .0379382 1.71 0.088
2001 .1169526 .0369771 3.16 0.002
2002 .1417687 .0361465 3.92 0.000
wam Intercept .0193615 .1514119 0.13 0.898
P_EU .1845457 .0373921 4.94 0.000
P_AR .0777706 .0346496 2.24 0.025
P_AM -.4683323 .047715 -9.82 0.000
P_ROW .2060161 .0295094 6.98 0.000
EXPEND. .0160433 .0108934 1.47 0.141
1998 -.0426107 .0269433 -1.58 0.114
1999 -.0305259 .0281794 -1.08 0.279
2000 -.0693004 .029053 -2.39 0.017
2001 -.073777 .0286544 -2.57 0.010
2002 -.0918706 .027681 -3.32 0.001
wrow Intercept .3777468 .2115584 1.79 0.074
P_EU .1333625 .0421497 3.16 0.002
P_AR .2352036 .0341901 6.88 0.000
P_AM .2060161 .0295094 6.98 0.000
P_ROW -.5745822 .0467045 -12.30 0.000
EXPEND. -.0111245 .0152504 -0.73 0.466
1998 .0149127 .0387848 0.38 0.701
1999 -.0179513 .0406371 -0.44 0.659
2000 .0349881 .0411827 0.85 0.396
2001 .0332272 .0400239 0.83 0.406
2002 .0511152 .0392995 1.30 0.193

104
Section 4. Prepared foodstuffs

Equation Obs RMSE R2

weu 1423 .1602209 0.8872
war 1423 .1263707 0.8419
wam 1423 .0901497 0.7912
wrow 1423 .1196586 0.8097

Equation Variable Estimate Std. Error T statistic P value

weu Intercept .3593698 .0111249 32.30 0.000
P_EU -.4167154 .0116678 -35.72 0.000
P_AR .1604307 .0081907 19.59 0.000
P_AM .113943 .0065892 17.29 0.000
P_ROW .1423417 .0081505 17.46 0.000
EXPEND. .0004223 .0010453 0.40 0.686
1998 -.0068506 .0153203 -0.45 0.655
1999 -.0051125 .0152301 -0.34 0.737
2000 -.0362815 .0151732 -2.39 0.017
2001 -.006029 .0146224 -0.41 0.680
2002 .0080845 .0145925 0.55 0.580
war Intercept .4746037 .1304081 3.64 0.000
P_EU .1604307 .0081907 19.59 0.000
P_AR -.5485573 .0109626 -50.04 0.000
P_AM .1953649 .0073484 26.59 0.000
P_ROW .1927616 .0086125 22.38 0.000
EXPEND. -.0164852 .0086008 -1.92 0.055
1998 -.0072873 .0121253 -0.60 0.548
1999 .0046796 .0120657 0.39 0.698
2000 .0188386 .0120014 1.57 0.116
2001 .0147671 .0117148 1.26 0.207
2002 .0091394 .0116702 0.78 0.434
wam Intercept -.0141605 .0993122 -0.14 0.887
P_EU .113943 .0065892 17.29 0.000
P_AR .1953649 .0073484 26.59 0.000
P_AM -.5246306 .010238 -51.24 0.000
P_ROW .2153227 .0080647 26.70 0.000
EXPEND. .0131907 .0065515 2.01 0.044
1998 .004625 .0086603 0.53 0.593
1999 .0070462 .0086138 0.82 0.413
2000 .0232758 .008565 2.72 0.007
2001 .0049472 .0083841 0.59 0.555
2002 -.0036163 .0083469 -0.43 0.665
wrow Intercept .1801869 .1224519 1.47 0.141
P_EU .1423417 .0081505 17.46 0.000
P_AR .1927616 .0086125 22.38 0.000
P_AM .2153227 .0080647 26.70 0.000
P_ROW -.550426 .0115466 -47.67 0.000
EXPEND. .0032888 .008076 0.41 0.684
1998 .0094493 .0114917 0.82 0.411
1999 -.0067374 .011427 -0.59 0.555
2000 -.0060107 .0113648 -0.53 0.597
2001 -.013916 .0111101 -1.25 0.210
2002 -.0138365 .0110603 -1.25 0.211

105
Section 5. Mineral products

Equation Obs RMSE R2

weu 223 .1975163 0.8469
war 223 .1845337 0.7405
wam 223 .1437422 0.4778
wrow 223 .1552377 0.5035

Equation Variable Estimate Std. Error T statistic P value

weu Intercept .371446 .0344526 10.78 0.000
P_EU -.4308286 .0529189 -8.14 0.000
P_AR .1189824 .0381255 3.12 0.002
P_AM .132472 .0345305 3.84 0.000
P_ROW .1793742 .0363283 4.94 0.000
EXPEND. -.0005924 .002275 -0.26 0.795
1998 .0671019 .0459111 1.46 0.144
1999 .0268526 .0455215 0.59 0.555
2000 -.0038735 .0465624 -0.08 0.934
2001 -.0124164 .0471962 -0.26 0.792
2002 -.0669843 .0447203 -1.50 0.134
war Intercept .7868615 .2118398 3.71 0.000
P_EU .1189824 .0381255 3.12 0.002
P_AR -.2280872 .0456215 -5.00 0.000
P_AM .0316585 .0312725 1.01 0.311
P_ROW .0774463 .033126 2.34 0.019
EXPEND. -.0368402 .0153521 -2.40 0.016
1998 -.0645515 .043397 -1.49 0.137
1999 .0049792 .0430081 0.12 0.908
2000 .0107446 .0439829 0.24 0.807
2001 .0141852 .0445526 0.32 0.750
2002 .0857521 .0427172 2.01 0.045
wam Intercept .0530117 .1724683 0.31 0.759
P_EU .132472 .0345305 3.84 0.000
P_AR .0316585 .0312725 1.01 0.311
P_AM -.3214419 .0518359 -6.20 0.000
P_ROW .1573114 .0448131 3.51 0.000
EXPEND. .0074529 .0124975 0.60 0.551
1998 .0086719 .0339112 0.26 0.798
1999 -.0145558 .0336111 -0.43 0.665
2000 .0241276 .034411 0.70 0.483
2001 -.0430705 .0348307 -1.24 0.216
2002 .0066845 .0333842 0.20 0.841
wrow Intercept -.2113192 .1838881 -1.15 0.250
P_EU .1793742 .0363283 4.94 0.000
P_AR .0774463 .033126 2.34 0.019
P_AM .1573114 .0448131 3.51 0.000
P_ROW -.4141319 .0540587 -7.66 0.000
EXPEND. .0293416 .0133186 2.20 0.028
1998 -.0114072 .0365475 -0.31 0.755
1999 -.0171636 .0363121 -0.47 0.636
2000 -.0310469 .0370618 -0.84 0.402
2001 .0412014 .037532 1.10 0.272
2002 -.0251159 .0360352 -0.70 0.486

106
Section 6. Chemical products

Equation Obs RMSE R2

weu 2295 .1419865 0.9374
war 2295 .111036 0.8350
wam 2295 .079295 0.7878
wrow 2295 .0922775 0.8714

Equation Variable Estimate Std. Error T statistic P value

weu Intercept .3494806 .0078068 44.77 0.000
P_EU -.3795532 .005856 -64.81 0.000
P_AR .1286152 .004261 30.18 0.000
P_AM .1105629 .0034585 31.97 0.000
P_ROW .1403752 .0037223 37.71 0.000
EXPEND. .0346361 .005302 6.53 0.000
1998 .0092109 .0100746 0.91 0.361
1999 -.0094711 .0104488 -0.91 0.365
2000 -.05073 .0105151 -4.82 0.000
2001 -.0351968 .0099823 -3.53 0.000
2002 -.0236095 .0100256 -2.35 0.019
war Intercept .2414736 .2097357 1.15 0.250
P_EU .1286152 .004261 30.18 0.000
P_AR -.4507782 .0060592 -74.40 0.000
P_AM .160411 .0045137 35.54 0.000
P_ROW .1617521 .0043539 37.15 0.000
EXPEND. -.0018192 .0136853 -0.13 0.894
1998 .000417 .0081894 0.05 0.959
1999 .0189272 .0083511 2.27 0.023
2000 .0240433 .0083873 2.87 0.004
2001 .028182 .0083482 3.38 0.001
2002 .0213511 .0084313 2.53 0.011
wam Intercept .3011769 .1595047 1.89 0.059
P_EU .1105629 .0034585 31.97 0.000
P_AR .160411 .0045137 35.54 0.000
P_AM -.4428039 .0064901 -68.23 0.000
P_ROW .1718301 .0042256 40.66 0.000
EXPEND. -.0062937 .0104113 -0.60 0.546
1998 -.0111927 .0058499 -1.91 0.056
1999 -.0109175 .0059699 -1.83 0.067
2000 .0163745 .0059972 2.73 0.006
2001 .0026579 .0060094 0.44 0.658
2002 -.008457 .0060775 -1.39 0.164
wrow Intercept .1078689 .1831005 0.59 0.556
P_EU .1403752 .0037223 37.71 0.000
P_AR .1617521 .0043539 37.15 0.000
P_AM .1718301 .0042256 40.66 0.000
P_ROW -.4739573 .0053222 -89.05 0.000
EXPEND. .0074331 .0119496 0.62 0.534
1998 -.0047127 .0068605 -0.69 0.492
1999 -.0146655 .0069973 -2.10 0.036
2000 -.0062763 .0070198 -0.89 0.371
2001 -.0143751 .0070248 -2.05 0.041
2002 -.0097091 .0070933 -1.37 0.171

107
Section 7. Plastics

Equation Obs RMSE R2

weu 2139 .1049223 0.9529
war 2139 .0809611 0.9029
wam 2139 .0763914 0.6931
wrow 2139 .124899 0.8954

Equation Variable Estimate Std. Error T statistic P value

weu Intercept .3313778 .0060162 55.08 0.000
P_EU -.4673406 .0052982 -88.21 0.000
P_AR .1612848 .0035507 45.42 0.000
P_AM .1403158 .0042409 33.09 0.000
P_ROW .16574 .0034537 47.99 0.000
EXPEND. .0017321 .0006215 2.79 0.005
1998 .021116 .0080105 2.64 0.008
1999 .0099586 .0080495 1.24 0.216
2000 -.0153923 .0081826 -1.88 0.060
2001 .0017335 .0078398 0.22 0.825
2002 -.0016187 .0077142 -0.21 0.834
war Intercept .2512545 .131813 1.91 0.057
P_EU .1612848 .0035507 45.42 0.000
P_AR -.4091024 .0041616 -98.30 0.000
P_AM .1593684 .0039711 40.13 0.000
P_ROW .0884492 .0028573 30.96 0.000
EXPEND. -.0033541 .0087121 -0.38 0.700
1998 .003711 .0062344 0.60 0.552
1999 .0160784 .0066082 2.43 0.015
2000 .0188151 .0069509 2.71 0.007
2001 .0063811 .0064186 0.99 0.320
2002 .0168589 .0063662 2.65 0.008
wam Intercept .06294 .1204851 0.52 0.601
P_EU .1403158 .0042409 33.09 0.000
P_AR .1593684 .0039711 40.13 0.000
P_AM -.3821334 .0067092 -56.96 0.000
P_ROW .0824492 .0029877 27.60 0.000
EXPEND. .0087873 .0079626 1.10 0.270
1998 -.0029839 .0058766 -0.51 0.612
1999 .0058528 .0062106 0.94 0.346
2000 .0054331 .0065221 0.83 0.405
2001 .0002911 .0060302 0.05 0.961
2002 -.0084799 .0059752 -1.42 0.156
wrow Intercept .3544277 .1791553 1.98 0.048
P_EU .16574 .0034537 47.99 0.000
P_AR .0884492 .0028573 30.96 0.000
P_AM .0824492 .0029877 27.60 0.000
P_ROW -.3366384 .0044885 -75.00 0.000
EXPEND. -.0054485 .0118402 -0.46 0.645
1998 -.0219699 .0095954 -2.29 0.022
1999 -.032096 .0100467 -3.19 0.001
2000 -.0090048 .0105019 -0.86 0.391
2001 -.0085527 .0097625 -0.88 0.381
2002 -.0069437 .0096605 -0.72 0.472

108
Section 8. Skins

Equation Obs RMSE R2

weu 639 .0680662 0.9696
war 639 .0711654 0.8568
wam 639 .0554271 0.7649
wrow 639 .10146 0.9661

Equation Variable Estimate Std. Error T statistic P value

weu Intercept .2957719 .0067714 43.68 0.000
P_EU -.3668817 .0053802 -68.19 0.000
P_AR .1162912 .0043588 26.68 0.000
P_AM .1048532 .0042242 24.82 0.000
P_ROW .1457373 .0037412 38.95 0.000
EXPEND. -.0001686 .0001628 -1.04 0.301
1998 -.0100773 .0091481 -1.10 0.271
1999 -.0162908 .0091553 -1.78 0.075
2000 -.0174036 .009794 -1.78 0.076
2001 -.0029986 .0089656 -0.33 0.738
2002 -.0005243 .0090588 -0.06 0.954
war Intercept .0680028 .1235086 0.55 0.582
P_EU .1162912 .0043588 26.68 0.000
P_AR -.3229802 .0057328 -56.34 0.000
P_AM .1230632 .0047598 25.85 0.000
P_ROW .0836259 .0040734 20.53 0.000
EXPEND. .009039 .0096483 0.94 0.349
1998 .0275689 .0095327 2.89 0.004
1999 .0418841 .0099978 4.19 0.000
2000 .0427384 .0112731 3.79 0.000
2001 .0245466 .0100819 2.43 0.015
2002 .0174521 .0102612 1.70 0.089
wam Intercept .2339915 .1002704 2.33 0.020
P_EU .1048532 .0042242 24.82 0.000
P_AR .1230632 .0047598 25.85 0.000
P_AM -.3079893 .0072065 -42.74 0.000
P_ROW .0800729 .0035235 22.73 0.000
EXPEND. -.0042109 .0078373 -0.54 0.591
1998 .0192624 .0074978 2.57 0.010
1999 .0254632 .0078702 3.24 0.001
2000 .0299044 .0089054 3.36 0.001
2001 .0147388 .0079431 1.86 0.064
2002 -.0095649 .0080664 -1.19 0.236
wrow Intercept .4022338 .1711621 2.35 0.019
P_EU .1457373 .0037412 38.95 0.000
P_AR .0836259 .0040734 20.53 0.000
P_AM .0800729 .0035235 22.73 0.000
P_ROW -.3094361 .005957 -51.94 0.000
EXPEND. -.0048574 .0133783 -0.36 0.717
1998 -.0367596 .0135432 -2.71 0.007
1999 -.0510731 .0141694 -3.60 0.000
2000 -.055283 .0159451 -3.47 0.001
2001 -.0363264 .0142817 -2.54 0.011
2002 -.0073931 .0145151 -0.51 0.611

109
Section 9. Wood

Equation Obs RMSE R2

weu 375 .1270376 0.9103
war 375 .0771496 0.6816
wam 375 .1321548 0.6951
wrow 375 .1494459 0.9108

Equation Variable Estimate Std. Error T statistic P value

weu Intercept .3110188 .0149544 20.80 0.000
P_EU -.5212124 .0164178 -31.75 0.000
P_AR .1862222 .0114556 16.26 0.000
P_AM .1494381 .0148582 10.06 0.000
P_ROW .1855521 .0114813 16.16 0.000
EXPEND. .0002782 .0007966 0.35 0.727
1998 .026852 .0217419 1.24 0.217
1999 .0188179 .0211935 0.89 0.375
2000 .004132 .0222287 0.19 0.853
2001 -.0039063 .021885 -0.18 0.858
2002 .0276699 .0213249 1.30 0.194
war Intercept -.0271798 .0691189 -0.39 0.694
P_EU .1862222 .0114556 16.26 0.000
P_AR -.3496456 .0163283 -21.41 0.000
P_AM .0936359 .0124943 7.49 0.000
P_ROW .0697876 .0083326 8.38 0.000
EXPEND. .0141796 .0052824 2.68 0.007
1998 .0076635 .0138047 0.56 0.579
1999 .0107797 .0132086 0.82 0.414
2000 .0088481 .013807 0.64 0.522
2001 .0077172 .0137369 0.56 0.574
2002 -.0076314 .0132893 -0.57 0.566
wam Intercept .1976814 .1057462 1.87 0.062
P_EU .1494381 .0148582 10.06 0.000
P_AR .0936359 .0124943 7.49 0.000
P_AM -.4284863 .0215159 -19.91 0.000
P_ROW .1854123 .0135526 13.68 0.000
EXPEND. .0032013 .0080271 0.40 0.690
1998 -.0083771 .0232919 -0.36 0.719
1999 -.0043642 .0223352 -0.20 0.845
2000 -.0171057 .0233957 -0.73 0.465
2001 .0172348 .0232164 0.74 0.458
2002 -.0094909 .0225023 -0.42 0.673
wrow Intercept .5184796 .1176223 4.41 0.000
P_EU .1855521 .0114813 16.16 0.000
P_AR .0697876 .0083326 8.38 0.000
P_AM .1854123 .0135526 13.68 0.000
P_ROW -.440752 .0158836 -27.75 0.000
EXPEND. -.0173427 .0089515 -1.94 0.053
1998 -.0259405 .0261905 -0.99 0.322
1999 -.0252012 .0251312 -1.00 0.316
2000 .0041311 .0263162 0.16 0.875
2001 -.0209489 .0260791 -0.80 0.422
2002 -.0104988 .0253091 -0.41 0.678

110
Section 10. Wood pulp and cellulose

Equation Obs RMSE R2

weu 1404 .1200254 0.9440
war 1404 .1114279 0.8803
wam 1404 .0768426 0.8237
wrow 1404 .0949986 0.9085

Equation Variable Estimate Std. Error T statistic P value

weu Intercept .3080198 .0084678 36.38 0.000
P_EU -.5199618 .00742 -70.08 0.000
P_AR .1699382 .0055777 30.47 0.000
P_AM .1632485 .0049549 32.95 0.000
P_ROW .1867751 .0050985 36.63 0.000
EXPEND. .0001603 .0005467 0.29 0.769
1998 .0171435 .0114827 1.49 0.135
1999 .0172693 .0114381 1.51 0.131
2000 -.0093816 .0113924 -0.82 0.410
2001 .0112789 .0110539 1.02 0.308
2002 .0014208 .0111856 0.13 0.899
war Intercept .4726448 .1069985 4.42 0.000
P_EU .1699382 .0055777 30.47 0.000
P_AR -.503958 .0073583 -68.49 0.000
P_AM .1743987 .005223 33.39 0.000
P_ROW .1596211 .00526 30.35 0.000
EXPEND. -.0179093 .0074955 -2.39 0.017
1998 .001136 .0106985 0.11 0.915
1999 .0061243 .0106581 0.57 0.566
2000 .0127463 .0106661 1.20 0.232
2001 .0058893 .0104747 0.56 0.574
2002 .0258216 .0104671 2.47 0.014
wam Intercept .1858369 .0785781 2.36 0.018
P_EU .1632485 .0049549 32.95 0.000
P_AR .1743987 .005223 33.39 0.000
P_AM -.5161219 .0081651 -63.21 0.000
P_ROW .1784748 .0051529 34.64 0.000
EXPEND. .0025702 .0055028 0.47 0.640
1998 -.0017853 .007382 -0.24 0.809
1999 -.0097854 .0073549 -1.33 0.183
2000 .0089813 .0073627 1.22 0.223
2001 -.0037337 .0072562 -0.51 0.607
2002 -.0079195 .0072215 -1.10 0.273
wrow Intercept .0334985 .0965743 0.35 0.729
P_EU .1867751 .0050985 36.63 0.000
P_AR .1596211 .00526 30.35 0.000
P_AM .1784748 .0051529 34.64 0.000
P_ROW -.524871 .0065695 -79.89 0.000
EXPEND. .015347 .0067666 2.27 0.023
1998 -.016526 .0091195 -1.81 0.070
1999 -.013668 .0090856 -1.50 0.132
2000 -.012433 .0090879 -1.37 0.171
2001 -.013522 .0089362 -1.51 0.130
2002 -.0193886 .0089156 -2.17 0.030

111
Section 11. Textiles

Equation Obs RMSE R2

weu 5504 .0933686 0.9455
war 5504 .0660521 0.8854
wam 5504 .0716599 0.8697
wrow 5504 .0981617 0.9562

Equation Variable Estimate Std. Error T statistic P value

weu Intercept .2841438 .0029694 95.69 0.000
P_EU -.3748678 .0025477 -147.14 0.000
P_AR .1108343 .0016716 66.31 0.000
P_AM .1190792 .0017663 67.42 0.000
P_ROW .1449543 .0017072 84.91 0.000
EXPEND. .0013622 .0003903 3.49 0.000
1998 .0014067 .0040838 0.34 0.730
1999 -.0023862 .0043327 -0.55 0.582
2000 .0020136 .0043875 0.46 0.646
2001 .0011856 .0042126 0.28 0.778
2002 .0189487 .0041195 4.60 0.000
war Intercept .0535645 .04723 1.13 0.257
P_EU .1108343 .0016716 66.31 0.000
P_AR -.3313903 .0020955 -158.14 0.000
P_AM .1282235 .0016414 78.12 0.000
P_ROW .0923325 .0013818 66.82 0.000
EXPEND. .0101224 .0030781 3.29 0.001
1998 .0043108 .0029302 1.47 0.141
1999 .0131946 .0033909 3.89 0.000
2000 .0062631 .0035783 1.75 0.080
2001 .0069477 .0033537 2.07 0.038
2002 -.0142967 .0033346 -4.29 0.000
wam Intercept .1305639 .051143 2.55 0.011
P_EU .1190792 .0017663 67.42 0.000
P_AR .1282235 .0016414 78.12 0.000
P_AM -.350663 .0022179 -158.10 0.000
P_ROW .1033603 .001471 70.26 0.000
EXPEND. .0055564 .003334 1.67 0.096
1998 .0204031 .003177 6.42 0.000
1999 .0279344 .0036727 7.61 0.000
2000 .0206931 .0038779 5.34 0.000
2001 .0114615 .0036347 3.15 0.002
2002 -.0164158 .0036161 -4.54 0.000
wrow Intercept .5317278 .0681119 7.81 0.000
P_EU .1449543 .0017072 84.91 0.000
P_AR .0923325 .0013818 66.82 0.000
P_AM .1033603 .001471 70.26 0.000
P_ROW -.3406471 .0021392 -159.24 0.000
EXPEND. -.0157059 .0044383 -3.54 0.000
1998 -.026062 .0043448 -6.00 0.000
1999 -.0385552 .0050034 -7.71 0.000
2000 -.0287379 .005277 -5.45 0.000
2001 -.0193386 .0049509 -3.91 0.000
2002 .0119371 .0049194 2.43 0.015

112
Section 12. Footwear

Equation Obs RMSE R2

weu 574 .0857875 0.9402
war 574 .0696522 0.6822
wam 574 .0758376 0.8384
wrow 574 .1369949 0.9437

Equation Variable Estimate Std. Error T statistic P value

weu Intercept .2803006 .008355 33.55 0.000
P_EU -.2747545 .0056087 -48.99 0.000
P_AR .0646993 .004149 15.59 0.000
P_AM .0823583 .0041336 19.92 0.000
P_ROW .1276969 .0047276 27.01 0.000
EXPEND. .0007879 .0004401 1.79 0.073
1998 -.0043494 .0112345 -0.39 0.699
1999 -.0029873 .0119651 -0.25 0.803
2000 -.0004657 .0128213 -0.04 0.971
2001 .0142379 .0119666 1.19 0.234
2002 .019392 .0123056 1.58 0.115
war Intercept -.0081546 .0978627 -0.08 0.934
P_EU .0646993 .004149 15.59 0.000
P_AR -.2372458 .0064598 -36.73 0.000
P_AM .1127198 .0048072 23.45 0.000
P_ROW .0598267 .0042381 14.12 0.000
EXPEND. .0121713 .0072527 1.68 0.093
1998 .0310641 .0091963 3.38 0.001
1999 .0389963 .0101503 3.84 0.000
2000 .0324458 .0116216 2.79 0.005
2001 .0093611 .0107743 0.87 0.385
2002 -.0101531 .0115179 -0.88 0.378
wam Intercept .0574252 .1048872 0.55 0.584
P_EU .0823583 .0041336 19.92 0.000
P_AR .1127198 .0048072 23.45 0.000
P_AM -.2752923 .0057301 -48.04 0.000
P_ROW .0802143 .0044364 18.08 0.000
EXPEND. .0105974 .0077709 1.36 0.173
1998 .0204522 .0098241 2.08 0.037
1999 .0249424 .0108368 2.30 0.021
2000 .0186073 .0124524 1.49 0.135
2001 .0204847 .01154 1.78 0.076
2002 -.0512504 .0123241 -4.16 0.000
wrow Intercept .6704287 .1621811 4.13 0.000
P_EU .1276969 .0047276 27.01 0.000
P_AR .0598267 .0042381 14.12 0.000
P_AM .0802143 .0044364 18.08 0.000
P_ROW -.2677379 .0079968 -33.48 0.000
EXPEND. -.0226795 .0120025 -1.89 0.059
1998 -.0471312 .0175162 -2.69 0.007
1999 -.0608136 .0191825 -3.17 0.002
2000 -.0502094 .021678 -2.32 0.021
2001 -.0437278 .0201803 -2.17 0.030
2002 .0423865 .0213399 1.99 0.047

113
Section 13. Stone, plaster, cement

Equation Obs RMSE R2

weu 1248 .1311204 0.9004
war 1248 .1185979 0.8555
wam 1248 .0865945 0.5990
wrow 1248 .1450048 0.8834

Equation Variable Estimate Std. Error T statistic P value

weu Intercept .3366716 .008697 38.71 0.000
P_EU -.3436087 .0073384 -46.82 0.000
P_AR .1475553 .0050338 29.31 0.000
P_AM .065159 .0047926 13.60 0.000
P_ROW .1308945 .005989 21.86 0.000
EXPEND. .0062875 .0022468 2.80 0.005
1998 -.0197095 .0121642 -1.62 0.105
1999 -.0349344 .0126047 -2.77 0.006
2000 -.0338599 .0127866 -2.65 0.008
2001 -.0302769 .0126012 -2.40 0.016
2002 -.01323 .0121857 -1.09 0.278
war Intercept .0086411 .1941905 0.04 0.965
P_EU .1475553 .0050338 29.31 0.000
P_AR -.3601307 .0061206 -58.84 0.000
P_AM .08144 .0044699 18.22 0.000
P_ROW .1311354 .0053479 24.52 0.000
EXPEND. .0141272 .0135168 1.05 0.296
1998 .0169591 .0111756 1.52 0.129
1999 .0207557 .0118061 1.76 0.079
2000 .0183731 .0133616 1.38 0.169
2001 .041012 .0129633 3.16 0.002
2002 .0253114 .0132751 1.91 0.057
wam Intercept -.1284731 .1461762 -0.88 0.379
P_EU .065159 .0047926 13.60 0.000
P_AR .08144 .0044699 18.22 0.000
P_AM -.2429284 .0076441 -31.78 0.000
P_ROW .0963294 .0052062 18.50 0.000
EXPEND. .0189909 .0101781 1.87 0.062
1998 .0116826 .0082169 1.42 0.155
1999 .0053038 .0087152 0.61 0.543
2000 .0208272 .0098877 2.11 0.035
2001 -.001888 .0095755 -0.20 0.844
2002 .0066846 .0098162 0.68 0.496
wrow Intercept .7831604 .2195445 3.57 0.000
P_EU .1308945 .005989 21.86 0.000
P_AR .1311354 .0053479 24.52 0.000
P_AM .0963294 .0052062 18.50 0.000
P_ROW -.3583593 .0082039 -43.68 0.000
EXPEND. -.0328525 .0152793 -2.15 0.032
1998 -.0089686 .0136341 -0.66 0.511
1999 .0080728 .0143636 0.56 0.574
2000 -.0046815 .0160316 -0.29 0.770
2001 -.0079281 .0155785 -0.51 0.611
2002 -.0174289 .0158585 -1.10 0.272

114
Section 14. Pearls, precious stones

Equation Obs RMSE R2

weu 163 .0503315 0.9746
war 163 .0479343 0.9457
wam 163 .047314 0.8410
wrow 163 .0808355 0.9798

Equation Variable Estimate Std. Error T statistic P value

weu Intercept .2739058 .0101144 27.08 0.000
P_EU -.2213738 .0065118 -34.00 0.000
P_AR .0672413 .0044553 15.09 0.000
P_AM .06003 .0057369 10.46 0.000
P_ROW .0941026 .004519 20.82 0.000
EXPEND. -.0000116 .0001079 -0.11 0.914
1998 -.0131319 .0133783 -0.98 0.326
1999 -.0145645 .0147437 -0.99 0.323
2000 .0107265 .0145414 0.74 0.461
2001 -.0027672 .0129176 -0.21 0.830
2002 -.0074357 .0125098 -0.59 0.552
war Intercept .086033 .0501628 1.72 0.086
P_EU .0672413 .0044553 15.09 0.000
P_AR -.2150815 .0049758 -43.23 0.000
P_AM .0642306 .0046871 13.70 0.000
P_ROW .0836096 .004507 18.55 0.000
EXPEND. .0083299 .0036524 2.28 0.023
1998 .0356433 .0127057 2.81 0.005
1999 .0405776 .0151347 2.68 0.007
2000 .0492673 .0146022 3.37 0.001
2001 .0285242 .0126476 2.26 0.024
2002 .0223144 .0121979 1.83 0.067
wam Intercept .0393235 .0461983 0.85 0.395
P_EU .06003 .0057369 10.46 0.000
P_AR .0642306 .0046871 13.70 0.000
P_AM -.196028 .0083312 -23.53 0.000
P_ROW .0717674 .0051928 13.82 0.000
EXPEND. .0119407 .0033761 3.54 0.000
1998 .0093392 .0126995 0.74 0.462
1999 .0361938 .0148735 2.43 0.015
2000 .0356285 .0144757 2.46 0.014
2001 .0369485 .0125432 2.95 0.003
2002 .0137418 .0120603 1.14 0.255
wrow Intercept .6007377 .0773256 7.77 0.000
P_EU .0941026 .004519 20.82 0.000
P_AR .0836096 .004507 18.55 0.000
P_AM .0717674 .0051928 13.82 0.000
P_ROW -.2494796 .0074855 -33.33 0.000
EXPEND. -.0202717 .0056079 -3.61 0.000
1998 -.0318538 .020816 -1.53 0.126
1999 -.0622282 .0246092 -2.53 0.011
2000 -.0956392 .0238809 -4.00 0.000
2001 -.0627173 .0207032 -3.03 0.002
2002 -.0286298 .01991 -1.44 0.150

115
Section 15. Base metals

Equation Obs RMSE R2

weu 2267 .1390371 0.9271
war 2267 .1075646 0.7697
wam 2267 .0915359 0.7226
wrow 2267 .1293809 0.8965

Equation Variable Estimate Std. Error T statistic P value

weu Intercept .3497472 .0068864 50.79 0.000
P_EU -.4064561 .005623 -72.28 0.000
P_AR .1242043 .0040497 30.67 0.000
P_AM .1191974 .0037758 31.57 0.000
P_ROW .1630544 .0039881 40.89 0.000
EXPEND. .007262 .0021429 3.39 0.001
1998 -.0189674 .0096994 -1.96 0.051
1999 -.027662 .0097182 -2.85 0.004
2000 -.0200898 .0099288 -2.02 0.043
2001 -.0196364 .0096126 -2.04 0.041
2002 -.0093883 .0096809 -0.97 0.332
war Intercept .0717873 .1446971 0.50 0.620
P_EU .1242043 .0040497 30.67 0.000
P_AR -.3493308 .0053923 -64.78 0.000
P_AM .1241733 .0042074 29.51 0.000
P_ROW .1009533 .0037277 27.08 0.000
EXPEND. .0077573 .0096847 0.80 0.423
1998 .0075254 .0079846 0.94 0.346
1999 .0058804 .0087066 0.68 0.499
2000 .0112735 .0094855 1.19 0.235
2001 .0164258 .0095788 1.71 0.086
2002 .0129298 .0100449 1.29 0.198
wam Intercept .3055142 .1239877 2.46 0.014
P_EU .1191974 .0037758 31.57 0.000
P_AR .1241733 .0042074 29.51 0.000
P_AM -.3678684 .0060076 -61.23 0.000
P_ROW .1244977 .0035314 35.25 0.000
EXPEND. -.007189 .008298 -0.87 0.386
1998 -.0080359 .006798 -1.18 0.237
1999 .0071999 .00742 0.97 0.332
2000 .0091106 .0080861 1.13 0.260
2001 -.0076076 .0081695 -0.93 0.352
2002 -.0072715 .0085686 -0.85 0.396
wrow Intercept .2729512 .16501 1.65 0.098
P_EU .1630544 .0039881 40.89 0.000
P_AR .1009533 .0037277 27.08 0.000
P_AM .1244977 .0035314 35.25 0.000
P_ROW -.3885054 .0049448 -78.57 0.000
EXPEND. -.0005351 .0110419 -0.05 0.961
1998 .0203208 .0095573 2.13 0.033
1999 .0150938 .0103451 1.46 0.145
2000 .0008707 .0112156 0.08 0.938
2001 .0130111 .011295 1.15 0.249
2002 .0062082 .0118137 0.53 0.599

116
Section 16. Machinery, mechanical appliances

Equation Obs RMSE R2

weu 5872 .1093365 0.9507
war 5872 .0698118 0.8340
wam 5872 .0700171 0.8657
wrow 5872 .1122722 0.9408

Equation Variable Estimate Std. Error T statistic P value

weu Intercept .3053716 .0038015 80.33 0.000
P_EU -.2627414 .0015498 -169.53 0.000
P_AR .0733052 .001026 71.45 0.000
P_AM .0803879 .0010411 77.21 0.000
P_ROW .1090483 .0011538 94.51 0.000
EXPEND. .0279928 .0016787 16.68 0.000
1998 -.029948 .0044649 -6.71 0.000
1999 -.0395329 .0047814 -8.27 0.000
2000 -.0394986 .0047976 -8.23 0.000
2001 -.0283856 .0046228 -6.14 0.000
2002 -.0087649 .0046421 -1.89 0.059
war Intercept .0250795 .0762811 0.33 0.742
P_EU .0733052 .001026 71.45 0.000
P_AR -.2488332 .001466 -169.74 0.000
P_AM .1068394 .0011757 90.87 0.000
P_ROW .0686887 .0009193 74.72 0.000
EXPEND. .0085132 .004697 1.81 0.070
1998 .0392599 .0030322 12.95 0.000
1999 .0555945 .0037843 14.69 0.000
2000 .0518209 .004009 12.93 0.000
2001 .0358396 .0035888 9.99 0.000
2002 .0248858 .0040301 6.17 0.000
wam Intercept .2057738 .0789811 2.61 0.009
P_EU .0803879 .0010411 77.21 0.000
P_AR .1068394 .0011757 90.87 0.000
P_AM -.2619046 .0015163 -172.73 0.000
P_ROW .0746773 .0009441 79.10 0.000
EXPEND. -.0006727 .0048628 -0.14 0.890
1998 .0266495 .0030489 8.74 0.000
1999 .0346517 .0038358 9.03 0.000
2000 .0390246 .0040756 9.58 0.000
2001 .0233204 .0036367 6.41 0.000
2002 .0009281 .0041012 0.23 0.821
wrow Intercept .463775 .1144012 4.05 0.000
P_EU .1090483 .0011538 94.51 0.000
P_AR .0686887 .0009193 74.72 0.000
P_AM .0746773 .0009441 79.10 0.000
P_ROW -.2524142 .0014589 -173.02 0.000
EXPEND. -.0098011 .0070427 -1.39 0.164
1998 -.0326247 .0048419 -6.74 0.000
1999 -.0454977 .0059524 -7.64 0.000
2000 -.0454461 .0062771 -7.24 0.000
2001 -.026574 .0056641 -4.69 0.000
2002 -.0116223 .0062982 -1.85 0.065

117
Section 17. Vehicles, aircrafts

Equation Obs RMSE R2

weu 857 .1191793 0.9315
war 857 .0813523 0.7509
wam 857 .0709813 0.8218
wrow 857 .1160335 0.9371

Equation Variable Estimate Std. Error T statistic P value

weu Intercept .352139 .0092946 37.89 0.000
P_EU -.259286 .0060926 -42.56 0.000
P_AR .0506682 .0041145 12.31 0.000
P_AM .0539842 .003721 14.51 0.000
P_ROW .1546337 .0045898 33.69 0.000
EXPEND. .0017231 .0013375 1.29 0.198
1998 .0013974 .0129078 0.11 0.914
1999 -.0146094 .0130546 -1.12 0.263
2000 -.0157443 .0137028 -1.15 0.251
2001 -.0076867 .0137397 -0.56 0.576
2002 -.0180368 .0143667 -1.26 0.209
war Intercept -.069224 .1036159 -0.67 0.504
P_EU .0506682 .0041145 12.31 0.000
P_AR -.2678689 .0058542 -45.76 0.000
P_AM .1409613 .0047235 29.84 0.000
P_ROW .0762394 .0040813 18.68 0.000
EXPEND. .0162784 .0071228 2.29 0.022
1998 -.0038286 .009384 -0.41 0.683
1999 .0174036 .0096446 1.80 0.071
2000 .0087468 .0104627 0.84 0.403
2001 -.0037555 .0107702 -0.35 0.727
2002 .0073153 .0126754 0.58 0.564
wam Intercept .2037681 .0961533 2.12 0.034
P_EU .0539842 .003721 14.51 0.000
P_AR .1409613 .0047235 29.84 0.000
P_AM -.2813072 .005928 -47.45 0.000
P_ROW .0863617 .0037765 22.87 0.000
EXPEND. -.0014368 .0066091 -0.22 0.828
1998 -.0011146 .0082619 -0.13 0.893
1999 -.005602 .0084957 -0.66 0.510
2000 .0049081 .0092452 0.53 0.596
2001 -.0122755 .0095514 -1.29 0.199
2002 -.0335139 .0113546 -2.95 0.003
wrow Intercept .513317 .146203 3.51 0.000
P_EU .1546337 .0045898 33.69 0.000
P_AR .0762394 .0040813 18.68 0.000
P_AM .0863617 .0037765 22.87 0.000
P_ROW -.3172348 .0060399 -52.52 0.000
EXPEND. -.0147789 .0100386 -1.47 0.141
1998 .0040695 .0133451 0.30 0.760
1999 .003067 .0137317 0.22 0.823
2000 .0024918 .0148905 0.17 0.867
2001 .0244287 .0153202 1.59 0.111
2002 .0455868 .0180054 2.53 0.011

118
Section 18. Optical, photographical products

Equation Obs RMSE R2

weu 513 .0869427 0.9703
war 513 .0491871 0.8897
wam 513 .0562485 0.9260
wrow 513 .0855554 0.9623

Equation Variable Estimate Std. Error T statistic P value

weu Intercept .2884133 .0082126 35.12 0.000
P_EU -.2708073 .0045423 -59.62 0.000
P_AR .0733377 .0028489 25.74 0.000
P_AM .0873076 .0030809 28.34 0.000
P_ROW .110162 .0035041 31.44 0.000
EXPEND. .0003941 .0007573 0.52 0.603
1998 -.0130697 .0116472 -1.12 0.262
1999 -.0370243 .0136033 -2.72 0.006
2000 -.0279147 .0142238 -1.96 0.050
2001 -.0173043 .0126431 -1.37 0.171
2002 .0274432 .011974 2.29 0.022
war Intercept .2509768 .0537984 4.67 0.000
P_EU .0733377 .0028489 25.74 0.000
P_AR -.2632291 .0042033 -62.62 0.000
P_AM .1075585 .0031855 33.76 0.000
P_ROW .0823329 .0029437 27.97 0.000
EXPEND. -.0049171 .0040102 -1.23 0.220
1998 .0216115 .0067394 3.21 0.001
1999 .0445834 .0082582 5.40 0.000
2000 .0352005 .0087249 4.03 0.000
2001 .0133617 .007423 1.80 0.072
2002 .0060798 .0072188 0.84 0.400
wam Intercept .3411068 .0647722 5.27 0.000
P_EU .0873076 .0030809 28.34 0.000
P_AR .1075585 .0031855 33.76 0.000
P_AM -.2930593 .0041177 -71.17 0.000
P_ROW .0981932 .0032766 29.97 0.000
EXPEND. -.0090435 .0048291 -1.87 0.061
1998 .0183705 .0077018 2.39 0.017
1999 .0327456 .0094809 3.45 0.001
2000 .0244245 .010048 2.43 0.015
2001 .0156984 .0085046 1.85 0.065
2002 -.0094666 .0082657 -1.15 0.252
wrow Intercept .1195031 .0927349 1.29 0.198
P_EU .110162 .0035041 31.44 0.000
P_AR .0823329 .0029437 27.97 0.000
P_AM .0981932 .0032766 29.97 0.000
P_ROW -.2906881 .0046958 -61.90 0.000
EXPEND. .0140101 .0069099 2.03 0.043
1998 -.0267858 .0116409 -2.30 0.021
1999 -.0400249 .0143113 -2.80 0.005
2000 -.0314245 .0151238 -2.08 0.038
2001 -.011618 .0128762 -0.90 0.367
2002 -.0239122 .0125091 -1.91 0.056

119
Section 19. Arms and ammunition

Equation Obs RMSE R2

weu 22 .0774148 0.9676
war 22 .0488121 0.8457
wam 22 .0815556 0.9318
wrow 22 .0684225 0.9684

Equation Variable Estimate Std. Error T statistic P value

Weu Intercept .4358315 .0817331 5.33 0.000
P_EU -.2731194 .0348007 -7.85 0.000
P_AR .0347733 .0243247 1.43 0.153
P_AM .1068147 .0197623 5.40 0.000
P_ROW .1315315 .0180438 7.29 0.000
EXPEND. .0051462 .0075513 0.68 0.496
1998 -.1181765 .0791999 -1.49 0.136
1999 -.2673108 .1084309 -2.47 0.014
2000 -.1690138 .0828506 -2.04 0.041
2001 -.1468392 .0883523 -1.66 0.097
2002 -.122623 .0812433 -1.51 0.131
war Intercept -.2330075 .1337006 -1.74 0.081
P_EU .0347733 .0243247 1.43 0.153
P_AR -.2019047 .0364994 -5.53 0.000
P_AM .0764834 .0150793 5.07 0.000
P_ROW .090648 .0196704 4.61 0.000
EXPEND. .0303118 .0107848 2.81 0.005
1998 .034559 .0554461 0.62 0.533
1999 .0942198 .0745486 1.26 0.206
2000 .0488852 .056964 0.86 0.391
2001 .0656687 .0605013 1.09 0.278
2002 .0481474 .0554358 0.87 0.385
wam Intercept -.1312034 .2606273 -0.50 0.615
P_EU .1068147 .0197623 5.40 0.000
P_AR .0764834 .0150793 5.07 0.000
P_AM -.2643313 .0216242 -12.22 0.000
P_ROW .0810332 .0164665 4.92 0.000
EXPEND. .0240801 .0215165 1.12 0.263
1998 .0402467 .0907919 0.44 0.658
1999 .2111997 .1171788 1.80 0.071
2000 .1609201 .0917786 1.75 0.080
2001 .0657155 .0955049 0.69 0.491
2002 .0975577 .0890549 1.10 0.273
wrow Intercept .9283794 .2401211 3.87 0.000
P_EU .1315315 .0180438 7.29 0.000
P_AR .090648 .0196704 4.61 0.000
P_AM .0810332 .0164665 4.92 0.000
P_ROW -.3032127 .0191808 -15.81 0.000
EXPEND. -.0532682 .0199722 -2.67 0.008
1998 .0423082 .0772969 0.55 0.584
1999 -.034465 .0988822 -0.35 0.727
2000 -.038774 .0780218 -0.50 0.619
2001 .0157937 .0809703 0.20 0.845
2002 -.0213737 .0749263 -0.29 0.775

120
Section 20. Miscellaneous manufactured articles

Equation Obs RMSE R2

weu 2278 .1263625 0.9345
war 2278 .0797824 0.7894
wam 2278 .0882207 0.7817
wrow 2278 .1098007 0.9286

Equation Variable Estimate Std. Error T statistic P value

weu Intercept .3639571 .0062828 57.93 0.000
P_EU -.2773353 .0038363 -72.29 0.000
P_AR .0657052 .0023928 27.46 0.000
P_AM .0746406 .0026335 28.34 0.000
P_ROW .1369895 .0027925 49.06 0.000
EXPEND. .0140724 .0025467 5.53 0.000
1998 -.0226464 .0085516 -2.65 0.008
1999 -.0388516 .0089464 -4.34 0.000
2000 -.0513498 .0091168 -5.63 0.000
2001 -.0358062 .008803 -4.07 0.000
2002 .0083714 .0086624 0.97 0.334
war Intercept -.0285836 .1115804 -0.26 0.798
P_EU .0657052 .0023928 27.46 0.000
P_AR -.2956413 .0038293 -77.21 0.000
P_AM .1425498 .0031009 45.97 0.000
P_ROW .0873863 .0025473 34.30 0.000
EXPEND. .0133912 .007646 1.75 0.080
1998 .0201116 .0055671 3.61 0.000
1999 .0249187 .0059675 4.18 0.000
2000 .0282586 .0061953 4.56 0.000
2001 .0148478 .0059566 2.49 0.013
2002 -.0001391 .0059191 -0.02 0.981
wam Intercept .1309473 .1223954 1.07 0.285
P_EU .0746406 .0026335 28.34 0.000
P_AR .1425498 .0031009 45.97 0.000
P_AM -.3057696 .0040659 -75.20 0.000
P_ROW .0885792 .0027667 32.02 0.000
EXPEND. .0034878 .0083858 0.42 0.677
1998 .0196082 .0061574 3.18 0.001
1999 .027014 .0066076 4.09 0.000
2000 .0296029 .0068555 4.32 0.000
2001 .0113373 .0065901 1.72 0.085
2002 .0033394 .006545 0.51 0.610
wrow Intercept .5336792 .1520086 3.51 0.000
P_EU .1369895 .0027925 49.06 0.000
P_AR .0873863 .0025473 34.30 0.000
P_AM .0885792 .0027667 32.02 0.000
P_ROW -.312955 .0036964 -84.67 0.000
EXPEND. -.0164536 .0104137 -1.58 0.114
1998 -.016925 .0076426 -2.21 0.027
1999 -.0142917 .0082077 -1.74 0.082
2000 -.0075401 .0085101 -0.89 0.376
2001 .0092431 .0081985 1.13 0.260
2002 -.0127874 .0081456 -1.57 0.116

121
Section 21. Works of art

Equation Obs RMSE R2

weu 80 .1218766 0.9470
war 80 .08073 0.6401
wam 80 .0798278 0.8594
wrow 80 .1021029 0.9307

Equation Variable Estimate Std. Error T statistic P value

weu Intercept .3507239 .0365591 9.59 0.000
P_EU -.2690277 .0227035 -11.85 0.000
P_AR .0471244 .0151219 3.12 0.002
P_AM .0841382 .0140487 5.99 0.000
P_ROW .137765 .0150092 9.18 0.000
EXPEND. -.0011131 .0023884 -0.47 0.641
1998 .0230545 .0478756 0.48 0.630
1999 .0432052 .0506004 0.85 0.393
2000 -.020834 .046159 -0.45 0.652
2001 -.0489964 .0448134 -1.09 0.274
2002 .0591941 .0464192 1.28 0.202
war Intercept -.0669794 .0860593 -0.78 0.436
P_EU .0471244 .0151219 3.12 0.002
P_AR -.3054159 .0256445 -11.91 0.000
P_AM .1720521 .0186115 9.24 0.000
P_ROW .0862393 .014753 5.85 0.000
EXPEND. .0182396 .0079865 2.28 0.022
1998 .0207787 .0327221 0.64 0.525
1999 .086918 .0348864 2.49 0.013
2000 .0559214 .0315821 1.77 0.077
2001 .0550647 .030532 1.80 0.071
2002 .0085865 .0315923 0.27 0.786
wam Intercept .2688113 .0901408 2.98 0.003
P_EU .0841382 .0140487 5.99 0.000
P_AR .1720521 .0186115 9.24 0.000
P_AM -.3333361 .0200362 -16.64 0.000
P_ROW .0771458 .0138931 5.55 0.000
EXPEND. -.0075321 .0083226 -0.91 0.365
1998 .0062868 .0324499 0.19 0.846
1999 .0009173 .0346093 0.03 0.979
2000 .0331751 .0313265 1.06 0.290
2001 .0389211 .0302336 1.29 0.198
2002 -.0049143 .0313103 -0.16 0.875
wrow Intercept .4474441 .1203715 3.72 0.000
P_EU .137765 .0150092 9.18 0.000
P_AR .0862393 .014753 5.85 0.000
P_AM .0771458 .0138931 5.55 0.000
P_ROW -.3011501 .0196139 -15.35 0.000
EXPEND. -.0110939 .0111989 -0.99 0.322
1998 -.0507128 .0411147 -1.23 0.217
1999 -.1316056 .0438571 -3.00 0.003
2000 -.0684387 .0399273 -1.71 0.087
2001 -.0452653 .038378 -1.18 0.238
2002 -.0631658 .0393935 -1.60 0.109

122
APPENDIX 4. BILATERAL TRADE WITH EGYPT - ESTIMATION RESULTS

The system of equations is

wij = β0j + β1 PEUi + β2 PARi + β3 PAMi + β4 PEGi + β5 PEG2i + β6 PROWi

+ γ1 EXPENDi + γ2 1998 + γ3 1999 + γ4 2000 + γ5 2001 + γ6 2002

where

i: index of commodity (HS8 classification);

j: region index (EU, AR , AM, EG and ROW);

wij : share of region j in expenditure on commodity i;

PEUi, PARi, PAMi, PROWi: logarithm of price index for commodity i from region EU, AR, AM
and ROW respectively;

PEGi, PEG2i: logarithm of price index for commodity i from Egypt, respectively before and
after implementation of the Preferential Trade Agreement (1999);

EXPENDi: total expenditure on commodity i (on imports from all regions);

1998, 1999, 2000, 2001 and 2002: indicator (dummy) variables, equal to 1 for the
corresponding year, and 0 otherwise.

To control for a possible real exchange rate effect, we compute the prediction of total
expenditures (variable EXPENDi) as a function of year and month dummy variables, regional
price indexes, and real exchange rates between the Lebanon pound and the US dollar,
European currency, and the Egyptian pound.

Furthermore, we also include the exchange rate between Lebanon and Egypt (in log) in the
demand share equation for Egyptian commodities. This variable is denoted EXRT in the tables
below.

For each section:

• the first table reports, for each regional equation, the number of observations (i.e., goods
classified under HS8 for the corresponding section), the Root Mean Square Error (RMSE,
interpreted as the relative prediction error of the model), and the significance coefficient
2
(R , measuring the goodness of fit of the model).

• the second table presents parameter estimates associated with explanatory variables (see
the system of equations above), the standard error (Std. Error, a measure of parametric

123
 estimation precision), the Student test statistic (T stat, the ratio of parameter estimate over
its standard error) and the associated probability value (p-value).

Interpretation:
2
• a R coefficient close to 1 indicates a satisfactory goodness of fit; a value of 0 indicates no
explanatory power, a value of 1 indicates perfect fit of the model.

• the Student test statistic should be greater than 1.96 in absolute value if the hypothesis of
no statistical significance of the parameter estimate is valid (with a 5 percent error level).
Hence, a parameter estimate is significantly different from 0 if the Student statistic is
greater than 1.96 in absolute value or, equivalently, if the probability value is less than 5
percent (0.05).

124
Section 1. Live animals, animal products

----------------------------------------------------------------------
Equation Obs Parms RMSE "R-sq" chi2 P
----------------------------------------------------------------------
weu 54 12 .0498386 0.9814 2897.776 0.0000
war 54 12 .0472403 0.9416 962.4804 0.0000
wam 54 12 .0425399 0.8914 451.2048 0.0000
wrow 54 12 .065885 0.9784 2537.702 0.0000
weg 54 13 .0222624 0.7695 180.456 0.0000
----------------------------------------------------------------------

------------------------------------------------------------------------------
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
weu |
cons | .2727015 .024067 11.33 0.000 .2255311 .319872
P_EU | -.6502608 .032144 -20.23 0.000 -.7132619 -.5872597
P_AR | .1774285 .0241317 7.35 0.000 .1301312 .2247258
P_AM | .1418862 .0257715 5.51 0.000 .091375 .1923975
PEG2 | -.6226851 .2427315 -2.57 0.010 -1.09843 -.1469401
P_EG | .6840177 .243664 2.81 0.005 .2064449 1.16159
P_ROW | .2696135 .026252 10.27 0.000 .2181606 .3210664
EXPEND.| .0014007 .012890 0.11 0.913 -2.38e-06 2.66e-06
1998 | .0492362 .0322231 1.53 0.127 -.0139198 .1123923
1999 | -.0614431 .0359408 -1.71 0.087 -.1318858 .0089996
2000 | .1323336 .0578555 2.29 0.022 .0189389 .2457282
2001 | -.0506886 .0369075 -1.37 0.170 -.1230259 .0216487
2002 | .0206354 .02914 0.71 0.479 -.036478 .0777487
-------------+----------------------------------------------------------------
war |
cons | .2561834 .0236843 10.82 0.000 .209763 .3026038
P_EU | .1774285 .0241317 7.35 0.000 .1301312 .2247258
P_AR | -.6082872 .037832 -16.08 0.000 -.6824367 -.5341378
P_AM | .0958635 .0282356 3.40 0.001 .0405226 .1512043
PEG2 | -.1352641 .224164 -0.60 0.546 -.5746174 .3040893
P_EG | .1998561 .2258405 0.88 0.376 -.2427832 .6424954
P_ROW | .2704032 .0302759 8.93 0.000 .2110635 .329743
EXPEND. | .0023158 .0191285 0.12 0.904 -.0351753 .0398069
1998 | .0294299 .0303225 0.97 0.332 -.0300012 .088861
1999 | -.0279299 .0334173 -0.84 0.403 -.0934266 .0375669
2000 | -.1320616 .0547173 -2.41 0.016 -.2393056 -.0248176
2001 | -.0410025 .0346084 -1.18 0.236 -.1088337 .0268287
2002 | -.0328468 .0273471 -1.20 0.230 -.086446 .0207525
-------------+----------------------------------------------------------------
wam |
cons | .1125909 .0214987 5.24 0.000 .0704542 .1547275
P_EU | .1418862 .0257715 5.51 0.000 .091375 .1923975
P_AR | .0958635 .0282356 3.40 0.001 .0405226 .1512043
P_AM | -.3595557 .0369588 -9.73 0.000 -.4319935 -.2871178
PEG2 | .21162 .2060498 1.03 0.304 -.1922302 .6154702
P_EG | -.1217069 .2066983 -0.59 0.556 -.5268281 .2834142
P_ROW | .0318929 .025217 1.26 0.206 -.0175315 .0813172
EXPEND. | .009974 .0137943 0.72 0.470 -.0170623 .0370103
1998 | -.0409688 .0274011 -1.50 0.135 -.094674 .0127365
1999 | .0355706 .0328337 1.08 0.279 -.0287822 .0999234
2000 | -.0135089 .0494014 -0.27 0.785 -.1103339 .0833162
2001 | .0275873 .031363 0.88 0.379 -.0338831 .0890577
2002 | -.0092504 .0247017 -0.37 0.708 -.0576648 .0391641
-------------+----------------------------------------------------------------
wrow |
cons | .2542338 .0313595 8.11 0.000 .1927703 .3156973
P_EU | .2696135 .026252 10.27 0.000 .2181606 .3210664
P_AR | .2704032 .0302759 8.93 0.000 .2110635 .329743
P_AM | .0318929 .025217 1.26 0.206 -.0175315 .0813172
PEG2 | .3681906 .3094051 1.19 0.234 -.2382322 .9746134
P_EG | -.283826 .3096818 -0.92 0.359 -.8907912 .3231391
P_ROW | -.6562741 .042153 -15.57 0.000 -.7388925 -.5736558
EXPEND. | -.0118083 .0248912 -0.47 0.635 -.0605942 .0369776
1998 | -.0354898 .0421085 -0.84 0.399 -.118021 .0470413
1999 | .0265224 .0447915 0.59 0.554 -.0612673 .1143121
2000 | .0295284 .075719 0.39 0.697 -.1188781 .1779348
2001 | .0730356 .04769 1.53 0.126 -.0204351 .1665064
2002 | .0436579 .0379416 1.15 0.250 -.0307063 .118022

125
 -------------+----------------------------------------------------------------
weg |
cons | .1042904 .0180042 5.79 0.000 .0690028 .139578
P_EU | .0613325 .019227 3.19 0.001 .0236482 .0990168
P_AR | .0645921 .0294581 2.19 0.028 .0068553 .1223288
P_AM | .0899131 .0236643 3.80 0.000 .0435319 .1362943
PEG2 | .1778879 .1119076 1.59 0.112 -.0414469 .3972227
P_EG | -.4780901 .124898 -3.83 0.000 -.7228856 -.2332945
P_ROW | .0843645 .0203641 4.14 0.000 .0444516 .1242775
EXPEND. | -.0005629 .009502 -0.06 0.953 -.0191864 .0180606
EXRT | -.0000598 .0006538 -0.09 0.927 -.0013411 .0012216
1998 | -.0020259 .0153882 -0.13 0.895 -.0321862 .0281343
1999 | .0275117 .0177798 1.55 0.122 -.0073361 .0623596
2000 | -.0160266 .0275876 -0.58 0.561 -.0700974 .0380442
2001 | -.0089306 .017422 -0.51 0.608 -.043077 .0252158
2002 | -.0220005 .0140581 -1.56 0.118 -.049554 .005553
------------------------------------------------------------------------------

Section 2. Vegetable products

----------------------------------------------------------------------
Equation Obs Parms RMSE "R-sq" chi2 P
----------------------------------------------------------------------
weu 161 12 .1308425 0.7587 508.5623 0.0000
war 161 12 .1508001 0.8123 703.9853 0.0000
wam 161 12 .0941586 0.8325 790.6083 0.0000
wrow 161 12 .1429129 0.8088 691.1323 0.0000
weg 161 13 .1372551 0.6307 289.6604 0.0000
----------------------------------------------------------------------

------------------------------------------------------------------------------
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
weu |
cons | .258987 .0296336 8.74 0.000 .2009061 .3170678
P_EU | -.3676693 .0364189 -10.10 0.000 -.4390489 -.2962896
P_AR | .1226297 .0282468 4.34 0.000 .067267 .1779923
P_AM | .0974199 .0221425 4.40 0.000 .0540215 .1408183
PEG2 | .0889239 .0664715 1.34 0.181 -.0413578 .2192055
P_EG | -.0314168 .074068 -0.42 0.671 -.1765874 .1137537
P_ROW | .0901127 .0312465 2.88 0.004 .0288706 .1513548
EXPEND.| -.0007498 .0016121 -0.07 0.941 -2.05e-06 1.90e-06
1998 | -.0453988 .0389872 -1.16 0.244 -.1218123 .0310148
1999 | -.0341543 .0413276 -0.83 0.409 -.1151548 .0468463
2000 | -.0853222 .0427416 -2.00 0.046 -.1690942 -.0015503
2001 | -.0553462 .0360816 -1.53 0.125 -.1260649 .0153726
2002 | -.0814787 .0383641 -2.12 0.034 -.156671 -.0062864
-------------+----------------------------------------------------------------
war |
cons | .1695086 .0341434 4.96 0.000 .1025888 .2364284
P_EU | .1226297 .0282468 4.34 0.000 .067267 .1779923
P_AR | -.6895144 .0422143 -16.33 0.000 -.7722529 -.6067759
P_AM | .1150139 .0232691 4.94 0.000 .0694074 .1606205
PEG2 | .0165897 .0763422 0.22 0.828 -.1330384 .1662177
P_EG | .2316708 .0844379 2.74 0.006 .0661757 .397166
P_ROW | .2036103 .0345623 5.89 0.000 .1358695 .2713511
EXPEND. | -.0141993 .025694 -0.55 0.581 -.0645586 .0361601
1998 | -.0074502 .0443541 -0.17 0.867 -.0943826 .0794822
1999 | .0481741 .0473765 1.02 0.309 -.0446821 .1410303
2000 | -.008622 .0493357 -0.17 0.861 -.1053182 .0880742
2001 | -.0189603 .0413558 -0.46 0.647 -.1000163 .0620956
2002 | .0338186 .0440549 0.77 0.443 -.0525273 .1201646
-------------+----------------------------------------------------------------
wam |
cons | .1285289 .021595 5.95 0.000 .0862035 .1708542
P_EU | .0974199 .0221425 4.40 0.000 .0540215 .1408183
P_AR | .1150139 .0232691 4.94 0.000 .0694074 .1606205
P_AM | -.5187525 .0281677 -18.42 0.000 -.5739601 -.4635449
PEG2 | .0598279 .0482762 1.24 0.215 -.0347917 .1544475
P_EG | .117217 .0596503 1.97 0.049 .0003045 .2341295
P_ROW | .1292738 .0278552 4.64 0.000 .0746786 .1838691
EXPEND. | -.026848 .0166339 -1.61 0.107 -.0594498 .0057539
1998 | .0051139 .0280416 0.18 0.855 -.0498466 .0600745
1999 | .0082208 .0300682 0.27 0.785 -.0507117 .0671533
2000 | .0402824 .0311102 1.29 0.195 -.0206924 .1012572

126
 2001 | -.0042729 .026104 -0.16 0.870 -.0554358 .0468901
2002 | .0043292 .0277344 0.16 0.876 -.0500291 .0586875
-------------+----------------------------------------------------------------
wrow |
cons | .203504 .032509 6.26 0.000 .1397874 .2672205
P_EU | .0901127 .0312465 2.88 0.004 .0288706 .1513548
P_AR | .2036103 .0345623 5.89 0.000 .1358695 .2713511
P_AM | .1292738 .0278552 4.64 0.000 .0746786 .1838691
PEG2 | .2262093 .0729605 3.10 0.002 .0832094 .3692093
P_EG | -.0372197 .0866758 -0.43 0.668 -.2071011 .1326618
P_ROW | -.6119864 .053752 -11.39 0.000 -.7173385 -.5066344
EXPEND. | .0481864 .0246413 1.96 0.051 -.0001096 .0964824
1998 | .0188086 .0422328 0.45 0.656 -.0639662 .1015835
1999 | .0233957 .0452339 0.52 0.605 -.065261 .1120525
2000 | .1282224 .0467686 2.74 0.006 .0365575 .2198872
2001 | .0484022 .0393236 1.23 0.218 -.0286707 .1254751
2002 | .0610311 .0417861 1.46 0.144 -.0208682 .1429304
-------------+----------------------------------------------------------------
weg |
cons | .2394716 .0327256 7.32 0.000 .1753306 .3036126
P_EU | .057507 .0373404 1.54 0.124 -.0156787 .1306928
P_AR | .2482605 .0399894 6.21 0.000 .1698826 .3266384
P_AM | .1770448 .0385524 4.59 0.000 .1014834 .2526063
PEG2 | -.3915866 .0703795 -5.56 0.000 -.529528 -.2536453
P_EG | -.2802153 .1106564 -2.53 0.011 -.4970979 -.0633328
P_ROW | .1889896 .0551769 3.43 0.001 .0808448 .2971344
EXPEND. | -.0069545 .0232407 -0.30 0.765 -.0525055 .0385965
EXRT | .0000291 .0005261 0.06 0.956 -.001002 .0010601
1998 | .0288371 .0406572 0.71 0.478 -.0508495 .1085237
1999 | -.045752 .0442177 -1.03 0.301 -.1324172 .0409132
2000 | -.0746174 .0449263 -1.66 0.097 -.1626713 .0134365
2001 | .0301408 .0377288 0.80 0.424 -.0438062 .1040879
2002 | -.0178094 .0400915 -0.44 0.657 -.0963873 .0607685
------------------------------------------------------------------------------

Section 3. Animal and vegetable fats

----------------------------------------------------------------------
Equation Obs Parms RMSE "R-sq" chi2 P
----------------------------------------------------------------------
weu 79 12 .1395178 0.7195 210.1824 0.0000
war 79 12 .1169395 0.8365 405.9108 0.0000
wam 79 12 .0712753 0.8577 455.2573 0.0000
wrow 79 12 .1220632 0.8449 436.1522 0.0000
weg 79 13 .119487 0.6521 153.9879 0.0000
----------------------------------------------------------------------

------------------------------------------------------------------------------
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
weu |
cons | .2227045 .0860932 2.59 0.010 .0539648 .3914441
P_EU | -.4327785 .1319179 -3.28 0.001 -.6913328 -.1742241
P_AR | .1043959 .0820521 1.27 0.203 -.0564233 .2652151
P_AM | .1539435 .0615049 2.50 0.012 .0333962 .2744908
PEG2 | .184959 .2576959 0.72 0.473 -.3201157 .6900337
P_EG | -.2112537 .2784977 -0.76 0.448 -.7570992 .3345919
P_ROW | .2007337 .080496 2.49 0.013 .0429644 .358503
EXPEND.| -.000814 .003936 -0.21 0.836 -8.51e-06 6.88e-06
1998 | -.092516 .1156413 -0.80 0.424 -.3191689 .1341368
1999 | .0515282 .0928678 0.55 0.579 -.1304895 .2335458
2000 | .0597234 .0935131 0.64 0.523 -.123559 .2430057
2001 | -.0042664 .08842 -0.05 0.962 -.1775664 .1690336
2002 | -.0524667 .0879405 -0.60 0.551 -.2248269 .1198934
-------------+----------------------------------------------------------------
war |
cons | .2578496 .0718035 3.59 0.000 .1171174 .3985819
P_EU | .1043959 .0820521 1.27 0.203 -.0564233 .2652151
P_AR | -.4420421 .0911666 -4.85 0.000 -.6207254 -.2633588
P_AM | -.0054338 .0492296 -0.11 0.912 -.1019221 .0910545
PEG2 | .5171461 .2182983 2.37 0.018 .0892893 .9450029
P_EG | -.3956379 .2299228 -1.72 0.085 -.8462783 .0550024
P_ROW | .2215718 .0662845 3.34 0.001 .0916565 .3514871
EXPEND. | -.0232451 .0333897 -0.70 0.486 -.0886876 .0421975

127
 1998 | -.1535837 .0981763 -1.56 0.118 -.3460058 .0388383
1999 | .0471668 .0786339 0.60 0.549 -.1069529 .2012865
2000 | .0181725 .0788228 0.23 0.818 -.1363174 .1726623
2001 | .0096979 .0748955 0.13 0.897 -.1370945 .1564903
2002 | -.049923 .0740781 -0.67 0.500 -.1951133 .0952674
-------------+----------------------------------------------------------------
wam |
cons | .195389 .0466137 4.19 0.000 .1040278 .2867502
P_EU | .1539435 .0615049 2.50 0.012 .0333962 .2744908
P_AR | -.0054338 .0492296 -0.11 0.912 -.1019221 .0910545
P_AM | -.5101383 .0603298 -8.46 0.000 -.6283826 -.391894
PEG2 | -.0026147 .1378542 -0.02 0.985 -.272804 .2675746
P_EG | .1704875 .158112 1.08 0.281 -.1394063 .4803813
P_ROW | .1937558 .0510176 3.80 0.000 .0937633 .2937484
EXPEND. | .0077995 .0227395 0.34 0.732 -.0367692 .0523681
1998 | -.047369 .0620111 -0.76 0.445 -.1689085 .0741705
1999 | -.0480024 .0495065 -0.97 0.332 -.1450334 .0490286
2000 | -.0805438 .0502628 -1.60 0.109 -.1790571 .0179694
2001 | -.075248 .0475349 -1.58 0.113 -.1684147 .0179188
2002 | -.0648305 .0470042 -1.38 0.168 -.156957 .027296
-------------+----------------------------------------------------------------
wrow |
cons | .2036823 .074945 2.72 0.007 .0567927 .3505718
P_EU | .2007337 .080496 2.49 0.013 .0429644 .358503
P_AR | .2215718 .0662845 3.34 0.001 .0916565 .3514871
P_AM | .1937558 .0510176 3.80 0.000 .0937633 .2937484
PEG2 | -.4474177 .2295131 -1.95 0.051 -.8972552 .0024198
P_EG | .6940265 .2406473 2.88 0.004 .2223663 1.165687
P_ROW | -.8626701 .0924486 -9.33 0.000 -1.043866 -.6814741
EXPEND. | .011855 .0362473 0.33 0.744 -.0591884 .0828984
1998 | .295217 .1021849 2.89 0.004 .0949383 .4954957
1999 | -.0681525 .0821752 -0.83 0.407 -.229213 .0929079
2000 | -.0672141 .0823074 -0.82 0.414 -.2285337 .0941055
2001 | .0002884 .0781411 0.00 0.997 -.1528654 .1534422
2002 | .0147637 .077962 0.19 0.850 -.138039 .1675663
-------------+----------------------------------------------------------------
weg |
cons | .1203746 .0832749 1.45 0.148 -.0428411 .2835904
P_EU | -.0262947 .1184086 -0.22 0.824 -.2583712 .2057819
P_AR | .1215082 .0923072 1.32 0.188 -.0594106 .302427
P_AM | .1678728 .0875693 1.92 0.055 -.0037598 .3395054
PEG2 | -.2524223 .2263748 -1.12 0.265 -.6961089 .1912642
P_EG | -.2572727 .2920901 -0.88 0.378 -.8297588 .3152134
P_ROW | .2466087 .0990329 2.49 0.013 .0525078 .4407097
EXPEND. | .0054774 .0355768 0.15 0.878 -.0642517 .0752066
EXRT | .0004282 .0025349 0.17 0.866 -.0045401 .0053965
1998 | -.0029533 .1024667 -0.03 0.977 -.2037843 .1978777
1999 | .0157005 .0813111 0.19 0.847 -.1436664 .1750674
2000 | .0681855 .0847981 0.80 0.421 -.0980158 .2343868
2001 | .0684782 .0797384 0.86 0.390 -.0878061 .2247626
2002 | .1508567 .077333 1.95 0.051 -.0007131 .3024265
------------------------------------------------------------------------------

Section 4. Prepared foodstuffs

----------------------------------------------------------------------
Equation Obs Parms RMSE "R-sq" chi2 P
----------------------------------------------------------------------
weu 486 12 .1121054 0.9325 6884.305 0.0000
war 486 12 .0662173 0.9192 5494.348 0.0000
wam 486 12 .0652751 0.8224 2264.986 0.0000
wrow 486 12 .0804194 0.8847 3672.733 0.0000
weg 486 13 .101143 0.7635 1782.749 0.0000
----------------------------------------------------------------------

------------------------------------------------------------------------------
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
weu |
cons | .2773576 .0145838 19.02 0.000 .2487739 .3059413
P_EU | -.5284395 .0211633 -24.97 0.000 -.5699189 -.4869602
P_AR | .124678 .011815 10.55 0.000 .1015209 .147835
P_AM | .0677136 .0116225 5.83 0.000 .044934 .0904932

128
 PEG2 | .2027994 .0301309 6.73 0.000 .1437439 .2618548
P_EG | -.0206006 .0341399 -0.60 0.546 -.0875137 .0463124
P_ROW | .1538492 .0138578 11.10 0.000 .1266884 .18101
EXPEND.| .0006898 .0029507 0.23 0.815 -5.09e-07 6.47e-07
1998 | .02628 .0202429 1.30 0.194 -.0133952 .0659553
1999 | .0662952 .020059 3.31 0.001 .0269802 .1056101
2000 | .0004991 .0191099 0.03 0.979 -.0369556 .0379538
2001 | .0161543 .0186762 0.86 0.387 -.0204504 .052759
2002 | .031501 .0179386 1.76 0.079 -.003658 .0666601
-------------+----------------------------------------------------------------
war |
cons | .1463638 .0089409 16.37 0.000 .12884 .1638876
P_EU | .124678 .011815 10.55 0.000 .1015209 .147835
P_AR | -.6466916 .0174343 -37.09 0.000 -.6808622 -.612521
P_AM | .1140945 .0120961 9.43 0.000 .0903865 .1378024
PEG2 | .1128553 .0184942 6.10 0.000 .0766074 .1491032
P_EG | .1278674 .0236365 5.41 0.000 .0815407 .1741941
P_ROW | .1671964 .0139292 12.00 0.000 .1398956 .1944972
EXPEND. | -.0060218 .0071417 -0.84 0.399 -.0200192 .0079757
1998 | .0111352 .0122426 0.91 0.363 -.0128598 .0351303
1999 | .0079504 .0121572 0.65 0.513 -.0158773 .031778
2000 | .013649 .0115759 1.18 0.238 -.0090393 .0363373
2001 | .0009149 .0113097 0.08 0.936 -.0212517 .0230815
2002 | .0160638 .0109071 1.47 0.141 -.0053138 .0374414
-------------+----------------------------------------------------------------
wam |
cons | .1180484 .008698 13.57 0.000 .1010007 .1350961
P_EU | .0677136 .0116225 5.83 0.000 .044934 .0904932
P_AR | .1140945 .0120961 9.43 0.000 .0903865 .1378024
P_AM | -.5413321 .0164684 -32.87 0.000 -.5736097 -.5090546
PEG2 | .1279424 .0180864 7.07 0.000 .0924936 .1633911
P_EG | .1210869 .0230143 5.26 0.000 .0759798 .1661941
P_ROW | .1104948 .0132635 8.33 0.000 .0844987 .1364908
EXPEND. | .0062723 .0069625 0.90 0.368 -.0073739 .0199186
1998 | -.0098662 .0119765 -0.82 0.410 -.0333397 .0136072
1999 | .0166293 .0118697 1.40 0.161 -.0066348 .0398934
2000 | .0175764 .0113053 1.55 0.120 -.0045816 .0397344
2001 | .0199973 .0110459 1.81 0.070 -.0016523 .0416469
2002 | .0089562 .0106551 0.84 0.401 -.0119275 .0298399
-------------+----------------------------------------------------------------
wrow |
cons | .1834468 .0106753 17.18 0.000 .1625237 .2043699
P_EU | .1538492 .0138578 11.10 0.000 .1266884 .18101
P_AR | .1671964 .0139292 12.00 0.000 .1398956 .1944972
P_AM | .1104948 .0132635 8.33 0.000 .0844987 .1364908
PEG2 | .1209312 .0222841 5.43 0.000 .0772552 .1646072
P_EG | .1616395 .0273204 5.92 0.000 .1080924 .2151866
P_ROW | -.7141111 .0212731 -33.57 0.000 -.7558055 -.6724166
EXPEND. | .0053522 .0087858 0.61 0.542 -.0118676 .022572
1998 | .0154487 .0147762 1.05 0.296 -.013512 .0444094
1999 | -.0184156 .0146733 -1.26 0.209 -.0471747 .0103435
2000 | -.0102972 .0139798 -0.74 0.461 -.037697 .0171027
2001 | -.0079755 .0136732 -0.58 0.560 -.0347745 .0188235
2002 | -.0160471 .0131829 -1.22 0.224 -.0418851 .0097909
-------------+----------------------------------------------------------------
weg |
cons | .2747834 .0136721 20.10 0.000 .2479866 .3015801
P_EU | .1821987 .0181718 10.03 0.000 .1465826 .2178148
P_AR | .2407227 .0186567 12.90 0.000 .2041563 .2772891
P_AM | .2490293 .0181861 13.69 0.000 .2133851 .2846734
PEG2 | -.5645313 .0279148 -20.22 0.000 -.6192433 -.5098193
P_EG | -.38999 .0392972 -9.92 0.000 -.4670112 -.3129689
P_ROW | .2825707 .0202573 13.95 0.000 .242867 .3222743
EXPEND. | -.0056824 .0089846 -0.63 0.527 -.023292 .0119271
EXRT | -.0000257 .0001366 -0.19 0.851 -.0002935 .0002421
1998 | -.0429397 .0183249 -2.34 0.019 -.0788559 -.0070235
1999 | -.0723605 .0181547 -3.99 0.000 -.107943 -.0367779
2000 | -.0213554 .017298 -1.23 0.217 -.0552589 .0125481
2001 | -.0290595 .0169015 -1.72 0.086 -.0621858 .0040668
2002 | -.0403962 .0162863 -2.48 0.013 -.0723167 -.0084756
------------------------------------------------------------------------------

129
Section 5. Mineral products

----------------------------------------------------------------------
Equation Obs Parms RMSE "R-sq" chi2 P
----------------------------------------------------------------------
weu 103 12 .1645991 0.9006 943.6614 0.0000
war 103 12 .1155597 0.8385 537.0255 0.0000
wam 103 12 .055116 0.6280 174.4403 0.0000
wrow 103 12 .0925524 0.5630 147.9221 0.0000
weg 103 13 .0957541 0.5813 157.0378 0.0000
----------------------------------------------------------------------

------------------------------------------------------------------------------
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
weu |
cons | .4718759 .0435469 10.84 0.000 .3865255 .5572263
P_EU | -.2988672 .071497 -4.18 0.000 -.4389986 -.1587357
P_AR | .1633603 .0447785 3.65 0.000 .075596 .2511245
P_AM | .0409454 .0249996 1.64 0.101 -.0080529 .0899437
PEG2 | .052802 .1076065 0.49 0.624 -.1581029 .2637068
P_EG | -.020673 .1057262 -0.20 0.845 -.2278925 .1865464
P_ROW | .0624326 .0390436 1.60 0.110 -.0140915 .1389566
EXPEND.| -.0013206 .0045406 -0.29 0.771 -.0000102 7.57e-06
1998 | .0108148 .0656062 0.16 0.869 -.1177711 .1394006
1999 | -.0748014 .0550381 -1.36 0.174 -.1826741 .0330712
2000 | -.0123629 .0577953 -0.21 0.831 -.1256395 .1009138
2001 | -.0910125 .0518776 -1.75 0.079 -.1926906 .0106656
2002 | -.0894467 .0582348 -1.54 0.125 -.2035848 .0246915
-------------+----------------------------------------------------------------
war |
cons | .2936768 .0300102 9.79 0.000 .2348579 .3524957
P_EU | .1633603 .0447785 3.65 0.000 .075596 .2511245
P_AR | -.198324 .0542728 -3.65 0.000 -.3046967 -.0919512
P_AM | -.0226616 .0257188 -0.88 0.378 -.0730696 .0277463
PEG2 | .0546173 .0763029 0.72 0.474 -.0949336 .2041682
P_EG | -.0606815 .0760775 -0.80 0.425 -.2097907 .0884276
P_ROW | .0636896 .038626 1.65 0.099 -.012016 .1393951
EXPEND. | .0810892 .0242687 3.34 0.001 .0335234 .1286551
1998 | -.1033009 .0463791 -2.23 0.026 -.1942023 -.0123996
1999 | -.0268513 .0387714 -0.69 0.489 -.1028418 .0491393
2000 | -.0017223 .040991 -0.04 0.966 -.0820632 .0786187
2001 | .0036542 .0366094 0.10 0.920 -.0680989 .0754073
2002 | -.0266142 .0418138 -0.64 0.524 -.1085677 .0553393
-------------+----------------------------------------------------------------
wam |
cons | .0839812 .0157712 5.32 0.000 .0530702 .1148922
P_EU | .0409454 .0249996 1.64 0.101 -.0080529 .0899437
P_AR | -.0226616 .0257188 -0.88 0.378 -.0730696 .0277463
P_AM | -.1692144 .08981 -1.88 0.060 -.3452388 .00681
PEG2 | -.0579013 .0423504 -1.37 0.172 -.1409066 .025104
P_EG | .0738096 .0663462 1.11 0.266 -.0562265 .2038457
P_ROW | .1350224 .0566559 2.38 0.017 .0239788 .2460659
EXPEND. | .0001651 .0124634 0.01 0.989 -.0242627 .0245929
1998 | -.0023495 .023287 -0.10 0.920 -.0479911 .0432921
1999 | -.0080811 .0190617 -0.42 0.672 -.0454413 .0292791
2000 | -.0289101 .0202559 -1.43 0.154 -.0686109 .0107908
2001 | -.0184224 .0178828 -1.03 0.303 -.053472 .0166272
2002 | .0096319 .020494 0.47 0.638 -.0305357 .0497995
-------------+----------------------------------------------------------------
wrow |
cons | .1033992 .0258553 4.00 0.000 .0527237 .1540747
P_EU | .0624326 .0390436 1.60 0.110 -.0140915 .1389566
P_AR | .0636896 .038626 1.65 0.099 -.012016 .1393951
P_AM | .1350224 .0566559 2.38 0.017 .0239788 .2460659
PEG2 | .0491345 .0656556 0.75 0.454 -.0795481 .1778171
P_EG | .1974115 .0741954 2.66 0.008 .0519912 .3428319
P_ROW | -.5076905 .081041 -6.26 0.000 -.6665279 -.3488531
EXPEND. | -.0430246 .0191832 -2.24 0.025 -.080623 -.0054263
1998 | .0569507 .0370937 1.54 0.125 -.0157516 .129653
1999 | .0423892 .0315036 1.35 0.178 -.0193568 .1041351
2000 | -.0163228 .0330785 -0.49 0.622 -.0811554 .0485099
2001 | .0005016 .0295129 0.02 0.986 -.0573425 .0583458

130
 2002 | -.0099475 .0337523 -0.29 0.768 -.0761008 .0562057
-------------+----------------------------------------------------------------
weg |
cons | .0470669 .0291788 1.61 0.107 -.0101226 .1042564
P_EU | .0321289 .0414929 0.77 0.439 -.0491957 .1134535
P_AR | -.0060643 .0389319 -0.16 0.876 -.0823695 .0702409
P_AM | .0159084 .0747189 0.21 0.831 -.130538 .1623547
PEG2 | -.0983875 .0713944 -1.38 0.168 -.2383181 .041543
P_EG | -.1901315 .090507 -2.10 0.036 -.367522 -.012741
P_ROW | .246546 .0715216 3.45 0.001 .1063663 .3867257
EXPEND. | -.0341881 .0185723 -1.84 0.066 -.0705892 .0022129
EXRT | .0004903 .00201 0.24 0.807 -.0034492 .0044297
1998 | .0357701 .0387793 0.92 0.356 -.0402359 .1117761
1999 | .0656156 .0323902 2.03 0.043 .002132 .1290992
2000 | .0584854 .0342286 1.71 0.088 -.0086014 .1255722
2001 | .1046927 .0303656 3.45 0.001 .0451772 .1642081
2002 | .1149198 .0346682 3.31 0.001 .0469714 .1828683
------------------------------------------------------------------------------

Section 6. Chemical products

----------------------------------------------------------------------
Equation Obs Parms RMSE "R-sq" chi2 P
----------------------------------------------------------------------
weu 429 12 .1267218 0.9341 6360.428 0.0000
war 429 12 .0886299 0.8629 2759.999 0.0000
wam 429 12 .0669718 0.7741 1584.977 0.0000
wrow 429 12 .0593435 0.9151 4235.397 0.0000
weg 429 13 .0892657 0.8106 2256.508 0.0000
----------------------------------------------------------------------

------------------------------------------------------------------------------
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
weu |
cons | .3662554 .0204367 17.92 0.000 .3262002 .4063106
P_EU | -.271238 .0119543 -22.69 0.000 -.294668 -.247808
P_AR | .0969759 .0082263 11.79 0.000 .0808527 .1130992
P_AM | .0705314 .006936 10.17 0.000 .0569371 .0841256
PEG2 | .2175403 .0285115 7.63 0.000 .1616588 .2734219
P_EG | -.1959938 .0303908 -6.45 0.000 -.2555587 -.1364288
P_ROW | .0821842 .0060388 13.61 0.000 .0703482 .0940201
EXPEND.| -.0001448 .0033007 -0.04 0.965 -6.60e-07 6.32e-07
1998 | .0348014 .0281771 1.24 0.217 -.0204248 .0900276
1999 | .0020784 .0263486 0.08 0.937 -.0495639 .0537207
2000 | -.0122926 .0257386 -0.48 0.633 -.0627393 .0381541
2001 | -.0236364 .0235378 -1.00 0.315 -.0697697 .022497
2002 | .0001523 .0231394 0.01 0.995 -.0452001 .0455047
-------------+----------------------------------------------------------------
war |
cons | .1829921 .0144299 12.68 0.000 .15471 .2112742
P_EU | .0969759 .0082263 11.79 0.000 .0808527 .1130992
P_AR | -.4917002 .0180245 -27.28 0.000 -.5270275 -.4563729
P_AM | .114516 .0132351 8.65 0.000 .0885758 .1404563
PEG2 | .1412587 .0213339 6.62 0.000 .0994449 .1830724
P_EG | .0295283 .0246687 1.20 0.231 -.0188214 .077878
P_ROW | .1094213 .010613 10.31 0.000 .0886202 .1302223
EXPEND. | -.0010748 .0104819 -0.10 0.918 -.0216189 .0194693
1998 | -.0053881 .019961 -0.27 0.787 -.044511 .0337348
1999 | .0349729 .0186634 1.87 0.061 -.0016067 .0715525
2000 | .0109095 .0182558 0.60 0.550 -.0248712 .0466902
2001 | .01829 .0167545 1.09 0.275 -.0145483 .0511282
2002 | .0015114 .0163987 0.09 0.927 -.0306294 .0336521
-------------+----------------------------------------------------------------
wam |
cons | .146198 .011022 13.26 0.000 .1245953 .1678007
P_EU | .0705314 .006936 10.17 0.000 .0569371 .0841256
P_AR | .114516 .0132351 8.65 0.000 .0885758 .1404563
P_AM | -.5398791 .0228726 -23.60 0.000 -.5847086 -.4950495
PEG2 | .0884129 .015977 5.53 0.000 .0570985 .1197273
P_EG | .1306445 .0258001 5.06 0.000 .0800773 .1812117
P_ROW | .1357743 .0107657 12.61 0.000 .1146739 .1568748
EXPEND. | .0030069 .0079737 0.38 0.706 -.0126214 .0186351
1998 | -.0186895 .0150985 -1.24 0.216 -.048282 .0109031

131
 1999 | -.0066375 .014146 -0.47 0.639 -.0343631 .0210881
2000 | .0206673 .0138433 1.49 0.135 -.0064651 .0477998
2001 | .0060203 .0126937 0.47 0.635 -.0188589 .0308994
2002 | -.008998 .0124225 -0.72 0.469 -.0333457 .0153497
-------------+----------------------------------------------------------------
wrow |
cons | .1491249 .0101456 14.70 0.000 .12924 .1690099
P_EU | .0821842 .0060388 13.61 0.000 .0703482 .0940201
P_AR | .1094213 .010613 10.31 0.000 .0886202 .1302223
P_AM | .1357743 .0107657 12.61 0.000 .1146739 .1568748
PEG2 | .0597842 .0146745 4.07 0.000 .0310226 .0885457
P_EG | .1111148 .0190223 5.84 0.000 .0738318 .1483979
P_ROW | -.4982787 .0119018 -41.87 0.000 -.5216058 -.4749516
EXPEND. | -.0082503 .0077484 -1.06 0.287 -.023437 .0069363
1998 | -.0043252 .0139749 -0.31 0.757 -.0317155 .0230651
1999 | -.0260364 .0130935 -1.99 0.047 -.0516993 -.0003735
2000 | -.01385 .0127918 -1.08 0.279 -.0389215 .0112215
2001 | -.0112306 .0117196 -0.96 0.338 -.0342006 .0117394
2002 | -.0193714 .0114844 -1.69 0.092 -.0418804 .0031376
-------------+----------------------------------------------------------------
weg |
cons | .1554296 .0144467 10.76 0.000 .1271145 .1837446
P_EU | .0215466 .0085968 2.51 0.012 .0046971 .0383961
P_AR | .170787 .0154323 11.07 0.000 .1405403 .2010337
P_AM | .2190574 .0208657 10.50 0.000 .1781614 .2599534
PEG2 | -.5069968 .0205552 -24.67 0.000 -.5472843 -.4667092
P_EG | -.0752932 .0329395 -2.29 0.022 -.1398535 -.0107329
P_ROW | .170899 .0125006 13.67 0.000 .1463983 .1953997
EXPEND. | .0063463 .0091083 0.70 0.486 -.0115056 .0241982
EXRT | 5.43e-06 .0001571 0.03 0.972 -.0003025 .0003133
1998 | -.0064131 .0197033 -0.33 0.745 -.0450308 .0322047
1999 | -.0043982 .0184744 -0.24 0.812 -.0406074 .031811
2000 | -.0054493 .0180847 -0.30 0.763 -.0408947 .029996
2001 | .0105504 .0165721 0.64 0.524 -.0219303 .043031
2002 | .0266894 .0162193 1.65 0.100 -.0050999 .0584787
------------------------------------------------------------------------------

Section 7. Plastics

----------------------------------------------------------------------
Equation Obs Parms RMSE "R-sq" chi2 P
----------------------------------------------------------------------
weu 364 12 .0738973 0.9670 10706.50 0.0000
war 364 12 .056346 0.9330 5322.563 0.0000
wam 364 12 .0484273 0.7288 1281.989 0.0000
wrow 364 12 .1136785 0.9163 4227.619 0.0000
weg 364 13 .0642983 0.7132 1533.432 0.0000
----------------------------------------------------------------------

------------------------------------------------------------------------------
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
weu |
cons | .2873505 .0118748 24.20 0.000 .2640763 .3106246
P_EU | -.5674137 .0155578 -36.47 0.000 -.5979065 -.536921
P_AR | .161011 .0095492 16.86 0.000 .1422949 .1797271
P_AM | .092783 .010428 8.90 0.000 .0723444 .1132215
PEG2 | .0799193 .0266855 2.99 0.003 .0276167 .1322218
P_EG | .0620311 .0273775 2.27 0.023 .0083723 .1156899
P_ROW | .1716695 .0074674 22.99 0.000 .1570336 .1863054
EXPEND.| -.0004300 .0014507 -0.30 0.767 -3.28e-07 2.42e-07
1998 | .0186893 .0138963 1.34 0.179 -.0085469 .0459254
1999 | .0119331 .016569 0.72 0.471 -.0205416 .0444078
2000 | -.0172492 .0155174 -1.11 0.266 -.0476628 .0131644
2001 | -.0196742 .014565 -1.35 0.177 -.048221 .0088727
2002 | -.0071482 .0141558 -0.50 0.614 -.0348931 .0205967
-------------+----------------------------------------------------------------
war |
cons | .1446346 .0089751 16.12 0.000 .1270438 .1622255
P_EU | .161011 .0095492 16.86 0.000 .1422949 .1797271
P_AR | -.4961228 .0115744 -42.86 0.000 -.5188082 -.4734373
P_AM | .0870374 .0097687 8.91 0.000 .067891 .1061838
PEG2 | .1572893 .0208134 7.56 0.000 .1164958 .1980827
P_EG | .0251847 .0212869 1.18 0.237 -.0165369 .0669063

132
 P_ROW | .0656004 .0058371 11.24 0.000 .0541598 .0770409
EXPEND. | -.0036298 .00675 -0.54 0.591 -.0168595 .0095998
1998 | -.0059585 .0106479 -0.56 0.576 -.026828 .014911
1999 | .02429 .0127178 1.91 0.056 -.0006364 .0492164
2000 | .0163902 .0119605 1.37 0.171 -.007052 .0398324
2001 | .0171951 .0112095 1.53 0.125 -.004775 .0391653
2002 | .0283544 .0108764 2.61 0.009 .0070371 .0496717
-------------+----------------------------------------------------------------
wam |
cons | .1149332 .0082896 13.86 0.000 .0986859 .1311805
P_EU | .092783 .010428 8.90 0.000 .0723444 .1132215
P_AR | .0870374 .0097687 8.91 0.000 .067891 .1061838
P_AM | -.5213662 .0189507 -27.51 0.000 -.5585089 -.4842236
PEG2 | .1016033 .0184092 5.52 0.000 .0655219 .1376846
P_EG | .1981214 .0203498 9.74 0.000 .1582366 .2380062
P_ROW | .0418212 .0053358 7.84 0.000 .0313631 .0522792
EXPEND. | .0007992 .005677 0.14 0.888 -.0103276 .011926
1998 | -.0054473 .0091403 -0.60 0.551 -.023362 .0124675
1999 | .0002516 .0109089 0.02 0.982 -.0211294 .0216327
2000 | -.0011057 .0102625 -0.11 0.914 -.0212198 .0190084
2001 | .0016993 .0096232 0.18 0.860 -.0171618 .0205604
2002 | -.0004382 .009335 -0.05 0.963 -.0187345 .0178582
-------------+----------------------------------------------------------------
wrow |
cons | .2795521 .0167072 16.73 0.000 .2468065 .3122977
P_EU | .1716695 .0074674 22.99 0.000 .1570336 .1863054
P_AR | .0656004 .0058371 11.24 0.000 .0541598 .0770409
P_AM | .0418212 .0053358 7.84 0.000 .0313631 .0522792
PEG2 | .0970622 .0404983 2.40 0.017 .0176869 .1764375
P_EG | -.0701501 .0406241 -1.73 0.084 -.149772 .0094717
P_ROW | -.3060031 .0117186 -26.11 0.000 -.3289711 -.2830351
EXPEND. | -.0011914 .0123933 -0.10 0.923 -.0254819 .023099
1998 | .0039755 .0212245 0.19 0.851 -.0376239 .0455748
1999 | -.0441014 .0253547 -1.74 0.082 -.0937956 .0055929
2000 | .0166082 .0237096 0.70 0.484 -.0298617 .0630781
2001 | .0174259 .0222822 0.78 0.434 -.0262465 .0610983
2002 | -.0066122 .0216431 -0.31 0.760 -.0490318 .0358074
-------------+----------------------------------------------------------------
weg |
cons | .1735297 .0105577 16.44 0.000 .1528369 .1942225
P_EU | .1419503 .0121779 11.66 0.000 .1180821 .1658185
P_AR | .182474 .0108771 16.78 0.000 .1611553 .2037927
P_AM | .2997247 .0164959 18.17 0.000 .2673933 .3320561
PEG2 | -.4358837 .0242812 -17.95 0.000 -.483474 -.3882933
P_EG | -.2151774 .0264664 -8.13 0.000 -.2670505 -.1633043
P_ROW | .0269121 .0068201 3.95 0.000 .0135449 .0402792
EXPEND. | .0040641 .0074834 0.54 0.587 -.0106031 .0187314
EXRT | .0000156 .0000698 0.22 0.823 -.0001212 .0001525
1998 | -.011298 .0120477 -0.94 0.348 -.0349111 .0123151
1999 | .0075655 .0143832 0.53 0.599 -.0206251 .0357561
2000 | -.0146892 .0135201 -1.09 0.277 -.0411881 .0118097
2001 | -.0166647 .0126868 -1.31 0.189 -.0415304 .0082011
2002 | -.0142025 .0122938 -1.16 0.248 -.038298 .009893
------------------------------------------------------------------------------

Section 8. Skins

----------------------------------------------------------------------
Equation Obs Parms RMSE "R-sq" chi2 P
----------------------------------------------------------------------
weu 104 12 .068626 0.9693 3330.075 0.0000
war 104 12 .0703877 0.8749 787.505 0.0000
wam 104 12 .0295419 0.9101 1438.931 0.0000
wrow 104 12 .0816181 0.9692 3437.688 0.0000
weg 104 13 .0447383 0.8069 858.6154 0.0000
----------------------------------------------------------------------

133
------------------------------------------------------------------------------
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
weu |
cons | .2830479 .0198046 14.29 0.000 .2442317 .3218641
P_EU | -.4035886 .0177058 -22.79 0.000 -.4382913 -.3688859
P_AR | .1267674 .0139703 9.07 0.000 .0993862 .1541486
P_AM | .0601078 .0089379 6.73 0.000 .0425899 .0776258
PEG2 | -.024654 .040914 -0.60 0.547 -.1048441 .055536
P_EG | .0868103 .0387352 2.24 0.025 .0108908 .1627298
P_ROW | .1545571 .0116332 13.29 0.000 .1317564 .1773578
EXPEND.| -.0036807 .0033307 -1.11 0.269 -1.02e-06 2.84e-07
1998 | -.0290249 .0206337 -1.41 0.160 -.0694662 .0114163
1999 | -.0457067 .0292112 -1.56 0.118 -.1029596 .0115463
2000 | -.0008906 .0304131 -0.03 0.977 -.0604991 .058718
2001 | -.0029082 .025174 -0.12 0.908 -.0522484 .0464321
2002 | -.0137715 .0222886 -0.62 0.537 -.0574562 .0299133
-------------+----------------------------------------------------------------
war |
cons | .1778394 .0201381 8.83 0.000 .1383694 .2173093
P_EU | .1267674 .0139703 9.07 0.000 .0993862 .1541486
P_AR | -.3991728 .0184932 -21.58 0.000 -.4354188 -.3629268
P_AM | .082205 .0097619 8.42 0.000 .063072 .1013381
PEG2 | .0542927 .0417827 1.30 0.194 -.0275999 .1361853
P_EG | .0453648 .039788 1.14 0.254 -.0326182 .1233478
P_ROW | .0905428 .0126373 7.16 0.000 .0657742 .1153114
EXPEND. | -.0022092 .0140686 -0.16 0.875 -.0297832 .0253647
1998 | .0197426 .0214824 0.92 0.358 -.0223621 .0618472
1999 | .0166566 .0299912 0.56 0.579 -.0421251 .0754383
2000 | .0280663 .0317317 0.88 0.376 -.0341268 .0902594
2001 | -.0006404 .0261395 -0.02 0.980 -.0518728 .050592
2002 | .0280454 .0229045 1.22 0.221 -.0168465 .0729373
-------------+----------------------------------------------------------------
wam |
cons | .1126289 .0105712 10.65 0.000 .0919098 .133348
P_EU | .0601078 .0089379 6.73 0.000 .0425899 .0776258
P_AR | .082205 .0097619 8.42 0.000 .063072 .1013381
P_AM | -.3969615 .013556 -29.28 0.000 -.4235308 -.3703922
PEG2 | .1739954 .0215394 8.08 0.000 .1317791 .2162118
P_EG | .0276676 .017422 1.59 0.112 -.0064788 .061814
P_ROW | .0529856 .0070797 7.48 0.000 .0391096 .0668615
EXPEND. | .0033913 .0065309 0.52 0.604 -.0094089 .0161916
1998 | .0016603 .0093932 0.18 0.860 -.0167501 .0200707
1999 | .0393321 .0131735 2.99 0.003 .0135125 .0651518
2000 | .0155162 .013836 1.12 0.262 -.0116019 .0426344
2001 | .0259644 .0113853 2.28 0.023 .0036496 .0482792
2002 | -.0050298 .0099626 -0.50 0.614 -.0245562 .0144966
-------------+----------------------------------------------------------------
wrow |
cons | .2943546 .0222841 13.21 0.000 .2506785 .3380306
P_EU | .1545571 .0116332 13.29 0.000 .1317564 .1773578
P_AR | .0905428 .0126373 7.16 0.000 .0657742 .1153114
P_AM | .0529856 .0070797 7.48 0.000 .0391096 .0668615
PEG2 | -.149643 .0468003 -3.20 0.001 -.24137 -.0579161
P_EG | .2043797 .0456686 4.48 0.000 .114871 .2938884
P_ROW | -.3528221 .0158603 -22.25 0.000 -.3839076 -.3217365
EXPEND. | -.0041407 .0178555 -0.23 0.817 -.0391369 .0308555
1998 | -.0060079 .0247956 -0.24 0.809 -.0546064 .0425906
1999 | -.0696991 .0344879 -2.02 0.043 -.1372942 -.0021041
2000 | -.084623 .0366318 -2.31 0.021 -.15642 -.0128259
2001 | -.053966 .0300525 -1.80 0.073 -.1128679 .0049359
2002 | .0021328 .0263654 0.08 0.936 -.0495424 .0538081
-------------+----------------------------------------------------------------
weg |
cons | .1321293 .015715 8.41 0.000 .1013285 .1629301
P_EU | .0621563 .0129131 4.81 0.000 .0368471 .0874655
P_AR | .0996575 .013973 7.13 0.000 .072271 .1270441
P_AM | .2016631 .0145012 13.91 0.000 .1732411 .230085
PEG2 | -.0540496 .0325844 -1.66 0.097 -.1179138 .0098146
P_EG | -.3641639 .0249547 -14.59 0.000 -.4130742 -.3152536
P_ROW | .0547366 .0104383 5.24 0.000 .034278 .0751953
EXPEND. | .0033783 .0092413 0.37 0.715 -.0147344 .0214909
EXRT | .000102 .0001408 0.72 0.469 -.0001739 .000378
1998 | .0135238 .0134903 1.00 0.316 -.0129168 .0399644
1999 | .0591119 .0188102 3.14 0.002 .0222446 .0959793
2000 | .0420286 .0198294 2.12 0.034 .0031637 .0808935

134
 2001 | .0316448 .0163001 1.94 0.052 -.0003028 .0635925
2002 | -.0115735 .0142835 -0.81 0.418 -.0395687 .0164216
------------------------------------------------------------------------------

Section 9. Wood

----------------------------------------------------------------------
Equation Obs Parms RMSE "R-sq" chi2 P
----------------------------------------------------------------------
weu 35 12 .0766484 0.9663 1024.639 0.0000
war 35 12 .032021 0.9366 1015.884 0.0000
wam 35 12 .0745184 0.6883 88.93661 0.0000
wrow 35 12 .08109 0.9769 1504.492 0.0000
weg 35 13 .0493822 0.8300 351.8168 0.0000
----------------------------------------------------------------------

------------------------------------------------------------------------------
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
weu |
cons | .2237321 .0376912 5.94 0.000 .1498588 .2976054
P_EU | -.6013862 .0496445 -12.11 0.000 -.6986876 -.5040848
P_AR | .0958858 .0216235 4.43 0.000 .0535044 .1382671
P_AM | .0713634 .0510918 1.40 0.162 -.0287748 .1715015
PEG2 | .4872656 .1681467 2.90 0.004 .1577041 .8168272
P_EG | -.3330836 .1739248 -1.92 0.055 -.67397 .0078028
P_ROW | .279955 .036762 7.62 0.000 .2079029 .3520071
EXPEND.| .0034706 .0026805 1.29 0.196 -1.78e-06 8.73e-06
1998 | .0648452 .0438231 1.48 0.139 -.0210465 .1507368
1999 | .0700269 .0651908 1.07 0.283 -.0577448 .1977985
2000 | .0861004 .0719351 1.20 0.231 -.0548899 .2270906
2001 | .0596075 .0534744 1.11 0.265 -.0452004 .1644154
2002 | .1513077 .0436481 3.47 0.001 .0657589 .2368564
-------------+----------------------------------------------------------------
war |
cons | .119195 .0168612 7.07 0.000 .0861476 .1522424
P_EU | .0958858 .0216235 4.43 0.000 .0535044 .1382671
P_AR | -.553707 .0279206 -19.83 0.000 -.6084304 -.4989836
P_AM | .1690914 .0487248 3.47 0.001 .0735925 .2645902
PEG2 | -.1178207 .0749608 -1.57 0.116 -.2647412 .0290998
P_EG | .3540255 .0849243 4.17 0.000 .187577 .520474
P_ROW | .0525251 .0221894 2.37 0.018 .0090347 .0960156
EXPEND. | .0035048 .0118991 0.29 0.768 -.019817 .0268266
1998 | -.0030748 .0204287 -0.15 0.880 -.0431143 .0369647
1999 | -.0482197 .0299703 -1.61 0.108 -.1069603 .010521
2000 | -.0481562 .0357933 -1.35 0.178 -.1183097 .0219973
2001 | -.046912 .0251045 -1.87 0.062 -.0961159 .0022918
2002 | -.0358886 .0208516 -1.72 0.085 -.076757 .0049797
-------------+----------------------------------------------------------------
wam |
cons | .1602539 .0399383 4.01 0.000 .0819762 .2385316
P_EU | .0713634 .0510918 1.40 0.162 -.0287748 .1715015
P_AR | .1690914 .0487248 3.47 0.001 .0735925 .2645902
P_AM | -.7200637 .1233592 -5.84 0.000 -.9618433 -.4782841
PEG2 | -.1289412 .1724059 -0.75 0.455 -.4668506 .2089682
P_EG | .4534917 .1870206 2.42 0.015 .086938 .8200454
P_ROW | .1550585 .0493168 3.14 0.002 .0583994 .2517175
EXPEND. | .0380213 .0263817 1.44 0.150 -.0136859 .0897285
1998 | .0043274 .045778 0.09 0.925 -.0853958 .0940507
1999 | .0323758 .0668367 0.48 0.628 -.0986217 .1633733
2000 | .0251471 .0796049 0.32 0.752 -.1308756 .1811698
2001 | -.0330172 .0557606 -0.59 0.554 -.142306 .0762716
2002 | -.034965 .0460286 -0.76 0.447 -.1251794 .0552494
-------------+----------------------------------------------------------------
wrow |
cons | .2555329 .0371618 6.88 0.000 .1826971 .3283687
P_EU | .279955 .036762 7.62 0.000 .2079029 .3520071
P_AR | .0525251 .0221894 2.37 0.018 .0090347 .0960156
P_AM | .1550585 .0493168 3.14 0.002 .0583994 .2517175
PEG2 | .3008549 .1849825 1.63 0.104 -.0617042 .6634139
P_EG | -.1008876 .1940051 -0.52 0.603 -.4811306 .2793554
P_ROW | -.6875059 .0521394 -13.19 0.000 -.7896972 -.5853146
EXPEND. | -.060765 .0277485 -2.19 0.029 -.115151 -.006379
1998 | -.0393855 .0471193 -0.84 0.403 -.1317376 .0529666

135
 1999 | -.0453682 .0726183 -0.62 0.532 -.1876975 .096961
2000 | -.0917888 .0867443 -1.06 0.290 -.2618045 .0782269
2001 | .0558569 .0598429 0.93 0.351 -.061433 .1731468
2002 | -.0326008 .0490563 -0.66 0.506 -.1287495 .0635478
-------------+----------------------------------------------------------------
weg |
cons | .241286 .0272112 8.87 0.000 .1879531 .2946189
P_EU | .154182 .0347216 4.44 0.000 .086129 .2222351
P_AR | .2362048 .0369973 6.38 0.000 .1636914 .3087182
P_AM | .3245505 .0781579 4.15 0.000 .1713639 .4777371
PEG2 | -.5358683 .1152133 -4.65 0.000 -.7616821 -.3100544
P_EG | -.3790364 .1371531 -2.76 0.006 -.6478515 -.1102212
P_ROW | .1999673 .0357028 5.60 0.000 .1299911 .2699434
EXPEND. | .0153251 .0177464 0.86 0.388 -.0194571 .0501074
EXRT | -.0014692 .0013123 -1.12 0.263 -.0040412 .0011028
1998 | -.0231413 .0310164 -0.75 0.456 -.0839322 .0376497
1999 | -.0016895 .045452 -0.04 0.970 -.0907737 .0873948
2000 | .0315036 .0549819 0.57 0.567 -.0762589 .1392661
2001 | -.0327489 .0385468 -0.85 0.396 -.1082993 .0428015
2002 | -.0427854 .031913 -1.34 0.180 -.1053337 .0197629
------------------------------------------------------------------------------

Section 10. Wood pulp and cellulose

----------------------------------------------------------------------
Equation Obs Parms RMSE "R-sq" chi2 P
----------------------------------------------------------------------
weu 398 12 .0905792 0.9547 8667.705 0.0000
war 398 12 .0863275 0.9148 4324.776 0.0000
wam 398 12 .0478276 0.8783 3171.413 0.0000
wrow 398 12 .0769973 0.9199 4624.766 0.0000
weg 398 13 .0672172 0.8254 2316.23 0.0000
----------------------------------------------------------------------

------------------------------------------------------------------------------
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
weu |
cons | .2649252 .0133515 19.84 0.000 .2387568 .2910936
P_EU | -.5608661 .0150453 -37.28 0.000 -.5903544 -.5313778
P_AR | .1394299 .0104952 13.29 0.000 .1188597 .1600001
P_AM | .0990368 .0080625 12.28 0.000 .0832347 .114839
PEG2 | .1024042 .0233216 4.39 0.000 .0566948 .1481136
P_EG | .0627917 .024963 2.52 0.012 .013865 .1117184
P_ROW | .1572035 .0104299 15.07 0.000 .1367613 .1776457
EXPEND.| .0005750 .0009631 0.60 0.550 -1.31e-06 2.46e-06
1998 | .0012963 .0170317 0.08 0.939 -.0320851 .0346777
1999 | .009291 .0177351 0.52 0.600 -.0254692 .0440512
2000 | -.0221823 .0168448 -1.32 0.188 -.0551974 .0108328
2001 | -.0250249 .0161851 -1.55 0.122 -.0567472 .0066973
2002 | -.014578 .0164213 -0.89 0.375 -.0467631 .0176071
-------------+----------------------------------------------------------------
war |
cons | .1693875 .0123692 13.69 0.000 .1451443 .1936307
P_EU | .1394299 .0104952 13.29 0.000 .1188597 .1600001
P_AR | -.5121581 .0137332 -37.29 0.000 -.5390746 -.4852415
P_AM | .0949143 .0079157 11.99 0.000 .0793998 .1104288
PEG2 | .1148876 .0225272 5.10 0.000 .070735 .1590402
P_EG | .045404 .0242365 1.87 0.061 -.0020986 .0929066
P_ROW | .1175223 .0100061 11.75 0.000 .0979106 .1371339
EXPEND. | -.0071729 .0091009 -0.79 0.431 -.0250104 .0106645
1998 | .0202047 .0164369 1.23 0.219 -.012011 .0524203
1999 | .0171744 .0171158 1.00 0.316 -.0163719 .0507206
2000 | .0288915 .0163008 1.77 0.076 -.0030574 .0608404
2001 | .0109972 .0156754 0.70 0.483 -.019726 .0417205
2002 | .0370085 .0158821 2.33 0.020 .0058801 .0681369
-------------+----------------------------------------------------------------
wam |
cons | .1426745 .0073974 19.29 0.000 .1281759 .1571731
P_EU | .0990368 .0080625 12.28 0.000 .0832347 .114839
P_AR | .0949143 .0079157 11.99 0.000 .0793998 .1104288
P_AM | -.5444095 .0126015 -43.20 0.000 -.5691081 -.519711
PEG2 | .109824 .0128065 8.58 0.000 .0847237 .1349244
P_EG | .1420824 .0159681 8.90 0.000 .1107855 .1733792

136
 P_ROW | .098552 .0083383 11.82 0.000 .0822092 .1148947
EXPEND. | .0024649 .0052601 0.47 0.639 -.0078447 .0127745
1998 | .0030551 .0091645 0.33 0.739 -.0149069 .0210172
1999 | -.010872 .0095188 -1.14 0.253 -.0295285 .0077845
2000 | -.0013406 .0091124 -0.15 0.883 -.0192005 .0165193
2001 | -.0044246 .0087322 -0.51 0.612 -.0215393 .0126902
2002 | -.0136981 .0088335 -1.55 0.121 -.0310115 .0036153
-------------+----------------------------------------------------------------
wrow |
cons | .2121928 .01118 18.98 0.000 .1902804 .2341052
P_EU | .1572035 .0104299 15.07 0.000 .1367613 .1776457
P_AR | .1175223 .0100061 11.75 0.000 .0979106 .1371339
P_AM | .098552 .0083383 11.82 0.000 .0822092 .1148947
PEG2 | .0932017 .0201671 4.62 0.000 .053675 .1327285
P_EG | .0700236 .0219984 3.18 0.001 .0269074 .1131397
P_ROW | -.5365031 .0137403 -39.05 0.000 -.5634335 -.5095727
EXPEND. | -.0012722 .00828 -0.15 0.878 -.0175008 .0149564
1998 | -.0116714 .0146799 -0.80 0.427 -.0404434 .0171005
1999 | -.017802 .0152709 -1.17 0.244 -.0477324 .0121284
2000 | -.0361728 .0145591 -2.48 0.013 -.0647081 -.0076376
2001 | -.0028336 .0139571 -0.20 0.839 -.030189 .0245219
2002 | -.0172254 .0141093 -1.22 0.222 -.0448791 .0104283
-------------+----------------------------------------------------------------
weg |
cons | .21082 .0109786 19.20 0.000 .1893022 .2323377
P_EU | .1651959 .0116929 14.13 0.000 .1422782 .1881136
P_AR | .1602916 .0112202 14.29 0.000 .1383004 .1822829
P_AM | .2519064 .0128112 19.66 0.000 .2267968 .277016
PEG2 | -.4202876 .0180628 -23.27 0.000 -.45569 -.3848851
P_EG | -.3203317 .0244155 -13.12 0.000 -.3681852 -.2724781
P_ROW | .1632253 .0115126 14.18 0.000 .140661 .1857896
EXPEND. | .0053226 .0068067 0.78 0.434 -.0080183 .0186635
EXRT | -.0002131 .0004625 -0.46 0.645 -.0011196 .0006934
1998 | -.0124572 .0128192 -0.97 0.331 -.0375823 .0126679
1999 | .0030225 .0133151 0.23 0.820 -.0230747 .0291196
2000 | .0314727 .0127259 2.47 0.013 .0065303 .0564151
2001 | .0215494 .0121932 1.77 0.077 -.0023488 .0454475
2002 | .0091572 .0123341 0.74 0.458 -.0150171 .0333316
------------------------------------------------------------------------------

Section 11. Textiles

----------------------------------------------------------------------
Equation Obs Parms RMSE "R-sq" chi2 P
----------------------------------------------------------------------
weu 676 12 .1359539 0.8750 4923.622 0.0000
war 676 12 .0581352 0.8759 5014.73 0.0000
wam 676 12 .055104 0.8982 6679.872 0.0000
wrow 676 12 .0994001 0.9536 13972.20 0.0000
weg 676 13 .0745045 0.4628 1377.273 0.0000
----------------------------------------------------------------------

------------------------------------------------------------------------------
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
weu |
cons | .2808525 .0129845 21.63 0.000 .2554033 .3063017
P_EU | -.3556373 .0126474 -28.12 0.000 -.3804257 -.3308489
P_AR | .0763939 .0057345 13.32 0.000 .0651546 .0876332
P_AM | .0750508 .0054308 13.82 0.000 .0644066 .085695
PEG2 | -.009675 .0265149 -0.36 0.715 -.0616432 .0422933
P_EG | .0646769 .0259503 2.49 0.013 .0138152 .1155386
P_ROW | .1491906 .0068373 21.82 0.000 .1357897 .1625916
EXPEND.| -.0003570 .0040209 -0.09 0.929 -8.23e-07 7.52e-07
1998 | .0021093 .0162914 0.13 0.897 -.0298214 .0340399
1999 | .0133839 .0189015 0.71 0.479 -.0236625 .0504303
2000 | .0340057 .0203177 1.67 0.094 -.0058162 .0738276
2001 | .0297639 .0182157 1.63 0.102 -.0059381 .0654659
2002 | .0100658 .0166593 0.60 0.546 -.0225858 .0427174
-------------+----------------------------------------------------------------
war |
cons | .1507984 .0062464 24.14 0.000 .1385556 .1630411
P_EU | .0763939 .0057345 13.32 0.000 .0651546 .0876332
P_AR | -.3453966 .0069717 -49.54 0.000 -.3590608 -.3317324

137
 P_AM | .1107074 .0049626 22.31 0.000 .1009809 .1204339
PEG2 | .0560761 .0129543 4.33 0.000 .0306862 .0814661
P_EG | .0461608 .011621 3.97 0.000 .0233841 .0689375
P_ROW | .0560584 .0038767 14.46 0.000 .0484602 .0636566
EXPEND. | -.0092014 .0048385 -1.90 0.057 -.0186846 .0002818
1998 | -.0068392 .0072863 -0.94 0.348 -.0211201 .0074418
1999 | -.0083189 .0084497 -0.98 0.325 -.02488 .0082422
2000 | -.0102272 .0090539 -1.13 0.259 -.0279725 .0075181
2001 | -.0088596 .0081152 -1.09 0.275 -.0247651 .0070459
2002 | -.0133106 .0074657 -1.78 0.075 -.027943 .0013219
-------------+----------------------------------------------------------------
wam |
cons | .1402573 .0060052 23.36 0.000 .1284873 .1520272
P_EU | .0750508 .0054308 13.82 0.000 .0644066 .085695
P_AR | .1107074 .0049626 22.31 0.000 .1009809 .1204339
P_AM | -.414715 .0067894 -61.08 0.000 -.428022 -.4014079
PEG2 | .1051491 .0125449 8.38 0.000 .0805616 .1297365
P_EG | .0578176 .0110277 5.24 0.000 .0362036 .0794316
P_ROW | .0659901 .0036933 17.87 0.000 .0587513 .0732289
EXPEND. | -.0070564 .0046018 -1.53 0.125 -.0160758 .001963
1998 | .0231264 .0069045 3.35 0.001 .0095938 .0366591
1999 | .031009 .0079932 3.88 0.000 .0153425 .0466755
2000 | .0092782 .0085704 1.08 0.279 -.0075194 .0260758
2001 | .0063143 .0076849 0.82 0.411 -.0087477 .0213763
2002 | .0055814 .0070798 0.79 0.430 -.0082947 .0194575
-------------+----------------------------------------------------------------
wrow |
cons | .2737849 .0097532 28.07 0.000 .254669 .2929009
P_EU | .1491906 .0068373 21.82 0.000 .1357897 .1625916
P_AR | .0560584 .0038767 14.46 0.000 .0484602 .0636566
P_AM | .0659901 .0036933 17.87 0.000 .0587513 .0732289
PEG2 | -.0205875 .0198633 -1.04 0.300 -.0595189 .0183439
P_EG | .0752029 .01938 3.88 0.000 .0372188 .113187
P_ROW | -.3258546 .0067503 -48.27 0.000 -.339085 -.3126241
EXPEND. | .0295528 .0083483 3.54 0.000 .0131905 .0459152
1998 | -.0325921 .0121951 -2.67 0.008 -.0564941 -.0086901
1999 | -.0530929 .0140793 -3.77 0.000 -.0806879 -.025498
2000 | -.0382714 .0151572 -2.52 0.012 -.067979 -.0085639
2001 | -.0235509 .0135909 -1.73 0.083 -.0501885 .0030867
2002 | .0275334 .0124283 2.22 0.027 .0031745 .0518924
-------------+----------------------------------------------------------------
weg |
cons | .1543069 .0084733 18.21 0.000 .1376996 .1709143
P_EU | .0550019 .0073844 7.45 0.000 .0405288 .0694751
P_AR | .1022369 .0070628 14.48 0.000 .0883942 .1160797
P_AM | .1629667 .007492 21.75 0.000 .1482827 .1776506
PEG2 | -.1309831 .0179203 -7.31 0.000 -.1661064 -.0958599
P_EG | -.2438379 .0145789 -16.73 0.000 -.272412 -.2152638
P_ROW | .0546155 .0050548 10.80 0.000 .0447082 .0645228
EXPEND. | -.0132153 .0060023 -2.20 0.028 -.0249795 -.001451
EXRT | .0000127 .0001781 0.07 0.943 -.0003364 .0003618
1998 | .0141644 .0091094 1.55 0.120 -.0036897 .0320185
1999 | .0169639 .0105291 1.61 0.107 -.0036728 .0376006
2000 | .0051768 .0112793 0.46 0.646 -.0169303 .0272838
2001 | -.003683 .0101142 -0.36 0.716 -.0235064 .0161404
2002 | -.0299104 .0093615 -3.20 0.001 -.0482587 -.0115622
------------------------------------------------------------------------------

Section 12. Footwear

----------------------------------------------------------------------
Equation Obs Parms RMSE "R-sq" chi2 P
----------------------------------------------------------------------
weu 38 12 .0652275 0.9605 963.9617 0.0000
war 38 12 .0516867 0.8290 233.9698 0.0000
wam 38 12 .0462537 0.8931 456.2693 0.0000
wrow 38 12 .1002233 0.9693 1338.92 0.0000
weg 38 13 .0373526 0.4670 100.5402 0.0000
----------------------------------------------------------------------

138
------------------------------------------------------------------------------
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
weu |
cons | .2537184 .0307046 8.26 0.000 .1935384 .3138984
P_EU | -.3692159 .0277175 -13.32 0.000 -.4235411 -.3148907
P_AR | .0954049 .0186641 5.11 0.000 .058824 .1319858
P_AM | .0648618 .0150045 4.32 0.000 .0354536 .09427
PEG2 | -.1372485 .1116456 -1.23 0.219 -.3560698 .0815729
P_EG | .1840164 .1101557 1.67 0.095 -.0318848 .3999177
P_ROW | .1621813 .0215639 7.52 0.000 .1199168 .2044457
EXPEND.| .0000131 5.40e-06 2.42 0.015 2.49e-06 .0000237
1998 | -.010694 .0431164 -0.25 0.804 -.0952006 .0738126
1999 | -.0491819 .0431908 -1.14 0.255 -.1338343 .0354706
2000 | .0005876 .0424561 0.01 0.989 -.0826249 .0838001
2001 | -.0084282 .0356098 -0.24 0.813 -.0782222 .0613658
2002 | .0254925 .0316652 0.81 0.421 -.0365702 .0875553
-------------+----------------------------------------------------------------
war |
cons | .1172931 .025577 4.59 0.000 .0671631 .1674231
P_EU | .0954049 .0186641 5.11 0.000 .058824 .1319858
P_AR | -.3455879 .0304993 -11.33 0.000 -.4053655 -.2858103
P_AM | .141878 .020532 6.91 0.000 .101636 .1821199
PEG2 | .0102156 .10639 0.10 0.924 -.198305 .2187363
P_EG | .0615206 .1025024 0.60 0.548 -.1393804 .2624216
P_ROW | .0365688 .0195529 1.87 0.061 -.0017541 .0748917
EXPEND. | -.022942 .0246879 -0.93 0.353 -.0713294 .0254454
1998 | -.0070666 .0351501 -0.20 0.841 -.0759594 .0618263
1999 | .0281373 .0364964 0.77 0.441 -.0433943 .0996689
2000 | .0116817 .0378762 0.31 0.758 -.0625543 .0859177
2001 | .0336557 .0297659 1.13 0.258 -.0246843 .0919958
2002 | .0122016 .0260967 0.47 0.640 -.0389471 .0633502
-------------+----------------------------------------------------------------
wam |
cons | .1950294 .0223207 8.74 0.000 .1512816 .2387772
P_EU | .0648618 .0150045 4.32 0.000 .0354536 .09427
P_AR | .141878 .020532 6.91 0.000 .101636 .1821199
P_AM | -.3982736 .0241465 -16.49 0.000 -.4455999 -.3509473
PEG2 | -.2054075 .0938337 -2.19 0.029 -.3893181 -.0214968
P_EG | .3185424 .0933106 3.41 0.001 .1356569 .5014279
P_ROW | .0783989 .0158401 4.95 0.000 .0473529 .1094449
EXPEND. | -.0131738 .0216299 -0.61 0.542 -.0555675 .02922
1998 | -.0089214 .0306001 -0.29 0.771 -.0688965 .0510537
1999 | .0008654 .0317397 0.03 0.978 -.0613432 .063074
2000 | -.0780958 .0339221 -2.30 0.021 -.1445819 -.0116096
2001 | -.0479698 .0259123 -1.85 0.064 -.098757 .0028173
2002 | -.0736015 .0229947 -3.20 0.001 -.1186703 -.0285327
-------------+----------------------------------------------------------------
wrow |
cons | .292643 .0440706 6.64 0.000 .2062663 .3790198
P_EU | .1621813 .0215639 7.52 0.000 .1199168 .2044457
P_AR | .0365688 .0195529 1.87 0.061 -.0017541 .0748917
P_AM | .0783989 .0158401 4.95 0.000 .0473529 .1094449
PEG2 | .6127475 .1829695 3.35 0.001 .2541338 .9713612
P_EG | -.5849384 .1790265 -3.27 0.001 -.9358239 -.234053
P_ROW | -.3049581 .0364351 -8.37 0.000 -.3763695 -.2335466
EXPEND. | .0412618 .0437638 0.94 0.346 -.0445136 .1270373
1998 | .0263249 .0643278 0.41 0.682 -.0997552 .1524051
1999 | .0529468 .064195 0.82 0.409 -.0728731 .1787668
2000 | .0759559 .0674351 1.13 0.260 -.0562145 .2081264
2001 | .053535 .0527705 1.01 0.310 -.0498933 .1569634
2002 | .105006 .047238 2.22 0.026 .0124212 .1975908
-------------+----------------------------------------------------------------
weg |
cons | .1413161 .0231275 6.11 0.000 .095987 .1866451
P_EU | .046768 .0140316 3.33 0.001 .0192666 .0742693
P_AR | .0717362 .022396 3.20 0.001 .0278409 .1156316
P_AM | .1131349 .0228709 4.95 0.000 .0683088 .1579611
PEG2 | -.2999715 .0822814 -3.65 0.000 -.4612401 -.1387028
P_EG | .0405233 .0803075 0.50 0.614 -.1168764 .197923
P_ROW | .0278091 .014636 1.90 0.057 -.000877 .0564951
EXPEND. | -.0214324 .0185627 -1.15 0.248 -.0578146 .0149498
EXRT | -.0038923 .0022354 -1.74 0.082 -.0082736 .0004891
1998 | .0143803 .0265137 0.54 0.588 -.0375856 .0663462
1999 | -.0205453 .0274868 -0.75 0.455 -.0744185 .0333278
2000 | -.0097018 .0291579 -0.33 0.739 -.0668502 .0474467

139
 2001 | -.0338781 .0223417 -1.52 0.129 -.077667 .0099108
2002 | -.0601083 .0198362 -3.03 0.002 -.0989865 -.0212301
------------------------------------------------------------------------------

Section 13. Stone, plaster, cement

----------------------------------------------------------------------
Equation Obs Parms RMSE "R-sq" chi2 P
----------------------------------------------------------------------
weu 308 12 .1251394 0.8962 2844.99 0.0000
war 308 12 .0805693 0.9089 3002.526 0.0000
wam 308 12 .0532981 0.7136 1250.088 0.0000
wrow 308 12 .109917 0.9231 3767.081 0.0000
weg 308 13 .0904559 0.7391 1538.723 0.0000
----------------------------------------------------------------------

------------------------------------------------------------------------------
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
weu |
cons | .2960055 .0181117 16.34 0.000 .2605073 .3315037
P_EU | -.3015367 .0147672 -20.42 0.000 -.33048 -.2725934
P_AR | .1056072 .0084054 12.56 0.000 .0891328 .1220816
P_AM | .0402626 .0065666 6.13 0.000 .0273923 .0531328
PEG2 | .0897988 .0269149 3.34 0.001 .0370466 .1425509
P_EG | -.0507935 .0279639 -1.82 0.069 -.1056018 .0040147
P_ROW | .1166617 .0112909 10.33 0.000 .0945319 .1387915
EXPEND.| .0009413 .0014206 0.66 0.507 -1.84e-06 3.72e-06
1998 | -.0098637 .023069 -0.43 0.669 -.0550781 .0353507
1999 | -.023813 .0249493 -0.95 0.340 -.0727128 .0250867
2000 | -.0500467 .029262 -1.71 0.087 -.1073992 .0073057
2001 | -.0183177 .0251099 -0.73 0.466 -.0675321 .0308967
2002 | .0147064 .0243381 0.60 0.546 -.0329954 .0624082
-------------+----------------------------------------------------------------
war |
cons | .1720218 .0119961 14.34 0.000 .1485099 .1955336
P_EU | .1056072 .0084054 12.56 0.000 .0891328 .1220816
P_AR | -.3854745 .0102839 -37.48 0.000 -.4056307 -.3653184
P_AM | .0473451 .0068374 6.92 0.000 .033944 .0607462
PEG2 | .0287858 .0181633 1.58 0.113 -.0068137 .0643852
P_EG | .0665392 .0193032 3.45 0.001 .0287056 .1043728
P_ROW | .1371973 .0100873 13.60 0.000 .1174265 .1569681
EXPEND. | .0144538 .0103443 1.40 0.162 -.0058206 .0347282
1998 | -.0072591 .0153882 -0.47 0.637 -.0374195 .0229012
1999 | .0004261 .016596 0.03 0.980 -.0321016 .0329537
2000 | -.0116309 .0194472 -0.60 0.550 -.0497468 .026485
2001 | .0057242 .0167304 0.34 0.732 -.0270668 .0385152
2002 | .0017052 .0161345 0.11 0.916 -.0299178 .0333283
-------------+----------------------------------------------------------------
wam |
cons | .1093731 .0085869 12.74 0.000 .092543 .1262032
P_EU | .0402626 .0065666 6.13 0.000 .0273923 .0531328
P_AR | .0473451 .0068374 6.92 0.000 .033944 .0607462
P_AM | -.4503141 .0153242 -29.39 0.000 -.480349 -.4202793
PEG2 | .085805 .0127184 6.75 0.000 .0608775 .1107325
P_EG | .2116338 .015796 13.40 0.000 .1806743 .2425934
P_ROW | .0652676 .0092651 7.04 0.000 .0471083 .083427
EXPEND. | -.0064397 .006822 -0.94 0.345 -.0198107 .0069312
1998 | .0102084 .0103996 0.98 0.326 -.0101745 .0305912
1999 | -.0165048 .0112428 -1.47 0.142 -.0385403 .0055307
2000 | -.0018197 .0131647 -0.14 0.890 -.0276221 .0239828
2001 | -.0235888 .0113062 -2.09 0.037 -.0457484 -.0014291
2002 | -.0288125 .0109034 -2.64 0.008 -.0501827 -.0074423
-------------+----------------------------------------------------------------
wrow |
cons | .2485193 .0162142 15.33 0.000 .21674 .2802985
P_EU | .1166617 .0112909 10.33 0.000 .0945319 .1387915
P_AR | .1371973 .0100873 13.60 0.000 .1174265 .1569681
P_AM | .0652676 .0092651 7.04 0.000 .0471083 .083427
PEG2 | .121596 .0240691 5.05 0.000 .0744215 .1687706
P_EG | .014341 .0265867 0.54 0.590 -.0377679 .0664499
P_ROW | -.4550636 .018233 -24.96 0.000 -.4907996 -.4193275
EXPEND. | .0007258 .0139134 0.05 0.958 -.0265439 .0279955
1998 | -.0181473 .0205315 -0.88 0.377 -.0583883 .0220938

140
 1999 | .0204412 .0220813 0.93 0.355 -.0228373 .0637197
2000 | .0473599 .0258732 1.83 0.067 -.0033506 .0980705
2001 | .0420898 .0222519 1.89 0.059 -.0015231 .0857026
2002 | .0414809 .0215015 1.93 0.054 -.0006613 .0836231
-------------+----------------------------------------------------------------
weg |
cons | .1740804 .0137108 12.70 0.000 .1472078 .2009531
P_EU | .0390052 .0100507 3.88 0.000 .0193063 .0587042
P_AR | .0953249 .0093526 10.19 0.000 .0769941 .1136558
P_AM | .2974388 .0137244 21.67 0.000 .2705395 .3243381
PEG2 | -.3260411 .0199714 -16.33 0.000 -.3651843 -.2868979
P_EG | -.2416649 .0239796 -10.08 0.000 -.2886641 -.1946658
P_ROW | .135937 .0129143 10.53 0.000 .1106254 .1612486
EXPEND. | -.0098046 .0096488 -1.02 0.310 -.0287158 .0091066
EXRT | -.0002994 .0005933 -0.50 0.614 -.0014622 .0008633
1998 | .0255293 .016697 1.53 0.126 -.0071962 .0582548
1999 | .0204671 .0180599 1.13 0.257 -.0149297 .0558638
2000 | .0168829 .021131 0.80 0.424 -.0245331 .0582989
2001 | -.0059358 .0181493 -0.33 0.744 -.0415079 .0296362
2002 | -.0282857 .0175184 -1.61 0.106 -.062621 .0060497
------------------------------------------------------------------------------

Section 14. Pearls, precious stones

----------------------------------------------------------------------
Equation Obs Parms RMSE "R-sq" chi2 P
----------------------------------------------------------------------
weu 25 12 .0189627 0.9943 4561.744 0.0000
war 25 12 .0157616 0.9722 1259.19 0.0000
wam 25 12 .018449 0.9762 1156.395 0.0000
wrow 25 12 .0374407 0.9961 6750.465 0.0000
weg 25 13 .0182662 0.9664 920.6906 0.0000
----------------------------------------------------------------------

------------------------------------------------------------------------------
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
weu |
cons | .2204828 .0138398 15.93 0.000 .1933572 .2476083
P_EU | -.3724191 .016672 -22.34 0.000 -.4050955 -.3397427
P_AR | .0584279 .0103261 5.66 0.000 .038189 .0786668
P_AM | .1267267 .0135205 9.37 0.000 .1002269 .1532264
PEG2 | .1058503 .0213569 4.96 0.000 .0639915 .1477091
P_EG | -.0071482 .0259834 -0.28 0.783 -.0580747 .0437783
P_ROW | .0885624 .0086273 10.27 0.000 .0716533 .1054716
EXPEND.| .0020922 .0022556 0.93 0.354 -2.33e-06 6.50e-06
1998 | -.0401119 .0112502 -3.57 0.000 -.0621619 -.0180619
1999 | -.0489454 .0180619 -2.71 0.007 -.0843461 -.0135446
2000 | -.0133477 .021884 -0.61 0.542 -.0562395 .029544
2001 | -.032844 .0167344 -1.96 0.050 -.0656428 -.0000452
2002 | -.0086623 .012611 -0.69 0.492 -.0333795 .0160548
-------------+----------------------------------------------------------------
war |
cons | .1119208 .0103893 10.77 0.000 .0915582 .1322835
P_EU | .0584279 .0103261 5.66 0.000 .038189 .0786668
P_AR | -.2625073 .010306 -25.47 0.000 -.2827068 -.2423079
P_AM | .0804052 .0103819 7.74 0.000 .0600571 .1007533
PEG2 | .0443627 .0185475 2.39 0.017 .0080103 .0807151
P_EG | .0367954 .0230467 1.60 0.110 -.0083753 .0819662
P_ROW | .0425161 .007314 5.81 0.000 .0281809 .0568513
EXPEND. | .0026924 .0065038 0.41 0.679 -.0100547 .0154395
1998 | .014805 .0094734 1.56 0.118 -.0037624 .0333725
1999 | .0286638 .0144416 1.98 0.047 .0003588 .0569689
2000 | .0402715 .0185224 2.17 0.030 .0039684 .0765747
2001 | .0188864 .0145233 1.30 0.193 -.0095789 .0473516
2002 | .0038307 .0106546 0.36 0.719 -.017052 .0247134
-------------+----------------------------------------------------------------
wam |
cons | .1747872 .0116391 15.02 0.000 .151975 .1975994
P_EU | .1267267 .0135205 9.37 0.000 .1002269 .1532264
P_AR | .0804052 .0103819 7.74 0.000 .0600571 .1007533
P_AM | -.4190166 .0193936 -21.61 0.000 -.4570274 -.3810058
PEG2 | .0602666 .0211759 2.85 0.004 .0187627 .1017705
P_EG | .0930314 .0266805 3.49 0.000 .0407385 .1453243

141
 P_ROW | .0585868 .0084265 6.95 0.000 .0420711 .0751024
EXPEND. | -.0077731 .0077097 -1.01 0.313 -.0228838 .0073376
1998 | -.006475 .010951 -0.59 0.554 -.0279386 .0149887
1999 | .0306256 .0169093 1.81 0.070 -.002516 .0637673
2000 | -.0230462 .0214304 -1.08 0.282 -.0650489 .0189565
2001 | .0208987 .016491 1.27 0.205 -.011423 .0532205
2002 | -.018344 .0121911 -1.50 0.132 -.042238 .0055501
-------------+----------------------------------------------------------------
wrow |
cons | .3386028 .0210804 16.06 0.000 .297286 .3799195
P_EU | .0885624 .0086273 10.27 0.000 .0716533 .1054716
P_AR | .0425161 .007314 5.81 0.000 .0281809 .0568513
P_AM | .0585868 .0084265 6.95 0.000 .0420711 .0751024
PEG2 | .1845289 .0424841 4.34 0.000 .1012617 .2677961
P_EG | -.1390171 .0450805 -3.08 0.002 -.2273733 -.050661
P_ROW | -.235177 .0171693 -13.70 0.000 -.2688282 -.2015259
EXPEND. | .0257865 .0151506 1.70 0.089 -.0039082 .0554812
1998 | .0080717 .0218751 0.37 0.712 -.0348027 .0509462
1999 | -.0424624 .0309344 -1.37 0.170 -.1030927 .0181679
2000 | -.0375867 .0422309 -0.89 0.373 -.1203578 .0451844
2001 | -.0435042 .0312643 -1.39 0.164 -.1047811 .0177727
2002 | .0260688 .0246099 1.06 0.289 -.0221657 .0743032
-------------+----------------------------------------------------------------
weg |
cons | .1542065 .0141626 10.89 0.000 .1264483 .1819647
P_EU | .0987021 .0119004 8.29 0.000 .0753778 .1220264
P_AR | .0811581 .0114337 7.10 0.000 .0587485 .1035677
P_AM | .1532979 .0135693 11.30 0.000 .1267025 .1798934
PEG2 | -.3954962 .0211152 -18.73 0.000 -.4368812 -.3541113
P_EG | .0168263 .0344152 0.49 0.625 -.0506263 .0842788
P_ROW | .0455117 .0085292 5.34 0.000 .0287949 .0622286
EXPEND. | -.0213892 .0077518 -2.76 0.006 -.0365824 -.006196
EXRT | -.0008971 .0010711 -0.84 0.402 -.0029964 .0012022
1998 | .0259059 .0107827 2.40 0.016 .0047722 .0470396
1999 | .0357697 .0165722 2.16 0.031 .0032887 .0682506
2000 | .0368283 .021338 1.73 0.084 -.0049935 .07865
2001 | .040463 .0169414 2.39 0.017 .0072586 .0736675
2002 | .0001781 .0121301 0.01 0.988 -.0235964 .0239526
------------------------------------------------------------------------------

Section 15. Base metals

----------------------------------------------------------------------
Equation Obs Parms RMSE "R-sq" chi2 P
----------------------------------------------------------------------
weu 255 12 .1087355 0.9387 4026.378 0.0000
war 255 12 .0556751 0.8442 1483.232 0.0000
wam 255 12 .0542863 0.8576 1715.706 0.0000
wrow 255 12 .0968743 0.9332 3600.413 0.0000
weg 255 13 .0876042 0.8122 1345.797 0.0000
----------------------------------------------------------------------

------------------------------------------------------------------------------
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
weu |
cons | .2673522 .0181448 14.73 0.000 .2317891 .3029153
P_EU | -.517386 .0209795 -24.66 0.000 -.5585051 -.4762669
P_AR | .1070025 .0110843 9.65 0.000 .0852777 .1287272
P_AM | .1024892 .0111362 9.20 0.000 .0806627 .1243157
PEG2 | .0908948 .0307274 2.96 0.003 .0306702 .1511193
P_EG | .0247954 .0329516 0.75 0.452 -.0397886 .0893793
P_ROW | .1922042 .0140768 13.65 0.000 .1646141 .2197943
EXPEND.| .0001344 .0084770 0.16 0.874 -1.53e-06 1.79e-06
1998 | .0192952 .0236248 0.82 0.414 -.0270087 .065599
1999 | .011498 .0249963 0.46 0.646 -.0374938 .0604898
2000 | .0135964 .0287724 0.47 0.637 -.0427965 .0699893
2001 | -.0037745 .025064 -0.15 0.880 -.052899 .0453501
2002 | .016242 .0240283 0.68 0.499 -.0308527 .0633366
-------------+----------------------------------------------------------------
war |
cons | .1338939 .0100082 13.38 0.000 .1142781 .1535097
P_EU | .1070025 .0110843 9.65 0.000 .0852777 .1287272

142
 P_AR | -.4084939 .0146011 -27.98 0.000 -.4371115 -.3798762
P_AM | .101765 .0115443 8.82 0.000 .0791384 .1243915
PEG2 | .0457356 .0163853 2.79 0.005 .013621 .0778501
P_EG | .0845469 .0199983 4.23 0.000 .0453508 .1237429
P_ROW | .069444 .0100219 6.93 0.000 .0498014 .0890866
EXPEND. | .0163016 .0081987 1.99 0.047 .0002324 .0323707
1998 | -.015255 .0125076 -1.22 0.223 -.0397695 .0092595
1999 | -.0135223 .0133752 -1.01 0.312 -.0397372 .0126927
2000 | -.0240059 .0153168 -1.57 0.117 -.0540264 .0060145
2001 | -.0167245 .0133785 -1.25 0.211 -.0429459 .0094969
2002 | -.0165158 .0128337 -1.29 0.198 -.0416693 .0086377
-------------+----------------------------------------------------------------
wam |
cons | .155128 .009906 15.66 0.000 .1357126 .1745435
P_EU | .1024892 .0111362 9.20 0.000 .0806627 .1243157
P_AR | .101765 .0115443 8.82 0.000 .0791384 .1243915
P_AM | -.5699227 .0177583 -32.09 0.000 -.6047283 -.5351171
PEG2 | .0880989 .0158337 5.56 0.000 .0570653 .1191324
P_EG | .1731345 .0200797 8.62 0.000 .1337791 .21249
P_ROW | .1044351 .0099888 10.46 0.000 .0848574 .1240128
EXPEND. | -.0014425 .0075478 -0.19 0.848 -.0162358 .0133509
1998 | -.0217689 .0120102 -1.81 0.070 -.0453084 .0017707
1999 | .0073779 .012912 0.57 0.568 -.0179292 .032685
2000 | -.0096745 .0148084 -0.65 0.514 -.0386985 .0193495
2001 | -.020326 .0129063 -1.57 0.115 -.0456219 .0049698
2002 | -.0081117 .0123954 -0.65 0.513 -.0324063 .0161828
-------------+----------------------------------------------------------------
wrow |
cons | .2131483 .0161671 13.18 0.000 .1814614 .2448352
P_EU | .1922042 .0140768 13.65 0.000 .1646141 .2197943
P_AR | .069444 .0100219 6.93 0.000 .0498014 .0890866
P_AM | .1044351 .0099888 10.46 0.000 .0848574 .1240128
PEG2 | .100869 .0276338 3.65 0.000 .0467076 .1550303
P_EG | .0807558 .0296856 2.72 0.007 .0225731 .1389385
P_ROW | -.5477082 .0172371 -31.77 0.000 -.5814922 -.5139241
EXPEND. | -.0178986 .0128726 -1.39 0.164 -.0431284 .0073311
1998 | .03081 .0212842 1.45 0.148 -.0109063 .0725263
1999 | -.0096831 .0224891 -0.43 0.667 -.053761 .0343947
2000 | -.0327031 .0258924 -1.26 0.207 -.0834514 .0180451
2001 | .0094039 .0226007 0.42 0.677 -.0348926 .0537003
2002 | .0078864 .0216232 0.36 0.715 -.0344943 .050267
-------------+----------------------------------------------------------------
weg |
cons | .2304776 .0153812 14.98 0.000 .2003311 .2606241
P_EU | .1156901 .0170772 6.77 0.000 .0822195 .1491608
P_AR | .1302824 .0151765 8.58 0.000 .1005371 .1600278
P_AM | .2612334 .0165174 15.82 0.000 .2288599 .2936069
PEG2 | -.3256243 .0255003 -12.77 0.000 -.3756039 -.2756447
P_EG | -.3632065 .0330672 -10.98 0.000 -.4280171 -.2983959
P_ROW | .1816248 .0152941 11.88 0.000 .1516489 .2116007
EXPEND. | .0027261 .011051 0.25 0.805 -.0189335 .0243858
EXRT | -.0000449 .0003744 -0.12 0.905 -.0007786 .0006889
1998 | -.0129666 .019193 -0.68 0.499 -.0505842 .0246509
1999 | .0044836 .0206194 0.22 0.828 -.0359297 .0448969
2000 | .0529104 .0235352 2.25 0.025 .0067823 .0990384
2001 | .0314423 .0206503 1.52 0.128 -.0090316 .0719163
2002 | .0006154 .0198157 0.03 0.975 -.0382227 .0394536
------------------------------------------------------------------------------

Section 16. Machinery, mechanical appliances

----------------------------------------------------------------------
Equation Obs Parms RMSE "R-sq" chi2 P
----------------------------------------------------------------------
weu 310 12 .0958659 0.9507 6126.074 0.0000
war 310 12 .0541102 0.8944 2684.878 0.0000
wam 310 12 .0480101 0.8938 2648.244 0.0000
wrow 310 12 .1216029 0.9287 4113.019 0.0000
weg 310 13 .0758671 0.6929 1199.666 0.0000
----------------------------------------------------------------------

143
------------------------------------------------------------------------------
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
weu |
cons | .2854036 .0136115 20.97 0.000 .2587254 .3120817
P_EU | -.3051586 .0084587 -36.08 0.000 -.3217375 -.2885798
P_AR | .0668037 .0050747 13.16 0.000 .0568575 .0767499
P_AM | .0555482 .0046282 12.00 0.000 .0464771 .0646194
PEG2 | .0831523 .0204662 4.06 0.000 .0430394 .1232652
P_EG | -.00782 .0215019 -0.36 0.716 -.049963 .034323
P_ROW | .1074744 .0054679 19.66 0.000 .0967576 .1181912
EXPEND.| .0001752 .0002897 0.61 0.544 -3.91e-07 7.41e-07
1998 | -.0278573 .0181843 -1.53 0.126 -.0634978 .0077832
1999 | -.0181657 .0216614 -0.84 0.402 -.0606213 .02429
2000 | -.0216628 .0211004 -1.03 0.305 -.0630187 .0196932
2001 | -.0283734 .0189436 -1.50 0.134 -.0655022 .0087553
2002 | -.0089384 .0177037 -0.50 0.614 -.0436371 .0257602
-------------+----------------------------------------------------------------
war |
cons | .1399813 .0082172 17.04 0.000 .1238759 .1560867
P_EU | .0668037 .0050747 13.16 0.000 .0568575 .0767499
P_AR | -.313689 .0083463 -37.58 0.000 -.3300474 -.2973306
P_AM | .0650964 .0057497 11.32 0.000 .0538272 .0763656
PEG2 | .0548682 .0119804 4.58 0.000 .0313871 .0783494
P_EG | .0751731 .0141846 5.30 0.000 .0473717 .1029744
P_ROW | .0517475 .0036835 14.05 0.000 .0445279 .0589671
EXPEND. | -.0107673 .0068394 -1.57 0.115 -.0241724 .0026377
1998 | .0208821 .0106487 1.96 0.050 .0000112 .0417531
1999 | .0114992 .012673 0.91 0.364 -.0133394 .0363378
2000 | .0202138 .0124362 1.63 0.104 -.0041608 .0445884
2001 | -.0042419 .0111362 -0.38 0.703 -.0260684 .0175846
2002 | -.0045852 .0103873 -0.44 0.659 -.024944 .0157736
-------------+----------------------------------------------------------------
wam |
cons | .1400606 .0074283 18.85 0.000 .1255013 .1546198
P_EU | .0555482 .0046282 12.00 0.000 .0464771 .0646194
P_AR | .0650964 .0057497 11.32 0.000 .0538272 .0763656
P_AM | -.2890723 .0074248 -38.93 0.000 -.3036247 -.27452
PEG2 | .0369229 .0107872 3.42 0.001 .0157803 .0580655
P_EG | .0939159 .0130679 7.19 0.000 .0683033 .1195286
P_ROW | .0375888 .0033203 11.32 0.000 .0310812 .0440965
EXPEND. | -.0095827 .006189 -1.55 0.122 -.021713 .0025475
1998 | .0039521 .0096128 0.41 0.681 -.0148886 .0227929
1999 | -.0148247 .0114522 -1.29 0.195 -.0372706 .0076213
2000 | .0058442 .0112091 0.52 0.602 -.0161251 .0278136
2001 | -.0111346 .010027 -1.11 0.267 -.0307872 .0085181
2002 | -.0161316 .0093593 -1.72 0.085 -.0344755 .0022124
-------------+----------------------------------------------------------------
wrow |
cons | .2715971 .0167202 16.24 0.000 .2388261 .3043682
P_EU | .1074744 .0054679 19.66 0.000 .0967576 .1181912
P_AR | .0517475 .0036835 14.05 0.000 .0445279 .0589671
P_AM | .0375888 .0033203 11.32 0.000 .0310812 .0440965
PEG2 | .1145227 .0260839 4.39 0.000 .0633991 .1656462
P_EG | -.0684962 .0262923 -2.61 0.009 -.1200282 -.0169642
P_ROW | -.2428372 .0075605 -32.12 0.000 -.2576555 -.2280189
EXPEND. | .0461335 .0135067 3.42 0.001 .0196608 .0726062
1998 | -.0396038 .02296 -1.72 0.085 -.0846045 .005397
1999 | -.0080442 .0275252 -0.29 0.770 -.0619926 .0459041
2000 | -.0618718 .0267746 -2.31 0.021 -.1143491 -.0093946
2001 | .0147902 .0240595 0.61 0.539 -.0323655 .0619459
2002 | .0241362 .0226203 1.07 0.286 -.0201987 .0684712
-------------+----------------------------------------------------------------
weg |
cons | .1629574 .0112747 14.45 0.000 .1408594 .1850554
P_EU | .0753323 .0071602 10.52 0.000 .0612985 .089366
P_AR | .1300413 .0089048 14.60 0.000 .1125882 .1474944
P_AM | .1308388 .0082545 15.85 0.000 .1146602 .1470174
PEG2 | -.289471 .0159836 -18.11 0.000 -.3207983 -.2581437
P_EG | -.092768 .0208802 -4.44 0.000 -.1336924 -.0518436
P_ROW | .0460265 .0050115 9.18 0.000 .0362042 .0558488
EXPEND. | -.0259861 .0088232 -2.95 0.003 -.0432793 -.0086929
EXRT | -.0000667 .0001344 -0.50 0.620 -.0003301 .0001967
1998 | .0427732 .0142447 3.00 0.003 .0148541 .0706923
1999 | .0298034 .0170103 1.75 0.080 -.0035361 .0631429
2000 | .0577108 .0167585 3.44 0.001 .0248647 .0905568

144
 2001 | .0290337 .0149497 1.94 0.052 -.0002671 .0583346
2002 | .0057083 .0138611 0.41 0.680 -.021459 .0328755
------------------------------------------------------------------------------

Section 17. Vehicles, aircrafts

----------------------------------------------------------------------
Equation Obs Parms RMSE "R-sq" chi2 P
----------------------------------------------------------------------
weu 38 12 .0860156 0.9253 609.7196 0.0000
war 38 12 .0355598 0.9022 506.1495 0.0000
wam 38 12 .026071 0.9402 394.535 0.0000
wrow 38 12 .0783759 0.9802 1970.827 0.0000
weg 38 13 .0470696 0.6965 222.3387 0.0000
----------------------------------------------------------------------

------------------------------------------------------------------------------
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
weu |
cons | .357755 .0357464 10.01 0.000 .2876934 .4278166
P_EU | -.3287763 .0496645 -6.62 0.000 -.4261169 -.2314357
P_AR | .0531496 .022174 2.40 0.017 .0096894 .0966098
P_AM | .0765148 .0220506 3.47 0.001 .0332965 .1197331
PEG2 | .0348027 .1142956 0.30 0.761 -.1892125 .258818
P_EG | -.0658715 .1197232 -0.55 0.582 -.3005246 .1687816
P_ROW | .2301806 .0300493 7.66 0.000 .1712851 .2890762
EXPEND.| .0007720 .0025906 0.30 0.766 -4.30e-06 5.85e-06
1998 | -.0219356 .0419417 -0.52 0.601 -.1041398 .0602686
1999 | -.0087584 .0842986 -0.10 0.917 -.1739807 .1564639
2000 | .0124796 .0529284 0.24 0.814 -.0912583 .1162174
2001 | -.0313501 .06538 -0.48 0.632 -.1594927 .0967924
2002 | -.0551882 .0431321 -1.28 0.201 -.1397254 .0293491
-------------+----------------------------------------------------------------
war |
cons | .1260927 .0190793 6.61 0.000 .088698 .1634874
P_EU | .0531496 .022174 2.40 0.017 .0096894 .0966098
P_AR | -.363803 .0243742 -14.93 0.000 -.4115755 -.3160304
P_AM | .0839799 .0166602 5.04 0.000 .0513265 .1166332
PEG2 | -.0330428 .0532355 -0.62 0.535 -.1373825 .071297
P_EG | .2104698 .059862 3.52 0.000 .0931424 .3277972
P_ROW | .0492464 .0191406 2.57 0.010 .0117315 .0867614
EXPEND. | .0285925 .0121904 2.35 0.019 .0046997 .0524853
1998 | .0144691 .0188173 0.77 0.442 -.0224122 .0513504
1999 | -.0137595 .0381217 -0.36 0.718 -.0884767 .0609577
2000 | -.0193048 .023765 -0.81 0.417 -.0658833 .0272737
2001 | -.0464315 .0299202 -1.55 0.121 -.105074 .012211
2002 | -.0250313 .0192527 -1.30 0.194 -.062766 .0127034
-------------+----------------------------------------------------------------
wam |
cons | .1079223 .0179375 6.02 0.000 .0727655 .1430791
P_EU | .0765148 .0220506 3.47 0.001 .0332965 .1197331
P_AR | .0839799 .0166602 5.04 0.000 .0513265 .1166332
P_AM | -.3472579 .025442 -13.65 0.000 -.3971233 -.2973925
PEG2 | .0009963 .0531828 0.02 0.985 -.1032401 .1052327
P_EG | .1607141 .0583188 2.76 0.006 .0464113 .2750168
P_ROW | .0250529 .0193961 1.29 0.196 -.0129627 .0630685
EXPEND. | .0036122 .0141779 0.25 0.799 -.0241759 .0314003
1998 | .0235388 .0188725 1.25 0.212 -.0134506 .0605282
1999 | .0250151 .0384285 0.65 0.515 -.0503034 .1003335
2000 | .0026147 .0238231 0.11 0.913 -.0440777 .049307
2001 | -.0189969 .0304091 -0.62 0.532 -.0785976 .0406039
2002 | -.0320232 .0193927 -1.65 0.099 -.0700322 .0059857
-------------+----------------------------------------------------------------
wrow |
cons | .2912417 .0325472 8.95 0.000 .2274504 .355033
P_EU | .2301806 .0300493 7.66 0.000 .1712851 .2890762
P_AR | .0492464 .0191406 2.57 0.010 .0117315 .0867614
P_AM | .0250529 .0193961 1.29 0.196 -.0129627 .0630685
PEG2 | .3506651 .1127711 3.11 0.002 .1296378 .5716923
P_EG | -.2827601 .1185183 -2.39 0.017 -.5150516 -.0504685
P_ROW | -.372385 .040681 -9.15 0.000 -.4521182 -.2926518
EXPEND. | -.0505264 .0286643 -1.76 0.078 -.1067073 .0056545
1998 | -.0367882 .0400817 -0.92 0.359 -.1153468 .0417705

145
 1999 | .0249448 .0815787 0.31 0.760 -.1349465 .1848361
2000 | .040587 .0506827 0.80 0.423 -.0587493 .1399233
2001 | .1188246 .064453 1.84 0.065 -.0075011 .2451502
2002 | .1188164 .0407632 2.91 0.004 .0389221 .1987107
-------------+----------------------------------------------------------------
weg |
cons | .1169883 .0253413 4.62 0.000 .0673202 .1666564
P_EU | -.0310688 .0291108 -1.07 0.286 -.0881249 .0259873
P_AR | .177427 .0269693 6.58 0.000 .1245682 .2302859
P_AM | .1617103 .0214202 7.55 0.000 .1197275 .2036932
PEG2 | -.3535895 .0666636 -5.30 0.000 -.4842479 -.2229312
P_EG | -.0223841 .077293 -0.29 0.772 -.1738755 .1291074
P_ROW | .067905 .0228333 2.97 0.003 .0231525 .1126575
EXPEND. | .0177581 .0130967 1.36 0.175 -.007911 .0434271
EXRT | -.0003109 .0011137 -0.28 0.780 -.0024937 .0018719
1998 | .0215837 .0239047 0.90 0.367 -.0252688 .0684361
1999 | -.0262645 .0482545 -0.54 0.586 -.1208416 .0683127
2000 | -.0354529 .0301578 -1.18 0.240 -.094561 .0236553
2001 | -.0223292 .0376528 -0.59 0.553 -.0961274 .051469
2002 | -.005566 .024477 -0.23 0.820 -.05354 .042408
------------------------------------------------------------------------------

Section 18. Optical, photographical products

----------------------------------------------------------------------
Equation Obs Parms RMSE "R-sq" chi2 P
----------------------------------------------------------------------
weu 36 12 .0550117 0.9790 1623.077 0.0000
war 36 12 .0212646 0.9167 908.6968 0.0000
wam 36 12 .0398332 0.9630 1721.122 0.0000
wrow 36 12 .0992245 0.9601 974.478 0.0000
weg 36 13 .0452414 0.8326 299.5461 0.0000
----------------------------------------------------------------------

------------------------------------------------------------------------------
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
weu |
cons | .2108642 .0242028 8.71 0.000 .1634276 .2583008
P_EU | -.2873579 .0164395 -17.48 0.000 -.3195788 -.2551371
P_AR | .0393316 .0059196 6.64 0.000 .0277294 .0509338
P_AM | .0759884 .0102758 7.39 0.000 .0558482 .0961286
PEG2 | .0545701 .0542082 1.01 0.314 -.051676 .1608161
P_EG | .0165661 .051883 0.32 0.750 -.0851226 .1182548
P_ROW | .1009017 .0146183 6.90 0.000 .0722503 .1295531
EXPEND.| .0028060 0.001750 1.60 0.110 -6.33e-07 6.24e-06
1998 | .0158371 .0319743 0.50 0.620 -.0468314 .0785056
1999 | -.0567322 .0508763 -1.12 0.265 -.1564479 .0429835
2000 | -.0228406 .032562 -0.70 0.483 -.0866609 .0409798
2001 | .0078487 .0356669 0.22 0.826 -.0620572 .0777546
2002 | .0339778 .0338669 1.00 0.316 -.0324001 .1003557
-------------+----------------------------------------------------------------
war |
cons | .1209701 .0111465 10.85 0.000 .0991234 .1428169
P_EU | .0393316 .0059196 6.64 0.000 .0277294 .0509338
P_AR | -.2499852 .0099444 -25.14 0.000 -.2694759 -.2304946
P_AM | .0527748 .0069816 7.56 0.000 .0390911 .0664586
PEG2 | .0397547 .0223294 1.78 0.075 -.0040101 .0835196
P_EG | .0581865 .0207298 2.81 0.005 .0175568 .0988161
P_ROW | .0599376 .006727 8.91 0.000 .0467529 .0731223
EXPEND. | -.0172118 .0071903 -2.39 0.017 -.0313046 -.0031191
1998 | .0261945 .0130334 2.01 0.044 .0006495 .0517395
1999 | .042046 .0210439 2.00 0.046 .0008007 .0832913
2000 | .01504 .0141375 1.06 0.287 -.012669 .042749
2001 | -.0036059 .0144823 -0.25 0.803 -.0319906 .0247788
2002 | -.025555 .0139182 -1.84 0.066 -.0528342 .0017243
-------------+----------------------------------------------------------------
wam |
cons | .1895489 .0196288 9.66 0.000 .1510771 .2280207
P_EU | .0759884 .0102758 7.39 0.000 .0558482 .0961286
P_AR | .0527748 .0069816 7.56 0.000 .0390911 .0664586
P_AM | -.3493119 .0138722 -25.18 0.000 -.3765009 -.3221229
PEG2 | .0327321 .039916 0.82 0.412 -.0455018 .1109659
P_EG | .099591 .0376561 2.64 0.008 .0257865 .1733955

146
 P_ROW | .0882256 .0122749 7.19 0.000 .0641672 .112284
EXPEND. | -.0187818 .0131491 -1.43 0.153 -.0445535 .00699
1998 | .0232111 .0239114 0.97 0.332 -.0236544 .0700767
1999 | -.1340252 .0391114 -3.43 0.001 -.2106821 -.0573683
2000 | -.0050599 .0252952 -0.20 0.841 -.0546376 .0445178
2001 | -.0164609 .0263102 -0.63 0.532 -.068028 .0351062
2002 | -.0205727 .0252444 -0.81 0.415 -.0700507 .0289053
-------------+----------------------------------------------------------------
wrow |
cons | .2192638 .0386002 5.68 0.000 .1436089 .2949188
P_EU | .1009017 .0146183 6.90 0.000 .0722503 .1295531
P_AR | .0599376 .006727 8.91 0.000 .0467529 .0731223
P_AM | .0882256 .0122749 7.19 0.000 .0641672 .112284
PEG2 | -.004692 .0882456 -0.05 0.958 -.1776501 .1682661
P_EG | .1208852 .0867525 1.39 0.163 -.0491466 .290917
P_ROW | -.3652581 .0256302 -14.25 0.000 -.4154923 -.3150239
EXPEND. | .0901463 .0271043 3.33 0.001 .0370228 .1432698
1998 | -.1097982 .0550053 -2.00 0.046 -.2176066 -.0019897
1999 | .0319336 .0874635 0.37 0.715 -.1394918 .2033589
2000 | -.013246 .0573566 -0.23 0.817 -.1256628 .0991708
2001 | -.002645 .0605591 -0.04 0.965 -.1213386 .1160486
2002 | .0473853 .0576397 0.82 0.411 -.0655865 .160357
-------------+----------------------------------------------------------------
weg |
cons | .2593529 .0279867 9.27 0.000 .2045001 .3142058
P_EU | .0711362 .0154875 4.59 0.000 .0407812 .1014911
P_AR | .0979412 .0118637 8.26 0.000 .0746888 .1211936
P_AM | .1323231 .0185659 7.13 0.000 .0959346 .1687116
PEG2 | -.1196463 .0504085 -2.37 0.018 -.2184452 -.0208474
P_EG | -.2979474 .0427217 -6.97 0.000 -.3816803 -.2142145
P_ROW | .1161932 .0161422 7.20 0.000 .0845552 .1478313
EXPEND. | -.0580172 .0144393 -4.02 0.000 -.0863177 -.0297166
EXRT | -.0010569 .0007721 -1.37 0.171 -.0025702 .0004564
1998 | .0466865 .0269598 1.73 0.083 -.0061538 .0995268
1999 | .1213699 .0438585 2.77 0.006 .0354089 .207331
2000 | .0277042 .0284962 0.97 0.331 -.0281474 .0835558
2001 | .0170857 .0298011 0.57 0.566 -.0413234 .0754948
2002 | -.031114 .0295645 -1.05 0.293 -.0890594 .0268315
------------------------------------------------------------------------------

Section 19. Arms and ammunition. Not enough observations

Section 20. Miscellaneous manufactured articles

----------------------------------------------------------------------
Equation Obs Parms RMSE "R-sq" chi2 P
----------------------------------------------------------------------
weu 498 12 .1123724 0.9421 8349.743 0.0000
war 498 12 .0557276 0.8680 3162.037 0.0000
wam 498 12 .0502472 0.8153 2340.573 0.0000
wrow 498 12 .0953448 0.9383 7811.445 0.0000
weg 498 13 .0908292 0.4853 1185.662 0.0000
----------------------------------------------------------------------

------------------------------------------------------------------------------
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
weu |
cons | .3335098 .0132586 25.15 0.000 .3075235 .3594962
P_EU | -.2607674 .0091983 -28.35 0.000 -.2787958 -.242739
P_AR | .0490712 .0046618 10.53 0.000 .0399343 .0582082
P_AM | .0316361 .0042298 7.48 0.000 .0233459 .0399263
PEG2 | .1302697 .0319324 4.08 0.000 .0676833 .1928561
P_EG | -.097575 .0322081 -3.03 0.002 -.1607018 -.0344483
P_ROW | .1473654 .0063478 23.22 0.000 .134924 .1598068
EXPEND.| .0002381 .0005408 0.44 0.659 -8.20e-07 1.30e-06
1998 | .0001831 .016996 0.01 0.991 -.0331284 .0334946
1999 | .0166863 .0193941 0.86 0.390 -.0213255 .0546981
2000 | -.0009936 .0202981 -0.05 0.961 -.0407772 .0387901
2001 | .0037214 .0185069 0.20 0.841 -.0325514 .0399942

147
 2002 | .0509777 .0174709 2.92 0.004 .0167353 .0852201
-------------+----------------------------------------------------------------
war |
cons | .1260234 .00714 17.65 0.000 .1120293 .1400176
P_EU | .0490712 .0046618 10.53 0.000 .0399343 .0582082
P_AR | -.3403907 .0085749 -39.70 0.000 -.3571972 -.3235843
P_AM | .0687872 .0062758 10.96 0.000 .0564869 .0810874
PEG2 | .0419475 .0170461 2.46 0.014 .0085378 .0753572
P_EG | .1138705 .0173771 6.55 0.000 .079812 .147929
P_ROW | .0667143 .0050524 13.20 0.000 .0568118 .0766168
EXPEND. | .0085087 .0053984 1.58 0.115 -.0020719 .0190893
1998 | .0003246 .0088565 0.04 0.971 -.0170339 .0176831
1999 | .0018952 .0101279 0.19 0.852 -.017955 .0217454
2000 | .0076957 .0106185 0.72 0.469 -.0131162 .0285076
2001 | -.0131458 .0096858 -1.36 0.175 -.0321297 .005838
2002 | -.0075883 .009074 -0.84 0.403 -.0253729 .0101964
-------------+----------------------------------------------------------------
wam |
cons | .1022256 .0063711 16.05 0.000 .0897384 .1147128
P_EU | .0316361 .0042298 7.48 0.000 .0233459 .0399263
P_AR | .0687872 .0062758 10.96 0.000 .0564869 .0810874
P_AM | -.327443 .0091239 -35.89 0.000 -.3453255 -.3095605
PEG2 | .0708082 .0151693 4.67 0.000 .0410769 .1005394
P_EG | .1183464 .0156285 7.57 0.000 .087715 .1489778
P_ROW | .0378652 .004628 8.18 0.000 .0287945 .046936
EXPEND. | -.0018452 .0047647 -0.39 0.699 -.0111839 .0074934
1998 | -.0086222 .0078285 -1.10 0.271 -.0239657 .0067212
1999 | .0026241 .0089559 0.29 0.770 -.0149292 .0201774
2000 | .0028482 .0093932 0.30 0.762 -.0155623 .0212586
2001 | -.0010386 .0085525 -0.12 0.903 -.0178012 .015724
2002 | -.0038348 .008017 -0.48 0.632 -.0195478 .0118783
-------------+----------------------------------------------------------------
wrow |
cons | .2809794 .0113829 24.68 0.000 .2586693 .3032894
P_EU | .1473654 .0063478 23.22 0.000 .134924 .1598068
P_AR | .0667143 .0050524 13.20 0.000 .0568118 .0766168
P_AM | .0378652 .004628 8.18 0.000 .0287945 .046936
PEG2 | .078056 .0273995 2.85 0.004 .0243541 .131758
P_EG | -.0298519 .0275125 -1.09 0.278 -.0837754 .0240716
P_ROW | -.300149 .0088851 -33.78 0.000 -.3175636 -.2827345
EXPEND. | -.0051214 .0093156 -0.55 0.582 -.0233797 .0131369
1998 | -.0086573 .0144889 -0.60 0.550 -.0370551 .0197405
1999 | -.0121669 .0165568 -0.73 0.462 -.0446176 .0202837
2000 | -.01533 .0173348 -0.88 0.377 -.0493056 .0186455
2001 | .0219499 .0157464 1.39 0.163 -.0089124 .0528122
2002 | -.0092269 .0148563 -0.62 0.535 -.0383447 .0198909
-------------+----------------------------------------------------------------
weg |
cons | .1572618 .0111524 14.10 0.000 .1354035 .1791201
P_EU | .0326947 .0071467 4.57 0.000 .0186874 .0467019
P_AR | .155818 .0091115 17.10 0.000 .1379599 .1736761
P_AM | .1891545 .0093645 20.20 0.000 .1708004 .2075087
PEG2 | -.3211599 .0262024 -12.26 0.000 -.3725157 -.269804
P_EG | -.1047114 .0269301 -3.89 0.000 -.1574934 -.0519295
P_ROW | .0482041 .0076803 6.28 0.000 .0331511 .0632571
EXPEND. | -.0017717 .0076956 -0.23 0.818 -.0168549 .0133114
EXRT | -.0000802 .0002412 -0.33 0.740 -.0005529 .0003925
1998 | .0169339 .0135658 1.25 0.212 -.0096545 .0435223
1999 | -.0087519 .0155353 -0.56 0.573 -.0392004 .0216967
2000 | .005976 .0162794 0.37 0.714 -.0259311 .0378832
2001 | -.0113725 .0148162 -0.77 0.443 -.0404118 .0176668
2002 | -.0301091 .0138749 -2.17 0.030 -.0573035 -.0029147
------------------------------------------------------------------------------

148
Section 21. Works of art
----------------------------------------------------------------------
Equation Obs Parms RMSE "R-sq" chi2 P
----------------------------------------------------------------------
weu 19 12 .0995136 0.9719 798.9246 0.0000
war 19 12 .0145679 0.9215 181.974 0.0000
wam 19 12 .0314125 0.9771 609.7831 0.0000
wrow 19 12 .0463379 0.9750 771.9161 0.0000
weg 19 12 .0617425 0.9116 406.3846 0.0000
----------------------------------------------------------------------

------------------------------------------------------------------------------
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
weu |
cons | .3374803 .0557325 6.06 0.000 .2282467 .446714
P_EU | -.2631493 .0427006 -6.16 0.000 -.3468409 -.1794577
P_AR | .0208936 .0093137 2.24 0.025 .0026391 .0391481
P_AM | .0418392 .0182132 2.30 0.022 .0061419 .0775365
PEG2 | .3530937 .0944492 3.74 0.000 .1679768 .5382107
P_EG | -.2777018 .1019037 -2.73 0.006 -.4774293 -.0779742
P_ROW | .1250245 .0223748 5.59 0.000 .0811707 .1688784
EXPEND.| -.0041356 .0091973 -0.45 0.653 -.0000221 .0000139
1998 | .1946279 .0851864 2.28 0.022 .0276657 .3615901
1999 | -.0726986 .0910371 -0.80 0.425 -.251128 .1057308
2000 | .2911521 .1062069 2.74 0.006 .0829905 .4993137
2001 | .0262024 .0819534 0.32 0.749 -.1344234 .1868282
2002 | .0513434 .0776675 0.66 0.509 -.100882 .2035688
-------------+----------------------------------------------------------------
war |
cons | .0592695 .013765 4.31 0.000 .0322907 .0862483
P_EU | .0208936 .0093137 2.24 0.025 .0026391 .0391481
P_AR | -.3282455 .0461245 -7.12 0.000 -.4186479 -.2378432
P_AM | .064441 .0130083 4.95 0.000 .0389452 .0899367
PEG2 | -.0145544 .021807 -0.67 0.505 -.0572954 .0281865
P_EG | .2202589 .0515999 4.27 0.000 .119125 .3213928
P_ROW | .0372065 .0119222 3.12 0.002 .0138395 .0605736
EXPEND. | .0257258 .0184129 1.40 0.162 -.0103628 .0618143
1998 | -.0031816 .0207926 -0.15 0.878 -.0439343 .0375711
1999 | .0043778 .0225517 0.19 0.846 -.0398228 .0485783
2000 | -.0146971 .0263755 -0.56 0.577 -.0663921 .0369979
2001 | .0053684 .0190481 0.28 0.778 -.0319653 .042702
2002 | -.0012667 .0170458 -0.07 0.941 -.0346759 .0321426
-------------+----------------------------------------------------------------
wam |
cons | .1225013 .0269618 4.54 0.000 .0696571 .1753456
P_EU | .0418392 .0182132 2.30 0.022 .0061419 .0775365
P_AR | .064441 .0130083 4.95 0.000 .0389452 .0899367
P_AM | -.4868372 .0302214 -16.11 0.000 -.54607 -.4276043
PEG2 | .1080327 .042789 2.52 0.012 .0241678 .1918975
P_EG | .1683246 .0498952 3.37 0.001 .0705318 .2661174
P_ROW | .1041997 .0217506 4.79 0.000 .0615694 .14683
EXPEND. | .0057154 .0369183 0.15 0.877 -.0666432 .078074
1998 | -.0201979 .0410303 -0.49 0.623 -.1006159 .06022
1999 | .0081531 .0413973 0.20 0.844 -.0729842 .0892903
2000 | -.0389809 .0521947 -0.75 0.455 -.1412806 .0633188
2001 | .0025156 .0360068 0.07 0.944 -.0680564 .0730875
2002 | -.0013555 .0341096 -0.04 0.968 -.068209 .0654981
-------------+----------------------------------------------------------------
wrow |
cons | .2331317 .0301964 7.72 0.000 .1739479 .2923155
P_EU | .1250245 .0223748 5.59 0.000 .0811707 .1688784
P_AR | .0372065 .0119222 3.12 0.002 .0138395 .0605736
P_AM | .1041997 .0217506 4.79 0.000 .0615694 .14683
PEG2 | .0911427 .0508205 1.79 0.073 -.0084637 .1907492
P_EG | .1166763 .0571828 2.04 0.041 .0046001 .2287525
P_ROW | -.4742497 .0339369 -13.97 0.000 -.5407648 -.4077346
EXPEND. | -.0899263 .0452425 -1.99 0.047 -.1785999 -.0012526
1998 | -.1352095 .0493416 -2.74 0.006 -.2319173 -.0385017
1999 | -.2023768 .0484215 -4.18 0.000 -.2972813 -.1074724
2000 | -.0554367 .0620055 -0.89 0.371 -.1769653 .0660919
2001 | -.0437455 .0430924 -1.02 0.310 -.128205 .040714
2002 | -.0516815 .040331 -1.28 0.200 -.1307288 .0273658
-------------+----------------------------------------------------------------

149
weg |
cons | .2476171 .0370834 6.68 0.000 .1749351 .3202992
P_EU | .075392 .0254096 2.97 0.003 .02559 .1251939
P_AR | .2057045 .0443452 4.64 0.000 .1187895 .2926195
P_AM | .2763573 .0321661 8.59 0.000 .2133129 .3394017
PEG2 | -.5411988 .0588559 -9.20 0.000 -.6565542 -.4258433
P_EG | -.224074 .0831573 -2.69 0.007 -.3870593 -.0610887
P_ROW | .207819 .0256608 8.10 0.000 .1575248 .2581133
EXPEND. | .0687671 .0393821 1.75 0.081 -.0084203 .1459546
1998 | -.0267842 .055548 -0.48 0.630 -.1356564 .0820879
1999 | .2654542 .0566011 4.69 0.000 .154518 .3763903
2000 | -.1841862 .0687157 -2.68 0.007 -.3188664 -.049506
2001 | .0162772 .0495546 0.33 0.743 -.080848 .1134024
2002 | .0061329 .0464647 0.13 0.895 -.0849363 .0972021
------------------------------------------------------------------------------

150