Trade Impacts of Increased Border Security Concerns

This article uses estimates of changes in frictional trading costs and the GTAP computable general equilibrium model to assess the effects of increased security concerns following the terrorist attacks of September 11 on international trade. As a result of additional security measures, trading companies have been confronted with additional costs relating to transport, handling, insurance, and customs. These costs tend to make international trade more expensive and reduce trade flows. The results from scenario analyses show that regions with high trade to GDP ratios and sectors with elastic import demand suffer the largest trade and welfare losses in relative terms.