Transient Products but Persistent Trade Patterns

In a recent issue of this Journal, Besedeš and Prusa (BP) provide a study of the duration of bilateral trade relationships at the product and industry level in the U.S. import market between 1972 and 2001 with interesting and somewhat surprising conclusions. They report that “[I]t is...common to observe short-lived trade relationships wherein a country trades a product for a few years and then stops. More than half of all trade relationships are observed for a single year and approximately 80 % are observed for less than five years. ” BP go on to state that product aggregation within a given industry does not overturn their findings of short-lived trading relationships. They find that “[D]espite the higher degree of aggregation, the median survival time for SITC data is only two to three years.” In concluding, BP raise several questions which they deem – and we agree – to be important: 1. “What happens when a country stops exporting a particular product? Does it switch to similar products or very different products, or does it stop exporting altogether to the U.S. market? ” (p. 293). 2. “The Heckscher-Ohlin factor endowments model would suggest that trade is ver