Trade Impacts of the Terrorist Attacks of 11 September 2001: A Quantitative Assessment

Abstract

This paper used estimates of changes in frictional trading costs and the Global Trade Analysis Project (GTAP) computable general equilibrium model to assess the effects of the terrorist attacks of 11 September on international trade. Following the 11 September events, regulatory measures were implemented to tighten security at air and seaports as well as land border crossings. As a result, trading and transport companies have been confronted with additional frictional trading costs, in particular costs relating to transport, handling, insurance, and customs. These additional costs make international trade more expensive and will tend to reduce trade flows. The results from scenario analysis show that regions with high trade to GDP ratios, such as South Asia or North Africa and the Middle East, suffer the largest trade and welfare losses in relative terms. Across sectors, trade in agri-food products, textiles, non-metallic minerals, and machinery is most severely affected by the higher frictional costs of trade.