The Trade Effect of Trust: Evidence from Agricultural Trade between China and Its Partners

Round 1

Reviewer 1 Report

See attached referee report

Comments for author File: Comments.pdf

Author Response

Dear Sirs/Madams,

Many thanks for your comments which are of great help.

We have revised our paper strictly according to your advice.

Firstly, in order to make the content succinctly described, we have touched up my paper grammatically and syntactically and we send you the new version with the correction in red, please check.

Secondly, as for the results of empirical study, we changed it in this way: from the whole map of the results to typical results, from coefficient of time variables to non-time ones to dummies.

Thirdly, we updated references by adding some of lately published or closely related literature (eg. Reference 3, 21, 27, 33, 34, 35, 36 ) and deleting some (eg. Reference 21, 40 in previous paper) . Among them, some are of well-known journals and some are of famous economists.

Last but not least, we have changed empirical method to better match the theory put forward in part 2. They are: adding added valuable scatter plot; calculating residuals of some variables, etc.

In addition, other improvements have been made in red in the new version, kindly please read. Although we have done our utmost to improve, there may still have been some errors, please kindly point out for us if any.

Many thanks again.

Best regards,

Chen Heping, Qi Chunjie

 

 

Author Response File: Author Response.pdf

Reviewer 2 Report

Dear Author(s),

I read your manuscript with interest as it attempts to examine the effect of trust on international trade of agricultural produces between China and its partners. And your innovative adoption of the gravity model with the introduction of an informal institutional variable of trust is observed. However I have concerns over your literature review, conceptual development, data analysis and discussion, which require substantial revision.

First, it is not clear why you wanted to discuss the differences in trust analysis at various levels, i.e., the macro-, meso-, and micro-level. Your analysis seems to be anchored at the macro-level as you use the WVS data, nonetheless, you have not clearly stated that you are.

Second, in your summary of the literature on trust, you cite Arrow (1972) without providing the page number of the quotation. This is a standard requirement for citation. In a similar vein, the referencing of Hicks (1976) is missing in your reference list.

Third, in developing and formulating your hypothesis, you introduce the concept of trustworthiness (p.4) yet without properly reviewing it. By the same token, the concept of bounded rationality (p.4 and p.5) needs elaboration to demonstrate your understanding.

Fourth, your discussion of WVS results does not provide references. You cannot simply state that China’s trust level is higher than the world’s average without providing a reference.

Fifth, I find your quartile regression interesting and effective. However, I am puzzled by your results on WTO effect which are in general either insignificant or negative (Tables 2-6). I would like to see some analysis and discussion on China’s WTO membership effect, which is to say the years before and after 2001/2002, as your data cover the period between 1997 and 2014.

In addition, there are a good number of minor issues such as lacking clarity in meaning, reference/referencing errors and typos as listed below:

1. on page 1, reference for Lu et al. (2019), not Lv;
2. on page 2, what is the meaning of material capital? We do use financial capital, human capital, social capital, tangible or intangible;
3. on page 3, the wording of “under-skin study” needs revision and changing for clarity;
4. on page 4, in the second paragraph Trust should be typed as trust without capitalisation;
5. on page 5, the hypothesis needs rewriting into a format like this:

H₀ or simply H: xxx

In short, you need careful proofreading before submission.

I hope my comments will help you to improve the manuscript.

Good luck.

Author Response

Dear Sirs/Madams,

We are grateful for your comments and suggestions. We have revised the paper exactly according to your comments. Here we would like to answer them one by one from major points to minors.

 

Q1. I read your manuscript with interest as it attempts to examine the effect of trust on international trade of agricultural produces between China and its partners. And your innovative adoption of the gravity model with the introduction of an informal institutional variable of trust is observed. However I have concerns over your literature review, conceptual development, data analysis and discussion, which require substantial revision.

Our answer：

Yes, we have improved our literature review which is in red in our paper. We have corrected the wrong cited Hicks, the right is Hirsch(1976). As for concepts, we added 2 footnotes on right page 4. We really made substantial revision on data analysis according to WVS data and we improved our analysis and discussion. The specific changes are in red.

Q2. First, it is not clear why you wanted to discuss the differences in trust analysis at various levels, i.e., the macro-, meso-, and micro-level. Your analysis seems to be anchored at the macro-level as you use the WVS data, nonetheless, you have not clearly stated that you are.

Our answer：

We removed the whole paragraph together with the references. And we reorganized the content of the paragraph.

Q3. Second, in your summary of the literature on trust, you cite Arrow (1972) without providing the page number of the quotation. This is a standard requirement for citation. In a similar vein, the referencing of Hicks (1976) is missing in your reference list.

Our answer：

We have checked the two mentioned authors and found that I have made a mistake about second one which should be Hirsch. Others are right, and we cited in the references, especially marked the pages. We updated my references by adding some of lately published or closely related literature (eg. Reference 3, 21, 27, 33, 34, 35, 36 ) and deleting some (eg. Reference 21, 40 in previous paper). Among them, some are from well-known journals and some are of famous economists.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

Q4. Third, in developing and formulating your hypothesis, you introduce the concept of trustworthiness (p.4) yet without properly reviewing it. By the same token, the concept of bounded rationality (p.4 and p.5) needs elaboration to demonstrate your understanding.

Our answer：

We have added footnotes on page 4 according to your suggestion.

Q5. Fourth, your discussion of WVS results does not provide references. You cannot simply state that China’s trust level is higher than the world’s average without providing a reference.

Our answer：

Yes, we demonstrated it in more detail like that:

The results of the World Values Survey (WVS) (1981-2014) show that the level of trust varies with country (region). However, China belongs to higher level countries of trust with average score of 58.80 and much higher than that of the world’s 27.85.

Q6. Fifth, I find your quartile regression interesting and effective. However, I am puzzled by your results on WTO effect which are in general either insignificant or negative (Tables 2-6). I would like to see some analysis and discussion on China’s WTO membership effect, which is to say the years before and after 2001/2002, as your data cover the period between 1997 and 2014.

Our answer：

Yes, we reorganized the dummy variables in 2 paragraphs and  elaborated the explanation of WTO membership effect as follows:

We also find that whether a trading partner is adjacent to China has a positive and significant impact on China’s agricultural exports, which indicates that China’s agricultural exports also have a proximity effect. Whether the sign of economic crisis in Table 2 is negative, but not significant can be traced to the demand income inelasticity of agricultural products. The shock of crisis will do little influence on export of agricultural products.

In addition, how the members of the WTO affect the trade value remains unclear. This result is in conformity to those of Rose [33, 34] and Wang et al.[14] which study on Chinese trade as a whole but not completely in line with that of Dutt [34]. The results of Rose [33, 34] showed that WTO membership affects slightly on bilateral trade value. After considering trade agreements effects varying with time, Dutt [35] adopts semi-parametric empirical method and holds that: WTO membership will positively affect bilateral trade if both are members, otherwise produce negative effect if neither of parties are members. If one side is a member and the other is not, then the effect is insignificant. Earlier in the study of Subramanian and Wei [36], WTO membership boosts trade unevenly and mainly in developed countries. What we do differently in the paper is that we focus on export of Chinese agricultural goods and China is a developing country. The insignificance of coefficient may be attributable to 3 points: First, China has fulfilled its WTO commitments after the accession in 2001 and reduced the tariff rate of agricultural products. However, the tariff rate of agricultural products from developed members is still high. According to The White Paper on China and the World Trade Organization (2018), China gradually reduced the tariffs on agricultural products after 2001. By 2010, the average tariff rate on agricultural products has decreased from 23.2% to 15.2%, which is far lower than the average tariff level of 56% in developing members and 39% in developed members. China’s reduction of agricultural tariffs has a great impact on agricultural imports, but impacts little on exports, while the higher tariff rates from developed members have an adverse impact on China's agricultural exports. Second, although the WTO requires all members to reduce tariffs, various non-tariff barriers often appear as substitute measures for protectionism. Among the main markets of China’s agricultural products export, developed countries (regions) such as Japan, the United States and the European Union, which are members of the WTO, take non-tariff measures such as green trade barrier (GBT) and upscale sanitary and phytosanitary (SPS) standards to restrict China’s agricultural products export. Third, under the multilateral trading system of the world trade organization, the parties to the negotiations on the liberalization of agricultural trade diverge a great deal, and the progress has been slowed since the Doha round of agricultural negotiations. Under this context, bilateral or regional trade freedom agreements weaken the multilateral importance of WTO as an international organization.

We also set two dummies variable for WTO effect, one is supposed two parties are WTO members (wto), another is whether China joint into WTO (wto1), the results are neither significant. And the two variables shouldn’t be included into model like the authors cited because the correlation is 0.9149 showing highly multicolinearity.

In addition, there are a good number of minor issues such as lacking clarity in meaning, reference/referencing errors and typos as listed below:

1. on page 1, reference for Lu et al. (2019), not Lv;(done)

We have changed into Chinese phonetics of “Lü”  (吕in Chinese) (is totally different from “Lu” 卢、鲁、路 in Chinese)

2. on page 2, what is the meaning of material capital? We do use financial capital, human capital, social capital, tangible or intangible;(done)

We have revised it as physical capital.

3. on page 3, the wording of “under-skin study” needs revision and changing for clarity;(in-depth study)

We changed into in-depth study.

4. on page 4, in the second paragraph Trust should be typed as trust without capitalisation;

Yes, we have corrected it.

5. on page 5, the hypothesis needs rewriting into a format like this:

Yes, it is a clear error. We put Hypothesis:

Although we have spared no efforts to improve, there may still have been some errors, please kindly point out for us if any. Many thanks again.

Best regards,

Chen Heping, Qi Chunjie

 

Author Response File: Author Response.pdf

Reviewer 3 Report

This is a paper well structured and well written on a topic of interest: the influence of trust on agricultural trade on the specific case of China.

It has a good methodology and the steps of the research are well explained and well presented in the paper.

However for its improvement the following suggestions are done:

• under the introduction section the bibliographical sources for the statistics on China's trade with agricultural products, need to be included in the text.
• under the model construction and data source section, there is the need to give more details about how the results of the six waves of the WVS survey have been translated in trust levels at YEARLY level.
• also under the same section, the bibliographical source for Linder's preference similarity theory needs to be included
• under the sample selection section, you need to better explain how you have chosen the main export markets of China (for agricultural products) and how their strong representativeness is defined.
• the title (3) Two stage least squares test based on instrumental variable, is it supposed to be (III) under section IV Analysis of Empirical Results?
• under the conclusion section, I suggest to change the style from "we export ....., we should know ......" to an impersonal style (third person)
• there are some sources under references that are incomplete and/or inconsistently written
• more recent references are recommended. There is just one source from 2020.
• the format of the papers does not fit into the journal's format and it needs to be redone accordingly.

Author Response

Dear Sirs/Madams,

We are grateful for your comments and suggestions. We have revised the paper exactly according to your comments. Here we would like to answer them one by one.

• under the introduction section the bibliographical sources for the statistics on China's trade with agricultural products, need to be included in the text.

Our answer:

Yes, we have explained it in our text. All trade data come from UN Comtrade Database.

• under the model construction and data source section, there is the need to give more details about how the results of the six waves of the WVS survey have been translated in trust levels at YEARLY level.
• Our answer:

Yes, we have explained this in the text on page5-6. For example, in wave 5 (2005-2009), the trust level of India is 0.2328. That is to say, the trust level remains the same during year 2005-2009. International scholars are doing the same (please see reference 7 and 13). This is the best we can do due to lack of data.

• also under the same section, the bibliographical source for Linder's preference similarity theory needs to be included.
• Our answer:

Yes, we added as reference 27.  

• under the sample selection section, you need to better explain how you have chosen the main export markets of China (for agricultural products) and how their strong representativeness is defined.
• Our answer:

Yes, we have done like this:

Chinese produces export mainly to Asia, Europe and North America. The selected country (region) sample is the main export markets of China's agricultural products over the year 1997- 2014. The countries (regions) involved some in Asia, they are Singapore, Japan, Pakistan, Philippines, Thailand, Korea, Malaysia, India, Vietnam, Indonesia, Jordan, China and HKSAR of China. Australia and New Zealand in Oceania; 18 in Europe, they are Poland, Germany, Russia, Georgia, Slovenia, Ukraine, the Netherlands, Moldova, Sweden, Switzerland, the United Kingdom, Italy, Hungary, Turkey, Spain, Romania, France and Armenia; 3 in North America, namely the United States, Canada and Mexico; 6 in South America including Brazil, Chile, Uruguay, Argentina, Colombia and Peru; There are 4 in Africa, namely Egypt, Morocco, Nigeria and South Africa. According to UN Comtrade database, the value of Chinese produce export to these sample countries (regions) catches 88.80% of the total value of that to the whole world, which have strong representativeness.

• the title (3) Two stage least squares test based on instrumental variable, is it supposed to be (III) under section IV Analysis of Empirical Results?
• Our answer:

We haven’t changed this for our logistic ideas are: first doing the benchmark regressions, then IV regressions, last heterogeneity tests. Two stage least squares test has been adopted after we find endogeneity (if not, its unnecessary to do). Part IV is mainly to test the heterogenous effects when dependable variables stay in different quartiles. 

• under the conclusion section, I suggest to change the style from "we export ....., we should know ......" to an impersonal style (third person)
• Our answer:

Yes, we have changed the whole section in third person.

• there are some sources under references that are incomplete and/or inconsistently written.
• Our answer:

Yes, to make the references in consistent with the text, we updated the references orderly.

• more recent references are recommended. There is just one source from 2020.
• Our answer:

We improved the references by adding some of lately published or closely related literature (eg. Reference 3, 21, 27, 33, 34, 35, 36 ) and deleting some (eg. Reference 21, 40 in previous paper). Among them, some are of well-known journals and some are of famous economists.

• the format of the papers does not fit into the journal's format and it needs to be redone accordingly.
• Our answer:

Yes, we have laid out our paper fitting into the journal’s format: revise all fonts and sizes. And display the right format of tables and figures and even footnotes. And we have adjusted the cited literature.

Although we have done our utmost to improve, there may still have been some errors, please kindly point out for us if any.

Many thanks again.

Best regards,

Chen Heping, Qi Chunjie

Author Response File: Author Response.pdf