nep-int New Economics Papers
on International Trade
Issue of 2010‒12‒18
23 papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Economic integration and the two margins of trade: the impact of the Barcelona Process on North African countries’ exports By Bensassi, Sami; Márquez-Ramos, Laura; Martínez-Zarzoso, Inmaculada
  2. Does importing more inputs raise exports? Firm level evidence from France By Bas, Maria; Strauss-Kahn, Vanessa
  3. Foreign Aid and Recipient Countries’ Exports: Does Aid Promote Bilateral Trade? By Felicitas Nowak-Lehmann D.; Inmaculada Martínez-Zarzoso; Adriana Cardozo; Dierk Herzer; Stephan Klasen
  4. Non-Tariff Barriers to Trade in Agricultural Products: Challenges for Brazilâs Beef Exports By De Miranda, Sílvia Helena Galvao; De Camargo Barros, Geraldo SantâAna
  5. Trade of Heilongjiang Province (China) with Russia By Hiraizumi, Hideki
  6. Do Natural Resources Attract FDI? Evidence from non-stationary sector level data By Steven Poelhekke; Frederick van der Ploeg
  7. How Costly is Modern Maritime Piracy for the International Community? By Bensassi, Sami; Martínez-Zarzoso, Inmaculada
  8. Global Financial Crisis: Implications for Trade and Industrial Restructuring in India By Prabir De; Chiranjib Neogi
  9. Unilateral Tariff Liberalisation By Richard Baldwin
  10. Determinants and Pervasiveness of the Evasion of Customs Duties By Sebastien Jean; Cristina Mitaritonna
  11. Sectoral Location of FDI in China By Lin, Mi; Kwan, Yum K.
  12. Jobs and Exposure to International Trade within the Service Sector in Sweden By Eliasson, Kent; Hansson, Pär; Lindvert, Markus
  13. Optimal Tariff Calculations in Tariff Games with Climate Change Considerations By Yan Dong; John Whalley
  14. The factor content of regional bilateral trade: the role of technology and demand By Andrés Artal-Tur; Juana Castillo-Giménez; Carlos Llano-Verduras; Francisco Requena-Silvente
  15. Backward linkages and the export;performance of business services.;Evidence from a sample of Italian firms By Giuliano CONTI; Alessia LO TURCO; Daniela MAGGIONI
  16. Multilateralising Regionalism: How Preferential Are Services Commitments in Regional Trade Agreements? By Sébastien Miroudot; Jehan Sauvage; Marie Sudreau
  17. Unemployment and relative labor market institutions between trading partners. By Hervé Boulhol
  18. Smith's and Ricardo's common logic of trade By Morales Meoqui, Jorge
  19. Unemployment and relative labor market institutions between trading partners By Hervé Boulhol
  20. African Export Successes: Surprises, Stylized Facts, and Explanations By William Easterly; Ariell Reshef
  21. Recent trends in Asian integration and Japanese participation By Kagami, Mitsuhiro
  22. EU-Asia Free Trade Areas? Economic and Policy Considerations By Plummer, Michael G.
  23. Endogenous Product Differentiation, Market Size and Prices By Ferguson, Shon

  1. By: Bensassi, Sami; Márquez-Ramos, Laura; Martínez-Zarzoso, Inmaculada
    Abstract: According to recently developed models of trade with imperfect competition and heterogeneous firms, lower trade costs increase bilateral trade not only through a rise in the mean value of individual shipments (the intensive margin of trade), but also through an increase in the number of exporting firms (the extensive margin of trade). The main aim of this paper is to provide new empirical evidence of the effects of the Euro-Mediterranean (EuroMed) agreements on both margins of trade. Using highly disaggregated export data for four North African countries (Algeria, Egypt, Morocco and Tunisia) and two Middle East countries (Jordan, Lebanon) over the period from 1995 to 2008, we estimate the impact of the EuroMed agreements on both trade margins and we provide empirical evidence of the validity of the theoretical predictions. Results indicate that only the North African countries enjoyed a positive and significant effect of the Barcelona process on their exports to the four biggest countries in the European Union.
    Keywords: Euro-Mediterranean agreements; trade integration; intensive and extensive margins.
    JEL: F10
    Date: 2010
  2. By: Bas, Maria; Strauss-Kahn, Vanessa
    Abstract: Following Melitz (2003)'s seminal paper, several theoretical and empirical studies have shown that only the subset of most productive firms export. While other studies provide evidence on a positive effect of an increase in imported inputs on firms' productivity, the link between imported intermediate inputs and export scope has not been made. This paper bridges the gap by studying the impact of imported inputs on the margins of exports. We use a unique firms' level database of imports at the product (HS6) level provided by French Customs for the 1995-2005 period. Access to new varieties of inputs may increase productivity, and thereby exports, through better complementarity of inputs, transfer of technology and/or decreased inputs price index. We test for these different mechanisms by distinguishing the origin of imports (developing vs. developed countries) and constructing an exact price index a la Broda and Weinstein (2006). We find a significant impact of higher diversification and increased number of imported inputs varieties on firm's TFP and export scope. Whereas the complementarity and transfer of technology mechanisms are supported by our results, the price effect seems very limited.
    Keywords: Firm heterogeneity; imported inputs; TFP; export scope; varieties; price index; firm-level data
    JEL: F10 F12
    Date: 2010–12
  3. By: Felicitas Nowak-Lehmann D. (Georg-August-University Göttingen); Inmaculada Martínez-Zarzoso (Georg-August-University Göttingen); Adriana Cardozo; Dierk Herzer; Stephan Klasen (Georg-August-University Göttingen)
    Abstract: This paper uses the gravity model of trade to investigate the link between foreign aid and exports in recipient countries. Most of the theoretical work emphasizes the negative impact of aid on recipient countries’ exports primarily due to exchange rate appreciation, disregarding possible positive effects of aid in promoting bilateral trade relations. The empirical findings, in contrast, indicate that the net impact of aid on recipient countries’ exports is positive -even though the macroeconomic impact of aid is rather small- and that the average return for recipients’ exports is about 1.50 US$ for every aid dollar spent. We argue that “bilateral aid” seems to promote good bilateral trade relations, mutual trust and familiarity and that those factors reinforce bilateral trade, including recipient country exports. The paper also estimates the effect of different types of aid (bilateral aid versus multilateral aid flowing to a specific recipient) and studies aid’s contribution to an expansion of exports in different regions of the world. It is found that aid is strongly export-enhancing in Asia and Latin America, but not in Africa.
    Keywords: International trade; foreign aid; recipient exports; bilateral trade relations
    JEL: F10 F35
    Date: 2010–12–07
  4. By: De Miranda, Sílvia Helena Galvao; De Camargo Barros, Geraldo SantâAna
    Keywords: International Relations/Trade, Livestock Production/Industries,
    Date: 2010–06–05
  5. By: Hiraizumi, Hideki
    Abstract: Local trade between the Far East region of the USSR and the Northeast region of the People’s Republic of China started in 1957, arranged by the public trade organizations in the respective borderlands. Heilongjiang Province of China has been the main actor in trade with the Far East region of the USSR, and more recently, Russia. After 1957, Heilongjiang Province’s trade with the Russian Far East developed rapidly until 1993, except a period of interruption (1967-1982). Thereafter, the Heilongjiang Province’s trade with the Russian Far East underwent a stagnation period (1994-1998), a recovery period (1999-2001), a rapid development period (2002-2007) and a period of change of tendencies and radical decrease (2008-2009). Heilongjiang Province’s trade with the Russian Far East consists of three main forms: general trade, Chinese-style border trade (Bianjing Trade which includes Bianjing Small Trade and trade between private persons (Hushi Trade)) and Travel Trade. The rapid increase of Heilongjiang Province’s trade with the Russian Far East from 2002 to 2007 is mainly attributable to the increase in the export of ordinary consumer goods, especially textile clothing and footwear, and to Bianjing Small Trade.
    Keywords: China, Russia, International trade, Local government, H-R Trade, Bianjing Small Trade, Trade between private persons, Travel Trade, Hushi Trade
    JEL: F14
    Date: 2010–08
  6. By: Steven Poelhekke; Frederick van der Ploeg
    Abstract: A new and extensive panel of outward foreign direct investment (FDI) at the sector level is used to estimate the determinants of non-resource and resource FDI. Since FDI is I(1), we estimate panel errorcorrection models of FDI with spatial lags for FDI and market potential. Our main result is that subsoil assets boost resource FDI, but crowd out non-resource FDI. The effect on non-resource FDI dominates, so that aggregate FDI is less in resource-rich countries. Spatial lags aggravate this crowding out of nonresource FDI. In addition, we find that (i) resource FDI is mainly vertical whereas other FDI is of the export-fragmentation variety; (ii) trade openness, free trade agreements and institutional quality do not impact non-resource FDI but institutional quality does have a positive effect on resource FDI; and (iii) the short-run dynamics comes mostly from shocks to FDI itself. Our main and ancillary results are robust to different measures of resource reserves and the oil price and to allowing for sample selection bias.
    Keywords: outward sector level FDI; subsoil assets; co-integration tests; spatial econometrics; hydrocarbon reserves; external margin; sample selection bias
    JEL: C21 C33 F21 Q33
    Date: 2010–11
  7. By: Bensassi, Sami; Martínez-Zarzoso, Inmaculada
    Abstract: This paper focuses on the impact of maritime piracy on international trade. Piracy increases the cost of international maritime transport through an increase in insecurity regarding goods deliveries. Bilateral trade flows between the main European and Asian countries over the 1999 to 2008 period are used to estimate an augmented gravity model that includes various measures of piracy acts. We found robust evidence indicating that maritime piracy reduces the volume of trade; the effect of ten additional vessels hijacked being associated to an 11% decrease in exports. Using these results, the international cost of piracy in terms of trade destruction is estimated to be 28 billion dollars. Finally, we compare the cost of low intensity conflict like Somalia, to the cost of a full scale conflict (Afghanistan) and to the cost of an autarkic state (North Korea) for the international community in the year 2008.The results indicate that the cost of war more than doubles the cost of low intensity conflict.
    Keywords: Piracy; International trade; Gravity equation; cost of conflict; security
    JEL: F10 F51
    Date: 2010
  8. By: Prabir De; Chiranjib Neogi (Research and Information System for Developing Countries)
    Abstract: This paper investigates the impact of global crisis shocks on India’s trade and industry. The estimated results show that changes in trade composition are positively associated with changes in manufacturing composition in India, controlling for other variables. While analysing its dynamic effects, compositional change in industry has responded significantly to the export to USA, Japan and EU in the crisis period. However, there is no strong indication to conclude that Indian industry has been severely affected by the fall in demand in crisis-affected advanced economies such as US, EU and Japan, holding other things constant.
    Keywords: Global crisis, trade, industrial composition, trade openness, India
    JEL: F02 F13 F17 F42 F47 L6 L7
    Date: 2010
  9. By: Richard Baldwin
    Abstract: Unilateral tariff liberalisation by developing nations is pervasive but our understanding of it is shallow. This paper strives to partly redress this lacuna on the theory side by introducing three novel political economy mechanisms with particular emphasis is on the role of production unbundling. One mechanism studies how lowering frictional barriers to imported parts can destroy the correlation of interests between parts producers and their downstream customers. A second mechanism studies how Kojima’s pro-trade FDI raises the political economy cost of maintaining high upstream barriers. The third works via a general equilibrium channel whereby developing country’s participation in the supply chains of advanced-nation industries undermines their own competitiveness in final goods, thus making final good protection more politically costly. In essence, developing nations’ pursuit of the export-processing industrialisation undermines their infant-industry industrialisation strategies.
    JEL: F1 F13
    Date: 2010–12
  10. By: Sebastien Jean; Cristina Mitaritonna
    Abstract: Evasion of customs duties is a serious concern in developing countries, where tariff receipts are often important, but their collection is often problematic. We study theoretically and empirically the determinants of evasion across countries and products, based on a systematic analysis of discrepancies in trade declarations - when available - for both partners. We conclude that evasion of customs duties is greater in poorer countries, especially where the rule of law is limited. The consequences are likely to be the most serious in the poorest countries, where we find a one percentage point higher tariff to be associated on average with an understatement of imports of 1% or more. We assess some policy remedies and conclude that automated customs data treatment may be particularly useful.
    Keywords: Tax evasion; custom duty; institutions; international trade
    JEL: F13 H26 K42
    Date: 2010–11
  11. By: Lin, Mi; Kwan, Yum K.
    Abstract: This paper investigates the determinants of FDI sectoral allocation in 29 China’s manufacturing sectors from 2000 to 2007. We find that FDI sectoral allocation has a strong self-reinforcing effect. MNCs with ownership advantages tend to invest more in local high productivity sectors. The FDI presence, however, is discouraged in China’s high productivity sectors in which the major market share is dominated by SOEs. We also find that the degree of FDI penetration is higher in sectors that are producing labor-intensive goods and also export-oriented.
    Keywords: Foreign Direct Investment; Dynamic Panel Regression
    JEL: F23 O53 F21
    Date: 2010–08–20
  12. By: Eliasson, Kent (Growth Analysis); Hansson, Pär (Uppsala Center for Labor Studies); Lindvert, Markus (Growth Analysis)
    Abstract: The service sector is very heterogeneous with respect to internationalization; in some industries there is international trade (or it may potentially exist), whereas other industries are non-tradable. Data on international trade in services is, however, typically very limited, making it difficult to identify in which industries there are international trade. In this paper, we partially surmount the problems with insufficient service trade statistics by calculating locational Ginis for different industries in the private business sector as well as in the public sector. The basic idea is that from the regional concentration of different activities within a country one can identify industries where there appears to be regional trade, and hence also a potential for international trade. Based on our method we find that the number of employed in tradable service appears to be at least as large as in the manufacturing sector. Remarkably, a larger share of the skilled labor exposed to international trade is working in the service sector than in manufacturing, while a majority of the less skilled labor working in tradable industries is employed in manufacturing. When it comes to employment growth, we observe that the employment has increased in tradable service, while it has fallen in the manufacturing sector (the whole sector is regarded as tradable).
    Keywords: jobs; service trade; regional concentration; structural change
    JEL: F16 J44 R12
    Date: 2010–10–10
  13. By: Yan Dong; John Whalley (Institute of World Economics and Politics)
    Abstract: We discuss whether or not the introduction of climate change considerations into Nash tariff games increases or reduces post retaliation tariffs. We briefly discuss how climate change considerations can be introduced into computational trade models. We then calculate optimal tariffs in comparable conventional (no climate change considerations present) and with climate change trade models. Results show that compared to conventional trade models, adding climate change considerations reduces the level of optimal tariffs, but this only occurs when the damage effects involved are large.
    Keywords: Climate change, Nash tariff games, climate change trade models, trade models
    JEL: F10 C70 Q54
    Date: 2010
  14. By: Andrés Artal-Tur (Technical University of Cartagena, Spain); Juana Castillo-Giménez (University of Valencia, Spain); Carlos Llano-Verduras (Autónoma University of Madrid and CEPREDE, Lawrence R. Klein Institute, Spain); Francisco Requena-Silvente (University of Valencia, Spain)
    Abstract: The Heckscher-Ohlin-Vanek (HOV) model in its strict form has been strongly rejected by the data. Relaxing some assumptions of the standard HOV model is key to find improvements in its performance. We apply Davis and Weinstein (2001) methodology to analyse the validity of the HOV model using regions rather than countries. Surprisingly, our results using data for 17 Spanish regions are similar to theirs with international data for OECD countries. Accounting for technological differences improve the predictive capacity of the factor proportions model and including trade costs and geography reduce significantly the missing trade problem. However, relaxing the assumption of factor price equalisation does not improve the performance of the HOV model in a regional setting.
    Keywords: Heckscher-Ohlin-Vanek (HOV) model, technological differences, gravity equation, Spanish regions
    JEL: F11 F14 R12
    Date: 2010–12
  15. By: Giuliano CONTI (Universita' Politecnica delle Marche, Dipartimento di Economia); Alessia LO TURCO (Universita' Politecnica delle Marche, Dipartimento di Economia); Daniela MAGGIONI (Universita' Politecnica delle Marche, Dipartimento di Economia)
    Abstract: We provide evidence on backward linkages between downstream manufacturing sectors and the export performance of Italian business service firms. Combining input-output coefficients from the National Accounts with region-level information on the international involvement and market thickness of downstream manufacturing sectors, we build some measures of local spillovers and we test them as determinants of the business service firms' export status. Our results show that the export activity of downstream manufacturing sectors is positively related to the services firms' probability of exporting to the same foreign market. Also downstream market thickness bears the same positive effect, even if the latter turns to be non-significant for KIBS sectors. Finally, our evidence confirms that the scope of export spillovers is essentially local.
    Keywords: Services, back-ward linkages, firms' internationalisation, spillovers
    JEL: F14 L25 L80
    Date: 2010–12
  16. By: Sébastien Miroudot; Jehan Sauvage; Marie Sudreau
    Abstract: This report examines services schedules of commitments in 56 regional trade agreements (RTAs) where an OECD country is a party. The preferential content of RTAs is assessed through an analysis of market access and national treatment commitments at the level of the 155 sub-sectors of the General Agreement on Trade in Services (GATS) Sectoral Classification List. Partial commitments are broken down according to nine categories of non-conforming measures. The report confirms that on average RTAs in services go beyond GATS with commitments in about 72% of sub-sectors, among which 42% correspond to preferential bindings (GATS-plus commitments). In addition, the report provides an overview of rules of origin for services providers and MFN clauses in services chapters in order to see whether commitments granted might be extended to non-parties to minimise discrimination among foreign services suppliers. Despite the heterogeneity found in schedules of commitments, there is a certain degree of commonality in new and improved commitments that suggests that multilateralising RTAs is achievable. The multilateralisation of services commitments would however imply a more symmetric and systematic liberalisation than what is seen in the schedules of RTAs. In the end, this is a matter of political will and negotiations.
    Keywords: services, market access, RTA, regional trade agreements, GATS, MFN, free trade agreements, multilateralisation, preferential trade agreements, commitments, national treatment, rules of origin
    JEL: F13 F15 L8
    Date: 2010–12–06
  17. By: Hervé Boulhol (OCDE et Centre d'Economie de la Sorbonne)
    Abstract: This paper contributes to the literature that highlights the role of trading partners' institutions for a country's unemployment rate. The objective is to study whether the results established in the minimum wage setting of Davis (1998) hold when unemployment is driven by search frictions. This paper finds that relative labor market institutions matter for equilibrium unemployment as they generate comparative advantages, but there are two main differences with Davis. With North-North trade, unemployment decreases in the low-regulation country. When South is brought into the picture, low-regulation North is not insulated, and unemployment increases in both developed countries as a result of specialization.
    Keywords: Unemployment, labor market institutions, trade.
    JEL: F16 J50 F10 F41
    Date: 2010–09
  18. By: Morales Meoqui, Jorge
    Abstract: Ricardo essentially adhered to the logic of trade that Smith formulated in the Wealth of Nations. The contrary notion that they had opposing logics of trade is the result of an inaccurate interpretation of Ricardo’s numerical demonstration of the comparative-advantage proposition in chapter seven of the Principles. A deeper understanding of this numerical demonstration also leads to a partial refutation of the familiar contraposition between the comparative-advantage proposition and the absolute cost advantage theory of trade.
    Keywords: comparative advantage; absolute cost advantage; Ricardian model; international trade theory; free trade
    JEL: B12
    Date: 2010–12
  19. By: Hervé Boulhol (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, OCDE - Département des affaires économiques)
    Abstract: This paper contributes to the literature that highlights the role of trading partners' institutions for a country's unemployment rate. The objective is to study whether the results established in the minimum wage setting of Davis (1998) hold when unemployment is driven by search frictions. This paper finds that relative labor market institutions matter for equilibrium unemployment as they generate comparative advantages, but there are two main differences with Davis. With North-North trade, unemployment decreases in the low-regulation country. When South is brought into the picture, low-regulation North is not insulated, and unemployment increases in both developed countries as a result of specialization.
    Keywords: Unemployment, labor market institutions, trade.
    Date: 2010–11
  20. By: William Easterly; Ariell Reshef
    Abstract: We establish the following stylized facts: (1) Exports are characterized by Big Hits, (2) the Big Hits change from one period to the next, and (3) these changes are not explained by global factors like global commodity prices. These conclusions are robust to excluding extractable products (oil and minerals) and other commodities. Moreover, African Big Hits exhibit similar patterns as Big Hits in non-African countries. We also discuss some concerns about data quality. These stylized facts are inconsistent with the traditional view that sees African exports as a passive commodity endowment, where changes are driven mostly by global commodity prices. In order to better understand the determinants of export success in Africa we interviewed several exporting entrepreneurs, government officials and NGOs. Some of the determinants that we document are conventional: moving up the quality ladder, utilizing strong comparative advantage, trade liberalization, investment in technological upgrades, foreign ownership, ethnic networks, and personal foreign experience of the entrepreneur. Other successes are triggered by idiosyncratic factors like entrepreneurial persistence, luck, and cost shocks, and some of the successes occur in areas that usually fail.
    JEL: D8 F1 O1 O3 O4
    Date: 2010–12
  21. By: Kagami, Mitsuhiro
    Abstract: In East Asia, de facto integration is taking place because Free Trade Agreements (FTAs) and Economic Partnership Agreements (EPAs) are flourishing in the region. ASEAN aims to form an ASEAN Economic Community (AEC) by 2015 with the completion of the ASEAN Free Trade Area (AFTA). Surrounding countries have been competing with each other to forge FTAs or EPAs with ASEAN, including China, Japan, Korea, Australia and New Zealand, and India. As a result, ASEAN has become a trading hub in East Asia. Bilateral FTAs/EPAs are also partly in place among 16 countries (ASEAN + 6). These economic ties in trade, services and investment are accelerating this region’s development as the world’s largest production base and biggest consumption market, helping to turn around the global recession in the aftermath of the so-called Lehman Shock. However, some problems also need to be pointed out in the East Asian integration such as the spaghetti bowl effect, severe competition, labor issues, environmental destruction and power struggles.
    Keywords: Asia, Southeast Asia, East Asia, Australia & New Zealand, India, International economic integration, International economic relations, International trade, AEC, AFTA, ACFTA (ASEAN-China Free Trade Area), AKFTA (ASEAN- Korea Free Trade Area), AJCEP (ASEAN-Japan Comprehensive Economic Partnership), AANZFTA (ASEAN-Australia New Zealand Free Trade Area), AIFTA (ASEAN-India Free Trade Area), ASEAN + 3, ASEAN + 6, Spaghetti bowl effect
    JEL: F15
    Date: 2010–09
  22. By: Plummer, Michael G. (Asian Development Bank Institute)
    Abstract: This paper analyzes key aspects of the changing economic relationship between the European Union (EU) and Asia, and explores the potential economic ramifications of deeper EU-Asian economic cooperation. The author investigates the possible costs to the EU of remaining “disengaged” from the Asian integration process and the likely impact of multi-nested EU-Asian trade agreements. His empirical review of CGE models revealed trivial effects of several possible EU-Asian accords (e.g., EU-India, EU-ASEAN, EU-Republic of Korea). In part, this is a result of relatively small trade shares, open markets, and restrictions in the models, particularly in that they excluded behind-the-border effects. He also presents two CGE models that estimate the potential negative effects of Asian/Asia-Pacific regional accords on the EU, and likewise found small effects. Nevertheless, using a highly-disaggregated (partial-equilibrium) approach, he argues that high-quality FTAs in Asia could be quite detrimental to the EU, particularly in key sectors. The push toward a Free Trade Area of the Asia Pacific could be particularly worrisome to the EU. It is therefore concluded that it makes sense for the EU to be more aggressive in pursuing prospective trade agreements with Asia.
    Keywords: asia eu economic cooperation; asia eu trade; free trade areas
    JEL: F13 F15
    Date: 2010–12–06
  23. By: Ferguson, Shon (Dept. of Economics, Stockholm University)
    Abstract: Recent empirical evidence suggests that prices for many goods and services are higher in larger markets. This paper provides an explanation for this phenomenon when firms can choose how much to differentiate their products in a monopolistically competitive environment. The model proposes that consumers’ love of variety makes them more sensitive to product differentiation efforts by firms, which leads to higher prices in larger markets. Larger markets lead to greater variety and products that are more differentiated, which provides consumers with greater welfare despite the adverse effect of product differentiation on prices. The social planner does not charge a markup, which allows it to differentiate products more than is possible in the competitive equilibrium. The model also provides an explanation for why prices do not always fall when trade is liberalized.
    Keywords: Endogenous Technology; Market Size Effect; International Trade
    JEL: D43 F12 L13
    Date: 2010–12–09

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