nep-int New Economics Papers
on International Trade
Issue of 2005‒05‒07
eleven papers chosen by
Martin Berka
University of British Columbia

  1. FDI, Globalisation and Economic Development: Towards Reforming National and International Rules of the Game By Ajit Singh
  2. Conditional Policies in General Equilibrium By Kala Krishna
  3. Vertical Distribution, Parallel Trade, and Price Divergence in Integrated Markets By Ganslandt, Mattias; Maskus, Keith E.
  4. Fundamental dimensions of U.S. trade policy By alok k. bohara; alejandro islas camargo; theresa grijalva; kishore gawande
  5. A Review of the Empirical Literature on FDI Determinants By Bruce A. Blonigen
  6. Taxation Issues in The Jamaican External Trade Sector By Felix K. Rioja; Keith E. Maskus
  7. My Policies or Yours: Have OECD Agricultural Policies Affected Incomes in Developing Countries? By Nava Ashraf; Margaret McMillan; Alix Peterson Zwane
  8. Trade Barriers As Bargaining Outcomes By kishore gawande; hui li
  9. Tariff protection in Sweden 1885–1914 By Bohlin, Jan
  10. Intra-Industry Trade and Business Cycles in ASEAN By Carlos Cortinhas
  11. The impact of FDI on industry performance By Jürgen Bitzer; Holger Görg

  1. By: Ajit Singh
    Abstract: The key analytical and policy question examined in this paper is whether multinational companies and their overseas investment need to be regulated at the national or the international level, in order to address market failures, and to enhance their potential contribution to world welfare. The paper examines two kinds of regulatory regimes: first the current regime and second, a new regime proposed by the European community and Japan at the WTO (ECJ) to institute fresh global rules of the game which will effectively allow multinationals unfettered freedom to invest where they like, whenever they like, how much and in what products. Very briefly, the central conclusion of the paper is that ECJ, despite its important concession of confining itself to only one source of external finance namely FDI, is a flawed proposal both from the perspective of developing and developed countries. Its shortcomings are particularly serious with respect to developing countries as it essentially ignores the developmental dimension altogether. It is emphasized that although the current post-Uruguay Round FDI regime is to be preferred in relation to the ECJ, the former has, nevertheless severe deficits from a developmental perspective. These need prompt action by the international community.
    Keywords: globalisation, foreign direct investment, trade flows, WTO
    JEL: F02 F40
  2. By: Kala Krishna
    Abstract: Obtaining lower generalized system of preferences (GSP) tariffs requires meeting costly Rules of Origin (ROOs). Growing coffee in the shade is more costly, but yields a price premium. This paper analyzes the effects of such restrictions in a general equilibrium setting and shows that such policies may have unanticipated effects. It is shown that in a world with capital mobility, the GSP could result in capital outflows rather than inflows and consumer preferences for shade grown coffee end up hurting labor in developing countries. Even small subsidies that are contingent on the use of domestic intermediates can result in specialization in the targeted good. Value added contingent policies can easily lead to multiple equilibria despite the absence of externalities or market imperfections.
    JEL: F13 F15 F16
    Date: 2005–05
  3. By: Ganslandt, Mattias (The Research Institute of Industrial Economics); Maskus, Keith E. (Department of Economics)
    Abstract: We develop a model of vertical pricing in which an original manufacturer sets wholesale prices in two markets that are integrated at the distributor level by parallel imports (PI). The manufacturing firm needs to set these two prices to balance three competing interests: restricting competition in the PI-recipient market, avoiding resource wastes due to actual trade, and reducing the double-markup problem in the PI-source nation. These trade-offs imply the counterintuitive result that both wholesale and retail prices could diverge as a result of declining trading costs, even as the volume of PI increases. Thus, in some circumstances it may be misleading to think of PI as an unambiguous force for price integration.
    Keywords: Vertical Restraints; Parallel Imports; Market Integration
    JEL: F12 F15
    Date: 2005–04–15
  4. By: alok k. bohara (u. new mexico); alejandro islas camargo (itam, mexico); theresa grijalva (weber state u.); kishore gawande (texas a&m)
    Abstract: How many dimensions adequately characterize voting on U.S. trade policy? How are these dimensions to be interpreted? This paper seeks those answers in the context of voting on the landmark 1988 Omnibus Trade and Competitiveness Act. The paper takes steps beyond the existing literature. First, using a factor analytic approach, the dimension issue is examined to determine whether subsets of roll call votes on trade policy are correlated. A factor-analytic result allows the use of a limited number of votes for this purpose. Second, a structural model with latent variables is used to find what economic and political factors comprise these dimensions. The study yields two main findings. More than one dimension determines voting in the Senate, with the main dimension driven by economic interest, not ideology. Although two dimensions are required to fully account for House voting, one dimension dominates. That dimension is driven primarily by party. Based on reported evidence, and a growing consensus in the congressional studies literature, this finding is attributed to interest-based leadership that evolves in order to solve collective action problems faced by individual legislators.
    Keywords: Dimensionality; Roll call voting; Omnibus Trade Act; Interest; Ideology
    JEL: F1 F2
    Date: 2005–05–03
  5. By: Bruce A. Blonigen
    Abstract: This paper surveys the recent burgeoning literature that empirically examines the foreign direct investment (FDI) decisions of multinational enterprises (MNEs) and the resulting aggregate location of FDI across the world. The contribution of the paper is to evaluate what we can say with relative confidence about FDI as a profession, given the evidence, and what we cannot have much confidence in at this point. Suggestions are made for future research directions.
    JEL: F21 F23
    Date: 2005–05
  6. By: Felix K. Rioja (Andrew Young School of Policy Studies, Georgia State University); Keith E. Maskus
    Abstract: This report is concerned with issues of the efficiency and revenue aspects of the current Jamaican taxes on trade, including tariffs, other charges, customs valuation questions, and incentives. It also considers revenue implications of further Jamaican tariff liberalization through the World Trade Organization (WTO) as a member of the Caribbean Community (CARICOM) and through the proposed Free Trade Agreement of the Americas (FTAA). Finally, it comments on the scope for integrating tariff reform with reforms in domestic taxes in order to recoup potential revenue losses and increase the efficiency of the tax system.
    Keywords: Jamaica, External Trade Sector
    Date: 2004–12–01
  7. By: Nava Ashraf; Margaret McMillan; Alix Peterson Zwane
    Abstract: This paper seeks to understand the impact of rich-country agricultural support policies on the poor. Using non-parametric analysis we establish the fact that the majority of poor countries are currently net food importers and have been for the past thirty years. Using a a cross-country regression framework we measure the overall impact of agricultural support policies in rich countries on average income per capita in poor countries. We find some evidence that OECD support polices are positively correlated with average incomes in food-importing countries and negatively correlated with average incomes in food-exporting countries. Using the national employment and household consumption and expenditure surveys from Mexico for the period 1991-2000, we examine the implications of a reduction in the price corn on Mexico's corn farmers. We find that the poorest corn farmers in Mexico are net consumers of corn and have been largely unaffected by changes in the price of corn. Middle income corn farmers saw their real income from corn farming fall by more than fifty percent. The real income of the largest corn farmers increased by fourty percent.
    JEL: F0 O0 Q0
    Date: 2005–05
  8. By: kishore gawande (texas a&m); hui li (eastern illinois u.)
    Abstract: Whether bilateral trade barrier data conform with the Grossman-Helpman (1995) model’s predictions about “trade talks” is examined in this article. A simple form of the prediction from the model is tested. Bilateral US-Japan and US-EU data from the 1990s are employed. The results are the first in the literature.
    Keywords: Trade talks equilibrium; Nontariff barriers;
    JEL: F13 Q18 D72
    Date: 2005–05–03
  9. By: Bohlin, Jan (Department of Economic History, School of Economics and Commercial Law, Göteborg University)
    Abstract: This paper presents disaggregated estimates of nominal and effective rates of tariff protection for Sweden 1885–1914. In a methodological part of the article I argue that the proper way to measure tariff protection is an output weighted average of tariff rates for a representative sample of commodities. In the empirical part of the paper, I show that Swedish tariff protection increased substantially in the period even though tariff income as a proportion of total imports decreased slightly. This seeming contradiction is explained by the restructuring of Swedish imports that took place in the period under review; the share in imports of highly protected consumer goods declined while the share of capital goods with lower protection rates and duty free raw materials and input goods increased. The result stands in contradiction to some recent views expressed in the international literature. <p>
    Keywords: Economic History; Industrialisation; Industrial Policy; Trade Policy; Protectionism
    JEL: F13 N43
    Date: 2005–05–03
  10. By: Carlos Cortinhas (Universidade do Minho - NIPE)
    Abstract: Recently, a new resolve for both increased economic integration and monetary and exchange rate cooperation has started to emerge in ASEAN, especially since the 1997- 1998 Asian financial crisis. According to the optimum currency area theory, the degree of trade integration is one most important criterion for joining a currency union. The large increase in intra-ASEAN trade in recent years naturally raises the question of whether the ASEAN countries are becoming better prepared to form a currency union. This paper sets to test whether the recorded increase in intra-ASEAN trade is leading the ASEAN members to closer economic integration and thus to better satisfy the criteria for a common currency. Two separate models are estimated for that purpose. First, a variation of the model of Frankel and Rose (1997) was estimated for the ASEAN members. As the results were not very significant, a new methodology that uses the whole sample period data instead of dividing the data into sub-periods was conducted. The results with our own model were very significant and robust when four of the ASEAN5 countries were considered, and showed a clear positive correlation between intra-industry trade and business cycle synchronization in ASEAN. This result has important implications for the prospects of the creation of a common currency in the region.
    Keywords: Intra-Industry Trade; Business Cycle Harmonization; Economic Integration; Asean.
    JEL: F15 F33 E42
    Date: 2005
  11. By: Jürgen Bitzer (Free University Berlin Department of Economics & Institute for East European Studies); Holger Görg (Centre for Research on Globalisation & Economic Policy, School of Economics, University of Nottingham)
    Abstract: This paper investigates the productivity effects of inward and outward foreign direct investment using industry and country level data for 17 OECD countries. The paper relates to a large recent literature on productivity spillovers from inward FDI, however, we also consider the relationship between productivity and outward FDI in the same estimation. Our results show that there are, on average, productivity benefits from inward FDI, although we can identify a number of countries which, on aggregate, do not appear to benefit in terms of productivity. On the other hand, a country's stock of outward FDI is, on average, negatively related to productivity. However, again there is substantial heterogeneity in the effect across OECD countries.
    Keywords: Foreign direct investment, inward FDI, outward FDI, productivity, spillovers
    JEL: F23
    Date: 2005–05–04

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