nep-int New Economics Papers
on International Trade
Issue of 2005‒07‒25
twelve papers chosen by
Martin Berka
University of British Columbia

  1. The relationship between REER and trade flows in the context of the equilibrium exchange rate By Reimo Juks
  2. Do Countries Free Ride on MFN? By Rodney Ludema (Georgetown University)and Anna Maria Mayda (Georgetown University and CEPR)
  4. Does external trade promote financial development? By Yongfu Huang; Jonathan Temple
  5. The Erosion of Tariff Preferences: The Impact of U.S. Tariff Reductions on Developing Countries By Kara Reynolds
  6. Arms Trade Offsets and Development By Jurgen Brauer; J Paul Dunne
  7. The impact of Scandinavian economies on Estonia via foreign trade and direct investments By Laura Ehrlich; Ülo Kaasik; Anu Randveer
  8. Trade Policy Reforms and the Structure of Protection in Vietnam By Prema-chandra Athukorala
  9. ¿Se ha liberalizado el comercio de servicios en los acuerdos comerciales de EEUU? El caso de NAFTA y los TLC con Chile y Singapur. By Alejandra RANGEL; Catalina DELGADO; Jorge CEPEDA; Germán MUÑOZ
  10. Production Fragmentation and Trade Integration: East Asia in a Global Context By Prema-chandra Athukorala; Nobuaki Yamashita
  11. Should We Set the Market Free? Some Notes on International Economic Sanctions By Raul Caruso
  12. Putting a Smiley Face on the Dragon: Wal-Mart as Catalyst to U.S.-China Trade By Emek Basker; Pham Hoang Van

  1. By: Reimo Juks
    Abstract: The paper focuses on the time-series analysis of the traditional trade equations. The results from the cointegration, ARDL and Granger causality analyses of trade elasticities cast some doubt on the usefulness of the internal-external balance approach to the equilibrium exchange rate. The long-run impact of the REER on trade flows turned out to be statistically insignificant, being independent of method and specification of the model employed. The latter implies a secondary role for the REER in achieving a sustainable position of external balance.
    Date: 2003–11–20
  2. By: Rodney Ludema (Georgetown University)and Anna Maria Mayda (Georgetown University and CEPR) (Department of Economics, Georgetown University)
    Abstract: The Most-Favored Nation (MFN) clause has long been suspected of creating a free rider problem in multilateral trade negotiations. To address this issue, we model multilateral negotiations as a mechanism design problem with voluntary participation. We show that an optimal mechanism induces only the largest exporters to participate in negotiations over any product, thus providing a rationalization for the Principal supplier rule. We also show that, through this channel, equilibrium tariffs vary according to the Herfindahl index of export shares: higher concentration in a sector reduces free riding and thus causes a lower tariff. Estimation of our model using sector-level tariff data for the U.S. provides strong support for this relationship. Classification-JEL Codes: F13, D7
    Keywords: Most-Favored Nation (MFN) clause, free riding, Principal supplier rule
  3. By: Ricardo Arguello; Ernesto Valenzuela
    Abstract: This study contributes to the economic assessment of further trade liberalization in the Western Hemisphere over the Andean Community member countries. The most significant trade liberalization scenarios are identified and simulated by means of the standard, constant returns to scale, GTAP model. The main results show little coincidence in the direction of welfare changes for the Andean countries under the four scenarios analyzed. In a very simplified way, further trade liberalization brings welfare losses for Colombia, Peru, and Ecuador-Bolivia, while Venezuela experiences gains under the implementation of the Free Trade Area of the Americas and loses under the implementation of Free Trade Agreements of the other Andean countries with the U.S. Terms of trade effects play a significant role in determining this outcome. In general, they move against these economies, with the notorious exception of Venezuela. It appears that Andean countries have benefited in the past from trade deviation from other regions as they entered into preferential trade agreements. With the erosion of preferential market access embodied in the scenarios simulated, the increase in competition at the import and export levels tend to adjust the standing of these countries, bringing in new challenges for them.
    Keywords: Trade liberalization
    JEL: F13
    Date: 2005–06–01
  4. By: Yongfu Huang; Jonathan Temple
    Abstract: Several recent papers have argued that trade and financial development may be linked, either for political economy reasons, or because foreign competition and exposure to shocks lead to changes in the demand for external finance. In this paper we use the cross-country and time-series variation in openness to study the relationship between trade and finance in more detail. Our results suggest that increases in goods market openness are typically followed by sustained increases in financial depth.
    Keywords: openness, trade, financial development.
    JEL: F13 O16
    Date: 2005–07
  5. By: Kara Reynolds (American University)
    Abstract: The Generalized System of Preferences (GSP), the program instituted in 1976 that allows developing countries to export thousands of products to the United States duty-free, is an important element of U.S. efforts to promote economic growth in the developing world. However, since the program's inception U.S. tariff rates have fallen significantly, thus potentially reducing the ability of the GSP program to encourage U.S. imports from beneficiary countries. This paper estimates the impact of U.S. tariff reductions on imports from the developing world using a panel of import data from 76 countries and 2,389 GSP-eligible products between 1998 and 2001. It finds that reductions in U.S. tariff rates have diminished imports from developing countries significantly, although some countries have been impacted more than others.
    Keywords: Generalized System of Preferences, GSP, Trade Diversion, Preferential Tariffs
    JEL: F13 F15 O1
    Date: 2005–07–18
  6. By: Jurgen Brauer (Augusta State University); J Paul Dunne (School of Economics, University of the West of England)
    Abstract: Offsets, arrangements that obligate the arms seller to reinvest (“offset”) arms sales proceeds in the purchasing country, are an increasingly important facet of the international trade in arms. They are used to justify spending on imports by promises that there will be significant benefits to the economy, through the promotion and development of local industry, technology and employment. Until recently, however, there has been little research on how well offsets work in practice. This paper is a ‘state-of-the-art’ review of our empirical knowledge regarding arms trade offsets. We find virtually no case where offset arrangements have yielded unambiguous net benefits for a country’s economic development. As a general rule arms trade offset deals are more costly than ‘off-the-shelf’ arms purchases, create little by way of new or sustainable employment, do not appear to contribute in any substantive way to general economic development, and with very few exceptions do not result in significant technology transfers, not even within the military sector.
  7. By: Laura Ehrlich; Ülo Kaasik; Anu Randveer
    Abstract: The paper focuses on the benefits, challenges and risks of the Estonian economy stemming from close relations with its main foreign partners Finland and Sweden, through foreign direct investments and foreign trade. The paper gives a short overview of Finnish and Swedish economies to provide a background for the analysis of the characteristics of FDI and trade flows between Estonia and these countries. As Estonia is a very small and open economy main benefits and challenges are related to it. The authors find that FDI from Finland and Sweden increase the credibility of Estonian economy, but as foreign investment flows are subject to push factors they have the potential of destabilising capital flows, because these two countries make over 70% of FDI into Estonia. The authors also find that the dynamics of Estonian exports to Finland and Sweden (which make more than half of total exports) is generally determined by the demand factors of those countries.
  8. By: Prema-chandra Athukorala
    Abstract: This paper examines the current state of the trade policy regime in Vietnam against the backdrop of market-oriented policy reforms undertaken over the past one-and-a-half decades. The core of the paper is an in-depth analysis of the structure of protection, focussing on both incentives for import-competing production the bias in the incentive structure against export production compared to import-competing production. It is found that, despite notable reform efforts, the structure of protection in Vietnam is still out of line with that of the major trading nations in the region, in terms of the level and the inter-industry dispersion of nominal and effective protection rates. There is a clear ani-export bias in the incentive structure, even though the degree of the bias has considerably declined over the years. There is no evidence to justify the existing protection structure on grounds of infant industry protection or employment generation.
    Keywords: Length (pages): 45
    Date: 2005–04
  9. By: Alejandra RANGEL; Catalina DELGADO; Jorge CEPEDA; Germán MUÑOZ
    Abstract: Debido a la importancia de los servicios en la producción, el empleo y el comercio internacional, la eliminación de las barreras al comercio de este sector y su consecuente liberalización, se ha convertido en uno de los principales objetivos de las negociaciones comerciales llevadas a cabo en los últimos años. Dado que Colombia se encuentra actualmente impulsando la negociación de un tratado bilateral con Estados Unidos, resulta conveniente examinar los últimos tratadosfirmados por este país a fin de establecer el grado de liberalización de los países en el sector servicios. Para esto, se requiere una metodología que tenga en cuenta que las barreras al comercio en este sector no son aranceles -como en el comercio de bienes- sino regulaciones internas de los países. En este documento, se empleó el tradicional índice de Hoekman para comparar algunos acuerdos firmados por Estados Unidos, el TLCAN con México y Canadá y los TLC con Chile y Singapur. La metodología muestra que, en promedio, el tratado menos liberal es el firmado entre EEUU y Chile, y el más abierto es el TLCAN. Sin embargo, el grado de liberalización de Estados Unidos cambia en cada uno de los tratados, lo mismo sucede por sectores.
    Keywords: comercio de servicios
    Date: 2005–01–26
  10. By: Prema-chandra Athukorala; Nobuaki Yamashita
    Abstract: This paper examines the implications of international production fragmentation for analysing global and regional trade patterns, with special emphasis on countries in East Asia. It is found that, while 'fragmentation trade' has generally grown faster than total world manufacturing trade, the degree of dependence of East Asia on this new form of international specialisation is proportionately larger compared to North America and Europe. International production fragmentation has certainly played a pivotal role in continuing dynamism of the East Asian economies and increasing intra-regional economic interdependence. There is, however, no evidence to suggest that this new form of international exchange has contributed to lessoning the regions dependence on the global economy. On the contrary, growth dynamism based on vertical specialisation depends inexorably on extra-regional trade in final good, and this dependence has in fact increased over the years.
    Keywords: production fragmentation, vertical specialisation, regional integration Length (pages): 48
    JEL: F15 F23 O53
    Date: 2005
  11. By: Raul Caruso (Università Cattolica del Sacro Cuore)
    Keywords: International Political economy, International economic sanctions, international trade
    JEL: F1 F2
    Date: 2005–07–22
  12. By: Emek Basker (Department of Economics, University of Missouri-Columbia); Pham Hoang Van (Department of Economics, University of Missouri-Columbia)
    Abstract: Retail chains and imports from developing countries have grown sharply over the past 25 years. Wal-Mart’s chain, which currently accounts for 10% of U.S. imports from China, grew 10-fold and its sales 90-fold over this period, while U.S. imports from China increased 30-fold. We relate these trends using a model in which scale economies in retail interact with scale economies in the import process. Combined, these scale economies amplify the effects of technological change and trade liberalization. Falling trade barriers increase imports not only through direct reduction of input costs but also through an expanded chain and higher investment in technology. This mechanism can explain why a surge in U.S. imports followed relatively modest tariff declines and why Wal-Mart abandoned its “Buy American” campaign in the 1990s. Also consistent with these facts, we show that tariff reductions have a greater effect the more advanced the retailer’s technology. The model has implications for the pace of the product cycle and sheds light on the recent apparent acceleration in foreign outsourcing.
    Keywords: Wal-Mart, Trade, Increasing Returns
    JEL: L11 L81 F12
    Date: 2005–07–20

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