nep-int New Economics Papers
on International Trade
Issue of 2005‒09‒11
fourteen papers chosen by
Martin Berka
Massey University

  1. On Measurements of the Factor Content of Trade: - The Case of Sweden By Widell, Lars
  2. TRANSPACIFIC TRADE IMBALANCES: CAUSES AND CURES By Jong-Wha Lee; Warwick J. McKibbin; Yong Chul Park
  3. The Poverty Impacts of the Doha Round in Cameroon: the Role of Tax Policy By Christian Arnault Emini; John Cockburn; Bernard Decaluwe
  4. The Australia–US Free Trade Agreement: An Assessment By Philippa Dee
  5. Trade Policy at the Crossroads - The Indonesian Story By David Vanzetti; Greg McGuire; Prabowo
  6. Trade Liberalization, Skill-Linked Intermediate and Two-Sided Wage Gap By Sugata Marjit; Rajat Acharyya
  7. Trade Theory and the Role of Time Zones By Sugata Marjit
  8. Trade liberalization and the evolution of skill earnings differentials in Brazil By Gustavo Gonzaga; Naércio Menezes Filho; Maria Cristina Terra
  9. Trade Credit as Collateral By Massimo Omiccioli
  10. Collateral Damage: Trade Disruption and the Economic Impact of War By Reuven Glick; Alan M. Taylor
  11. Informaility, Corruption and Trade Reform By Sugata Marjit; Amit Biswas
  12. Antidumping : a problemin international trade By Zanardi,Maurizio
  13. Globalisation and Monetary Policy By Paul Cavelaars
  14. Autarkic Indeterminacy and Trade Determinacy By Nicholas Sim; Kong-Weng Ho

  1. By: Widell, Lars (Department of Business, Economics, Statistics and Informatics)
    Abstract: In this paper we evaluate different measurement practices when calculating the human capital content of a country's net trade. The calculations are performed using a structural measure developed by Lundberg & Wiker (1997) that relates the average factor input requirements in exports relative to those in imports. We find the calculations highly dependent on measurement practice when performing those on a cross-section for a single year. However, when calculating the human capital content of trade over time instead, the inclusion of service sectors in the trade vector as well as variable factor input requirements seem to be very important. <p>This paper then continues with an empirical evaluation of the human capital content of Swedish trade in 1986-2000. We find that during the period 1986-1992, the average human capital intensity in exports relative to imports was slightly increasing, mirroring an increased specialization in human capital-intensive production. After 1992, though, there is a rapid decrease in the human capital content of trade in exports relative to imports. In 1995 there is a recovery, but the recovery seems both to be leveling out and turning down in the late 1990's. In this paper we also draw the conclusion that a well functioning educational system is important for a country's comparative advantage.
    Keywords: Factor content of trade; educational policy; high skilled labor
    JEL: F11 I28 J24
    Date: 2005–08–12
  2. By: Jong-Wha Lee; Warwick J. McKibbin; Yong Chul Park
    Abstract: This paper explores the causes of the transpacific trade imbalances using an empirical global model. It also evaluates the impact of various policies to reduce these imbalances. We find that the fundamental cause of trade imbalance since 1997 is changes in saving-investment gaps, attributed to the surge of the US fiscal deficits and the decline of East Asia's private investment after the 1997 financial crisis. Our stimulation results show that a revaluation of East Asia's exchange rates by 10 percent (effectively a shift in monetary policy) cannot resolve the imbalances. We find East Asia's concerted efforts to stimulate aggregate demand can have significant impacts on trade balances globally, but the impact on the US trade balance is not large. US fiscal contraction is estimated to have large impacts on the US trade position overall and on the bilateral trade imbalances with East Asian economies. These results suggest that in order to improve the transpacific imbalance, macroeconomic adjustment will need to be made on both sides of the Pacific.
    JEL: F32 F42
  3. By: Christian Arnault Emini; John Cockburn; Bernard Decaluwe
    Abstract: The aim of this chapter is to assess the possible impacts of the Doha round of negotiations on poverty in Cameroon. During the recent period of economic recovery, Cameroon has enjoyed a sharp decline in poverty with the headcount index falling from 53.3 percent of inhabitants in 1996 to 40.2 percent in 2001, mostly thanks to economic growth rather than redistribution. Will the current trade negotiations under the Doha Round reinforce or curb this trend? We apply a CGE microsimulation model which involves 10,992 households in order to address this question. The Doha Round is found to be poverty reducing for Cameroon. For the whole country, the estimate of net number of people who are lifted out of poverty is 22,000 following this scenario. Further investigations indicate that more ambitious world trade liberalization leads to greater poverty alleviation at the national level, while Cameroon's domestic trade liberalization has adverse poverty and inequality impacts - despite giving rise to higher aggregate welfare. Under the Doha scenario, the cuts in Cameroon's tariffs in the Doha scenarios are very small (the average tariff rate moves from 11.79 percent in the base run to merely 11.66 percent) so that ROW liberalization effects on world prices more than offset the adverse own liberalization effects in this scenario. If the Rest of the World (ROW) and Cameroon full trade liberalizations are combined, the adverse impacts of own liberalization outweigh the favourable outcomes of the ROW liberalizations. Our results suggest furthermore that the choice of tax replacement instrument canhaave an important bias in poverty impacts: poverty gets worse in our country-case study when using an imperfect VAT instead of a neutral replacement tax to compensate lost tariff revenue, and gets even worse when using consumption tax. Key reasons here are the Chapter 12 in Putting Development Back into the Doha Agenda: Poverty Impacts of a WTO Agreement, Thomas W. Hertel and L. Alan Winters (eds) forthcoming from the World Bank, Washington, DC.
    Keywords: Computable General Equilibrium, Microsimulation, International Trade, Poverty, Cameroon
    JEL: D33 D58 E27 F13 F14 I32 O15 O53
    Date: 2005
  4. By: Philippa Dee (Australia Japan Research School)
    Abstract: Australia and the United States signed a bilateral trade agreement in 2004. This paper analyses the provisions of the agreement, compares the provisions with other bilateral and multilateral agreements and comments on the modelling that the Australian Government used to estimate the likely benefits of the agreement. The author concludes that the modelling relied on overstates the potential gains from the agreement, which establishes many undesirable precedents, especially in relation to sugar, rules of origin, safeguard provisions and intellectual property. The author argues that bilateral agreements of this type could be severely disruptive to future trade relations within the Asian region, particularly with China.
    Keywords: Australia, Japan, free-trade agreement, intellectual property
    JEL: F13 F14 F15 O34
    Date: 2005–01
  5. By: David Vanzetti (Asia Pacific School of Economics and Government, The Australian National University); Greg McGuire (United Nations Support Facility for Indonesia Recovery); Prabowo (United Nations Support Facility for Indonesia Recovery)
    Abstract: Indonesia provides an interesting case study of the potential benefits and costs of alternative trade strategies that are under active consideration in many developing countries. The ASEAN region has recently announced a deepening of its commitments and is considering widening the agreement to include countries such as China, Japan and the Republic of Korea. A bilateral agreement with the United States is also a possibility. Against this background, Indonesia’s options on trade policy range from increasing protection to actively pursuing bilateral, regional and multilateral initiatives.
    Keywords: Indonesia, trade policy, United States, US, ASEAN, Japan, bilateral agreement, protection, incentive
    JEL: F13 O31 F14 F15
    Date: 2005–01
  6. By: Sugata Marjit (Department of Economics and Finance, City University of Hong Kong); Rajat Acharyya (Department of Economics, Jadavpur University, Calcutta)
    Abstract: An interesting contemporary reserach question in trade theory deals with the possibility of rising wage inequality across the globe. A few possible explanations have been provided so far. We provude a natural expplanation and a rigerous proff of the phenomenon by arguing that liberalizing trade in skill linked intermediate product is likely to increase skilled-unskilled wage gap across the globe. Our model has the feature that a trade induced shock can reduce the price of the skill-intensive traded good and raise the skilled-uinskilled wage gap at the same time.
    Keywords: Wage gap, liberalization, skill-linked intermediate, North-South trade
    JEL: F11 F13 J31
    Date: 2005–01
  7. By: Sugata Marjit (Department of Economics and Finance, City University of Hong Kong)
    Abstract: International time difference, due to the location of countries in different time zones, determines pattern of trade in a vertically integrated Ricardian model. The idea is related to service trade in the information technology sector. Technoloigcal progress helps in generating trade through "nature" driven comparitive advantage. Time-difference emerges as an independant driving force of international trade besides taste, technology and endowment. Our model also predicts the free transfer of technology will improce global welfare.
    Keywords: Comparitive advantage, time zone
    JEL: F11
    Date: 2004–11
  8. By: Gustavo Gonzaga (Department of Economics PUC-Rio); Naércio Menezes Filho (IBMEC-SP and USP); Maria Cristina Terra (EPGE/FGV)
    Abstract: Skilled labor earnings differentials decreased during the trade liberalization implemented in Brazil from 1988 to 1995. This paper investigates the role of trade liberalization in explaining these relative earnings movements. We perform several independent empirical exercises that check the traditional trade transmission mechanism, using disaggregated data on tariffs, prices, earnings, employment and skill intensity. We find that: i) employment shifted from skilled to unskilled intensive sectors, and each sector increased its relative share of skilled labor; ii) relative prices fell in skill intensive sectors; iii) tari¤ changes across sectors were not related to skill intensities, but the pass-through from tariffs to prices was larger in skill intensive sectors; iv) the decline in skilled earnings differentials mandated by the price variation predicted by trade was even larger than the observed one. The results are compatible with trade liberalization accounting for the observed relative earnings changes in Brazil. They also highlight the importance of considering the effects of differentiated pass-through from tariffs to prices.
    JEL: F13 J21
    Date: 2005–08
  9. By: Massimo Omiccioli (Bank of Italy, Economic Research Department)
    Abstract: A remarkable feature of short-term business finance is the widespread use of trade credit as collateral in bank borrowing, especially by small and medium-sized firms. The paper models the incentives for a firm to collateralize accounts receivable as a trade-off between the benefit from lower interest rates and the implicit cost from the disclosure of private information associated with this form of collateral. The model shows that the share of receivables pledged as collateral is larger: i) when the borrowing firm is riskier (and the difference in interest rates between secured and unsecured lending is larger); ii) when information disclosure costs for the firm are lower (e.g., when the information is dispersed among many banks and firm’s assets are mostly made up of tangibles); iii) when the default correlation between sellers and buyers is lower; iv) when the legal protection of creditors is weaker (and suppliers have a stronger advantage over banks in monitoring and enforcing loan contracts). These predictions are supported by empirical evidence in a sample of 7,250 Italian firms.
    Keywords: trade credit, collateral, information disclosure
    JEL: G32 G33 L15
    Date: 2005–06
  10. By: Reuven Glick; Alan M. Taylor
    Abstract: Conventional wisdom in economic history suggests that conflict between countries can be enormously disruptive of economic activity, especially international trade. Yet nothing is known empirically about these effects in large samples. We study the effects of war on bilateral trade for almost all countries with available data extending back to 1870. Using the gravity model, we estimate the contemporaneous and lagged effects of wars on the trade of belligerent nations and neutrals, controlling for other determinants of trade. We find large and persistent impacts of wars on trade, and hence on national and global economic welfare. A rough accounting indicates that such costs might be of the same order of magnitude as the "direct" costs of war, such as lost human capital, as illustrated by case studies of World War I and World War II.
    JEL: D74 F02 F10 F14 H56 N40 N70
    Date: 2005–08
  11. By: Sugata Marjit (Department of Economics and Finance, City University of Hong Kong); Amit Biswas (Viswasharati University, india)
    Abstract: Stringent regulations coupled with corruption generate and sustain extra legal or informal transactions in the developing countries. Does trade related reform discourage informal activities and corruption? This appears attempts to analyze such a phenomenon. An import competing firm allocates production between a high wage formal and a low wage informal segment. Illegal use of labour in the informal sectior is characterized by a probability of punishment which depends on the size of the informal output. In such a structure, as tariff comes down, total employment contracts but the informal sector expands. However, lowering of interest rate, possibly through the liberalization of capital account, tends to reduce the size of the informal segment. Hence, trade reforms may have conflicting impact on informaility and corruption.
    Keywords: Trade liberalization, informal sector, corruption
    JEL: F11 H2
    Date: 2004–12
  12. By: Zanardi,Maurizio (Tilburg University, Center for Economic Research)
    Abstract: When in 1923 Jacob Viner wrote the book "Dumping: A Problem in International Trade", he probably did not imagine that the system put in place to eliminate the effects of dumping (i.e. antidumping) would surge to be a problem. However, as we celebrate the 100th anniversary of the first antidumping law, the situation is quite different from what Viner could observe at the beginning of last century. And if his economic analysis on the nature and causes of dumping is still valid, since the early 1990s the debate has centered on the widespread use and consequences of antidumping, which is just a modern protectionist tool used by many countries. This paper documents the evolution of antidumping from its early days by looking at the number of countries adopting antidumping laws and various statistics pertaining to the total caseload. One striking result is the important role of new users of antidumping, with negative consequences not only for traditional users.
    Keywords: WTO;antidumping; trade liberalization;GATT
    JEL: F13 F14
    Date: 2005
  13. By: Paul Cavelaars
    Abstract: This paper studies the implications of globalisation for the effectiveness of monetary policy in large open economies, such as the euro area and the United States. The analysis allows for imperfect competition and an endogenous home bias in consumption. I find that globalisation (a reduction in the costs of international trade) causes a monetary expansion to have a larger (smaller) e¤ect on prices (output). To the extent that globalisation also induces stronger competition in the goods market, I find that its impact on the incentive for activist monetary policy is ambiguous. Finally, globalisation reduces the beggary-thy-neighbour effects of monetary policy.
    Keywords: trade costs; openness; monetary policy.
    JEL: F15 F41
    Date: 2005–08
  14. By: Nicholas Sim (Boston College); Kong-Weng Ho (National University of Singapore)
    Abstract: Most existing evidences for indeterminacy are obtained from analyzing models that do not consider trade. This paper considers an extension of Nishimura and Shimomura (Journal of Economic Theory, 2002) Heckscher-Ohlin framework by removing sector-specific externalities in one country while maintaining all other assumptions previously made by the authors. We show that even though indeterminacy arises under autarky, it can be eliminated when trade takes place with another country exhibiting saddle-path stability. Consequently, support for indeterminacy from calibrating an autarkic framework should be treated with some degree of caution.
    Keywords: E32, F00, F11, F43
    Date: 2005–08

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