nep-int New Economics Papers
on International Trade
Issue of 2005‒11‒12
nine papers chosen by
Martin Berka
Massey University

  1. Tariff Equivalent of Technical Barriers to Trade with Imperfect Substitution and Trade Costs By Yue, Chengyan; Beghin, John C.; Jensen, Helen H.
  2. Trade Globalization and Political Liberalization: A Gravity Approach By Miaojie YU
  3. Intra- and extra-euro area import demand for manufactures By Robert Anderton; Badi H. Baltagi; Frauke Skudelny; Nuno Sousa
  4. A Customs Union with Multinational Firms: The Automobile Market in Argentina and Brazil By Irene Brambilla
  5. Regional Trade Agreements By Richard Pomfret
  6. Cultural Effects of Trade Liberalization By Steven M. Suranovic; Robert Winthrop
  8. Foreign and Domestic Firms in Colombia:Exports, Imports and External Debt By Peter Rowland

  1. By: Yue, Chengyan; Beghin, John C.; Jensen, Helen H.
    Abstract: The price-wedge method yields a tariff-equivalent estimate of technical barriers to trade (TBT). An extension of this method accounts for imperfect substitution between domestic and imported goods and incorporates recent findings on trade costs. We explore the sensitivity of this revamped TBT estimate to its key determinants (substitution elasticity, preference for home good, and trade cost). We use the augmented approach to investigate the ongoing US-Japan apple trade dispute and find that removing the Japanese TBT would yield limited export gains to the United States. We then draw policy implications of our findings.
    Keywords: apple, Japan, SPS, TBT, technical barriers to trade, trade cost, trade dispute, WTO.
    Date: 2005–11–01
  2. By: Miaojie YU (Department of Economics, UC-Daivs)
    Abstract: This paper is an empirical investigation on the relationship between trade globalization and political liberalization. The sample is based on 157 countries from years 1957-1998, taking into consideration many social, economic, environmental, geographical, and historical factors. From this, an augmented gravity equation is estimated and evidence is found to support the prediction that political liberalization could discourage trade and trade could foster democracy.
    Keywords: Trade, Democracy, Gravity Equation
    JEL: F13 F14 P16
    Date: 2005–11–09
  3. By: Robert Anderton (European Central Bank and Special Professor at School of Economics, University of Nottingham, University Park, Nottingham NG7 2RD, United Kingdom.); Badi H. Baltagi (Department of Economics, Center for Policy Research, 426 Eggers Hall, Syracuse University, Syracuse, New York, 13244-1020, USA..); Frauke Skudelny (European Central Bank, Kaiserstrasse 29, Frankfurt am Main, Germany.); Nuno Sousa (European Commission.)
    Abstract: The aim of this paper is to improve our understanding of the key determinants of intra- and extra-euro area imports. Using a simultaneous equation estimation framework, and pooling the data across nine euro area countries as an approximation of the euro area, we estimate intra- and extra-euro area import demand functions and impose various restrictions within and across equations. We find that there are significant substitution effects between intra- and extra-euro area imports due to changes in their relative prices, while exchange rate volatility decreases trade vis-à-vis regions characterised by volatility and leads to substitution of trade away from higher-volatility regions towards lower-volatility regions.
    Keywords: Intra- and extra-euro area imports; substitution; trade integration; three stage least squares.
    JEL: F10 F15
    Date: 2005–10
  4. By: Irene Brambilla
    Abstract: This paper looks empirically into the behavior of multinational firms in international oligopolistic markets with trade balance constraints. I show how a particular form of non-tariff barrier applied at the firm level can lead to an increase in trade flows in the presence of intra-firm strategic trade. In my application, I estimate a model of demand, supply and trade policy in the automobile sector in Argentina and Brazil during 1996-1999. I measure the economic impact of a trade balance constraint that was in effect during that period and I compute predicted economic outcomes for the full adoption of a customs union, as has been agreed as part of the Mercosur negotiations, separating the sometimes opposing impacts of the removal of non-tariff barriers and the adoption of a common external tariff. Results show that the elimination of non-tariff barriers dominates the leveling of tariffs. Imports from outside of Mercosur increase under the new regime even though tariffs against these goods become more discriminatory, and exports from Brazil to Argentina decrease once the trade balance constraint is removed.
    JEL: F12 F13 F15
    Date: 2005–11
  5. By: Richard Pomfret (University of Adelaide)
    Abstract: This paper reviews the evolution of thinking about regional trade agreements (RTAs) and the policy developments reflected in three waves of RTAs during the last half century. It rejects claims, based on number of RTAs notified to the WTO, that RTAs are today more prolific than ever. Desirable and undesirable features of RTAs can be identified, but the central message of the theory of second-best about the ambiguity of outcomes remains valid. Describing many RTAs as free trade agreements distorts the meaning of “free trade” and deeper integration in some regions undermines use of the nation state as the central unit of analysis; both make it difficult to determine whether active RTAs are stepping stones or stumbling blocks to improved resource allocation.
    Keywords: trade policy; regional trade agreements
    JEL: F13 F15 F02
    Date: 2005–11–03
  6. By: Steven M. Suranovic (The George Washington University); Robert Winthrop (Bureau of Land Management, US Dept. of Interior)
    Abstract: We incorporate culture into a standard trade model in two distinct ways. In the ¡°cultural affinity from work¡± model, workers receive a non- pecuniary cultural benefit from work in a particular industry. In the ¡°cultural externality¡± model, consumers of a product receive utility from other consumer¡¯s consumption of a domestic good. We show that resistance to change due to cultural concerns can reduce the national benefits from trade liberalization. Complete movements to free trade will have a positive national welfare impact in the cultural affinity case whereas it may lower national welfare in the cultural externality case. We also show that a loss of cultural benefits is more likely to occur in the externality model.
    Keywords: Cigarettes, smoking, addiction, Behavioral economics
    JEL: F1 Z1 F11 F16
    Date: 2005–11–08
  7. By: Sarbajit Chaudhuri (Dept. of Economics, Calcutta University)
    Abstract: Developing countries have been facing substantial adjustment costs in their endeavor in implementing trade reform. To lessen the adjustment costs of trade reform and to diffuse political support for protection a uniform tariff policy has often been recommended. The present paper examines the efficacy of this policy in terms of a 3„e4 specific factor full-employment structure reasonable for a developing economy. It shows that whether a symmetric tariff structure would be able to protect all the import-competing sectors crucially depends on the economy¡¦s trade pattern. The paper is then extended to include Harris-Todaro type unemployment of unskilled labour. In this framework also the implications of the uniform tariffs and then welfare effects of tariffs on one sector have been studied. Finally, the consequences of tariffs on urban unemployment of unskilled labour have been examined.
    Keywords: Full-employment, specific factor, uniform tariffs, Hechscher- Ohlin subsystem, skilled labour, unskilled labour, urban unemployment
    JEL: F2 O10 O41
    Date: 2005–11–09
  8. By: Peter Rowland
    Abstract: This is the third of three papers investigating the differences between foreign and domestic firms in Colombia. The study uses a dataset containing the 2003 balance sheets and income statements for some 7,001 firms obtained from the Superintendencia de Sociedades. This dataset is crossed with a database of the Banco de la República, containing data on exports, imports and external debt. Foreign firms are shown to both export and import more than their domestic counterparts. Foreign firms are also shown to hold much more external debt than their domestic counterparts. The paper also studies different business sectors, and it is shown that there are large variations between different sectors in terms of exports, imports and external debt.
  9. By: Allen J. Scott (UCLA)
    Abstract: Regional push derives from the geographic agglomeration of economic activities, and is expressed in increments to national productivity. Various pieces of statistical evidence in favor of the existence of regional push effects in low- and middle-income economies are marshalled. The origins of these effects in different sorts of externalities and increasing returns to agglomerative scale and scope are analyzed in theoretical terms. Further evidence for the existence of these effects is displayed in a brief review of published case studies of African, Asian, and Latin American regions. A number of observations are then offered on the possibilities of identifying viable developmental policies and practices directed to enhancing the productivity-boosting properties of regions in low- and middle-income economies.
    Keywords: Agglomeration, big push, regional development, developing countries, local economic development
    JEL: O P
    Date: 2005–11–07

This nep-int issue is ©2005 by Martin Berka. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.