nep-int New Economics Papers
on International Trade
Issue of 2006‒01‒29
fourteen papers chosen by
Martin Berka
Massey University

  1. What You Export Matters By Hausmann, Ricardo; Hwang, Jason; Rodrik, Dani
  2. Service Offshoring, Productivity and Employment: Evidence from the US By Amiti, Mary; Wei, Shang-Jin
  3. Economic Effects of Free Trade between the EU and Russia By Pekka Sulamaa; Mika Widgrén
  4. A Dual Policy Paradox: Why Have Trade and Immigration Policies Always Differed in Labour-Scarce Economies? By Hatton, Timothy J.; Williamson, Jeffrey G
  5. Protection for Sale Made Easy By Baldwin, Richard; Robert-Nicoud, Frédéric
  6. Asian Regionalism versus Global Free Trade: A Simulation Study on Economic Effects By Pekka Sulamaa; Mika Widgrén
  7. Employment Dynamics and Openness to Trade in Finnish Manufacturing By Satu Nurmi
  8. Does Bilateralism Promote Trade? Nineteenth Century Liberalization Revisited By Accominotti, Olivier; Flandreau, Marc
  9. A New International Division of Labour in Europe: Outsourcing and Offshoring to Eastern Europe By Marin, Dalia
  10. Russian Regions and Their Foreign Trade By Sergey Sutyrin; Vladimir Sherov
  11. National Treatment in the GATT By Horn, Henrik
  12. Impact analysis of cotton subsidies on poverty: A CGE macro-accounting approach applied to Mali By Dorothée Boccanfuso; Luc Savard
  13. Bangladesh 2020: An Analysis of Growth Prospect and External Sector Behaviour By Debapriya Bhattacharya; Uttam Kumar Deb
  14. The Factor Intensity of Accession and EU15 Countries´ Comparative Advantage in the Internal Market By Ville Kaitila

  1. By: Hausmann, Ricardo; Hwang, Jason; Rodrik, Dani
    Abstract: When local cost discovery generates knowledge spillovers, specialization patterns become partly indeterminate and the mix of goods that a country produces may have important implications for economic growth. We demonstrate this proposition formally and adduce some empirical support for it. We construct an index of the 'income level of a country's exports,' document its properties, and show that it predicts subsequent economic growth.
    Keywords: growth; productivity; specialization
    JEL: F1 O4
    Date: 2006–01
  2. By: Amiti, Mary; Wei, Shang-Jin
    Abstract: The practice of sourcing service inputs from overseas suppliers has been growing in response to new technologies. This paper estimates the effects of offshoring on productivity in US manufacturing industries between 1992 and 2000, using instrumental variables estimation to address the potential endogeneity of offshoring. It finds that service offshoring has a significant positive effect on productivity in the US, accounting for around 11% of productivity growth during this period. Offshoring material inputs also has a positive effect on productivity, but the magnitude is smaller accounting for approximately 5% of productivity growth. There is a small negative effect of less than half a percent on employment when industries are finely disaggregated (450 manufacturing industries). However, this affect disappears at more aggregate industry level of 96 industries indicating that there is sufficient growth in demand in other industries within these broadly defined classifications to offset any negative effects.
    Keywords: employment; offshoring; outsourcing; productivity; services
    JEL: F1 F2
    Date: 2006–01
  3. By: Pekka Sulamaa; Mika Widgrén
    Keywords: EU, Russia, free trade, integration
    JEL: F15 F17
    Date: 2005–03–30
  4. By: Hatton, Timothy J.; Williamson, Jeffrey G
    Abstract: Today's labour-scarce economies have open trade and closed immigration policies, while a century ago they had just the opposite, open immigration and closed trade policies. Why the inverse policy correlation, and why has it persisted for almost two centuries? This paper seeks answers to this dual policy paradox by exploring the fundamentals which have influenced the evolution of policy: the decline in the costs of migration and its impact on immigrant selectivity, a secular switch in the net fiscal impact of trade relative to immigration, and changes in the median voter. The paper also offers explanations for the between-country variance in voter anti-trade and anti-migration attitude, and links this to the fundamentals pushing policy.
    Keywords: history; immigration restriction; policy; tariffs
    JEL: F22 J1 O1
    Date: 2006–01
  5. By: Baldwin, Richard; Robert-Nicoud, Frédéric
    Abstract: Formal analysis of the political economy of trade policy was substantially redirected by the appearance of Gene Grossman and Elhanan Helpman's 1994 paper, 'Protection for Sale'. Before that article a fairly wide range of approaches were favoured by various authors on various issues, but afterwards, the vast majority of theoretical tracts on endogenous trade policy have used the Protection for Sale framework (PFS for short) as their main vehicle. The reason, of course, is that the framework is both respectable - because its microfoundations are distinctly firmer than were those of the earlier lobbying approaches - and it is very easy to work with. Despite the popularity of the PFS framework, it appears that no one has presented a simple diagram that illustrates how the PFS frameworks and explains why it is so easy. This short note aims to remedy that omission.
    Keywords: endogenous protection; protection for sale
    JEL: H32 P16
    Date: 2006–01
  6. By: Pekka Sulamaa; Mika Widgrén
    Keywords: free trade, regionalism, GTAP model, F15; F17
    Date: 2005–06–01
  7. By: Satu Nurmi
    Keywords: job flows, worker flows, internationalisation, manufacturing
    JEL: F16 J21 J23 L60
    Date: 2004–12–02
  8. By: Accominotti, Olivier; Flandreau, Marc
    Abstract: Textbook accounts of the Anglo-French trade agreement of 1860 argue that it heralded the beginning of a liberal trading order. This alleged success has much interest from a policy point of view: unlike modern GATT/WTO multilateral agreements, it rested on bilateral negotiations. But, in reality, how great were its effects? With the help of new data on international trade we provide empirical evidence. We find that the Anglo-French treaty and subsequent network of Most Favoured Nation (MFN) trade agreements coincided with the end of a period of unilateral liberalization across the world, and that it did not contribute to expand trade at all. This is contrary to a deeply rooted belief among economists and economic historians. We conclude that, contrary to a popular wisdom, bilateralism did not promote trade in the 19th century.
    Keywords: Anglo-French treaty; bilateralism; liberalization; MFN; multilateralism; trade policy
    JEL: F31 N32
    Date: 2006–01
  9. By: Marin, Dalia
    Abstract: Europe is reorganizing its international value chain. I document these changes in Europe’s international organization of production with new survey data of Austrian and German firms investing in Eastern Europe. I show estimates of the share of intra-firm trade between Austria and Germany on the one hand and Eastern Europe on the other. Furthermore, I present empirical evidence of the drivers of the new division of labour in Europe. I find among other things that falling trade costs and falling corruption levels as well as improvements in the contracting environment in Eastern Europe are affecting the level of intra-firm imports from Eastern Europe. They are also favouring outsourcing over offshoring. Low organizational costs of hierarchies and large costs of hold-up (when there are no alternative investors in Old Europe or no alternative suppliers in Eastern Europe) are favouring offshoring over outsourcing. Tax holidays granted by host countries in Eastern Europe also mildly affect the organizational choice.
    Keywords: comparative advantage in Eastern Europe; contract enforcement; empirical test of the theory of the firm; intra-firm trade; the empirics of global sourcing
    JEL: D23 D51 F11 L14 O11
    Date: 2006–01
  10. By: Sergey Sutyrin; Vladimir Sherov
    Keywords: Russia, regional diversity, import intensity, custom, price level, incomes and expenditures per capita
    Date: 2005–12–20
  11. By: Horn, Henrik
    Abstract: The National Treatment clause (NT) is the first-line defence in the GATT (and in most other trade agreements) against opportunistic exploitation of the inevitable incompleteness of the agreement. This paper examines the role of NT as it applies to internal taxation under the GATT. It is shown that despite severely restricting the freedom to set internal taxes, NT may improve government welfare. But it will not completely solve the incomplete contract problem it is meant to remedy. Furthermore, it requires a high degree of economic sophistication on behalf of trade negotiators in order for this beneficial effect to materialize.
    Keywords: GATT; National Treatment; non-discrimination; trade agreement; WTO
    JEL: F13
    Date: 2006–01
  12. By: Dorothée Boccanfuso (GREDI, Faculte d'administration, Université de Sherbrooke); Luc Savard (GREDI, Faculte d'administration, Université de Sherbrooke)
    Abstract: In this paper, we construct the first country specific CGE model for Mali with a micro-simulation component to analyze the poverty and inequality changes of removing cotton subsidies in developed countries. We used the macro-accounting approach proposed by Chen and Ravallion (2004). This issue has attracted significant attention as is has contributed to stall the broader trade agenda. Research on the issue has been mainly done with partial equilibrium analysis with a few exceptions. We use the first CGE-micro-simulation model to investigate. A 17 sectors CGE model with almost 5000 households is used to demonstrate that removal of subsidies on cotton will contribute to significant decrease in poverty in Mali. Our results show that combining the cotton subsidies removal to other agricultural subsidies does not attenuate the positive effects observed. We also show that the subsidies removal would marginally contribute to decrease inequality in Mali.
    Keywords: computable general equilibrium model, micro-simulation, poverty analysis, income distribution, agricultural subsidies
    JEL: D58 D31 I32 Q17
    Date: 2006
  13. By: Debapriya Bhattacharya; Uttam Kumar Deb
    Abstract: External factors such as export, import, remittances and foreign aid have always played important rolesto Bangladesh’s economy, though the relative importance of various external factors has changed over time. This study has analysed the trend, structure and changing features of the external sector of Bangladesh. Based on the past performance and changes in the global economy, the study has projected the growth prospect and likely behaviour of Bangladesh’s external sector under three scenarios: (i) optimistic scenario (8% GDP growth per annum), (ii) business as usual scenario (6% GDP growth per annum), and (iii) base case scenario (4% GDP growth per annum). Under these three scenarios, the study has projected the level of total GDP and per capita GDP of Bangladesh till FY2020. Projections are made about the required level of exports, imports, remittances, foreign aid and foreign investment to attain a consistent GDP growth at the rate of 4%, 6% and 8% up to the year 2020. The paper has also put forward the implications of the findings for policies related to the external sector of Bangladesh. The paper suggests that Bangladesh needs a steady growth based on foreign investment, service income and trade. The report adds that future growth of Bangladesh will depend on promoting export, sustaining remittances, and triggering export. Bangladesh will require a breakthrough in the performance of the external sector. According to the report, the key to the breakthrough lies in effective integration of Bangladesh’s economy with the global economy which will ultimately depend on the ability of political leadership to undertake necessary policy reforms and institution building measures.
    Keywords: External Sector,Growth, Bangladesh
    JEL: E61 H60
    Date: 2006–01
  14. By: Ville Kaitila
    Keywords: EU, Eastern enlargement, comparative advantage, factor intensity
    Date: 2004–08–26

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