nep-int New Economics Papers
on International Trade
Issue of 2006‒05‒13
fifteen papers chosen by
Martin Berka
Massey University

  1. Size Really Doesn%u2019t Matter: In Search of a National Scale Effect By Andrew K. Rose
  2. What Determines Bilateral Trade Flows? By Marianne Baxter; Michael A. Kouparitsas
  3. Trade Liberalization with Heterogenous Firms By Richard E. Baldwin; Rikard Forslid
  4. Trading on time By Pham, Cong S.; Freund, Caroline; Djankov, Simeon
  5. Australia and New Zealand CER Agreement and Breakpoints in Bilateral Trade: An Application of the Wald-type Test By Jayanthakumaran, Kankesu; Pahlavani, Mosayeb
  6. The World Trade Organization ' s Doha cotton initiative : a tale of two issues By Valenzuela, Ernesto; Anderson, Kym
  7. Recent and prospective adoption of genetically modified cotton : a global computable general equilibrium analysis of economic impacts By Jackson, Lee Ann; Valenzuela, Ernesto; Anderson, Kym
  8. Denomination Composition of Trade and Trade Balance : Evidence from Turkey By Hakan Berument; Nergiz Dinçer
  9. Trade Liberalization and Wage Inequality: Empirical Evidence from Bangladesh By Durevall, Dick; Munshi, Farzana
  10. Trade Liberalisation, Poverty and Inequality in South Africa: A CGE-Microsimulation Analysis By Nicolas Hérault
  11. The Post MFA Performance of Developing Asia By John Whalley
  12. Trade and harmonization : if your institutions are good, does it matter if they are different ? By Reshef, Ariell; Islam, Roumeen
  13. Economic Partnership Agreements: Redesigning trade and development among EU and ACP Countries By Nicolo' Tomaselli
  14. Turkey ' s evolving trade integration into Pan-European markets By Ng, Francis; Kaminski, Bartlomiej
  15. Revisiting Budget and Trade Deficits in Lebanon: A Critique By Marashdeh, Hazem; Saleh, Ali Salman

  1. By: Andrew K. Rose
    Abstract: I search for a “scale” effect in countries. I use a panel data set that includes 200 countries over forty years and link the population of a country to a host of economic and social phenomena. Using both graphical and statistical techniques, I search for an impact of size on the level of income, inflation, material well-being, health, education, the quality of a country’s institutions, heterogeneity, and a number of different international indices and rankings. I have little success; small countries are more open to international trade than large countries, but are not systematically different otherwise.
    JEL: O57
    Date: 2006–05
  2. By: Marianne Baxter; Michael A. Kouparitsas
    Abstract: This paper undertakes an exhaustive search for robust determinants of international trade, where "robustness" is tested using three popular empirical methods. The paper is frankly atheoretical: our goal is solely to establish statistically robust relationships. Along the way, however, we relate our results to the empirical results obtained by prior researchers and to the received theory of international trade. We find that robust variables include a measure of the scale of factor endowments; fixed exchange rates; the level of development; and current account restrictions. Variables that are robust under certain methods and sample periods include exchange rate volatility, an index of sectoral similarity, and currency union. However, the estimated coefficient n currency union is much smaller than estimates obtained by prior researchers.
    JEL: F10 C23 O24
    Date: 2006–05
  3. By: Richard E. Baldwin; Rikard Forslid
    Abstract: This paper examines the impact of trade liberalization with heterogeneous firms using the Melitz (2003) model. We find a number of novel results and effects including a Stolper-Samuelson like result and several results related to the volume of trade, which are empirically testable. We also find what might be called an anti-variety effect as the result of trade liberalization. This resonates with the often voiced criticism from antiglobalists that globalization leads the world to become more homogenous by eliminating local specialities. Nevertheless, we find that trade liberalization always leads to welfare gains in the model.
    JEL: H32 P16
    Date: 2006–05
  4. By: Pham, Cong S.; Freund, Caroline; Djankov, Simeon
    Abstract: The authors determine how time delays affect international trade using newly collected World Bank data on the days it takes to move standard cargo from the factory gate to the ship in 126 countries. They estimate a modified gravity equation, controlling for endogeneity and remoteness. On average, each additional day that a product is delayed prior to being shipped reduces trade by at least 1 percent. Put differently, each day is equivalent to a country distancing itself from its trade partners by 70 kilometers on average. Delays have an even greater impact on developing country exports and exports of time-sensitive goods, such as perishable agricultural products. In particular, a day ' s delay reduces a country ' s relative exports of time-sensitive to time-insensitive agricultural goods by 6 percent.
    Keywords: Free Trade,Economic Theory & Research,Trade Policy,Common Carriers Industry,Transport and Trade Logistics
    Date: 2006–05–01
  5. By: Jayanthakumaran, Kankesu (University of Wollongong); Pahlavani, Mosayeb (University of Wollongong)
    Abstract: This paper investigates the impact of the Australia-New Zealand Closer Economic Relations (CER) Trade Agreement on bilateral trade of each member country by using historical time series data before and after the implementation of the CER. We determined the existence of endogenously determined structural breaks over the last 30 years. The Vogelsang (1997) Wald-type testing procedure is then used to test for the existence of a break at an unknown time in the trend function of the dynamic time series. The advantage of this model is that the procedure does not impose any restriction on the nature of the data since it allows for either trending or unit root series, or both, in the model. Using a Wald-type test for detecting breaks in the trend function of a univariate time series, we found that a significant trend break detected in New Zealand in 1988 coincided with the extensive review of the CER in 1988.
    Keywords: Trend breaks, Wald-type testing, Australia-New Zealand integration
    JEL: C12 C22 C52 F13
    Date: 2006
  6. By: Valenzuela, Ernesto; Anderson, Kym
    Abstract: Four West African nations have demanded that the World Trade Organization ' s Doha Development Agenda include a Cotton Initiative that involves two issues: cutting cotton subsidies and tariffs, and assisting farm productivity growth in Africa. The authors provide estimates of the potential economic impacts of (1) complete or partial removal of cotton subsidies and import tariffs globally, and (2) cotton productivity growth through the adoption of genetically modified (GM) cotton varieties. They use the latest version of the GTAP database and model. Their results confirm that-unlike for other agricultural subsidies and tariffs-for cotton it is subsidy reductions rather than tariff cuts that would make by far the largest impact. For Sub-Saharan Africa the potential gains are huge relative to the effects on that region of reforming other merchandise trade policies. And they could be more than doubled if that reform provided the cash for farmers to take advantage of the biotechnology revolution and adopt GM cotton varieties. But those potential gains, and the affordability of switching to costly GM seed, depend crucially on the extent to which high-income countries are willing to lower domestic support to their cotton farmers.
    Keywords: Economic Theory & Research,Crops & Crop Management Systems,Tax Law,Textiles, Apparel & Leather Industry,Wholesale & Retail Trade Industry
    Date: 2006–05–01
  7. By: Jackson, Lee Ann; Valenzuela, Ernesto; Anderson, Kym
    Abstract: The authors provide estimates of the economic impact of initial adoption of genetically modified (GM) cotton and of its potential impacts beyond the few countries where it is currently common. They use the latest version of the Global Trade Analysis Project (GTAP) database and model. The results suggest that by following the lead of China and South Africa, adoption of GM cotton varieties by other developing countries-especially in Sub-Saharan Africa-could provide even larger proportionate gains to farmer and national welfare than in those first-adopting countries. Furthermore, the estimated gains are shown to exceed those from a successful campaign under the World Trade Organization ' s Doha Development Agenda to reduce and remove cotton subsidies and import tariffs globally.
    Keywords: Crops & Crop Management Systems,Environmental Economics & Policies,Economic Theory & Research,Textiles, Apparel & Leather Industry,Livestock & Animal Husbandry
    Date: 2006–05–01
  8. By: Hakan Berument; Nergiz Dinçer
    Date: 2005
  9. By: Durevall, Dick (Department of Economics, School of Business, Economics and Law, Göteborg University); Munshi, Farzana (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper explores the relationship between trade liberalization and skilled-unskilled wage inequality in the Bangladesh cotton textile industry. A dynamic two-equation model is estimated for wages of skilled and unskilled workers over the period 1973-2002, using four different openness measures. In no case does opening up affect unskilled wages differently than skilled wages, implying that openness per se has not contributed to changes in wage inequality. Our findings also suggest that openness increased real wages for both skilled and unskilled workers. <p>
    Keywords: Bangladesh; cotton textile industry; openness; relative wages; trade liberalization; wage inequality
    JEL: F13 F14 F15 O15 O24
    Date: 2006–04–28
  10. By: Nicolas Hérault (Centre d'Économie du Développement (IFReDE-GRES) Université Montesquieu Bordeaux IV and Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: This paper aims to study the effects on poverty and income inequality of trade liberalisation in South Africa. This is achieved by using a micro-macro model. The main issue of interest is the effect of international trade on households (especially their income); some changes may contribute to reduce poverty while other changes could work against the poor. The approach presented in this paper relies on combining a macro-oriented computable general equilibrium (CGE) model and a microsimulation (MS) model. Combining these two models the microeconomic effects (on poverty and inequality) of a macroeconomic policy (trade liberalisation) can be analysed. The paper gives details about the MS model, the CGE model and the "top-down" approach used to link the two models. The main concern regarding poor households is whether the decrease in real (or nominal) earnings for formal low-skilled and skilled workers is offset by the upward trend in formal employment levels. This appears to be the case implying a decrease in poverty due to trade liberalisation. Although whites emerge as the main winners, the increase in inter-group inequality is more than compensated by the decrease in intra-group inequality.
    Date: 2005–11
  11. By: John Whalley
    Abstract: This paper assesses the impact thus far that the termination of trade restrictions under the Multi Fibre Arrangement (MFA) which up to the end of 2004 applied to exports of clothing and textiles in key OECD markets has had on Asian suppliers. The speculation prior to MFA termination had been that large increases of Chinese exports would ensue, and at the expense of other Asian suppliers. Using data from US, EU Chinese and other sources, the picture that emerges is only small impacts on aggregate US and EU imports of clothing and textiles, and equally only small impacts on aggregate Chinese exports of clothing and textiles. There are, however, large changes in the country pattern of trade, and also within more narrowly defined product categories. There are large increases in shipments from China to both the US and the EU, and for the US proportionally more so in textiles than in clothing. But the US accounts for only 20% of China's exports of clothing and textiles, and exports to Japan (comparable in size to the US) hardly change, and to Hong Kong fall sharply. There are also large price falls for shipments to the US and to certain EU countries (Germany). The shares of other Asian suppliers in US markets generally hold up well, with the largest falls occurring in preferentially treated non Asian suppliers such as Mexico. In EU markets, with the exception of India, all non Chinese Asian suppliers experience falls in their market share.
    JEL: F00 F13 O24
    Date: 2006–05
  12. By: Reshef, Ariell; Islam, Roumeen
    Abstract: Good institutional quality (function) and similar institutional design (form) can promote international trade by reducing transactions costs. The authors evaluate the relative importance of function versus form in a gravity model, using an indicator of different legal systems as a proxy for differences in form, together with indicators of overall institutional quality. They find that good institutions promote trade much more than similar legal systems and have much more explanatory power. This effect is economically large-up to 10 times the effect of different legal systems. Moreover, better infrastructure matters as much as good institutions.
    Keywords: Legal Products,Trade Law,Economic Theory & Research,Transport and Trade Logistics,Common Carriers Industry
    Date: 2006–05–01
  13. By: Nicolo' Tomaselli (Department of Agricultural Economics and Engineering, Alma Mater Studiorum - University of Bologna)
    Abstract: The European Union is currently engaged in redesigning its trade relations with many of its partners in the Southern hemisphere. The present study assesses the economic implications of the negotiations of Economic Partnership Agreements between the European Union and ACP’s regional groupings. These new trade arrangements, natural evolution of the Cotonou Agreements, represent an outstanding opportunity to favour the insertion of ACP countries into the world trade system and a genuine attempt to promote economic development and regional integration in developing world. Is this project bound to fail? Which are the prerequisites to make it work? Which lessons can be drawn from empirical evidences?
    Keywords: EPA, Trade and development, Market access, Regional integration, Cotonou agreements, Kenya and Mauritius
    JEL: F13 F15 O19
    Date: 2005
  14. By: Ng, Francis; Kaminski, Bartlomiej
    Abstract: This is an empirical paper seeking to identify the mode of Turkey ' s integration into global markets in general, and pan-European markets in particular, as revealed in its trade performance. The analysis provides empirical support to the following observations. First, thanks to steady expansion of trade in goods and services since the mid-1980s, Turkey has become highly integrated into the world economy. Second, Turkey ' s export performance in 1996-2004 in EU markets bears strong similarities to the aggregate performance of new EU members from Central Europe (EU-8). Similarities include dynamics, similar factors responsible for the increased presence in EU markets, factor content, and the role of " producer-driven " network trade. Turkey, together with Hungary, the Czech Republic, the Slovak Republic, Slovenia, Estonia, and Poland, stands as one of the top performers in " producer-driven " network trade indicating participation in a new global division of labor based on production fragmentation. The available evidence suggests an economic success story in the making. Export expansion owes a lot to improved policy environment and domestic liberalization. It is rather telling that the recent expansion has coincided with the implementation of most of the provisions of the EU-Turkey Customs Union Agreement, the completion of the removal of tariffs on trade in industrial products among pan-European parties to the Pan European Cumulation of Origin Agreement, and improved macroeconomic stability after the 2001 crisis.
    Keywords: Trade Policy,Economic Theory & Research,Free Trade,Transport Economics Policy & Planning,Trade Law
    Date: 2006–05–01
  15. By: Marashdeh, Hazem (University of Wollongong); Saleh, Ali Salman (Monash University Malaysia)
    Abstract: This study re-examines the relationship between the budget deficit and the trade deficit in Lebanon. In contrast to earlier studies, we start by testing for a unit root in the presence of structural change using the Innovational Outlier (IO) model. This study also utilizes the newly proposed autoregressive distributed lag (ARDL) approach to examine such a relationship. The results show that the endogenously determined times of the breaks coincide with observed real events occurring during the years of Civil War in Lebanon and especially after the Israeli invasion of Beirut in 1982. This study finds, as well, that the trade deficit in Lebanon has a long run impact on the budget deficit.
    Keywords: Budget deficit, trade deficit, structural break, ARDL, Lebanon
    JEL: C13 C22 E6
    Date: 2006

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