nep-int New Economics Papers
on International Trade
Issue of 2006‒06‒10
fifteen papers chosen by
Martin Berka
Massey University

  1. Protection for Sale or Surge Protection? By Susumu Imai; Hajime Katayama; Kala Krishna
  2. A Dual Policy Paradox: Why Have Trade and Immigration Policies Always Differed in Labor-Scarce Economies? By Timothy J. Hatton; Jeffrey G. Williamson
  3. A Search Cost Perspective on Duration of Trade By Tibor Besedes
  4. Is Distance a Good Proxy for Transport Costs?: The Case of Competing Transport Modes By Inmaculada Martínez-Zarzoso; Felicitas Nowak-Lehmann D.
  5. Search and the Path-Dependency of Trade. By T. Huw Edwards
  6. The Impact of Trade on Plant Scale, Production-Run Length and Diversification By Baldwin, John R.; Gu, Wulong
  7. The Global Chilling Effects of Antidumping Proliferation By Hylke, VANDENBUSSCHE; Maurizio, ZANARDI
  8. Does the Liberalization of Trade Advance Gender Equality in Schooling and Health? By T. Paul Schultz
  9. Determining Factors of Czech Foreign Trade: A Cross-Section Time Series Perspective By Vladimir Benacek; Jiri Podpiera; Ladislav Prokop
  10. Agriculture-sector Policies and Poverty in the Philippines: a Computable General-Equilibrium (CGE) Analysis By Caesar B. Cororaton; Erwin L. Corong
  11. Increasing the Market Access for Agricultural Products from Bangladesh to the EU By Jorge Nufiez Ferrer
  12. Trade Liberalization and the Dynamics of Poverty in Tunisia: a Layered CGE Microsimulation Analysis/Libéralisation des échanges et dynamique de la pauvreté en Tunisie: Analyse avec une micro-simulation séquentielle By Sami Bibi; Rim Chatti
  13. Pattern of trade and European economic integration : an unexpected relation By Fabien Rondeau (CREM - CNRS)
  14. The Impact of Trade Reform in the 1990s on Welfare and Poverty in the Philippines By Caesar B. Cororaton
  15. Foreign Direct Investment and the Nature of the Imitation Process By Helene, LATZER

  1. By: Susumu Imai; Hajime Katayama; Kala Krishna
    Abstract: This paper asks whether the results obtained from using the standard approach to testing the influential Grossman and Helpman “protection for sale (PFS)” model of political economy might arise from a simpler setting. A model of imports and quotas with protection occurring in response to import surges, but only for organized industries, is simulated and shown to provide parameter estimates consistent with the protection for sale framework. This suggests that the standard approach may be less of a test than previously thought.
    JEL: F13 D72 B41
    Date: 2006–05
  2. By: Timothy J. Hatton (University of Essex, Australian National University and IZA Bonn); Jeffrey G. Williamson (Harvard University, NBER and IZA Bonn)
    Abstract: Today's labor-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: tariffs, immigration restriction, international policy, economic history
    JEL: F22 J1 O1
    Date: 2006–05
  3. By: Tibor Besedes
    Abstract: More than half of all US import relationships begin with less than $10,000 annually. The median relationship is observed to last just one year. The incidence and duration of these relationships are consistent with a matching model of international trade. The preponderance of small starting relationships reveals uncertainty present in formation of trade relationships. Initial size, reliability, and search costs matter and play an important role. Larger initial purchase results in longer relationships. Higher reliability and lower search costs lead to larger initial purchases and longer relationships.
  4. By: Inmaculada Martínez-Zarzoso; Felicitas Nowak-Lehmann D.
    Abstract: In this paper, we analyze separately the determinants of maritime transport and road transport costs for Spanish exports to Poland and Turkey (markets for which maritime and road transport are competing modes) and investigate the different effects of these costs on international trade. First, we investigate the extent to which maritime and road transport costs depend on different factors such as unit values, distances, transport conditions, service structures, and service quality. Second, we analyze the relative importance of road and maritime transport costs in comparison with distance measures as determinants of trade flows. The main results of this investigation indicate that real distance is not a good proxy for transportation costs and identify the central variables influencing road and maritime transportation costs: for both modes, transport conditions are strong determinants, whereas efficiency and service quality are more important for maritime transport costs, and geographical distance is more important for road transport. Road and maritime transport costs are central explanatory factors of exports and they seem to deter trade to a greater extent than road or maritime transit time when endogeneity is considered.
    Keywords: transport costs, transport mode, Spanish exports, international trade
    JEL: F1 O1 O55
    Date: 2006–06–02
  5. By: T. Huw Edwards (Loughborough University)
    Abstract: This paper investigates the implications of imperfect information and matching/searching for international trade theory. I develop an illustrative model where firms find such partners by a search through successive matches. The consequences include linking today's import demand patterns to past changes in costs, protection and interest rates. Today's policy decisions will likewise affect future trade. Trade diversion from a preferential trading agreement may well persist as informational diversion well after the preferential agreement has been scrapped. This has important implications for the timing of trade liberalisation.
    Keywords: Trade, Protection, Search, Outsourcing.
    JEL: F00 F12 F13
    Date: 2006–05
  6. By: Baldwin, John R.; Gu, Wulong
    Abstract: This paper examines the effect of trade liberalization on plant scale, production-run length and product diversification. We first develop a model of trade in differentiated products with multi-product plants. We then present empirical evidence using a large panel of Canadian manufacturing plants and their experience with the 1989 Canada-U.S. Free Trade Agreement (FTA). The model predicts that the bilateral tariff reduction reduces the product diversification of exporting plants, increases the production-run length and has an ambiguous effect on the size of those plants. It also reduces the product diversification and size of non-exporting plants, and has no effect on the production-run length of those plants. The empirical evidence on non-exporting plants provides broad support for the model. The evidence on exporting plants shows that exporters reduce product diversification, and increase production-run length and plant size, but those changes do not appear to be related to tariff cuts. Once in the export markets, plants respond to forces other than tariff cuts. Further tariff cuts have less effect on those plants.
    Keywords: Trade, Manufacturing, Exports, Manufacturing industries
    Date: 2006–05–19
  7. By: Hylke, VANDENBUSSCHE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Maurizio, ZANARDI (Tilburg University)
    Abstract: Advocates of antidumping (AD) laws downplay their effects by arguing that the trade flows that are subject to AD are small and their distortions negligible. This paper is the first to counter that notion by quantifying the worldwide effect of AD laws on aggregate trade flows. The recent proliferation of AD laws across countries provides us with a natural experiment to estimate the trade effects of adopting versus using AD laws; differences in the intensity of use among countries with older AD laws allow us to investigate reputation effects. For this purpose, we estimate worldwide trade flows using a gravity equation spanning 21 years (1980-2000) of annual observations. Our estimates confirm that AD effects are not small. Among other findings, new tough users have their aggregate imports depressed by 15.7 billion US$ a year (or6.7%) as a result of the AD measures they have imposed. For a traditional user like the United States, current AD measures depress annual imports by almost 20 billions US$ on top of the cumulative negative effect of reputation. For some countries, the dampening effects of AD laws on trade flows are found to nearly offset the gains from trade liberalization.
    Keywords: Antidumping; gravity equation, trade liberalization; trade flows
    JEL: F13 F14
    Date: 2006–03–15
  8. By: T. Paul Schultz (Yale University and IZA Bonn)
    Abstract: This paper assesses the empirical relationship between the liberalization of international trade and the economic status of women. Although historically globalization is not generally linked to the advancement of women, several recent country studies find export led growth in middle and low income countries is associated with improvements in women’s employment opportunities. Does intercountry empirical evidence confirm this association across a wider range of countries, and suggest the mechanisms by which it operates? Measures of wages for men and women are an unreliable basis for study of gender inequality in many low income countries, and thus schooling and health are analyzed here as indicators of productivity and welfare and gender gaps. For a sample of 70 countries observed at five year intervals from 1965 to 1980, tariff, quota, and foreign exchange restrictions are found to be inversely associated with trade, and with the levels of education and health, especially for women. Natural resource exports, although providing foreign exchange for imports, appear to reduce investments in schooling and health, and delay the equalization of these human capital investments between men and women. Liberalization of trade policy is consequently linked in the cross section to increased trade, to greater accumulation of human capital, and to increased gender equality.
    Keywords: trade liberalization, schooling, health, gender equality
    JEL: I12 J16 I21
    Date: 2006–05
  9. By: Vladimir Benacek; Jiri Podpiera; Ladislav Prokop
    Abstract: By quantifying the determining factors of Czech trade during 1993-2002, this paper enriches the empirical trade literature with evidence from an economy that has undergone intensive structural changes. Our findings lend significance to standard macroeconomic variables such as aggregate demand and the real exchange rate. Apart from these, however, liberalisation of tariffs, the evolution of unit prices of exports and imports, and economies of scale also played a significant role. An out-of-sample forecast for the trade balance was carried out for 2003-2004.
    Keywords: Dynamic estimation, export and import dynamics, trade determinants.
    JEL: C23 F14 F32
    Date: 2005–11
  10. By: Caesar B. Cororaton; Erwin L. Corong
    Abstract: The Philippines has undertaken substantial trade-policy reforms since the 1980s. However, the poverty impact is not very clear and has been the subject of intense debate, most crucial of which is the likely poverty effects of liberalizing the highly protected agricultural sector. A CGE micro-simulation model is employed to estimate and explain these impacts. Tariff reduction induces consumers to substitute cheaper imported agricultural products for domestic goods, thereby resulting in a contraction in agricultural output. In contrast, the prevalence of cheap, imported inputs reduces the domestic cost of production, benefiting the outward-oriented and import-dependent industrial sector as their output and export increases. The national poverty headcount decreases marginally as lower consumer prices outweigh the income reduction experienced by the majority of households. However, both the poverty gap and severity of poverty worsens, implying that the poorest of the poor become even poorer.
    Keywords: Agriculture, International trade, Poverty, Computable general equilibrium, Micro-simulation, Philippines
    JEL: D58 E27 F13 I32 O13 O15 O24 O53 Q10
    Date: 2006
  11. By: Jorge Nufiez Ferrer
    Abstract: This paper analyses the present developments and future prospects for increased agricultural trade for Bangladesh with the EU. The trade relationship with the European Union (EU) is seeing important changes in recent years. The EU has unilaterally eliminated in 2001 tariff barriers for products originating in Less Developed Countries through the Everything But Arms (EBA) agreement, which includes the highly protected agricultural products. This creates important export opportunities for Bangladesh. The paper analyses in detail the export trends for major agricultural products from Bangladesh and other countries in the region to look for any evidence of an impact from the EBA. Despite the short period analysed, there are indications of some positive impacts. However, these are often rather weak and at times there are none where expected. Analysing the trends of regional competitors, the paper implies that even with EBA Bangladesh lacks price competitiveness in some products, and most importantly a lack of marketing strategy directed towards EU consumers. For the future, the impact of the EBA will also depend on a number of other factors, such as any progress in the farm liberalisation negotiations at WTO, amendments in the Sanitary and Phytosanitary rules and the reform of the EU’s Common Agricultural Policy. All of these factors have the potential to erode the benefits of the EBA considerably. The paper also addresses some important strategic aspects to improve import opportunities, from marketing to taking advantage of the trade related assistance offered by the EU to the less developed countries.
    Keywords: Agriculture, Agricultural products, Market Access, Export, Eu, Bangladesh
    JEL: F1 F13 F14
    Date: 2006–04
  12. By: Sami Bibi; Rim Chatti
    Abstract: The effects of trade liberalization on poverty in Tunisia are examined, using a layered dynamic CGE-microsimulation approach. A dynamic CGE model endogenously generates the evolution of prices, as well as income paths under protection and freer trade assumptions for each household group. These results are then used to assess the change in real income of each household, using a sample from the 1995 household survey, and thus the effects of the simulated changes on poverty. Dominance tests are also used to avoid the arbitrariness of choosing line and a poverty measure. Simulation results show that trade openness slows down the poverty reduction in the short run, but enhances it in the long-run/Une analyse dynamique des effets de la libéralisation commerciale montre que celle-ci n'entraînera pas, contrairement aux cas précédents, une augmentation de la pauvreté en Tunisie. Néanmoins, l'ouverture commerciale freinera probablement la dynamique de la réduction de la pauvreté à court terme mais, l'accélèrera à long terme. La baisse de la pauvreté touchera aussi bien les ménages urbains que ruraux, avec une plus faible réduction de la pauvreté rurale à court et à long terme. Pour comprendre ce résultat, il faut d'abord noter que la Tunisie, comme dans la plupart des autres pays, impose des taux de protection plus élevés sur les produits agricoles que sur les produits industriels; pendant que les branches industrielles, notamment celle des services, contribuent davantage aux recettes d'exportation. Par conséquent, la libéralisation commerciale entraîne une expansion plus rapide du secteur des services par rapport aux autres branches industrielles et au secteur agricole. Cela engendre un taux de croissance du revenu nominal des ouvriers et des exploitants agricoles plus faible que celui des autres ménages urbains. Les prix à la consommation croient plus faiblement pour les ménages urbains, qui consomment davantage de produits industriels et des services, que pour les ménages ruraux, qui consomment plus de produits alimentaires. Tous ces résultats font que l'amélioration du revenu réel, qui touche toutes les catégories des ménages, est légèrement plus importante pour les ménages urbains.
    Keywords: Trade liberalization, poverty, dynamic CGE models, sequential microsimulation, Tunisia/Libéralisation des échanges, pauvreté, modèles d'EGC dynamiques, micro-simulation séquentielle, Tunisie
    JEL: C68 I32 O24
    Date: 2006
  13. By: Fabien Rondeau (CREM - CNRS)
    Abstract: In this article, the degree of integration between European countries is linked to the evolution of the pattern of trade. Evolution of the long-run sensitivity between European outputs is estimated by recursive Fully-Modifed Ordinary Least Squares (FM-OLS) and compared to a recursive index of intra-industry trade. Significant correlations are found between integration and intra-industry trade share. Interestingly, correlations have not all the same sign: positive for one group of countries and negative for others. The explanatory variable seems to be the initial intra-industry trade share. In the last section, a Hansen test is computed and confirms a threshold effect of the pattern of trade on economic integration. Finally, the development of the intra-industry trade due to the creation of the European Monetary Union has a positive e¤ect on integration for some countries but also a negative e¤ect on integration for other European countries.
    Keywords: Trade, Growth, Intra-industry trade, Integration
    JEL: F4 F43 F02
    Date: 2006
  14. By: Caesar B. Cororaton
    Abstract: This paper analyzes the impact of trade reform on welfare and poverty in the Philippines in the 1990s using a CGE model. The results indicate that while welfare rises and poverty falls for all household groups except the poorest (those with rural unskilled private employees as household head), urban households gain more than rural households. Policy experiments involving full tariff reduction and uniform five percent tariff rate indicate generally the same pattern of effects, except that the magnitude of change is relatively larger in the former while all household groups, including the poorest, experience a reduction in poverty in the latter. Since poverty remains high and the disparity between rural and urban poverty is still wide, other poverty-reducing measures have to be designed and implemented to target those households that do not benefit much from this type of market reform.
    Keywords: Computable general equilibrium, International trade, Poverty, Philippines
    JEL: D33 D58 E27 F13 F14 I32 O15 O53
    Date: 2006
  15. By: Helene, LATZER (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)
    Abstract: We study the optimal imitation strategy of a developing country having access to both imitation through trade and imitation through Foreign Direct Investments (FDIs). We base ourselves on an extension of the Romer ‘variety model’ (1990) of technology-driven growth, and find that the two types of imitation are substitutes and not complements. We characterize a condition on the technology level transferred by multinational foreign firms for imitation through FDI to be optimal, and study the effect of a technological acceleration.
    JEL: F23 O33 O40
    Date: 2006–05–05

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