nep-int New Economics Papers
on International Trade
Issue of 2006‒08‒19
eleven papers chosen by
Martin Berka
Massey University

  1. Fixed Transport Costs and International Trade By Didier Laussel; Raymond Riezman
  2. Trade Liberalization and Industrial Restructuring through Mergers and Acquisitions By Holger Breinlich
  3. The endogenous formation of sustanaible trade agreements By NIELSEN, Mette
  4. Trade and Growth with Heterogeneous Firms By Richard E. Baldwin; Frédéric Robert-Nicoud
  5. Stormy Days on an Open Field: Asymmetries in the Global Economy By Nancy Birdsall
  6. The U.S. External Deficit and the Developing Countries By William R. Cline
  7. The Influence of Product Markets on Industrial Relations By William Brown
  8. Openness and technological innovations in developing countries : evidence from firm-level surveys By Almeida, Rita; Fernandes, Ana Margarida
  9. A Country-Level Analysis of Competitive Advantage in the Wine Industry By Richard Castaldi; Susan Cholette; Mahmood Hussain
  10. Productivity, Exporting and the Learning-by-Exporting Hypothesis: Direct Evidence from UK Firms By Gustavo Crespi; Chiara Criscuolo; Jonathan Haskel
  11. Innovation and export portfolios By Klinger, Bailey; Lederman, Daniel

  1. By: Didier Laussel; Raymond Riezman
    Abstract: We develop a simple two country model of international trade that assumes that there is a fixed cost of doing international trade. We show that this leads to multiple equilibria that can be Pareto-ranked. We examine the stability properties of these equilibria.
    JEL: F10 F11
    Date: 2006
  2. By: Holger Breinlich
    Abstract: This paper analyzes mergers and acquisitions (M&A) as a previously neglected channel ofindustrial restructuring in the face of trade liberalization. Using the Canada-United StatesFree Trade Agreement of 1989 as a natural experiment, I show that trade liberalization leadsto a significant increase in M&A activity. I also provide evidence that resources aretransferred from less to more productive firms in the process and that the magnitude of theoverall transfer is quantitatively important. Taken together, these results suggest that M&A isan important alternative to the previously studied adjustment channels of firm andestablishment closure and contraction. This has strong implications for the design ofcompetition policy in the wake of trade liberalizations since M&A may offer a more efficientway of transferring resources than contraction and closure of low productivity firmscombined with internal growth of more efficient firms.
    Keywords: Mergers and Acquisitions, Trade Liberalization, International Trade, CUSFTA
    JEL: F12 F15 L2 L4
    Date: 2006–03
  3. By: NIELSEN, Mette
    Abstract: This paper addresses the endogenous formation of trade agreements in a three - country model of imperfect competition. While the requirement of sustainability of preferential trade areas has often been ignored in the literature, I construct a framework for predictin which trade agreements form when sustainability is explicitly included as a constraint on the formation of the cooperative agreements. It is found that the introduction of a self-enforcement requirement reduces the overall scope for a cooperative trade agreements, and that preferential trade areaas can be stepping stones or stumbling blocks depending on the size of relative demand between countries.
    Date: 2006–01–01
  4. By: Richard E. Baldwin; Frédéric Robert-Nicoud
    Abstract: This paper explores the impact of trade on growth when firms are heterogeneous. We findthat greater openness produces anti-and pro-growth effects. The Melitz-model selectioneffects raises the expected cost of introducing a new variety and this tends to slow the rate ofnew-variety introduction and hence growth. The pro-growth effect stems from the impact thatfreer trade has on the marginal cost of innovating. The balance of the two effects isambiguous with the sign depending upon the exact nature of the innovation technology andits connection to international trade in goods and ideas. We consider five special cases (theseinclude the Grossman-Helpman, the Coe- Helpman and Rivera-Batiz-Romer models) two ofwhich suggest that trade harms growth; the others predicting the opposite.
    Keywords: trade and endogenous growth, heterogeneous firms, dynamic versus staticefficiency
    JEL: H32 P16
    Date: 2006–06
  5. By: Nancy Birdsall
    Abstract: Openness is not necessarily good for the poor. Reducing trade protection has not brought growth to today’s poorest countries, and open capital markets have not been good for the poorest households in emerging market economies. In this paper I present evidence on these two points. First, countries highly dependent on primary exports two decades ago, despite their substantial engagement in trade and a marked decline in their tariff rates in the 1990s, have failed to grow. Second, within high-debt emerging market economies the financial crises of the last decade, whether induced by domestic policy problems or global contagion, have been especially costly for the poor (in welfare terms if not in terms of absolute income losses). I discuss the asymmetries in the global economy that help explain why countries and people cannot always compete on equal terms on the “level playing field” of the global economy.
    Keywords: IMF, trade protection, economic growth, market economy, tariff
    JEL: F13 F40
    Date: 2006–02
  6. By: William R. Cline
    Abstract: In the absence of US fiscal adjustment and a further correction of the dollar, the current account deficit is headed to $1.3 trillion by 2010 (8 to 8.5 percent of GDP) and net US foreign liabilities to over $8 trillion (50 percent of GDP). According to CGD/IIE Senior Fellow William R. Cline, the rising trade deficit and associated borrowing from abroad are now financing a decline in personal saving and a rise in the government deficit. This imbalance will increasingly put the US economy—and the developing countries—at risk. This working paper focuses on the impact that the US external deficit and a possible “hard landing” for the US and world economies will have on developing countries. Cline finds that these countries are at risk since they have relied heavily on a continuing expansion of trade surpluses with the United States as a source of demand. Developing countries with high borrowing abroad are also doubly sensitive to a spike in world interest rates—once directly from higher US interest rates, and once indirectly through higher risk spreads—that might be associated with a hard landing. This Working Paper is based on The United States as a Debtor Nation, a book published in 2005 by the Center for Global Development and the Institute for International Economics.
    Keywords: trade deficit, personal savings, world economy, trade surplus
    JEL: E21 E0 E4 F4
    Date: 2006–03
  7. By: William Brown
    Abstract: Product markets are the foundation on which industrial relations institutions are built. Trade union strength is partly dependent upon the state of the labour market, but it is imperfections in the product market that are the precondition of their winning benefits for their members. Sectoral agreements consequently formed the basis for collective bargaining in most industrialised countries. But international competition has destroyed this for much of the private sector. Quasi-markets have undermined it for much of the public sector. The paper assesses the empirical economic literature on the impact of product markets. It considers enthnographic insights into how competitive pressures feed through to managerial behaviour. It concludes with alternative strategies - co-operative bargaining, legislative intervention, and consumer campaigns - that seek to defend labour standards from competitive erosion.
    Keywords: product markets; John Commons; trade union power; collective bargaining; labour; wages; bargaining structure
    JEL: B52 M54 N34
    Date: 2006–08
  8. By: Almeida, Rita; Fernandes, Ana Margarida
    Abstract: The authors analyze the role of international technological diffusion for firm-level technological innovations in several developing countries. Their findings show that, after controlling for firm, industry, and country characteristics, exporting and importing activities are important channels for the diffusion of technology. They also find evidence that the majority of foreign-owned firms are significantly less likely to engage in technological innovations than minority foreign-owned firms or domestic-owned firms. The authors interpret this finding as evidence that the technology transferred from multinational parents to majority-owned subsidiaries is more mature than that transferred to minority-owned subsidiaries. This finding supports the idea that equity joint ventures maximize technology transfers to local firms.
    Keywords: Technology Industry,ICT Policy and Strategies,Education for Development,Innovation,Foreign Direct Investment
    Date: 2006–08–01
  9. By: Richard Castaldi (San Francisco State University); Susan Cholette (San Francisco State University); Mahmood Hussain (San Francisco State University)
    Abstract: The purposes of this paper are (1) to examine driving forces and key success factors related to the increasing globalization of the wine industry, and (2) to analyze the current competitive advantage positions of four Old and five New World wine producing countries. Each country will be profiled using key industry data and analyzed regarding their national capabilities to address five key success factors that contribute to their national competitive advantage position. The countries fall into three groups with respect to their national comparative competitive advantage position. The group with the strongest competitive position includes United States, Australia, and Chile. Australia and Chile both have small populations that provide for a tiny domestic market with little potential for growth. However they are very well positioned to produce and export wine with their adaptive, large-scale producers and their great lure for foreign investments, providing them with a position of a strong competitive advantage. With respect to production, cost structures suggest Australia and Chile may be better positioned that the US. However, economies of scale and economies of scope in marketing offer an advantage to the US because it is a populous and affluent nation. While the US wine market is already significantly larger than Australia and Chile, it has even more potential to expand. The group of countries with moderate competitive advantages includes Italy, Spain, Argentina and South Africa. Lingering economic concerns and disadvantages of scale prevent Argentina from being ranked as competitively as neighboring Chile. Likewise, South Africa has strong marketing economies of scale and moderate production economies of scale, but currently domestic unrest has diminished its attraction for foreign investment and ability to expand its home market. In the Old World, Spain and Italy are hampered by decreased consumption rates and weak economies of scale in production. However, on the positive side, they have shown promise in their ability to adapt to an increasingly internationalized marketplace and to attract foreign investment. The countries with the weakest competitive advantage positions in the global wine industry are two traditional strongholds of wine production in the Old World: France and Germany. While they have large domestic markets, there is little opportunity for further growth. The concentration of production into small wineries, scarce land and labor, complex labeling practices and inability to leverage new production, and marketing techniques does not bode well for effective competition in a global market place. Nor does either country hold much potential for attracting foreign investment, save for some traditionally undervalued areas of France, like Languedoc. In conclusion, it is clear that the New World countries are currently positioned better to capitalize on the opportunities created through industry globalization and other current driving forces. Italy and Spain emerge as the best positioned Old World nations. This competitive advantage scenario should be a wake-up call to many wine producing countries. Indeed, some Old World countries have begun efforts to better adapt to industry-wide improvements in production and marketing practices. However, it is clear that many nations need to increase support that will encourage production and marketing innovations to improve their competitive advantage position to help local wineries succeed in the changing and increasingly competitive wine marketplace.
    Keywords: Wineries, Globalization, Competitive Advantage, Exports, Markets
    JEL: L11 M21 E32
    Date: 2006–05
  10. By: Gustavo Crespi; Chiara Criscuolo; Jonathan Haskel
    Abstract: Case study evidence suggests that exporting firms learn from their clients. But econometric evidence,mostly using exporting and TFP growth, is mixed. We use a UK panel data set with firm-levelinformation on exporting and productivity. Our innovation is that we also have direct data on thesources of learning (in this case about new technologies). Controlling for fixed effects we have twomain findings. First, we find firms who exported in the past are more likely to then report that theylearnt from buyers (relative to learning from other sources). Second, firms who had learned frombuyers (more than they learnt from other sources) in the past are more likely to then have productivitygrowth. This suggests some support for the learning-by-exporting hypothesis.
    Keywords: Productivity, Exporting, Learning
    JEL: F12 L1
    Date: 2006–05
  11. By: Klinger, Bailey; Lederman, Daniel
    Abstract: This paper examines the link between sectoral concentration and overall performance in the search for on-the-frontier innovations, inside-the-frontier innovations, and export booms. It extends the literature by increasing country coverage and the types of search processes considered, and by focusing on the links with overall performance in these search processes. After controlling for the necessary relationships as well as fixed effects at the country/commodity group level, the paper finds a clear negative relationship between the concentration of innovation portfolios and performance: countries that are the most successful in these search processes have their successes spread across a broader range of industries than those with poorer performance. Furthermore, the search for export booms exhibits the least amount of sectoral concentration and path-dependence. These findings suggest that public support for these processes need not be focused in a narrow range of sectors, and modeling of these processes in theoretical work, particularly in the search for export booms, should be of a stochastic flavor.
    Keywords: Education for Development,Economic Theory & Research,Innovation,Pro-Poor Growth and Inequality,Technology Industry
    Date: 2006–08–01

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