nep-int New Economics Papers
on International Trade
Issue of 2006‒10‒07
fifteen papers chosen by
Martin Berka
Massey University

  1. Does the Gravity Model Explain India's Direction of Trade? A Panel Data Approach By Bhattacharyya Ranajoy; Banerjee Tathagata
  2. Trade specialisation patterns: The case of Russia By Algieri , Bernadina
  3. Entry and Exit in International Markets: Evidence from Chilean Data By Roberto Alvarez; Ricardo Lopez
  4. Corporate Taxation and Multinational Activity By Peter Egger; Simon Loretz; Michael Pfaffermayr; Hannes Winner
  5. Distributional Effects of WTO Agricultural Reforms in Rich and Poor Countries By Hertel, Thomas; Keeney, Roman; Ivanic, Maros; Winters, Alan
  6. Tax competition, location, and horizontal foreign direct investment By Kristian Behrens; Pierre M. Picard
  7. Clean development mechanism (CDM) vs. international permit trading – the impact on technological change By Hagem, Cathrine
  8. Global Climate Change, Technology Transfer and Trade with Complete Specialization By Dirk T.G. Rübbelke; Vivekananda Mukherjee
  9. Regional impacts of Russia ' s accession to the World Trade Organization By Rutherford, Thomas; Tarr, David
  10. Regulation, Market Structure and Service Trade Liberalization By Denise Eby Konan; Ari Van Assche
  11. The World Trade Organization and antidumping in developing countries By Bown, Chad P.
  12. Exchange rate regimes, foreign exchange volatility and export performance in Central and Eastern Europe: Just another blur project? By Égert , Balázs; Morales-Zumaquero, Amalia
  13. Recent Regional Agreements: Why so many, why so much Variance in Form, why Coming so fast, and where are they Headed? By John Whalley
  14. A further step into the ELGH and TLGH for Spain and Italy By Isabel Cortés_Jiménez; Manuela Pulina
  15. Commerce international et développement : règles et enjeux pour l'Afrique By Nicolas Ponty

  1. By: Bhattacharyya Ranajoy; Banerjee Tathagata
    Abstract: In this paper we apply the gravity model to the panel consisting of India’s yearly bilateral trade data with all its trading partners in the second half of the twentieth century. The main conclusions that emerge from our analyses are: (1) The core gravity model can explain around 43 per cent of the fluctuations in India’s direction of trade in the second half of the twentieth century (2) India’s trade responds less than proportionally to size and more than proportionally to distance (3) Colonial heritage is still an important factor in determining India’s direction of trade at least in the second half of the twentieth century (4) India trades more with developed rather than underdeveloped countries, however (5) size has more determining influence on India’s trade than the level of development of the trading partner.
    Date: 2006–09–13
  2. By: Algieri , Bernadina (University of Naples)
    Abstract: This paper considers trade specialisation in Russia, examining changes in trade patterns at the sectoral level over the transition period. Trade based on inter-industry specialisation and intra-industry trade (IIT) are empirically distinguished using the Aquino and Grubel-Lloyd indices. The Aquino index is applied to measure the degree of inter-industry specialisation by sector, while the Grubel-Lloyd index is used to establish the level of IIT between industries. The empirical results support recent trade theory, which predicts an increasing level of intra-industry trade with liberalisation processes. They also suggest how inter- and intra-industry trade coexist. The final econometric estimation of the factor content of Russia’s exports (specialisation in resource-intensive products) supports the index analysis.
    Date: 2004–12–31
  3. By: Roberto Alvarez (Central Bank of Chile); Ricardo Lopez (Indiana University Bloomington)
    Abstract: Several studies examine the patterns and determinants of entry and exit in manufacturing industries. Not much work exists on entry and exit in international markets. This paper uses Chilean data to analyze the determinants of entry and exit in and out of export markets. We find that entry and exit rates differ across industries; vary over time; and are positively correlated. The econometric analysis shows that within-industry heterogeneity, measured by differences in productivity or other firm characteristics, has a significant effect on plant turnover in international markets. Our findings reveal that trade costs, factor intensities, and fluctuations in the real exchange rate play a minor role explaining entry and exit. This last result is consistent with hysteresis in international markets.
    Keywords: Treatment Entry, Exit, International Markets, Chile
    JEL: F14 D21 O54
    Date: 2006–09
  4. By: Peter Egger; Simon Loretz; Michael Pfaffermayr; Hannes Winner
    Abstract: This paper assesses the impact of corporate taxation on multinational activity. A numerically solvable general equilibrium model of trade and multinational firms is used to incorporate the following components of corporate taxation: parent and host country statutory corporate tax rates, withholding tax rates, and parent and host country depreciation allowances. We account for their differential impact under alternative methods of double taxation relief (i.e., credit, exemption, and deduction). The hypotheses regarding the effects of changes in the tax parameters are investigated in a panel of bilateral OECD outbound stocks of foreign direct investment (FDI) from 1991 to 2002. For this, we compile annual information on taxation to construct the largest existing panel of tax parameters at the bilateral level based on national tax law and bilateral tax treaties. Our findings indicate that the parent country's statutory corporate tax rate tends to foster outward FDI, whereas the host country's statutory corporate and withholding tax rates are negatively associated with outward FDI. Depreciation allowances exert a significant impact on FDI, as hypothesized.
    Keywords: corporate taxation, foreign, direct investment, panel econometrics
    JEL: C33 F21 F23 H25 H73
    Date: 2006
  5. By: Hertel, Thomas; Keeney, Roman; Ivanic, Maros; Winters, Alan
    Abstract: Rich countries’ agricultural trade policies are the battleground on which the future of the WTO’s troubled Doha Round will be determined. Subject to widespread criticism, they nonetheless appear to be almost immune to serious reform, and one of their most common defenses is that they protect poor farmers. Our findings reject this claim. The analysis conducted here uses detailed data on farm incomes to show that major commodity programs are highly regressive in the USA, and that the only serious losses under trade reform are among large, wealthy, farmers in a few heavily protected subsectors. In contrast, analysis using household data from fifteen developing countries indicates that reforming rich countries’ agricultural trade policies would lift large numbers of developing country farm households out of poverty. In the majority of cases these gains are not outweighed by the poverty-increasing effects of higher food prices among other households. Agricultural reforms that appear feasible, even under an ambitious Doha Round, achieve only a fraction of the benefits for developing countries that full liberalization promises, but protects US large farms from most of the rigors of adjustment. Finally, the analysis conducted here indicates that maximal trade-led poverty reductions occur when developing countries participate more fully in agricultural trade liberalization.
    Date: 2006
  6. By: Kristian Behrens (CORE, Université catholique de Louvain, 34 voie du Roman Pays, 1348 Louvain-la-Neuve, Belgium); Pierre M. Picard (Université catholique de Louvain; Belgium; and University of Manchester, UK)
    Abstract: We develop a model of capital tax/subsidy competition in which imperfectly competitive firms choose both the number and the location of the plants they operate. The endogenous presence of horizontal multinationals is shown to attenuate the "race to the bottom" and yields some results that are opposite to traditional findings in the tax competition literature. First, in the presence of horizontal multinationals, increasing subsidies decrease firms' profits by exacerbating price competition due to more firms "going multinationa"’. Second, instead of being always subsidized, capital may actually be taxed in equilibrium. Third, taxes/subsidies become strategically independent policy instruments, instead of being strategic complements. Last, there may exist multiple equilibria with either low or high subsidies.
    Keywords: capital tax competition; international trade; horizontal multinationals; foreign direct investment; imperfect competition
    JEL: F12 F23 H27 H73 R12
    Date: 2006–10
  7. By: Hagem, Cathrine (Dept. of Economics, University of Oslo)
    Abstract: The clean development mechanism (CDM) under the Kyoto Protocol may induce a technological change in developing countries. As an alternative to the CDM-regime, developing countries may accept a (generous) cap on their own emissions, let domestic producers invest in new efficient technologies, and sell the excess emission permits on the international permit market (cap&trade-regime). The purpose of this paper is to show how the gains from investment, and hence the incentive for investment in new technology may deviate between the two alternative regimes. We show that the difference in gains from investment depends on whether the producers face competitive or non-competitive output markets, whether the investment affects fixed or variable production costs and whether the producers can reduce emissions through other means than investment in new technology
    Keywords: Climate Policy; Technology Adoption; Emission Trading; Clean Development Mechanism; Technological Change
    JEL: L13 Q28
    Date: 2006–10–04
  8. By: Dirk T.G. Rübbelke (Chemnitz University of Technology); Vivekananda Mukherjee (Jadavpur University)
    Abstract: The paper develops a model in which a country with better technology for abatement of Green House Gas (GHG) emission (the North) commits to an international protocol to keep the global GHG emission within a specified limit while it helps the mitigation effort in the other country (the South) with unconditional transfer of abatement technology. It finds out in the autarkic (‘no trade’) equilibrium the technology transfer offer from the North is always accepted by the South. The North may offer either a partial or a complete technology transfer. If partial technology transfer is offered it finds out the determinants of the extent of technology transfer. Then it compares the autarkic equilibrium with equilibrium where trade with complete specialization occurs and finds out that trade limits the scope of technology transfer as an instrument for mitigation of global GHG emission.
    Keywords: GHG Emission, Mitigation, Technology Transfer, Trade
    JEL: F18 F35 Q54 Q56
    Date: 2006–09
  9. By: Rutherford, Thomas; Tarr, David
    Abstract: In this paper we develop a computable general equilibrium model of the regions of Russia to assess the impact of accession to the World Trade Organization (WTO) on the regions of Russia. We estimate that the average gain in welfare as a percentage of consumption for the whole country is 7.8 percent (or 4.3 percent of consumption); we estimate that three regions will gain considerably more: Northwest (11.2 percent), St. Petersburg (10.6 percent) and Far East (9.7 percent). We estimate that the Urals will gain only 6.2 percent of consumption, considerably less than the national average. The principal explanation in our central analysis for the differences across regions is the ability of the different regions to benefit from a reduction in barriers against foreign direct investment. The three regions with the largest welfare gains are clearly the regions with the estimated largest shares of multinational investment. But the Urals has attracted relatively little FDI in the service sectors. An additional reason for differences across regions is quantified in our sensitivity analysis: regions may gain more from WTO accession if they can succeed in creating a good investment climate.
    Keywords: Economic Theory & Research,ICT Policy and Strategies,Free Trade,Markets and Market Access,Investment and Investment Climate
    Date: 2006–09–01
  10. By: Denise Eby Konan; Ari Van Assche
    Abstract: In this paper, we develop a method to quantify the importance of regulation and market structure on the success of trade liberalization. For this purpose, we incorporate a single imperfectly competitive service sector that can take on various market structures into a standard computational general equilibrium model. We apply our framework to analyze the impact of allowing a single foreign telecom provider to enter Tunisia. If the regulation environment guarantees competition, Tunisia’s welfare can improve up to 0.65 percent. If a cartel is formed between the domestic incumbent and foreign entrant, however, Tunisia’s welfare can drop up to 0.25 percent. Our results thus call for Tunisia among other developing countries to step up its procompetitive regulatory reforms while liberalizing its telecom sector. <P>Dans ce papier, nous développons une méthode permettant de quantifier l’importance de la réglementation et de la structure des marchés sur la libéralisation du commerce et sur son succès. À ces fins, nous incorporons un secteur unique et imparfaitement compétitif pouvant intégrer différentes structures de marché dans un modèle standard de calcul d’équilibre général. Nous appliquons notre cadre d’analyse afin d’étudier l’impact de l’entrée d’un seul fournisseur étranger en Tunisie. Nous trouvons que si la réglementation du marché y garantit la compétition, le bien-être de la Tunisie peut augmenter de 0,65 %. Cependant, s’il y a formation d’un cartel entre le réseau domestique et l’entrant étranger, le bien-être de la Tunisie peut baisser de 0,25 %. Nos résultats démontrent que tout en libéralisant son secteur des télécommunications, la Tunisie bénéficierait de réformes visant des régulations pro-compétitives.
    Keywords: service trade liberalization, regulation, market structure, imperfect competition, CGE (Computable General Equilibrium), CGE (équilibre général calculable), compétition imparfaite, libéralisation du commerce, réglementation, structure de marché
    JEL: F12 F13 F23
    Date: 2006–09–01
  11. By: Bown, Chad P.
    Abstract: Since the 1995 inception of the World Trade Organization (WTO), developing countries have become some of the most frequent users of the WTO-sanctioned antidumping trade policy instrument. This paper exploits newly available data to examine the pattern of actual industrial use of antidumping in nine of the major " new user " developing countries - Argentina, Brazil, Colombia, India, Indonesia, Mexico, Peru, Turkey and Venezuela. For these countries we are able to match data from two newly available sources: data on production in 28 different 3-digit ISIC industries from the Trade, Production and Protection Database to data on antidumping investigations, outcomes and imports at the 6-digit Harmonized System (HS) product level from the Global Antidumping Database. Our econometric analysis is to estimate a two-stage model of the industry-level decision to pursue an antidumping investigation and the national government ' s decision of whether and how much antidumping import protection to provide. First, we find evidence consistent with the theory of endogenous trade policy: larger industries that face substantial import competition are more likely to pursue an antidumping investigation, and larger and more concentrated industries receive greater antidumping protection from imports. Second, we find that industries that use antidumping are more likely to face the changing economic conditions specified by the technical evidentiary criteria of the WTO Antidumping Agreement: industries that face rapidly falling import prices are more likely to pursue an investigation, and industries that are more susceptible to cyclical dumping due to greater capital investment expenditures and that face rapidly increasing competition from imports receive greater antidumping protection.
    Keywords: Free Trade,Water and Industry,Economic Theory & Research,Globalization and Financial Integration,Trade Law
    Date: 2006–09–01
  12. By: Égert , Balázs (Oesterreichische Nationalbank); Morales-Zumaquero, Amalia (University of Málaga and Centro de Estudios Andaluces)
    Abstract: This paper attempts to analyze the direct impact of exchange rate volatility on the export performance of ten Central and Eastern European transition economies as well as its indirect impact via changes in exchange rate regimes. Not only aggregate but also bilateral and sectoral export flows are studied. To this end, we first analyze shifts in exchange rate volatility linked to changes in the exchange rate regimes and second, use these changes to construct dummy variables we include in our export function. The results suggest that the size and the direction of the impact of forex volatility and of regime changes on exports vary considerably across sectors and countries and that they may be related to specific periods.
    Keywords: exchange rate volatility; export; trade; transition; structural breaks
    JEL: F31
    Date: 2005–07–11
  13. By: John Whalley
    Abstract: Recent years have seen a sharp growth in the number of regional agreements both concluded and under negotiation. This paper attempts to document and discuss this growth focusing on US, EU, Chinese, Indian and other agreements. The form, coverage, and content of these agreements varies considerably from case to case. The paper asks why so many, why the variation in form, and why the recent acceleration. Implications for the trading system are discussed in a final section.
    JEL: F10 F13
    Date: 2006
  14. By: Isabel Cortés_Jiménez (Universitat de Barcelona); Manuela Pulina (Università di Sassari)
    Abstract: Nowadays many developing countries focus on economic policies for promoting international tourism and exports expansion as a potential source of economic growth of the country. However, the understanding of the relationship between exports and economic growth is still ongoing. When treating the relationship between tourism and economic growth, considering tourism as a non-traditional export few studies have been published to date. This paper has the objective to assess if exports and tourism have really promoted growth by means of the export-led growth hypothesis (ELGH) and the tourism-led growth hypothesis (TLGH). The cases under analysis are Spain and Italy, two of the most important countries worldwide regarding the expansion of tourism. Cointegration techniques and the multivariate Granger causality test are applied. Results reveal that exports cause economic growth in the long-term for both countries, whilst only for Spain tourism appears as a factor which influences economic growth in the lon-run.
    Keywords: Economic Growth, Exports, Tourism, Cointegration, Multivariate Granger Causality, Spain, Italy
    JEL: L83 C32 O49
    Date: 2006–09
  15. By: Nicolas Ponty (Administrateur de l'INSEE / Economiste principal au PNUD)
    Abstract: Les pays africains sont aujourd'hui engagés dans différentes négociations commerciales. Au niveau multilatéral, un cycle de négociations pour le commerce et le développement a été ouvert en 2001 à Doha. Parallèlement, les pays Afrique-Caraïbe-Pacifique (ACP) négocient avec l'Union européenne les Accords de Partenariat Économique (APE). Cette étude analyse les enjeux de ces négociations commerciales multilatérales et régionales pour les pays africains ainsi que leur cohérence. Les pays africains, déjà engagés dans des négociations multilatérales où ils peinent déjà à faire valoir leurs intérêts, ont a priori peu d'intérêt à négocier les APE car la grande majorité d'entre eux bénéficient déjà d'un accès préférentiel aux marchés européens en tant que PMA. La seule incitation pour les pays africains à s'engager véritablement dans les négociations des APE proviendrait d'une aide pour le commerce additionnelle. Les pays ACP et l'Union européenne pourraient également proposer une révision de l'article XXIV du GATT sur les accords commerciaux préférentiels, comme les y invite d'ailleurs la déclaration de Doha en son paragraphe 29, afin d'y intégrer la dimension traitement spécial et différencié. Enfin, la rationalisation du « bol de spaghetti » que constituent les différentes Communautés économiques régionales (CER) africaines constitue le troisième élément clé pour la réussite des négociations des APE. African countries are today committed in différent trade negotiations. A multilateral Round for trade and development has been launched in 2001 at Doha. Simultaneously, African, Carribean and Pacifie (ACP) countries negotiate with the European Union Économie Partnership Agreements (EPA). This study is about first the issues at stake in these multilateral and regional trade negotiations and secondly their mutual consistency. African countries, which struggle at the multilateral level to hold successfully their positions, have indeed few interests to achieve EPA negotiations because most of them benefit still from free access on European markets. Only an additional aid for trade would lead African countries to commit themselves strongly in EPAs. ACP countries and the European Union should also propose jointly a revision of the GATT XXIV Article about regional trade agreements, pursuant to the Doha ministerial declaration which has agreed in paragraph 29 to clarify provisions for regional trade agreements and take into account special and differential treatment. Finally, the third pillar for a successful negotiation of EPAs will rely on a rationalization of the African regional economic communities "spaghetti bocal". (Full text in french)
    JEL: F02 F13 F15
    Date: 2006–10

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