nep-int New Economics Papers
on International Trade
Issue of 2007‒07‒20
ten papers chosen by
Martin Berka
Massey University

  1. Rules of origin and the web of East Asian free trade agreements By Manchin, Miriam; Pelkmans-Balaoing, Annette O.
  2. A Test of Endogenous Trade Bloc Formation Theory on EU Data By Baldwin, Richard; Rieder, Roland
  3. Knowledge Spillovers and Entrepreneurs? Export Orientation By Clercq, D. de; Hessels, S.J.A.; Stel, A.J. van
  4. An initial push for successful transition from import substitution to export-orientation in Taiwan and China: The FDI-led hypothesis By Jayanthakumaran, Kankesu and Lee, Shao-Wei
  5. Human capital, trade liberalization, and income risk By Krebs, Tom; Krishna, Pravin; Maloney, William
  6. The impact of the Arab Customs Union on small and medium industries in the Arab countries By Alasrag, Hussien
  7. The Impact of Large Firms in Promoting Economic Growth, Exports and Regional Integration: A Chandlerian Perspective with Emphasis on East Asia By Sanidas, Elias
  8. French Wine and the U.S. Boycott of 2003: Does Politics Really Affect Commerce? By Orley Ashenfelter; Stephen Ciccarella; Howard J. Shatz
  9. The Huddle/Tangle Hypothesis of Regional Integration: The Case of the European Union and Its Enlargement By Sanidas, Elias
  10. The Effect of Taxes on Royalties and the Migration of Intangible Assets Abroad By John H. Mutti; Harry Grubert

  1. By: Manchin, Miriam; Pelkmans-Balaoing, Annette O.
    Abstract: The authors provide an overview of the preferential rules of origin in East Asia, highlighting the aspects that might possibly generate some trade-chilling effects. They review characteristics of existing preferential trade agreements with special emphasis on lessons from the European experience, and analyze some important features of the existing rules of origin in East and South-East Asian regional integration agreements. The empirical analysis of the effectiveness of preferentialism on intra-regional trade flows focuses on the ASEAN Free Trade Area (AFTA), with the aim of providing a rough estimate of the costs of requesting preferences. The results suggest that preferential tariffs favorably affect intra-regional imports only at very high margins (around 25 percentage points). This points to the likelihood of high administrative costs attached to the exploitation of preferences, particularly with regard to the compliance with AFTA ' s rules of origin.
    Keywords: Free Trade,Trade Law,Rules of Origin,Trade Policy,Economic Theory & Research
    Date: 2007–07–01
  2. By: Baldwin, Richard; Rieder, Roland
    Abstract: This paper empirically confronts one explanation of spreading regionalism with the European experience. The domino theory asserts that forming a preferential trade area, or deepening an existing one, produces trade diversion that generates new political-economy forces in third nations as third-nation exporters seek to redress the new discrimination and profit from newly deepened preferences. The pressure increases with the bloc’s size yet bloc size depends upon how many nations join, so a single incidence of regionalism may trigger several rounds of membership requests from nations that were previously happy to stay out. We estimate a time-series of EU trade creation and diversion over the last five decades and use these to estimate a model EU membership demands. The results provide broad support for the model and show that trade diversion has a more powerful impact on membership than trade creation.
    Keywords: Domino theory of regionalism; Endogenous trade bloc formation; EU enlargement
    JEL: F13 F15
    Date: 2007–07
  3. By: Clercq, D. de; Hessels, S.J.A.; Stel, A.J. van (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: We draw on knowledge spillover literature to suggest that a country?s level of foreign direct investment (FDI) and international trade may influence the export orientation of its entrepreneurs, which in turn may relate to the country?s total level of entrepreneurial activity. Macro-level data from 34 countries during 2002?2005 indicate that a country?s outward FDI, export, and import positively affect entrepreneurs? export orientation, but these effects differ in how fast they manifest themselves. Furthermore, the extent to which a country?s entrepreneurs engage in export-oriented activities affects the subsequent emergence of new businesses. These findings have important implications for research and practice.
    Keywords: Knowledge spillovers;Export orientation;Country-level entrepreneurship;
    Date: 2007–06–08
  4. By: Jayanthakumaran, Kankesu and Lee, Shao-Wei (University of Wollongong)
    Abstract: This paper examines the association between government policy interventions, Foreign Direct Investment (FDI) and exports in Taiwan and China by applying the LP (Lumsdaine and Papell, 1997), approach allowing two endogenous structural breaks. This paper further explores the cointegrating relationship between FDI and exports in Taiwan by using the Johansen and Juselius (1990) approach and causal relationships between FDI and exports in both Taiwan and China by using the Granger causality tests respectively. We found that significant trend breaks in the FDI and export time series detected in both countries coincided with extensive government interventions, mainly in the form of Export Processing Zones (EPZ), encouraging FDI during a transition period from import substitution to export orientation. The results emerging from our research indicate no long-run cointegrating relationship in Taiwan and one-way causal relationship flows from exports to FDI in China and FDI to exports in Taiwan. The growing fear is that the World Trade Organisation’s (WTO) involvement in deregulating EPZs may narrow the differences between the zones and the rest of the economy and prevent new firms from entering the zones. The EPZs may no longer be the transitional strategy for poor/developing countries.
    Keywords: FDI, Exports, EPZ, structural breaks, causality, East Asia
    JEL: C22 F21 R58
    Date: 2007
  5. By: Krebs, Tom; Krishna, Pravin; Maloney, William
    Abstract: Using data from Mexico, the authors study empirically the link between trade policy and individual income risk and the extent to which this varies across workers of different human capital (education) levels. They use longitudinal income data on workers to estimate time-varying individual income risk parameters in different manufacturing sectors in Mexico between 1987 and 1998, a period in which t he Mexican economy experienced substantial changes in trade policy. In a second step, they use the variations in trade policy across different sectors and over time to estimate the link between trade policy and income risk for workers of varying education levels. The authors ' findings are as follows. The level of openness of an economy is not found to be related to income risk for workers of any type. Furthermore, changes in trade policy (that is, trade policy reforms) are not found to have any effect on the risk to income faced by workers with either low or high levels of human capital. But workers with intermediate levels of human capital are found to experience a statistically and economically significant increase in income risk immediately following liberalization of trade. The findings thus point to an interesting non-monotonicity in the interaction between human capital, income risk and trade policy changes.
    Keywords: Economic Theory & Research,Inequality,Free Trade,Income,Political Economy
    Date: 2007–07–01
  6. By: Alasrag, Hussien
    Abstract: The small and medium industries played a key role in providing employment opportunities, in addition to its significant share in total value added and they provide goods and services at affordable prices for a substantial segment of the low-income, which is seen as a useful tool to guide the small savings to invest, as they are able to strengthen the innovation and experimentation that are basic structural change through the emergence of a group of business leaders who are qualified, ambition and activity, and is also able to play a more positive role in the development of exports in helping to develop new products, and at certain levels of productivity can work again behave like nutritious large industrial industries (as is the case in Japan), this is the provision of foreign exchange spent on the import of intermediate goods and capital. It is also considered an important barometer of the nature of the market vitality and movement. And the Arab Customs Union is an advanced stage and later after the free trade area already among 17 Arab countries in 2005, and earlier stage is to create a strategy to reach a common Arab market in the year 2020. There is no doubt that speeding up the customs union Arab need for fair competition between the Arab products, but because of the way it was done establish a free trade area and updating raise tariffs from the beginning of January 2005 without taking preventive action during transitional periods, taking into account the insurance of small and medium industries in many Arab States against the risks stages of the shift towards integration, in addition to the direct impact of the expansion on the market, it is expected to be the overthrow of a number of these industries and removed from the productive activity. The research aims to study the impact of the Arab Customs Union on small and medium industries in the Arab countries.
    Keywords: The small and medium industries; the Arab Customs Union; the Arab countries.
    JEL: F0 F13 F15
    Date: 2007–01
  7. By: Sanidas, Elias (University of Wollongong)
    Abstract: Chandler’s work is well known. He has amply demonstrated that large firms played a huge role in the economic take-off and development of countries such as Germany and especially the USA. In this paper his thesis is extended to the whole world, by considering various countries, economically integrated regions, their exports and economic achievement. The largest firms in the world are examined in this context. Chandler’s thesis is thus confirmed with this analysis and some quantitative evidence is provided in that respect. In particular, Korea’s position is quite strong in the region of East Asia following Japan’s leadership. This paper also demonstrates that SMEs role in economic development without the presence of large firms would be rather limited. Last but not least, integration seems to take place even without the existence of formal agreements due to the presence of large firms.
    Keywords: Largest 2000 firms; national exports; Chandler; regression
    Date: 2006
  8. By: Orley Ashenfelter; Stephen Ciccarella; Howard J. Shatz
    Abstract: In early 2003, France actively tried to thwart the plans of the Bush administration to build international support for a war to depose Iraqi ruler Saddam Hussein. In response, calls in the United States for a boycott of French products, wine in particular, rebounded through all forms of media. In the spring of 2003, French business people even reported that the boycott calls were hurting their U.S. sales. Using a dataset of sales of nearly 4,700 individual wine brands, we show that there actually was no boycott effect. Rather, sales of French wine dipped for two reasons. First, they experience a cyclical peak at holiday time, from November through early January, and the boycott was called during the February to May period. Second, sales of French wine have been in a secular decline in the United States. Sales in February through May 2003 merely stayed on trend. We contrast our results with other recent work that has found evidence of a boycott effect but that omits the holiday effect from several specifications. French wine producers may be having economic problems, but it is not because of their government's foreign policy.
    JEL: D12 F14 L66 Q17
    Date: 2007–07
  9. By: Sanidas, Elias (University of Wollongong)
    Abstract: Regional integration can be a process that resembles that of a huddle/tangle. Some countries might be more prone or keen or able to integrate than others; however there is no guarantee that this process will be smooth through time. On the contrary, integrating countries seem to hover and spin around some main stronger economically countries and form a tangle. Was there a pattern of integration for the various stages of new countries joining the EU? Was the initial momentum created by the founding countries a situation that has never changed during the last 40 years or so? Is there any tendency for sub-integration, especially for some specific groups of countries? This paper focuses on national exports as a tool of evidence that joining the EU is not a solution to long term economic growth unless a strategy is adopted to counteract the inherent tendencies of the huddle/tangle process. Various methods will be used to bring this evidence forward and answer the questions above.
    Keywords: regional integration, exports, core, clusters
    Date: 2006
  10. By: John H. Mutti; Harry Grubert
    Abstract: Migration of intangible assets from the United States to foreign countries has become easier due to the ability of U.S. firms to create hybrid entities in their affiliates abroad and to reach favorable cost sharing agreements with them. This strategy was particularly encouraged by the U.S. adoption of "check-the-box" regulations in 1997. Rather than receive royalties from affiliates abroad, US parent firms have an incentive to retain abroad in low-tax countries a greater share of the return to their US R&D. Evidence from several sources for years that span the 1997 policy change indicate a significant response by US corporations in utilizing this strategy. BEA data indicate affiliate earnings and profits grew more rapidly than royalty payments to US parents. Payments to U.S. parents for technical services rose even faster, as would be called for under cost sharing agreements. Regression analysis of affiliate data shows that parent R&D was a more important determinant of royalty payments to U.S. parents than it was for affiliate earnings and profits in 1996, but by 2002 it played a larger role in earnings and profits than in royalties. Cost sharing payments from affiliates in Ireland and from pure tax havens (Bermuda, the Cayman Islands, and Luxembourg) are particularly significant, both economically and statistically.
    JEL: F23 H32
    Date: 2007–07

This nep-int issue is ©2007 by Martin Berka. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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