nep-int New Economics Papers
on International Trade
Issue of 2007‒09‒30
fifteen papers chosen by
Martin Berka
Massey University

  1. Can Immigrants Hurt Trade? By Tomas Konecny
  2. Developing Countries and Enforcement of Trade Agreements: Why Dispute Settlement Is Not Enough By Bown, Chad P.; Hoekman, Bernard
  3. The Political Economy of Services Trade Liberalization: A Case for International Regulatory Cooperation? By Hoekman, Bernard; Mattoo, Aaditya; Sapir, André
  4. Did US Safeguards Affect Mark-ups of EU Steel Producers? By Vandenbussche, Hylke; Zarnic, Ziga
  5. Trade costs, barriers to entry, and export diversification in developing countries By Shepherd, Ben; Dennis, Allen
  6. Vertical Product Differentiation, Minimum Quality Standards and International Trade By Dimitra Petropoulou
  7. Multilateral Trade Cooperation: What Next? By Hoekman, Bernard; Vines, David
  8. Intellectual Property Provisions in North-South Trade Agreements By Hoekman, Bernard; Saggi, Kamal
  9. Antidumping Protection and Productivity of Domestic Firms : A firm level analysis By Josef, KONINGS; Hylke, VANDENBUSSCHE
  10. What Explains the Proliferation of Antidumping Laws ? By Hylke, VANDENBUSSCHE; Tilburg University and CentER
  11. Aid and Trade By Suwa Eisenmann, Akiko; Verdier, Thierry
  12. Product Market Competition in the OECD Countries: Taking Stock and Moving Forward By Jens Høj; Miguel Jimenez; Maria Maher; Giuseppe Nicoletti; Michael Wise
  13. Foreign direct investment in Latin America during the emergence of China and India : stylized facts By Olarreaga, Marcelo; Lederman, Daniel; Cravino, Javier
  14. Who Prices Locally? Survey Evidence of Swiss Exporters By Fischer, Andreas M; Lutz, Matthias; Wälti, Manuel
  15. Trade Openness and Growth: Is There Any Link? By Sarkar, Prabirjit

  1. By: Tomas Konecny
    Abstract: This paper estimates the impact of immigrant network spillovers on international trade. Contrary to previous studies focusing mostly on the trade enhancing role of immigrant networks, the present framework allows for potential trade diverting effects. A simple matching model that incorporates both trade creation and diversion channels furthermore points at the importance of relative as opposed to absolute measures of immigrant networks. Using a new dataset of 19 OECD countries, I find that while immigrant networks indeed facilitate exports from host to source country, they simultaneously hurt trade with the host country’s other trading partners. In addition, I find that the impact of information-related trade barriers might be negatively related to the economic size of the trading partner. In particular, the larger the trading partner, the smaller the trade benefits of lower information costs due to a shared common language.
    Keywords: International trade, immigration, informal trade barriers.
    JEL: F22 O24
    Date: 2007–05
  2. By: Bown, Chad P.; Hoekman, Bernard
    Abstract: Poor countries are rarely challenged in formal WTO trade disputes for failing to live up to commitments, reducing the benefits of their participation in international trade agreements. This paper examines the political-economic causes of the failure to challenge poor countries and discusses the static and dynamic costs and externality implications of this failure. Given the weak incentives to enforce WTO rules and disciplines against small and poor members, bolstering the transparency function of the WTO is important to make trade agreements more relevant to trade constituencies in developing countries. While our focus is on the WTO system, our arguments also apply to reciprocal North-South trade agreements.
    Keywords: developing countries; dispute settlement; enforcement; trade agreements; WTO
    JEL: F13
    Date: 2007–09
  3. By: Hoekman, Bernard; Mattoo, Aaditya; Sapir, André
    Abstract: Little progress has been made since the creation of the WTO in expanding and deepening the coverage of services liberalization commitments. This paper identifies and discusses five hypotheses that may explain the absence of dynamism: (i) technological changes allow ever more services to be traded cross-border unaffected by policy; (ii) strong incentives to pursue liberalization on an autonomous basis (unilaterally); (iii) perceptions that bilateral or regional cooperation are a good substitute for the WTO; (iv) standard political economy factors such as adjustment costs and resistance by incumbents to erosion of rents; and (v) concerns that the WTO will affect the ability of regulators to enforce national norms. We argue that all of these explanations play a role, and that some of these factors significantly impede the scope for reciprocal exchanges of ‘concessions’—the engine of WTO negotiations.
    Keywords: Doha Round; GATS; political economy; trade in services; trade negotiations; WTO
    JEL: F13
    Date: 2007–09
  4. By: Vandenbussche, Hylke; Zarnic, Ziga
    Abstract: This paper empirically investigates the effects of the US safeguard protection on steel imports in 2002 on the mark-ups of EU steel producers. We identify a large panel of EU steel producers between 1995 and 2005 affected by the safeguards. Using the Roeger methodology, our results show that the protection signifcantly reduced the EU firms' mark-ups. Single-product firms suffered relatively more from the safeguards than multi-product firms. Our evidence further suggests that the US protection resulted in some diverting of the EU steel especially towards China, aggravating the situation on the Chinese steel market and ultimately resulting in the Chinese trade protection of steel imports.
    Keywords: firm data; price-cost margins; safeguard measures; steel industry; trade diversion
    JEL: F13 L13 L61
    Date: 2007–09
  5. By: Shepherd, Ben; Dennis, Allen
    Abstract: This paper finds that a 1 percent reduction in the cost of exporting or the cost of international transport is associated with an export diversification gain of 0.3 percent or 0.4 percent respectively. Lower domestic market entry costs can also promote diversification, but the elasticity is weaker (-0.1). To obtain these results, the authors construct new measures of export diversification for 118 developing countries using highly detailed 8-digit mirror data from the European Union. The analysis also incorporates new export cost data from the World Bank ' s Doing Business database, covering document preparation, inland transport, administrative fees, and port/customs charges. Findings are highly robust, including to the use of geography and colonial history as instruments for trade and entry costs. Both the signs and relative magnitudes of these effects are consistent with predictions from a heterogeneous firms model of trade with asymmetric costs.
    Keywords: Housing & Human Habitats,E-Finance and E-Security,Mining & Extractive Industry (Non-Energy),Educational Technology and Distance Education,Transport Economics Policy & Planning
    Date: 2007–09–01
  6. By: Dimitra Petropoulou
    Abstract: This paper extends a well-established vertical product differentiation model to an international duopoly with two segmented countries, where firms compete in quality and price. The framework is used to analyse governments` incentives for unilateral minimum standard-setting as well as the scope and effects of cooperative agreements in minimum standards. Endogenous national standards result from a standard-setting game between governments whose objective function is to maximise national welfare. Cross-country externalities can be are either positive or negative, depending on the quality of traded goods. Four unregulated Nash equilibria in minimum standards are shown to exist, two symmetric and two asymmetric, which correspond to the four different combinations of externalities that may arise between the two countries: symmetric positive externalities, symmetric negative externalities, or asymmetric positive and negative externalities. Unilateral minimum standards can be inefficiently high or low relative to world optimum symmetric standards and operate as non-tariff barriers to trade. Harmonisation of minimum quality standards through cooperation is both feasible and mutually beneficial in the symmetric case, but the scope for mutually beneficial cooperation is significantly restricted when countries are asymmetric and lump-sum transfers are not possible. The resulting cooperative standards are asymmetric and do not maximise world welfare.
    Keywords: Vertical Product Differentiation, Quality Reversal, International Trade, Minimum Quality Standards
    JEL: F13 L13 L52
    Date: 2007
  7. By: Hoekman, Bernard; Vines, David
    Abstract: This paper first briefly describes the role of the WTO and its history. It then lays out a simple bargaining model of international negotiations, which can be used for understanding the Doha round of talks. This simple framework is used to distil and discuss a number of potential explanations for the difficulties that have arisen in concluding these talks, as well as a number of systemic questions that confront WTO members. A key question is whether the WTO should concentrate primarily on market access or on further expanding its coverage to deal with regulatory issues or with other domestic policies that may have an impact on trade. Given the difficulties that arise in agreeing on ‘behind the border’ disciplines, we argue that a continued focus on market access and enforcement of market access commitments is likely to prove most fruitful.
    Keywords: Doha Round; international cooperation; market access; multilateral trading system; WTO
    JEL: F13 F15
    Date: 2007–09
  8. By: Hoekman, Bernard; Saggi, Kamal
    Abstract: Using a repeated game approach, this paper models a North-South trade agreement under which North offers South improved market access (via a tariff reduction) if South agrees to prevent local imitation by strengthening its protection of intellectual property rights (IPRs). We show that such an agreement arises in equilibrium if South's imitative capacity is neither too high nor too low. The paper also considers a scenario where Southern protection of IPRs is induced via a North-South transfer. A comparison of the two instruments shows that one instrument does not unambiguously dominate the other in terms of sustaining cooperation. We also analyze whether and how the availability of the second instrument affects cooperation given that one instrument is already available.
    Keywords: Intellectual Property Rights; international cooperation; market Access; tariffs; trade agreements; Transfers
    JEL: F12 F13 L41 O19
    Date: 2007–09
  9. By: Josef, KONINGS (KULeuven Department of Economics); Hylke, VANDENBUSSCHE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)
    Abstract: We analyze the relationship between Antidumping (AD) Protection and the productivity of EU domestic firms in import-competing industries. For this purpose we identify a panel of domestic firms between 1993 and 2003 that a some point during this period are affected by AD initiations. Using a difference-in-difference approach, we find that AD measures result in improvements of measured productivity for domestic firms. Total Factor Productivity (TFP) of protected firms increases by 2% in the short-run and by 5% to 13% in the long-run. However, there is substantial heterogeneity across firms. The effect of protection depends on the initial Òdistance-to-the-frontier firmÓ in the industry. While protection raises TFP of ÒlaggardÓ domestic firms, it lowers TFP for ÒefficientÓ firms that operate close to the efficiency frontier. These results are consistent with recent theoretical work supporting the view that trade policy, under certain conditions, can induce technological catching-up. While this paper evaluates the effectiveness of AD policy it does not engage in a welfare analysis.
    Date: 2007–09–17
  10. By: Hylke, VANDENBUSSCHE (UNIVERSITE CATHOLIQUE DE LOUVAIN - Department of Economics and CORE, KULeuven, CEPR); Tilburg University and CentER
    Abstract: A recent phenomenon is the rapid spread of Antidumping (AD) laws mainly amongst developing countries Ôi.e. China, India, Mexico). Between 1980 and 2003 the number of countries in the world with an AD law more than doubled going from 36 to 97 countries. This proliferation of trade protection laws amongst developing countries is likely to have substantial implications for trade as recently shown by Vandenbussche and Zanardi (2007). The purpose of this paper is to use a duration analysis to investigate the determinants leading a country to adopt an AD law. We also analyze the related question of what explains the heterogeneity between countries that can be observed in terms of the time between adoption and their first use of the AD law. We find strong evidence that retaliatory motives are at the heart of the proliferation decision as countries that were targeted by AD actions of traditioal users in the past (i.e., US, EU) are much more likely to adopt an AD law. Also, our evidence suggests that past trade liberalization substantially increases the probability of a country to adopt an AD law. In addition, we find that the size of the chemicals sector and the extent of steel imports are positively correlated with the probability to adopt. The amount of inward FDI on the other hand has a clear negative effect on the probability to adopt. While short term macroeconomic factors like GDP growth and exchange rate volatility seem to matter less for adoption, asymmetric regional shocks and the development level of a country seem to raise the probability of starting to use an AD law. Our results are robust to several specifications of duration models.
    Keywords: Antidumping, trade liberalization, GATT/WTO
    JEL: F13 F14
    Date: 2007–09–17
  11. By: Suwa Eisenmann, Akiko; Verdier, Thierry
    Abstract: The paper surveys the interactions between aid and trade, distinguishing between policies and outcomes as well as between various instruments. It first discusses the theoretical literature, focusing on the causal impact of aid on the recipient’s welfare via the trade channel, before turning to the empirical and institutional literature on the topic. It dentifies the main conclusions that are suggested by the literature and discusses the gaps that need to be filled out in order to get plausible policy recommendations.
    Keywords: aid; development; trade
    JEL: F13 F35 O10
    Date: 2007–09
  12. By: Jens Høj; Miguel Jimenez; Maria Maher; Giuseppe Nicoletti; Michael Wise
    Abstract: Based on 18 country reviews performed over the 2003-2005 period, this paper examines, the cross-country differences in policy approaches to product market competition and their consequences for product market rents. Against this background, the paper summarises OECD recommendations to further strengthen competition in various sectors and areas. These include: removing remaining barriers to trade and inward foreign direct investments; better securing deterrence of cartels through effective sanctions; facilitate market access to inherently competitive industries by easing zoning laws (the retail sector), abolishing reserved monopolies (sales of tobacco and alcohol), limiting the scope of trade associations’ self-regulation and easing residency or nationality requirements (professional services); meet competition challenges in network industries by facilitating the effective separation of monopoly components from competitive activities, reducing public ownership, clearly separating the government’s ownership and regulatory functions and creating the right incentives for investing in infrastructures. <P>Concurrence dans les marchés des produits des pays de l’OCDE : bilan et perspectives <BR>Ce document est basé sur 18 études économiques de l’OCDE menées entre 2003 et 2005. Il examine les différences entre pays dans les politiques de la concurrence ainsi que leur conséquences sur les caractéristiques des marchés de produits. Sur cette base, le document propose une synthèse des recommandations de l’OCDE pour renforcer la concurrence dans différents domaines et secteurs économiques. Celles-ci comprennent: la suppression des barrières commerciales et aux investissements directs étrangers encore en place; une meilleure dissuasion des stratégies de cartel à l’aide de sanctions plus efficaces; un accès plus aisé aux activités concurrentielles en assouplissant les régulations concernant l’aménagement du territoire (commerce de détail), la suppression de certains monopoles (vente de tabac et d’alcool), la limitation des prérogatives des associations professionnelles dans le domaine règlementaire ainsi que l’assouplissement des obligations de résidence ou de nationalité (professions libérales) ; et un meilleur essor de la concurrence dans les industries de réseau par la séparation des activités en situation de monopole des activités concurrentielles, la réduction du degré de contrôle public, notamment en distinguant clairement les fonctions de tutelle des fonctions de régulation sectorielle et en mettant en place les bonnes incitations à l’investissement en infrastructures.
    Keywords: network industries, industrie de réseau, trade policy, politique commerciale, competition law, droit de la concurrence, OECD countries, market imperfections, antitrust issues and policies, inherently competitive sectors, pays membres de l'OCDE, défaillances de marché, régulations anti-trust, secteurs concurrentiels
    JEL: D43 F13 K21 L4 L8 L9
    Date: 2007–09–17
  13. By: Olarreaga, Marcelo; Lederman, Daniel; Cravino, Javier
    Abstract: In spite of the growing concerns about foreign direct investment being diverted from Latin America to China and India, the best available data show that Latin America has performed relatively well since 1997. Foreign capital stocks from OECD countries and the United States in particular in China and India are still far from those in the largest Latin American economies. The evidence shows that foreign capital stocks in China increased more than in Latin America during 1990-1997, but not as much since 1997. In fact, Latin America has actually performed better than China since 1997 given its lack of relative growth. The growth of foreign capital stocks in India was more stable than in China. Nonetheless, after controlling for shocks emanating from the source countries and bilateral distance between source and host countries, this paper finds a significant change in foreign capital stocks relative to China between 1990 and 1997, but no change relative to India.
    Keywords: Debt Markets,Transport and Trade Logistics,Common Carriers Industry,,Corporate Law
    Date: 2007–09–01
  14. By: Fischer, Andreas M; Lutz, Matthias; Wälti, Manuel
    Abstract: Survey information on Swiss exporters is used to test the hypothesis that firm-specific factors, in particular firm size, are important determinants of pricing--to-market (PTM). The survey asked exporters whether they set different prices across markets and, if so, whether price segmentation occurred because of pricing conditions in the local market or other factors. The empirical analysis is based on a probit model that regresses a binary-choice variable of PTM on firm size and other control variables. The main empirical finding is that firm size and PTM are positively and significantly correlated. A further result is that while firms whose main export market is in the Euro area are less likely to engage in PTM, firm size plays a bigger role for them. These results are robust across different PTM classifications, regression specifications, export destinations, and industrial sectors.
    Keywords: firm size; local currency pricing; Pricing to markets
    JEL: F10 F14
    Date: 2007–09
  15. By: Sarkar, Prabirjit
    Abstract: The present study examines the relationship between openness (trade-GDP ratio) and growth. Our cross-country panel data analysis of a sample 51 countries of the South during 1981-2002 shows that for only 11 rich and highly trade-dependent countries a higher real growth is associated with a higher trade share. Time series study of individual country experiences shows that the majority of the countries covered in the sample including the East Asian countries experienced no positive long-term relationship between openness and growth during 1961-2002. Our study of the experience of various regions and groups shows that only the Middle Income group exhibited a positive long-term relationship.
    Keywords: growth; opening up; liberalization; less developed countries and globalization.
    JEL: F02 F43 O50
    Date: 2007–09

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