nep-int New Economics Papers
on International Trade
Issue of 2008‒01‒12
seventeen papers chosen by
Martin Berka
Massey University

  1. Trade, Production Sharing, and the International Transmission of Business Cycles By Ariel Burstein; Christopher Kurz; Linda Tesar
  2. Trade Credit, International Reserves and Sovereign Debt By Kohlscheen, E.; O’Connell, S. A.
  3. Imports, Exports and Foreign Direct Investment Interactions and Their Effects By Santi Chaisrisawatsuk; Wisit Chaisrisawatsuk
  4. On Pitchforks and Tomahawks By Michael Pflüger; Jens Südekum
  5. Services trade and growth By Mattoo, Aaditya; Hoekman, Bernard
  6. Regionalism and trade facilitation : a primer By Maur, Jean-Christophe
  7. Trade Facilitation beyond the Doha Round of Negotiations By Yann Duval
  8. From Export Promotion To Import Substitution; Comparative Experience of China and Mexico By Shafaeddin, Mehdi; Pizarro, Juan
  9. Investment Regulation through Trade Agreements:Lessons from Asia By Pierre Sauve
  10. Services Trade in Developing Asia:A case study of the Banking and Insurance Sector in Malaysia By Muthi Samudram
  11. Trade and Investment Linkages in Higher Education Services in Malaysia By Tham Siew Yean; Andrew Kam Jia Yi
  12. The Macroeconomic, Industrial and Distributional Effects of Removing Tariffs in Bangladesh By Serajul Hoque
  13. Services Trade in Developing Asia:A case study of the Banking and Insurance Sector in Bangladesh By Salahuddin Ahmad; Dilli Raj Khanal
  14. Trade and Investment Liberalization Effects on SME Development: A literature Review and a Case Study of Indonesia By Tulus Tambunnan
  15. Services Trade in Developing Asia:A Case Study of the Banking and Insurance Sector in Nepal By Dilli Raj Khanal
  16. India-EU FTA-Challenges, Opportunities and strategies for the future? By Jindal, Kunal
  17. Who are the net food importing countries ? By Aksoy, M. Ataman; Ng, Francis

  1. By: Ariel Burstein; Christopher Kurz; Linda Tesar
    Abstract: Countries that are more engaged in production sharing exhibit higher bilateral manufacturing output correlations. We use data on trade flows between US multinationals and their affiliates as well as trade between the United States and Mexican maquiladoras to measure production-sharing trade and its link with the business cycle. We then develop a quantitative model of international business cycles that generates a positive link between the extent of vertically integrated production-sharing trade and internationally synchronized business cycles. A key assumption in the model is a relatively low elasticity of substitution between home and foreign inputs in the production of the vertically integrated good.
    JEL: F4 F41
    Date: 2008–01
  2. By: Kohlscheen, E. (Department of Economics, University of Warwick); O’Connell, S. A. (Department of Economics, Swarthmore College)
    Abstract: We present a unified model of sovereign debt, trade credit and international reserves. Our model shows that access to short-term trade credit and gross international reserves critically affect the outcome of sovereign debt renegotiations. Whereas competitive banks do optimally lend for the accumulation of borrowed reserves that strengthen the bargaining position of borrowers, they also have incentives to restrict the supply of short-term trade credit during renegotiations. We first show that they effectively do so and then derive propositions that : I) establish the size of sovereign debt haircuts as a function of economic fundamentals and preferences ; II) predict that defaults occur during recessions rather than booms, contrary to reputation based models ; III) provide a rationale for holding costly borrowed reserves and, IV) show that the stock of borrowed international reserves tends to increase when global interest rates are low.
    JEL: F30 F34
    Date: 2007
  3. By: Santi Chaisrisawatsuk; Wisit Chaisrisawatsuk (School of Development Economics, NIDA, Bangkok, Thailand.)
    Abstract: This study explores how international trade and investment flows affect each other, using data from OECD and 6 ASEAN countries , and examines whether trade and investment linkages are different between developed and developing economies, or between countries that participate actively in bilateral and/or regional trade agreements.
    Keywords: Imports, Exports, Foreign, Investment, Interactions, Effects
    JEL: F1
    Date: 2007–10
  4. By: Michael Pflüger (University of Passau, DIW Berlin and IZA); Jens Südekum (University of Duisburg-Essen and IZA)
    Abstract: The core-periphery model by Krugman (1991) has two 'dramatic' implications: catastrophic agglomeration and locational hysteresis. We study this seminal model with CES instead of Cobb-Douglas upper tier preferences. This small generalization suffices to change these stark implications. For a wide range of parameters we find that the model exhibits instead a smooth and easily reversible transition from symmetry to agglomeration.
    Keywords: core-periphery model, new economic geography, agglomeration, bifurcation pattern
    JEL: F12 F15 F22 R12 R50
    Date: 2007–12
  5. By: Mattoo, Aaditya; Hoekman, Bernard
    Abstract: The competitiveness of firms in open economies is increasingly determined by access to low-cost and high-quality producer services - telecommunications, transport and distribution services, financial intermediation, etc. This paper discusses the role of services in economic growth, focusing in particular on channels through which openness to trade in services may increase productivity at the level of the economy as a whole, industries and the firm. The authors explore what recent empirical work suggests could be done to enhance comparative advantage in the production and export of services and how to design policy reforms to open services markets to greater foreign participation in a way that ensures not just greater efficiency but also greater equity in terms of access to services.
    Keywords: Economic Theory & Research,Banks & Banking Reform,Transport Economics Policy & Planning,ICT Policy and Strategies,Emerging Markets
    Date: 2008–01–01
  6. By: Maur, Jean-Christophe
    Abstract: This paper investigates when trade facilitation reform should be undertaken at the regional level. First, looking at both efficiency and implementation considerations, it confirms the perception that the regional dimension matters. Investigating where efficiency gains can be made, this research explains why national markets alone fail to produce the full scale economies and positive externalities of trade facilitation reform. Second, because trade facilitation policies need to address coordination and capacity failures, and because of the operational complexity challenge, the choice of the adequate platform for delivering reform is crucial. The lessons are that regional trade agreements offer good prospects of comprehensive and effective reform and can effectively complement multilateral and national initiatives. However, examples of implementation of trade facilitation reform in regional agreements do not seem to indicate that regional integration approaches have been more successful than trade facilitation through specific cooperation agreements or other efforts, multilateral or unilateral. Customs unions may be an exception here, and the author suggests reasons why this could be the case.
    Keywords: Transport Economics Policy & Planning,Trade Law,Trade and Regional Integration,Free Trade,Trade Policy
    Date: 2008–01–01
  7. By: Yann Duval (Trade and Investment Division, UNESCAP)
    Abstract: this paper succinctly explores three emerging (in the case of customs valuation, re-emerging) issues, drawing from recent ARTNeT working papers as well as other relevant literature: (a) trade facilitation and regional trade agreements and initiatives; (b) trade facilitation and customs valuation; and (c) trade facilitation and services.
    Keywords: Trade, Facilitation, Doha, Negotiations
    JEL: F1
    Date: 2007–12
  8. By: Shafaeddin, Mehdi; Pizarro, Juan
    Abstract: Abstract Both Mexico and China have started export orientation in some industries, through assembly operations, based on imported inputs a couple of decades ago. The literature on industrialization, has discussed the questions of import substitutions and outward-orientation mainly as alternative routes to industrialization. In both cases, it is argued that “learning” would contribute to industrial development. Proponent of import substitution argued that import substitution contributes to industrial development through “learning by doing”. Those in favour of free trade and outward orientation argue that trade contributes to the transfer of knowledge and technology. This study is the first part of a twin study in which the authors attempt to shed some light on the comparative experience of the two countries in the light of the above-mentioned literature. The present study is devoted to the establishment of facts, while in the second study an attempt will be made to provide an explanation for differences in the performance of the two countries and the role played by their government in order to see whether the process, if successful, is replicable elsewhere. China and Mexico the process of trade liberalization and development of export oriented industries started, following a period of pursuing import substitution strategy , more or less, at the same time-if not earlier in the case of Mexico. It will be shown in this study that both countries have managed to develop comparative advantage in many industries initiated through import substitution; but China has been more successful than Mexico in gradually increasing value added in export oriented industries by substituting domestic production for imported inputs in these industries. The first section is devoted to a brief survey of the literature. In the second section, we will shed some light on the general trends in development of export promotion industries and general performance of the manufacturing sector in exports and production. The third section is devoted to the analysis of processing trade and value added in assembly operations through production of domestic components. In section four we will investigate the evolution of revealed comparative advantage in exports, production and assembly operation of traded finished goods and parts and components in order to shed some light on their future export prospects. The final section will conclude the study. . 2
    Keywords: Mexico; China; Industrialization; Value added; Trade policy; Import substitution; export expansion
    JEL: F0 N6 O5 O2 O1 F1 O3 O4
    Date: 2007–06
  9. By: Pierre Sauve (World Trade Institute, Berne, Switzerland)
    Abstract: This article takes stock of recent trends in the investment dimensions of deepening economic integration in Asia.
    Keywords: Investment, Regulation, Trade Agreements, Lessons, Asia
    JEL: F1
    Date: 2007–11
  10. By: Muthi Samudram (Monash University)
    Abstract: This study reviews the development of the banking and insurance sectors in Malaysia since the 1980s, with a particular attention to the effects and sequencing of the various reforms as well as the impact of services trade liberalization and related commitments.
    Keywords: Service Trade, Malaysia
    JEL: F1
    Date: 2007–07
  11. By: Tham Siew Yean; Andrew Kam Jia Yi (Institute of Malaysian and International Studies, Malaysia)
    Abstract: This study aims to explore the trade and investment links in private higher education in Malaysia. Specifically, the study assesses whether, and if so, how trade and investment policies in general, and in the education sector in particular, are coordinated at the national level.
    Keywords: Trade and Investment, Education Services,Mode 1,Malaysia
    JEL: F1
    Date: 2007–09
  12. By: Serajul Hoque
    Abstract: This paper examines the economic effects of removing tariffs in Bangladesh using a computable general equilibrium (CGE) modelling approach. The results of the simulations indicate that in the short-run a funded tariff cut with fixed real national savings would increase employment slightly and hence would expand GDP. There would be a small economy-wide welfare gain as measured by real consumption. The sectoral results showed that export-oriented industries would experience an expansion in output and employment. There also would be positive effects on the suppliers to these industries. Lightly-protected industries, which rely heavily on imported intermediate inputs, are projected to show robust expansion as they would benefit from a cost reduction. However, highly-protected, import-competing industries would suffer a contraction in output and employment as they would face increased competition from imports due to the removal of tariffs. The simulation results also indicate that there would have some noticeable effects on the distribution of real consumption between different household groups. Overall, urban households would experience an expansion in real consumption and rural households would suffer a contraction as a consequence of the funded tariff cut with fixed real national savings.
    Keywords: CGE model, trade liberalisation, income distribution, Bangladesh
    JEL: C68 F13 O15
    Date: 2008–01
  13. By: Salahuddin Ahmad; Dilli Raj Khanal (Uttara University)
    Abstract: This study assesses the strengths and weaknesses of reforms in the banking and insurance industries. Banking sector performance is analysed using various indicators as well as Principle Component Analysis techniques. A comparative case study of three banks with different ownership structures is presented. The study concludes with important conclusions and policy implications for future reforms based on the findings.
    Keywords: Service Trade, Bangladesh
    JEL: F1
    Date: 2007–07
  14. By: Tulus Tambunnan (Centre for Industry and SME Studies, University of Trisakti)
    Abstract: As this research seeks to bring to the fore benefits that have been or may be derived for SMEs from international trade and investment liberalization in Indonesia, it has three main questions: (1). how international trade and investment policy reforms affect local SMEs; (2) has growth of exports of SMEs accelerated since the reforms; and (3) does investment liberalization generate more subcontracting between local SMEs and FDI.?
    Keywords: Trade and Investment, SME, Indonesia
    JEL: F1
    Date: 2007–08
  15. By: Dilli Raj Khanal (Institute for Policy Research and Development)
    Abstract: This study reviews the development of the banking and insurance sectors in Nepal and the effect of reforms and commitments linked to these sectors since the 1980s, when financial sector liberalization in Nepal began with deregulation of the interest rate structure and opening of the banking sector to foreign investors.
    Keywords: Service Trade, Nepal
    JEL: F1
    Date: 2007–07
  16. By: Jindal, Kunal
    Abstract: India presently is one of the fastest growing economies. India has tried a unique path of liberalization. Since 1990’s, while it has gradually unilaterally opened various sectors to foreign players, at the same time, it has realized the importance of Free trade areas (FTA) and preferential trade areas (PTA). It has been proactive in concluding FTA’s with developing countries. However, at the WTO, it has emerged as a strong voice of developing countries. Such an approach has given it flexibility in its approach. The talks of a promising India-EU FTA make India critically analyze the way to liberalization in the future. With increasing presence on the world economic scenario, it faces a critical question of it’s approach in the future? Without taking a stand, this paper tries to analyze its present approach and explore options for India. Then, in the second part, this paper attempts to delve into some of the problems facing India-EU FTA and the benefits of the same.
    Keywords: Unilateral; Bilateral; Multilateral; Liberalization; FDI
    JEL: F59
    Date: 2008–01–06
  17. By: Aksoy, M. Ataman; Ng, Francis
    Abstract: The purpose of this paper is to update the information on net food importing countries, using different definitions of food, separating countries by their level of income, whether they are in conflict and whether they are significant oil exporters. The study also estimates the changes in net food importing status of these countries over the last two and a half decades, and, most important, the study measures the relative importance of these net food imports in the import basket of the countries. Our results show that while many low-income countries are net food importers, the importance and potential impact of the net food importing status has been highly exaggerated. Many low-income countries that have larger food deficits are either oil exporters or countries in conflict. Food deficits of most low-income countries are not that significant as a percentage of their imports. Our results also show that only 6 low-income countries have food deficits that are more than 10 percent of their imports. Last two decades have seen a significant improvement in the food trade balances of low-income developing countries. SSA low-income countries are an exception to this trend. On the other hand, there are a g roup of countries which are experiencing civil conflicts which are large importers of food, and these countries can not meet their basic needs. They also need special assistance in the distribution of food within their boundaries. Therefore, one should modify the WTO Ministerial Declaration, and focus on these conflict countries rather than the broad net food importers.
    Keywords: Food & Beverage Industry,Emerging Markets,Currencies and Exchange Rates,Economic Theory & Research,
    Date: 2008–01–01

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