nep-int New Economics Papers
on International Trade
Issue of 2008‒02‒23
sixteen papers chosen by
Martin Berka
Massey University

  1. Welfare Effect of Mergers and Trade Liberalization By Chaudhuri, A.R.; Benchekroun, H.
  2. Bilateral Trade of Cultural Goods By Anne-Celia Disdier; Silvio H.T. Tai; Lionel Fontagne; Thierry Mayer
  3. A Dynamic Model of Endogenous Mergers and Trade Liberalization By Chaudhuri, A.R.
  4. Trade between China and the Netherlands: a Case Study of Globalization By Frank A.G. den Butter; Raphie Hayat
  5. Productivity Gains from Offshoring: an Empirical Analysis for the Netherlands By Frank A.G. den Butter; Christiaan Pattipeilohy
  6. Exporting Spillovers: Firm-Level Evidence from Argentina By F. Albornoz, M. Kugler
  7. Exports and productivity – comparable evidence for 14 countries By The International Study Group on Exports and Productivity; Mauro Pisu
  8. Dynamic Adjustments to Terms of Trade Shocks: The USA Productivity Boom and Australia By Richard G. Harris; Peter E. Robertson
  9. The Trade and FDI Effects of EMU Enlargement By Jelle Brouwer; Richard Paap; Jean-Marie Viaene
  10. Tariffs and Technology Transfer through an Intermediate Product By Eiji Horiuchi; Jota Ishikawa
  11. Trade-Induced Changes in Economic Inequality: Assessment Issues and Policy Implications for Developing Countries By Sylvain Chabe-Ferret; Author-Name: Julien Gourdon; Mohamed Ali Marouani; Tancrède Voituriez
  12. The Consequences of WTO Accession for Belarus By Kiryl Kurilionak; Stanislav Vassilevsky; Vitaly Medvedev
  13. Trends of Trade Disputes During the WTO Regime By Ziaul Abedin and Mohammad Ali Tareq
  14. The Transaction Costs Perspective on Standards as a Source of Trade and Productivity Growth By Frank A.G. den Butter; Stefan P.T. Groot; Faroek Lazrak
  15. Trade Openness, Capital Mobility, and the Sacrifice Ratio By Joseph P. Daniels; David D. VanHoose
  16. What Explains the International Location of the Clothing Industry? By Tengstam, Sven

  1. By: Chaudhuri, A.R.; Benchekroun, H. (Tilburg University, Center for Economic Research)
    Abstract: In a two-country model where firms behave a la Cournot, we show that marginal and non-marginal trade liberalization have different effects on the social desirability of horizontal mergers. Marginal tariff reductions increase (decrease) the desirability of merger at sufficiently low (high) tariff levels. In the neighborhood of free trade, for sufficiently low cost savings from merger, trade liberalization increases the desirability of merger whilst decreasing the profitability, implying that mergers should be actively encouraged by competition authorities. Furthermore, we identify ranges of tariff levels for which, if trade liberalization increases (decreases) the desirability of merger, it necessarily increases (decreases) its profitability.
    JEL: L41 F13
    Date: 2008
  2. By: Anne-Celia Disdier; Silvio H.T. Tai; Lionel Fontagne; Thierry Mayer
    Abstract: International trade flows of cultural goods have grown very rapidly over the last decades and their liberalization will be one of the important issues of future multilateral trade negotiations. Despite these stakes, cultural flows have, to date, not been much studied by trade economists. In this paper, we focus on bilateral trade in cultural goods, such as books, recorded media, visual arts, audio visual media, and we investigate its determinants. Furthermore, we use trade in cultural goods as a proxy for countries’ cultural proximity and study if countries with proximate cultural tastes tend to have more intense bilateral exchanges. Our estimations show a positive and significant influence of cultural flows on overall trade, suggesting that regulations fostering domestic cultural creation might have impacts going beyond what is generally expected.
    Keywords: International trade models and databases; gravity model; simulation
    JEL: F10 Z10
    Date: 2007–11
  3. By: Chaudhuri, A.R. (Tilburg University, Center for Economic Research)
    Abstract: This paper uses a dynamic dominant-firm model with an endogenous merger process to examine the effects of trade liberalization on industry structure. Domestic and cross-border mergers and demergers are allowed for. When firms are myopic and the dominant firm has a sufficiently high pre-merger capital share in any one country, trade liberalization causes the industry to become significantly more concentrated. When firms are forward-looking, this anti-competitive effect of trade liberalization is mitigated. Tariff reduction from a prohibitive to a non-prohibitive level aligns merger patterns across countries and initiates merger (or demerger) waves simultaneously across countries, provided all firms are equally forward-looking. When the dominant firm is more forward-looking than the fringe, however, this result may be reversed. These results, thus, highlight the importance of taking into consideration existing industry structure and firms' discount rates whilst formulating competition policy in the face of trade liberalization.
    Keywords: endogenous market structure;horizontal mergers;trade liberalization
    JEL: L41 F13
    Date: 2008
  4. By: Frank A.G. den Butter (VU University Amsterdam); Raphie Hayat (KPMG Corporate Finance, Amsterdam)
    Abstract: During the last decades, the growth of trade between China and the Netherlands has been larger than the increase in bilateral trade flows between China and most other countries. Using a time series based gravity model, this paper investigates the main determinants of this increase. The empirical analysis indicates that, apart from GDP growth, Dutch in-house offshoring to China is a major determinant of Dutch import growth from China. Dutch firms tend to offshore production in-house when the asset specificity of the traded inputs is high and offshore via the market when this asset specificity is low. Controlling for these product types also reveals that transport costs are more important for trade in homogeneous and reference priced goods than for trade in differentiated goods
    Keywords: international trade; transaction costs; offshoring; foreign direct investments; asset specificity; gravity model
    JEL: F14 L16 L23
  5. By: Frank A.G. den Butter (VU University Amsterdam); Christiaan Pattipeilohy (VU University Amsterdam, and Frisch Center, Oslo)
    Abstract: A major question in the globalization debate is whether outsourcing and offshoring activities are beneficial to the home country. This paper investigates the effects on productivity and trade from the perspective of transaction costs, using a recent theory on trade in tasks. A production function is estimated for the Netherlands for the period 1972-2001. It suggests that the effect of offshoring manufacturing and services on total factor productivity (TFP) is positive and larger than the effect of R&D on productivity.
    Keywords: globalization; offshoring; foreign direct investments; transaction costs; total factor productivity
    JEL: F10 F43 O47
    Date: 2007–11–23
  6. By: F. Albornoz, M. Kugler (Wilfrid Laurier University)
    Abstract: We investigate whether exporting firms generate possibilities for productivity enhancement by other firms through spillovers. While spillovers have been analyzed when domestic learn from foreign-owned firms, we consider the possibility of learning from firms that export, irrespective of ownership origin. We find evidence consistent with learning from exporters to upstream producers. Foreign-owned firms that do not export do not generate spillovers. Therefore, our results suggest that export activity, as opposed to foreign direct investment (FDI) per se, is associated with knowledge diffusion to input suppliers. Indeed, the results suggest that FDI subsidies to foster technology spillovers may well be dominated by certain export promotion strategies. In addition, removing barriers to exports can prove less costly than removing barriers to FDI inflows.
    Keywords: Exporting, Spillovers, FDI, Supply-Chain Linkages
    JEL: O30 F10
    Date: 2008
  7. By: The International Study Group on Exports and Productivity; Mauro Pisu (National Bank of Belgium, Research Department)
    Abstract: Consisting of teams working with firm level data, the International Study Group on Exports and Productivity has used comparable micro level panel data for 14 countries and a set of identically specified empirical models to investigate the relationship between exports and productivity. The overall results are in line with the big picture that is by now familiar from the literature: Exporters are more productive than non-exporters when observed and unobserved heterogeneity are controlled for, and these exporter productivity premia tend to increase with the share of exports in total sales; there is strong evidence in favour of self-selection of more productive firms into export markets, but nearly no evidence in favour of the learning-by-exporting hypothesis. The authors document that the exporter premia differ considerably across countries in identically specified empirical models. In a meta-analysis of the results they find that countries that are more open and have more effective government report higher productivity premia. However, the level of development per se does not appear to be an explanation for the observed cross-country differences.
    Keywords: exports, productivity, micro data, international comparison
    JEL: F14 D21
    Date: 2008–02
  8. By: Richard G. Harris (Department of Economics, Simon Fraser University); Peter E. Robertson (School of Economics, The University of New South Wales)
    Abstract: How has the USA’s “new economy” productivity boom affected Australia? We consider this question using a dynamic multi-sector growth model of the Australian and USA economies. We find that productivity growth in the USA durables sector generates small but important gains to Australia. We find that the transmission of growth is generated through increased export demand for Agriculture. Consequently we find that the USA’s productivity growth tends to favour Australia’s traditional export sectors. Likewise it increases the relative demand for less skilled labour in Australia and reduces the demand for skilled labour and higher education.
    Keywords: Terms of Trade; Productivity; Economic Growth; Human Capital; Computable General Equilibrium Models
    Date: 2007–06
  9. By: Jelle Brouwer; Richard Paap; Jean-Marie Viaene (Erasmus University Rotterdam)
    Abstract: This paper considers the nature and the distribution of trade and FDI effects of a potential enlargement of the European Monetary Union (EMU) to the ten countries that obtained EU membership in 2004. Intuitively, the implementation of a single currency for these countries means replacing several fluctuating currencies by a common currency. This gives rise to both “level” and “risk” effects of reduced currency movements on trade and investment. Another factor is the nature of the link between trade and FDI. This is also important not only because cross-border factor flows are becoming increasingly important, but also the international trade literature has long recognized that cross-border factor flows and trade in goods and services can be substitutes or complements. Given this background, one-way and two-way error component gravity models are estimated to examine for these theoretical expectations within a dataset of unbalanced panel data that combines bilateral trade flows among 29 countries and the distribution of outward FDI stocks among these countries (including the 10 new EU members). The data generally cover the period from 1990 to 2004. Our empirical results convincingly support: (i) a complementarity between trade and investment, (ii) a relationship between trade and exchange rate volatility that depends on the sign of bilateral trade balances, (iii) a positive effect of EU on trade and investment, and (iv) a positive effect of EMU on foreign investment. Using a simulation-based technique, we find that estimates of FDI effects of EMU range between 18.5 percent for Poland and 30 percent for Hungary.
    Keywords: EMU; exchange rate volatility; foreign investment; trade diversion; vertical integration
    JEL: C33 F21 F31 F33 F36
    Date: 2007–10–04
  10. By: Eiji Horiuchi (Hitotsubashi University); Jota Ishikawa (Hitotsubashi University)
    Abstract: We examine the relationship between tariffs and technology transfer from the North to the South in an oligopolistic model. Technology is embodied in a key component which only the North firm can produce. Interestingly, a decrease in the tariff on the final good as well as an increase may induce technology transfer. If the South subsidizes the final-good production or imports of the intermediate good, technology transfer is also facilitated. However, the welfare effects are different between tariffs and subsidies. Our analysis suggests that the South should take pro-competitive policies to induce technology transfer and enhance welfare.
    Keywords: technology transfer; intermediate products; tariffs; licensing; North-South trade
    JEL: F12 F21 F23
    Date: 2007–05
  11. By: Sylvain Chabe-Ferret (CERDI, Clermont-Ferrand); Author-Name: Julien Gourdon (CERDI, Clermont-Ferrand); Mohamed Ali Marouani (Université Paris1-Sorbonne/IEDES, DIAL et ERF); Tancrède Voituriez (CIRAD et IDDRI)
    Abstract: (english) The starting point of this paper is given by country situations where trade liberalization is expected to be poverty and inequality alleviating in the long run while inducing a short run increase in poverty or in inequality. The question we ask is what are the distributive aspects of trade which are worth documenting to better help governments integrate trade policies within a global policy framework so as to enhance growth and reduce poverty and inequality. The method followed is a literature review, organized according to three different acceptations of fairness implied by the “Development” objective of world trade liberalization agenda. A “pro-development” trade liberalization agenda should first correct past unfairness in trade regime, which raises the broad issue of country level trade liberalization’s ex post impact assessment. It should equally reduce poverty, which points toward household level assessment. Last, because development is basically a dynamic process, the distributive-dynamic effects of trade liberalization are also considered. Across all these three definitions of fairness, the development objective of the Doha round proves to be an objective which trade liberalization cannot systematically achieve. A synthesis of our ten main results concludes the paper. _________________________________ (français) Nous dressons dans ce papier un bilan de la littérature sur le lien empirique entre libéralisation commerciale et développement selon trois acceptions différentes du « développement » et de l’impératif de justice que ce terme sous-entend dans les négociations à l’OMC. Rebaptisé « cycle du développement », le cycle de Doha a la première ambition de corriger des injustices passées en matière d’accès au marché, dont ont pâti les pays en développement. Les évaluations ex post et transversales de la libéralisation sur ces pays sont mobilisées pour documenter ce grief. Le cycle de Doha doit également contribuer à réduire la pauvreté des ménages. Les évaluations au niveau des ménages sont ici mobilisées et leurs résultats saillants recensés. Enfin, parce que le « développement » est avant tout un processus, les effets dynamiques de la libéralisation sur les inégalités intertemporelles sont passés en revue. Il ressort de ces trois grandes définitions qu’aucun effet systématique de la libéralisation ne s’observe sur le développement. Ce résultat pourrait expliquer, en partie, la difficulté que rencontrent les négociations à l’OMC dans un cycle au nom chargé de promesses intenables si l’on se restreint à l’état de la connaissance économique sur la question.
    Keywords: International Trade, Income Distribution, Poverty, libéralisation, OMC, commerce, inégalités, pauvreté.
    JEL: F11 F16 D3 D5
    Date: 2007–12
  12. By: Kiryl Kurilionak; Stanislav Vassilevsky; Vitaly Medvedev
    Abstract: In this paper we consider the possible consequences that accession to the World Trade Organization (WTO) bears for Belarus. Our approach is based on partial equilibrium. We have applied a method of locating specific 'sensitive' points in the economy and treating them as separate items: specific elements in the economic system on which WTO access will have an appreciable impact. Our research focuses on Belarusian manufacturing. We first determine possible changes in access to foreign markets associated with the cancellation of discriminatory non-tariff, antidumping and other restrictive measures introduced by WTO members. Total losses to the Belarusian manufacturers are currently estimated to be of the order of USD 230-250 million a year. Lifting those barriers will constitute the immediate short-term benefits to Belarus on accession to the WTO. In order to assess the short-term impact of WTO accession on Belarusian manufacturing, the scenario used assumed a reduction of tariffs, complete removal of discriminatory measures and a lowering of market barriers to Belarusian exports. A quantitative assessment was made of the gains and losses by manufacturing branch, followed by a simple sensitivity analysis. The latter revealed the Belarusian manufacturers' ability to withstand increased import competition up until such time as the requisite restructuring measures have been introduced. Summary conclusions are drawn for each branch in the light of those findings. One section of the paper focuses on the implications for Belarus of the Russian Federation's accession to the WTO. Consideration is given to the possible impact on Belarusian exports to the Russian market. The analysis shows, however, that Russia's joining the WTO does not incur the risk of Belarus losing its share of the Russian market. In the final section, consideration is given to state support for agriculture and the development of service markets, with a discussion on possible forms of, and limits to, liberalization. The final conclusion is that liberalizing the imports of certain items is very much in line with the need to revise the current structure of trade specialization in Belarus. Import liberalization should not be seen simply as a trade-off for the non-discrimination of Belarusian exports. If the economy of Belarus is to benefit, the country must pursue a consistent policy of cutting back or closing down those manufacturing activities that are unlikely to evolve into internationally competitive industries. Liberalization of the domestic market in the wake of WTO accession must be in keeping with: (a) the financial viability of specific industries; and (b) the need to provide in a manner compatible with WTO rules and regulations additional protection to those industries with high value-added that are of strategic importance to the country¿s future development.
    Keywords: international trade, WTO accession, manufacturing, services, agriculture
    JEL: F1 F42 F53 L6 L8 O24
    Date: 2007–01
  13. By: Ziaul Abedin and Mohammad Ali Tareq (Shiga University, Japan.; American International University Bangladesh)
    Abstract: Patterns and trends of trade disputes reveal vital information about the users of the Dispute Settlement Understanding (DSU) of the World Trade Organization (WTO). Despite WTO has detailed guidelines regarding how the multilateral trade should be practiced by the Member Countries, the DSU is the ultimate Agreement that promises fair justice against unfair trade practices. Analyses of trade disputes show that the developed countries use the Dispute Settlement Mechanism (DSM) more than the developing or the newly industrialized countries. The rate of participation of the least-developed countries (LDC) in the dispute settlement process is particularly very low. The direction of disputes shows that the disputes are mostly targeted to the developed countries. All categories of countries- i.e. developed, developing, newly industrialized and transitional economies- lodged disputes against the developed countries more frequently compared to the disputes they lodged against other categories of countries. This indicates that developed countries are targeted in the trade disputes. However, the rate of winning disputes for the developed countries is also higher than those of the other categories. This indicates that despite the developed countries are targeted in the disputes, they manage to survive quite successfully.
    Date: 2008–01
  14. By: Frank A.G. den Butter (VU University Amsterdam); Stefan P.T. Groot (VU University Amsterdam); Faroek Lazrak (VU University Amsterdam)
    Abstract: This paper discusses the design, implementation and use of standards from the perspective of transaction costs economics. A proper design and implementation of standards may lead to a considerable reduction of transaction costs, which enhances trade and, consequently, economic welfare. A major example is the use of containers, which has drastically changed the worldwide transport infrastructure, and lowered the costs of transport of goods considerably. The example of containers also shows that network externalities play a major role in the use of standards, and that, on the other hand, worldwide standards with large sunk investment costs may lead to a lock-in. This may call for government intervention in the design and use of standards, and in the transition processes to new standards. The paper provides ample further examples of standards and on the role of the government, or clubs, with respect to these standards.
    Keywords: standards; transaction costs; innovations; lock-ins; network externalities; international trade
    JEL: L15 L16 L17
    Date: 2007–11–23
  15. By: Joseph P. Daniels (Center for Global and Economic Studies, Marquette University); David D. VanHoose (Hanmaker School of Business, Baylor University)
    Abstract: This paper develops and evaluates empirically the implications of a theoretical model of an open economy in which variations in both trade openness and capital mobility can influence the sacrifice ratio. Key predictions forthcoming from the model are that both forms of globalization can independently affect the capital ratio, once the influences of the level of central bank independence and the degree of wage stickiness in nations‘ economies are taken into account. Examination of cross-country data encompassing 58 disinflations for 16 countries yields evidence consistent with these essential predictions of the theoretical framework.
    Keywords: Openness, Capital Mobility, Sacrifice Ratio
    JEL: F40 F41 F43
    Date: 2007–01
  16. By: Tengstam, Sven (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: The clothing sector has been a driver of diversification and growth for countries that have graduated into middle income. Using a partial adjustment panel data model, this study tries to explain the international location of clothing production based on a combination of variables suggested by the Heckscher-Ohlin theory and by New Economic Geography theory. Our Blundell-Bond system estimator results show that closeness to intermediates such as low-cost labor and textile production has a positive effect on clothing production. Factor endowment and closeness to the world market have inversed U-shaped effects. This is expected, because above a certain level several other sectors benefit even more from closeness and factor endowments, driving resources away from the clothing industry.<p>
    Keywords: Clothing Industry; New Economic Geography; Comparative Advantages; Industrial Agglomeration.
    JEL: F12 F13 L13 L67 R12 R30
    Date: 2008–02–21

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