nep-int New Economics Papers
on International Trade
Issue of 2008‒03‒01
eleven papers chosen by
Martin Berka
Massey University

  1. Trade growth in a heterogeneous firm model: Evidence from South Eastern Europe By d'Artis Kancs
  2. The Impact of Trade Liberalization on the Trade Balance in Developing Countries By Yi Wu; Li Zeng
  3. The Clash of Liberalizations: Preferential versus Multilateral Trade Liberalization in the European Union By Baybars Karacaovali; Nuno Limao
  4. Why Has the Border Effect in the Japanese Machinery Sectors Declined? The Role of Business Networks in East Asian-Machinery Trade By Kyoji Fukao; Toshihiro Okubo
  5. External Tariff Liberalization in CARICOM: A Commodity-Level Analysis By Azim M. Sadikov
  6. Trade Restrictiveness in the CEMAC Region. The Case of Congo By Maria-Angels Oliva
  7. Long Run Sustainability of Sarawak- West Kalimantan Cross-Border Trade Flows By Bariyah, Nurul; Lau, Evan
  8. What makes a successful export? By Holger Görg; Richard Kneller; Balázs Muraközy
  9. How does Vietnam ' s accession to the World Trade Organization change the spatial incidence of poverty? By Roland-Holst, David; Fujii, Tomoki
  10. Credit chains and sectoral comovemen t: does the use of trade credit amplify sectoral shocks ? By Raddatz, Claudio
  11. The Effects of Foreign Price Uncertainty on Australian Production and Trade By Elie Appelbaum; Alan D. Woodland

  1. By: d'Artis Kancs (London School of Economics and Catholic University of Leuven)
    Abstract: In 2007 a Free Trade Area (BFTA) will be created in the Balkans. In this paper we study the potential impact of BFTA on trade growth in the SEE. Given that welfare impacts associated with trade growth depend on the growth channels, more goods and varieties exported or at higher price or higher volume of goods and varieties are exported, in this paper we investigate the structure of integration-induced export growth in the Balkans. The empirical implementation of our analysis is complicated by the fact that firm-level trade data is not available for the SEE economies. In order to cope with this data paucity, we adopt a heterogeneous firm framework, which allows us to decompose the aggregate trade growth in two parts: the intensive margin of trade and the extensive margin of trade using only aggregate trade data. The empirical findings of our study suggest that the BFTA would primarily trigger trade growth through a growing number of exported goods (the extensive margin of trade).Thus, the actual welfare gains from trade growth in the Balkans might be larger than predicted by previous trade studies. We also found that a variable trade cost reduction would lead to higher export growth rates compared to a fixed trade cost reduction. These results allow us to draw detailed policy conclusions.
    Keywords: Balkans, export growth, regional integration, trade costs
    JEL: F12 F14 R12 R23
    Date: 2007–12
  2. By: Yi Wu; Li Zeng
    Abstract: Using two recently constructed measures of trade liberalization dates, this research studies the impact of trade liberalization on imports, exports, and overall trade balance for a large sample of developing countries. We find strong and consistent evidence that trade liberalization leads to higher imports and exports. However, in contrast Santos-Paulino and Thirwall (2004) who find a robustly negative impact of trade liberalization on the overall trade balance, we only find mixed evidence of such a negative impact. In particular, we find little evidence of a statistically significant negative impact using our first measure of liberalization dates which extends Li (2004). Using a second measure of liberalization dates compiled by Wacziarg and Welch (2003), we find some evidence that liberalization worsens the trade balance, but the evidence is not robust across different estimation specifications, and the estimated impact is smaller than that reported by Santos-Paulino and Thirwall (2004).
    Keywords: Trade liberalization , Balance of trade , Developing countries ,
    Date: 2008–01–30
  3. By: Baybars Karacaovali (Fordham University, Department of Economics); Nuno Limao (University of Maryland, Department of Economics; NBER; CEPR)
    Abstract: Preferential trade agreements (PTAs) are characterized by liberalization with respect to only a few partners and thus they can potentially clash with, and retard multilateral trade liberalization (MTL). Yet there is almost no systematic evidence on whether the numerous existing PTAs actually affect MTL. We provide a model showing that PTAs hinder MTL unless they entail accession to a customs union with internal transfers. Using product-level tariffs negotiated by the European Union (EU) in the last two multilateral trade rounds we find that several of its PTAs have clashed with its MTL. However, this effect is absent for EU accessions. Moreover, we provide new evidence on the political economy determinants of trade policy in the EU.
    Keywords: Preferential trade agreements, customs unions, multilateral trade negotiations, MNF tariff concessions, reciprocity
    JEL: D78 F13 F14 F15
    Date: 2008
  4. By: Kyoji Fukao; Toshihiro Okubo
    Abstract: This paper analyzes the causes of the decline in Japan's border effect in four machinery industries (electrical, general, precision, and transportation machinery) by estimating gravity equations for Japan's international and interregional trade. In the estimation, we explicitly take account of firms' networks. We find that ownership relations usually enhance trade between two regions (countries); moreover, we find that we can explain 35% of the decline in Japan's border effect from 1980 to 1995 in the electrical machinery industry by the increase of international networks.
    Keywords: Gravity Model, Border Effect, Networks, Fragmentation
    JEL: F14 F17 F21 L14
    Date: 2008–02
  5. By: Azim M. Sadikov
    Abstract: This paper estimates the impact of the tariff liberalization in four largest CARICOM countries (Barbados, Guyana, Jamaica, and Trinidad and Tobago) on their trade flows. I trace changes in the product-line imports from CARICOM and non-CARICOM countries against time and commodity-level variation in external tariffs. I find that in each country the reduction of the external tariff, which eroded preferences enjoyed by member imports, increased the ratio of imports from non-member countries to imports from member countries. In Trinidad and Tobago, the higher ratio was largely the result of non-member imports crowding out member imports. In the three other countries, the ratio increased mainly because of higher non-member imports; there is little evidence that tariff reductions had an impact on member imports. Findings suggest that in Trinidad and Tobago liberalization of the external tariff reversed some of the trade diversion effects of CARICOM.
    Keywords: Trade liberalization , Barbados , Guyana , Jamaica , Trinidad and Tobago , Tariffs , Imports ,
    Date: 2008–02–05
  6. By: Maria-Angels Oliva
    Abstract: Congo's vital dependence on trade for development stands in contradiction with its trade policy. As a member of the CEMAC, Congo's tariff scheme at least formally is guided by CEMAC's 1994 trade regime agreement. This paper shows CEMAC's customs code is restrictive relative to that of comparable regional integration groups. The paper also discusses a number of quantitative and qualitative barriers to trade applied by Congo that render its current regime complex, nontransparent, and relatively unpredictable, compromising efforts to develop the non-oil sector and the country's export base. Moreover, Congo's high tariffs and other taxes have not led to higher fiscal revenues, as the number of exemptions granted in recent years has surged and customs administration remains weak.
    Keywords: Trade restrictions , Congo, Republic of , Revenues , Trade policy ,
    Date: 2008–01–30
  7. By: Bariyah, Nurul; Lau, Evan
    Abstract: This paper is concerned with the time series behavior of the cross border trade flows between Sarawak - West Kalimantan conducted through regional port of Tebedu custom district with the main focus on the long run sustainability of Sarawak trade deficits. Cross border trade activity has gain much attention due to the dynamic linkages of this unique regional economic activity on industry, investment and employment. By employing the three stages of modern time series econometric technique, the research found significant long run cointegration relationship for the bilateral trade flows as well as support for the strong form of sustainability condition, suggesting that Sarawak-West Kalimantan bilateral trade is on the sustainable path in governing their trade flows performance. This suggests that the macroeconomic policies of Sarawak and West Kalimantan have been effective in bringing exports and imports into a long run equilibrium.
    Keywords: Sarawak; West Kalimantan; Bilateral Trade Sustainability
    JEL: F40 C32 F10
    Date: 2008–02–26
  8. By: Holger Görg; Richard Kneller; Balázs Muraközy
    Abstract: We analyse a very rich and unique panel database which provides information on exports at the firm-product level. A stylised fact in the data is that many firms add as well as drop products from the export mix in any given year. Motivated by recent theory we investigate what determines the survival of products in the export mix. Estimating hazard models we find evidence that is consistent with the view that characteristics of the product as well as that of the firm matter. This suggests, in line with theory, that there are firm- as well as firm-product specific competencies that are important for shaping firms’ export mix.
    Keywords: export mix, product level, product survival, competencies
    JEL: F12 F14
    Date: 2008–02
  9. By: Roland-Holst, David; Fujii, Tomoki
    Abstract: Trade policies can promote aggregate efficiency, but the ensuing structural adjustments generally create both winners and losers. From an incomes perspective, trade liberalization can raise gross domestic product per capita, but rates of emergence from poverty depend on individual household characteristics of economic participation and asset holding. To fully realize the growth potential of trade, while limiting the risk of rising inequality, policies need to better account for microeconomic heterogeneity. One approach to this is geographic targeting that shifts resources to poor areas. This study combines an integrated microsimulation-computable general equilibrium model with small area estimation to evaluate the spatial incidence of Vietnam ' s accession to the World Trade Organization. Provincial-level poverty reduction after full liberalization was heterogeneous, ranging from 2.2 percent to 14.3 percent. Full liberalization will benefit the poor on a national basis, but the northwestern area of Vietnam is likely to lag behind. Furthermore, poverty can be shown to increase under comparable scenarios.
    Keywords: Rural Poverty Reduction,Population Policies,Economic Theory & Research,Achieving Shared Growth
    Date: 2008–02–01
  10. By: Raddatz, Claudio
    Abstract: This paper provides evidence of the presence and relevance of a credit-chain amplification mechanism by looking at its implications for the correlation of industries. In particular, it tests the hypothesis that an increase in the use of trade-credit along the input-output chain linking two industries results in an increase in their correlation. The analysis uses detailed data on the correlations and input-output relations of 378 manufacturing industry-pairs across 44 countries with different degrees of use of trade credit. The results provide strong support for this hypothesis and indicate th at the mechanism is quantitatively relevant.
    Keywords: Economic Theory & Research,Access to Finance,Bankruptcy and Resolution of Financial Distress,Investment and Investment Climate,
    Date: 2008–02–01
  11. By: Elie Appelbaum (York University, Canada); Alan D. Woodland (Faculty of Economics and Business, University of Sydney)
    Abstract: This paper provides a framework for the empirical analysis of the role of uncertain international prices for the Australian economy’s production sector and its international trade. We model the movement of traded goods prices via a bivariate GARCH model and embed this within an expected utility maximizing model of the production sector. We find that the empirical results are consistent with expected utility maximization and that the hypothesis of risk neutrality is soundly rejected. Estimates of the effects of changes in expected prices and volatility of traded goods prices upon production decisions and the return to capital are presented and discussed, as are the impacts of changes in output growth of Australia’s major trading partners. The overall conclusion is that price uncertainty matters for the Australian production sector.
    Keywords: Price uncertainty, production under risk, expected utility maximization, international trade
    JEL: F10 C51
    Date: 2008–01

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