nep-int New Economics Papers
on International Trade
Issue of 2010‒01‒30
33 papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Productivity and Firm Selection: Quantifying the "New" Gains from Trade. By Gregory Corcos; Massimo Del Gatto; Giordano Mion; Gianmarco I.P. Ottaviano
  2. Structural Estimation of Variety Gains from Trade Integration in Asia By d'Artis Kancs
  3. A Theory on the Role of Wholesalers in International Trade based on Economies of Scope By Akerman, Anders
  4. Integration and Trade Specialization in East Asia By Yose Rizal Damuri; Raymond Atje; Arya B. Gaduh
  5. The Factor Content of Heterogeneous Firm Trade By d’Artis Kancs; Pavel Ciaian
  6. Export Status and Performance in a Panel of Italian Manufacturing Firms By Vito Amendolagine; Rosa Capolupo; Nadia Petragallo
  7. Will New Trends in Foreign Direct Investment Change the Structure of Intra-industry Trade between China and Japan? By Tao Tao
  8. Transport infraestructure, sunk costs and firms' export behaviour By Pedro Albarrán; Raquel Carrasco; Adelheid Holl
  9. A Globally Consistent Framework for Reliability-based Trade Statistics Reconciliation in the Presence of an Entrepôt By Zhi Wang; Mark Gehlhar; Shunli Yao
  10. Preferential Trading Agreements and Agricultural Liberalization in East and Southeast Asia By Gloria O. Pasadilla
  11. Intellectual Property Protection and Patterns of Trade By Jade Vichyanond
  12. Elasticity Optimism By Jean Imbs; Isabelle Méjean
  13. Vietnam's Trade Policy Dilemmas By David Vanzetti; Pham Lan Huong
  14. Trade and Thy Neighbor's War By Mahvash Saeed Qureshi
  15. Trade Policy at the Crossroads - The Indonesian Story By David Vanzetti; Greg McGuire; Prabowo
  16. Chinese Foreign Trade Performance and the China-US Trade 1995 – 2004 - A Graphical Analysis Based on China Customs Statistics By Shunli Yao
  17. Impacts of the Free Trade Area of the Pacific (FTAAP) on Production, Consumption, and Trade of the Philippines By U-Primo E. Rodriguez
  18. An Empirical Assessment of a Tradeoff Between FDI and Exports By Hongshik Lee; Joon Hyung Lee
  19. Measuring Trade and Trade Potential- A Survey By Shiro Armstrong
  21. International Specialization and the Return to Capital By Catia Batista; Jacques Potin
  22. What Kinds of Countries Have More Free Trade Partner Countries? - Count Regression Analysis By Jung Hur; Backhoon Song
  23. An Evaluation of the Intermediation Role of Hong Kong in Chinese Foreign Trade By Xinhua He
  24. Trade liberalisation and import price behaviour: the case of textiles and wearing apparels By Andreas Benedictow and Pål Boug
  25. The Political Economy of Trade Policy in Indonesia By Hadi Soesastro; M. Chatib Basri
  26. A Dynamic Shift-Share Analysis of the Electronics Export Market 1988-2001- Can the NIEs Compete with China? By Peter Wilson; Ting Su Chern; Tu Su Ping; Edward Robinson
  27. Rules of Origin - Evolving Best Practices for RTAs/FTAs By Dorothea C. Lazaro; Erlinda M. Medalla
  28. Multinational Corporations and Pacific Regionalism By Philippa Dee
  29. Chinese Agricultural Reform, the WTO and FTA Negotiations By Shunli Yao
  30. US and EU Trade Policies and East Asia By Peter Drysdale; Christopher Findlay
  31. Determinants of Export Specialization in ICT Products: A Cross-Country Analysis By Klimis Vogiatzoglou
  32. The WTO Trade Effect By Pao-li Chang; Myoung-jae Lee
  33. Modelling Small Economy Exports- The Case of Singapore By Tilak Abeysinghe; Keen Meng Choy

  1. By: Gregory Corcos (Norwegian School of Economics and Business Administration); Massimo Del Gatto ("G.d'Annunzio" University and CRENoS); Giordano Mion (LSE, Department of Geography, NBB, CEP and CEPR); Gianmarco I.P. Ottaviano (KITeS, Bocconi Univerity - Milan - Italy)
    Abstract: We discuss how standard computable equilibrium models of trade policy can be enriched with selection effects without missing other important channels of adjustment. This is achieved by estimating and simulating a partial equilibrium model that accounts for a number of real world effects of trade liberalisation: richer availability of product varieties; tougher competition and weaker market power of rms; better exploitation of economies of scale; and, of course, efficiency gains via the selection of the most efficient firms. The model is estimated on E.U. data and simulated in counterfactual scenarios that capture several dimensions of European integration. Simulations suggest that the gains from trade are much larger in the presence of selection effects. Even in a relatively integrated economy as the E.U., dismantling residual trade barriers would deliver relevant welfare gains stemming from lower production costs, smaller markups, lower prices, larger rm scale and richer product variety. We believe our analysis provides enough ground to support the inclusion of rm heterogeneity and selection effects in the standard toolkit of trade policy evaluation.
    Keywords: European integration, firm-level data, firm selection, gains from trade, total factor productivity
    JEL: F12 R13
    Date: 2009–03
  2. By: d'Artis Kancs (European Commission ‐ Joint Research Centre (IPTS); Catholic University of Leuven (LICOS); Economics and Econometrics Research Institute (EERI))
    Abstract: The present paper studies variety gains from trade integration in Asia. Applying a heterogenous Örm model we simulate trade integration in Asia in three different scenarios (CIFTA, ASEAN+3, and ASEAN+6). The paper makes three contributions to the literature. First, in addition to traditional gains from specialisation, we also account for gains arising from increased number of different varieties. Second, we explicitly account for di§erences in trade gains between variable and fixed trade cost reduction. Third, using a unique set of firm-level panel data we estimate the underlying trade modelís structural parameters econometrically. We find that the gains from trade integration are substantial. Reducing trade barriers by 15 percent induces trade growth up to 60 percent, which due to the additional extensive margin is more than in trade models with representative firms. Similarly, due due additional welfare gains from variety growth, the gains from trade are up to 17 percent higher than in models with homogenous products.
    Keywords: Variety gains, extensive margin, trade integration, Asia, heterogenous firms.
    JEL: F12 F14 R12 R23
    Date: 2009
  3. By: Akerman, Anders (Dept. of Economics, Stockholm University)
    Abstract: Intermediaries and wholesalers play an important role in international trade. This paper develops a model of international trade with heterogeneous firms that offers an explanation of the existence of wholesalers. All exporting firms have to pay a fixed cost of establishing a distribution network in the foreign market. However, wholesalers possess a technology different to normal manufacturing firms: they can buy manufacturing goods domestically and sell in foreign markets and handle more than one good. A wholesaler therefore faces an additional fixed cost which is convex and monotonically increasing in the number of goods it ships. The entry of wholesale firms leads to productivity sorting. The most productive firms export on their own, as in the standard model, by paying a fixed cost to do so, while the least productive firms do not export. However, a range of firms with intermediate productivity levels export through international wholesalers. The existence of wholesale firms increases total exports and the number of firms that export. Moreover, a higher fixed cost of exporting leads to (i) a higher share of exported goods that is distributed by wholesalers, and (ii) a higher share of total exports that is distributed by wholesalers. The higher the fixed cost of exporting, the more important is the role of wholesalers since these can spread the fixed cost across more than one good. The wholesale technology therefore exhibits economies of scope. Finally, a larger fixed cost of exporting increases the scope of each wholesaler firm.
    Keywords: heterogeneous firms; international trade; intermediation; wholesalers
    JEL: D21 F12 F15
    Date: 2010–01–15
  4. By: Yose Rizal Damuri; Raymond Atje; Arya B. Gaduh (Centre for Strategic and International Studies, Jakarta)
    Abstract: The 1990s saw East Asia becoming more integrated as trade barriers fell, trade intensity and intra-industry trade increased, and production networks formed. This greater integration has resulted in changing patterns of trade specialization in the region, as different economies adjust. Some economies (especially resource-rich economies) maintain their top trade-specialty products, while others move towards higher-productivity manufacturing goods. Nonetheless, we observe in all East Asian countries in our study a trend towards specializing in products with higher sophistication and technological intensity. Meanwhile, our examination of the product specialization mobility and our empirical analysis suggest no indication of East Asian countries being in a "low-productivity specialization trap" which would disable them from shifting their specialization towards higher-productivity and higher-value goods.
    Keywords: trade specialization, regional integration, East Asia
    JEL: F14 F15 O14
    Date: 2010–01
  5. By: d’Artis Kancs (European Commission ‐ Joint Research Centre (IPTS); Catholic University of Leuven (LICOS); Economics and Econometrics Research Institute (EERI)); Pavel Ciaian (European Commission ‐ Joint Research Centre (IPTS); Catholic University of Leuven (LICOS); Economics and Econometrics Research Institute (EERI))
    Abstract: In this paper we study the determinants of the factor content of the CEE agricultural trade. Examining empirically three hypothesis, which relate cross- country di§erences in technology, relative factor abundance and transaction costs and market imperfections to the factor content of trade, we find that the first two hypotheses are confirmed by the ma jority of the developed EU countries, but rejected by roughly one half of the CEE transition country pairs. Second, we find that when accounting for transaction costs of farm (re)organisation, both hypotheses are confirmed by the ma jority of the CEE country pairs. These findings provide empirical evidence of market imper- fections, and particularly, of transaction costs of farm (re)organisation in the CEE.
    Keywords: Factor content, bilateral trade, relative factor abundance, technological diferences, agriculture, transaction costs
    JEL: F12 F14 D23 Q12 Q17
    Date: 2009
  6. By: Vito Amendolagine (Department of Economics & Mathematics, University of Bari); Rosa Capolupo (Department of Economics & Mathematics, University of Bari); Nadia Petragallo (Department of Economics & Mathematics, University of Bari)
    Abstract: Following a growing literature we test, in this paper, the two alternative hypotheses of self selection and learning by exporting across different Italian manufacturing firms. Using matched sampling techniques, we estimate whether new export-oriented firms are more efficient than domestically-oriented firms on the basis of three Italian representative Surveys of manufacturing firms covering consecutive triennial periods (1995-2003). Our findings indicate that export entrants improve their productivity in the first period after entry. This occurs for both total factor productivity (TFP) and labour productivity growth rates. These results are consistent with those found in the existing literature for many countries. The only lasting significant effect that we find among the different measures of performances is that new exporters earn higher profits than their domestic counterparts.
    Keywords: international trade, Export-led growth, productivity, matched techniques
    JEL: F11 F14 O12 C22
    Date: 2010–01
  7. By: Tao Tao (Australia Japan Research Centre)
    Abstract: It is generally believed that Japan's cost-oriented and export-oriented direct investment has introduced a bilateral intra-industry trade pattern in China–Japan trade through which China imports accessories from Japan, processes them and exports the product to Japan. Based on investment and trade data in the machinery sector, this paper discusses whether Japan's market-oriented investment in China since 2000 has changed the structure of the trade between two countries. We conclude that the vertical division of labour, as described by the ‘flying-geese’ model and applied to the machinery industry, is gradually disappearing. In its place, no stereotypical East Asian vertical division of labour has been formed in transport machinery industry, despite it being the sector into which investment has grown fastest since 2000. Rather, factor endowment is the main determinant of intra-industry trade in the machinery industry between the two countries.
    Keywords: Trade, Foreign Direct Investment, Japan, China, Intra-industry trade
    JEL: F14 F15 F21
    Date: 2010–01
  8. By: Pedro Albarrán; Raquel Carrasco; Adelheid Holl
    Abstract: Transport infrastructure investment reduces the cost of distance and enables firms to establish contacts over larger distances. We study the impact of transport-cost reductions on firms’ export behaviour, accounting for the role of entry costs and other firms’ characteristics. Using Spanish data we estimate dynamic probability models controlling for firms’ unobserved heterogeneity and for the simultaneity of firms’ export and location decisions. Our results provide support for a positive effect of domestic transport improvements on firms’ exporting probability for small and medium sized firms. We find a strong effect of previous export experience, suggesting high entry costs into export markets.
    Keywords: Export decision, Transport infrastructure, Accessibility, Dynamic panel data
    JEL: F14 R1 R4
    Date: 2009–06
  9. By: Zhi Wang; Mark Gehlhar; Shunli Yao (China Center for Economic Research)
    Abstract: This paper develops a mathematicla programming model to reconcile trade statistics subject to a set of global consistency conditions in the presence of an entrepot. Initial data reliability serves a key function for governing the magnitude of adjustment. Through a two-stage optimization procedure, the adjusted trade statistics are achived as solutions to a system of simultaneous equations that minimize a quadratic penalty function. As an empirical illustration, the model is applied to reconcile the 2004 trade statistics reported by China, Hong Kong, and their major trading partners, initialized with detailed estimates of bilateral trade flows, re-export markups, cif/fob ratios and data reliability indexes.
    Keywords: trade statistics reconciliation, entrepot trade, data reliability, global consistency
    JEL: F1 C61 C81
    Date: 2010–01
  10. By: Gloria O. Pasadilla (Philippine Institute for Development Studies)
    Abstract: The paper analyzes how various preferential trading arrangements deal with agriculture liberalization and examines a few case studies highlighting the provisions on agriculture. It assesses the effect of preferential trade agreements on agriculture trade flows in the case of ASEAN. It finds that while the tariff reduction on all goods, including agriculture, in ASEAN provides a marked advantage from the MFN tariff rates, intra-ASEAN agriculture trade have not been all that significant. Most of the growth in the intra-ASEAN trade had come from trade in industry; and if total agriculture trade had expanded, much of it was due to trade outside the region. The paper argues that AFTA, by original design, had not really been made to boost intra-regional agriculture trade, but rather to facilitate the inter-industry trade arising out of the vertically integrated network of manufacturing transnational corporations.
    Keywords: Regional trade liberalization, preferential trading arrangements, FTA, tariffs, relative tariff ratios, ASEAN, AFTA, agriculture
    JEL: F13 F14 Q17
    Date: 2010–01
  11. By: Jade Vichyanond (Princeton University)
    Abstract: The paper provides a simple theoretical model for understanding how the difference in the level of intellectual property rights protection determines trade patterns. In particular, I examine how countries ?levels of patent rights protection affect exports in industries with different degrees of reliance on innovation. In contrast to most models of institutional comparative advantage, which predict that countries with superior institutions specialize in industries that are very dependent on institutions, I show that higher patent rights protection does not necessarily lead to specialization in industries that rely heavily on innovation. There may exist a threshold beyond which occurs a reversal of specialization patterns, a consequence of monopoly power inherent in intellectual property rights protection. I then use the model?s implications to assess empirically whether such predicted patterns hold in cross-country trade data and fi?nd evidence for general patterns of specialization as well as a reversal of such patterns among countries with high levels of patent rights protection.
    Keywords: intellectual property rights, trade patterns, patent rights
    JEL: L10 L12 K39 H32
    Date: 2009–11
  12. By: Jean Imbs; Isabelle Méjean
    Abstract: In most macroeconomic models, the substitutability between domestic and foreign goods is calibrated using aggregated data. This imposes homogeneous elasticities across goods, and the calibration is only valid under this assumption. If elasticities are heterogeneous, the aggregate substitutability is a weighted average of good-specific elasticities, which in general cannot be inferred from aggregated data. We identify structurally the substitutability in US goods using multilateral trade data. We impose homogeneity, and find an aggregate elasticity similar in value to conventional macroeconomic estimates. It is more than twice larger with sectoral heterogeneity. We discuss the implications in various areas of international economics.
    Keywords: Consumer goods , Data analysis , Economic models , Exports , Imports , International trade , Monetary policy , United States ,
    Date: 2009–12–18
  13. By: David Vanzetti; Pham Lan Huong (Australian National University and Central Institute for Economic Management)
    Abstract: Vietnam faces alternative options in opening its economy to trade. It is about to join the World Trade Organization; as a member of the ASEAN Free Trade Area it is contemplating extending the regional trade area to include China, Korea and Japan; and it has recently concluded a bilateral agreement with the United States. Opening up to trade is a two-edged sword, with the beneficial effects of improved market access and resource allocation liable to be partially or totally offset by adverse terms of trade effects and significant, albeit one-off, cost of structural adjustment. Simulations of unilateral, bilateral, regional and multilateral liberalization reform and a tariff harmonization scenario are undertaken using a general equilibrium model, GTAP. Results indicate that significant welfare benefits could be obtained from unilateral liberalization without the need to negotiate with others. Harmonization of tariffs at the current average also shows to be beneficial in raising tariff revenues with little need for adjustment. The extension of AFTA brings moderate benefits, as does a multilateral reform which reduces applied tariffs by 50 per cent. There are only limited gains in the agricultural and resources sectors, as these major exports face low tariff barriers. However, the market for Vietnam's textiles and apparel is crucially important.
    Keywords: Vietnam, trade, WTO negotiations
    JEL: F13 Q17
    Date: 2010–01
  14. By: Mahvash Saeed Qureshi
    Abstract: This paper examines the spatial dispersion effects of regional conflicts, defined as internal or external armed conflicts in contiguous states, on international trade. Our empirical findings-based on different measures of conflict constructed using alternate definitions of contiguity and conflict-reveal a significant collateral damage in terms of foregone trade as a result of spillovers from conflict in neighboring countries. The magnitude of this negative externality is somewhat larger for international conflicts than intrastate warfare, but about one-third of conflict in the host economies. Further, the impact is persistent-on average, it takes bilateral trade three years to recover from the end of intrastate conflicts in neighboring states, and five years from international conflicts. These findings are robust to alternate definitions of conflict, estimation methods, and specifications, and underscore the importance of taking into account spillover effects when estimating the economic costs of warfare.
    Keywords: Economic models , International trade , Political economy , Regional shocks ,
    Date: 2009–12–23
    Abstract: Following the crises of the late 1990s and the subsequent slowdown in the world economy, many countries in the developed and developing world are at the crossroads in their trade strategy, uncertain whether to advance with trade reforms, to stand still or increase protection. While the case for liberalisation has been widely accepted as a long-term goal for economic policy, the gains from trade have not always been forthcoming and macroeconomic crises have exacerbated the situation. The delayed and uncertain benefits of reform, plus the costs of adjustment, the need to offset tariff revenue losses, and the possible benefits of some degree of intervention to foster industrialisation have all contributed to this indecision. Support for the WTO multilateral negotiations now appears half-hearted, and there are calls for increased protection. Following the slow progress of multilateral negotiations, attention has inevitably turned to regional and bilateral agreements. Indonesia provides an interesting case study of the potential benefits and costs of alternative trade strategies that are under active consideration in many developing countries. The ASEAN region has recently announced a deepening of its commitments and is considering widening the agreement to include countries such as China, Japan and the Republic of Korea. A bilateral agreement with the United States is also a possibility. Against this background, Indonesia’s options on trade policy range from increasing protection to actively pursuing bilateral, regional and multilateral initiatives. The results of a global general equilibrium analysis point to several interesting implications for policy makers. The results from the model show that increasing protection results in economic losses while a stand-still and more liberalisation produce economic gains. After undergoing full adjustment, estimated annual gains to Indonesia from a conservative Uruguay Round-style outcome within the WTO system total an estimated US$380 million (0.22 per cent of GDP). However, annual gains from a completely liberalised ASEAN plus China, Japan and Republic of Korea regional trade agreement are estimated at US$2.3 billion, again after adjustment. Indonesia could capture half of these benefits by liberalising unilaterally. The major source of the gains from unilateral, regional and multilateral liberalisation is improved efficiency following removal of tariffs on politically sensitive sectors such as motor vehicles. This improves productivity in many downstream sectors. There are significant trade diversion effects from regional integration, with non-members worse off as a result. The results have implications for other countries having second thoughts about their strategy.
    Keywords: trade policy, Indonesia, economic policy, ASEAN
    JEL: F13 F40
    Date: 2010–01
  16. By: Shunli Yao (China Center for Economic Research)
    Abstract: Using detailed Chinese Customs data, this paper prepares a series of graphsto illustrate the changing patterns of the Chinese foreign trade during theyears 1995 and 2004. Combined with discussions on related literature andpolicy development during the same period, the graphs are organized (1) to establish links between FDI inflow and Chinese trade expansion, (2) toidentify the regional and sectoral power horses of Chinese trade growth, (3)to sketch a picture of production sharing among China, its Asian neighborsand the United States, and (4) to highlight the institutional innovation of theChinese customs regime that helps facilitate the process of globaloutsourcing to China. Special attention is given to the China-US tradewhen it differs significantly from the China world trade.
    Keywords: trade, production fragmentation, FDI
    JEL: F14 F15
    Date: 2010–01
  17. By: U-Primo E. Rodriguez (Philippine Institute for Development Studies)
    Abstract: This paper examines the economy-wide impacts of a Free Trade Area of the Asia Pacific (FTAAP) on the Philippine economy. In particular, it uses an applied general equilibrium model to determine the effects of alternative scenarios on aggregate and sectoral outputs, consumption, and international trade. The paper also compares the FTAAP to reforms which are confined to the ASEAN plus 3 and to a broader set of tariff changes that covers all the trading partners of the Philippines. The findings of the paper are as follows. First, the FTAAP is likely to benefit the Philippines in the form of higher aggregate output and employment. However, such gains are not projected for all industries as the simulation results indicate declines in the outputs of activities related to rice and corn. Second, the benefits from the FTAAP are likely to come more from the removal of tariffs on nonagriculture products. Finally, the aggregate gains from the FTAAP are larger than an arrangement which is limited to ASEAN plus 3 countries. However, the differences in the impacts do not appear to be very large.
    Keywords: applied general equilibrium models, Asia Pacific Economic Cooperation, free trade area, international trade, Philippines
    JEL: F13 E27 E21
    Date: 2010–01
  18. By: Hongshik Lee; Joon Hyung Lee (Korean Institute for International Economic Policy)
    Abstract: The relation between exports and FDI could be complementary or substitutable depending on the types of FDI. Overseas investment to displace exports must have a substitution relation while FDI for vertical fragmentation between countries would boost the home export. Empirical studies have generally found a positive relation and finding a substitution relation is relatively recent. We investigate the relation between those two variables using detailed information of Korean multinational firms and their foreign affiliates from 1999 to 2004. In so doing, unlike previous studies, we consider the host country’s income level and various activities of each affiliate, whether it serves the host country or exports outside in particular. The complementary relation is found by simply following previous studies. Once we consider the host country’s income level and various activities of each affiliate, however, different results are produced. Our empirical results show substitution if the affiliates are located in a developed country and mainly serve the host country, while complementarity if the affiliates export their products outside of the host country. Moreover, the complementary effect is strengthened if they are located in a less developed country.
    JEL: F14 F15
    Date: 2010–01
  19. By: Shiro Armstrong (Australian National University)
    Abstract: This paper provides a survey and a brief critical review of the literature on the widely used gravity models of trade, as a prelude to the justification of its use with the stochastic frontier methodology. The important papers on the theoretical foundations of the gravity model are reviewed and related to papers applied to explain determinants of trade flows. Then some shortcomings of the gravity model are discussed. The paper introduces the stochastic frontier gravity model as a way of estimating trade resistances and overcoming some of the shortcomings of conventional gravity models in their use for that purpose.
    Date: 2010–01
  20. By: Yan Dong; John Whalley (Institute of World Economics & Politics)
    Abstract: This paper discusses both the potential contribution that trade policy initiatives can make towards the achievement of significant global carbon emissions reduction and the potential impacts of proposals now circulating for carbon reduction motivated geographical trade arrangements, including carbon free trade areas. We first suggest that trade policy is likely to be a relatively minor consideration in climate change containment. The dominant influence on carbon emissions globally for next several decades will be growth more so than trade and its composition, and in turn, the size of trade seemingly matters more than its composition given differences in emission intensity between tradables and nontradables. We also note that differences in emissions intensity across countries are larger than across products or sectors and so issues of country discrimination in trade policy (and violations of MFN) arises. We next discuss both unilateral and regional carbon motivated trade policy arrangements, including three potential variants of carbon emission reduction based free trade area arrangements. One is regional trade agreements with varying types of trade preferences towards low carbon intensive products, low carbon new technologies and inputs to low carbon processes. A second is the use of joint border measures against third parties to counteract anti-competitive effects from groups of countries taking on deeper emission reduction commitments. A third is third country trade barriers along with free trade or other regional trade agreements as penalty mechanisms to pressure other countries to join emission reducing environmental agreements. We differentiate among the objectives, forms and possible impacts of each variant. We also speculate as to how the world trading system may evolve in the next few decades as trade policy potentially becomes increasingly dominated by environmental concerns. We suggest that the future evolution of the trading system will likely be with environmentally motivated arrangements acting as an overlay on prevailing trade and financial arrangements in the WTO and IMF, and eventually movement to linked global trade and environmental policy bargaining.
    Keywords: carbon, trade policy, WTO, regional trade agreements, trade barriers, anti-competitive effects
    JEL: F13 F14 F10
    Date: 2010–01
  21. By: Catia Batista (Department of Economics and Institute for International Integration Studies, Trinity College Dublin); Jacques Potin (ESSEC Paris)
    Abstract: How does factor accumulation affect the pattern of international specialization and returns to capital? We provide a new integrated treatment to this question using a panel of 44 developing and developed countries over the period 1976-2000. We confirm the Heckscher-Ohlin prediction that, with sufficient differences in country endowments, there is no factor price equalization and countries specialize in different subsets of goods. Innovatively, we obtain the returns to capital implied by this model: these are consistent with the Lucas paradox, which we explain after accounting for cross-country differences in the cost of capital goods. We also find that, along their development path, countries have often experienced structural change in the form of intra-industry specialization. Our findings are consistent with Ventura’s hypothesis that growth can be promoted in this way through “beating the curse of diminishing returns” — indeed we find no decrease in the return to capital at any given capital-labor ratio despite capital accumulation by most countries within a cone of diversification.
    Keywords: Economic Growth and International Trade; Heckscher-Ohlin; Multiple Cones of Diversification; Marginal Product of Capital; Return to Capital; Lucas paradox; Specialization
    JEL: F11 F21 O40
    Date: 2009–12
  22. By: Jung Hur; Backhoon Song (Korean Institute for International Economic Policy)
    Abstract: According to the WTO data for regional trade agreements (RTA), the number of RTA has been exponentially growing since the middle of the 1990s. As a result, many countries these days have had more than one free trade partner country. In this paper, we attempt to find out statistically important characteristics of countries that may explain the frequency of a country’s RTA formations and as a result its total number of free trade partner countries. We find that the following country-specific variables are important- distance from equator, government effectiveness, and the low-middle income group countries and regional blocs that countries belong to. In contrast, the following variables are not statistically significant- geographical size of country; upper-middle or high-income group countries; languages and other institutional variables such as political aspects and the stability, law, regulation, and national corruption level. The important implication of the findings is that the current expansion of RTAs may not be linked to a global free trade system because of the peculiarity of countries having multiple RTAs.
    Keywords: regional trade agreements; Poisson regression; negative binomial regression; cross section data
    JEL: F1
    Date: 2010–01
  23. By: Xinhua He (Institute of World Economics and Politics)
    Abstract: Two different data sources can be used to study Hong Kong's role in intermediating China's foreign trade. One is the bilateral trade statistics between Hong Kong and the Chinese Mainland reported by National Bureau of Statistics of China, and the other is the bilateral trade statistics published by Census and Statistics Department, Hong Kong. The corresponding statistics are not comparable to each other because of the different statistical criteria adopted by each source. Hong Kong's intermediation role has been declining since the mid-1990s. A major long-run factor contributing to the decline is the structural change in Hong Kong's industry led by Hong Kong direct investment in China. The Chinese currency appreciation will have a further negative effect on Hong Kong's intermediation role. Hong Kong's offshore trade has increased rapidly in recent years, but its impact is not strong enough to offset the declining share of Hong Kong in Chinese foreign trade.
    Keywords: Bilateral trade statistics, Intermediation role, China and Hong Kong
    JEL: F14 F19 N75
    Date: 2010–01
  24. By: Andreas Benedictow and Pål Boug (Statistics Norway)
    Abstract: Previous studies on the relationship between exchange rates and traded goods prices typically find evidence of incomplete pass-through, usually explained by pricing-to-market behaviour. Although economic theory predicts that incomplete pass-through may also be linked to presence of non-tariff barriers to trade, variables reflecting such a link is rarely included in existing empirical models. In this paper, we estimate a pricing-to-market model for Norwegian import prices on textiles and wearing apparels, controlling explicitly for the removal of non-tariff barriers to trade and the shift in imports from high-cost to low-cost countries through a Törnqvist price index based measure of foreign prices. We show that this measure of foreign prices unlike standard measures used in the literature is likely to produce unbiased estimates of the degree of pass-through, and thereby also the extent of pricing-to-market behaviour. Finally, we demonstrate that the estimated import price equation is reasonably stable and exhibits no serious forecasting failures. These findings contradict the hypothesis that pass-through has changed alongside trade policy shifts during the second half of the 1990s and the monetary policy regime shift in 2001.
    Keywords: Trade liberalisation; import prices; pricing-to-market; exchange rate pass-through; vector autoregressive models.
    JEL: C22 C32 C43 E31
    Date: 2010–01
  25. By: Hadi Soesastro; M. Chatib Basri (Centre for Strategic and International Studies, Jakarta)
    Abstract: This paper focuses on Indonesia's trade policies after the economic crisis. It examines the trend towards protection and addresses the issues of competitiveness. The concluding part briefly discusses Indonesia's policies on and involvement in free trade agreements (FTAs), which have recently proliferated in the Asia Pacific region.
    Keywords: Indonesia, political economy, trade policy, economic crisis, free trade agreement
    JEL: F13 F15
    Date: 2010–01
  26. By: Peter Wilson; Ting Su Chern; Tu Su Ping; Edward Robinson (Singapore Centre for Applied and Policy Economics)
    Abstract: This paper uses dynamic shift-share analysis to examine the export performance of China in electronics compared to the east Asian NIEs exporting to the USA, European Union and Japan between 1988 and 2001. Our findings suggest that China has now emerged as a serious contender in the export market for electronics goods, but this position has not been a dominant one. Her main gains have been in consumer electronics and telecommunications equipment and to a lesser extent in disk-drives, printers and PCs; but in the higher-end exports of printed circuit boards and semiconductors, China has not yet gained a significant stronghold in developed country markets, at least to the extent that the growth in her overall exports and increase in market shares might suggest. Moreover, China’s success since the early 1990s has been largely underpinned by strong export growth rather than a favourable industry mix. Nonetheless, If China can sustain rapid growth in exports and is able consolidate its industrial base, China’s overall competitiveness can be expected to improve substantially in the future. Its low cost structure, an increasingly skilled workforce and an influx of technology and management skills associated with large foreign direct investment inflows, together with its recent entry into the WTO, places China in a very favourable position.
    Keywords: Trade, Competitiveness, Exports, East Asia, Shift-Share
    JEL: F10 F14
    Date: 2010–01
  27. By: Dorothea C. Lazaro; Erlinda M. Medalla (Philippine Institute for Development Studies)
    Abstract: The paper aims to add to the understanding of the issues and suggests a framework to move towards the use of best practice in ROOs. Rules of Origin (ROO), originally designed as uncontroversial and neutral devise for authentication and statistical purposes, have evolved over time to accommodate different purposes which come about with new technologies and other developments, across different trade regimes. ROO is becoming a tool in implementing discriminatory trade policies and trade policy instrument per se. ROO has become a critical and to some extent, a “dragging point� in the negotiation process of recent trade agreements. The growing relevance of ROO in trade negotiations cannot be overemphasized. The paper begins with the definition that has been adopted and traces the developments in the use of ROOs. It looks at ROOs within the context of multilateral rules of origin and the preferential ROO in Regional or Bilateral FTAs. Different types of ROO with some illustration from existing RTA are also presented. The paper also focuses on some recurring ROO issues, and presents some suggestions for a framework for ROO best practices which is characterized by transparency, predictability, neutrality, and non-discrimination, and with the added dimension of being development-friendly.
    Keywords: Rules of Origin (ROO), free trade agreement, WTO, regional integration
    JEL: F15 F13
    Date: 2010–01
  28. By: Philippa Dee (Australian National University)
    Abstract: The purpose of this paper is twofold. The first is to determine empirically whether there is a unique regional model of foreign direct investment (FDI) somewhere in the Asia–Pacific region, driven by complex ‘network’ behaviour of multinational corporations. The second is to determine empirically whether the investment provisions of preferential trade agreements (PTAs) have had any influence on this regional investment behaviour. The results suggest that the answer to the first question is affirmative and the answer to the second is negative. They show that when FDI and trade are sufficiently driven by fundamentals, as in Asia, the resulting network patterns of investment do not need to be boosted by investment provisions of PTAs. Further, the network patterns can be sufficiently strong to insulate a country from investment diversion when the FDI source countries play the PTA game elsewhere. So the investment provisions of PTAs pose neither a threat nor a promise to FDI in the Asian region. But a very real threat may come from the trade provisions of PTAs.
    JEL: F1
    Date: 2010–01
  29. By: Shunli Yao (China Center for Economic Research)
    Abstract: China's early industrialization created distortions. This paper identifies major distortions in the Chinese economy in the pre-reform era and brings agricultural distortions into perspective. Comparison is made of the reform experience in Chinese industry and agriculture. It suggests that with limited arable land, it is difficult to align Chinese agricultural production fully with its comparative advantage without also reforming China's grain policy. Reform has substantially freed up agricultural production but border distortions serve as one of a few remaining effective measures to ensure the grain self-sufficiency target. Unlike agricultural protection in rich countries, China's grain self-sufficiency policy ahs much weaker institutional underpinnings and is susceptible to the influence of interest groups. The patterns of Chinese agricultural trade explain its ambiguous positions in WTO agriculture negotiations. In terms of grain sectoral adjustment, a possible comprehensive China-Australia FTA is consistent with the multilateral process, while the China-ASEAN FTA is not. There is no evidence that the China-ASEAN FTA helps with the WTO agriculture negotiations, particularly when rice is excluded from the deal; but China-Australia FTA could generate competitive liberalization in grain trade, and thus help with the global agricultural liberalization.
    Keywords: agricultural trade, WTO, Free Trade Agreement
    JEL: Q17 F13 F14
    Date: 2010–01
  30. By: Peter Drysdale; Christopher Findlay (Australian National University, University of Adelaide)
    Abstract: This article identifies a number of examples of apparent lack of coherence in United States and European Union trade policies. They include the effect of preferential policies that lock in trade shares and inhibit growth promoting structural adjustment, biases in tariff structures, policies that affect incentives of developing countries to make commitments in the World Trade Organisation, the use of anti-dumping actions and the nature of tariff peaks and escalation. The origins of the lack of policy coherence lie within the domestic policy-making processes of the developed economies. An important question, then, is whether opportunity exists for East Asian economies to mobilise to induce an external shock sufficient to shift policy consensus in the United States and the European Union – The key elements of such a grand bargain on trade in manufactured goods would include an explicit East Asian commitment to bind more tariff lines, initiatives to resolve the problem of accelerating anti-dumping actions and a replacement for the program of tariff preferences. A package of trade policy reforms of this type in East Asia would constitute a substantial offer and benefit to the United States and the European Union. It has the potential to trigger a response of equal benefit to East Asian economies.
    Keywords: Trade Policy, US, EU, East Asia
    JEL: F1
    Date: 2010–01
  31. By: Klimis Vogiatzoglou (Centre for Planning and Economic Research)
    Abstract: In this paper the determinants of ICT export specialization are investigated with a panel- econometric analysis, which includes 28 countries. ICT exports are broken down into three broad ICT product groups (electronic data processing machines, integrated circuits and electronic components, and telecommunications equipment), and the determinants are examined for each of the above product categories. Our results indicate that technology factors, such as Research & Development expenditure and human capital constitute significant determinants. However, other deterministic factors, related to more recent trade theories, seem to be relatively more important.
    Keywords: Export specialization, Information and Communications Technology (ICT), ICT exports, Panel data analysis
    JEL: F02 F10 F14
    Date: 2009
  32. By: Pao-li Chang; Myoung-jae Lee (Singapore Management University)
    Abstract: Rose (2004) showed that the WTO or its predecessor, the GATT, did not promote trade, based on conventional econometric analysis of gravity-type equations of trade. We argue that conclusions regarding the GATT/WTO trade effect based on gravity-type equations are arbitrary and subject to parametric misspecifications. We propose using nonparametric matching methods to estimate the `treatment effect' of GATT/WTO membership, and permutation-based inferential procedures for assessing statistical significance of the estimated effects. A sensitivity analysis following Rosenbaum (2002) is then used to evaluate the sensitivity of our estimation results to potential selection biases. Contrary to Rose (2004), we find the effect of GATT/WTO membership economically and statistically significant, and far greater than that of the Generalized System of Preferences (GSP).
    Keywords: GATT/WTO, GSP, treatment effect, matching, permutation test, signed-rank test, sensitivity analysis
    JEL: F13 F14 C14 C21 C23
    Date: 2010–01
  33. By: Tilak Abeysinghe; Keen Meng Choy (Singapore Centre for Applied and Policy Economics)
    Abstract: This paper sheds further light on the debate spearheaded by Riedel (1988) on the specification of a small country export function. The theoretical and empirical analysis in the paper shows that while the price-taker assumption cannot be rejected, the export function for Singapore should not be construed as a standard export supply equation. As argued by Kapur (1983) instead, it is an export function with both demand and supply factors playing a role. We arrived at the final model specification by taking into consideration changes in the import content of exports over time. The paper also provides a new methodology for deriving a quarterly series of manu7facturing net capital stock.
    Keywords: price taker, demand constraint, export function, import content, restricted cointegrating space
    JEL: C32 F14 F41
    Date: 2010–01

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