nep-int New Economics Papers
on International Trade
Issue of 2010‒05‒22
thirteen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Global Production Networks and the People's Republic of China's Processing Trade By Ma, Alyson; Assche, Ari Van; Hong, Chang
  2. Export margins and export barriers: Uncovering market entry costs of exporters in the Netherlands By Roger Smeets; Harold Creusen; Arjan Lejour; Henk Kox
  3. China's export growth and the China safeguard : threats to the world trading system ? By Bown, Chad P.; Crowley, Meredith A.
  4. Learning-by-Exporting and Destination Effects: Evidence from African SMEs By Boermans, Martijn Adriaan
  5. The evolution of agricultural trade flows By Aksoy, M. Ataman; Ng, Francis
  6. Parallel Imports and Innovation in an Emerging Economy By Andrea Mantovani; Alireza Naghavi
  7. Intra-Regional Trade in East Asia: The Decoupling Fallacy, Crisis, and Policy Challenges By Athukorala, Prema-chandra; Kohpaiboon, Archanun
  8. Productivity, Quality, and Export Intensities By Rosario Crinò; Paolo Epifani
  9. Is protectionism on the rise ? assessing national trade policies during the crisis of 2008 By Kee, Hiau Looi; Neagu, Cristina; Nicita, Alessandro
  10. OECD imports : diversification and quality search By Cadot, Olivier; Kukenova, Madina; Strauss-Kahn, Vanessa
  11. Rigidities in employment protection and exporting By Seker, Murat
  12. A Trade TheoristÕs Take on Global Imbalance By Alan V. Deardorff
  13. Environmentally Damaging Electricity Trade By De Villemeur, Étienne; Pineau, Pierre-Olivier

  1. By: Ma, Alyson (Asian Development Bank Institute); Assche, Ari Van (Asian Development Bank Institute); Hong, Chang (Asian Development Bank Institute)
    Abstract: This paper unveils a systematic pattern in the People's Republic of China's (PRC) processing trade. In a cross-section of the PRC's provinces, the average distance traveled by processing imports (import distance) is negatively correlated with the average distance traveled by processing exports (export distance). To explain this pattern, we set up a three-country industry-equilibrium model in which heterogeneous firms from two advanced economies, East and West, sell their products in each other's markets. Each firm can use two modes to serve the foreign market. A firm can directly export its products from its home country. Alternatively, it can indirectly export to the foreign market by assembling its product in a third low-cost economy, PRC, which is located in the vicinity of East. Our model established two theoretical predictions relating the PRC's geographical location to its processing trade patterns. First, the PRC's processing exports are negatively affected by both an increase in import distance and an increase in export distance. Second, the PRC's processing exports to East Asian economies are more sensitive to export distance and less sensitive to import distance than its processing exports to non-Asian economies. We found empirical support for both predictions.
    Keywords: location trade costs prc; processing trade export platform prc; fdi prc
    JEL: F12 F14 F23
    Date: 2009–12–10
  2. By: Roger Smeets; Harold Creusen; Arjan Lejour; Henk Kox
    Abstract: Even though the Netherlands was the world’s sixth largest exporter in 2009, the majority of Dutch firms does not engage in international trade at all, possibly because they are unable to cover the costs to enter specific foreign markets. What are these costs that limited the internationalisation of Dutch firms? Using detailed and unique transaction-level data on export patterns of about 1,200 large Dutch firms in the years 2006-2007, this research opens the black box of market entry costs. First, we find that more productive firms are both more likely to engage in exports (extensive margin) and to export larger volumes abroad (intensive margin). Second, next to the common determinants of export volumes, such as market size, transport and trade costs, we find that poorly developed foreign institutions and regulations form important impediments to firms’ export decisions, but not to their subsequent export volume decisions. We also find some evidence that such effects on the export decision are relatively large in small markets, whereas export volumes react more to changes in trade and transport costs in large markets.
    Keywords: heterogeneous firms; export destinations; market entry costs; gravity equations
    JEL: F14
    Date: 2010–05
  3. By: Bown, Chad P.; Crowley, Meredith A.
    Abstract: Is there evidence from China's pre-WTO accession period that newly imposed U.S. or EU import restrictions deflect Chinese exports to third markets? The authors examine this question by drawing on a newly constructed data set of U.S. and EU product-level import restrictions on Chinese trade imposed between 1992 and 2001 and estimate their impact on Chinese exports to 38 alternative markets. There is no systematic evidence that the import restrictions imposed during this period resulted in Chinese exports surging to such alternate destinations. To the contrary, there is weak evidence of a chilling effect on China's exports to third markets.
    Keywords: Free Trade,Economic Theory&Research,Trade Policy,Trade Law,Markets and Market Access
    Date: 2010–05–01
  4. By: Boermans, Martijn Adriaan
    Abstract: Vast empirical evidence underscores that exporting firms are more productive than non-exporters. As governments accordingly pursue export-promoting policies we are interested in the firmness of these conclusions with respect to African small and medium sized enterprises (SMEs) and the influence of the destination of export trade. Using a micro-panel dataset from five African countries we confirm the self-selection. We apply propensity scores to match exporters and use a difference-in-difference methodology to test if African SMEs experience productivity gains because of export participation. Results indicate that African firms significantly learn-by-exporting. Manufacturers obtain significant performance improvements due to internationalization although this effect is moderated by export destination. Firms that export outside Africa become more capital intensive and at the same time hire more workers. In contrast we find evidence that exporters within the African region significantly downsize in capital intensity. Results regarding skill-bias of internationally active firms are mixed, where exporters within the region expand in size and hire more relatively unskilled workers.
    Keywords: learning-by-exporting; destination effects; firm-level; Africa; propensity scores
    JEL: D21 O55 F14 O12 L60
    Date: 2010–03–21
  5. By: Aksoy, M. Ataman; Ng, Francis
    Abstract: Earlier research showed that during the 1980s and 1990s most of the global agricultural trade expansion took place among the industrial countries and among countries within trade blocs. These were also periods of declining agricultural prices. These prices increased during the 2000s, there were continuous trade reforms, and many developing countries started to support their agricultural sectors. This paper analyzes trade flows during the past two decades, and tries to measure whether all these developments have changed the trade balances and the share of different groups within the global trade flows. In addition, it looks at the trade balances on food to see the impact of these changes on net food importing countries. In conclusion, unlike the case with manufacturing, developing countries have not been able to increase their export shares in agriculture as significantly. They have maintained their trade shares by primarily expanding exports to other developing countries.
    Keywords: Emerging Markets,Food&Beverage Industry,Economic Theory&Research,Trade Policy,Free Trade
    Date: 2010–05–01
  6. By: Andrea Mantovani (University of Bologna); Alireza Naghavi (niversity of Bologna and Fondazione Eni Enrico Mattei)
    Abstract: This paper studies the consequences of parallel import (PI) on process innovation of firms heterogeneous in their production technology. In an international setting where foreign markets differ with respect to their intellectual property rights regime, a move by a technologically inferior firm to exploit a new unregulated market can result in imitation and PI. The impact of PI on innovation is determined by the degree of heterogeneity between firms and trade costs. Increasing trade costs shifts from the market share losses brought by PI from the more to the less productive firm. This induces the former to invest more in R&D. At this point, sales in the foreign market become a determinant of the R&D decision by the technologically inferior firm. For low levels of firm heterogeneity, PI increases output by this firm targeted for the unregulated market, hence increases its innovation efforts. A tariff policy accompanied by opening borders to PI only increases welfare when the technological gap between the two firms is sufficiently large.
    Keywords: Intellectual Property Rights, Parallel Imports, Innovation, Trade Costs, Welfare
    JEL: F12 F13 L11
    Date: 2010–04
  7. By: Athukorala, Prema-chandra (Asian Development Bank Institute); Kohpaiboon, Archanun (Asian Development Bank Institute)
    Abstract: This paper examines the export experience of East Asian economies in the aftermaths of the crisis against the backdrop of a systematic analysis of precrisis trade patterns. The analysis is motivated by the “decoupling” thesis, which was a popular theme in Asian policy circles in the lead-up to the onset of the recent financial crisis, and aims to probe three key issues: Was the East Asian trade integration story that underpinned the decoupling thesis simply a statistical artifact or the massive export contraction caused by an overreaction of traders to the global economic crisis and/or by the drying up of trade credit, which overpowered the cushion provided by intra-regional trade? What are the new policy challenges faced by the East Asian economies? Is there room for an integrated policy response that marks a clear departure from the precrisis policy stance favoring export-oriented growth? The findings serve to caution against a possible costly backlash against openness to foreign trade arising from the newfound enthusiasm for rebalancing growth (redressing the strong bias for exports in development policy), and make a strong case for a well-coordinated strategy to fight new protectionism, as part of a long-term commitment to nondiscriminatory multilateral and unilateral trade liberalization.
    Keywords: decoupling; intra-regional trade; growth rebalancing; asia
    JEL: F14 F15 O19
    Date: 2009–12–11
  8. By: Rosario Crinò; Paolo Epifani
    Abstract: We study how firm and foreign market characteristics affect the geographic distribution of exporter' sales. To this purpose, we use export intensities (the ratio of exports to sales) across destinations as our key measures of firms'relative involvement in heterogeneous foreign markets. In a representative sample of Italian manufacturing firms, we find a robust negative correlation between revenue-TFP and export intensity to low-income destinations and, more generally, that the correlations between export intensities and TFP are increasing in per capita income of the foreign destinations. We argue that these (and other) empirical regularities can arise from the interplay between (endogenous) cross-firm heterogeneity in product quality and cross-country heterogeneity in quality consumption. To test this conjecture, we propose a new strategy to proxy for product quality that allows to exploit some unique features of our dataset. Our results strongly suggest that firms producing higher-quality products tend to concentrate their sales in the domestic and other high-income markets.
    Keywords: Heterogeneous Firms; Export Intensities; Quality; Technical Efficiency; Total Factor Productivity (TFP)
    JEL: F1
    Date: 2010–04–08
  9. By: Kee, Hiau Looi; Neagu, Cristina; Nicita, Alessandro
    Abstract: To understand the role of trade policies in the crisis of 2008, this paper constructs the overall trade restrictiveness indices for a wide range of countries using their tariff schedules in 2008 and 2009. The index summarizes the trade policy stance of a country, taking into account the share of each good in trade as well as its corresponding import demand elasticity. Results show that there is no widespread increase in protectionism via tariff policies since the global financial crisis has unfolded. While many countries have adjusted tariffs upward on selected products, only a handful of countries, such as Malawi, Russia, Argentina, Turkey and China focus on products that have significant impacts on trade flows. The United States and the European Union, by contrast, rely mainly on anti-dumping duties to shield domestic industries. Overall, while the rise in tariffs and anti-dumping duties in these countries may have jointly caused global trade to drop by as much as US$43 billion during the crisis period, it explains less than 2 percent of the collapse in world trade.
    Keywords: Trade Law,Trade Policy,Economic Theory&Research,Free Trade,Trade and Services
    Date: 2010–04–01
  10. By: Cadot, Olivier; Kukenova, Madina; Strauss-Kahn, Vanessa
    Abstract: This paper explores the evolution of OECD imports over time and as a function of income levels, measuring the concentration of those imports across origin countries at the product level. The authors find evidence of diversification followed, in the last years of the sample period (post-2000), by a slight re-concentration. This re-concentration is entirely explained by the growing importance of Chinese products in OECD imports. They also find evidence of relatively more volatile concentration levels for differentiated goods, consistent with a simple model of adverse selection and screening of suppliers by OECD buyers. Finally, they find that"accession"to OECD markets occurs directly (rather than after acquiring prior export experience on other markets) for more than half of the (extra-OECD) exporter/product pairs, but that one to eight years of experience enhances subsequent survival on OECD markets. Exports that reach OECD markets after more than eight years of experience elsewhere tend to survive less.
    Keywords: Markets and Market Access,Economic Theory&Research,Labor Policies,Debt Markets,Microfinance
    Date: 2010–04–01
  11. By: Seker, Murat
    Abstract: A large number of studies have shown that contribution of exporters to economic growth and development is much higher than non-exporting firms. This evidence has lead governments to improve their trade policies in order to increase foreign exposure of firms. However, improvements in trade policies can only be fully effective when they are complemented with other regulatory reforms that improve the investment climate for firms. This study focuses on a particular aspect of investment climate, namely employment protection legislation, and shows how these regulations discourage firms from exporting. Using a rich set of firm level data from 26 countries in the Eastern Europe and Central Asia region, the author shows that firms that cannot create new jobs due to restrictive labor regulations are less likely to export. Evidence shows that firms that plan to export expand their size before they start to export. However the rigidities in labor markets make this adjustment costly. Higher costs of labor decrease operating profits and lead to a higher threshold value of productivity required for entering export markets. As a result, a smaller fraction of firms chooses to export.
    Keywords: Labor Markets,Labor Policies,Microfinance,Small Scale Enterprise,E-Business
    Date: 2010–05–01
  12. By: Alan V. Deardorff (University of Michigan)
    Abstract: This paper uses simple trade theory to interpret global imbalance. A world equilibrium in which one country runs a trade surplus and the other a deficit can be interpreted as the welfare improving outcome of free inter-temporal trade. However, comparative advantage would predict that the surplus would arise in the more slowly growing economy, unless consumer preferences differ sufficiently to reverse that. In order to explain the apparent situation of the United States and China in the world today without resorting to such differences in preferences, the paper suggests that both countries may be using policies that, in effect, subsidize the export of the goods in which they have comparative inter-temporal disadvantage. If this is the case, the resulting trade reduces world welfare compared to autarky, and it can easily make both countries worse off.
    Keywords: global imbalance, inter-temporal comparative advantage
    JEL: F11 F32
    Date: 2010–04
  13. By: De Villemeur, Étienne; Pineau, Pierre-Olivier
    Abstract: Electricity trade across regions is often considered welfare enhancing. We show in this paper that this could be reconsidered if environmental externalities are taken into account. We consider two cases where trade is beneficial, before accounting for environmental damages: first, when two regions with the same technology display some demand heterogeneity; second when one region endowed with hydropower arbitrages with its "thermal" neighbor. Our results show that under reasonable demand and supply elasticities, trade comes with an additional environmental cost. This calls for integrating environmental externalities into market reforms when redesigning the electricity sector. Two North American applications illustrate our results: trade between Pennsylvania and New York, and trade between hydro-rich Quebec and New York.
    Keywords: Electricity trade, hydropower, greenhouse gas emissions
    Date: 2009–11

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