nep-int New Economics Papers
on International Trade
Issue of 2010‒07‒17
thirteen papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Scope for Export-Led Growth in a Large Emerging Economy: Is India Learning by Exporting? By Saleh S. Tabrizy; Natalia Trofimenko
  2. Modes of Delivery in Services By Elisabeth Christen; Joseph Francois
  3. trade policy: home market effect versus terms of trade externality By Alessia Campolmi; Harald Fadinger; Chiara Forlati
  4. Learning from trade through innovation:Causal link between imports, exports and innovation in Spanish microdata By Jože.P.Damijan; Črt. Kostevc
  5. International Trade Patterns and Labor Markets – An Empirical Analysis for EU Member States By Götz Zeddies
  6. The Impact of Financial Crises on Trade Flows: A Developing Country Perspective By Macias, Jose Brambila; Massa, Isabella; Salois, Matthew J.
  7. An EU-Canada bilateral trade agreement; a DefraT AP application By Kitou, Elisavet; Philippidis, George
  8. Case Studies of Costs and Benefits of Non-Tariff Measures: Cheese, Shrimp and Flowers By Frank van Tongeren; Anne-Célia Disdier; Joanna Komorowska; Stéphane Marette; Martin von Lampe
  9. The costs and benefits of duty-free, quota-free market access for poor countries By Bouët, Antoine; Laborde Debucquet, David; Dienesch, Elisa; Elliot, Kimberly
  10. Emergence of Sri Lanka in European fish trade By Muhammad, Andrew; Ngeleza, Guyslain
  11. Spatial complementarity of FDI: example of transition countries By Oleksandr Shepotylo
  12. Offshoring and the State of American Manufacturing By Susan Houseman; Christopher Kurz; Paul Lengermann; Benjamin Mandel
  13. Estimating Import-Demand Function in ARDL Framework: The Case of Pakistan By Rashid , Abdul; Razzaq, Tayyaba

  1. By: Saleh S. Tabrizy; Natalia Trofimenko
    Abstract: The ongoing debate of the literature on learning-by-exporting is whether the conspicuously stellar performance of exporters relative to non-exporters can be, at least partially, attributed to the horizonwidening interaction with foreign consumers and learning of cost-efficient and quality enhancing production methods, or whether all of the differential is due to the self-selection of best firms into exporting. This study uses data from the 1998-2008 Prowess Database to examine how firm-level productivity paths differ between firms with varying degrees of exposure to international trade in India, the country to rank third among the most dominant economies by the year 2050. Having used Levinsohn-Petrin measure of total factor productivity and a proxy for labor productivity, we find significant ex-ante differences in productivity between exporters and non-exporters and no difference in the ex-post productivity gains. These findings suggest that even in a large emerging economy with strong absorptive capacity and a significant catch-up potential, learning-by-exporting effects are nonexistent. Rather, self-selection of more productive firms into exporting explains the productivity differential between exporters and non-exporters
    Keywords: trade, total factor productivity, exports, export-led growth, learning by exporting
    JEL: D21 F10 L60
    Date: 2010–07
  2. By: Elisabeth Christen; Joseph Francois
    Abstract: We develop a new analytical framework for both cross-border services trade and services trade through foreign affiliates, based on heterogeneous firms operating under oligopoly. This leads to direct predictions about choice of services delivery (mode of delivery) at the firm level, and about the pattern of bilateral trade at the industry level. We examine the industry-level predictions, working with a panel of U.S. data. Unlike the recent literature that works with FDI as a proxy for affiliate services sales, we work directly with data on bilateral U.S. trade through affiliates. These data feature more sector detail than in the recent literature. We also directly compare observed patterns of services trade and affiliate sales with the corresponding indicators of patterns of cross-border and affiliate sales for manufacturing sectors. In contrast to mixed results in manufacturing, in services overseas multinational activities consistently increase relative to direct exports the further away are host countries. Language and the presence of manufacturing FDI are also important. The impact of factors like corporate tax rates and relative stocks of human capital on modes of service delivery varies across sectors. The evidence on interdependence across modes and the importance of local affiliates implies that the impact of policy in any one mode is likely to depend on the mix of domestic regulation and policy across all modes of supply.
    Keywords: International trade in Services, Modes of Supply, FDI, Foreign Affiliates Trade, GATS
    JEL: F10 F14 F23 L80
    Date: 2010–06
  3. By: Alessia Campolmi (Central European University and Magyar Nemzeti Bank, Hungary); Harald Fadinger (University of Vienna, Austria); Chiara Forlati (École Polytechnique Fédérale de Lausanne, Switzerland)
    Abstract: We study trade policy in a two-sector Krugman-type trade model with home market effects. We conduct a general analysis allowing for three different instruments: tariffs, export taxes and production subsidies. For each instrument, we consider unilateral trade policy without retaliation. When carefully disentangling the different effects that determine policy makers’ choices and modeling general equilibrium effects of taxes/tariffs, we find – contrary to the results of previous studies – that production subsidies are always inefficiently low and driven by the incentives to improve the (welfare relevant) terms of trade. In the cases of tariffs and export taxes results depend crucially on whether the free trade allocation is efficient. When starting from an allocation that is distorted because of monopolistic competition, the home market effect (and in the case of export taxes also the desire to correct for the monopolistic inefficiency) induces policy makers to set a tariff (an export subsidy). However, when monopolistic distortions are corrected, terms of trade effects dominate the choice of trade policy and lead to an import subsidy (an export tax).
    Keywords: home market effect, terms of trade, tariffs and subsidies.
    JEL: F12 F13 F42
    Date: 2010
  4. By: Jože.P.Damijan; Črt. Kostevc
    Abstract: The paper explores the learning from trade hypothesis. Standardized research approach searchs for learning e¤ects from trade focusing solely on exports, whereby …rms learning e¤ects are accounted in the form of total factor productivity improvements. In contrast, this papers de…nes a …rm learning from trade in terms of introduction of either new products or processes induced by its import and export links with foreign markets. By using microdata for a large sample of Spanish …rms, including data on innovation and trade, we …nd clear sequencing between imports, exports and innovation. The results suggest that …rms learn primarily from import links, which enables them to innovate products and processes and to dress up for starting to export. In a sequence, exporting may enable …rms to introduce further innovations. These positive learning e¤ects from trade, however, seem to be limited to small and partially medium …rms only. On the other side, …rms that are closer to the relevant technological frontier seem to bene…t more from trading activities in terms of innovation than the technological laggard fi…rms.
    Keywords: rm heterogeneity, innovation, exports, imports, matching
    JEL: D24 F14 F21
    Date: 2010
  5. By: Götz Zeddies
    Abstract: During the last decades, international trade flows especially of the industrialized countries allegedly became more and more intra-industry. At the same time, employment perspectives particularly of the low-skilled by tendency deteriorated in these countries. This phenomenon is often traced back to the fact that intra-industry trade, which should theoretically involve low labor market adjustment, became increasingly vertical in nature and might thus entail labor market disruptions. Against this background, the present paper investigates the relationship between international trade patterns and selected labor market indicators in European countries, with a focus on vertical intra-industry trade. As the results show, neither inter- nor vertical intra-industry trade do have a verifiable effect on wage spread in EU member states. As far as structural unemployment is concerned, the latter increases only with the degree of countries’ specialization on capi-tal intensively manufactured products in inter-industry trade relations. Only for unemployment of the less-skilled, a slightly significant impact of superior vertical intra-industry trade seems to exist. However, the link between unemployment of the lower qualified and inter-industry specialization on labor intensive goods as well as parts and components imports is considerably higher.
    Keywords: intra-industry trade, trade and labor market interactions, unemployment
    JEL: F12 F16 J64
    Date: 2010–06
  6. By: Macias, Jose Brambila; Massa, Isabella; Salois, Matthew J.
    Abstract: The global financial crisis has hit hard international trade that dropped below levels not seen since the Great Depression with disastrous consequences for the developing world. This paper estimates an extended gravity model of trade on a sample of 83 developing countries over the period 1990-2007 to shed light on how banking crises and global economic downturns affect bilateral exports flows from developing countries. In addition to traditional variables, we include a trade finance variable and foreign aid among the regressors. Differences between developing regions are taken into account. Our results show that (i) trade finance has a positive and significant impact on bilateral export flows in all developing regions except Latin America; (ii) foreign aid matters in all regions; (iii) global economic downturns exert a negative and significant impact on export flows in all developing countries, and especially in Latin American and Sub-Saharan African economies; (iv) banking crises appear to have no significant impact in most regions.
    Keywords: Banking Crises, Developing Countries, Foreign Aid, Global Downturn, International Trade, Trade Finance, Mixed Effects Panel Data, Random Coefficients., Agricultural and Food Policy, C23, F11, F12, F34, F35, G01.,
    Date: 2010–03–29
  7. By: Kitou, Elisavet; Philippidis, George
    Abstract: The first round of negotiations held in Ottawa on the 19th October, 2009, heralded the opening of bilateral trade talks intent on reaching a Canadian-European Union (EU27) free trade area (FTA) agreement. A second round of negotiations were staged in Brussels in January, whilst further rounds are scheduled for 2010, with the longer term aim of ratifying an agreement within 24-30 months. Although stumbling blocs will be encountered, the divergent political interests of each region are compatible. In Canada, a FTA with its second largest trading partner offers a viable alternative to its current overdependence on the US. Similarly, the EU27 sees an opportunity to regain a competitive foothold in the North American market. This paper re-examines the long run trade led gains from a Canada-EU27 FTA. Unlike previous studies, our assessment also accounts for the HS6 level sensitive product declarations submitted by both parties in the first round. We examine the extent to which these proposals afford protection to key strategic sectors and impact on trade led growth and real incomes. All estimates are compared with a realistic contemporary baseline scenario. The results suggest that non tariff barrier (NTB) reductions dominate real income gains, whilst sensitive product exceptions, principally affecting wheat, dairy, wearing apparel and leather sectors, reduce Canadian and EU27 real income gains by 20% and 24%, respectively. Trade diversion impacts are relatively marked for the US and EFTA, whilst China escapes largely unscathed due to the pattern of its trade specialisation.
    Keywords: EU27, Canada, Economic integration, Sensitive products, International Relations/Trade, C68, F11, F15, F17,
    Date: 2010–03–29
  8. By: Frank van Tongeren; Anne-Célia Disdier; Joanna Komorowska; Stéphane Marette; Martin von Lampe
    Abstract: This report applies a cost-benefit analysis to quantify the economic effects of non-tariff measures in the agri-food sector. Three case studies are presented to demonstrate how such analysis can help identify least-cost solutions of Non-Trade Measures (NTMs) designed to ensure that imported products meet domestic requirements. The present analysis examines benefits and costs for the different domestic and foreign stakeholders involved, thus taking a broader view that goes beyond evaluating the trade impact alone.
    Keywords: international trade, trade policy, non-tariff measures, food safety, plant health
    JEL: D61 F13 L51 Q17
    Date: 2010–07
  9. By: Bouët, Antoine; Laborde Debucquet, David; Dienesch, Elisa; Elliot, Kimberly
    Abstract: This paper examines the potential benefits and costs of providing duty-free, quota-free (DFQF) market access to the least developed countries and the effects of extending eligibility for DFQF access to other small and poor countries. Using the MIRAGE computable general equilibrium model, the paper assesses the impact of scenarios involving different levels of coverage for products, recipient countries, and preference-giving countries on participating countries, as well as competing developing countries that are excluded. The main goals of this paper are to highlight the role that rich and emerging countries could play in helping poor countries to improve their trade performance, to assess the distribution of costs and benefits for developing countries, and to determine whether the potential costs for domestic producers are in line with political feasibility in preference-giving countries.
    Keywords: CGE Modeling, duty-free market access, preference erosion, technical barriers to trade, Trade policy,
    Date: 2010
  10. By: Muhammad, Andrew; Ngeleza, Guyslain
    Abstract: This paper examines European Union (E.U.) demand for chilled fish fillets assuming product heterogeneity due to country of origin and assesses the structural adjustment in demand as indicated by the increase in imports from Sri Lanka since the tsunami in December 2004. The primary objective of this research is to assess how Sri Lanka’s fish exports affected fish exports from Kenya, Tanzania, and Uganda (Lake Victoria region). Although the results show no significant price competition between the Lake Victoria region and Sri Lanka, the Lake Victoria countries are clearly worse off now that Sri Lanka is a major supplier of chilled fish to the E.U. A comparison of the two periods 2001–2004 and 2007–2009 finds that in the former period, past imports of Lake Victoria fish had a positive impact on present imports, indicating that importers developed a preference for Lake Victoria fish during this time; in the latter period, this effect no longer existed. Most important is the change in the responsiveness of imports from Lake Victoria to real aggregate expenditures on imported fish in the E.U. The results show that a lesser share of aggregate expenditures is allocated to the Lake Victoria region and that the region now benefits less from an increase in aggregate expenditures.
    Keywords: Lake Victoria, fish, imports,
    Date: 2010
  11. By: Oleksandr Shepotylo (Kyiv School of Economics, Kyiv Economics Institute)
    Abstract: This paper investigates spatial determinants of FDI location. In particular, FDI in neighboring countries and foreign market potential are two variables it focuses on. The sample includes a panel of 27 transition countries in 1993-2007. The spatial links are found positive and economically large. Omitting spatial FDI leads to a serious misspecication of the model and biases estimation of the coecient of the foreign market potential variable, which is found to be a non-robust determinant of FDI location. As the analysis of sub-samples of the data indicates, the FDI complementarity is stronger for the CIS countries and for earlier period. The spatial complenmentarity is stronger for disaggregated data such as bilateral FDI flows and industry level data. I nd substantial heterogeneity of spatial FDI spillovers across indus- tries. Spillovers are large and positive for services sectors and non-sighicant or even negative for manufacturing sectors.
    Keywords: foreign direct investments, spatial econometrics, transition
    JEL: C21 F21 P33
    Date: 2010–06
  12. By: Susan Houseman (W.E. Upjohn Institute); Christopher Kurz (Federal Reserve Board); Paul Lengermann (Federal Reserve Board); Benjamin Mandel (Federal Reserve Board)
    Abstract: The rapid growth of offshoring has sparked a contentious debate over its impact on the U.S. manufacturing sector, which has recorded steep employment declines yet strong output growth—a fact reconciled by the notable gains in manufacturing productivity. We maintain, however, that the dramatic acceleration of imports from developing countries has imparted a significant bias to the official statistics. In particular, the price declines associated with the shift to low-cost foreign suppliers generally are not captured in input cost and import price indexes. To assess the implications of offshoring bias for manufacturing productivity and value added, we implement the bias correction developed by Diewert and Nakamura (2009) to the input price index in a growth accounting framework, using a variety of assumptions about the magnitude of the discounts from offshoring. We find that from 1997 to 2007 average annual multifactor productivity growth in manufacturing was overstated by 0.1 to 0.2 percentage point and real value added growth by 0.2 to 0.5 percentage point. Furthermore, although the bias from offshoring represents a relatively small share of real value added growth in the computer and electronic products industry, it may have accounted for a fifth to a half of the growth in real value added in the rest of manufacturing.
    Keywords: offshoring, manufacturing, price measurement, productivity, output growth
    JEL: O41 O47 F14 L60
    Date: 2010–06
  13. By: Rashid , Abdul; Razzaq, Tayyaba
    Abstract: We develop a structural econometric model of import demand for Pakistan, with binding foreign exchange constraint. ARDL and DOLS techniques are used to estimate the log-run coefficients of price and income elasticities. The empirical results from ARDL bound testing approach and Johansen’s method for cointegration show strong evidence of the existence of a long-run stable relationship among the variables included in the import demand model. The price and income elasticity estimates have correct signs and are statistically significant. The coefficient of scarcity premium, as it appeared statistically significant with correct sign, confirms the presence of a binding foreign exchange constraint on aggregate import demand, particularly before the period of trade liberalization.
    Keywords: Import Demand; Foreign Exchange Constraint; ARDL; DOLS; Pakistan
    JEL: O24 F14
    Date: 2010–01–10

This nep-int issue is ©2010 by Alessia A. Amighini. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.