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on International Trade |
| By: | Ana Cristina Molina (IUHEID, The Graduate Institute of International and Development Studies, Geneva) |
| Abstract: | This paper investigates whether preferential trade agreements (PTA) promote exports to third nations through the expansion of the extensive margin (i.e. larger number of export goods). The analysis covers 11 South- South and South-North PTAs involving 36 countries that exported to 118 different destinations during the 5 years before and after the PTA. Using a conditional logit model, and trade data at the SITC 5-digit level, we estimate the effect of new within-PTA exports on the subsequent exports to thirdnation markets. The results suggest that PTAs have a positive indirect effect, i.e. spillover-effect, on exports to third countries. Previous export experience in a given product in the preferential area is shown to have a positive effect on the probability that the same product is subsequently exported to a nonmember market. The size of the effect, however, varies across PTAs. |
| Keywords: | Trade policy, spillovers, market entry |
| JEL: | D21 F13 L10 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp13-2010&r=int |
| By: | Alyson C. Ma; Ari Van Assche; Chang Hong |
| 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. [ADBI Working Paper 175] |
| Keywords: | People’s Republic of China, imports, industry-equilibrium, model, advanced, economies |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:3041&r=int |
| By: | Hasan, Arsalan |
| Abstract: | Conventional economic theory advocates trade liberalization, and ultimately free trade because its benefits are said to outweigh its costs. This paper states the arguments for and against the liberalization of trade and then analyzes the case of Pakistan's trade liberalization. Some recommendations are also put forward for trade liberalization to be successful in developing economies. |
| Keywords: | trade liberalization; free trade; costs and benfits; pakistan trade |
| JEL: | F13 F0 F1 |
| Date: | 2010–09–27 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:25657&r=int |
| By: | Vivek Joshi (IUHEID, The Graduate Institute of International and Development Studies, Geneva) |
| Abstract: | This paper investigates whether the India-Sri Lanka Free Trade Agreement (ISLFTA) has had trade creation or trade diversion effects on the rest of the World. The method used resembles the one used by Romalis (2005) to study NAFTA. In order to use the variations in tariff at the product level, we use six digit HS classification of products. We construct seven panel data sets for the period 1996 to 2006. We use the commodity and time variation in the tariff preferences allowed under ISLFTA, to identify its effect on sourcing of different products from ‘control country’ to ISLFTA region. Using fixed effects model we find that the ISLFTA has been minimally trade creating for control countries. |
| Keywords: | Free trade agreement, tariffs, trade creation |
| JEL: | F10 F13 F15 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp04-2010&r=int |
| By: | José Vicente Blanes (Universidad Pablo de Olavide) |
| Abstract: | International trade can foster economic development. This paper examines the link between immigration from developing countries to OECD countries and their bilateral trade; it also explores some possible mechanism behind this link. It uses a gravity equation for trade augmented by an immigrant stock variable and a set of control variables. The immigrants’ variable enters the estimated equation in different ways depending on immigrants’ relevant characteristics both individual and non individual-specific. Results show that in developing countries there is a positive link between immigration and both exports and imports. We find evidence for the trade transaction cost channel but not for the preference one. We identify the social or ethnic network effect as the mechanism behind this link since immigrants related to business activities are the ones who have a positive effect on bilateral trade. |
| Keywords: | International Trade, Migration, Economic Development. |
| JEL: | F10 F22 O10 |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:aee:wpaper:1007&r=int |
| By: | G.M. Peter Swann |
| Abstract: | While there is a large literature on the economic theory of international standards, and their presumed effects, we know much less about how international standards work in practice. This paper reviews the body of empirical work that has investigated the specific question: How international standards impact on international trade? Do they help or hinder trade? The work reviewed ranges from econometric studies using a variety of measures of standards derived from e.g. the Perinorm database, diffusion of ISO9000, regional agreements, mutual recognition agreements and harmonisation, to surveys of exporting firms. A mapping of the findings from econometric models shows that there is often, but not always, a positive relationship between international standards and exports or imports, which is in line with the widely held view that international standards are supportive of trade. For national (i.e. country-specific) standards studies find positive as well as negative effects on trade and thus provide only qualified support for the commonly held view that national standards create barriers to trade. Overall, the literature reviewed does not provide a single answer to the question of trade effects, and the explanation for this appears to have to do with how the multiple economic effects of standards interact. The paper summarises some of the existing empirical evidence for some of these effects, which include network externalities, variety, knowledge, quality and trust, and which merit further research in order to understand when standards help trade, and when not. |
| Keywords: | international trade, exports, imports, trade barriers, standards, mutual recognition agreement, ISO, technical regulations, harmonisation, mutual recognition, international standards, harmonisation agreement, International Organisation for Standardisation, econometric model, empirical, trade effect, International Electrotechnical Commission, IEC, International Telecommunication Union, ITU, TBT Agreement, WTO SPS Agreement, Perinorm, MRAs |
| Date: | 2010–06–02 |
| URL: | http://d.repec.org/n?u=RePEc:oec:traaab:97-en&r=int |
| By: | Said, Mona; Elshennawy, Abeer |
| Abstract: | This paper explores the impact of trade liberalization on manufacturing employment and wages over a period 1993-2006, a period coinciding with significant reduction in trade barriers and rising unemployment. Despite increasing import penetration, the paper shows that employment has increased across all manufacturing industries. Data from Egypt’s labor market survey confirm that layoffs as a result of trade liberalization is not among the factors responsible for unemployment. On the other hand, regression analysis shows that the reduction in tariffs and increasing export orientation has been associated with an increase in wages in manufacturing industries though the role of export orientation in influencing poor wages has not been significant. Meanwhile, quantile regressions reveal that the impact of both the reduction in tariffs and increase in export orientation has not been uniform across the different quantiles of the wage distribution. The paper further points out to the possibility that further reduction of trade barriers might lead to high adjustment costs in terms of long spells of unemployment or lower pay on grounds of old age and low educational attainment of Egypt’s work force. Adjustment policies in the form of direct job search assistance as country experience illustrates is considered to be the most appropriate form of adjustment assistance. |
| Keywords: | Trade liberalization; employment; wages; adjustment costs; adjustment assistance |
| JEL: | F16 J31 F14 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:25759&r=int |
| By: | Siow Yue Chia |
| Abstract: | The global economic crisis has affected the East Asian economies via trade and investment. The export-led model which had been responsible for the “East Asian Miracle†now must redirect the basis of growth from exports sent to the US and Europe to regional and domestic demand. Regional trade integration has been market-led through production networks and foreign direct investment (FDI). Since the proliferation of bilateral and plurilateral free trade agreements (FTA) and economic partnership agreements (EPA) has not resulted in an integrated regional market, it is important that East Asia seek an arrangement for a region-wide FTA/EPA. Currently, there are proposals for an ASEAN+3, an ASEAN+6, Pan-Asia, and Asia Pacific initiatives. While proponents of a region-wide FTA/EPA highlight its benefits, skeptics and critics point to the difficulties of reaching consensus in a region with widely varying political, economic, and social systems. Ultimately it will depend on a political-economic decision based on a cost-benefit analysis of liberalization, facilitation, and cooperation in a region-wide FTA. [ADBI Working Paper No. 210] |
| Keywords: | global, economic crisis, East Asian, political-economic, benefits |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:2993&r=int |
| By: | Yunling Zhang |
| Abstract: | The People’s Republic of China (PRC) has emerged as a major player in the global economy and considers free trade agreements (FTAs) an important part of its global trading strategy. The PRC’s export industries are embedded in existing regional and global production networks and are reliant on foreign direct investment flows and external supplies of material and intermediate goods. Immediately after its accession to the World Trade Organization in December 2001, the PRC adopted a regional approach to trade and began negotiating and implementing FTAs. This paper analyzes the results of a survey undertaken across 232 Chinese firms with regard to FTA-related issues such as utilization, perceived costs and benefits, perceptions of multiple rules of origin, and policy and institutional support mechanisms. It was found that, of the firms surveyed, 45% were using FTAs to some extent. While this utilization rate appears relatively high, and reflects the assertive stance of Chinese firms when it comes to exploring market opportunities, the actual coverage of export value by FTAs is variable. In general, Chinese firms view FTAs as a way to increase their access to partner markets. [ADBI Working Paper 251] |
| Keywords: | Republic, China, global trading strategy, export industries, support mechanisms, markets |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:3015&r=int |
| By: | Rana Hasan (Asian Development Bank); Karl Robert L. Jandoc (School of Economics, University of the Philippines Diliman) |
| Abstract: | We examine the role of trade liberalization in accounting for increasing wage inequality in the Philippines from 1994 to 2000--a period over which trade protection declined and inequality increased dramatically. Using the approach of Ferreira, Leite, and Wai-Poi (2007), we find that trade-induced effects on industry wage premia and industry-specific skill premia account for an economically insignificant increase in wage inequality. A more substantial role for trade liberalization comes through trade-induced employment reallocation effects whereby reductions in protection appear to have led to a shift of employment to more protected sectors, especially services where wage inequality tended to be high to begin with. Nevertheless, the key drivers of wage inequality appear to be changes in economy-wide returns to education and changes in industry membership over and above those accounted for by our estimates of trade-induced employment reallocation effects. In order for trade liberalization to account for a relatively large portion of the increases in wage inequality, it would have to be a major determinant of the changes in economy-wide returns to education. |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:phs:dpaper:201006&r=int |
| By: | Goerke, Laszlo (University of Tuebingen); Pannenberg, Markus (Bielefeld University of Applied Sciences) |
| Abstract: | In Germany, there is no trade union membership wage premium, while the membership fee amounts to 1% of the gross wage. Therefore, prima facie, there are strong incentives to free-ride on the benefits of trade unionism. We establish empirical evidence for a private gain from trade union membership which has hitherto not been documented: in West Germany, union members are less likely to lose their jobs than non-members. In particular, using data from the German Socio-Economic Panel we can show that roughly 50% of the observed raw differential in individual dismissal rates can be explained by the estimated average partial effect of union membership. |
| Keywords: | dismissal, free-riding, trade union membership, survey data |
| JEL: | C23 H41 J51 J63 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5222&r=int |
| By: | Eliasson, Kent (Growth Analysis,); Hansson, Pär (Department of Business, Economics, Statistics and Informatics); Lindvert, Markus (Growth Analysis) |
| Abstract: | The service sector is very heterogeneous with respect to internationalization; in some industries there is international trade (or it may potentially exist), whereas other industries are non-tradable. Data on international trade in services is, however, typically very limited, making it difficult to identify in which industries there are international trade. In this paper, we partially surmount the problems with insufficient service trade statistics by calculating locational Ginis for different industries in the private business sector as well as in the public sector. The basic idea is that from the regional concentration of different activities within a country one can identify industries where there appears to be regional trade, and hence also a potential for international trade. Based on our method we find that the number of employed in tradable service appears to be at least as large as in the manufacturing sector. Remarkably, a larger share of the skilled labor exposed to international trade is working in the service sector than in manufacturing, while a majority of the less skilled labor working in tradable industries is employed in manufacturing. When it comes to employment growth, we observe that the employment has increased in tradable service, while it has fallen in the manufacturing sector (the whole sector is regarded as tradable). |
| Keywords: | jobs; service trade; regional concentration; structural change |
| JEL: | F16 J44 R12 |
| Date: | 2010–10–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:oruesi:2010_012&r=int |
| By: | Pierre-Louis Vézina (IUHEID, The Graduate Institute of International and Development Studies, Geneva) |
| Abstract: | This paper uses an untapped dataset on Swiss immigration and a novel instrumental variable to test three channels through which migrants promote trade. The main finding is that migrant networks are an effective substitute for formal institutions in facilitating trade. The effect takes place entirely on the extensive margin, suggesting migrant networks may be reducing fixed entry costs characterized by corruption. |
| Keywords: | trade, migration, corruption |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp03-2010&r=int |
| By: | Vivek Joshi (IUHEID, The Graduate Institute of International and Development Studies, Geneva) |
| Abstract: | In this paper, we address the impact of multilateral trade liberalisation (MTL) on the preferential tariffs granted by the EU, who is one of the top traders as well as biggest contributors to MTL. We empirically address two important questions. First, if the MFN tariff for a product is higher, does it lead to a higher or lower preferential tariff? Second, the EU being a large trading partner in such agreements, does reciprocity matter for giving meaningful preferential access? For a given MFN tariff, we model the preferential tariff with a simple linear functional form. We draw three important conclusions. First, the products that are highly protected do not get high preferential access even at the regional level. Second, reciprocity plays only a limited role in granting better preferential access. Third, GSP preferences matters when the EU negotiates with the developed partners but it does not matter when it negotiates with the developing partners. |
| Keywords: | MFN tariffs, preferential tariffs, reciprocity, GSP |
| JEL: | F13 F15 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp05-2010&r=int |
| By: | Vivek Joshi (IUHEID, The Graduate Institute of International and Development Studies, Geneva) |
| Abstract: | This paper addresses the impact of Multilateral Trade Liberalisation (MTL) on the preferential tariffs granted by the United States. For a given MFN tariff, we model the preferential tariff with a simple linear functional form. We take MTL of the US as known to the world by the end of Uruguay Round in 1994 and estimate its impact on preferential tariff negotiations during 1995 to 2007. We use a three dimensional panel data, which takes into account the partner, product and time variation of the data-set. To complete our data-set, we codify eight PTA legal agreements. We draw three important conclusions. First, the products that are highly protected do not get high preferential access even at the regional level. Second, reciprocity plays only a limited role in granting better preferential access. Third, irrespective of development level of the partner, the non-reciprocal GSP preferences always matter. |
| Keywords: | MFN tariffs, preferential tariffs, reciprocity, GSP |
| JEL: | F13 F15 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp06-2010&r=int |
| By: | Gianmarco I.P. Ottaviano; Giovanni Peri; Greg C. Wright |
| Abstract: | How many "American jobs" have U.S.-born workers lost due to immigration and offshoring? Or, alternatively, is it possible that immigration and offshoring, by promoting cost-savings and enhanced efficiency in firms, have spurred the creation of jobs for U.S. natives? We consider a multi-sector version of the Grossman and Rossi-Hansberg (2008) model with a continuum of tasks in each sector and we augment it to include immigrants with heterogeneous productivity in tasks. We use this model to jointly analyze the impact of a reduction in the costs of offshoring and of the costs of immigrating to the U.S. The model predicts that while cheaper offshoring reduces the share of natives among less skilled workers, cheaper immigration does not, but rather reduces the share of offshored jobs instead. Moreover, since both phenomena have a positive "cost-savings" effect they may leave unaffected, or even increase, total native employment of less skilled workers. Our model also predicts that offshoring will push natives toward jobs that are more intensive in communication-interactive skills and away from those that are manual and routine intensive. We test the predictions of the model on data for 58 U.S. manufacturing industries over the period 2000-2007 and find evidence in favor of a positive productivity effect such that immigration has a positive net effect on native employment while offshoring has no effect on it. We also find some evidence that offshoring has pushed natives toward more communication-intensive tasks while it has pushed immigrants away from them. |
| JEL: | F22 F23 J24 J61 |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:16439&r=int |
| By: | Schenker, Oliver; Bucher, Raphael |
| Abstract: | Not only after the failure of the Copenhagen climate conference 2009, border carbon adjustment (BCA) has received growing attention in the climate policy debate as a measure to combat "carbon leakage" and force non-abating countries to tighter climate policies. In this paper, we study the strategic interactions between international trade and climate policy with a focus on the effectiveness of border measures. First, we analyze the main principles of unilateral climate policy with international trade in a small analytical model. Second, we examine welfare effects of WTO compatible carbon import tariffs in a stylized numerical integrated assessment model with explicit trade in commodities and analyze if BCA is a credible threat to force non-abating countries to implement stricter climate policies. We show that the terms of trade effects can, depending on trade patterns, ease or boost the prisoners dilemma of mitigating greenhouse gases. We further demonstrate that WTO conform BCA increases the effectiveness of climate policy and forces trading partners to reduce emissions. But as the results of the numerical model illustrate, welfare effects are depended on trade flows and are negative for realistic parameter values. |
| Keywords: | International Trade; Environmental Policy; Border Tax Adjustment |
| JEL: | F18 D58 Q54 |
| Date: | 2010–07–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:25820&r=int |
| By: | Nico Meyer; Tamas Fenyes; Martin Breitenbach; Ernst Idsardi |
| Abstract: | Regional trade agreements (RTAs) present opportunities for controlling technical barriers to trade (TBTs). Using key principles and provisions of the WTO Agreement on TBT as a yardstick for analysis, this paper examines whether and how eight major regional integration agreements within the African region address TBT issues. It finds that TBT are not an important issue in Sub-Saharan African RTAs. Only one of the 8 agreements surveyed refers explicitly to the WTO TBT Agreement. Existing provisions for eliminating TBT-related barriers or harmonising legitimate technical regulations are formulated mostly in broad and nonprescriptive terms. The paper describes concrete steps that parties to these RTAs have taken in order to reduce technical barriers. Such initiatives have been taken at the national level but can also involve collaboration between RTAs. Country case studies show that weak TBT infrastructure remains a handicap for businesses and governments and that, with the exception of the Southern African Development Cooperation (SADC), investment by regional economic communities (RECs) in institutional infrastructure related to TBT has not been significant. The paper describes in some detail relevant activities taking place within SADC which could serve as a best-practice model for other African regional agreements. Serious capacity constraints stand in the way of African countries taking on the challenge of reducing TBT barriers. Also, low local levels of living standards favour weak product standard, and this acts as a barrier to upgrading product standards for export markets. Amending TBT coverage in African RTAs, a review of performance of enquiry points and assistance with infrastructure modernisation are among a set of measures recommended for achieving better TBT policy alignment among countries of the region. |
| Keywords: | trade barriers, standards, RTA, regional trade agreements, technical barriers to trade, TBT, technical regulations, conformity assessment procedures, harmonisation, South Africa, Sub-Sahara Africa, technical barriers, free trade agreement, FTA, regional economic community, WTO Agreement on TBT, mutual recognition, West African Economic and Monetary Union, Economic Community of West African States, Central African Economic and Monetary Union, East African Community, Southern African Development Community, South African-EU Trade and Development Cooperation Agreement, Kenya, Nigeria |
| Date: | 2010–06–02 |
| URL: | http://d.repec.org/n?u=RePEc:oec:traaab:96-en&r=int |
| By: | Panicos Demetriades; Peter Rousseau |
| Abstract: | We explore the role of government in the nexus of finance and trade starting from the earliest days of organised finance in England and then broadening the analysis to 84 countries from 1960 to 2004. For 18th century England, we find that the government expenditures and international trade did have a positive long-run effect on financial development when measured as the value of private loans made by the Bank of England. For the wider panel of countries and more recent data, we find that government expenditures and trade have positive effects on financial development for countries that are in the mid-ranges of economic development as measured by their per capita incomes, but have little effect for poor countries and strongly negative effects for the wealthiest ones. |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:11/03&r=int |
| By: | OKUBO Toshihiro; Rikard FORSLID |
| Abstract: | The present paper focuses on sorting as a mechanism behind the well-established fact that there is a central region productivity premium. Using a model of heterogeneous firms that can move between regions, Baldwin and Okubo (2006) show how more productive firms sort themselves to the large core region. We extend this model by introducing different capital intensities among firms and sectors. In accordance with empirical evidence, more productive firms are assumed to be more capital intensive. As a result, our model can produce sorting to the large regions from both ends of the productivity distribution. Firms with high capital intensity and high productivity, as well as firms with very low productivity and low capital intensity, tend to relocate to the core. We use region and sector productivity distributions from Japanese micro data to test the predictions of the model. Several sectors show patterns consistent with two-sided sorting, and roughly an equal number of sectors seem to primarily be driven by sorting and selection. We also find supportive evidence for our model prediction that two-sided sorting occurs in sectors with high capital intensity. |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:10056&r=int |
| By: | Roger Bandick; Holger Görg; Patrik Karpaty |
| Abstract: | The aim of this paper is to evaluate the causal effect of foreign acquisition on R&D intensity in targeted domestic firms. We are able to distinguish domestic multinationals and non-multinationals, which allows us to investigate the fear that the change in ownership of domestic to foreign multinationals leads to a reduction in R&D activity in the country, as headquarter activities are relocated to the new owner’s home country. We use unique and rich firm level data for the Swedish manufacturing sector and different micro-econometric estimation strategies in order to control for the potential endogeneity of the acquisition dummy. Overall, our results give no support to the fears that foreign acquisition of domestic firms lead to a brain drain of R&D activity in Swedish MNEs. Rather, this paper finds robust evidence that foreign acquisitions lead to increasing R&D intensity in acquired domestic MNEs and non-MNEs |
| Keywords: | domestic multinationals, foreign acquisition, R&D, propensity score matching |
| JEL: | F23 |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1651&r=int |
| By: | Cadogan, Godfrey |
| Abstract: | This paper focuses on the necessary conditions required in order to exploit the substitution effect which arises when there is a shift in demand induced by import quotas under imperfect competition. The protective policy succeeds if the substitution effect shifts in favor of goods produced by the domestic industry and this shift offsets foreign firms quota rents and the decrease in consumer welfare. While extant literature tends to focus on welfare loss associated with import quotas, in this paper social welfare analytics are produced and a trade policy decision rule for net welfare gain is obtained. |
| Keywords: | Import quota; social welfare; substitution effect; trade policy decision rule. |
| JEL: | F13 F10 F12 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:25862&r=int |
| By: | Kunal Sen; Bibhas Saha; Dibyendu Maiti |
| Abstract: | There has been increasing ‘flexibilisation’, in the formal labour markets of both developed and developing countries. Labour institutions and globalisation are often taken to be causally related to this phenomenon, but the evidence remains inconclusive. In India, there has been an increasing use of temporary workers employed through contractors (contract workers), who are not represented by trade unions and who do not fall under the purview of the labour laws that are applicable to directly employed workers (formal workers) in formal labour markets. We develop a model of labour demand where firms choose a mix of contract workers and formal workers, rather than formal workers alone. Then we test the model using state-industry-year panel data for Indian manufacturing from 1998 to 2005. We find that both pro-worker labour institutions and increased import penetration lead to greater use of contract labour in Indian manufacturing. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:bwp:bwppap:12310&r=int |