nep-int New Economics Papers
on International Trade
Issue of 2010‒12‒23
twelve papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. The impact of trade promotion services on Canadian exporter performance By Johannes VAN BIESEBROECK; Emily YU; Shenjie CHEN
  2. Trade Disputes Between China and the United States: Growing Pains so Far, Worse Ahead? By Gary Clyde Hufbauer; Jared C. Woollacott
  3. Export Potential at the State-Level; A Case Study of Karnataka By Bibek Raychaudhuri; Debottam Chakraborty
  4. "How Rich Countries Became Rich and Why Poor Countries Remain Poor: It's the Economic Structure . . . Duh!" By Jesus Felipe; Utsav Kumar; Arnelyn Abdon
  5. Examining the potential for cross-South Pacific trade: ASEAN and Latin America By Mikic, Mia; Jakobson, Elias
  6. Global Sourcing of Familiy Firms By Horgos, Daniel
  7. Complex Vertical FDI and Firm Heterogeneity: Evidence from East Asia By Kazunobu Hayakawa; Toshiyuki Matsuura
  8. Openness and optimal monetary policy By Giovanni Lombardo; Federico Ravenna
  9. Does Exporting Raise Productivity? Evidence from Korean Microdata By Sanghoon Ahn
  10. Financial development, trade openness and financial openness: do income levels matter for developing countries? By Simplice A, Asongu
  11. Oligopoly and Trade By Dermot Leahy; J. Peter Neary
  12. Bilateral Trade, Openness and Asset Holdings By Jing Li; Alexander Szimayer

  1. By: Johannes VAN BIESEBROECK; Emily YU; Shenjie CHEN
    Abstract: We evaluate the impact of the programs delivered by the Canadian Trade Commissioner Service (TCS) on export performance by Canadian firms. We draw on a unique set of microdata created by linking three separate firm-level databases: Statistics Canada’s Exporter Register and its Business Register, which provide information on export activity and firm characteristics, and the TCS client management database maintained by Foreign Affairs and International Trade Canada, which contains details on trade promotion services provided to Canadian firms. We apply the treatment effects analytical framework to isolate the effects of public sector trade promotion. We find that TCS programs have a consistent and positive impact on Canadian exporter performance. Exporters that access TCS services export, on average, 17.9 percent more than comparable exporters that do not. Furthermore, we also find that TCS assistance benefits exporters in terms of product and market diversification.
    Keywords: Export Promotion, Heterogeneous Firms, Canada
    JEL: F13 F14 L15
    Date: 2010–04
  2. By: Gary Clyde Hufbauer (Peterson Institute for International Economics); Jared C. Woollacott (Peterson Institute for International Economics)
    Abstract: This study covers the history of Sino-US trade relations with a particular focus on the past decade, during which time each has been a member of the World Trade Organization (WTO). Providing a brief history of 19th and 20th century economic relations, this paper examines in detail the trade disputes that have arisen between China and the United States over the past decade, giving dollar estimates for the trade flows at issue. Each country has partaken in their share of protectionist measures, however, US measures have been characteristically defensive, protecting declining industries, while Chinese measures have been characteristically offensive, promoting nascent industries. We also cover administrative and legislation actions within each country that have yet to be the subject of formal complaint at the WTO. This includes an original and comprehensive quantitative summary of US Section 337 intellectual property rights cases. While we view the frictions in Sino-US trade a logical consequence of the rapid increase in flows between the two countries, we caution that each country work within the WTO framework and respect any adverse decisions it delivers so that a protracted protectionist conflict does not emerge. We see the current currency battle as one potential catalyst for such conflict if US and Chinese policymakers fail to manage it judiciously.
    Keywords: Agreement, Anti Dumping, Antidumping, Commodity Agreements, Dumping, Duty, Export Promoting, Export Restrictions, Exports, Free Trade, GATT, GATT WTO, General Agreement on Tariffs and Trade, Import, Import Restricted, Import Subsidies, Import Subsidy, Intellectual Property Rights, International Agreement, International Trade Agreements, International Trade Organizations, Liberalization, MFN, Multilateralism, Non Tariff, Nontariff Barrier, Openness, Optimal Trade Policy, Protectionism, Protectionist, Quotas, Sanctions, Services, Smoot Hawley, Subsidies, Tariff, Trade, Trade Agreements, International Trade.
    JEL: F13 F53 N71 N72 N75
    Date: 2010–12
  3. By: Bibek Raychaudhuri; Debottam Chakraborty (Indian Institute of Foreign Trade, Kolkata, India)
    Abstract: Given the diversified framework different regions of India have different priority sectors and their requirements are different. In order to fulfill this, each region will engage in trade with different countries or other regions within India. In case of international trade, it is interesting to observe that, although any particular region (say a state) cannot individually trade with other countries, the trade basket of India, as a whole, will reflect different regional priorities of India. In this framework, it is challenging to find out the regional export potential in a country like India. Data regarding regional trade is not much accurate, since export data of regions are computed on the basis of the port-wise data. In this connection, a methodology is proposed in this paper, to estimate the regional export potential, considering Karnataka as a case. The existing production basket has been matched with the potential export items from India for this purpose. At the end, we shift our emphasis to the products which have export potential but have not yet achieved high export values. Considering tariff, non-tariff barriers and import penetration ratio for different countries we identified high, low, and medium potential products for the state from this set of products. It has been observed that some agricultural products like sunflower, groundnut, onion, turmeric, and silk, electrical machinery, precision engineering products have high unrealized export potential from the state to different countries. Identification of the basis of this unrealized export and the ways to enhance the export of such products were arrived at through the survey of various stakeholders.
    Keywords: Export Potential, Comparative Advantage, Shift Share
    JEL: F14
    Date: 2010–11
  4. By: Jesus Felipe; Utsav Kumar; Arnelyn Abdon
    Abstract: Becoming a rich country requires the ability to produce and export commodities that embody certain characteristics. We classify 779 exported commodities according to two dimensions: (1) sophistication (measured by the income content of the products exported); and (2) connectivity to other products (a well-connected export basket is one that allows an easy jump to other potential exports). We identify 352 "good" products and 427 "bad" products. Based on this, we categorize 154 countries into four groups according to these two characteristics. There are 34 countries whose export basket contains a significant share of good products. We find 28 countries in a "middle product" trap. These are countries whose export baskets contain a significant share of products that are in the middle of the sophistication and connectivity spectra. We also find 17 countries that are in a "middle-low" product trap, and 75 countries that are in a difficult and precarious "low product" trap. These are countries whose export baskets contain a significant share of unsophisticated products that are poorly connected to other products. To escape this situation, these countries need to implement policies that would help them accumulate the capabilities needed to manufacture and export more sophisticated and better connected products.
    Keywords: Bad Product; Capabilities; "Low Product" Trap; "Middle Product" Trap; Proximity; Sophistication; Structural Transformation
    JEL: O14 O25 O57
    Date: 2010–12
  5. By: Mikic, Mia; Jakobson, Elias
    Abstract: This paper discusses the potential for cross-South Pacific trade between selected Southeast Asian and Latin American economies. The objective of this discussion is to identify obstacles for more intensive trade between the observed countries. Firstly, the paper reviews trends in trade flows and trade patterns between the selected economies, and by using several trade performance indicators it finds the level of trade still relatively low. It then discusses the possible reasons for this state of affairs. It focuses on a review of tariffs, trading costs and other possible impediments to trade. Paper also considers how trade relations among these countries could be improved. It provides a background into the features of the trade agreements that have been signed among the countries belonging to these two sub-regions in an attempt to identify if any of them could be used as a “driver” for future integration.
    Keywords: ASEAN; Latin America; trade entropy; complementarity; trade agreements; cross-Pacific trade; noodle bowl
    JEL: F15 F13
    Date: 2010–12–01
  6. By: Horgos, Daniel (Helmut Schmidt University, Hamburg)
    Abstract: In Europe, a huge share of firms is family owned. Since family firms are known to be more risk averse concerning international transactions, an interesting question emerges: Do family firms adopt a different international sourcing pattern. Altering the Gloubal Sourcing model of Antràs and Helpman, this theoretical contribution adopts a family firm's perspective. The model shows that family firms tend to decrease international procurement. In the headquarter intensive sector, where FDI coexists with international outsourcing, family firms unambiguously decrease FDI, whereas the effect on international outsourcing is ambiguous: A substitution process may work towards an increase in international outsourcing activities.
    Keywords: Global Sourcing; Family Firms; Outsourcing; Offshoring; FDI
    JEL: D23 F10 L23
    Date: 2010–12–15
  7. By: Kazunobu Hayakawa (Inter-disciplinary Studies Center, Institute of Developing Economies); Toshiyuki Matsuura (Institute of Economic and Industrial Studies, Keio University)
    Abstract: In this study, we statistically test the validity of the mechanics of complex vertical foreign direct investment (VFDI) in Japanese machinery FDI to East Asia by estimating a multiple-spatial lag model. From the theoretical viewpoint, in complex VFDI, the production activity of affiliates in a given country is positively related to that in neighboring countries that have large differences in factor prices with the given country. Our empirical results show that such mechanics of complex VFDI work in Japanese FDI to East Asia, and that they work more strongly in those MNEs with higher productivity. These results have important implications on the policies of developing countries in attracting FDI.
  8. By: Giovanni Lombardo (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Federico Ravenna (HEC Montreal.)
    Abstract: We show that the composition of imports has important implications for the optimal volatility of the exchange rate. Using input-output data for 25 countries we document substantial differences in the import and non-tradable content of final demand components, and in the role played by imported inputs in domestic production. We build a business cycle model of a small open economy to discuss how the problem of the optimizing policy-maker changes endogenously as the composition of imports and of final demand is altered. Contrary to models where steady state trade openness is entirely characterized by home bias, we find that trade openness is a very poor proxy of the welfare impact of alternative monetary policies. Finally, we quantify the loss from an exchange rate peg relative to the Ramsey policy conditional on the composition of imports, using parameter values that are estimated from OECD input-output tables data. We find that the main determinant of the losses is the share of non-traded goods in final demand. JEL Classification: E52, E31, F02, F41.
    Keywords: International Trade, Exchange Rate Regimes, Non-tradable Goods, Optimal Policy.
    Date: 2010–12
  9. By: Sanghoon Ahn
    Abstract: This paper explores a plausible channel through which exporting could have made both a substantial and a persistent contribution to export-oriented economic growth in Korea and by extension other East Asian NIEs: namely, the spillovers (or externalities) of learning-by-exporting. Plant-level data for Korean manufacturing show that more export-intensive industries tend to have a higher productivity level. In addition, a substantial part of the variance in plant-level productivity is explained by the variance in industry-level export intensity. [ADB Institute Research Paper Series No. 67]
    Keywords: plausible, channel, substantial, economic growth, Korea, East Asian
    Date: 2010
  10. By: Simplice A, Asongu
    Abstract: Using a panel of 29 African middle and low income countries with data spanning from 1988 to 2007, we analyze linkages between openness and financial intermediary development when income levels matter. Main findings are four: firstly, openness in the last two decades has not been the effect of growth and welfare, but of structural adjustment policies imposed by the IMF and World Bank; secondly, but for the positive impact of trade openness on the financial depth of low income countries, openness in sampled countries fail to bring about financial intermediary development; thirdly, financial openness brings trade openness for both income levels, but the reverse is true only for middle income countries; lastly, low income countries will benefit more from trade openness through financial deepening and financial openness than their middle income counterparts.
    Keywords: Openness; financial intermediary development; income levels; panel; Africa.
    JEL: E00 A10 D60 E40
    Date: 2010–12–14
  11. By: Dermot Leahy; J. Peter Neary
    Abstract: In this chapter we present a selective analytic survey of some of the main results of trade under oligopoly. We concentrate on three topics: oligopoly as an independent determinant of trade, as illustrated by the reciprocal-markets model of Brander (1981); oligopoly as an independent rationale for government intervention, as illustrated by strategic trade and industrial policy in the third-market model of Spencer and Brander (1983); and the challenges and potential of embedding trade under oligopoly in general equilibrium as illustrated by the GOLE model of Neary (2002).
    Keywords: GOLE (General Oligopolistic Equilibrium), reciprocal dumping, strategic trade policy
    JEL: F12 L13
    Date: 2010
  12. By: Jing Li; Alexander Szimayer
    Abstract: We study the valuation of unit-linked life insurance contracts with surrender guarantees. Instead of solving an optimal stopping problem, we propose a more realistic approach accounting for policyholders’ rationality in exercising their surrender option. The valuation is conducted at the portfolio level by assuming the surrender intensity to be bounded from below and from above. The lower bound corresponds to purely exogenous surrender and the upper bound represents the limited rationality of the policyholders. The valuation problem is formulated by a valuation PDE and solved with the finite difference method. We show that the rationality of the policyholders has a significant effect on average contract value and hence on the fair contract design. We also present the separating boundary between purely exogenous surrender and endogenous surrender. This provides implications on the predicted surrender activity of the policyholders.
    Keywords: unit-linked life insurance contracts, surrender guarantee, limited rationality, fair contract analysis
    JEL: G13 G22 C65
    Date: 2010–12

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