nep-int New Economics Papers
on International Trade
Issue of 2011‒07‒21
twelve papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Trade as an Engine of Creative Destruction Mexico experience with Chinese competition By Leonardo Iacovone; Ferdinand Rauch; L. Alan Winters
  2. The Impact of trade preferences on export prices in the European Union - who captures the preference rent? By Xavier Cirera
  3. Is the Border Effect an Artefact of Geographic Aggregation? By Carlos Llano; Asier Minondo; Francisco Requena
  4. Protectionist Responses to the Crisis: Damage Observed in Product-Level Trade By Christian Henn; Bradley J. McDonald
  5. No Protectionist Surprises: EU Antidumping Policy Before and During the Great Recession By Hylke VANDENBUSSCHE; Christian VIEGELAHN
  6. The People’s Republic of China and India: Commercial Policies in the Giants By Wignaraja, Ganeshan
  7. Nations as Strategic Players in Global Commodity Markets: Evidence from World Coal Trade By Paulus, Moritz; Trueby, Johannes; Growitsch, Christian
  8. How Wages and Employment Adjust to Trade Liberalization: Quasi-Experimental Evidence from Austria By Marius Brülhart; Céline Carrere; Federico Trionfetti
  9. Deep Integration in EU FTAs By Peter Holmes
  10. Does trade opennes increase vulnerability? A survey of the literature By Pierluigi Montalbano
  12. Euro Area Export Performance and Competitiveness By Richard T. Harmsen; Jarkko Turunen; Tamim Bayoumi

  1. By: Leonardo Iacovone (Development Research Group, World Bank); Ferdinand Rauch (Department of Economics, University of Vienna); L. Alan Winters (Department of Economics, University of Sussex)
    Abstract: This paper exploits the surge in Chinese exports from 1994 to 2004 as a natural experiment to evaluate the effects of a unilateral low wage trade and competition shock to producers in Mexico. We find that this shock causes selection at both firm and product levels as its impact is highly heterogeneous both on the intensive and extensive margins. Sales of smaller plants and more marginal products are compressed and are more likely to cease, while larger plants and products exhibit an opposite response. Similar results hold both for the domestic market and for competition facing Mexican exporters in a third market (i.e. the United States).
    Keywords: China, Mexico, multi-product-firm, trade shock
    JEL: F14 L11
    Date: 2010–09
  2. By: Xavier Cirera (Institute of Development Studies (IDS), University of Sussex)
    Abstract: Preferential Trade Agreements (PTAs) aim at increasing trade flows via reductions on applied tariffs and the incentives created by the difference between the applied and the most favoured nation (MFN) tariff, the preference margin. An often omitted element in PTAs evaluation is the possibility that the wedge between preferential and MFN tariffs may induce a preference rent. This paper analyses empirically who captures the preference rent by exploiting a unique dataset of imports in the European Union at a highly disaggregated level (CN-10) linked to information on the preferential regime used and the tariff applied. In order to remove potential bias and measurement errors from comparing preferential prices from specific countries and products with average MFN prices, this paper uses the prices from the same country, product and year. This is possible since we observe in the database a large number of cases where in the same year a preferential regime is both utilised and non-utilised. Our main findings suggest that on average an exporter obtain a larger price margin under a preferential regime than under MFN. However, this preference rent is only partially appropriated by exporters with a pass-through coefficient from preference to price margins that oscillates between 0.16 and 0.5.
    Keywords: Preferential Trade Agreements; Unilateral preference; GSP; EBA; Price margins; Preference rent
    JEL: F13 F15
    Date: 2010–11
  3. By: Carlos Llano (Universidad Autónoma de Madrid); Asier Minondo (Universidad de Deusto-ESTE); Francisco Requena (Universidad de Valencia)
    Abstract: The existence of a large border effect is considered as one of the main puzzles of international macroeconomics. We show that the border effect is, to a large extent, an artefact of geographic concentration. In order to do so we combine international flows with intranational flows data characterised by a high geographic grid. At this fine grid, intranational flows are highly localised and dropping sharply with distance. The use of a small geographical unit of reference to measure intra-national bilateral trade flows allows to estimating correctly the negative impact of distance on shipments. When we use sector disaggregated export flows of 50 Spanish provinces in years 2000 and 2005 split into interprovincial and inter-national flows, we find that the border effect is reduced substantially and even becomes statistically not different from zero in some estimations.
    Keywords: border effect, distance, interregional trade, international trade, Spanish provinces
    JEL: F14 F15
    Date: 2010–10
  4. By: Christian Henn; Bradley J. McDonald
    Abstract: This paper investigates how trade flows are being affected by new discriminatory measures implemented during the global financial crisis. We match data on behind-the-border measures (e.g., bailouts and subsidies) and border measures implemented through April 2010 to monthly HS 4-digit bilateral trade data. Our estimation strategy relies on a first-differenced gravity equation and time-varying fixed effects to disentangle the impact of new discriminatory measures. Trade in exporter-importer pairs subject to new measures decreased by 5 to 8 percent relative to trade in the same product among pairs not subject to new measures. These product-level results imply global trade declines at the aggregate level of about 0.2 percent, or $30-35 billion a year. These aggregate figures would be higher, if one third of measures had not been excluded due to incomplete data. The paper then goes on to dissect protectionism’s trade impact by disaggregating measures by type, advanced/developing countries, regions, sectors, and time. Behind-the-border measures are found to have been more harmful than border measures at the product level. Among border measures, impacts tend to be higher for less transparent measures. Advanced countries are found to be responsible for 2/3 of the trade decline due to crisis protectionism, but their exports also absorbed 2/3 of this decline. When breaking down measures in a time dimension, we find that those taken in the first nine months after the Lehman collapse were most harmful and likely continue to constitute a drag on trade.
    Keywords: Exports , Financial crisis , Global Financial Crisis 2008-2009 , Imports , International trade , Protectionism , Trade policy ,
    Date: 2011–06–16
  5. By: Hylke VANDENBUSSCHE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and Center for Operations Research and Econometrics (CORE), CEPR and LICOS-KULeuven); Christian VIEGELAHN (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE))
    Abstract: This paper evaluates the European Union’s antidumping (AD) policy from 1995-2009 with a special focus on the 2008-9 crisis. Combining product-level data on AD cases with detailed import data, we fail to find clear signs of a major trade policy change since the outbreak of the crisis. Our findings suggest that the EU largely remained on its pre-crisis path of AD policy with an increasing share of products and more industries covered by AD measures. Moreover, EU AD policy has increasingly focused on China and other lower middle income countries as targets. Further findings suggest that the EU is more likely to impose protection against countries and country-industries that are similar in their product mix. Country-product combinations subject to a preferential tariff are also more likely to be targeted. In terms of product characteristics, we observe that especially the shares of consumer goods and differentiated goods covered by EU AD measures have increased rapidly, remaining at a relatively high level also during the crisis. The patterns we reveal do not appear to be driven by a few outlying countries but are also similar when considering imports of individual EU member states.
    Keywords: Antidumping, Crisis, European Union, Great recession, Product-level data, Temporary trade barriers, Trade policy, WTO
    JEL: F13 F14 F52
    Date: 2011–06–06
  6. By: Wignaraja, Ganeshan (Asian Development Bank)
    Abstract: This paper analyses the link between commercial policies and exports through a comparative analysis of the Asian giants—the People’s Republic of China (PRC) and India. While the PRC has surged ahead of India to dominate world manufactured exports, India has acquired competitive capabilities in skill-intensive services. Favorable initial conditions such as large domestic markets and low-cost productive labor have laid the foundations for the giants’ export success. While the gradual switch to marketoriented commercial policies in the late 1970s drove trade-led growth in the giants, the PRC’s reforms were swifter and more coordinated. It has introduced an open door policy towards foreign direct investment (FDI), actively facilitated technological upgrading through FDI, steadily liberalized a controlled import regime, ensured a competitive exchange rate, and concluded more comprehensive free trade agreements (FTAs) with Asia’s developing economies. India has attempted to develop more effective commercial policies since 1991, especially to attract FDI and liberalize imports. Therefore, one might expect the gap in trade performance between the PRC and India to narrow over time. However, both giants face an uncertain world economic environment in the aftermath of the global financial crisis and future export success will depend on their evolving commercial policies. Critical issues that still to be resolved include how the giants will respond to the risk of protectionism, manage real exchange rates, promote the use of FTAs among businesses, and increase spending on infrastructure as well as research and development.
    Keywords: FTAs; free trade agreements; People’s Republic of China; India; commercial policy; trade
    JEL: F13 O24 O53 P33
    Date: 2011–06–01
  7. By: Paulus, Moritz (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Trueby, Johannes (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Growitsch, Christian (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: We explore the hypothesis that export policies and trade patterns of national players in the steam coal market are consistent with non-competitive market behavior. We test this hypothesis by developing an equilibrium model which is able to model coal producing nations as strategic players. We explicitly account for integrated seaborne trade and domestic markets. The global steam coal market is simulated under several imperfect market structure setups. We find that trade and prices of a China - Indonesia duopoly fit the real market outcome best and that real Chinese export quotas in 2008 were consistent with simulated exports under a Cournot-Nash strategy.
    Keywords: Strategic National Trade; Imperfect Competition; Steam Coal; China; Indonesia
    JEL: C61 F10 L13 L71
    Date: 2011–06–01
  8. By: Marius Brülhart (HEC - LAUSANNE - École des HEC, Université de Lausanne Département d'économétrie et économie politique - Université de Lausanne); Céline Carrere (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Federico Trionfetti (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)
    Abstract: We study the responses of regional employment and nominal wages to trade liberalization, exploiting the natural experiment provided by the opening of Central and Eastern European markets after the fall of the Iron Curtain in 1990. Using data for Austrian municipalities, we examine differential pre- and post-1990 wage and employment growth rates between regions bordering the formerly communist economies and interior regions. If the 'border regions' are defined narrowly, within a band of less than 50 kilometers, we can identify statistically significant liberalization effects on both employment and wages. While wage responses preceded employment responses, the employment effect over the entire adjustment period is estimated to be around three times as large as the wage effect. The implied slope of the regional labor supply curve can be replicated in a new economic geography model that features obstacles to labor migration due to immobile housing and to heterogeneous locational preferences.
    Keywords: trade liberalization; spatial adjustment; regional labor supply; natural experiment
    Date: 2011–07–11
  9. By: Peter Holmes (Department of Economics, University of Sussex)
    Abstract: This paper explores the paradox that the EU invests significant effort into including regulatory issues into Free Trade Agreements with apparently little binding impact other than in the case of prospective candidate countries who are likely to become members of the EU. The explanation does not appear to be pressure from the EU for binding agreements that is resisted by developing country partners. The main non trade issues in the recent CARIFORUM EPA appear to have been sought by the CARIFORUM negotiators, perhaps for internal reasons. The EU may also be seeking to establish softlaw precedents for more binding rules, but there is little evidence as yet of this and the EU itself is equally unwilling to be bound, eg on competition policy, leaving the mystery still unresolved
    Keywords: Non trade issues, bilateral trade agreements
    JEL: F15
    Date: 2010–10
  10. By: Pierluigi Montalbano (Department of Economic Theory and Quantitative Methods for Political Choices, Sapienza-University of Rome; Department of Economics, University of Sussex)
    Abstract: This work focuses on the welfare costs of exposure to shocks and uncertainty linked to trade opennes - a prominent issue in the international debate. It contributes by presenting a comprehensive review of the literature on the "destabilizing effects" of trade openness, drawing together studies in different fields. It provides a conceptualization of vulnerability and three promising lines of reasoning for future research on the link between trade and vulnerability.
    Keywords: vulnerability, trade openness, volatility, crisis transmission, developing countries
    JEL: F40 I32 C82 E17 D60
    Date: 2010–09
  11. By: Loganathan, Nanthakumar; Muhammad Najit Sukemi (Department of Economics, Faculty of Management and Economics, Universiti Malaysia Terengganu); Mori Kogid (School of Business and Economics, Universiti Malaysia Sabah)
    Abstract: The Malaysian economy has gone through a process of profound changes for the past 30 years. From the global economics perspective, the decade started with inflation pressures, deep recession in the middle of 1980s and 1990s, and decline of trade balance and with high level of unemployment rate in 1980s. The aim of this paper is to trace out more about the asymmetrical integration between trade balance and unemployment dynamics for Malaysia using Granger non-causality test analysis. The major finding of this paper shows that increased in trade balance has a negative Granger non-causality effects on rigidity of unemployment dynamics for the case of Malaysia. This indicates that trade liberalization is also able to increase aggregate productivity in the differentiated sectors and able increase efficiency on economic performance will simultaneous increase in term of employment opportunities for skilled and unskilled labor in Malaysia. Trade balance can be also become an additional favorable effects of reducing Malaysia’s unemployment scenario in future
    Keywords: Granger non-causality analysis, trade balance, unemployment
    JEL: M00
    Date: 2011–06
  12. By: Richard T. Harmsen; Jarkko Turunen; Tamim Bayoumi
    Abstract: Concerns about export growth within the euro area peripheral countries due to a lack of competitiveness within the euro area are a key policy issue. Our analysis suggests that: (i) Long-term price elasticities for intra-euro area exports are at least double those for extra-euro area exports, so traditional real effective exchange rate indexes may overstate the effectiveness of euro depreciation in restoring exports growth in the euro area periphery and; (ii) There are surprisingly wide divergences across alternative relative price measures and even when relative price data suggest a steady loss in intra- (and extra-) euro area competitiveness, the pace of deterioration depends on the measure of relative prices used.
    Keywords: Cross country analysis , Demand , Economic models , Euro Area , Export competitiveness , Export growth , Export performance , Exports , Price elasticity , Real effective exchange rates ,
    Date: 2011–06–16

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