nep-int New Economics Papers
on International Trade
Issue of 2013‒01‒19
nine papers chosen by
Alessia A. Amighini
Universita' Amedeo Avogadro

  1. Chinese exports and U.S. import prices By Benjamin R. Mandel
  2. Trade costs in the developing world : 1995 - 2010 By Arvis, Jean-François; Duval, Yann; Shepherd, Ben; Utoktham,Chorthip
  3. Impact of diagonal cumulation rule on FTA utilization : evidence from bilateral and multilateral FTAs between Japan and Thailand By Hayakawa, Kazunobu
  4. Uncertainty and Trade Agreements By Nuno Limão; Giovanni Maggi
  5. Trade Structure and Belief-Driven Fluctuations in a Global Economy By Yunfang Hu; Kazuo Mino
  6. Industrial Policy and Downstream Export Performance By Bruce Blonigen
  7. Trade Liberalization, Democratization and Technology Adoption By Cervellati, Matteo; Naghavi, Alireza; Toubal, Farid
  8. Dispute Settlement Provisions in International Investment Agreements: A Large Sample Survey By Joachim Pohl; Kekeletso Mashigo; Alexis Nohen
  9. A theoretical framework for trading experiments By Maxence Soumare; Jørgen Vitting Andersen; Francis Bouchard; Alain Elkaim; Dominique Guegan; Justin Leroux; Michel Miniconi; Lars Stentoft

  1. By: Benjamin R. Mandel
    Abstract: This paper develops a technique to decompose price distributions into contributions from markups and marginal cost. The estimators are then used as a laboratory to measure the relationship between increasing Chinese competition and the components of U.S. import prices. The estimates suggest that the intensification of Chinese exports in the 2000s corresponded to substantial changes in the distributions of both the markups and marginal cost of U.S. imports. The entry of a Chinese exporter in an industry corresponded to rest-of-world exporters shrinking their markup (lowering prices by up to 30 percent) and increasing their marginal cost (raising prices by up to 50 percent). The fact that marginal cost increased as competition stiffened strongly suggests that the composition of non-Chinese exports shifted toward higher-quality varieties. The estimates also imply a pattern in the acquisition of market share by Chinese exporters: They enter at relatively low cost/quality and then subsequently undertake quality improvements and markup reductions. These results provide some of the first measures of the dual nature of trade’s procompetitive effects; exporters respond to tougher competition by simultaneously adjusting both markups and quality.
    Keywords: Exports - China ; Imports - Prices ; International trade ; Competition
    Date: 2013
  2. By: Arvis, Jean-François; Duval, Yann; Shepherd, Ben; Utoktham,Chorthip
    Abstract: The authors use newly collected data on trade and production in 178 countries to infer estimates of trade costs in agriculture and manufactured goods for the 1995-2010 period. The data show that trade costs are strongly declining in per capita income. Moreover, the rate of change of trade costs is largely unfavorable to the developing world: trade costs are falling noticeably faster in developed countries than in developing ones, which serves to increase the relative isolation of the latter. In particular, Sub-Saharan African countries and low-income countries remain subject to very high levels of trade costs. In terms of policy implications, the analysis finds that maritime transport connectivity and logistics performance are very important determinants of bilateral trade costs: in some specifications, their combined effect is comparable to that of geographical distance. Traditional and non-traditional trade policies more generally, including market entry barriers and regional integration agreements, play a significant role in shaping the trade costs landscape.
    Keywords: Economic Theory&Research,Free Trade,Emerging Markets,Trade Law,Trade Policy
    Date: 2013–01–01
  3. By: Hayakawa, Kazunobu
    Abstract: In this paper, we empirically investigate the effect of diagonal cumulation on free trade agreement (FTA) utilization by exploring Thai exports to Japan under two kinds of FTA schemes. While the one scheme adopts bilateral cumulation, the other scheme does diagonal cumulation. Comparing trade under these two kinds of FTAs, we can examine the effect of diagonal cumulation without relying on not only the variation in cumulation rules across country pairs but also the variation across years. In short, our estimates do not suffer from biases from time-variant elements and country pair-specific elements. As a result, our estimates show around 4% trade creation effect of diagonal cumulation, which is much smaller than the estimates in the previous studies (around 15%).
    Keywords: Thailand, Japan, Trade policy, International economic integration, International agreements, FTA, Tariff, Diagonal cumulation, Trade creation effect
    JEL: F13 F15 F23
    Date: 2012–11
  4. By: Nuno Limão; Giovanni Maggi
    Abstract: In this paper we explore the potential gains that a trade agreement (TA) can provide by regulating trade-policy uncertainty, in addition to the more standard gains from reducing the mean levels of trade barriers. We show that in a standard trade model with income-risk neutrality there tends to be an uncertainty- increasing motive for a TA. With income-risk aversion, on the other hand, the uncertainty-managing motive for a TA is determined by interesting trade-offs. For a given degree of risk aversion, an uncertainty- reducing motive for a TA is more likely to be present when the economy is more open, the export supply elasticity is lower and the economy is more specialized. Governments have stronger incentives to sign a TA when the trading environment is more uncertain. As exogenous trade costs decline, the gains from decreasing trade-policy uncertainty tend to become more important relative to the gains from reducing average trade barriers. We also derive simple "sufficient statistics" to determine the direction of the uncertainty motive for a TA and the associated welfare gains, and we apply them to the trading relationship between US and Cuba before 1934. Finally, we examine how the uncertainty motive for a TA is affected by the presence of ex-ante investments, and examine conditions under which an uncertainty-reducing TA will increase investment in the export sector.
    JEL: F1 F13 F5 O19
    Date: 2013–01
  5. By: Yunfang Hu (Tohoku University); Kazuo Mino (Kyoto University)
    Abstract: This paper constructs a dynamic two-country model with country-specific production externalities and inspects the presence of equilibrium indeterminacy under alternative trade structures. It is shown that the presence of belief?driven economic fluctuations caused by equilibrium indeterminacy is closely related to the specified trade structure. If investment goods are not internationally traded and international lending and borrowing are allowed, then indeterminacy arises in a wider set of parameter space than in the corresponding closed economy. By contrast, either if both consumption and investment goods are traded in the absence of international lending and borrowing or if only investment goods are traded with financial transactions, then the indeterminacy conditions are the same as those for the closed economy counterpart.
    Keywords: two-country model, non-traded goods, equilibrium indeterminacy, social constant returns
    JEL: F43 O41
    Date: 2013–01
  6. By: Bruce Blonigen
    Abstract: Industrial policies (IPs) include such varying practices as production subsidies, export subsidies, and import protection, and are commonly used by countries to promote targeted sectors. However, such policies can have significant impacts on sectors other than those targeted by the IPs, particularly when the target sector produces goods that are key inputs to downstream sectors. Surprisingly, there has been little systematic analysis of how IPs in targeted sectors affect other sectors of the economy. Using a new hand-collected database of steel-sector IP use in major steel-producing countries from 1975 through 2000, this paper examines whether steel-sector IPs have a significant impact on the export competitiveness of the country’s other manufacturing sectors, particularly those that are significant downstream users of steel. I find that a one-standard-deviation increase in IP presence leads to a 3.6% decline in export competitiveness for an average downstream manufacturing sector. But this effect can be as high as 50% decline for sectors that use steel as an input most intensively. These general negative effects of IPs are primarily due to export subsidies and non-tariff barriers, particularly in less-developed countries.
    JEL: F13 F14 H25 H81
    Date: 2013–01
  7. By: Cervellati, Matteo (University of Bologna); Naghavi, Alireza (University of Bologna); Toubal, Farid (ENS de Cachan)
    Abstract: We study the role of trade liberalization, democratization and their interaction for technology adoption. A general equilibrium theory with heterogeneous skills predicts a complementarity between trade and political regimes. Openness should accelerate technology adoption if coupled with democratization but may lead to a slow down if these regime changes are imbalanced. We use panel data on technology adoption at the sectoral level for the period 1980-2000 by exploiting within country variation and the heterogenous timing of openness and democratization. The results document the existence of robust positive interactions between these institutional changes for technology adoption and productivity growth.
    Keywords: trade openness, democratization, political economy theory, technology adoption, sector level panel data, cross-country analysis
    JEL: F16 J24 O14 P51 F59
    Date: 2013–01
  8. By: Joachim Pohl; Kekeletso Mashigo; Alexis Nohen
    Abstract: Investor-State dispute settlement mechanisms (ISDS) are an important component of most International Investment Agreements (IIAs) and have significant influence on how disputes between States and investors are resolved.<p> This statistical survey of a large sample of 1,660 bilateral investment treaties (BITs) identifies the main parameters of ISDS regulation in BITs; traces their emergence, frequency and dissemination over time; and highlights past and recent country-specific treaty practice. The survey finds among other things that many countries define the procedural framework thinly compared to advanced domestic procedural frameworks, despite a broad trend toward greater regulation in treaties of parameters of ISDS. Many treaties offer foreign investors a range of procedural choices, such as a choice between arbitration fora.<p> The survey also highlights the diversity that characterises the design of ISDS: over a thousand different combinations of rules regulating ISDS can be found in only 1,660 bilateral treaties –, with variation found both at editorial and substantial level. Differences in policy approaches between countries are the source of some of this variance, but it appears that much of it may not reflect differences in policy.<p> The study also found little evidence of general convergence of approaches towards regulating ISDS in BITs, or indeed much development in the BIT negotiating practice of a number of countries. A different approach, characterised by significantly more thorough ISDS regulation and pioneered by some countries, seems to spread increasingly in multilateral IIAs and more comprehensive treaties.
    Keywords: regulation, bilateral investment treaty, foreign investment, international investment, international investment law, international investment agreements, international arbitration, dispute resolution
    JEL: F02 F21 F23 F53 K33 K41 N40 O38 P45 P48
    Date: 2012–12–14
  9. By: Maxence Soumare (JAD - Laboratoire Jean Alexandre Dieudonné - CNRS : UMR6621 - Université Nice Sophia Antipolis (UNS)); Jørgen Vitting Andersen (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne); Francis Bouchard (HEC - Institute for Applied Economics - HEC MONTRÉAL); Alain Elkaim (HEC - Institute for Applied Economics - HEC MONTRÉAL); Dominique Guegan (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne); Justin Leroux (HEC - Institute for Applied Economics - HEC MONTRÉAL); Michel Miniconi (JAD - Laboratoire Jean Alexandre Dieudonné - CNRS : UMR6621 - Université Nice Sophia Antipolis (UNS)); Lars Stentoft (HEC - Institute for Applied Economics - HEC MONTRÉAL)
    Abstract: A general framework is suggested to describe human decision making in a certain class of experiments performed in a trading laboratory. We are in particular interested in discerning between two different moods, or states of the investors, corresponding to investors using fundemental investment strategies, technical analysis investment strategies respectively. Our framework accounts for two opposite situations already encountered in experimental setups : i) the rational expectations case, and ii) the case of pure speculation. We consider new experimental conditions which allow both elements to be present in the decision making process of the traders, thereby creating a dilemma in terms of investment strategy. Our theoretical framework allows us to predict the outcome of this type of trading experiments, depending on such variables as the number of people trading, the liquidity of the market, the amount of information used in technical analysis strategies, as well as the dividends attributed to an asset. We find that it is possible to give a qualitative prediction of trading behavior depending on a ratio that quantifies the fluctuations in the model.
    Keywords: Decision making; game theory; complex systems theory; technical analysis; rational expectations
    Date: 2012–11

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