nep-int New Economics Papers
on International Trade
Issue of 2013‒01‒26
fifteen papers chosen by
Alessia A. Amighini
Universita' Amedeo Avogadro

  1. The export-magnification effect of offshoring By Joern Kleinert; Nico Zorell
  2. Foreign Trade and FDI in the Austrian Regions – A new methodology to estimate regional trade and an analysis of the crisis effects By Roman Römisch
  3. Chinese Renewable Energy Technology Exports: The Role of Policy, Innovation and Markets By Jing Cao; Felix Groba
  4. Antidumping, retaliation threats, and export prices By Avsar, Veysel
  5. Modeling the Effects of Free Trade Agreements between the EU and Canada, USA and Moldova/Georgia/Armenia on the Austrian Economy: Model Simulations for Trade Policy Analysis By Joseph Francois; Olga Pindyuk
  6. Financing constraints, firm dynamics, and international trade By Stephane Verani; Till Gross
  7. Is the Growth of Regionalism as Significant as the Headlines Suggest? Lessons from Agricultural Trade By Grant, Jason H.
  8. Trade policy flexibilities and Turkey : tariffs, antidumping, safeguards, and WTO dispute settlement By Bown, Chad P.
  9. Determinants of Greenfield Investment in Knowledge Intensive Business Services By Martin Falk
  10. The TRIPS Agreement as a Coercive Threat: Estimating the Effects of Trade Ties on IPR Enforcement By Cardwell, Ryan T.; Ghazalian, Pascal L.
  11. The effect of high-tech services offshoring on skilled employment: intra-firm evidence By Tamayo, M. P.; Huergo, E.
  12. Wage effects of high-skilled migration : international evidence By Grossmann, Volker; Stadelmann, David
  13. Offshoring and Occupational Specificity of Human Capital By Moritz Ritter
  14. What world price? By Jamora, Nelissa; von Cramon-Taubadel, Stephan
  15. Challenges to the multilateral trading system and possible responses By Panagariya, Arvind

  1. By: Joern Kleinert (Karl-Franzens University of Graz); Nico Zorell (European Central Bank, Frankfurt am Main)
    Abstract: In this paper we propose a novel mechanism that helps explain the surge in world trade over the last two decades: the export-magnification effect of offshoring. We show analytically in a general equilibrium model with heterogeneous firms that a fall in variable offshoring costs boosts trade in differentiated final goods through an intra-industry reallocation of resources towards the more productive firms. More specifically, lower barriers to offshoring reduce the average costs of inputs for offshoring firms and allow more firms to source cheap foreign intermediates, which improves firm-level price competitiveness. This, in turn, translates into higher export quantities of incumbent exporters (intensive margin) and the entry of new exporters (extensive margin). The increase in final goods trade comes on top of the boost to trade in intermediates. Hence the mechanism proposed in this paper is consistent with the fact that the share of intermediate goods in international trade has remained broadly stable.
    Keywords: offshoring, international trade, multinational firms
    JEL: F12 F15 F23
    Date: 2012–12
  2. By: Roman Römisch
    Abstract: Foreign trade and foreign direct investments (FDI) are key elements for economic development and growth of both a country and its regions. This paper focuses on foreign trade and FDI in Austrian regions (Bundesländer). Unfortunately, data on regional trade in Austria is only available on a very limited basis. The aim of this study is to develop new methodologies for the estimation of exports and imports of Austrian regions and analyse the data generated by this methodology. The basic idea is to disaggregate national foreign trade data to the regional level by using national input-output, regional employment and other supplemental data. This allows estimating Austrian regional foreign trade for the years 1999 to 2009. The study shows a large variation in trade among regions. Lower Austria, Upper Austria, Styria and Vorarlberg are the regions with the highest export share. The importance of regional trade increases between 1999 and 2008; the crisis in 2009 had a strong negative impact. Furthermore, the competitiveness of regions differs considerably. Only three regions, Upper Austria, Styria and Vorarlberg, show trade surplus.
    Keywords: Austria, regions, Bundesländer, foreign trade, economic crisis
    JEL: C82 F10 F14 F16 R1 R12 R15
    Date: 2012–10
  3. By: Jing Cao; Felix Groba
    Abstract: Chinese companies have become major technology producers, with the largest share of their output exported. This paper examines the development of solar PV and wind energy technology component (WETC) exports from China and the competitive position of the country`s renewable energy industry. We also describe the government's renewable energy policy and its success in renewable electricity generation as well as increasing renewable energy innovation and foreign knowledge accumulation, which may drive export performance. We aim at empirically identifying determinants of Chinese solar PV and WETC exports. We estimate an augmented gravity trade model using maximum likelihood estimation. Besides controlling for standard variables derived from the gravity literature, we consider additional explanatory factors by accounting for market, policy and innovation effects steaming from both importing countries and China. We use a panel dataset representing annual bilateral trade flows of 43 countries from the developed and developing world that imported solar PV and WETCs from China between 1996 and 2008. The analysis shows that while the national market remained small for solar PV, the industry successfully entered foreign markets. The export performance of firms producing WETC increased but remained relatively small while the country developed a large home market. Empirical results indicate that high income countries, with a large renewable energy market and demand side policy support scheme, in terms of incentive tariffs, are increasingly importing solar PV components from China. We show that trade costs have a negative impact on exports of solar PV components but not WETC. Additionally, we find a positive impact of research and development (R&D) appropriation growth, especially from provincial governments in China, but no evidence that bilateral knowledge transfer and indigenous innovation affect exports.
    Keywords: China, Gravity model, Trade, Innovation, Policy, Renewable Energy Technologies
    JEL: C32 F14 O30 Q42 Q48 Q56
    Date: 2013
  4. By: Avsar, Veysel
    Abstract: Utilizing four-dimensional (firm-product-destination-year) Brazilian firm-level export data, the paper shows that antidumping (AD) duties result in a significant and dramatic increase in the unit values of the products that firms export to duty-imposing countries. Furthermore, it examines the effect of potential (retaliatory) AD duties on the unit price of the firms'shipments. The findings suggest that AD activities in Brazil lead Brazilian exporting firms to increase their unit export prices for the named industries'products to decrease the dumping margin and avoid the threat of retaliation by the target countries.
    Keywords: Markets and Market Access,Water and Industry,Access to Markets,Free Trade,E-Business
    Date: 2013–01–01
  5. By: Joseph Francois; Olga Pindyuk
    Abstract: This study examines the economic impact on Austria of three possible new EU free trade agreements: (1) an EU-US agreement; (2) an EU-Canada agreement; and (3) an EUArmenia/Georgia/Moldova agreement. This is done with a computational model of the global economy. The trade agreements are modeled as a mix of preferential tariff reductions and reductions in non-tariff measures that affect both goods and services. The primary impact follows from NTM reduction rather than tariff reductions. Of the three agreements, a potential agreement with the US is by far the most important. This follows from the size of the US economy. The US accounts for roughly one-quarter of extra-EU Austrian exports. Overall, the combined impact of the FTAs studied is positive. Most of the impact follows from investment response. Productivity gains from NTM reduction mean a combination of increased national income, higher wages, and employment, and increased capital stocks for the Austrian economy.
    Keywords: Free trade agreements, EU, Canada, USA, CGE modeling
    JEL: C68 F15 F17
    Date: 2013–01
  6. By: Stephane Verani; Till Gross
    Abstract: There is growing empirical support for the conjecture that access to credit is an important determinant of firms' export decisions. We study a multi-country general equilibrium economy in which entrepreneurs and lenders engage in long-term credit relationships. Financial constraints arise as a consequence of financial contracts that are optimal under private information. Consistent with empirical regularities, the model implies that older and larger firms have lower average and more stable growth rates, and are more likely to survive. Exporters are larger, their survival in international markets increases with the time spent exporting, and the sales of older exporters are larger and more stable.
    Date: 2013
  7. By: Grant, Jason H.
    Abstract: The proliferation of regional trade agreements (RTAs) has motivated a significant number of ex post econometric studies investigating their agricultural trade impacts. The general conclusion is that RTAs increase members’ trade by as much as 150 percent, on average. In this article, we demonstrate that previous empirical work likely misrepresents the impact of RTAs because of considerable heterogeneity in the depth of economic integration pursued by these agreements. Contrary to previous studies, the results reveal that RTAs are not universally trade creating, and some agreements appear to provide very little benefit. “Deep integration agreements”, on the other hand, are largely responsible for the impressive agricultural trade flow increases reported in the literature. Testing the hierarchy of RTAs largely confirms the theory: the benefits of regionalism are an increasing function of the depth of economic integration.
    Keywords: Agricultural trade, regional trade agreements, customs unions, free trade agreements, partial scope arrangements, gravity equation, Agribusiness, Agricultural and Food Policy, International Relations/Trade,
    Date: 2012–10
  8. By: Bown, Chad P.
    Abstract: Trade policy commitments to lower import tariffs and to maintain tariffs at low levels entail short and long-run political-economic costs and benefits. Empirical work examining the relationship between such commitments and the exercise of trade policy flexibilities is still relatively nascent, especially for emerging economies. This paper provides a rich, empirically-based assessment of ways that Turkey exercised trade policy flexibilities during the global economic crisis of 2008-11. First, and despite multilateral and customs union commitments that might limit changes to applied tariffs, Turkey made changes to both its applied Most Favored Nation and preferential tariffs that cumulatively affect nearly 9 percent of manufacturing imports and 10 percent of import product lines. Second, Turkey's cumulative application of temporary trade barrier (TTB) policies -- antidumping, safeguards and countervailing duties -- are estimated to impact by 2011 an additional 4 percent of imports and 6 percent of product lines. Other surprising results on Turkey's use of flexibilities include: extending the duration of previously imposed antidumping and safeguards beyond expected removal dates, removing one TTB policy over a set of products and immediately reapplying a different TTB policy, covering lengthy upstream and downstream segments of important industries, and deepening discriminatory preference margins already inherent in existing preferential trade agreements.
    Keywords: Free Trade,Trade Policy,Trade Law,Currencies and Exchange Rates,Economic Theory&Research
    Date: 2013–01–01
  9. By: Martin Falk
    Abstract: This study investigates the determinants of bilateral Greenfield FDI projects and flows in knowledge intensive business services from OECD/BRIC countries to the EU countries for the period 2003-2010. Greenfield FDI projects are distinguished by type of activity: (i) business services, (ii) design, development and testing activities, (iii) headquarters activities and (iv) R&D services. Another aim of this study is to provide new empirical evidence on the patterns of Greenfield investments in knowledge intensive business services over time, source country and destination country. For Austria, the number of Greenfield investments in headquarter functions remains stable over time whereas Greenfield investments in R&D and related activities declined during the sample period. The same holds true for the number of jobs generated through greenfield investments. The results using panel count data models show that wage costs, tertiary education, corporate taxes, having a common border and sharing a common language all play a significant role in determining bilateral Greenfield FDI projects in knowledge intensive services. However, the impact of corporate taxation and labour costs differs widely across the functions and does not play a role in Greenfield investments in R&D and development, design and testing services.
    Keywords: Greenfield foreign direct investment, knowledge intensive business services, headquarter functions, R&D activities, gravity equation, panel data, FDI determinants
    JEL: F23
    Date: 2012–12
  10. By: Cardwell, Ryan T.; Ghazalian, Pascal L.
    Abstract: Negotiators from developed countries pushed hard for the inclusion of the TRIPS Agreement in the WTO set of agreements because it was viewed as a potentially effective method of coercing developing countries to strengthen their protection of intellectual property rights (IPR). We investigate whether the threat of cross-agreement retaliation, which could be authorized in disputes regarding the TRIPS Agreement, is effective in changing countries’ IPR protection regimes. The results from a panel empirical model suggest that both the TRIPS Agreement and the strength of trade ties with developed countries are important determinants of IPR protection, but that the vulnerability to potential trade losses through cross-agreement retaliation is not a uniformly significant determinant across geo-economic regions. We conclude that the threat of trade retaliation is just one important determinant of countries’ institutional protection of IPR.
    Keywords: TRIPS Agreement, intellectual property, WTO, panel estimation, Agribusiness, Agricultural and Food Policy, International Relations/Trade,
    Date: 2012–10
  11. By: Tamayo, M. P.; Huergo, E.
    Abstract: The offshoring of high-tech services has greatly increased in recent years, with consequences for firms demand for skilled employment in firms. This paper specifically analyzes the relationship between R&D offshoring and the demand for R&D employment using firm-level data for Spanish manufacturing and services companies during the period 2004-2009. Estimating different specifications with panel data techniques, we find that this association is statistically positive. In particular, for services firms a 1 percentage point increase in R&D offshoring raises the demand for researchers by about 11%. This suggests the existence of complementarity among them as productive inputs.
    Keywords: R&D offshoring; wages; skilled employment
    JEL: F16 O32 L24
    Date: 2013
  12. By: Grossmann, Volker; Stadelmann, David
    Abstract: The international migration of high-skilled workers may trigger productivity effects at the macro level such that the wage rate of skilled workers increases in host countries and decrease in source countries. The authors exploit data on international bilateral migration flows and provide evidence consistent with this theoretical hypothesis. They propose various instrumentation strategies to identify the causal effect of skilled migration on log differences of GDP per capita, total factor productivity, and the wages of skilled workers between pairs of source and destination countries. These strategies aim to address the endogeneity problem that arises when international wage differences affect migration decisions.
    Keywords: Population Policies,Labor Markets,International Migration,Labor Policies,Human Migrations&Resettlements
    Date: 2013–01–01
  13. By: Moritz Ritter (Department of Economics, Temple University)
    Abstract: I document that workers in newly tradable service occupations possess more occupation-specific human capital and are more highly educated than workers in previously tradable occupations. Motivated by this observation, I develop a dynamic equilibrium model with labor market frictions and specific human capital to study the labor adjustment process after a trade shock. When calibrated to match the increase in U.S. trade between 1990 and 2010, the model suggests that (1) output increases immediately after a trade shock and converges quickly to the steady state; (2) labor market institutions play a larger role in the adjustment process than specific human capital; (3) the short run distributional effects are small if the labor market is flexible, even in the presence of specific human capital.
    Keywords: Offshoring, Sectoral Labor Reallocation, Human Capital
    JEL: E24 F16 J24 J62
    Date: 2012–12
  14. By: Jamora, Nelissa; von Cramon-Taubadel, Stephan
    Abstract: There is no consensus on what defines a reference for the world rice price. A review on rice as a differentiated commodity shed two important insights. First, it confirms that few studies have considered segmentation of rice in their price analysis. Second, Thai 5% brokens has often been considered the world reference price for rice but no empirical exercise has been carried out to validate this. This study analyzes the extent of market integration in the international rice market by generating empirical evidence on the cointegration of different export prices. We start our analysis with the assumption that rice is not a homogeneous good. In this context, we establish clusters by rice quality and determine which export markets best represent the world rice price within and across clusters. The study uses 19 monthly average export rice price quotations from January 2000 to July 2012 extracted from the FAO Global Information and Early Warning System food price database and from the Thai Rice Exporters Association. We also include FAO Export Price indices for high and low quality indica to assess their performance with other export prices. Our study contributes to the limited discussion on rice as a heterogeneous commodity. We validate Thai 5% brokens as the benchmark price for rice by examining its bivariate relationships with other export prices. We employ Johansen maximum likelihood procedure to confirm the long-run equilibrium relations and cointegration of price series. Then, we extend the error correction model to a multivariate cointegration analysis by cluster. We test for the Law of One Price, long run exclusion, and weak exogeneity to assess the dynamics of price transmission and determine how prices are related with one another. We build on this information and our knowledge of the rice market system to answer the question – What is the world rice price? We find evidence that the rice market is highly segmented. This suggests that there is no single answer to our research question. While we find that Thai 5% brokens is cointegrated with many other export prices and contributes strongly in defining long run equilibrium relations, there are several international rice prices that could be used as benchmarks. The results imply that failure to find cointegrating relations from world to domestic rice markets can be a result of failure to effectively define the appropriate international reference price. In price transmission analysis, we find that it is imperative to examine the types of rice and to discuss the relevance of specific markets to the benchmark price based on understanding of rice trade structure. This study affirms the importance of having up-to-date and reliable sources of rice prices both in the export and domestic markets, accounting for differences in quality.
    Keywords: rice, price transmission, cointegration, world price, Agricultural and Food Policy, Demand and Price Analysis, C32, Q11, Q17, Q18,
    Date: 2012–12
  15. By: Panagariya, Arvind
    Abstract: This paper develops three major themes. First, the atmosphere of gloom around the multilateral trading system due to dim prospects of a successful conclusion of the Doha Round notwithstanding, global trade regime remains open and the institution in charge of it, the World Trade Organization, is in sound health. If anything, the Doha Round has been a victim of its own success: considerable de facto liberalization in agriculture has been achieved since the launch of the round. Second, to secure the future of the multilateral trading system, it is nevertheless crucial that the Doha Round is brought to a conclusion even if in a highly diluted form. The damage to the system from an outright failure will be very substantial. Finally, closing the Doha Round will require the United States leading the negotiations. Suggestions that as the largest merchandise exporter, China should now take the lead are frivolous. --
    Keywords: World Trade Organization,Doha Round,multilateralism,regionalism
    JEL: F13 F15
    Date: 2013

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