nep-int New Economics Papers
on International Trade
Issue of 2013‒06‒09
twenty-one papers chosen by
Alessia A. Amighini
Universita' Amedeo Avogadro

  1. The Impact of AFTA on Intra-AFTA Trade By Shujiro URATA; Misa OKABE
  2. Trade Openness and Cross-country Income Differences By Hepenstrick, Christian; Tarasov, Alexander
  3. Global Value Chains and Developing Country Employment: A Literature Review By Ben Shepherd
  4. Output, renewable energy consumption and international trade: Evidence from a panel of 69 countries By Ben Jebli, Mehdi; Ben Youssef, Slim
  5. How Far Will Hong Kong's Accession to ACFTA Impact its Trade in Goods? By Kohei SHIINO
  6. Output, renewable energy consumption and trade in Africa By Ben Jebli, Mehdi; Ben Youssef, Slim
  7. How to encourage network trade rules interconnections? an application to the case of non tariff barriers By Vaillant, Marcel
  8. Commodity Trade and the Carry Trade: a Tale of Two Countries By Nikolai Roussanov; Robert Ready
  9. Economics of Export Restrictions as Applied to Industrial Raw Materials By K.C. Fung; Jane Korinek
  10. Dominance, dependence and interdependence in linear structures. A theoretical model and an application to the international trade flows By Roland Lantner; Didier Lebert
  11. International fragmentation of production, trade and growth: Impacts and prospects for EU member states By Neil Foster; Robert Stehrer; Marcel Timmer
  12. The Impact of Restrictions in Trade in the Telecommunications: an Application to Middle East and North African Countries By Thierry Montalieu; Isabelle Rabaud
  13. Widening and Deepening Economic Integration Impact on Bilateral Trade in the Eurozone and ASEAN By Zaenal Mutaqin; Masaru Ichihashi
  14. Internationalization of the Japanese Manufacturing Industry and the Structure of the Global Value Chain (Japanese) By ITO Koji
  15. The Role of Intra-Industry Trade in the Industrial Upgrading of the 10 CEECs New Members of the European Union By Károly Attila SOÓS
  16. A CGE Study of Economic Impact of Accession of Hong Kong to ASEAN-China Free Trade Agreement By Ken Itakura; Yoshifumi Fukunaga; Ikumo Isono
  17. Greenhouse Gas Emission Controls and Firm Locations in North-South Trade By ISHIKAWA Jota; OKUBO Toshihiro
  18. Inter-linkage between Foreign Direct Investment and Foreign Trade in Pakistan: Are they Complements or Substitute? By Unbreen Qayyum; Zafar Mahmood
  19. What does economic research tell us about cross-border e-commerce in the EU Digital Single Market? By Bertin Martens
  20. The Costs and Challenges of Implementing Trade Facilitation Measures By Evdokia Moïsé
  21. How Important is Exports and FDI for China's Economic Growth? By Yuqing Xing; Manisha Pradhananga

  1. By: Shujiro URATA (Economic Research Institute for ASEAN and East Asia); Misa OKABE (Wakayama University, Japan)
    Abstract: ASEAN countries have liberalized intra-ASEAN trade over the last 20 years by establishing the ASEAN Free Trade Area (AFTA). This paper aims to examine the impact of trade liberalization under AFTA on intra-ASEAN trade. By applying a gravity model, we find positive and significant trade creation effects from the tariff elimination for a wide range of products. We also find that the elasticity of tariff reduction on imports tends to be much larger than that on exports. Trade creation effects for the new ASEAN members are relatively small compared to those for the old members. Our results show that AFTA has been successful in promoting intra-AFTA trade, but we argue that further expansion may be achieved by increasing the use of AFTA and by reducing/removing non-tariff measures (NTMs) through such ways as improving customs procedures and harmonizing/mutually recognizing product standards.
    Keywords: ASEAN Free Trade Area; Intra-regional trade; Gravity model, Trade creation effect.
    JEL: F13 F15 O19
    Date: 2013–05
  2. By: Hepenstrick, Christian; Tarasov, Alexander
    Abstract: Development accounting literature usually attributes the observed cross-country variation in per capita income to differences in countries' factor endowments and total factor productivity (the Solow residual). While the former can be relatively straightforward interpreted and measured, the latter remains at least partly a black box. In this paper, we provide a structural interpretation for differences in total factor productivity across countries and quantitatively explore the role of trade barriers in explaining cross-country income differences. In particular, we find that giving all countries the same market entry costs or giving all country-pairs the same variable trade costs reduces inequality by around 13%.
    Keywords: General equilibrium; market access costs; development accounting; experiments
    JEL: F11 F12 O10 O40
    Date: 2013–05–29
  3. By: Ben Shepherd
    Abstract: This paper provides a review of the available literature on global value chains (GVCs) and employment markets in developing countries. Due to the difficulty of observing intra-GVC transactions, there is very little direct empirical work on GVCs and labour markets. However, it is possible to extrapolate from the extensive empirical work already undertaken on firm internationalisation and labour markets to draw inferences as to the likely impacts of GVCs. The review therefore focuses on the labour market impacts of three processes that lie at the core of GVC development: importing, exporting, and foreign direct investment (FDI). It examines their impact on labour demand and wages, and disaggregates the effects whenever possible by skill level. The available empirical evidence strongly suggests that the type of activities undertaken by GVC participants influence labour market outcomes. For instance, many GVC firms are vectors of technological upgrading that in turn increases the relative demand for skilled labour. In these cases, GVC participation is linked to higher relative wages for skilled workers, but also greater wage inequality between skilled and unskilled workers. The evidence on outcomes is more mixed as regards pure processing trade (assembly), however: the limited data available on firms engaged purely in these activities suggests that they do not systematically pay higher wages than domestic firms, which is the reverse of the finding for foreign-owned firms, exporters, and importers in general. The labour market effects of GVCs in developing countries are therefore likely to be broadly positive, but highly case specific. The review therefore concludes with two case studies—electronics in Asia and services in Chile—that demonstrate the complexity of the issues involved, and the role of complementary policies in areas such as human capital development.
    Keywords: trade, labour markets, foreign direct investment, developing countries, global value chains
    JEL: F16 F21 F23 O24
    Date: 2013–05–14
  4. By: Ben Jebli, Mehdi; Ben Youssef, Slim
    Abstract: This paper uses panel cointegration techniques to examine the causal relationship between output, renewable energy consumption and international trade for a sample of 69 countries during the period 1980-2007. In the short-run, Granger causality tests show that there is evidence of bidirectional causality relationship between output and trade (exports or imports), and a unidirectional causality relationship running from renewable energy consumption to trade. However, in the short-run, there is evidence of no causality running from trade to renewable energy consumption. In the long-run, the error correction term provides that there is evidence of bidirectional causality relationship between output, trade and renewable energy consumption. Long-run estimations show that all coefficients are positive and statistically significant. Policies recommendations are that, in the long-run, international trade enables countries to benefit from technology transfer and to build the human and physical capacities needed to produce more renewable energies, while increasing their output. Therefore, more trade openness could be a good policy for combating global warming as it incites the use of renewable energies.
    Keywords: Renewable electricity consumption; Trade openness; Panel cointegration.
    JEL: C33 F14 Q42 Q43
    Date: 2013–05
  5. By: Kohei SHIINO (JETRO Singapore, Japan External Trade Organization, Singapore)
    Abstract: Hong Kong proposed its possible accession to the ASEAN-China Free Trade Area (ACFTA) in November 2011. This report examines how much Hong Kong's accession to ACFTA will impact on the trade in goods between ASEAN and China. It is likely that the direct impact of Hong Kong's accession will be minimal on the trade in goods since re-exports account for 96.3% of Hong Kong's total exports, indicating that the value of Hong Kong-origin products is marginal. However stock operations using movement certificates (MCs) in Hong Kong, which cannot be carried out in non-members of ACFTA, will facilitate the trade in goods between China and ASEAN. As such stock operations are generally carried out in places located near to final destinations, Hong Kong's accession will facilitate further ASEAN exports to China.
    Keywords: Free trade area (FTA); ASEAN; China; Trade facilitation; Intermediary trade
    JEL: F15
    Date: 2013–05
  6. By: Ben Jebli, Mehdi; Ben Youssef, Slim
    Abstract: We use panel cointegration techniques to examine the relationship between renewable energy consumption, trade and output in a sample of 11 African countries covering the period 1980-2008. The results from panel error correction model reveal that there is evidence of bidirectional causality between output and exports and between output and imports in both the short-run and the long-run. However, in the short-run, there is no evidence of causality between output and renewable energy consumption and between trade (exports or imports) and renewable energy consumption. In the long-run, the FMOLS panel approach estimation shows that renewable energy consumption and trade (exports or imports) have a statistically significant and positive impact on output. Policies recommendations are that, in the long-run, international trade enables African countries to benefit from technology transfer and to build the human and physical capacities needed to produce more renewable energies, which in turn increases their output.
    Keywords: Renewable energy consumption; International trade; Africa; Panel cointegration.
    JEL: C33 F14 Q42 Q43
    Date: 2013–04
  7. By: Vaillant, Marcel
    Abstract: The focus of this paper is different and is also a by-product of the globalization process. As the range of economic activities in the international economy expands, the themes that require necessary consideration in trade agreements also grow. The extension of the set of economic activities in the international economy provokes an extension of the themes that require necessary consideration in trade agreements. The adaptation speed in the multilateral field is structurally slow. Countries are less willing to establish rules on the basis of MFN than within PTAs. Hence the demands to expand and deepen in new topics have been channelled through the proliferation of preferential trade agreements. The content of commitments and themes in the agenda of international trade negotiations between national jurisdictions has widened: from the trade of goods to the trade of services, as well as to the mobility of some production factors. At the same time, the field where commitments are achieved has increased exponentially: bilateral agreements, plurilateral agreements, agreements between groups of countries, and the extension of agreements. For a diagnosis of what is happening, it is necessary to build a complex and large matrix of information that crosses the fields of commitment (columns of the matrix) with its issues or contents (“lines”).
    Keywords: non trade barriers, multilateralism
    JEL: F13
    Date: 2012–06
  8. By: Nikolai Roussanov (Wharton School, U. of Penn); Robert Ready (University of Rochester)
    Abstract: Persistent differences in interest rates across countries account for much of the profitability of currency carry trade strategies. We relate these differences to the differences of economic fundamentals across countries. We show that countries that primarily export basic commodities exhibit systematically high (real) interest rates while countries that specialize in exporting finished consumption goods typically have lower rates. The resulting interest rate differentials do not fully translate into the depreciation of the commodity currencies, on average. Instead, they translate into expected returns that capture the bulk of the unconditional risk premia that can be obtained in the currency markets. We provide a general equilibrium model of commodity trade and currency pricing that can rationalize these facts by relying on adjustment costs in the shipping sector.
    Date: 2012
  9. By: K.C. Fung; Jane Korinek
    Abstract: Governments intervene in non-renewable natural resources sectors more than in many others, including through the use of export taxes and quotas. Industrial raw materials sectors are characterized by a number of specificities: production is often geographically concentrated, firms are often large with substantial market power, production processes are highly capital intensive, products are relatively homogeneous and potentially substantial differences in costs of production are prevalent. This paper aims to increase understanding of the economic effects of export restrictions, in particular as they apply to the mining sector. It ascertains the prevalence of export restrictions on metals and minerals, proposes a Cournot-Nash model of export restrictions, suggests some of the economic effects due to the presence of export restrictions, and draws some implications for trade policy among producing and consuming countries of non-renewable natural resources.
    Keywords: export restrictions, export taxes, export quotas, export prohibition, extractive industries, export ban, industrial raw materials, mining sector, Cournot-Nash model
    JEL: F12 F13 L72
    Date: 2013–05–14
  10. By: Roland Lantner (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); Didier Lebert (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, ENSTA ParisTech - Unité d'Economie Appliquée)
    Abstract: This paper aims to study the structure of international trade. It establishes, through a simple formalization of exchange coefficients, that many theorems can be proved on a function of the macroscopic structure (the determinant of the matrix). This determinant is the cornerstone of indicators to analyze the evolution of trade between countries and regions. The objective is to introduce new tools to rigorously measure the characteristics and effects of globalization. The structural analysis proposed in this way can be applied to many other areas.
    Keywords: Influence graph theory; interdependence; international trade
    Date: 2013–04
  11. By: Neil Foster; Robert Stehrer; Marcel Timmer
    Abstract: There has been an ongoing trend towards increasing internationalisation of production over the past two decades or so. This implies that countries become more dependent on demand from foreign countries but also that countries and industries are able to source intermediates from different countries, an activity referred to as ‘offshoring’. Whereas the former aspect means an increasing dependency on foreign markets, the second aspect implies that countries and industries source at lower costs making them more productive and competitive. Using the World Input-Output Database (WIOD) we first provide an overview of these trends over the period 1995-2011 for 40 advanced and emerging countries with a specific focus on the EU as a whole and the individual EU member states. In the second part of the paper we show results from an econometric analysis to explain growth performance, focusing on the impacts of the increasing internationalisation of production.
    JEL: E20 F15 F43
    Date: 2013–04
  12. By: Thierry Montalieu (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR7322 - Université d'Orléans); Isabelle Rabaud (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR7322 - Université d'Orléans)
    Abstract: Theoretically, welfare gains from liberalisation of trade in services arise from falling prices and technology transfers from foreign firms. Empirically, due to the role of the regulatory framework in barriers to trade in services ('behind-the-border' laws) substantial gains are only reached when entry of foreign firms is widened. We have a close look at the way impediments to trade in services affect cost-price margin in telecommunication in Middle East and North Africa (MENA) countries. First, we criticise the measurements of barriers in trade in services, which tend towards an overestimation. Second, we show that analyses bend to overvalue the impact of regulations on the cost-price margin in telecommunications for MENA countries, in line with inadequate econometric techniques or underestimation of the effect of technical progress. Therefore, the best way in terms of trade in services liberalisation is to opt for a flexible, qualitative interpretation of the quantitative results and rank ordering of countries.
    Keywords: Trade restrictions, Commercial presence, Liberalisation of trade in services, Telecommunications, MENA countries
    Date: 2012–07–10
  13. By: Zaenal Mutaqin (Graduate School for International Development and Cooperation, Hiroshima University); Masaru Ichihashi (Graduate School for International Development and Cooperation, Hiroshima University)
    Abstract: The main aim of this study is to comparatively investigate the impact of different level of economic integration on bilateral trade between the Eurozone and ASEAN. Applying augmented gravity equation, the results showed that deepening impact on bilateral trade was positive in all Eurozone members but insignificant for original member. In ASEAN, deepening impact which is creating AFTA generates positive result only between ASEAN-6, but not when CLMV joined the membership. The policy related with Maastricht criteria variables has small influence on reciprocal trade in both the Eurozone and ASEAN. Horizontal integration was improving in both the Eurozone and ASEAN for positive result of size and similarity coefficient. Intra-trade industry was a phenomenon in all Eurozone, but it was insignificant if only between original members in both the Eurozone and ASEAN due to relatively similar level of development in original members. For ASEAN, different factor endowment was determinant for higher bilateral trade when CLMV countries were included in 1990-2009.
    Keywords: Regional Integration; International Trade; Hecksher-Ohlin; Maastricht Criteria; and Gravity Model
    JEL: F33 F36 O11 O57
    Date: 2013–05
  14. By: ITO Koji
    Abstract: As a result of globalization in the world economy, firms with different nationalities are now engaging in the production of goods or services. The potential of a firm's growth driven from participation in the global value chain (GVC) has long been pointed out although figuring out firms' GVC participation is still challenging due to a lack of information of inter-firm trade.<br />Thus, this paper extracts matched data of firms from the database of Tokyo Shoko Research, LTD. (TSR) including the "TSR firm relationship file" and the "TSR firm group information file," and the "Basic Survey of Japanese Business Structure and Activities" from the Ministry of Economy, Trade and Industry, and classifies the data into "international firms" (those which export and/or have foreign affiliates), "GVC participation firms" (those which directly deliver their goods or services to international firms), and other "GVC non participation firms" to compare the characteristics.<br />This paper shows that international firms, located at the top of the GVC structure, are the largest and have the best performance in terms of sales, followed by GVC participation firms, implying that participation in GVC and climbing up in the GVC structure enhance the possibility of firms' growth.
    Date: 2013–05
  15. By: Károly Attila SOÓS (senior research fellow, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences, Visiting Professor, Kyoto Institute of Economic Research, Kyoto University(2012.11.26-2013.3.16))
    Abstract: In this paper, we analyse the intra-industry trade (IIT) of the ten Central and Eastern European countries (CEECs), members of the EU partly from 2004, partly from 2007, with the 15 “old” member countries of the EU. We use 10 old EU countries’ analogous trade data and trends as a basis of comparison. Besides the (spectacular) growth of IIT, we also examine the trends of strong and not really favourable sectoral concentration of IIT. At the same time, the beakdown of IIT by price-quality segments (i. e., horizontal, low-quality and high-quality vertical IIT) shows a very positive picture, hinting to a very important technological and quality upgrading in the manufacturing industry of CEECs. However, such a conclusion is open to doubts because IIT does not include only the exchange of otherwise similar products of equal or different quality but also back-and-forth transactions in vertically fragmented production chains in the same commodity category. Thus, revealing the actual nature of the contribution to the production of items exported in the framework of IIT requires further research. The latter extends here to an analysis of relative wage levels of workers in industries participating in intra-industry trade, as well as to the examination of the trade of the products of research-intensive (Schumpeter”) industries.
    Date: 2013–06
  16. By: Ken Itakura (Faculty of Economics, Nagoya City University, Japan); Yoshifumi Fukunaga (Economic Research Institute for ASEAN and East Asia); Ikumo Isono (Economic Research Institute for ASEAN and East Asia)
    Abstract: We conduct a set of global computable general equilibrium (CGE) simulations to evaluate economic effects of Hong Kong’s accession to the ASEAN-China FTA (HK-ACFTA) by implementing tariff elimination, logistics, enhancement, and reduction in service trade barriers. All the participating countries can benefit from the accession, resulted in higher real GDP and economic welfare.The welfare gain becomes the largest when HK-ACFTA improves the existing agreement and trade facilitation programs between ASEAN and China. The simulation results indicate that such trade facilitation could generate considerable export volume increases for both ASEAN and China
    Keywords: FTA;computable general equilibrium (CGE) model;tariff elimination;services liberalization;trade facilitation
    JEL: F15 F17
    Date: 2013–05
  17. By: ISHIKAWA Jota; OKUBO Toshihiro
    Abstract: This paper studies greenhouse gas (GHG) emission controls in the presence of international carbon leakage through international firm relocation. In a trade and geography framework with two countries ("North" and "South"), only North sets a target for GHG emissions. We compare the consequences of emission quotas, emission taxes, and emission standards under trade liberalization for the location of pollution-intensive and less pollution-intensive sectors and the degree of carbon leakage. With low trade costs, further trade liberalization increases global emissions by facilitating carbon leakage. Regulation by quotas leads to spatial sorting with less carbon leakage and less global emissions than regulation by taxes and standards.
    Date: 2013–05
  18. By: Unbreen Qayyum (Pakistan Institute of Development Economics, Islamabad); Zafar Mahmood (Pakistan Institute of Development Economics, Islamabad)
    Abstract: This study tries to investigate the inter-linkage between foreign trade and Foreign Direct Investment (FDI) in case of Pakistan. Annual data for the period 1985–2010 have been considered for eight major trading partners—Canada, France, Germany, Hong Kong, Japan, Saudi Arabia, UK and USA. The Johansen Fisher Panel Cointegration Test and Vector Error Correction Mechanism (VECM) have been applied to examine whether the FDI and foreign trade are complements or substitutes. The analysis gives evidence in favour of complementarity of FDI and foreign trade i.e., FDI promotes Pakistan’s foreign trade with its trading partners.
    Date: 2013
  19. By: Bertin Martens (European Commission – JRC - IPTS)
    Abstract: This paper presents a non-technical summary of the latest economic research studies on cross-border e-commerce in the EU and elsewhere, and combines this with findings from older research on this subject. It compares online with offline cross-border trade and investigates the differences in drivers and impediments to both. It also looks into research findings regarding consumer motives to shift from offline to online trade and explores possible sources of consumer welfare increase as a result of this shift. Finally, it flags issues for further research. The main purpose of this note is to bring the findings from recent research together in a coherent framework and make it accessible to stakeholders and decision-makers involved in EU policy-making on the Digital Agenda for Europe and the EU Digital Single Market.
    Keywords: online trade, e-commerce, gravity, barriers to trade, home bias
    JEL: F15 O52
    Date: 2013–02
  20. By: Evdokia Moïsé
    Abstract: This study provides data on the costs and challenges of implementing trade facilitation measures currently under negotiation in the WTO. It updates an earlier study undertaken in 2005, presenting data and insights from nine additional developing countries. The study confirms earlier findings that the costs of putting in place and maintaining trade facilitation measures are not particularly large and are far smaller than the benefits gained from implementing these measures. Capital expenditure to introduce the measures ranged between EUR 3.5 and EUR 19 million, while annual operating costs did not exceed EUR 2.5 million. Information technologies and single window mechanisms seem the most expensive elements but the most important area is training, because of its role in changing business practices of border agencies. Some measures may be expensive to introduce but not costly to operate, others require political commitment rather than funds. Moreover, an increasing amount of technical and financial assistance to implement these measures has been made available to developing countries over the last decade.
    JEL: F13 F14 F35 H5 H83
    Date: 2013–05–15
  21. By: Yuqing Xing (National Graduate Institute for Policy Studies; Asian Development Bank Institute); Manisha Pradhananga (Asian Development Bank Institute; University of Massachusetts Amherst)
    Abstract: The Global Financial Crisis and the recent slowdown of China’s growth have led to questions about the sustainability of China’s growth. The argument is that, China is too dependent on external demand and that it needs to “rebalance” its economy toward domestic consumption. However, conventional measures of external: net exports-over-GDP and exports-over-GDP are biased and do not accurately measure the contribution of external demand to GDP growth. In this paper, we propose two measures that are simple modifications of the conventional measures. We argue that our proposed measures provide a more accurate estimate of the vulnerability of China’s economy to external shocks, in the form of exports and FDI. Our estimates show that in 2001, exports and FDI accounted for 18.2% of GDP growth and by 2004 the share rose to 49 percent. During 2005-2007, the contribution of exports and FDI to growth remained in the range of 38-40 percent. Our estimates also show that the impressive recovery of the Chinese economy in the post-crisis period owed at least 53% of its growth to exports and FDI. Based on these results, we conclude that the Chinese economy remains highly dependent on external demand in the form of exports and FDI, and re-balancing the economy towards domestic demand has not been achieved yet.
    Date: 2013–05

This nep-int issue is ©2013 by Alessia A. Amighini. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.