nep-int New Economics Papers
on International Trade
Issue of 2014‒07‒28
thirty-one papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Terms-of-Trade Impacts of Trade Agreements and the Choice of Trade Policy By Joachim Jarreau
  2. A note on firm age and the margins of exports: First evidence from Germany By Joachim Wagner
  3. Trade Integration and Business Cycle Synchronization in the EMU: The Negative Effect of New Trade Flows By Jean-Sébastien Pentecôte; Jean-Christophe Poutineau; Fabien Rondeau
  4. "Assembled in Europe" - the role of processing trade in EU export performance By Cernat, Lucian; Pajot, Michael
  5. EU-US economic linkages: The role of multinationals and intra-firm trade By Lakatos, C.; Fukui, T.
  6. The Euro-Med Free Trade Area: An Empirical Assessment of the main Trade Agreements' Effects By elmallah, mariam
  7. The use of gravity models in the identification of the factors determining trade flows in the European Union By Michal Bernard Pietrzak; Justyna Lapinska
  8. A note on quality of a firm’s exports and distance to destination countries: First evidence from Germany By Joachim Wagner
  9. Trade Frictions and Market Access of Developing Countries: A Product-Level Empirical Analysis By Steven Husted; Eugene Bempong-Nyantakyi; Shuichiro Nishioka
  10. The economic impact of the EU - Singapore Free Trade Agreement By Commission, European
  11. THINKING IN A BOX: A ‘MODE 5’ APPROACH TO SERVICE TRADE By Cernat, Lucian; Kutlina-Dimitrova, Zornitsa
  12. A comparative analysis of EU and US trade preferences for the LDCs and AGOA beneficiaries By Davies, E.; Nilsson, L.
  13. Trade Adjustment and Productivity in Large Crises By Gopinath, Gita; Neiman, Brent
  14. Food competition in world markets: Some evidence from a panel data analysis of top exporting countries By Donatella Baiardi; Carluccio Bianchi; Eleonora Lorenzini
  15. An Account of Pollution Emission Embodied in Global Trade: PGT1 and PGT2 Database By Honma, Satoshi; Yoshida, Yushi
  16. Market Size, Competition, and the Product Mix of Exporters By Mayer, Thierry; Melitz, Marc J.; Ottaviano, Gianmarco I. P.
  17. Trade in Health Services and Globalization: The Role of Infinitesimal Changes of Trade Policy By Chatterjee, Tonmoy; Gupta, Kausik
  18. US Policies toward Liquefied Natural Gas and Oil Exports: An Update By Cathleen Cimino; Gary Clyde Hufbauer
  19. Economists as political philosophers : a critique of normative trade theory By Robert Lepenies
  20. Losses From Trade In Krugman’s Model: Almost Impossible By Igor A. Bykadorov; Alexey A. Gorn; Sergey G. Kokovin; Evgeny V. Zhelobodko
  21. China-U.S. Trade: A global outlier By THORBECKE, Willem
  22. Policies to Enhance Trade Facilitation in South Asia and Southeast Asia By Bayley, Anthony
  23. Do Institutions Quality Affect FDI Inflows in Sub Saharan African Countries? By Fiodendji, Daniel Komlan
  24. NAFTA at 20: Misleading Charges and Positive Achievements By Gary Clyde Hufbauer; Cathleen Cimino; Tyler Moran,
  25. Commercial Imperialism? Political Influence and Trade during the Cold War By Berger, Daniel; Easterly, William; Nunn, Nathan; Satyanath, Shanker
  26. FDI Spillovers and Multinational Firm Heterogeneity By K. LENAERTS; B. MERLEVEDE
  27. Rethinking Policy Intervention for the Transition towards Competitive Trade-Led Green Growth By Bhishma K. Bhusal; Susana Franco; James Wilson
  28. State-Invested Enterprises in the Global Marketplace: Implications for a Level Playing Field By Hans Christiansen; Yunhee Kim
  29. Skilled Immigrants' Contribution to Productive Efficiency By Nahm, Daehoon; Tani, Massimiliano
  30. Global Agricultural Value Chains, Standards, and Development By Johan Swinnen
  31. Cross-border commuting and consuming: An empirical investigation By Mathä, Thomas Y.; Porpiglia, Alessandro; Ziegelmeyer, Michael

  1. By: Joachim Jarreau (AMSE - Aix-Marseille School of Economics - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM))
    Abstract: This paper studies the impacts and determinants of trade policy. I use data on applied tariff protection of world countries over 2001-2007 to estimate sector-level trade elasticities. I then calibrate a structural gravity model of world trade. I compute the impacts of trade agreements which were implemented and of those which were not. I find that expected real income gains predict the signing of PTAs. Decomposing these gains shows that domestic mill price increases, reflecting market access gains, have a larger impact than the impact on the consumer price index. I also find that larger expected gains from multilateral liberalization reduce the probability to engage in preferential agreements.
    Keywords: international trade; preferential trade agreements; counter-factual estimation; trade creation and diversion
    Date: 2014–07
  2. By: Joachim Wagner (Leuphana University Lueneburg, Germany)
    Abstract: This note uses a new tailor-made data set to investigate the link between firm age and the extensive and intensive margins of exports empirically for the first time for Germany. Results turn out to be fully in line with the theoretical considerations. Older firms are more often exporters, export more and more different goods to more different destination countries, and export to more distant destination markets.
    Keywords: Exports, firm age, export margins, Germany
    JEL: F14
    Date: 2014–07
  3. By: Jean-Sébastien Pentecôte (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes 1 - Université de Caen Basse-Normandie); Jean-Christophe Poutineau (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes 1 - Université de Caen Basse-Normandie); Fabien Rondeau (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes 1 - Université de Caen Basse-Normandie)
    Abstract: This paper questions the impact of trade integration on business cycle sychronization in the EMU by distinguishing increase of existing trade flows (the intensive margin) and creation of new trade flows (the extensive margin). Using a DSGE model, we find that synchronization is weakened when new firms are allowed to export as a response to productivity gains. Consistenly with our model and using disaggregated data over 1995-2007 for the 11 founding members of the EMU, we find that trade intensity has a positive direct effect while new trade flows have a negative effect on business cycle synchronization. Furthermore, new flows play essentially an indirect role by intensifying specialization and explain 60 % of the overall effect of trade intensity and specialization on synchronization.
    Keywords: Trade integration; business cycles; European Monetary Union
    Date: 2014
  4. By: Cernat, Lucian (DG Trade); Pajot, Michael (DG Trade)
    Abstract: According to recent analyses, processing trade represents around 50% of total Chinese exports. But processing trade is not just a feature of Chinese trade or other emerging economies. It is also one option that EU trade policy offers to interested companies, subject to a specific set of rules and procedures. If in the case of China processing trade is responsible for half of China's impressive trade performance, what is the role of processing trade in Europe? This column investigates the use and role of processing trade - a trade regime credited as a key driver of Chinese export performance but largely overlooked in Europe - on the overall and sectoral EU trade performance in recent years. It argues that, despite its rather low profile in trade debates, EU exports after inward processing accounted for around 10% of total extra-EU exports in 2011. Given its non-negligible share, processing trade procedures may require further reflection on how to maximize its benefits for EU's external competitiveness.
    Keywords: EU TRADE; EU exports; processing trade regime
    JEL: F13
    Date: 2012–10–12
  5. By: Lakatos, C. (DG Trade); Fukui, T. (U.S. International Trade Commission)
    Abstract: EU-US economic relations go beyond that of traditional trade ties. Multinational companies and their affiliates abroad do not only represent vital elements of each other's domestic economy but are also major determinants of the movement of goods and capital across borders. In the light of the on-going Transatlantic Trade and Investment Partnership (TTIP) negotiations it becomes increasingly important to consider the impact of a given trade policy change on traditionally over-looked economic variables such as foreign affiliate output, value added and intra-firm trade. The goal of this paper is two-fold. First, we provide a comparative overview of multinational companies on the two sides of the Atlantic exploring data on production, value added, employment and intra-firm trade. Second, we consider the determinants of arm's length versus related party EU-US trade. Our findings suggest that EU-US arm's length trade is found to be relatively more supply driven (GDP of the exporter matters more) while conversely related party trade is relatively more demand driven (GDP of the importer matters more). Surprisingly, our results also show that related party trade is more sensitive to changes in tariffs than arm's length trade.
    Keywords: EU US intra-firm trade; multinational companies; barriers to trade
    JEL: F14 F23
    Date: 2013–11–28
  6. By: elmallah, mariam
    Abstract: This paper provides an assessment of the effects of the main trade agreements implemented in the Euro-Mediterranean region. The empirical analysis in this paper is based on a gravity model for a panel of 14 countries (7 South Mediterranean, 4 EU member states in addition to USA and Japan) for the time span 1991 till 2012. The trade agreements of interest are the Pan-Arab Free Trade Agreement (PAFTA), the Agadir Agreement and the Association Agreements (AAs) signed between the EU and the South Mediterranean countries (SMCs) and are considered the main building blocks for the Euro-Med Free Trade Area. Results show a positive and significant effect of both the PAFTA and the Agadir Agreement on the exports of their signatories. Differently, signing the AAs seems to have no significant impact on the exports of the countries on average as well as the exports of the majority of the SMCs in specific. However, there is a positive and significant impact of the AAs on the exports of the EU member states. When analyzing the behavior of the single countries, emerges a positive impact of PAFTA on the exports of Egypt and Morocco, a negative impact on Tunisia and insignificant impact on Algeria and Jordan. The Agadir Agreement benefited both Egypt and Morocco, leaving no significant effects on both Tunisia and Jordan. Finally, signing the AAs had a positive impact on Egypt, Morocco and Turkey, a negative impact on Algeria and Jordan, and insignificant impact on the exports of both Israel and Tunisia. These results imply the success of the intra-regional integration efforts, unlike the outcome of the inter-regional AAs. The current design of the AAs seems to have asymmetric outcome on its signatories. The persistence of this problem can hinder the path towards a mutually beneficial and fully fledged Euro-Med Free Trade Area.
    Keywords: Empirical Studies of Trade, Economic Integration
    JEL: F14 F15
    Date: 2014–07–14
  7. By: Michal Bernard Pietrzak (Nicolaus Copernicus University, Nicolaus Copernicus University, Poland); Justyna Lapinska (Nicolaus Copernicus University, Nicolaus Copernicus University, Poland)
    Abstract: The article analyzes the impact of potential determinants on the level of trade volume between the member states of the European Union. As a result of the use of gravity model for panel data the identification of a significant impact of the size of the economies of the member states, their level of economic development, foreign direct investment, the level of the so-called trade freedom of countries and of significant differences in the level of economic development between trading partners on the level of their bilateral trade. Also, it confirmed the existence of a negative relationship between the geographical distance and the size of the countries and their mutual exchange and a significant increase in the level of exports, both from the EU-12 to EU-15, and vice versa.
    Keywords: international trade, the European Union, a gravity model
    JEL: C33 F14
    Date: 2014–01
  8. By: Joachim Wagner (Leuphana University Lueneburg, Germany)
    Abstract: This note uses a tailor-made new data set to investigate for the first time the link between the quality of a firm’s exports and the distance to destination countries for Germany. To anticipate the most important result, it is shown that the quality of exported goods and the distance to destination countries are not statistically positively correlated.
    Keywords: Exports, export quality, distance, Germany
    JEL: F14
    Date: 2014–07
  9. By: Steven Husted; Eugene Bempong-Nyantakyi; Shuichiro Nishioka
    Abstract: This paper examines the e¤ects of trade frictions, including tari¤s and a variety of factors that raise trade costs, on export market access at the product level and, in particular, the role these frictions have on the ability of developing countries to access world markets. We …nd that a variety of trade frictions do serve to limit market access. We …nd distance and e¢ ciency in trade facilitation are signi…cant determinants of the probability of success in entering foreign markets. We examine whether there are any systematic development-related biases from these frictions that further limit market access for exporters from developing countries. Our results suggest that developing countries are not di¤erentially impacted by these factors. In the spirit of an earlier study by Markusen and Wigle (1990), we also conduct a series of counterfactual exercises to see the impact of signi…cant reductions in trade frictions on developing country market access. In contrast to their results, our …ndings show that reductions in tari¤s do not greatly improve the number of new markets for developing countries. Our results suggest a traditional recommendation to resolve the market access problem for developing countries: expansion and diversi…cation of the industrial base and productivity improvements in the handling of exports. Both are vital preconditions to increasing the number of export markets.
    JEL: F12 F14 O19
    Date: 2014–01
  10. By: Commission, European (DG Trade)
    Abstract: This Chief Economist Special Report analyses the economic benefits of the recently negotiated agreement between the EU and Singapore. The results estimated in this paper suggest that the bilateral reduction of tariff and non-tariff barriers in services trade brings benefits for both sides: Singapore GDP is expected to increase by € 2.7 billion whereas the EU gains are assessed at € 550 million. In addition, EU exports to Singapore would rise by some € 1.4 billion and Singapore's exports to the EU by some € 3.5 billion. Given that this is the EU's first FTA with an ASEAN member country and the second one with a key Asian trading partner after the conclusion of the EU-Korea FTA, this agreement sets an important benchmark for future FTAs with countries in the region.
    Keywords: International Trade; Economic modelling; FTA
    JEL: F13 F41 F47
    Date: 2013–09–01
  11. By: Cernat, Lucian (DG Trade); Kutlina-Dimitrova, Zornitsa (DG Trade)
    Abstract: This paper draws the attention to the growing importance of services inputs in manufacturing sectors’ exports in the EU and beyond. The GATS existing four modes of supply do not adequately cover this type of indirect services value-added trade. Hence, theoretically, the case for a new indirect mode of services supply - ‘mode 5’ - is made. On the basis of the TiVA database, our estimates of mode 5 services exports point to a substantial share of total merchandise trade. The paper also finds that from a ‘mode 5’ perspective, services embodied into products are also subject to fairly complex trade rules. One such example illustrated in this paper is the area of customs valuation. Other issues (trade facilitation, rules of origin) could have an impact on the way ‘mode 5’ services are traded. The renewed impetus at the WTO on trade facilitation and the post-Bali agenda should provide a new opportunity for policy makers to forge trade rules that are well-suited for the ways in which goods and services interact along global supply chains.
    Keywords: International trade; trade in services; modes of supply
    JEL: F13
    Date: 2014–03–03
  12. By: Davies, E. (Oxford University); Nilsson, L. (DG Trade)
    Abstract: In light of the much praised US African Growth and Opportunity Act (AGOA), this study compares EU and US preferential trade policies towards the least developed countries (LDCs) under the EU Everything but Arms (EBA) initiative and the countries covered by the US AGOA. The descriptive analysis examines and compares product coverage, diversification of imports, share and value of preferential imports and preference utilisation rates. The empirical analysis, conducted in a gravity setting, compares the relative trade creating effects of the EU and US schemes. Excluding mineral fuels, it finds that EU preferential trade policies generate about twice as much trade as do corresponding US policies.
    Keywords: EU trade; US trade; preference utilisation; LDCs
    JEL: F13 F14 F35
    Date: 2013–02–07
  13. By: Gopinath, Gita; Neiman, Brent
    Abstract: We empirically characterize the mechanics of trade adjustment during the Argentine crisis. Though imports collapsed by 70 percent from 2000-2002, the entry and exit of firms or products at the country level played a small role. The within-firm churning of imported inputs, however, played a sizeable role. We build a model of trade in intermediate inputs with heterogeneous firms, fixed import costs, and roundabout production. Import demand is non-homothetic and the implications of an import price shock depend on the full distribution of firm-level adjustments. An import price shock generates a significant decline in productivity.
    Date: 2014
  14. By: Donatella Baiardi (Department of Economics, Quantitative Methods and Business Strategies, University of Milano-Bicocca); Carluccio Bianchi (Department of Economics and Management, University of Pavia); Eleonora Lorenzini (Department of Economics and Management, University of Pavia)
    Abstract: This paper investigates the relevance of relative prices and world income as determinants of food exports for the top trading countries in the period 1992-2012 using a panel data framework. A distinction between processed and unprocessed goods is drawn and, within this last category, a specific focus on commodities is made. We find that price elasticities generally take lower values for processed goods, and the opposite holds for income elasticities. Processed goods are also characterized by an inverse relationship between price elasticities and average unit values. The overall analysis leads to the conclusion that both emerging and advanced countries should increase their export specialization in processed goods. Furthermore, developed economies could face the fierce competition from emerging countries by enhancing the quality content of their processed goods exports.
    Keywords: Food Exports, Price and Income elasticities, Cross-country comparisons, Panel data analysis, Panel Granger causality
    JEL: F14 L66 Q17 C23
    Date: 2014–07
  15. By: Honma, Satoshi; Yoshida, Yushi
    Abstract: For the period between 1988 and 2009, we constructed the two sets of the world panel database for the pollution emission embedded in international trade. By applying the time-invariant common pollution intensity at industry level for international trade of over 150 countries, a change in pollution emission from the first database reflects scale and composition effects. This first database allows us to investigate whether the composition of international trade for a country changed toward pollution intensive industries during the last two decades. By utilizing a time-varying and country-varying pollution intensity variable for technique effect, the second database provides a full account of pollution emission embodied in global trade and show to what degree the pollution emission is attributed to scale, composition and technique effects.
    Keywords: Database Construction; Environment; International trade; Pollution emission; World Panel Database
    JEL: F18 O13 Q56
    Date: 2014–07–22
  16. By: Mayer, Thierry; Melitz, Marc J.; Ottaviano, Gianmarco I. P.
    Abstract: We build a theoretical model of multi-product firms that highlights how competition across market destinations affects both a firm's exported product range and product mix. We show how tougher competition in an export market induces a firm to skew its export sales toward its best performing products. We find very strong confirmation of this competitive effect for French exporters across export market destinations. Theoretically, this within-firm change in product mix driven by the trading environment has important repercussions on firm productivity. A calibrated fit to our theoretical model reveals that these productivity effects are potentially quite large.
    Date: 2014
  17. By: Chatterjee, Tonmoy; Gupta, Kausik
    Abstract: This paper attempts to integrate the issues related to health care, consumption efficiency hypothesis and international trade in the context of a developing economy. In this article we have framed a hybrid type of three sector general equilibrium trade model in the presence of a nutritional efficiency factor of health consumption, where first two sectors form a Heckscher-Ohlin nugget and the third one is a non-traded health service producing sector. Overall, we find little harm from trade, and potential gains from welfare aspect.
    Keywords: Health sector, Trade Policy, Social Welfare and General equilibrium.
    JEL: D58 F11 F13 I11 I15 I31
    Date: 2013–10–03
  18. By: Cathleen Cimino (Peterson Institute for International Economics); Gary Clyde Hufbauer (Peterson Institute for International Economics)
    Abstract: Horizontal drilling and fracking are transforming global energy production, consumption, and trade leading to a surge of domestic production in the United States. Free exports of liquefied natural gas, crude oil, and other energy products are an essential complement of US international economic policy, which has long advocated free trade in raw materials, unconstrained by export barriers or restrictions. The Obama White House should prod the Department of Energy, the Department of Commerce, the Federal Energy Commission, and other agencies to speed up their approvals of such exports. Short of lifting full restrictions on crude oil exports, the Department of Commerce should build on its recent exemptions for ultralight oil condensate and exempt light crude oil from the current export prohibitions with determination that sales to Europe are consistent with the US national interest.
    Date: 2014–07
  19. By: Robert Lepenies
    Abstract: Economists are political philosophers. This claim is defended based on an investigation of normative arguments made in economics textbooks. The paper aims to explain, reconstruct and contest the neoclassical vision implicit in mainstream economic trade theory. Analyzing arguments made by international economists from the perspective of political philosophy, I show how the contemporary defence of free markets and trade liberalization is linked to a specific normative ideal of the political and social good.
    Keywords: Political philosophy, Neoclassical economics, Normative trade theory, Free trade, Efficiency
    JEL: A12 A13 B21 B50 D60 F11
    Date: 2014–06
  20. By: Igor A. Bykadorov (National Research University Higher School of Economics); Alexey A. Gorn (Bocconi University); Sergey G. Kokovin (National Research University Higher School of Economics); Evgeny V. Zhelobodko
    Abstract: Studying the standard monopolistic competition model with unspecified utility/cost functions, we find necessary and sufficient conditions on the function elasticities, when an expanding market or trade incur welfare losses. Two numerical examples explain why: either excessive or insufficient entry of firms is aggravated by market growth. The variable marginal cost enforces the harmful effect. Still harm looks practically improbable.
    Keywords: Market distortions, Trade gains, Variable markups, Demand elasticity.
    JEL: F12 L13
    Date: 2014
  21. By: THORBECKE, Willem
    Abstract: China's computer exports to the United States increased 38 times between 1996 and 2013, growing from 4% to 66% of U.S. computer imports. China's exports of phones to the United States increased 32 times over this period, growing from 11% to 57% of U.S. phone imports. China's total exports to the United States also increased rapidly and are four or five times larger than U.S. exports to China. Cointegration evidence indicates that exchange rate depreciations in both China and in supply chain countries significantly increase China's exports. Evidence from gravity models indicates that China's exports to the United States have been twice as large as predicted every year since 2004. Thus, China's exports to the United States are a global outlier.
    Date: 2014–07
  22. By: Bayley, Anthony (Asian Development Bank Institute)
    Abstract: This paper discusses trade facilitation in the context of enhancing trading links between South and Southeast Asia, in a manner understandable to the non-specialist. Presently, these two Asian regions tend to trade preferentially with distant markets. One of the reasons cited for the limited trade between themselves is that trade facilitation with trade partners in developed countries is more user friendly and stable. This suggests that enhancing trade facilitation within the two regions could promote intra- and inter-regional trade. The paper identifies the scope of trade facilitation and profiles the current overall situation in the two regions. It highlights the key issues and constraints, often referred to as non-trade barriers, in terms of both “soft” and “hard” infrastructure, and highlights ongoing initiatives designed to promote change, especially through the application of new approaches and procedures. Lastly, the paper concludes by discussing the key regional trade facilitation issues and proposing recommendations to eliminate these non-trade barriers that are adversely impacting on trade within and between these regions.
    Keywords: connecting south asia and southeast; trade facilitation; non-trade barriers
    JEL: F13 F15
    Date: 2014–07–15
  23. By: Fiodendji, Daniel Komlan
    Abstract: One of the problems which sub-Saharan African (SSA) countries are confronted with is the low level of investment. Yet, the theory of capital tells us that it is impossible to envisage development without a considerable accumulation of capital. An important channel through which those countries can solve this capital issue is to resort to foreign direct investment (FDI), especially knowing the considerable role such investment played in the development of the economy of several Asian countries. Sub-Saharan African countries have not benefited enough from such a type of investment form many reasons. One of them is the quality of institutions. This paper investigates the linkages between political risk, institutional quality and FDI using different econometric techniques for a data sample of 30 African Sub-Saharan countries from period 1984 to 2007. This paper argues that countries whose governments are highly ranked according to various indices of the quality of institutions tend to do better in attracting FDI. In an empirical analysis of cross-section data, the paper finds that different aspects of the quality of institutions of a country (corruption, law and order, government stability, profile of investment, internal and external conflicts etc...) are almost always significant, regardless of the other control variables that are used in the least-squares and instrumental variables estimation. By using the interaction approaches, we find that when a host country's institutions qualities are sufficiently low, a further decrease in institutions may not stimulate and, in fact, may even decrease FDI inflows. In addition, FDI inflows significantly rise as the institutions quality become better. We also find that the marginal effect of natural resources on FDI depends on the level of resources abundance; i.e., when a country is resource-intensive, the marginal effect of natural resource on FDI inflows increases. In the non resource-intensive countries, natural resources might be more effective to attract FDI. Our results suggest that the institutional quality competition between FDI host countries may have different impacts on countries with different natural resource levels. Thus, the ability of a country to benefit from financial globalization and its vulnerability to financial crises can be significantly affected by the quality of its domestic institutions and its macroeconomic framework.
    Keywords: Foreign Direct Investment, Natural Resources, Institutional Quality
    JEL: D7 F21 O1
    Date: 2013–03
  24. By: Gary Clyde Hufbauer (Peterson Institute for International Economics); Cathleen Cimino (Peterson Institute for International Economics); Tyler Moran, (Peterson Institute for International Economics)
    Abstract: The North American Free Trade Agreement (NAFTA) between the United States, Mexico, and Canada, which took effect 20 years ago, continues to face divided public opinion. Opponents of free trade agreements (FTAs) cite NAFTA as a job-killing precedent, while proponents argue that the economic gains from NAFTA have been considerable and unappreciated. This Policy Brief analyzes the record of NAFTA in order to clear the air so that the benefits and challenges of trade can be examined objectively. In the last 20 years, trade, investment, and economic interdependence among the three countries have grown dramatically. Nearly 2 million US jobs now depend on trade with Mexico. Closer integration with the United States and Canada has transformed Mexico's auto industry from a minor backwater into a major automotive powerhouse. The analysis presented here argues that increased trade with Mexico led to some US job losses during adjustments but that these were very small compared to the usual churn and to job losses due to other factors over the same period. The pact contributed some to wage losses in manufacturing but not to any lasting and significant increase in US unemployment. Also contrary to what opponents predicted, NAFTA did not encourage more illegal immigration to the United States. Above all, NAFTA created a new foundation for US-Mexican relations by facilitating Mexico's transition to a multiparty political state with a market-oriented system.
    Date: 2014–05
  25. By: Berger, Daniel; Easterly, William; Nunn, Nathan; Satyanath, Shanker
    Abstract: We provide evidence that increased political influence, arising from CIA interventions during the Cold War, was used to create a larger foreign market for American products. Following CIA interventions, imports from the US increased dramatically, while total exports to the US were unaffected. The surge in imports was concentrated in industries in which the US had a comparative disadvantage, not a comparative advantage. Our analysis is able to rule out decreased trade costs, changing political ideology, and an increase in US loans and grants as alternative explanations. We provide evidence that the increased imports arose through direct purchases of American products by foreign governments.
    Date: 2013
    Abstract: Theoretical work implies that more investment promotion will attract less productive foreign firms. We analyze to what extent less productive foreign firms are capable of generating positive spillover effects. We find that only sufficiently productive foreign firms generate positive backward spillover effects. When we combine foreign and domestic firm heterogeneity, more productive multinationals, and especially those that are more than two standard deviations more productive than an individual domestic firm, are found to be the main source of positive backward spillover effects for the latter. More productive domestic firms benefit from larger positive effects. Supplying less productive multinationals results in negative spillover effects. Lower productivity levels of domestic and foreign firms generally lead to a more negative impact. If investment promotion aims at technology transfer to domestic firms, policy makers should be aware that attracting additional foreign investment might result in zero or negative spillover effects.
    Keywords: FDI spillovers, multinationals, firm heterogeneity, technology transfer
    JEL: F23
    Date: 2014–04
  27. By: Bhishma K. Bhusal; Susana Franco; James Wilson
    Abstract: A neo-classical trade-led growth model supported by rapid technological advancement and the WTO regime has been instrumental to achieving higher growth and prosperity during the last few decades. However, it struggles to cope with critical societal challenges such as environmental degradation, inequality, social disharmony and poor quality of life. The green growth approach is gaining momentum to overcome these issues. Since two thirds of world production is traded, trade should be competitive, inclusive and environmentally sustainable in a green growth regime. Through an extensive review of trade and competitiveness theories, alongside the human development and environmental sustainability literature, the paper analyses three trade-offs: sustainability-competitiveness; inclusiveness-sustainability; and inclusiveness-competitiveness. From this analysis a core strategy mix for transition to competitive, trade-led green growth is identified, setting up an agenda for future research into the role of systems of policy instruments/incentives in catalysing this transition.
    Keywords: Competitiveness, Green economy, sustainability, inclusiveness
    JEL: O15 O19 Q56
  28. By: Hans Christiansen; Yunhee Kim
    Abstract: State-owned and other state-invested enterprises (SIEs) have become more prominent in the global economy over the last decade. A growing role for state-invested enterprises in the marketplace is not in itself onerous. According to an OECD consensus, as expressed through the Organisation’s legal instruments, SOEs can be operated according to similarly high standards of governance, transparency and efficiency as private companies, in which case the ownership issue is moot. However, only some of the world’s most advanced economies, following decades of reform of their SOE sectors, have approached this point. Moreover, when SOEs operate across borders the challenges may multiply. With this background, this paper compares the difference between SIEs and non- SIEs in five sectors: air transportation, electricity, mining, oil & gas and telecommunication. The empirical analysis indicates that, in addition to any financing advantages, large state-invested enterprises also seem to benefit from an unusually favourable position in their home markets. A comparative analysis further shows that, in the course of the last ten years, SIEs have generally enjoyed higher rates of return than comparable private companies. The paper concludes that the growing role of state-invested enterprises in the international marketplace does not yet present a serious macroeconomic challenge. However, since it is likely to keep growing for some time, challenges need to be addressed relatively soon. This makes for a strong case for enhanced policy coordination and information sharing. If legally binding instruments cannot be developed in the near to medium-term to ensure competitive neutrality, consultation mechanisms could be established through which the main players in international trade and investment can exchange views on matters of common concern related to the state in the marketplace. The ultimate purpose would be ensuring that the international trade and investment environment remains open, non-discriminatory and offering a level playing field.
    Keywords: international investment, state-owned enterprises, competition, competitive neutrality, multinational firms
    JEL: F21 F23 G30 G38 L32 L33
    Date: 2014–07–23
  29. By: Nahm, Daehoon (Macquarie University, Sydney); Tani, Massimiliano (IZA)
    Abstract: This paper studies whether skilled migrants contribute to the host country's 'productive efficiency' (Farrell, 1957) using input-output and immigration sectoral data for seven industries in twelve countries during the period 1999-2001. We find that skilled migrants contribute positively to a country's productive efficiency with the exception of the finance sector. The results broadly support the adoption of skill-biased migration policies.
    Keywords: highly skilled migration, human capital, productive efficiency
    JEL: D24 F2 J6 J24
    Date: 2014–07
  30. By: Johan Swinnen
    Abstract: Understanding the development implications of agri-food value chains is crucial as they are a fundamental component of developing countries’ growth potential and could increase rural incomes and reduce poverty. This note reviews some of the implications of these global agri-food value chains for developing countries and global poverty reduction. I focus on five aspects: (a) smallholder inclusion in value chains; (b) impacts on smallholder income and food security; (c) technology transfer and access to inputs; (d) labor market effects and impacts on gender and rural poverty; and (e) the interaction between liberalization policies and value chains. I summarize key insights and provide references to a rapidly growing literature.
    Keywords: Value Chains, Agriculture, Food, Standards, Development, Poverty, Trade, Foreign Direct Investment
    Date: 2014–07
  31. By: Mathä, Thomas Y.; Porpiglia, Alessandro; Ziegelmeyer, Michael (Munich Center for the Economics of Aging (MEA))
    Abstract: This paper analyses empirically how cross-border consumption varies across product and services categories and across household characteristics. It focuses on the part of crossborder sales that arise due to work-related cross-border crossings; it analyses the crossborder consumption behaviour of cross-border commuter households residing in Belgium, France and Germany and working in Luxembourg. In total, it is estimated that these households spend €925 million per annum in Luxembourg, reflecting about 17% of their gross annual income from Luxembourg and contributing about 10% to total household final consumption expenditure in Luxembourg. Cross-border consumption expenditure is shown to depend on individual and household characteristics, such as total household income, the number of cross-border commuters in the household, distance between home and work, as well as price level (index) differences between Luxembourg and its neighbouring countries. Cross-border commuters take advantage of existing arbitrage opportunities.
    JEL: F15 R12 R23 J61
    Date: 2014–04–14

This nep-int issue is ©2014 by Luca Salvatici. 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.