nep-int New Economics Papers
on International Trade
Issue of 2015‒01‒19
38 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Lao PDR Market Access Guide: Trading with ASEAN Dialogue Partners – People’s Republic of China By Lord, Montague J.
  2. The tide that does not raise all boats: An assessment of EU preferential trade policies: By Cipollina, Maria; Laborde Debucquet, David; Salvatici, Luca
  3. Trade liberalization gains under different trade theories: A case study for Ukraine By Zoryana Olekseyuk; Edward J. Balistreri
  4. Export management and incomplete VAT rebates to exporters: the case of China By Sandra PONCET; Julien GOURDON; Laura HERING; Stéphanie MONJON
  5. The Gravity of Institutions in Resource-Rich Country By Zeynalov, Ayaz
  6. Growth and Pattern of Intra-Industry Trade between India and Bangladesh: 1975–2010 By Kumar, Sushil; Ahmed, Shahid
  7. Productivity Sorting and Mode of Export By Marco Grazzi; Chiara Tomasi
  8. Betting on exports: Trade and endogenous heterogeneity By Alessandra Bonfiglioli; Gino Gancia
  9. Do firm-bank relationships affect firms' internationalization? By Riccardo De Bonis; Giovanni Ferri; Zeno Rotondi
  10. Harmonization versus Mutual Recognition: Some pitfalls for the coordination of product standards under imperfect competition By Jørgensen, Jan Guldager; Schröder, Philipp J.H.
  11. Two-tier asymmetric information as a motive for trade, trade policies, and inefficient trade agreements: By Bouët, Antoine; Laborde Debucquet, David; Martimort, David
  12. Future-of-Eco-Coop-in-SARRC-Countries By Shah, Syed Akhter Hussain
  13. Mismeasurement of Distance Effects: The Role of Internal Location of Production By Hakan Yilmazkuday
  14. A Shifting Mandate:International Ownership, Global Fragmentation and A Case for Deeper Integration under the WTO By Emily J. Blanchard
  15. Coverage of Trade in Services under ASEAN+1FTAs By Hikari ISHIDO
  16. The Bali Trade Facilitation Agreement and Rulemaking in the WTO: Milestone, Mistake or Mirage? By Bernard Hoekman
  17. Estimated Impacts of TAA on Participants' Outcomes Under the Trade Act of 2002 By Peter Schochet
  18. Wage differentials: Trade Openness and Wage Bargaining By Gustavo Gonzaga; Beatriz Muriel; Cristina Terra
  19. EC – Seal Products: Seals and Sensibilities (TBT Aspects of the Panel and Appellate Body Reports) By Philip I. Levy; Donald H. Regan
  20. The Margins of Global Sourcing: Theory and Evidence from U.S. Firms By Pol Antràs; Teresa C. Fort; Felix Tintelnot
  21. Visa Policies, Networks and the Cliff at the Border By Simone BERTOLI; Jesús FERNÁNDEZ-HUERTAS MORAGA
  22. Multi-level determinants of inward FDI ownership By Bhupatiraju S.
  23. International R&D spillovers and business service innovation By Foster-McGregor N.; Pöschl J.; Stehrer R.
  24. Summary of Structure and performance of Ethiopia’s coffee export sector: By Minten, Bart; Tamru, Seneshaw; Kuma, Tadesse; Nyarko,Yaw
  25. Nepal's Accession to the World Trade Organization: Case Study of Issues Relevant to Least Developed Countries By Posh Raj Pandey; Ratnakar Adhikari; Swarnim Wagle
  26. Green Subsidies and the WTO By Steve Charnovitz
  27. The impact of outward FDI on the performance of Chinese multinationals By Cozza , Claudio; Rabellotti , Roberta; Sanfilippo, Marco
  28. International rice trade and security stocks: Prospects for an expanded Asian international rice reserve: By Dorosh, Paul A.; Childs, Abigail
  29. Should the host economy invest in a new industry? The roles of FDI spillovers, development level, and heterogeneity of firms. By Huu Thanh Tam Nguyen; Ngoc-Sang Pham
  30. Exports, agglomeration and workforce diversity: An empirical assessment of German establishments By Stephan Brunow; Luise Grünwald
  31. Extractive Institutions and Gains From Trade: Evidence from Colonial Africa By Federico Tadei
  32. Are Armington Elasticities Different across Countries and Sectors? – A European Study By Zoryana Olekseyuk; Hannah Schürenberg-Frosch
  33. What next for the DDA? Quantifying the role of negotiation modalities By Yvan Decreux; Lionel Fontagné
  34. Knocking on Tax Haven's Door: Multinational Firms and Transfer Pricing By Ronald B. Davies; Julien Martin; Mathieu Parenti; Farid Toubal
  35. Temporary Protection and Technology Adoption: Evidence from the Napoleonic Blockade By Réka Juhász
  36. On food security stocks, peace clauses, and permanent solutions after Bali: By Díaz-Bonilla, Eugenio
  37. Competitive General Equilibrium with Finite Change and Theory of Policy Making By Hamid Beladi; Avik Chakrabarti; Sugata Marjit
  38. Distortion effects of export quota policy : an analysis of the China raw materials dispute By Sarah Guillou

  1. By: Lord, Montague J.
    Abstract: China is the second most important export destination of Laos, and export growth to that market has far outpaced exports to Thailand, the leading export destination. One of the major drivers of this growth is the comprehensive ASEAN-China Free Trade Agreement (ACFTA) under which Lao benefits in trade of goods and services and in investment measures. How Lao Producers and Exporters Benefit from ACFTA: - ACFTA’s Trade in Goods Agreement has already eliminated tariffs on 90% of its products imported by China. Tariffs on the remaining 10% of imports, classified as sensitive products, are being reduced at a slower pace. - Without preferential market access, other foreign suppliers to China are subject to an average tariff of over 8%. This high level of protection gives Lao businesses a large competitive advantage over competitors who are not ACFTA members. - For agricultural products, China’s average tariff is 65% for non-ACFTA member countries. Lao businesses therefore have a huge competitive advantage in agricultural exports over countries that are not part of the Agreement. - Laos’ proximity to China makes it easier to transport goods to that country than from other ACFTA member countries, especially with the planned development of transport infrastructure between the two countries. Moreover, China’s logistics environment is relatively favorable to trading. - China is one of the fastest growing markets in Asia. Two-way trade between China and ASEAN increased by nearly 30% in 2011 and is targeted to expand by another 20% by 2015. In the case of the Lao PDR, the trade expansion has been much higher. In the last five years, Lao exports to China have grown by an average of 80% a year and that rapid expansion is expected to continue in the coming years. This study covers the operation of the Agreement and its parts related to rules of origin, opportunities of Lao businesses, how to gain access to the market, and useful contacts and resources.
    Keywords: ASEAN-China Free Trade Area, ACFTA, ASEAN, FTA, free trade area, Laos, Lao PDR, ASEAN Dialogue Partners
    JEL: F13 F53 F55
    Date: 2013–03–01
  2. By: Cipollina, Maria; Laborde Debucquet, David; Salvatici, Luca
    Abstract: The aim of this paper is to assess of the impact of the European Union’s trade preferences on global trade, focusing on several methodological issues that are relevant to the trade-creating impact of these preferences. Using highly disaggregated eight-digit data in a theoretically grounded gravity model framework, we define an explicit measure of preferential tariff margins computed on alternative definitions based on a comparison between bilateral applied tariffs and two different reference levels: the most favored nation duty and a constant elasticity of substitution price aggregator. From the methodological point of view, we show that assessing the impact of these policies can be very sensitive to the definition of the preferential tariff margin.
    Keywords: Mathematical models, trade, Trade negotiations, trade policies, International trade, theoretical gravity model, preferential trade agreements, trade cost elasticity, sectoral trade flows,
    Date: 2014
  3. By: Zoryana Olekseyuk (University of Duisburg-Essen); Edward J. Balistreri (Division of Economics and Business, Colorado School of Mines)
    Abstract: To analyze the Deep and Comprehensive Free Trade Area (DCFTA) between Ukraine and the EU we develop a multi-region general-equilibrium simulation model calibrated to GTAP 8.1 data. We implement three alternative trade structures for services and manufactured goods: a.) a standard specification of perfect competition based on the Armington [1969] assumption of regionally differentiated goods; b.) monopolistic competition among symmetric firms consistent with Krugman [1980]; and c.) a competitive selection model of heterogeneous firms consistent with Melitz [2003]. Across these structures the DCFTA indicates relatively large gains for Ukraine (and small gains for the EU). A novel result emerges, however, in that the gains for Ukraine are largest under an assumed Armington structure. This is attributed to a movement of resources into Ukraine's traditional export sectors which produce under constant returns. While there is little danger of deindustrialization dominating the overall welfare gains, we do observe substantially lower gains due to monopolistic competition.
    Keywords: DCFTA, Ukraine, EU, Armington, New trade theory, Krugman, Melitz
    JEL: F12 C68
    Date: 2014–12
  4. By: Sandra PONCET (Université de Paris I); Julien GOURDON (FERDI); Laura HERING (FERDI); Stéphanie MONJON (FERDI)
    Abstract: Compared to most countries, China’s value-added tax (VAT) system is not neutral and makes it less advantageous to export a product than to sell it domestically, as exporters may not receive a complete refund on the domestic VAT they have paid on their inputs. However, the large and frequent changes to the VAT refunds which are offered to exporters have been led China to be accused of providing its firms with an unfair advantage in global trade. We use city-specific export-quantity data at the HS6-product level over the 2003-12 period to assess how changes in these VAT rebates have affected Chinese export performance. Our identification strategy relies on triple difference estimates that exploit an eligibility rule which disqualifies processing trade with supplied materials from these rebates. We find that changes in VAT rebates have significant export repercussions: eligible export quantity for a given city-HS6 pair rises by 6.5% following a one percentage-point increase in the VAT rebate. This magnitude yields a better understanding of the strong resistance of Chinese exports during the global recession, in which export rebates increased substantially.
    JEL: F10 F14 O14
    Date: 2014–12
  5. By: Zeynalov, Ayaz
    Abstract: This research will analyze the effects of the similarities in economic size and institutional level on bilateral trade. It is interested whether similarities at the country size and institutional level encourage international trade between countries. Using panel data of the bilateral trade of Azerbaijan with 50 different countries from 1995 to 2012 estimating by the Poisson Pseudo-Maximum Likelihood (PPML) method, it is expecting that similarity at the income size is not necessary for increasing bilateral trade across countries, on the contrary, country has interest to trade with dissimilar economic-size countries. Institutional similarity is expecting plays pivot role in international relationships and it has positive impact on bilateral trade.
    Keywords: international trade, gravity model, economic growth, institutions
    JEL: F14 P33 P48
    Date: 2014
  6. By: Kumar, Sushil; Ahmed, Shahid
    Abstract: The present study investigates the intra-industry trade between India and Bangladesh over the period of 1975 to 2010. GL index is used to calculate intra-industry trade at the three-digit level of SITC. The study also calculated the trade complementarity index, and revealed comparative index. The extent of intra-industry trade is high in sectors like crude materials, inedible, except fuels, food and live animals. The study also reveals mismatch between Indian imports and Bangladesh exports. The present study indicates positive effect on consumer surplus and trade using SMART model. Finally, the paper suggests that Bangladesh should diversify his export structure to reduce the bilateral trade deficit on the basis of comparative advantage.
    Keywords: Grubel Lloyd index, trade complementarity index, SMART model, economic regionalism
    JEL: F14 F15
    Date: 2014–12–29
  7. By: Marco Grazzi; Chiara Tomasi
    Abstract: This paper investigates the relation between firms' productivity and exporting behavior in presence of export intermediaries. Using a cross section of firm-level data for several advanced and developing economies, the study confirms the productivity-sorting prediction according to which domestic firms are less efficient than those resorting to an export intermediary, while the latter are less productive than producers which export directly. Our novel finding is that firms' productivity has a stronger effect on the probability of exporting directly than on the likelihood of exporting indirectly. This suggests for a stronger role of intermediaries in granting foreign market access to a large proportion of small and less productive firms.
    Keywords: heterogeneous firms, international trade, direct and indirect exports intermediation
    Date: 2014–12–19
  8. By: Alessandra Bonfiglioli; Gino Gancia
    Abstract: We study the equilibrium determinants of firm-level heterogeneity in a model in which firms can choose between different probability distributions when drawing productivity at the entry stage and explore the implications in closed and open economy. One novel result is that export opportunities, by increasing payoffs in the tail, induce firms to draw technology from riskier distributions. When more productive firms also pay higher wages, trade amplifies wage dispersion by inducing firms to take more risk ex-ante and hence making them more unequal ex-post. Our model is consistent with new evidence on how firm-level heterogeneity varies across U.S. industries.
    Keywords: Firm Heterogeneity, Productivity Dispersion, Wage Inequality, International Trade.
    JEL: F12 F16 E24
    Date: 2014–12
  9. By: Riccardo De Bonis (Bank of Italy); Giovanni Ferri (LUMSA); Zeno Rotondi (Unicredit Group)
    Abstract: The goal of this paper is to investigate the link between the length of a firm-bank relationship and firm's internationalization. The analysis is carried out on matched firm-bank micro-data from a survey of Italian enterprises from 1998 to 2003. We obtain two main results. First, a longer relationship with the main bank fosters firms' foreign direct investment (FDI) while it does not affect the export status of the enterprises not engaging in FDI. Second, the probability of a firm undertaking FDI further increases if its main bank is itself internationalized by holding foreign subsidiaries.
    Keywords: internationalization, foreign direct investments, export, external finance, firm-bank relationships, bank internationalization mode
    JEL: D21 F10 F21 F23 G21
    Date: 2014–11
  10. By: Jørgensen, Jan Guldager (Department of Business and Economics); Schröder, Philipp J.H. (Aarhus University)
    Abstract: The present paper examines trade liberalization driven by the coordination of product standards. For oligopolistic firms situated in separate markets that are initially sheltered by national standards, mutual recognition of standards implies entry and reduced profits at home paired with the opportunity to start export sales. In contrast, harmonization, in particular the prospect that one's own national (but not the foreign) standard becomes the only globally accepted standard, opens the foreign market without balancing entry at home. We study these scenarios in a reduced form lobby game with two countries and three firms, where firms first lobby for the policy coordination regime (harmonization versus mutual recognition), and subsequently, in case of harmonization, the global standard is auctioned among the firms. We discuss welfare effects and conclude with policy implications. In particular, harmonized standards may fail to harvest the full pro-competitive effects from trade liberalization compared to mutual recognition; moreover, the issue is most pronounced in markets featuring price competition.
    Keywords: Standard regimes; harmonization; technical trade barriers; NTBs; Cournot competition; Bertrand competition
    JEL: F12 F13 F15
    Date: 2014–12–21
  11. By: Bouët, Antoine; Laborde Debucquet, David; Martimort, David
    Abstract: This theoretical paper intends to provide an explanation of the implementation of behind-the-border policies, border policies, and of the inefficiency of trade negotiations. We consider a general equilibrium model of international trade with two identical countries, two commodities, a terms-of-trade externality, and a double-tier informational problem. First, domestic producers have private information on their technology. This first layer of asymmetric information affects the design of behind-the-border policies. To reduce the information rent of those producers and ease incentive compatibility constraints, behind-the-border policies must contract domestic supply. Autarky prices are thus modified so that international trade appears. The informationally sensitive sector becomes an import sector and the more so, the greater the political influence of high-cost producers.
    Keywords: Markets, trade, Mathematical models, trade policies, International trade, Trade negotiations, asymmetric information, double-edged incentives, tariff equilibrium, behind-the-border policies,
    Date: 2014
  12. By: Shah, Syed Akhter Hussain
    Abstract: Implications of Bilateral and Sub-regional Trade The paper analyses the impact of bilateral trade and multilateral trade agreements amongst SAARC countries on their agreements with the developed countries. Multilateral agreements for economic development contribute to socio-economic development of individual states and enhance regional cooperation. Bilateral agreements for economic development may contribute to regional cooperation in the long run but in the short run negatively affect a country which is less competitive, less informed, has a weak marketing system. In the long run most states may increase their capacity, strengthen marketing networks, improve competitiveness and improve trade by linking with comparative advantage, which may raise overall production, reduce inefficiencies and increase total trade thereby enhancing income levels, interdependence and regional harmony amongst member states.
    Keywords: Key words: Bilateral trade agreements, multilateral trade agreements, SAARC countries, regional cooperation, economic development, competitiveness, comparative advantage.
    JEL: F15
    Date: 2014
  13. By: Hakan Yilmazkuday (Department of Economics, Florida International University)
    Abstract: The estimated e¡èects of distance in empirical international trade regressions are unrealistically high. Using state-and-sector level U.S. exports data, this paper shows analytically and proves empirically that ignoring the internal location of production (of international exports), which leads to the overestimation of distance e¡èects by about twofold, is a possible explanation. This overestimation is mostly attributed to the mismeasurement of the distance elasticity of trade costs when internal locations of production are ignored. A corrective distance index is proposed to avoid such mismeasurements and is shown to work well for the median sector. The results are robust to the consideration of alternative estimation methodologies and data sets.
    Keywords: Corrective Distance Index, Elasticity of Substitution, Distance Elasticity of Trade, State Exports
    JEL: F12 F13 F14
    Date: 2014–12
  14. By: Emily J. Blanchard
    Abstract: This paper reviews several key implications of international investment and global supply chain fragmentation for the multilateral trading system. Based on existing economic research, I identify a two-fold challenge for policy makers: first, to leverage the trade-liberalizing potential of global fragmentation at the multilateral level; and second, to counter the potential for opportunistic manipulation of behind-the-border policy instruments.
    Keywords: WTO, trade
    Date: 2014–11
  15. By: Hikari ISHIDO (Faculty of Law, Politics and Economics, Chiba University)
    Abstract: This paper examines how ASEAN-centered free trade agreements (FTAs) or so-called ASEAN+1 FTAs are correlated among themselves and thus have the potential to be merged into one single commitment toward the establishment of a Regional Comprehensive Economic Partnership (RCEP). The "Coverage Index" defined in this paper highlights similarities and differences among the ASEAN+1 FTAs (i.e., ASEAN Framework Agreement on Services 8th package [AFAS-8], ASEAN-China Free Trade Area 2nd package [ACFTA-2], ASEAN-Australia-New Zealand Free Trade Agreement [AANZFTA], and ASEAN-Korea Free Trade Agreement [AKFTA]). It has been found that the degree of liberalization in terms of the Coverage Index is highest under AFAS-8, which could serve as the focal point for the convergence of the ASEAN+1 FTAs which are positively correlated with AFAS-8. Also, the ASEAN priority integration sectors are making progress (with the exception of transport-related sectors). While the Coverage Index shows rather low levels of commitment by the member countries, a feasible policy suggestion is to further prioritize the priority integration sectors, including transport-related sectors, for a seamless ASEAN Economic Community as well as for a well-connected RCEP.
    Keywords: Trade in services, RCEP, liberalization
    JEL: F13 F15
    Date: 2014–12
  16. By: Bernard Hoekman
    Abstract: The Agreement on Trade Facilitation (TFA) embodies the first set of new multilateral rules to have been negotiated under auspices of the WTO, part of a small package of decisions centering on matters of interest to developing countries that was “harvested” from the broader Doha round. This paper analyzes the outcome of the trade facilitation talks, assesses the role of the epistemic community that provided information to negotiators and reflects on the lessons and possible implications of the TFA experience for the prospects for new rule-making and cooperation on regulatory matters in the WTO. The TFA illustrates both the potential and the difficulty of negotiating generally applicable stand-alone agreements in the WTO and demonstrates the importance of issue linkage in achieving cooperation in trade policy matters.
    Keywords: trade facilitation, trade agreements, issue linkage, WTO, economic development
    JEL: F13 F53 O24 R11
    Date: 2014–10
  17. By: Peter Schochet
    Keywords: TAA, Trade Adjustment Assistance Trade Act of 2002, Labor
    JEL: J
    Date: 2013–11–08
  18. By: Gustavo Gonzaga (PUC - Rio); Beatriz Muriel (Institute for Advanced Development Studies (INESAD)); Cristina Terra (Université de Cergy-Pontoise)
    Abstract: We build a theoretical model that incorporates unionization in the labor market into a Heckscher-Ohlin-Samuelson (HOS) framework to investigate the impact of unionization on the Stolper-Samuelson Theorem. To capture the American economy case, we assume that unskilled labor in the manufactured goods sector is unionized, and that sector is intensive in skilled labor, and that trade liberalization increases the relative price of manufactured goods. In the HOS model, trade liberalization induces a reallocation of production towards the sector that uses intensively the country's most abundant factor. The resulting change in relative labor demand impacts wage bargaining in the unionized sector, which, in turn, has a dampening eect on the Stolper- Samuelson eect. Moreover, wages of unionized workers are even less responsive to trade liberalization. Through traditional mandated-wages regressions, we show that skilled-wage diferentials changes were less pronounced among more unionized sectors in the U.S. economy for the 1979-1990 period.
    Keywords: Stolper-Samuelson Theorem, wage bargaining, unionization
    JEL: F16 J31 J51
    Date: 2014–04
  19. By: Philip I. Levy; Donald H. Regan
    Abstract: The EC-Seals case stemmed from complaints by Canada and Norway against European Union regulations that effectively banned the importation and marketing of seal products from those countries. The EU said it had responded to European moral outrage at the killing of seals. Canada and Norway challenged the regime under various provisions of the Technical Barriers to Trade (TBT) Agreement and the GATT. This analysis looks primarily at the WTO panel decision and considers issues such as whether there is any bright line to be drawn between legitimate and illegitimate purposes in regulation and the proper legal meaning of a “technical regulation.”
    Keywords: TBT, TBT 2.1, Technical Regulation, EC - Seal Products, Public Morals and Trade, Even-handedness
    JEL: F13 F5 K2
    Date: 2014–12
  20. By: Pol Antràs; Teresa C. Fort; Felix Tintelnot
    Abstract: This paper studies the extensive and intensive margins of firms' global sourcing decisions. We develop a quantifiable multi-country sourcing model in which heterogeneous firms self-select into importing based on their productivity and country-specific variables. The model delivers a simple closed-form solution for firm profits as a function of the countries from which a firm imports, as well as those countries' characteristics. In contrast to canonical models of exporting in which firm profits are additively separable across exporting markets, we show that global sourcing decisions naturally interact through the firm's cost function. In particular, the marginal change in profits from adding a country to the firm's set of potential sourcing locations depends on the number and characteristics of other countries in the set. Still, under plausible parametric restrictions, selection into importing features complementarity across markets and firms' sourcing strategies follow a hierarchical structure analogous to the one predicted by exporting models. Our quantitative analysis exploits these complementarities to distinguish between a country's potential as a marginal cost-reducing source of inputs and the fixed cost associated with sourcing from this country. Counterfactual exercises suggest that a shock to the potential benefits of sourcing from a country leads to significant and heterogeneous changes in sourcing across both countries and firms.
    JEL: C63 D21 D22 F12 F23 L11 L16 L23
    Date: 2014–12
  21. By: Simone BERTOLI (Centre d'Etudes et de Recherches sur le Développement International); Jesús FERNÁNDEZ-HUERTAS MORAGA
    Abstract: The scale of international migration flows depends on moving costs that are, in turn, influenced by host-country policies and by the size of migrant networks at destination. This paper estimates the influence of visa policies and networks upon bilateral migration flows to multiple destinations. We rely on a Poisson pseudo-maximum likelihood estimator to derive estimates that are consistent under more general distributional assumptions on the underlying RUM model than the ones commonly adopted in the literature. We derive bounds for the estimated direct and indirect effects of visa policies and networks that reflect the uncertainty connected to the use of aggregate data, and we show that bilateral migration flows can be highly sensitive to the immigration policies set by other destination countries, an externality that we are able to quantify.
    Keywords: visa policies, Networks, externalities, international migration, multiple destinations
    JEL: J61 O15 F22
    Date: 2014–12
  22. By: Bhupatiraju S. (UNU-MERIT)
    Abstract: In this paper, we empirically analyse the determinants of FDI ownership into developing countries. We do this by using firm-level data obtained from the Enterprise Surveys data of the World Bank and country level data from various sources. Using a multi-level logit model, we analyse how institutional and structural variables at both firm and country levels impact inward FDI. In our view, there is a gap between analysis at the country level studies and firm level studies on inward FDI. In this paper, we fill the gap by doing a multi-level regression analysis, taking into account both firm variables and country characteristics to explain inward FDI ownership. We find that firm structural characteristics and obstacles they face most affect inward FDI. While some macroeconomic variables such as GDP per capita, inflation and openness have a significant influence, other variables that measure institutional quality of a country do not have any statistically significant influence on FDI inflow.
    Keywords: International Factor Movements and International Business: General; Macroeconomic Analyses of Economic Development; Microeconomic Analyses of Economic Development; Institutions and Growth;
    JEL: F20 O11 O12 O43
    Date: 2014
  23. By: Foster-McGregor N.; Pöschl J.; Stehrer R. (UNU-MERIT)
    Abstract: A major international transmission channel of productivity increases is trade in intermediate products and services. This paper analyses international spillovers at the industry level and for the first time investigates effects from the services sector in this framework. The analysis makes use of newly available data on international input-output linkages between industries. Our results using this novel approach indicate significant positive productivity effects from innovation in knowledge intensive, high technology business services and confirm the productivity effects from international manufacturing spillovers found in the recent literature.
    Keywords: Empirical Studies of Trade; Economic Growth of Open Economies; Innovation and Invention: Processes and Incentives; Institutions and Growth;
    JEL: F14 F43 O31 O43
    Date: 2014
  24. By: Minten, Bart; Tamru, Seneshaw; Kuma, Tadesse; Nyarko,Yaw
    Abstract: We study the structure and performance of the coffee export sector in Ethiopia, Africa’s most important coffee producer, over the period 2003 to 2013. We find an evolving policy environment that leads to structural changes in the export sector, including an elimi-nation of vertical integration for most exporters. Ethiopia’s coffee export earnings increased four-fold in real terms over this period. This increase has mostly been due to changes in international market prices. The quality of coffee improved only slightly over this time, but the quantity exported increased by 50 percent, explained by both higher domestic supplies and reduced local consumption. To further progress coffee export performance, investments to increase the quantities produced and to improve quality are needed, including an increase in washing, certification, and traceability, as these characteristics are shown to be associated with significant quality premiums in international markets.
    Keywords: trade, exports, coffee, Quality, Markets,
    Date: 2014
  25. By: Posh Raj Pandey; Ratnakar Adhikari; Swarnim Wagle
    Abstract: Nepal was the first Least Developed Country to negotiate its accession to the World Trade Organization. The negotiation process was demanding, yet it succeeded in securing a relatively well-balanced accession package. The purpose of this paper is to describe the contours of the negotiation process and to share lessons learned. The paper details the onerous process involved in the accession of LDCs to the WTO and describes the context of Nepal’s negotiating positions. Some distinctive aspects of Nepal’s approach to the process of accession are highlighted and compared with the situation of some other LDCs.
    Keywords: WTO, accession negotiation, least developed countries (LDCs), economic reform, Nepal
    JEL: F13
    Date: 2014–11
  26. By: Steve Charnovitz
    Abstract: This paper provides a detailed explanation how the law of the World Trade Organization regulates environmental subsidies with a focus on renewable energy subsidies. The paper begins by discussing the economic justifications for such subsidies and the criticisms of them and then gives examples of different categories of subsidies. Next the paper provides an overview of the relevant WTO rules and caselaw, including the recent Canada -Renewable Energy case. The paper also makes specific recommendations for how WTO law can be improved, and discusses the existing literature discussing reform proposals. The study further finds that because of a lack of clarity in WTO rules, for some clean energy subsidies, a government will not know in advance whether the subsidy is WTO-legal.
    Keywords: international trade, international law, environmental protection, climate, subsidies, trade law
    Date: 2014–09
  27. By: Cozza , Claudio (BOFIT); Rabellotti , Roberta (BOFIT); Sanfilippo, Marco (BOFIT)
    Abstract: Using a new firm-level database, EMENDATA, this paper investigates the effects on Chinese multinational enterprises of Outward FDI (OFDI) into advanced European countries. Propensity score matching is combined with a difference-in-difference estimator to reduce the problems of self-selection of treated firms in foreign markets and to eliminate time-invariant and unobservable differences between those firms and the controls. The results provide robust evidence in support of the view that China’s OFDI had so far a positive impact on domestic activities in enhancing firms’ productivity and scales of operation, as measured by assets, sales and employment. Distinguishing among such investments on the basis of entry mode shows that acquisitions facilitate early access to intangible assets but are detrimental to financial performance, whereas greenfield investments have a positive impact on the scale and productivity of Chinese investors.
    Keywords: outward FDI; reverse spillovers; performance; Chinese multinationals
    JEL: F49
    Date: 2014–12–04
  28. By: Dorosh, Paul A.; Childs, Abigail
    Abstract: This paper examines the recent experience with international rice reserves in Asia and re-examines the roles of national stocks and international trade in stabilizing domestic rice prices and availability in importing countries.
    Keywords: rice, Food prices, trade, food stocks,
    Date: 2014
  29. By: Huu Thanh Tam Nguyen (EPEE - Université d'Evry Val d'Essonne); Ngoc-Sang Pham (Centre d'Economie de la Sorbonne)
    Abstract: We consider a small open economy with two productive sectors (an old and a new). There are two types of firms in the new industry: a well planted multinational firm and a potential domestic firm. Our framework highlights a number of results. First, in a poor country with low return of training and weak FDI spillovers, the domestic firm does not exist in the new industry requiring a high fixed cost. Second, once the host economy has the capacity to create the new firm, the productivity of the domestic firm is the key factor allowing it to enter into the new industry, and even eliminate the multinational firm. Interestingly, in some cases where FDI spillovers are strong, the country should invest in the new industry, but not train specific workers. Last, credit constraints and labor/capital shares play important roles in the competition between the multinational firm and the domestic one.
    Keywords: FDI spillovers, investment in training, heterogeneous firms, entry cost.
    JEL: F23 F4 O3
    Date: 2014–10
  30. By: Stephan Brunow (Institut für Arbeitsmarkt- und Berufsforschung (IAB)); Luise Grünwald (Technische Universität Dresden)
    Abstract: Theoretical and empirical contributions on export behavior highlight the importance of firms' productivity and their levels of economies of scale on firms' export success in `foreign’ markets. In the context of agglomeration economies, firms enjoy productivity gains when they are located close to competitors or upstreaming industries and they benefit from knowledge spillovers and other positive externalities. In such a stimulating environment, firms become more prone to be exporters. Beyond the role played by externalities, firms may benefit when they employ a diverse workforce and when the interaction of distinct knowledge and related problem-solving abilities increases productivity and secures export success. In this paper, we ask whether German firms (i.e., establishments) benefit from localization and urbanization externalities and face higher export proportions. We also control for a variety of establishment characteristics and workforce diversity. For this purpose, a comprehensive German data set that combines survey data and administrative data is used. While controlling for firm heterogeneity in a fractional response model, we provide evidence that manufacturing establishments and smaller establishments (up to 250 employees) benefit most from externalities and especially from knowledge spillover. There is weak evidence supporting the benefit of workforce diversity; however, that factor could explain between-establishment variation.
    Keywords: Export behavior, firms, agglomeration economies, cultural and workforce diversity
    JEL: D F J M R12
    Date: 2014–12
  31. By: Federico Tadei
    Abstract: A common explanation for African current underdevelopment is the extractive character of institutions established during the colonial period. Yet, since colonial extraction is hard to quantify, its precise mecha- nisms and magnitude are still unclear. In this paper, I tackle these issues by focusing on colonial trade in French Africa. By using new data on export prices, I show that the colonizers used trade monopsonies and coercive labor institutions to reduce prices to African agricultural producers way below world market prices. As a consequence, during the colonial period, extractive institutions cut African gains from trade by at least one-half. JEL Classification: N17; O43 Keywords: Africa, Development, Institutions, Colonization, Trade, Labor Markets
    Date: 2014
  32. By: Zoryana Olekseyuk; Hannah Schürenberg-Frosch
    Abstract: CGE models are widely used for policy evaluation and impact analysis especially with respect to trade reforms, tax reforms, energy sector reform and development policy analysis. However, the results of such models are often argued to be sensitive to the choice of exogenous parameters such as trade elasticities. Several authors show that the choice of the so-called Armington elasticities in the import demand function has a strong influence on the simulation results. Most existing estimates of Armington elasticities are only for the US. The few studies for other countries find substantially differing results. Nevertheless, many CGE modelers simply adopt the elasticities from the literature. This paper aims at providing estimated elasticities based on recent data for a larger group of European countries. Using cointegration and panel fixed effects analyses we estimate the first order condition resulting from cost minimization or utility maximization subject to the CES subutility or cost function in imports and domestic goods. The results show a rather large variation across sectors and countries and the magnitude is only partly comparable to the US elasticities. Moreover, in a small CGE application we are able to show that changing the elasticity set has a quantitative and even qualitative impact on CGE model results, which confi rms the concern that one might end up with biased results due to a misspecification of the elasticities.
    Keywords: Informal care; labour supply; cognitive ability; physical and mental health
    JEL: I12 J14 J18 J22
    Date: 2014–11
  33. By: Yvan Decreux; Lionel Fontagné
    Abstract: Negotiators have reached a deal on a limited series of issues WTO Ministerial Conference in Bali (3–6 December 2013), one of these being trade facilitation. Based on a quantitative assessment taking into account the detail of the last proposals circulated, we argue however that due to the design of the negotiation, achievements of the DDA will eventually be limited. This is due to a lack of ambition making it difficult for negotiators to compensate their own concessions. Such feebleness is induced by the way negotiations were organized – in separate groups, without much consideration for, or understanding of, how the different elements added up to more than the sum of the parts. Our quantification of these issues is performed with a dynamic computable general equilibrium model of the world economy, while liberalisation of tariffs is taken into account at the product level in order to address exceptions, flexibilities as well as the non-linear design of the formulas. A reduction in domestic support and the phasing out of export subsidies in agriculture are taken into account, as well as trade facilitation. Our conclusion is that negotiators will have to re-bundle the bits of the negotiation and shift efforts towards the neglected issue of services to make progress towards the objectives agreed on in Bali.
    Keywords: Doha Development Round, Computable General Equilibrium Models, Trade facilitation
    JEL: F13 F17
    Date: 2014–12
  34. By: Ronald B. Davies (University College Dublin; Institute for International Integration Studies, Trinity College Dublin; CES-Ifo); Julien Martin (Department of Economics, Universit\'e du Qu\'ebec \`a Montr\'eal, Canada); Mathieu Parenti (CORE-UCLouvain and IRES UCLouvain (Belgium), NRU-Higher School of Economics (Russia)); Farid Toubal (Ecole Normale Supérieure de Cachan, Paris School of Economics and CEPII, France)
    Abstract: This paper analyzes the transfer pricing of multinational firms. We propose a simple framework in which intra-firm prices may systematically deviate from arm's length prices for two motives: i) pricing to market, and ii) tax avoidance. Multinational firms may decide not to avoid taxes if the risk to be sanctioned is high compared to the tax gap. Using detailed French firm-level data on arm's length and intra-firm export prices, we find that both mechanisms are at work. The sensitivity of intra-firm prices to foreign taxes is reinforced once we control for pricing-to-market determinants. Most importantly, we find almost no evidence of tax avoidance if we disregard exports to tax havens. Back-of-the-envelope calculations suggest that tax avoidance through transfer pricing amounts to about 1\% of the total corporate taxes collected by tax authorities in France. The lion's share of this loss is driven by the exports of 450 firms to ten tax havens. As such, it may be possible to achieve significant revenue increases with minimal cost by targeting enforcement.
    Keywords: Transfer pricing, Tax haven, Pricing to market
    JEL: F23 H25 H25 H32
    Date: 2014–12
  35. By: Réka Juhász
    Abstract: This paper uses a natural experiment to assess whether temporary protection from trade with industrial leaders can foster development of infant industries in follower countries. Using a new dataset compiled from primary sources, I find that in the short-run regions (départements) in the French Empire which became better protected from trade with the British for exogenous reasons during the Napoleonic Wars (1803-15) increased capacity in a new technology, mechanised cotton spinning, to a larger extent than regions which remained more exposed to trade. Temporary protection had long term effects. In particular, by exploiting the fact that the post-war location of the cotton industry was determined to a large extent by the historical accident of the wars, I first show that the location of cotton spinning within France was persistent, and firms located in regions with higher post-war spinning capacity were more productive 30 years later. Second, I find that after the restoration of peace, exports of cotton goods from France increased substantially, consistent with evolving comparative advantage in cottons. Third, I show that as late as 1850, France and Belgium - both part of the French Empire prior to 1815 - had larger cotton spinning industries than other Continental European countries which were not protected from British trade during the wars; this suggests that adoption of the new technology was far from inevitable.
    Date: 2014–12
  36. By: Díaz-Bonilla, Eugenio
    Abstract: This paper discusses potential solutions to the current impasse related to food security stocks, including a concrete proposal by the author on language to be included in the Agreement on Agriculture that may help comply with the mandate of the Bali Ministerial to find a solution in the next four years. The paper begins with an explanation of the background to the debate of the links between food security and WTO agricultural and trade negotiations and the interim solution (the peace clause) agreed upon at Bali. Then it discusses some economic issues that frame the discussion about food security stocks, noting the new context of higher (in nominal terms) and perhaps more volatile food prices, in part associated with expanding links among energy markets and food production, supply and prices, and greater weather variability associated with climate change. The paper analyzes potential approaches to solving the problems related to the use of public stocks for food security reasons and suggests specific language that may solve the current debate. The paper also notes the more complex political economy of the future negotiations, which, among other things, will require greater flexibility among WTO Member s and deeper awareness of the evolving negotiating landscape.
    Keywords: food security, trade, Trade negotiations, Developing countries, Food supply, Food reserves, World Trade Organization, Food aid, public food stocks,
    Date: 2014
  37. By: Hamid Beladi; Avik Chakrabarti; Sugata Marjit
    Abstract: We construct a generalized model of finite change whereby exogenous shocks such as international trade or technological change, not only contract, but totally shut down production in some sectors. In such cases even in a competitive structure and in absolute contrast to the conventional wisdom, price based strategies to protect those vanishing sectors will not be equivalent to quantity based strategies. We also consider factor trade and a similar asymmetry between price based and quantity based interventionist policies.
    Keywords: Finite change, Trade policy, General Equilibrium. JEL Classification: F1, D50, F10
    Date: 2014
  38. By: Sarah Guillou (OFCE)
    Abstract: The China-Raw Materials dispute recently arbitrated by the WTO opposed China as defendant to the US, the EU and Mexico as the claimants on the somewhat unusual issue of export restrictions on natural resources. For the claimants, Chinese export restrictions on various raw materials, of which the country is a major producer, create shortages in foreign markets increasing the prices of these goods. China defends export limitations by presenting them as a natural resource conserving policy. This paper offers a theoretical analysis of the dispute with the help of a model of a monopoly extracting a non-renewable resource and selling it on both the domestic and foreign markets. The theoretical results focus on the effects of imposing an export quota on quantities, prices and price distortion. Given the crucial importance of demand elasticities in this theoretical understanding of the conflict, the empirical part of the paper provides estimates of import demand elasticity of the parties for each product concerned in the case. The model and the empirical results challenge the ideas that an export quota always favors conservation of natural resource, that a higher foreign price necessarily follows this policy and that it inherently increases price distortion and therefore discrimination.
    Date: 2014–12

This nep-int issue is ©2015 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.