nep-int New Economics Papers
on International Trade
Issue of 2015‒04‒11
38 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. How to Sustain Export Dynamism by Reducing Duality in the Dominican Republic By World Bank
  2. Firm efficiency and Input market integration Trade versus FDI By Michele Imbruno
  3. Theory and empirics of Markusen type multinationals By Uchida, Yoko; Oyamada, Kazuhiko
  4. On the variety of Mexico's export goods By Ito, Tadashi
  5. L’usine du monde au ralenti ou le changement de régime du commerce extérieur chinois By Françoise Lemoine; Sandra Poncet; Deniz Ünal; Clément Cassé
  6. Is FTA/EPA effective for a developing country to attract FDI? : simulation analysis based on an extended knowledge-capital model By Oyamada, Kazuhiko; Uchida, Yoko
  7. Can mirror data help to capture informal international trade? By Céline CARRERE; Christopher GRIGORIOU
  8. Estimation of export specialization: Lithuanian case By Dalia Bernatonyte
  9. Establishing global value chains through the liberalization of trade in services By Ishido, Hikari
  10. Beyond Trade Creation: Free Trade Agreements and Trade Disputes By Tan LI; Larry D. QIU
  11. The curious case of Brazil's closedness to trade By Canuto Dos Santos Filho,Otaviano; Fleischhaker,Cornelius; Schellekens,Philip
  12. Product quality and intra-industry trade By Ito, Tadashi; Okubo, Toshihiro
  13. The Next Chapter of ASEAN Economic Community through Integrating with the existing FTA partners (RCEP), Turkey, and Pakistan By durongkaveroj, wannaphong
  14. Did China Tire Safeguard Save U.S. Workers? By Sunghoon CHUNG; Joonhyung LEE; Thomas OSANG
  15. Tax evasion through trade intermediation : evidence from Chinese exporters By Liu,Xuepeng; Shi,Huimin; Ferrantino,Michael Joseph
  16. Product Differentiation, and the Composition of Trade Across Dissimilar Nations By Ahmad Lashkaripour
  17. Applied General Equilibrium Analysis of Mega-Regional Free Trade Initiatives in the Asia-Pacific By Hiro Lee; Ken Itakura
  18. Determinants of export performance of Ukrainian firms By Andrzej Cieslik; Jan Michalek; Iryna Nasadiuk
  19. AGOA Rules: The Intended and Unintended Consequences of Special Fabric Provisions By Lawrence Edwards; Robert Z. Lawrence
  20. Does Outward Foreign Direct Investment affect domestic real wages? An investigation using French micro-data By Alexandre Gazaniol; Catherine Laffineur
  21. The source of sustainable growth in Costa Rica By Nabeshima, Kaoru; Ito, Tadashi; Tanaka, Kiyoyasu; Kashcheeva, Mila; Bullon, David; Sanchez, Natalia
  22. Industrial Upgrading in Global Production Networks: The Case of the Chinese Automotive Industry By Yansheng LI; Xin Xin KONG; Miao ZHANG
  23. What Do We Really Know About Protection Before The Great Depression: Evidence From Italy By Federico, Giovanni; Vasta, Michelangelo
  24. Labor Clauses in Regional Trade Agreements and Effects on Labor Conditions: An Empirical Analysis By Isao Kamata
  25. Technology, Trade, and Quality Slopes By Adina Ardelean; Volodymyr Lugovskyy
  26. Institutional Support, Regional Trade Linkages and Technological Capabilities in the Semiconductor Industry in Malaysia By Rajah Rasiah; Yap Xiao SHAN
  27. Globalization: A Woman's Best Friend? Exporters and the Gender Wage Gap By Esther Ann BØLER; Beata Smarzynska JAVORCIK; Karen Helene ULLTVEI-MOE
  29. Does Monetary Policy Matter For Trade? By Chong, Terence Tai Leung; Wong, Kin Ming
  30. Intra-industry Trade, Product Fragment By Patarapong INTERAKUMNERD; Kriengkrai TECHAKANONT
  31. Learning from the ASEAN+1 Model and the ACIA By Nanda NURRIDZKI
  32. Export specialisation and regional growth, in Romania By Antonescu, Daniela
  33. Offshoring under Oligopoly By Mitsuru Igami
  34. The Indian Automotive Industry and the ASEAN Supply Chain Relations By Tristan Leo Dallo AGUSTIN; Martin SCHRODER
  35. Targeted carbon tariffs - Carbon leakage and welfare effects By Christoph Böhringer; Brita Brita Bye; Taran Fæhn; Knut Einar Rosendahl
  36. Values and Limitations of the ASEAN Agreement on the Movement of Natural Persons By Yoshifumi FUKUNAGA; Hikari ISHIDO
  37. Demand for Value Added and Value-Added Exchange Rates By Rudolfs Bems; Robert C. Johnson
  38. Black Cat, White Cat: The Identity of the WTO Judges By Johannesson, Louise; Mavroidis, Petros C.

  1. By: World Bank
    Keywords: International Economics and Trade - Export Competitiveness International Economics and Trade - Foreign Trade Promotion and Regulation International Economics and Trade - Free Trade International Economics and Trade - Trade Facilitation International Economics and Trade - Trade Policy
    Date: 2015–03
  2. By: Michele Imbruno
    Abstract: This paper highlights the crucial role played by international access to intermediate inputs to explain firm-level performance, via two channels simultaneously: trade and FDI. We develop a simple theoretical model showing that trade integration of input market entails an efficiency improvement within firms able to import (gains from input switching) and an efficiency decline within other firms (losses from domestic input availability). At the same time, FDI integration of input market implies non-importers’ efficiency enhancement (gains from input switching) and some ambiguous effects on importers’ efficiency (due to additional losses from foreign input availability). Using firm-level data from the Chinese manufacturing sector over the period 2002-2006, we find some results coherent with our theoretical predictions.
    Keywords: Heterogeneous firms, Trade liberalization, FDI, Intermediate inputs, Productivity
    JEL: F12 F14 F23
    Date: 2015–03
  3. By: Uchida, Yoko; Oyamada, Kazuhiko
    Abstract: Research on multinational firms’ activity has been conducted widely since late 1980s. The literature is differentiated into three types: horizontal FDI, vertical FDI, and three-country FDI, represented by export platform FDI. There are other methods of differentiation of the literature by approach, for example, the pure theory approach represented by Krugman and Melitz and the numerical simulation approach represented by Markusen. This paper surveys Markusen type literature by firm type. There is little literature focused on intermediate goods trade, although intermediate goods trade is considered to be strongly related to the production patterns of MNEs. In this paper, we introduce a model to explicitly treat intermediate goods trade and present simulation analysis for empirical estimation.
    Keywords: Developing countries, Developed countries, Foreign investments, International business enterprises, Multinational firms, Foreign direct investment, Knowledge-capital model
    JEL: F21 F23
    Date: 2015–03
  4. By: Ito, Tadashi
    Abstract: This paper examines the evolution of the variety of Mexico’s export goods using disaggregated trade data. Both the econometric estimation analyses using the raw data and the one using an improved version of Feenstra and Kee's (2004, 2007) methodology proposed in this paper show that NAFTA membership does not enhance the variety of Mexico's export goods. This finding contrasts with NAFTA's positive association with the increase in export variety found in the literature.
    Keywords: Mexico, Exports, International trade, International economic integration, NAFTA, Export goods variety
    JEL: F14 F15
    Date: 2015–03
  5. By: Françoise Lemoine; Sandra Poncet; Deniz Ünal; Clément Cassé
    Abstract: Since the global crisis, China's foreign trade is no longer driven by its involvement in the global supply chains (i.e. by processing trade) but its dynamics stems from China’s own domestic demand and supply. For foreign funded enterprises, China is less and less a production base for export and more and more a domestic market to be captured, as shown by their growing involvement in ordinary trade. The demand for high-end consumer goods has benefited European exporters, especially to Germany.
    Keywords: China;Growth model;FDI;Foreign trade;Domestic market
    JEL: F2 F1 F15 F23
    Date: 2015–03
  6. By: Oyamada, Kazuhiko; Uchida, Yoko
    Abstract: To prepare an answer to the question of how a developing country can attract FDI, this paper explored the factors and policies that may help bring FDI into a developing country by utilizing an extended version of the knowledge-capital model. With a special focus on the effects of FTAs/EPAs between market countries and developing countries, simulations with the model revealed the following: (1) Although FTA/EPA generally ends to increase FDI to a developing country, the possibility of improving welfare through increased demand for skilled and unskilled labor becomes higher as the size of the country declines; (2) Because the additional implementation of cost-saving policies to reduce firm-type/trade-link specific fixed costs ends to depreciate the price of skilled labor by saving its input, a developing country, which is extremely scarce in skilled labor, is better off avoiding the additional option; (3) If a country hopes to enjoy larger welfare gains with EPA, efforts to increase skilled labor in the country, such as investing in education, may be beneficial.
    Keywords: Developing countries, Foreign investments, International trade, International economic integration, Foreign direct investment, Multinational enterprise, Export platform, Free trade agreement, Economic partnership agreement
    JEL: F11 F12 F15 F23
    Date: 2015–03
  7. By: Céline CARRERE (Université de Genève); Christopher GRIGORIOU (Fonds Monétaire international)
    Abstract: Empirical studies on international trade extensively rely on the use of mirror trade statistics, i.e data reported by trading partners. However, while extensive reviews have been done on how to use mirror data to compensate poor quality data or to proxy transportation costs, very few has been done to see if and how the gap between the declared and mirrored disaggregated bilateral data could be used to capture informal cross border trade. Indeed, beyond the valid logistic reasons to explain why reported bilateral export flows from one country do not match the respective reported imports of its partner country, deliberate misreporting could significantly contribute to explain those discrepancies, either through misevaluation or misclassification of the imported goods, notably to evade tariffs and taxes. This paper proposes a review of the reasons for the gap between matched partner data, before investigating stylized facts from UN-COMTRADE data. Empirical analysis relying on econometrical panel data over a worldwide set of data at the 6 digits level evidences that discrepancies from the mirror data are not erratically driven. A statistically significant relationship between the gap and macroeconomic variables such bilateral distance, gdp per capita, average tariffs, foreign direct investments (FDI), implementation of regional trade agreements (RTA) have been evidenced. Based on these preliminary correlations, a probit has been run on orphan imports (imports reported by importing country without equivalent by exporting country) and predicts accurately up to 68% of these misclassification cases. Thus, part of the gap can be predicted by macroeconomic variables, some of them suggesting a relationship between cross-border trade flows misreporting and fraud opportunities to evade tariffs and taxes.
    JEL: F14 C33
    Date: 2015–03
  8. By: Dalia Bernatonyte (Kaunas University of Technology, Lithuania)
    Abstract: This paper investigates the nature and pattern of export specialization in Lithuania. The aim of this paper is to estimate the nature and pattern of Lithuanian export specialization under existing conditions. Seeking to define the nature and pattern of export specialization, the basic methods of export specialization measurement and the nature and pattern of export specialization in trade between Lithuania and the EU are determined. For measurement the pattern of export specialization in Lithuania two approaches are adopted. The index of export specialization is used to determine the pattern of comparative advantage. Secondly, trade dissimilarity index is used to predict structural changes in Lithuanian exports. Using these methods of measurement and standard international trade classification (SITC) was determined the nature and pattern of Lithuanian export specialization. It was found that the biggest flows from Lithuania to the EU are in such groups: food, drink and tobacco; raw materials; mineral fuels, lubricants and related materials. These calculation results show the main directions of nature and pattern of export specialization. This research could be useful for preparing and forecasting the possibilities of Lithuanian export development.
    Keywords: trade, export, export specialization, revealed comparative advantage index, trade dissimilarity index
    JEL: F1 F11 F14
    Date: 2015–04
  9. By: Ishido, Hikari
    Abstract: This paper addresses the importance of establishing global value chains through the liberalization of trade in services. A database has revealed rather disconnected policy arrangements across APEC members in terms of service trade liberalization. While the economic benefits arising from harmonized and liberalized policy across APEC members are widely recognized in the business sector, relevant policy coordination seems to be missing. With this in mind, APEC could work on establishing its own harmonized "service trade commitment table" that would be centered on simple foreign capital participation criteria. This would surely contribute to forming an APEC-wide global value chain.
    Keywords: Asia, Latin America, Oceania, North America, International trade, Service industries, International economic integration, Global Value Chain, Trade in services, Connectivity
    JEL: F13 F15
    Date: 2015–03
  10. By: Tan LI (Faculty of Business and Economics, The University of Hong Kong); Larry D. QIU (Faculty of Business and Economics, The University of Hong Kong)
    Abstract: This paper investigates the effects of the formation of free trade agreements (FTAs) on trade disputes. We construct a unique and comprehensive dataset on inter-country trade disputes from 1995 to 2007. The dataset covers 110 countries and 1130 trade disputes. We find that the incidences of trade disputes between two countries are positively associated with economic size, economic growth, and trade shares, thereby lending partial support to the “capacity hypothesis” in the dispute literature. More importantly, we obtain that FTAs between two countries reduces the occurrences of trade disputes between them. We also find that FTAs relying on the WTO dispute settlement mechanism further reduce trade disputes between their members compared to FTAs without provisions on trade dispute settlement. By contrast, the dispute-reducing effect is mitigated in FTAs which have their own dispute settlement mechanisms. The main results are robust to the control for possible measurement error and endogeneity problem.
    Keywords: Trade disputes, Trade conflicts, Disputes settlement, WTO, FTA
    JEL: F1 F5
    Date: 2015–03
  11. By: Canuto Dos Santos Filho,Otaviano; Fleischhaker,Cornelius; Schellekens,Philip
    Abstract: Although Brazil has become one of the largest economies in the world, it remains among the most closed economies as measured by the share of exports and imports in gross domestic product. This feature cannot be explained simply by the size of Brazil's economy. Rather, it is due to an economic structure reliant on domestic value chain integration as opposed to participation in global production networking. It also reflects more generally an export base that shows lack of dynamism. Opening up and moving toward integration into global value chains could produce efficiency gains and help Brazil address its productivity and competitiveness challenges.
    Keywords: Economic Theory&Research,Trade Law,Trade Policy,Free Trade,Emerging Markets
    Date: 2015–04–02
  12. By: Ito, Tadashi; Okubo, Toshihiro
    Abstract: In this study, we argue that the conventional intra-industry trade (IIT) index does not address the quality issue directly and propose a methodology to make full use of unit-price gap information to deduce quality differences between simultaneously exported and imported products. By applying this measure to German trade data at the eight-digit level, we study the quality improvement of Chinese export goods in its IIT with Germany. We compare the case of China with those of Eastern European countries, which are also major trading partners of Germany. Our results show that the unit-value difference in IIT between Germany and Eastern European countries is clearly narrowing. However, China's export prices to Germany are much lower than Germany's export prices to China, and this gap has not narrowed over the last 23 years. This is at odds with the common perception that China's product quality has improved, as documented by Rodrik (2006) and Schott (2008). Our results support Xu (2010), which argued that incorporating the quality aspect of the exported goods weakens or even eliminates the evidence of the sophistication of Chinese export goods in Rodrik (2006).
    Keywords: China, East Europe, Germany, International trade, Exports, Product quality, Intra-Industry Trade
    JEL: F15
    Date: 2014–09
  13. By: durongkaveroj, wannaphong
    Abstract: Economic integration is nowadays likely to be larger in major economies around the world, especially among the ten active countries in the Southeast Asia. The purpose of this study is to investigate the impacts of the possible trade agreement between the ASEAN and its current FTA partners as RCEP, Turkey, and Pakistan through Computable General Equilibrium (CGE) model using Global Trade Analysis Project (GTAP) model. This study reveals that most of the ASEAN member countries is positively affected under various trade bloc on their GDP, export, import, and regional household income. However, there is the difference in the level of gains among all members which leads to an urgent responsibility to create an inclusive growth.
    Keywords: AEC; FTA; RCEP; Trade liberalization; CGE model; GTAP model
    JEL: C68 F0 F1 F15 F5
    Date: 2015–03–21
  14. By: Sunghoon CHUNG (Korea Development Institute); Joonhyung LEE (Fogelman College of Business and Economics, The University of Memphis); Thomas OSANG (Department of Economics, Southern Methodest University)
    Abstract: While the impact of globalization on income inequality has received a lot of attention, little is known about its effect on the gender wage gap (GWG). This study argues that there is a systematic differece in GWG between exporting firms and non-exporters. By the virtue of being exposed to higher competition, exporters require greater commitment and flexibility from their employees. If commitment is not easily observable and women are precieved as less committed workers than men, exporters will statistically discriminate against female employees and will exhibit a higher GWG than non-exporters. We test this hyphesis using matched employer-employee data from the Norwegian manufacturing sector from 1996 to 2010. Our identification strategy relies on an exogeneous shock, namely, the legislative changes that increased the lenght of the parental leave that is available only to fathers. We argue that these changes have narrowed the perceived commitment gap between the genders and show that the initially higher GWG observved in exporting firms relative to non-exporters has gone down after the changes took place.
    Keywords: China Tire Safeguard, Temporary Trade Barriers, Trade Diversion Synthetic Control Method
    JEL: F13 F14 F16
    Date: 2015–03
  15. By: Liu,Xuepeng; Shi,Huimin; Ferrantino,Michael Joseph
    Abstract: Many production firms use intermediary trading firms to export indirectly. This paper uses Chinese export data at the transaction level to investigate the tax evasion motive through indirect trade. The paper provides strong evidence that, under China's partial export value-added tax rebate policy, production firms can effectively evade value-added taxes by underreporting their selling prices to domestic intermediary trading firms, especially when they sell differentiated products. Even for a moderate level of underreporting, the revenue loss is close to one billion U.S. dollars. The paper also finds that such underreporting behavior through domestic intermediaries may be associated with cross-border evasion through underreporting export values to foreign partners. In addition, the results indicate that the evasion motive is stronger for larger transactions.
    Keywords: Economic Theory&Research,Debt Markets,Trade Policy,Markets and Market Access,Emerging Markets
    Date: 2015–04–06
  16. By: Ahmad Lashkaripour (Indiana University)
    Abstract: I develop a novel view of comparative advantage that collectively explains (i) the effect of distance and GDP per capita on the price composition of trade, and (ii) the systematically higher trade-to-GDP ratio of rich countries. There are two types of goods, which offer different scopes for product differentiation. In equilibrium, rich and remote countries have (endogenously determined) comparative advantage in the highly-differentiated type, whereas poor countries have comparative advantage in the less-differentiated type. I combine the new channel of comparative advantage with National Product Differentiation to construct a unified model of trade. The unified model extends beyond standard gravity models as it characterizes both the volume and the product composition of foreign trade. Remarkably, in the unified model, despite homothetic preferences rich and poor countries have systematically different consumption structures, and iceberg (ad-valorem) trade costs distort the price composition of exports across space. I estimate the unified model using bilateral trade data on 100 countries and compare it to a special case, which delivers the standard gravity equation. The unified model fits the data significantly better than the standard gravity model. The estimated gains from trade are substantially larger than the standard model, and more unequally distributed across nations. Importantly, when accounting for the role of composition, further liberalization of trade systematically favors poor and remote countries.
    Keywords: trade, gravity, composition, price, Washington Apples, trade-to-GDP, gains, rich, poor
    Date: 2015–06
  17. By: Hiro Lee (Osaka School of International Public Policy, Osaka University); Ken Itakura (Graduate School of Economics, Nagoya City University)
    Abstract: Asia-Pacific countries are currently negotiating two mega-regional free trade agreements (FTAs), namely Trans-Pacific Partnership (TPP) and Regional Comprehensive Economic Partnership (RCEP). The objectives of this paper are twofold. First, by using a dynamic applied general equilibrium model with several plausible sequences of region-wide FTAs, we offer results that are highly policy relevant. Second, we examine additional effects of mega-regional FTAs, including the positive impact on productivity, reductions in compliance costs associated with rules of origin, and FTA-induced agricultural policy reforms in Japan. When the mega-regional FTAs are assumed to exerts a positive effect on productivity, the magnitudes of welfare gains for all the member countries increase significantly. When implementations of these FTAs are assumed to lead to reductions in compliance costs associated with rules of origin, it would also boost welfare gains of the member economies. Finally, when Japan's agricultural policy reforms would result in an increase in productivity of its agricultural sectors, the extent of output contraction of agricultural and processed food sectors in the country would be reduced significantly except for dairy products.
    Keywords: TPP, RCEP, productivity growth, rules of origin, agricultural policy reform
    JEL: F15 F17
    Date: 2015–03
  18. By: Andrzej Cieslik (University of Warsaw); Jan Michalek (University of Warsaw); Iryna Nasadiuk (University of Warsaw)
    Abstract: Following the new strand in the new trade theory literature that focuses on firm heterogeneity in this paper we investigate determinants of firm export performance in Ukraine. The study is based on the BEEPS firm level data compiled by EBRD and the World Bank. The study covers the period starting in 2005 and ending in 2013. We estimate probit regressions for each year of our sample as well as for the pooled dataset that includes all years. Our pooled estimation results indicate that the probability of exporting is related to the level of productivity, the firm size, R&D expenditure, the share of university graduates in productive employment, as well as the internationalization of firms. The estimation results obtained for particular countries reveal some degree of heterogeneity. In particular, the firm age is significant only in the last years of our sample.
    Keywords: Export activity, firm heterogeneity, Ukraine
    JEL: F14 P33
    Date: 2015–04
  19. By: Lawrence Edwards (University of Cape Town); Robert Z. Lawrence (Harvard University, John F. Kennedy School of Government)
    Abstract: While exports of clothing from Africa to the United States responded impressively to the preferences they were granted under the African Growth and Opportunity Act (AGOA), this performance was not accompanied by some of the more dynamic benefi ts that might have been hoped for. Benefi ciary countries still do not have viable internationally competitive industries that could survive without the preferences, or that have diversifi ed horizontally into new products and markets or vertically into greater domestic value addition. In this paper we demonstrate that this outcome is a predictable consequence of incentives under the Multi-Fiber Arrangement (MFA) quotas and the AGOA trade preferences. Th e paper fi rst extends standard trade models and predicts that, in equilibrium, the MFA encouraged exports of low quality and low value added products by AGOA countries and higher quality and higher value added products by quotaconstrained countries. AGOA preferences further encourage specialization in clothing products with high fabric cost shares in the least developed countries receiving the preference. Th e paper then tests these theoretical predictions using diff erence-in-diff erences estimations by looking at changes in the value-added and fabric intensity of AGOA apparel exports in response to the ending of the MFA in January 2005 and the granting of AGOA preferences from 2001. Th e results show that MFA quotas and AGOA preferences caused least developed AGOA recipients to specialize in fabricintensive products with low value added as well as rising fabric content.
    Keywords: African Growth and Opportunity Act, AGOA, Multi-Fiber Arrangement, trade preferences, exports, apparel, industrial development, value chains, rules of origin
    JEL: F13 F14 O14 O24
    Date: 2013–11
  20. By: Alexandre Gazaniol; Catherine Laffineur
    Abstract: This paper investigates to which extent outward foreign direct investment (FDI) affects domestic wages. We are first interested in the raw wage differential between multinational and domestic firms. Results reveal that multinational companies pay a wage premium to their employees, even within precise skill-groups (blue-collar workers, intermediate occupations and managers). The wage premium is increasing within the wage distribution. In a second step, we use spell of workers within a firm in a fixed effect model to analyze the effect of outward FDI within job-spells. Results suggest that outward FDI raises wages for managers and reduces wages for workers performing offshorable tasks. The positive effect of FDI on managers’ wages is mainly driven by the intensive margin of outward FDI, that is by large firms already established abroad. This result is observed even after controlling for endogenous workers’ mobility.
    Keywords: Offshoring, Tasks, Wages, Inequality
    JEL: J24 J31 D21 D23
    Date: 2015–03
  21. By: Nabeshima, Kaoru; Ito, Tadashi; Tanaka, Kiyoyasu; Kashcheeva, Mila; Bullon, David; Sanchez, Natalia
    Abstract: Costa Rica has some concerns for the "middle income trap" stemming from her perceived weakening export competitiveness, intensifying competition in attracting FDI inflow; and apparent lack of innovation capabilities. Quantitative analyses on the impact of recent FTAs suggest only large firms benefit from FTAs suggesting the need for improving utilization by smaller firms. Continuing attraction of potential MNCs backed by human capital development is necessary. In pursuing its development goals, Costa Rica should be mindful of its reputation as an environmentally friendly place.
    Keywords: Costa Rica, International trade, Exports, International economic integration, Economic growth, Foreign investments, Middle income trap, FTA, Innovation
    JEL: F15 F21 O31 O54
    Date: 2015–03
  22. By: Yansheng LI (Beijing Zhengxiang Yongdao Management Consulting Company); Xin Xin KONG (Chinese Academy of Science and Technology for Development); Miao ZHANG (Department of Development Studies, University of Malaya)
    Abstract: This article examines the development of China’s automotive industry. The evidence shows that integration in global production networks has stimulated upgrading of technological capabilities among automotive firms. However, the competitiveness and intra-industry analyses show mixed results. Although intraindustry trade in automotive products has improved since 2000, the trade competitiveness of completely built up vehicles has largely remained in low value added activities. Nevertheless, firm-level evidence shows that the industry has undergone considerable upgrading, albeit in low value added activities. Trade integration and host-country institutional support have been the prime driving forces of technological upgrading in the automotive industry in China.
    Keywords: automotive industry, foreign firms, production networks, technological capabilities
    JEL: L62 L22 L14 O31
    Date: 2015–02
  23. By: Federico, Giovanni; Vasta, Michelangelo
    Abstract: The impact of protection on economic growth is one of the traditional issues in economic history, which has enjoyed a revival in recent times, with the publication of a number of comparative quantitative papers. They all share a common weakness: they measure protection with the ratio of custom revenues to imports, which is bound to bias results if imports are not perfectly inelastic. In this paper, we show that the measure of protection matters, by estimating the Trade Restrictiveness Index (TRI) by Anderson and Neary (2005) for Italy from its unification to the Great Depression. We put forward a different interpretation of some key moments of Italian trade policy and we show that the aggregate welfare losses were small in the long run and mostly related to the outlandish protection on sugar in the 1880s and 1890s. We also show that different measures of protection affect considerably the results of econometric tests on the causal relation between trade policy on economic growth in Italy and in the United States. Accordingly, we argue that the economic history of trade policy needs a systematic re-estimating of protection.
    Keywords: Italian economic growth; trade policy; Trade Restrictiveness Index
    JEL: F13 F14 N73 N74
    Date: 2015–04
  24. By: Isao Kamata
    Abstract: his paper attempts to perform an empirical analysis of the effects of “labor clauses” provided in bilateral or plurilateral trade agreements (or regional trade agreements: RTAs) on working conditions that laborers in the RTA signatory countries actually face, using macro-level data for a wide variety of countries. The paper first reexamines the labor-provision classification of 223 RTAs in force proposed in the author’s other study (Kamata, 2014) by reviewing the texts of a selected set of those RTAs, and re-defines “RTAs with labor clauses” according to two criteria: (i) the agreement urges or expects the signatory countries to harmonize their domestic labor standards with internationally recognized standards, and (ii) the agreement stipulates the procedures for consultations and/or dispute settlement on labor-condition issues between the signatory countries. Based on this RTA labor-clause (re-)classification, this paper then estimates the impacts of a country’s trade intensities with partners of RTAs with labor clauses and of those without on four measured working conditions in the country: average earnings, average work hours, fatal occupational injury rate, and the number of the ILO’s fundamental conventions ratified. The empirical result indicates that RTAs with labor clauses do not differ from RTAs without labor clauses in the direction of their impacts (improving or worsening) on actual working conditions, and trade intensity with RTA partners should not have a statistically significant impact on the country’s working conditions regardless of whether or not those RTAs include labor clauses. It, however, may be premature to conclude that RTA labor clauses are not effective, since there should be some technical issues inherent in the method and data employed in the current study.
    Keywords: wage gap; International trade, Regional trade agreements, Labor standards, Labor clauses
    JEL: F13 F14 F16 J81 J88
    Date: 2015–03
  25. By: Adina Ardelean (Santa Clara University); Volodymyr Lugovskyy (Indiana University)
    Abstract: We investigate the factors that, in addition to preferences, aect the extent to which richer households pay more for a given durable good with respect to their expenditures on nondurables, dened as the quality slope. We show theoretically and conrm empirically that the quality slope decreases in the cost elasticity of quality. Given that this elasticity varies across countries, the quality slope also depends on taris. Specifcally, it increases in the tariff on middle-income exporters (higher elasticity) and decreases in the tariff on imports from high-income OECD exporters (lower elasticity) to the U.S.
    Keywords: Quality Differentiation, Quality Upgrading, Non-homothetic, Technology, International Trade
    JEL: F1
    Date: 2015–04
  26. By: Rajah Rasiah (Department of Development Studies, University of Malaya); Yap Xiao SHAN (Department of Development Studies, University of Malaya)
    Abstract: This article examines the relationship between host-site institutional support and regional trade linkages on firm-level technological capabilities in the semiconductor industry in Malaysia. An evolutionary perspective was used to measure technological capabilities using knowledge embodied in machinery, organization, processes and products. The results show that host-site institutional support, and regional trade linkages were correlated with technological upgrading. The relationship between host-site institutional support and technological upgrading was stronger than that between regional trade linkages and technological upgrading. The results show that host site institutional support is more important than regional integration in influencing firms’ capacity to upgrade their technological capabilities.
    Keywords: institutional support, Malaysia, regional trade chains, semiconductors, technological capabilities
    JEL: L62 L22 L14 O31
    Date: 2015–02
  27. By: Esther Ann BØLER (University of Oslo and ESOP); Beata Smarzynska JAVORCIK (University of Oxford, ESOP and CEPR); Karen Helene ULLTVEI-MOE (University of Oslo, ESOP and CEPR)
    Abstract: While the impact of globalization on income inequality has received a lot of attention, little is known about its effect on the gender wage gap (GWG). This study argues that there is a systematic differece in GWG between exporting firms and non-exporters. By the virtue of being exposed to higher competition, exporters require greater commitment and flexibility from their employees. If commitment is not easily observable and women are precieved as less committed workers than men, exporters will statistically discriminate against female employees and will exhibit a higher GWG than non-exporters. We test this hyphesis using matched employer-employee data from the Norwegian manufacturing sector from 1996 to 2010. Our identification strategy relies on an exogeneous shock, namely, the legislative changes that increased the lenght of the parental leave that is available only to fathers. We argue that these changes have narrowed the perceived commitment gap between the genders and show that the initially higher GWG observved in exporting firms relative to non-exporters has gone down after the changes took place.
    Keywords: Exporters, Globalizations, Gender Wage Gap
    JEL: F10 F14 F16 J16
    Date: 2015–03
  28. By: Pami Dua (Departments of Economics, Delhi School of Economics, University of Delhi, India); Divya Tuteja (Departments of Economics, Delhi School of Economics, University of Delhi, India)
    Abstract: We study the impact of recent crisis episodes viz. the global recession of 2008-09 and the Eurozone debt crisis of 2010-12 on the Emerging Market Economies (EMEs) of China and India. Macroeconomic indicators suggest that both China and India were impacted by the crises. We focus on the trade channel of transmission of the crises i.e. on exports from China and India to the U.S. and Euro Area respectively. This study finds that the exports from China and India to both the destinations were affected as a result of the crisis episodes with major exporting sectors of the two economies displaying negative rates of growth. Further, Markovswitching autoregressive models are utilized to examine the regimes in the growth rate of total value of exports to the U.S. and Eurozone. We find presence of slowdown and pickup regimes in the export growth rates. Furthermore, Markov-switching regression results suggest that the economic activity levels in the U.S. and the Eurozone significantly and positively affect the exports to these destinations from China and India across high as well as low export growth rate regimes. As a result, a dampening of the economic activity in the U.S. and Eurozone in the wake of the crises led to a reduction in the rate of growth of exports from China and India due to a fall in the demand for exports.
    Keywords: Global Recession, Eurozone Debt crisis, China, India, Exports, Trade Channel
    JEL: C22 F14 G01
    Date: 2015–04
  29. By: Chong, Terence Tai Leung; Wong, Kin Ming
    Abstract: There is a large literature on the effect of exchange rate arrangements on trade. The monetary policy used in the floating exchange rate regime, however, is usually ignored and unidentified in the empirical studies. This makes the effect of alternative monetary policy regimes on trade remains largely unknown. This paper sheds light on this area by examining the effect of two well-defined monetary policy regimes, namely exchange-rate targeting and inflation targeting regimes, on bilateral and multilateral trade. Our result suggests a moderate positive effect of inflation targeting policy on bilateral trades between two inflation targeting countries. This effect of inflation targeting, even much moderate than the effect of currency union and a fixed exchange rate at the bilateral level, could exist in the bilateral trades with a large number of trading partners under the same regime. This implies that inflation targeting regime may not have a lower level of multilateral trade than exchange-rate targeting regime. We further support this view with an analysis of multilateral trade.
    Keywords: Monetary Policy Regimes; Inflation Targeting; Exchange-rate Targeting; Gravity Model; Trade
    JEL: E42 E52 E58 F14
    Date: 2015–04–12
  30. By: Patarapong INTERAKUMNERD (Graduate Institute for Policy Studies (GRIPS), Tokyo, Japan); Kriengkrai TECHAKANONT (Faculty of Economics, Thammasat University, Thailand)
    Abstract: Thailand’s automotive industry has evolved from a small importsubstituting industry to a vibrant exporting one. It has contributed significantly and increasingly to the economy and intra-industry trade in Southeast Asia. The country also has experienced ‘qualitative’ change from simple production to technologically sophisticated activities. The evidence amassed illustrates that firm strategy and collaboration with other actors in the national innovation system were the most important drivers of technological upgrading in the industry. Local automotive part suppliers in particular had to become ‘active’ learners by collaborating with other partners beyond their own multinational buyers to compete in export markets.
    Keywords: automotive, host-site institutions, intra-industry trade, Thailand technology
    Date: 2015–02
  31. By: Nanda NURRIDZKI (University of Indonesia)
    Abstract: The Regional Comprehensive Economic Partnership (RCEP) is a new regional integration initiative intended to achieve a modern, comprehensive, high-quality, and mutually beneficial economic partnership agreement among the ASEAN Member States (AMSs) and ASEAN’s FTA Partners. The RCEP initiative was announced by the ASEAN Leaders in November 2011 during the 19th ASEAN Summit. It is believed that this ASEANled process will enable ASEAN to broaden and deepen its economic engagements with its FTA partners. The RCEP will enhance access to a huge potential market, bringing benefits to both businesses and consumers in the participating countries. The agreement is between 16 countries, which make up 45 percent of world population and contribute a third of the world’s GDP in total. The RCEP should lead to greater economic integration, support equitable economic development, and strengthen economic cooperation among the countries involved. In general, RCEP can be seen as regional economic integration in East Asia on a higher level. It is assumed that RCEP will produce a commitment from AMSs and all partners (although there are several possible exceptions). Commitments from the partners are also expected to be in conjunction with the commitments made with individual AMSs. Additionally, the commitments made under RCEP are supposed to be substantially better compared to the existing ASEAN+1 commitment. This technical note aims to support RCEP through a key point analysis of the current ASEAN+1 FTA agreements. This analysis is expected to become an input for policy on the baseline for RCEP negotiation in the area of investment. This technical note is composed of the following parts: 1) a narrative on the background, which is then followed by an account of the evolution of IGA, AIA, and ACIA1 ; 2) a discussion on the progress of the ASEAN+1 FTA Agreements on Investments; and 3) the reservation lists in the ACIA. The note ends with a brief conclusion.
    Keywords: ASEAN, International Trade Agreements, FDI
    JEL: F13 F21
    Date: 2015–03
  32. By: Antonescu, Daniela
    Abstract: From regional growth theoretical perspectives, exports represent the important factor with different impact in time and space. The export activities depend in a large share on the way in which a state or a region capitalises their endogenous potential, including the accumulated knowledge and existing capacities. Due to the positive impact on the regional competitiveness and specialisation, export is regarded, currently, as an important factor of economic resilience, but also as a pillar for the emergence of territorial inequalities. This paper investigates which export fields and products at regional level have resisted to crisis and the possible policy responses to mitigate the effects. Also, we intend to present a series of quantitative and qualitative comparisons regarding the regional export activity, for the period 2008-2013, when export registered variations from one from one region to another, under the impact of the world economic and financial crisis.
    Keywords: economic and financial crisis, export specialisation, NUTS 2 region, regional growth
    JEL: F14 R1 R11
    Date: 2015–02
  33. By: Mitsuru Igami (Yale University)
    Abstract: This paper empirically investigates high-tech firms’ decisions to relocate manufacturing plants to low-cost countries. Computers and electronics have undergone sector-wide offshoring and typically feature an oligopolistic market structure, in which firms’ profits depend on their own and rivals’ costs. To incorporate the endogenous evolution of offshoring incentives and market structure, I model and estimate a dynamic offshoring game with entry/exit, using unique data on hard disk drive (HDD) manufacturers. The results suggest that due to competitive pressure, the incentives to offshore increase as more rivals offshore. I then assess the welfare impacts of government interventions and find that (1) offshoring is pro-competitive, (2) discouraging offshoring would risk the survival of domestic firms, and (3) governments in Nash equilibrium would engage in either a subsidy race to drive out foreign firms, or free-riding on foreign firms’ offshoring efforts, depending on policy objectives.   Also available via SSRN. 
    Keywords: dynamic oligopoly, Industry Life Cycle, Offshoring, Strategic Trade Policy
    JEL: F12 F14 L13
    Date: 2015
  34. By: Tristan Leo Dallo AGUSTIN (Mitsubishi Fuso); Martin SCHRODER (Research Institute Auto Parts Industries, Waseda University)
    Abstract: The topic of automotive supply chains has been increasingly studied as it raises questions of economic development, especially from the perspectives of simultaneous globalisation and regionalisation, and trade. While ASEAN is a prime example of intraregional production networks, supply chains that connect ASEAN and India have not been studied indepth. Therefore, this paper investigates the Indian automotive industry, which is composed of automobile original equipment manufacturers (OEMs) and parts and components producers, and other supply chain connections to the neighbouring ASEAN region. This study is structured as follows. First, we will take a look at the historic development of the automotive industry in India, as it provides the context for the development of companies and their capabilities that are crucial determinants for their ability to join supply chains. The investigation will not be limited to Indian firms because as case studies of the ASEAN region forcefully demonstrate, foreign OEMs and parts suppliers may use developing and emerging markets as specialised production bases of their global and regional supply chains. Second, against the historic background, the current condition of the automotive industry in India will be analysed by discussing industry data. Third, we will conduct case studies of automotive companies from India, Japan, and South Korea to investigate how India and ASEAN are connected through supply chains and determine which chains integrate Indian companies. We will analyse to which extent industrial and trade policies promote or hinder the extension of ASEAN supply chains to India and vice versa. As a final step, policy recommendations will be formulated based on the findings in order to improve the automotive trade between India and ASEAN.
    Keywords: Automotive industry, supply chain organization, production networks
    JEL: L62
    Date: 2015–03
  35. By: Christoph Böhringer (University of Oldenburg, Department of Economics); Brita Brita Bye (Statistics Norway, Research Department); Taran Fæhn (Statistics Norway, Research Department); Knut Einar Rosendahl (Norwegian University of Life Sciences, School of Economics and Business)
    Abstract: Climate effects of unilateral carbon policies are undermined by carbon leakage. To counteract leakage and increase global cost-effectiveness carbon tariffs can be imposed on the emissions embodied in imports from non-regulating regions. We present a theoretical analysis on the economic incentives for emission abatement of producers subjected to carbon tariffs. We quantify the impacts of different carbon tariff designs by an empirically based multi-sector, multi-region CGE model of the global economy. We find that firm-targeted tariffs can deliver much stronger leakage reduction and higher efficiency gains than tariff designs operated at the industry level. In particular, because the exporters are able to reduce their carbon tariffs by adjusting emissions, their competitiveness and the overall welfare of their economies will be less randomly and less adversely affected than in previously studied carbon tariff regimes. This beneficial distributional impact could facilitate a higher degree of legitimacy and legality of carbon tariffs
    Keywords: carbon leakage, border carbon adjustment, carbon tariffs, computable general equilibrium (CGE)
    JEL: Q43 Q54 H2 D61
    Date: 2015–03
  36. By: Yoshifumi FUKUNAGA (Economic Research Institute for ASEAN and East Asia); Hikari ISHIDO (Faculty of Law, Politics and Economics, Chiba University)
    Abstract: ASEAN Economic Ministers signed the Agreement on the Movement of Natural Persons (MNP) in 2012. This is a new instrument potentially facilitating the free flow of goods, services, investment, and skilled labour, thus contributing to the establishment of an ASEAN single market and production base. The objective of this paper is to assess the benefits and limitations of this new instrument. The MNP Agreement is an independent Mode 4 services agreement. Actual commitments cover business visitors (seven ASEAN Member States, or AMSs), intra-corporate transferees (all the AMSs), and contractual services suppliers (three AMSs). In general, the commitments add value to predated agreements (namely, AFAS 8 and AANZFTA) for many AMSs in terms of wider sectoral coverage and/or new categories of commitment. However, the commitments vary widely across countries regarding sectoral coverage, committed categories of MNP, and lengths of initial periods of stay. A stand-alone MNP Agreement may result in Mode 4 commitments inconsistent with Mode 3 commitments. Furthermore, the current agreement does not cover non-services sectors at all.
    Keywords: ASEAN, movement of natural persons, AANZFTA, AFAS, GATS
    JEL: F13 F15 F16
    Date: 2015–03
  37. By: Rudolfs Bems; Robert C. Johnson
    Abstract: We examine the role of cross-border input linkages in governing how international relative price changes influence demand for domestic value added. We define a novel value-added real effective exchange rate (REER), which aggregates bilateral value-added price changes, and link this REER to demand for value added. Input linkages enable countries to gain competitiveness following depreciations by supply chain partners, and hence counterbalance beggar-thy-neighbor effects. Cross-country differences in input linkages also imply that the elasticity of demand for value added is country specific. Using global input-output data, we demonstrate these conceptual insights are quantitatively important and compute historical value-added REERs.
    JEL: F1 F4
    Date: 2015–04
  38. By: Johannesson, Louise (Research Institute of Industrial Economics (IFN)); Mavroidis, Petros C. (Columbia Law School)
    Abstract: WTO judges are proposed by the WTO Secretariat and elected to act as ‘judges’ if either approved by the parties to a dispute, or by the WTO Director-General in case no agreement between the parties has been possible. They are typically ‘Geneva crowd’, that is, they are either current or former delegates representing their country before the WTO. This observation holds for both first- as well as second instance WTO judges (e.g. Panelists and members of the Appellate Body). In that, the WTO evidences an attitude strikingly similar to the GATT. Whereas the legal regime has been heavily ‘legalized’, the people called to enforce it remain the same.
    Keywords: Dispute resolution; Panelists; Judicial appointments
    JEL: K40
    Date: 2015–03–31

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