nep-int New Economics Papers
on International Trade
Issue of 2015‒05‒09
nineteen papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Trade Agreements and Enforcement: Evidence from WTO Dispute Settlement By Bown, Chad P.; Reynolds, Kara M.
  2. The Great Trade Collapse and the Spanish Export Miracle: Firm-level Evidence from the Crisis By Peter S. Eppinger; Nnicole Meythaler; Marc-Manuel Sindlinger; Marcel Smolka
  3. Imported inputs and Egyptian exports: Exploring the links By Parra, María Dolores; Martínez-Zarzoso, Inmaculada
  4. The Gains from Trade in a New Model from the IMF: Still Very Small By David Rosnick
  5. Export Spillovers from Foreign Direct Investment: Evidence from Turkey By Başak Dalgıç; Burcu Fazlıoğlu; Michael Gasiorek
  6. Changes in the Environment Surrounding Japan's Exports: An Approach Focusing on Global Trade Volume and Export Share By Yoshiyuki Kurachi; Masatoshi Ando; Kanako Shoji
  7. Comparative Advantages in U. S. Bilateral Services Trade with China and India By Lirong Liu; Hiranya K. Nath; Kiril Tochkov
  8. Multi-product Offshoring By Eckel, Carsten; Irlacher, Michael
  9. Internal Trade, Productivity, and Interconnected Industries: A Quantitative Analysis By Trevor Tombe; Lukas Albrecht
  10. China Integrates Asia with the World: An Empirical Study By Dinda, Soumyananda
  11. Regional Economic Integration and Multilateralism: The Case of the ASEAN-Australia-New Zealand FTA and the Malaysia-New Zealand FTA By Vitalis, Vangelis
  12. The evolution of comparative advantage: measurement and implications By Andrei A. Levchenko; Jing Zhang
  13. Comparative Advantages in U. S. Bilateral Services Trade with China and India By Lirong Liu; Hiranya K. Nath; Kiril Tochkov
  14. A political economy of China's export restrictions on rare earth elements By Pothen, Frank; Fink, Kilian
  15. Suspiciously Timed Trade Disputes By Paola Conconi; David De Remer; Georg Kirchsteiger; Lorenzo Trimarchi; Maurizio Zanardi
  16. What type of FDI is attracted by bilateral investment treaties? By Liesbeth Colen; Damiaan Persyn; Andrea Guariso
  17. The Impact of Trade on Labor Market Dynamics By Caliendo, Lorenzo; Dvorkin , Maximiliano; Parro, Fernando
  18. International public procurement: From scant facts to hard data By Cernat, Lucian; Kutlina-Dimitrova, Zornitsa
  19. A Half Century of Trans-Pacific Competition: Price level indices and productivity gaps for Japanese and U.S. industries, 1955-2012 By Dale W. JORGENSON; NOMURA Koji; Jon D. SAMUELS

  1. By: Bown, Chad P.; Reynolds, Kara M.
    Abstract: This paper examines implications of the terms-of-trade theory for the determinants of outcomes arising under the enforcement provisions of international agreements. Like original trade agreement negotiations, we model formal trade dispute negotiations as potentially addressing the terms-of-trade externality problem that governments implement import protection above the globally efficient level so as to shift some of the policy's costs onto trading partners. We first extend earlier theoretical models from trade agreement accession negotiations to the setting of enforcement negotiations, and the resulting theory guides our empirical assessment. We use instrumental variables to estimate the model on trade volume outcomes from WTO disputes over 1995-2009. Our evidence is consistent with theoretical predictions that larger import volume outcomes are associated with products that have smaller increases to foreign exporter-received prices (terms-of-trade losses to the importer) as a result of the dispute, larger pre-dispute import volumes, larger import demand elasticities, and smaller foreign export supply elasticities. Dispute settlement outcome differences are also explained by variation in institutionally-motivated measures of retaliation capacity and the severity of the free rider problem associated with foreign exporter concentration.
    Keywords: dispute settlement; terms of trade; trade agreements; WTO
    JEL: F13 F14
    Date: 2015–05
  2. By: Peter S. Eppinger (University of Tübingen); Nnicole Meythaler (Institute for Applied Economic Research (IAW) at the University of Tübingen); Marc-Manuel Sindlinger (University of Bonn); Marcel Smolka (Department of Economics and Business, Aarhus University, Denmark and IZA)
    Abstract: We provide novel evidence on the micro-structure of international trade during the 2008 financial crisis and subsequent global recession exploring a rich firm-level data set from Spain. The analysis is motivated by the surprisingly strong export performance of Spain in the aftermath of the great trade collapse (dubbed by some as the “Spanish export miracle”). The focus of our analysis is on changes at the extensive and intensive firm-level margins of trade, as well as on performance differences (jobs, productivity, and firm survival) across firms that differ in their export status. We find no adverse effects of the financial crisis on foreign market entry or exit, but a considerable increase in the export intensity of firms after the financial crisis. Moreover, we find that those firms that entered the crisis as exporters (and continued exporting throughout the crisis years) were more resilient to the crisis than those firms that restricted their sales to the domestic market. Finally, in contrast to exporters, non-exporters experienced a significant deterioration in their total factor productivity, which led to an overall decline in the productivity of a significant number of industries in Spanish manufacturing.
    Keywords: international trade, financial crisis, manufacturing, firm-level data, Spain
    JEL: F10 F14 G01 D24
    Date: 2015–04–29
  3. By: Parra, María Dolores; Martínez-Zarzoso, Inmaculada
    Abstract: This paper is the first to explore the links between exporting and importing activities of Egyptian firms using panel data over the period from 2003 to 2007. The main aim is twofold. Firstly, the authors report regression results indicating that firms that both export and import are the most productive, followed by importing-, exporting-only firms and nontraders. Secondly, the authors estimate the determinants of the extensive and intensive margins of exports and imports using dynamic panel-Probit and panel-Tobit models in combination with the method proposed by Hesketh and Skrondal (2013) to tackle the initial conditions problem. Their results show that both activities present a high degree of hysteresis, which is higher for imports than for exports pointing to the existence of sunk costs in both activities. Moreover, past productivity does affect the extensive margin of imports, but not of exports and the initial condition status is also only relevant for the import side. Similar outcomes are obtained for the intensive margin of trade.
    Keywords: Firm level data,Egypt,internationalization,imports,exports,intermediates
    JEL: F14
    Date: 2015
  4. By: David Rosnick
    Abstract: This paper takes a careful look at a recent International Monetary Fund (IMF) Working Paper that claims to find significant gains for liberalization of trade through the World Trade Organization. It is not clear that the reported gains are at all large. The IMF paper shows that multilateral liberalization increases consumption perhaps 0.014 percent. This would be about 43 cents per person per month in the United States. One significant result of the IMF paper is that potential gains of multilateral trade liberalization are very small even in a formal New Keynesian model incorporating economies with significant power in international markets.
    Keywords: IMF, WTO, trade, trade liberalization
    JEL: F F1 F13 F17 F14 F16 F10
    Date: 2015–04
  5. By: Başak Dalgıç (Department of Public Finance, Hacettepe University , Turkey); Burcu Fazlıoğlu (Department of International Entrepreneurship, TOBB ETU University , Turkey); Michael Gasiorek (Department of Economics, University of Sussex, United Kingdom)
    Abstract: This paper explores export spillovers that arise from foreign direct investment generated linkages between domestic and foreign firms in Turkish manufacturing industry. By making use of a recent firm level dataset, we investigate how supplying to foreign affiliated firms, as proxied by their presence in downstream industries and foreign presence in firms’ own industry affects (i) extensive and intensive margins of domestic firms’ exporting, (ii) the quality of exports proxied by unit values, (iii) the decision of domestic firms to export or start exporting, (iv) firms’ export orientation towards destination markets with high income levels. The results of the study suggest that even after controlling for firm heterogeneity, stronger presence of foreign firms in downstream industries yields better export performance of domestic firms. We do not find any evidence on the effect of supplying to foreign affiliated firms on the quality of exporting. Furthermore, it is shown that foreign presence in downstream industries is associated with higher probability of exporting, while foreign presence in firms’ own industry is found to have a negative effect. Finally, we find evidence on the fact that supplying to multinationals in downstream industries is positively associated with firms’ both intensive and extensive margins of exports towards developed regions of the world.
    Date: 2015
  6. By: Yoshiyuki Kurachi (Bank of Japan); Masatoshi Ando (Bank of Japan); Kanako Shoji (Bank of Japan)
    Abstract: Japan's exports have lacked momentum since the Lehman shock. In this paper, we examine export trends for the period by breaking them down into "global trade volume" and "Japan's share." This analysis finds: (1) in addition to sluggish growth for global trading activities, (2) there has been a secular decline in competitiveness in IT-related fields, (3) global fixed investment demand has been weak, and (4) overseas production has accelerated, accompanied by increases in local procurement, particularly in the automobile sector. These factors including structural ones have interacted with each other and depressed exports with other changes. It should be noted, however, that at the current point in time global trade volume is enjoying moderate growth, and the environment surrounding Japan's exports is gradually improving, specifically, (1) global demand for capital goods has turned upwards, particularly in the United States, and (2) the depreciation of the yen that began at the end of 2012 has improved price competitiveness in various fields including IT-related sectors. In this situation, Japan's exports are picking up.
    Date: 2015–04–28
  7. By: Lirong Liu; Hiranya K. Nath; Kiril Tochkov
    Abstract: Using bilateral trade data for 16 service categories, this paper examines the patterns, evolution, and determinants of comparative advantage (CA) in U.S. services trade with China and India from 1992 to 2010. The results indicate that the U.S. has a CA in most services, except in more traditional ones, such as travel and transportation. However, India, and more recently China, gained a CA in modern services, such as computer and information services during the period considered in this paper. An examination of the distributional dynamics indicates that the likelihood of U.S. gaining CA over an initial position of comparative disadvantage (CDA) in its trade of a particular service with India is higher than the probability of losing its initial dominance. In contrast, the U.S. CA or CDA vis-à-vis China exhibits high levels of persistence over time. The regression results suggest that relative abundance of sector-specific labor, human capital, and FDI inflows have been significant sources of CA for the U.S. over both China and India.
    Keywords: Services Trade; Comparative Advantage; China; India
    JEL: F14 O57
    Date: 2015–04–01
  8. By: Eckel, Carsten; Irlacher, Michael
    Abstract: We show that the labor market effects of product line relocations within multi-product firms differ significantly from the relocation of production tasks within single-product firms. By incorporating offshoring of labor-intensive goods in a model with multi-product firms, and exploring its implications in partial and general equilibrium, we identify the cannibalization effect of offshoring as an important transmission mechanism within multi-product firms and show that this effect hits domestic labor demand in addition to the well-known relocation effect. Furthermore, we contribute to the growing literature on multi-product firms and trade by showing that lower offshoring costs tend to increase the range of products produced.
    Keywords: cannibalization effect; efficiency-seeking offshoring; general oligopolistic equilibrium; product range
    JEL: F12 F23 L23
    Date: 2015–05
  9. By: Trevor Tombe (University of Calgary); Lukas Albrecht
    Abstract: Does trade within a country affect welfare and productivity? What are the magnitude and consequences of costs to such trade? To answer these questions, we exploit unique Canadian data to measure internal trade costs in a variety of ways – they are large, and vary across sectors and provinces. To quantify their consequences for welfare and productivity, we use a recent multi-sector trade model featuring rich input-output relationships. We find inter-provincial trade is an important contributor to Canada’s GDP and welfare, though there are significant costs to such trade. Reducing inter-provincial trade costs by 10% yields aggregate gains of 0.9%; eliminating our preferred estimates of costs, gains average between 3-7% – equivalent to real GDP gains between $50-$130 billion. Finally, as policy reforms are often sector-specific, we liberalize sectors one at a time and find gains are largest in highly interconnected industries.
    Keywords: Internal trade; gains from trade; input-output linkages
    JEL: F1 F4 R1
    Date: 2015–05–05
  10. By: Dinda, Soumyananda
    Abstract: The paper focuses on China’s economic integration with Asia region and the world. It also attempts to find the long run relation with short run dynamics of China’s trade in Asia and the world. The augmented Dicky-Fuller (ADF) and Phillips-Perron (PP) methods are applied to test the time-series properties of the variables. Co-integration technique is used to detect the economic integration of China’s export to the US and its import from Asian nations using monthly aggregate data from December 2005 to July 2010. This study observed that empirically China’s export to the US depends on exchange rate and China’s import from Asia depends on China’s export to the US. China has double role in international trade – (i) China acts as an attractor of all inputs from Asia and (ii) China exports the final products in international market. This study also reveals that the speed of China’s import from Asia is faster than that of China’s export to the US. The results imply that China’s trade should be treated as an engine of growth in the Asian developing countries and the trade promotion policies should be encouraged. The emerging China will create other opportunities through trade integration with Asia and the world. China is economically integrated with region and the world. The paper contributes to measure the speed of China's export and import within Asia and the world. These empirical findings will help policy makers to formulate their policy and design the mechanism for application as per their targets.
    Keywords: Economic Integration, production network, Co-integration, Asia, China, the US, ECM, Engine of Growth, Export, Import, Long run, Short run dynamics.
    JEL: C22 C52 F2 F4 F5 N95 R12
    Date: 2012–07
  11. By: Vitalis, Vangelis (Asian Development Bank Institute)
    Abstract: Regional economic integration is back in vogue following the "stumble" in the Doha Round in July 2008. Preferential trade agreements (PTAs) are driving this trend in Asia and the Pacific as well as in Central and South America, and the sheer volume of PTAs is striking. In the 1990s there were barely five PTAs in force, but now there are more than 200 either under negotiation or in force. In this regard, Asia and the Pacific has developed a rapidly evolving regional economic architecture that spans two major plurilateral agreements, the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (or ASEAN+6 RCEP), as well as the putative Free Trade Agreement of the Asia-Pacific (FTAAP), which received a new lease on life through the Asia-Pacific Economic Cooperation (APEC) leaders' meeting in Beijing late last year. ASEAN, as a group or individually, has been particularly busy in this sphere, deliberately using PTAs as a supplement to its own regional integration process. In Central and Latin America, economic integration has been similarly pursued at variable speeds and in variable geometries. In the meantime, there have been some concerns about the proliferation of PTAs for all the usual reasons. Trade diversion is a reality and with their less-than-comprehensive approach to sensitive issues like agriculture and burdensome rules of origin (ROO), many PTAs are perceived as being at best of marginal business interest and at worst a "stumbling block" to conclusion of the Doha Development Round. This paper argues, however, that more recent PTA outcomes, like the ASEAN-Australia-New Zealand FTA (AANZFTA) and the Malaysia-New Zealand FTA (MNZFTA) present a rather more nuanced picture. There may even be some grounds for modest optimism about how PTAs can be building—not stumbling—blocks for multilateralism. Four distinct criteria are used to assess the AANZFTA and the MNZFTA. These include: 1) the breadth and depth of agricultural market access liberalization; 2) the existence (or non-existence) of WTO-plus commitments; 3) how the risks of complex ROO, etc., are mitigated; and 4) the introduction of bespoke solutions of direct commercial value to business (e.g., facilitated business visitor access). The paper suggests that both the AANZFTA and the MNZFTA provide the basis for engagement at the WTO on how to multilateralize the outcomes secured through the AANZFTA and the MNZFTA. The role and experience of New Zealand in both of these high quality and comprehensive PTAs is something that may be of enduring interest.
    Keywords: regional economic integration; preferential trade agreements; doha development round; asean-australia-new zealand free trade agreement; malaysia-new zealand free trade agreement; multilateralization; Australia; Malaysia Trade; New Zealand; Asia
    JEL: F13 F15 F53
    Date: 2015–04–22
  12. By: Andrei A. Levchenko; Jing Zhang
    Abstract: We estimate productivities at the sector level for 72 countries and 5 decades, and examine how they evolve over time in both developed and developing countries. In both country groups, comparative advantage has become weaker: productivity grew systematically faster in sectors that were initially at greater comparative disadvantage. These changes have had a signicant impact on trade volumes and patterns, and a non-negligible welfare impact. In the counterfactual scenario in which each country's comparative advantage remained the same as in the 1960s, and technology in all sectors grew at the same country-specic average rate, trade volumes would be higher, cross-country export patterns more dissimilar, and intra-industry trade lower than in the data. In this counterfactual scenario, welfare is also 1.6% higher for the median country compared to the baseline. The welfare impact varies greatly across countries, ranging from −1.1% to +4.3% among OECD countries, and from −4.6% to +41.9% among non-OECD countries.
    Keywords: Technological change, sectoral TFP, Ricardian models of trade, welfare
    JEL: F11 F43 O33 O47
    Date: 2015–04
  13. By: Lirong Liu (Department of Economics, Sam Houston State University); Hiranya K. Nath (Department of Economics and International Business, Sam Houston State University); Kiril Tochkov (Department of Economics, Texas Christian University)
    Abstract: Using bilateral trade data for 16 service categories, this paper examines the patterns, evolution, and determinants of comparative advantage (CA) in U.S. services trade with China and India from 1992 to 2010. The results indicate that the U.S. has a CA in most services, except in more traditional ones, such as travel and transportation. However, India, and more recently China, gained a CA in modern services, such as computer and information services during the period considered in this paper. An examination of the distributional dynamics indicates that the likelihood of U.S. gaining CA over an initial position of comparative disadvantage (CDA) in its trade of a particular service with India is higher than the probability of losing its initial dominance. In contrast, the U.S. CA or CDA vis-à-vis China exhibits high levels of persistence over time. The regression results suggest that relative abundance of sector-specific labor, human capital, and FDI inflows have been significant sources of CA for the U.S. over both China and India.
    Date: 2015–04
  14. By: Pothen, Frank; Fink, Kilian
    Abstract: We investigate why governments restrict exports of exotic raw materials taking rare earth elements as a case study. Trade restrictions on exotic materials do not have immediate macroeconomic effects. Relocating rare earth intensive industries is found to be the main reason behind China's export barriers. They are part of a more extensive strategy aiming at creating comparative advantages in these sectors and at overcoming path dependencies. Moreover, export barriers serve as a second-best instrument to reduce pollution and to slow down the depletion of exhaustible resources. Growing domestic rare earth consumption renders those increasingly ineffective. Rising reliance on mine-site regulation indicates that this fact is taken into account. Rare earth extraction is dominated by a few large companies; the demand side is dispersed. That speaks against successful lobbying for export restrictions. It appears as if the export barriers are set up to compensate mining firms.
    Keywords: Rare Earths,Export Restrictions,Political Economy
    JEL: Q37 Q38 D78 P26
    Date: 2015
  15. By: Paola Conconi; David De Remer; Georg Kirchsteiger; Lorenzo Trimarchi; Maurizio Zanardi
    Keywords: trade disputes; elections; reciprocity
    JEL: F13 D72 D78 D63
    Date: 2015–05
  16. By: Liesbeth Colen; Damiaan Persyn; Andrea Guariso
    Abstract: Developing countries have increasingly engaged in Bilateral Investment Treaties (BITs) to attract foreign investors. While it is found that BITs are successful in attracting FDI, we argue that the effectiveness of BITs depends on the type of FDI. We find the effect of BITs to differ importantly across sectors of investment. FDI characterized by higher sunk investment costs responds more strongly to the signing of BITs. Given that the development impact of FDI differs according to the sector of investment, our results raise concerns on the effectiveness of BITs in attracting FDI in those sectors where it is considered most beneficial.
    Keywords: investment treaties; foreign direct investment; sunk costs; Central and Eastern Europe; development
    Date: 2014
  17. By: Caliendo, Lorenzo (Yale University and NBER); Dvorkin , Maximiliano (Federal Reserve Bank of St. Louis); Parro, Fernando (Federal Reserve Board.)
    Abstract: We develop a dynamic labor search model where production and consumption take place in spatially distinct labor markets with varying exposure to domestic and international trade. The model recognizes the role of labor mobility frictions, goods mobility frictions, geographic factors, and input-output linkages in determining equilibrium allocations. We show how to solve the equilibrium of the model without estimating productivities, reallocation frictions, or trade frictions, which are usually di¢ cult to identify. We use the model to study the dynamic labor market outcomes of aggregate trade shocks. We calibrate the model to 38 countries, 50 U.S. states and 22 sectors and use the rise in China’s import competition to quantify the aggregate and disaggregate employment and welfare effects on the U.S. economy. We find that China’s import competition growth resulted in 0.6 percentage point reduction in the share of manufacturing employment, approximately 1 million jobs lost, or about 60% of the change in the manufacturing employment share not explained by a secular trend. Overall, China’s shock increases U.S. welfare by 6.7% in the long-run and by 0.2% in the short-run with very heterogeneous effects across labor markets.
    Keywords: Migration; labor reallocation; dynamic discrete choice; manufacturing employment; intersectoral trade; interregional trade; international trade
    JEL: E24 F16 J62 R13 R23
    Date: 2015–05–01
  18. By: Cernat, Lucian (DG Trade); Kutlina-Dimitrova, Zornitsa (DG Trade)
    Abstract: Public procurement is a negotiating area gaining in importance at multilateral and bilateral level, as evidenced by a brief review of procurement provisions in existing trade agreements. The size of procurement spending stands in most developed economies at double-digit percentage points of GDP. However, despite the size and importance of these markets, the factual information available to trade negotiators remains scarce. Although public procurement patterns (e.g. size of procurement markets, composition of procurement spending and level of government procurement) can be derived from traditional national accounts statistics, these figures fall short of capturing the international dimension of public procurement. Hence, the paper puts forward a basic conceptual framework for data collection on public procurement that would best serve the future negotiating agenda in this area.
    Keywords: International public procurement; international trade; WTO; GPA
    JEL: F13 H57
    Date: 2015–04–22
  19. By: Dale W. JORGENSON; NOMURA Koji; Jon D. SAMUELS
    Abstract: Trans-Pacific competition between Japanese and U.S. industries has provided powerful incentives for mutually beneficial economic cooperation between Japan and the United States. The benefits would be greatly enhanced by the proposed Trans-Pacific Partnership, an international agreement that would involve Japan, the United States, and 10 additional countries of the Asia-Pacific region. In this paper, we analyze competition between Japanese and U.S. industries in detail over more than a half century. We conclude with a discussion of opportunities for improving productivity performance in both countries.We first present new estimates of price level indices for Japan and the United States over the period 1955-2012. These indices are key indicators of international competitiveness between the two countries, often expressed as over-valuation or under-valuation of the Japanese yen relative to the U.S. dollar. We provide price level indices for outputs and inputs of 36 industries and for the two economies as a whole. The inputs at the industry level include capital, labor, energy, materials, and services (KLEMS). For an economy as a whole, output is gross domestic product (GDP) and the inputs are capital and labor services.We use our price level indices to generate new estimates of productivity gaps for the two countries and for individual industries. The productivity gap is an indicator of the efficiency of production. A wide Japan-U.S. productivity gap that existed in 1955 contracted for more than three decades, and Japan came close to parity with the United States in 1991. After the collapse of the "bubble economy" in Japan, the Japan-U.S. productivity gap widened again and only a few industries in Japan retained a productivity advantage over their U.S. counterparts in 2012. We conclude that industries sheltered from international competition offer the greatest opportunities for improvements in productivity performance.
    Date: 2015–05

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