nep-int New Economics Papers
on International Trade
Issue of 2015‒12‒12
twenty-two papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Participation in Global Value Chains: macro and micro evidence for North Africa By Davide Del Prete; Giorgia Giovannetti; Enrico Marvasi
  2. An Assessment of the Korea-China Free Trade Agreement By Jeffrey J. Schott; Euijin Jung; Cathleen Cimino
  3. Rethinking distance in international trade: World Trade Atlas 1870-2013 By Guillermo Garc\'ia-P\'erez; Mari\'an Bogu\~{n}\'a; Antoine Allard; M. \'Angeles Serrano
  4. The double role of GDP in shaping the structure of the International Trade Network By Assaf Almog; Tiziano Squartini; Diego Garlaschelli
  5. United States Trade Developments 2013-2014 By -
  6. Trade, Aid and Terror By Asongu, Simplice; Kodila-Tedika, Oasis
  7. Upgrading of Hungarian subsidiaries in machinery and automotive global value chains By Andrea Elteto; Andrea Szalavetz; Gabor Tury; Aniko Magashazi
  8. The impact of oil shocks on exchange rates: A Markov-switching approach By Syed Abul, Basher; Alfred A, Haug; Perry, Sadorsky
  9. Regional integration in the Caribbean: The role of trade agreements and structural transformation By McLean, Sheldon; Pantin, Machel; Skerrette, Nyasha
  10. An assessment of the performance of CARICOM extraregional trade agreements: An initial scoping exercise By McLean, Sheldon; Khadan, Jeetendra
  11. Logistics and trade facilitation between CARICOM and Central America By Cordero, Martha
  12. Aid for Trade indicators Dashboard: user manual By Durán Lima, José Elías
  13. Trade and Development Nexus: reflections on the performance of trade in goods under the Cariforum-European Union Partnership agreement a Cariforum perspective By McLean, Sheldon; Humphrey, Errol; Khadan, Jeetendra
  14. Perception of Risks Associated with Economic Sanctions: The Case of Russian Manufacturing By Golikova Victoria; Kuznetsov Boris
  15. Survive or Die? A Decade of Tough Competition for Foreign Affiliates By Giorgia Giovannetti; Giorgio Ricchiuti; Margherita Velucchi
  16. Aid for trade 10 years on: Keeping it effective By Frans Lammersen; Michael Roberts
  17. Institutionality, logistics and international cooperation for the economic and social development: The case of the Plurinational State of Bolivia By Barriga, Oswaldo
  18. Trade and investment relations between the Community of Latin American and Caribbean Stales (CELAC) and its strategic extraregional partners By -
  19. The potential of Aid for Trade to improve the infrastructure and logistics performance of landlocked developing countries of Latin America By -
  20. Review of ECLAC damage and loss assessments in the Caribbean By Moore, Winston; Phillips, Willard
  21. The Panama Canal expansion: A driver of change for global trade flows By Sabonge, Rodolfo
  22. The Dynamics of Comparative Advantage By Hanson, Gordon H.; Lind, Nelson; Muendler, Marc-Andreas

  1. By: Davide Del Prete; Giorgia Giovannetti (Dipartimento di Scienze per l'Economia e l'Impresa); Enrico Marvasi (Dipartimento di Scienze per l'Economia e l'Impresa)
    Abstract: This paper analyzes North African countries' participation into international production networks and estimates if/to what extent being part of a global value chain affects firms' performance. Using new Input-Output data from UNCTAD-Eora, we describe regional and country GVC participation. Results show that North African countries have not been able so far to integrate into international production networks. However, large part of their (low) trade is due to global value chains related activties, mainly in the upstream phases, and the importance of global linkages has been increasing over time. To better understand the impact of international fragmentation of production, we perform a micro, firm-level analysis. We show that firms' performance, measured by several indicators, is positively associated with internationalization modes as well as GVC participation. These results confirm those of our sectoral analyses and are in line with existing anecdotal evidence. Enhancing GVC participation of North African countries is likely to substantially benefit the area. However, the ability to retain such benefits relies on specific characteristics, such as the level of human capital, the logistics, the presence of trade barriers, thus leaving room for policy intervention.
    Keywords: global value chains, firms' heterogeneity, North Africa
    JEL: F14 F15 L23 L25
    Date: 2015
  2. By: Jeffrey J. Schott (Peterson Institute for International Economics); Euijin Jung (Peterson Institute for International Economics); Cathleen Cimino (Peterson Institute for International Economics)
    Abstract: Of all the free trade agreements (FTAs) concluded by Korea with its major trading partners since the turn of the century, the Korea-China FTA may be the largest in trade terms. It is, however, far from the best in terms of the depth of liberalization and the scope of obligations on trade and investment policies. Korea and China agreed to liberalize a large share of bilateral trade within 20 years, but both sides incorporated extensive exceptions to basic tariff reforms and deferred important market access negotiations on services and investment for several years. Political interests trumped economic objectives, and the negotiated outcome cut too many corners to achieve such a comprehensive result. The limited outcome in the Korea-China talks has two clear implications for economic integration among the northeast Asian countries. First, prospects for the ongoing China-Japan-Korea talks will be limited and unlikely to exceed the Korea-China outcome. Second, Korea and Japan need to strengthen their bilateral leg of the northeast Asian trilateral and the best way is by negotiating a deal in the context of the Trans-Pacific Partnership.
    Date: 2015–12
  3. By: Guillermo Garc\'ia-P\'erez; Mari\'an Bogu\~{n}\'a; Antoine Allard; M. \'Angeles Serrano
    Abstract: Here, we present the World Trade Atlas 1870-2013, a collection of annual world trade maps in which distances incorporate the different dimensions that affect international trade, beyond mere geography. The atlas provides us with information regarding the long-term evolution of the international trade system and demonstrates that, in terms of trade, the world is not flat, but hyperbolic. The departure from flatness has been increasing since World War I, meaning that differences in trade distances are growing and trade networks are becoming more hierarchical. Smaller-scale economies are moving away from other countries except for the largest economies; meanwhile those large economies are increasing their chances of becoming connected worldwide. At the same time, Preferential Trade Agreements do not fit in perfectly with natural communities within the trade space and have not necessarily reduced internal trade barriers. We discuss an interpretation in terms of globalization, hierarchization, and localization; three simultaneous forces that shape the international trade system.
    Date: 2015–12
  4. By: Assaf Almog; Tiziano Squartini; Diego Garlaschelli
    Abstract: The International Trade Network (ITN) is the network formed by trade relationships between world countries. The complex structure of the ITN impacts important economic processes such as globalization, competitiveness, and the propagation of instabilities. Modeling the structure of the ITN in terms of simple macroeconomic quantities is therefore of paramount importance. While traditional macroeconomics has mainly used the Gravity Model to characterize the magnitude of trade volumes, modern network theory has predominantly focused on modeling the topology of the ITN. Combining these two complementary approaches is still an open problem. Here we review these approaches and emphasize the double role played by GDP in empirically determining both the existence and the volume of trade linkages. Moreover, we discuss a unified model that exploits these patterns and uses only the GDP as the relevant macroeconomic factor for reproducing both the topology and the link weights of the ITN.
    Date: 2015–12
  5. By: - (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: United States Trade Developments 2013-2014, is an annual report prepared by the ECLAC Washington Office. It provides an overview of the most relevant trade developments in the United States trade relations with Latin America and the Caribbean and the measures that inhibit the free flow of goods among countries in the Western Hemisphere. The report presents trade figures and trends over the last few years to illustrate the nature of the U.S. engagement through trade with the world and with the Latin America and Caribbean region. Special emphasis was given to trade among the U.S., Canada, and Mexico on the 20th anniversary of the North American Free Trade Agreement, and to trade with Brazil, the second U.S .trade partner in the region, after Mexico.
    Date: 2014–12
  6. By: Asongu, Simplice; Kodila-Tedika, Oasis
    Abstract: This study assesses the role of foreign aid in reducing the hypothetically negative impact of terrorism on trade using a panel of 78 developing countries with data for the period 1984-2008. The empirical evidence is based on interactive GMM estimations with forward orthogonal deviations. Bilateral, multilateral and total aid dynamics are employed whereas terrorism entails: domestic, transnational, unclear and total terrorism dynamics. The following findings have been established. First, while bilateral aid has no significant effect on trade, multilateral and total aids have positive impacts. Second total terrorism, domestic terrorism and transnational terrorism increase trade with increasing order of magnitude. Third, corresponding negative marginal effects on the interaction between foreign aid (bilateral and total) and terrorism display thresholds that are within range. Unexpected signs are clarified and policy implications discussed.
    Keywords: Trade Openness, Foreign Aid; Terrorism; Development
    JEL: F23 F35 F40 O40
    Date: 2015–06
  7. By: Andrea Elteto (Institute of World Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences); Andrea Szalavetz (Institute of World Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences); Gabor Tury (Institute of World Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences); Aniko Magashazi (Corvinus University of Budapest, International Relations, Multidisciplinary Doctoral School)
    Abstract: Global networks shape international production and trade. The main question of our paper is how Hungarian companies can improve their positions within these global value chains. The production and export of automotive and machinery industry are dominated by foreign multinational enterprises, therefore these sectors were chosen as examples. Research is based on interviews that explore local manufacturing subsidiaries' product, process and functional upgrading experience. Our findings show that there are differences among the firms in terms of extent of upgrading. This depends on one hand, on the owner’s global strategy and on the type of final products. On the other hand local capabilities are of crucial importance among the factors that influence the volume of intangible transfers. Furthermore, our interviews suggested that upgrading is not a unidirectional process: previously gained mandates can also be lost. Economic policy should support the business development and entrepreneurial learning and provide adequate conditions for suppliers and subsidiaries of leading multinational enterprises.
    Keywords: global value chains, machinery industry, automotive industry, Hungary
    JEL: D22 D24 E23 F16 F23 L6 L62 O52
    Date: 2015–11
  8. By: Syed Abul, Basher; Alfred A, Haug; Perry, Sadorsky
    Abstract: This paper uses Markov-switching models to investigate the impact of oil shocks on real exchange rates for a sample of oil exporting and oil importing countries. This is an important topic to study because an oil shock can affect a country’s terms of trade which can affect its competitiveness. We detect significant exchange rate appreciation pressures in oil exporting economies after oil demand shocks. We find limited evidence that oil supply shocks affect exchange rates. Global economic demand shocks affect exchange rates in both oil exporting and importing countries, though there is no systematic pattern of appreciating and depreciating real exchange rates. The results lend support to the presence of regime switching for the effects of oil shocks on real exchange rates.
    Keywords: Markov-switching; exchange rates; oil shocks.
    JEL: F31 G15 Q43
    Date: 2015–12–06
  9. By: McLean, Sheldon; Pantin, Machel; Skerrette, Nyasha (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: Despite having relatively open economies and a dedicated strategic focus on export expansion, Caribbean economies still account for a small proportion of global trade (goods and services). This paper therefore posits that the subregion adopt a new dais of regional integration, which favours deeper trade and economic integration with countries which are the region’s natural trading partners.
    Date: 2014–10
  10. By: McLean, Sheldon; Khadan, Jeetendra (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: Despite its active embrace of trade liberalization and the maintainance of relatively open economies, CARICOM trade performance both within the region and extraregionally has been poor. The nexus between bilateral Free Trade Agreements (FTAs), Partial Scope Agreements (PSAs) and preferential trade arrangements, which was intended to assist in compensating for the small size of domestic and regional markets, while providing an additional tier of trade and economic integration, has thus far failed to deliver its intended results. This paper makes this conclusion in assessing the performance of these extraregional trade agreements and sheds light on issues not often discussed.
    Date: 2015–03
  11. By: Cordero, Martha (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: The purpose of this article is to analyze the progress and challenges in the trade relationships between CARICOM1 and Central America.2 First, it highlights the increase in the trade dynamic between both regions, its progress in investment as well as its economic complementarities, establishment of lines of communication between their institutions, and trade negotiations. Secondly, it emphasizes upon the elements that inhibit a greater trade dynamic and investment between CARICOM and Central America. Among these elements are high tariff protections between the members of CARICOM, low availability of transport routes and their high costs, the heterogeneity in their visa policies as well as the costs related to cross-border trade. Moreover, it does a perfunctory approach to the aid these countries receive for trade and development, within an emphasis on projects related to trade facilitation. Both regions have the potential to mutually benefit through an economic complementarity. Notwithstanding, joint progress is needed to mitigate the elements that inhibit their trade and commerce.
    Date: 2014–07
  12. By: Durán Lima, José Elías (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: This Manual is intended to guide individuals and institutions seeking to use the Aid for Trade Dashboard developed by the Economic Commission for Latin America and the Caribbean as part of the Development Project “Facilitating the Effective Integration of Developing Countries into the Global Economy through Aid for Trade Schemes”. This Dashboard presents a set of online indicators for all the countries comprising the five United Nations’ Regional Commissions which are currently participating in this Project.
    Date: 2014–10
  13. By: McLean, Sheldon; Humphrey, Errol; Khadan, Jeetendra (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: Given the asymmetry in the levels of development and capacity which exist between the EU and CARIFORUM States, the architects of the CARIFORUM-European Union (EU) Economic Partnership Agreement (EPA)1 anticipated the need for review and monitoring of the impacts of implementation. Article 5 and other provisions in the Agreement therefore specifically mandate that monitoring be undertaken to ensure that the Agreement benefits a wide cross-section of the population in member countries. The paper seeks to provide a preliminary assessment of the impact of the EPA on CARIFORUM countries. In so doing, it highlights some critical information and implementation gaps and challenges that have emerged during the implementation process. The analysis however, is restricted to goods trade. The services sector will be the subject of a separate report. The paper draws on a combination of quantitative and qualitative analyses. While the paper undertakes a CARIFORUM-wide analysis for the most part, five CARIFORUM member states including Barbados, Dominican Republic, Guyana, Saint Kitts and Nevis and Saint Lucia are examined more closely in some instances. These economies were selected by virtue of economic structure and development constraints, as a representative subset of CARIFORUM, which comprises the CARICOM membership as well as the Dominican Republic.
    Date: 2014–12–16
  14. By: Golikova Victoria (National Research University Higher School of Economics); Kuznetsov Boris (National Research University Higher School of Economics)
    Abstract: This paper is focused on assessing the factors of risks for Russian manufacturing firms due to the sanctions imposed on Russia by the EU, US and other countries in 2014. While there is extensive literature on assessing the successes and failures of international sanctions on the economies of both senders and targets on a macroeconomic level (Hufbauer et al., 2007; Drezner 1998, 2003; Morgan et al, 2009; Krustev, 2010; Morgan et al, 2009 among others), we are more interested in trying to understand the corporate response, i.e. which firms evaluate the introduction and increasing scale of economic sanctions as a threat to their corporate strategy and their possible reactions aimed at adjusting to a changing environment due to the geopolitical shock. Our research, based on a recent survey of manufacturing companies, provides evidence that Russian manufacturing firms have in the last decade become much more integrated into the global economy than is commonly assumed, via FDI, foreign trade, including both the importing of technological equipment and intermediates, via establishing international partnerships and extensively supplying foreign companies which operate in Russia. Considering the self-selection effect of the top performing firms in terms of foreign trade, we can state that sanctions could be the most harmful effect for the better performing and globalized firms and, thus, the impact of the sanctions on the prospects of the Russian manufacturing sector may be very strong in the medium and long-term perspectives
    Keywords: economic sanctions, perceptions of risks, manufacturing firms, Russia
    JEL: F14 O31 O33 P23
    Date: 2015
  15. By: Giorgia Giovannetti (Dipartimento di Scienze per l'Economia e l'Impresa); Giorgio Ricchiuti (Dipartimento di Scienze per l'Economia e l'Impresa); Margherita Velucchi
    Abstract: Firms' survival and internationalization are key elements to assess a country's competitiveness. In this paper, we draw on these two strands of literature and study how firms' characteristics affect demographic dynamics. We focus on foreign direct investors' survival probability, modelling it conditional on both parent company and affiliates' set of characteristics. The novelty of our approach is twofold: on the one hand, we generalize the base model used in business demography disentangling the effect of affiliates and parents. On the other hand, we stress the technological level relationships between affiliates and their investors. For the empirical assessment, we use an original longitudinal database (2004 - 2012) for Italy. We show that, larger affiliates of large investors compete better and survive more. Being part of networks of affiliates in the same country and/or sector also decrease the risk of exiting markets. When the investors have a higher (lower) technological level, their affiliates' failure probability increases (decreases). When the investor is more advanced than its affiliates, it considers the investment abroad like a cost-saving, low skills investment. The investor will easily disinvest, moving to a more convenient economic context. Affiliates with a higher level of technology, instead, are considered strategic to the parent company, due to skills, talent or competencies.
    Keywords: Business Demography, Survival, Competitiveness, Internationalization
    JEL: C41 L11 L25 F21
    Date: 2015
  16. By: Frans Lammersen; Michael Roberts
    Abstract: Ten years after the 2005 WTO Ministerial Conference agreed on a mandate to operationalise aid for trade, this paper assesses the achievements and challenges of the WTO-led Initiative. After outlining the achievements, the paper discusses where to put the emphasis, how to expand partnerships, how to enhance effectiveness; and, most importantly, how to retain interest in using aid to make trade work for the poor. In conclusion, the paper proposes that the Initiative could focus on promoting connectivity, boosting sustainable investment, promoting green growth, and supporting the achievement of the Sustainable Development Goals. The paper suggests that these aims can best be achieved through regional approaches for tackling trade-related binding constraints with development finance from a combination of different sources, including providers of South-South co-operation and with engagement of the private sector.
    Date: 2015–12–07
  17. By: Barriga, Oswaldo (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: The limitations faced by landlocked countries have an impact upon economic and social development since landlocked countries are highly dependent on the transportation infrastructure of neighboring countries to access maritime routes. This results in an increase in the time and cost to trade —factors which can significantly reduce the competitiveness and complementarity of the exports of a landlocked country as well as increase the price of imports. Studies indicate that the Plurinational State of Bolivia’s landlockedness results in losses estimated at 0.5% to 2% of GDP annually. However, some studies, as well as international evidence, conclude that developing adequate logistics and infrastructure is a way of increasing efficiency and contributing to the overall economy. In some countries, the investment in logistics reaches almost 25% of GDP. In this vein, investing in infrastructure, transportation and logistics are significant factors in fostering economic and social development.
    Date: 2014–08
  18. By: - (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
  19. By: - (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: America is one of the priority areas of the Economic Commission for Latin America and the Caribbean (ECLAC) of the United Nations and, in particular, of ECLAC Natural Resources and Infrastructure Division (NRID). Prepared as a contribution to the United Nations Development Account Project: “Facilitating the Effective Integration of Developing Countries in the Global Economy through Aid for Trade Schemes”, ROA 139-7, the present document presents the main activities, carried out by NRID for the benefit of the landlocked developing countries since the adoption of the Almaty Programme of Action: addressing the special needs of the Landlocked Developing Countries. It is intended to serve as an inventory of the Division’s studies and projects in the area, highlighting the main conclusions and policy recommendations resulting from these activities. In line with this objective, the document presents the results of the NRID work in the following three areas: • Linking Landlockedness and development (Chapter II) • Status of landlocked countries in Latin America (Chapter III) • Logistics in landlocked countries (Chapter IV) • Landlocked developing countries and the Aid for Trade initiative (Chapter V) The concluding Chapter deals with the Aid for Trade initiative and identifies the activities in the area of infrastructure and logistics where Aid for Trade would be beneficial for landlocked countries in Latin America.
    Date: 2014–08
  20. By: Moore, Winston; Phillips, Willard (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Date: 2014–08
  21. By: Sabonge, Rodolfo (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: This paper describes the role of the Panama Canal in establishing and opening new global trade routes as well as the ambitious expansion project currently underway designed to meet the needsof the XXIth century global trade.
    Date: 2014–08
  22. By: Hanson, Gordon H. (UC San Diego and NBER); Lind, Nelson (UC San Diego); Muendler, Marc-Andreas (UC San Diego and NBER)
    Abstract: This paper characterizes the dynamic empirical properties of country export capabilities in order to inform modelling of the long-run behavior of comparative advantage. The starting point for our analysis is two strong empirical regularities in international trade that have previously been studied incompletely and in isolation to one another. The literature has noted a tendency for countries to concentrate exports in a few sectors. We show that this concentration arises from a heavy-tailed distribution of industry export capabilities that is approximately log normal and whose shape is stable across countries, sectors, and time. Likewise, previous research has detected a tendency for mean reversion in national industry productivities. We establish that mean reversion in export capability, rather than indicative of convergence in productivities or degeneracy in comparative advantage, is instead consistent with a well behaved stochastic growth process that delivers a stationary distribution of country export advantage. In literature on the growth of cities and firms, economists have used stochastic processes to study the determinants of the long-run size distributions. Our contribution is to develop an analogous empirical framework for identifying the parameters that govern the stationarydistribution of export capability. The main result of this analysis is that a generalized gamma distribution, which nests many commonly studied distributions, provides a tight fit of the data but log normality offers a reasonable approximation. Importantly, the stochastic process that generates log normality can be estimated in its discretized form by simple linear regression. Log linearity allows for an extension of our approach to multivariate diffusions, in which one can permit innovations to productivity to be transmitted intersectorally and internationally, as in recent models of trade and growth.
    Keywords: International trade; comparative advantage; generalized logistic diffusion; estimation of diffusion process JEL Classification: F14, F17, C22
    Date: 2015

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