nep-int New Economics Papers
on International Trade
Issue of 2016‒03‒06
39 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Outward FDI by Indian Manufacturing MNEs: Impacts and Implications By Khanindra Ch. Das
  2. How firms export: processing vs. ordinary trade with financial frictions By Kalina Manova; Zhihong Yu
  3. Fitting the Gravity Model when Zero Trade Flows are Frequent: a Comparison of Estimation Techniques using Africa's Trade Data By Kareem, Fatima Olanike; Martinez-Zarzoso, Inmaculada; Brümmer, Bernhard
  4. Foreign ownership and the export and import propensities of developing-country firms By Boddin, Dominik; Raff, Horst; Trofimenko, Natalia
  5. Revenue-Constrained Combination of an Optimal Tariff and Duty Drawback By Hatta, Tatsuo
  6. The Romanian export with livestocks- live animals – a far-reaching activity? By Grodea, Mariana; Ionel, Iuliana
  7. Dynamics in European Exports in times of Crisis: The Impact of Growth at Home and Abroad. By Janez Kren,; T.Huw Edwards,; Jan Van Hove,
  8. Estimating Industry-level Armington Elasticities For EMU Countries By Lisa Aspalter
  9. Corporate social responsibility in global supply chains of multinational companies By Görg, Holger; Hanley, Aoife; Seric, Adnan
  10. Ongoing trade facilitation improvement: Its impact on export-oriented small and medium-sized enterprises in Indonesia By Tulus T. H. Tambunan
  11. Regional Trade Agreements & Procurement Rules: Facilitators or Hindrances? By Robert D. Anderson; Anna Caroline Müller, and Philippe Pelletier
  12. Does Exporting Improve Matching? Evidence from French Employer-Employee Data By Bombardini, Matilde; Orefice, Gianluca; Tito, Maria D.
  13. Mexican manufacturing and its integration into global value chains By Castillo, Juan Carlos; Szirmai, Adam
  14. Passive unilateral cross-ownership and strategic trade policy By Fanti, Luciano; Buccella, Domenico
  15. Enabling Participation of SMEs in International Trade and Production Networks: Trade Facilitation, Trade Finance and Communication Technology By Yann Duval; Chorthip Utoktham
  16. Productivity spillovers from foreign multinationals and trade policy: firm-level analysis of Vietnamese manufacturing By Thuyen, Truong Thi Ngoc; Jongwanich, Juthathip; Ramstetter, Eric D.
  17. Trading Forests: Quantifying the Contribution of Global Commodity Markets to Emissions from Tropical Deforestation - Working Paper 384 By Martin Persson, Sabine Henders, and Thomas Kastner
  18. Digitization, Copyright, and the Welfare Effects of Music Trade By Luis Aguiar; Joel Waldfogel
  19. Markups and misallocation with trade and heterogeneous firms By Weinberger, Ariel
  20. Support policies for agri-food export promotion in the Republic of Moldova By Stratan, Alexandru; Ignat, Anatolie; Moroz, Victor
  21. On the different geographic characteristics of Free Trade Agreements and Customs Unions By James Lake; Halis M. Yildiz
  22. Trade Flows and Trade Specialisation: The Case of China By Guglielmo Maria Caporale; Anamaria Sova; Robert Sova
  23. GLM estimation of trade gravity models with fixed effects By Egger, Peter; Staub, Kevin E
  24. The Effect of Trade Liberalization on Firm-Level Profits: An Event-Study Approach By Holger Breinlich
  25. Catching up of emerging economies: The role of capital goods imports, FDI inflows, domestic investment and absorptive capacity By Glas, Alexander; Hübler, Michael; Nunnenkamp, Peter
  26. Knowledge transfer in global supply chains: Multinationals in Sub-Saharan Africa By Pérez-Villar, Lucia; Seric, Adnan
  27. Institutional Distance and Foreign Direct Investment By Rafael Cezar; Octavio Escobar
  28. Romanian agri-food trade with the new member states (NMS-13) of the EU - a comparative analysis By Gavrilescu, Camelia
  29. Enter the dragon: Policies to attract Chinese investment By Bala Ramasamy; Matthew Yeung
  30. FDI and Heterogeneous Firms: Evidence from BRIC Countries By Valeria, Gattai; Rajssa, Mechelli; Piergiovanna, Natale
  31. It’S Not the Economy Stupid! Is Russia-Us Trade Really Underdeveloped? A Test Using Gravity Models By Maxim Bratersky; Gunes Gokmen; Andrej Krickovic
  32. The Effects of Trade Policy By Goldberg, Pinelopi; Pavcnik, Nina
  33. Availability of business services and outward investment: Evidence from French firms By Görg, Holger; Jabbour, Liza
  34. EEC:stage and potential economic integration By Levchenko, Olga; Ignatyeva, Galina
  35. Presentation and Analysis of Recent Developments in Trade in Tuna Products; An EU Perspective By Nicolas Dross
  36. Dispute Settlement in the WTO. Mind over Matter By Petros C. Mavroidis
  37. Government Procurement Polices Across the Tasman; What Role Played by (Preferential) Trade Agreements? By Malcolm Bosworth
  38. Financing trade and supply chains   By Alexander R. Malaket
  39. The Silent Success of Customs Unions By Gnutzmann, Hinnerk; Gnutzmann-Mkrtchyan, Arevik

  1. By: Khanindra Ch. Das (Rajiv Gandhi Indian Institute of Management (RGIIM))
    Abstract: Outward foreign direct investment (OFDI) by Indian firms has increased significantly in recent years. Such investments by Indian firms have gone to more than 100 host countries. However, little is known about the effects of such OFDI on domestic activity of Indian multinational enterprises (MNEs). The paper investigates the home-country effects of OFDI by Indian manufacturing firms during 2008/09 to 2011/12 using a quasi-experimental technique. A priori, the relationship between firm’s OFDI and domestic activity is ambiguous as both complementary and substitution effects could be induced by such investment activities. The propensity score matching technique is used, to construct treatment and control groups, for examining the effect of engaging in OFDI on domestic activities of Indian manufacturing MNEs. The empirical evidence suggests that OFDI by Indian MNEs has positive impact on export intensity and research and development (R&D). On the other hand, no significant impact could be found on domestic investments, output, employment, import of raw materials, and import of capital goods. Overall, no significant negative (or substitution) effect of OFDI on domestic activity could be discerned in this study. Nevertheless, to derive desired complementary benefits of OFDI by the manufacturing firms, policies may be directed to enhance the country’s international supply chain connectivity for greater participation in global value chain and production network.
    Keywords: Outward FDI, Multinational Enterprises, Manufacturing, Propensity Score Matching, Production Network
    JEL: F13 F14 F21 F23 O31
    Date: 2015–04
  2. By: Kalina Manova; Zhihong Yu
    Abstract: The fragmentation of production across borders allows firms to make and export final goods, or to perform only intermediate stages of production by processing imported inputs for re-exporting. We examine how financial frictions affect companies’ choice between processing and ordinary trade – implicitly a choice of production technology and position in global supply chains – and how this decision affects performance. We exploit matched customs and balance-sheet data from China, where exports are classified as ordinary trade, import-and-assembly processing trade (processing firm sources and pays for imported inputs), and pure-assembly processing trade (processing firm receives foreign inputs for free). Value added, profits and profitability rise from pure assembly to processing with imports to ordinary trade. However, more profitable trade regimes require more working capital because they entail higher up-front costs. As a result, credit constraints induce firms to conduct more processing trade and pure assembly in particular, and preclude them from pursuing higher value-added, more profitable activities. Financial market imperfections thus impact the organization of production across firms and countries, and inform optimal trade and development policy in the presence of global production networks.
    Keywords: China; trade regime; processing trade; global value chain; credit constraints; heterogeneous firms
    JEL: F10 F13 F14 F23 F34 G32
    Date: 2015–10
  3. By: Kareem, Fatima Olanike; Martinez-Zarzoso, Inmaculada; Brümmer, Bernhard
    Abstract: The issues of zero trade observations and the validity of the log linear transformation of the gravity equation have generated a number of debates in the literature with differing claims about the most suitable estimation technique. To produce unbiased and consistent estimates for policy making, we undertake a careful comparison of a number of widely used estimators to investigate if EU fish standards are protectionist following reoccurring rejection of African fish products at the EU border. Analysis was based on a dataset of Africa's fish exports to the European Union between 2007 and 2012, which contains about 63% zero trade observations. Our results from the robustness checks are in favour of only the Multinomial Poisson Maximum Likelihood (MPML) technique as the most consistent estimator in relation to the impacts of standards and other explanatory variables. In addition, we find EU standards are indeed non-protectionist in spite of the high level of African fish exports rejected since 2008 at the EU border. Thus, a deeper trade agreement between these trading partners involving a significant transfer in science and technology to the Africa could help improve their compliance rate to EU standards and ensure increased export penetration.
    Keywords: Gravity model, Zero trade, Estimation techniques, Food safety standards, European Union, African Exports, Agricultural and Food Policy, Health Economics and Policy, International Development, International Relations/Trade, Research Methods/ Statistical Methods, C18, F13, F14, L15,
    Date: 2016–01
  4. By: Boddin, Dominik; Raff, Horst; Trofimenko, Natalia
    Abstract: This paper uses micro-data from the World Bank Enterprise Surveys 2002-2006 to investigate how foreign ownership affects the likelihood of manufacturers in developing countries to export and/or import. Applying propensity score matching to control for differences across firms in terms of labor productivity and other characteristics, we find that foreign ownership is an economically important and statistically significant determinant of the likelihood that a firm will export and/or import. Foreign ownership raises the propensity to export by over 17 and the propensity to import by more than 13 percentage points. The effects are even bigger for the lowest-income countries.
    Keywords: international trade,multinational enterprise,foreign direct investment,foreign ownership,development,intermediation
    JEL: F12 F14 F23 O19
    Date: 2015
  5. By: Hatta, Tatsuo
    Abstract: A duty drawback is an export subsidy determined as a percentage of the tariffs paid on the imported inputs used in its production. This paper examines the revenue-constrained optimal tariff structure in a small open economy including a duty drawback as a trade policy tool. This paper has two main aims. First, we show that the revenue-constrained optimal combination of tariff and duty drawback for a given revenue level is not unique. Second, we show that if the optimal import tariff rates are all positive when the duty drawback rate is zero, then the optimal import tariff rates are always positive when the duty drawback is positive.
    Keywords: Revenue-Constrained Optimal Tariff, Duty Drawback, Export Subsidy, Uniformity
    JEL: F11 F13 H21
    Date: 2015–12
  6. By: Grodea, Mariana; Ionel, Iuliana
    Abstract: In the period 2003-2014, Romania became an important source for the export of live animals (bovines and sheep), both for the intra-Community trade and for third countries. Although in the same period the imports consisted mainly of breeding animals, the balance of trade was constantly positive. The method used in the paper was the comparative analysis of trade-specific set of indicators, the main information sources being international information, reports and studies, FAOSTAT and EUROSTAT statistics. From our analysis, it results that that Romania practiced a conjuncture export, as the herds specialized in meat production, both in the case of bovines and sheep, have a significant share in total livestock herds. The reason why Romania is agreed as supplier of live animals is rather represented by the raising of animals under extensive system, where feeding is mainly based on grazing.
    Keywords: import, export, bovines, sheep, balance of trade
    JEL: F1 F13 F43 Q1 Q17 Q18 Q27
    Date: 2015–11–20
  7. By: Janez Kren, (Katholieke Universiteit, Leuven); T.Huw Edwards, (School of Business and Economics, Loughborough University); Jan Van Hove, (Katholieke Universiteit, Leuven)
    Abstract: While the financial crisis of 2008-2009 led to the great collapse of international trade, the European debt crisis in 2010-2013 did not have such a drastic impact on trade. The collapse has been studied a lot in recent empirical literature, but the European debt crisis has not been investigated thoroughly yet. This paper looks into the impact of economic growth in European exporters and in their export destination markets on export performance as reflected in total export growth and growth in various export margins. Our findings point to an important role for both demand and supply side factors.
    Keywords: trade collapse, trade structure, European trade, economic crisis
    JEL: F14
    Date: 2016–02
  8. By: Lisa Aspalter (Department of Economics, Vienna University of Economics and Business)
    Abstract: In an open economy economic agents distribute their spending between domestic and various import goods and they may reconsider their choice whenever relative international prices change. Armington elasticities quantify these reallocations in demand for goods produced in different countries. Recent analytical frameworks allow to further differentiate between a macro elasticity of substitution between domestic and import goods and a micro elasticity between different import sources. Despite the relevance of Armington elasticities for evaluating trade policy there has been no systematic study on whether micro and macro elasticities significantly differ for highly integrated economies within a free trade area and whether there is a common pattern. Using highly disaggregated data, this paper estimates Armington elasticities for a panel of 15 EMU Member States. Empirical results indicate a significant difference between micro and macro elasticities for up to one half of the consistent product groups considered, implying preferences across EMU countries are not perfectly aligned with non-discriminatory tariffs. I conclude that both the absolute and relative macro elasticities are informative and that heterogeneous preference patterns link to current trade imbalances.
    Keywords: International Trade, Armington, Substitution Elasticities, Nested CES-preferences, EMU, Industry-level, Matching Trade and Production Data
    JEL: F14
    Date: 2016–02
  9. By: Görg, Holger; Hanley, Aoife; Seric, Adnan
    Abstract: This paper looks at the importance of CSR considerations in the decision taken by a foreign affiliate of a multinational company about the choice of local suppliers. We investigate this empirically using unique firm level data for more than 2,000 foreign owned firms in 19 Sub-Saharan African countries. In terms of the role of global value chains we find that firms that import intermediates from their parent company abroad are more likely to implement CSR. Similarly, CSR plays a larger role for affiliates that export their output to developed countries. This suggests that the immediacy of the production chain provides a strong link to CSR: Intermediate inputs are imported from HQ and are then processed, together with locally sourced inputs, into a final good, which is then exported for consumption in developed countries. Furthermore, our results show that the determinants of environmental and social CSR activities are likely to be different.
    Keywords: corporate social responsibilities,global supply chains,multinational companies
    JEL: F23 M14 O14
    Date: 2015
  10. By: Tulus T. H. Tambunan (Trisakti University)
    Abstract: Trade facilitation refers to all measures that can be taken to facilitate cross-border trade flows, but there is no standard formal definition of trade facilitation. This paper examines whether export-oriented MSMEs have access to trade facilitation and how helpful trade facilitation is in supporting exports by MSMEs. Data shows only a small proportion of MSMEs export their products, and the paper makes recommendations on encouraging export activities through increasing awareness and training of MSMEs regarding trade facilitation information, and promotion of information communications technology.
    Keywords: Development, Indonesia, SME, Trade, Trade Facilitation
    JEL: F13
  11. By: Robert D. Anderson; Anna Caroline Müller, and Philippe Pelletier
    Abstract: This Working Paper considers the significance of government procurement chapters in regional trade agreements (RTAs), both in their own right and vis-à-vis the WTO Agreement on Government Procurement (GPA). The paper finds, inter alia, that: (i) a strong complementarity exists between government procurement trade commitments and general goods and services trade commitments, making integration of procurement commitments in a more general system such as the WTO Agreements desirable; (ii) government procurement chapters in RTAs, where they exist in detailed form, are modelled substantially or entirely on the WTO GPA – a fact which can facilitate eventual accession to the GPA by participating WTO Members; and (iii) the market access opportunities created by government procurement chapters in RTAs generally are less extensive than those available under the revised GPA - a factor helping to maintain incentives for eventual GPA accession by relevant WTO Members. The recent successful renegotiation of the GPA has set the stage for a broadening of its membership, over time, ensuring that the Agreement's future remains strong.
    Keywords: WTO Agreement on Government Procurement (GPA), Regional trade agreements, Market access, Good governance.
    Date: 2015–12
  12. By: Bombardini, Matilde (University of British Columbia); Orefice, Gianluca (CEPII); Tito, Maria D. (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: Does opening a market to international trade affect the pattern of matching between firms and workers? This paper answers this question both theoretically and empirically in three parts. We set up a model of matching between heterogeneous workers and firms in which variation in the worker type at the firm level exists in equilibrium only because of the presence of search costs. When firms gain access to the foreign market, their revenue potential increases. When stakes are high, matching with the right worker becomes particularly important because deviations from the ideal match quickly reduce the value of the relationship. Hence, exporting firms select sets of workers that are less dispersed relative to the average. We then document a novel fact about the hiring decisions of exporting firms versus non-exporting firms in a French matched employer-employee dataset. We construct the type of each worker using both a traditional wage regression and a model-based approach and construct measures of the average worker type and worker type dispersion at the firm level. We find that exporting firms feature a lower type dispersion in the pool of workers they hire. This effect is comparable and larger than the common finding in the literature that exporters pay higher wages because, among other factors, they employ better workers. The matching between exporting firms and workers is even tighter in sectors characterized by better exporting opportunities as measured by foreign demand or tariff shocks. Finally, we show that revenue loss is lower relative to the optimum allocation for exporting and more productive firms. This analysis is suggestive of the potenti al presence of additional gains from trade due to improved sorting.
    Keywords: International Trade; Search frictions; Worker-Firm Matching
    Date: 2015–12–18
  13. By: Castillo, Juan Carlos (UNU-MERIT, Maastricht University); Szirmai, Adam (UNU-MERIT, Maastricht University)
    Abstract: This paper studies the value added contributions to final manufacturing output produced in Mexico. It distinguishes between contributions originating from foreign producers located in different major regions of the world economy and contributions made by domestic producers. The analysis is performed for the main two components of Mexican manufacturing: assembly plants producing for export markets (Maquiladora industry) and manufacturing firms mainly producing for the domestic market (Domestic Manufacturing). To this end, Mexico (Maquiladora) and Mexico (Domestic Manufacturing) are separately included into World Input-output Tables (WIOT) from 1998 to 2011. The empirical analysis shows that the structure of value added contributions with regard to the final output of the Mexican domestic sector has remained unaltered, while the structure of value added contributions to the final output of the Maquiladora sector has drastically changed over time. For its own final output, Mexico (Domestic) has the largest share of value added contributions with some increase in the value added contributions of producers in foreign countries (notably, the USA). With regard to the final output of Mexico (Maquiladora) there was a shift from a dominance of US value added in all the manufacturing sectors (70% in 1998) to a much more diversified structure of value added contributions. By 2011, the East Asian share in value added was the largest in the Electrical and Optical equipment sector. Mexico (Domestic Manufacturing) and Mexico (Maquiladora) had the largest value added contributions in the Transport Equipment sector, while the US continued to account for the lion's share of value added in the textile industry. In our view, those changes in the structure of value added contributions have to do with decisions by US firms to reallocate production to low-cost countries in Asia. They reflect changing patterns of the integration of Mexico in global value chains.
    Keywords: Global Value Chains, Export processing, World Input-output Tables, Manufacturing, Mexico
    JEL: C67 L60 F20
    Date: 2016–01–10
  14. By: Fanti, Luciano; Buccella, Domenico
    Abstract: In a Cournot duopoly model in which exporters compete in a third market, this paper revisits the classical issue (dating back to the pioneering work of Brander and Spencer, Export Share and International Market Share Rivalry, 1985) of the strategic trade policy choice in the presence of the passive participation of one firm in the rival. Passive cross-ownership dramatically alters the participating and participated firms' governments' choice to apply the strategic trade policy instrument, the equilibria typology and their efficiency properties. In fact, if the share of cross-ownership is sufficiently large, the participated firm's government finds optimal to tax export. Moreover, beyond an adequately high threshold, cross-ownership modifies the equilibrium from the activist regime for both countries to an asymmetric regime in which only the participating firm's government intervenes. In addition, in the case of the traditional common activist regime equilibrium, the classical prisoner's dilemma game structure may disappear.
    Keywords: export subsidy,prisoner's dilemma,unilateral cross-ownership,Cournot duopoly
    JEL: F16 L13
    Date: 2016
  15. By: Yann Duval (United Nations Economic and Social Commission for Asia and the Pacific (ESCAP)); Chorthip Utoktham (United Nations Economic and Social Commission for Asia and the Pacific (ESCAP))
    Abstract: This study aimed at identifying key factors affecting SME participation in direct export and international production networks (IPNs), both globally and in Asia and the Pacific. A global dataset of firm-level data from developing countries was analyzed to identify the main obstacles to establishment and operation of direct and indirect small and medium size exporters. Logit models of SME export and IPN participation revealed the importance of several trade facilitation and related factors. The importance of modern information technology and international quality certification appear to be particularly crucial to participation in IPNs with SMEs using both at least 13% more likely to be involved in such networks. Exporting SMEs both globally as well as in the Asia-pacific region reported access to finance as the key obstacle to their business operations. Almost 60% of Asia-Pacific exporting SMEs rely exclusively on internal financing, while only 40% do so globally. Access to a variety of external trade finance sources was found to be important to boost SME export participation, with bank financing and supplier credit found to increase likelihood of SME participation in both direct export and IPNs most. The results particularly highlighted the importance of supply chain financing to facilitate direct export participation of Asia-Pacific SMEs. Comparing the marginal effects of various factors on SMEs and large enterprises, a reduction in customs and trade clearance times was also found to increase SMEs likelihood of participation in export or IPNs relatively more than that of larger enterprises.
    Keywords: Export participation, international production network, firm-level data, Asia and the Pacific, trade facilitation, trade finance, small and medium-sized enterprises (SMEs)
    JEL: F1 O5 C1
    Date: 2014–07
  16. By: Thuyen, Truong Thi Ngoc; Jongwanich, Juthathip; Ramstetter, Eric D.
    Abstract: This article examines how the presence of foreign multinational enterprises (MNEs) affects productivity in local firms in Vietnamese manufacturing in 2005-2010. The paper also emphasizes how import protection has affected these productivity spillovers and how spillovers from wholly-foreign MNEs and joint ventures differ. The most consistent result suggests wholly-foreign MNEs impart negative spillovers while joint ventures generate positive spillovers. Theory and random effects estimates also indicate that import protection reduces local firm productivity and weakens the effect of spillovers from all MNEs, but this result is not obtained when a fixed effects estimator is used. Results are similar in samples of labour-intensive industries, which include close to three-fourths of all sample firms, but differ markedly for more capital-intensive groups.
    Keywords: Multinational enterprise, spillover, tradepolicy, manufacturing, Vietnam, Multinational enterprise, spillover, tradepolicy, manufacturing, Vietnam
    JEL: F23 L60 O24 O53
    Date: 2014–06
  17. By: Martin Persson, Sabine Henders, and Thomas Kastner
    Abstract: This paper aims to improve our understanding of how and where global supply-chains link consumers of agricultural and forest commodities across the world to forest destruction in tropical countries. A better understanding of these linkages can help inform and support the design of demand-side interventions to reduce tropical deforestation. To that end, we map the link between deforestation for four commodities (beef, soybeans, palm oil, and wood products) in eight case countries (Argentina, Bolivia, Brazil, Paraguay, Democratic Republic of the Congo, Indonesia, Malaysia, and Papua New Guinea) to consumption, through international trade. Although few, the studied countries comprise a large share of the internationally traded volumes of the analyzed commodities: 83% of beef and 99% of soybean exports from Latin America, 97% of global palm oil exports, and roughly half of (official) tropical wood products trade. The analysis covers the period 2000-2009. We find that roughly a third of tropical deforestation and associated carbon emissions (3.9 Mha and 1.7 GtCO2) in 2009 can be attributed to our four case commodities in our eight case countries. On average a third of analyzed deforestation was embodied in agricultural exports, mainly to the EU and China. However, in all countries but Bolivia and Brazil, export markets are dominant drivers of forest clearing for our case commodities. If one excludes Brazilian beef on average 57% of deforestation attributed to our case commodities was embodied in exports. The share of emissions that was embodied in exported commodities increased between 2000 and 2009 for every country in our study except Bolivia and Malaysia.
    Keywords: Climate change, Forests, REDD+, Commodities, Commodity supply chains, Energy, Food, Agriculture.
    JEL: Q23 Q54 L73 Q02 Q17
    Date: 2014–10
  18. By: Luis Aguiar (European Commission - JRC - IPTS); Joel Waldfogel (University of Minnesota - Carlson School of Management)
    Abstract: Since the launch of the iTunes Music Store in the US in 2003 and in much of Europe in the following years, music trade has shifted rapidly from physical to digital products, raising the availability of products in dierent countries. Despite substantial growth in availability, the available choice sets of digital music have not fully converged across countries. The territorial fragmentation of the EU copyright management regime and related cross-border transaction costs are often perceived as an obstacle to greater availability. However, other factors such as commercial strategies by music producers may also aect availability. EU policy makers are now contemplating various possibilities to reduce these cross-border trade costs and improve convergence in music availability across countries. This raises the question of how much benet these policy measures would create for consumers and producers in Europe and around the world. This study calculates the economic benets for consumers and producers from further trade opening or trade cost reductions in digital music. We address this question using comprehensive Nielsen data on digital track sales in the US, Canada, 13 EU Member States, and 2 other European countries (Norway and Switzerland) from 2006 to 2011. We estimate a structural model of music demand which allows us to obtain the consumer surplus for consumers in each destination country as well as the revenue for producers in each origin country. Our model allows us to simulate several scenarios. We rst compare the baseline current situation (the \status quo") with full autarky whereby only local music is available in each country - a big step backwards compared to the status quo. We then compare the status quo with a fully open EU Digital Single Market whereby all European music is available in all EU countries. Finally, we simulate worldwide openness in which all music is available in all countries. We estimate both consumer surplus benets and producer revenue eects for these scenarios. Not surprisingly, the current status quo music trade benets consumers everywhere compared to the autarky scenario. Relative to autarky, status quo trade raises aggregate consumer surplus in the 17 countries by about e300 million (a 11.3% increase). Trade also raises producer revenue by e85 million (a 2.8% increase). European consumers benet more from music trade than North Americans. However, it has large benets for American producers but on balance small benets to European producers. American producers have a larger market share in Europe that European producers have in the US. Moving from the current status quo to an EU Digital Single Market for music would increase consumer surplus from digital music consumption by 1.8 per cent (e19 million) and music producers'revenue by 1.1 per cent (e10 million). Benets vary considerably across Member States. Under worldwide frictionless trade consumers in 15 European countries gain e31 million (a 3% increase) while North American consumers gain e6.5 million (a 0.35% increase). Most of the gains from fully frictionless trade - about two thirds - are accomplished by a European single market. Annual gains from worldwide frictionless trade for producers, compared to autarky, reach 1.9% in Europe and 0.38% in the US. Clearly, the additional gains from moving beyond a European Digital Single Market to a worldwide open market would be small for European producers and consumers. Digital music production and consumption is only a small part of all media markets covered by copyright. We note that the gures presented here represent only a fraction of the potential benets from further trade opening in other digital media.
    Keywords: music, digitization, digital media, online markets, downloading, international trade,
    Date: 2014–11
  19. By: Weinberger, Ariel (University of Oklahoma)
    Abstract: With non-homothetic preferences, a monopolistic competition equilibrium is inefficient in the way inputs are allocated towards production. This paper quantifies a gains from trade component that is present only when reallocation is properly measured in a setting with heterogeneous firms that charge variable markups. Due to variable markups, reallocations initiated by aggregate shocks impact allocative efficiency depending on the adjustment of the market power distribution. My measurement compares real income growth with the hypothetical case of no misallocation in quantities. Using firm and industry-level data from Chile during a period with large terms of trade gains, I find that cost reductions are associated with losses in allocative efficiency because firms pass-through measured productivity gains into markups. From industry-year variation, there is also evidence that industries that import a larger share of their inputs become more misallocated as a result of exchange rate appreciations compared to open sectors whose output competition becomes fiercer.
    JEL: F12 F14 F43 L11 O47
    Date: 2015–09–01
  20. By: Stratan, Alexandru; Ignat, Anatolie; Moroz, Victor
    Abstract: Agri-food trade has expanded over the recent decade in the Republic of Moldova. Trade policies promoted by the Republic of Moldova are mostly oriented towards product diversification, knowledge transfer and promotion of new competitive goods with high added value for domestic and foreign markets. The trade balance remains dynamic with significant fluctuations in product categories over time and countries of destination, due to climatic and trade shocks. In this context, the aim of the paper is to provide an analysis of agri-food sector and external trade, assess the impact of external factors over the national economy and opportunities for the better export targeting, and identify possible solutions to increase resilience to agro-food foreign trade shocks. For such tasks were used the statistical methods of analysis and informal interviews with main stakeholders. This paper’s outcome incorporates the scale, significance and dynamics of the agri-food export including the continued evolution of the regulatory agencies involved and the critical role of support policies provided by other sectors of national economy for the export promotion.
    Keywords: Agri-food trade, trade policies, export promotion
    JEL: F13 Q17 Q18
    Date: 2015–11–20
  21. By: James Lake (Southern Methodist University); Halis M. Yildiz (Ryerson University)
    Abstract: Casual observation reveals a striking phenomenon of Preferential Trade Agreements (PTAs): while Customs Unions (CUs) are only intra-regional, Free Trade Agreements (FTAs) are inter and intra-regional. Using a farsighted dynamic model, we endogenize the equilibrium path of PTAs among two close countries and one far country. Rising transport costs mitigate the cost of discrimination faced by the far country as a CU non-member and diminish the value of preferential access as a CU member. Thus, sufficiently large transport costs imply an FTA is the only type of PTA that can induce the far country's participation in PTA formation. Unlike CU formation, FTA formation can induce participation because FTAs provide a flexibility benefit: an FTA member can form further PTAs with non-members but a CU member must do so jointly with all existing members. Hence, in equilibrium, CUs are intra-regional while FTAs are intra- and inter-regional.
    Keywords: Free Trade Agreement, Customs Union, fl?exibility, coordination, geography, networks, farsighted
    JEL: C71 F12 F13
    Date: 2014–05
  22. By: Guglielmo Maria Caporale; Anamaria Sova; Robert Sova
    Abstract: Using annual data for the period 1992-2012, this paper examines trade flows between China and its main trade partners in Asia, North America and Europe, and whether increasing trade has led to industrial structural adjustment and changes in China’s trade patterns. The analysis is based on both economic indicators and the estimation of a gravity model, and applies recently developed panel data methods that explicitly take into account unobserved heterogeneity, specifically the fixed effect vector decomposition (FEVD) technique. The findings confirm the significant change in China’s trading structure associated with the fast growth of foreign trade. In particular, there has been a shift from resource- and labour-intensive to capital- and technology-intensive exports.
    Keywords: gravity model, panel data analysis, trade specialisation, comparative advantage
    JEL: C23 F14 F15
    Date: 2015
  23. By: Egger, Peter; Staub, Kevin E
    Abstract: Many empirical gravity models are now based on generalized linear models (GLM), of which the Poisson pseudo-maximum likelihood estimator is a prominent example and the most-frequently used estimator. Previous literature on the performance of these estimators has primarily focussed on the role of the variance function for the estimators’ behavior. We add to this literature by studying the small-sample performance of estimators in a data-generating process that is fully consistent with general equilibrium economic models of international trade. Economic theory suggests that (i) importer- and exporter-specific effects need to be accounted for in estimation, and (ii) that they are correlated with bilateral trade costs through general-equilibrium (or balance-of-payments) restrictions. We compare the performance of structural estimators, fixed effects estimators, and quasi-differences estimators in such settings, using the GLM approach as a unifying framework.
    Keywords: fixed effects; generalized linear models; gravity models
    JEL: C23 F14
    Date: 2015–02
  24. By: Holger Breinlich
    Abstract: I use an event study approach to present novel evidence on the impact of trade liberalization on firm-level profits. Using the uncertainty surrounding the negotiation and ratification process of the Canada-United States Free Trade Agreement of 1989 (CUSFTA), I estimate the impact of different types of tariff reductions on the abnormal returns of Canadian manufacturing firms. I find that Canadian import tariff reductions lead to lower, and reductions in Canadian intermediate input tariffs to higher abnormal returns. The impact of U.S. tariff reductions is less clear and depends on the size of the affected firms. I also calculate the total profit increase implied by my estimates. Overall, CUSFTA increased per-period profits by around 1.2%. This was mainly driven by intermediate input tariff reductions which more than offset the negative effect of Canadian import tariff reductions.
    Keywords: Profitability, Trade Liberalization, Stock Market Event Studies, Canada-U.S. Free Trade Agreement
    JEL: F12 F14 G14
    Date: 2016–01
  25. By: Glas, Alexander; Hübler, Michael; Nunnenkamp, Peter
    Abstract: We assess the role of capital goods imports and inflows of foreign direct investment (FDI) as transmission channels through which major emerging economies (BRICs, i.e., Brazil, Russian Federation, India and China) could catch up with advanced source countries in terms of total factor productivity (TFP). We find that the importance of these transmission mechanisms depends on the BRICs' local capacity to absorb superior technologies and on domestic investment.
    Keywords: total factor productivity,imports,foreign direct investment,absorptive capacity,BRICs
    JEL: F14 F21 O47
    Date: 2015
  26. By: Pérez-Villar, Lucia; Seric, Adnan
    Abstract: We analyze in this paper determinants of voluntary knowledge transfer from foreign investors to their local suppliers in 19 Sub-Saharan African countries using data from the 2010 Africa Investor Survey by UNIDO. We argue that not all backward linkages entail the same potential for spillovers since not all local sourcing activities by multinationals involve a transfer of knowledge to suppliers. Our findings support the idea that foreign investor's heterogeneity and country environment are key factors shaping the spillover potential of backward linkages. Local management autonomy and the long-term nature of local procurement contracts are positively associated with the transfer of knowledge. Also sourcing strategies that seek to meet local market requirements, to optimize value chain efficiency and that respond to social responsibility commitments are more likely to involved a transfer of knowledge to suppliers. Additionally, host country institutional quality and institutional distance relative to the origin country of the MNE are relevant determinants of the degree of knowledge transfer. Investment policies that merely focus on promoting larger shares of locally sourced inputs might fail to get the most of FDI positive externalities. Instead, quality linkages that involve a transfer of knowledge should be promoted over quantity linkages.
    Keywords: knowledge transfer,global value chains,institutional distance,supplier upgrading,sub-Saharan Africa
    JEL: F23 O33
    Date: 2015
  27. By: Rafael Cezar (Banque de France - Direction de la Recherche, DIAL - Développement, institutions et analyses de long terme - Institut de recherche pour le développement [IRD]); Octavio Escobar (School of Business - Adelphi University)
    Abstract: This paper studies the link between Foreign Direct Investment (FDI) and institutional distance. Using a heterogeneous firms framework, we develop a theoretical model to explain how institutional distance influences FDI and it is shown that institutional distance reduces both the likelihood that a firm will invest in a foreign country and the volume of investment it will undertake. We test our model, using inward and outward FDI data on OECD countries. The empirical results confirm the theory and indicate that FDI activity declines with institutional distance. In addition, we find that firms from developed economies adapt more easily to institutional distance than firms from developing economies.
    Keywords: Foreign Direct Investment,institutions,heterogeneous firms,gravity model
    Date: 2015
  28. By: Gavrilescu, Camelia
    Abstract: After joining CEFTA in 1997, Romania established a relatively stable group of partner countries for its agri-food trade. Several factors contributed to the stability in time of this group, firstly the existence or establishment of preferential trade agreements, the geographical proximity, and last, but not least, the historical traditions. The exit from CEFTA and the accession to the EU of some of the partner countries, then of Romania itself, changed only temporarily the trade flows, until everyone's adaptation to the ”new rules of the game”. Among the new Member States of the EU (NMS-13), the main trading partners for Romania were and are Hungary, Bulgaria and Poland. The paper is analyzing the evolution of the agri-food trade flows with these countries, in terms of value and composition of the exchanges.
    Keywords: Agri-food trade, CEFTA, NMS-13, Romania
    JEL: F13 Q17 Q18 Q58
    Date: 2015–11–20
  29. By: Bala Ramasamy (China Europe International Business School); Matthew Yeung (Open University of Hong Kong, China)
    Abstract: Over the last ten years, Chinese enterprises have become more multi-national in nature. China’s outward foreign direct investment (OFDI) has been growing at a phenomenal rate. In 2012, China became the third largest investor, after the US and Japan; and the largest investor among developing countries. How can host governments attract more of this Chinese capital? What are some short to medium term policies that host governments can initiate to make their respective nations attractive to Chinese investors? We consider these questions by utilizing a best-worst choice exercise among 114 senior corporate decisionmakers of Chinese companies who have planned or are planning to globalize. Using the maximum difference scaling methodology, we rank 19 most common determinants that influence FDI location choice. We propose five “low hanging fruits” that policy-makers should consider that could ensure their countries come within the radar of Chinese multi-nationals.
    Keywords: Foreign Direct Investment (FDI), outward FDI, FDI policies, China, Investment, Maximum difference scaling
    JEL: F21 F23 F40
    Date: 2014–04
  30. By: Valeria, Gattai; Rajssa, Mechelli; Piergiovanna, Natale
    Abstract: This paper investigates the link between Outward Direct Investment (ODI) and the performance of BRIC firms. Drawing on firm-level data, we introduce a rich taxonomy of ODI that accounts for the decision to invest and the number, destination and ownership structure of foreign affiliates. Through different econometric models and specifications, we consistently demonstrate that BRIC firms engaged in ODI are in the minority, but they outperform domestic enterprises. Moreover, firms selecting less preferred ODI types outperform firms undertaking other ODI strategies.
    Keywords: ODI, FDI, Performance, BRIC, Firm-Level Data
    JEL: F23 L25 O57
    Date: 2016–01–18
  31. By: Maxim Bratersky (National Research University Higher School of Economics); Gunes Gokmen (National Research University Higher School of Economics); Andrej Krickovic (National Research University Higher School of Economics)
    Abstract: Politicians, pundits and experts in both Russia and the US frequently bemoan the “underdevelopment” of US-Russia trade, arguing that political factors have inhibited the development of economic ties. It is also often argued that political relations between the two countries would also be more cooperative and less conflictual if these ties developed up to their full potential. The paper seeks to test the conventional wisdom that the US-Russia trade is underdeveloped by employing a standard gravity model to measure where trade between the two countries “should” be. We find no evidence that the US-Russia trade is underdeveloped. In terms of its ability to live up to the predictions of the model, trade between the two countries is predicted by the standard determinants of trade, suggesting that there is nothing erratic about the US-Russia trade and it behaves like any average country pair. These findings suggest that US-Russia trade relations actually live up to their economic potential and that the commonly held idea that political relations between Russia and the US can be dramatically improved by tapping into the “unfulfilled” promise of improved trade relations is unfounded. Moreover, our analysis demonstrates that the sectorial structure of the two economies, factor endowments and comparative advantages do not seem to indicate that there is significant potential for increased trade, as the conventional wisdom would suggest. The conventional view argues that poor political relations have impeded the development of economic relations between the two states. But, in fact, the opposite may be true: relations between the US and Russia are characterized by rivalry and conflict because there is little solid economic grounds for more pacific relations
    Keywords: US-Russia Relations, International Trade, Gravity Models, Economic Interdependence
    JEL: F14
    Date: 2016
  32. By: Goldberg, Pinelopi; Pavcnik, Nina
    Abstract: The last two decades have witnessed a shift in the focus of international trade research from trade policy to other forms of trade frictions (e.g., transportation, information and communication costs). Implicit in this development is the widespread view that trade policy no longer matters. We confront this view by critically examining a large body of evidence on the effects of trade policy on economically important outcomes. We focus on actual as opposed to hypothetical policy changes. We begin with a discussion of the methodological challenges one faces in the measurement of trade policy and identification of its causal effects. We then discuss the evidence on the effects of trade policy on a series of outcomes that include: (1) aggregate outcomes, such as trade volumes (and their price and quantity subcomponents), the extensive margin of trade, and static, aggregate gains from trade; (2) firm and industry performance, i.e., productivity, costs, and markups; (3) labor markets, i.e., wages, employment, and wage inequality; (4) long-run aggregate growth and poverty, secondary distortions and misallocation, uncertainty. We conclude that the perception that trade policy is no longer relevant arises to a large extent from the inability to precisely measure the various forms of non-tariff barriers that have replaced tariffs as the primary tools of trade policy. Better measurement is thus an essential prerequisite of policy-relevant research in the future. Despite measurement challenges and scant evidence on the impact of actual policy changes, existing evidence when properly interpreted points to large effects of trade policy on economically relevant outcomes, especially when trade policy interacts with other developments, e.g., technological change. We point to areas and opportunities for further research and draw lessons from the past to apply to future studies.
    Keywords: firms and trade; growth; international trade; labor markets; trade policy
    JEL: F10 F13 F14 L11
    Date: 2016–02
  33. By: Görg, Holger; Jabbour, Liza
    Abstract: This paper considers the link between the local availability of services and a firm's decision to become a multinational. This is a highly topical issue, given that many industrialised countries are increasingly becoming services economies and firms become increasingly more globalised. In an analysis of rich firm level data for France we find evidence that the availability of services in the home country indeed has a positive impact on firms' decisions to become multinationals. This is robust to endogeneity concerns. The result can be interpreted in a simple set up where the local availability of business services improves firm efficiency and, hence, allows firms to overcome sunk costs of investing abroad more easily.
    Keywords: Business Services,Foreign Direct Investment,Multinationals
    JEL: F23 R11
    Date: 2015
  34. By: Levchenko, Olga (Russian Presidential Academy of National Economy and Public Administration); Ignatyeva, Galina (Russian Presidential Academy of National Economy and Public Administration)
    Abstract: The peculiarities of international economic integration in the framework of the Eurasian Economic Union. It describes the degree of economic integration – of the free trade area, customs union, common market and economic union to complete economic integration. The characteristics of the economic potential of combining the EAEC member-countries.
    Keywords: international economic integration, EAEC
    Date: 2015
  35. By: Nicolas Dross (European Commission, DG Trade, Brussels, Belgium)
    Abstract: Trade in tuna products with the EU faces systemic changes. In 2013, the EU launched a raft of large-scale negotiations, with countries including the United States and Japan. This comes on top of a number of ongoing negotiations (e.g., Mercosur, Thailand, and Vietnam), as well as recently concluded ones (e.g., Korea, Canada, Andean Community). Equally important for the tuna sector is a cluster of EU development-oriented negotiations known as Economic Partnership Agreements with African, Caribbean and Pacific countries. Finally, it is particularly important that the tuna sector is aware of the modernisation of the EU's scheme of trade concessions for developing countries, known as the Generalised Scheme of Preferences (GSP). The new rules entered into force on 1 January 2014 and will have an impact on the sector. Looking at the most recent trade figures, it seems that for the moment significant changes have not materialised yet. It will take more time before the trade flows are impacted.
    Keywords: international trade, EU trade policy, tariff preferences, duty rates, tuna products, import price.; international trade, EU trade policy, tariff preferences, duty rates, tuna products, import price.
    Date: 2015
  36. By: Petros C. Mavroidis
    Abstract: The basic point I advocate in this paper is that the WTO Dispute Settlement System aims to curb unilateralism. No sanctions can be imposed, unless if the arbitration process is through, the purpose of which is to ensure that reciprocal commitments entered should not be unilaterally undone through the commission of illegalities. There are good reasons though, to doubt whether practice guarantees full reciprocity. The insistence on calculating remedies prospectively, and not as of the date when an illegality has been committed, and the ensuing losses for everybody that could or could not be symmetric, lend support to the claim that the WTO regime serves ‘diffuse’ as opposed to ‘specific’ reciprocity. Still, WTO Members continue to routinely submit their disputes to the WTO adjudicating fora, showing through their behaviour that they would rather live in a world where punishment is curbed, than in world where punishment acts as deterrent since full reciprocity would be always guaranteed.
    JEL: K40
    Date: 2016–01
  37. By: Malcolm Bosworth
    Abstract: This paper examines developments in government procurement arrangements across the Tasman to assess the extent to which recent trade, especially preferential agreements, of Australia and New Zealand containing government procurement commitments have contributed to any reform in these policies. It argues that (preferential) trade agreements have had little or no impact on any such reforms, and that in the case of Australia, such commitments have not prevented procurement arrangements from going backwards. Transparent price preferences favouring local content have been largely replaced by hidden and more costly discretionary discriminatory measures. In sharp contrast to Australia, New Zealand seems to have maintained a relatively open and non-discriminatory government procurement regime based not on commitments in trade agreements but rather on unconditional MFN unilateral reforms. The central policy message is trade agreements cannot substitute for unilateral reforms.
    Keywords: Government procurement, Australia, New Zealand, trade agreements, governance
    Date: 2015–12
  38. By: Alexander R. Malaket (OPUS Advisory Services International Inc)
    Abstract: International trade is widely acknowledged as a positive force in the creation of economic value and in the advancement of global development efforts and poverty-reduction initiatives. Imperfections and inadequacies in the system of global commerce aside for the moment, it is correct to consider trade to be one of the few truly global drivers of economic activity, and, as was illustrated during the global crisis, one area where national and international policy levers can be effective and highly impactful.
    Keywords: Financing trade, transactions, development
    JEL: F1
    Date: 2015–05
  39. By: Gnutzmann, Hinnerk; Gnutzmann-Mkrtchyan, Arevik
    Abstract: While "mega FTAs" and WTO-driven efforts at multilateral liberalisation dominate the agenda, customs unions (CU) are the silent success story of regional integration. Throughout the world, CUs have been superseding earlier FTAs, as new unions were formed or old ones expanded. Due to problems of measurement, this fact appears to have gone largely unnoticed so far. We show that the proliferation of CUs is driven by national social welfare considerations: even allowing for lobbying, CUs lead to higher social welfare than any other bilateral trade agreement. Thus, even the most ambitious mega FTAs eventually turn into "mega CUs".
    Keywords: Customs unions, Political viability, Member welfare
    JEL: F12 F13 F14
    Date: 2016

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