nep-int New Economics Papers
on International Trade
Issue of 2017‒06‒18
23 papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Trading firms and trading costs in services: The case of Sweden By Lodefalk, Magnus; Kyvik Nordås, Hildegunn
  2. Brexit: estimating tariff costs for EU countries in a new trade regime with the UK By Rita Cappariello
  3. How Did China’s WTO Entry Benefit U.S. Consumers? By Mary Amiti; Mi Dai; Robert C. Feenstra; John Romalis
  4. Bilateral and Regional Trade Agreements : Detangling the Noodle/Spaghetti Bowl By Paul Gretton
  5. Bilateral and Regional Trade Agreements : Detangling the Noodle/Spaghetti Bowl By Paul Gretton
  6. General Equilibrium Trade Modelling with Canada-US Transportation Costs By Chuantian He; Chunding Li; John Whalley
  7. The short-run effects of Knowledge intensive greenfield FDI on new domestic entry By Sara Amoroso; Bettina Mueller
  8. Brands in Motion: How frictions shape multinational production By K. Head; T. Mayer
  9. Decomposing Service Exports Adjustments along the Intensive and Extensive Margin at the Firm-Level By Elisabeth Christen; Michael Pfaffermayr; Yvonne Wolfmayr
  10. Trade Induced Structural Change and the Skill Premium By Javier Cravino; Sebastian Sotelo
  11. The Regional Impact of Trade Liberalization on Households in Egypt, 1999-2012 By Jérémie Gignoux; Akiko Suwa-Eisenmann
  12. Trading with China; Productivity Gains, Job Losses By JaeBin Ahn; Romain A Duval
  13. Cross-border Co-operation Networks in West Africa By Olivier J. Walther
  14. North-South Trade, Technology Diffusion and Productivity Growth: Are Small States Different? By Schiff, Maurice; Wang, Yanling
  15. The Trade Impacts of the Naming and Shaming of Forced and Child Labor By Margaryta Klymak
  16. Competition for Global Value Added: Export and Domestic Market Shares By R. Cezar; A. Duguet; G. Gaulier; V. Vicard
  17. South-South FDI: Is it really different? By Görg, Holger; Gold, Robert; Hanley, Aoife; Seric, Adnan
  18. Trade and labour adjustment in Europe: What role for the European Globalization Adjustement Fund? By Cernat, Lucian; Mustilli, Federica
  19. FDI and poverty reduction in Botswana:A multivariate causality test By Magombeyi, Mercy T; Odhiambo, Nicholas M
  20. The Role of TTIP on the Environment. By Pascalau, Razvan; Qirjo, Dhimitri
  21. Do Remittances Promote Labor Productivity Growth in Mexico? An Empirical Analysis, 1970-2014. By Miguel D. Ramirez
  22. Offshoring, industry heterogeneity and employment By Bramucci, Alessandro; Cirillo, Valeria; Evangelista, Rinaldo; Guarascio, Dario
  23. Social Mobility and Brexit: A Closer Look At England's 'Left Behind' Communities By Marianne Sensier; Fiona Devine

  1. By: Lodefalk, Magnus (Örebro University School of Business); Kyvik Nordås, Hildegunn (Örebro University School of Business)
    Abstract: This paper first portraits Swedish services exporters and services MNEs; second it analyses the determinants of services exports and affiliate sales; and third it studies the choice of mode of entering a foreign market. Emanating from a heterogeneous firm internationalization model, the main contribution of the paper is to explore the interaction between firm characteristics and foreign market characteristics, particularly policy-induced services trade barriers, in shaping services trade and investment patterns. Exploiting a large and very detailed firm-level dataset for the 2008-2013 period, the descriptive analysis finds that most exporting firms export one or two products to a few, most often other Nordic countries. Still, firms that export to 25 or more markets account for more than 80% of total export value. Furthermore, firms that export to 20 countries export more than 60% to their main destination country. Similar patterns are found for affiliate sales. Using a gravity approach we then study the determinants of the extensive and intensive margin of exports and affiliate sales in pooled as well as sector level regressions. We find that trade costs, both natural and policy-induced have the largest impact on the extensive margin of trade, suggesting that trade costs facing services exporters are mainly in the form of fixed entry costs. This is further supported by the finding that incumbency is the most important determinant of future exports and affiliate sales, and incumbents tend to be protected and thrive behind trade barriers.
    Keywords: services trade; affiliate sales; trade costs; micro data; Sweden
    JEL: D22 F13
    Date: 2017–06–09
  2. By: Rita Cappariello (Bank of Italy)
    Abstract: This study estimates the average tariffs that the producers of each of the 27 EU countries could face when exporting to the UK in the event that a new Free Trade Agreement is not reached as part of the Brexit negotiation and that trade between the EU and the UK is conducted under WTO most-favoured-nation terms. The analysis is based on information from the WTO-IDB database and on bilateral trade flows at the product level published by UN Comtrade. The results show that average tariff costs would be different across EU countries, depending on the initial level of commercial relationships with the UK and on the sectoral composition of trade flows. Different tariff costs may potentially create a strong heterogeneity in the EU economies with regard to their stakes in the negotiations with the UK, and have an impact on the establishment of the EU position, to which each Member State contributes equally.
    Keywords: tariffs, protectionism, Brexit
    JEL: F13 F15
    Date: 2017–06
  3. By: Mary Amiti; Mi Dai; Robert C. Feenstra; John Romalis
    Abstract: China’s rapid rise in the global economy following its 2001 WTO entry has raised questions about its economic impact on the rest of the world. In this paper, we focus on the U.S. market and potential consumer benefits. We find that the China trade shock reduced the U.S. manufacturing price index by 7.6 percent between 2000 and 2006. In principle, this consumer welfare gain could be driven by two distinct policy changes that occurred with WTO entry. The first, which has received much attention in the literature, is the U.S. granting permanent normal trade relations (PNTR) to China. A second, new channel we identify is China reducing its own input tariffs. Our results show that China’s lower input tariffs increased its imported inputs, boosting Chinese firms’ productivity and their export values and varieties. Lower input tariffs also reduced Chinese export prices to the U.S. market. In contrast, PNTR had no effect on Chinese productivity nor export prices, but did increase Chinese entry into the U.S. export market. We find that at least two-thirds of the China WTO effect on the U.S. price index of manufactured goods was through China lowering its own tariffs on intermediate inputs.
    JEL: F12 F14
    Date: 2017–06
  4. By: Paul Gretton
    Abstract: Following the global financial crisis, economic growth and international trade growth have been sluggish. Current projections indicate that growth may continue to be sluggish in the medium term. These continuing trends will limit income raising productivity growth needed to maintain and improve living standards with population ageing across many economies. It will also limit capacities needed to raise living standards amongst lower income regions. Gaining public acceptance of productivity improving policies and the contribution that trade openness makes, however, is getting harder due to re-emerging national protectionist sentiments. This note looks at possible ways to improve trade policy formulation at the national, regional and global levels through evidence to bolster the case for greater openness and economic reform. Growth could be revived if G20 countries act to implement deeper and wider trade and economic reforms, and avoid policies that limit productivity growth prospects.
    JEL: F1 F3 F4 O4 O5
    Date: 2017–06
  5. By: Paul Gretton
    Abstract: Following the global financial crisis, economic growth and international trade growth have been sluggish. Current projections indicate that growth may continue to be sluggish in the medium term. These continuing trends will limit income raising productivity growth needed to maintain and improve living standards with population ageing across many economies. It will also limit capacities needed to raise living standards amongst lower income regions. Gaining public acceptance of productivity improving policies and the contribution that trade openness makes, however, is getting harder due to re-emerging national protectionist sentiments. This note looks at possible ways to improve trade policy formulation at the national, regional and global levels through evidence to bolster the case for greater openness and economic reform. Growth could be revived if G20 countries act to implement deeper and wider trade and economic reforms, and avoid policies that limit productivity growth prospects.
    JEL: F1 F3 F4 O4 O5
    Date: 2017–06
  6. By: Chuantian He; Chunding Li; John Whalley
    Abstract: Transportation costs are an important topic in international trade, but seldom have researches paid attention to general equilibrium trade modelling with transportation costs and explored their relevant effects. This paper uses different numerical general equilibrium trade model structures to simulate the impacts of transportation costs on both welfare and trade for a Canada-US country pair case. We compare two groups of model structure, Armington assumption models and homogeneous goods models. Within these two groups of models, we also compare balanced trade structures to trade imbalance structures, and production function transportation costs to iceberg transportation costs. Armington goods models generate absolute welfare gains from transportation cost elimination than homogeneous goods models. Welfare gains under balanced trade structures are larger in production function transportation cost scenarios, but are larger in iceberg transportation cost scenario under trade imbalance structures. Canada’s welfare gains with iceberg transportation cost are significantly larger than gains with production function transportation cost. On trade effects, homogeneous goods models generate more export and import gains, balanced trade structures have more trade variations, and iceberg transportation cost generate more trade effects.
    JEL: F10 F47 O51
    Date: 2017–06
  7. By: Sara Amoroso (European Commission - JRC); Bettina Mueller (Centre for European Economic Research (ZEW))
    Abstract: Existing evidence on the impact of foreign direct investment on domestic economies remains ambiguous. Positive technology spillovers of foreign investment may be outweighed by negative crowding out effect due to increased competition. In this paper, we employ a unique country/sector-level data set to investigate the impact of what is considered the best type of foreign investment greenfield knowledge intensive FDI on domestic entry. Our results suggest that, in the short run, this type of FDI is positively related to the entry rate in the host country, if the domestic sector is either dynamic, or highly R&D intensive. These sectors may be respectively characterized by lower entry costs, which encourage a trial and error learning business approach, and by a higher level of absorptive capacity which increases the chance of technology transfer.
    Keywords: foreign direct investments; knowlwdge spillovers; new firm entry
    Date: 2017–04
  8. By: K. Head; T. Mayer
    Abstract: We use disaggregated data on car assembly and trade to estimate a model of multinational production. Our framework delineates four theory-based specifications under which all frictions relevant to multinational production can be structurally estimated. In addition to the trade costs and multinational production frictions emphasized in past work, we incorporate a third friction: regardless of production origin, it is more difficult to make sales in markets that are geographically separated from the brand’s headquarters. The estimation transparently recovers internally consistent estimates of each type of friction cost. With structural parameters in hand, we investigate the consequences of three trade integration experiments: TPP, TTIP, and Brexit. We show that each type of friction makes a qualitative and quantitative difference in the reallocation of production caused by economic integration.
    Keywords: cars, gravity, multinational production model, regional integration, structural estimation.
    JEL: F1
    Date: 2017
  9. By: Elisabeth Christen (WIFO); Michael Pfaffermayr (WIFO); Yvonne Wolfmayr (WIFO)
    Abstract: Using a panel-data set of Austrian service exporting firms this paper examines the determinants of service exports at the firm-destination country level. We implement a random-effects Heckman sample selection firm-level gravity model as well as a fixed effects Poisson model. Expected firm-level service exports are decomposed into the intensive and extensive margins of adjustment as a response to counterfactual changes. We find market demand to be the key determinant. Results also suggest high service export potentials due to regulatory reform in partner countries within the EU. Adjustments at the extensive margin only play a marginal role. Increasing firm size as well as changes in distance related costs are most effective in developing new export relationships in services.
    Keywords: Services trade, Firm-level evidence, Firm heterogeneity, Gravity model, Sample selection, Intensive and extensive margin of trade
    Date: 2017–06–14
  10. By: Javier Cravino; Sebastian Sotelo
    Abstract: We study how international trade affects manufacturing employment and the relative wage of unskilled workers when goods and services are traded with different intensities. Manufacturing trade reduces manufacturing prices worldwide, which reduces manufacturing employment if manufactures and services are complements. We document that manufacturing production is unskilled-labor intensive, so that these changes increase the skill-premium. We incorporate this mechanism in a quantitative trade model and show that trade has had a negative impact on manufacturing employment and the relative wage of unskilled workers. The impact on the skill premium was larger in developing countries where manufacturing is particularly unskilled-labor intensive.
    JEL: F16 F62 F63
    Date: 2017–06
  11. By: Jérémie Gignoux (PSE-INRA, France); Akiko Suwa-Eisenmann
    Abstract: This paper assesses the impact of trade liberalization in Egypt by comparing regions more exposed to trade opening compared to regions that were less exposed. As each region in Egypt (that we define as the urban or the rural part of a governorate) specializes in different production sectors, and tariff reduction varies by sector, the impact of trade liberalization on households depends on the region they live in and the sector they source their income from. This approach is relevant in the case of Egypt, as geographical mobility across regions is small. We find that trade liberalization in Egypt at a fast pace between 1999 and 2004 has been detrimental to households, while the subsequent liberalization between 2004 and 2012 had more limited effects. Poverty has declined in Egypt but less so in regions more exposed to tariff reduction. In the latter, household income has also been reduced, especially self-employment income and wages. Unskilled wages were the most affected but less so after 2004, a possible effect of labor reform in 2003. While activity and employment rates increased on average over the period, they did significantly more for skilled individuals in regions that were more protected by trade policy.
    Date: 2017–06–15
  12. By: JaeBin Ahn; Romain A Duval
    Abstract: We analyze the impact on productivity in advanced economies of fast-growing trade with China between the mid-1990s and late-2000s, separately identifying the export and import channels. We use country-sector-level data for 18 advanced economies and, similar to Autor, Dorn, and Hanson (2013), exploit exogenous variation in trade with China in a given country-sector by instrumenting imports from (exports to) China in a given country-sector with the average imports from (exports to) China in the same sector in other advanced economies. Our estimates point to large productivity gains from trading with China—the (exogenous) rise of China in global trade may have increased the level of total factor productivity by about 1.9 percent, or 12.3 percent of the overall increase over the sample period, in the median country-sector. By contrast, using a similar empirical strategy, we find adverse employment effects of Chinese imports in exposed country-industries, consistent with previous studies. Taken together, these findings point to large gains from free trade, while underscoring the scope for a more active policy role in redistributing them, particularly by easing workers’ transition between jobs and industries.
    Date: 2017–05–23
  13. By: Olivier J. Walther (University of Southern Denmark)
    Abstract: Long seen as artificial barriers inherited from decolonisation, West African borders now lie at the heart of policies designed to encourage regional trade and combat political instability. This rediscovery of the peripheries of the nation state has fostered a proliferation of institutional initiatives that aim to cultivate co-operation between countries, regions and municipalities while ensuring the protection and promoting the interests and rights of the people living in border regions. Despite these regional initiatives, the effective functioning of cross-border co-operation still remains largely unknown across West Africa. The purpose of this paper is to fill that gap, with an analysis of both the social structure and the geography of West African governance networks. On the basis of this structural and geographic analysis, policy recommendations are formulated aimed at implementing policies that are more place-based, more attentive to relations between the actors at play in co-operation, and more specifically adapted to the constraints and opportunities of the West African region.
    Keywords: cross-border co-operation, governance, networks, regional integration, West Africa
    JEL: O18 O19 O43 O55 R58
    Date: 2017–06–12
  14. By: Schiff, Maurice; Wang, Yanling
    Abstract: The economies of small developing states tend to be more fragile than those in large ones. This paper examines this issue in a dynamic context by focusing on the impact of education and North-South trade-related technology diffusion (NRD) on TFP growth in small and large states in the South. The main findings are: i) TFP growth increases with NRD, education and the interaction between the two; ii) the impact of NRD, education and their interaction on TFP growth in small states is over three times that for large countries; and iii) the greater TFP growth loss in small states has two brain drain-related causes: a substantially greater sensitivity of TFP growth to the brain drain, and brain drain levels that are much higher in small than in large states.
    Keywords: Technology Diffusion,Trade,Productivity Growth,Education
    JEL: F22 J61
    Date: 2017
  15. By: Margaryta Klymak (Department of Economics, Trinity College Dublin)
    Abstract: This paper investigates whether the provision of information regarding what foreign goods might be produced with child and forced labor affects imports to the United States. I use three different measures of information revelation: inclusion on the U.S. government's list of goods produced with child or forced labor, a media coverage index and an index composed from reports of the International Labor Organisation. Across all specifications I find no evidence that information provision decreased imports of these goods to the United States. The key policy implication of this finding is that public information strategies without more concrete measures will not act as a large disincentive for countries that export goods made with child and forced labor.
    Keywords: international trade, child labor, forced labor, social labelling
    JEL: O11 J81 F14 G14
    Date: 2017–06
  16. By: R. Cezar; A. Duguet; G. Gaulier; V. Vicard
    Abstract: We propose a new “global” market share indicator that complements the traditional export market share analysis by accounting for the foreign value added embodied in the production process and for the performance of national firms on their domestic market. We also consider all the income from activities used in the production to address the manufacturing final demand, namely all activities within the manufacturing value chain. Our results show that the role of services is growing in global value chains. Interestingly, considering our global indicator makes the dynamics of market shares converge among large economies, which can be explained by a de-correlation between national and export performances. This de-correlation appears to reflect greater specialization within global manufacturing value chains.
    Keywords: International trade, Market share, Value added, Global value chains, Globalization, Manufacturing industry.
    JEL: F10 F60 L60
    Date: 2017
  17. By: Görg, Holger; Gold, Robert; Hanley, Aoife; Seric, Adnan
    Abstract: We compare the performance of Northern and Southern multinationals in Sub-Saharan Africa, and contrast it with local firms in the host country. Employing unique firm level data for 19 Sub-Saharan African countries, we show that firms receiving FDI outperform domestic ones, while the origin of the foreign investor is of minor importance. We use three different definitions of "South" to compare Northern and Southern FDI. Overall, we do not find strong differences in terms of firm productivity growth between Northern and Southern FDI, irrespective of how the latter is defined. However, we find that employment growth is generally higher for firms receiving FDI from other African investors as compared to Northern FDI, and they also receive more technology transfer from their parent company abroad.
    Keywords: South-South FDI,productivity,performance differences,Africa
    JEL: F23 O14
    Date: 2017
  18. By: Cernat, Lucian (DG Trade); Mustilli, Federica (DG Trade)
    Abstract: Trade agreements have become a growing source of concerns due to potential job losses that some sectors can incur as a result of increased competition. Although the economic literature shows that the overall results of trade liberalization are positive, some sectors may be adversely affected, leading to job losses and adjustment costs. One instrument designed to deal with such adjustment costs is the European Globalization Adjustment Fund (EGF), established by the European Commission in 2006. By jointly funding with EU Member States active labour market policies, the EGF is a tool that supports workers who lost their jobs due to globalisation. Despite the relevance of the EGF as trade adjustment mechanism, the existing evidence suggests that its use is still limited compared to its potential. The paper tries to review some of the constraining factors identified in the latest mid-term evaluation by the European Commission and suggest several avenues for further improvement.
    Keywords: European Globalization Adjustment Fund (EGF); labour market policies; international trade
    JEL: F16
    Date: 2017–06–12
  19. By: Magombeyi, Mercy T; Odhiambo, Nicholas M
    Abstract: In this study, the causal relationship between foreign direct investment (FDI) inflows and poverty reduction is investigated in Botswana from 1980 to 2014. The study has used a trivariate causality model; and economic growth has been included as the intermittent variable between poverty reduction and foreign direct investment. In addition, three proxies of poverty have been used: 1) household consumption expenditure; 2) infant mortality rate; and 3) life expectancy. The study has used the autoregressive distributed lag (ARDL) bounds testing approach to cointegration and the ECM-based causality test to examine this linkage. The empirical results show that there is a distinct unidirectional causality from FDI to poverty reduction, but only in the short run, when household consumption expenditure is used as a proxy for poverty reduction. When infant mortality rate is used, the study finds bidirectional causality between FDI and poverty reduction ??? both in the short run and the long run. However, when life expectancy is used as a poverty reduction proxy, no causal relationship is found to exist, irrespective of the time considered. Based on the results from this study, it can be concluded that the causal relationship between poverty reduction and FDI is sensitive to the proxy used to measure the level of poverty reduction and to the time-frame considered.
    Keywords: Botswana; Household consumption expenditure; Life expectancy; infant mortality rate; Granger-causality
    Date: 2017–05
  20. By: Pascalau, Razvan; Qirjo, Dhimitri
    Abstract: The current study empirically investigates and shows that on average, the possible implementation of the Transatlantic Trade and Investment Partnership (TTIP) would generally help in the fight against global warming. In particular, the study finds that a one percent increase in the bilateral trade between the U.S. and the typical EU member would reduce annual per capita emissions of CO2 and GHGs in the typical TTIP member by about 2.7 and 2.4 percent, respectively. However, results also show that TTIP may increase annual per capita emissions of GHGs in the U.S. by about 2.5 percent per year. These results stand because the factor endowment hypothesis (FEH) and the pollution haven hypothesis based on population density variations (PHH2) appear to dominate the pollution haven hypothesis based on national income differences (PHH1).
    Keywords: Free Trade; Environmental Economics; TTIP.
    JEL: F18 F53 F64
    Date: 2017–06–12
  21. By: Miguel D. Ramirez (Department of Economics, Trinity College)
    Abstract: This paper investigates remittance flows to Mexico during the 1980-2014 period in absolute terms, relative to GDP, in comparison to FDI inflows, and in terms of their regional destination. Next, the paper reviews the growing literature that assesses the impact of remittances on investment spending and economic growth. Third, it presents a simple endogenous growth model that explicitly incorporates the potential impact of remittance flows on economic and labor productivity growth. Fourth, it presents a modified empirical counterpart to the simple model that tests for both single- and two-break unit root tests, as well as performs cointegration tests with an endogenously determined level shift over the 1970-2014 period. The error-correction model estimates suggest that remittance flows to Mexico have a positive and significant effect, albeit small, on both economic growth and labor productivity growth. The concluding section summarizes the major results and discusses potential avenues for future research on this important topic
    Keywords: Error-correction model, FDI inflows, Gregory-Hansen cointegration single-break test, Gross fixed capital formation, Johansen Cointegration test, KPSS no unit root test, Lee-Strazicich two-break unit root test, remittance flows, and Zivot-Andrews single-break unit root
    JEL: C10 F01
    Date: 2017–06
  22. By: Bramucci, Alessandro; Cirillo, Valeria; Evangelista, Rinaldo; Guarascio, Dario
    Abstract: Economies and production systems are subject to incessant processes of structural change fuelled by the dynamics of demand, technology and international competition. The increasing international fragmentation of production, also known as "offshoring", is an important element of such a (global in scale) process of structural change having important implications for employment and on the way employment gains and losses are distributed across firms, industries, national economies and components of the labour force. This paper assesses the employment impact of offshoring, in five European countries (Germany, Spain, France, Italy and the United Kingdom), distinguishing between different types of inputs/tasks offshored, different types of offshoring industries and types of professional groups affected by offshoring. Results provide a rather heterogeneous picture of both offshoring patterns and their effects on labour, and the presence of significant differences across industries. Along with this variety of employment outcomes, the empirical evidence suggests that offshoring activities are mainly driven by a cost reduction (labour saving) rationale. This is particularly the case for the manufacturing industry where offshoring is found to exert a negative impact among the less qualified (manual) or more routinized (clerks) types of jobs, while the main difference between high- and low-technology industries has to do with the type of labour tasks that are offshored and the types of domestic jobs that are affected. In hightech industries the negative effects of offshoring on employment are concentrated among the most qualified professional groups (managers and clerks). A specular pattern is found in the case of the low-tech industries where job losses are associated to the offshoring of the least innovative stages of production and manual workers are those most penalised.
    Keywords: Offshoring,Technological change,Employment
    JEL: F16 O33 F11
    Date: 2017
  23. By: Marianne Sensier; Fiona Devine
    Date: 2017

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