nep-int New Economics Papers
on International Trade
Issue of 2018‒04‒02
thirty-six papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. The Impact of Chinese Technical Barriers to Trade on its Manufacturing Imports By Mahdi Ghodsi
  2. Beyond Tariff Reductions: What Extra Boost From Trade Agreement Provisions? By Dhingra, Swati; Freeman, Rebecca; Mavroeidi, Eleonora
  3. Economic and Policy Uncertainty: Export Dynamics and the Value of Agreements By Jeronimo Carballo; Kyle Handley; Nuno Limão
  4. Multinational enterprises and global value chains: New Insights on the trade-investment nexus By Charles Cadestin; Koen De Backer; Isabelle Desnoyers-James; Sébastien Miroudot; Ming Ye; Davide Rigo
  5. Immigrant entrepreneurs, diasporas and exports By Bratti, Massimiliano; De Benedictis, Luca; Santoni, Gianluca
  6. Trade, Reform, and Structural Transformation in South Korea By Rubina Verma; Rahul Giri; Caroline Betts
  7. Strategy of the remove and easy TBT in GCC6 countries By YongJae Kim
  8. Inequality, Redistribution and Optimal Trade Policy By Ali Shourideh; Roozbeh Hosseini
  9. Trade with Correlation By Nelson Lind; Natalia Ramondo
  10. The value of market access and national treatment commitments in services trade agreements By Philipp Lamprecht; Sébastien Miroudot
  11. The Case for Raising de minimis Thresholds in NAFTA 2.0 By Gary Clyde Hufbauer; Zhiyao (Lucy) Lu; Euijin Jung
  12. European Union services liberalisation in CETA By Julia Magntorn; L. Alan Winters
  13. Tax-Response Heterogeneity and the Effects of Double Taxation Treaties on the Location Choices of Multinational Firms By Simon Behrendt; Georg Wamser
  14. The design of the Romanian wine imports and exports using the gravity model approach By Anca Tamas
  16. Structural Change and Slowdown of International Trade By Ryan Monarch; Jing Zhang; Logan Lewis
  17. Legal and Policy Implications of the Trans-Pacific Partnership Agreement: Focus on Intellectual Property By Vilchez, Ma. Gladys C.
  18. The US Gains From Trade: Valuation Using the Demand for Foreign Factor Services By Costinot, Arnaud; Rodriguez-Clare, Andres
  19. Firms and economic performance: A view from trade By Alessandra Bonfiglioli; Rosario Crinò; Gino Gancia
  20. Export pricing at the firm level with panel data By Sofia Anyfantaki; Sarantis Kalyvitis; Margarita Katsimi; Eirini Thomaidou
  21. Choked by Red Tape? The Political Economy of Wasteful Trade Barriers By Peter Neary; Giovanni Maggi; Monika Mrázová
  22. Maximum-Revenue Tariffs versus Free Trade By Collie, David R.
  23. The Relationship Between Greek Exports and Foreign Income By Konstantinos Chisiridis; Theodore Panagiotidis
  24. An Empirical Examination of the J-Curve: New Zealand's Bilateral Trade with Selected Countries By Sayeeda Bano; Gazi Hassan
  25. Dollar Funding and Firm-Level Exports By A. Berthou; G. Horny; J-S. Mésonnier
  26. Foreign Direct Investment according to different countries’ stages of Human Development By João Oliveira; Francisco Martins; Elísio Brandão
  27. The Philippines' Readiness for the TPP: Focus on Investor-State Dispute Settlement By Teehankee, Manuel A.J.
  28. The nested structural organization of the worldwide trade multi-layer network By Luiz G. A. Alves; Giuseppe Mangioni; Isabella Cingolani; Francisco A. Rodrigues; Pietro Panzarasa; Yamir Moreno
  29. Ice(berg) Transport Costs By Maarten Bosker; Eltjo Buringh
  30. Trump Administration's Trade Policy Toward China By Yoon, Yeo Joon; Kim, Jonghyuk; Kwon, Hyuk Ju; Kim, Wongi
  31. Progress of the Brexit Negotiations By Joe, Dong-Hee
  32. Changing Economic Environments in Mercosur and Strategic Ways to Foster Business Cooperation between Korea and Mercosur By Kwon, Kisu; Kim, Jino; Park, Misook; Kim, Hyoeun
  33. Assessing Implementation of Environmental Provisions in Regional Trade Agreements By Clive George; Shunta Yamaguchi
  34. Climate change and Migration: Is Agriculture the Main Channel? By Chiara Falco; Marzio Galeotti; Alessandro Olper
  35. What drives the legalization of immigrants? Evidence from IRCA By Casarico, Alessandra; Facchini, Giovanni; Frattini, Tommaso
  36. The TPP Agreement and Government Procurement: Opportunities and Issues for the Philippines By Clarete, Ramon L.; Pascua, Gerald Gracius Y.

  1. By: Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: In the past few decades, China has put substantial efforts into liberalising its trade and economy that accelerated after its accession to the World Trade Organisation (WTO) in December 2001. In this period China has significantly reduced its tariffs on manufacturing imports. However, the proliferation of non-tariff measures (NTMs) imposed by China has made it the country notifying the second largest number of technical barriers to trade (TBTs) to the WTO after the United States. This paper investigates the impact of Chinese TBTs and tariffs on the imports of manufacturing products at the 6-digit level of the Harmonised System (HS) during 2002-2015. Heterogeneity of exporting firms, sample selection bias, multilateral resistances, and endogeneity bias are controlled for according to the recent strands of gravity modelling. Results suggest a positive impact of tariff reduction and the imposition of TBTs by China on its import values and quantities. The impact of Chinese TBTs is also differentiated across exporting countries. Since import prices are not significantly affected by TBTs, the imposed standards and regulations embedded in these trade policy measures allowed the economy to gain access to more products from the more developed economies, leading to trade creation.
    Keywords: World Trade Organisation, trade liberalisation, trade policy, technical barriers to trade
    JEL: F13 F14
    Date: 2018–03
  2. By: Dhingra, Swati; Freeman, Rebecca; Mavroeidi, Eleonora
    Abstract: There is a growing recognition that for developed economies, like the UK, tariff-free market access is just one of a number of measures that ease cross-border trade flows. Modern trade agreements go beyond tariff reductions by setting rules, such as market access and regulation of foreign service providers. We examine the contribution of deep non-tariff provisions on international trade in goods and services. Using a gravity model, we find that provisions related to services, investment, and competition make up half of the overall impact of economic integration agreements on trade flows. These deep provisions have larger effects for trade in services than for trade in goods, and their relative contribution is highest in sectors that facilitate supply chain activity, such as transportation and storage. We apply our sectoral estimates of deep provisions to examine two counterfactuals of the UK signing bilateral deals with the US and with China and India. We find that negotiating services, investment, and competition provisions in these future deals would boost trade relatively more in professional, scientific, and technical activities in the UK.
    Keywords: deep provisions; EIAs; integration agreements; non-tariff barriers; Trade agreements; trade policy
    JEL: F10 F13 F14 F15
    Date: 2018–03
  3. By: Jeronimo Carballo; Kyle Handley; Nuno Limão
    Abstract: We examine the interaction of economic and policy uncertainty in a dynamic, heterogeneous firms model. Uncertainty about foreign income, trade protection and their interaction dampens export investment. This can be mitigated by trade agreements, which are particularly valuable in periods of increased demand volatility. We use firm data to establish new facts about U.S. export dynamics in 2003-2011 and estimate the model. We find a significant role for uncertainty in explaining the trade collapse in the 2008 crisis and partial recovery in its aftermath. Consistent with the model predictions, we find that the negative effects worked (1) through the extensive margin, (2) in destinations without preferential agreements with the U.S. (accounting for over half its trade) and (3) in industries with higher potential protection. U.S. exports to non-preferential markets would have been 6.5% higher under an agreement—equivalent to an 8% foreign GDP increase. These findings highlight and quantify the value of international policy commitments through agreements that mitigate uncertainty, particularly during downturns.
    JEL: E02 E3 E61 F02 F1 F14 F15 F55
    Date: 2018–03
  4. By: Charles Cadestin; Koen De Backer; Isabelle Desnoyers-James; Sébastien Miroudot; Ming Ye; Davide Rigo
    Abstract: Because of their numerous and large activities across different countries, Multinational Enterprises (MNEs) are believed to be central and dominant actors in the global economy. In addition, it has been argued that the growing fragmentation of production within global value chains (GVCs) in the past decades is largely driven by MNEs. It is remarkable then that despite their acclaimed importance, empirical evidence on MNEs is not widely available and largely incomplete, with data only available for a subset of OECD economies. Based on the new OECD analytical AMNE database including information on MNEs across 43 industries and countries on a bilateral basis, this paper derives new insights on the importance of MNEs today. As the new database also allows the linking with the OECD TiVA database, the new evidence additionally discusses in detail the trade and investment nexus within GVCs and suggests that MNEs’ role in GVCs goes beyond trade and investment policy.
    Date: 2018–03–26
  5. By: Bratti, Massimiliano (European Commission – JRC); De Benedictis, Luca (University of Macerata); Santoni, Gianluca (CEPII)
    Abstract: In this paper we highlight a new complementary channel to the business and social network effect à la Rauch (2001) through which immigrants generate increased export flows from the regions in which they settle to their countries of origin: they can become entrepreneurs. Using very small-scale (NUTS-3) administrative data on immigrants' location in Italy, the local presence of immigrant entrepreneurs (i.e. firms owned by foreign-born entrepreneurs) in the manufacturing sector, and on trade flows in manufacturing between Italian provinces and more than 200 foreign countries, we assess the causal relationship going from diasporas and immigrant entrepreneurs towards export flows. Both the size of the diaspora and the number of immigrant entrepreneurs have a positive, significant and economically meaningful effect on exports. In particular, we find that increasing the stock of (non-entrepreneur) immigrants by 10% would lead to a 1.7% increase in exports in manufacturing, while increasing the number of immigrant entrepreneurs in manufacturing by 10% would raise exports by about 0.6%.
    Keywords: exports, immigrants, gravity model, immigrant entrepreneurs, Italy
    JEL: F10 F14 F22 R10
    Date: 2018–01
  6. By: Rubina Verma (Instituto Tecnologico Autonomo de Mexico (ITAM)); Rahul Giri (International Monetary Fund); Caroline Betts (University of Southern California)
    Abstract: We develop a quantitative two country, three-sector model to measure the effects of trade policies for Korean structural change from 1963 through 2000. The model features non-homothetic preferences, Armington trade, proportional import tariffs and export subsidies, and is carefully calibrated to match sectoral value added production and value added trade between Korea and the OECD. We find that tariff liberalization increased imports and total trade, especially agricultural imports, accelerating de-agriculturization and intensifying Korean industrialization. Subsidy liberalization lowered exports and trade, especially industrial exports, attenuating industrialization. Thus, these effects of trade reform were individually powerful, but negated each other. Korea’s subsidy reform dominated quantitatively; relative to a “no reform” regime which maintains both 1963 tariff and subsidy rates forever, observed trade reform produces comparable but lower trade volumes, a larger agricultural and lower industrial employment share, and slower industrialization. “Complete reform”, lowering tariffs and subsidies to zero from 1963 onwards, would have substantially increased trade volumes and facilitated industrialization.
    Date: 2017
  7. By: YongJae Kim
    Abstract: The last technical barriers to trade(TBT) between countries are Non-Tariff Barriers(NTBs), meaning all trade barriers are possible other than Tariff Barriers. And the most typical examples are (TBT), which refer to measure Technical Regulation, Standards, Procedure for Conformity Assessment, Test & Certification etc. Therefore, in order to eliminate TBT, WTO has made all membership countries automatically enter into an agreement on TBT. In this study, the elimination strategy of TBT with aid of technical regulations or standards is excluded, and only the conformity assessment shall be considered as the strategic measure of eliminating TBT in GCC(Gulf Cooperation Council) 6 countries. The measure for every membership country to accord with the international standards corresponding to their technical regulations and standards, is only to present TBT related Specific Trade Concern(STC) to WTO. However, each of countries retains its own conformity assessment area, and measures to settle such differences are various as well. Therefore, it is likely required an appropriate level of harmonization in them to carry forward this scheme. KTC(Korea Testing Certification) written MRA with GCC test & certification company in 2015 years. So Korea exporting company can export to GCC goods with attached test & certification documents in Korea. To conclude, it is suggest MRA for the remove and reduce TBT to increse export and import among countries.
    Date: 2018–03
  8. By: Ali Shourideh (Carnegie Mellon University); Roozbeh Hosseini (University of Georgia)
    Abstract: Recent evidence, as illustrated by Autor et al. (2013) as well as Caliendo et al. (2015), suggests that international trade and global reallocation of production has contributed to domestic reallocation of labor and income inequality. In this paper, we explore the relationship between optimal trade and redistributive policies. In particular, in an environment where international trade affects the relative wages and the allocation of labor across various sectors, we study how taxes and tariffs should be designed in order to balance the efficiency gains from trade with the costs associated with the resulting increased inequality. To do so, we use a two-country Ricardian model of trade which can be thought of as a generalized version of the model developed by Caliendo et al. (2015). More specifically, each country is consisted of many competitive sectors. Workers choose their occupation modeled as a multinomial logit model and the intensity of their work effort in the chosen sector. Accordingly, the multinomial logit captures the idea that different workers have different costs and benefits of working in each sector and yet retains significant tractability in the framework. We assume that countries differ in their comparative advantages across different sectors as well the composition of their work force in terms of their cost of their sectoral choice. We are interested in government policies that are in the form of linear tariffs on imports and exports as well general income taxes. We solve the optimal taxation problem of the world in which all governments coordinate. This can be viewed, for example, as a binding international trade agreement that maximizes welfare of all individuals in all countries and aims at a comprehensive overhaul of tariffs and income taxes. We first show that if governments have access to sector-specific transfers, tax and transfers that depend on workers' sectors, then optimal tariff should be zero. This result is independent of the choice of utility function and social welfare function. Opening to trade, changes the distribution of wages across sectors and increases income inequality. If sector-specific transfers exist, they can be used to completely offset this effect on income without affecting the trade in goods. Hence, government can achieve its desired goal without tariffs. We next turn our attention to a more realistic setup in which governments do not have access to sector-specific transfers. We assume that fiscal policy instruments are incomplete to the extent that they only depend on income (and not other characteristics such as occupation, etc.). This features leads to existence of a deadweight loss from taxation which in turn depends on the distribution of wages in the economy. Since tariffs affect the distribution of wages, they can be efficiently used to lower the deadweight loss of taxation. As a result, optimal trade policy leads to non-zero tariffs even when countries can coordinate their policies. We use our framework characterizes the key determinants of optimal tariffs: comparative advantage, sectoral productivities, as well as the elasticity of sectoral choice in each country.
    Date: 2017
  9. By: Nelson Lind; Natalia Ramondo
    Abstract: We develop a trade model in which productivity—the result of a country’s ability to adopt global technologies—presents an arbitrary pattern of spatial correlation. The model generates the full class of import demand systems consistent with Ricardian theory, and, hence, captures its full macroeconomic implications. In particular, our framework formalizes Ricardo’s insight—absent from the canonical Ricardian model—that countries gain more from trade partners with relatively dissimilar technology. Incorporating this insight into the calculations of macro counterfactuals entails a simple correction to self-trade shares. Our framework enables general aggregation results which tie micro optimization to macro demand systems and guide counterfactual analysis based on micro estimates. Our quantitative application to a multi-sector trade model suggests that countries specialized in low correlation sectors have 40 percent higher gains from trade relative to countries specialized in high correlation sectors. After accounting for correlation, the model predicts that lower trade costs for imports from China, rather than Canada, have the largest impact on real wages in the United States.
    JEL: F1
    Date: 2018–03
  10. By: Philipp Lamprecht (OECD); Sébastien Miroudot (OECD)
    Abstract: This paper looks at market access and national treatment commitments for services in the General Agreement on Trade in Services (GATS) and in 95 regional trade agreements (RTAs) involving the countries that are covered in the OECD Services Trade Restrictiveness Index (STRI). The objective is to quantify the impact of legal bindings on trade in services that result from a reduction in the uncertainty faced by exporters. Bilateral bindings indices are created for five broad service sectors (professional services, computer services, telecoms, financial services and transport services). They indicate how close the sector is from a fully bound regime with no possibility to introduce any new trade barrier, by comparing commitments with the actual trade regime. These bilateral indices are then tested over the period 2000-2014 in a structural gravity model. Despite differences across sectors, the results confirm that the legal bindings typically found in services trade agreements tend to have a positive impact on exports even if no actual liberalisation takes place.
    Keywords: legal bindings, market access, national treatment, regional trade agreements, services trade liberalisation, Trade in services
    JEL: F13 F15
    Date: 2018–03–28
  11. By: Gary Clyde Hufbauer (Peterson Institute for International Economics); Zhiyao (Lucy) Lu (Peterson Institute for International Economics); Euijin Jung (Peterson Institute for International Economics)
    Abstract: The fraught negotiations over revising the North American Free Trade Agreement (NAFTA) have focused largely on US demands to limit imports from Canada and Mexico. But one little discussed step could help the United States increase exports to Canada and Mexico in a way the Trump administration ought to support. US express shipments to its NAFTA partners are far below potential, partly due to what are called low de minimis thresholds in those countries. The de minimis threshold refers to the value of imported goods below which no duty or tax is collected, and the customs declaration is very simple. This Policy Brief reviews the very low de minimis thresholds in Canada and Mexico and argues that substantial room exists for the expansion of express shipments within North America. Under the assumption that express shipments from the United States to Canada and Mexico could exhibit the same relationship to likely household buyers as found in the United States, the share of actual low-value shipments to Canada and Mexico is far below potential. US low-value shipments to Canada and Mexico could potentially increase to about $34 billion annually but have reached less than half that level. The gap suggests that higher de minimis thresholds could boost US exports of low-valued goods and improve consumer choice in Canada and Mexico.
    Date: 2018–03
  12. By: Julia Magntorn (UK Trade Policy Observatory, University of Sussex); L. Alan Winters (UK Trade Policy Observatory, University of Sussex)
    Abstract: The Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada has been suggested as a template for a future UK-EU trade relationship. To inform the ongoing debate surrounding a ‘Canada plus’ deal post-Brexit, this paper assesses in detail the services and investment chapters of CETA. We have scored each of the EU’s detailed commitments in CETA according to their degree of liberalisation, and aggregated the scores across member states and sub-sectors to provide a broad comparison between sectors. We find that, while in some sectors the EU is relatively open in CETA, in other sectors important to the UK such as financial services and transport services it remains significantly restricted. Further, we evaluate the extent to which the EU’s commitments in CETA improve on its pre-CETA commitments under the General Agreement on Trade in Services (GATS). This shows that although CETA generally offers a bit more liberalisation than the EU’s GATS schedule, it nevertheless follows the latter closely, so that sectors that are relatively protected under GATS remain protected in CETA.
    Keywords: services trade; CETA; GATS; Brexit
    JEL: F15 F53 G28 L8
    Date: 2018–03
  13. By: Simon Behrendt; Georg Wamser
    Abstract: This paper examines location choices of multinational enterprises (MNEs). We particularly focus on the consequences of double taxation treaties (DTTs) and corporate profit taxes on the probability to choose a location. DTTs have become a key policy instrument used by countries to regulate international tax issues related to the cross-border activities of MNEs. Based on three alternative location choice models, which all allow parameter estimates to vary randomly across firms, we show that firm responses to policy variables are highly heterogeneous. Postestimation statistics suggest that the heterogeneity of parameters is strongly correlated with firm size and effective tax burden, which is consistent with tax-avoidance behavior and provides an explanation for why tax-responses are heterogeneous in the first place. We quantify the (positive) effect of DTTs and demonstrate that the negative tax-responsiveness becomes larger if a DTT is implemented. The latter is evidence that provisions intended to prevent tax avoidance are effective.
    Keywords: location choice, multinational firm, double taxation treaties, corporate income taxes
    JEL: F23 H25 H26
    Date: 2018
  14. By: Anca Tamas (Bucharest University of Economic Studies)
    Abstract: Purpose-the aim of this paper is to assess the design of the Romanian wines imports and exports using the gravity model.Design/Methodology/Approach-the regression was used, namely Panel EGLS (Estimated Generalized Least Squares), with cross-section weights option, which allows the control of heteroscedasticity and of the auto-correlation as well. The independent variables used in the gravity model are GDP per capita, distance, Unit price, exchange rates, wine production.Findings-the GDP per capita and the common membership of two countries influence positively the wine trade flows. The Unit price, the distance, the isolation and the dominant religion influence negatively the wine trade flows. The wine production and the exchange rates have low influence and they are not statistically significant.Practical implications-the article is useful for importers and exporters because it highlights which variables of a country could influence the wine trade flows.Originality/Value-the application of the gravity model on Romanian wine trade flows.
    Keywords: gravity model, wine trade flows
    JEL: F14
    Date: 2017–10
  15. By: Aleksandra Kordalska (Gdansk University of Technology, Gdansk, Poland); Magdalena Olczyk (Gdansk University of Technology, Gdansk, Poland)
    Abstract: This paper aims to assess the impact of determinants on service exports in both value added terms and in gross terms for seven Central Eastern European economies in years 1995-2011. The results confirm the importance of increasing labour productivity and highly-skilled and medium-skilled workers for growth in services trade. Exports of services are also supported by linkages between domestic services, especially business services, and the manufacturing sector. The results show the impacts of the determinants are fairly similar when exports are measured in value added terms or in gross terms, however the strength of impact differs in some subgroup of analysed countries.
    Keywords: gross exports, value added exports, CEE economies, trade in services
    JEL: C23 F14 L80
    Date: 2018–03
  16. By: Ryan Monarch (Federal Reserve Board); Jing Zhang (Federal Reserve Bank of Chicago); Logan Lewis (Federal Reserve Board of Governors)
    Abstract: As countries get richer, they consume a larger share of their income in the services or less-traded sector. This structural change pattern is one of the most salient features of economic development. Consequently, as the world economy becomes more services oriented, it will become "less open" in terms of total trade over GDP. Thus structural change impacts long-run global trade. This paper quantitatively studies the impact of structural change on global trade, and we find that the world trade over GDP ratio would have been about 17 percentage points higher if structural change had not happened. We find little evidence that this drag on trade growth has become more pronounced in recent years.
    Date: 2017
  17. By: Vilchez, Ma. Gladys C.
    Abstract: As the Philippines participates in negotiations for new-generation free trade agreements (FTAs), it is crucial for the country to have a critical assessment of its readiness to meet the obligations set out therein. Among others, the legal and policy implications of particular new-generation FTA provisions must be carefully examined. This paper provides a study of the legal and policy implications of the intellectual property (IP) provisions of these new-generation FTAs through an analysis of the relevant IP provisions of the Trans-Pacific Partnership (TPP) Agreement. It also reviews the IP treaties and conventions ratified by the Philippines, the current IP laws and related laws enacted to implement these treaties, as well as the legal framework within which IP rights are protected and enforced, to assess their convergence with TPP obligations, draw out the gaps, and identify policy and regulatory changes and administrative actions that may be required for the Philippines to achieve readiness to join the TPP or similar FTAs.
    Keywords: Philippines, TPP, FTA, free trade agreement, Trans-Pacific Partnership Agreement, new-generation FTAs, intellectual property
    Date: 2018
  18. By: Costinot, Arnaud; Rodriguez-Clare, Andres
    Abstract: About 8 cents out of every dollar spent in the United States is spent on imports. What if, because of a wall or some other extreme policy intervention, imports were to remain on the other side of the US border? How much would US consumers be willing to pay to prevent this hypothetical policy change from taking place? The answer to this question represents the welfare cost from autarky or, equivalently, the welfare gains from trade. In this article, we discuss how to evaluate these gains using the demand for foreign factor services. The estimates of gains from trade for the US economy that we review range from 2 to 8 percent of GDP.
    Date: 2018–03
  19. By: Alessandra Bonfiglioli; Rosario Crinò; Gino Gancia
    Abstract: We use transaction-level US import data to compare firms from virtually all countries in the world competing in a single destination market. Guided by a simple theoretical framework, we decompose countries'market shares into the contribution of the number of firm-products, their average attributes (quality and efficiency) and heterogeneity around the mean. Our results show that the number of firm-products explains half of the variation in sales, while the remaining part is equally accounted for by average attributes and their dispersion. Quality is the main driver of firm heterogeneity (explaining between 75% and 100%). We then study how the distribution of firm-level characteristics varies across countries, and we explore some of its determinants. Countries with a larger market size tend to be characterized by a more dispersed distribution of firms'sales, especially due to heterogeneity in quality. These countries also tend to be more likely to host superstar firms, although this is not the only source of higher heterogeneity. To further explore the role of exceptional firms, we develop a novel decomposition that separates the contribution of heterogeneity from that of granularity. While individual firms matter, we find that heterogeneity is more important than granularity for explaining sales.
    Keywords: US Imports, Firm Heterogeneity, International Trade, Prices, Quality, Variety, Granularity.
    JEL: F12 F14
    Date: 2018–03
  20. By: Sofia Anyfantaki (Athens University of Economics and Business, and Bank of Greece); Sarantis Kalyvitis; Margarita Katsimi (Athens University of Economics and Business, and CESifo); Eirini Thomaidou
    Abstract: This chapter reviews the growing empirical literature that explores the determinants of export prices at the firm level. It first presents evidence from empirical studies that link firm export pricing to destination characteristics (‘gravity-type’ models). The main implications of channels that can generate price differentiation, namely quality customization, variable markups and exchange rate pass-through, and financial frictions are then explored. A newly compiled panel dataset from Greek exporting firms is used to present evidence from regressions with export price as the dependent variable and show how the main economic hypotheses derived in theoretical models are nested in empirical specifications.
    Keywords: firm exporting; pricing; quality; financial frictions; panel data
    JEL: F14 L11 L15
    Date: 2018–02
  21. By: Peter Neary; Giovanni Maggi; Monika Mrázová
    Abstract: Abstract Red-tape barriers (RTBs) are an important source of trade costs, but have received little scholarly attention. Here we take a first step toward a theory of RTBs, and show that their implications are very different from those of more traditional trade barriers. Our model highlights that RTBs have important impacts on the extensive margin of trade, and yields rich predictions on how changes in the political-economic environment and product characteristics affect RTBs. Taking into account the endogenous response of RTBs is crucial to understanding the impact of reductions in tariffs and natural trade costs on the extensive and intensive margins of trade, as well as on welfare. Moreover, the availability of RTBs affects in important ways the tariff commitments that are specified in a trade agreement.
    Keywords: International trade policy; Non-Tari Measures; Political economy; Red tape barriers; Trade agreements
    JEL: F13 D7 F55
    Date: 2018–03–21
  22. By: Collie, David R. (Cardiff Business School)
    Abstract: Welfare with the maximum-revenue tariff is compared to free-trade welfare under perfect competition in the case of a large country able to affect its terms of trade; under Cournot duopoly with differentiated products; and under Bertrand duopoly with differentiated products. Under perfect competition, assuming linear demand and supply, welfare with the maximum-revenue tariff will be higher than free-trade welfare if the country has sufficient market power. Under Cournot duopoly and Bertrand duopoly, assuming linear demands and constant marginal costs, welfare with the maximum-revenue tariff is always higher than free-trade welfare.
    Keywords: Maximum-Revenue Tariff; Free Trade; Perfect Competition; Cournot Oligopoly; Bertrand Oligopoly
    JEL: F12 F13 F13
    Date: 2018–03
  23. By: Konstantinos Chisiridis (Department of Economics, University of Macedonia); Theodore Panagiotidis (Department of Economics, University of Macedonia)
    Abstract: This paper assesses the eect of foreign economic activity on Greek exports based on both static and dynamic analysis. We employ data from 1995:I to 2016:IV and quantify the long-run foreign income elasticity of Greek exports. We establish a cointegration relationship and nd, based on Dynamic OLS estimations, that the aggregate foreign income elasticity of Greek exports is above one and the price elasticity is positive. We reveal that economic growth in Turkey and in emerging markets such as the Balkans, North Africa and the Middle East have the greatest impact on Greek exports. The impact of the traditional European trading partners of Greece (Germany and Italy) are found to be positive but insignicant. Finally, the dynamic analysis shows a positive interaction between real income growth in Turkey and Greek export growth in the short-run horizon. A real depreciation of the Greek economy will lead to an increase in exports.
    Keywords: exports, growth, cointegration, Greece.
    JEL: C22 F41
    Date: 2018–04
  24. By: Sayeeda Bano (University of Waikato); Gazi Hassan (University of Waikato)
    Abstract: The J-curve hypothesis holds that the devaluation or depreciation of a country’s currency worsens the trade balance in the short run before improving the balance in the long run. This study investigates the short-run and long-run effects of nominal exchange rate changes on the bilateral trade balance between New Zealand, Australia, USA, UK, China, India, Japan and Singapore using quarterly data from 1990 to 2014. The results show some evidence of J-curve effects in the case of New Zealand and China and New Zealand and Japan but with no evidence to support J-curve effects in the case of New Zealand and Australia, USA, UK, India and Singapore. Diagnostic tests, however, suggest that there are some omitted variables in the models.
    Keywords: international trade; J-curve; New Zealand trade; exchange rates; ASEAN; RCEP
    JEL: F01 F02 F10 F13 F14 Q1
    Date: 2018–03–27
  25. By: A. Berthou; G. Horny; J-S. Mésonnier
    Abstract: How do financial frictions in currency markets affect firm-level exports? We bring new answer to this question by looking at a recent episode in the summer of 2011 when the cost of US dollar funding increased markedly for European banks and their clients. Our analysis relies on a unique dataset of matched banks and exporters located in France. We measure the exposure of individual exporters to the 2011 dollar funding shock using information about their lending banks' crossborder US dollar liabilities before the shock. Controlling for observed and unobserved firm-level factors and product-destination-level demand effects, we find robust evidence that more exposed firms reduced more their exports to the United States in the twelve months that followed the shock. The magnitude of this financial trade cost is equivalent to a counterfactual rise in US tariffs by 2 to 5 percentage points. Finally, we document various transmission channels related to firms' natural hedging, market power, relations with US banks in France or use of financial instruments to hedge.
    Keywords: foreign currency borrowing, trade finance, firm-level exports, euro-area crisis.
    JEL: F14 F42 G21 E58
    Date: 2018
  26. By: João Oliveira (FEP-UP, School of Economics and Management, University of Porto); Francisco Martins (FEP-UP, School of Economics and Management, University of Porto); Elísio Brandão (FEP-UP, School of Economics and Management, University of Porto)
    Abstract: This investigation studies Foreign Direct Investment determinants with a framework different from the major research present in the literature related to FDI. Its aim is to study and give insights into the reported differences in FDI determinants in the literature. This framework uses thirteen pillars as FDI determinants, which are synthesized recurring to a wide spectre of variables representing nations’ characteristics selected from literature namely from The World Competitiveness Reports of The World Economic Forum. The results of the econometric models estimated by GLS, with data from 186 countries, indicate significant differences on FDI determinants according to the different human development stage; therefore policies regarding FDI attraction must be shaped according to the stage of human development of each country and the specific determinants. The effect of the recent financial crisis in investors decisions regarding FDI was also studied using a structural change test. The results indicate that there was a significant shift in FDI flows.
    Keywords: Foreign Direct Investment, Determinants, Human Development Index Levels, Principal Component Analysis, Taxes.
    JEL: C38 F21 O15 O57
    Date: 2017–09
  27. By: Teehankee, Manuel A.J.
    Abstract: While the Trans-Pacific Partnership (TPP) has seen some rough sailing with the United States' withdrawal, it remains the acknowledged state of the art for current economic cooperation agreements, and it stands out as the first of its kind as a megaregional agreement. This article reviews and analyzes investor protection clauses of the original TPP in the context of Philippine policy concerns and the attempt of the TPP's provisions to both enhance and balance investor protection with good governance in the areas of environment and labor regulations.
    Keywords: Philippines, dispute settlement, TPP, Trans-Pacific Partnership Agreement, investor-state dispute settlement, investments, investor protection, labor regulations
    Date: 2018
  28. By: Luiz G. A. Alves; Giuseppe Mangioni; Isabella Cingolani; Francisco A. Rodrigues; Pietro Panzarasa; Yamir Moreno
    Abstract: Nestedness has traditionally been used to detect assembly patterns in meta-communities and networks of interacting species. Attempts have also been made to uncover nested structures in international trade, typically represented as bipartite networks in which connections can be established between countries (exporters or importers) and industries. A bipartite representation of trade, however, inevitably neglects transactions between industries. To fully capture the organization of the global value chain, we draw on the World Input-Output Database and construct a multi-layer network in which the nodes are the countries, the layers are the industries, and links can be established from sellers to buyers within and across industries. We define the buyers' and sellers' participation matrices in which the rows are the countries and the columns are all possible pairs of industries, and then compute nestedness based on buyers' and sellers' involvement in transactions between and within industries. We uncover variations of country- and transaction-based nestedness over time, and identify the countries and industries that most contributed to nestedness by assessing the effects of the removal of nodes and layers on the participation matrices. We discuss the implications of our findings for the study of the international production network and other real-world systems.
    Date: 2018–03
  29. By: Maarten Bosker; Eltjo Buringh
    Abstract: Iceberg transport costs are one of the main ingredients of modern trade and economic geography models: transport costs are modelled by assuming that a fraction of the goods shipped “melts in transit”. In this paper, we investigate whether the iceberg assumption applies to the costs of transporting the only good that literally melts in transit: ice. Using detailed information on Boston’s nineteenth-century global ice trade, we show that ice(berg) transport costs in practice were a combination of a true ad-valorem iceberg cost: melt in transit, and freight, (off)loading and insurance costs. The physics of the melt process and the practice of insulating the ice in transit imply an immediate violation of the iceberg assumption: shipping ice is subject to economies scale.
    Keywords: iceberg transport costs, nineteenth-century Boston ice trade
    JEL: F10 N70 N51
    Date: 2018
  30. By: Yoon, Yeo Joon (Korea Institute for International Economic Policy); Kim, Jonghyuk (Korea Institute for International Economic Policy); Kwon, Hyuk Ju (Korea Institute for International Economic Policy); Kim, Wongi (Chonnam National University)
    Abstract: Donald Trump was elected as the 45th President of the United States of America follow-ing the election held on November 18, 2016. Wielding the campaign slogan of "Make America Great Again," he promised to bring back jobs to the U.S. and reduce inequality for blue-collar white Americans, the main group that supported Mr. Trump. Even during his campaign, President Trump blamed the major trading partners of the U.S. for "unfair trade," insisting that such trade had widened trade deficit and decreased employment. This bellicose manner dis-played by the U.S. president signaled other countries to prepare for aggressive action on the part of the U.S. As protectionist policies are expected under the new U.S. president, his administration may mainly accuse China of protectionism, particularly when considering how the U.S. has criticized its biggest trading partner for currency manipulation, illegal subsidies, intellectual property rights, and many other subjects that are relevant to its trade activities since accession to the World Trade Organization (WTO) in 2001. Therefore, this study focuses on a possible scenario where trade conflicts deepen between the U.S. and China, and the economic impact this would have on Korea.
    Keywords: U.S. Trade Policy; China
    Date: 2018–03–05
  31. By: Joe, Dong-Hee (Korea Institute for International Economic Policy)
    Abstract: On December 15 of last year, the European Council of the 27 remaining Member States (EU-27 hereinafter) concluded that sufficient progress had been made in the first phase of the Brexit negotiations that started in June 2017. This edition of the World Economy Brief summarizes the results of the first phase, which dealt with important matters regarding the United Kingdom's exit from the European Union per se, namely (1) the rights of citizens of the EU-27 residing in the UK and vice versa, (2) the border between Ireland, a remaining member state, and Northern Ireland, a part of the UK and (3) the settlement of financial commitments made to each other. It then explains the two main topics of the second-phase negotiations: a possible transition period and the form of the post-Brexit relationship between the EU and the UK.
    Keywords: Brexit; EU; European Union; UK; United Kingdom
    Date: 2018–03–13
  32. By: Kwon, Kisu (Hankuk University of Foreign Studies); Kim, Jino (Korea Institute for International Economic Policy); Park, Misook (Korea Institute for International Economic Policy); Kim, Hyoeun (Korea Institute for International Economic Policy)
    Abstract: In recent years, the economic ties between Korea and Mercosur countries have declined due to various factors. However, the emergence of market-friendly governments in Brazil and Argentina that put emphasis on reform and accessibility could prove to be the catalyst to reignite stagnant economic relations between Korea and Mercosur. In addition, the announcement of trade agreement negotiations between Korea and Mercosur will likely prove to be a turning point in their cooperation relationship. In this regard, this study was conducted to help forward a breakthrough in mutual cooperation, with a particular focus on business cooperation.
    Keywords: Mercosur; Business Cooperation
    Date: 2018–03–06
  33. By: Clive George (University of Manchester); Shunta Yamaguchi (OECD)
    Abstract: This report assesses the progress of the implementation of environmental provisions in RTAs. It focuses on the extent to which governments have complied with the environmental commitments made in the trade agreements to which they are a Party. The report takes a two track approach. First, a review of implementation and evaluation reports associated with environmental provisions in such agreements is performed. Second, a survey of government officials, trade negotiators and other experts is carried out.
    Keywords: environment policy, environmental provisions, free trade agreements, Regional trade agreements, trade and environment, trade policy
    JEL: F13 F18 N50 Q56 R11
    Date: 2018–03–28
  34. By: Chiara Falco; Marzio Galeotti; Alessandro Olper
    Abstract: Migration and climate change are two of the most important challenges the world currently faces. They are connected as climate change may stimulate migration. One of the sectors most strongly affected by climate change is agriculture, where most of the world’s poor are employed. Climate change may affect agricultural productivity and hence migration because of its impact on average temperatures and rainfall and because it increases the frequency and intensity of weather shocks. This paper uses 50 years of data, from 1960 to 2010, for more than 150 countries to analyse the relationship between weather variation, agricultural productivity and migration. Our main findings are that, in line with theoretical predictions, negative shocks to agricultural productivity caused by weather fluctuations significantly increase migration in middle and lower income countries but not in the poorest and in the rich countries. The results are robust to different econometric specifications.
    Keywords: Climate Change, Temperature, Agriculture, International Migration
    JEL: F22 Q54 O13 Q15
    Date: 2018
  35. By: Casarico, Alessandra; Facchini, Giovanni; Frattini, Tommaso
    Abstract: We develop a model to understand the trade-offs faced by an elected representative in supporting an amnesty when a restrictive immigration policy is in place. We show that an amnesty is more desirable the more restricted are the occupational opportunities of undocumented immigrants and the smaller is the fiscal leakage to undocumented immigrants via the welfare state. Empirical evidence based on the voting behaviour of U.S. Congressmen on the Immigration Reform and Control Act of 1986 provides strong support for the predictions of our theoretical model.
    Keywords: amnesties; migration policy; Roll Call Votes
    JEL: F22 O51
    Date: 2018–03
  36. By: Clarete, Ramon L.; Pascua, Gerald Gracius Y.
    Abstract: This paper assesses the alignment of the Philippine Government Procurement Reform Act (GPRA) with respect to the Trans-Pacific Partnership (TPP) Agreement, and examines the policy reforms in government procurement that the country may have to implement if it accedes to the TPP. It takes stock of the legal gaps between the current public procurement law of the country--Republic Act 9184 or the GPRA--and the obligations of TPP parties in Chapter 15 of the agreement covering government procurement (GP-TPP). The key consideration to be made by the Philippines is to determine whether joining the TPP and acceding to a party's obligations in GP-TPP would accrue net positive benefits to the country as a whole. Taking note of the need to implement compensating measures to minimize adjustment costs of local firms currently enjoying preference, the paper argues that opening up the procurement market to foreign suppliers belonging to TPP countries would confer net benefits to the Philippine government and Filipinos in general.
    Keywords: Philippines, government procurement, TPP, Trans-Pacific Partnership Agreement, GPRA, Government Procurement Reform Act, procurement rules
    Date: 2018

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