nep-int New Economics Papers
on International Trade
Issue of 2020‒02‒03
twenty-one papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. The Impact of Tariff and Imported Raw Materials on Textile and Clothing Export: Evidence from the United States Market By Devi Setyorini; Budiono
  2. Rising protectionism and global value chains: quantifying the general equilibrium effects By Cappariello, Rita; Gunnella, Vanessa; Franco-Bedoya, Sebastian; Ottaviano, Gianmarco
  3. Singapore in the Global Value Chains By Chang, Pao-Li; Nguyen, Tran Bao Phuong
  4. The WTO Reference Paper meets EU common regulatory policy in CETA By Kyvik Nordås, Hildegunn
  5. On the Simultaneous Openness Hypothesis: FDI, Trade and TFP Dynamics in Sub-Saharan Africa By Simplice A. Asongu; Joseph Nnanna; Paul N. Acha-Anyi
  6. Changes in the trade patterns of the UK in a global perspective By Erdey, László; Gáll, József; Márkus, Ádám; Tőkés, Tibor
  7. Manufacturing Export and ICT Infrastructure in West Africa: Investigating the Roles of Economic and Political Institutions By Ibukun Beecroft; Evans S. Osabuohien; Uchenna R. Efobi; Isaiah Olurinola; Romanus A. Osabohien
  9. Protecting Foreign Direct Investment in the Belt and Road Countries By Dini Sejko
  10. The Impact of Intranational Trade Barriers on Exports: Evidence from a Nationwide VAT Rebate Reform in China By Jie Bai; Jiahua Liu
  11. Working across time zones: exporters and the gender wage gap By Bøler, Esther Ann; Javorcik, Beata; Ulltveit-Moe, Karen Helene
  12. Trade Costs in Services: Firm Survival, Firm Growth and Implied Changes in Employment By Elisabeth Christen; Michael Pfaffermayr; Yvonne Wolfmayr
  13. Impact of Chinese Renminbi on Korean Exports: Does Quality Matter? By Jihyun Eum
  14. The US Fiscal Consolidation, its impact and policy implications By Chuluunbayar, Delgerjargal
  15. Commodity dependence, global commodity chains, price volatility and financialisation: Price-setting and stabilisation in the cocoa sectors in Côte d'Ivoire and Ghana By Tröster, Bernhard; Staritz, Cornelia; Grumiller, Jan; Maile, Felix
  16. Analyzing the impact of trade and investment agreements on pharmaceutical policy: provisions, pathways and potential impacts By Gleeson, Deborah; Lexchin, Joel; Labonté, Ronald; Townsend, Belinda; Gagnon, Marc-André; Kohler, Jillian; Forman, Lisa; Shadlen, Kenneth C.
  17. Which Countries Have Benefited the Most from China’s Belt and Road Initiative? By Albert Park
  18. The Short and Long-term Impact of International Migration on Human Capital Formation of the Left Behind By Sur, Pramod Kumar
  19. The Problem of Global Turmoil in The Dilemma of Globalization-Multilateralism: Long-Term Interactions Between Democracy and Economy within The Framework of Political Regimes By Kaplan, Emin Ahmet; Erul, Rana Dayıoğlu
  20. The Belt and Road Initiative: Reshaping Economic Geography in Central Asia?* By Anthony Venables; Julia Bird; Mathilde Lebrand
  21. Exporting out of China or out of Africa? Automation versus relocation in the global clothing industry By Altenburg, Tilman; Chen, Xiao; Lütkenhorst, Wilfried; Staritz, Cornelia; Whitfield, Lindsay

  1. By: Devi Setyorini (Master of Applied Economics, Padjadjaran University); Budiono (Department of Economics, Padjadjaran University)
    Abstract: The textile and clothing industry is an important sector because of its contribution to the economy. It becomes an important industry which absorbs most workers, especially in the low labor-cost countries. The United States (U.S.) is the biggest market for textile and clothing products worldwide. Distorted by some protections, the trend in the U.S. textile and clothing market changes rapidly. One of the most influential agreements was The Multi-Fiber Agreement (MFA) with its quota restriction from 1974 to 1994. After the end of MFA, The Agreement on Textile and Clothing (ATC) toke into effect. This agreement set by the World Trade Organization (WTO) to eliminate the quota restriction gradually within 10 years (1995-2005) and use the tariff restriction. After the end of the ATC, the trade in textile and clothing becomes governed by the general rules and the multilateral trading system. Meanwhile, the tariff still becomes a burden for some countries, especially the ones which do not get a special tariff rate because of the lack of trade agreement with the U.S. Another challenge is the use of imported raw materials as the main input of production. This makes the cost of production sensitive to international price volatility. According to that, this study examines the impact of tariff and imported raw material on the export of textile and clothing to the U.S. market. Data from 23 exporters of textile and clothing products to the U.S. are analyzed using the gravity model with The Poisson Pseudo-Maximum Likelihood (PPML) estimator. The result shows that the higher tariff reduces the amount of textile and clothing export to the U.S. Market. Moreover, imported raw materials still become an important source of input in this industry.
    Keywords: Textile Industry, International Trade, Gravity Model, The Poisson Pseudo-Maximum Likelihood (PPML)
    JEL: L0
    Date: 2020–01
  2. By: Cappariello, Rita; Gunnella, Vanessa; Franco-Bedoya, Sebastian; Ottaviano, Gianmarco
    Abstract: Quantifying the effects of trade policy in the age of ’global value chains’ (GVCs) requires an enhanced analytical framework that takes the observed international input-output relations in due account. However, existing quantitative general equilibrium models generally assume that industry-level bilateral final and intermediate trade shares are identical, and that the allocation of imported inputs across sectors is the same as the allocation of domestic inputs. This amounts to applying two proportionality assumptions, one at the border to split final goods and inputs, and another behind the border to allocate inputs across industries. In practice, neither assumption holds in available input-output data sets. To overcome this limitation of existing models, we consider a richer input-output structure across countries and sectors that we can match with the actual structure reported in input-output tables. This allows us to investigate the relation between the effects of changes in trade policies and GVCs. When we apply the enhanced quantitative general equilibrium model to the assessment of the effects of Brexit, we find trade and welfare losses that are substantially larger than those obtained by previous models. This is due to the close integration of UK-EU production networks and implies that denser GVCs amplify the adverse effects of protectionist trade policies. JEL Classification: F13, F15, F40, F60
    Keywords: Brexit, supply chains, trade model, trade policy shocks
    Date: 2020–01
  3. By: Chang, Pao-Li (School of Economics, Singapore Management University); Nguyen, Tran Bao Phuong (Lee Kong Chian School of Business, Singapore Management University)
    Abstract: In this chapter, we analyze the participation of Singapore in the global value chains (GVC): how much of its gross exports are GVC-related trade, how downstream it is, and which countries are its key upstream and downstream trade partners. This is done at both the country aggregate and at the sector level. New formulas are proposed in the gross export decomposition framework of Koopman, Wang and Wei (2014) and Borin and Mancini (2017), to characterize a country/industry’s downstreamness in the GVC and the importance of each trade partner in its backward/forward linkages. Singapore is found to start off with a very high level of GVC trade in 1995, but its unique status became diluted over the years. East Asian countries (such as Taiwan and Korea) had become equally, if not more, active players in the GVCs in the last two decades. In contrast with Japan and the US, Singapore was overall located at the lower end of the GVC (with similar downstreamness index as China). Malaysia and the US used to be the top two upstream/downstream partners of Singapore in 1995, but by 2011, China had taken up substantially more weight and replaced the US’s status.
    Keywords: Gross export decomposition; global value chain participation; position in the global value chain; upstream/downstream trade partners
    Date: 2020–01–13
  4. By: Kyvik Nordås, Hildegunn (Örebro University School of Business)
    Abstract: International trade and investment in telecommunications are governed by the World Trade Organization’s (WTO) General Agreement on Trade in Services (GATS) and its Annex and Reference Paper (RP) on telecommunications. This paper discusses whether the 25-year old WTO framework is still fit for purpose. It makes two contributions to the literature. First, it offers a systematic comparison between the provisions in the RP, the EU-Canada Comprehensive Economic and Trade Agreement (CETA) and EU common regulatory framework. GATS builds on an outdated classification of telecommunications which is repeated in the CETA. The RP obliges countries to regulate interconnection, which is also largely repeated in CETA, although regulatory forbearance is permitted. CETA does not offer new market access in telecommunications to either party. Second, the paper investigates empirically whether binding regulation in trade agreements strengthen market openness, measured by imports of telecommunications services, and finds that it does not. The paper concludes that trade agreements may not be suitable for international cooperation on telecommunications regulation. Trade agreements run the risk of making regulation hostage to unrelated trade policy issues while adopting the RP runs a risk of legal obligations to over-regulate telecommunications.
    Keywords: Telecommunications; International trade; WTO reference paper; EU; CETA
    JEL: F13 F14 L86
    Date: 2020–01–25
  5. By: Simplice A. Asongu (Yaoundé/Cameroon); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria); Paul N. Acha-Anyi (Walter Sisulu University, South Africa)
    Abstract: This study assesses the simultaneous openness hypothesis that trade modulates foreign direct investment (FDI) to induce positive net effects on total factor productivity (TFP) dynamics. Twenty-five countries in Sub-Saharan Africa and data for the period 1980 to 2014 are used. The empirical evidence is based on the Generalised Method of Moments. First, trade imports modulate FDI to overwhelmingly induce positive net effects on TFP, real TFP growth, welfare TFP and real welfare TFP. Second, with exceptions on TFP and welfare TFP where net effects are both positive and negative, trade exports modulate FDI to overwhelmingly induce positive net effects on real TFP growth and welfare real TFP. In summary, the tested hypothesis is valid for the most part. Policy implications are discussed.
    Keywords: Productivity; Foreign Investment; Sub-Saharan Africa
    JEL: E23 F21 F30 L96 O55
    Date: 2020–01
  6. By: Erdey, László; Gáll, József; Márkus, Ádám; Tőkés, Tibor
    Abstract: The aim of our paper is threefold. Based on the contemporary theories of international trade we analyze the integration of the United Kingdom to the European Union from the aspect of merchandise trade. We use disaggregated data (6-digit, HS, CEPII BACI) on bilateral trade flows of the UK with the EU14(13) in the timeframe of 1996-2016 to show the changes on the extensive and intensive margins (à la Kehoe and Ruhl, 2013) and also that of vertical and horizontal intra-industry trade. The analyses of the changes allow us to make conclusions about the possible effect of Brexit on the intra-European trade, while we also extend our calculations to the dynamics of global patterns in intra-industry trade. The latter topic to our knowledge has not been thoroughly examined since the seminal paper of Brülhart (2009).
    Keywords: Brexit, Intra-Industry Trade, Extensive and Intensive Margins of International Trade
    JEL: F14 F15
    Date: 2020–01–13
  7. By: Ibukun Beecroft (CEPDeR, Covenant University, Ota, Nigeria); Evans S. Osabuohien (CEPDeR, Covenant University, Ota, Nigeria); Uchenna R. Efobi (CEPDeR, Covenant University, Ota, Nigeria); Isaiah Olurinola (Covenant University, Ota, Ogun State, Nigeria); Romanus A. Osabohien (CEPDeR, Covenant University, Ota, Nigeria)
    Abstract: Investment in ICT infrastructure development is crucial to international trade through its provision of reliable interconnectedness via communication. This can be augmented via institutional intervention, which addresses opportunistic or rent-seeking behaviours of ICT infrastructure providers and reduces operational costs, among others. However, ICT infrastructural provision in West Africa remains low, necessitating the current drive by the regional economic community (ECOWAS) to make some advancement in this regard for enhanced trade outcomes of members. With the aim of unbundling institutional framework in the infrastructure-export nexus, this study empirically examines the relationship between manufacturing export and ICT infrastructure and articulates how economic and political institutions influence such interaction. Focusing on 14 West African countries, the study uses the Systems Generalised Method of Moments (SGMM) technique to address possible issues of endogeneity and reverse causality. The results reveal that in the face of improved economic and political institutions, particularly those related to enforcement of contracts, the influence of ICT infrastructure in strengthening the exporting capacity from the manufacturing sector is greater. In addition, some measures of economic and political institutions matter more than others. The study recommends that ECOWAS countries promote better institutional quality, particularly in terms of transparency, accountability, corruption control, regulatory quality and the rule of law.
    Keywords: Dynamic panel data; Infrastructural provision; Infrastructural development; Institutional framework; Institutional quality; Manufacturing export; Manufacturing value added
    JEL: F14 O14 O17 O43 P45
    Date: 2019–01
  8. By: Christian Ruckteschler (University of Oxford); Adeel Malik; Ferdinand Eibl (King’s College London)
    Abstract: Although non-tariff measures (NTMs) have surpassed tariffs as the most prevalent instrument of trade protection globally, our knowledge of what drives these NTMs is extremely limited. This paper sheds light on the political determinants of non-tariff protection using a rich empirical setting in Morocco. Taking advantage of a bilateral EU-Morocco trade agreement that resulted in an across the board tariff cut and a subsequent rise in NTMs, we use a difference-in-differences regression framework to show that sectors with close prior political connections to the royal family received disproportionately higher levels of non-tariff protection than unconnected sectors. We also demonstrate that, in the wake of the EU-induced tariff cut, connected sectors were mainly compensated through technical barriers to trade that depend on administrative oversight and are vulnerable to political influence.
    Date: 2019–10–20
  9. By: Dini Sejko (Post-doctoral Fellow; Hong Kong University of Science and Technology)
    Abstract: The Belt and Road Initiative (BRI) is increasing foreign direct investment (FDI) flows from China to BRI countries. Many BRI investments, especially in large infrastructure projects, face substantial risk, because they feature large up-front capital expenditures that require long time horizons in order to generate returns. BRI recipient countries are very heterogeneous, with different degrees of economic development and openness, and regulated by different legal regimes. Some suffer from high levels of corruption and poor governance, which undermine the trade, investment, and general business environment. The complexity of some projects and their geographic scope across more than one jurisdiction adds to the legal risk. In these circumstances, investments are affected not only by economic and financial risks but also face severe political and regulatory risks.Length: 4 pages
    Keywords: Belt and Road
    Date: 2019–09
  10. By: Jie Bai; Jiahua Liu
    Abstract: It is well known that various forms of non-tariff trade barriers exist within a country. Empirically, it is difficult to measure these barriers as they can take many forms. We take advantage of a nationwide VAT rebate policy reform in China as a natural experiment to identify the existence of these intranational barriers due to local protectionism and study the impact on exports and exporting firms. As a result of shifting tax rebate burden, the reform leads to a greater incentive of the provincial governments to block the domestic flow of non-local goods to local export intermediaries. We develop an open-economy heterogenous firm model that incorporates multiple domestic regions and multiple exporting technologies, including the intermediary sector. Consistent with the model's predictions, we find that rising local protectionism leads to a reduction in interprovincial trade, more "inward-looking" sourcing behavior of local intermediaries, and a reduction in manufacturing exports. Analysis using micro firm-level data further shows that private companies with greater baseline reliance on export intermediaries are more adversely affected.
    JEL: F14 F15 O14
    Date: 2019–12
  11. By: Bøler, Esther Ann; Javorcik, Beata; Ulltveit-Moe, Karen Helene
    Abstract: This study argues that there is a systematic difference in the gender wage gap (GWG) between exporting firms and non-exporters. Exporters may require greater commitment from their employees, such as working particular hours to communicate with partners in different time zones or travelling at short notice, and may therefore disproportionately reward employee flexibility. If women are less flexible, or perceived as such, exporters will exhibit a higher GWG than non-exporters. This hypothesis is examined using matched employer-employee data from the Norwegian manufacturing sector for 1996–2010. The results suggest a firm's entry into exporting increases the GWG by about 3 percentage points for college educated workers. A lower overlap in business hours between the Norwegian exporter and its foreign markets and a greater need for interactions with foreign buyers are associated with a higher GWG.
    Keywords: Exporters; Globalization; Gender Wage Gap
    JEL: F10 F14 F16 J16
    Date: 2018–03–01
  12. By: Elisabeth Christen; Michael Pfaffermayr; Yvonne Wolfmayr
    Abstract: This paper provides new insight into the firm-level employment impacts of trade cost changes at the industry level in the Austrian services sector. We apply a two-part model of firm survival (exit) and firm growth. Separate regressions for firm entry rates at the industry-region level complete the picture of total trade-induced net job creation. We implement the trade cost measure introduced by Chen and Novy (2011) and base it on own estimates of industry specific substitution elasticities. Falling trade costs in the Austrian services sector over the period 2000 to 2014 resulted in net job creation of about 19,000 jobs accounting for 9.5 percent of overall job flows in the sector. The smallest and least productive firms contract while large and productive firms expand as predicted by theory. Most adjustments occur at the extensive margin due to changes in the probability of firm survival.
    Keywords: services trade, trade costs, elasticity of substitution, firm-level evidence, heterogenous firms, gravity model, job flows, trade and employment
    JEL: C15 C21 C25 C23 C26 F14 F16 F66 J21 D21 L20 L80
    Date: 2019
  13. By: Jihyun Eum (Economic Research Institute, Bank of Korea)
    Abstract: This paper examines the impact of changes in the Chinese exchange rate on Korean exports taking into consideration the characteristics of the exported products. In this paper, we consider the degree of vertical product differentiation to be one of the causes that ease the negative spillover effects from the depreciation of the Chinese renminbi on Korea¡¯s export performance. Using import data from OECD member countries from 2002 to 2014, we find that Korea's exports to OECD countries of the products that have a greater degree of competition fall more as the renminbi depreciates. In addition, once quality differences between Korea and China are considered in the estimation, the negative impact from the depreciation of the Chinese renminbi turn out to be negligible. Due to a small response to the depreciation of the Chinese renminbi for a high quality good, the negative impact diminishes in the markets and the products where Korean goods show a relatively higher quality than those of China.
    Keywords: Export competition, Exchange rate pass-through, Quality, Product differentiation
    JEL: F10 F11 F13 F14 F31
    Date: 2019–09–25
  14. By: Chuluunbayar, Delgerjargal
    Abstract: High government debt levels - especially among advanced countries including the United States (US) – have prompted calls for fiscal consolidation. US fiscal policy is experiencing considerable debate since its policy decisions influence other countries and the effects of the policy choices have economic consequences for the global economy. Therefore, the paper examines the effect of the US fiscal consolidation for the country as well as the rest of the world and analyses different approaches to determine the best option to the fiscal consolidation. For the choosing optimal policy, it is important to see differences between the short and long-run effects, size and speed of the policy, how much and how fast the policy should be implemented. This paper analyses three simulations using G-Cubed, which is intertemporal general equilibrium model with international trade and finance. From the analysis, there are short-run contractions, however, fiscal consolidation overall positive impact on the US and Non-US countries when the only US is introducing the policy. For policy choose, permanent fiscal consolidation is more favourable than gradual in the short-run. If all countries carry out the same policy, both short and long-run impacts are positive for those countries.
    Keywords: US fiscal consolidation, global impact
    JEL: E62 F4 H6
    Date: 2019–09
  15. By: Tröster, Bernhard; Staritz, Cornelia; Grumiller, Jan; Maile, Felix
    Abstract: Commodity price volatility remains a crucial development challenge of commodity-dependent countries of the Global South. Drawing on structural development economics' concerns with commodity price volatility and stabilisation, this article calls for the integration of price-setting into the analysis of governance in global commodity chains (GCCs). It argues that price-setting power and related uneven exposure to price instability and risks adds to other power dimensions in producing unequal distributional outcomes in GCCs. The paper assesses national price stabilisation in the top cocoa-producing countries Côte d'Ivoire and Ghana against changing inter-firm governance and price-setting institutions in the cocoa GCC. Based on over 50 interviews with commodity trading houses (CTHs) and cocoa sector actors in Côte d'Ivoire and Ghana, our analysis shows that national-level price stabilisation mechanisms address intra-seasonal producer price volatility, but have few possibilities to shield export and producer prices from inter-seasonal price variations. This is because both countries remain 'global price takers' with global prices set on financialized derivatives markets and transmitted along the GCC by CTHs, which limits possibilities for 'domestic price making'. This leaves the major burden of price risks between seasons with smallholder producers that have the least possibilities to deal with these risks.
    Keywords: Global Commodity Chains,Cocoa,Commodity Trading Houses,Price Setting,Financialisation,Côte d'Ivoire,Ghana
    Date: 2019
  16. By: Gleeson, Deborah; Lexchin, Joel; Labonté, Ronald; Townsend, Belinda; Gagnon, Marc-André; Kohler, Jillian; Forman, Lisa; Shadlen, Kenneth C.
    Abstract: Trade and investment agreements negotiated after the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) have included increasingly elevated protection of intellectual property rights along with an expanding array of rules impacting many aspects of pharmaceutical policy. Despite the large body of literature on intellectual property and access to affordable medicines, the ways in which other provisions in trade agreements can affect pharmaceutical policy and, in turn, access to medicines have been little studied. There is a need for an analytical framework covering the full range of provisions, pathways, and potential impacts, on which to base future health and human rights impact assessment and research. A framework exploring the ways in which trade and investment agreements may affect pharmaceutical policy was developed, based on an analysis of four recently negotiated regional trade agreements. First a set of core pharmaceutical policy objectives based on international consensus was identified. A systematic comparative analysis of the publicly available legal texts of the four agreements was undertaken, and the potential impacts of the provisions in these agreements on the core pharmaceutical policy objectives were traced through an analysis of possible pathways.
    JEL: L81 R14 J01
    Date: 2019–11–28
  17. By: Albert Park (Director, HKUST Institute for Emerging Market Studies; Chair Professor, Department of Economics, Division of Social Science and Division of Public Policy, Hong Kong University of Science and Technology)
    Abstract: Analysis of project-level data on China’s outbound FDI and construction projects finds that the Belt and Road Initiative (BRI) has led to a large increase in China’s outbound FDI in Belt and Road (B&R) countries compared to non-B&R countries, especially for greenfield FDI projects and in the energy sector. The importance of economic fundamentals in allocating Chinese investment to different countries has declined substantially under the BRI, raising concerns that the expected returns to such investments has declined. The importance of governance quality in explaining China’s outbound FDI increased significantly under the BRI, dispelling concerns that under the BRI China targets investments toward corrupt, poorly governed countries
    Keywords: Belt and Road, China, Financial Development, Firms, Jobs
    Date: 2019–09
  18. By: Sur, Pramod Kumar
    Abstract: This paper examines the short and long-term impact of international migration on overall human capital formation as well as the quality of human capital formation of the left behind households in the community of origin. Exploiting a unique migration policy, we find that the time passed since the migration event took place could affect the human capital formation of the left behind households differently. Furthermore, we find that international migration could also impact overall human capital as well as the quality of human capital formation differently.In particular, we do not find any impact of short and long-term international migration on the overall human capital formation of the left-behind household members. However, we find that households with long-term migrants are more likely to switch from a lower quality of education and substituting it with a higher quality of education of the left behind household members.
    Keywords: International Migration, Human Capital Formation, Education, F22, J24, I21
    Date: 2020–01
  19. By: Kaplan, Emin Ahmet; Erul, Rana Dayıoğlu
    Abstract: Recent inabilities to find an escape point from the global crisis has demonstrated that multilateral institutions cannot fulfill the functions expected from them anymore. In this respect, the policies to be adopted by democratic countries are thought to be essential in the escape from global turmoil and crisis. Therefore, the objective of this study is to measure the effects of institutional and socioeconomic variables on economic growth with regard to the significance of political regime types or democracy, within a government. Thus, 85 countries in four types of political regimes were included in the analysis by the period of 1984-2015. As a result, it has been acknowledged that multilateral institutions, which have been ineffective in producing a solution, should be reassessed within the context of recent global developments, these assessments should be performed by countries within the framework of their tendencies towards democratization and developing their sociocultural infrastructures.
    Keywords: Globalization; global turmoil; multilateralism; democracy and economic growth; political regimes
    JEL: C33 O43
    Date: 2019
  20. By: Anthony Venables; Julia Bird; Mathilde Lebrand
    Abstract: This paper develops a computable spatial equilibrium model of Central Asia and uses it to analyze the possible effects of the Belt and Road Initiative on the economy of the region. The model captures international and subnational economic units and their connectivity to each other and the rest of the world. Aggregate real income gains from the Belt Road Initiative range from less than 2 percent of regional income if adjustment mechanisms take the form of conventional Armington and monopolistic competition, to around 3 percent if there are localization economies of scale and labor mobility. In the latter case, there are sizeable geographical variations in impact, with some areas developing clusters of economic activity with income increases of as much as 12 percent and a doubling of local populations, while other areas stagnate or even decline.
    Keywords: regional integration, transport infrastructure, spatial modeling, economic geography, Central Asia.
    JEL: F12 F15 R11 R13
    Date: 2020–01–17
  21. By: Altenburg, Tilman; Chen, Xiao; Lütkenhorst, Wilfried; Staritz, Cornelia; Whitfield, Lindsay
    Abstract: The Discussion Paper examines the opportunities that the rising industrial wages in China will bring for Africa. China has been the industrial workbench of the global economy for decades. However, its competitive advantages are waning, particularly for labour-intensive assembly activities in the clothing, shoe, electronics and toy industries. The Chinese government estimates that up to 81 million low-cost industrial jobs are at risk of relocation to other countries - unless China can keep the companies in the country through automation. Against this background, three complementary studies were carried out. The first examines where the automation technology for clothing and footwear production stands today; the second, how clothing companies in China deal with the cost pressure: to what extent they automate, relocate within China or abroad and how great is the interest in Africa as a production location. The third part is devoted to Africa's competitiveness in clothing assemly, with empirical findings from Ethiopia and Madagascar. The Discussion Paper shows that the manufacture of clothing can already be robotized today, but that for sewing, robotization will probably remain more expensive than manual labor in the next 15-20 years. China's companies are investing heavily in the automation of all other production processes and at the same time shifting production to neighbouring Asian countries. In Africa, only Ethiopia is currently competitive in the manufacture of clothing, and here too there are significant institutional difficulties in absorbing large amounts of direct investment.
    Date: 2020

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