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on International Trade |
| By: | Jose Daniel Rodríguez-Delgado |
| Abstract: | The paper evaluates the South Asia Free Trade Agreement (SAFTA) within the global structure of overlapping regional trade agreements (RTAs) using a modified gravity equation. First, it examines the effects of the Trade Liberalization Program which started in 2006. SAFTA would have a minor effect on regional trade flows and the impact on custom duties would be a manageable fiscal shock for most members. Second, the paper ranks the trade effects of other potential RTAs for individual South Asian countries and SAFTA: RTAs with North American Free Trade Agreement (NAFTA) and the European Union (EU) dominate one with the Association of South East Asian Nations (ASEAN). |
| Keywords: | International trade agreements , Asia , Trade liberalization , Economic models , |
| Date: | 2007–02–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:07/23&r=int |
| By: | Cyrille Schwellnus |
| Abstract: | Services trade liberalisation is on the top of the agenda of trade negotiators both at the multilateral and at the bilateral level. At the multilateral level services trade liberalisation is negotiated in the framework of the General Agreement on Trade in Services (GATS) and most bilateral trade agreements now include a section on services. In contrast to negotiations over goods trade liberalisation for which negotiators are informed by reliable data and a well established body of research, services trade data and studies on services trade liberalisation based on them have only recently become available. Given the intangible nature of services that precludes the imposition of tariffs, policy induced barriers to services trade take the form of specific domestic regulations. A common approach to studying services trade liberalisation consists thus in the analysis of correlations between services trade and domestic regulation indicators. This approach has to deal with four main difficulties. (i) Services trade data are of low quality as compared to data on trade in physical goods, (ii) precise quantitative measures of domestic regulations impeding services trade are not readily available, (iii) domestic regulations may be influenced by services trade and may therefore not be considered as exogenous variables, and (iv) cross country studies are likely to yield spurious results if it is not appropriately controlled for unoberserved country heterogeneity. |
| Keywords: | International trade; services; gravity model; regulation |
| JEL: | F13 F15 L80 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2007-08&r=int |
| By: | Zhiwei Zhang; Shang-Jin Wei |
| Abstract: | While new conventional wisdom warns that developing countries should be aware of the risks of premature capital account liberalization, the costs of not removing exchange controls have received much less attention. This paper investigates the negative effects of exchange controls on trade. To minimize evasion of controls, countries often intensify inspections at the border and increase documentation requirements. Thus, the cost of conducting trade rises. The paper finds that a one standard-deviation increase in the controls on trade payment has the same negative effect on trade as an increase in tariff by about 14 percentage points. A one standard-deviation increase in the controls on FX transactions reduces trade by the same amount as a rise in tariff by 11 percentage points. Therefore, the collateral damage in terms of foregone trade is sizable. |
| Keywords: | Capital controls , Capital account liberalization , International trade , Nontariff barriers , |
| Date: | 2007–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:07/8&r=int |
| By: | Fouquin, Michel; Nayman, Laurence; Wagner, Laurent |
| Abstract: | This paper investigates the determinants of intra-firm trade of multinational firms located in France, using data on French companies. Results on the vertical pattern of production networks differ according to the affiliates’ location. Lower wage and transportation costs in the developing countries increase, as expected, the vertical segmentation of production. In the developed countries, lower trade and unit wage costs, and hence, a strong and positive labour productivity matter a lot in explaining French MNCs’ preferences. Among the other variables of interest, partnership and market potential have been given special attention. The results substantiate a mix of vertical and horizontal FDI, mainly when we separate out capital intensive from labour intensive intermediate products. |
| Keywords: | Multinational Firms, Intra-firm Trade, Intermediate Products, Vertical Production Networks, Horizontal FDI |
| JEL: | F1 F23 L1 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:5565&r=int |
| By: | Sebastian Braun (School of Business and Economics, Humboldt University of Berlin) |
| Abstract: | The paper studies the effects of a one-sided minimum wage in a two-country model of intra-industry trade, in which multinational firms arise endogenously. With positive levels of intra-industry trade the adverse employment and welfare effects of an asymmetric minimum wage are significantly larger than in a non-trading economy. Multinational firms generally mitigate the effect somewhat. Even though factor prices are not equalised across countries, a (binding) wage floor in one country will prop up wages in the other. The flexible wage country is insulated from shocks caused by factor accumulation in the rigid wage country, while an increase in the labour supply of the latter economy may have profound impacts on labour market outcomes in both countries. |
| Keywords: | Intra-Industry trade, wage rigidity, multinational firms, unemployment |
| JEL: | F12 F16 F23 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:jep:wpaper:07003&r=int |
| By: | Edward J. Balistreri; James R. Markusen |
| Abstract: | We illuminate the relationship between optimal firm pricing and optimal trade policy by exploring a generalized model that accommodates product differentiation at both the national and sub-national (firm) levels. We assume monopolistic competition in the differentiated products at the sub-national level. When the national and sub-national substitution elasticities are similar we find little opportunity for small countries to improve their terms of trade through trade distortions, because firms play an important preemptive role in optimally pricing unique varieties. We contrast this with standard applications of perfect-competition Armington models, which exhibit high optimal tariffs--even for relatively small countries. |
| JEL: | F1 F13 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13130&r=int |
| By: | ITOH Seiro; WATANABE Mariko; YANAGAWA Noriyuki |
| Abstract: | This paper documents financial aspects of transactions and trade credit supply behavior with foreign direct investment (FDI) among small- and medium-sized enterprises, based on two original surveys. The surveys, conducted in four cities in China in 2003, were designed to uncover the nature of inter-firm transactions, trade credit and other financial conditions. Literature on FDI mainly refers to technology transfer, employment, or investment. This paper focuses on the role/significance of FDI in the supply of trade credit due to its enforcement technology of trade credit. Yanagawa, Ito, and Watanabe (2006) developed an incomplete contract model wherein when the seller has a higher enforcement technology or the buyer has richer liquidity, both trade credit and transaction volume will increase. In this paper we first compute the "enforcement probability" of each seller then test the propositions of the model. We confirm that (1) FDI and G firms provide larger trade credit. (2) This is due to their higher enforcement probability in trade credit. Furthermore, (3) higher enforcement probability has a positive external effect in enhancing the trade credit and transaction volume of indirect transaction partners. However, we also find that (4) in order to raise the probability of "no default," enhancing the ratio of cash on delivery is a necessary measure. (5) A more competitive supplier will prefer cash on delivery payment and consequently will provide less trade credit to the economy. (6) With a shorter transaction period, the supplier will provide larger trade credit. This implies that firms with a stronger bargaining power prefer providing no trade credit though they can expect higher enforcement probability, thus reduces the volume of economic activity. These negative forces against enhancing trade credit and economic activity exist at a substantial level in China. Because of this force, a strategic default problem persists in China even 30 years after the transition began. |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:07031&r=int |
| By: | Lionel Fontagne; Guillaume Gaulier; Soledad Zignago |
| Abstract: | Recent developments in trade theory and related empirical studies have drawn a revised picture of trade patterns that is refreshing our understanding of North-South competition: international specialisation has been proved to take place within products, across varieties, rather than across products or across industries. On average, Japanese unit values (values/quantities) for instance are 1.4 times higher than for Brazil, 1.9 times higher than for India, and 2.9 times higher than for China, for the same products, shipped to the same markets, within the same year (2004). Systematising this repeated empirical evidence, we ask here what are the precise patterns regarding the specialisation of countries within products and across varieties and what are the determinants of such specialisation. Better understanding such trade patterns helps to clarify the challenges for policy posed by the emergence of competitors in the South, covering the whole range of traded products. |
| Keywords: | Product trade; export unit values; vertical differentiation |
| JEL: | F1 F4 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2007-06&r=int |
| By: | Giorgio Fagiolo (Sant’Anna School of Advanced Studies); Javier Reyes (University of Arkansas); Stefano Schiavo (Observatoire Français des Conjonctures Économiques) |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:0711&r=int |
| By: | Francesco Crespi (University of Roma Tre); Valeria Costantini (University of Roma Tre) |
| Abstract: | The pollution haven hypothesis affirms that an open market regime will encourage the flow of low technology polluting industries toward developing countries, due to potential comparative advantages related to low environmental standards. In contrast, the hypothesis suggested by Porter and van der Linde claims for a competitive dynamic behaviour by innovating firms, allowing a global diffusion of environmental-friendly technologies. Environmental regulation may represent a relevant mechanism through which technological change is induced. In this way countries subject to more stringent environmental regulations may become net exporters of environmental technologies. This paper provides new evidence on the evolution of export flows of environmental technologies across different countries for the energy sector. Advanced economies, particularly the European Union, have given increasing attention to the role of energy policies as tools for sustaining the development path. The Kyoto Protocol commitments, together with growing import dependence of energy products, have stimulated the attention on the analysis of innovation processes in this specific sector. The analysis uses a gravity model in order to test the determinants and the transmission channels through which environmental technologies for renewable energies and energy efficiency are exported to advanced and developing countries. Our results are consistent with the existence of the Porter and van der Linde hypothesis, where environmental regulation represents a significant component of comparative advantages. What strongly emerges is that the stringency of environmental regulation supplemented by the strength of National Innovation System is a crucial driver of export performance in the field of energy technologies. |
| Keywords: | Environmental Regulation, Trade and Environment, Energy Technologies |
| JEL: | F18 F21 Q43 Q55 Q56 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2007.53&r=int |