|
on International Trade |
| By: | Noura Abdelwahab |
| Abstract: | The implementation of Article VI of the GATT (1994) Agreement defines dumping as “the introduction of products of one country into the commerce of another at less than normal value of the products”. It describes “less than normal value” as: a- Less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country, or, b- In the absence of such domestic price, is less than either (i) The highest comparable price for the like product for export to any third country in the ordinary course of trade, or (ii) The cost of production of the product in the country of origin plus a reasonable addition for selling and administration cost plus reasonable profit margin. If such dumping causes or threatens to cause ‘material injury’ to the industries in the importing country, then that country is authorized following an investigation, to impose an (appropriate) Anti-dumping (AD) duty on the dumping companies in the specific countries that are subject to the investigation and are found to have dumped those products ( Vermulst, 1994). To the same end Article 9.1 of the AD Agreement urges investigating authorities to impose AD duties less than the full AD margin if such lesser duty would be adequate to remove the injury to the domestic industry. However, in practice only few jurisdictions apply the full AD margin such as Egypt and the US while other jurisdictions apply a mandatory Lesser Duty Rule (LDR) in their AD investigations such as the EU. Thus, the amount of the AD duty does not exceed the lesser of the margin of dumping or the injury margin, which is defined as the difference between the import prices of the dumped product exported from the exporting Member to the importing Member (“the import price”) and the non-injurious price (“the NIP”). The jurisdictions which apply Lesser Duty Rule believe that AD measures should not exceed the injury margin suffered by the domestic industry to protect consumers from the increase in prices. As after the imposition of AD duties, usually domestic producers raise their prices (World Trade Organization, 1998). The realization of the negative consequences of AD duties that resulted from the imposition of AD duties urged developed countries, mainly Japan and Korea in Uruguay Round to call for disciplines for the use of AD duties. However, the Round ended with only procedural changes in the Agreement, the matter which resulted in a huge surge of AD duties, mainly imposed by new Users (India, Brazil, China, Argentina, Egypt and South Africa). Therefore, Japan and India as well as the Group of Friends of AD (Brazil; Chile; Costa Rica; Hong Kong, China; Israel; Japan; Korea, Norway; Singapore; Switzerland; the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu; and Thailand) have been calling for the adoption of the LDR proposal i.e. AD duties should not be higher than the calculated injury margin (injury suffered by the domestic industry in the named country), in the current Rules Negotiations in the context of the Doha Round Negotiations. The adoption of such a proposal would lead to the imposition of a lower AD duties, the matter which would result in a lesser consistency in the country's trade policy and the net loss of the national interest would even be less( World Trade Organization, 2004 & 2005). Many economists analyzed the impacts that resulted from the imposition of AD duties or the impacts that result from initiation of AD investigation. Among which were Deardorff and Stern (1990), who used the Michigan model (a CGE model) of world production and trade to calculate the effects on trade and employment of a variety of AD scenarios. Leamer (1990) also used a general equilibrium model to estimate the effects of tariff and non-tariff barriers on trade using cross-section data for 1983 on fourteen industrial countries. Anderson (1992) analysed the effects of AD laws on U.S. trade as well as their economic costs. Prusa (1999) relied on disaggregated trade data from the United States in estimating an econometric model to quantify the effect of filing an AD petition on trade from named and non-named countries . Vandenbussche and Zanardi (2006) quantified the worldwide effects AD laws on aggregate trade flows. They estimated worldwide trade flows using a gravity equation spanning 21 years (1980-2000) of annual observations and used trade flows for 121 exporting countries and 58 importing countries. Based on this background, this paper seeks answering the following questions: • To what extent would the adoption of the LDR result in positive impacts on the Egyptian Economy? • What is the impact of such adoption on household’s welfare? The study uses a partial equilibrium model; the TAPES model that is developed by Sherman Robinson , in 2006 which captures the welfare impacts that result if the Egyptian authorities adopt LDR in the Tires AD investigations. The model specifies five trade partners for Egypt comprising the New Users Group, which are India, Brazil, China, Argentina, and South Africa. The model comprises data for 72 manufacturing sectors. It uses Egypt's production and trade data for the year 2014 Published by the Central Agency for Public Mobilization and Statistics and 2014 tariffs data published by the ministry of Trade and Industry. The TAPES model is built around supply and demand curves for exports and demand curves for imports. Consumer welfare are measured using consumer and producer surpluses. Imports valued at domestic prices gives total import demand or apparent import consumption. Demand curves for imports are defined for each imported good and each regional source of imports has a supply curve specified. The composition of imports from different regional sources of supply is treated as an imperfect substitute and is governed by a variable elasticity of substitution related to the Armington elasticities. Two different scenarios are simulated in this study as follows: 1) Simulation 1: Application of full AD margin for the Tires cases. 2) Simulation 2: Using LDR for the application of AD margins for the Tires cases. This study analyses the impact of adopting full AD margins in AD investigation on the Egyptian Economy, versus the impact that would result if the Egyptian Investigating Authorities adopted LDR in AD investigations for policy makers that enable them to better address these challenges. Based on the applied model, data and policy scenarios, the study will provide policy recommendation on the welfare impacts that result from Appling full AD margins in AD investigations.it shall also provide policy recommendations on the way forward to adopt LDR in AD investigations. |
| Keywords: | Egypt, Impact and scenario analysis, Trade issues |
| Date: | 2016–07–04 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:009007:9599&r=int |
| By: | Maria C Latorre; Hidemi hi Yonezawa |
| Abstract: | This paper analyzes the impact of the Transatlantic Trade and Investment Partnership (TTIP) on the EU and the US. The outcomes are derived at the microeconomic, as well as at the macroeconomic level in a consistent framework by using a computable general equilibrium (CGE) model. With respect to the sectoral results, the effects on production, exports and imports are derived for the twenty one sectors (including manufactures and services) in which the economies are split. Regarding the macroeconomic outcomes the impact for GDP, aggregate exports and imports, wages, capital rates of return and welfare will be obtained. We will consider that both moderate or ambitious scenarios (regarding tariff and non-tariff barriers reductions) could be reached in the negotiations that are actually taking place. One important characteristic of our model is that, contrary to the few previous analyses of the TTIP, it includes the impact of the operations of foreign multinationals in a context of imperfect competition and increasing returns to scale. The model is the successor of a number of recent models devoted to the study of Foreign Direct Investment (FDI) in services. Beginning with the stylized model from Markusen, Rutherford and Tarr (2005) further extensions led to applications to real economies, including the accession of Russia in the WTO (Rutherford and Tarr, 2008) and other integration processes of African and East European countries. A number of previous CGE models have analyzed the same topic (Francois and Manchin, 2014; Francois et al., 2013; Fontagne et al., 2013; Francois and Pindyuk, 2013). To the best of our knowledge none of them has included the impact of multinationals within the same CGE model, thus deriving their impact in a consistent framework. This absence of foreign multinationals’ effects in the analyses of the TTIP has been lamented by several authors (e.g., Aichele, Felbermayr and Heiland, 2014; Messelin, 2015). In fact, more generally, only a few number of CGE models consider the presence of multinationals (for a summary see Latorre, 2009, 2010). Tarr (2012) has recently reviewed the recent models with FDI in services. There is a particularly relevant analysis in this type of models in order to analyze employment outcomes, which could be summarize as follows. The advanced services provided by foreign multinationals or FDI, could be a partial equilibrium substitute for labor. However, the may well turn to be a general equilibrium complement, thus leading to employment increases. Foreign multinationals may economize on labor, compared to domestic firms, due to their more capital intensive technologies and to the use of foreigm imported intermediates (partial equilibrium effect). However, they may increase labor demand because after their arrival more varieties of services would be available reducing their prices through the Dixit-Stiglitz endogenous productivity effects. These reductions in prices would increase the final demand for more services and increase the productivity of firms using these services as intermediates, thus boosting their production. More labor may turn out to be employed if this general equilibrium perspective, including final demand and intermediate use is adopted. Several applications to the real economies have confirmed these overall positive outcomes for employment (Tarr, 2012). Is there an employment increasing case in the present study of the TTIP? Yes, we find that there is an overall job creation following the reductions of Non-Tariff Barriers NTBs to export and FDI in both sides of the Atlantic. We use the publicly available estimations for FDI barriers from Jafari and Tarr (2012). The results indicate that there is indeed an increase in the number of firms providing advanced services which leads to cost reductions in other sectors of the economy. This, in turn, causes an overall output increase trend across sectors and may even dumpen or turn positive the initial output reductions in the sectors that had been negatively affected by the reductions of NTBs in the exports of both goods and services. Our model exhibit other relevant features for the analyses of the TTIP, such as the presence of imperfect competition and scale economies in a Dixit Stiglitz setting, which are important to grasp more accurately the impact of trade (e.g., Francois and Reinert, 1997). Furthermore, we also pay attention to the impact of deepening services’ integration among European countries. Even though the Services Directive has been implemented in the period 2006-2009, several authors (e.g., Messerlin, 2015), envisage the TTIP as an important opportunity to continue the process of integration in services in Europe. Clearly, services’ integration within Europe is much deeper than in other parts of the world, but there is still scope for further integration (Mustilli and Pelkmans, 2014; Monteagudo, Rutkowski and Lorenzani, 2012). If Europe and the US are able to agree reductions in barriers to services, it seems reasonable that Europe could advance in its own integration in this area. We find that the possibility of further integration in services exports would have a rather reduced impact but that in the case of FDI the effects would be more sizeable. The former effect is an outcome of the rather low initial level of NTBs in services derived by Ecorys (2009), which is what we use for this modelling exercise. The latter arises in a framework consistent with the estimations of Copenhagen Economics (2005a; 2005b), which despite the initial low levels of barriers turns out to be of larger importance. Another special feature of this CGE models it that it includes unemployment, by means of a wage curve (Blanchflower and Oswald, 1994a; 1994b; 2005). This curve describes a negatively sloped curve linking the wages earned by employees to the unemployment rate in their region. This feature allows grasping the impact of the TTIP on the unemployment rate and a more nuanced study of job creation. It further distinguishes between skilled and unskilled workers across regions. We convert the five skilled labor categories available in the last release of the GTAP 9 Database, into two levels of skills due to the difficulties in estimating future unemployment rates for (only) both types of categories. All in all, the present modelling approach offers several novelties that should facilitate a better understanding of the effects of the TTIP, particularly focusing on the beneficial impact of foreign multinationals operating in advanced services sectors. References: Aichele, R., Felbermayr, G. and Heiland, I. (2014) “Going Deep: The Trade and Welfare Effects of TTIP”, Cesifo Working Paper No. 5150. Balistreri, E.J., Tarr, D. G. and Yonezawa, H. (2014) “Reducing trade costs in east Africa: deep regional integration and multilateral action”, Policy Research working paper no. WPS 7049. Washington, DC: World Bank Group. Available at: http://documents.worldbank.org/curated/en/2014/09/20250345/reducing-trade-costs-east-africa-deep-regional-integration-multilateral-action Blanchflower, D. G. and Oswald, A. J. (1994a) The Wage Curve, MIT Press, Cambridge, MA. Blanchflower, D. G. and Oswald, A. J. (1994b) "An introduction to the wage curve", Journal of Economic Perspectives, Summer, 9(3), pp. 153-167. Blanchflower, D. G. and Oswald, A. J. (2005) “The wage curve reloaded”, paper presented at the National Bureau of Economic Research conference, Cambridge Mass, on April 15, 2005 Copenhagen Economics (2005a) “Economic Assessment of the barriers to the internal market for services”, Final Report, May. Copenhagen Economics (2005b) The economic importance of the country of origin principle in the proposed Services Directive”, Final Report. Ecorys (2009), Non-Tariff Measures in EU-US Trade and Investment – An Economic Analysis, Report prepared by Berden, K., J. Francois, M. Thelle, P. Wymenga y S. Tamminen for the European Commission, Reference OJ 2007/S180–219493. Fontagné, L., J. Gourdon and Jean, S. (2013), Transatlantic Trade: Whither Partnership, Which Economic Consequences?, CEPII Policy Brief No 1, September, 2013. Francois, J. and Manchin, M. (2014) “Quantifying the Impact of a Transatlantic Trade and Investment Partnership (T-TIP) Agreement on Portugal”, Final Report, July. Francois, J. F. and Reinert, K. A. (1997) Applied Methods for Trade Policy Analysis: A Handbook, Cambridge University Press, Cambridge. Francois, J. and Pindyuk, O. (2013) “Modeling the Effects of Free Trade Agreements between the EU Canada, USA and Moldova/Georgia/Armenia on the Austrian Economy: Model Simulations for Trade Policy Analysis”, FIW Research Reports 2012/13. Francois J., Manchin M., Norberg H., Pindyuk O. and Tomberger P. (2013) “Reducing Transatlantic Barriers to Trade and Investment, An Economic Assessment”, Study for the European Commission, CEPR Report. Jafari, Y. and Tarr, D.G. (2014) “Estimates of Ad Valorem Equivalents of Barriers Against Foreign Suppliers of Services in Eleven Services Sectors and 103 Countries”, World Bank Policy Research Working Paper 7096. Latorre, M.C. (2009) “The economic analysis of multinationals and foreign direct investment: A review”, Hacienda Pública Española/Revista de Economía Pública, vol. 191, pp. 97-126. Latorre, M. C. (2010) “The impact of foreign-owned companies on host economies: A Computable General Equilibrium approach”, Nova Science Publishers, New York. Markusen, J. R., Rutherford, T. and Tarr, D. G. (2005) “Trade and Direct Investment in Producer Services and the Domestic Market for Expertise”, Canadian Journal of Economics, vol. 38, pp. 758-777. Messerlin, P. (2015) “The Transatlantic Trade and Investment Partnership: The Services Dimension”, Paper No. 6 in the CEPS-CTR project “TTIP in the Balance’’ and CEPS Special Report No. 106, May. Monteagudo, J., Rutkowski, A. and Lorenzani, D. (2012), “The economic impact of the services directive: A first assessment following implementation”, European Economy, Economic Papers No. 456, European Commission, Brussels. Mustilli, F. and Pelkmans, J. (2013) “Access Barriers to Services Markets Mapping, tracing, understanding and measuring”, CEPS Special Report, No. 77, June. Rutherford, T. F. and Tarr, D. G. (2008) “Poverty effects of Russia’s WTO accession: Modeling “real” households with endogenous productivity effects”, Journal of International Economics, vol. 75, pp. 131–150. Tarr, D. G. (2012) “Putting Services and Foreign Direct Investment with Endogenous Productivity Effects in Computable General Equilibrium Models” in Dixon, P. And Jorgenson, D. (Eds.) Handbook of Computable General equilibrium modeling, Elsevier, North-holland, available at: http://www-wds.worldbank.org/ external/ default/ WDS ContentServer/IW3P/IB/2012/03/26/0001583 49_20120326084225/Rendered/PDF/WPS6012.p df |
| Keywords: | Europe and the US, General equilibrium modeling, Trade issues |
| Date: | 2016–07–04 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:009007:9333&r=int |
| By: | Kazuhiko Oyamada |
| Abstract: | To prepare an answer to the question of how a developing country can attract foreign direct investment (FDI), this paper explored the factors and policies that may help bring FDI into a developing country by utilizing an extended version of the knowledge-capital model developed by Markusen (1997). Although models with heterogeneous firms are widely utilized for both theoretical and empirical studies that explore motives behind FDI since Melitz (2003), the knowledge-capital model still is useful when we comprehensively handle every operational pattern of multi-national enterprises (MNEs) in one uniform framework. The model used in this study includes six types of firms, national enterprises, horizontal MNEs, vertical MNEs, horizontal export-platforms, vertical export-platforms, and complexly integrated MNEs, with four countries grouped into market (or developed) and non-market (or developing) ones. A firm established in one of two market countries chooses the locations of its assembly plants from four countries including two non-market ones to sell its products on the market placed only in the two market countries. With a special focus on the effects of a free trade agreement (FTA), expressed by lowering import tariff, and an economic partnership agreement (EPA), which includes the additional implementation of cost-saving policies to reduce firm-type/trade-link specific fixed costs, between market and non-market countries, simulations with the model revealed the following points. (1) MNEs will not setup plants in non-market countries if their relative factor endowments are similar even when FTA takes place between some of those countries and a market country. To attract inward FDI, a non-market country must have substantially cheap unskilled labor based on a rich relative endowment of this factor. (2) In the setting wherein two market countries are perfectly symmetric, a non-market country's choice of FTA partner from among the market countries will not affect the production pattern of firms, welfare levels, or factor prices in the non-market countries. On the other hand, the welfare level in the market country that settles FTA with a non-market country improves, while the market country that has not been chosen as the FTA partner is worse off. (3) Although FTA/EPA generally tends to increase FDI to a non-market country, the possibility to improve welfare through increased demand for skilled and unskilled labor becomes lower as the size of the country grows. This is because the rate of change of factor prices per unit assembly plant increase becomes small in a large-sized country. (4) A non-market country may suffer severe welfare losses through FTA/EPA if the availability of skilled labor is extremely limited. To avoid this problem, policies to increase the availability of skilled labor in the country, such as investing in education, may help. (5) Because the additional implementation of cost-saving policies to reduce the firm-type/trade-link specific fixed cost tends to depreciate the price of skilled labor by saving its input, a non-market country, in which skilled labor is relatively scarce but not extremely scarce, can enhance welfare gains from FTA, and it is even possible to recover the welfare effects from negative to positive, by making the arrangement to be EPA. This tendency becomes strong when the total endowments for the non-market countries are large. |
| Keywords: | Artificial Developed and Developing Countries, General equilibrium modeling, Trade issues |
| Date: | 2016–07–04 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:009007:9154&r=int |
| By: | Motaz Khorshid; Saad Nassar; Victor Shaker |
| Abstract: | Permitted under the Article (XXIV) of GATT/WTO, Free Trade Agreements (FTAs) have become a prominent feature in the current trading system. Its share in total world trade has increased tremendously. Although it may be considered an easy substitute for a more difficult multilateral arrangement, it goes further beyond what is agreed upon in the world trade organization. In this regard, FTAs may provide lessons and suggest good practices that could be used to enhance economic policy debate. The current research is directed to assess and quantify the economy wide consequences of the proposed FTA between Egypt and the United States, which represents an important stepping stone towards a regional free trade agreement with the countries of the Middle East and North Africa (MENA) following the bottom-up approach in negotiation. Unlike the previous studies, which are mainly based on qualitative analysis, partial equilibrium or general equilibrium static models, the present research develops a dynamic computable general equilibrium (CGE) model that captures the interaction between the agriculture sector and the rest of the economy in a consistent and comprehensive manner. As an analytical tool, the model – as well as its social accounting matrix- reflects three technical modifications to the CGE modeling tradition. First, it represents an issue- oriented economy-wide modeling approach that establishes the linkages between agriculture sector and the rest of the economy. Second, it handles the case of multiple rest of the world with similar exchange rate and different regions (USA and the rest of the world). Third, aggregate investment spending is broken down into investment of domestic origin and foreign direct investment (FDI) flows. Given the above economic rationale, the model is used to capture and assess the impact of two main effects: (i) the effect of removing tariffs on trade between Egypt and the United States, which is nominated the "shallow agreement effect " and (ii) the effect generated by the shallow agreement in addition to reducing non-tariff measures and increasing FDI inflows from the United states, which is nominated the " the deep agreement effect". Taking into account the scheduled total annual U.S. aid to Egypt, the main results of the simulation experiments can be summarized as follows: First, the main results show that the aggregate and sectoral impacts in all experiments are quite modest due to the fact that the bilateral trade and investment flows with the United States are relatively small. Second, reducing non-tariff measures and attracting U.S. Foreign direct investment flows as part of the deep agreement is expected to provide positive gains in the medium/long run with an increase in average annual growth rate of real gross domestic product (GDP) accounting for 1.87% compared with the reference path. Third, Analytical results show limited structural changes caused by the deep agreement in the medium-long run. Fourth, the experimental analysis shows a clear improvement in Egypt’s external balance. This improvement is apparent in exports, trade balance and the current account surplus. Sixth, the deep agreement is expected to have positive effects on real households consumption and Investment as well as terms of trade and employment. However, it shows a negative effect on aggregate national saving. |
| Keywords: | Egypt, General equilibrium modeling, Agricultural issues |
| Date: | 2016–07–04 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:009007:9243&r=int |
| By: | Suh, Jin Kyo (Korea Institute for International Economic Policy); Lee, Hyo-young (Korea Institute for International Economic Policy) |
| Abstract: | The outcome of the bi-annual WTO ministerial gathering held in Nairobi, Kenya (MC10) can cautiously be evaluated as a 'stopgap solution' to the question of whether the Doha Round would stay alive post-Nairobi. In short, the small package of deals struck at the ministerial prevented the collapse of the multilateral system as a whole, but fell short of reaffirming the continuation of the Doha Round. The Nairobi Ministerial closed without delivering any concerted position on how to deal with the future of the WTO agenda and what approach to employ in tackling the multilateral trade agenda. The 10th WTO Ministerial Conference may be credited for achieving agreement on several important issues on the agriculture agenda, especially export competition issues such as the elimination of export subsidies that distort agriculture trade. The agreement may have been a strategic move to prevent the DDA from falling apart since the Ministerial was the first to be held in an African member country, making achievement on issues of interest to the developing and LDCs all the more significant. The outcome of the Nairobi Ministerial could also be evaluated as being rather 'balanced' since the major countries were able to go back with claims that their national interests were appropriately reflected in the end. The future of the Doha Development Round, however, still remains in the dark since there is no clear reaffirmation of the DDA. With the developed country groups quite opposed to continuing multilateral negotiations in the current format, it may not be realistic to predict that the DDA will sustain its form. In the end, this would imply a new form of DDA, i.e. 'DDA 2.0', with the support of all WTO members and coverage of all "new issues" on the multilateral trade agenda that are addressed in a "new approach". |
| Keywords: | WTO; Doha Development Agenda (DDA); MC10; Multilateral Trading System |
| Date: | 2016–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepwe:2016_009&r=int |
| By: | Fritz Breuss (WIFO) |
| Abstract: | The Comprehensive Economic and Trade Agreement (CETA) between the European Union and Canada is the most ambitious (new generation) free trade agreement the EU has ever negotiated. It is a "mixed" agreement with EU and member countries competences. Most elements of the agreement for which the EU has "exclusive competence", including the chapter on tariffs and non-tariff barriers (the dismantling of all barriers to trade in goods and services and market access to foreign direct investment) can – after the European Parliament gave its consent on 15 February 2017 – be applied provisionally in spring 2017. With a specifically constructed macroeconomic trade and growth model for Austria, we simulate the impact of CETA on Austria. CETA will add 0.3 percent to Austria's real GDP in the medium run and will stimulate bilateral trade and FDI. Our model is a small prototype model and can easily be applied to other foreign trade agreements the EU is planning. A comparison shows that TTIP – which is "politically" dead now – would have the biggest impact (real GDP +1.7 percent).The almost finished negotiated EU-Japan foreign trade agreement would result in an increase of Austria's real GDP by 0.4 percent in the medium run. |
| Keywords: | Free trade agreement, European Union, open-economy macroeconomics |
| Date: | 2017–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:wfo:wpaper:y:2017:i:532&r=int |
| By: | Elena Ianchovichina; Shantayanan Devarajan; Csilla Lakatos |
| Abstract: | This paper quantifies the global economic effects and strategic responses to the lifting of economic sanctions on Iran. The proposed lifting of sanctions, following its July 14, 2015 nuclear agreement with the permanent members of the UN Security Council and Germany (“P5+1”), will have consequences for the global, regional, and Iranian economies. The global effects will be felt mostly through the oil channel. The resumption of Iranian oil exports to pre-2012 levels could eventually add one million barrels per day on the world oil market, bidding down world prices. There will also be regional effects on Iran’s major trading partners, including the United Arab Emirates and other countries in the Middle East and Central Asia, through an expansion of oil and non-oil trade, as sanctions-induced trading costs come down. Finally, there will be effects on Iran’s economy as barriers to trade are relaxed, the production mix shifts in favor of goods that fetch high prices abroad and its consumption towards cheaper imports, with attendant effects on economic growth, efficiency and household welfare. This paper quantifies the economic effects of the lifting of sanctions on Iran using a modified version of the GTAP 9 database (Narayanan et al., 2015) and a global, computable general-equilibrium (CGE) model, GTAP, documented in Hertel (1997). CGE models capture the interaction between producers and consumers in the economy, mediated through the price mechanism. The global CGE model also captures the trade flows between countries and solves for a set of world prices that equilibrate global supply and demand. We use the model to simulate the effect of a “shock”, such as the removal of a trade embargo, on the market-clearing prices at the global and national levels. We are therefore able to isolate the consequences of the lifting of sanctions from other ongoing developments in the economy. Since the model captures the new equilibrium of an economy that has been perturbed, the time horizon of a simulation is best thought of as medium term, i.e. three to five years. In our simulations, the lifting of economic sanctions on Iran has three components. The first is the lifting of the EU oil embargo. The 2012 restrictions on imports of Iranian oil by the EU were the most far-reaching of the sanctions as they curtailed the volume of exports of Iran’s most important export commodity. Thus, the removal of the EU oil embargo is expected to have the largest macroeconomic impact on Iran and the rest of the world as oil accounts for about 64 percent of Iranian export revenue and Iran has a relatively large share (8 percent) of total world exports. The second component is the removal or significant reduction of the cargo inspections on Iranian exports and imports that were imposed as part of the sanctions regime. Transport costs on trade with Iran are expected to decline. This in turn will have an effect on Iran’s merchandise trade and boost in particular exports and imports of bulky goods and other goods with large transport margins, such as agricultural and industrial products and machinery. The third component is associated with improvements in non-tariff barriers affecting Iran’s cross-border imports of financial and transport services. As the US and other partners lift restrictions on financial transactions and transport services, Iran’s imports of these services are expected to rise. Simulations with the model show that gains from the embargo removal are the largest for Iran, resulting in a welfare gain of about $18 billion to the economy, or an increase in per capita welfare of 3.7 percent. Almost half of these gains (1.7 percent or approximately $8.2 billion) stem from the lifting of the EU oil embargo, while the reduction in trade costs and improvements in conditions for cross-border services trade result in additional gains of $2.0 billion and $7.5 billion, respectively. The gains to Iran will be 22 percent lower if Iran’s oil exports to the EU do not recover completely but reach only half of their pre-sanction levels. This may be a more likely outcome since a full bounce back may not be possible in the medium term due to various impediments to oil production and exports, including a range of technical constraints on crude oil extraction and high domestic oil demand, to name a few. In the global economy, net oil importers gain and net oil exporters lose as the world price of oil declines by about 13 percent due to the additional amount of oil sold on the global market. The gains to the EU and the US, both net oil importers, are sizable in absolute terms $67 billion and $34 billion but small in relative terms as per capita welfare increases by slightly less than a half of a percent in the EU and a quarter of a percent in the US. The losses are steepest for OPEC members, especially the GCC, which are expected to lose 3.9 percent in per capita welfare (equivalent to $55 billion in 2011 prices). Per capita welfare for other OPEC members and Russia declines by 2.9 percent ($19 billion) and 1.6 percent ($30 billion), respectively. The rest of the world is not significantly affected by the reduction in Iran’s trade costs because Iran is responsible for a negligible share of the world’s non-oil exports. Overall, the removal of Iran’s economic sanction translates into a gain for the world economy of $53 billion. Iran gains the most in per capita terms, while the losses of oil exporting countries are large and of similar absolute magnitude to Iran’s gains. The paper also considers the strategic responses of different trading blocks to the lifting of the sanctions. Major oil exporters may limit their own oil output and exports in order to stabilize world oil prices. We assess the effect of such a strategic move in combination with the lifting of Iran’s sanctions. Recognizing that Iran’s policy responses will have a substantial effect on the country’s ability to benefit from the lifting of sanctions, we consider the effects of two policy reforms: (i) unilateral reduction of tariffs on imported capital goods and (ii) reforms intended to boost automobile production. Finally, we assess the effects of improved market access for Iranian exports in western markets in response to credible signs of successful implementation of the nuclear agreement. We find that if major OPEC members limit the quantity of oil produced and exported in order to leave the world price of oil unchanged, the global welfare gains from the removal of the EU oil embargo would be significantly reduced. Compared to the baseline scenario, world-wide welfare gains decrease by 70 percent, from $54 billion to $16 billion. Iran’s welfare gains are enhanced and the losses to oil exporting countries reduced, but not by enough to compensate for the oil importers’ reduced welfare gains. The benefits to Iran will also increase if the lifting of the embargo is accompanied with national economic reforms that strengthen the supply response. With a reduction of tariffs on imports of capital goods, welfare gains are expected to be $1.8 billion larger for Iran than in the baseline scenario. Policies that encourage the expansion of automobile production to pre-sanction levels would translate into even higher gains. Given the importance of this industry to the Iranian economy, these reforms translate into a 40 percent boost to welfare or $7 billion. Exports of automobiles are found to increase by more than two-fold benefiting all factors of production but most significantly the returns to capital and skilled labor. Finally, improved market access to the west benefits not only Iran, but also the market-access-granting countries. The supply response will be stronger and the welfare effects larger if investment in general, and foreign direct investment in particular, picks up. |
| Keywords: | Iran, EU, US, Russia, Israel, GCC OPEC, Other MENA, Other OPEC, Rest of World, Impact and scenario analysis, Trade issues |
| Date: | 2016–07–04 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:009007:9185&r=int |
| By: | Doan, Ha Thi Thanh (Asian Development Bank Institute); Wan, Guanghua (Asian Development Bank Institute) |
| Abstract: | Contradicting the conventional wisdom of constant factor shares, the portion of national income accruing to labor has been trending downward in the last three decades. This decline must have contributed to rising inequality as labor income is more evenly distributed than capital income. This study contributes to the literature on income inequality by exploring the role of globalization in driving the labor share. In particular, we focus on the impacts of trade openness and foreign direct investments (FDI) on the labor share. Using country-level panel data for 1980–2010, the study finds that trade is a significant and robust determinant of labor share. Generally speaking, export depresses while import increases the labor share. The impact of FDI, however, is insignificant. These results are similar for both developed and developing countries. |
| Keywords: | labor share; wage share; globalization; imports; exports; FDI |
| JEL: | D63 E25 F62 |
| Date: | 2017–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0639&r=int |
| By: | Suh, Jin Kyo (Korea Institute for International Economic Policy) |
| Abstract: | Global trade growth has been depressed since 2010. What is worse is that the WTO cut 2016 global trade growth forecast to 1.7%, down from its previous estimate of 2.8%. On the other hand, plurilateral negotiations are rapidly becoming widespread in the WTO negotiations. The first-ever universal, legally binding global climate deal was adopted by 195 countries. There is a rapid spread of increasing anger over globalization. Furthermore, the next WTO Ministerial Conference will be held in Buenos Aires, Argentina in early December 2017. However, the Trump administration is developing a national trade policy that would seek to diminish the influence of the WTO in the United States. What should the new direction for Korea's multilateral trade policy be in such a changing global trade environment? New directions of Korea's multilateral trade policies are suggested as follows. Korea has to make efforts to secure enough flexibility in the reduction of both total and product-specific AMS (aggregate measure of support), since AMS of rice accounts for more than 90% of the Total AMS of Korea. Second, Korea should actively participate in both the U.S.-led plurilateral discussions on fishery subsidies and multilateral negotiations led by the EU, if it is to reflect its interests in the process of rule-making on fishery subsidies. The new multilateral trade policy of Korea should aim to spread benefits of trade liberalization out to the whole stakeholders, particularly focusing on small and medium enterprises (SMEs). Korea should prepare for the proliferation of plurilateral negotiations led by developed countries. Finally, we have to think of environmental subsidies as green subsidies, which are allowed in the WTO system. |
| Keywords: | DDA; WTO; MC11 |
| Date: | 2017–03–07 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepwe:2017_006&r=int |
| By: | ISHIKAWA Yasushi; SAITO Yukiko; TAOKA Takaaki |
| Abstract: | This paper investigate the role of indirect exporters, i.e., firms which are involved in international trade indirectly through transaction networks, and that of supporting firms of indirect exporters in a regional economy, considering the fact that the ratio of direct exporters in periphery regions is much smaller than that in core regions. The following are the main findings. First, compared to manufacturing firms in the core regions, the size of firms in the periphery regions is smaller and the ratio of direct exporters is smaller even after controlling the firm size. Second, less than 40% of firms in the periphery regions are involved in exporting directly or indirectly and the share of the number of employee, sales, and value added of those firms is 70%-80% in total. Third, indirect exporters through wholesalers are likely to start exporting directly, and the effect is larger in the periphery regions. However, the role of wholesalers in the periphery regions as intermediaries is limited, and most firms tend to export indirectly through wholesalers in the core regions. Fourth, indirect exporters through manufacturing firms are likely to grow faster, and the effect is larger in the periphery regions. Furthermore, direct manufacturing exporters in the periphery regions play an important role. These facts imply the importance of enhancing indirect exporting in the periphery regions where it is difficult to export directly. Matching firms in the periphery regions to exporting wholesalers in the core regions and enforcement of exporting ability of wholesalers in the former might raise the possibility of direct exporting there. Furthermore, a rise in the share of direct exporters in the periphery regions accompanies a rise in the share of high growth indirect exporters through manufacturers there, which leads to growth of the regional economy. |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:eti:rpdpjp:17009&r=int |
| By: | Maria Bas (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Antoine Berthou (Banque de France) |
| Abstract: | This paper studies the impact of input-trade liberalization on firms' decision to upgrade foreign technology embodied in imported capital goods. Our empirical analysis is motivated by a simple theoretical framework of endogenous technology adoption, heterogeneous firms and imported inputs. The model predicts a positive effect of input tariff reductions on firms' technology choice to source capital goods from abroad. This effect is heterogeneous across firms depending on their initial productivity level. Relying on India's trade liberalization episode in the early 1990s, we demonstrate that the probability of importing capital goods is higher for firms producing in industries that have experienced greater cuts on tariffs on intermediate goods. Only those firms in the middle range of the initial productivity distribution have benefited from input-trade liberalization to upgrade their technology. JEL classification: F10, F12 and F14. |
| Keywords: | firm heterogeneity and Indian firm-level data,Input-trade liberalization,firms' decision to import capital goods |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-01387558&r=int |
| By: | Guillaume Corlay (ENSAE - Ecole Nationale de la Statistique et de l'Analyse Economique - Ecole Nationale de la Statistique et de l'Analyse Economique); Stéphane Dupraz (Department of Economics Columbia University - Columbia University [New York]); Claire Labonne (ENSAE - Ecole Nationale de la Statistique et de l'Analyse Economique - Ecole Nationale de la Statistique et de l'Analyse Economique); Anne Muller (ENSAE - Ecole Nationale de la Statistique et de l'Analyse Economique - Ecole Nationale de la Statistique et de l'Analyse Economique); Céline Antonin (OFCE - OFCE - Sciences Po); Guillaume Daudin (LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine) |
| Abstract: | Jacks et al. (2011) offer an alternative to price gaps to quantify trade costs. Implementing a method which consists in deducing international trade costs from trade flows, they argue that the reduction in trade costs was the main driving force of trade growth during the first globalization (1870-1913), whereas economic expansion was the main driving force during the second globalization (1950-2000). We argue that this important result is driven by the use of an ad hoc aggregation method. What Jacks et al. (2011) capture is the difference in the relative starting trade of dyads experiencing faster trade growth in the first and second globalization. More generally, we cast doubts on the possibility to reach conclusions of such nature with a method that infers trade costs from trade flows, and then uses these costs to explain trade flows. We argue that it can only rephrase the information already contained in openness ratios. |
| Keywords: | Trade costs,globalization,gravity model,aggregation,structure effect |
| Date: | 2017–02–23 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01475320&r=int |
| By: | Lionel Fontagné (PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique); Gianluca Orefice (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique) |
| Abstract: | Highlights Stringent TBTs drive the average firm out of the market with a magnified effect for multi-destination players, who are encouraged to redirect their exports to other destinations (free of TBT concerns). Multi-destination firms are more likely to exit as a response to a stringent TBT. Thus, the imposition of a stringent TBT, by pushing multi-destination (high-productive) firms out of the market, reduces the average productivity of incumbent firms (i.e. the welfare of the imposing country). We combine aggregate estimations at sector-destination level with firm-level estimations and find that stringent TBTs represent mainly increases in fixed (more than variable) trade costs, with trade elasticity magnified for more homogeneous sectors. |
| Keywords: | Multi-destination Firms,Non-tariff Measures, TBT, Trade Margins |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-01476545&r=int |
| By: | KONISHI Yoko |
| Abstract: | Japanese manufacturers are becoming increasingly dependent on non-manufacturing functions such as sales, leasing, and after-sales services as their main source of value added in global value chains (GVCs). We discuss the role of services in GVCs in observing the service industry's contributions to exports and growth of the Japanese economy. The service industry affects trade and the global economy in two ways. One is by exports of services directly to partner countries. Another is through observation of the services embodied in the manufacturing process for parts, intermediate products, or final products, which is known as indirect trade. In this paper, we focus on tourism because of Japan's favorable tourism market, which has grown rapidly in recent years. Also, tourism has a unique feature known as high tradability service and affects various industries (e.g., transport, retail, wholesale, restaurant, agricultural production, cleaning, information communication, etc.). In order to understand Japan's tourism GVCs, we propose the GVC map following Gerreffi et al. (2011) and estimate the ripple effects of the inbound boom to the Japanese economy using the input-output (I-O) table conducted by the Ministry of Economy, Trade and Industry (METI). |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:eti:polidp:17011&r=int |
| By: | Mustafa Sakr; Andre Jordaan |
| Abstract: | As literature remains sparse regarding emerging African multinational corporations (EAMNCs), this article focuses on examining the key push factors (i.e. home country macroeconomic specifications) influencing the outward foreign direct investment flow from South Africa and Egypt. Based on dynamic panel data model estimation, the empirical research proves that trade openness, patent and the gross domestic product (GDP) and the GDP growth rate of South Africa and Egypt are dominant drivers of their outward foreign direct investment. In contrast, the number of investment treaties and inward foreign direct investment rate do not significantly influence outbound investment decisions of South African and Egyptian corporations. |
| Keywords: | South African MNCs, Egyptian MNCs, emerging African MNCs, Emerging MNCs, push factor determinants of OFDI |
| JEL: | P45 F21 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:rza:wpaper:664&r=int |
| By: | Giorgia Giovannetti (Dipartimento di Scienze per l'Economia e l'Impresa); Enrico Marvasi |
| Abstract: | The recent trade literature has shown how incomplete contracts can shape firms’ boundary and the decision of whether to outsource or integrate vertically. Related evidence and conceptualizations from the business literature show that buyer-supplier relations in global value chains can take several governance structures, depending on the degree of vertical coordination and power relations between firms. Building upon these two non-competing strands of the literature, we construct a taxonomy of firms that considers their positioning (upstream or downstream), their belonging to domestic or global value chains and the type of relations they entertain with other firms. We apply our taxonomy to the 2011 census of firms operating in Tuscany. We first describe regional characteristics and then study how positioning and governance affect firms’ decisions and performance. |
| Keywords: | Global value chains; Buyer-supplier relations; Heterogeneous firms; International trade. |
| JEL: | F14 F23 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpaper:wp2016_14.rdf&r=int |
| By: | Lee, Kyu Yub (Korea Institute for International Economic Policy); Lee, Joun Won (Korea Institute for International Economic Policy); Chung, Min-Chirl (Korea Institute for International Economic Policy) |
| Abstract: | On 20 December 2015, the Korea-China Free Trade Agreement (FTA) entered into force. The Korea-China FTA would impact both economies' welfare in the long run, elevating it to a higher level compared to before the FTA was concluded. However, it must be pointed out that in the short run, trade activities between Korea and China might be affected by external/internal economic forces such as the persistent global trade slowdown and weak domestic economic growth, and non-economic forces such as THAAD and non-tariff barriers. Thus, it might be impetuous to examine the economic impact on the Korean and Chinese economies just a year after the Korea-China FTA was concluded. Nevertheless, it would be worth examining the positive changes that have occurred over the last year, and providing constructive suggestions to both countries in order to accelerate the materialization of the benefits of the Korea-China FTA. This article investigates the major changes after the Korea-China FTA in terms of trade of goods and services, digital trade, and investment. Section II covers a brief analysis of the trade of goods between Korea and China. Section III underscores the distinctive features of international digital trade between Korea and China. Section IV provides facts on trade in services and investment. The last section presents policy implications for the Korea-China FTA. |
| Keywords: | Korea-China; FTA |
| Date: | 2017–02–08 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepwe:2017_004&r=int |
| By: | Quy-Toan Do; Andrei A. Levchenko |
| Abstract: | We compare redistribution through trade restrictions vs. domestic lump-sum transfers. When preferences are non-homothetic, even domestic lump-sum transfers affect relative prices. Thus, contrary to the conventional wisdom, domestic lump-sum transfers are not necessarily superior to distortionary trade policy. We develop this argument in the context of food export bans imposed by many developing countries in the late 2000s. |
| JEL: | F13 O24 Q17 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23237&r=int |
| By: | Jung, Jihyun (Korea Institute for International Economic Policy) |
| Abstract: | This study aims to seek the countermeasures of Korea by analyzing the structural changes in China's import market for domestic demand and Korea's export to China. In particular, the characteristics of the import market for domestic demand was analyzed by processing phase and industry. China's import structure is shifting focus to general trade (import for domestic demand), general trade import has switched to a structure focused on primary commodities since 2010, while total import is still focused on intermediate goods. And the manufacturing industry plays a crucial role, but has recently been witnessing a rapid decline in share. Korea's export to China is still defined by a structure of export-oriented processing trade. The structure of Korea's general trade export to China is still concentrated on intermediate goods and the top two manufacturing industries. Therefore, exports to China should likewise undergo a structural change in accordance with the evolving needs of China's domestic market, especially Korea should raise its export of intermediate goods (parts and components) and consumer goods to the Chinese domestic market. |
| Keywords: | Chinas Import For Domestic Demand; Koreas Export To China; Trade Structure Changes |
| Date: | 2016–10–26 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepwe:2016_027&r=int |
| By: | Assaf Razin |
| Abstract: | The paper reviews the crucial role which globalization forces played in Israel’s transformation from low tech to high tech economy. Special emphasis is placed on foreign direct investment as a driver for the high-tech transformation. |
| JEL: | F21 F3 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23223&r=int |
| By: | Choi, Jangho (Korea Institute for International Economic Policy); Im, So Jeong (Korea Institute for International Economic Policy) |
| Abstract: | China’s shifting economic circumstances have been impacting the structure of its economic cooperation with North Korea. The Chinese economy has been slowing down since 2007 and China’s Northeastern region has been suffering from labor shortage, especially young labor. Decreasing raw material prices due to economic slowing down of China cause the growing share of textiles, decline in mineral share in trade, and increase of processing trade. This also indicates how China may be utilizing North Korea’s cheap labor in the form of outsourcing certain manufacturing procedures, especially those that are labor intensive, for instance in the garment and textile industry. The rising traffic of textile products between borders, especially in the form of processing trade, points to this trend. Intricate webs of division of labor are occurring in the service sector as well. Tourism is one of the newest industries that North Korea has been developing as a means to earn foreign currency, and China’s role in the recent growth of tourism in North Korea is evident. On the one hand, North Korea and China’s deepening economic cooperation may facilitate North Korea’s marketization and opening up. On the other hand, the intensification of economic cooperation between the two countries may also result in North Korea’s over-dependence on the Chinese economy. |
| Keywords: | North Korea; China; Economic Cooperation |
| Date: | 2016–06–23 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepwe:2016_015&r=int |
| By: | Manasakis, Constantine; Mitrokostas, Evangelos; Petrakis, Emmanuel |
| Abstract: | This paper investigates the determinants of a responsible multinational firm's decision to enter in a foreign country either through exports or through foreign direct investment (FDI), as well as the relevant market and societal outcomes. We find that CSR investments are higher under FDI than under exports. The multinational firm's incentives to serve the foreign country through FDI are increasing in the average consumer's valuation for CSR and in the intensity of the foreign country's market competition, but only if the average consumer's valuation for CSR in this country is sufficiently high. These incentives are mitigated by the multinational firm's liability in this country under exports. We also find that there is misalignment of preferences between the stakeholders of the two countries over the multinational firm's mode of entry in the foreign country. |
| Keywords: | Corporate social responsibility,Multinational firms,Foreign direct investment,Exports,Import tariffs |
| JEL: | D43 F13 F23 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:246&r=int |
| By: | Zhi Wang; Shang-Jin Wei; Xinding Yu; Kunfu Zhu |
| Abstract: | This paper makes two methodological contributions. First, it proposes a framework to decompose total production activities at the country, sector, or country-sector level, to different types, depending on whether they are for pure domestic demand, traditional international trade, simple GVC activities, and complex GVC activities. Second, it proposes a pair of GVC participation indices that improves upon the measures in the existing literature. We apply this decomposition framework to a Global Input-Output Database (WIOD) that cover 44 countries and 56 industries from 2000 to2014 to uncover evolving compositions of different production activities. We also show that complex GVC activities co-move with global GDP growth more strongly than other types of production activities. |
| JEL: | F10 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23222&r=int |
| By: | Nabeshima, Kaoru; Michida, Etsuyo |
| Abstract: | This paper first shows the trend of tea trade in major exporting countries. Although tea trade has been expanding, stricter regulation and tighter food safety requirements lead to a decline of trade and a consolidation of tea supply chains into a handful of multinationals is observed. Challenges that exporters face stemming from supply chain management as well as regulatory compliances are reviewed from the literature. Commoditization has been progressed with consumers' willingness to pay for organic or other special characteristics and it leads to consolidation of supply chains. Tea industry is shown as a good example for this global trend. Consolidation of supply chains has an important implication for economic development in developing countries that depend on agricultural export. |
| Keywords: | Tea, International trade, World, Food Standards Compliance, Importer, Supply Chain |
| JEL: | O12 D22 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper644&r=int |
| By: | Lionel Fontagné (PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique); Cristina Mitaritonna (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique); José Signoret (USITC - U.S. International Trade Commission) |
| Abstract: | Quantifying the restrictiveness of NTMs for services has proven to be difficult. The main limitation has been the lack of comprehensive data, whether trade, policy, or microeconomic data. A first solution is to use a STRI approach whereby qualitative information is arbitrarily transformed into a quantitative measure of the restrictiveness of each measure. We use here a reduced form of the gravity approach to estimate services trade without relying on STRI information. Our results compare with those of Fontagné, Guillin, and Mitaritonna (2011) for the year 2004. We use the same method, for a larger set of countries. The tariff equivalents are inferred by comparing the inward multilateral resistance term for each country with that of a benchmark country. We provide ad valorem equivalents of restrictions on trade in services for 117 countries in 2011 using GTAP data of trade in services. |
| Keywords: | Non-Tariff Measures, Trade in Services, Ad-valorem Equivalents |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-01476543&r=int |
| By: | Gianmarco León; Christopher Hansman; Jonas Hjort; Matthieu Teachout |
| Abstract: | This paper studies the relationship between a firm’s organizational structure and output quality. The setting is a large manufacturing sector in Peru where plants produce a vertically differentiated but otherwise homogeneous product for export: fishmeal. We link customs data to plant level data on each shipment’s quality grade, transaction level data on supplies, and GPS measures of supplier (fishing boat) behavior.We start by documenting a robust association between the quality grade of a firm’s exports and the share of its inputs that comes from vertically integrated suppliers at the time of production. To understand the source of this relationship, we first show that classical theories of the firm predict that, in incomplete contracts settings, owning productive assets upstream may help a subset of downstream manufacturers attempting to produce high quality output to incentivize quality-effort from the assets’ operators. This explanation finds empirical support: in a given supplier-plant pair, the supplier delivers higher quality inputs (fresher fish) when integrated, and does so comparatively more during periods when (i) the plant aims to produce high quality output, and/or (ii) exogenous variation in upstream production (plankton) conditions makes quality-effort more costly. Finally, we show that firms source more of their inputs from integrated suppliers when faced with firm-specific shocks to demand for high quality exports. These results document an overlooked motivation for vertical integration and that strategic changes in organizational structure help manufacturers in developing countries achieve export success. |
| Keywords: | Vertical integration, quality upgrading, export, Peru |
| JEL: | D2 O1 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1562&r=int |
| By: | Brueckner, Markus (College of Business and Economics, Australian National University); Vespignani, Joaquin (Tasmanian School of Business & Economics, University of Tasmania) |
| Abstract: | This paper examines the relationship between trade uncertainty and income inequality. In countries where only a small share of the population is educated, an increase in trade uncertainty is associated with a significant increase in income inequality. As education of the population increases the relationship between trade uncertainty and income inequality becomes more muted. Trade uncertainty has no significant effect on income inequality in countries that are world leaders in education. Developing countries that want to reduce income inequality arising from trade uncertainty should therefore consider further improving their education system. |
| Keywords: | trade uncertainty, inequality, education |
| JEL: | F1 E2 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:tas:wpaper:23400&r=int |
| By: | Kazuhiro Kurose; Naoki Yoshihara |
| Abstract: | This paper examines the validity of the factor price equalisation theorem (FPET) in relation to capital theory. Additionally, it presents a survey of the literature on Heckscher-Ohlin-Samuelson (HOS) models that treat capital as a primary factor, beginning with Samuelson (1953). Furthermore, this paper discusses the Cambridge capital controversy, which contends that marginal productivity theory does not hold when capital is assumed to be as a bundle of reproducible commodities instead of as a primary factor. Consequently, it is shown that under this assumption, the FPET does not hold, even when there is no reversal of capital intensity. This paper also demonstrates that the recent studies on the dynamic HOS trade theory generally ignore the difficulties posed by the capital controversies and are thereby able to conclude that the FPET holds even when capital is modelled as a reproducible factor. Our analysis suggests that there is a need for a basic theory of international trade that does not rely on factor price equalisation and a model that formulates capital as a bundle of reproducible commodities. |
| Date: | 2016–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:toh:dssraa:58&r=int |
| By: | Choi, Hyelin (Korea Institute for International Economic Policy) |
| Abstract: | This report analyzes the impact of foreign investment on the exit and sales of domestic firms, using 2006-2013 Korean firm-level data. The results show that the crowding-out and market-stealing effects are more severe for small firms. While foreign firms drive small domestic firms out of the domestic market and take away domestic market shares, large firms rather enjoy the spillover effects from foreign firms. The baseline estimation is further investigated by dividing the full sample into manufacturing vs. service sectors and low-export vs. high-export groups. The crowding-out effect related to exits is more severe in the service sector, while the market-stealing effect on domestic firms' sales is larger in the manufacturing sector. On the other hand, both of the crowding-out and market-stealing effect appear to be larger in high-export groups. To summarize, foreign firms have negative impacts, in particular, on small firms, whereas larger firms rather benefit from the positive externalities of foreign firms. It may be that large firms possess enough ability to compete with foreign firms, and also to learn and apply the advanced technology the foreign firms bring in. The result also shows that since domestic firms in the service sector tend to be small, their survival is vulnerable to the presence of foreign firms, whereas since market competition is more severe in the manufacturing sector, domestic firms' market share loss is more severe in the manufacturing sector. Lastly, we found that domestic exporting firms are in more intense competition with foreign firms. |
| Keywords: | FDI; Crowd-out Effect; Market-stealing Effect; SMEs |
| Date: | 2017–01–02 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepwe:2017_001&r=int |
| By: | Stephen Karingi; Ottavia Pesce; Lily Sommer |
| Abstract: | Significant progress has been made by the East African Community partner states in implementing the East African Community customs union. Trade within the East African Community is now free from import duties, and partner states have adopted a three-band common external tariff. This paper assesses how the customs union has supported intraregional trade and industrialization, in particular through the development of competitive smokestack-free industries. It concludes that regional integration has provided a support environment for the development of smokestack-free industries, but significant opportunities still exist within the region. Recommendations are provided on what should be done to harness these opportunities. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2016-160&r=int |
| By: | Loitongbam, Bishwanjit Singh |
| Abstract: | The changing global environment brings about new opportunities and new markets for domestic firms in developing countries. We examine the impacts of globalization and IPR protection on the innovation in the Indian pharmaceutical industry, using the firm-level panel data. This paper finds that there is a positive and highly significant level of foreign ownership effect on R&D activities. This indicates that there is technology spillover in the Indian pharmaceutical industry. TRIPS implementation has insignificant effects on R&D innovation. It is also found that exporting firms and firms with a higher productivity level are significantly more likely to carry out R&D activities. |
| Keywords: | Globalization, Foreign Ownership, Innovation, R&D |
| JEL: | F1 F14 F6 |
| Date: | 2016–03–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:75925&r=int |
| By: | Dany Bahar (Center for International Development at Harvard University); Miguel Angel Santos (Center for International Development at Harvard University) |
| Abstract: | The literature on Dutch disease is extensive when it comes to documenting the negative impacts of natural resource exports on non-resource tradable goods as an aggregate. Little has been said on the impact of natural resources on non-resource export concentration, either from a broad perspective or at the product level. We explore this relationship using a variety of non-resource export concentration indexes for the period 1985-2010. We find significant evidence indicating that countries with high share of natural resources in exports tend to have less diversified non-resource export baskets. Furthermore, using highly disaggregated data at the product level we study what type of products are more likely to thrive or suffer in resource rich countries. We find that capital intensive goods tend to have larger shares on the non-resource export basket when natural resources are high. We also find that homogeneous goods make for a larger share of the non-resource export basket the lower their technological sophistication. For differentiated goods the pattern is reversed: they tend to make for a larger share of the non-resource export basket, the higher they are in the technology scale. |
| Keywords: | Export diversification, Dutch disease, homogeneous products, heterogeneous products, skill intensity, capital intensity |
| JEL: | F14 F43 O11 O13 Q33 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:cid:wpfacu:68&r=int |
| By: | - |
| Abstract: | United States Trade Developments, 2015-2016, provides an overview of the most relevant developments in United States trade relations with Latin America and the Caribbean and of the measures that inhibit the free flow of goods among countries in the Western Hemisphere. This is an annual report elaborated by the ECLAC Washington Office. |
| Keywords: | COMERCIO INTERNACIONAL, ACUERDOS ECONOMICOS, POLITICA COMERCIAL, RESTRICCIONES COMERCIALES, POLITICA DE IMPORTACION, ARREGLO DE CONTROVERSIAS, DESARROLLO AGRICOLA, ESTADISTICAS COMERCIALES, INTERNATIONAL TRADE, ECONOMIC AGREEMENTS, TRADE POLICY, TRADE RESTRICTIONS, IMPORT POLICY, DISPUTE SETTLEMENT, AGRICULTURAL DEVELOPMENT, TRADE STATISTICS |
| Date: | 2016–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecr:col896:41070&r=int |
| By: | Bae, Chankwon (Korea Institute for International Economic Policy) |
| Abstract: | This article aims to assess Korea's competitiveness in manufacturing exports, focusing on the rivalry among the three countries. To this end, we examine the productivities of C-J-K and estimates the effect of relative productivity on exports in Korea. It finds that first, China has drastically caught up with Korea since 2000, while there still exists a relatively large productivity gap between Japan and Korea. This is reminiscent of the sandwich theory, meaning that Korea is literally sandwiched between a fast-growing China and a technologically advanced Japan. Second, technical efficiency, an important determinant of productivity, has improved rapidly and steadily in China during the 2000s, while it has declined in Korea and Japan since the global financial crisis. Third, there seems to be a positive link between productivity and exports in Korea. In particular, a relative increase in productivity to China and Japan is highly related to its export performance. Not only technological progress, but also the enhancement of production efficiency is important for boosting export volumes and global market share. |
| Keywords: | TFP; Technical Efficiency; Productivity; C-J-K |
| Date: | 2016–10–25 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepwe:2016_026&r=int |
| By: | Federico Tadei (Department of Economic History, Universitat de Barcelona.) |
| Abstract: | A common explanation for current African underdevelopment is the extractive character of institutions established during the colonial period. Yet, since colonial extraction is hard to quantify, the magnitude of this phenomenon is still unclear. In this paper, I address this gap in the literature by focusing on monopsonistic colonial trade in French Africa. By using new archival data on export prices, I provide yearly-estimates of colonial extraction via trade, measured as the gap between actual prices that the colonial trading companies paid to African agricultural producers and prices that should have been paid in a counter-factual competitive market (i.e. world prices minus trade costs). The results show that African prices were about half than what they would have been in competitive markets. This suggests that colonial trade dynamics was characterized by a considerable amount of extraction. |
| Keywords: | Africa, Development, Extractive Institutions, Colonization, Trade, Price Gaps |
| JEL: | N17 O43 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:hes:wpaper:0109&r=int |
| By: | Görg, Holger; Hanley, Aoife |
| Abstract: | We investigate whether firms' "global engagement", either in the form of exporting or opening up affiliates abroad, is related to the change in their management performance. We use new and unique data from a recent large scale firm survey of management practices in Germany. We calculate management scores for firms as in Bloom et al. (2013), which indicate how structured management is in a given firm. We find that switching into exporting, and to a lesser degree opening up affiliates abroad, is related to improving management performance in the sense of having more structured management practices. |
| Keywords: | management practices,global engagement,exporting,outward investment |
| JEL: | F2 L2 M2 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwkwp:2073&r=int |
| By: | Bosupeng, Mpho |
| Abstract: | Previous studies on economic growth have shown that countries that relied on exports to propel their economies have been successful in achieving robust economic growth. This study considers Botswana’s mineral exports production from 2003Q1 to 2012Q4 and relates each export commodity with the GDP. This study applies the Johansen cointegration test and the Granger causality test to determine the applicability of the export-led growth hypothesis for the Botswana economy. The cointegration test shows that there is long run comovement between GDP and four of Botswana’s mineral exports namely: matte; diamonds; copper; nickel and soda ash. In addition, the Granger causality test shows that Botswana’s economy propels exports production.From these results, the study nullifies the export-led growth hypothesis and postulates that the Botswana economy rather follows the growth-driven exports hypothesis (GDE). The study further postulates recommendations and also potential areas of research. |
| Keywords: | export-led growth; growth-driven exports; mineral exports. |
| JEL: | F41 F43 |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:77917&r=int |
| By: | Munyanyi, Musharavati Ephraim |
| Abstract: | This paper seeks to examine the relationship between foreign direct investment and economic growth in Zimbabwe by applying an Autoregressive Distributed Lag (ARDL) cointegration approach on time series data stretching from 1975 to 2007. The short-and long-run relationship results show that foreign direct investment has a positive effect on economic growth and this confirms the proposition of economic theory and the result findings of the previous studies in this area. According to the study, the results imply that economic and investment policies which can attract more foreign investments be effectively drafted so as to stimulate economic growth. This also involves creating a stable economic and investment environment, improving infrastructure, and ensuring clarity and consistency of investment policies. |
| Keywords: | Economic Growth, Foreign Direct Investment, Cointegration, Autoregressive Distributed Lag (ARDL), Zimbabwe |
| JEL: | F21 |
| Date: | 2017–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:77946&r=int |
| By: | Daniel Leigh; Weicheng Lian; Marcos Poplawski-Ribeiro; Rachel Szymanski; Viktor Tsyrennikov; Hong Yang |
| Abstract: | We examine the stability and strength of the relationship between exchange rates and trade over time using three alternative approaches, mitigating the endogeneity of the relation. We find that both exchange rate pass-through and the price elasticity of trade volumes are largely stable over time. Economic slack and financial conditions affect the relationship, but there is limited evidence that participation in global value chains has significantly changed the exchange rate–trade relationship over time. |
| Date: | 2017–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:17/58&r=int |
| By: | Lee, Jae-Ho (Korea Institute for International Economic Policy) |
| Abstract: | In 2015, while Korea's total exports were sluggish mainly due to weak global demand, its exports to Vietnam have increased rapidly, and Vietnam emerged as Korea's top 3rd export destination. Since the establishment of diplomatic relations in 1992, Korean investors took advantage of Vietnam's low-wage in labor-intensive industry. From the mid 2000s, they started to shift their focus from labor-intensive to capital and technology-intensive industries. This has been driven by massive investment by SEC (Samsung Electronics Co. Ltd) in mobile phone manufacturing. The strategic investment by SEC is transforming Vietnam's industrial structure from labor-intensive to technology-intensive, and has put Vietnam on the top of the list of world's mobile phone producing countries. With Korea-Vietnam FTA ratified in 2015, and the year 2016 will offer new opportunities to promote cooperation between Korea and Vietnam. Future bilateral economic cooperation should not simply stop at demanding higher liberalization levels, but support building a production network that promotes a 'win-win' cooperative relationship for mutual benefits. |
| Keywords: | Vietnam; FDI; Export; Production Network; Virtuous Circle |
| Date: | 2016–02–05 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepwe:2016_005&r=int |
| By: | Lee, Jae-Young (Korea Institute for International Economic Policy); Gwun, Ka Woen (Korea Institute for International Economic Policy) |
| Abstract: | Since the establishment of diplomatic relations between Korea and Mongolia in 1990, the two countries have promoted cooperation in various areas including politics, economy, society, and culture, and have even made impressive strides in several fields. Nonetheless, compared to other areas of cooperation, progress in economic cooperation between the two countries has been relatively slow. This is due to the fact that Mongolia is still viewed by Korea as a landlocked country with a small domestic market. However, since the recent surge of the economic and political importance of the Eurasian continent, the strategic value of Mongolia has grown exponentially for Korea. Mongolia is not only one of the world’s top ten countries with the most mineral resources, not to mention an agriculture and livestock sector that holds high potential, but also lies geographically in the junction connecting Europe and Asia. In addition to that, Mongolia is strategically located with direct access to China and Russia, two of the largest emerging markets. In this context, the strategic partnership with Mongolia from the Korean perspective is important for a number of reasons. Not only can Mongolia provide food and mineral resource security to Korea, but it can also act as a logistical bridgehead for Korea to make inroads into the Northern regions in the future. This is why the Park Geun-hye administration has chosen Mongolia as one of Korea’s strategic partners in establishing Eurasian transport logistics, energy resources, and a trade network, goals pursed by the Eurasia Initiative. In this context, the purpose of this article is to review Korea-Mongolia economic relations for the past 26 years and to seek measures to reinforce economic cooperation between the two countries. |
| Keywords: | Korea-Mongolia; Economic; Relations |
| Date: | 2016–08–17 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepwe:2016_021&r=int |
| By: | Makino, Kumiko |
| Abstract: | Global governance has become an increasingly popular concept among international relations scholars for analyzing how non-state actors participate in the governance of various issues of global common interest. HIV/AIDS policy is one of the key fields in which the prominent features of global governance are found. This paper discusses how the global governance of HIV/AIDS intersects with state sovereignty issues by examining the case of South Africa, a country seriously affected by the disease and one of the principal loci of contestation over the direction of HIV/AIDS policy. |
| Keywords: | Diseases, Medical care, Social policy, South Africa, Exports, Information technology, FDI |
| JEL: | F15 O14 O30 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper645&r=int |
| By: | Peng, Ito. |
| Keywords: | international migration, migrant worker, domestic worker, care worker, migration policy, East Asia, South East Asia |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ilo:ilowps:994940891402676&r=int |
| By: | Mohammad Reza Farzanegan (Philipps-Universität Marburg); Mai Hassan (Philipps-Universität Marburg) |
| Abstract: | This study examines the economic globalization and the shadow economy nexus in Egypt. Using time series data from 1976 to 2013, the impulse response analysis shows that the response of the shadow economy in Egypt to positive shocks in economic globalization is negative and statistically significant for the first three years following the shock. This finding is obtained by controlling for several intermediary channels in globalization-shadow economy nexus such as education, government spending, industrial production, and labor force participation. Our results show the importance of promoting economic globalization by reducing the costs of doing business and trade in dealing with sizable shadow economy in Egypt. |
| Keywords: | Shadow economy, Globalization, VAR model, Impulse responses, Egypt |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201718&r=int |