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on International Trade |
| By: | Maria Cipollina; Filomena Pietrovito; Alberto Franco Pozzolo |
| Abstract: | Global value chains (GVCs) are a major feature of globalization, with a strong impact on the patterns of international trade. In this paper we take the analysis one step forward, studying the impact of GVCs on cross-border mergers and acquisitions (M&As). We test the two symmetric hypotheses that a higher degree of participation in GVCs of a supplier sector to the exports of a user sector (e.g., the assembly in China of cell-phones eventually exported to US and, in turn, to the rest of the world) encourages: (i) firms in the user sector to acquire foreign participations in the supplier sector; and (ii) firms in the supplier sector to acquire foreign participations in the user sector. Our analysis is based on a unique dataset covering 12 supplier and user sectors, for over 22 investor countries and 47 target countries between 1995 and 2010. Estimating an augmented gravity equation model of cross-border M&As, inflated with a large number of bilateral sector and country fixed effects, we find strong support that a higher GVC participation has a positive impact on the size of M&As in both the user and the supplier sectors. |
| Keywords: | Global Value Chains; Mergers and Acquisitions; Sector level |
| JEL: | F14 F23 F60 |
| Date: | 2020–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:csl:devewp:459&r=all |
| By: | Mary Amiti (Board of Governors of the Federal Reserve System (U.S.); Schweizerische Nationalbank; Federal Reserve Bank of New York; Universität St. Gallen; Centre for Economic Policy Research (CEPR); Internationaler Währungsfonds; Research and Statistics Group; Chinese University of Hong Kong; University of Melbourne; Universitätt Bern; National Bureau of Economic Research); Tyler Bodine-Smith; Caroline L. Freund (Board of Governors of the Federal Reserve System (U.S.); Columbia University; Peterson Institute for International Economics; Centre for Economic Policy Research (CEPR); Reserve Bank of India; World Bank) |
| Abstract: | Supply chains have become increasingly interlinked across the U.S.-Mexico border. The North American Free Trade Agreement (NAFTA), allowing tariff-free commerce between the United States, Canada, and Mexico, has facilitated this integration. Some critics of NAFTA are concerned about the bilateral trade deficit and have proposed stricter rules of origin (ROO), which would make it more cumbersome for firms to access the zero tariff rates they are entitled to with NAFTA. We argue that measures that make it costlier for U.S. firms to import will also hurt U.S. exports because much of U.S.-Mexican trade is part of global supply chains. |
| Keywords: | supply chains; intermediate inputs; rules of origin; NAFTA |
| JEL: | F00 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:87190&r=all |
| By: | Mary Amiti (Board of Governors of the Federal Reserve System (U.S.); Schweizerische Nationalbank; Federal Reserve Bank of New York; Universität St. Gallen; Centre for Economic Policy Research (CEPR); Internationaler Währungsfonds; Research and Statistics Group; Chinese University of Hong Kong; University of Melbourne; Universitätt Bern; National Bureau of Economic Research); Caroline L. Freund (Board of Governors of the Federal Reserve System (U.S.); Columbia University; Peterson Institute for International Economics; Centre for Economic Policy Research (CEPR); Reserve Bank of India; World Bank) |
| Abstract: | An underappreciated benefit of the North American Free Trade Agreement (NAFTA) is the protection it offers U.S. exporters from extreme tariff uncertainty in Mexico. U.S. exporters have not only gained greater tariff preferences under NAFTA than Mexican exporters gained in the United States, they have also been exempt from potential tariff hikes facing other exporters. Mexico?s bound tariff rates?the maximum tariff rate a World Trade Organization (WTO) member can impose?are very high and far exceed U.S. bound rates. Without NAFTA, there is a risk that tariffs on U.S. exports to Mexico could reach their bound rates, which average 35 percent. In contrast, U.S. bound rates average only 4 percent. At the very least, U.S. exporters would be subject to a higher level of policy uncertainty without the trade agreement. |
| Keywords: | tariffs; Mexico; exports; imports; NAFTA |
| JEL: | F00 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:87189&r=all |
| By: | Görg, Holger; Mao, Haiou |
| Abstract: | This paper evaluates firms' exporting responses to BRI and considers their heterogeneity in ownership types, product types, regional origin and trade mode. This is done by analyzing firm-product-destination level customs data from 2011 to 2015 in a gravity model framework. Our empirical results show that aggregate export behavior did not change significantly after BRI. However, ownership matters when evaluating firms reactions. SOEs increase their total exporting and average export value (the intensive margin) to BRI countries, while private domestic firms show no reaction to BRI at any margin. Further, our results on regional heterogeneity suggests that "open through the west", i.e., boosting the development of western regions in China, did not appear to work in the short term. Our findings show clearly the implications of BRI's impact from firm level perspective. |
| Keywords: | belt and road Initiative,firm's export,extensive margin,intensive margin,state-owned firms |
| JEL: | F10 O24 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kcgwps:21&r=all |
| By: | Cecilia Bellora; Lionel Fontagné |
| Abstract: | Since the beginning of 2018, the US administration has announced and implemented several measures limiting US trade, in particular with China. This has fueled retaliation and has escalated in high trade tensions at the global level. We address in this paper the effects of the current trade tensions on trade, sectoral value added and welfare, in General Equilibrium under imperfect competition. We rely on a set-up differentiating demand of goods according to their use, for final or intermediate consumption. This authorizes tracing the impact of protection, along the value chains, on prices, value added and factor income. Additional tariffs from official lists are averaged at the 6 digit level of the Harmonized System (HS6), before being aggregated at the sector level with a reference group weighted method. Negotiated quantities in Voluntary Export Restraints are also taken into account at the product level. Beyond the direct toll of sanctions, US exports to the world post a 7.5% decrease as a result of reduced competitiveness led by vertical linkages along the value chains. Because of the measures in place as of August 2019, three quarters of the sectors decrease their value added in the US, suggesting that with this tariff war the US are shooting themselves in the foot. The quantification of job destructions and creations in the different sectors is consistent with effects channeling through prices and demand along the value chains detrimental to downstream industries. |
| Keywords: | Trade War;Global Value Chains |
| JEL: | F13 F17 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2019-18&r=all |
| By: | Gnutzmann, Hinnerk; Gnutzmann-Mkrtchyan, Arevik |
| Abstract: | How strongly can the reduction in bureaucracy and red tape at the border increase trade? To address this, we study an ambitious trade facilitation policy - the complete abolition of internal customs controls - in the Eurasian Customs Union. Using a structural gravity model with high-dimensional fixed effects, we find evidence that non-tariff trade facilitation strongly and robustly increases the number of newly traded products. The value of trade, however, reacts more strongly to a traditional tariff-driven diversion of trade towards union members. Trade facilitation policies can diversify bilateral trade, highlighting the importance of trade analysis at the extensive margin. |
| Keywords: | trade facilitation; non-tariff trade costs; customs union; border effects; structural gravity |
| JEL: | F14 F15 F55 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:han:dpaper:dp-664&r=all |
| By: | Isabelle Joumard; Christine Arriola; Marnix Dek |
| Abstract: | India is becoming a key player in the global economy. It performs well in exporting information and technology services, pharmaceuticals and petroleum products. India’s large diaspora is well integrated abroad, helping to develop new export markets and facilitate the transfer of technology and know-how. India could perform better in some domains. These include labour-intensive manufacturing exports and foreign direct investment. Better performance in these areas would boost job creation and thus make growth more inclusive. It would require improving further infrastructure, in particular transport and energy provision, modernising product market regulations, developing skills, and reconsidering barriers to trade and investment. OECD simulations suggest that India would be a major beneficiary were barriers to trade and investment be reduced multilaterally. In the absence of a multilateral agreement, the economy would also gain from a unilateral liberalisation of trade and investment.This Working Paper relates to the 2019 OECD Economic Survey of Indiahttp://www.oecd.org/economy/india-e conomic-snapshot/ |
| Keywords: | foreign direct investment, globalisation, India, migration, simulations, trade |
| JEL: | F1 F13 F17 F21 F22 F6 F62 F66 |
| Date: | 2020–02–07 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1597-en&r=all |
| By: | Chowdhry, Sonali; Felbermayr, Gabriel |
| Abstract: | The authors analyze the economic consequences of the Economic and Trade Agreement (ETA) between China and the USA, also referred to as the Phase-I Deal, which was signed on January 15, 2020. It is a highly asymmetric treaty which commits China to open its markets and to purchase large quantities of US products in order for the US to refrain from imposing additional punitive tariffs. It requires Chinese imports of certain US goods to increase by about 95 bn USD in 2021 relative to the 2017 baseline. The authors show that compared to a 2021 benchmark without a US-China trade war and without the ETA, the EU is likely to lose about 11 bn USD in exports to China. The largest negative effects for the EU are expected in aircraft, vehicles, industrial machinery, optical and medical machinery, pharmaceuticals, and agricultural goods. The country in the EU most strongly affected by the possible trade diversion effects is Germany. They conclude that the ETA is very unlikely to be compatible with WTO law, because it violates the most-favored-nations principle and fosters managed trade thus undermining the multilateral trading system. |
| Keywords: | US-China relations,managed trade,trade diversion,multilateralism,Beziehungen USA-China,gelenkter Handel,Handelsumlenkung,Multilateralismus |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwkpb:132&r=all |
| By: | Robert C. Feenstra (University of Pittsburgh; Worth Publishers; National Bureau of Economic Research; ebrary Inc; University of California Davis); Mi Dai; Mary Amiti (Board of Governors of the Federal Reserve System (U.S.); Schweizerische Nationalbank; Federal Reserve Bank of New York; Universität St. Gallen; Centre for Economic Policy Research (CEPR); Internationaler Währungsfonds; Research and Statistics Group; Chinese University of Hong Kong; University of Melbourne; Universitätt Bern; National Bureau of Economic Research); John Romalis (University of Sydney; National Bureau of Economic Research; Graduate School of Business; Massachusetts Institute of Technology; University of Chicago; Booth School of Business; Reserve Bank of Australia) |
| Abstract: | Import tariffs are on the rise in the UnitedStates, with a long list of new tariffs imposed in the last few months?25percent on steel imports, 10percent on aluminum, and 25percent on $50billion of goods from China?and possibly more to come. One of the objectives of these new tariffs is to reduce the U.S.trade deficit, which stood at $568.4 billion in 2017 (2.9percent of GDP). The fact that the United States imports far more than it exports is viewed by some as unfair, so the idea is to try to reduce the amount that the nation imports from the rest of the world. While more costly imports are likely to reduce the quantity and value of imports into the UnitedStates, the story does not stop there, because we cannot presume that the value of exports will remain unchanged. In this post, we argue that U.S.exports will also fall, not only because of other countries? retaliatory tariffs on U.S.exports, but also because the costs for U.S.firms producing goods for export will rise and make U.S.exports less competitive on the world market. The end result is likely to be lower imports and lower exports, with little or no improvement in the trade deficit. |
| Keywords: | imports; deficit; tariffs; exports; China |
| JEL: | F00 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:87270&r=all |
| By: | Lionel Fontagné; Houssein Guimbard; Gianluca Orefice |
| Abstract: | Trade elasticity is a crucial parameter in evaluating the welfare impacts of trade liberalization. We estimate trade elasticities at the product level (6-digit of the Harmonized System comprising more than 5,000 product categories) by exploiting the variation in bilateral applied tariffs for each product category for the universe of available country pairs. This is done by constructing a panel of bilateral applied tariffs and bilateral trade covering the period 2001 to 2016. We address potential endogeneity issues as well as heteroskedasticity and selection bias due to zero flows. The obtained trade elasticities are centered around -5. We finally highlight the differences in the gains from trade arising from considering heterogeneous rather than average trade elasticities. All product level elasticities are made publicly available for sake of scrutiny and use by other researchers. |
| Keywords: | Trade Elasticity;International Trade;Tariffs;Welfare Gain |
| JEL: | F14 F17 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2019-17&r=all |
| By: | OECD |
| Abstract: | This report synthesises the key findings and policy messages from recent OECD work on global value chains (GVCs) in agriculture and food. The food and agriculture sector is increasingly organised within GVC around a number of global hubs. Agro-food GVCs have broadened the gains from specialisation and trade through stronger sector and employment growth. Openness to trade, especially services trade, can positively influence domestic value added creation in agro-food GVCs. However, trade protection and distorting agricultural support policies can reduce the gains from GVC participation and impose costs along the value chain. Government policies need to focus on facilitating participation in GVCs and helping to manage any adjustments across the food and agriculture sectorKeywords: Agro-food, value added, employment, policy reform, trade. |
| Keywords: | agricultural trade, employment, global value chains, policy reform, services, trade in value added |
| JEL: | Q17 F60 F14 |
| Date: | 2020–02–04 |
| URL: | http://d.repec.org/n?u=RePEc:oec:agraaa:139-en&r=all |
| By: | Oleg Itskhoki (National Bureau of Economic Research; Princeton University; Woodrow Wilson School of Public and International Affairs; Harvard University); Jozef Konings (Federal Reserve Bank of Dallas); Mary Amiti (Board of Governors of the Federal Reserve System (U.S.); Schweizerische Nationalbank; Federal Reserve Bank of New York; Universität St. Gallen; Centre for Economic Policy Research (CEPR); Internationaler Währungsfonds; Research and Statistics Group; Chinese University of Hong Kong; University of Melbourne; Universitätt Bern; National Bureau of Economic Research) |
| Abstract: | There has been much debate about the proposed border tax adjustment, in which U.S. firms would pay a 20 percent tax on all imported inputs and be exempt from paying taxes on export revenue. The view among many economists, including proponents of the plan, is that the U.S. dollar would appreciate by the full amount of the tax and thus completely offset any relative price effects. In this post, we consider the implications of an alternative scenario where the U.S. dollar only appreciates part of the way. This could happen, for example, as a result of the uncertainty surrounding the policy response from other countries. As the proposed tax is effectively equivalent to an import tax combined with an export subsidy, it is possible that there could be retaliation from other countries in the form of taxes on U.S. exports or litigation with the World Trade Organization. If the U.S. dollar does not appreciate by the full amount of the tax, we argue that the effect of the tax will be to lower both U.S. imports and exports in the short to medium run. |
| Keywords: | tax |
| JEL: | F00 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:87180&r=all |
| By: | Mary Amiti (Board of Governors of the Federal Reserve System (U.S.); Schweizerische Nationalbank; Federal Reserve Bank of New York; Universität St. Gallen; Centre for Economic Policy Research (CEPR); Internationaler Währungsfonds; Research and Statistics Group; Chinese University of Hong Kong; University of Melbourne; Universitätt Bern; National Bureau of Economic Research); Noah Kwicklis (Research and Statistics Group); Sebastian Heise |
| Abstract: | President Trump announced a new tariff of 25 percent on steel imports and 10 percent on aluminum imports on March 8, 2018. One objective of these tariffs is to protect jobs in the U.S. steel industry. They were introduced under a rarely used 1962 Act, which allows the government to impose trade barriers for national security reasons. Although the tariffs were initially to apply to all trading partners, Canada and Mexico are currently exempt subject to NAFTA negotiations, and implementation of the tariffs for the European Union, Argentina, Australia, and Brazil has been paused. South Korea has received a permanent exemption from the steel tariffs and will instead be subject to a quota of 70 percent of its current average steel exports to the United States. In this post, we consider how the steel tariffs could affect U.S. trade and employment. We focus on steel since the steel industry employs about three times as many workers as the aluminum industry, although qualitatively our conclusions apply to both. We argue that the new tariffs are likely to lead to a net loss in U.S. employment, at least in the short to medium run. |
| Keywords: | steel tariffs imports jobs WTO |
| JEL: | F00 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:87254&r=all |
| By: | Andrea Marín Odio (OECD) |
| Abstract: | Increasing moves away from multilateralism have created a fragmented trade and investment scenario where economies progressively combine the application of restrictive unilateral actions with bilateral and regional preferences. The application of, and exceptions to, the non-discrimination provisions are a fundamental element of these trends.This paper sheds light on the two types of non-discrimination provisions considered the founding stones of the multilateral system: the most favoured nation (MFN) clause - as developed under the GATT and GATS - and the non-discrimination clause among countries adhering to the OECD Codes of Liberalisation.While not taking a position on the complex question of whether a multilateral, plurilateral or bilateral approach to trade and investment liberalisation should be pursued, the paper illustrates the OECD has upheld the non-discrimination obligation as one of its basic principles, dating back to its origins over 60 years ago. |
| Keywords: | Codes of Liberalisation, international trade law, MFN, most favoured nation, multilateralism, non-discrimination, regional integration, WTO |
| JEL: | F13 F15 F42 F51 F53 F55 F60 K33 |
| Date: | 2020–02–10 |
| URL: | http://d.repec.org/n?u=RePEc:oec:dafaaa:2020/01-en&r=all |
| By: | Natalie Chen; Luciana Juvenal |
| Abstract: | We investigate theoretically and empirically how exporters adjust their markups across destinations depending on bilateral distance, tariffs, and the quality of their exports. Under the assumption that trade costs are both ad valorem and per unit, our model predicts that markups rise with distance and fall with tariffs, but these effects are heterogeneous and are smaller in magnitude for higher quality exports. We find strong support for the predictions of the model using a unique data set of Argentinean firm-level wine exports combined with experts wine ratings as a measure of quality. |
| Keywords: | distance, export unit values, heterogeneity, markups, quality, tariffs, trade costs, wine |
| JEL: | F12 F14 F31 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8013&r=all |
| By: | ALVES DIAS Patricia; AMOROSO Sara; ANNONI Alessandro; ASENSIO BERMEJO Jose Miguel; BELLIA Mario; BLAGOEVA Darina; DE PRATO Giuditta; DOSSO Mafini; FAKO Peter; FIORINI Alessandro; GEORGAKAKI Aliki; GKOTSIS Petros; GOENAGA BELDARRAIN Xabier; GREGORI Wildmer; HRISTOV Hristo; JAEGER-WALDAU Arnulf; JONKERS Koen; LEWIS Adam; MARMIER Alain; MARSCHINSKI Robert; MARTINEZ TUREGANO David; MUNOZ-PINEIRO Maria Amalia; NARDO Michela; NDACYAYISENGA Nathalie; PASIMENI Francesco; PREZIOSI Nadir; RANCAN Michela; RUEDA CANTUCHE Jose; RONDINELLA Vincenzo; TANARRO COLODRON Jorge; TELSNIG Thomas; TESTA Giuseppina; THIEL Christian; TRAVAGNIN Martino; TUEBKE Alexander |
| Abstract: | China is rapidly becoming a major industrial competitor in high tech and growth sectors. Its economic success and related industrial policies have received a high degree of attention, especially in light of its capacity to challenge the leading position of advanced economies in several fields. China aims, through the 'Made in China 2025' strategy, to become a world leader in key industrial sectors. In these sectors, it strives to strengthen its domestic innovation capacity, to reduce its reliance on foreign technologies while moving up in global value chains. This report analyses China's approach to attain a dominant position in international markets through a combination of industrial, R&I, trade and foreign direct investment policies. It offers an assessment of China's current position compared to the EU and US innovation systems across a range of dimensions. It concludes that China has become a major industrial competitor in several rapidly expanding high tech sectors, which may well result in attaining China's goal of becoming an innovation leader in specific areas. As a response, the EU will need to boost its industrial and R&I performance and develop a trade policy that can ensure a level playing field for EU companies in China and for Chinese companies in the EU. |
| Keywords: | China, Global Value Chains, M&As, FDI, Venture Capital, R&I, Genomics, Artificial Intelligence, Robotics, Quantum, Nuclear, New Vehicles, Wind Energy, Solar Photovoltaics, Industrial Leadership |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc116516&r=all |
| By: | David E. Weinstein (Federal Reserve Bank of New York; Wake Forest University; Columbia University; Department of Economics; School of Arts and Sciences; Harvard University; National Bureau of Economic Research; University of Michigan); Mary Amiti (Board of Governors of the Federal Reserve System (U.S.); Schweizerische Nationalbank; Federal Reserve Bank of New York; Universität St. Gallen; Centre for Economic Policy Research (CEPR); Internationaler Währungsfonds; Research and Statistics Group; Chinese University of Hong Kong; University of Melbourne; Universitätt Bern; National Bureau of Economic Research) |
| Abstract: | The financial crisis of 2008-09 brought about one of the largest collapses in world trade since the end of World War II. Between the first quarter of 2008 and the first quarter of 2009, the value of real global GDP fell 4.6 percent while exports plummeted 17 percent, as can be seen in the chart below. The dramatic decline in world trade?a loss of $761 billion in nominal exports?came through two channels: decreased demand for imports and supply effects, most likely arising from financial constraints. In this post, we look at evidence that supply effects, including curtailed funding for export-related activities, played a key role in the trade collapse?and thus in the transmission of the financial crisis from Wall Street to ?Main Street,? here and abroad. |
| Keywords: | exports; trade finance; trade; financial crisis |
| JEL: | F00 G1 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:86753&r=all |
| By: | Marco Bettiol (DSEA, University of Padova); Mauro Capestro (DSEA, University of Padova); Valentina De Marchi (DSEA, University of Padova); Eleonora Di Maria (DSEA, University of Padova) |
| Abstract: | There is a growing attention on the relationship between investments in industry 4.0 technologies – specifically 3D printing – and internationalization processes. Such technologies can modify the scale and the organization of manufacturing processes, potentially pushing firms in the redefinition of their activities worldwide. At the same time, firms with manufacturing activities located in high-cost countries can benefit from industry 4.0 investments for increasing productivity. Although these relevant implications, limited attention is given to explore how manufacturing firms adopt industry 4.0 technologies in relation to their degree of internationalization. Based on an original dataset of about 1,400 Italian manufacturing firms, the paper analyzes the technological investments strategies of 200 Industry 4.0 adopters in terms of intensity of technological adoption, differences in the technological solutions used and related motivations, taking into account the location of their manufacturing activities as well as export. Results suggest that the adoption of 4.0 technologies per se is independent from the level of internationalization, while internationalized and domestic firms invest in different technologies. Among the four groups of firms identified (global/domestic sourcing – export/domestic market) differences in motivations arise as well as in the steps of value chains where technologies have been implemented. |
| Keywords: | industry 4.0, internationalization, manufacturing, global sourcing, high-cost countries, 3D printing, automation |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0245&r=all |
| By: | Stéphane Mbiankeu Nguea (LAREFA, Faculty of Economics and Management, University of Dschang, Cameroon) |
| Abstract: | Better access to improved infrastructure services is one of the components of a favourable investment climate for foreign investors and an important engine for sustainable economic growth. The purpose of this study was to investigate the effects of communication, energy and transport infrastructures development on Foreign Direct Investment (FDI) in Cameroon. This study employs autoregressive distributed lag (ARDL) approach to cointegration and an error correction model based on ARDL approach using time series data for the period 1984-2014. The results revealed that communication infrastructure has a positive and significant impact on FDI in both the long run and the short run. Findings also revealed a negative impact of energy infrastructure in attracting FDI in the long run and in the short run while an insignificant impact of transport infrastructure on FDI is registered in both the long run and the short run. The results suggest that the improvement of business climate trough better infrastructures play a major role in attracting FDI in Cameroon. |
| Keywords: | ARDL,FDI,Cameroon JEL Classification: H41,R42,F21,E22,Infrastructure |
| Date: | 2020–01–21 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-02446497&r=all |
| By: | Amit Khandelwal (Columbia University’s Graduate School of Business.); Mary Amiti (Board of Governors of the Federal Reserve System (U.S.); Schweizerische Nationalbank; Federal Reserve Bank of New York; Universität St. Gallen; Centre for Economic Policy Research (CEPR); Internationaler Währungsfonds; Research and Statistics Group; Chinese University of Hong Kong; University of Melbourne; Universitätt Bern; National Bureau of Economic Research) |
| Abstract: | Firms must produce high-quality goods to be competitive in international markets, but how do they transition from producing low- to high-quality goods? In a new study (?Import Competition and Quality Upgrading,? forthcoming in the Review of Economics and Statistics), we focus on how tougher import competition affects firms? decisions to upgrade the quality of their goods. Our results, which we summarize in this post, show that stiffer import competition affects quality-upgrading decisions. For firms already producing very high-quality goods, lower tariffs induce them to produce goods of even higher quality. However, for firms producing very low-quality goods, lower tariffs actually discourage quality upgrading. Ours is the first study to show a significant relationship between import competition and quality. |
| Keywords: | quality upgrading; Import competition |
| JEL: | F00 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:86865&r=all |
| By: | Tsakanikas, Aggelos; Roth, Felix; Caliò, Simone; Caloghirou, Yannis; Dimas, Petros |
| Abstract: | This paper analyzes the contribution of intangible inputs and participation in global value chains (GVCs) to the productivity performance of an EU-28 country sample over the time frame 2000-2014. Utilizing new data from the GLOBALINTO Input-Output Intangibles database, this paper finds a positive relationship between a country's intangible inputs and its productivity performance once the interaction between intangible inputs and the participation in Global Value Chains is taken into account. This effect is stronger in the subset of 19 euro area countries. The results clarify that national and European policymakers should ensure the mechanisms, the tools and the legislative framework that will support sufficient production and development of intangible inputs by investing in public intangibles, such as the quantity and quality of a highly-skilled labour force and well-functioning formal and informal institutions that could lead to the further growth of intangibles. Furthermore, the need for a unified EU intangibles policy framework arises, in which common guidelines align national agendas in order to address the relevant gaps in intangibles industrial policy. |
| Keywords: | Intangibles,Global Value Chain,Productivity Performance,European Union,Euro Area |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:uhhhdp:5&r=all |
| By: | Gnutzmann, Hinnerk; Gnutzmann-Mkrtchyan, Arevik |
| Abstract: | Under the Generalized System of Preferences (GSP), high-income countries grant unilateral trade preferences to developing countries. These preferences are subject to political conditionality, but little is known about the trade impact of loss of preferential access and the implications for political leverage implied by it. We study the EU’s withdrawal of GSP preferences from Belarus in 2007 in response to labour rights violations to fill this void. The withdrawal caused a significant drop in trade for affected products (26\% to 29\% trade decline) and some trade reduction at the extensive margin. However, there is little evidence of a GSP effect on total trade. This is due to the fact that the main exports of Belarus were not eligible for the GSP program. |
| Keywords: | GSP, generalized system of preferences, preference withdrawal, political leverage, Belarus |
| JEL: | F13 F14 O19 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:han:dpaper:dp-663&r=all |
| By: | N. Nergiz Dincer (TED University Trade Research Center; Department of Economics, TED University, Ziya Gokalp Bul. No:48, Kolej, Ankara, Turkey); Ayça Tekin-Koru (TED University Trade Research Center; Department of Economics, TED University, Ziya Gokalp Bul. No:48, Kolej, Ankara, Turkey) |
| Abstract: | The Authorized Economic Operator (AEO) program comprises of comprehensive trade facilitation and security improvement measures that also serve the overarching objective of institutional development. The aim of the current paper is to analyze the impact of AEO program adoption on trade of the members of the Organization of Islamic Countries (OIC) for the period of 2000-2017 by using descriptive analysis, convergence analysis and gravity model. Gravity analysis spans the period of 2000-2017 for 132 countries of which 57 are the OIC Member States. Both the traditional and the structural gravity analyses show that AEO adoption by OIC member states has no impact on the bilateral trade of these countries. Our analysis suggests that there is a high level of convergence in terms of AEO implementation among the OIC Member States. However, there are a number of serious challenges both in the design and the implementation of the programs. This de jure-de facto differentiation stands as one of the main reasons in regards to the effectiveness of the AEO programs |
| Date: | 2019–09–20 |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:1347&r=all |
| By: | Olena Ivus (Queen's University); Alireza Naghavi (University of Bologna); Larry D. Qiu (University of Hong-Kong) |
| Abstract: | This paper develops a North-South trade model with heterogeneous labour and horizontally differentiated products and compares the implications of two policies: Southern intellectual property rights (IPRs) and Northern immigration policy that aims to attract Southern talent as means of preempting imitation. Individuals self-select into becoming entrepreneurs and innovate (imitate) in the North (South). The likelihood of imitation depends on product quality, imitator’s ability, and strength of IPRs. Several interrelated channels of competition are identified. Allowing high-ability migration when IPRs protection in the South is weak shifts imitation to low-quality and innovation to high-quality products. The outcome is in stark contrast to the policy of strengthening IPRs, which limits low-quality imitation and encourages low-quality innovation. High-ability migration also increases the income of lowability entrepreneurs, as well as the average quality of products in the high-ability imitation sector in the South. |
| Keywords: | Intellectual propert yrights; High-skilled migration; Imitation; Innovation; Product quality; Entrepreneurability |
| JEL: | F22 O31 O34 J24 K37 O38 |
| Date: | 2019–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:csl:devewp:457&r=all |
| By: | Mary Amiti (Board of Governors of the Federal Reserve System (U.S.); Schweizerische Nationalbank; Federal Reserve Bank of New York; Universität St. Gallen; Centre for Economic Policy Research (CEPR); Internationaler Währungsfonds; Research and Statistics Group; Chinese University of Hong Kong; University of Melbourne; Universitätt Bern; National Bureau of Economic Research); David E. Weinstein (Federal Reserve Bank of New York; Wake Forest University; Columbia University; Department of Economics; School of Arts and Sciences; Harvard University; National Bureau of Economic Research; University of Michigan); Stephen J. Redding (Princeton University) |
| Abstract: | Tariffs on $200 billion of U.S. imports from China subject to earlier 10 percent levies increased to 25 percent beginning May 10, 2019, after a breakdown in trade negotiations. In this post, we consider the cost of these higher tariffs to the typical U.S. household. |
| Keywords: | tariffs; China |
| JEL: | F1 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:87336&r=all |
| By: | Mary Amiti (Board of Governors of the Federal Reserve System (U.S.); Schweizerische Nationalbank; Federal Reserve Bank of New York; Universität St. Gallen; Centre for Economic Policy Research (CEPR); Internationaler Währungsfonds; Research and Statistics Group; Chinese University of Hong Kong; University of Melbourne; Universitätt Bern; National Bureau of Economic Research); Logan T. Lewis; Tyler Bodine-Smith; Colin Hottman |
| Abstract: | The growth in U.S. imports of goods has been stubbornly low since the second quarter of 2015, with an average annual growth rate of 0.7 percent. Growth has been even weaker for non-oil imports, which have increased at an average annual rate of only 0.1 percent. This is in sharp contrast to the pattern in the five quarters preceding the second quarter of 2015, when real non-oil imports were growing at an annualized rate of 8 percent per quarter. The timing of the weakness in import growth is particularly puzzling in light of the strong U.S. dollar, which appreciated 12 percent in 2015, lowering the price of imported goods relative to domestically produced goods. The trajectory for imports can affect the variety of goods consumed in the United States and could, if it is evolving independently, have implications for overall economic growth. To understand the consequences of lower import growth, it is important to understand what is behind this recent trend. In this blog post, we explore what has been driving the recent slump in U.S. imports of non-oil goods. |
| Keywords: | Imports; exchange rate; appreciation |
| JEL: | F00 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:87161&r=all |
| By: | Tsotne Kutalia; Revaz Tevzadze |
| Abstract: | This paper explores the gain maximization problem of two nations engaging in non-cooperative bilateral trade. Probabilistic model of an exchange of commodities under different price systems is considered. Volume of commodities exchanged determines the demand each nation has over the counter party's currency. However, each nation can manipulate this quantity by imposing a tariff on imported commodities. As long as the gain from trade is determined by the balance between imported and exported commodities, such a scenario results in a two party game where Nash equilibrium tariffs are determined for various foreign currency demand functions and ultimately, the exchange rate based on optimal tariffs is obtained. |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2001.02426&r=all |
| By: | Gnutzmann-Mkrtchyan, Arevik; Van Damme, Isabelle |
| Abstract: | The Appellate Body report in EU – PET (Pakistan) raises distinct questions relating to the need for findings in relation to expired measures, the conditions under which duty drawback schemes may constitute subsidies and the causation methodology to apply under the SCM Agreement. We conclude that the report offers no clear guidance on whether the function and design of WTO dispute settlement require or preclude findings in case of expired measures. We welcome the Appellate Body’s conclusion that, in case of duty drawback schemes, the financial contribution element of the subsidy is limited to the excess remission or drawback of import charges. Finally, although the Appellate Body rightly found that authorities are free to choose the methodology for causation analysis provided that the analysis is complete and objective, the methodology used by the investigating authority in this case show a number of deficiencies that were not recognized by the Appellate Body. |
| Keywords: | Duty drawback scheme, countervailing measures, WTO, expired measures, causation |
| JEL: | F13 F53 K33 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:han:dpaper:dp-665&r=all |
| By: | Hoppe, Thomas; Schanz, Deborah; Sturm, Susann; Sureth, Caren; Voget, Johannes |
| Abstract: | This paper analyzes the association between tax complexity and foreign direct investments (FDI) based on the newly developed Tax Complexity Index (TCI) and its components. For a sample of 15,607 new foreign subsidiaries, we find no association between total tax complexity, as proxied by the TCI, and the location probability. When we decompose the TCI into tax code complexity and tax framework complexity, we find opposing associations. Tax code complexity is positively related to the location probability, while tax framework complexity is negatively related to it. These associations are, for example, driven by the complexity of transfer pricing and loss offset regulations in the tax code and the dimensions guidance, audits, as well as filing and payments, in the tax framework. In additional analyses, we find that the associations are sensitive to certain characteristics, such as country-specific and firm-specific characteristics. For example, the positive tax code association diminishes when tax rates are high. Overall, we are the first to provide empirical evidence on potential cost-benefit tradeoffs of tax complexity for FDI and thereby enhance prior literature, which has primarily focused on the costs of tax complexity. |
| Keywords: | corporate taxation,tax complexity,foreign direct investments,location choice,multinational corporations |
| JEL: | C21 F23 H25 O50 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:arqudp:250&r=all |