Search

Calibrating a stylized version of the Dornbusch-Fischer-Samuelson model, this paper finds that relative to a cohort of 97 trading partners, the US capital stock, labor force, and nominal GDP per capita decreased, while the level of technology embodied in its output increased. These observed dynamics suggest a shift in comparative advantage that, coupled with increased production at the extensive and intensive margins, yields an expectation of labor market churning. Grouping trading partners by World Bank income classifications reveals that observed changes for low and lower middle income cohorts resulted in more pronounced shifts in comparative advantage. Examining employment and earnings in US manufacturing industries, a dynamic regression model reveals that increased import penetration has significant negative effects on production worker employment and wages, while increases in exports has significant positive effects on production worker employment. Variation in labor market outcomes is found across income classifications, as well as industries categorized by trade orientation.

The present paper aims to determine the effects of different levels of economic integration on the intensive and the extensive margins of trade. Specifically, the analysis focuses on the case of Latin America. It is of great importance for development policies in the region since the extensive margin can be defined as those exports that provide new market entrants, while the intensive margin is due to continued growth in sales of old exporters to the same destinations. Therefore, obtained results have important policy implications related to diversification strategies. The long-term period considered will allow us to determine whether different effects on trade margins might arise in the following two sub-periods: 1962~1989 and from 1990 onwards, i.e. before and after the spread of regional integration agreements and the deepening of the liberalization process in the region. Finally, we focus on those specific sectors in which Latin American countries present a higher relative participation of trade. The obtained results show that the effect of economic integration is both time and period sensitive. The main positive effects are found to be reflected in the intensive margin for all different types of agreements. Moreover, we find that deeper economic integration agreements have the greatest effect on trade margins. The authors thank Maria Victoria Barone for her active and valuable research assistance. We also thank German Gonzalez and Pedro Degiovanni for their participation in database processing, and very gratefully acknowledge the support and collaboration of SECYT, Universidad Nacional de Córdoba, Universitat Jaume I and Generalitat Valenciana (SECYT 05/E349; P1•1B2013-06; PROMETEOII/2014/053). We would also like to thank Jesica De Angelis, Juan Carlos Hallak and Jordi Paniagua, an anonymous referee, the editor and the participants in the ETSG held in Birmingham in September 2013, the Annual Meeting of the Asociación Argentina de Economía Política held in Rosario in November 2013, and in the X Conference on Economics Integration (INTECO) held in Castellón de la Plana in November 2013, for their very helpful comments and suggestions.

This paper examines the impact of voluntary standards on trade studying textiles, clothing, and footwear sectors. It hypothesizes that internationally harmonized standards can reduce the fixed cost burden facing exporting firms, thus encouraging greater market entry and a corresponding increase in product variety on the import side. The data bear out this contention, providing the first evidence on the links between international harmonization and extensive margin trade growth. Moreover, the income level of the exporting country—as a proxy for its ability to adapt to foreign standards—has a major impact on the effect of standards. For an average low income country, a 1% reduction in the total number of European Union standards is associated with a 0.6% increase in export variety, while a 1% increase in the proportion of European Union standards that are internationally harmonized leads to a 0.8% increase in export variety. These effects are weaker, and even reversed, for high income countries.

Using a panel data set for 146 countries over the period 1984~2007, this study contributes in the area of trade-corruption linkages by highlighting the non-monotonic relationship between trade and corruption and significance of complementary policy reforms in shaping the link. Findings of the study suggest that trade increases corruption in a linear specification while its effect on corruption decreasing in a non-linear specification. The analysis exhibits that this non-linear nature of the relationship is worth noting and help answering the question why the literature on the relationship between trade and corruption is not conclusive. Furthermore, we make argument and find empirical support to our proposition that this is not just openness to trade that can reduce corruption but there are complimentary policy reforms that cause a decline in corruption. Findings of the study are robust to alternative specifications, econometric techniques, control of nonlinearity, control of interactive effects, and exclusion of outliers.

International economic integration has been a central policy goal for the Vietnam government since the doi moi reform was initiated in 1986. We explore the Vietnamese increasing integration into the world market and bouts of high inflation. Five price transmission models using three levels of sectoral aggregation, examine the transmission of world price shocks to the Vietnamese domestic market and the impact of inflation on domestic prices from 1999 to 2008. Empirical results find wide sectoral variation, imperfect price transmission, non-neutral inflation pass-through, the dominant effect of inflation on domestic prices, and a low speed of adjustment to the Law of One Price. We conclude that policy analysts need disaggregated sector-level price transmission elasticities for accurate trade policy analysis and that careful attention must be paid to how inflation influences the economy. Moreover, while tariff reforms have typically been focused in many studies to come to grips with policy outcomes, the key to such understanding should be more associated with institutional reforms, market access, and incentives for foreign investment.

This paper empirically examines the relationship between Foreign Direct Investment (FDI) and economic growth conducting a panel data analysis for a period of 20 years (1989~2008) in three different country groups: European Union member-countries, European Monetary Union member-countries, and countries in transition. These three country groups differ in many dimensions, one of which is their degree of economic integration. In contrast to the theoretical work that tends to suggest that FDI inflows have a positive effect on economic growth, we do not find a robust causality relationship between FDI and economic growth.

This paper compares alternative ways of measuring participation of a country in Global Value Chains (GVCs) and estimates distribution of gains among countries in terms of countries’ shares in total value-added created by trade under GVCs. Using the OECD-WTO database on Trade in Value Added, this paper shows that 67% of total global value created under global value chains, accrue to OECD countries while share of NICs and BRICs countries is 25%. Only 8% of total value added is shared among all other developing countries and Least Developed Countries (LDCs). Linking into Global Value Chains is not enough for taking gains. Policy should be designed to raise forward linkages, that is, exporting domestic value-added contents. Trade-led growth is more complex than it seems.

Capital goods industries, for example, nuclear reactors, steam and vapour turbines, air or gas compressors, filtering or purifying machinery and apparatus are intrinsically heterogeneous in terms of vintages and the level of technological knowledge embodied in their products. Countries decide to import wide range of varieties from different sources, which has a bearing on their growth rates. The present paper analyses the hypothesis that the types of imported capital goods and the sources of their origin matter for growth. We construct a new index that measures the level of knowledge embodied in a country’s import basket of capital goods. Using the instrumental variable method, we find that the high initial value of this index for the year 1995, leads to high growth rate of per capita income in the subsequent years during 1995~2005, that is, 10 percent increase in the value of the index raises growth rate by 2 to 3 percentage points. This paper looks beyond the simple relationship between trade openness and growth.

We develop a methodology based on two important criteria - sensitivity in delivery time and value-to-weight ratio – to classify air cargo products. The classification is applied to evaluate the trade integration in Southern Africa since air cargo is a valuable option to overcome trade barriers associated with poor land transport infrastructure and corruption. We find that South Africa’s exports to industrialized countries consist of precious products such as diamonds and gold. These products tend to be transported in the hand baggage of a security personnel as they leave the loading weight of an average airplane almost unaffected. When correcting African trade for these ‘invisible outliers’ in the loading freight, we find that African trade integration including Southern Africa is based upon a comparatively higher share of air cargo relevant products than Southern Africa’s trade with industrialized and emerging economies. A more liberal market for air cargo services can reduce transport costs and will allow the continent to integrate even further.

Price undertakings are alternatives to imposing anti-dumping duties. In the past, almost half of EU anti-dumping measures were price undertakings. This has drastically changed in recent years. We identify four reasons for the decreasing relevance of price undertakings. First, prior to the accession of Eastern European Countries (EEC) to the EU, price undertakings were heavily used vis-à-vis EEC. At the same time, China became frequent subject of anti-dumping proceedings, where undertakings were rarely used due to monitoring issues. Second, unlike anti-dumping duties, price undertakings are often difficult to monitor and can be circumvented more easily. Third, there are reasons related to the suitability of price undertakings to remove dumping practice and injurious effects, particularly in the context of high price volatility. Fourth, price undertakings may have potentially anti-competitive effects, as minimum prices tend to exacerbate competition policies.

Non-Tariff Measures (NTMs) have recently become a central issue for economists and policy makers. Based on a new database developed by the World Bank on five Middle East and North African(MENA) countries at a very detailed product level, this article provides calculations of the average tariff equivalents (AVEs) of NTMs in these countries. A second contribution is the development of an original empirical model with detailed trade costs. This makes it possible to provide the assessment of these NTMs impacts as well as other trade costs ones on the trade of goods in these countries. This analysis is also extended to the trade of 15 service sectors, through the use of the updated GTAP database. Results show that NTMs are very significant in the selected MENA countries. The model also shows that NTMs are significantly trade reducing in almost all MENA countries, especially Sanitary and Phytosanitary(SPS) measures. NTMs in services are also significantly trade reducing, especially in Maghreb countries. The study shows that not all NTMs must necessarily been reduced or removed, but the ones which are particular trade-reducing must be paid particular attention. In addition, the governments should also progress toward either mutual recognition, or the adoption of international standards especially in relation to technical standards.

In this paper we first document the growing importance of intra-East Asian trade in parts and components and capital goods facilitated by foreign direct investment (FDI). Japanese direct investment has a stronger influence on intra-East Asian trade relative to FDI from France and Germany. It is related to the roles of small and medium enterprises in the Japanese FDI in East and Southeast Asia.

Via partnership agreements like the Cotonou Partnership Agreement, the EU provides African countries with access to its markets and asks for compliance with a given set of good governance norms and procedures. While the EU markets are significant for African countries, African markets are not significant for the EU. This asymmetric relationship should give the EU the power to “convince” the African countries to adopt better governance practices. Results from panel data regression analyses indicate that for 34 African countries, an increase in the intensity of trade and imports from the EU over the period of 1984~2009 reduced the level of corruption, but not always the intensity of exports to the EU. These findings do not provide strong evidence in favor of the idea that the EU has effectively used its asymmetric trade relationship in convincing African countries to adopt better governance practices, but they consistently support alternative-rival-hypotheses, namely trade openness and imports-as-market discipline hypotheses. Further research needs to takes into account the increasing influence of China.

We apply a simple method to study the relative quality of Chinese versus European products exported in the clothing sector after the end of the Multi-Fiber Arrangement. Based on the model of Foster et al., (2008), we interpret the change in relative export prices and quantities sold in narrowly defined product categories as an indicator of quality shifts. Using UN Comtrade data, we find that European varieties exported to the US typically sell for a higher price than identical Chinese varieties exported to the US, but this price gap is narrowing. Despite rising prices, Chinese varieties are gaining market share. This opposite movement of relative prices and quantities sold in the same destination market are a strong indication of China’s moving up the quality ladder in its clothing exports relative to the EU. While European core products in clothing are stable over time, Chinese exports show product dynamics with exit and entry of new core products every year.

This study examines the development of trade between ASEAN and New Zealand. Indices of trade intensity and trade potential are used to analyse the intensity of existing trade for the period 1980~2010 and trade potential going forward. This is the first use of the trade potential method to assess the trade potential between New Zealand and ASEAN across industries. The results show significant potential for future growth in specific export sectors and demonstrate changing trade patterns between New Zealand and ASEAN members. Our findings also show that New Zealand-ASEAN trade has intensified over the years, even if it has been marked by fluctuations. This study also highlights development of Australian trade with ASEAN in the context of the ASEAN-Australia-New Zealand FTA. Our findings have implications for the integration of ASEAN with Australia and New Zealand.

This paper investigates the novel development of machinery trade pattern in the Central and Eastern Europe (CEE) and analyzes the extent and depth of production networks in Europe from the perspective of their links with East Asia during the past 15 years, 1995~2010. Our descriptive analysis based on the total value of trade and the extensive margin demonstrates further production fragmentation in Europe, shifting from Western Europe (CEE production sharing to a regional network with more active transactions among CEE countries) to a global link with East Asia via CEE, particularly in the electric machinery sector. Our quantitative analysis verifies the evolution of production networks in Europe, from regional to global. These results partially reflect the reduction in services link costs, the evolution of industrial clustering among CEE countries particularly after the EU enlargement, and the strengthening competence of production networks in East Asia.

The paper assesses the impact of Jordan’s substantial trade liberalisation over the last two decades. Using a gravity model, a large country sample and a long time-series, we estimate the effects of various Free Trade Agreements (FTAs) and the WTO accession on both Jordan’s exports and imports. Overall, we find that the impact has been rather small, as no statistically significant impact on exports and imports can be found due to multilateral or preferential trade liberalisation. However, there are three exceptions: The FTA with the United States of America has boosted Jordan’s exports, whereas both the FTA with other Arab countries (GAFTA) and the WTO accession have led to an increase in imports.

This paper analyzes the potential effects of two ongoing trade liberalization experiences: Ecuador signing a Free Trade Agreement with the United States and Slovenia joining the European Union as a full member. We construct a static Applied General Equilibrium Model and perform a numerical experiment that consists on eliminating all import tariffs that Ecuador and Slovenia impose on the United States and European Union, respectively. To calibrate our models, we work with Input-Output tables and construct a Social Accounting Matrix for each country. We perform additional numerical experiments, such as sensitivity analysis on the import and export elasticities of substitution, a partial liberalization scenario, the fiscal impact of eliminating the tariff revenues and how this loss can be compensated with other taxes, and an alternative trade liberalization framework for Slovenia. We find that both countries benefit from these trade liberalization reforms, with prices falling in the import sector and production rising in the export sector. However, different forms of trade liberalization (free trade agreement vs. customs union) have different implications on the patterns of trade and welfare.