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How do global supply chain linkages modify countries' incentives to impose import protection? Are these linkages empirically important determinants of trade policy? To address these questions, this paper introduces supply chain linkages into a workhorse terms-of-trade model of trade policy with political economy. Theory predicts that discretionary final goods tariffs will be decreasing in the domestic content of foreign-produced final goods. Provided foreign political interests are not too strong, final goods tariffs will also be decreasing in the foreign content of domestically-produced final goods. The paper tests these predictions using newly assembled data on bilateral applied tariffs, temporary trade barriers, and value-added contents for 14 major economies over the 1995-2009 period. There is strong support for the empirical predictions of the model. The results imply that global supply chains matter for trade policy, both in principle and in practice.

International trade is the key element of globalisation and closer economic and political cooperation between countries. Regional integration is an important driver of closer trade ties among countries. In this context, the article focuses on analysing the factors, influencing the dynamics of trade patterns of the Baltic States. The research method used in the article is the gravity model of trade, which rests on the key assumption that trade between countries is defined by the size of the economies and the distance between the countries. The gravity equation estimates showed that the membership of the Baltic States in the EU had a positive effect on the export levels of the Baltic States to other EU members. On the other hand, the membership in the EU is not the main trade stimulating factor. The more important factor for the Baltic States’ exports is the former economic ties with Russia. An analysis also revealed that the Baltic States have many important trade partners with different levels of income. This finding does not support the Linder hypothesis which states that the main trading partners should have a rather similar level of income.

This paper examines the implications of global production sharing for economic integration in East Asia, with emphasis on the behavior of trade flows in the wake of the 2008 global economic crisis. While trade in parts and components and final assembly within production networks (“network trade”) has generally grown faster than total world trade in manufacturing, the degree of dependence of East Asia on this new form of international specialization is proportionately larger than elsewhere in the world. Network trade has certainly strengthened economic interdependence among countries in the region, with the People’s Republic of China (PRC) playing a pivotal role as the premier center of final assembly. However, contrary to the popular belief, this has not lessened the dependence of the export dynamism of these countries on the global economy. The rise of global production sharing has strengthened the case for a global, rather than regional, approach to trade and investment policymaking.

The development of Southeast European countries (SEECs) depends crucially on international trade. This paper empirically analyzes intraindustry trade between SEECs and the European Union using bilateral trade data at the combined nomenclature four-digit level from 1996 to 2004. We analyze trade patterns for Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia, Romania, and Serbia and Montenegro. Applying the Grubel-Lloyd index indicates changes in the trade of manufactured goods between the SEECs and the European Union during the first years of the Stabilization and Association Agreement implementation period.

It is frequently stated that Turkey's trade orientation has shifted in the last decade away from Europe and more towards the East, specifically Arab countries and Middle East. However, comprehensive presentation of the situation is lacking, causing concern over the validity of the statement. This paper examines the foreign trade of Turkey for years 1995 to 2012. The analysis focuses on a number of country groups and product categories. The analysis confirms the shift away from EU and towards not only Arab countries but Asia as a whole, primarily due to gas imports from Russia. It is observed that Turkey's exports are becoming more focused towards manufactured goods and increasing in technological complexity. An interesting observation is the increase in the share of “commodities and transactions not elsewhere classified”, especially with the Arab countries.

The main message of this report is that if Kazakhstan wants to take advantage of global integration and diversification opportunities, the government needs to improve its trade policy framework, its management, and its regulations. It is also finalizing accession to the World Trade Organization (WTO) while its trade strategy includes a number of free trade agreements to be negotiated. It is an active member of the Central Asia Region Economic Cooperation (CAREC). This report is composed of three policy notes that discuss how to improve the trade policy framework, management, and regulations: note one is on the trade policy framework and recommends joining the WTO on a tariff schedule that is more liberal than Russia’s; note two postulates that to benefit more fully from the WTO membership and future regional or bilateral agreements, the institutional framework for trade policy management will need a clearer strategic vision, better coordination within the government and with private sector, and enhanced human capacity; and note three suggests that for the private sector to benefit from global integration and diversification, the government should ease the burden of regulations that affect trade (non-tariff measures (NTMs)).

The emergence of global value chains (GVCs) and their rapid expansion over the past two decades has transformed the global trade environment. GVCs involve task-based trade across multiple stages of the production process that take place across a number of different countries, in which multiple inputs and exports of intermediate goods and services are necessary to produce a final good, which may also be exported. GVC-oriented trade is seen to offer significant opportunities for developing countries, especially smaller ones, to benefit from global integration by changing the nature of competitiveness. With competition for GVC investment taking place in a truly global market, factor competitiveness relative to other countries matters a lot. In this context, the purpose of this note is to shed some light for policymakers, in this case specifically in the Southern African Customs Union (SACU) countries, on where to focus efforts to drive competitiveness for GVC participation. This is a data-intensive exercise that requires indicators to represent underlying capabilities, disaggregated international trade data, and finally, a classification of which products are likely to be trade within GVCs.

Recent years have seen a substantial reduction in trade policy and other barriers inhibiting developing country participation in the world trade. Lower barriers have contributed to a dramatic shift in the pattern of developing country trade -away from dependence on commodity exports to much greater reliance on manufactures and services. In addition, exports to other developing countries have become much more important. These changes have profound implications for the role played by developing countries in the world economy and the trade system. Developing countries have become major players in the global economy. The outward-oriented strategies of many economies in emerging Asia have been reflected in high trade growth and a steady increase in their share in the world trade.

It is frequently stated that Turkey's trade orientation has shifted in the last decade away from Europe and more towards the East, specifically Arab countries and Middle East. However, comprehensive presentation of the situation is lacking, causing concern over the validity of the statement. This paper examines the foreign trade of Turkey for years 1995 to 2012. The analysis focuses on a number of country groups and product categories. The analysis confirms the shift away from EU and towards not only Arab countries but Asia as a whole, primarily due to gas imports from Russia. It is observed that Turkey's exports are becoming more focused towards manufactured goods and increasing in technological complexity. An interesting observation is the increase in the share of “commodities and transactions not elsewhere classified”, especially with the Arab countries.

The increasing availability of detailed trade datasets is exposing limits in existing trade theories that need to be addressed. For example, this Thesis documents how the observed micro and aggregate trade patterns cannot be explained by the combinations of functional forms and sources of heterogeneity proposed in the existing literature. To fill this gap, it is here developed a new class of space-augmented trade models based on quadratic utilities with asymmetric varieties and heterogeneous consumers yielding rich patterns of multi-dimensional heterogeneity across firms and markets. Different models are analysed, each one associated with specific properties in terms of market outcomes and underlying spatial structure. Hence, based on the observed or desired properties of the problem at hand, trade practitioners can refer to this Thesis to find guidance on which model suits better their research purposes. One model in particular, called the “verti-zontal”, is identified as the most appropriate to study trade patterns in general, when all products are included in the sample. Its validity is tested on micro and aggregate trade data, showing that market and exporter characteristics are enough to capture price variability across markets but an additional, variety-market-specific source of variability is needed to explain quantity variability. The models can be used for research purposes, to identify demand parameters, or for policy purposes, to produce indices of competitiveness at the country-product level. (ECGE - Sciences économiques et de gestion) -- UCL, 2014

This paper builds a small-open-economy nonscale-growth model with negative population growth and investigates the relationship between trade patterns and per capita consumption growth. Under free trade, if the population growth rate is negative and its absolute value is small, the home country becomes an agricultural country. Then the long-run growth rate of per capita consumption is positive and depends on the world population growth rate. On the other hand, if the population growth rate is negative and its absolute value is large, the home country becomes a manufacturing country. Then the long-run growth rate of per capita consumption is positive and depends on both the home country and the world population growth rates. Moreover, the home country is better off under free trade than under autarky in terms of per capita consumption growth irrespective of whether the population growth is positive or negative.

The Central America region is a small market. The region contains around 43 million inhabitants (0.6 percent of total world population) who generate around 0.25 percent of the world's Gross Domestic Product (GDP). While the region has successfully embarked on a regional integration agenda and has strong commercial links with the US, extra-regional trade-mainly with large fast-growing emerging economies-remains a challenge. Export performance is analyzed along three dimensions that, together, give a fairly comprehensive picture of competitiveness: 1) the composition, orientation and growth of the export basket; 2) the degree of export diversification across products and markets; and 3) the level of sophistication and quality of their main exports. This analysis allows exports dynamics at the different margins of trade (intensive, extensive, and quality) to be evaluated and individual countries' to be benchmarked with peers in the Central American region. The results of this report allow policy makers to identify key areas to explore in the overall discussion of export competitiveness in the Central American region. This paper relates to the literature on challenges and opportunities that trade liberalization can bring to the Central American region. Much of the recent literature focuses on the role of the free trade agreement negotiated by Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua, with the US.

The North American Free Trade Agreement (NAFTA) is arguably the first case study of what may be expected from the increasing number of preferential trade agreements involving both developed and developing economies. Ten years after the treaty's inception, it is time to assess how its outcomes compare with initial expectations. The articles in this symposium issue provide insights into the effects of NAFTA on economic geography, trade, wages and migration, and foreign investment from Mexico's perspective. The contributions paint a complex post-NAFTA reality characterized by persistent intra-bloc trade barriers, interregional inequality within Mexico, labor market outcomes that seem closely tied to migration patterns and international trade and investment, and foreign investment flows that appear weakly related to trade agreements.

Institutions—quality of contract enforcement, property rights, shareholder protection, and the like—have received a great deal of attention in recent years. Yet trade theory has not considered the implications of institutional differences, beyond treating them simply as different technologies or taxes. The purpose of this paper is twofold. First, we propose a simple model of international trade in which institutional differences are modelled within the framework of incomplete contracts. We show that doing so reverses many of the conclusions obtained by equating institutions with productivity. Institutional differences as a source of comparative advantage imply, among other things, that the less developed country may not gain from trade and factor prices may actually diverge as a result of trade. Second, we test empirically whether institutions act as a source of trade, using data on U.S. imports disaggregated by country and industry. The empirical results provide evidence of “institutional content of trade”: institutional differences are an important determinant of trade flows. Copyright 2007, Wiley-Blackwell.

This paper reports panel gravity estimates of aggregate bilateral trade for 130 countries over the period 1962-96 in which the coefficient of distance is allowed to change over time. In a standard specification in which transport costs are proxied by distance only, it is found paradoxically that the absolute value of the elasticity of bilateral trade to distance has been significantly increasing.The result is attributed to a relatively larger decline in costs independent of distance (such as handling) than in distance-related costs (e.g. oil price). An extended version of the model that controls for these two factors eliminates this positive trend without reversing it. However, when the sample is split into two groups ("rich-rich" and "poor-poor"), the paradox is maintained for the "poor-poor" group. While not conclusive, these results are consistent with the view that poor countries may have been marginalized by the current wave of globalization.

The experience of countries in transition from a planned to a market-oriented economy has varied greatly. The clearest differences are between the East Asian countries, China and Vietnam, and the countries of Central and Eastern Europe (CEE) and the former Soviet Union (FSU). China and Vietnam have contained inflation and benefited from continued high growth in GDP since the beginning of their reforms, while all CEE and FSU countries have experienced large declines in output, and most have experienced hyperinflation. But even in CEE and the FSU, differences are marked. Some countries have lost over half of their GDP, and growth performance in a number of countries is still poor, while others are growing strongly. Some are still suffering from high inflation while others have successfully reduced annual inflation. What determines this divergence of outcomes across transition countries? No study so far has analyzed the interaction of all factors, including initial conditions, political change, and reforms, in a unified framework including CEE, the FSU, China, and Vietnam. The authors examine these broader interactions, but focus first on the role of initial conditions, such as initial macroeconomic distortions and differences in economic structure and institutions, which have been emphasized less in the literature. They find that initial conditions and economic policy jointly determine the large differences in economic performance among the 28 transition economies in the sample. Initial conditions dominate in explaining inflation, but economic liberalization is the most important factor determining differences in growth. But reform policy choices are not exogenous. They depend, in turn, on both initial conditions and political reform, with political reform the most important determinant of the speed and comprehensiveness of economic liberalization. Other findings provide additional insight into these relationships. Results show that liberalization has a negative contemporaneous impact, but a stronger positive effect on performance over time. The results also show that macroeconomic and structural distortions are negatively related to both policy and performance. Regarding the former, unfavorable initial conditions discourage policy reforms but do not diminish their effectiveness once they are implemented. The authors find some evidence that the influence of initial conditions diminishes over time. This is in part because many of the initial conditions are themselves modified in the course of transition. Monetary overhangs are dissipated through inflation, industrial overhang is eroded as plants shut down, and market memory returns through experience.

The paper analyses international trade of goods of the Republic of Croatia by counties from 2001 to 2010. The analysis determines the significance of particular counties in the international trade of goods. Beside level of international trade, other indicators like imports dependence, exports propensity, openness and regional structure of exports are used in order to determine importance of international trade for each of individual county. Significant regional differences are found in the international trade pattern in various counties. The paper also analyses the exports concentration and specialisation of Croatian counties. Apart from exports structure defined by NKD 2007 classification, paper further deals with specialisation according to technology structure of exports. In the concluding chapter, the paper explores the connection between export propensity of particular counties, specialisation and the economic development. In accordance to the recent theoretical and empirical research, in the case of Croatian counties, a significant correlation between exports features, specialisation pattern and openness on one side and economic development on the other side is also found. Counties specialised in exports of high technology products are usually more developed than counties specialised in exports of lower technology products.

This paper focuses on an economic aspect of the disarmament question: the international market of armaments. I shall explore the thesis that arms trade is an increasingly important factor in North-South economic relations, that it affects not only international trade patterns, but also through trade, domestic patterns of economic development. Research assistance for this work was provided by Michael de Mello at Columbia University. In addition to the statistical sources in the references I shall be drawing as well on the results of a UNITAR study on technology, domestic distribution and North-South relations. (1)