Showing papers on "Bilateral trade published in 1997"

A Political-Economic Analysis of Free-Trade Agreements

Abstract: This paper demonstrates that bilateral free-trade agreements can undermine political support for further multilateral trade liberalization. If a bilateral trade agreement offers disproportionately large gains to key agents in a country, then their reservation utility is raised above the multilateral free-trade level, and a multilateral agreement would be blocked. Bilateral agreements between countries with similar factor endowments are most likely to have this effect. It also follows that bilateral free-trade agreements can never increase political support for multilateral free trade. Copyright 1997 by American Economic Association.

Are International R&D Spillovers Trade-Related? Analyzing Spillovers Among Randomly Matched Trade Partners

Abstract: In this paper, I analyze recent findings by Coe and Helpman (1995) on trade-related international R&D spillovers. A Monte Carlo based robustness test is proposed which compares the elasticity of domestic productivity with respect to foreign R&D estimated by Coe and Helpman with an elasticity which is based on counterfactual international trade patterns. I show that also these randomly created trade patterns give rise to positive international R&D spillover estimates, which are larger and explain more of the variation in productivity across countries than if true' bilateral trade patterns are employed. The finding casts doubt on the claim that patterns of international trade are important in driving R&D spillovers.

World Trade Flows, 1970-1992, with Production and Tariff Data

Abstract: This paper describes two databases dealing with world bilateral trade flows: the World Trade Database (WTDB) assembled by Statistics Canada, which contains bilateral trade flows for all countries over 1970-1992, classified according to the Standard International Trade Classification, Revision 2 (with some modification); and the Compatible Trade and Production (COMTAP) database assembled by the Organization for Economic Cooperation and Development (OECD), which contains production of manufactured goods in OECD countries and bilateral trade flows between these countries and all their trading partners over 1970-1985, classified according to the International Standard Industrial Classification, Revision 2. These databases are available to academic users on the CD-ROM. Also contained on the CD-ROM is information on country factor endowments, tariff and non-tariff barriers for selected countries, and input-output tables for the United Kingdom and the United States. The WTDB database is made available under a license with Statistics Canada, the terms of which are described herein, and the COMTAP database is made available by permission of the OECD. A revised version of this data set is available on CD-ROM.

Alliances, Preferential Trading Arrangements, and International Trade

Abstract: We analyze the effects of alliances and preferential trading arrangements on bilateral trade flows. Both factors are likely to promote trade among members, but we argue that the interaction between them is central to explaining patterns of commerce. The combination of an alliance, which creates political incentives for participants to engage in trade, and a commercial institution, which liberalizes trade among members, is expected to provide a considerable impetus to commerce among parties to both. The results of our quantitative analyses support these arguments. Both alliances and preferential trading arrangements strongly affected trade from 1960 to 1990, and allies that included a major power conducted considerably more trade than their nonmajor-power counterparts. Moreover, the interaction between alliances and preferential trading arrangements is fundamental to explaining patterns of bilateral commerce: Parties to a common preferential trading arrangement and a common alliance engage in markedly greater trade than do members of either type of institution but not both.

Country characteristics and foreign direct investment in China: A panel data analysis

Abstract: Country Characteristics and Foreign Direct Investment in China: A Panel Data Analysis. — In this paper an error-components model is developed to analyze the economic, political and cultural determinants of both pledged and realized FDI in China which has recently become the second largest host country for FDI. The panel data cover the period 1983–1994 (1984–1994) and 22 (17) home countries/regions in the case of pledged (realized) FDI. The results indicate that bilateral trade, cultural differences, and relative real changes in market size, wage rates, and exchange rates are important determinants of pledged FDI, and that bilateral trade, relative changes in wage rates and exchange rates affect realized FDI.

World Trade Flows, 1970-1992, with Production and Tariff Data

Abstract: This paper describes two databases dealing with world bilateral trade flows: the World Trade Database (WTDB) assembled by Statistics Canada, which contains bilateral trade flows for all countries over 1970-1992, classified according to the Standard International Trade Classification, Revision 2 (with some modification); and the Compatible Trade and Production (COMTAP) database assembled by the Organization for Economic Cooperation and Development (OECD), which contains production of manufactured goods in OECD countries and bilateral trade flows between these countries and all their trading partners over 1970-1985, classified according to the International Standard Industrial Classification, Revision 2. These databases are available to academic users on the CD-ROM. Also contained on the CD-ROM is information on country factor endowments, tariff and non-tariff barriers for selected countries, and input-output tables for the United Kingdom and the United States. The WTDB database is made available under a license with Statistics Canada, the terms of which are described herein, and the COMTAP database is made available by permission of the OECD. A revised version of this data set is available on CD-ROM.

The Relationship Between The Real Exchange Rate and The Trade Balance: An Empirical Reassessment

Abstract: This paper presents an empirical reassessment of the relationship between the real exchange rate and the trade balance, using the multivariate cointegration approach. Based on bilateral trade between the U. S. and the other G7 countries, we find evidence that the trade balance is unresponsive to the exchange rate in the very short run but is significantly affected by it within two years. We also find evidence supporting the empirical validity of the Marshall-Lerner condition, indicating that devaluations do improve the trade balance in the long run.[F32]

Technology and Bilateral Trade

Abstract: We develop a Ricardian model to explore the role of trade in spreading the benefits of" innovation. The theory delivers an equation for bilateral trade that gravity specification, but identifies underlying parameters of technology. We estimate the" equation using trade in manufactures among the OECD. The parameter estimates allow us to" simulate the model to investigate the role of trade in spreading the benefits of innovation and to" examine the effects of lower trade barriers. Typically foreigners benefit by only a tenth as much" as the innovating country, but in some cases the benefits to close neighbors approach those of the" innovator.

When It's Not The Only Game in Town: The Effect of Bilateral Search on the Quality of a Dealer Market

Abstract: We report results from experimental asset markets with liquidity traders and an insider where we allow bilateral trade to take place, in addition to public trade with dealers. In the absence of the search alternative, dealer profits are large- unlike in models with risk-neutral, competitive dealers. However, when we allow traders to participate in the search market, dealer profits are close to zero. Dealers compete more aggressively with the alternative trading avenue than with each other. There is no evidence that price discovery is less efficient when the specialists are not the only game in town.

Determinants of Intra-Industry Trade between East and West Europe

Abstract: The share of intra-industry trade (IIT) in total trade between Central and East European nations and the EU is among the highest of all the EU’s bilateral trade flows. IIT is broken down into horizontal and vertical components and the determinants of each is investigated. Vertical IIT (exchange of similar goods of different quality) is found to account for 80-90% of total IIT and is positively associated with product differentiation, labour intensity of production, economies of scale, and foreign direct investment (FDI). Controlling for country effects, a statistically significant positive association is found between horizontal IIT (the exchange of close substitutes of similar quality) and FDI, product differentiation, and industry concentration; a significant negative relationship is found for scale and labour intensity. These results do not hold if country effects are not controlled for, suggesting that country-specific factors are key determinants of horizontal IIT. The estimation results are more robust than those in previous studies, reflecting the specific characteristics of the endowments of, and ongoing restructuring process in, transition economies.

Technology and Bilateral Trade

Abstract: We develop a Ricardian model to explore the role of trade in spreading hte benefits of innovation. The theory delivers an equation for bilateral trade that, on its surface, resembles a gravity specification, but identifies underlying parameters of technology. We estimate the equation using trade in manufactures among the OECD. The parameter estimates allow us to simulate the model to investigate the role of trade in spreading the benefits of innovation and to examine the effects of lower trade barriers. Typically foreigners benefit by only a tenth as much as the innovating country, but in some cases the benefits to close neighbors approach those of the innovator.

Trade and Technology from a Schumpeterian Perspective

Abstract: This paper attempts to implement empirically a Schumpeterian model of international trade. After briefly discussing the literature on trade and technology, we formulate a model in which ‘real’ factors such as R&D expenditures, investment and wage costs have an impact on bilateral trade flows between advanced economies. We also take into account the effect of exchange rate differences. The model is empirically estimated on sectoral data for nine OECD countries. We find that what determines competitiveness differs by sector. In many sectors, either R&D expenditures or wage costs are important. The results for investment indicate a weaker role. Consistent with the Marshall-Lerner logic, we find that the sign of exchange rate changes varies by sector. We conclude the paper by a discussion of the relevance of the results for ‘technology-based’ theories of international trade.

Trade Integration between Eastern and Western Europe: Policies Follow the Market

Abstract: This paper examines to what extent Eastern Europe trade reorientation towards the West has been driven by market forces versus policies for regional integration. Hierarchical cluster analysis based on bilateral trade intensity reveals the convergence of regional trade structures to the pre- World- War II pattern. Estimates of the expected trade pattern of Eastern Europe with a grav - ity model predict continuing rising importance of the EU. Furthermore, the assessment of the welfare implications of preferential access to EU markets shows that beneficial effects of trade expansion are likely to outweigh possible distortions. Hence integration policies follow the facts created by the market.

Common Market with Regulated Firms

Abstract: We examine the effect of bilateral trade in a concentrated industry under Cournot competition, when firms are regulated by national agencies who care about national social welfare. We allow for differences in costs and market sizes and for asymmetric information between regulatory agencies and regulated firms. A national regulatory policy may or may not be publicly observed by foreign competitors. We show that it is optimal to allow states to subsidize their domestic firms: bilateral trade improves the allocative efficiency and reduces the agency costs of regulation. Strategic trade policy effects that appear when regulatory contracts are public are beneficial to both states and reduce incentive costs as well as allocative inefficiencies. Results extend to the case of segmented markets with export costs when states are allowed to use export subsidies as well as to regulate domestic production. They also extend under perfect information to an arbitrary number of states and regulated firms, to the existence of private importing firms and of a not too large export market.

The United States‐China copyright dispute: A two‐level games analysis

Abstract: United States media and computer software industries long have alleged they lose billions of dollars to copyright piracy in China. Negotiations between the countries have had little effect. This article uses two‐level games theory to explore why the United States is reluctant to impose sanctions, and why China is unwilling to take action against the pirates even at the risk of trade sanctions. Negotiations are examined at the usaional level and at the domestic level in both countries. At the usaional level, a two‐player sequential model of the game is presented. At the domestic level, the heterogeneity of interest groups in the United States, and the different agendas of central and provincial authorities in China are discussed. Based on this analysis, the article proposes, (1) a more flexible time‐frame for negotiations with foreign trading partners, (2) greater reliance on multilateral frameworks than on bilateral trade sanctions and (3) American efforts to distribute the gains from better copyright pro...

Third-Country Effects and Second-Best Grain Trade Policies: Export Subsidies and Bilateral Liberalization

Abstract: An incumbent export subsidy will affect the size and distribution of gains from bilateral trade liberalization but, in theory, may still permit increased trade volume and mutual benefits from freer trade. These points are illustrated using the case of Canada-U.S. durum wheat trade, which grew rapidly following the 1989 Canadian-U.S. Free Trade Agreement (CUSTA). An empirical analysis suggests that, given its Export Enhancement Program (EEP), the United States lost from freer trade in durum. Conversely, freer trade in durum means greater gains to the United States from eliminating EEP.

Foreign Direct Investment and Trade: An Empirical Investigation of the Evidence from China

Abstract: The main objective of this study is to investigate the relationship between foreign direct investment (FDI) and trade and further to examine the impact of FDI on trade from the evidence of China. Some earlier theoretical work has predicted either a substitute or complementary relationship between FDI and trade yet some empirical studies have revealed a positive relationship between FDI and trade. In this study, using the recent FDI and trade data of China, we find that FDI has a positive impact both on China's provincial trade and on China's bilateral trade. It argues that given the overwhelming dominance of developing source countries and their labour-intensive investment pattern in China, FDI is mainly export-oriented and, therefore, has a positive impact on promoting China's international trade. JEL: F14, F21, C12

Can Bilateral Trade Agreements Help Induce Free Trade

Abstract: There has been growing debate about whether bilateral trade agreements are damaging multilateral efforts to eliminate barriers to international trade. This paper develops a model in which trading blocs always charge optimal tariffs and make trade agreements based on strategic considerations. We ask a very simple question. Does the fact that trading blocs can form bilateral trade agreements make Free trade less likely to occur? The answer is that it depends on the size distribution of the trading blocs. If there is one large trading bloc along with some smaller ones then bilateral trade agreements allow the smaller trading blocs to coalesce and block the monopoly power of large trading blocs. In this case, bilateral trade agreements facilitate the attainment of free trade. Not allowing customs unions leads to more not less protection. If trading blocs are of roughly equivalent size then bilateral trade agreements allow groups of trading blocs to more effectively monopolize world trade in which case they may make free trade less likely. These results suggest that a policy that inhibits the formation of trading blocs may be harmful. We also compute the welfare effects of trade agreements to get some idea of how empirically important these issues are.

Functional form for United States-Mexico trade equations

Abstract: The literature concerning bilateral trade flows between Mexico and the United States is comparatively small. With the growing importance of international commerce between these economies, potential trade flow responses to changes in relative prices and income performance deserves more attention. This paper attempts to partially fill this gap in the literature by estimating bilateral trade flow equations that decompose relative import and relative export prices into foreign prices, domestic prices, and the exchange rate.

What Can We Learn from Bilateral Trade? Gravity and Beyond

Abstract: Much empirical international trade reserach requires a careful analysis of bilateral trade patterns In this paper we examine a commonly used technique called the gravity equation Though the use of the gravity equation on aggregate data is well-grounded in monopolistic competition trade theory, we show that central predictions necessary for its derivation can be rejected with simple tests on disaggregated data

Intra-industry trade between members of the pta/comesa regional trading arrangement

Abstract: Using available bilateral trade data between members of the Common Market for Eastern and Southern Africa (COMESA) formerly PTA, this study estimated the extent of intraindustry trade and the factors that determine this trade in the region. The hypothesis was that intra-industry trade exists in this region. The results of the study show that indeed this trade does exist and it is determined by the same factors as found in other regions. The principal determinant is distance, which has a negative significant relationship with intra-industry trade. Other factors include per capita income and language. The trade is more significant in bordering countries that are relatively more developed in terms of their manufacturing sectors. Special ties also seem to play a role, although the variable was not significant in the regression analysis. Improved communication networks will enhance this trade within the region.

China's Foreign Economic Relations

Abstract: This paper provides an up-to-date overview of China's economic relations with its major trade and investment partners, including Hong Kong and Taiwan, the United States, Japan, the European Union and ASEAN. We also discuss other important international issues such as China and the WTO and the status of China's currency and foreign reserves. In 1995, China's merchandise exports to the world increased by 22%, while merchandise imports rose by 14%. But preliminary data show that China's foreign trade experienced a dramatic slowdown in 1996. Exports grew only by 1.4%, while imports rose by 5.1%. Asia absorbed more than 60% of China's exports and provided about 60% of China's imports. After adjusting for re-exports via Hong Kong, the largest export market for China is the United States, followed by Japan and the EU. Hong Kong and Taiwan are the largest foreign investor in China. Together they accounted for more than 60% of the total foreign direct investment. There are three general problems that China faces with its trading partners: trade restrictions imposed by importing countries against China in the textile and clothing sector, the use of the rule of origin as a means to restrict China's exports, and the use of antidumping duties against Chinese goods. In addition, economic relation with the United States is also affected by the large but inaccurately measured bilateral trade balance, as well as tough negotiations related to China's entry to the WTO. Japan's importance to China is not only through trade and investment, but also through being the largest source of concessional fianancing and aid. The EU is important since it is the third largest export market for China and the second largest provider of China's imports.

Inversion extranjera directa

Abstract: The report reviews lessons from the International Finance Corporation's (IFC) investment, and advisory experience in the developing world, which show the interactions between policy frameworks, and the volume and structure of foreign direct investments (FDI). Case studies show how the Corporation promotes successful project structures, and regulatory changes, as it tries to attain the strongest development impact for investments. In developing countries, FDI has flowed mainly into manufacturing, and processing industries. In the past, investment attractiveness had been closely linked to possession of natural resources, or a large domestic market, while production and trade globalization, competitiveness as a location for investment, and exporting, have become the main determinants of attractiveness. Sources of FDI in the past, came almost exclusively from industrial countries, though recently those sources have widened, emerging from developing countries in their own right, and for their own regions. IFC, as an international initiative to promote FDI in developing countries, is liable to promote bilateral trade agreements, bilateral and multilateral financial institutions, and investment promotion programs; its advisory role may vary from diagnostic studies overviewing constraints to FDI, to investment policy studies giving specific solutions on either changes, or strategies. The study further looks at how policy environment is set, and at finding investor opportunities, through project financing, largely structured as joint ventures. The inherent, fragile nature of joint ventures, restricts foreign ownership, thus limiting project structures; however, careful project design has lead to successful operations, by ensuring management, and financial arrangements. Still, to maximize benefits, an unfinished agenda of policy reform remains, and, as more countries open to FDI, this integration will lead to an overall increase in FDI flows.

The impact of NAFTA on US employment: a preliminary assessment of job gains and losses from expanded trade with Mexico

Abstract: Assesses the extent to which increased bilateral trade between the USA and Mexico has impacted on the employment situation in the USA since the beginning of 1994. Provides a descriptive summary of bilateral trade flows between the USA and Mexico in recent years. Provides a review of recent research on the topic and gives an account of job losses associated with increased imports from Mexico. Attempts to show how changes in exports targeted for Mexico correspond to job creation in the domestic economy and provides a tentative forecast of the job effects of increased exports to Mexico in recent years.

The (Re)Emergence of Regional Economic Integration In the Former Soviet Union

Abstract: This study examines the consequences of the collapse of the unified Soviet market at the end of 1991, the dilemmas of choice generated by the economic and political costs and benefits of reintegration with different states, and the resulting attempts to create new forms of economic cooperation. A gravity model is used to determine whether these new forms of cooperation have had a positive impact on the members' bilateral trade. This reveals that in the first few years of its existence membership in the Commonwealth of Independent States has not generally had a positive impact on trade, while membership in the Baltic Free Trade Association and the Central Asian Commonwealth have, although they are composed of small states which produce similar products and, in the case of the Central Asian Commonwealth, are at a lower level of development. Since World War II, the international economy has been characterized by growing economic integration. Some states, either singly or in concert, have begun to dismantle barriers to cross-border transactions in order to reap the benefits of trade. Neoliberals argue that "the voluntary sacrifice of sovereignty for collaborative problem solving does not require a state to sacrifice its interests" (Kegley 1993: 142; also Keohane and Nye 1977). However, even from this viewpoint, it is clear that there is some tension between the economic benefits of intensified trade and the political costs of decreased policy autonomy which result from increased economic integration. Moreover, despite the success of the European Union (EU), economic integration has proven more difficult to attain and maintain among less developed states in Africa and Latin America. Nowhere are the obstacles to integration more evident than in the former Soviet Union where fifteen states of varying sizes and levels of development determined to protect their newly gained sovereignty struggle with the disastrous consequences of the collapse of a unified market.l Although the West has advocated reintegration as a partial solution to the region's economic problems, these states have been skeptical about the benefits. Nonetheless, new forms of regional cooperation have emerged since 1991. The success of these cooperative arrangements can be measured in many ways, and this study focuses on one such measure: whether they increase the level of bilateral trade among the members.2 The study first examines the consequences of the collapse of the Soviet market at the end of 1991. It then discusses the economic and political costs and benefits of reintegration. Although the international political economy literature has focused much attention on why states choose to cooperate despite the tension between sovereignty and economic benefit (e.g., Krasner 1983; Keohane 1984; and Stein 1990), state choices have largely been portrayed as dichotomous-cooperate or not cooperate. In reality, the choices faced by the former Soviet republics, in particular, are more complex. They must not only decide whether to cooperate but also with whom to cooperate and how deeply to cooperate because the political and economic costs and benefits of cooperation vary with the size and level of development of the partners as well as the depth of the proposed cooperation. Therefore, these states are faced with rationales for competing options which Stein (1990) refers to as dilemmas of choice. After identifying the institutions which have been created with the goal of achieving some degree of economic reintegration, the study uses a gravity model of trade to examine whether these cooperative efforts have had a positive impact on interrepublic trade. This model makes it possible to control for the natural economic determinants of trade such as size, level of development, and proximity. CONSEQUENCES OF THE COLLAPSE OF THE SOVIET MARKET The Soviet Union consisted of fifteen tightly integrated republic economies. Trade flows were centrally planned, and prices were set administratively In 1988, interrepublic trade amounted to 21 percent of gross domestic product (GDP), far more than in the EU (IMF 1991: 1,193). …

The China - United States Bilateral Trade Balance: How Big Is It Really?

Abstract: There are huge discrepancies between the official Chinese and U.S. estimates of the bilateral trade balance. The discrepancies are caused by different treatments accorded to re-exports through Hong Kong, re-export markups, and trade in services. Deficit-shifting between China, on the one hand, and Hong Kong and Taiwan, on the other, due to direct investment in China from Taiwan and Hong Kong, is partly responsible for the growth in the China - United States bilateral trade deficit. The 1995 China - United States bilateral balance of trade in goods and services, adjusted by both re-exports and re-export markups, may be estimated as US$23.3 billion, a large deficit but considerably smaller than the often-cited official U.S. figure of US$33.8 billion.

Economic Interdependence and Development in East Asia

Abstract: Preface The New Global Powerhouse: Overview and Outline of the Issues The "Flying Geese" Model of Regional Development Intra-regional Trade and Specialization Patterns in East Asia Determinants of Bilateral Trade Flows: A Gravity Approach Intra-regional Foreign Investment and Development in East Asia Organization of Economic Co-operation in Asia-Pacific ASEAN--A Success Story? Epilogue References Index

The Growth of Intra-Industry Trade: New Trade Patterns in a Changing Global Economy

Abstract: First Published in 1997. The explosive growth of world trade in the last three decades is unparalleled in history, both due to the rapid increase in volume and to the change in the composition of trade. Historically, trade between nations has consisted largely of exchanges of products that were very different from each other, neither closely substitutable in consumption nor production processes. However, in this latest period of trade expansion, the majority of the increase in world trade has been in manufactured goods, many of which are highly substitutable differentiated products. This has led to growth in intra-industry trade, the cross-shipment of similar products. This study links increased shares of intra-industry trade with growth in newly-industrializing countries. To examine these questions, this study first gives a review of existing literature, both theoretical and empirical. Five hypotheses on intra-industry trade are then discussed. A model is then presented and estimated, using data on bilateral trade between the United States and its five major trading partners, Canada, Japan, France, Germany, and the United Kingdom.