Showing papers on "Free trade published in 1979"

Wage determination in an economy with many trade unions

Abstract: ONE of the interesting 'stylised facts' about wage determination in a unionised economy is the apparent interdependence between trade unions' wage claims. There are many names for this ubiquitous phenomenon'pattern bargaining' or 'the wage transfer mechanism', to name but twoand much empirical evidence on its importance,2 but there has been little theoretical analysis of the phenomenon. This is surprising, particularly when it is borne in mind that numerous economists3 have pointed to the significance of imitative union behaviour in the process of wage inflation. Some of these writers, in fact, most notably Wiles [34], have gone as far as to suggest that there may not be an equilibrium set of wage rates in a modern, unionised economy-essentially, it is argued, because of the inevitable rivalry between laboirr groups over issues of 'fair' differentials and 'wage parity'. In a field where economic and sociological forces are unquestionably intertwined, no explicit theoretical framework has as yet emerged. This paper attempts, fairly tentatively, to sketch a simple theoretical analysis of wage determination in an economy with many trade unions. While the first part of the paper is concerned with the microeconomics of imitative union wage policies, a primary purpose of the paper's later sections is to examine the notion and possible existence of wage equilibrium in an economy where several trade unions exist. The crucial but elusive links between individual inter-union wage reactions and the general equilibrium structure of wage rates should become clear as the paper progresses. If an explanation of an economic phenomenon such as union claims for wage parity is to be attempted along classic and conventional economic lines, it seems necessary to begin with a model posited upon optimal behaviour by the relevant decision making agents. In this case we might expect these agents to be trade unions, firms and, perhaps, the government. Throughout this paper unions are assumed to be rational agents, in the sense

Import Tariffs and Price Formation in the World Wheat Market

Abstract: A theoretical analysis of price formation in the world wheat market has been presented by McCalla; Taplin; and Alaouze, Watson, and Sturgess. McCalla and Taplin based their models on a duopoly arrangement between the United States and Canada. These models were extended by Alaouze, Watson, and Sturgess to include Australia, and a theoretical model of triopoly pricing in the world wheat market was developed. Canada is assumed to act as a price leader in the triopoly, and it is concluded that producer prices in wheatexporting countries will be higher under triopoly as opposed to duopoly pricing. The major thrust of these papers is that price formation in the world wheat market is largely determined by the major exporters. The purpose of this paper is to suggest and empirically test an alternative hypothesis; namely, that world wheat prices are essentially determined by the major wheat importers. Two major importers-Japan and the European Economic Community (EEC)-are used as the focal point for the analysis. The authors believe the world wheat market is usually a buyer's rather than a seller's market. By arguing the market is usually dominated by buyers, it is recognized that there are periodical exceptions to the argument over time, the major one being the commodity boom period of 1973-74. It is well known that the major importers are restricting trade in wheat. This paper suggests that the restrictive policies of the importers (whether consciously or not) are likely to result in a welfare gain to importing nations greater than that under free trade. This suggests that perhaps importing countries are using tariffs in an optimal sense (where all sectors of society are taken into account) rather than merely using them to protect domestic producers from low-priced competitive imports. This is not to argue that a duopoly or triopoly structure does not exist among the United States, Canada, and Australia but rather that the effect of such arrangements is minor relative to the buying power exerted by importers. Although this paper focuses on the world wheat market, the framework of analysis has application to other agricultural markets as well.

Intra-industry trade and the integration of developing countries in the world economy

Abstract: This paper reviews the experience of the Latin American Free Trade Association and the Central American Common Market with intra-industry trade in manufacturing, entailing the exchange of differentiated products, and considers the welfare effects of this trade The paper further examines intra-industry specialization between developed and developing countries that involves the importation of labor intensive product varieties and parts, components, and accessories into the former group of countries from the latter Finally, recommendations are made for policy measures that may be taken to encourage intra-industry specialization, including regional integration and multi-lateral trade liberalization

The Politics of Workplace Trade Unionism: Recent Tendencies and some Problems for Theory

Abstract: The aim of this chapter1 is above all to stimulate discussion: firstly about the nature and significance of the changes which have occurred in British trade unionism (particularly at shop-floor level) since the 1960s; secondly about the implications of these changes for the analyses of union democracy and union leadership which are popular on the left.2 Much of the argument is tentative or exploratory; constructive criticism will be very welcome.

Preferential Trading Theory: The n Commodity Case

Abstract: This is a general equilibrium analysis of preferential trading. A method was developed which allows the analysis of the many-good case and which suggests the tools for empirical studies. It is shown that increasing the number of commodities beyond two introduces new considerations. It is, however, always possible to identify welfare-increasing tariff changes. The study analyzes the inter-relationship between preferential trading and a unilateral movement to free trade. The effect of a customs union on income distribution among union members is emphasized.

The changing international division of labor in manufactured goods

Abstract: The paper reviews recent changes in trade in manufactured goods between developed and developing countries and examines the employment effects of this trade for the former group of countries. It is shown that the developing countries have assumed increased importance as markets for developed country exporters and that these trends are expected to continue in the future. At the same time, the net employment effects of the projected expansion of trade for the developed countries would be practically nil and employment changes in their import-competing industries would be small as compared to total employment in those industries. Simultaneously, the developed countries would derive benefits through a shift from low-skill to high-skill occupations, the exchange of physical and human capital for unskilled labor, and technological change.

Food Price and Supply Stabilization: National Buffer Stocks and Trade Policies

Abstract: Trade policies are likely to have a greater impact on the stability of a country's food grain supply than any reasonable size buffer stock. At the margin, countries need to trade off the cost of additional stocks against the cost of unstable foreign exchange balances associated with free trade. A stochastic simulation model is specified to assess the impact of trade and buffer stock policies on the stability of consumption and prices and the expected values and standard deviations of costs and gains to consumers, producers, and the government, and the balance of payments.

Trade policy for developing countries

Abstract: Although some issues remain unsettled, expert opinion and lessons of experience have begun to converge in recent years on trade policy measures that make sense for an individual developing country. Trade policy must be made on three levels, all of which are treated here -- strategic choices, economy-wide management including exchange rate policy, and detailed setting of incentives in relation to particular products and industries. Along with the underlying relationships at each level, attention is focused on practical lessons of experience concerning the policy instruments available, their proper design and use, and complications that arise in a world of harsh realities. Social repercussions of trade policy are also considered. Part I is concerned mainly with trade policy for purposes of industrial development, e.g., how to expand manufactured exports along with production for the home market. Part II examines relationships of trade policy with social and political systems and goals, for example, its effects on poverty, and how it interacts with repression or redistribution. Part III looks at how to achieve a successful transition from an unsatisfactory to a desirable trade policy regime.

Trade Benefits to All: A Design of the Beef Import Liberalization in Japan

Abstract: Liberalization of trade in agricultural commodities and protection of domestic agriculture are considered two conflicting policy goals. Severe restrictions have been imposed on the imports of agricultural commodities into Japan, resulting in substantial social costs, even though the level of agricultural protection in Japan is not necessarily higher than European Community (EC) countries (Bale and Greenshields, Hayami). The restriction is especially severe for beef where efficiency of domestic production is comparatively low. As a result, the expansion of beef imports has been a major focus in trade negotiations of Japan with Australia, New Zealand, and the United States. In this paper, we argue that the basic premise of the present Japanese beef policy is wrong. As far back as Ricardo, trade liberalization has been shown to result in a net gain to society. Based on this logic, it should be possible to design a policy to achieve the dual goals of trade liberalization and the protection of domestic agriculture by redistributing the gains from trade. Our analysis suggests that a possibility exists for beef imports into Japan to increase several fold, to a level of $1 billion (U.S.) per year; and, at the same time, output and income of domestic producers also could be increased without imposing an additional burden on the government budget.

Accounting for economic growth : the case of Norway

Abstract: The background of economic growth in Norway is reviewed. Models that derive the direct and indirect measures used in empirical estimation and aggregate estimates for Norway's economy are analyzed, and the results are compared to those of Japan. The adoption of an outward-looking policy has led to increases in both exports and imports in Norway entailing the reallocation of resources according to comparative advantage among industries as well as specialization within industries. It is noteworthy that per capita income grew more rapidly in the 1961 to 1969 subperiod, when the establishment of the European Free Trade Association gave a boost to exports, than between 1953 and 1961. The experiences of Norway and Japan during the period of import liberalization were similar. However, available data indicate that exports made a larger contribution to economic growth in Norway than in Japan. These differences may be due to factors such as the size of the domestic market, rates of imports protection, and Norway's free trade arrangement in manufactured goods within the free trade zone.

Marx and "Underdevelopment"

Abstract: Recently a new current of interpretation of Marx's view of British free trade in the nineteenth century seems to be on the rise among historians and theorists interested in the historical experiences of Third World peoples as "consumers of imperialism." One allegation usually shared by these interpreters is that Marx failed to grasp the historical function British free trade played in retarding or distorting the development of backward countries' economies through their integration into the world market system. In other words, Marx is criticized for having optimistically believed that British free trade would promote industrialization throughout the world on the European model. It seems worthwhile to see if these critiques do indeed do justice to Marx or not. Before re-examining Marx's theses on British free trade, however, I think I had better briefly review how Marx's view is criticized by the aforesaid current of interpretations. Let us look at some of the most typical examples.This article can also be found at the Monthly Review website, where most recent articles are published in full.Click here to purchase a PDF version of this article at the Monthly Review website.

Economic Development and the Theory of International Trade

Abstract: Recently the major issue in the international aspects of economic development has been the so-called "North-South dialogue" in connection with the UN resolutions calling for a New International Economic Order The intellectual basis for the proposed reforms, in so far as one exists, appears to lie in the well-known writings of Raul Prebisch and Hans Singer Both of them argue that there is a fundamental asymmetry in the workings of the global economic system which biases the resulting income distribution in favor of the industrial North and against the predominantly primary producing South Neither writer has been successful in putting forward convincing arguments for such asymmetry The standard trade theory of the HeckscherOhlin variety is usually presented in such a way that "countries A and B" are identical in all respects except for a difference in factor proportions that leads to pretrade product and factor-price differentials that are removed by free trade There is no room for any asymmetry here It would therefore seem to be both relevant and interesting to construct and investigate models that exhibit the PrebischSinger asymmetry at the level of rigor that generally prevails in pure trade theory The rest of this paper will present two examples of such models from current research The first consists of a simple diagrammatic exposition of an interesting but heavily mathematical paper by Murray Kemp and M Ohyama and the second outlines the essential features of an approach to the analysis of North-South economic relations found in my earlier paper 1 The Kemp-Ohyama Model

Bulk Exports, Trade Tiers, Regulation, and Development: An Economic Approach to the Study of West Africa's “Legitimate Trade”

Abstract: During the nineteenth century the export of bulk commodities from West Africa expanded at the expense of slave exports. Research has focused on the political implications of the expansion of so-called “legitimate trade” rather than on its economic character. In the interests of an economic approach, new terminology and a conceptual framework are proposed, and then applied to a historical problem—the levels of competition prevailing in the African trader networks serving the coastal ports. The conclusions of this study are related to the issue of the historical origins of African underdevelopment.