Showing papers on "Free trade published in 1991"

Environmental Impacts of a North American Free Trade Agreement

Abstract: In general, a reduction in trade barriers will affect the environment by expanding the scale of economic activity, by altering the composition of economic activity and by initiating a change in the techniques of production. We present empirical evidence to assess the relative magnitudes of these three effects as they apply to further trade liberalization in Mexico. We first use comparable measures of three air pollutants in a cross-section of urban areas located in 42 countries to study the relationship between air quality and economic growth. We find for two pollutants (sulphur dioxide and `smoke') that concentrations increase with per capita GDP at low levels of national income, but decrease with GDP growth at higher levels of income. We then study the determinants of the industry pattern of US imports from Mexico and of value added by Mexico's maquiladora sector. We investigate whether the size of pollution abatement costs in US industry influences the pattern of international trade and investment. Finally, we use the results from a computable general equilibrium model to study the likely compositional effect of a North American Free Trade Agreement (NAFTA) on pollution in Mexico.

Learning by Doing and the Dynamic Effects of International Trade

Abstract: Using an endogenous growth model in which learning by doing, although bounded in each good, exhibits spillovers across goods, this paper investigates the dynamic effects of international trade. Examining an LDC and a DC, the latter distinguished by a higher initial level of knowledge, under autarky and free trade, I find that under free trade the LDC (DC) experiences rates of technical progress and GOP growth less than or equal (greater than or equal) to those enjoyed under autarky. Unless the LDC's population is several orders of magnitude greater than that of the DC and the initial technical gap between the two economies is not large, the LDC will be unable to catch up with its trading partner. Hence, in terms of technical progress and growth, the LDC experiences dynamic losses from trade, whilst the DC experiences dynamic gains. However, since technical progress abroad can improve welfare at home, LDC consumers may enjoy - higher intertemporal utility along the free trade path. In the case of DC consumers, as long as their economy is not overtaken by the LDC they will enjoy both more rapid technical progress and the traditional static gains from trade, and hence experience an unambiguous improvement in intertemporal welfare.

Learning by Doing and the Dynamic Effects of International Trade

Abstract: Using an endogenous growth model in which learning by doing, although bounded in each good, exhibits spillovers across goods, this paper investigates the dynamic effects of international trade. Examining the interaction of a LDC and a DC, the latter distinguished by a higher initial level of knowledge, the author finds that, under free trade, the LDC (DC) experiences rates of technical progress and GDP growth less than or equal (greater than or equal to) those enjoyed under autarky. Since both countries enjoy the usual static gains from trade, free trade may, nevertheless, improve the welfare of LDC consumers.

International Trade with Endogenous Technological Change

Abstract: To explain why trade restrictions sometimes speed up worldwide growth and sometimes slow it down, we exploit an analogy with the theory of consumer behavior. substitution effects make demand curves slope down, but income effects can increase or decrease the slope, and can sometimes overwhelm the substitution effect. We decompose changes in the worldwide growth rate into two effects (integration and redundancy) that unambiguously slow down growth, and a third effect (allocation) that can either speed it up or slow it down. We study two types of trade restrictions to illustrate the use of this decomposition. The first is across the board restrictions on traded goods in an otherwise perfect market. The second is selective protection of knowledge-intensive goods in a world with imperfect intellectual property rights. In both examples, we show that for trade between similar regions such as Europe and North America, the first two effects dominate; starting from free trade, restrictions unambiguously reduce worldwide growth.

The move toward free trade zones

Abstract: From World War I1 until about 1980, regional free trade agreements and global trade negotiations under the General Agreement on Tariffs and Trade (GATT) could reasonably be seen as complements rather than substitutes-as two aspects of a broad march toward increasingly open international markets. Since then, however, the two have moved in opposite directions. The 1980s were marked by stunning and unexpected success for regional trading blocs. In Europe, the European Community (EC) not only enlarged itself to include the new democracies of Southern Europe, but made a lunge for an even higher degree of economic unity with the cluster of market-integrating measures referred to as "1992." In North America, Canada ended a century of ambivalence about regional integration by signing a free trade agreement (which is also to an important extent an investment agreement) with the United States; even more startlingly, the reformist Salinas government in Mexico has sought, and appears likely to get, the same thing. And in East Asia, 'while formal moves toward regional free trade are absent, there was after 1985 a noticeable increase in Japanese investment in and imports from the region's new manufacturing exporters.

Environmental impacts of a North American free trade agreement

Abstract: A reduction in trade barriers generally will affect the environment by expanding the scale of economic activity, by altering the composition of economic activity, and by bringing about a change in the techniques of production. We present empirical evidence to assess the relative magnitudes of these three effects as they apply to further trade liberalization in Mexico. In Section 1. we use comparable measures of three air pollutants in a cross-section of urban areas located in 42 countries to study the relationship between air quality and economic growth. We find for two pollutants (sulfur dioxide and "smoke") that concentrations increase with per capita GDP at low levels of national income, but decrease with GD? growth at higher levels of income. Section 2 studies the determinants of the industry pattern of U.S. imports from Mexico and of value added by Mexico's maquiladora sector. We investigate whether the size of pollution abatement costs in the U.S. industry influences the pattern of international trade and investment. Finally, in Section 3, we use the results from a computable general equilibrium model to study the likely compositional effect of a NAFTA on pollution in Mexico.

Some Economics of Trade Secret Law

Abstract: Despite the practical importance of trade secrets to the business community, the law of trade secrets is a neglected orphan in economic analysis. This paper sketches an approach to the economics of trade secret law that connects it more closely both to other areas of intellectual property and to broader issues in the positive economic theory of the common law.

North American Free Trade: Issues and Recommendations

Abstract: Negotiations toward a North American free trade area (FTA) started in early 1991. This study assesses the impact such negotiations would have on the US and Mexican economies, the goals of a North American ETA, and the implications for world trade relations. Three main topics are examined: the goals of the United States, Mexico, and Canada in pursuing closer trade ties, and the appropriate modalities and timetable for achieving those objectives; the implications of prospective negotiations: what should and should not be on the table, how the US-Canada model could be applied, and/or how that model would need to be modified; and the implications for the world trading system in light of the results of the Uruguay Round of multilateral trade negotiations in the GATT. The study also addresses specific questions relating to the liberalization of tariff and nontariff barriers; the application of countervailing and antidumping duties, investment in the energy sector, rules of origin, and "hot potato" labour issues (wages, health and safety, and environmental standards).

Best practices in trade policy reform

Abstract: It was recognized by many developing countries in the 1980s that integration with the global economy is necessary for economic development and technological progress. Efforts to liberalize trade were controversial. A unique body of evidence on developing country trade liberalization will examine why outcomes have varied from one country to another. The political economy of trade liberalization and the interaction among trade and domestic reform, macro-economic stability, and export development is examined using: (a) cross-sectional data, (b) country studies, (c) and interviews. The sequencing of reforms and implications for multilateral trade negotiations, foreign direct investment, and regional integration schemes is an additional consideration. The emphasis is on practical problems-economic and political-and recommendations of how policies can be designed and implemented to yield stronger and more sustainable results.

The Myth of Free-Trade Britain and Fortress France: Tariffs and Trade in the Nineteenth Century

Abstract: This examination of official commercial statistics suggests that the conventional wisdom regarding early free-trade efforts of Britain and France is wrong. French average tariff levels were, surprisingly, consistently below those of Britain throughout most of the nineteenth century, even after the abolition of the Corn Laws and before passage of the 1860 Treaty of Commerce. Previous scholarship has focused on French commercial policies covering a narrow range of items and has largely ignored the overall trade policies of both nations. This study moves us further away from stories of development and trade confined to a few "leading" sectors.

Quality and Trade

Abstract: We present a model of trade in which similar countries trade more with each other than very different countries. The reason is that high human capital countries have a comparative advantage at producing high quality goods, but are also rich enough to want to consume high quality. As a result, countries choose trading partners at a similar level of development, who produce similar quality products. The model helps account for the observed trade patterns, and sheds light on international income comparisons. It also helps explain recent concerns of Eastern European countries that they have "nothing to sell" to the West.

Learning by Doing and the Dynamic Effects of International Trade

Abstract: Using an endogenous growth model in which learning by doing, although bounded in each good, exhibits spillovers across goods, this paper investigates the dynamic effects of international trade. Examining an LDC and a DC, the latter distinguished by a higher initial level of knowledge, under autarky and free trade, I find that under free trade the LDC (DC) experiences rates of technical progress and GOP growth less than or equal (greater than or equal) to those enjoyed under autarky. Unless the LDC's population is several orders of magnitude greater than that of the DC and the initial technical gap between the two economies is not large, the LDC will be unable to catch up with its trading partner. Hence, in terms of technical progress and growth, the LDC experiences dynamic losses from trade, whilst the DC experiences dynamic gains. However, since technical progress abroad can improve welfare at home, LDC consumers may enjoy - higher intertemporal utility along the free trade path. In the case of DC consumers, as long as their economy is not overtaken by the LDC they will enjoy both more rapid technical progress and the traditional static gains from trade, and hence experience an unambiguous improvement in intertemporal welfare.

International trade and trade policy

Abstract: Centering on questions of the potential optimality of some trade protection, these original contributions present research at the frontier of international trade and trade policy. They expand and test the new trade theory that has developed during the last decade, incorporating elements of industrial organization and political economy into the study of trade structure and the formation of trade policy.Essays in the first two parts take up trade policy, addressing issues such as the formation of trading blocks, strategic trade policy, the political economy of protection, growth-oriented trade policies, and including empirical studies of the welfare effects of quality - upgrading voluntary export restrictions and import quotas. Essays in the third part discuss various structural issues such as trade in services, intersectoral adjustments, and the advantage of early entry.Contents: Trade Policy: Theory. Is Bilateralism Bad? "Paul R. Krugman. "Strategic Trade Policy and Direct Foreign Investment: When Are Tariffs and Quotas Equivalent? "James A. Levinsohn. "Making Altruism Pay in Auction Quotas, "Kala Krishna. "On the Ineffectiveness of Made-to-Measure Protectionist Programs, "Aaron Tornell. "Export Subsidies and Price Competition, "Peter Neary. "Adverse Selection in Credit Markets and Infant Industry Protection, "Harry Flam "and "Robert W. Staiger. "Protection, Politics, and Market Structure, "Arye L. Hillman. "Growth and Welfare in a Small Open Economy, "Gene M. Grossman "and "Elhanan Helpman. "Trade Policy: Evidence. Quality Upgrading and Its Welfare Cost in U.S. Imports, "1969-74, Randi Boorstein "and "Robert C. Feenstra. "Counting the Cost of Voluntary Export Restraints in the European Car Market, "Alasdair Smith "and "Anthony J. Venables. "Structural Issues. Services in International Trade, "Wilfred J. Ethier "and "Henrik Horn. "First-Mover Advantages, Blockaded Entry, and the Economics of Uneven Development, "James R. Markusen. "Wage Sensitivity Rankings and Temporal Convergence, "Ronald W. Jones "and "Peter Neary."

The Political Economy of International Trade: Essays in Honour of Robert E. Baldwin.

Abstract: Part 1: Theory of trade policy with imperfect information Avinash Dixit strategic trade policy and the new international economics a critical analysis, Gottfried Haverlay the role of services in production and international trade a theoretical framework, Ronald W.Jones and Henry Kierzkowski the coefficient of trade utilization - back to the Baldwin envelope, James E Anderson and J.Peter Neary. Part 2: Trade policy issues, reflections on uniform taxation, Arnold C.Harberger intellectual property rights and north-south trade, Judith C.Chin and Gene M.Grossman optimal tariff retaliation rules, David F. Burgess international trade in capital and capital goods, Rachel McCulloch and J.David Richardson. Part 3 Political economy of trade policy asymmetries in policy between exportables and import-competing goods, Anne D.Krueger trade policy, development, and the new political economy, Gerald M.Meier does 1992 come before or after 1990? on regional versus multilateral integration, Andre Sapir. Part 4: empirical studies of trade issues the structure and effects of tariff and non-tariff barriers in 1983, Edward Leamer a computational analysis of alternative safe guards of policy scenarios in international trade, Alan V. Deardorff and Robert M. Stern direct foreign investments and trade in east and southeast Asia, Seiji Naya.

Commodity and Developing Country Terms of Trade: What Does the Long Run Show?

Abstract: Recently, the debate surrounding the commodity net barter terms of trade and the terms of trade of developing countries has entered a new phase. In this JOURNAL, Spraos (I980) presents evidence of a 'stable' declining commodity, terms of trade and Sapsford (i985), although fl'nding 'instability' in the work of Spraos, argues in support of the 'stable' declining terms of trade hypothesis. Grilli and Yang (I988), henceforth GY, also provide evidence supporting this view and state the implications of this finding for developing-country terms of trade. A major contribution of GY is a published set of data on the main price indices with a high degree of consistency for the whole century.1 However, Cuddington and Urzua (I989) in thisJOURNAL, illustrate that the hypothesis of a 'secular deterioration' in the commodity terms of trade is not robust to the alternative claim that there was a once-and-for-all shift in commodity prices in the period I920-I. After taking this shift into account these authors find little evidence to support the view of a 'secular decline'. 2 This debate has important implications for the 'Prebisch-Singer' hypothesis of a 'stable declining commodity terms of trade' (see for instance Prebisch, I 950) . It also has implications for both development and stabilisation strategies adopted by commodity-dependent developing countries. A central issue in this analysis is the order of integration of the commodity terms of trade. A time series is said to be integrated of order o, I(o), if its mean and variance are constant, or roughly speaking if the series is stationary. A time series is said to be I(n) if the series requires first differencing n times before a stationary series is obtained. Alternatively, if adding a time trend is sufficient to induce stationarity, the series is termed 'trend stationary'. A 'trend stationary' series implies that the variable in question simply adjusts around a constant growth path, but an I(i) series is truly non-stationary and displays very different properties. A commonly cited example of an 1(i) series is the random walk. The order of integration of a single time series is related to the idea of cointegration of a number of time series. Consider two variables, X and Y, that are not themselves I (o) but are of the same order of integration. If the residuals from regressing X on Y, or vice versa, are I(o), or roughly speaking if the residuals are stationary, it can be concluded that the two variables are cointegrated. In turn this implies that there is some form of equilibrium

Impacts of Structural Adjustment Programs on African Women Farmers and Female-Headed Households

Abstract: The structural adjustment programs (SAPs) initiated by the International Monetary Fund (IMF) and the World Bank and supported by donors are stimulating many tropical African economies through an infusion of foreign exchange, increased agricultural prices, devaluation of overvalued currencies, improved marketing policies, trade liberalization, and increased competition from the private sector. Recently, however, debates about the pros and cons of SAPs have ensued.

Computational Analysis of Global Trading Arrangements

Abstract: Part 1 Modelling global trading arrangements: the Michigan model of world production and trade - theoretical considerations implementation of the model. Part 2 Computational analysis of the effects of production: the structure of tariff protection - effects of foreign tariffs and NTBs input-output technologies and the effects of tariff reductions neighbourhood effects of developing country protection the effects of protection on the factor content of Japanese and American foreign trade an evaluation of factor endowments and protection as determinants of Japanese and American foreign trade the economic consequences of an import surcharge - theory and empirical evidence for the US economy tariffs and defensive responses the impact of tariffs on profits in the United States and other major trading countries. Part 3 Computational analysis of multilateral trade liberalization: impact of the Tokyo Round and US macroeconomic adjustments onm North American trade alternative scenarios for trade liberalization in the Uruguay Round negotiations evaluation of alternative safeguards scenarios in the major trading countries. Part 4 Conclusions and implications for research and policy: what have we learned?

European trade patterns after the transition

Abstract: This paper concentrates on geographic direction of trade only It applies a fairly conventional gravity model technique to answer the question: What would be the geographic pattern of trade of East and Central Europe (ECE) if their trade were determined by the same factors as those that affect market economies? It consists of the following sections: (a) a general introduction to this question and the paper's objectives; (b) a presentation of the model and the estimation results for a sample of non-socialist countries; and (c) a report on the ECE simulations The paper concludes by predicting a dramatic shift in trade patterns and discusses the implications of such a shift

Africa's external economic relations: 1960–90

Abstract: AE RICA'S EXTERNAL relations have dominated the discussion of its economies. In trade relations, protectionism against imports and schemes to reduce the volatility of export income; in factor market relations, dependence upon foreign firms and foreign labour. During the 1 980s even domestic policies such as public services have been internationalized through donor condil:ionality, itself a by-product of foreign aid and foreign debt. In this short paper I cannot attempt to be comprehensive. Instead I focus upon two thmes. The first is about changes in the relationship between African governments and external authorities. I argue that decolonization abolished a set of economic agencies which have yet to be adequately replaced. My second theme is about trade and shocks. Africa was and is a collection of small open economies reliant upon agricultural and mineral exports the income from which is volatile. I focus upon how policies have reilnforced this structure and on the problems it has caused. The two thlvmes are drawn together by a proposal to enhance the role of a particular type of multinational institution which has had some success.

Measuring outward orientation in developing countries : can it be done?

Abstract: The pressure for trade reform as an integral component of adjustment programs has intensified the ongoing debate about the benefits of trade liberalization of trade regimes in the less developed countries (LDCs). This heightened interest has in turn generated continued empirical study of the relationship between economic performance and trade policy orientation. One branch of this overall policy-performance literature uses cross-country regressions relating economic performance and a measure of policy"outward orientation"or"openness"to investigate this relationship. This paper attempts to move the debate on the empirical cross-country relationship between trade policy and economic performance backwards one step by asking the question, can the economists'intuitive notion of outwardly oriented policy captured empirically? It reviews some principles of the measurement of trade barriers and examines the relationship between four types of empirical measures of outward orientation across countries, including: (a) the share of trade in GDP; (b) the average tariff and coverage ratio of non-tariffbarriers; (c) measures of the deviation of countries'actual trade pattern from the pattern predicted from a model of resource based comparative advantage; and (d) a measure of real price distortions. The paper also discusses the interpretation and implications of the lack of association between the various measures.

Credit Markets, Credibility, and Economic Transformation

Abstract: This paper focuses on the special role that capital markets play in the transformation of centrally planned economies into well-functioning market economies. We demonstrate that underdeveloped credit markets inhibit the effectiveness of price reform, monetary and credit policies, and trade liberalization. We explore various ways to overcome the difficulties associated with the underdeveloped credit markets. In this regard, we examine the implications of "cleaning" the balance sheets of enterprises and banks from nonperforming loans, as well as ways to enhance credibility. The paper concludes with a brief discussion of sequencing of economic reform measures.

Size rationalization and trade exposure in developing countries

Abstract: Given the lack of direct evidence regarding industrial adjustment in response to trade liberalization, this paper tackles some very basic questions. Specifically, in LDCs, how is trade orientation correlated with the size distribution of plants and with plant-level labor productivity? It begins with a simple model that summarizes some effects of trade exposure on producer size and productive efficiency that have been stressed in the recent analytical and simulation literature. It then examines annual plant-level data from Chile and Colombia to determine whether these effects can be confirmed. The empirical results indicate that, over the long run, higher trade exposure is correlated with smaller plant sizes, controlling for industry and country effects. However, the mix of high versus low productivity plants is not strongly associated with trade exposure. Both of these findings cast doubt on the mechanisms linking trade, plant size, and productivity in a number of recent analytical and simulation studies.

Risk and trade regimes: another exploration

Abstract: An analysis of a small sample of countries shows that the higher the level of termsof-trade risk that a nation faces in international markets, the more likely it is to increase barriers. The analysis also shows that the greater the availability of social insurance programs mounted by a nation's government, the less likely it is to block free trade. In comparison with the small open economies of Western Europe, therefore, developing countries may remain protectionist because they lack the resources to mount internal programs of transfer payments as a means of coping with risk from international markets.