Impact of ICT on trade in different technology groups: analysis and implications / Evgeniya Yushkova

The link between ICT use and trade flows has been widely discussed in the literature. It has been argued that the use of ICT contributes to the fall of trade costs. The analysis presented identifies the role of a specific ICT variable, namely the extent of use of Internet by the business community, in international trade. The export flows between 40 countries (OECD countries plus Brazil, China, India, Indonesia, Russia and South Africa) are analyzed. The results are presented for different technology groups of products, from high-tech to low-tech. The relationship between the use of Internet and trade in ICT goods is also considered

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Does the internet generate economic growth, international trade, or both? / Huub Meijers

Recent cross country panel data studies find a positive impact of internet use on economic growth and a positive impact of internet use on trade. The present study challenges the first finding by showing that internet use does not explain economic growth directly in a fully specified growth model. In particular openness to international trade variables seem to be highly correlated with internet use and the findings in the literature that internet use causes trade is confirmed here suggesting that internet use impacts trade and that trade impacts economic growth. A simultaneous equations model confirms the positive and significant role of internet use to openness and the importance of openness to economic growth. Internet use shows to be more impacting trade in non-high income countries than in high income countries whereas the impact of trade on economic growth is the same for both income groups.

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A macro assessment of China effects on Malaysian exports and trade balances / Tze-Haw Chan, Hooi Hooi Lean and Chee-Wooi Hooy

This paper aims to focus on the impact of China’s export expansion on Malaysian monthly trading with to her 12 major trading partners over the liberalization era.

Regime shifts are evident in the long run where structural break(s) found mostly coincides with the Asia crisis and China’s accession into WTO. While the income effects are more apparent in most cases, the real exchanges are rather insignificant and incorrectly signed for Malaysian bilateral trading. Besides, the trade balance estimation is generally more consistent that the Chinese exports have exhibited complementary effects in the long-run, mainly for advanced export destination such as Australia, Germany, Japan, the UK and the USA. On the whole, there is insufficient evidence to support the “PRC competitive threat”.

The paper assesses the China’s crowding out effect and magnitudes of Malaysian export and trade balance elasticities with model specifications that consider structural breaks. The paper also assesses the macro dimension of income and real exchanges effects.

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Trade Policy: Home Market Effect versus Terms-of-Trade Externality / Alessia Campolmi, Harald Fadinger, Chiara Forlati

We study trade policy in a two-sector Krugman (1980) trade model, allowing for wage, import and export subsidies/taxes. We study non-cooperative trade policies, first for each individual instrument and then for the situation where all instrumentscan be set simultaneously, and contrast those with the efficient allocation. We show that in this general context there are four motives for non-cooperative trade policies: the correction of monopolistic distortions; the terms-of-trade manipulation; the delocation motive for protection (home market effect); the fiscal-burden-shifting motive. The Nash equilibrium when all instruments are available is characterized by first-best-level wage subsidies, and inefficient import subsidies and export taxes, which aim at relocating firms to the other economy and improving terms of trade. Thus, the dominating incentives for non-cooperative trade policies are the fiscal-burden-shifting motives and terms-of-trade effects.

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The sustainability of trade accounts of the ASEAN-5 countries / Olayeni Olaolu Richard and Aviral Kumar Tiwari

The present study aims to analyse the sustainability of the trade deficits in the Association of Southeast Asian Nations (ASEAN)-5 countries using panel framework during the period from 1965 to 2011. The paper found the evidence of sustainable trade deficit in ASEAN-5 countries while utilizing panel unit root tests as well as panel cointegration tests.

The main contribution of the paper is to show that the macroeconomic policies of ASEAN-5 countries had been effective in leading exports and imports to long-run steady-state equilibrium relationship. To the authors’ best knowledge, in this area, this is the first study in the panel framework for ASEAN countries.

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Exchange-rate risk and UK-China trade: evidence from 47 industries / Mohsen Bahmani-Oskooee, Scott Hegerty and Ruixin Zhang

Recent years have seen a rapid expansion of studies that examine the effects of exchange-rate risk on bilateral exports and imports for specific industries. Since the underlying theory is ambiguous, each case must be studied individually. This paper considers British trade with China, for 47 types of product, over the period from 1978 to 2010. Consistent with the underlying theory, cointegration analysis shows that most industries register no effect due to volatility in the long run, while some trade flows are reduced and a handful are even increased. An analysis of industry characteristics suggests that while the type of good might play little role on an industry’s specific results, a product’s trade share does. This is the case for UK imports of Chinese goods, perhaps because large Chinese exporters are able to successfully hedge against exchange-rate risk. The paper aims to discuss these issues.

The paper arrives at two key conclusions. First, as has been shown previously for other country pairs, most industries demonstrate no long-run response to exchange-rate volatility. A fraction of industries are affected, and most of these effects are negative.

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The sustainability of trade accounts of the ASEAN-5 countries / Olayeni Olaolu Richard and Aviral Kumar Tiwari.

The present study aims to analyse the sustainability of the trade deficits in the Association of Southeast Asian Nations (ASEAN)-5 countries using panel framework during the period from 1965 to 2011.

The paper found the evidence of sustainable trade deficit in ASEAN-5 countries while utilizing panel unit root tests as well as panel cointegration tests. The findings have important macroeconomic policies implication for ASEAN-5 countries that these policies had been effective in leading exports and imports to long-run steady-state equilibrium relationship among the ASEAN-5 countries. The main contribution of the paper is to show that the macroeconomic policies of ASEAN-5 countries had been effective in leading exports and imports to long-run steady-state equilibrium relationship. To the authors’ best knowledge, in this area, this is the first study in the panel framework for ASEAN countries.

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Research on the effects of WTO accession on China’s economic growth: Path analysis and empirical study / Zhang Zhiming, Zhang Xin, Cui Riming

The purpose of this paper is to measure the effects of WTO accession on the economic growth of China, and the paths of those effects. This article carries out a theoretical and empirical analysis on the effect on China’s economic growth from WTO accession. First is about the theoretical analysis of the paths of those effects which WTO accession has on China’s economic growth. Next is to make empirical test about the effects through dummy variable regression and cross variable analysis.

WTO accession has a remarkable and a positive effect on China’s economic growth through the following specific paths, i.e. foreign trade path, economic system reform path and FDI path. But so far entry into WTO has not positively influenced China’s economic growth through technological innovation.

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China’s ten years in the WTO: review and perspectives / Huijiong Wang and Shantong Li and Qi Wang

The primary purpose for the World Trade Organization (WTO) is to open trade for the benefits of all. Since its accession to WTO in 2001, China has experienced remarkable economic growth with an average annual growth rate of around 10.5 percent GDP in the past ten years and has moved itself up from the original sixth position to the second on the world largest exporters’ rank. This has served as a linchpin for global trade, benefiting exporters of commodities such as Australia as well as exporters of capital goods such as Germany and Japan. This shows clearly the role contributed by WTO and the benefits of open trade. China’s reform process has also been benefited from its accession into WTO.

There are several systematic studies summarizing the lessons and experience of China’s ten years in the WTO both in China and abroad. This paper will contribute to the current understanding about China’s WTO experience by reviewing relevant
literature and adding new perspectives on some issues not fully discussed in the literature. This paper is organized into two main parts: Part I will provide a brief review of four selected publications, two in Chinese and two by international
organizations. It aims at providing English readers with the essential information about China’s ten years in WTO. Part II will provide some analysis of selected issues not fully addressed in the publications from the perspective of the authors. Brief concluding remarks are provided in the end.

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Bank opacity, intermediation cost and globalization: Evidence from a sample of publicly traded banks in Asia / Wahyoe Soedarmono, Amine Tarazi

This paper examines the relationship between opacity and the cost of intermediation in Asian banks. Using a sample of publicly traded commercial banks from 2002 to 2008, our empirical results show that higher opacity is associated with a lower intermediation cost in banking. Hence, bank managers in their efforts to overcome asymmetric information issues and to improve transparency tend to offset the higher cost of acquiring and disclosing information by increasing the cost of intermediation for entrepreneurs. Moreover, a deeper look at the country level indicates that the negative link between opacity and the cost of intermediation is reversed as globalization increases. Greater globalization therefore outweighs managerial entrenchment behavior to preserve bank opacity. Our findings highlight that bank opacity issues are even more costly in countries with higher globalization.

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China’s energy consumption under the global economic crisis: decomposition and sectoral analysis / Fangyi Li, Zhouying Song and Weidong Liu

It is now widely recognized that there is a strong relationship between energy consumption and economic growth. Most countries′ energy demands declined during the economic depression of 2008–2009 when a worldwide economic crisis occurred. As an export-oriented economy, China suffered a serious exports decline in the course of the crisis. However, it was found that energy consumption continued to increase. Against such a background, this paper aims to assess and explain the factors causing the growth of energy consumption in China. First, we will explain the impact of domestic final use and international trade on energy consumption by using decomposition analysis. Second, embodied energy and its variation across sectors are quantified to identify the key sectors contributing to the growth. Lastly, the policy implications for long-term energy conservation are discussed. The results show that the decline in exports was one of the driving forces for energy consumption reduction in the crisis, but that the growth of domestic demand in manufacturing and construction, largely stimulated by economic stimulus plans, had the opposite effect on energy consumption. International trade contributed to decreasing energy consumption of China during and after the crisis because the structure of exports and imports changed in this period.

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Growth, Renewables, and the Optimal Carbon Tax

Optimal climate policy is investigated in a Ramsey growth model of the global economy with exhaustible oil reserves, an infinitely elastic supply of renewables, stock-dependent oil extraction costs, and convex climate damages. Four regimes can occur, depending on the initial social cost of oil being larger or smaller than that of renewables and depending on the initial oil stock being large or small. We also offer some policy simulations for the first and second regime, which illustrate that with a lower discount rate more oil is left in situ and renewables are phased in more quickly. We identify the conditions under which the optimal carbon tax rises or decreases. Subsidizing renewables (without a carbon tax) induces more oil to be left in situ and a quicker phasing in of renewables, but oil is depleted more rapidly initially. The net effect on global warming is ambiguous.

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Output, renewable energy consumption and trade in Africa / Mohamed Safouane Ben Aissa, Mehdi Ben Jebli and Slim Ben Youssef

We use panel cointegration techniques to examine the relationship between renewable energy consumption, trade and output in a sample of 11 African countries covering the period 1980–2008. The results from panel error correction model reveal that there is evidence of a bidirectional causality between output and exports and between output and imports in both the short and long-run. However, in the short-run, there is no evidence of causality between output and renewable energy consumption and between trade (exports or imports) and renewable energy consumption. Also, in the long-run, there is no causality running from output or trade to renewable energy. In the long-run, our estimations show that renewable energy consumption and trade have a statistically significant and positive impact on output. Our energy policy recommendations are that national authorities should design appropriate fiscal incentives to encourage the use of renewable energies, create more regional economic integration for renewable energy technologies, and encourage trade openness because of its positive impact on technology transfer and on output.

On the trade-diversion effects of free trade agreements / Mian Dai, Yoto V. Yotov and Thomas Zylkin

Trade-diversion effects of free trade agreements (FTAs) have not been thoroughly examined empirically. Using a novel empirical approach, we confirm that FTAs divert trade away from non-member countries and even more so from internal trade (domestic sales) in member countries.

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Trade liberalisation and manufacturing wage premiums: Evidence from Thailand / Kankesu Jayanthakumaran, Piyapong Sangkaew, Martin O’Brien

This paper investigates trade related industrial wage premiums. The procedure involves (1) estimating industrial wage premiums and (2) linking those estimated wage premiums to trade related variables. Results reveal that (1) in addition to workers’ characteristics, industry characteristics where workers are employed were important in determining the wages for workers, (2) falling output tariffs resulted in increased wage premiums, and (3) an increase in intermediate imports exerted a strong positive influence on wage premiums. Linked employer and employee micro data may provide further insights which are currently not available.

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A note on detecting biases in assessing the use of FTAs / Shintaro Hamanaka

There has been much confusion, rather than debate, on the use of free trade agreements (FTAs). Unfortunately, a large part of the confusion is caused by the absence of consensus on the meaning of key terms such as the “utilization rate” and “usage rate” of FTAs, and the lack of knowledge on upward or downward biases from various data sources regarding the use of FTAs. Rather than making an original empirical contribution, this article reviews existing studies and attempts to identify the relevant methodologies for assessing the use of FTAs.

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The Role of the EU in Shaping FDI Flows to East Central Europe / Gergo Medve-Bálint

East Central Europe’s (ECE) recent record in accumulating FDI stock is notable even from a global perspective. While most scholarly works downplay the role of the European Union (EU) in this process, this article claims that in an attempt to manage the economic opportunities and threats that ECE posed after the regime change, the EU has actively shaped foreign capital inflows to the region. First, the EU triggered a liberal shift in ECE’s FDI policies. Second, after enlargement, the EU has reinforced ECE’s locational advantages through its practice of approving most of the incentive schemes offered to foreign investors. While investors mainly coming from the old EU Members began to dominate ECE economies, the region’s heavy reliance on FDI has also produced a reverse effect: ECE investments have enhanced the global competitiveness of western European firms. To a certain extent, FDI has therefore transcended the traditional east–west divide.

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The impacts of trade liberalization on informal labor markets: a theoretical and empirical evaluation of the Brazilian case / Lourenco S. Paz

Following trade liberalization, several developing countries experienced a sharp increase in the share of informal manufacturing employment. In this paper, I examine the impacts of trade liberalization on the labor markets of a small open economy, in an environment in which tariffs affect firms’ payroll tax compliance decisions. I demonstrate that a reduction in domestic import tariffs reduces the average formal wage and show that the direction of the effect on the share of informal employment depends on the initial labor market conditions. A cut in trading partner import tariffs decreases the share of domestic informal employment and increases the average formal wage. I confirm the model’s principal findings empirically, using data from the 1989–2001 Brazilian trade liberalization episode. I find the results robust to endogeneity and self-selection concerns, which are addressed, respectively, using instrumental variable and switching regression approaches.

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Partisanship and antidumping / Veysel Avsar

This paper empirically examines the influence of political partisanship on antidumping protection, which has become the most frequently used contingent trade remedy in the last 20 years. First, we show that the number of antidumping initiations from the labor intensive industries increases when there is a left-wing government in power. In addition, the evidence on the governments’ decision to impose antidumping duty demonstrates that the increase in the leftist orientation of the governments is associated with an increase in the likelihood of an affirmative antidumping outcome from the petitions of labor intensive industries. Although antidumping is an administrative protection which includes a set of necessary procedures and rules to follow, our findings clearly point out the political bias in AD actions in the form of partisan preferences.

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The relationship between trade, FDI and economic growth in Tunisia: An application of the autoregressive distributed lag model / Mounir Belloumi

The relationship between foreign direct investment (FDI), trade openness and economic growth in host countries remains one of the most important issues in the economic literature and met with renewed interest in recent years mainly for countries suffering from unemployment problems and lack of technological progress. This paper examines this issue for Tunisia by applying the bounds testing (ARDL) approach to cointegration for the period from 1970 to 2008. The bounds tests suggest that the variables of interest are bound together in the long run when foreign direct investment is the dependent variable. The associated equilibrium correction is also significant, confirming the existence of a long-run relationship. The results also indicate that there is no significant Granger causality from FDI to economic growth, from economic growth to FDI, from trade to economic growth and from economic growth to trade in the short run. Even though there is a widespread belief that FDI can generate positive spillover externalities for the host country, our empirical results fail to confirm this belief for the case of Tunisia. They go against the generally accepted idea considering the positive impact of FDI on economic growth to be automatic. The results found for Tunisia can be generalized and compared to other developing countries which share a common experience in attracting FDI and trade liberalization.

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