Analysis on International Trade of CLM Countries

Since their accession to AFTA, trade volumes of CLM countries have being grown rapidly while their trade patterns and directions have significantly changed. Recognizing the importance of international trade in CLM economies, this study attempts to analyze the trade patterns of CLM countries based the gravity model. The empirical analysis is conducted to identify the determining factors of each country’s bilateral trade flows and policy implications for promoting their trade.

Strategic trade policy and non-linear subsidy : in the case of price competition

In a strategic trade policy, it is assumed, in this paper, that a government changes disbursement or levy method so that the reaction function of home firm approaches infinitely close to that of foreign firm. In the framework of Bertrand-Nash equilibrium, Eaton and Grossman[1986] showed that export tax is preferable to export subsidy. In this paper, it is shown that export subsidy is preferable to export tax in some cases in the framework of Bertrand-Nash equilibrium, considering the uncertainty in demand. Historically, many economists mentioned non-linear subsidy or tax. However, optimum solution of it has not yet been shown. The optimum solution is shown in this paper.

Non-conventional provisions in regional trade agreements : do they enhance international trade?

The scope of recent regional trade agreements (RTAs) is becoming much wider in terms of including several provisions such as competition policy or intellectual property. This paper empirically examines how far advanced, non-conventional provisions in RTAs increase trade values among RTA member countries, by estimating the gravity equation with more disaggregated indicators for RTAs. As a result, we find that the provision on competition policy has the largest impacts on trade values, following that on government procurement. Our further analysis reveals that the more significant roles of these two provisions can be also observed in the impacts on the intensive and extensive margins.

The effect of EU environmental regulation on international trade : restriction of hazardous substance as a trade barrier

In 2003 the Restriction of Hazardous Substances (RoHS) was established in the EU, which limited the trade of machinery, electrical and electronic equipment that have at least one of the substances considered hazardous under RoHS directive. Since countries trading with the EU must comply with this new regulation, it is expected a decrease in value of imports to the EU. In this paper, it is followed the procedures used in Heckman (1979), as well as the extended procedure suggested by Helpman, Melitz, and Rubinstein (2008) to ascertain the effects on the persistence of trade and values of trade.

Comparing the Networks of Ethnic Japanese and Ethnic Chinese in International Trade

In this paper I re-examined the trade enhancing effects of ethnic Chinese networks, found by Rauch and Trindade (2002), on a newer and extended data set. The effects are estimated by the gravity equation with the product of the population ratio (or absolute number) of the ethnic Chinese in both the importing and exporting countries, and are reaffirmed positive and statistically significant. I also compared the effects of two different ethnic Japanese networks, i.e., the networks of long-term Japanese stayers in foreign countries, and the networks of permanent Japanese residents in foreign countries. It is found that the former has stronger trade enhancing effects than the latter. This shows that the effects of ethnic networks on international trade can be generalized beyond the ethnic Chinese, and the ’cohesiveness’ of the ethnic network matters to the trade enhancing effects of the network.

The Effect of Exchange Rate Volatility on International Trade: The Implication for Production Networks in East Asia

This paper is an empirical investigation of the relationship between exchange rate volatility and international trade, focusing on East Asia. It finds that intra-East Asian trade is discouraged by exchange rate volatility more seriously than trade in other regions because intermediate goods trade in production networks, which is quite sensitive to exchange rate volatility compared with other types of trade, occupies a significant fraction of trade. In addition, this negative effect of volatility is mainly induced by the unanticipated volatility and has an even greater impact than that of tariffs.

Are trading partners complementary in international trade?

We use a unique dataset on trading transactions at the firm level to investigate a complementary effect in international transactions between sellers and buyers; trading transactions are more likely to be international when both sellers and buyers are large in size than when either sellers or buyers are large. Our econometric analysis provides evidence for the complementary effect between trading partners on the likelihood of international trade, which is most prominent for exports from North to South.

Bilateral tariff rates in international trade : finished goods versus intermediate goods

In this paper, we examined back-and-forth international transactions through tariff reduction by estimating modified gravity equations for finished goods and intermediate goods separately. Our main findings are as follows. Exports of finished machinery products are negatively associated with not only the importer's tariff rates on finished machinery products but also the exporter's tariff rates on machinery parts. Similarly, exports of machinery parts are negatively associated with not only the importer's tariff rates on machinery parts but also the exporter's tariff rates on finished machinery products. These results imply that tariff reduction in only one production process in an industry has the potential to drastically change the magnitude of trade in the whole industry.

Australia's Foreign Economic Policy: a 'State-Society Coalition' Approach and a Historical Overview

This paper aims to explain the historical development of Australia's foreign economic policy by using an analytical framework called a 'state-society coalition' approach. This approach focuses on virtual coalitions of state and society actors that share 'belief systems' and hold similar policy ideas, goals and preferences, as basic units (policy subsystems) of policy making. Major policy changes occur when a dominant coalition is replaced by another. The paper argues that, in Australia, there have been three major state-society coalitions in the foreign economic policy issue area: 'protectionists', 'trade liberalisers' and 'optional bilateralists'. The rise and fall of these coalitions resulted in distinctive shifts of Australia's foreign economic policy in the 1980s towards unilateral and multilateral liberalisation and in the late 1990s towards bilateral trade and investment arrangements.

Trade, Exchange Rates, and Macroeconomic Dynamics in East Asia: Why the Electronics Cycle Matters

Against the background of increasing regional trade and investment, there is growing interest in monetary and macroeconomic policy coordination in East Asia. Although there is a sizable literature on macroeconomic linkages among East Asian countries and the potential merit of policy coordination in the region, the existing studies tend to examine these issues exclusively in terms of macroeconomic variables and do not consider how these aggregate variables are influenced by one prominent feature of a number of East Asian economies: their heavy dependence on the electronics industry. Although active engagement in the global electronics industry has been a powerful growth engine for the Asian countries, it has also left their economies vulnerable to cyclical fluctuations in the world electronics market. As the cycle of the global electronics industry exerts profound impacts on the medium-term dynamics of the Asian economies, it is imperative to take an explicit account of its influence when studying the way in which the regional economies are linked to one another and how this relationship can be altered by a specific policy initiative. We illustrate the importance of this point by examining recent studies on: (1) trade competition between China andother Asian countries and the role of the Chinese renminbi therein; and (2) the effect offluctuations in the yen/dollar exchange rate on the regional economies.

Management for a Variety of Environmental Pollution and North-South Trade

A simple static model incorporating a variety of environmental pollution is developed. An autarky model shows that a developing country regulates fewer types of pollution by income-induced environmental policy. As income grows, the types of regulated pollution increase and also introduced regulations become tougher.Then the model incorporates international trade between a developed country and a developing country. The model gives a new interpretation for the pollution haven hypothesis. Some types of pollution abated with inefficient technology are emitted more in a developing country but other types necessarily increase in a developed country in order to meet the trade balance.

East Asia's Economic Development cum Trade "Divergence"

This paper addresses some salient features of how some of "successful" East Asian economies have been faring in terms of enhancing their export competitiveness. That export becomes more divergent in terms of its unit price as more technology-enhancing economic activity is undertaken within an economy, is the primary message that this study conveys. This is indeed what Schumpeter had addressed in conjunction with his "creative destruction" thesis. From this perspective, East Asia's export-led industrialization has been attained through a particular policy focus upon high "trade divergence" sectors underpinned by a generally high level of manufacturing flexibility. The experience of Malaysia's development serves as the strong case in point. As an East Asia-wide FTA is expected to facilitate "divergent" export-led industrialization through enhanced knowledge interaction, this dynamic or "divergent" impact that knowledge creation could exert should come to the fore of relevant policy arguments, together with static consideration of trade creation and diversion. A formal statistical test of the "divergence hypothesis" above is called for with a view to building upon this preliminary study.

Is It Worthwhile for Indonesia to Rush into a Free Trade Deal with Japan?

This report represents a preliminary attempt to refine some basic ideas on the potential impact Indonesia might experience from a free trade arrangement with Japan, using a forward-looking, multi-regional, multi-sectoral applied general equilibrium model of global trade to capture growth effects through capital accumulation paying attention to the changes in the patterns of interregional capital flows that might happen even before the policy change occurs. The simulation results revealed that the welfare gains of rushing into trade liberalization with Japan are not so large. This makes out that taking time over negotiations might be the best choice for Indonesia if the government places priority on convincing the Indonesian people that a free trade deal with Japan will definitely bring positive effects, while proceeding rapidly might be the answer if the country is serious about recovering the welfare levels that might be lowered by free trade arrangements among Malaysia, the Philippines, and Japan.