Structure of international cooperation in trade, investment and environment

This dissertation analyzes the obstacles against further cooperation in international economic relations. The first essay explains the gradual nature of trade liberalization. I show that existence of asymmetric information between governments provides a sufficient reason for gradualism to exist. Governments prefer starting small to reduce the cost of partner’s betrayal when there is sufficient degree of information asymmetry regarding the partner’s type. Learning about partner’s incentive structure enhances expectations, encouraging governments to increase their current level of cooperation. Specifically, the uninformed government’s subjective belief for the trading partner being good is improved as the partner acts cooperatively. This updated belief, in turn, lowers the subjective probability of future betrayal, enabling further progress in cooperation. The second essay analyzes the relationship between two countries facing two policy dilemmas in an environment with two way goods and capital flows. When issues are independent and countries are symmetric, signing separate agreements for tariffs (Free Trade Agreements-FTA) and for taxes (Tax Treaties-TT) provides the identical level of enforcement as signing a linked agreement. However, linkage can still improve the joint welfare by transferring the slack enforcement power in a case of asymmetric issues or countries. I report non-results in two cases where the policy issues are interconnected due to technological spillover effect of FDI. Moreover, I show that linking the agreements actually reduces enforcement when agreements are linked under a limited punishment rule and policy variables are strategic substitutes. The third essay investigates the welfare/enforcement consequences of linking trade and environmental agreements. In the standard literature, linking the agreements generate non-trivial results only when there is structural relation between the issues. I focus on institutional design of the linkage and show that even if environmental aspects of international trade are negligible linking the agreements might still have some interesting welfare implications under current GATT Rules. Specifically, when traded goods are substitutes in consumption, linking the environmental agreement with trade agreement under the Withdrawal of Equivalent Concession Rule (Article XXVIII) will reduce the enforcement. However, enforcement in environmental issue increases when the same rule is implemented in the absence of linkage.

Essays on administrative protection and trade deflection

This dissertation analyzes the trading effects and the politics of antidumping. The first essay empirically examines the influence of partisanship on antidumping. I show that an increase in the leftist orientation of the government makes labor intensive industries less likely to file an antidumping petition. I also demonstrate that the increase in the leftist orientation of the government is associated with an increase in the likelihood of an affirmative antidumping outcome for the petitions of labor intensive industries. The second essay investigates the effect of past exporting relationships of the firms, whose products are targeted by antidumping duties, on their export flows to alternative markets. My estimations show that facing an antidumping duty on a product leads to a 18% increase in the exports of the firm for that product to the alternative countries where the firms previously exported the same product and a 8% increase to the countries where the firms exported another product. On the contrary, I fail to find a significant effect of antidumping duties on the exports of the particular product to third countries to which the firm did not export before. Further, I show that a firm’s probability to start exporting the duty imposed product in a different destination increases by 8–10% if the firm already exported another product to that destination. However, I find no such evidence for the countries to which the firm did not export before. The third essay empirically analyzes the effect of potential antidumping claims, resulting from an antidumping investigation in the domestic market, on the quality of exported products to the target countries. My findings suggest that retaliation threats increase the quality of firms’ shipments for the named industries’ products to the target countries by 11%. This effect is also significantly increasing in the share of the exports of the named industries’ products shipped to the target country in the firms’ total exports. Further, I show that this effect is 4% higher for the exporters serving the developed countries and 3% higher for ones serving the heavy antidumping users.