Tomorrow's silk road: Assessing an EU-China Free Trade Agreement.

Foreword. The Foreign Trade Association, which represents the European and international distribution and retail sector, commissioned this study in light of the importance of China as a sourcing country and its attractiveness as a rapidly growing consumer market. We believe that open borders and free trade can contribute to a broader choice and lower costs for consumers and create growth and employment in both Europe and China. This independent study aims to provide an in-depth contribution on the status of bilateral economic exchanges and persistent trade barriers that exist between the European Union and China. The second objective of the report is to encourage a frank and open dialogue, based on a scientific evaluation and without prejudice, on the possibility of a preferential trade agreement between the two sides. This study should be read by anyone who is interested in economic relations between the EU and China and in trade policy in general. The report provides many interesting findings and raises a number of surprising points. Overall, this study is one of the most significant contributions to the discourse on EU-China relations in recent years. We hope that this study will stimulate fresh thoughts on the benefits of closer future cooperation between two regions that have been interlinked since the times of antiquity and the first Silk Road.

Towards a plurilateral Trade in Services Agreement (TISA): Challenges and prospects

This paper addresses a number of policy challenges arising from ongoing attempts to negotiate a plurilateral Trade in Services Agreement (TISA), a recently launched plurilateral negotiating initiative coexisting uneasily alongside the World Trade Organisation’s General Agreement on Trade in Services (GATS), particularly in the context of the ongoing Doha Development Agenda. While the TISA offers scope for imparting much needed forward movement to a policy area of central economy-wide and trade importance, such progress, even if realized within the narrower confines of a preferential trade agreement made possible under the GATS, poses a number of systemic risks to the multilateral order extending beyond services trade.

Toward alignment of carbon standards under the Transatlantic Trade and Investment Partnership

With its wide coverage of economic spheres and the variety of trade and investment measures currently under negotiation, the Transatlantic Trade and Investment Partnership (TTIP) opens windows of opportunity for climate change mitigation and adaptation. The paper examines the possible avenues and the WTO law implications for the alignment of emissions standards between the European Union (EU) and United States of America (US). Looking particularly at the automobile sector, it argues that TTIP negotiators should strive for the mutual recognition of equivalence of EU and US car emissions standards, while pursuing full harmonisation in the long term. It concludes that the preferential trade agreement (PTA) status of TTIP would not be able to exempt measures taken for regulatory convergence from compliance with applicable WTO rules, particularly the rules of the WTO’s Agreement on Technical Barriers to Trade (TBT). Furthermore, the EU and the US would not be able to ignore requests for the recognition of equivalence of third countries’ standards and would need to provide the grounds upon which they assess third countries’ standards as not adequately fulfilling the objectives of their own regulations and therefore rejecting them.

MTN studies : a report prepared at the request of the Subcommittee on International Trade, Abraham Ribicoff, chairman /

At head of title: 96th Congress, 1st session. Committee print. CP 96-11, [etc.]

Asset Price Instability and Policy Responses: The Legacy of Liberalization

The problem of asset price bubbles, and more generally of instability in the financial system, has been a matter of concern since the 1980s but has only recently moved to the center of the macroeconomic policy debate. The main concern with bubbles arises when they burst, imposing losses on investors holding the bubble assets and potentially on the financial institutions that have extended credit to them. Asset price volatility is an inevitable consequence of financial market liberalization and, in extreme cases, generates asset price bubbles, the bursting of which can impose substantial economic and social costs. Policy responses within the existing liberalized financial system face daunting levels of uncertainty and risk. Given the pattern of increasing asset market volatility over recent decades and the policy issues highlighted in this paper, the future looks uncertain. Another significant cycle of asset price movements, especially in one of the major economies, could see a fundamental revision of thinking about the costs and benefits of liberalized financial systems.

Patterns and Drivers of the Agri-Food Intra-Industry Trade of European Union Countries

This paper investigates the drivers of agri-food intra-industry trade (IIT) indices in the European Union (EU-27) member states during the period from 2000–2011. The increased proportion of IIT in matched two-way agri-food trade of the EU-27 member states is consistent with economic integration and economic growth. When export prices were at least 15% higher than the import prices, high-vertical IIT, increased for most member states. This finding suggests that quality improvements occurred when comparing agri-food exports to similar imports of agri-food products. The IIT indices for both horizontal and vertical IIT are positively associated with higher economic development levels, new EU membership and EU enlargement. Additionally, as higher levels of economic development decreases, the size of the economy and marginal IIT increases the effects of agri-food trade liberalization on the costs of the labor market adjustment. Understanding how improvements in agri-food trade quality impact agribusiness and managerial competitiveness reveal significant policy implications.

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 the political economy of trade policy and economic *development

This dissertation studies the political economy of trade policy in a developing country, namely Turkey, under different economic and political regimes. The research analyzes the effects of these different regimes on the import structure, the trade policy and the industrialization process in Turkey and derives implications for aggregate welfare. ^ In the second chapter, the effects of trade liberalization policies on import demand are examined. Using disaggregated industry-level data, import demand elasticities for various sectors have been computed, analyzed under different economic regimes, and compared with those of developed countries. The results are statistically significant and reliable, and conform to the predictions of economic theory. Estimation of these elasticities is also a necessary ingredient for the third chapter of the dissertation. ^ The third chapter examines the predictions of the state-of-the-art “Protection For Sale” model of Grossman and Helpman (1994). Employing advanced econometric methods and a unique data set, strong support is found for the fundamental predictions of the model in the context of Turkey. Specifically, the government is found to attach a much higher weight to social welfare than to political contributions. This weight is higher under the democratic regime than under the dictatorship, a result potentially of interest to all researchers in the area of political economy. ^ The fourth chapter looks at the effects of industry concentration and import price shocks on protection, promotion and the choice of policy instruments in Turkey. In this context, it examines and finds support for the predictions of some well-known models in the literature. ^

Globalization, Trade Policy, and the Permissive Consensus in Canada (Working Paper 27)

Do public protests dramatize the new political salience of trade policy? This article analyzes a survey of Canadian mass opinion taken just before the protests against the proposed Free Trade Area of the Americas in Quebec City in April 2001. The survey design allows a comparison of the difference between Canadians’ positive assessment of trade agreements but more ambivalent responses to “globalization.” We examine a series of underlying attitudes and values to probe latent opinion on trade and globalization. We conclude that the permissive consensus on trade agreements is robust – that is, Canadians are prepared to defer to governments on trade liberalization – but this consensus may be endangered by ongoing globalization and pressures for North American integration that go well beyond issues of tariffs and trade. On these latter issues, the nature of globalization and integration, not its existence, are subject to heated debate.

Global Trade Governance and ASEAN: Studies of Trade-Related Aspects of Labor, Environment and Culture in Southeast Asia

Thesis (Ph.D.)--University of Washington, 2016-08

Trade Shocks and Local Labor Markets' Linkages: Theory and Evidence

In the past few years, there has been a concern among economists and policy makers that increased openness to international trade affects some regions in a country more than others. Recent research has found that local labor markets more exposed to import competition through their initial employment composition experience worse outcomes in several dimensions such as, employment, wages, and poverty. Although there is evidence that regions within a country exhibit variation in the intensity with which they trade with each other and with other countries, trade linkages have been ignored in empirical analyses of the regional effects of trade, which focus on differences in employment composition. In this dissertation, I investigate how local labor markets' trade linkages shape the response of wages to international trade shocks. In the second chapter, I lay out a standard multi-sector general equilibrium model of trade, where domestic regions trade with each other and with the rest of the world. Using this benchmark, I decompose a region's wage change resulting from a national import cost shock into a direct effect on prices, holding other endogenous variables constant, and a series of general equilibrium effects. I argue the direct effect provides a natural measure of exposure to import competition within the model since it summarizes the effect of the shock on a region's wage as a function of initial conditions given by its trade linkages. I call my proposed measure linkage exposure while I refer to the measures used in previous studies as employment exposure. My theoretical analysis also shows that the assumptions previous studies make on trade linkages are not consistent with the standard trade model. In the third chapter, I calibrate the model to the Brazilian economy in 1991--at the beginning of a period of trade liberalization--to perform a series of experiments. In each of them, I reduce the Brazilian import cost by 1 percent in a single sector and I calculate how much of the cross-regional variation in counterfactual wage changes is explained by exposure measures. Over this set of experiments, employment exposure explains, for the median sector, 2 percent of the variation in counterfactual wage changes while linkage exposure explains 44 percent. In addition, I propose an estimation strategy that incorporates trade linkages in the analysis of the effects of trade on observed wages. In the model, changes in wages are completely determined by changes in market access, an endogenous variable that summarizes the real demand faced by a region. I show that a linkage measure of exposure is a valid instrument for changes in market access within Brazil. By using observed wage changes in Brazil between 1991-2000, my estimates imply that a region at the 25th percentile of the change in domestic market access induced by trade liberalization, experiences a 0.6 log points larger wage decline (or smaller wage increase) than a region at the 75th percentile. The estimates from a regression of wages changes on exposure imply that a region at the 25th percentile of exposure experiences a 3 log points larger wage decline (or smaller wage increase) than a region at the 75th percentile. I conclude that estimates based on exposure overstate the negative impact of trade liberalization on wages in Brazil. In the fourth chapter, I extend the standard model to allow for two types of workers according to their education levels: skilled and unskilled. I show that there is substantial variation across Brazilian regions in the skill premium. I use the exogenous variation provided by tariff changes to estimate the impact of market access on the skill premium. I find that decreased domestic market access resulting from trade liberalization resulted in a higher skill premium. I propose a mechanism to explain this result: that the manufacturing sector is relatively more intensive in unskilled labor and I show empirical evidence that supports this hypothesis.

Tomorrow’s Silk Road: Assessing an EU-China Free Trade Agreement

The Centre for European Policy Studies (CEPS) is an independent policy research institute in Brussels. Its mission is to produce sound policy research leading to constructive solutions to the challenges facing Europe. The views expressed in this book are entirely those of the authors and should not be attributed to CEPS or any other institution with which they are associated or to the European Union. This book, commissioned by the Foreign Trade Association, aims to provide an independent and in-depth contribution on the status of bilateral economic exchanges and persistent trade barriers between the European Union and China. A second objective is to encourage a frank and open dialogue, based on a scientific evaluation and without prejudice, of the possibility of a preferential trade agreement between the two sides. The study was carried out by CEPS, in cooperation with the World Trade Institute at the University of Bern.

Does international trade produce convergence?

In spite of increasing globalization around the world, the effects of international trade on economic growth are not very clear. I consider an endogenous economic growth model in an open economy with the Home Market Effect (HME) and non-homothetic preferences in order to identify some determinants of the different results in this relationship. The model shows how trade between similar countries leads to convergence in economic growth when knowledge spillovers are present, while trade between very asymmetric countries produces divergence and may become trade in a poverty or growth trap. The results for welfare move in the same direction as economic growth since convergence implies increases in welfare for both countries, while divergence leads to increases in welfare for the largest country and the opposite for its commercial partner in the absence of knowledge spillovers. International trade does not implicate greater welfare as is usual in a static context under CES preferences.

Structural change, balance-of-payments constraint, and economic growth: evidence from the multisectoral Thirlwall`s law

This paper contributes to the literature on balance-of-payments constrained growth by investigating how structural change identified with changes in the sectoral composition of exports and imports affects the external constraint We test both the original and a multisectoral version of Thirlwall`s law for a sample of Latin American and Asian countries The original Thirlwall s law is found to hold for all sample countries except South Korea, whereas the multisectoral analogue holds for all of them As the sectoral composition of exports and imports is found to matter for growth we analyze the evolution of each country`s weighted trade income elasticities