Does trade liberalization boost quality upgrading? : evidence from Indonesian plant-product-level data

In this study, we examine the effects of tariff reduction on firms' quality upgrading by employing an Indonesian plant-product-level panel dataset matched with a plant-level dataset. We explore the effects of lower output and input tariffs separately, by focusing on the apparel industry. By estimating the Berry-type demand function, we derive product-quality indicators based on the Khandelwal (Review of Economic Studies, 2010) methodology, which enables us to isolate quality upgrading from changes in prices. Our findings are as follows. First, a reduction in output tariffs does not affect product quality upgrading. Second, a reduction in input tariffs boosts quality upgrading in general. In particular, this impact is greater for import firms, which is consistent with the fact that the source of the boost is the import of high-quality foreign inputs.

Heckscher-Ohlin : evidence from virtual trade in value added

The fragmentation of production chains across borders is one of the most distinctive feature of the last 30 years of globalization. Nonetheless, our understanding of its implications for trade theory and policy is only in its infancy. We suggest that trade in value added should follow theories of comparative advantage more closely than gross trade, as value-added flows capture where factors of production, e.g. skilled and unskilled labor, are used along the global value chain. We find empirical evidence that Heckscher-Ohlin theory does predict manufacturing trade in value-added, and it does so better than for gross shipment flows. While countries exports across a broad range of sectors, they contribute more value-added in techniques using their abundant factor intensively.

Economic Partnership Agreements in the EU's post-Lome trade regime: negotiations with West Africa. ZEI Discussion Paper C214, 2012

Trade is a key element of the development policy of the European Union (EU). As the most important trading partner of developing countries, the EU attempts to facilitate the participation of developing countries in global trade and contribute to economic growth through providing market access and financial assistance. For twenty-five years, the commitment of the EU was largely focused on its former colonies, more specifically in Africa, the Caribbean and the Pacific (ACP). The developing world, in terms of the EU’s trade policy, was therefore divided between ACP states with special provisions under the Lomé Conventions and all other developing countries. With the new millennium, this special relationship came to an end. Pressure from several member states1 and the World Trade Organization (WTO) led to an overhaul of the EU’s trade regime vis-à-vis developing countries and to the loss of the privileged position of ACP countries. The result of this overhaul is still pending. Economic Partnership Agreements (EPAs) – to be negotiated between the EU and several ACP regions – have only been realized in the Caribbean. This article will to examine the negotiations between the EU and West Africa and discuss the interests involved on the African side. Following the introduction, the second part of this article is dedicated to the Lomé Conventions with a focus on the change occurring from the third to the fourth revision in order to understand the current situation. The third part is going to take a look at the Cotonou agreement and the trade regime of the EU in general before turning to the negotiations for an Economic Partnership Agreement between the EU and West Africa. The conclusion summarizes the main findings.

The Mercosur-EU preferential trade agreement. A view from Europe. CEPS Working Document No. 377, February 2013

This paper first aims at assessing the economic and political importance of Mercosur for the EU’s interests in the short and medium run – say for the one or two coming decades or so. As Mercosur’s size is largely determined by Brazil’s size, this paper focuses on Brazil – although the paper assumes that, from Brazil’s perspective, a Brazil–EU preferential trade agreement (PTA) is a non-starter. It then aims at positioning the Mercosur–EU (MEU) PTA in the context of the EU’s current trade policy. In particular, it tries to assess, once one takes into account all the crucial goals to be met by the EU, whether the EU is likely to find the time and the resources necessary for dealing properly with a MEU PTA; this effort is notably complicated by the very divergent views on the role of trade between Brazil on the one hand, and Argentina and Venezuela, on the other hand. Finally, the paper examines the PTA options that can be seen as reasonably feasible. It suggests that, unless there are dramatic changes in Mercosur’s present trajectory, the goal of negotiating a fully-fledged MEU PTA should be set aside for some time – at least a decade or so. This does not mean leaving the negotiating table, but rather focusing on negotiating topics that remain attractive to both sides in the current context, and manageable and flexible enough to overcome the broad general problems confronted by Mercosur and the EU.

Concording EU trade and production data over time. National Bank of Belgium Working Paper No. 239, December 2012

This paper provides concordance procedures for product-level trade and production data in the EU and examines the implications of changing product classifications on measured product adding and dropping at Belgian firms. Using the algorithms developed by Pierce and Schott (2012a, 2012b), the paper develops concordance procedures that allow researchers to trace changes in coding systems over time and to translate product-level production and trade data into a common classification that is consistent both within a single year and over time. Separate procedures are created for the eightdigit Combined Nomenclature system used to classify international trade activities at the product level within the European Union as well as for the eight-digit Prodcom categories used to classify products in European domestic production data. The paper further highlights important differences in coverage between the Prodcom and Combined Nomenclature classifications which need to be taken into account when generating combined domestic production and international trade data at the product level. The use of consistent product codes over time results in less product adding and dropping at continuing firms in the Belgian export and production data.

Tackling barriers to trade in the Single Market. ACES Cases No. 2014.2

This paper focuses on the challenges operating in the single market due to continued persistence of regulatory barriers to trade, despite being considered one of the most integrated and successful areas of market integration. We use a unique data set on infringements to the free movement of goods to assess the types of barriers that firms encounter, their impact and variation across states and sectors, and their resolution method - through Court decisions or the pre-litigation, administrative means available within the infringement proceedings mechanism to restore compliance. We also resort to the Solvit dataset provided to the authors by the Commission to analyse some features and the effectiveness of this informal mechanism in dealing with discriminatory domestic trade and regulatory practices. We examine four key questions: What are the most problematic policy areas in terms of barriers to trade that undermine the single market? What different dispute resolution mechanisms are utilized to address trade barriers and thus improve the functioning of the single market? Under what conditions are different enforcement mechanisms and strategies more likely to be used to resolve barriers for businesses operating in the single market? How important and effective are the more informal strategies in improving market access? In doing so, our goal is to link the research on trade barriers to that of implementation and compliance to assess the diverse strategies undertaken to reduce regulatory barriers to trade.

The Role of Civil Society Dialogue in the EU-China Cooperation on Renewable Energy. IES Policy Brief Issue 2012/05/December 2012

Summary. Expanding EU-China institutional cooperation in the energy sector has been matched by a parallel process of stronger economic ties between European and Chinese companies in the renewable energy (RE) sector (particularly wind and photovoltaics). While the foundation of early EU-China institutional relations was based primarily on trade cooperation, international efforts to mitigate climate change and the common challenge of decreasing energy dependence in a sustainable manner brought a new dimension to their partnership in the energy sector in the mid 90s. Although the role of EU-China energy cooperation has grown tremendously in the context of EU external trade policy and EU strategy to boost its energy independence and international climate policy, the potential of civil society collaboration in this partnership has remained rather unexploited. Based on major civil society initiatives in the RE field that have been developed in recent years, this policy brief argues that civil society dialogue between China and EU could be an important driving force in deepening EU-China cooperation on RE and a bridge towards a more sustainable future.

The European Commission and International Trade Negotiations: A Principal-Agent Approach. IES WORKING PAPER 2/2011

Starting from the concept of delegation of power in external trade policy, this paper aims to investigate the dynamics surrounding the European Union’s position in international trade negotiations. The analysis centres on the role of the European Commission (the agent), which by means of Treaty-based delegation and as mandated by the Council (the principal) acts as the sole trade negotiator in the international sphere on behalf of the European Union (EU). The broader negotiating process is thus conceptualised as a threelevel game, where the Commission holds an intermediary position between the European and international levels and also interacts with the Member States in the Council. After an insight into the European decision-making process for external trade, the paper further analyses the Commission’s role during the multilateral trade negotiations of the Doha Development Round. By applying the principal-agent theory to international trade negotiations in general, and subsequently to the controversial agricultural negotiations, this paper seeks to investigate some of the potential sources of autonomy that the Commission can draw upon while upholding an EU position at the international level, in addition to the “hardball” job of balancing the interests of the Member States with those of World Trade Organisation (WTO) partners. Along these lines, the paper finally aims to contribute to the literature concerning agency autonomy in EU external trade relations but also to provide a better understanding of inter-institutional relations within the EU as they may unfold in practice.

Transatlantic Conflict and Cooperation Concerning Trade Issues. Jean Monnet/Robert Schuman Paper Series Vol. 14 No. 13, July 2014

From the Introduction. Transatlantic relations have undergone significant changes within the past twenty-five years. During the Cold War era, the United States and Western Europe were bound together by a perceived common threat from the Soviet Union. Consequently, economic issues commanded less attention than security issues. After the Cold War ended, economic issues were thought to be the glue that would hold the transatlantic relationship together. Much attention was given for several years to fostering economic cooperation through the development of intergovernmental initiatives. After the terrorist incidents of September 11, 2001 in the United States, and the subsequent wars in Iraq and Afghanistan, security issues again came to the forefront of the relationship. However, in contrast to the earlier era that was mainly characterized by close cooperation, disagreements between the United States and major countries of Western Europe about how to deal with the terrorist threat created severe strains in the relationship. By 2003, the third year of the George W Bush administration, transatlantic political relations had reached perhaps their lowest point since World War II. They have gradually improved since then, but with a significant setback from Wikileaks revelations, and even more serious strains resulting from the revelations by Edward Snowden concerning United States surveillance activities. Security issues have come to the forefront also in connection with regional unrest in the Middle East, EU nations’ dependence on Russian oil and gas, and Russian intrusions into Ukraine.

Enhancing the Prospects of the EU’s Deep and Comprehensive Free Trade Areas in the Mediterranean: Lessons from the Eastern Partnership. CEPS Commentary, 24 June 2015

In their March 2015 Consultation paper on the review of the European Neighbourhood Policy (ENP), the European Commission and the High Representative raised the question whether the Deep and Comprehensive Free Trade Areas (DCFTAs) “are the right objective for all or should more tailor-made alternatives be developed, to reflect differing interests and ambitions of some partners?” Such ambitious but complex trade agreements have now finally been signed with Ukraine, Moldova and Georgia, but they are still on the table for several Mediterranean ENP countries. Although these Mediterranean partners have a completely different political, economic and legal relationship with the EU, some important lessons can be drawn from the ‘Eastern DCFTA experience’. In particular, the DCFTA negotiators should avoid overly ambitious and ill-defined legislative approximation commitments and develop a comprehensive implementation strategy.

Brexit – potential economic consequences if the UK exits the EU. Policy Brief #2015/05

If the United Kingdom (UK) exits the EU in 2018, it would reduce that country’s exports and make imports more ex-pensive. Depending on the extent of trade policy isolation, the UK’s real gross domestic product (GDP) per capita would be between 0.6 and 3.0 percent lower in the year 2030 than if the country remained in the EU. If we take into ac-count the dynamic effects that economic integration has on investment and innovation behavior, the GDP losses could rise to 14 percent. In addition, it will bring unforeseeable political disadvantages for the EU – so from our perspective, we must avoid a Brexit.

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.

Labor clauses in regional trade agreements and effects on labor conditions : an empirical analysis

An increasing number of bilateral or plurilateral trade agreements (or regional trade agreements: RTAs) include "labor clauses" that require or urge the signatory countries to commit to maintaining a certain level of labor standards. This paper performs an empirical analysis of the impacts of such labor clauses provided in RTAs on working conditions that laborers in the RTA signatory countries actually face, using macro-level data for a wide variety of countries. The paper first examines the texts of labor provisions in more than 220 effective RTAs and (re-)classifies "RTAs with labor clauses" according to two criteria: (i) the agreement urges or expects the signatory countries to harmonize their domestic labor standards with internationally recognized standards, and (ii) the agreement stipulates the procedures for consultations and/or dispute settlement on labor-condition issues between the signatory countries. Based on this labor-clause RTA classification, the paper estimates the impacts of RTA labor clauses on working conditions in countries with two empirical specifications using the sample covering 136 countries or economies and years from 1995 through 2011. The estimation is extended to takes into account possible lags in the labor-condition effects of labor clauses as well as to consider potential difference in the impacts for countries in different income levels. The empirical results for the four measures of labor conditions (mean monthly real earnings, mean weekly work hours per employee, fatal occupational injury rate, and the number of the ILO's Core Conventions ratified) find no evidence for possible pro-labor-condition effects of RTA labor clauses overall, which should be consistent with the view of economics literature that questions the relevance of linking trade policy with issues in the domestic labor standards.

Preferential trade agreements and antidumping actions against members and nonmembers

In a three-country oligopoly model, this paper analyzes a country's decisions concerning antidumping (AD) action against two foreign countries and the relationship between those decisions and regional trade agreements (RTAs). An RTA intensifies product-market competition in the markets of member countries and lowers product prices, while it raises export prices of goods subject to tariff reductions. This effect widens the dumping margin of the non-member firm and narrows the dumping margin of the member firm. If the government is more concerned with domestic firm profit in its AD decision, the RTA may invoke the member's AD action against the nonmember. If the governments attach a sufficiently high value on social welfare, however, the RTA may promote the AD action against the member. If the governments' weight on the domestic firm's profit is neither high nor low, an RTA may block the AD actions against both countries.

The Tokyo Round trade agreements.

Vol. 1 prepared by Andrew L. Stoler.