Dress- and Auto- Makers in the “Free Trade” Arena

Even though there have been many studies on the impact of trade liberalisation on labour standards, most of the studies are at national level, and there is a lack of research at industry level. This paper examines the impact of free trade on labour standards in capital- and labour-intensive industries in a developing country. For empirical findings, I take the case of the garment industry, representing labour-intensive industry, and automotive industry, representing capital-intensive industry, in Indonesia in the face of ASEAN Free Trade Area (AFTA). Since the garment industry is a women-dominated industry, while the automotive industry is a men-dominated industry, this paper also employs a feminist perspective. As such, this paper also investigates whether free trade equally affects men and women workers. Besides free trade, other independent variables are also taken into account. Employing quantitative and qualitative methods, empirical evidence shows that there is an indication that free trade has a negative relationship with labour standards in the garment industry, whereas a positive relationships with labour standards in the automotive industry. This implies that free trade might result in decreasing labour standards in labour-intensive industry, while increasing standards in capital-intensive industry. It can also be inferred that free trade unequally affect men and women workers, in that women workers bear the brunt of free trade. The results also show that other internal and external independent variables are indicated to have relationships with labour standards in the garment and automotive industries. Therefore, these variables need to be considered in examining the extent of the impact of free trade on labour standards in labour- and capital-intensive industries.

An exploratory assessment of the potential impact of the free trade area of the americas on the andean community

A través de una simulación llevada a cabo con GTAP, este documento presenta una evaluación preliminar del impacto potencial que el Área de Libre Comercio de las Américas tendría sobre la Comunidad Andina de Naciones. Mantenido por la Universidad de Purdue, el GTAP es un modelo multiregional de equilibrio general, ampliamente usado para el análisis de temas de economía internacional. El experimento llevado a cabo tiene lugar en un ambiente de competencia perfecta y rendimientos constantes a escala y consiste en la completa eliminación de aranceles a las importaciones de bienes entre los países del Hemisferio Occidental. Los resultados muestran la presencia de modestas pero positivas ganancias netas de bienestar para la Comunidad Andina, generadas fundamentalmente por mejoras en la asignación de recursos. Movimientos desfavorables en los términos de intercambio y el efecto de la desviación de comercio con respecto a terceros países, reducen considerablemente las ganancias potenciales de bienestar. De la misma forma, la existencia de distorsiones económicas al interior de la Comunidad Andina tiene un efecto negativo sobre el bienestar. El patrón de comercio aumenta su grado de concentración en el comercio bilateral con los Estados Unidos y la remuneración real a los factores productivos presenta mejoras con la implementación de la zona de libre comercio.

Rent dissipation, political viability and the strategic adoption of free trade agreements

This paper studies the political viability of free trade agreements (FTAs). The key element of the analysis is the “rent dissipation” that these arrangements induce: by eliminating intra-bloc trade barriers, an FTA reduces the incentives of the local firms to lobby for higher external tariffs, thereby causing a reduction of the rents created in the lobbying process. The prospect of rent dissipation moderates the governments’ willingness to participate in FTAs; they will support only arrangements that are “substantially” welfare improving, and no FTA that reduces welfare. Rent dissipation also implies that the prospects of political turnover may create strategic reasons for the formation of FTAs. Specifically, a government facing a high enough probability of losing power may want to form a trade bloc simply to “tie the hands” of its successor. An FTA can affect the likelihood of political turnover as well. If the incumbent party has a known bias toward special interests, it may want to commit to less distortionary policies in order to reduce its electoral disadvantage; the rent dissipation effect ensures that an FTA can serve as the vehicle for such a commitment. In nascent/unstable democracies, the incumbent government can use a free trade agreement also to reduce the likelihood of a dictatorial takeover and to “consolidate” democracy – a finding that is consistent with the timing of numerous accessions to and formations of preferential arrangements.

Asymmetries and cooperation in the Free Trade Area of the Americas

Includes bibliography

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.

How do free trade agreements change import prices? : firm-level evidence from China's imports from ASEAN

The literature has revealed the positive impacts of free trade agreements (FTAs) on export prices by employing product-level trade data. This paper empirically examines the impacts of FTAs on import prices at the firm level. We focus on firm-level imports in China from ASEAN countries by employing China’s firm-product-level trade data. As a result, controlling for firm characteristics and product characteristics, we could not find significantly positive impacts of an FTA’s entry into force on import prices of FTA eligible products. Instead, we found a significant increase in import quantities of FTA eligible products. Thus, at the firm level, the gains from FTAs for exporters may be the increase in export quantities rather than the rise in export prices.

How do free trade agreements reduce tariff rates and non-tariff barriers?

This paper empirically investigates how far free trade agreements (FTAs) successfully lower tariff rates and non-tariff barriers (NTBs) for manufacturing industries by employing the bilateral tariff and NTB data in a time series for countries around the world. We find that FTAs under GATT Article XXIV and the Enabling Clause contribute to reducing tariff rates by 2.1% points and 1.5% points, respectively. In the case of NTBs, their respective impacts are 6.6% points and 5.7% points. Membership in the World Trade Organization (WTO) does not contribute greatly to reducing tariff rates but does play a significant role in reducing NTBs. These results provide important implications for the literature on numerical assessments of FTAs.

Issues, effects and implications of the Free Trade Area of the Americas (FTAA) Agreement for CARICOM economies

Includes bibliography