The macroeconomic impact of NAFTA termination

US President Trump has threatened to leave the North American Free Trade Agreement. How much would each member country gain or lose if this threat were carried out? Would trade imbalances within the region diminish? What would the transition to new production and consumption patterns look like? I provide quantitative answers to these questions using a dynamic general equilibrium model with a multi-sector input–output production structure, heterogeneous firms that make forward-looking export participation decisions, and adjustment frictions in trade and factor markets. Regional trade flows would fall dramatically, and while the US trade deficit with Canada would decline, the deficit with Mexico would grow. Welfare would fall by 0.04%, 0.12%, and 0.2% in the United States, Canada, and Mexico, respectively, and transition dynamics would significantly affect welfare in both the short run and the long run.     

Economic Performance, Trade Restrictiveness, and Efficiency

The paper addresses the question of whether trade restrictiveness impacts economic performance, via a trade restrictiveness index that is decomposable into a trade distortion and a domestic distortion component. The paper builds on the Anderson and Neary price index measure of trade distortion, in evaluating trade restrictiveness via a distance function approach. This is accomplished by adding a “dual” version to their trade restrictiveness price index, based on distance functions that scale output quantities. The authors compute the trade restrictiveness quantity index (TRQI) using a parametric frontier approach to model the production side of the economy, and a panel of information on the agricultural sector of a set of European Community countries. The results suggest that the use of TRQI makes a considerable difference to interpretations of the efficiency impact of agricultural trade policies in EC countries, as compared to policy‐oriented aggregates or result‐oriented measures of trade restrictiveness.     

Border effects and the availability of domestic products abroad

Abstract.  Trade between countries could fall short of trade within a country because (1) the volume of international trade is less than the volume of domestic trade for a given product (the intensive margin); or (2) some goods that are sold domestically are simply not exported (the extensive margin). My theoretical model illustrates that either of these two factors could explain a given aggregate 'border effect.' I examine the empirical relevance of this distinction by isolating the fraction of total domestic production attributable only to exporters, finding that around one‐half of the border effect may be attributed to each explanation. JEL classification: F1     

TRANSPORTATION COSTS,AGRICULTURAL PRODUCTIVITY,AND CROSS‐COUNTRY INCOME DIFFERENCES*

I study the role of transportation for development by introducing regional trade and a transportation sector into the standard two‐sector model of agriculture–nonagriculture. Low transport productivity can distort the allocation of resources across geographically dispersed production units within sectors and between agriculture and nonagriculture. I infer cross‐country transport productivity disparities from observed domestic transport costs and transport infrastructure stocks. “Endowing” rich countries with the transport productivity of poor countries would reduce their income by 10%. Combining transport productivity disparities with disparities in nonagricultural productivity and arable land the model yields a 50% higher rich–poor income ratio than the two‐sector model.     

Towards a better estimation of agricultural supply elasticity: the case of soya beans in Brazil

Brazil is a major exporter of several agricultural commodities and has shown strong interest in agricultural trade negotiations. For several commodities, trade liberalization is expected to be followed by farmgate prices increase and to boost domestic production. However, in a country as big as Brazil, possible supply responses to price increase will probably strongly differ from one region to another. This article focuses on soya beans for which Brazil became a top exporter. The panel data technique is used to estimate the soy bean supply response at national and regional level. Soya bean supply is shown to be very price elastic. Moreover, soya bean supply own price elasticity is much higher in the Center-North regions than in the South of the country. Substitution between livestock and soya bean is also very significant in the Center-North region. World agricultural trade models should take account for such regional variability of soya bean supply elasticity. The results also allow us to discuss the issue of soya bean expansion at the Amazon border.     

National borders and international trade: evidence from the European Union

In this paper the impact of national borders on international trade within the European Union is considered. Using a gravity model, I find that, averaged over all EU countries, intranational trade is about ten times as high as international trade with an EU partner country of similar size and distance. This relatively strong home bias suggests that even within the European Union national borders still have a decisive impact on trade patterns. JEL Classification: F02, F14, F15, O52
Ce mémoire examine l'impact des frontières nationales sur le commerce international à l'intérieur de l'Union européenne. On montre que, en moyenne pour tous les pays de l'Union européenne, le commerce intranational est à peu près dix fois plus important que le commerce international avec un pays partenaire de l'Union européenne de même taille et à même distance. Ce degré relativement important de préférence nationale suggère que, même dans le cadre de l'Union européenne, les frontières nationales ont encore un impact déterminant sur les patterns de commerce.     

The impact of trade openness on technical efficiency in the agricultural sector of the European Union

The aim of this study is to analyse the impact of trade openness on technical efficiency of the European Union’s (EU) agricultural sector. There are no systematic theories linking trade policy to technical efficiency; hence, the relation between trade liberalization and technical efficiency is fundamentally ambiguous. Stochastic frontier analysis is used to model the relationship between EU’s production resources and agricultural output, as well as the importance of trade openness on technical efficiency of a country. The data for 16 of the 28 EU members were available for the period 1980–2007 including land, capital, fertilizer, labour, agricultural GDP, foreign direct investments (FDI), exports and import data. Results indicate that trade openness has an immediate, negative impact on efficiency in the EU agricultural sector. Over time, however, trade openness does increase efficiency. The FDI outflows increase efficiency. This suggests that an initial reduction in capital supply forces EU nations to utilize other factor inputs more efficiently. However, there is the unexamined potential that over time the depletion of capital results in a decrease in efficiency. Finally, formerly communist member-countries of the EU are found to have the lowest technical efficiency scores whereas Southern European nations have the highest efficiency.     

Trade agreements, bargaining and economic growth

Rebelo’s two-sector endogenous growth model is embedded within a two-country international trade framework. The two countries bargain over a trade agreement that specifies: (i) the size of the foreign aid that the richer country gives to the poorer one; (ii) the terms of the international trade that takes place after the aid is given. Foreign aid is given not because of generosity, but because it improves the capital allocation across the world and thus raises total world production. This world production surplus enables the rich country to raise its equilibrium consumption and welfare beyond their no-aid levels. To ensure it, the rich country uses a trade agreement to condition the aid on favorable terms of trade.     

The Border Effect and the Nonlinear Relationship between Trade and Distance

The border‐effect literature confirms that sub‐national units tend to trade more with the rest of their country than with foreign markets. However, it is likely that ongoing processes of trade integration will generate a trade‐off between internal and external integration for sub‐national units within countries. In this paper we estimate the internal and external border effect, using a novel dataset that captures intra‐ and international shipments between Spanish regions and regions in eight European countries with alternative treatments of the nonlinear relationship between distance and trade.     

Protectionary bias in agriculture: A pure economic argument

Empirical evidence suggests that the agricultural sector in the developed countries has enjoyed a greater degree of protection than the import-competing manufacturing sectors. Usually this is attributed to strong farm lobbies and hence on political factors. We provide a theoretical model and a possible explanation of this phenomenon based on purely economic arguments. Two importables are accommodated in a three-good three-factor model of trade and production, one is a labor-intensive manufacturing good and the other is an agricultural commodity. This captures the trade pattern of a typical industrialized country with an agricultural sector such as Europe and the USA. We show that uniform tariffs in agriculture and labor-intensive manufacturing will definitely hurt the land owners in real terms and may reduce their absolute return. Hence, if there has to be protection, it has to be biased in favor of agriculture.     

The water footprints of Morocco and the Netherlands: Global water use as a result of domestic consumption of agricultural commodities

The volume of international trade in agricultural commodities is increasing faster than the global volume of production, which is an indicator of growing international dependencies in the area of food supply. Although less obvious, it also implies growing international dependencies in the field of water supply. By importing food, countries also import water in virtual form. The aim of the paper is to assess the water footprints of Morocco, a semi-arid/arid country, and the Netherlands, a humid country. The water footprint of a country is defined as the volume of water used for the production of the goods and services consumed by the inhabitants of the country. The internal water footprint is the volume of water used from domestic water resources; the external water footprint is the volume of water used in other countries to produce goods and services imported and consumed by the inhabitants of the country. The study shows that both Morocco and the Netherlands import more water in virtual form (in the form of water-intensive agricultural commodities) than they export, which makes them dependent on water resources elsewhere in the world. The water footprint calculations show that Morocco depends for 14% on water resources outside its own borders, while the Netherlands depend on foreign water resources for 95%. It is shown that international trade can result in global water saving when a water-intensive commodity is traded from an area where it is produced with high water productivity to an area with lower water productivity. If Morocco had to domestically produce the products that are now imported from the Netherlands, it would require 780 million m³/year. However, the imported products from the Netherlands were actually produced with only 140 million m³/year, which implies a global water saving of 640 million m³/year.     

中国农产品贸易现状及对策分析

中国是世界主要的农产品生产国与出口国,也是重要的农产品消费大国。农产品的生产、流通与消费水平决定了中国的国民经济发展水平。随着全球经济的发展,尤其是加入WTO後,中国的农产品贸易面临着前所未有的挑战。中国的农产品在国际市场上竞争力下降,出口屡屡碰壁,面临诸多制约因素。因此只有从政府、农民与企业等多方面进行调整才能促进中国农产品贸易更好地发展。     

Location of vertically linked industries: agglomeration versus comparative advantage

This paper analyses the effects of trade liberalisation on the location of manufacturing firms that are vertically linked and differ in factor intensities. I extend the new economic geography literature, by embedding a model with vertical linkages within a Heckscher-Ohlin framework. I show that lower trade costs can lead to an agglomeration of all upstream and downstream firms in one country, even when they differ in factor intensities. These industrial location patterns do not always lead to factor price convergence; and may result in an increase in returns to both factors in the country where the agglomeration locates.     

Managerial versus Production Wages: Offshoring,Country Size,and Endowments

We explore the role of trade in differentiated final goods as well as offshoring of tasks for inequality both within and between countries, emphasizing the distinction between managerial and production labour. We extend Grossman and Rossi‐Hansberg (2012), where task trade is driven by external economies of scale, by considering asymmetric endowments. Identifying possible equilibrium patterns of task trade, we find little scope for two‐way trade if endowments are asymmetric. Our numerical simulations identify non‐monotonicities between the level of offshoring and measures of within‐country as well as between‐country inequality.     

Pharmaceutical regulation under market integration through parallel trade

In this paper, I study the effect of parallel trade (cross-border resale of goods without the authorization of the manufacturer) on pharmaceutical regulation. Governments may restrict prices directly (price caps) or limit third-party payer reimbursement for the drug (reimbursement limits). I find that parallel trade may relax regulation in the source country of parallel imports under both instruments and intensify regulation in the destination country under a reimbursement limit. I also find that parallel trade may change regulatory preferences: under no parallel trade, both the source and destination country set price caps, and under parallel trade, the source country sets a price cap but the destination country sets a reimbursement limit, thereby enforcing a higher price cap in the South. This implies that drug prices are higher under parallel trade in both source and destination countries.     

Measuring internal trade distances: a new method applied to estimate provincial border effects in Canada

In this paper we suggest an improved methodology for comparing the intensity of trade across and within national and provincial boundaries. Earlier efforts to assess border effects for provinces or for countries without internal trade statistics made fairly arbitrary assumptions about average distances for internal trade flows. We improve on earlier efforts by taking more complete account of the distribution of population within each province or country. Internal distance is estimated as a population-weighted average of intra-city and intercity distances as well as distances to and within rural areas. We find higher estimates of internal distances, and hence border effects, than found in previous studies.     

International Trade in Hazardous Waste

This paper combines a gravity model with country characteristics to examine trade in hazardous waste. A significant pollution haven effect is observed as rising per capita income reduces the amount of hazardous waste countries' import. However, this effect is outweighed by high-income countries' relative capital abundance, and by rising GDP creating larger increases in disposal capacity than waste production. Simulating the volume and direction of hazardous waste trade in the absence of distance costs, leads to a 153% increase in waste traded, and a larger increase in shipments from non-OECD countries to OECD members than from the OECD to nonmembers.     

Labour Market Regulations and the Sectoral Reallocation of Workers: The Case of Trade Reforms

In this paper I highlight the importance of incorporating the institutional features of local labour markets into the analysis of trade reforms. A trade reform is often deemed beneficial because the elimination of trade barriers allows labour to reallocate towards those sectors in the economy in which the country has a comparative advantage. The amount and speed of the reallocation, however, and the post-reform behaviour of output, productivity and welfare, will depend on how regulated the labour market is. First, I document that high firing costs slow down the intersectoral reallocation of labour after a trade reform. Second, in order to isolate the effect of firing costs on labour reallocation, output and welfare after a trade reform, I build a dynamic general equilibrium model. I find that if a country does not liberalize its labour market at the outset of its trade reform, the intersectoral reallocation of workers will be 30% slower, and as much as 30% of the gains in real output and labour productivity in the years following the trade reform will be lost. From a policy standpoint, the message is that while trade reforms are desirable, they need to be complemented by labour market reforms in order to be fully successful.     

Is wealth found in the soil or in the brain? Investing in farm people in Malawi

Should a typical developing country invest more in agriculture or education? At what stage of development is it optimal to invest more in each of these sectors? These are important questions that governments of developing countries grapple with when designing investment plans. In this paper, I propose a soil–human capital conceptual framework of development and use it to explain estimates of agricultural returns to schooling in Malawi. I use panel survey data for Malawi and rely on the exogenous education policy changes and spatial variation in access to schooling to identify effects of schooling on agricultural incomes. In addition, I correct for selection into income activities within a panel data and instrumental variables estimation framework. I find annual agricultural returns to schooling in Malawi of 3%–4% after correcting for selection and unobserved heterogeneity and 7% in the uncorrected specifications. I also find consistently higher returns to schooling in the nonagricultural sector for those not living in the village of birth and higher returns in the agricultural sector for those living in the village of birth. Given the size of the farm sector, wealth in Malawi is still in the soil, but that future growth in wealth depends on human capital investments.     

中国农产品产业内贸易影响因素的实证研究

本文首先运用Grubel-Lloyd计量法和GHM分解法对1997—2008年中国农产品产业内贸易以及垂直型和水平型农产品产业内贸易水平分别加以测度,然后运用面板数据从国家层面对中国农产品产业内贸易影响因素进行了实证研究。结果表明:人均收入差距、外商直接投资、农产品贸易不平衡、贸易伙伴的贸易开放度是影响中国农产品产业内贸易的主要国家层面因素;区域优惠贸易安排、地理距离、市场规模因素对中国农产品产业内贸易发展也有不容忽视的影响。