ALTERNATIVE OPTIMAL TRADE POLICIES IN THE PRESENCE OF FOREIGN INPUT MONOPOLY

Abstract.  This paper develops a generalized three-country model with downstream and upstream industries to analyze optimal import and export trade policies in the presence of monopoly distortion in a foreign intermediate input market. It shows that the import tariff and export tax are linearly dependent. Thus, the optimal choice of the tariff gives rise to the same results as the optimal choice of the export tax, which implies that the domestic government, to avoid tariff retaliation, can use export tax as a substitute for the import tariff.     

Trade liberalization in environmental goods

Trade negotiations have started to pay attention to liberalization in environmental goods (EGs), whose production may require dirty intermediate goods. We construct a two-country trade model to explore the effects of trade liberalization in EGs on the local pollution, the global environment and welfare in the presence of such an environmental conundrum. We find that countries do not necessarily benefit from trade liberalization in EGs in the absence of an environmental policy. With the assistance of an upstream pollution tax, trade liberalization in EGs improves each country's welfare. This result holds independent of whether the upstream market is competitive or not, or whether we have upstream trade across countries. For asymmetric countries, trade liberalization in EGs improves the world welfare and the welfare for the country if it has a smaller demand for EGs; or experiences less damage from the production of dirty inputs; or values environment improvement more.     

Asymmetric Tax Policy Responses in Large Economies With Cross-Border Pollution

We build a model of cross-border pollution between two large open economies, one importing the polluting good and the other exporting it, and derive their non-cooperative trade and environmental tax policies. We show among other things, that (1) in response to a bilateral reduction in trade taxes by both countries, the former country’s optimal policy is to lower its Nash emissions tax while the latter’s is to raise it, and (2) in response to an increase in emissions tax rates by both countries, the former country’s optimal reaction is to raise its Nash import tariff, while the latter’s is to reduce its Nash export tax. That is, in the present context, freer trade leads the exporting country to adopt stricter while the importing country laxer environmental tax policies.     

贸易自由化是如何影响我国出口产品质量的？*--基于贸易政策不确定性下降的视角

传统理论认为贸易自由化会促进出口产品的质量升级,但我国加入W TO后的情况却并非如此。文章基于贸易政策不确定性的视角,利用我国加入W TO前后美国对我国产品进行关税调整这一自然实验,通过倍差法分析了贸易自由化对我国出口产品质量的影响。研究表明：（1）在贸易自由化的过程中,贸易政策不确定性的下降会拉低我国的出口产品质量,且这一结论在改变质量测度方法、控制成本效应以及使用不同的产品属性、贸易对象和样本的情况下依然稳健;（2）贸易政策不确定性主要是通过广延边际上的质量调整降低了我国出口产品的总体质量,即在贸易政策不确定性下降幅度越大的产品中,有越多的生产低质量产品的企业进入出口市场;（3）在集约边际上,存续企业并未针对贸易政策不确定性的下降做出及时的产品质量调整,从而无法改变我国的产品质量在短期内下降的趋势。文章为我国如何在推行贸易自由化的同时实现出口产品质量升级提供了启示。     

Upstream and downstream pollution taxations in vertically related markets with imperfect competition

When two markets are vertically related, the government can control pollution at the upstream as well as the downstream market levels. This paper employs the stylized model of input price discrimination and compares the effectiveness of upstream and downstream pollution taxations. We consider the situation in which downstream firms have heterogeneous abatement technologies and an upstream monopolist performs input price discrimination against them. In order to mitigate pollution, the government imposes input tax on the intermediate inputs and emission tax on the pollutant. We show that the degree of input price discrimination decreases with a rise in the input tax and increases with a rise in the emission tax. We further examine the effect of a green tax reform in which the government changes the source of taxation from input tax to emission tax. We argue that although this green tax reform may reduce the tax revenue of the government, it will certainly increase social welfare.      

Trade Liberalisation of Intermediate Inputs

This paper considers the effects of tariff cuts in the intermediate inputs market. Traditional trade theories predict that upstream industries would contract and downstream industries would expand. In contrast, new trade theories show that trade liberalisation of the intermediate inputs market may expand both upstream and downstream industries.     

Measuring China’s trade liberalization: A generalized measure of trade restrictiveness index

Neither simple average nor import-weighted average tariff indexes are ideal measures of tariff barriers. In this paper, we propose a generalized trade restrictiveness index (GTRI) that extends Feenstra’s (1995) tariff restrictiveness index (TRI) by relaxing the crucial assumption of a small open economy. We show that the GTRI can be measured using import tariffs, import shares, and the corresponding import and foreign export elasticities. We then apply the GTRI to examine how trade restrictiveness has evolved in China from 1997 to 2008, the period in which China entered the WTO. The GTRI indicates a higher level of protection than simple and import-weighted averages, but lower than the TRI. We further show a negative correlation between tariffs and product export supply elasticity, indicating that strategic trade policy was being pursued prior to China’s WTO accession. Finally, we calculate the welfare loss and terms-of-trade gain due to tariff protection. The overall tariff pass-through increases from around 28% to almost 47% because of the WTO.     

Trade,Transboundary Pollution,and Foreign Lobbying

In this paper, we explore the use of trade policy in addressing transboundary stock pollution problems such as acid rain and water pollution. We show that a tariff determined by the current level of accumulated pollution can induce the time path of emissions optimal for the downstream (polluted) country. But if the upstream (polluting) country can lobby the downstream government to impose lower tariffs, distortions brought by corruption and foreign lobbying lead to a rise in the upstream country’s social welfare, and to a decrease in social welfare in the downstream country. Thus, the usefulness of trade policy as a tool for encouraging cooperation and internalizing transboundary externalities depends critically on the degree of governments’ susceptibility to foreign political influence.     

Implications of reform and WTO accession for China’ agricultural policies

While China’s trade policies in most areas have been transformed in the reform era, trade in many agricultural goods remains under relatively non‐transparent state trading arrangements. Accession to the WTO will be a critical turning point, increasing transparency and introducing disciplines on protection even for the commodities remaining under state trading. While China’s tariff bindings for the most sensitive products seem unlikely to require substantial short‐term reductions in protection, they rule out substantial increases in the future, provide the opportunity to develop an efficient agricultural sector, and highlight the need for effective policies to reduce rural poverty. WTO membership provides an opportunity for China to improve market access opportunities for its agricultural exports, which face much higher barriers than its exports of industrial products. JEL classification: D58, F13, O13, O56, P33, Q17.     

Does free trade promote environmental technology transfer?

We investigate how environmental and trade policies affect the transfer of environmental technology in a two-country model with global pollution. By comparing free trade and tariff policy with or without commitment, the following results are obtained. First, firms avoid the implementation of environmental tax by contracting technological transfer. Second, there is a case in which free trade is preferable to a tariff policy for both countries when there is no commitment to a tariff level. Third, free trade is not Pareto-preferred to a tariff policy when there is a commitment.     

Understanding China’s Foreign Trade Policy: A Literature Review

China has continued to experience rapid growth in its foreign trade since the implementation of its reform and opening-up policies. In recent years, the country has become the world’s largest exporter and second largest importer of goods and commodities. China’s trade policy has also gradually been transforming from protectionism to open trade. This paper aims to provide a comprehensive survey on the literature of China’s trade policy. The review covers (1) export and import policies, (2) tariff and non-tariff barriers, and (3) policy effects and motivations behind the policy design. This paper also reports on important topics and issues that deserve more research attention.     

Environmental impact of customs union agreement with EU on Turkey's trade in manufacturing industry

In this study, we analyse Turkey's manufacturing industry trade by estimating sectoral import and export demand equations for 1980–2000. The study aims to understand whether the trade in the manufacturing industry complies with pollution haven hypothesis, and whether the free trade environment provided by the customs union (CU) agreement altered the trade pattern of the clean and dirty industries. Results of our econometric models have shown that while CU positively affects the import demand, it does not have any significant impact on the export demand of Turkish manufacturing industry. In terms of the environmental impact, distinction between clean and dirty industries turns out to be significant for both import and export demand. In general, our findings suggest that both clean and dirty industries’ import demand increased during the study period. In terms of export demand, clean industries’ export demand declines whereas dirty industries’ export demand increases compared to the total demand.     

China's membership in the World Trade Organization (WTO) and the exports of the developing economies of East Asia: a computable general equilibrium approach

There is a general perception particularly among the developing countries of East Asia that China's WTO membership would spell bad news for their exports. The ASEAN countries in particular are quite concerned about its likely negative impact on their export and growth potentials. In this light, the main objective of this paper is to empirically assess the trade implications of China's WTO membership for these countries. Only few studies, using a Computable General Equilibrium (CGE) approach, have addressed the issue of China's WTO membership trade implications. Further, these studies have not adequately addressed the issue from the perspective of the developing countries of East Asia, particularly the ASEAN countries. Using the latest version of the Global Trade Analysis Project (GTAP) model and based on the latest tariff reduction commitments by China, the results showed that, contrary to the current perception and previous studies, almost all of the developing countries of East Asia are likely to benefit from China's WTO membership overall, after allowing for anticipated price adjustments. Without the price adjustments, the Philippines and Singapore would have come out as net losers. These findings have confirmed the need for economic and export restructuring among the ASEAN countries and the importance of accelerating their economic integration. They have also highlighted the importance of promoting trade and investment cooperation between China and ASEAN countries.     

Environmental Protection and Trade Liberalization in a Small Open Dual Economy

The author investigates the conditions under which environmental protection and trade liberalization might improve urban unemployment and welfare in a small open Harris–Todaro model with polluting urban manufacturing. While a tariff reduction decreases manufacturing employment, a rise in the pollution tax rate may increase it when a dirty input is complementary to capital. Environmental protection and trade liberalization are consistent in reducing the level of urban unemployment because they lower it under the same condition. They are consistent in increasing GDP if a rise in the pollution tax rate decreases manufacturing employment. Otherwise, trade liberalization will mitigate a decrease in GDP because of environmental protection if the degree of urbanization is low and if rural technology exhibits weak diminishing returns to labor. This GDP effect plays a central role in welfare improvement.     

Pollution, Capital Mobility and Tax Policies with Unemployment

In this paper we highlight aspects related to the links among unemployment, international capital mobility, and tax policies in a small open developing economy. Without international capital mobility, the joint optimal trade and environmental policies require a zero tariff and an emission tax lower than the Pigouvian tax. With international capital mobility and a capital tax (subsidy), the optimal emission tax rate is smaller (larger) compared to the rate when capital is untaxed. When both the emission tax and the capital tax/subsidy are jointly chosen optimally, then the optimal policy on capital is a lower subsidy, or even a tax, compared to the standard capital subsidy of the no pollution case.     

Trade Restrictiveness and Deadweight Loss in China’s Imports

China is believed to have gained immensely from its admission into to the World Trade Organization (WTO) in 2001. One of the direct gains comes from the lessening of deadweight loss (DWL) due to tariff reduction. Conventional measures for DWL, however, are too aggregate to capture the trade policies, which are determined at a much higher disaggregated level, and ignore the interactions between tariff and corresponding import demand as suggested by theories. In this paper, we first systematically estimate the import demand elasticities at a highly disaggregated level and then match them with the most detailed lines of the applied tariff for the most favored nations as reported by the WTO. Using the detailed matching data, we construct Feenstra’s (1995) simplified trade restrictiveness index (TRI), which captures the covariance of tariff and the corresponding demand elasticity. Finally, we use the TRI to compute the DWL from1997 to 2008 and find that the DWL due to the tariff barrier was reduced to 0.73% of GNI in 2008, noticeably lower than the highest previous mark of 4.58% of GNI in 2001.     

Open-access renewable resources and pollution: Trade and policy implications in a two-country model

We examine the interaction between the relative inter-industry pollution externality and resource stock externality of harvesting in deciding trade patterns and welfare gains from trade in a two-country model (less-developed countries) with renewable resources in the absence of resource management. This paper focuses on the impacts of trade policies on resource conservation and welfare outcomes in two countries with different environmental management regimes. Differences in pollution management standards between both countries determine the direction of trade flow and gains from trade in a diversified production case. The country with a lower pollution intensity parameter, an exporter of resource goods, certainly experiences welfare loss in the post-trade steady-state and may also suffer a decline in utility throughout the transition path. However, a country with higher pollution intensity and importers of resource goods tend to gain from trade. Under national open-access resources, given that pollution is regulated up to a certain point in both countries, this study finds that implementing better restrictions on only one externality factor is not optimal from a post-trade welfare perspective. Lastly, from the point of view of policy suggestion, this paper offers an optimal trade policy that the economic and environmental effects of enforcing import tax on resource goods are likely to be Pareto-improving consequences compared to the implications of using an export tax.     

Trade Policy in Lobbying Equilibrium: With Non‐Traded and Traded Final Goods and Intermediate Inputs

The paper derives trade policies endogenously for final consumption and intermediate input industries in the presence of a non‐traded sector. Contrary to what the existing literature suggests, results show that there is no definite relation between lobbying status and the direction of trade policy of an industry. Trade protection of an industry depends on how its consumption (horizontal) and production (vertical) linkages with other industries reinforce or cancel out its lobbying efforts. To cite a few results, (i) an organized industry may face trade tax, whereas an unorganized one may obtain protection; (ii) an organized downstream industry may not be able to impose trade tax to an unorganized upstream industry, (iii) an organized upstream industry may not hurt unorganized downstream industry, (iv) lobby for non‐traded industry alone can influence trade policies, and (v) lobby for traded industry affects the size of the non‐traded sector in the economy.     

稀土资源税对“寡头”国出口市场势力的影响研究

笔者主要从税收转嫁的角度分析“寡头”国的稀土资源税政策对其出口市场势力的潜在影响,在系统把握我国稀土产业链上下游布局,理清稀土生产、加工以及贸易结构的基础上,通过改变国内稀土生产函数,研究使得稀土贸易市场出清条件下的税收价格转移弹性.分析表明:“寡头国”资源税的征收除了倒逼国内稀土行业整合,提高行业集中度之外,还可以将部分的税负转嫁到国际市场,增加稀土出口市场势力和贸易利得.     

US Ethanol Trade Policy: Pollution Reduction or Domestic Protection

To mitigate dependence on fossil fuel and reduce pollution, the US government has undertaken several policies—an import tariff, tax credit, and mandate—to augment domestic ethanol production and increase ethanol in the fuel supply. This study uses a general equilibrium model to analyze the effects of the US ethanol import tariff on welfare by internalizing the externality and incorporating US fuel and ethanol policies and to determine the optimal tariff. The results show that because of the environmental benefits of imported ethanol, the adverse effects of domestic ethanol on the environment, the need for the imported ethanol to boost the blended gasoline production, and the economy‐wide interactions of various markets, the optimal trade policy may call for subsidizing rather than taxing ethanol imports.