Distortions of Sino-US and Sino-EU Safeguard Agreements： Effects on World Textile Markets

The effects of Sino‐US and Sino‐EU safeguard agreements on US, Chinese and world cotton and textile sectors are investigated using a partial equilibrium model. The effects are compared to a free trade scenario under the provisions of the Agreement on Textiles and Clothing. The two safeguard agreements capping Chinese textile exports would decrease China's textile and apparel exports, production, and domestic consumption by an average 1.57, 0.63 and 0.32 percent, respectively. The safeguard agreements cause an increase in the US cotton textile price index and a slight decrease in US net textile imports and textile consumption. The agreements cause a decrease in the world cotton price and the quantity of cotton traded, but these trends reverse at safeguard expiration. The results generally support the view that the safeguard agreements forestall the effects of free trade in textiles and apparel rather than creating long lasting shifts in the textile trade.     

Towards a welfare model of trade and multinational firms with oligopolistic competition

This paper constructs a general equilibrium model in a world with two-symmetric countries. It explains welfare gains from international trade and horizontal Foreign Direct Investment (FDI) in the economy with firm heterogeneity and variable markups stemming from oligopolistic competition. My model shows that the pro-competitive effects of trade and horizontal FDI happen because trade openness induces an increase in product market competition that reduces markups and toughens selection, increasing aggregate productivity. The most significant contribution of the paper is that multinational firms, via horizontal FDI, produce the most significant welfare gains through the toughest selection and lowest markups.     

Trade Policy,Competition and Productivity: The Impact of EU Harmonization in the Dutch Food Processing Industry

Evidence broadly confirms that European Union (EU) harmonization of food regulations can be considered as a trade-promoting and market-integrating instrument in the Single Market. However, little is known on how this particular trade liberalization measure may impact total factor productivity (TFP). One of the general presumptions is that trade liberalization has a positive impact on productivity through the effect of competitive pressures to which domestic firms are exposed. For instance, as a result of lowering or removing regulatory barriers to trade, a decline in entry costs of foreign and domestic competitors leads to more competitive pressures which have a downward effect on prices and markups and higher TFP through a better reallocation of inputs. The overall evidence shown in this paper leads to the conclusion that the impact of EU harmonization on various TFP measures occurs through a markup mechanism: more EU harmonization results in more competition (lower markups) and greater TFP growth. We also investigate the impact of assumptions relating to market structure and the production function. We empirical test and refute the assumptions of perfect competition and constant returns to scale in our sample. The analysis is carried out at the level of Dutch food processing firms for the 1979–2005 period. We extend and built upon a new database on EU harmonization of regulations in the food industry. The product classification of this database follows the detailed Combined Nomenclature classification that codes the relevant harmonization initiatives of technical regulations at the product level.     

Trade Liberalization and Industry Dynamics

This paper uses a large data set for 28 industries in 40 countries to examine the effects of trade liberalization on the number of firms, the average size of surviving firms, and markups. We extend previous studies by examining not only tariff changes in the liberalizing country but also trade reforms in the rest of the world. In addition, we look at whether these effects differ across industries depending on their degree of comparative advantage. The results show that a reduction in home tariffs decreases the number of establishments, firms average size, and markups. All of these three effects are found to be of lower magnitude for comparative advantage industries. In the case of foreign tariffs, our results show that a reduction in protection in the rest of the world is associated with an increase in the number of establishments (which is likely to be reflecting an increase in export profitability), a decrease in average size, while markups are mostly unaffected. As with home tariffs, these effects tend to be less pronounced in comparative advantage industries.     

The Impact of COVID-19 on Chinese trade and production: An empirical analysis of processing trade with Japan and the US

The COVID-19 pandemic severely disrupted international trade, leading countries to grapple with product shortages and firms to experience major supply chain issues. These challenges increased production costs and significantly contributed to lower trade and higher inflation. In this paper, we examine the impact of COVID-19 on Chinese trade through its two main trading partners: Japan and the US. By differentiating products by product type and processing status, we find evidence that products in the middle of the global supply chain were most affected by the pandemic and that the severity of the shock depends on the partner country’s role in the global supply chain. Additionally, we find that Chinese exports are more impacted than Chinese imports, regardless of processing status. These findings are largely consistent with economic theory. Understanding that the effects of global shocks vary by product and country will help guide policies that minimize supply chain disruptions.     

Determinants of Individual-Firm Markup in Japan: Market Concentration, Market Share, and FTC Regulations

This paper estimates individual firm level markup for more than 400 major manufacturing firms in Japan. Our estimates suggest the presence of significant market power for most of these firms, due not only to market concentration but also to the firms' own market shares, as well as advertizing and sales promotion efforts. The paper then goes on to assess systematically the impact on estimated markups of regulatory measures taken by the Fair Trade Commission (FTC) of the Japanese Government. We find that non-punitive FTC activities are directed toward the right targets and are reasonably effective, whereas injunctions, the strongest measure endowed to the FTC, has essentially no effect on the markups of firms in our sample. J. Japan. Int. Econ., Dec. 1999, 13(4), pp. 424–450. Institute of Economic Research, Kyoto University, Yoshida-Honmachi, Sakyo-ku, Kyoto 606-8501, Japan; Institute for Social and Economic Research, Osaka University; and Faculty of Economics, University of Tokyo. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: L13, L41.     

Competition in the Chinese market: Foreign firms and markups

This study addresses the issues of whether foreign firms outperform domestic firms in markups and whether the presence of foreign firms dampens the markup of their local counterparts in the Chinese market. Analysis of a firm-level panel dataset, we find foreign-invested enterprises (FIEs), particularly those not from Hong Kong–Macau–Taiwan, charging a higher markup. Estimations on the determinants of markups highlight the important roles played by technological capability and intangible assets. The potential channels and mechanisms are also discussed. Entering the Chinese market through joint ventures helps FIEs raise markups, and this effect is notable for HMT–FIEs, which might have a relative advantage of cultural proximity than other FIEs. Sharing equality with national capital to construct political connection (guanxi) also helps facilitate markups. Crucially, foreign presence is positively related to local firms’ markups, suggesting that the spillover and linkage effects dominate the competition pressure brought about by foreign direct investment.     

An open economy general equilibrium model with heterogeneous producers, a homothetic utility function and endogenous elasticity

Recent monopolistic competition models have identified three main sources of the gains from trade: (1) the introduction of new varieties for consumers, (2) an improvement in efficiency through the exit of low-productivity firms, and (3) a reduction in firms’ markups through import competition. In this paper, we extend Feenstra (Economics Letters, 78(1):79–86, 2003) to develop a model with producers heterogeneous in productivity to capture these gains. Here, firm markups are decreasing with market share, and trade introduces new varieties to consumers and reduces the market share of domestic firms. This reduces markups and profits and forces low-productivity firms to exit. This pro-competitive effect on the distribution of productivity contrasts with the conventional export-driven mechanism in a constant elasticity setup. We can usefully extend this model for further study because of the homotheticity of the utility function and the tractability of the model.     

Assessing Productivity Gains from International Trade in a Small Open Economy

Empirical evidence suggests that exporter firms tend to charge higher markups than non-exporters due to trade barriers. The exporters’ markup premium, however, may disappear in a special case, namely when the home country is small relative to its trade partners and trade barriers are low. This can be because competition is more intense in the large export destination than in the small home country, so that firms are able to set higher markups for locally sold products but not for exports. This paper provides empirical evidence on the validity of this special case by estimating markups for firms in Luxembourg who generally export to larger countries. The estimated negative markup premium for exporters has important implications for the productivity measurement. In a sufficiently small open economy, exporters’ productivity may be biased downward, when the firm-level markup variation is not controlled for in the productivity estimation. The bias in the productivity estimates further leads to the inaccurate conclusion that openness to international trade lowers allocative efficiency.     

The trade depressing and trade diversion effects of antidumping actions: The case of China

China is by far the main target of antidumping (AD) litigation for most of its major trading partners. Recently, however, China itself has started using AD instrument intensively and was, in fact, the third leading country in initiating AD investigations between 2002 and 2004. This paper empirically investigates the impact of China's AD activities on trade by employing the system GMM estimator. The empirical results show that AD protection has significant trade depressing and trade diversion effects. These findings are consistent with Prusa [Prusa, T.A., 2001. On the Spread and Impact of Antidumping, Canadian Journal of Economics 34, 591–611.] and Brenton [Brenton, P., 2001. Anti-dumping policies in the EU and trade diversion, European Journal of Political Economy 17, 593–607] that investigate the trade effects of AD actions in the US and EU, respectively.     

Is Japan's trade (still) different?

Does Japanese trade in manufactured goods differ from the rest-of-the world average and from the US? We use a simple industry-level gravity model and 1981–1998 data to answer this question. We construct a measure of normalized imports by dividing bilateral industry-level imports by the importer's aggregate absorption and the exporter's industry output. We find that Japan imports less than other countries, but also exports less than other countries. Relative to the US, Japanese export performance is half as strong today as it was in the mid-1980s. Bilaterally, Japan is more open to imports from the US than the US is to imports from Japan. This means that the US runs a trade surplus with Japan in normalized imports of manufactured goods. J. Japanese Int. Economies 17 (4) (2003) 507–519.     

Learning to import from neighbors

This study examines the impact of learning from neighboring firms on new importers' behaviors. We first develop a learning model in which firms update their beliefs concerning import prices in foreign markets. These beliefs are based on the number of neighboring firms that import from that market and the level and heterogeneity of import prices. The updating proceeds according to the Bayesian rule. The model predicts that a positive signal regarding import prices revealed by neighboring importers encourages importing entry from the same country. Such signals play a stronger role when revealed by a greater number of neighbors. In addition, the model predicts that a positive signal increases firm-level initial imports and survival rates, but decreases post-entry import growth. Using a transaction-level dataset of Chinese importers during 2000–2006, we find supporting evidence for the model's predictions. Furthermore, importer learning displays heterogeneous effects on different firms and exhibits a spatial decay structure. Our robustness checks include controlling for various fixed effects, employing an alternative entry definition, and using subsamples comprising ordinary trade firms and direct importers.     

Impact of the US Economic Crisis on East Asian Economies： Production Networks and Triangular Trade through Chinese Mainland

This paper investigates the impact of the 2008 economic crisis on industries in East Asia. It attempts to identify the transmission mechanism and the magnitude of the impact of the crisis on industries in East Asia using the updated Asian international input–output table for 2008. The analyses reveal that the crisis significantly affected industrial output of the nine East Asian economies included in the present study. The economies that are deeply involved in production networks were affected most seriously. Our analyses also show that the impact was transmitted to East Asian industries through triangular trade, in which Chinese mainland imports parts and components from neighboring East Asian economies and then exports final products to the US and EU markets. Although such intricate production networks have improved the competitiveness of East Asian economies, they have also increased vulnerability to external shocks.     

Free Trade Agreements and the SADC Economies

Countries in southern Africa have engaged in a variety of tradeliberalisation initiatives such as the European Union (EU)–SouthAfrica Free Trade Agreement (FTA), the EU's ‘Everythingbut Arms’ (EBA) initiative to eliminate trade barriersagainst imports from the least developed countries and a potentialFTA among Southern African Development Community (SADC) countries.In this paper we use a multi-country computable general equilibrium(CGE) model to analyse the impact of trade liberalisation inthe region. First, we analyse the FTA between South Africa andthe EU. Then, we consider how the rest of southern Africa mightrespond: (i) by enforcing an SADC FTA; (ii) by exploiting theadvantages of unilateral access to the EU in addition to anSADC FTA; and (iii) by entering an FTA with the EU and otherSADC countries. The scenarios are ordered such that the SADCcountries pursue increased trade liberalisation. We find thatunder all FTA arrangements the increased total imports fromFTA partners exceeds the reduction in imports from non-FTA partners— the FTAs examined are all net trade creating. Some SADCeconomies are slightly hurt by the FTA between the EU and SouthAfrica, while others gain slightly. Overall, the agreement isnot a beggar-thy-neighbour policy. We also find that unilateralaccess to the EU is more beneficial for SADC countries thanan SADC FTA because the SADC countries trade more with the EUthan with each other. However, reciprocal reforms under an EU–SADCFTA dominate unilateral access to the EU because they requiremore structural adjustment in the SADC countries. Finally, wefind that South Africa is not large enough to serve as a growthpole for the region. Access to EU markets provides substantiallybigger gains for the other SADC countries than access to SouthAfrica.     

How international outsourcing drives up Eastern European wages

How International Outsourcing Drives Up Eastern European Wages. — This paper analyzes the effects of intermediate goods trade on the development of real wages in Central and Eastern European manufacturing. The empirical findings show that world exports in intermediate goods of the CEEC exhibit a negative impact on wages, and imports a positive one. Since 1993, intermediate goods trade between the EU and the CEEC accounted for an increase in wages being most pronounced in Slovakia, Poland and the Czech Republic.     

Higher productivity in importing German manufacturing firms: self-selection, learning from importing, or both?

This paper uses a newly available comprehensive panel data set for manufacturing enterprises from 2001 to 2005 to document the first empirical results on the relationship between imports and productivity for Germany, a leading actor on the world market for goods. Furthermore, for the first time the direction of causality in this relationship is investigated systematically by testing for self-selection of more productive firms into importing, and for productivity-enhancing effects of imports (‘learning-by-importing’). We find a positive link between importing and productivity. From an empirical model with fixed enterprise effects that controls for firm size, industry, and unobservable firm heterogeneity we see that the premia for trading internationally are about the same in West and East Germany. Compared to firms that do not trade at all two-way traders do have the highest premia, followed by firms that only export, while firms that only import have the smallest estimated premia. We find evidence for a positive impact of productivity on importing, pointing to self-selection of more productive enterprises into imports, but no clear evidence for the effect of importing on productivity due to learning-by-importing.     

Re-estimation of China-EU trade balance

Significant discrepancy exists between official Chinese and EU trade statistics on the magnitudes of the China-EU trade in goods as well as in services. While the discrepancy of China-U.S. trade surplus has been thoroughly studied by scholars and policymakers, the discrepancy of China-EU trade surplus is barely discussed in literatures. This may lead to seriously bias in understanding China-EU trade relationship, and even cause unnecessary trade friction. In this paper, we discuss the reasons behind the discrepancy of China-EU trade and quantify the extent to which the discrepancy is contributed by transportation costs, re-exports and their markups. We also employ the input-output tables of both EU and China, and measure the China-EU trade balance of goods and services in both domestic value-added (DVA) terms as well as in gross terms. The discrepancy of China-EU trade balance in goods (and services) still exists after adjustments, but is significantly reduced. With the adjustments on price and re-exports, in 2016, the discrepancy of China-EU trade in goods and services of Chinese release over EU release would shrink from an initial estimation of US$90.6 billion to an estimation of US$20.4 billion in gross terms, and further to US$15.8 billion in value-added terms.     

Economic performance and international trade engagement: the case of Portuguese manufacturing firms

By combining economic and financial data for Portuguese manufacturing firms with data on their exports and imports, we uncover some aspects of the relationship between international trade engagement and firms’ performances. In line with recent theoretical and empirical developments in the international trade literature: (i) we testify that Portuguese international trade is highly concentrated, especially on the import side, and both in inter- and intra-sector terms; (ii) we corroborate previous studies and theses according to which two-way traders outperform only importers, only exporters and above all domestic firms; (iii) we find that the greater the diversification of markets and goods (especially with regard to imports), the better the performance achieved by internationalised firms; (iv) we notice that the higher the intensity of firms’ international trade (especially imports), the better their performance; (v) we also present evidence that destination markets for exports and origin markets for imports are also important in explaining firm’s performance.     

Transatlantic trade and investment partnership: sectoral and macroeconomic perspectives for Germany,the EU and the US

The EU and the US have started negotiations on a Transatlantic Trade and Investment Partnership Agreement (TTIP) which could bring a considerable increase of exports and output as well as changes in the composition of output and employment. Thus export simulation studies in combination with input output analysis and employment analysis is useful. In the analysis presented the focus is mainly on sectoral output and employment effects where the key sectors are the automotive sector, chemical industry, information and communication technology production, pharmaceuticals and machinery and equipment. Backward sector links are analysed and found to be quite important in the automotive sector, the chemical industry, the machinery and equipment sector in both Germany and the US; in Germany also in ICT production. However, most of the observed sectors have weak forward linkage. Input output analysis is also used to identify employment effects in various sectors: the pure employment effect of a 20 % export expansion in Germany amounts to about 800 000 new jobs. Looking only at the US and German perspective turns out to be misleading—the high imports of intermediate inputs of German firms from EU partner countries suggests that a comparison EU-US is analytically required for some key issues and that considering the effects on EU partners is also useful. There is a host of key policy issues, including the issue of extended sustainability reporting.