Business groups,foreign direct investment,and capital goods trade: The import behavior of Japanese affiliates

We examine the impact of buyer–supplier relationships within business groups on capital goods trade by taking into account potential simultaneous effects of business group ties on foreign direct investment. We posit that (1) foreign affiliates of business group firms have a greater propensity to import capital goods from the home country, increasing home country exports; (2) if the establishment of overseas affiliates by business group firms attracts foreign direct investment by their capital goods suppliers, business group ties are localized and the ‘trade creating’ impact of business group ties may disappear or even be reversed. Empirical analysis of capital goods imports by 1790 manufacturing affiliates operated abroad by Japanese multinational firms, combined with information on linkages with machinery suppliers within horizontal and vertical business groups, provides broad support for these predictions. Our findings suggest that it may be incorrect to infer from the absence of a simple relationship between business group ties and trade that such ties are unimportant; instead, intra-group ties may be replicated abroad through foreign direct investment.     

Measuring network effects on trade: A reexamination

Building upon [Greaney, T.M., 2005. Measuring network effects on trade: are Japanese affiliates distinctive? Journal of the Japanese and International Economies 19, 194–214], this research provides improved estimates of the impact of network effects on trade conducted by foreign affiliates operating in the US. With an expanded and improved data set, I find that both home and regional biases are much stronger for affiliates’ imports than for their exports. At the country-specific level, I find evidence to support the hypothesis that Japanese affiliates have particularly strong network effects, but these effects are limited to a home bias effect alone. Although Japanese affiliates show signs of a regional, or Asian, network effect in their import pattern, the strength of this effect is the weakest among all of the countries tested. Only two countries’ affiliates show signs of regional bias in their export behavior, Australia and the Netherlands.     

Platforms in the Pacific: the trade effects of direct investment in Thailand

Thailand, as other ASEAN countries, experienced a dramatic surge of inward foreign direct investment in the late 1980s. These investments took place in relatively advanced, export-oriented industries. This study examines the effects of these investments on Thailand's trade, using a new methodology based on international input-output analysis. This framework accounts for the direct trade of foreign-affiliated companies as well as their indirect trade effects, including the displacement of competing imports, on one hand, and the procurement of imported intermediate inputs and capital goods, on the other. The framework is implemented with data from a Japanese Chamber of Commerce (Bangkok) survey. The results show, among other things, that Japanese-affiliated firms tend to offset their large direct trade deficits in the longer run with substantial indirect trade surpluses. These firms do, however, contribute to “triangular trade”-that is, Thai trade deficits with Japan, and surpluses with other countries.     

Vertical Trade,Exchange Rate Pass-Through,and the Exchange Rate Regime

We compare the welfare of different combinations of monetary and currency policies in an open-economy macroeconomic model that incorporates two important features of many small open economies: a high level of vertical international trade and a high degree of exchange rate pass-through. In this environment, a small economy prefers a fixed exchange rate regime over a flexible regime, while the larger economy prefers a flexible exchange rate regime. There are two main causes underlying our results. First, in the presence of sticky prices, relative prices adjust through changes in the exchange rate. Multiple stages of production and trade make it more difficult for one exchange rate to balance the whole economy by adjusting several relative prices simultaneously throughout the vertical chain of production and trade. More specifically, there is a tradeoff between delivering an efficient relative price between home and foreign final goods and delivering an efficient relative price between home and foreign intermediate goods. Second, because the small economy faces a high degree of exchange rate pass-through under a flexible regime, it suffers from a lack of efficient relative prices in vertical trade. The larger economy, however, does not face this problem because its level of exchange rate pass-through is low.     

Trade Propensities and Foreign Ownership Shares in Indonesian Manufacturing

This paper examines the relationship between trade propensities and foreign ownership shares in Indonesian manufacturing in 1992 and 1994. Foreign plants had relatively high trade propensities, and plants with high foreign ownership shares had the highest export propensities. Differences in import propensities among foreign ownership groups were relatively small. It might be argued that trade propensities determine foreign ownership shares in Indonesia, which historically waives foreign ownership restrictions for firms that export much of their output. However, this paper argues that causation runs from foreign ownership shares to trade propensities, because multinational firms have strong incentives to restrict access by uncontrolled affiliates to their international marketing networks, and because the relationship persists even when the effects of policy distortions are accounted for. Correspondingly, ownership restrictions that discriminate among foreign ownership groups are likely to reduce the exports of foreign multinational affiliates, but to have a much weaker effect on imports.     

我国贸易顺差的可持续性研究

近几年来,伴随着我国的经济的快速发展,我国的贸易顺差不断增长,但到目前为止,对于我国贸易顺差的可持续性问题还缺乏全面、深入的研究。本文基于两个实际经济变量模型,对我国贸易收支出现顺差的原因进行了分析。本文认为,国内有效需求不足和国内投资过度扩张、贸易品生产相对过剩与公共品供给不足,以及国民储蓄超过国内投资,是我国贸易收支出现顺差的直接原因,而人口红利、大规模的工业化与城市化、地方政府行为扭曲、金融抑制等因素,决定了我国贸易顺差将在较长时期内存在,具有可持续性。     

EMU, EU, Market Integration and Consumption Smoothing

By taking a new approach to the study of the impact of EMU on consumption smoothing, centering on consumption volatility and therefore on smoothing more directly, we find that even though EMU tends to smooth consumption, it is not through cross-country property and claims. Rather it comes through the promotion of the tradability of goods, capital in particular: specifically, the encouragement of price competition, contestable home markets, ability to borrow and buy insurance at home, and the harmonization of regulations. Some of the consumption smoothing may also depend on EU membership rather than EMU as such but EMU adds to it. As a fundamental part of the analysis, the paper uses a new index of currency union which focuses on the ratio of trade with other countries sharing the same currency relative to total foreign trade.     

反倾销政策与研发竞争

借助异质产品的Bertrand双寡头模型,本文分析了一国反倾销政策对该国企业和外国企业的研发、产品价格及社会福利的影响。研究结论表明:与自由贸易相比,当产品的差异度较小时,受反倾销政策保护的企业会策略性地利用反倾销政策而退出国外市场,减少研发投入,进而提高产品价格,而遭受反倾销政策约束的外国企业由于其研发投入的边际收入增加,因而会增加研发投入,降低产品价格。此外,反倾销政策的存在还有可能促进各国社会福利的提升。     

Do domestic and foreign exporters differ in learning by exporting? Evidence from China

In view of the importance of intra-firm trade and export-platform FDI conducted by multinationals, we investigate how domestic firms and foreign affiliates exhibited differential impacts of export entry and exit on productivity changes. Using a comprehensive dataset from China's manufacturing industries, we employ the Olley–Pakes method to estimate firm-level TFP and the matching techniques to isolate the impacts of export participation on firm productivity. Robust evidence is obtained that domestic firms displayed significant productivity gains (losses) upon export entry (exit), whereas foreign affiliates showed no evident TFP changes. Moreover, the productivity gains for domestic export starters were more pronounced in high- and medium-technology industries than in low-technology ones. We explain our findings from the perspective of the technology gap theory after considering processing trade and the fragmentation of production stages in the era of globalization.     

Firm's choice of ownership structure: An empirical test with Korean multinationals

This paper examines the choices of ownership structure of multinational firms (MNFs) based in a newly developed country (South Korea) for their foreign affiliates. A transaction cost economics perspective is employed, taking advantage of a distinct and comprehensive firm-level data set. This is investigated as a whole-set sample of all overseas affiliates and as a sample of only partially owned affiliates using a number of analytical techniques. The paper shows that the choice of equity ownership structure is affected by the characteristics of various host countries. We find that the MNF prefers sharing control rights with a local partner when its affiliate is in a resources-based sector, when it enters a country with a large black market, or when there is large socio-cultural difference between the home and the host country.     

Global production sharing and the FDI–trade nexus: New evidence from the Japanese automobile industry

The growing importance of global production sharing makes the nexus between outward foreign direct investment (FDI) and trade in intermediate goods ever more important. This study employs newly-constructed product-level data covering 32 products and 49 host countries over the period 1993–2008 and finds evidence that FDI by upstream firms leads to additional exports of intermediate goods from the home country. The finding of a complementary relationship between FDI and intermediate exports from Japan runs counter to the popular view that the growing overseas activity of multinational enterprises could replace intermediate exports from a home country, thereby depriving the home country of job opportunities.     

Affiliates and parent employment through foreign direct investment: a study case of substitutability or complementarity

How does outward foreign direct investment (FDI) affect employment of multinationals in the home country? Does the impact of outward investment differ among manufacturing and service sectors? Using data on Italian MNEs, this paper examines the impact of Italian outward FDI on local employment between 1998 and 2006. In particular, we investigate the relationship existing between employment in the parent company and employment in foreign affiliates by distinguishing according to host-country location and sector of activity. The results suggest that the effects of Italian outward FDI on domestic employment differ according to the sector and the country of destination. In the manufacturing sector, a weak but significant relationship of labour substitutability is found for Italian MNEs producing low-technology products in foreign affiliates localized in high-wage countries. On the other hand, a significant North–south complementarity relationship in labour demands appears in the High and Medium-high- technology sectors. In the service sector, we find strong complementarity between employment in the parent firm and employment in foreign affiliates: in particular, this regards Italian MNEs producing knowledge-intensive services both in Western affiliates and CEEC locations. These results are robust when we control for endogeneity of output and parent wages.     

Export processing zones as catalysts

A potentially important indirect effect of export processing zones (EPZs) is the catalyst effect. The foreign affiliates attracted to the EPZs could stimulate local firms to begin to export by showing them how to produce, market, sell and distribute manufactured goods on the world market. Our results indicate a significant catalyst effect in Malaysia.     

Expansion of EU's Free Trade Agreements into Asian Countries and Its Impact on the Chinese Economy

Abstract

This study investigates the macroeconomic impact of EU's free trade agreements with Asian countries and the US on the Chinese economy. In addition we examine the impacts on the Chinese industry output based on the framework of production network and production fragmentation. The expansion of the EU's economic reach toward ASEAN and Japan through free trade agreement will generate a positive macroeconomic effect on negotiation participants while it generates a negative effect on the Chinese economy: Some portions of existing trade and foreign direct investment will be shifted to partner countries from non-partner countries. However, according to a sectorial analysis, EU's free trade agreements with three countries result in a positive impact on China's electronics and machinery industry, because China's industry is linked to the production fragmentation and foreign affiliates play a crucial role.     

Host country competition,labor skills,and technology transfer by multinationals

Host Country Competition, Labor Skills, and Technology Transfer by Multinationals. — This paper examines the impact of local competition and the availability of skilled labor on the technology imports of foreign MNC affiliates in Mexican manufacturing industries. The authors find that proxies for local competition and labor skills are positively related to the recorded technology imports of foreign owned affiliates. The effects of competition appear to be particularly strong in intermediate and consumer goods industries, while the availability of skilled labor seems to be particularly important in durable and capital goods industries. Thus, government policies aiming to create a competitive climate and improve labor quality may also promote inflows of modern technology.     

Effects of overseas production on home country exports: Evidence based on Swedish multinationals

Effects of Overseas Production on Home Country Exports: Evidence Based on Swedish Multinationals. —Using unique data on Swedish multinationals 1974–1990, the impacts of overseas production on parent exports are analyzed. Two methodological applications are introduced: (i) In order to avoid sample selection bias, the model includes also countries to which the firm exports, but has not established any affiliates; (ii) the effect of affiliate exports to “third countries” is incorporated. The results suggest that increased foreign production both replaces exports of finished goods and attracts intermediate goods from the parent. In contrast to previous studies, the net effect is negative, albeit significant only in the case of affiliate exports in the EC.     

Import competition from and offshoring to low-income countries: Implications for employment and wages at U.S. domestic manufacturers

Using confidential linked firm-level trade transactions and census data between 1997 and 2012, we provide new evidence on how American firms without foreign affiliates adjust employment and wages as they adapt to import competition from low-income countries. We provide stylized facts on the input sourcing strategies of these domestic firms, contrasting them with multinationals operating in the same industry. We then investigate how changes in firm input purchases from low-income countries as well as domestic market import penetration from these sources are correlated with changes in employment and wages at surviving domestic firms. Greater offshoring by domestic firms from low-income countries correlates with larger declines in manufacturing employment and in the average production workers’ wage. Given the negative association, however, the estimated magnitudes are small, even for a narrow measure of offshoring that includes only intermediate goods. Import penetration of U.S. markets from these sources is associated with relatively larger changes in employment for arm’s length importing firms, but has no significant correlation with employment changes at firms that do not trade. Given differences in the degree of both offshoring and import penetration, we find substantial variation across industries in the magnitude of changes associated with low-income country imports.     

Inspection,testing errors and trade in tainted products

This paper examines international trade and inspection involving tainted products in a model of quality choice, facing fears that globalization is the cause of numerous food incidents. Particularly, we ask the following questions: (i) What are the conditions under which foreign firms choose to produce tainted goods? (ii) Does globalization via freer trade lower product safety? (iii) Why are goods imported even though they are known to be harmful? We show the existence of a free trade Nash equilibrium characterized by production and trade of high-quality non-tainted products. However, free trade cannot prevent the export of tainted goods, because the foreign firm may deviate under different combinations of parameters. We identify self-correcting mechanisms such as nationalism and a political-economy re-allocation of public resources in favor of customs authorities. Nevertheless, we also uncover activities that exacerbate tainted production like errors of testing and sabotage by rival firms.     

Prospects for Japanese-Russian trade expansion in the second half of the 1990s

During the Soviet period, trade between the USSR and Japan was relatively unimportant, constituting approximately 2 percent of the Soviet Union's total foreign trade turnover. The composition of trade goods, moreover, was primitive. The USSR exported unprocessed raw materials in exchange for high value added industrial products. This paper examines the impact of Russia's fledgling transition on its trade with Japan and finds some hopeful developments. Although the volume of trade has contracted, Russian exports are reviving, the commodity structure is adjusting appropriately to changes in relative prices, and embodied factor content is import-capital-intensive as required by the Leontief variant of the Heckscher-Ohlin theory. The primary cloud blighting this performance is Russia's continuing inability to export its industrial goods.     

中印工业制成品贸易的本地市场效应比较研究

本地市场效应意味着一国的国内市场规模对工业制成品的出口具有促进作用。本文利用两个模型对中国和印度工业制成品贸易中的本地市场效应进行了检验,并通过相应的比较分析认为中国的工业制成品出口存在较为显著的本地市场效应,而印度出口的本地市场效应并不显著。相比之下,中国更具有本地市场效应带来的贸易持续发展的动力。但是,随着产业转移的推进和国内市场的日益扩张,印度多类工业制成品也具备获得本地市场效应的潜力。对于中国而言,在传统比较优势日益减弱的趋势下,更应充分重视本地市场优势对出口贸易的决定性作用,这样才能保证获得出口贸易上的持续优势。