Does services liberalization benefit manufacturing firms?: Evidence from the Czech Republic

While there is considerable empirical evidence on the impact of liberalizing trade in goods, the effects of services liberalization have not been empirically established. This study examines the link between services sector reforms and the productivity of manufacturing industries relying on services inputs. Several aspects of services liberalization are considered, namely, the presence of foreign providers, privatization and the level of competition. The results, based on firm-level data from the Czech Republic, show a positive relationship between services sector reform and the performance of domestic firms in downstream manufacturing sectors. Allowing foreign entry into services industries appears to be the key channel through which services liberalization contributes to improved performance of manufacturing sectors. This finding is supported by evidence that foreign acquisitions of Czech services providers result in profound changes in the labor productivity and sales of acquired firms. As most barriers to foreign investment today are not in goods but in services sectors, the findings of this study may strengthen the argument for reform in this area.     

Endogenous tariffs and trade adjustment assistance

This paper examines whether trade adjustment assistance is an effective tool for blunting political opposition to trade liberalization. The traditional argument is that adjustment assistance bribes labor unions so that they will accept reduced tariff protection. In this way, a trade adjustment assistance program should help the government lower tariffs and increase social welfare. This paper introduces trade adjustment assistance into a political economy model of endogenous tariff formation. The model shows that adjustment assistance reduces policy makers’ incentives to press for trade liberalization and may slow down the pace of reform and lower social welfare under certain plausible conditions.     

Markets for risk and openness to trade: how are they related?

If protectionist trade policies aim to insure domestic industries against swings in world market prices, the development of financial markets could lead to trade liberalization. Likewise, trade liberalization could lead to the development of financial markets that help agents diversify the added risks. In this paper, we empirically address the hypothesis that there is a positive interdependence between financial development and liberal trade policies. We find a positive and economically significant relationship between the two, with causation running in both directions. The results are, however, somewhat dependent on the measure of trade policy being used.     

Labor demand and trade reform in Latin America

Trade liberalization is thought to result in higher own-wage elasticities of labor demand, particularly for unskilled labor, with adverse implications for both labor market volatility and wage dispersion. The paper first argues that theoretically the link between liberalization and labor-demand elasticities is less clear than has previously been asserted. It then uses dynamic panel techniques to estimate labor-demand relations for manufacturing establishments in Chile, Colombia, and Mexico across periods of trade policy reform. The results do not strongly support the hypothesis that trade liberalization has a direct impact on own-wage elasticities.     

External tariffs under a free-trade area

How do free-trade areas affect the tariffs that member countries impose against non-members? There is no consensus in the literature regarding this important question. In this study, we use a political-economy model of endogenous protection to show that if individual preferences exhibit loss aversion or if the government's objective is characterized by diminishing marginal political support, a free-trade area can lead member countries to increase their external tariffs and thus act as a stumbling block to unilateral liberalization. We also argue that the stumbling block result is more likely to arise under loss aversion than under diminishing marginal political support and confirm this using a simulation. Finally, we show that the stumbling block effect can also take place under multilateral liberalization. Our results highlight a new type of mechanism through which preferential trade agreements may affect external tariffs.     

Free trade as ideology: fair trade as goal problems of an ideological approach in U.S. trade policy

Increased protectionist practices among the major industrialized countries present serious challenges to a free trade doctrine. Contradictions between theory and practice make the defense of a pure trade system increasingly untenable. Yet U.S. trade policy continues to be driven by an ideological commitment to such a system. Changing international economic and political conditions suggest that a new “fair trade” paradigm may be in the making. However, replacement of a “free” trade regime by a “fair” one will depend on how well the weaknesses of a free trade ideology can be overcome. These weaknesses are discussed and some suggestions are offered for clarifying policy thinking about free trade under contemporary conditions.     

Trade and the (dis)incentive to reform labor markets: The case of reform in the European Union

We study the relation between international trade and the gains to reform labor markets by removing firing restrictions. We find that trade linkages imply substantially smaller benefits to reform than those calculated in the closed economy general equilibrium model of Hopenhayn and Rogerson [Hopenhayn, Hugo, Rogerson, Richard, 1993. Job Turnover and policy evaluations: a general equilibrium analysis. Journal of Political Economy 101 (5), 915–938 October]. When economies trade, labor market policies in one country spill over to other countries through their effect on the terms of trade. A key finding in the open economy is that the share of the welfare gains from domestic labor market reform exported substantially exceeds the share of goods exported. Thus, with international trade, a country retains little to no benefit from unilaterally reforming its labor market. A coordinated elimination of firing taxes yields considerable benefits. We also find that the U.K. benefits from labor market reform by its continental trading partners. These insights provide some explanation for recent efforts toward labor market reform in the European Union.     

Welfare implications of trade liberalization and fiscal reform: A quantitative experiment

This paper studies the welfare implications of revenue-neutral trade liberalization and fiscal reform programs for developing economies using a multi-sector dynamic general equilibrium model of a small open economy. We analyze how different combinations of tariffs – on imported consumption goods, intermediate inputs, and capital goods – and taxes – on consumption, labor income and capital income – affect the transitional and long-run welfare. We report three main findings. First, trade liberalization programs financed by consumption and labor income taxes tend to result in substantial welfare gains, but financing the lost tariff revenue through capital income taxes can have an adverse impact on welfare. Second, a significant fraction of welfare changes is due to transitional effects stemming from the allocation of resources in response to changes in tariffs and taxes. Third, trade liberalization and fiscal reform programs often translate into much larger welfare gains in countries that are more open to international financial markets.     

Trade, wages, and the political economy of trade protection: evidence from the Colombian trade reforms

Worker industry affiliation plays a crucial role in how trade policy affects wages in many trade models. Yet, most research has focused on how trade policy affects wages by altering the economy-wide returns to a specific worker characteristic (i.e., skill or education) rather than through worker industry affiliation. This paper exploits drastic trade liberalizations in Colombia in the 1980s and 1990s to investigate the relationship between protection and industry wage premiums. We relate wage premiums to trade policy in an empirical framework that accounts for the political economy of trade protection. Accounting for time-invariant political economy factors is critical. When we do not control for unobserved time-invariant industry characteristics, we find that workers in protected sectors earn less than workers with similar observable characteristics in unprotected sectors. Allowing for industry fixed effects reverses the result: trade protection increases relative wages. This positive relationship persists when we instrument for tariff changes. Our results are in line with short- and medium-run models of trade where labor is immobile across sectors or, alternatively, with the existence of industry rents that are reduced by trade liberalization. In the context of the current debate on the rising income inequality in developing countries, our findings point to a source of disparity beyond the well-documented rise in the economy-wide skill premium: because tariff reductions were proportionately larger in sectors employing a high fraction of less-skilled workers, the decrease in the wage premiums in these sectors affected such workers disproportionately.     

Policymakers' horizon and trade reforms: The protectionist effect of elections

This paper shows that electoral incentives deter politicians from supporting trade liberalization. We focus on all major trade liberalization bills introduced since the early 1970s in the U.S. Congress, in which House and Senate members serve respectively two- and six-year terms and one third of senators face elections every two years. We show that senators are more likely to support trade liberalization than House representatives. However, this result does not hold for the last generation of senators, who face elections at the same time as House members, suggesting that inter-cameral differences are driven by term length. Considering senators alone, we find that the last generation is less likely to support trade liberalization than the previous two. This result is pervasive and holds both when comparing the behavior of different senators voting on the same bill and that of individual senators voting on different bills. The protectionist effect of election proximity disappears for senators who are retiring or hold safe seats.     

Preferences,rent destruction and multilateral liberalization: The building block effect of CUSFTA

If a free trade agreement (FTA) is characterized by the exchange of market access with a large and competitive trading partner, the agreement can cause a leakage of protectionist benefits to domestic industry from lobbying against external tariff cuts. This rent destruction effect of an FTA can free policy makers to be more aggressive in multilateral tariff cuts. We argue that the Canadian–US free trade agreement (CUSFTA) provides an ideal policy experiment to link this mechanism to the data. Exploring the determinants of Canada's tariff cuts at the 8-digit HS product level, we find that CUSFTA acted as an additional driver of Canadian multilateral tariff reductions during the Uruguay Round.     

WTO成员在金融危机中实施的“二反一保”和“中国特保”措施

2008年下半年以来,由于全球金融危机引发的经济衰退使全球贸易保护主义抬头。WTO成员在国际贸易萎缩的背景下纷纷采用贸易救济措施,导致反倾销、反补贴和保障措施的数量激增。WTO成员还针对中国频繁使用了特保措施。总体而言,与上世纪30年代经济大萧条比较,当前的贸易保护主义是低度的。WTO的法律框架也为贸易保护提供了依据,实施贸易保护措施是贸易自由化进程中的必要补充。但国际贸易的主流依然是贸易自由化。贸易自由化与经济增长之间的正相关系一直被经济学所证明。     

Policy choice: Theory and evidence from commitment via international trade agreements

Why do governments employ inefficient policies when more efficient ones are available for the same purpose? We address this puzzle in the context of redistribution toward special interest groups (SIGs) by focusing on a set of important policies: tariffs and non-tariff barriers (NTBs). In our policy choice model a government can gain by committing to constrain tariffs through international agreements even if this leads to the use of less efficient NTBs; commitment has political value because it improves the bargaining position of a government that is weak relative to domestic SIGs. Using detailed data we find support for several of the model's predictions including: (i) tariff commitments in trade agreements increase the likelihood and restrictiveness of NTBs but not enough to offset the original tariff reductions; (ii) tariff commitments are more likely to be adopted and more stringent when the government is weaker relative to a SIG. Thus, the results can explain the use of inefficient policies for redistribution and suggest that the bargaining motive is an important source of the political value of commitment in international agreements.     

The impact of trade liberalization on productivity: Evidence from India's formal and informal manufacturing sectors

Despite a large literature investigating the impacts of trade on firm productivity, there is almost no evidence on how small firms react to trade liberalization. Using a unique dataset of firm-level surveys that are representative of the entire Indian manufacturing industry, I show that India's unilateral reduction in final goods tariffs increased the average productivity of small, informal firms, which account for 80% of Indian manufacturing employment but have been excluded from previous studies. In contrast, the increase in productivity among larger, formal firms was driven primarily by the concurrent reduction in input tariffs. By examining the effect of the tariff liberalization on the distributions of productivity and firm size, I find evidence consistent with the exit of the smallest, least productive firms from the informal sector. In addition, I find that although the decline in final goods tariffs did not significantly impact average formal sector productivity, it did increase productivity among the top quantiles of the distribution.     

Revisiting the evidence on trade policy preferences

Past literature has found evidence that labor market attributes affect individuals' trade policy preferences in a manner consistent with theories of international trade. This paper shows that, with the exception of education, the relationships between labor market attributes and trade policy preferences are not robust in US survey data. This suggests that either our proxies of labor market attributes are poor or our theories for what drives trade policy preferences need to be revisited.     

International trade and unemployment: Theory and cross-national evidence

We present a model of trade and search-induced unemployment, where trade results from Heckscher-Ohlin (H-O) and/or Ricardian comparative advantage. Using cross-country data on trade policy, unemployment, and various controls, and controlling for endogeneity and measurement-error problems, we find fairly strong and robust evidence for the Ricardian prediction that unemployment and trade openness are negatively related. This effect dominates the positive H-O effect of trade openness on unemployment for capital-abundant countries, which turns negative for labor-abundant countries. Using panel data, we find an unemployment-increasing short-run impact of trade liberalization, followed by an unemployment-reducing effect leading to the new steady state.     

外国应对贸易保护经验谈及对我国的启示

经济学者普遍认为,在世界经济的繁荣期,政府决策偏向自由贸易;经济危机后,世界各国在呼吁国际合作同时,却又采取着不同形式的贸易保护政策,尽管贸易自由化已经是大势所趋,但各国的贸易保护却愈演愈烈,中国作为有着勃勃生机的新生经济体,受到多国政府的频频发难,已成为遭受贸易保护主义损失最大的国家之一,应对贸易保护已是当务之急。回顾别国在经济发展中应对贸易摩擦的经验,得到我国应对贸易摩擦的有益启示。     

Buyer power in international markets

This paper investigates the implications for international markets of the existence of retailers/wholesalers with market power. Two main results are shown. First, in the presence of buyer power trade liberalization may lead to retail market concentration. Due to this concentration retail prices may be higher and welfare may be lower in free trade than in autarky, thus reversing the standard effects of trade liberalization. Second, the pro-competitive effects of trade liberalization are weaker under buyer power than under seller power.     

Making Trade Policy in a New Democracy after a Deep Crisis: Indonesia

This paper examines the recent political economy of trade policy in Indonesia against the backdrop of two major events: the deep economic crisis of 1997–98, and the transition from three decades of rapid growth under an authoritarian regime to a weaker but democratic state. We investigate both international and domestic trade policy. The international trade policy regime has remained largely open, perhaps surprisingly in view of the unpopularity of liberal economic policies in the wake of the crisis and the forces advocating more protectionist policies. However, this openness is precarious, and lacks both institutional and community opinion support. In contrast, while remaining largely open at the international border, domestic barriers to trade have increased. This conjunction of economic crisis and weak, democratic states is a common phenomenon in the developing world, and the lessons for trade policy from the Indonesian experience over this decade are therefore relevant to many other countries.     

国际贸易运输:基本框架与自由化改革政策比较静态分析

在贸易壁垒趋于整体弱化的情况下,高效的国际运输成为降低贸易成本、增强国际竞争力的首要途径。在廓清相关概念内涵的基础上,本文建立了国际运输物流与货物贸易之间的关联框架,评估了自由化改革政策的效果并全面检视了深化改革的主要路向,结果显示竞争强化和放松规制等政策改革可以降低贸易成本,并产生贸易促进效果。