Making Sense of the Comparative Advantage Gains from Trade: Comment on Batra

This paper addresses Ravi Batra’s (2002 ) criticism of the basic comparative advantage gains‐from‐trade model. While Batra’s criticism is based on the selection view interpretation of real income, the gains from trade can only be properly understood from the options view interpretation of real income. I also show how a recent empirical implementation of the gains‐from‐trade model defies Batra’s claim that “the consumption gain . . . is not subject to measurement” (2002, p. 642).     

Productivity and Firms’ Sales Destination: Chinese Characteristics

In the trade literature, it is often assumed that there is little or no trade cost within a country's borders, but large trade costs across a country's borders. Thus, productive firms self‐select into exporters and the less productive firms can only serve domestic consumers. This paper presents a similar but different case in China, whose domestic markets are segmented by provincial borders mainly owing to the various (hidden) protective measures favoring local firms. These discriminative measures are de facto trade barriers. It applies the heterogeneous trade theory to examine the effects of firms’ productivity on their sales choices in both the international and domestic markets, in the presence of intra‐national and international trade costs. We find that productive firms not only self‐select into exporters, but also into sales in other provincial markets. This pattern is sensitive to firms’ locations and ownerships. For foreign direct investment (FDI)‐controlled firms, increases in productivity are associated with a higher probability of selling into other provincial markets, rather than into international ones. Productivity increases for firms operating in the inland area exhibit different patterns than those in the Eastern area.     

A calm investigation into Mr Ricardo's principles of international trade

Abstract

This paper deals with some difficulties presented by Ricardo's texts on international trade, taking seriously Ricardo's account of the systematic interaction of real and monetary phenomena. After a brief reassessment of the main features of Ricardo's views on foreign trade, some basic questions are examined, concerning the method of analysis and the alleged invalidity of the labour theory of value at the international level. The enquiry goes on to state that, for Ricardo, there are no significant differences between domestic and international exchanges, and on this basis, proposes a simple and general rule explaining the flows of trade. The “principle of comparative advantage” and the “gains from trade” thus appear as simple unintended consequences of the decisions of agents in free markets. Finally, the characteristics of an international equilibrium and the nature and impact of destabilising shocks are analysed.     

The Empirics of Comparative Advantage: Overcoming the Tyranny of Nonrefutability

I assess the empirical evidence on comparative advantage. I argue that the Heckscher–Ohlin–Vanek (HOV) relationship is not a refutable general‐equilibrium proposition. Consequently, the empirical Heckscher–Ohlin literature has been suffering from the tyranny of nonrefutability. The trade‐governing principle of comparative advantage, the Ricardo–Haberler–Deardorff (RHD) theorem, yields a refutable general‐equilibrium prediction about the pattern of international trade and allows for a theory‐based assessment of the magnitude of the gains from trade. The recent experimental evidence on Japan's nineteenth‐century opening‐up to world trade provides a strong case for the hypothesis that comparative advantage governed Japan's international trade in its early trading years. The aggregate gains from that trade are estimated to be no larger than 9% of Japan's GDP.     

What Do Progressives Need to Know About Trade? Some observations on the competitiveness debate

In a recent book entitled Pop Internationalism Paul Krugman takes to task several prominent commentators who in recent years have published works decrying the loss of competitive position of the United States in an increasingly global economy. In particular, Krugman critically considers and rejects several arguments that he considers both wrong and dangerous. Among these are (1) the United States has lost, or is in the process of losing, its position of global technological leadership; (2) material standards of living in the US are threatened by the country's excessively liberal trade policies as compared with its trade partners; (3) stagnant or declining wages in the US are the result of trade with low wage Third World countries; (4) the US is in need of a new model and a corresponding policy approach that recognizes the changing structure of new global economic forces. The debate over the validity of the above assertions has been largely conducted between adherents of mainstream interpretations of international economic theory and policy. For Krugman the controversies are mostly a matter of a proper understanding of that theory along with an appreciation of the relevant data. The purpose of this paper is to offer an interpretation of the debate from a progressive left perspective. My position is that Krugman's critique of his imagined opponents on most issues is largely overdone and that there is actually substantive agreement among and between these mainstream views on most matters of trade and trade policy. More importantly, however, these same views, including Krugman's, are bounded by assumptions that are not supportable from a progressive left perspective. The title of the paper is an ironic twist on a title of one of Krugman's chapters, 'What do undergrads need to know about trade?'     

Determinants of intra‐firm trade: Evidence from foreign affiliates in Sub‐Saharan Africa

By exploiting a unique sample of foreign affiliates in Sub‐Saharan Africa, we study previously examined and unexamined firm‐level determinants of intra‐firm trade. We document that foreign affiliates engaging in intra‐firm trade are relatively few and that the majority of these also engage in trade at arm's length, which accounts for an important fraction of their total trade. The identified firm‐level determinants of intra‐firm trade are consistent with property rights and intangible asset theories of the multinational firm, with international production hierarchy theories, as well as with theories of complex FDI and of multinational activity under credit constraints.     

Globalization and firm‐level cost structure

In this study, we draw on economic theories of cost structure and the effects of international trade on firms' productivity to assess firm‐level cost behavior in the context of globalization. We investigate why and how trade openness affects firms' cost structure by examining the changes of fixed inputs along with those in capacity levels. Using a sample consisting of 25 countries from 2000 to 2014, we find that trade openness does significantly affect firms fixed and variable cost inputs, which indicate that production uncertainty along with international trade is essential to the cost structure decision in terms of cost rigidity. Furthermore, larger firms are more likely to adopt a rigid cost structure with higher fixed costs and lower variable costs because they are more involved in the international economy and more exposed to associated uncertainties.     

全球价值链嵌入与制造业转移 ——基于贸易增加值的实证分析

本文利用亚洲开发银行的多区域投入产出表(ADB-MRIO),依据出口贸易增加值分解框架,测算了中国制造业细分行业2000—2017年的全球价值链嵌入位置和国际产业转移情况,通过构建动态面板模型,实证分析了全球价值链嵌入位置对制造业国际转移的影响。研究发现:第一,价值链地位提升促进产业向外转移。劳动生产率提升、垂直专业化与研发投入的交互作用有利于产业向外转移,而过度投资和行业垄断则导致产业向内转移。第二,分行业类型检验结果表明,中低技术行业产业转移对于价值链嵌入位置提升的反应更为敏感。第三,影响机制检验表明,外商直接投资和中间品贸易是全球价值链地位提升作用于产业转移的主要渠道。     

STRATEGIC TRADE POLICY WITH INTERNATIONALLY OWNED FIRMS*

The consequences of international firm ownership for strategic trade policy are examined both in a general and in a simple linear model of an international duopoly with two governments using production subsidies as policy instruments. At first sight, the case for strategic trade policy seems to be weakened, because international ownership reduces a government's incentive for rent-shifting. Closer inspection shows, however, that there are ownership structures leading to optimal policies which induce the duopolists to behave more collusively. This tends to resolve the conflict between national and international rationality in a policy game with retaliation and makes strategic trade policy look more attractive.     

PROFIT TAX AND FIRM MOBILITY IN A THREE‐COUNTRY MODEL

We construct a three‐country model that incorporates international relocation by imperfectly competitive firms and examine both the effects of each country's profit tax reduction on the consumption and welfare of all countries, and the incentive for the countries to decrease the profit tax. In such a model, both the terms of trade and international relocation of firms offer the key to understanding the impacts of one country's profit tax policy. In particular, we note that the relocation of firms from the other two countries is positively related to the wage incomes of the third country through a shift in labour demand, and the terms‐of‐trade improvement is not only positively related to the wage incomes, but also negatively related to profit incomes through a shift in world consumption demand. We show that (i) in a three‐country world economy, regardless of the reduction's source, the profit tax reduction of each country leads to relocation of firms away from foreign countries toward its own economy and deteriorates the terms of trade of its economy and (ii) this becomes a ‘beggar‐thy‐neighbour’ policy in the sense that it lowers the welfare of the other foreign countries.     

Trade Liberalization and Environmental Regulation on International Transportation

Incorporating pollution emissions from international transportation into a model of strategic trade and environmental policies, we investigate the effect of trade liberalization and environmental regulation on national welfare and the environment. Our model includes imperfectly competitive markets for international transportation and final products. We find that trade liberalization may reduce each country's welfare unless some level of environmental regulation on international transportation is in place. When international trade is liberalized initially, a mutual increase in the common emission tax rates may improve each country's welfare. However, when international trade is highly protected initially, imposing an emission tax may reduce welfare.     

“GATT‐think” with Asymmetric Countries*

We argue that a trade agreement which conforms to GATT’s reciprocity rule benefits the (stronger) less trade‐dependent country at the expense of the (weaker) more trade‐dependent country. Reciprocity is so unfavorable to the weaker country that it may be worse off under reciprocity than under the Nash‐ bargaining solution, a “power‐based” approach to trade negotiations that reflects power asymmetries among trading partners. Our results question Bagwell and Staiger’s (1999 , 2000 ) view of reciprocity as a rule that “serves to mitigate the influence of power asymmetries on negotiated outcomes.”     

Where Do Australians Invest?

In this article, we analyse the geography of Australia's international portfolio investment using the International Monetary Fund's Co‐ordinated Portfolio Investment Survey dataset. Preliminary results suggest that Australia's external holdings of equity and debt as a percentage of national income almost doubled between 1997 and 2001. However, Australia's international investment position as a percentage of national income is one of the lowest amongst the major OECD countries. In 2001 approximately two‐thirds of Australia's total investments were in the United States and the United Kingdom. By contrast Australia's trade share (exports plus imports as a percentage of Australia's total world trade) with these countries was approximately 20 per cent in the same year. The major determinants of Australia's geographical allocation of portfolio investment indicate a broad correspondence between stock market capitalisation of destination countries and the allocation of Australian financial investments but with some deviations from that baseline, where the deviations are correlated with Australian trade patterns.     

Long‐run Lunacy,Short‐run Sanity: a Simple Model of Trade with Labor Market Turnover*

It is often argued that international trade is all about long‐run relationships. In this paper, we argue that this view is flawed when factor markets are characterized by turnover. Toward that end, we provide a simple dynamic model of trade with labor market turnover and show that the relationship between the economy's short‐run and long‐run behavior is more complex than in traditional trade models. For example, in the short run, the economy may produce outside of its long‐run frontier. We show that focusing on long‐run relationships can lead one to draw faulty policy conclusions, while focusing on its short‐run behavior restores sanity. The implication is that in the presence of factor market turnover, international trade issues can only be understood by studying the entire dynamic path of the economy. Long‐run relationships should be ignored.     

International Environmental Permit Trade and Debt: the Consequences of Country Sovereignty and Cross-Default Policies*

We investigate the joint occurrence of international intertemporal trade and international environmental-permit trade, both of which are subject to country sovereignty. Assuming that side payments cannot be made to keep a debtor country from terminating international environmental cooperation, we analyze the impact of these two trade opportunities on a debtor country's incentive to continue environmental cooperation. We also show how, by way of a suitable strategic linkage between debt and permit trade, the public good of ensuring continued environmental cooperation can be provided by the supply side of private international loans.     

The Welfare Cost of Autarky: Evidence from the Jeffersonian Trade Embargo, 1807–09

The United States came close to complete autarky in 1808 as a result of a self‐imposed embargo on international shipping from December 1807 to March 1809. Monthly prices of exported and imported goods reveal the embargo's striking effect on commodity markets and allow a calculation of its welfare effects. A simple general‐equilibrium calculation suggests that the embargo cost about 5 percent of America's 1807 GNP, at a time when the trade share was about 13 percent (domestic exports and shipping earnings). The welfare cost was lower than the trade share because the embargo did not completely eliminate trade and because domestic producers successfully shifted production toward previously imported manufactured goods.     

Keynes,the socialisation of trade,and international monetary institutions

While Keynes began formulating his ideas concerning the post-WWII international financial system in the early 1940s, the genesis of these ideas can be traced to his earlier work. The Keynes Plan represents the culmination of his search for adequate institutions that guide economic activity for the public good. The reasons given by Keynes for the establishment of an International Clearing Bank are relevant in the modern international economy, given the current imbalances in international trade. As Keynes argued for the socialisation of investment as a method to achieve full-employment in the domestic economy, he argued for the “socialisation of trade” as a method to achieve international economic balance among nations.     

Sea turtle interactions with Hawaii's longline fishery: an extended multi-objective programming model incorporating spatial and seasonal dimensions

The numerous discussions regarding the advantages and disadvantages of Turkey's becoming a member of the Customs Union has been inconclusive. The empirical analysis that mostly focus on the changes in the volume of trade without much regard to the conjectural changes have also been insufficient. This study attempts to shed light on this issue in a formal analysis of Turkey's international trade by empirically accounting for the changes before and after the Customs Union Agreement (CUA). In doing so, we explicitly account for the concurrent changes in the macroeconomic environment that may have affected Turkey's trade with the rest of the world. Our empirical findings indicate that CUA has not only positively impacted on Turkey's trade, but also led to changes in the behaviour of both exports and imports with regards to their responsiveness to underlying variables.     

Environmental Pollution in an Open Economy*

This paper attempts to analyze an interaction between international trade and domestic environmental pollution. A country engaging in international trade biases its domestic economic structure toward exportable sectors. The bias thus caused has a significant impact on the quality of the environment. It will be shown that a country can and should control international trade activities as a means of dealing with pollution problems. One of the paper's main purposes is to give a warning to a country which expands its international trade activities without taking serious consideration of its domestic environment.     

Research on the Emergence of China's Foreign Trade Surplus and Countermeasures

With the development of economic globalization and the deepening of international division of labor, the integration of foreign trade and investment is booming, which leads China to linked with world by world trade and international financial system. The imbalance in the global economy is getting worse, and the attention has a constant improvement. It's necessary for us to have a intensive study.