Three questions on China's “Belt and Road Initiative”

Three broad questions about China's “Belt and Road Initiative” are raised. First, what are likely to be the real objectives behind the Initiative? Second, are investment and trade, considered the “major task” of the Initiative by China, to be driven by market-based transactions, or will they be a form of foreign aid that is not based on economic calculation of gains and losses? Third, which of the 60 or so countries in Asia, Europe and Africa along the Belt and Road will likely be the Initiative's priority targets of economic cooperation?     

Why do Estimates of the EMU Effect on Trade Vary so Much?

Larger data sets, with more countries and a longer span of time, exhibit systematically larger effects of European monetary union on trade. I establish this stylized fact with meta-analysis and confirm it by estimating a plain-vanilla gravity model. I then explain this finding by examining systematic biases in “multilateral resistance to trade” manifest in time-varying country fixed effects; bias grows as the sample is truncated by dropping small poor countries.     

How China's accession to the WTO affects global welfare?

Conventional wisdom suggests that, if a large nation reduces tariffs, the Rest of the World (RoW) as a whole should immediately experience gains from trade. However, little simulation evidence has been provided to evaluate the welfare effects of China's tariff reduction upon its WTO accession on each of its trade partners. This paper addresses the above issue under both the perfectly competitive model and the monopolistic competition framework à la Eaton and Kortum (2002) and Melitz (2003). Armed by the method of Dekle, Eaton, and Kortum (2007, 2008) to quantify the individual countries' responses to the “China (trade liberalization) shock” at equilibrium, we could check the extent to which global welfare benefit from the import tariff reduction after China's entry into the WTO. The quantitative results show that, both China and the RoW benefit from Chinese participation into the WTO, with estimated welfare gains falling in a range of [1.4697%, 3.8743%] and [0.0743%, 0.1015%], respectively. That is to say, about 58.24% of total benefits extracted from China's accession into the WTO worldwide flow to countries other than China under perfect competition; while under monopolistic competition, the whole world enjoys a 0.1571% welfare increases if firms' entry is restricted, of which 42.64% are injected into the RoW, an equivalent amount of 23.3903 billion US dollars. Since allowing for firms' entry and exit would lead to adjustments in both aggregate price indices and government tariff revenues, welfare gains of the world significantly increase (0.2474%), but these adjustments would slightly distort the welfare changes for other countries in the sense that only 36.50%, which is equivalent to 32.1008 billion US dollars, overflow to the RoW. As a result, some countries gain more, while some less.     

A Note on the Distribution of Trade Gains in a Model of Monopolistic Competition

This article examines the relationship between relative country size and the welfare consequences of opening trade in a model of monopolistic competition with trade costs. The findings indicate that if two countries produce differentiated products in trading equilibrium, the rate of welfare changes brought about by opening trade will be equalized across the countries.     

Policy Analysis and Development Evaluation of Digital Trade: An International Comparison

As an extension of traditional trade, digital trade is a new type of trade in the era of the digital economy. In this paper, we first analyze the digital trade‐related strategies of eight leading economies through word clouds and dissect China's digital trade‐related policies using the word frequency method by sorting through the digital trade‐related policy documents of 26 economies and Chinese provinces. We then evaluate the status quo of digital trade development in 111 countries and Chinese provinces by building a digital trade index system to determine the development environment and market potential. The results show that all countries attach great importance to digital technology, data and government guidance in the development of digital trade. The results also reveal that “development,” “service” and “construction” are the three most frequently used words in various Chinese documents. The overall level of China's digital trade is at the global vanguard, but is characterized by uneven regional development. In the era of digital trade, traditional international trade theory is also in urgent need of breakthroughs and innovation.     

The relationship between china and Siberia/Russian Far East: Economic cooperation and security conflicts*

This paper analyzes the current relationship between China and Siberia/Russian Far East from the economic and political‐security perspectives. The relationship between China and Siberia/Russian Far East is that of cooperation and conflict. China gains natural resources and energy from Siberia/Russian Far East, while Siberia/Russian Far East secures consumer goods, food and labor to fill its shortage from China. The two regions are in an economically complementary relationship. However, they show differences in their interests in issues such as the Tuman River Development Project. If their economic cooperation could be called the “bright” side of their relationship, there exists the “dark” side of their relationship, which is the border dispute. The paper argues that as a way to reduce conflict and increase cooperation in Northeast Asia, a multilateral security/economic organization, tentatively called the “Organization for Security and Cooperation in Northeast Asia,” should soon be established.     

中加双边贸易产品国际竞争力分析与比较

入世以来,中加双边贸易发展迅速,四年中双边贸易额增加1.6倍。中加双边贸易规模扩大潜力何在?本文对此进行了探讨。文内分别运用中加两方的统计数字,从“类”与“章”两个层次,对2002~2005年的贸易产品逐一进行贸易竞争力指数(TC)的测算。结论是两国间的国际分工主要建立在资源(要素)禀赋的基础上,主要体现的是作为资源大国的加拿大与作为劳动力资源丰富的中国之间的分工格局,加拿大作为技术大国的优势在双边贸易中并未充分体现。中加经贸规模要扩大,应重视发挥各自优势,扩展产业内的贸易分工,增加投资,扩大技术贸易与技术合作。     

An elementary model of export tax war

In this paper, the author uses a generalized version of Kennan and Riezman (Int Econ Rev 29(1):81–85, 1988) trade war model with Stone–Geary preferences, where countries can choose between a Nash tariff or an export tax. Three scenarios emerge from this setting, namely: the standard tariff war, the export tax war and a mixed scenario—“the tariff-export tax war”—where one country applies a Nash tariff, while the other imposes an export tax. In this setting, countries derive their market power not only from their relative endowment size, but also from their subsistence consumptions. As a consequence, a large country does not necessarily win a trade war if it has a substantially higher consumption requirement than the small country. This finding explains why large economies sign trade agreements with small counterparts that prohibit the use of tariffs and export taxes.     

电子商务条件下的国际市场博弈

本文将电子商务条件下的产品分为实物产品(服务)与信息产品(服务),将传统市场分为实体市场和虚拟市场,并对国内贸易与国际贸易加以区分,进而提出我国在国际电子商务竞争中的博弈对策:在博弈双方力量不对称的情况下,应采用“智猪博弈”策略,从学习中获得利益;另一方面,世界虚拟市场非常之大,远非几头“大猪”能够吃下去的,因此,在不同的地域或领域,可以采用“斗鸡博弈”的思路,在新兴的虚拟市场上抢先占领份额,迫使其他国家放弃对该领域的觊觎。     

Flying with the Dragon: Estimating Developing Countries’ Gains from China's Imports

As a large trading nation, China competes with importing countries’ domestic and third‐country markets but also creates growth opportunities for exporters. Most studies on China trade shocks or “China shocks” focuse on the impacts of import competition on developed economies. The present paper complements research on China shocks by exploring the other side of the trade exposure to China – China as the largest importer, rather than as an exporter. We analyze the effects of export expansion into China on the local labor markets of the exporting developing countries for the years 1992 to 2018. Using detailed export and employment data, we estimate employment pattern variations in manufacturing industries with exports from other developing countries as instruments for export exposure. We find that the increase in trade exposure to China in the world economy has caused extensive job gains in manufacturing industries in developing countries that were exporters. On average, our estimations show that this trade exposure created approximately 1.5 million additional jobs from 1992 to 2018, which made an important contribution to manufacturing industries in developing countries. Our empirical analysis also shows that trade had stabilizing effects on employment in the countries in our sample generally.     

Economic integration, market size and the welfare effects of trade liberalisation

Economic Integration, Market Size and the Welfare Effects of Trade Liberalisation. — This paper examines the welfare effects of regional and global integration in a model where market size matters. Regional integration leads to higher welfare in the countries of a preferential trading arrangement (PTA), but to lower welfare outside. In case the countries also decide to form a customs union (CU), both countries will experience further gains if the creation of the CU means that the average external trade barriers are raised. In turn, the outside country will in this case experience further welfare losses. If it retaliates and creates a trade war, this will lower welfare in all countries. In contrast, global integration mostly benefits both PTA countries and outside countries.     

Why Chinese Exports Face So Many Trade Remedy Actions: An Empirical Study Based on Multi‐country and Multi‐industry Data

This paper offers a comprehensive analysis of the reasons for the large number of trade remedy actions taken against China. Using a multi‐country and multi‐industry dataset, the present paper shows that the macroeconomic situation of China's partners has a great influence on the probability of trade frictions arising with China. Moreover, the more powerful the industry is, the more likely it is to take trade remedy actions against China. The empirical results reveal that China has been hurt under the operating mechanism of the WTO, and the number of free trade agreements is negatively related to the initiation and approval of trade remedy actions. Basically, the determinants for countervailing and double remedy measures are identical, while they are different from determinants of antidumping measures. Accordingly, strengthening communication with trade partners will alleviate friction between China and its trade partners. Meanwhile, making use of foreign lobbies' power, actively integrating into the international trading system and participating in regional trade agreements are effective ways for China to deal with the “new normal” of trade frictions.     

An Economic Analysis of Audit and Nonaudit Services: The Trade‐off between Competition Crossovers and Knowledge Spillovers*

In this paper, I present a model in which both markets for audit services and nonaudit services (NAS) are oligopolistic. Accounting firms providing both audit services and NAS will employ oligopolistic competition in each of these markets. In addition to auditors' gaining “knowledge spillovers” from auditing to consulting or vice versa, oligopolistic competition in one market will influence the counterpart in the other market ‐ what I call “competition crossovers”. Although scope economies due to knowledge spillovers (for example, cost savings) are always beneficial to auditors, such benefits can entice accounting firms to adopt strategies (for example, price reductions) to compete aggressively in the audit market so that some, or all, firms become worse off. A trade‐off arises between these two economic forces in the two oligopolistic markets. Given the trade‐off between competition crossovers and knowledge spillovers, accounting firms may not reduce their audit prices, even though supplying NAS enables firms to decrease auditing costs — a nontrivial impact of oligopolistic competition in two markets on audit pricing. The empirical implication of my results is that because of competition‐crossover effects between the auditing and consulting service markets, finding empirical evidence for knowledge‐spillover benefits is likely to be difficult. Control variables for “audit‐market concentration” concerned with competition‐crossover effects and “auditor expertise” concerned with knowledge‐spillover benefits should be included in audit‐fee regressions to increase the power of empirical tests. With regard to policy implications, my analyses help explain the impact of the Sarbanes‐Oxley Act on “market segmentation” and, hence, the profitability of accounting firms.     

技术与霸权兴衰的关系——国家与市场逻辑的博弈

以技术为主要解释变量,可以从国家逻辑和市场逻辑互动的角度分析技术与霸权兴衰之间的关系。市场寻求财富,国家寻求权力。国家逻辑与市场逻辑之间存在矛盾互动,既有张力也有统一。两种逻辑之间的张力出现于两种情况:其一,技术周期更迭且新技术研发滞后。其二,霸权国比较权力优势下降,安全威胁感上升。为了护持霸权,主导国会基于国家逻辑"校正"市场逻辑。然而,"天平重心"偏向哪种逻辑并不必然决定霸权兴衰的结果。未来高科技领域的竞争会越来越激烈,各国会更加强调加强自主研发能力的重要性。人工智能等新技术将带来诸多新挑战,甚至可能重塑世界格局。大国之间的冲突并无益于问题的解决,只有诉诸国际交流与合作,各国才能共同应对挑战并共享发展与繁荣。     

New Evidence on the Gains from Trade

We summarize the evidence on the gains from trade in monopolistic competition models, arising from three sources: (i) price reductions due to increasing returns to scale; (ii) increased product variety available to consumers; (iii) self-selection of firms with only the most efficient firms surviving after trade liberalization. There is little direct evidence to support the first source of gains from trade, though some indirect evidence from the European Union. The second and third sources of gains from trade find strong empirical support from studies from various countries, relying on new models and new empirical methods. JEL no. F10, F12, F15     

Can Cultural Affinity Promote Trade ? HSK Test Data from the Belt and Road Countries

As Chinese culture is “going out,” more and more non‐native Chinese speakers are beginning to study Mandarin and are taking the Hanyu Shuiping Kaoshi (HSK) test. Mandarin has become a very important trade language for the Belt and Road countries. This paper uses the difference‐in‐difference model and the Mahalanobis distance and the nearest neighbor distance matching methods to study the internal relationship between culture “going out” and foreign trade. We find that cultural affinity is an important factor in promoting trade, and that the HSK project has expanded China's exports to the Belt and Road countries. Culture's promotion effect in Asia is stronger than that in Europe. Culture's promotion effect shows the characteristics of regional differences, a time‐lag and a fluctuating upward trend. Therefore, further enhancing the international influence of its culture would help China to find a new source of export growth.     

中国摆脱依附式发展与中美贸易冲突根源

中美贸易冲突根源的探寻不应停留在国际贸易层次,而是应该从当下的国际分工结构和国际生产关系中去寻找。作者从马克思主义国际政治经济学角度出发,认为国际分工及其相应的国际生产关系是决定国家在世界舞台上政治经济地位与利益的基础。发展中国家在传统的国际分工结构中长期处于外围、在生产关系上处于依附地位的根本原因在于生产力落后,特别是技术水平落后。20世纪70年代以来,全球生产链作为一种新的国际生产组织方式逐渐形成并发展起来。在这一新的国际分工生产中,发展中国家的依附地位并没有改变,但是具体的依附形式不同于历史上的依附形式,呈现出“技术—市场”依附的特点。在这种新的依附形式下,广大参与全球生产链分工的发展中国家只能从中获得微薄的附加值,进而形成一种依附式发展,而西方发达国家的跨国企业却能够主导全球生产进程并从中获得高额的附加值。中国要实现现代化强国的目标,就需要摆脱依附式发展模式,实现在全球生产链中从中低端向中高端的攀升。近年来中国在发展高新技术产业和提升世界市场地位方面的努力及其获得的相应成就触动了美国作为现有国际分工主导者的既得利益。为了维护其霸权的经济基础,美国不惜发起贸易战以遏制中国的发展有其必然性。中国摆脱依附式发展以及美国相对衰落所导致的国际分工格局现实和潜在的变化正是中美贸易冲突爆发的根源所在。     

Reorganization of Intra‐ASEAN 5 Trade Flows: The ‘China Factor’*

There are claims that China's influence on ASEAN is direct in that she has encouraged more exports to flow into her huge markets and changed trade flows among member countries. Demand and supply are thus deemed to have become more China‐centered. This study therefore explores the plausibility of China as a ‘factor’ that influences bilateral intra‐ASEAN 5 trade flows through demand (exporting country) and supply (importing country). The results imply that China's integration in the region increases the size of the key ASEAN member economies export market. There is also no indication that import sourcing from China by ASEAN 5 countries reduces export expansion within the latter. The results accord with the fact that although China has become an important export destination and an import source for individual ASEAN 5 countries, this has not reduced intra‐ASEAN 5 trade.     

A comprehensive economic partnership between India and Japan: Impact,prospects and challenges

This paper examines the benefits and challenges of the 2011 Comprehensive Economic Partnership Agreement (CEPA) between India and Japan, specifically the ways to maximize gains from their complementary economies, trade and FDI relations. It also measures the partnership's economy-wide impact empirically, and its role in regional and global integration. An analysis of the trade intensity indices shows that the bilateral trade flow is small considering the other country's importance in world trade, suggesting the existence of great potential for improving trade relations. The computable general equilibrium (CGE) analysis of the economy wide impact of the CEPA suggests that tariff reductions will create a marginal increase in output growth for both India and Japan as compared to the business as usual scenario. In terms of the effect on exports, India's exports to Japan would increase more than those of Japan to India while positive net welfare gains are expected for both countries as a result of trade liberalization. This is in contrast to the study by Ahmed (2010), which finds welfare gains only for Japan, not for India. Furthermore, one of the striking results of the paper is that Japan will not reduce its heavy reliance on the Chinese market, though India will. In general, India, compared to Japan, will gain more, if CEPA materializes by 2020. Japan too will have welfare gains in spite of opening up the agriculture sector with 100% tariff reduction by 2020. Both countries need to accelerate structural reforms to remove the border barriers in addition to reducing tariffs, in order to reap maximum benefit of their economic partnership.     

Strategic R&D policy in a quality-differentiated industry with three exporting countries

We examine strategic research and development (R&D) policy for quality-differentiated products in a third-market trade model. We extend the previous work by adding a third exporting country, so that the market structure is international triopoly. We show that the presence of the third exporting country affects strategic R&D policies. With three exporting countries, the lowest-quality exporting country gains from taxing domestic R&D and the middle-quality exporting country gains from subsidizing domestic R&D under both Bertrand and Cournot competition. As in the duopoly case, however, the optimal unilateral policy for the highest-quality exporting country depends on the mode of competition. Various cases of policy coordination by exporting countries are also examined.