China's potential future growth and gains from trade policy bargaining: Some numerical simulation results

Numerical simulation analysis of bargaining solutions is little developed in existing literature. In this paper, we use a numerical general equilibrium model which captures China and her major trading partners and examine the outcomes of trade policy bargaining solutions (bargaining over tariffs and financial transfers) over time, and then measure both absolute and relative gains to China from trade bargaining. These measurements are important for policy making. Our simulation results indicate that China's welfare gain from trade bargaining will increase over time if countries keep their present higher GDP growth rates for several decades, but there are major difference when using different bargaining solution concepts. These differences have not been noted in existing literature but have an intuitive explanation. Our results also indicate that if China jointly bargains along with India, Brazil and other developing countries with the OECD, and when we use PPP to adjust China's relative GDP size China's gain will further increase.     

Issue Linking in Trade Negotiations: Ricardo Revisited or No Pain No Gain*

There has been much discussion about what issues should be included in international “trade” negotiations. Different countries, firms, and activist groups have quite different views regarding which items should (or should not) be negotiated together. Proposals run the gamut from no linking to linking trade with investment, the environment, labor, and human rights codes. This paper provides a formal framework for analyzing this question. It employs a two‐country, two‐issue bargaining model and contrasts outcomes when issues are negotiated separately and when they are linked in some form. A key concept is “comparative interest,” analogous to Ricardian comparative advantage. We provide general results and note, in particular, where a country can benefit by agreeing to include an agenda item for which, when viewed by itself, the country does not receive a positive payoff. We also provide an application of our analysis to negotiations on trade liberalization and environmental protection.     

Trade liberalization in environmental goods

Trade negotiations have started to pay attention to liberalization in environmental goods (EGs), whose production may require dirty intermediate goods. We construct a two-country trade model to explore the effects of trade liberalization in EGs on the local pollution, the global environment and welfare in the presence of such an environmental conundrum. We find that countries do not necessarily benefit from trade liberalization in EGs in the absence of an environmental policy. With the assistance of an upstream pollution tax, trade liberalization in EGs improves each country's welfare. This result holds independent of whether the upstream market is competitive or not, or whether we have upstream trade across countries. For asymmetric countries, trade liberalization in EGs improves the world welfare and the welfare for the country if it has a smaller demand for EGs; or experiences less damage from the production of dirty inputs; or values environment improvement more.     

多边贸易谈判中的政策协调与交易

针对目前多边贸易谈判过程中出现的愈演愈烈的双边(诸边)合作和发展中国家的不断边际化问题,通过从国家和议题的视角对多边贸易谈判中的政策协调与交易进行分析,指出国际经济领域将长期表现为多边合作和双边(诸边)合作的并行发展,建议发展中国家应充分利用谈判议题的互换来影响国际经济规则的制定。     

Do state trading exporters distort trade?

In this paper, we analyse the trade-distorting effects of state trading enterprises (STEs) which exist in some exporting countries. Because of these potential effects, several countries have raised the issue of state enterprises in the Doha Round negotiations in the WTO. The belief is that STEs in certain developed countries have trade effects which are equivalent to an export subsidy. STEs also exist in developing countries, though since the aim of government policy may differ from the developed country case, the trade distortion may be equivalent to an export tax. We present a theoretical model that is sufficiently general to allow us to consider the case of exporting STEs in developed and developing economies. The model is calibrated with data on two examples of STEs, one typical of an STE in a developed country, the other typical of an STE in a developing economy. In each case, we allow for differences in the nature of the STE's pay-off function. The overall conclusion is that STEs do distort trade and the trade distortion effect is potentially significant.     

The Efficiency of Direct Public Involvement in Environmental Policymaking: An Experimental Test

In collaborative negotiation, stakeholder representatives are charged with the development of a mutually acceptable set of public policies. Although this approach has become popular in environmental negotiations, little is known about the characteristics of the outcomes that are reached. In this paper, we employ an Edgeworth box framework to investigate the nature of bargaining over public goods (environmental policies) that have multiple attributes. We then design and conduct laboratory experiments within this framework to test whether negotiated outcomes satisfy standard axiomatic bargaining predictions under a variety of conditions. Specifically, we test whether two parties with Pareto inefficient endowments of two goods will trade to Pareto improving and Pareto efficient outcomes, and to the Nash bargain in particular. We vary whether the Nash bargain coincides with or diverges from the outcome that maximizes the joint payoff, or the outcome that equalizes payoffs, and whether subjects are provided full or partial information. We find that bargainers reach Pareto improving and efficient outcomes across treatments, but withdraw support for the Nash bargain when it generates unequal payments or when payoff information is private. We conclude that this experimental framework offers a promising method for studying multi-attribute negotiations.     

Abenomics and Japan's Trade Policy in a New Era

Trade policy, in particular, the Trans‐Pacific Partnership Agreement (TPP), has been a centerpiece of the Abe administration's economic strategy. The TPP's contributions to Japan's growth strategy include: (i) creating trade and investment opportunities abroad for Japanese companies through ambitious liberalization targets; (ii) advancing domestic reforms – with the largest service and agricultural liberalization commitments to date; and (iii) increasing bargaining leverage in other trade negotiations. But the domestic reform goals of Abenomics in agriculture have come up short due to opposition from domestic lobbies. American trade politics – which culminated in the US withdrawal from the TPP – have upended the goals of trade policy under Abenomics. Japan's best option in this new environment is to deliver on high quality, multi‐party trade agreements: concluding negotiations with Europe; scaling up the ambition of Regional Comprehensive Economic Partnership; and salvaging a TPP 11. The merits of a bilateral free trade agreement with the USA will depend on how the Trump administration operationalizes its America First policy.     

Community–Industry Contracting over Natural Resource use in a Context of Weak Property Rights: The Case of Indonesia

Decentralization in Indonesia has resulted in an increased influence of local communities over the terms of logging agreements with timber companies. The outcomes of such community–company negotiations vary significantly across communities. What are the conditions that cause this variation, and how can the outcomes be more effectively and efficiently influenced by third-party actors such as the local government or NGOs? This paper addresses these questions by developing a game-theoretic model to illustrate the strategic interactions between communities and companies. The model allows for endogeneity of de facto property rights and bargaining positions. We show that third-party actions to improve the community’s bargaining position by raising its reservation utility may result in an increase in the area logged and thereby harm the environment. Our results indicate that the strategy of intervention matters. In particular, strategies that raise the sensitivity of interventions to local logging threats are likely to be more cost-effective in supporting communities and reducing forest degradation than more indiscriminatory strategies. The model will be relevant to other situations where communities negotiate contracts over natural resource use with outside actors in a context of weak property rights, a situation increasingly observed in other developing countries.     

International production fragmentation,trade in intermediate goods and environment

This paper examines the implications of growing international production fragmentation-induced trade in intermediate goods on environmental quality. Specifically, by making use of a general equilibrium framework, this paper explores the link between trade in intermediate goods and pollution in a setting of endogenous environmental policy. The paper shows that international trade in intermediate goods, through an increase in the number of components available to the international producers, affects the level of pollution and environmental quality. Specifically, developed countries may reduce pollution at the cost of more pollution in developing countries.     

Agricultural trade liberalization,price changes,and environmental effects

Many analyses of agricultural trade liberalization have been undertaken but few have considered the effects on the environment. For the developed countries, reducing the degree of protection would result in less intensive production; therefore, environmental stress would be reduced. A reduction of trade barriers in industrial countries would result in higher world prices and in a somewhat lower world price variability. Assuming initially no policy changes for developing countries, the question is how the liberalization would affect the environment. Higher Prices in developing countries increase the level of production by intensifying production, particularly in the commercial sector, and by an area expansion. Both result in negative environmental effects. These could be partly offset by an increase in hired labor in the commercial sector, which might reduce pressure at the frontier and on marginal lands, as well as by the income effect. These off-setting effects may be small; however, the direction of the overall environmental effects cannot be determined unambiguously without empirical examination. At the global level, the beneficial economic effects of agricultural trade liberalization probably outweigh the expected negative environmental effects in developing countries, but this cannot be unambiguously established without valuation.     

Trade and Domestic Policy Linkage in International Agreements*

A central question in discussions of integrating negotiations over domestic policy (e.g., environmental policy or labor standards) into traditional trade agreements is the degree to which the trade policy and domestic policy provisions of an agreement should be explicitly linked. For example, should the World Trade Organization enforce domestic policy obligations with the threat of the suspension of trade concessions? This article considers the conditions under which linking trade and domestic policy agreements within a self‐enforcing agreement is beneficial, and argues that the benefits of such policy linkage may be lower than is commonly thought.     

A Ricardian Model with Endogenous Comparative Advantage and Endogenous Trade Policy Regimes

This paper develops a Ricardian model with transaction costs and endogenous and exogenous comparative advantages. It shows that the level of division of labour and trade increases as transaction conditions improve. It identifies the conditions for trade negotiations that result in zero tariff rates and the conditions for the coexistence of unilateral tariff protection and unilateral laissez faire policies. The model may explain the policy transformation of some European governments from Mercantilism to laissez faire in the 18th and 19th century and policy changes in developing countries from protection tariff to trade liberalization and tariff negotiation.     

Eco-Labeling and Stages of Development

The paper examines the effectiveness of eco-labeling in providing a market-based solution to the under-consumption of eco-friendly products in developing and developed countries. The authors show that whether labeling is an effective device in solving the problem of asymmetric information between sellers and buyers, or whether false labeling severs the link between willingness to pay and environmental conscious production choices, depends crucially on how monitoring intensities respond endogenously to economic growth, openness to trade, and technology transfers. In particular, by accounting for endogenous policy responses to economic growth, it is shown that an inverted-U relationship exists between consumer spending on eco-unfriendly products and national income. In addition, while international trade unambiguously benefits the environment in the presence of eco-labeling with perfect enforcement, trade openness may nevertheless delay the turning point of the growth and environment relationship, when the cost of enforcement falls disproportionately on developing countries, and when environmental policies are employed to reap terms-of-trade gains.     

对贸易自由化和环境保护关系的经济学思考

文章从经济学角度分析了环保政策对一国比较优势和吸引外资的影响以及贸易自由化对环境的影响,认为评价贸易自由化效应时必须考虑对环境的影响,不能为了贸易自由化而牺牲环境。     

Pollution Policy and Trade Liberalization of Environmental Goods

During the Doha Round at the World Trade Organization, reductions in trade barriers on environmental goods (EG) were put forward as a means of helping developed and developing countries alike deal with current environmental problems. We examine the potential effectiveness of such a strategy in a developing country that imports all its consumption of EG from an imperfectly competitive foreign eco-industry. We point out that trade liberalization of EG might in fact lead to less stringent pollution taxes, which can result in an actual rise in pollution levels. We then show that the environmental effectiveness objective of this trade reform can be achieved when the regulator uses quantitative abatement standards as an alternative pollution policy instrument. However, this environmental achievement comes at the expense of social welfare.     

当前国际环境形势下中国的国际贸易对策

随着环境问题的国际化和普遍联系性特点的相互结合，国际环境形势出现了环境活动的主体性、环境行动的合作性、环境总理２的对立性和环境关系的复杂性等特点，在这种国际环境形势下，一方面环境问题越来越多地渗透到国际贸易中来，另一方面发达国家依例其环保管理入技术上的优势，趁机对发展中国家设置绿色壁垒并衽倾销，从而使中国和其他所有发展中国家的国际贸易面临严峻的环境挑战，对此，中国应该积极采取相应对策，包括开展环境     

政策干预下我国贸易自由化的福利效应

近年来,贸易和环境问题越来越成为各国关注的焦点,传统贸易理论忽视了环境资源的合理使用和保护,给发展中国家带来了严重的环境问题。文章在揭示传统贸易理论在环境资源分析不足的同时,建立了一个政策干预下的发展中国家的自由贸易模型,在此基础上结合我国实际情况分析贸易自由化的福利效应。     

Are free trade agreements good for the environment? A panel data analysis

This study empirically examines the relationship between free trade agreements (FTAs) and greenhouse gas (GHG) emissions. For this purpose, we use three different FTAs: the Southern Common Market, the North American Free Trade Agreement, and the Australia–United States Free Trade Agreement. These FTAs are between developing, both developing and developed, and only developed countries, respectively. Panel unit root, panel cointegration, and fully modified ordinary least squares estimations are employed to examine the long‐run relationship between GHG emissions and trade liberalization. The results indicate that the environmental effects of FTAs depend on the different agreement types. When FTAs are between only developed or developing countries, overall there is no environmental damage, and these types of FTAs can be beneficial for the environmental quality in the long run. However, when developing and developed countries are in a trade agreement, overall environmental quality decreases due to increased GHG emissions.     

Developing-Country Benefits from MFN Relative to Regional/Bilateral Trade Arrangements

Using a general‐equilibrium model of world trade, this paper evaluates the benefits of most‐favored‐nation (MFN) treatment to developing countries in multilateral relative to bilateral or regional trade agreements, from three sources. First, developing countries may be able to free‐ride on bilateral tariff concessions exchanged between larger countries in MFN‐based GATT/WTO rounds. Second, MFN benefits developing countries by restricting discriminatory retaliatory actions by other countries, evaluated here by a non‐ cooperative Nash tariff game. Finally, MFN changes threat points in bargaining and hence affects the bargaining solution of multilateral MFN‐based trade negotiation compared to a bilateral/regional arrangement. The authors find that the benefits to developing countries are small in the first case as the tariff rates are already low, and the benefits are small in the second case as the optimal tariffs under unconstrained retaliation are not very asymmetric. Benefits from the third case are large as large countries can extract large side‐payments if they bargain bilaterally.     

Export performance of developing countries: Does landlockedness matter?

Landlockedness imposes additional costs on trade and reduces international competitiveness. This paper examines the determinants of export performance in developing countries, within a comparative perspective of landlocked developing countries (LLDCs) and non‐landlocked developing countries, by using a standard gravity modeling framework. The study covers data from 1995 to 2015. The results suggest that despite recent trade policy reforms, the overall export performance of LLDCs is lower than that of non‐landlocked developing countries due to the inherent additional trade costs associated with landlockedness. The conventional wisdom that export performance is aided by economic openness also applies to LLDCs, but distance‐related trade costs have a greater negative impact on exports from LLDCs than on other developing countries. The immediate trade policy challenge for LLDCs is therefore to create a more trade‐friendly environment by lowering tariffs, reforming exchange rates and entering into regional trade agreements.