Econometric Analysis of the India–Sri Lanka Free Trade Agreement*

This paper investigates whether the India–Sri Lanka Free Trade Agreement (ISLFTA) has had trade creation or trade diversion effects on the rest of the world. Using data on tariffs at the six‐digit level of the Harmonized System classification for the period 1996 to 2006, the methodology of the present paper follows a study on the North American Free Trade Agreement by Romalis (2005 ) We use the commodity and time variation in the tariff preferences allowed under ISLFTA to identify its effect on sourcing of different products from the ‘control country’ to the ISLFTA region. Using a fixed effects model, we find that the ISLFTA has had small trade creation effects in the control countries.     

EU Anti‐dumping Measures against ASEAN Countries: Impact on Trade Flows*

In the present paper, anti‐dumping (AD) duties levied by the European Commission against products from ASEAN countries in the period 1991–2001 have been considered. The ASEAN countries were among the countries most targeted by AD measures imposed by the EU in the 1990s. A panel regression has been applied to estimate the impact of AD duties on trade in some 12 products that have been subject to AD duties targeting ASEAN countries in the period considered. A significant negative impact of AD duties is found, on both the value and the quantity of imports from ASEAN countries. Our estimation provides some (although not overwhelming) indications of trade diversion in favor of EU countries, but no evidence of trade diversion in favor of non‐targeted non‐EU countries.     

The effects of changing U.S. MFN status for China

The Effects of Changing U.S. MFN Status for China. — This paper focuses on the effects of the U.S. not renewing Most Favored Nation (MFN) trade status for Chinese imports. An applied general equilibrium model is used to simulate the increase in tariffs from the column 1 (MFN) to the column 2 (non-MFN) duty level. Using 1992 data, the results show Chinese exports to the U.S. drop by approximately $11 billion, or over 50 percent. The U.S. and China both experience a decline in real income. While these results suggest MFN withdrawal would have a larger detrimental effect on the Chinese economy than on the U.S. economy, the estimates do not include Chinese retaliation.     

The effects of Europe’s internal market program on production and trade: A first assessment

The Effects of Europe’s Internal Market Program on Production and Trade: A First Assessment. — The paper analyzes the extent of structural changes that have occurred inside the EC since the launching of the internal market program. The first part of the paper examines intersectoral shifts in the pattern of specialization within EC manufacturing and finds relatively little change from 1986 to 1992. The second analyzes the trade impact of the internal market program, and finds that internal and external trade creation have both prevailed. The third uses regression analysis to explain the share of intra-EC imports in total EC imports in 1986 and in 1992, and identifies the impact of the internal market program.     

Who Uses Free Trade Agreements?

The utilization of ASEAN free trade agreements (FTA) is low by international standards. To clarify the reasons for such low utilization, this paper uses unique affiliate‐level data to investigate what kinds of Japanese affiliates in ASEAN are more likely to use an FTA scheme in their exporting. Our findings are as follows. First, the larger the affiliate is, or the more diversified the origins of its procurements, the more likely it is to utilize an FTA scheme in its exporting. Second, affiliates that export actively to countries with higher general tariffs are more likely to use FTA. Third, there are clear differences in FTA utilization depending on affiliates' locations and sectors.     

ASEAN Economic Community: A General Equilibrium Analysis*

The ASEAN Economic Community (AEC) is the largest integration effort attempted in the developing world; if realized, it will create a single market with the free movement of goods, services, foreign direct investment and skilled labor, and freer movement of capital encompassing nearly 600 million people. This study, a first attempt to evaluate the full benefits of the AEC, finds that the project could produce gains similar to those resulting from the European Single Market, amounting to 5.3 percent of the region's income. The benefits could be doubled if, as expected, regional integration also leads to new free trade agreements with key external partners. The whole region will share in these gains. There will be mild trade and investment diversion effects for some other countries, but the world will benefit too. Nevertheless, the AEC poses political challenges: the present study finds that the project will imply significant structural adjustments in several ASEAN economies.     

Horizontal and vertical intra-industry trade between Eastern Europe and the European union

Horizontal and Vertical Intra-Industry Trade Between Eastern Europe and the European Union. — The share of intra-industry trade (IIT) in total trade between central and east European nations and the EU is broken down into various components. Vertical IIT is found to account for 80 to 90 percent of total IIT. Controlling for country-specific effects, it is positively associated with product differentiation, labor intensity of production, economies of scale, and foreign direct investment (FDI). Horizontal IIT is also positively correlated with FDI and product differentiation; however, a significant negative relationship is found for scale and labor intensity.     

Export taxes and income distribution: The Philippines coconut levy

Export Taxes and Income Distribution: The Philippines Coconut Levy. — A large, empirically based general equilibrium model of the Philippine economy is used to analyze the implications of a tax on coconut oil exports. The analysis shows how general equilibrium models can be used to derive optimal tax rates and to show the detailed relationship between the rates at which these taxes are applied and their economic effects. The analysis explores in particular the effects such taxes have on economic welfare and on income distribution within the country. The distributional effects of this export tax are shown to be highly regressive, revealing more clearly the policy trade-offs such taxes involve.     

Regional Trade Agreements in East Asia: Will They Be Sustainable?*

By assessing the sustainability of regional trade agreements (RTAs) for East Asia, we quantitatively evaluate the likely impact of proposed East Asian RTA strategies on the East Asian economies and the world economy with respect to consumption, production, volume of trade and terms of trade effects by applying a multi‐country and multi‐sector computable general equilibrium model. These strategies include: (i) the ASEAN Free Trade Area (AFTA: a being‐left‐alone strategy); (ii) an ASEAN Hub RTA (a hub‐and‐spoke type of overlapping RTA strategy); (iii) the AFTA versus a China–Japan–Korea RTA (a duplicating or competing RTA strategy); and (iv) an ASEAN+3 RTA (an expansionary RTA strategy). We find that an expansionary ASEAN+3 RTA could be a sustainable policy option because the members’ gains would be significantly positive, with more equitably distributed gains between members than when using other strategies. The effect on world welfare would also be positive and the negative effect on nonmembers would not be very strong. More interestingly, if the East Asian countries cooperate with Pacific Basin countries to form an APEC‐level RTA, such as a free trade area of the Asia‐Pacific, the extension of the regional trade bloc might be considered a more desirable policy option than the proposed East Asian RTAs for East Asian economies, even though countries excluded from the free trade area of the Asia Pacific are worse off.     

INTRAINDUSTRY SPECIALIZATION AND THE UNITED STATES–CENTRAL AMERICA–DOMINICAN REPUBLIC FREE TRADE AGREEMENT

This paper examines changes in intraindustry specialization indicators over the 1992–2004 period to assess the potential for structural adjustment problems that may arise in the United States with growth in trade resulting from the United States–Central America–Dominican Republic Free Trade Agreement (CAFTA‐DR) between the United States and six Central American countries—Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica, and the Dominican Republic. CAFTA‐DR will expand market access for US exporters. Few US industries are likely to encounter structural adjustment problems. Given the relatively large size of the US economy, and the small number of industries that face potential adjustment pressures, the United States should have liberalized all trade immediately. When potential adjustment pressures are indicated, long tariff phaseouts, complex rules of origin, and import safeguards are used to delay factor adjustments in import‐sensitive industries.