The Performance of Trading Firms in the Services Sectors – Comparable Evidence from Four EU Countries

We examine trade complexity and the implications of adding additional dimensions of trade for firm performance among services producers. We use unique firm‐level data to compare these patterns across four EU countries. Overall, services firms are relatively less engaged in trade than manufacturing firms; they mostly trade goods and are more likely to import than to export. Trade in services is quite rare; services are more likely to be traded by firms already trading goods. Trading firms in the services sectors are significantly larger, more productive and pay higher wages than non‐traders. Two‐way traders outperform one‐way traders. Changes in trading status by either adding another dimension of trade (imports, exports) or another type of product (goods, services) are infrequent and are associated with significant preswitching premia. In contrast, learning effects from switching trading status are uncommon. This points to significant fixed cost of being engaged in trade and confirms some previous findings that trading services firms have similar traits as their manufacturing counterparts. Apart from greater trade participation in smaller countries, we do not observe systematic differences in terms of trade or switching premia between the four countries that might be attributable to differences in country characteristics.     

Market Structure and Market Access

We explore an issue at the nexus of domestic competition policy and international trade, the interaction between goods trade and market power in domestic trade and distribution sectors. We examine the effect of variations in conditions of domestic competition in services on trade volumes in goods in the cases of both linear and nonlinear import demand, including standard form CES‐based gravity models of bilateral trade flows. Theory suggests a set of linkages between service‐sector pricing and goods trade supported by econometrics involving imports of 22 OECD countries vis‐a‐vis 69 exporters. Competition in distribution services affects the volume of trade in goods. Additionally, because of interaction between tariffs and pricing, the market structure of the domestic service sector becomes increasingly important as tariffs are reduced. Indeed, depending on the degree of competition, market access concessions on tariffs may be effectively undone in some cases by changes in margins. For exporters, we find that service competition in destination markets matters most for exporters from smaller, poorer countries. Our results also suggest that while negotiated agreements leading to cross‐border services liberalisation may boost goods trade as well, they may also lead to a fall in goods trade when such liberalisation involves FDI leading to increased service sector concentration.     

Effects of cultural institutes on bilateral trade and FDI flows: Cultural diplomacy or economic altruism?

The number of cultural institutes from major developed and developing countries increased significantly in the last twenty years. In this paper, using cross-sectional and panel data analysis on bilateral trade in goods and services, and FDI inflows and outflows, we examine the economic effects of 1,266 cultural institutes from China, France, Germany, Japan, Portugal, Spain, Turkey and UK for the period of 1990–2015. The empirical results suggest that cultural institutes have significantly positive trade and FDI enhancing effects, which are persistent over time. However, these effects are most robust only with goods exports and FDI outflows. Furthermore, the economic effects of cultural institutes are not homogenous across destinations and are the strongest for developed rather than developing host countries. There is also significant heterogeneity among cultural institutes with significant differences in their economic effects on different types of bilateral trade and FDI flows.     

What Would Normalisation of Economic Relations Between Mashrek Countries,Turkey and Israel Imply?

This article examines the potential for economic cooperation among Mashrek countries, Turkey and Israel in the fields of trade in goods and services both separately and across‐field. It first describes the macroeconomic features of the region and then estimates the overall potential for inter‐industry trade in goods by estimating gravity equations for each country separately and the potential for intra‐industry trade using Grubel‐Lloyd indices. The article also examines the potential for trade in specific services, namely information and computer technology, transport, financial and health services.     

Time,uncertainty and trade flows

This paper quantifies the impact of international transport time on bilateral trade flows in goods using previously unexploited information drawn from a large data set on international parcel delivery times. In line with previous work, we find that an extra day spent in international transit reduces bilateral trade by just under 1% at the sample median. In addition, and for the first time in the literature, we examine the impact of time-related uncertainty, which requires traders to hold costly inventories or build costly redundancies into supply chains. We find that a one day increase in international transport time uncertainty reduces bilateral trade flows by just over 1%. Splitting the sample into developing and developed countries shows that international transit time matters primarily for south–south trade, whereas uncertainty is relatively more important for north–north trade. Using new data on trade in intermediate versus final goods, we also find some evidence that time and uncertainty both matter more for movements of intermediates of the type that takes place within global value chains.     

The effect of border barriers to services trade on goods trade

This paper has two objectives (a) to introduce border policy-induced barriers (PIBs) to services trade and (b) analyse the impact of border PIBs in services sectors on goods trade. The World Input-Output Database covering 43 countries is used over the period 2000–14. A three-stage analysis is employed. The measures of bilateral services trade barriers calculated in each services sector in the first stage are decomposed into its cultural/geographic and policy-induced parts in the second stage. Border PIBs to services trade are used in the structural gravity estimations of bilateral goods trade in the final stage. The results demonstrate significant and robust adverse effects of barriers to services trade on goods trade. When the level of development is taken into consideration, there are marked differences in the impact of these barriers on goods trade.     

Computational Analysis of the US FTAs with Central America,Australia and Morocco

We use the Michigan Model of World Production and Trade to assess the economic effects of the US bilateral FTAs negotiated with Central America, Australia and Morocco. The model covers 18 economic sectors in each of 22 countries/regions and is based on version 5.4 of the GTAP database for 1997 together with specially constructed estimates of services barriers and other data on sectoral employment and numbers of firms. The distinguishing feature of the model is that it incorporates imperfect competition in the manufacturing and services sectors, including monopolistic competition, increasing returns and product variety. The modelling focus is on the effects of the bilateral removal of tariffs on agriculture and manufactures and services barriers. Rules of origin and other restrictive measures and the non‐trade aspects of the FTAs are not taken into account due to data constraints. The computational results indicate that the benefits of bilateral FTAs for the United States and partner countries are rather small in both absolute and relative terms, and that far greater benefits could be realised if the United States and its FTA partners adopted unilateral free trade and especially if multilateral free trade was adopted by all countries/regions in the global trading system.     

Free trade agreement and transport service trade

This study investigates the effects of free trade agreements (FTAs) on trade in transport services using OECD data from 2003 to 2006. Our analysis found that FTAs had a positive overall impact on transport services for multiple countries (i.e., 26 home and 56 partner countries). The resulting positive overall impact assures that, even with the challenges associated with different layers of services and the obstacles formed by generally low trade openness in the sector, the provisions in FTAs (e.g., national treatment and market access for goods and services) promote transport service trades. Our findings suggest that the provisions in FTAs encourage economic agents to increase engagement in transport services because of expanded openness of the physical movement of goods across international borders.     

The effects of bilateral attitudes on imports

Research based on the gravity model has shown that non-economic factors affect international trade, and recent studies have shown that people's perception affects economic exchange. In this study, we explore the effects of attitudes on bilateral trade. Using survey data from the Pew Research Center's Global Attitudes Projects for 68 countries from 2002 to 2015, we find that a more favourable attitude of a country towards another country will increase the former country's imports from the latter. The result is robust to an endogeneity check, to different measures of attitudes and to different estimation methods. However, heterogeneity is observed across different types of goods and countries. The result holds for trade in intermediate and consumer goods, but the effects are not statistically significant for capital goods. The effects are statistically significant for bilateral trade between different country groups, except for high-income countries' imports from non-high-income countries.     

Beyond Border Barriers: The Liberalisation of Services Trade in Tunisia and Egypt

Tunisia and Egypt have both recently undertaken significant steps toward trade reform. They have committed to a partnership agreement with the European Union. Both countries have also joined the WTO and are participating in Doha Round discussions on the liberalisation of non‐tariff barriers on both goods and services trade. These developments provide an interesting context within which to investigate not only the changes in welfare associated with reforms affecting the trade in goods, but also the impacts of services liberalisation. Using open‐economy computable general equilibrium models for both Tunisia and Egypt, this paper explores the reasons why structural differences in these two economies imply different opportunities and challenges with trade reform and services liberalisation. The gains from eliminating barriers at the border for goods trade are significantly greater for Tunisia than Egypt. Both countries, however, gain substantially from liberalisation of foreign direct investment in services. Furthermore, economic growth is more evenly distributed across sectors than with liberalisation of trade in goods alone. In addition to reporting on the impact of alternative policies on income, output, employment and trade, sector‐level effects are also considered.     

Granting preferential market access in services sequentially versus jointly with goods

Despite the cost and resource‐effectiveness of joint trade negotiations and complementarities between goods and services‐trade flows, more than 12% of the 132 WTO‐notified services‐trade agreements (STAs) in force until August 2015 were entered into effect sequentially to goods‐trade accords. This stylised fact motivates our study of the determinants of joint versus sequential negotiation/accession of goods and services accords, a subject hitherto unexplored in the growing literature on the determinants of STA membership. Our results suggest larger marginal effects of fundamental economic, geographic, institutional, doing business and services regulatory factors on the propensity of joint negotiation/accession compared to STA formation alone. Moreover, cultural‐distance variables are only found to affect the likelihood of joint preferential liberalisation of goods and services trade, without influencing STA‐only membership.     

The Impact of Exporting and Importing Goods and Services on Productivity in the UK

This paper investigates the impact of exporting and importing on productivity for UK plants using a combination of regression and propensity score matching. Unlike earlier papers, the data allows us to distinguish the effects of trade in goods and services. In confirmation of the results from other countries, we find that plants that both export and import have higher productivity than plants that only do one of these activities. In manufacturing, this is the case regardless of whether the trade is in goods or services (which suggests that servitisation of manufacturing is beneficial).In services, the results are more mixed and the benefits from involvement in international goods networks that are seen in manufacturing do not occur to the same extent (however, for the wholesale and retail sectors, trade in both goods and services is generally productivity enhancing).     

Composition of trade flows and the effectiveness of fiscal devaluation

We empirically explore whether the magnitude of the effects of fiscal devaluation, which consists of reducing the employers’ social security contribution rate and increasing the value‐added tax rate, depends on the composition of trade flows. Our sample comprises data on bilateral balances of trade between 28 European Union (EU) Member States and their main EU trade partners over the 2000–14 period. We use robust ordinary least squares regressions, controlling for the country‐pair and time fixed effects, to test whether there are differences in the sizes of relationships between these taxation forms and bilateral trade balances for different types of goods, by distinguishing between: (i) consumer, intermediate and capital goods; and (ii) labour and capital‐intensive goods. Our results show that the overall effectiveness of fiscal devaluation depends on the composition of trade flows. Value‐added tax is more strongly (positively) associated with (bilateral) balances of trade in consumer goods, compared to balances of trade in capital and intermediate goods. The employers’ contribution rate, in contrast, is more tightly (negatively) related to balances of trade in capital goods. The latter finding also holds true for trade balances of labour‐intensive goods compared to balances of capital‐intensive goods.     

Networks of Value‐added Trade

Global value chains (GVCs) require new methods for evaluating interconnections among countries, which can no longer be accurately appraised by standard bilateral gross trade flows. This paper uses tools of network analysis to examine the evolution of value‐added trade from 1995 to 2011. GVCs are very centralised and asymmetric networks, with a few large economies acting as hubs, which exposes them to the propagation of idiosyncratic shocks. As GVCs expanded, the networks of foreign value added in exports became denser, more complex and intensively connected. The regional dimension of GVCs is still dominant but is progressively giving place to a more global network. Networks of foreign value added in goods exports outpace those of services exports. However, foreign inputs of services are important for exports of both goods and services. There is a striking rise of China as a supplier of value added, while Germany and the United States maintain a central role in GVCs over the whole period.     

Economic Implications of WTO Negotiations on Non‐agricultural Market Access

The economic implications of current WTO negotiations are likely to be far reaching. The World Bank and UNCTAD estimate annual global gains in agriculture and non‐agricultural products (including fish) of about $70−150 billion each under various scenarios and technical assumptions. Liberalising trade in services could be even more important, especially if agreement were reached to facilitate the temporary movement of labour (Mode 4 under the General Agreement on Trade in Services, GATS). Some qualifications, however, are in order. First, gains are likely to be spread unevenly across countries and across sectors; and, second, short‐term adjustment costs might precede long‐term gains. Much depends on how ambitious liberalisation is and on policies to facilitate adjustment. This paper examines the Doha mandate in non‐agricultural market access (NAMA) and the current state of the WTO negotiations, in particular some key proposals being considered at the December 2005 Ministerial Meeting in Hong Kong. We analyse various scenarios and their implications for trade, welfare, output, employment, revenues and preferences, as well as the distributional effects across countries and sectors. We note possible adjustment problems related to balance of payments and structural adjustment, as well as revenue and preference losses. These suggest the need for ‘aid for trade’ to help developing countries realise gains possible from WTO negotiations.     

EMU and trade: A PPML re-assessment with intra-national trade flows

This paper examines the EMU effect on trade for the eleven early joiners and Greece relying for the first time on data that include both international and intra-national trade flows, in line with all the microfoundations of the structural gravity model of trade. We find that the overall EMU impact on trade is positive between its members and, specially, for trade between members and non-members. Interestingly, we further show that the effect of the EMU on bilateral trade remarkably differs across countries. For Ireland, Belgium–Luxembourg, Spain, Portugal and Austria, we find robust evidence that EMU has boosted trade both with other members and with third countries, while for Finland, France, Germany, Italy and the Netherlands, the results suggest that only trade with third countries has been enhanced by the EMU. Greece is the only country that shows a negative impact in trade with other EMU members and no effect in trade with non-members. Finally, the results across countries according to the direction of the trade flows (exports versus imports) do not show significant differences in any case.     

International trade in services: A portrait of importers and exporters

We provide a novel set of stylized facts on firms engaging in international trade in services, using unique data on firm-level exports and imports from the world's second largest services exporter, the United Kingdom (UK). We show that only a fraction of UK firms engage in international trade in services, that trade participation varies widely across industries and that service traders are different from non-traders in terms of size, productivity and other firm characteristics. We also provide detailed evidence on the trading patterns of service exporters and importers, such as the number of markets served, the value of exports and imports per market and the share of individual markets in overall sales. We interpret these facts in the light of existing theories of international trade in services and goods. Our results demonstrate that firm-level heterogeneity is a key feature of services trade. Also, we find many similarities between services and goods trade at the firm level and conclude that existing heterogeneous firm models for goods trade will be a good starting point for explaining trade in services as well.     

Costly investment and complementarities in an international trade model with directed technological change

We investigate the impacts on the skill premium and on economic growth in an innovator‐imitator general equilibrium growth model assuming: (a) directed technological change; (b) international trade of intermediate goods; (c) internal costly investment in both physical capital and R&D; and (d) complementarities between intermediate goods in aggregate production. With trade of intermediate goods, the complementarities degree and investment costs influence the economic growth of both countries, but do not affect the countries' skill premia, which are directed by technological knowledge. Additionally, in agreement with related empirical literature, openness to trade of intermediate goods leads to a higher equilibrium skill premium in both countries, whereas its impact on the common growth rate can vary in sign.     

政治距离、文化差异与中国的对外贸易

政治利益与决策如何影响经济成为近年来学者关注与争议的焦点。文章基于中国视角,选取96个国家1992~2015年度数据为样本,实证考察了双边政治距离、经贸往来与文化差异之间的互动关系,结论如下:首先,政治距离显著降低了中国与贸易伙伴国间双边贸易往来,双边文化的差异则加深了彼此的政治风险,显著提高了双边贸易对政治距离的敏感性(偏效应)。其次,上述关系在不同时期呈现出不同的特征,尤其是在危机后的经济复苏阶段,中国与伙伴国的贸易往来却独立于双边的政治距离。最后,当对所涉及的贸易产品进行细分研究时,发现主要是在食品和活动物、制成品、机械和运输设备以及杂项制品这四类产品的贸易中显著存在上述贸易损害效应。     

International Trade Agreements and International Migration

Despite large potential economic gains, bilateral and multilateral negotiations focusing on liberalisation of migration have not shared the high profile of international trade negotiations and agreements. Migration and trade have been traditionally viewed rather separately and the relevance of the many, and complex, interdependencies has been given remarkably little attention in the literature to date. In this article, we focus on the two‐way interaction between international migration and agreements designed to enhance cross‐border trade and investment. Liberalisation of international trade in services and in the movement of people potentially offers much greater economic gains than liberalisation of remaining barriers to goods trade. However, progress within multilateral frameworks is fraught with difficulty. The World Trade Organization’s General Agreement on Trade in Services (GATS) has yielded little real progress so far and negotiations within more flexible unilateral and bilateral frameworks are likely to be more successful in liberalising the movement of labour. We discuss a range of specific examples, focusing particularly on the interesting case of New Zealand. We find that trade agreements are increasingly including agreements on migration, though typically favouring temporary migration and involving numerically modest quotas. We conclude that migration regulatory frameworks are likely to be further and more strongly linked to trade and investment agreements in the future, particularly given changing economic and demographic forces. The primary focus of migration policies may nonetheless remain different from that of trade policies. While further migration liberalisation is likely to be through bilateral and regional agreements, it will be important to try to lock in the gains of such agreements, while simultaneously working to consolidating these in a way that will help to facilitate future multilateral agreement.