Economic determinants of free trade agreements

The purpose of this study is to provide the first systematic empirical analysis of the economic determinants of the formation of free trade agreements (FTAs) and of the likelihood of FTAs between pairs of countries using a qualitative choice model. We develop this econometric model based upon a general equilibrium model of world trade with two factors of production, two monopolistically-competitive product markets, and explicit intercontinental and intracontinental transportation costs among multiple countries on multiple continents. The empirical model correctly predicts, based solely upon economic characteristics, 85% of the 286 FTAs existing in 1996 among 1431 pairs of countries and 97% of the remaining 1145 pairs with no FTAs.     

Recurrent trade agreements and the value of external enforcement

This paper presents a theory of dynamic trade agreements in which external institutions, such as the WTO, play a central role in supporting credible enforcement. In our model, countries engage in ongoing negotiations, and, as a consequence, cooperative agreements become unsustainable in the absence of external enforcement institutions. By using mechanisms such as delays in dispute resolution and direct penalties, enforcement institutions can restore incentives for cooperation, despite the lack of coercive power. The occurrence of costly trade disputes, and the feasibility of mechanisms such as escape clauses, depend on the degree to which enforcement institutions can verify, and condition on, events that may lead to trade disputes.     

Formation of interdependent regional trade agreements and production networks

Production networks (PNs) can be defined as a determinant of trade partnership. Deepening PNs may generate positive welfare effects and lead to a proliferation in the formation of interdependent regional trade agreements (RTAs). This paper theoretically develops the link between PNs and the formation of RTAs and empirically investigates the link by applying a qualitative choice model estimation methodology (probit) with panel data that covers bilateral country‐pairs among 147 countries between 2000 and 2010. We find that the RTA formation has been strongly driven by deepening PNs between members as well as with third countries. We also find that production network‐driven RTA interdependence is member specific.     

Increasing returns, multinationals and geography of preferential trade agreements

This paper uses a model of horizontal multinational enterprises to explore the relationship between transportation costs and trade policy cooperation. Tariffs have the effect of attracting foreign direct investment to the benefit of consumers in the host country. As transport costs fall, the incentive to impose tariffs falls and the benefits to cooperation rise. Thus, in a repeated game in which cooperation is limited by a self-enforcement constraint, a reduction in transport costs facilitates free trade. This logic is applied to a three-country model to examine preferential trade agreements. It is found that if any country is too distant from the others, then global free trade is not attainable. Rather, if two of the countries are within a critical distance of each other and distant from the third country, then the unique outcome is an exclusive free trade agreement between the two adjacent countries. Thus, the model predicts a strong regional bias in preferential trade agreements.     

Economic integration agreements and the margins of international trade

One of the main policy sources of trade–cost changes is the formation of an economic integration agreement (EIA), which potentially affects an importing country's welfare. This paper: (i) provides the first evidence using gravity equations of both intensive and extensive (goods) margins being affected by EIAs employing a panel data set with a large number of country pairs, product categories, and EIAs from 1962 to 2000; (ii) provides the first evidence of the differential (partial) effects of various “types” of EIAs on these intensive and extensive margins of trade; and (iii) finds a novel differential “timing” of the two margins' (partial) effects with intensive-margin effects occurring sooner than extensive-margin effects, consistent with recent theoretical predictions. The results are robust to correcting for potential sample-selection, firm-heterogeneity, and reverse causality biases.     

Endogenous political organization and the value of trade agreements

In a bargaining model of endogenous protection, I introduce fixed costs of political-organization that need to be incurred by capitalists prior to actual lobbying. Unlike Maggi and Rodriguez-Clare [J. Pol. Econ. 106(3) (1998) 575] intersectoral capital mobility is disallowed. Nevertheless, I am still able to obtain their main result that a government with low bargaining power vis-à-vis the import-competing lobby precommits to a free-trade agreement. Further, with high fixed organizational costs, the government prefers to stay out of such agreements. Its maximum bargaining power consistent with signing a trade agreement has an inverse-V-shaped relationship with respect to the size of fixed costs.     

A comparative institutional analysis of agreements on product standards

The WTO and the EU have chosen two different agreements on product standards. While the WTO's approach is primarily based on a “National Treatment” (NT) principle, the EU's approach crucially relies on a principle of “Mutual Recognition” (MR). This paper offers a first look at the comparative performance of these two principles. We show that standards are imposed for levels of externalities that are too low under NT and too high under MR. This suggests that NT should be preferred to MR when the amount of trade in goods characterized by high levels of externalities is large.     

Multilateral stability and efficiency of trade agreements: A network formation approach

We study the endogenous network formation of bilateral and multilateral trade agreements by means of hypergraphs and introduce the equilibrium concept of multilateral stability. We consider multicountry settings with a firm in each country that produces a homogeneous good and competes as a Cournot oligopolist in each market. Under endogenous tariffs, we find that a multilateral trade agreement governing the rules and norms of tariff setting, that is the WTO/GATT regime itself, together with a bilateral preferential trade agreement (PTA) is multilaterally stable. We also find that the existence of the WTO is necessary for the stability of the trading system. We further analyse the impact of PTAs on multilateral tariffs within the WTO. We find that the formation of PTAs increases countries' incentives for multilateral tariff reduction.     

A model of trust and compliance in franchise relationships

Despite the danger of franchisee non-compliance as a severe impediment to overall franchise operation and performance, there is currently minimal understanding of the key factors that lead to these behaviors. Using a foundation of relational exchange theory, we construct and test a model that demonstrates how two distinct forms of trust, based upon perceptions of franchisor integrity and franchisor competence, are critical to explaining the roles that relational conflict and satisfaction play in influencing franchisee compliance. Implications of these findings are then demonstrated to have compelling relevance to the effective management of franchise systems.     

Drivers of importer trust and commitment: Evidence from a developing country

This study investigates the interrelationships between antecedents of importers' trust and commitment to their foreign suppliers in an Asian country. This area has been under-researched in comparison to exporters' behavioral perspectives as well as in comparison to developed countries. A theoretical model is developed based on theories of transaction cost (TC) and the internationalization process (IP), and studies examined regarding the context of relationship trust and commitment. The model is tested using SEM on a sample of 238 importers in Bangladesh. The findings suggest that importer trust leads to commitment but that foreign supplier's opportunistic inclination affects both their trust and commitment. Overall, the findings indicate that cultural similarity, effective communication, knowledge and experience, opportunism and environmental uncertainty are vital antecedents of trust and commitment. The findings have important implications for academics and practitioners.     

Creating and sustaining trust in virtual teams

Conventional wisdom assumes that trust develops from a history of interpersonal interactions and communication, through which people come to ‘know and trust’ one another. In virtual teams, however, establishing trust can be complicated: members may have no past on which to build, no future to reference, and may never even actually meet face-to-face. Swift but fragile trust can develop early in a team's life cycle. Yet, if swift trust doesn't develop or even dissipates, members need to find ways of building trust in each other. To this end, an understanding of how trust impacts a virtual team's development will help managers and team leaders to facilitate and improve team success. Herein, we describe the three components of trust (ability, integrity, and benevolence) and identify which of these are critical to each life cycle stage (establishing the team, inception, organizing, transition, and accomplishing the task) of the virtual team. Proposed action steps for each stage show managers and team leaders how to help members develop trust and sustain it through the project's successful completion.     

Trade liberalization,free trade agreements,and the value of firms: Stock market evidence from Singapore

We examine the effects of the United States–Singapore Free Trade Agreement (FTA) on the value of firms listed in the Singapore Exchange using event study analysis. Despite the predictability of the FTA negotiations, we find that one event – the removal of the last obstacle to the free trade deal in January 2003 – increases the value of firms in some industries by 1–11% on average. These results indicate that trade liberalization and FTAs do increase the value of firms.     

The true art of the tax deal: Evidence on aid flows and bilateral double tax agreements

Of a total of 2,976 double tax agreements (DTA s), some 60% are signed between a developing and a developed economy. As DTA s shift taxing rights from capital‐importing to capital‐exporting countries, the latter inherently benefit more from the agreements. In this paper, we argue that capital exporters use foreign aid to incite capital importers into signing DTA s. We demonstrate in a theoretical model that in a deal, one country does not trump the other, but that the deal must be mutually beneficial. In the case of an asymmetric DTA , this requires compensation from the capital‐exporting country to the capital‐importing country. Examining DTA s that are signed between donor and recipient countries between 1991 and 2012, and using a fixed effects Poisson model, we find that bilateral foreign aid commitments increase by 22% in the year of the signature of a DTA . Evaluated at the sample mean, this translates into around US$ six million additional aid commitments in a DTA signatory year.     

The role of the Internet in physician-patient relationships: The issue of trust

The Internet has proven to be a powerful and very popular vehicle for distributing health information to millions of individuals; it is interactive, user-controlled, and provides an effective means for communicating detailed information. While there has been increasing use of the Internet in healthcare, little research has been conducted to examine what, if any, impact the availability and integrity of healthcare information on the Internet has on the physician-patient relationship. Importantly, several studies show that Web-based health information frequently contains inaccurate or incomplete information. Patients who retain such information go so far as to suggest approaches to their physicians and express disappointment when the physicians refuse to prescribe as expected. For their part, doctors are concerned about the physician-patient relationship when they have to explain to patients that their Internet-based information is less than accurate; consequently, the physician-patient relationship is often affected. While many issues bear upon the physician-patient relationship, the central one is trust. This article examines consumer use of the Internet for healthcare information, considers the problems caused by inaccuracies or omissions from third party websites, and sets forth recommendations regarding how the Internet can be used to improve the physician-patient relationship. It is hoped that these suggestions provide a better understanding of the required components of upcoming healthcare strategies.     

Franchisees' trust in and satisfaction with franchise partnerships

This paper aims to establish the relationship between the antecedents of trust, trust itself, and franchisee satisfaction. Taking its cue from power-dependence, international business, and social exchange theories, the paper contributes to the franchise literature by offering a more comprehensive theoretical perspective to aid understanding of trust development in and satisfaction with franchise partnerships. Drawing on a multi-sector survey of Turkish franchisees, the study provides empirical evidence of the impact of the franchisors' role performance and cultural sensitivity on franchisees' trust in and satisfaction with franchise partnerships. Furthermore, this research demonstrates the central role of communication in the development of franchisees' trust.     

Resolving the empty core: trust as a determinant of outcomes in three-party negotiations

This research examined how trust affected resource allocation in a three-party negotiation. Negotiators were presented with an empty core problem in which their theoretical share of resources exceeded the resources available for distribution. We tested which of three components of trust—reliability, predictability and empathy—predicted negotiators’ outcomes. We distinguished between absolute and relative trust. We found that relative trust was a more consistent predictor of individual outcomes than absolute trust and that the most trusted party in a network obtained the highest individual outcomes. This finding highlights the importance of social context in shaping trust judgements. The component of trust that predicted individuals’ outcomes was affected by structural power. High and low power negotiators benefited from conveying empathy (identity-based trust), whereas moderate power negotiators benefited from conveying predictability (knowledge-based trust). Low power parties also benefited from appearing unreliable (low calculus-based trust). The research reported in this paper was supported by a grant from the Australian Research Council. An earlier version of this paper was presented at the 2002 International Association of Conflict Management Conference, Park City, Utah.     

Competence and trust guardians as key elements of building trust in east-west joint ventures in Russia

This paper summarises the author 's doctoral research on the development of interpersonal/interorganisational trust in relationships between expatriate and Russian staff working in east-west enterprises in Russia. There is strong evidence from a variety of researchers to suggest that in order for western businesses investing in Russia to succeed, the dif.cult process of building trust needs to be understood and managed since in the Russian business climate western standards and norms of ethical business have not yet been established. According to research.ndings, western investors doing business in Russia and the long-term, personal trust that characterises family and friend relationships more congenial and more productive than formal, arm's-length contacts and contracts. In such a context, it becomes important to identify what creates and destroys trust in the post-Soviet business environment. This paper describes the causal factors leading to trust or lack of trust in relationships within western-invested strategic alliances in Russia. The key relationship under consideration is the one between expatriate western staff and managers seconded to the venture on the one hand, and their local Russian staff, counterparts and superiors on the other.     

中俄建筑领域合作商机无限

本文通过分析中俄两国建筑领域合作的广阔前景，借鉴已往合作的成功经验，指出今后合作应认真了解和掌握俄罗斯的政策法规，遵循互利双赢的原则，认真选择合作伙伴．注意保护环境和尊重俄民众意愿，加强行业协调管理，注重提升档次和水平，以实际行动树立中国企业良好形象。     

Cosmic profit: Countercultural commerce and the problem of trust in American marketing

This article offers an historical thesis on the demise of impersonal mass marketing and its replacement by personal niche or lifestyle marketing. Two parallel discussions are examined on the moral possibilities of marketing: one within the mainstream marketing establishment and the other among a countercultural network of small businesses. On a macro‐theoretical level, theories of moral identity (derived from Anthony Giddens) are used to describe the anxieties provoked by a popular failure of trust in mass marketing generally, and the significance of lifestyles in refurbishing this trust. On a cultural–historical level, the dialogue between mainstream and countercultural businesses reveals how these anxieties were addressed through lifestyles meant to affirm trust and intimacy between marketers and consumers. An analysis of the intellectual synergy between countercultures and mainstream marketers suggests an alternative to the standard understanding of cooptation.     

The effect of trust on customer contact personnel strategic behavior and sales performance in a service environment

The involvement of customer contact personnel in the strategy process is a largely unexplored area in both marketing and strategic management. Based on social exchange theory, and in particular, the notion of trust within this context, we examine the nature and extent of strategy participation exhibited by customer contact personnel. Exploring dyadic relationships we found that the extent to which contact personnel trust their supervisors positively influence their willingness to participate in strategic activities. Furthermore, we found that communication and information sharing moderate the relationship between trust and strategic activities. Thus, the more contact personnel are involved in the strategic process, the more likely supervisors are to rate the contact person's selling performance as high.