Trade interdependence, the international financial institutions, and the recent evolution of sovereign-debt renegotiations

This paper analyzes the effect of a debtor country’s pattern of trade with commercial creditors’ home countries on the outcome of debt-rescheduling negotiations. The analysis reveals that a debtor country with more market power has greater leverage in a three-way debt-rescheduling negotiation that includes the debtor country, its creditors and the International Financial Institutions (IFIs). The paper also considers the effects of the IFI sovereign-debt policy on the bargaining power of the parties in debt-rescheduling negotiations. Two bargaining frameworks analyzed and compared in the paper represent the negotiation mechanism at different stages of the IFI sovereign-debt policy evolution.     

Strategic trade policy and union-firm bargaining agenda

In this paper, we revisit the issue of the scope of bargaining between duopolistic firms and unions in an open economy with strategic trade policy. It is shown that, in contrast with the case of the absence of export tax/subsidy, a right-to-manage (RTM) arrangement always emerges endogenously as a sub-game perfect Nash equilibrium in agreement between parties. Moreover, such an arrangement may be also Pareto-optimal in both exporting countries in the sense that profits, workers' welfare (provided that union's power is sufficiently high) and social welfare as a whole are higher than the efficient bargaining (EB) arrangement. Moreover, since the government of the country in which there is EB (while in the other country the alternative agenda RTM is used) levies a tax on export, then the conventional result that under quantity competition it is always optimal for exporting countries to subsidise exports may be reversed.     

Dealing with Donald Trump

The logic for multilateral cooperation in trade and beyond becomes stronger, not weaker. A new governance forum will emerge, where negotiating will take place in country clubs instead of among members at the WTO.However, by breaking protocol, the US president has gained substantial bargaining power, because he puts himself in a situation in which he actually has to implement his threats if the negotiation counterparts do not confirm in order to save face on the domestic and global stages.     

Negotiating free trade

We develop a dynamic bargaining model in which a leading country endogenously decides whether to sequentially negotiate free trade agreements with subsets of countries or engage in simultaneous multilateral bargaining with all countries at once. We show how the structure of coalition externalities shapes the choice between sequential and multilateral bargaining, and we identify circumstances in which the grand coalition is the equilibrium outcome, leading to worldwide free trade. A model of international trade is then used to illustrate equilibrium outcomes and how they depend on the structure of trade and protection. Global free trade is not achieved when the political-economy motive for protection is sufficiently large. Furthermore, the model generates both “building bloc” and “stumbling bloc” effects of preferential trade agreements. In particular, we describe an equilibrium in which global free trade is attained only when preferential trade agreements are permitted to form (a building bloc effect), and an equilibrium in which global free trade is attained only when preferential trade agreements are forbidden (a stumbling bloc effect). The analysis identifies conditions under which each of these outcomes emerges.     

A reappraisal of strategic trade policies with the endogenous mode of competition under vertical structures

This paper examines the endogenous choice of competition mode with strategic export policies in vertically related markets when each upstream firm located in each country determines the terms of the two-part tariff contract by maximizing generalized Nash bargaining. We show that (i) choosing Cournot (Bertrand) competition is the dominant strategy for both downstream firms when goods are substitutes (complements), which leads Pareto superior regardless of the nature of goods under the optimal trade policies; (ii) irrespective of rival’s competition mode, the optimal trade policy is an export subsidy under Cournot competition and an export tax under Bertrand competition; and (iii) trade liberalization may give rise to changes of competition mode and increase of social welfare.     

Trade preferences and political equilibrium associated with trade liberalization

This paper, motivated by the so-called North–South problem in trade, analyzes ex ante trade preferences and the source of potential political conflicts regarding trade liberalization. Developing a dynamic extension of the traditional Heckscher–Ohlin model with imperfect labor mobility and tracking overall dynamic paths from the autarky to free-trade steady states, we demonstrate that in the presence of inter-sectoral migration barrier, bilateral free-trade agreements can be welcomed (opposed) by the majority of workers in a capital-abundant (labor-abundant) country, which is inconsistent with the welfare prediction by Stolper and Samuelson. This paper also proposes a numerical algorithm to solve for the entire transition path of the model under rational expectation. Our simulation experiments further reveal that preannounced and delayed implementation can facilitate a bilateral free-trade agreement by partially neutralizing short-run transitional gains and losses so as to persuade the losers to support the reform without affecting the beneficiaries’ trade preferences.     

Buyer power in international markets

This paper investigates the implications for international markets of the existence of retailers/wholesalers with market power. Two main results are shown. First, in the presence of buyer power trade liberalization may lead to retail market concentration. Due to this concentration retail prices may be higher and welfare may be lower in free trade than in autarky, thus reversing the standard effects of trade liberalization. Second, the pro-competitive effects of trade liberalization are weaker under buyer power than under seller power.     

Backward stealing and forward manipulation in the WTO

Motivated by the structure of WTO negotiations, we analyze a bargaining environment in which negotiations proceed bilaterally and sequentially under the most-favored-nation (MFN) principle. We identify backward-stealing and forward-manipulation problems that arise when governments bargain under the MFN principle in a sequential fashion. We show that these problems impede governments from achieving the multilateral efficiency frontier unless further rules of negotiation are imposed. We identify the WTO nullification-or-impairment and renegotiation provisions and its reciprocity norm as rules that are capable of providing solutions to these problems. In this way, we suggest that WTO rules can facilitate the negotiation of efficient multilateral trade agreements in a world in which the addition of new and economically significant countries to the world trading system is an ongoing process.     

多边贸易体制互惠原则探析——兼论多边贸易体制对发展中和 “非市场经济 ”成员的差别待遇

互惠是人类合作关系的基石,国际贸易协定将之作为基本原则原因正在于此。在多边贸易体制中,互惠虽未得到明确界定,但却被公认与最惠国共同构成其两个基本原则,互惠是双边谈判的动因和策略,最惠国则是双边谈判成果多边化的实现机制。与最惠国的有条件性和无条件性相对应,互惠有特定和一般之分。由于一般互惠缺乏严格的减让对等和利益平衡,多边贸易体制始终是特定互惠和一般互惠的混合,并在对发达成员、发展中成员和"非市场经济"成员分别强调不同互惠待遇的基础上,形成了一个三层结构。     

欧盟贸易协定谈判机制研究

国际协定是欧盟法律体系的重要组成部分。与贸易有关的国际协定,包括贸易协定、合作协定以及联系协定等,也是欧盟贸易政策的重要组成部分。本文通过介绍欧盟贸易协定谈判权的法理依据、各参与主体的法律地位和作用、参与主体内部及之间的权力平衡关系,分析和研究了欧盟贸易协定谈判机制,以利于进一步了解欧盟法律和贸易政策,也有益于发展中欧贸易关系。     

Disagreement points in trade negotiations

This paper analyzes trade negotiations between two large countries in the framework of an alternating-offer bargaining model with endogenous interim disagreement actions. Despite of the flexibility in disagreement tariff selection, the countries would keep the status quo tariffs in disagreement periods as far as the country which benefits from keeping the status quo tariffs compensates for the other country’s foregone gains from deviating in disagreement actions. Each equilibrium outcome converges to a corresponding Nash bargaining solution whose disagreement point reflects the status quo tariff rates as well as the threat of raising the tariff to the Nash tariff rate.     

Tariff wars in the Ricardian Model with a continuum of goods

This paper describes strategic tariff choices within the Ricardian framework of Dornbusch, Fischer, and Samuelson (1977) using CES preferences. The optimum tariff schedule is uniform across goods and inversely related to the import demand elasticity of the other country. In the Nash equilibrium of tariffs, larger economies apply higher tariff rates. Productivity adjusted relative size (≈ GDP ratio) is a sufficient statistic for absolute productivity advantage and the size of the labor force. Both countries apply higher tariff rates if specialization gains from comparative advantage are high and transportation cost is low. A sufficiently large economy prefers the inefficient Nash equilibrium in tariffs over free trade due to its quasi-monopolistic power on world markets. The required threshold size is increasing in comparative advantage and decreasing in transportation cost. I discuss the implications of the static Nash-equilibrium analysis for the sustainability and structure of trade agreements.     

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.     

On the Path to Trade Liberalisation: Political Regimes in Trade Negotiations

The number of free trade agreements (FTA) has increased substantially since 1990 despite efforts to promote multilateral trade liberalisation. While there is evidence on the determinants of FTA formation, still little is known on the processing of trade agreements, particularly regarding the pre‐implementation duration. This paper fills the research gap by using event data on the negotiation, the signing and the implementation of trade agreements. Duration analysis is employed to examine the connection between regime types and the lengths of the negotiation and the ratification stages. The results support the claim that higher levels of democratisation are associated with shorter negotiations, while political constraints lead to delays. Moreover, the depth of an agreement matters: a higher number of WTO‐X and WTO+ provisions do not only prolong the negotiation stage, but also the subsequent ratification. Against the background of potential anticipation effects of trade agreements, these results are of interest for exporting firms that assess the timing of implementation.     

China's New Regional Trade Agreements

This paper discusses the recent regional trade agreements that China has concluded rapidly following accession to the WTO in 2002. Agreements are in place with Hong Kong, Macao, ASEAN, Australia and New Zealand, and are either in negotiation or under discussion with South Africa, Chile, India and the Gulf Cooperation Council. These agreements differ sharply in form and substance, and involve process commitments to ongoing negotiation and cooperation on a wide range of issues. Differences relating to the regional agreements negotiated by the EU and the US are emphasised, as are later potential difficulties these agreements create in moving to an Asian trade bloc centred on them.     

Carbon,Trade Policy and Carbon Free Trade Areas

This paper discusses both the potential contribution that trade policy initiatives can make towards the achievement of significant global carbon emissions reduction and the potential impacts of proposals now circulating for carbon reduction motivated geographical trade arrangements, including carbon‐free trade areas. We first suggest that trade policy is likely to be a relatively minor consideration in climate change containment. The dominant influence on carbon emissions globally for the next several decades will be growth more than trade and its composition, and in turn, the size of trade seemingly matters more than its composition given differences in emission intensity between tradables and non‐tradables. We then note that differences in emissions intensity across countries are larger than across products or sectors and so issues of country discrimination in trade policy (and violations of MFN) arise. We next discuss both unilateral and regional carbon motivated trade policy arrangements, including three potential variants of carbon emission reduction based free trade area arrangements. One is regional trade agreements with varying types of trade preferences towards low carbon‐intensive products, low carbon new technologies and inputs to low carbon processes. A second is the use of joint border measures against third parties to counteract anti‐competitive effects from groups of countries taking on deeper emission reduction commitments. A third is third‐country trade barriers along with free trade or other regional trade agreements as penalty mechanisms to pressure other countries to join emission‐reducing environmental agreements. We differentiate among the objectives, forms and possible impacts of each variant. We also speculate as to how the world trading system may evolve in the next few decades as trade policy potentially becomes increasingly dominated by environmental concerns. We suggest that the future evolution of the trading system will likely be with environmentally motivated arrangements acting as an overlay on prevailing trade and financial arrangements in the WTO and IMF, and eventually movement to linked global trade and environmental policy bargaining.     

Why is the Doha Development Agenda Failing? And What Can Be Done? A Computable General Equilibrium–Game Theoretical Approach

We use a world computable general equilibrium model to simulate 143 potential trade reforms and seek solutions to the issues hampering progress in the Doha Development Agenda (DDA). Inside the domain defined by all these possible outcomes, we apply the axiomatic theory of bargaining and select the Nash solution of cooperative games. The solutions vary according to the objective functions adopted by the trade negotiators. When real income is the objective and services are excluded, or when optimising terms of trade is the objective, the Nash solution is the status quo. Trade liberalisation is feasible only when the negotiators focus on national exports or gross domestic product (GDP). Our assessment of some possible solutions reveals that excluding members having a GDP below a certain threshold improves the bargaining process, regardless of the governments’ objective. Formation of coalition, such as the G20, constitutes an option for its members to block outcomes imposed by rich members. We also find that side payments may be a solution, but represent a very high share of the global income gain.     

Trade Liberalization,Nature of Mergers and Employment

This paper investigates the roles of comparative advantage and market size in the international location of manufacturing production. Building on the conventional Helpman and Krugman (1985) general equilibrium framework, our analysis extends the present literature by incorporating both effects in the same model, while allowing trade costs to vary almost continuously from autarky to free trade. The main result of our exercise is that market size effects offset comparative advantage if countries have similar factor proportions. A large country with a slight comparative disadvantage in manufacturing production may thus be a net exporter of manufactures. A small country with the same comparative disadvantage would be a net importer of manufactures. When countries are very dissimilar in their relative factor endowments, land-abundant countries specialize in the production of food, irrespective of market size, if manufactures are a labour-intensive sector. Labour-rich countries of any size are manufacture cores. However, land-abundant countries with large markets can sustain a domestic manufacturing industry until trade costs are very low, and in some cases only specialize in agriculture at free trade.     

Non-binding sequential exchange between discounting agents

When exchange is sequential, and no binding agreements can be written, the agent acting first is exposed to the possibility that even if he honors the agreement his trading partner might not. Repeated interaction of this nature is modeled. Exchange will successfully occur when there are ample gains from trade for the second agent, implying that the first agent may be better off with less bargaining power. Thus, the first agent may want to bargain at less than his full ability in order to ensure that an otherwise unsuccessful transaction will successfully occur. Additionally, if the first agent can facilitate exchange by hiring an escrow service, he will do so when his bargaining advantage is sufficiently large.JEL subject classification C70, D40, L14     

Trade-diverting free trade agreements,external tariffs,and feasibility

There has been a proliferation of preferential trade agreements within the last two decades. This paper analyzes the effects of free trade agreements (FTAs) on external tariffs in small economies where protection decisions are made politically. Our model determines tariff rates endogenously instead of assuming they are fixed during or after the formation of FTAs as commonly done in the literature. We show that when an FTA is established, the tariff rates that apply to non-members essentially decline. More importantly, we investigate the interaction between endogenous tariff determination and the feasibility of an FTA. We find that the expectation of tariff reductions under endogenous tariffs could make an otherwise feasible FTA if tariffs were fixed become infeasible. However, if domestic import-competing sectors are relatively smaller and the government places a significant weight on political contributions relative to social welfare, an FTA with endogenous tariffs may be more likely to be feasible than an FTA assumed to fix external tariffs.