Multilateral trade liberalisation helps promote export product diversification: Trade tensions damage the prospects of the poorest economies

Using a large panel dataset over a 20‐year period, this article explores the effect of multilateral trade liberalisation on export product diversification. Empirical results show that multilateral trade liberalisation is positively associated with export product diversification. However, less‐developed economies experience a greater positive effect than relatively advanced economies. This analysis suggests that if trade tensions reduce cooperation on trade matters among World Trade Organization members, it may hinder export product diversification in developing countries, and the poorest countries might be the most adversely affected.     

Bilateral trade between India and Bangladesh: A general equilibrium approach

India and Bangladesh have pursued policies of trade liberalization since the early 1990s. However, owing to the differential speeds of opening up, Bangladesh's bilateral trade deficit with India widened substantially over the years. This aggravated the economic and the political tensions between the economies. It has been held that promotion of free trade between the two economies may enhance the trade and hence economic cooperation between them. Against this backdrop the present paper proposes a theoretical framework that provides a general equilibrium determination of the commodity pattern of trade and hence locates the comparative advantages of the economies. The empirical implementation of the model considers trade in 25 sectors comparable in the input–output tables of the economies. The study isolates the gains from free trade accruing to either economy. The paper also explores the pattern of bilateral trade when each economy produces goods by utilizing their own as well as the other country's technology. The gains from this trading arrangement are also isolated.     

China‐commodity nexus at the heart of global upturn

• ? The China‐commodity nexus has been at the heart of the global upturn in trade and industry. It could directly and indirectly account for as much as 70% of the recovery since mid‐2016, based on our analysis. We think this nexus will continue to support world growth in the near term, but the global upturn is vulnerable to moderating Chinese growth and slippage in commodity prices.
• ? China has directly accounted for around a third of the upturn in world trade, similar to the contribution of G7 countries. But adding in indirect effects, China's influence is likely to have been much more significant. Stronger Chinese demand has contributed to an improvement in the trade performance of its Asian trading partners, commodity exporters and other advanced economies.
• ? Using a model simulation that introduces positive shocks to imports in “greater China” and to commodity prices (based on the scale we have seen since mid‐2016), our top‐end estimate for China's contribution to the upturn in world trade is around 70%.
• ? The simulation points to especially strong improvements in output and exports for economies such as South Korea, Japan, Malaysia and some commodity exporters. This broadly matches the pattern of performance seen over recent months, though commodity exporters' performance has been quite mixed.
• ? G7 investment growth is likely to have played only a modest role in the recent global upturn. But Japan is an exception, while upgrades to investment forecasts for South Korea, Taiwan and Hong Kong have also been large.
• ? A 1% rise in commodity prices could raise commodity exporters' investment by 0.3–0.6%, based on our analysis. As a result, there could be additional improvement in commodity exporters' investment this year, supporting world growth. However, with our forecasts suggesting that commodity prices are set to slip further over the coming quarters, this boost could prove short‐lived.

     

Spatially blind trade and fiscal impact policies and their impact on regional economies

The evidence for the US suggests that spatially blind policies often generate greater impacts on regional economic growth and development than policies specifically targeted at regions on regional issues generally. In this presentation, attention will be directed to two sets of national policies that have been promulgated without due consideration of their specific spatial (regional) impacts – trade policy and fiscal policy.Drawing on research conducted for the US, Japan and Brazil, an examination of trade policies will be presented, using the experience of NAFTA in North America and MERCOSUR in Brazil. Some further analysis of experience in Colombia will also provide insights into the role of national trade policy and, in the case of Colombia, fiscal decentralization policies. The second part of the presentation will examine fiscal policy impacts mediated through regional business cycles; the experience of Japan and the US will be examined.The results affirm the important implications that national (spatially blind) policies can have on regional economies; in the case of Brazil, trade policies have exacerbated already wide differentials in per capita income across states.     

NEOCLASSICAL POLITICAL ECONOMY: AN APPLICATION TO TRADE POLICIES

Abstract. This paper starts with a review of the literature on 'neoclassical'political economy and then goes on to apply this perspective to the issue of trade liberalization. In this connection, the paper critically discusses various political economy models which have been advanced to explain patterns of trade policies in both developed and developing countries and assesses them in light of recent empirical evidence. The paper also makes a brief review of the empirical planning studies which estimate the gains from trade liberalization.     

The short and long-run impact of globalization if firms differ in factor input ratios

Empirical evidence has shown that exporters are more capital intensive than non-exporters. Based on this evidence, I construct a two-factor general equilibrium model with firm heterogeneity in factor intensities, monopolistic competition, scale economies and international trade. This setting can explain several empirical regularities on international trade, factor market competition, factor relocations and factor returns: (i) exporters are more capital intensive than non-exporters, regardless of a country's relative factor endowments; (ii) finite supply of capital limits a country's export activities; (iii) trade liberalization increases the relative return to capital; (iv) new profit opportunities in export markets change the distribution of firms towards the more capital intensive ones. Finally, I extend the setting to endogenous capital accumulation and show that trade liberalization induces economic growth and, in the long-run, benefits all factors in real terms.     

Economies in Transition: How Important Is Trade Openness for Growth?*

We investigate the effect of trade openness on economic growth in transition countries using a transparent statistical methodology that leads to data‐driven case studies. In particular, we employ synthetic control methods in a panel of transition economies and compare GDP growth in treated (that is, open) countries with growth in a convex combination of similar but untreated (that is, closed) countries. We find that trade liberalization tends to have a positive effect on the pattern of real GDP per capita. One of our most robust results shows that making the transition without opening up to trade considerably hampers growth.     

Separating the Wheat from the Chaff: Icelandic and Irish Policy Responses to the Banking Crisis

When the stories of the Icelandic and Irish crises are told, they are framed as if one country did everything right to exit recession and the other country everything wrong. This article assesses their recovery policies and finds that the truth lies somewhere in between. By allowing its banking system to suffer substantial losses, Iceland shielded its citizens from the costly debt overhang apparent in Ireland. Ireland's commitment to open capital markets and price deflation has allowed trade flows to remain robust, and relative prices to realign to signal sustainable production plans to entrepreneurs. These responses provide a roadmap for other small open economies with large financial sectors entering similar crises in the future.     

Exchange rate volatility and growth in small open economies at the EMU periphery

Since the introduction of the euro in January 1999, exchange rate stability in the periphery of the euro area is growing. The paper investigates the impact of exchange rate stability on growth for a sample of 41 mostly small open economies at the EMU periphery. It identifies international trade, international capital flows and macroeconomic stability as important transmission channels from exchange rate stability to more growth. Panel estimations reveal a robust negative relationship between exchange rate volatility and growth for countries in the economic catch-up process with open capital accounts.     

美国金融危机对我国贸易顺差的影响及对策研究

美国金融危机影响已由虚拟经济扩散到实体经济，由发达经济体扩展到新兴经济体。持续多年的贸易顺差是当前我国经济增长的主要推动力，为我国积累了巨额的外汇储备。然而，金融危机导致我国贸易顺差额大幅收窄，FDI连续十个月同比负增长及经济增速放缓。为了应对美国金融危机给我国对外贸易、经济带来的消极影响。为此，建议从加大创新力度，提高出口企业产品附加值，转变出口市场结构等三方面来寻求应对危机的有效办法。     

How Do Small Businesses Finance Their Growth Opportunities?—The Case of Recovery from the Lost Decade in Japan

Previous studies argue that bank loans are cheaper than trade credit, so less‐constrained firms largely depend on bank loans and use trade credit less, especially in financially developed economies. However, the Japanese evidence does not support this view. First, small businesses with higher credit demand increase trade credit more during the period of the recovery from a severe recession. Second, creditworthy firms also increase trade credit to finance their growth opportunities. Third, firms in unstable industries increase trade credit more. This suggests that suppliers are able to offer credit, unlike banks, as they have a relative advantage in day‐by‐day monitoring. Copyright © 2012 John Wiley & Sons, Ltd.     

A Meta‐Analysis of the Effect of Common Currencies on International Trade*

Abstract. Thirty‐four recent studies have investigated the effect of currency union on trade, resulting in 754 point estimates of this effect. This paper uses meta‐analysis to combine, explain, and to summarize these disparate estimates of common currency trade effects. The hypothesis that there is no effect of currency union on trade is easily and robustly rejected at standard significance levels. Combining these estimates implies that a currency union increases bilateral trade by between 30 and 90%. Although there is evidence of publication selection, there is also evidence of a genuine positive trade effect beyond publication bias.     

The paradox of rising wage growth and falling inflation

• ? Strong labour markets and rising wages in advanced economies stand in sharp contrast to recent declines in economists’ inflation forecasts and market expectations. In our view, though, these developments are not necessarily contradictory. Even if wage growth edges higher, we think demand factors will limit any pick‐up in prices. Instead, we expect firms’ margins will be squeezed.
• ? Although the labour share has risen more sharply than we had expected over the past couple of years, we are sceptical that this will translate into substantially stronger underlying inflation. Not only has the rise been small, it has been employment rather than wages that has surprised to the upside. The strength of employment is probably more about firms’ production preferences than workers’ capitalising on a stronger negotiating position.
• ? True, wages adjusted for productivity now look high by historical standards. But neither theory or empirical evidence suggests that this must inevitably lead to stronger CPI inflation in the short‐term. Our forecast for flat wage growth in 2019 and the absence of strong cost pressures elsewhere are also a comfort.
• ? Inflation tends to be more responsive to demand indicators – and the recent GDP growth soft patch suggests any further pick‐up in underlying inflation pressures will be limited (see Chart below).
• ? More generally, we think that the consensus view on inflation for the key advanced economies is high. Market‐based inflation expectations are typically lower than our own, which may reflect the perception that inflation risks are skewed to the downside. Positive economic surprises could lead downside risks to narrow, but ageing expansions and secular stagnation worries suggest this is unlikely, limiting any future pick‐up in bond yields.

     

The shrinking mining city: urban dynamics and contested territory

Shrinking mining cities — once prosperous settlements servicing a mining site or a system of mining sites — are characterized by long-term population and/or economic decline. Many of these towns experience periods of growth and shrinkage, mirroring the ebbs and flows of international mineral markets which determine the fortunes of the dominant mining corporation upon which each of these towns heavily depends. This dependence on one main industry produces a parallel development in the fluctuations of both workforce and population. Thus, the strategies of the main company in these towns can, to a great extent, determine future developments and have a great impact on urban management plans. Climate conditions, knowledge, education and health services, as well as transportation links, are important factors that have impacted on lifestyles in mining cities, but it is the parallel development with the private sector operators (often a single corporation) that constitutes the distinctive feature of these cities and that ultimately defines their shrinkage. This article discusses shrinking mining cities in capitalist economies, the factors underpinning their development, and some of the planning and community challenges faced by these cities in Australia, Canada, Japan and Mexico.     

中美水产品产业内贸易实证分析

从1998年到2012年,中美双边水产品贸易快速发展。文章运用G-L指数,Bruelhart指数和Thom&McDowell水平、垂直产业内贸易指数,采用联合国贸易数据库(UN COMTRADE)的数据,对中美水产品产业内贸易进行实证分析。结果表明,中美水产品产业内贸易水平较低,贸易的增长主要来源于产业间贸易;从两国的产业内贸易结构看,垂直型产业内贸易占优势。因此,中美水产品产业内贸易的发展应从增加水产品贸易的差异化;推动水产品加工技术创新等方面着手。     

EXPLAINING RISING INEQUALITY: SKILL‐BIASED TECHNICAL CHANGE AND NORTH–SOUTH TRADE*

Abstract We review the ‘skill‐biased technological change (SBTC) versus North–South trade (NST)’ debate in order to explain widening wage inequality between skilled and unskilled workers. The traditional explanations based on exogenous SBTC and on the North–South Heckscher–Ohlin–Samuelson approach, as well as the early estimates that diagnosed a clear prevalence of the former, are firstly exposed and discussed. A presentation is then made of the recent theoretical literature that endogenizes SBTC, introduces new channels of impacts from NST, and combines both explanations. Finally, the current estimates show that (i) both explanations are relevant, (ii) their impacts differ according to industries and countries, (iii) outsourcing is the main vector of impact from NST and (iv) SBTC and NST interact.     

国际贸易便利化对顾客满意度的影响研究

国际贸易发展是世界经济进步的重要表现。全球化背景下,经济和科技不断发展,人们对于生活的要求也发生了各种各样的变化,其中顾客对于产品的满意度直接影响了企业的利润增长,所以如何提高顾客满意度是经济发展的重要因素。国际贸易便利化是全球化背景下出现的新型经济特点,国际贸易便利化使各国对外贸易的政策发生了改变,实现了对国际贸易链条的全部环节的覆盖,顺应时代背景的发展。贸易便利化的发展趋势必不可挡,在国际贸易便利化发展过程中对于顾客满意度有着很大的影响。     

The impact of China’s one belt one road initiative on international trade in the ASEAN region

This study explores the potential effects of China’s ‘One Belt One Road’ (OBOR) policy on trade flows in ASEAN countries and China. We use the augmented gravity model of international trade and data on ASEAN countries and China from 2000 to 2016. The empirical results show that the coefficient of the OBOR dummy is positive and statistically significant, which implies that this policy benefits both ASEAN countries and China in terms of increased trade flows among these countries. In addition, the coefficients of other control variables, such as a common language, a common border, and distance, have the expected signs, and all are statistically significant. Thus, the OBOR policy initiative could be a promising mechanism for trade facilitation in these countries in the years to come.     

World Economic Prospects Monthly

Overview: Global growth in 2019 revised down again

• ? In response to continued weakness in global trade and signs that the softness has spread to other sectors, we have cut our 2019 world GDP growth forecast to 2.5% from 2.7% last month (after 3.0% in 2018). But we see growth accelerating in H2 due to fiscal and monetary policy changes and as some temporary negative forces unwind. While revised fractionally lower, global growth is still expected to tick up to 2.7% in 2020 – but the risks lie to the downside.
• ? The latest tranche of trade data points to another poor quarter in Q1. While the weakness in Chinese trade is partly related to the impact of US tariffs, the causes of the trade slowdown are rather broader. Reflecting this, we have again lowered our world trade growth forecast – we now see it slowing from 4.8% in 2018 to just 2.5% in 2019, only a little above the previous low of about 2% in 2016.
• ? One source of comfort is that the February global services PMI rose to its highest level since November. But retail sales in the advanced economies as a whole have been weak recently and, while consumer confidence bounced in February, it has trended lower over recent months. Reflecting this, we have cut our global consumer spending forecast for this year.
• ? We expect ongoing policy loosening in China and dovish central banks – either in the form of delays to rate hikes and liquidity tightening or via renewed easing – to boost the global economy in H2 and beyond. Some recent temporary drags on growth (such as auto sector weakness) should also wane, providing further modest support.
• ? But the modest rise seen in GDP growth in 2020 exaggerates underlying dynamics due to sharp rebounds in a few crisis‐hit economies such as Turkey, Venezuela and Argentina. And downside risks for 2020 are probably larger than in 2019; benign financial conditions and the weaker US$ assumed in our baseline may not materialise, while the build‐up of debt in EMs could act as a larger‐than‐expected drag on growth.