Revisiting the effects of regional trade agreements on trade flows with proper specification of the gravity model

This paper uses a gravity model to assess ex-post regional trade agreements. The model includes 130 countries and is estimated with panel data over the period 1962-1996. The introduction of the correct number of dummy variables allows for identification of Vinerian trade creation and trade diversion effects, while the estimation method takes into account the unobservable characteristics of each pairs of trade partner countries, the endogeneity of some of the explanatory variables as well as a potential selection bias. In contrast to previous estimates, results show that regional agreements have generated a significant increase in trade between members, often at the expense of the rest of the world.     

Restricted origin principle under triangular trade flows: Implications for trade and tax revenues

In this paper we try to show that, even when we allow for the assumptions embodied in the standard literature of border tax adjustments, and furthermore restrict ourselves to the case of uniform as well as general taxes, across products and countries, the choice between origin and destination principles need not be irrelevant. In particular, when a triangular trade flow of products takes place between two states of a federation and foreign countries, unless the same principle of border tax adjustments is adopted on both domestic and foreign trade, part of the state tax base is transferred from one state to the other, leading to an undesirable reallocation of local tax revenues. We found that adoption by the Brazilian states of the restricted origin principle (origin principle applied to interstate trade and destination principle applied to foreign trade) led to a reallocation of local tax revenues from the Northeastern states to the residents of the rest of country. An obvious implication of this analysis is that reallocation of tax revenues due to bilaterally unbalanced trade could be easily adjusted by adoption of the same principle, origin or destination, for both domestic and foreign trade.     

RASAT,a model for the estimation of commodity trade flows in EFTA

The RAS method of updating a trade flow matrix is extended into the third dimension of commodity trade. The model is used to update the 1959 trade flows to 1965 for the EFTA countries. Measures are then derived to estimate trade diversion within EFTA. These estimates are contrasted with other ex-post estimates, and are further used to examine the accuracy of the predictions of trade diversion from a simple elasticity of demand model.     

Bringing geography into the analysis of trade competition

Trade competition between two countries is usually measured through structural similarity indicators (e.g., Krugman Specialization Index). We contribute to the area of research that focuses on how to measure trade competition between two countries by proposing an indicator that simultaneously accounts for structural and geographical similarity (i.e., similarity in sectoral weights for each market and weights of destination markets). We perform an empirical analysis considering the exports from the 28 EU countries to more than 120 markets. The importance of the geographical dimension is confirmed, highlighting that applied studies may produce inaccurate conclusions when this dimension is excluded.     

On the efficiency of fair trade

The first part of this paper reviews five major theoretical approaches that describe the fundamental causes of poverty, with particular attention to what these theories imply about government policy towards markets and the need for immediate poverty alleviation. Different causal theories have very different policy implications; it is difficult to recommend specific anti-poverty policies with making assumptions about the nature of economic markets and of individual behavior. The paper ends with comments about how to make these choices, arguing that the greater moral onus one associates with poverty, the more willing one should be to adopt less efficient strategies that do more to raise incomes among the poor. The interconnections between markets and social and political systems—which often disadvantage poor populations—suggests that some market regulations and targeted programs may be necessary to reduce poverty, especially if these can be implemented with minimal corruption and monitored for effectiveness.     

The gravity model analysis: an application on MERCOSUR trade flows

This paper explores the determinants of bilateral trade flows between Mercosur countries. To this aim, a gravity model is applied to annual bilateral exports between 75 countries in 1980–2008. The model is augmented with variables that are relevant in determining the volume and direction of international trade using two alternative estimation methods; pooled ordinary least squares and panel fixed effects. The results reveal that the influence of the agreement on trade has been positive but moderate. As a whole, Mercosur has had positive effects, and this agreement can be reinforced with the deepening of their relationships and the entry of new members.     

On the trade-diversion effects of free trade agreements

Trade-diversion effects of free trade agreements (FTAs) have not been thoroughly examined empirically. Using a novel empirical approach, we confirm that FTAs divert trade away from non-member countries and even more so from internal trade (domestic sales) in member countries.     

A two-methodology comparison study of a spatial gravity model in the context of interregional trade flows

This article argues that the introduction of spatial interactions to model the determinants of origin-destination (OD) flows can potentially result in excessive contiguity. To explain flows between OD regions, it is not only what happens in the origin and destination that is relevant, but also what happens in their neighbouring regions. However, what happens if there is a high degree of overlap between origin neighbouring areas and destination neighbouring areas? The article presents an empirical illustration to re-examine the evidence presented in previous research (Alamá-Sabater et al., 2013) and more closely analyses the territorial level, focusing on the case of interregional trade of goods at the NUTS3 level (Spanish provinces). We then use two different methodologies within the framework of a spatial gravity equation for interregional trade modelling. The findings confirm the importance of spatial dependence on trade flows and in particular that logistics decisions within a province affect shipments from contiguous provinces.     

On the theory of east-west trade under uncertainty

Taking the final stage of the existing socialist economy as the labormanaged economy, this paper establishes a model of East-West trade between a capitalist economy and a labor-managed economy, both of which face asymmetric technological uncertainty. The model reflects the facts that the securities markets for firms' ownership shares exist only in the capitalist economy and that the firm's objective function in the capitalist economy is different from that in the labor-managed economy. It also considers the existence of international forward markets for commodities as international risk-sharing arrangements. Thus, the paper shows that all the basic theorems in traditional trade theory (Factor Price Equalization, Heckscher-Ohlin, Stolper-Samuelson and Rybczynski) carry over to the uncertain environments characterized by different types of economies.This is the final version of the paper, the first draft of which was presented at the 1987 annual meeting of the Japanese Association of International Economics. An earlier version has recently appeared in my book,Competition, Monopoly and International Trade Under Uncertainty (written in Japanese, Tokyo: Asian Economic New Press 1989). I wish to thank professors H. E. Leland, S. Fujino, H. Eguchi, M. Ohyama, K. Otaka, M. Ogawa, T. Ohsawa, K. Fukao, M. Nishijima and two anonymous referees for their helpful comments. Any remaining errors, however, are my responsibility.     

The determinants of trade performance: influence of R&D on export flows

A theoretical model is presented, in which supply side differences between countries determine international trade flows. This model is empirically tested at a sectoral level for a group of EU countries, within a framework that focuses on changes through time and differences between countries. The results show that the validity of the theoretical model is limited at sectoral level. However, as expected, we find that the variable representing technological differences is significant and correctly signed for high-technology sectors. The evidence points to the existence of different production functions across countries and to the importance of supply side factors in determining the direction and the terms of trade.     

On the welfare effects of trade and investment liberalization

Using a three-factor knowledge- and physical capital model of trade and multinational activity, we consider a set of policy experiments to assess the welfare effects of trade and investment liberalization in general equilibrium. Specifically, we address the question of whether and under which circumstances a single versus a combined trade/investment liberalization strategy or a unilateral versus a bilateral policy change is preferable from a single country's and the world's point of view. The focus of this paper is to look at three relevant questions. First, when is investment liberalization beneficial and when is it harmful for a single economy or the whole world? Second, is pure investment liberalization a welfare maximizing strategy? Third, when is either kind of liberalization (trade, investment, or both) welfare improving and when neither of them?     

On the trade impact of nominal exchange rate volatility

What is the effect of nominal exchange rate variability on trade? I argue that the methods conventionally used to answer this perennial question are plagued by a variety of sources of systematic bias. I propose a novel approach that simultaneously addresses all of these biases, and present new estimates from a broad sample of countries from 1970 to 1997. The estimates indicate that nominal exchange rate variability has no significant impact on trade flows.     

对我国外贸发展规模与质量问题几点思考

改革开放二十多年来，我国对外贸易已具有了相当规模，对我国经济增长做出了巨大的贡献。但同发达国家相比还存在着很大的差距。召集世界经济陷入低迷状态，我国还要履行入世承诺。在这种“内外双紧”的环境下，我国对外贸易保持适度的发展规模，同时改善外贸质量显得尤为重要。     

On the possibility of attaining environmental and trade objectives simultaneously

With the greening of political debate around the world, large nations — precluded from using trade instruments explicitly — have become aware of the fact that they can manipulate their domestic tax structure to attain environmental and trade objectives simultaneously. In this note we show how such nations can attain these two targets with one instrument. Specifically, we show how to construct dual purpose taxes. We then focus on the empirical determinants of these taxes.