External balances,trade flows and financial conditions

This paper studies how changing expectations concerning future trade and financial conditions are reflected in international external positions. In the absence of Ponzi schemes and arbitrage opportunities, the net foreign asset position of any country must, as a matter of theory, equal the expected present discounted value of future trade deficits, discounted at the cumulated world stochastic discount factor (SDF) that prices all freely traded financial assets. I study the forecasting implications of this theoretical link in 12 countries (Australia, Canada, China, France, Germany, India, Italy, Japan, South Korea, Thailand, The United States and The United Kingdom) between 1970 and 2011. I find that variations in the external positions of most countries reflect changing expectations about trade conditions far into the future. I also find the changing forecasts for the future path of the world SDF are reflected in the dynamics of the U.S. external position.     

Policy and politics behind Shanghai’s Free Trade Zone Program

China launched the Shanghai Free Trade Zone (FTZ) Program on September 29, 2013 in a bid to reduce administrative interventions, ease restrictions on investments, further open up its financial system, and internationalize its currency to booster shipping, logistics, and commerce. This article aims to present a background of the Shanghai FTZ and some reflections on it. China’s economic reconstruction has made a major impact on its port cities. Competitions between ports are gradually evolving into competitions between supply chains, with ports no longer considered as isolated links in the transport chain but rather as integral links in the supply chain. Ports are transitioning into fourth-generation ports with the establishment of logistics and value-added activities, which are developed in conjunction with local industrial and service businesses. In this trend, China’s port cities can provide a wide range of value-added services and become centers of commodity flow, capital flow, and information flow. Specifically, the combined effects of driving the development of peripheral industries and actively coordinating the activities of relevant parties help regulate the operations of the entire supply chain to obtain potential value-added benefits. The implementation of the Shanghai FTZ will not only stimulate trade but will also bring increased shipping and finance opportunities to the city. With free trade as the new direction and focus of the country’s economic initiatives, the Shanghai FTZ will hopefully lay the groundwork for a new round of reforms and restructuring of the Chinese economy.     

Trade dress: The increasing importance of an ancient yet new form of intellectual property protection

Trade dress is a means of identifying and differentiating the product of a vendor by visual (and very occasionally auditory) cues of a form other than written language. The use of trade dress certainly goes back into pre-Roman times, and was very likely used well before then. Trade dress remains important in societies both highly literate and substantially illiterate, and in some respects has increased in importance in both.     

Are EU trade preferences really effective? An impact evaluation assessment of the Southern Mediterranean Countries’ case

This work assesses the causal impact of the EU trade preferences granted to the Southern Mediterranean Countries (SMCs) in agriculture and fishery products over the period 2004–2014. It overcomes some of the weaknesses of previous assessments and presents several methodological improvements. Firstly, it relies on a continuous treatment – i.e. preferential margins – to capture the ‘average treatment effect’ of trade preferences, rather than on a binary treatment based on dummy variables. Secondly, it uses highly disaggregated data at sectoral level in order to evaluate properly the preferential treatment. Thirdly, it applies a non-parametric matching technique for continuous treatment – specifically, a generalized propensity score matching. The results show, on the one hand, that the impact of the EU preferences is positive and significant on SMCs trade and is better evaluated using impact evaluation techniques. On the other hand, they demonstrate that the relationship between preferences and trade flows is asymmetric and warn against the risk of providing too much of a good thing. These results raise important issues for policy-making. First, they demonstrate that raising the level of preferences is not the solution to foster the SMCs trade towards EU. Second, that the policy-makers should put more emphasis on complementary factors other than trade barriers.     

Trade openness and household welfare within a country: A microeconomic analysis of Vietnamese households

The positive effects of trade liberalisation on several dimensions of poverty have initiated studies of the trade–poverty relationship. Trade liberalisation accompanies institutional reforms that help to reduce institutional barriers against the poor. This study examines the impacts of trade openness and institutional reforms on rural household welfare at the provincial level through the analysis of the determinants of welfare of rural households in Vietnam. The study employs a model of micro-determinants of growth and tests it on the data from the Vietnam Household Living Standards Surveys (VHLSSs) of 2006 and 2010. What makes the study different from some other studies of the same vein is that it attempts to directly capture the institutional effect on welfare. The study finds that, in the provinces with high institutional reforms and trade openness, the welfare of rural households improved. Institutional reforms in Vietnam appeared to be sluggish in the late 2000s. In particular, both access to land and lower informal charges were the important determinants of welfare improvement over time. These findings suggest that Vietnam should maintain its development by accelerating the process of institutional reforms, thereby helping poor households to improve standards of living.     

Economic growth and income inequality in the Asia-Pacific region: A comparative study of China,Japan, South Korea,and the United States

This paper builds an inequality-growth-redistribution nexus, and applies the Engle–Granger two-step ECM approach to estimate the long-run and short-run relationships between inequality and growth for four economies: China, Japan, South Korea, and the United States. Our estimation results support the S-shaped curve hypothesis relating GDP per capita to inequality with different starting points for the four economies. For the reverse relationship, we find a positive causal relationship for China, Japan, and the United States, indicating that increased income inequality spurred economic growth. In addition, we find mixed results on the effect of trade openness on inequality and growth. Trade openness reduced inequality in the United States and Japan, worsened it in China and had no significant effect in South Korea. In the inequality-GDP per capita relationship, exports provided an impetus to economic growth for Japan. As for redistribution, although fiscal redistributive measures reduced inequality in Japan, they played no major role in the other three countries. With regard to the inequality-GDP per capita relationship, all countries except for China show a negative effect of fiscal redistribution on GDP per capita.     

Addressing climate change cause and effect on land cover and land use in South Asia

This paper evaluates the role of trade liberalization and agricultural intensification in mitigating climate change cause and effects on land use and emissions using a computable general equilibrium model. Our results indicate that cropland expansion triggered by climate-induced crop productivity changes results in deforestation and increases emissions in South Asia and globally. Global full trade liberalization on all goods is the optimum policy for South Asia despite significant global deforestation, but for the world, unilateral partial trade liberalization on all goods is a more appropriate policy while ensuring a considerable emissions reduction for South Asia. These results indicate that mitigation responses to climate change are location specific and no one trade policy is suitable at the regional and global levels. Lastly, agricultural intensification by improving productivity growth is the best strategy in land-based emissions mitigation, thereby avoiding the transformation of forest and pasture lands for agricultural cultivation both at regional and global levels.     

Policy tolerance of economic crime? An empirical analysis of the effect of counterfeiting on Italian trade

Some governments seem ambivalent towards economic crime because, on the one hand, there are adverse effects on competition and legal businesses; on the other hand, there are benefits through (shadow) employment and income in less-developed areas, as well as benefits through relations of political clientage. We focus on counterfeiting and its economic effects on trade in Italy during the economic crisis. Using a newly built regional dataset and a dynamic panel model, we find evidence of the dual impact of counterfeiting. The production (and exchange) of fake goods depresses the legal market that relies on intellectual property rights but supports shadow-economic activities for the benefit of illegal workers, criminal organisations, and political clientele. We show that the negative effects outweigh the positive effects.     

What drives cross-country differences in export variety? A bilateral panel approach

A worldwide event like the 2020 Coronavirus outbreak can only reinforce the interest in modelling trade diversification as a key factor in countries’ vulnerability to external shocks. This paper adopts a detailed relative framework to study the determinants of product-level export variety in a large bilateral panel of developing and developed economies (16,770 country pairs in the period 1988–2014). We find that country pairs characterized by large differentials in productivity and in the makeup of the labour force differ in export variety patterns. This result holds after controlling for other endowments and for trade costs. Further, productivity plays a significant role in the reduction of export variety dissimilarities between countries belonging to different income groups. Hence, without successful technological convergence the low-income economies will not be able to reduce their exposure to export risk.     

Vulnerability to climate change: Are innovative countries in a better position?

The impact of climate change on organizations and economies remains one of the most significant yet underestimated threats. Although the consequences of climate change have started to gain attention among policy makers, international business research on this issue is lagging behind. Drawing from the knowledge and innovation literatures, we explore the impact of a country’s degree of innovation on its vulnerability to climate change. Using a longitudinal sample of 73 countries for the years of 1998–2013, we examine the impact of innovation, openness to trade, and regulatory quality on a country’s vulnerability to climate change. We find that R&D expenditures as a percentage of GDP (innovation input), openness to trade, and regulatory quality decrease a country’s vulnerability to climate change. We also find that openness to trade moderates the effect of patenting rates (innovation output) on a country’s vulnerability to climate change.