Narrow Results

This study empirically investigates the impact of import protection on female labor using a panel dataset of 211 countries. Our findings suggest that import protection increases female labor participation rate in capital abundant countries, whereas decreases in labor abundant ones. This result is also in line with the stylized view that female labor benefits from labor intensive production which requires less formal training and lower job skills.

This study compares the impacts of gross trade openness measures with trade openness in value-added measures on economic growth for the years 1995–2014 by employing a dynamic panel data estimation. Our findings suggest that although gross trade shares promote growth, using value-added trade shares magnifies this positive effect. Compared with gross terms, estimates also imply that while exports in value-added terms have much larger growth effect, imports in value-added terms have no significant impact. We then evaluate the impacts of tariffs on growth in terms of gross trade and trade in value added separately. Although our results imply the negative growth effects of gross import tariffs, this negative impact disappears for tariffs in value-added terms. These results reaffirm that trade protectionism has potential to lower global growth through reducing exports because it is clear that export shares regardless of their measurements and disaggregation levels promote growth. Our results indicate that countries should support not only exports of final products but also exports of intermediates. However, given the necessity of imports for exports, our results do not lend any evidence to discourage overall imports.

Declining global multilateralism has brought numerous trade disputes, most notably between the US and China. Here, a new global model featuring monetary policy and revenue reassignment are used to examine the effects of this conflict and this macroeconomic perspective proves to be important. The emergent results provide additional insight and complement other “trade-focused” general equilibrium studies. We find that, with capacity adjustment, US unilateral protection emerges as “beggar thy neighbor” policy. China’s proportional losses are large, little mitigated by its retaliation, which nonetheless constrains US net gains. Third regions trading with China and the US suffer losses only partly offset by trade diversion and greatly enhanced if, to avoid leakage, protection is extended to all sources.

While embracing trade policies that foster trade liberalization, Taiwan has clear protectionist policies covering its agricultural trade, which combine border measures with domestic support, and are closely modeled on the policies created by the European Union. The idea of multifunctionality of agriculture — and its link to trade policy — has created a normative framework whereby the agricultural markets have to be shielded in order for them to provide non-commodity attributes or public goods. This paper aims to explore the causal power of ideas (liberalization and multifunctionality) in the definition of Taiwan’s agricultural trade policy, by analyzing them from the perspective of historical institutionalism, and taking Taiwan as a case study. It is the institutionalization of the idea of multifunctionality that gives it an explanatory power toward understanding the ideational source of protectionism in agricultural trade.

This paper explores the political economy determinants of cross-industry distribution of protection in Tunisia. Instead of the contribution motive, we assume that the government was seeking legitimacy and, to that end, chose import substitution as an industrial strategy to promote industries with learning potential but still with a likely concern for tariff proceeds as well as for rent generation. Following Esfahani (2005), we include in the latter motive the need for the government to alleviate risk for groups that have imperfect access to credit and/or insurance markets. The estimation of a simple model for a cross-section of 35 Tunisian manufacturing industries in 1997 shows that the industrial distribution of nominal protection tended to obey the special-interests pressures emanating from big, capitalistic firms, supplying consumer goods in the import substitution sectors. However, the workers' interests and the government ad hoc growth objectives seem to matter as well.

This paper systematically discusses the evolution of China's industrial and trade policy regarding coke and the effects of this policy over the past decade, particularly from 2004 to 2013. We found that: (1) due to the impact of China's strict industrial policies, the country's coal and coke industry is still competitive. These policies have also helped the Chinese government achieve its goal of maintaining security and energy conservation. (2) China's coke trade policies did not reduce the volume of coke export. There is also no reliable evidence that strong coke industrial and trade policies have led to the expansion of the spread between the Chinese price and the international price. (3) There is a co-integration relationship between the domestic Chinese coke price and the international coke price, while changes in China's domestic coke price and macroeconomic climate index are both one-way Granger causes of the change in the international coke price.

This paper analyzes the fiscal implications of special economic zones (SEZs) on the government exchequer. The analysis is based on aggregating data collected from seven conventional SEZs and taking 1990–1991 to 2007–2008 as the reference period. The exercise reveals that the government has spent huge sums of money to play the role of a trade facilitator and has, in the process, lost considerable revenue as a fiscal manager. This, in turn, has affected both revenue and capital expenditure of the government's budget. Given the magnitude of these costs, one cannot but raise questions about the actual contributions of these enclaves to the national fiscal health and the feasibility of relentlessly adopting measures that seeks to promote these zones across the nation.

Developed countries, led by the United States and the European Union, have stepped up security review of supply chains and adopted a series of restrictive policies and protectionist measures to reshape a more secure, sustainable, and risk-controllable supply chain. A key objective of the West’s supply chain strategy is to wean their economies off Chinese influence by resorting to discriminatory policies. Supply chain interventionism on national security grounds violates market rules on which the global supply chain is based, and also runs counter to the principles of nondiscrimination and liberalization embedded in the multilateral trade governance architecture. Global supply chain reshuffles will take time and incur huge costs, leaving ample room for Beijing to make necessary adjustments and bolster its position in global supply networks.

India’s political economy and economic policies can no longer be understood in a purely domestic-oriented or closed economy framework. This paper offers an “India in the world” framework that analyzes how traditional borders of domestic political economy and international politics interact in shaping domestic policy and political economy. In contrast to existing political economy approaches on India, such a framework pays attention to the changing nature of domestic political economy but also how international factors affect and shape domestic imperatives and goals. Simultaneously, domestic developments have important global consequences in terms of increasing (or decreasing) global attention and external economic flows to India, which must be attended to in understanding India’s domestic political economy. I also suggest that the global world is not only a set of exogenous structures and constraints, but rather, the changing global order is deployed and used by state actors to refurbish their political and state power to achieve both domestic and global aims. However, if state actors fail to renew the domestic sources of growth or contribute to crony capitalist or debt-laden domestic growth, then, even attending to global alliances may fail to renew the economic sources of state power and create serious contradictions in India’s domestic and global strategies despite new realignments favoring India at the global level. These ideas help us understand Modi regime’s political economy in a new way.

This paper considers the timing of issuing a compulsory license on pharmaceuticals. Apart from confirming the role of basic public health concerns--such as the virulence and prevalence of the disease to be addressed--in compulsory licensing, the paper identifies key economic variables of direct concern to a revenue-maximizing government with the power to issue the license. The paper finds that a disease that threatens to reduce domestic tax revenues is likely to be met with a move toward generic manufacturing of patented drugs. A compulsory license is less likely to be issued if retaliation by trade partners endangers the domestic export sector or if foreign trade contributes significantly to government finances. Thailand’s 2006 compulsory license issue is discussed as an example supporting the implications derived from the model.

Economic policy has often been an integral part of foreign policy usage by governments. Many states will use trade, aid, and investment as instruments to attain other objectives deemed to be in the national interest. Albert Hirschman in an early and classic study suggested that governments in the Weimar Republic and Nazi Germany consciously attempted to dominate the trade of weaker states in Europe as a means of enhancing the German foreign policy position. Russian trade policy since the breakup of the Soviet Union has followed a similar policy, especially in regard to the other successor states of the former Soviet Union. Patterns were different for the Baltic countries, other European successor states, the Transcaucasian states, and Central Asian countries. Notwithstanding differences that were present, there was evidence in the trade patterns to indicate that Moscow was using trade policy to gain influence in the successor states.

The Michigan Computable General Equilibrium (CGE) Model of World Production and Trade is used to calculate the aggregate welfare and sectoral employment effects of the menu of U.S. trade policies. The menu of policies encompasses the various preferential U.S. bilateral and regional free trade agreements (FTAs) negotiated and in process, unilateral removal of existing trade barriers, and global (multilateral) free trade. The welfare impacts of the FTAs on the United States are shown to be rather small in absolute and relative terms. The sectoral employment effects are also generally small but vary across the individual sectors depending on the patterns of the bilateral liberalization. The welfare effects on the FTA partner countries are mostly positive though generally small, but there are some indications of potentially disruptive employment shifts in some partner countries. There are indications of trade diversion and detrimental welfare effects on nonmember countries for some of the FTAs analyzed. In comparison to the welfare gains from the U.S. FTAs, the gains from both unilateral trade liberalization by the United States and the FTA partners and from global (multilateral) free trade are shown to be rather substantial and more uniformly positive for all countries in the global trading system.

The U.S. FTAs are based on “hub” and “spoke” arrangements. It is shown that the spokes emanate out in different and often overlapping directions, suggesting that the complex of bilateral FTAs may create distortions of the global trading system, which could be avoided if multilateral liberalization in the context of the Doha Round were to be carried out.

Kozo Kiyota is Associate Professor of International Economics in the Faculty of Business Administration, Yokohama National University. He is also a Research Fellow at the Manufacturing Management Research Center (MMRC), the University of Tokyo and a Faculty Fellow at the Research Institute of Economy, Trade and Industry (RIETI). He received his Ph.D. from Keio University, Tokyo, Japan. His research focuses on empirical microeconomics. He has published articles in the International Journal of Industrial Organization, Journal of Economic Behavior and Organization, and The World Economy.

Robert M. Stern is Professor of Economics and Public Policy (Emeritus) in the Department of Economics and Gerald R. Ford School of Public Policy, University of Michigan.

The paper explores incentives of national trade representatives (TRs) in international negotiations when trade policy basically follows a non-cooperative track with countries imposing tariffs on each other's exports due to "terms of trade cum international political economy" considerations. The paper shows that negotiations might get stuck even if a limited form of mutual trade liberalization Pareto-dominates the initial Nash-equilibrium in trade policies. The dilemma is rooted in a second-mover advantage, which adds considerable inertia to the Nash equilibrium of protectionism. The second-mover advantage arises whenever the countries' tariffs are strategic complements, with the latter, in turn, conditional on the traded goods being complements in final demand.

Because China’s economic structure is different from that in OECD countries, using conventional neo-classical competitive trade models to analyze the welfare and trade impacts of trade related policy change can be misleading. In particular, both the exchange rate regime and output and pricing policies of state owned enterprises (SOE’s) will have effects on trade and welfare which differ from a classical competitive model. This paper present a numerical model that captures the combined and interactive effects of three policy elements in prototype form of tariffs, policy towards SOEs in the industrial sector, and an exchange rate regime supporting large trade surpluses and additions to foreign reserves. The model has non neutral monetary features, endogenous trade imbalances and average product pricing of labor in goods. We do not claim it to be fully representative of modern China, but it does go some way beyond simple competitive models used elsewhere and points to different conclusions of policy impact. We calibrate our model to 2006 data, and then evaluate the impacts both singly and in combination of: tariff liberalization, a move to more freely floating exchange rates, and SOE enterprise reform. Results show that large differences in policy have a different impact relative to a classical competitive model. SOE reform and a freely floating Chinese exchange rate have more impact on China’s welfare than tariff liberalization. Policies of RMB appreciation and increasing China’s money stock reduce China’s trade surplus. In the traditional competitive model, trade liberalization impacts both imports and exports, while in our central case model, with endogenously determined trade surplus, trade liberalization has little effect on exports. Most of the policy impact is on imports and the trade surplus. SOE reform of China’s manufacturing sector significantly decreases production of China’s manufacturing sector and increases production in China’s other sectors.

An enduring puzzle in international economics is why trade interventions are biased in favor of import-competing rather than export sectors and therefore restrict trade. In this paper, we show that if the government’s objective reflects a concern for inequality then trade policy generally exhibits an anti-trade bias. Importantly, under neutral assumptions, the mechanism that we analyze generates the anti-trade bias independently of whether factors are specific or mobile across sectors. The mechanism also generates an anti-trade bias between large countries even after they sign reciprocal trade agreements that eliminate any terms-of-trade motivation for the use of trade protection.

Using Bernheim and Whinston (1986) common agency game, we endogenize trade policy in a duopoly composed of a domestic firm and a foreign firm, where both firms influence the domestic government’s trade policy via their contributions. The foreign firm can jump over trade restrictions by undertaking foreign direct investment (FDI) in the domestic market. The government prefers a voluntary export restraint (VER) to a tariff for two reasons. First, a VER leads to higher contributions from the foreign firm than a tariff. Second, a VER provides a higher level of protection to the domestic firm without generating FDI by the foreign firm.

In an n country oligopoly model of intraindustry trade (n ≥ 3), this paper explores the economics of the most-favored-nation (MFN) principle. Under the non-cooperative tariff equilibrium, each country imposes higher tariffs on low cost producers relative to high cost ones thereby causing socially harmful trade diversion. MFN adoption by each country improves world welfare by eliminating this trade diversion. Under linear demand, MFN adoption by the country with the average production cost is most desirable. High cost countries refuse reciprocal MFN adoption with other countries and also lose even if others engage in reciprocal MFN adoption amongst themselves.

This paper examines the tariff-jumping response of all firm and product combinations subject to US antidumping investigations from 1980 to 1990 using a newly constructed database. Previous studies have focused only on Japanese FDI responses to antidumping protection and found large tariff-jumping responses. In contrast, this paper finds quite modest tariff-jumping responses and the evidence suggests that tariff-jumping is only a realistic option for multinational firms from industrialized countries. This may partially explain developing countries’ concerns about addressing AD protection in the WTO. Despite high tariff-jumping responses, there is no evidence of a Japanese-specific propensity to tariff-jump, holding other economic factors constant.

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.

Using the menu-auction approach to endogenous determination of tariffs and allowing additionally for lobby formation itself to be endogenous, this paper analyzes the impact of unilateral trade liberalization by one country on its partner's trade policies. We find that such unilateral liberalization may induce reciprocal tariff reductions by the partner country. Intuitively, unilateral liberalization by one country has the effect of increasing the incentives for the export lobby in the partner country to form and to lobby effectively against the import-competing lobby there for lower protection.