Papers Received in 1999
Market Structure,Trade Liberalization, and the GATS
J.F. Francois, Erasmus University
I. Wooton, University of Glasgow and CEPR
Abstract: In this paper we consider the impact of improved domestic market access for a foreign service provider. We emphasize the interaction between the different modes of market access commitments in services (cross-border and establishment) market structure, and regulation. We work with a model where the domestic industry is assumed to be imperfectly competitive and, as a result of domestic regulation, able to act as a cartel. We also examine the incentives for the domestic firms to accommodate the entry of the foreign firm by inviting it to join the cartel.
Keywords: Trade in services, GATS, establishmen
Download the paper; Contact address: francois@few.eur.nl
Trade in International Transport Services: The Role of Competition
J.F. Francois, Erasmus University
I. Wooton, University of Glasgow and CEPR
Abstract: We are concerned with trade in transport services (not cabotage but rather international shipping, transport, and related logistical services) and the importance of competition and market structure in the sector. We examine implications of liberalization for profits, trade, and national gains from trade. Though past GATS maritime negotiations involved the maritime nations, we also flag interests of consuming nations (particularly poorer developing countries). We further illustrate issues raised in the analytical section through computational example, to provide a rough sense of orders of magnitude and the importance of the issues raised for basic gains from improved market access.In this paper we explore linkages between financial services trade and growth.
Keywords: Trade and transport services, shipping services, GATS
Download the paper; Contact address: francois@few.eur.nl
International Trade in Financial Services, Competition, and Growth Performance
J.F. Francois, Erasmus University
L. Schuknecht, World Trade Organization
Abstract: In this paper we explore linkages between financial services trade and growth. We offer a formalization of the argument that trade, through the fostering of financial market integration, may yield important long-run effects related to increased competition. The relationships formalized here link long-run economic performance to scale economies and cost structures in the financial services sector, and to market concentration in the sector. We first develop an analytical model. This motivates an econometric exercise. Cross-country growth regressions point to a strong positive relationship between financial sector competition and financial sector openness, and between growth and financial sector competition.
Keywords: Trade in financial services, GATS, financial sector openness
Download the paper; Contact address: francois@few.eur.nl
Whether the Rules of the WTO Will Broaden the Gap Between the Most Developed and the Least Developed Countries?
(Paper prepared for The Twelfth World Congress of International Economics Association, Buenos Aires, 23-27 August, 1999.)
T. Roza, Skopje University
F. Nikola, Belgrade University
G. Jelena, Belgrade University
Abstract: After almost half a century of negotiation, the Uruguay Round was concluded in 1994. The WTO proclaimed as its basic goals the growth of the living standard, full employment, the growth of production and trade, optimal use of world resources etc. Undoubtedly the world, as a whole, will experience the rise of welfare. However, there is a serious doubt that the rules of the WTO were formulated primarily for the sake of maximization welfare of the most developed countries. Majority of the least developed countries will be faced with the reduced welfare. Considering that the absence from the WTO implies potentially larger loses, the only dilemma for these countries is the choice of strategy of accession to the WTO in order to minimize their loses.
Keywords: WTO, developing countries, enequality, TRIPs, agriculture
No direct link available Contact address: fnikola@one.ekof.bg.ac.yu
Export, foreign direct investment and local content requirement
L. D. Qiu, Hong Kong University of Science and Technology
Z. Tao, University of Hong Kong
Abstract: Local content requirement (LCR) is a popular government regulation on foreign direct investment (FDI). This paper investigates the design of optimal LCR policy. LCR affects multinationals' international strategies, namely FDI and export. We find that a less efficient or more vertically integrated firm is more likely to adopt the FDI strategy over the export strategy. By taking the endogeneity of a firm's international strategy into account, we characterize conditions under which the host government's optimal LCR policy results in one of the following equilibria: (i) all firms make FDI, (ii) all firms choose export, and (iii) some make FDI and others choose export.
Keywords: Export, FDI, local content requirement, tariff, multinationals
No direct link available Contact address: larryqiu@ust.hk
Eastern Enlargement of the EU: How Much is it Worth for Austria?
C. Keuschnigg, University of Saarland and CEPR
W. Kohler, University of Linz
Abstract: We evaluate potential costs and
benefits of Eastern enlargement of the EU. In addressing fiscal costs of enlargement in addition to tariff
and nontariff barriers, we arrive at important conclusions: 1) Overall, extending EU membership
to Eastern applicants is more than worth its price for Austria. The (dynamic) gains from integration
clearly outweigh the budgetary costs. 2) Somewhat surprisingly, the wage spread between skilled and
unskilled labor is narrowed rather than widened. 3) significant sectoral and intergenerational
redistribution, however, may render EU enlargement difficult on political grounds
whereby the agricultural sector and
young generations are at the losing end.
Keywords: European integration, Eastern enlargement, Dynamic trade modeling, Computable general equilibrium analysis
Intra-Industry Trade, Endogenous Technological Change, Wage Inequality and Welfare
R. A. Santis
Abstract: By using two alternative intra-industry trade models (1. - New goods cannot be introduced into the economy; 2. - The possibility for a set of capital goods available in the economy to vary; both models consider the existence of an intersectoral linkage), I show by means of Applied General Equilibrium (AGE) analysis that globalisation (either lower transport costs or lower tariffs) has an impact on the ratio between the wage rates of skilled and unskilled labours; but the impact on wage inequality is far larger, when countries are assumed to exchange differentiated capital goods. The latter result has been obtained by using an imperfect competitive model, which embodies a sector bias technological change that arises from trade. In addition, the gains from trade, insignificant under the standard trade hypotheses, are extraordinarily large when endogenous technological change is taken into account. The main policy conclusion is that if policy makers of flexible wage economies introduce trade barriers to reduce wage inequality, these protective measures, by affecting the diffusion of technology, would cause a large welfare loss.This paper examines theoretical reasons why we believe trade and technology are linked to wage movements in general, and how we should therefore organize our examination of the recent episode of wage and employment erosion in the OECD countries. We start with a graphic tour through the mechanics of general equilibrium theory on trade and wages. This provides a set of implied relationships between wages and factor intensity trends that, together, provide a casual test of the consistency of posited relationships with actual trends. Numeric analysis and a review of the general equilibrium empirical literature follow the theoretical overview.
Keywords: Trade, Technical change, Wage inequality, Applied General Equilibrium
The influence of environmental concern on the international tropical timber trade agreement
A. Osthoff Barros
Abstract:Forest is discussed in the international political scene for different reasons. Among these reasons is the international trade of timber. The problem of deforestation is another reason. The loss of forest biodiversity, the links of forest with the problem of climate change and desertification, are other reasons. However, until today there is no successful agreement on any issue concerning forests on the international scene. In the past 15 years, two major international intergovernmental forest policy processes took place: the International Tropical Timber Agreement, and the 1992 United Nations Conference on Environment and Development ("the Earth Summit") which lead to the Statement of Forest Principles signed in 1992. The Forest Principles is a set of guidelines for the management conservation and ecologically viable exploitation of all types of forest and it is the most ambitious effort done to reach a global environmental agreement on forest. This paper will explore the link of these two processes, which are the main processes at the international level, directly or indirectly related to the idea of a global convention on forest. Through different ways, the Timber Agreement influenced the negotiation process of the 'Forest Principles' and vice-versa. This influence will be highlighted and analysed. This paper also examines the main actors, issues and interest involved in international forest policy, and the reasons why there is no successful international agreement on forest.
Keywords: Environment negotiations, tropical forest, international trade
No direct link available Contact address: osthoff@centre-cired.fr
Is exporting efficiency-enhancing? Evidence using dynamic panel data techniques.
F. Requenas-Silvente, London School of Economics
Abstract:
Keywords: Export supply, inefficiency, stochastic production function, panel data techniques
No direct link available Contact address: f.requenas-silvente@lse.ac.uk
The empirical basis for a complete theory of international trade
F. Requenas-Silvente, London School of Economics
J. Walker
Abstract: Where intra-industry trade is concerned,
income inequality between countries matters. We
propose an empirical model that separates the productivity effects of factor
supplies (the Heckscher-Ohlin model), and
differences in tastes driven by both income per capita (the
classical Linder hypothesis), and income inequality (a reinterpretation of
Linder's hypothesis that provides an explicit role for
income distribution) within a unified framework to
explain IIT volumes and patterns. We then test the empirical validity of our
model, first within a static framework, then
utilising a dynamic analysis. We are interested in
whether inequality affects bilateral IIT patterns and volumes symmetrically
within and between countries in the North and the South. We therefore focus our
investigation on the North/South, and North/North cases.We find that:
· In both our static and dynamic specifications income
inequality differences reduce IIT
· Greater levels of income inequality in the South have a
detrimental impact on bilateral IIT
· Greater egalitarianism between Northern countries is IIT
enhancing
Our empirical results provide challenges and opportunities
for both trade theorist and empirical practitioners alike.
Keywords: Intra-industry trade, income inequality, North-South
No direct link available Contact address: f.requenas-silvente@lse.ac.uk
Trade and Wages: What Can Factor Content Tell Us?
W. Kohler, University of Linz
Abstract: The relationship between trade and wage inequality will remain an important and contentious issue. Economists should, therefore, be able to empirically address this issue on a firm theoretical basis. Empirical research on trade and wages in one way or another often relies on the use of so-called factor contents. While trade economists have long been using factor contents to test the factor proportions theory of comparative advantage, they are generally quite critical of this more recent application in which factor contents are relied upon to infer factor price effects of trade. Following up on a recent debate, this paper argues that in discussing the usefulness of factor contents one should separate two issues: a) The information content of factor contents as such, and b) the design of specific thought experiments in which this information content may be exploited in an empirical context. The paper first delineates the information content of factor contents in a reasonably general way, without any specific thought experiment in mind. It then shows how one may design useful thought experiments involving various counterfactual equilibria, and how these counterfactuals must be interpreted.
Keywords: Globalization, factor contents, income distribution, factor prices