Bilateral Trade Research Articles

Gravity-Based Tools to Assess the Impact of Tariff Changes: An Application to Armenia

This paper uses two empirical tools to quantify the impact of tariff changes on bilateral trade and welfare. Both tools are rooted in structural gravity literature. The first tool estimates the impact of tariff changes on bilateral trade for 5,020 products in a partial equilibrium framework. The second tool quantifies the impact on bilateral aggregate trade in a general equilibrium setup, allowing estimates of trade diversion and welfare changes. These tools are used to estimate the impact of tariff changes on Armenia with regard to (i) its alignment with the external tariff of the Eurasian Economic Union; (ii) free trade agreements between the Eurasian Economic Union and other economies, including Iran and the People’s Republic of China; and (iii) Armenia’s loss of beneficiary status under the Generalised Scheme of Preferences of the European Union.

Interconnectivity disrupted by fading globalization: A network approach to recent international trade developments

Abstract The post-World War II decades experienced rapid growth in international trade, but recently a trend of weakening globalization has been consolidating. We construct an International Trade Network (ITN) using bilateral trade (2010 to 2022) to assess how interconnectedness has evolved in the face of recent developments. Our analysis reveals that while network connectivity initially improved, there was a shift towards a negative trend from 2018, coinciding with an increasingly unfavorable environment for international trade. We also document significant changes in the roles of countries within the ITN. While the USA remains the primary hub and China solidifies its second position, key countries like Germany, France, Great Britain, and Japan have notably lost relevance, whereas nations like India and the Republic of Korea are gaining prominence. Finally, employing an econometric model, we show that countries with large economies, significant manufacturing sector, lower inward foreign direct investment stock, and economic and geopolitical stability tend to occupy more central positions in the ITN.

Science diplomacy for stronger bilateral relations? The role of Arctic science in Iceland’s relations with Japan and China

ABSTRACT The aurora borealis research carried out by China and Japan in the Arctic state of Iceland has been received very differently both in Iceland and abroad. While the Japanese research has gone almost unnoticed for decades, the Chinese research has been received with much scepticism and negative media coverage, including talk of a possible security threat. This paper presents a comparative study which explores the history of the two research projects, as well as their execution and reception. Through the lens of the aurora research, the paper also explores the broader implications of Arctic and science diplomacy on bilateral relations between Iceland and the two Asian powerhouses. As the aurora research in Iceland has so far received limited academic attention outside the natural sciences, the paper is largely based on primary research, including thirteen in-depth interviews with key individuals closely connected to the projects. The paper demonstrates the different reception of the two projects in Iceland and discusses both organisational issues, such as differences in scale and capacity, and underlying factors related to international politics. Furthermore, the research demonstrates that the Japanese case is a purely science-focused collaboration devoid of science diplomacy, while in the Chinese case, science has been used as a tool to facilitate more strategic diplomatic goals – most importantly the bilateral Free Trade Agreement between China and Iceland.

Strategic directions of cooperation between Ukraine and the Republic of Turkey through the prism of ratification of the free trade agreement

Strategic directions of cooperation between Ukraine and the Republic of Turkey through the prism of ratification of the free trade agreement

Trade liberalization and women's marriage and fertility decisions in Vietnam

This study investigates the impact of a large demand shock driven by the US-Vietnam Bilateral Trade Agreement (BTA) in 2001 on the timing of women's marital decisions and first childbirth experiences in Vietnam. We hypothesize that the reduction in women's and men's self-employment would delay family formation and childbirth, with the ultimate impact on marriage remaining ambiguous. Analyzing data from the Vietnam Household Living Standards Surveys, we find that both men and women are less likely to be self-employed in the face of a substantial trade shock. Notably, the decreasing impact on women's self-employment becomes more pronounced than that for men post-2012, a decade after the agreement's enforcement. Employing the Multiple Indicator Cluster Survey and survival analysis, we empirically demonstrate that increased exposure to trade postpones women's timing of marriage and first childbirth. On average, in 2013, the BTA resulted in a 7.39- and 7.42 %-point decrease in the probability of entering marriage and becoming a mother, respectively. We also present suggestive evidence that increased exposure to trade liberalization eventually increases the likelihood of marriage and the number of children among women over 40. The findings in this study imply that policy promoting trade liberalization should consider its extensive impacts on young labor force's family formation through change in their individual economic prospects.

Is artificial intelligence technology innovation a recipe for low-carbon energy transition? A global perspective

Against the background of global warming, the low-carbon energy transition (LCET) has become one of the top concerns of governments around the world. Artificial intelligence (AI) is serving an increasingly relevant role in the energy sector by facilitating the development of cleaner energy. Thus, based on the panel data of 44 countries from 2000 to 2022, this study employs the Augmented Mean Group (AMG) and Common Correlated Effects Mean Group (CCEMG) methods to explore the impact of AI technology innovation on LCET. Moreover, we explore the moderating and spatial spillover effects between AI technology innovation and LCET. The main results show that: (1) AI technology innovation significantly promotes LCET. A 1 % increase in the AI technology innovation index causes a 0.176 % increase in the level of LCET using the AMG method, and a 0.198 % increase using the CCEMG method. (2) Financial incentives and energy efficiency effectively amplify the positive influence of AI technology innovation on LCET. (3) AI technology innovation generates discernible spillover effects on LCET through bilateral trade influence, particularly in countries with closer “trade distances.” This study recommends that countries adequately strengthen AI technology resources to realize new situations for the synergistic development of technology and green energy.

The Effects of Investment Treaties and Trade Agreements on FDI: The Case of Serbia

ABSTRACT This study explores the effects of Bilateral Investment Treaties (BIT) and Regional Trade Agreements (RTA) on foreign direct investment (FDI) inflows into Serbia, utilizing panel data for 2010–2021. The results indicate that both BIT and RTA independently exert positive impacts on Serbia’s inward FDI. Also, the interaction effects between BIT and RTA dummies and export/import variables on inward FDI are positive. This suggests that the implementation of BITs and/or RTAs fosters a complementary relationship between trade and FDI in Serbia as the predominant type of FDIs from partner states with which Serbia shares BITs and/or RTAs is vertical and export-platform rather than horizontal.

Aid for trade and export performance of recipient countries: The moderating role of institutions

Using bilateral trade and aid for trade (AfT) data for a sample of 155 countries over the period 2002-2019, we implement a gravity analysis to assess whether bilateral aggregate AfT and various AfT categories have stimulated exports of AfT-recipient countries to donors, and to examine if the institutional distance between recipients and donor countries affected the efficacy of AfT in promoting the former's bilateral exports. We show that AfT flows tend to foster exports of recipients, both at the extensive margin and intensive margin. Moreover, the trade-stimulating effect of AfT for trade policy and regulation is more pronounced than that of other AfT flows. Finally, institutional disparities between trading partners dampen the effectiveness of AfT in promoting exports at both margins of trade; and certain regions and income-based groups have managed to benefit more than others from AfT. Increasing the amount of disbursed aid flows is likely to speed-up the insertion of developing countries into world markets; strengthening governance in AfT-beneficiary countries and closing their institutional gap with donors would enhance the effect of AfT on their exports; and tying AfT flows to governance-related reforms in recipients can be an option to consider by donors.

A decade of Eurasian integration: An ex-post non-parametric assessment of the Eurasian economic union

This paper provides a sound ex-post evaluation of the impact of the Eurasian integration on member countries’ bilateral trade after a decade of implementation. We overcome the main limitations of current empirical analyses on the effects of trade agreements, namely the aggregation of tariff and non-tariff barriers and the likely self-selection bias, by applying a non-parametric method specifically designed to fully exploit time-series cross-sectional data. We thus compare the trade flows of the member countries in the Eurasian agreement with the exporter-importer pairs located in the Eurasian continent most similar in terms of pre-treatment trends and features. Our results confirm the previous literature about the lack of a significant impact of the Eurasian customs union, but find more positive net effects of the more recent integration steps. Our results ask for conveying additional efforts to complete the Eurasian integration and let its member countries fully benefit from its hoped-for long-term effects.

How Important are Sino-Latin American Trade for Economic Growth? A Trade in Value-Added Perspective

Sino-Latin American trade have increased substantially for decades. However, the increasing trade imbalances between China and several Latin American countries have yielded growing trade frictions. In this paper, we re-calculate the bilateral trade balance using the value-added content in trade and measure the contribution of Sino-Latin American trade to economic growth. The results show that gross trade statistics seriously overestimate the real bilateral trade imbalance, and China’s trade surplus with Mexico decreased by over 50%. The composition of Sino-Latin American trade suggests that most Latin American economies are complementary with Chinese economy. The South-South trade has been increasingly important for both China’s and Latin America’s economic development. We foresee an optimistic future of relations and continuously increasing trade between China and Latin America. Meanwhile, more efforts should be made to settle trade frictions and intensify Sino-Latin American relations.

China-Mexico Economic Relationship in the Context of China’s Penetration in Latin America

China’s relationship with Latin America countries experienced a process of significant expansion over the past two decades. Even though Latin America was not considered as part of the BRI when it was first established, China designed its economic strategy toward the region by emphasizing investment, financial and industrial capacity cooperation, besides trade. Afterwards, China invited Latin American countries to participate in the BRI at the China–Community of Latin American and Caribbean States (CELAC) Ministerial Forum in Santiago in January 2018. Twenty-one Latin American and Caribbean (LAC) countries have signed up to the BRI. However, there are few LAC countries that have not done so, among them the region’s largest economies such as Brazil, Mexico and Colombia, although Brazil is with full AIIB membership. This paper focuses on the specific economic relations between China and Mexico, as far as Mexico is the less involved LA country into the BRI, and Mexico’s position toward China is more aligned with that of its North American partners than to the Latin American countries. This article analyzes the specific situation of Mexico, characterized by its deep integration and dependency on the US market and examines the current economic relations of China and Mexico, considering the impact of the United States–Mexico–Canada Agreement on the bilateral economic relations. The structure of bilateral trade between Mexico and China is also examined, using the Grubel-Lloyd Index (GLI).

Impact of Trade Policies, Tariffs, and Sanitary and Phytosanitary Regulations on International Livestock Trade and Market Access for Livestock Producers in Brazil

Purpose: The aim of the study was to evaluate impact of trade policies, tariffs, and sanitary and phytosanitary regulations on international livestock trade and market access for livestock producers in Brazil. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: it's evident that trade policies, including tariffs and non-tariff measures, significantly influence bilateral trade flows in livestock products. Reductions in tariffs generally lead to increased trade, while increases in tariffs have the opposite effect, demonstrating the importance of tariff liberalization for stimulating trade and enhancing market access. Unique Contribution to Theory, Practice and Policy: Theory of comparative advantage & new trade theory may be used to anchor future studies on impact of trade policies, tariffs, and sanitary and phytosanitary regulations on international livestock trade and market access for livestock producers in Brazil. Enhance capacity-building initiatives and technical assistance programs for developing countries to improve SPS compliance and facilitate trade in livestock products, thereby promoting inclusive trade practices. Negotiate comprehensive regional trade agreements (RTAs) that address trade facilitation measures, infrastructure development, and regulatory harmonization to maximize the benefits of market integration for the livestock sector.

Current Status, Problems and Suggestions of Import and Export of Goods Trade between China and Chile

As one of the largest trading countries in the world, China continues to expand its trade relations with various countries, which has promoted the development of China-Chile trade in goods. Bilateral goods trade has consistently exhibited robust growth. This paper aims to delve into the current status of goods trade between China and Chile, analyze the existing challenges, and propose feasible recommendations. Through comprehensive data analysis, this research unveils the key features and challenges of their trade relationship, providing substantial support for enhancing cooperation.To begin with, this paper provides a detailed overview of the scale of China-Chile trade, emphasizing the mutually beneficial nature of their relationship. Simultaneously, it highlights the primary categories of Chinese exports to the Chilean market and Chile’s key import demands from China. Furthermore, an in-depth analysis of the major issues confronting the current merchandise trade between the two nations is conducted, encompassing concerns such as trade imbalances, product structures, and investment levels. Finally, recommendations are put forth to address these challenges, primarily focusing on enhancing policy coordination to promote bilateral investments, improving product structures to augment the value of traded goods, and optimizing investment structures to deepen bilateral cooperation.

Relatedness and product complexity meet gravity models of international trade

Researchers have long used gravity models to analyze international trade patterns, identify export opportunities, and negotiate trade agreements. Recent research has emphasized the significance of relatedness and product complexity research in developing robust economic development strategies. This paper presents a novel approach, incorporating relatedness and product complexity as integral elements for interpreting export potential within gravity models powered by machine learning. Our approach stands out for its proficiency in accurately predicting bilateral trade values at a detailed product group level, providing valuable insights for policymakers and other stakeholders. The research leverages random forest machine learning models for predictions and incorporates relatedness and complexity to reveal new dimensions in international trade analysis.

Mitigating environmental impacts of food consumption in the European Union: Is the power truly on our plates?

In the context of the sustainable use of our planet's resources, there is a pressing need for environmentally friendly diets. Moreover, health issues linked to inadequate nutrition are rising, further emphasising the need for more balanced diets. The aim of the planetary health diet developed by the EAT-Lancet commission is to sustainably feed 10 billion people in 2050 while not exceeding planetary limits. According to these guidelines, the EU should reduce red meat intake by 80 % and multiply legume intake by 15. This significant shift from animal to plant-based proteins could modify trade partnerships and EU dependency on plant-based proteins for animal feed, currently discussed within the EU protein strategy. This study evaluates land use changes and environmental consequences of this change in dietary patterns by applying a consequential life cycle assessment approach combined with an agri-economic model, additionally assessing if this diet shift could help to achieve EU Green Deal targets. For this simulation, the partial equilibrium model CAPRI was used, which is a global agricultural market model focusing on Europe, including bilateral trade worldwide. We found that the diet shift results in gaps between domestic demand and supply which are compensated by increased imports of legumes and additional exports of red meat from the EU due to an increased demand for red meat in non-EU countries, as a consequence of decreased red meat prices. Land use changes within NUTS-2 regions indicate broad disparities depending on regional specialisation and profitability. The results from our life cycle assessment show limited benefits for most environmental impact categories within the EU given the considerable change in diets. GHG emissions from the agricultural sector would be reduced by 9 %, representing 4 % of the change needed to achieve overall EU GHG emission targets i.e., a reduction of 55 % by 2030 compared to 1990 levels. Yet, the mitigation potential allocated to EU production of shifting diets could be greater if international trade were not offsetting expected local environmental benefits. Indeed, if EU red meat and animal feed production were reduced proportionally to the demand shift, domestic legume production could hypothetically be extended in the available agricultural areas coming along with improvements in all environmental impact categories. Scientific contribution and media regularly point out the significant influence of individual consumer behaviour as an impulse for change: “the power is on our plates”, while the results of our simulations show that this holds only to a limited extent. To minimise environmental pollution, strong supply-side policies are needed to complement the power on the consumers' plates.

International trade, mandatory IFRS adoption and financial reporting quality

Purpose This study examines how bilateral international trade among mandatory International Financial Reporting Standards (IFRS) adopter countries moderates the relation between IFRS adoption and firms’ financial reporting quality. Design/methodology/approach The authors use data from 2007 to 2015 and focus on publicly listed firms from non-European Union countries that adopted IFRS on a mandatory basis. Findings The authors find that the interaction between mandatory IFRS adoption and a country’s bilateral trade with other countries using IFRS is negatively and significantly related to accruals-based earnings management, which is an inverse measure of financial reporting quality. This result is driven by firms in less developed countries. The improvement in accounting quality is for firms located in countries that both fully and partially adopt IFRS. The authors also find a significant and negative coefficient for the relation between real earnings management and the interaction between mandatory IFRS adoption and a country’s bilateral trade with other IFRS countries in the post-global financial crisis period. Originality/value Overall, the authors’ results are consistent with the notion that the mandatory adoption of IFRS creates a positive externality where firms improve their accounting quality because increased financial statement comparability means that foreign customers and suppliers can monitor the quality of earnings more easily.

The bilateral trade imbalances between the EU and China: Structure and trends

The EU and China are among the largest economies affecting the global economy and each other. The paper aims to determine the structure and trends in the trade relations between the EU and China from the perspective of trade imbalances. Net export index (–29% in 2021) and the difference between export and import growth rates (–9% in 2016-2021) were calculated as the indicators of competitiveness of the economies relative to each other. Correlation coefficients and regression models were used to estimate the effects of several factors on the net export index. The EU has a surplus in services trade with China (21% of the trade), but it does not cover a much larger bilateral merchandise trade deficit (–36%), which exists in most member states. Machinery and vehicles are the most important traded items. The net export index shows that the European Union is more competitive than China in nonfuel minerals, food, vehicles, pharmaceutical products, intellectual property, computer, travel, and sea transport services. The effect of the real exchange rates on the trade imbalances is not robust due to the large difference in regression coefficients for the real exchange rates based on consumer prices and unit labor costs. In recent years, the trade balance was not significantly affected by industrial output growth trends in the EU and China (except for the COVID-19 pandemic crisis when the relative competitiveness of China in its trade with the EU improved at least in the short run).

Analysis of the competitiveness and complementarity of China-Vietnam bilateral agricultural commodity trade.

Vietnam's agricultural exports to China have remained strong, with the country maintaining its position as the top destination for Agri-products. This article primarily utilizes the Revealed Comparative Advantage (RCA) Index, and Trade Complementarity (TC) index to examine the trade comparative advantage, and the complementary of twenty major agricultural products between China and Vietnam from 2012 to 2021. The study results showed that Vietnam and China frequently exchange agricultural products. Vietnam has more stronger competitiveness than China in terms of agricultural products. China's exports to Vietnam were highly complementary to Vietnam's imports in category 0 whiles Vietnam's exports to China showed strong complementarity with China's imports in category 2. This paper analyzes the complementarity and comparative advantages of agricultural trade between China and Vietnam, and proposes informed suggestions for policy-making to promote agricultural trade between the countries. The proposed suggestions aim to expand agricultural trade between the two countries, reduce the trade imbalance, and achieve mutual benefit and win-win results.

Analysis of the Development History and Problems of Sino-Russia Trade in the Context of "One Belt, One Road"

China and Russia, as neighboring economic powers, have geopolitical advantages and stable political relations. The two countries have complementary advantages in production factor endowment and industrial structure, creating favorable conditions for bilateral trade. This paper examines the healthy development momentum in China-Russia relations in recent years. For 13 consecutive years, China has been Russia's largest trading partner. However, the trade between the two countries is limited to low-value-added products and other issues, failing to reflect their comparative advantages fully. This paper analyzes the history and problems of Sino-Russia trade in the context of the 'Belt and Road' initiative. The content is divided into three parts. First, it introduces the background and reasons for the study. Secondly, the development of Sino-Russia trade is analyzed by taking the "Belt and Road" initiative as the dividing line. Finally, it analyzes the problems existing in the process of Sino-Russia trade development and puts forward suggestions.

Virtual Water Embodied in Interregional Energy Trade in China: A City-Level Analysis.

Large volumes of water are used in energy production for both primary (e.g., fuel extraction) and secondary energy (e.g., electricity). In countries such as China, with a large internal trade in fuels and long-distance transmission grids, this can result in considerable water inequalities. Previous research focused on the water impacts of energy production at the national and provincial levels, which is too coarse to identify the spatial differences and make specific case studies. Here, we take the next step toward a spatially explicit economically integrated water-use for energy assessment by combining a bottom-up assessment approach with a city-level multiregional input-output model. Specifically, we examine the water consumption of energy production in China, distinguishing between water for primary and secondary energy at the level of coal mines, oil and gas fields, and power plants for the first time. Of the total energy-related freshwater consumption of 4.9 Gm3 in 2017, primary energy accounted for 19% (940 Mm3) and secondary energy accounted for 81% (3955 Mm3). Coal was the largest water consumer for both primary and secondary energy (540 and 3880 Mm3, respectively), with both oil (361, and 0.5 Mm3, respectively) and gas (7 and 69 Mm3, respectively) also consuming large amounts. Intercity virtual water, that is, water embodied in energy trade across cities, reached 54% (2.6 Gm3) of energy-related freshwater consumption. Across China, 32% of cities see a bilateral trade in secondary- and primary-energy-related virtual water (e.g., Daqing city exports virtual water embodied in primary fuel to other cities that is then used to produce electricity in those cities, part of which is used back in Daqing via transmission). For these 32% of cities, 73% export more virtual water than import and 27% import more virtual water than export. This study reveals significant differences in city-level virtual water patterns (e.g., scale and direction) between primary and secondary energy to provide information for cities about their virtual water inflow and outflow and the potential collaboration partners for water management.