Higher Levels Of Trade Research Articles

EU-GCC free trade agreement: Adjustments in a factors proportion model for the UAE

The EU-GCC Free Trade Agreement would likely cause price changes across industries with subsequent effect on output and factor price adjustments. With higher levels of trade, the rising income will be redistributed among winner and loser industries and factors of production. This paper simulates the magnitude of these adjustments with a factors proportion model of production and trade for six different labor categories and capital in four sectors of the UAE economy. Results show a large impact on sector specific factors but for mobile factors, the shocks would be smaller suggesting a policy to increase factor mobility in the UAE.

The Nexus between the Democratic Peace Theory and Economic Coercion: Why Democracies Fight Each Other?

Recent research shows that the Democratic Peace Theory (hereinafter referred to as DPT) is based on the dyadic (democracies rarely if ever fight one another) and the monadic (democracies are more peaceful in general) assumptions. In asserting these premises the DPT has concentrated mainly on militarized conflict. However, recent scholarly work has shown that the definition of the term “conflict” has widened in scope to include economic conflict prompting the use of coercion. Using some sanctions episodes in Hufbauer Clyde Gary et al (2006) this article investigates how and why democracies have used economic sanctions against each other despite their shared values and beliefs, economic interdependence and universal conflict resolution mechanisms that presumably favor peace. This research seeks to falsify the dyadic premise/claim of the DPT by citing a clash of interests, domestic values and priorities among citizens, high levels of trade between democracies and economic strength of democracies as factors facilitating democracies sanctioning each other. Key words: democratic peace theory (DPT), economic sanctions/coercion, democracies

The Ebb and Flow of Comparative Advantage: Trade and the Industrial Specialization of Canadian Manufacturing Regions, 1974 to 1999

Utilizing a longitudinal micro data file of manufacturing plants (1974 to 1999), this study tests the effect of higher levels of trade on the level of industrial specialization experienced by regional manufacturing economies. Consistent with trade driven by comparative advantage, the analysis demonstrates that higher levels of export intensity (exports as a share of output) across regions are associated with greater industrial specialization. However, the analysis also shows that changes in export intensity are only weakly associated with changes in specialization. This occurs because comparative advantage tends to shift away from industries that account for a large share of regional manufacturing employment and towards industries that initially have lower shares. This ebb and flow of comparative advantage helps to explain why Canadian manufacturing regions have not become more specialized in an environment of increasing integration into the world market.

North Sea troubles, petrol riots in Iran and an American gorilla

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'. Trading in North Sea oil fell sharply following changes to the reporting of the price of Forties crude. On 7th June, 2007, the price‐reporting service Platt's announced that it would no longer include Forties crude of less than 37.0° API or more than 0.6% sulphur in its price assessments. Oil companies complained that this was much too restrictive and trading fell amid fears that the market was becoming too narrowly based in terms of which crude grades were included. London's ICE futures exchange declared that it would not accept price assessments of Forties as narrowly defined by Platt's. In a further development, on 8th June, Ekofisk crude was added to the basket constituting the benchmark for dated North Sea crude, which now comprises Brent, Forties, Oseberg and Ekofisk (BFOE). Problems are affecting benchmark crudes elsewhere. The Dubai Mercantile Exchange's Oman futures contract, which was launched on 1st June, has been slow to attract participants, as has Dubai futures contract launched by ICE on 21st May. Both need to attract much higher levels of trade if they are to be used as benchmarks for Persian Gulf sour crude.

Disputes, Democracies, and Dependencies: A Reexamination of the Kantian Peace

Militarized interstate disputes are widely thought to be less likely among democratic countries that have high levels of trade and extensive participation in international organizations. We reexamine this broad finding of the Kantian peace literature in the context of a model that incorporates the high degree of dependency among countries. Based on in‐sample statistical tests, as well as out‐of‐sample, predictive cross‐validation, we find that results frequently cited in the literature are plagued by overfitting and cannot be characterized as identifying the underlying structure through which international conflict is influenced by democracy, trade, and international governmental organizations. We conclude that much of the statistical association typically reported in this literature apparently stems from three components: (1) geographical proximity, (2) dependence among militarized interstate disputes with the same initiator or target, and (3) the higher‐order dependencies in these dyadic data. Once these are incorporated, covariates associated with the Kantian peace tripod lose most of their statistical power. We do find that higher levels of joint democracy are associated with lower probabilities of militarized interstate dispute involvement. We find that despite high statistical significance and putative substantive importance, none of the variables representing the Kantian tripod is associated with any substantial degree of predictive power.

Priority Integration Sectors in ASEAN: Supply-side Implications and Options

There are 12 priority integration sectors of strategic importance for the Association of Southeast Asian Nations (ASEAN). Exports from the nine largely goods sectors, with almost three quarters of merchandise export value, are dominated by electronics-related equipment and products. Priority goods have diverse supply and trade characteristics but among the common performance issues and development options for attention in ASEAN are the high levels of trade and nontrade costs and complications. These are mainly caused and compounded by inadequate transport connectivity, cross-border clearance problems, and diverse and exacting trade rules and technical regulations. Meanwhile, greater supply linkages have yet to be achieved for enhanced collective efficiency in textiles and clothing within the region and/or across ASEAN, People’s Republic of China, and South Asia. Higher levels of product and process creativity and innovation, moreover, are needed to lift local value addition and to upgrade to high-premium, more sophisticated activities and services, especially in electronics-related sectors. All these issues and options have become more pressing against the backdrop of People’s Republic of China’s speedy progress in competence building, technology catch-up, and manufacturing competitiveness. The extensive and complex agenda for further research and information dissemination concerning regional integration and competitive globalization in ASEAN, and more generally East Asia, is thus well highlighted.

Reputations in Markets with Asymmetric Information: A Classroom Game

This paper describes a classroom game used to teach students about the impact of reputations in markets with asymmetric information. The game is an extension of Holt and Sherman's lemons market game and simulates a market under three information conditions. In the full information setting, all participants know both the quality and the price of the items for sale. In the second setting, sellers have better quality information than buyers. In the third setting, sellers maintain their information advantage, but buyers may post feedback on the sellers' performance. The posted feedback generally increases buyer trust and disciplines sellers resulting in higher levels of trade and higher average product quality. The game can be completed in one class period and includes a set of discussion questions.

The Effects of Capital Outflows from Neighboring Countries on a Home Country's Terms of Trade and Real Exchange Rate: The Case of East Asia

While there is an extensive body of empirical analyses showing that currency crises tend to be regionally concentrated to specific areas and contagious to countries with high levels of trade, there has been insufficient research on the mechanisms underlying such tendencies. Using a two country model, we investigate the possibility of deterioration in the terms of trade and a rise in the real exchange rate of a home country in the case of capital outflows from its trade partner. In addition, an empirical analysis of East Asian countries conclusively shows that some countries conform to the model. Generally, neighboring countries trade extensively with one another for reasons like low logistics costs. This paper finds that such patterns of trade can be one reason for a currency crisis being regional.

The Effects of Capital Outflows from Neighboring Countries on a Home Country’s Terms of Trade and Real Exchange Rate: The Case of East Asia

While there is an extensive body of empirical analyses showing that currency crises tend to be regionally concentrated to specific areas and contagious to countries with high levels of trade, there has been insufficient research on the mechanisms underlying such tendencies. Using a twoiⓒcountry model, we investigate the possibility of deterioration in the terms of trade and a rise in the real exchange rate of a home country in the case of capital outflows from its trade partner. In addition, an empirical analysis of East Asian countries conclusively shows that some countries conform to the model. Generally, neighboring countries trade extensively with one another for reasons like low logistics costs. This paper finds that such patterns of trade can be one reason for a currency crisis being regional.

Causes of Peace: Democracy, Interdependence, and International Organizations, 1885-1992

Previous studies provide strong evidence for the Kantian theory of peace, but a satisfactory evaluation requires establishing the causal influence of the variables. Here we focus on the reciprocal relations between economic interdependence and interstate conflict, 1885–1992. Using distributed-lags analyses, we find that economically important trade does have a substantively important effect in reducing dyadic militarized disputes, even with extensive controls for the influence of past conflict. The benefit of interdependence is particularly great in the case of conflict involving military fatalities. Militarized disputes also cause a reduction in trade, as liberal theory predicts. Democracy and joint membership in intergovernmental organizations, too, have important pacific benefits; but we find only limited support for the role of costly signals in establishing the liberal peace. We find no evidence that democratization increases the incidence of interstate disputes; and contrary to realists' expectations, allies are not less conflict prone than states that are not allied. Democracies and states that share membership in many international organizations have higher levels of trade, but allies do not when these influences are held constant.

Clear and Clean: The Fixed Effects of the Liberal Peace

In their article in this issue, Donald P. Green, Soo Yeon Kim, and David H. Yoon claim, contrary to liberal theory and extensive evidence, that neither joint democracy nor economic interdependence significantly reduces the frequency of militarized interstate disputes in pooled time-series analyses when dyadic fixed effects are taken into account. Similarly, their fixed-effects analyses contradict theory and previous evidence that democracies have higher levels of trade with one another than do other types of states. Our reexamination, however, refutes both claims and reinforces previous findings. Their fixed-effects analyses of disputes produces distorted results because they consider a relatively short time period, 1951–92, in which variation in the binary dependent variable and the key independent variables, democracy and trade, is limited. When we analyze a longer period (1886–1992), the results confirm liberal theory. The differences between our analyses of bilateral trade and those of Green, Kim, and Yoon primarily arise from a seemingly minor methodological decision. A more reasonable method confirms that democracies do have higher levels of trade than expected on purely economic grounds. Though we do not advocate a fixed-effects model for analyzing these data and have serious reservations about its general usefulness, our findings provide additional confirmation of liberal theories of international relations.

Correction to “The Political Determinants of International Trade”

Efforts to replicate our study of the effects of politics on trade flows between the major powers have revealed that the computer program written to calculate the estimates produced errors in both the coefficients and the standard errors. Furthermore, these errors have some consequences for the results. In this brief corrigendum, we present corrected tables for our research note and a slightly modified interpretation of the results.Our study examined evidence to assess three arguments about how politics may affect trade. The first contends that positive political relations in a dyad result in higher levels of trade. This argument leads to two hypotheses: States in conflict will have a lower level of trade than those not in conflict, and trade will increase with the degree of common interests between a pair of states. The second argument concludes that democratic dyads will have a higher level of trade than other dyads. The third argument focuses on the security concerns of states and leads to the hypotheses that alliances will increase trade in a bipolar system but will have no effect in a multipolar system. We refer readers to the original article for a fuller statement of the logic of these arguments, their respective hypotheses, and a complete statement of our research design and operationalization of the variables (Morrow, Siverson, and Tabares 1998).

Globalization and Conflict: Welfare, Distribution,and Political Unrest

The consequences of globalization for the development of a more peaceful world remain highly controversial. This article seeks to clarify the impact that the globalization of the economy may have on civil war and political instability. Liberals argue that countries heavily dependent on the global economy (whether measured by trade or investment) are likely to experience higher economic growth, greater affluence, more democracy, and increasingly peaceful conditions at home and abroad. In stark contrast, most dependency theorists argue that high levels of trade and investment tend to generate greater economic inequality. Relative deprivation theory suggests that such inequality will increase the risk of political instability. From these two broad perspectives, a set of hypotheses is developed and tested on a global dataset for the period 1965-93. The consequences of an open economy prove to be quite complex. A high level of trade does generate more domestic peace; at the same time, direct foreign investment also creates conditions conducive to political instability. However, the consequences of trade are dependent on what is being exported. Exports of manufactured goods create high levels of welfare and equality, while exports of agricultural products promote poverty and inequality. Inequality emerges as but one of many factors which lead to political instability.