Implications Of Trade Liberalization Research Articles

Welfare implications of trade liberalization when revenue matters

ABSTRACT Some empirical studies have shown that many developing economies were unable to recover lost trade revenue from domestic taxes after implementing trade liberalizing policies. Ignoring the fiscal cost of trade liberalization when government spending is not completely wasteful may lead to misleading welfare estimates. We address these concerns by developing a model in which government spending augments the production function, enabling it to account for the role of revenue and its impact on welfare. The model is calibrated to capture the features of the Ghanaian economy. We find significant but lower welfare effects of trade liberalization when government spending on infrastructure plays an important role in the production process. The lower welfare impact of trade liberalization is explained by a decline in infrastructure spending caused by shortfalls in revenue emanating from tariff cuts. The implication of the study is that there are further welfare gains to trade liberalization but such gains are significantly reduced when fiscal costs are high. The role of revenue matters in evaluating the welfare implications of trade liberalization.

Exploring the Links between Trade Reforms and Household Income Distribution in South Asia: A General Equilibrium Approach

Trade reforms in South Asia have been often associated in the popular debate with increases in income inequality and poverty. This creates a growing interest to investigate the link between trade liberalization, poverty and income distribution. This paper provides a quantitative assessment of the likely implications of trade liberalisation in South Asian economies, and in particular the impacts on the household sector. A multi-country computable general equilibrium model (CGE) was constructed by incorporating a multiple household framework into the Global Trade Analysis Project (GTAP) model. The database consists of household survey data of the respective South Asian economies and the version seven of the GTAP database which reflects the 2004 world economy. The study examines the effects of reductions in import tariffs under the SAFTA on the welfare and the income distribution of socio-economic household groups and the implications for government revenue in the respective South Asian economies. The results indicate that although the short-run household gains are limited, in the long-run there is a reallocation of resources from manufacturing to agricultural sectors. Benefits accrue to unskilled rural household labour and to skilled labour in urban households. However, trade liberalisation would lead to reductions in government revenue in all South Asian countries, which in turn may affect the overall welfare of the citizens in those economies.

General Equilibrium Analysis of Strategic Trade: A Computable General Equilibrium Model for India

Strategic trade refers to international trade under market imperfections. The purpose of the article is to comprehend general equilibrium implications of trade liberalization on Indian macroeconomic aspects under alternative market structures. We applied computable general equilibrium (CGE) modelling as our relevant methodology following Shoven and Whalley, ( 1984 ). Constructing a four sector social accounting matrix (SAM) for India, the article attempts to purport the effects of liberalized trade over different macroeconomic aspects under monopolistic competition and compared the results with the same obtained under benchmark perfect competition scenario. Our study reveals that trade under imperfect competition could not produce any greater domestic output, expansion of trade in terms of volume of export and import and gains from trade as compared to standard perfect competition scenario.

Auto Sector Impacts of a Canada-Japan Free Trade Agreement: A Market-Segment-Based Evaluation

With the recent completion of a second Joint Study regarding a Canada-Japan Free Trade Agreement, and Canada’s entry into the Trans-Pacific Partnership negotiations, which may eventually include Japan, the implications of trade liberalization with Asian economies gains renewed interest, in particular the implications for Canada’s auto sector, which has been a stumbling block in previous negotiations. This paper considers the implications of auto sector liberalization between Canada and Japan. The impacts are modest for three main reasons: the export-orientation of Canada’s auto sector, the fact that auto manufacturers price strategically, often practicing “pricing to market” (PTM) and so do not automatically pass on tariff cuts to consumers, and the impact of tariff cuts at the border is muted by the large share of domestic transport and distribution costs in the final consumer price. Taking into account the segmented nature of the auto sector tends to amplify rather than reduce the scale of the effects on the Canadian industry, suggesting that there is some degree of aggregation bias in analyses that treat the sector in aggregated terms. Income effects from the overall CJFTA would be expected to be channelled in part into increased auto purchases, providing a sizeable offset to the direct negative trade effects. Based on previous estimates of income gains from a CJFTA, this would reduce the negative impacts on Canadian production by half.

Syria at the Crossroads: A Review and Comparative Analysis of Syria's Current Trade Policy Reality

Slowly but steadily Syria is emerging from several decades of economic seclusion. Syria currently finds itself in a period of cautious albeit unprecedented engagement with the global economy. These efforts are personified in terms of greater engagement within the region, manifested by its participation in the Greater Arab Free Trade Area or GAFTA as well as bilateral agreements with Turkey and Iran, tentative steps to engage with the European Union to a previously unimagined degree, as well as hitherto uneven progress in its long-standing bid to join the World Trade Organization (WTO).The review conducted in this paper covers five agreements and one draft agreement. The five agreements are the Greater Arab Free Trade Area (GAFTA), the Cooperation Agreement with the European Community (1979), the Association Agreement with the European Union (2004), the Association Agreement with Turkey (2004), and the Preferential Trade Agreement with Iran (2006). The draft agreement reviewed is the one with Belorussia, still pending conclusion, signature and ratification by either party.The review concludes with a discussion of the strategic implications of trade liberalization are for Syria, looking first at increased engagement bilaterally and regionally followed by a discussion on WTO accession.The next few years, as Syria moves forward, involve challenges, risks and a certain degree of uncertainty, but they also bring with them the prospect of enormous rewards and benefits for the Syrian economy and its people. To be sure, the alternative of continued marginalization at the periphery of the global trading system and the limited influence this brings with it, is no real alternative at all.

Efficiency, equity, and environmental implications of trade liberalization: A computable general equilibrium analysis

This paper evaluates the effect of trade liberalization on global efficiency, equity, and the environment using global welfare, welfare redistribution, and carbon emission as indicators. A static, computable general equilibrium trade model with explicit representation of agricultural production and energy use is used to simulate a series of new scenarios in which 1997 baseline import tax and export subsidy trade barrier equivalents are scaled back. Findings indicate that with trade liberalization agricultural output declines, energy use increases, and carbon emissions rise. Global welfare rises revealing an overall increase in efficiency; however, gains to poorer nations come at the expense of richer nations. An increase in the use of polluting inputs such as coal in developing countries suggests poorer nations will risk environmental degradation with the lowering of trade barriers.

Trade liberalization, intra-industry trade and the environment: competition mode and the order of firms’ moves

This paper explores the implications of trade liberalization by extending the intra-industry trade framework a la Fung and Maechler (J Int Trade Econ Dev 16(1):53–69, 2007) to the case of sequential move and taking the mode of firms’ competition into consideration as well. It is shown that the existing results obtained for the case of simultaneous price competition are robust in quantity competition and sequential move cases. Moreover, it studies the likelihood that the environmental effects of trade liberalization occur.

Urban informal sector and poverty

Many studies have explored the connection between trade and poverty theoretically and empirically for the developing world. We offer another look at the possible implications of trade liberalization on urban poverty by using the urban informal sector as a catalyst. The theory shows that trade liberalization in the import competing sector raises informal wage across occupational types, and expands production and employment in the informal industrial segment. Further, using Indian provincial data on wage, capital stock and value added in the informal sector we show that real informal wage increased with trade reform and transmitted favorable impact on urban poverty reduction.

Trade liberalisation and the feminisation of poverty: The Mauritian scenario

abstract This article looks at the effects of trade liberalisation on women's employment in the Mauritius Export Processing Zone. Export Processing Zones (EPZs) are well known for being primary employers of women, but with poor working conditions and low salaries. EPZs are also highly vulnerable to changes in world economic conditions and trade liberalisation has a major impact on industries in these zones. Since women form the majority of EPZ employees, they are directly affected by such changes. In the 1980s and 1990s, the Mauritian EPZ thrived because of protectionism and its status as a former colony. The Multi-Fibre Arrangement (MFA) had given Mauritian textile and garment exports duty free access to the European market. However the MFA was phased out in 2005 and Mauritian industries, especially in the textile and garment sector, have been unable to compete with exporters from Bangladesh and China, who have much lower costs of production. Hence, large numbers of older women are being retrenched as a consequence of trade liberalisation, leading to growing unemployment among this group of women and contributing to the feminisation of poverty in the country. These women are also facing major difficulties in finding alternative employment because of their low educational qualifications, age and very basic skills. The article thus argues that there is an urgent need for the gender implications of trade liberalisation to be considered by the major trade making bodies.

Impact assessment of trade-related policies and agreements: experience and challenges

Since the mid-1990s strategic-level impact assessment has increasingly been applied to trade-related policies and agreements, to provide information to trade negotiators and decision-makers. Assessments can take the form of a SEA-type assessment at the national level, or a very complex assessment that evaluates the significance of economic, social and environmental impacts up to the global policy level. The articles in this special issue describe a wide range of experience in the development of assessment methodologies and improving practices and processes. The recent impasse in the Doha trade negotiations, predicated on sustainable development and poverty reduction, demonstrates more than ever the need for timely and relevant information on the economic, social and environmental implications of trade liberalisation.

A decade of debate over non-trade concerns and agricultural trade liberalisation: convergences, remaining conflicts and a way forward

The debate over non-trade concerns (NTC) and trade liberalisation for the past decade is reviewed and convergences and remaining conflicts are identified. It is found that, while the legitimacy of multifunctionality is no longer controversial and there is a convergence of the views on the best policy instrument for addressing NTC, divergent positions regarding the treatment of NTC in market access commitments still remain. It is concluded that the difference in views on the pace and sequence to arrive at targeted payment solution for non-trade objectives is a root cause. The article presents three justifications for gradual trade reform as a way to resolve the conflicts: the lack of information on the implications of trade liberalisation and the irreversible nature of non-commodity outputs, high initial transaction costs for designing targeted payments for non-commodity outputs, and the costs and time for shifting public funds to financing targeted green box payments.

Policy implications of trade liberalization: The case of meat products in Taiwan and South Korea

Policy implications of trade liberalization: The case of meat products in Taiwan and South Korea

Fiscal Implications of Trade Liberalization

Fiscal Implications of Trade Liberalization

Import Restrictions, Capital Taxes, and Welfare

This paper develops a two-good, small-country, general-equilibrium model with trade restrictions (i.e., a tariff, an import quota, or a voluntary export restraint (VER)), inter- national capital mobility, and taxes on the rate of return to capital. Within this context it examines the price and welfare effects of capital taxes, the second-best policy towards capital in the presence of such trade restrictions, and the welfare implications of trade liberalization in the presence of capital taxes. The analysis demonstrates, among other things, that (i) the optimal policy towards capital is a zero tax when imports are quota constrained, and is a tax under a tariff and a subsidy under a VER when the imported good is capital intensive; and that (ii) an asymmetry exists between trade and capital movements liberalization under the various trade regimes.

The Fiscal Implications of Trade Liberalization

The Fiscal Implications of Trade Liberalization