Large Trade Deficits Research Articles

Competitiveness Strategy of South Korean Cosmetic Brands: Current Practices and Opportunities for Russian Cosmetic Brands

This study analyzes place, trends and competitiveness of the South Korean cosmetics brands to identify opportunities for the Russian cosmetics brands, whose country has suffered from a large trade deficit in the cosmetics industry despite the government’s vigorous attempts in implementing import substitution policies. We constructed the econometric models (with ordinary least square, weighted least square and robust least square estimators) of the cosmetics brands’ competitiveness by employing the endogenous factors of Porter’s diamond model, which are comprised of firm factor conditions, demand conditions, related and supporting industries, and strategy, structure and rivalry. From the regression analysis, it is revealed that the brand diversification, expansion of e-commerce sales and improvement of governance quality are factors that drive up sales revenues of a cosmetic company. The follow-up comparative analysis between Russian and South Korean companies allowed us to substantiate that the main factors causing the gap between Russian and South Korean cosmetic brands are e-commerce strategies and the efficiency of the governmental system. Russian cosmetic companies should construct stable global and domestic supply chain and expand contact points with foreign customers through big data analysis and development of customized product portfolio. Furthermore, the government is recommended to implement digital services and construct a data-sharing ecosystem to enhance efficiencies of the business process.

Türkiye-Japan FTA and Türkiye’s Changing Economic Relations with the East Asian Economies

Türkiye has always run a large trade deficit against Japan due to the low value-added and technology contents of its export products and the very high technology content of Japanese export products. Japan was not viewed as a major trading partner considering that around six-tenths of Turkish exports were destined for Europe. However, some industrial products such as electronic machines and motor vehicles were essential not only for consumption but also for industries as inputs. In Türkiye’s trade with East Asia, Japan dominated its position as the major trading partner of Türkiye in the region. During the early 2000s, Japan lost its top position first to China and then second position to Korea, dropping to the third rank. The decreasing importance of Japan in Türkiye’s trade with East Asia reflects the demise of Japanese industries which have been losing competitiveness against Korean and Chinese industries. Recently, a free trade agreement (FTA) has been proposed between Türkiye and Japan. The negotiations started in 2014 but are yet to be completed due to disagreements about opening up the agricultural sector in Japan and other trade[1]related issues. The proposed FTA is expected to improve the ailing trade relations between Türkiye and Japan. In this paper, we evaluate the trade relations between the two countries, in conjunction with the rise of China and Korea in Türkiye’s trade, by a careful comparison of trade statistics and a simulation analysis using a computable general equilibrium model.

Production-Driven and Non-Production-Driven Bilateral Trade Balance: Assessing Trade Deficits between the United States and China and the COVID-19 Epidemic

This study aims to look deeper into the long-standing phenomenon of the United States’ large trade deficits with China by examining both countries’ bilateral trading structures (character). In this investigation, we, for the first time, redefine the traditional bilateral trade balance (BTB) ratio based on economic impact content as production-driven BTB ( X pd ) and non-production-driven BTB ( X npd ). This is done because, while the former undergoes an economic activity within the United States, the latter doesn’t. The traditional ratio, i.e. total export/total import, doesn’t technically allow such an investigation. Hence, the proposed methodology of this study, using these two new forms of BTBs, may provide new perspectives to this phenomenon for U.S. policymakers. The main empirical finding may make it imperative to analyze the US BTB with China using the methodology proposed because the independent variables of the study’s models have different effects on X pd and X npd . For example, while real depreciation in the USD improves X npd for 13 industries, the same change in the USD improves X pd for only seven. Additionally, this methodology allows U.S. policymakers to compare/review the US BTB based on economic impact contents through X pd and X npd separately. Last, it can be interpreted that the United States benefits from decreasing trade-policy uncertainty in the United States.

Oil price movements and agricultural production from heterogeneous sub‐sectors: Analysing the Dutch disease in an African resource‐rich economy

AbstractThe economy of a developing country like Nigeria has evolved from a strong dependence on agricultural exports in the 1960s to an unhealthy reliance on crude oil exports. This has led to a large agricultural trade deficit that requires a better understanding of the dynamic relationship between oil price booms and agricultural production. To this end, the study not only isolates the effect of oil price movements on agricultural production from heterogeneous sub‐sectors in Nigeria but also tests for Dutch disease symptoms using annual data from 1970 to 2019. Employing the auto‐regressive distributed lag (ARDL) cointegration and dynamic simulations as well as dynamic Granger causality techniques, the study shows that in the long run, oil price booms affect the food sector and the livestock sector heterogeneously. An increase in the oil price undercuts the production performance of the food sector. Also, because of the strong linkage between domestic livestock production and the global livestock market, an increase in domestic production has a weak predictive content for oil price booms. The policy implications of these findings include the sterilization of oil revenues outside the country and collaboration with foreign investors to provide much‐needed investment in the agricultural sector through various incentive schemes.

Razvoj inicijative "Pojas i put" u Srbiji

The paper presents a general overview of the projects, observed according to the sectors of the Serbian economy, which were implemented in Serbia through the Belt and Road Initiative or are in the phase of implementation, planning or signed memoranda between China and Serbia. This initiative to strengthen trade, infrastructure and investment links between China and the countries of Asia, Africa and Europe, through a network of land and waterways, has affected the landscape of global trade, investment and financing, thereby expanding China's influence in the world. As a European country which is not a member of the European Union, Serbia found itself in a specific situation and was able to independently manage its relations with China and conclude contracts directly. In addition to the European Union as the main economic partner, Serbia is also turning to China, so this cooperation has a growing trend in the form of Chinese investments in Serbia, which are being investigated here, in contrast to the almost non-existent implementation of Serbian projects in China. Chinese companies in Serbia are actively building infrastructure, investing in the energy sector as well as the privatization and renewal of production of the former metallurgical giants of Serbia, and more. So, despite the large trade deficit with China, this initiative brings tangible economic and social benefits at the local level, creating new opportunities for employment and income generation in the community. That is why it can be said that the Belt and Road Initiative contributed to the development of cooperation between Serbia and China.

Research on the Development Prospect of "China-Asean" Service Trade- Analysis based on the manufacturing level of service industry

For many years, China's foreign trade in service industry has shown a large trade deficit, limited international development level, and insufficient competitiveness in the international market. Relevant studies show that the lack of development potential of the service industry foreign trade may be caused by the low level of industrial integration in China, the lack of high-tech participation rate and the low comparative advantages. At the same time, many ASEAN countries are also caught in a similar service industry development dilemma. Therefore, China and ASEAN countries should actively deepen cooperation in the areas of complementarity and inadequacy to promote win-win development, and jointly optimize the level of technology and the quality of the service industry, we will comprehensively improve the international competitiveness of the “China-ASEAN” service foreign trade.

Research on the Development Prospect of "China-Asean" Service Trade- Analysis based on the manufacturing level of service industry

For many years, China's foreign trade in service industry has shown a large trade deficit, limited international development level, and insufficient competitiveness in the international market. Relevant studies show that the lack of development potential of the service industry foreign trade may be caused by the low level of industrial integration in China, the lack of high-tech participation rate and the low comparative advantages. At the same time, many ASEAN countries are also caught in a similar service industry development dilemma. Therefore, China and ASEAN countries should actively deepen cooperation in the areas of complementarity and inadequacy to promote win-win development, and jointly optimize the level of technology and the quality of the service industry, we will comprehensively improve the international competitiveness of the “China-ASEAN” service foreign trade.

The Impact of Global Financial Crisis on the Palestinian Economy

This research looked at the overall impact of the global financial crisis on the Palestinian economy from 2005 to 2021, focusing on two periods: the first from the start of the global crisis in the fall of 2008 to December of that year, and the second from December of that year to the end of that year 2011. The findings of this study show that Palestine's strong reliance on the prices of foodstuffs, oil, olive oil, fruits, vegetables, and food items as a whole has resulted in a rise in the prices of oil and gas, commodities, and foodstuffs as a result of the worldwide crisis. We also discovered that the banking and tourist industries were unaffected by the downturn. The information is given in a series of tables with statistical analysis to back it up. This research backs up this theory with solid empirical data. In terms of Palestinian economic growth, it should be highlighted that for the past two decades, the Palestinian National Authority has relied on foreign donations and grants to fund its expenditures. This revenue source has recently dwindled, resulting in the suspension of public worker salary payments as well as a reduction in overall government spending. Large and persistent trade deficits, on the other hand, continue to push the government and the private sector into unsustainable debt. Because there is no national currency in Palestine, both the governmental and commercial sectors rely on foreign reserves. Although the Palestinian National Authority (PNA) and the Palestinian Monetary Authority (PMA) have so far avoided a systemic currency crisis, existing deficit financing patterns are unlikely to last permanently, since domestic foreign reserves are fast diminishing and arrears mount. The amount of debt owed is increasing at an alarming rate. This leaves the administration with two alternatives for funding the deficit: either selling debt instruments on the capital markets or using the Palestinian Monetary Authority to introduce Palestinian currency to cover expenditures. Capital market financing without monetary authority, according to the study, leads to large interest rate volatility and financial instability. Given terms of monetary finance, in the existing institutional and economic framework, there are no criteria for creating a national currency.

Inflation Dynamics and Food Prices in Hungarian Agricultural Economy

During 2021-2022, many commodity prices rose to record levels. As a result, Hungary in 2022 experiencing high inflation, large trade deficits, and an unstable macroeconomic environment. High commodity prices, particularly for food, also have adverse effects on poverty. Hungary has not experienced for a long time such increase in inflation, which is among the highest in Europe. Inflation growth has recently associated with large energy price shocks, food price increases are traditionally believed to have rather small effects. At the same time, there has been an absence of rigorous work to identify empirically the relative importance of each factor contributing to inflation. It is thus of vital importance to improve the understanding of the causes of inflation in Hungary to allow adequate policies to be put in place. The purpose of this paper is to fill this gap and thoroughly analyze the determinants of inflation in Hungary using data for the current decade, with a focus on food prices. The authors identify the relative importance of several factors contributing to overall inflation and its major components. The main finding is that, in a longer perspective, one of the main factors that determine domestic inflation are the food prices. In the short run, agricultural supply shocks strongly affect domestic inflation, causing large deviations from long-run price trends. The results suggest the need for a multi-pronged approach to fight inflation. This analysis suggest monetary and exchange rate policies need to take into account agricultural production, which is among the key determinants of inflation. Moreover it has a greater influence on inflation than is widely known.

Re-examination of Japan-China Economic Relations Since the 1980s: From the Viewpoint of Economic Security

Purpose: The purpose of this study is to re-examine the Japan-China economic relationship from the perspective of economic security, which has recently come into the spotlight. It will clarify how China and Japan’s governments and business communities perceived economic security issues, what measures they have taken, and how these measures have affected the economic relationship between them. Research design, data, and methodology: This study first defines economic security and then discusses Japan-China economic relations from the 1980s to the present in chronological order. In doing so, I use a qualitative case study approach, focusing on representative examples from each period. Statistical data from China and Japan’s official sources and the latest reports published by Japan’s major economic institutes were widely used in this study. Results: Although the term “economic security” was not used until recently, Japan-China economic relations since the 1980s have not been free from economic security. In the mid-1980s, China perceived its large trade deficit with Japan as a serious problem for its economic security. In the 2000s, the “China threat theory” emerged in Japan, and in the 2010s, the “China plus one” strategy was proposed to mitigate the vulnerability of supply chains dependent on China. In recent years, with the rapid rise of China in high technology and the increasing confrontation between the U.S. and China, there has been a growing interest in economic security in Japan’s political and business circles. Implications: Japan is currently developing an infrastructure of laws and organizations related to economic security with China in mind, but the importance of Chinese business to Japan has not fundamentally changed. How to maintain Japan’s economic security while maintaining a trade regime that is inclusive of China will be a long-term issue that the Japanese government and business community will have to face.

25 Years Ago august 1996

No room for nostalgia; GE Fanuc Automation Europe reveals new products; large trade deficit in machine tools in the first three months of the year; Charmilles Technologies and Agie, join forces; Lamiera 96 a success; and Tooling 96 on track

The Paradox of the Virtual Water Trade Balance in the Mediterranean Region

Climate change, water shortages and desertification threaten the economic and environmental sustainability in the Mediterranean. Limited rainfall and higher temperatures put agricultural production, which relies on water availability, in jeopardy. Thereupon, Mediterranean countries pursue agri-food resilience and water preservation through efficient water policies. Hence, water-deprived areas ought to import rather than produce water-intensive products to maintain water inventories and sustainability consequently. As this study examines the water sustainability for a Mediterranean water-scarce region with a particular focus on agriculture, the virtual water trade balance explores this hypothesis. A regional input–output model is constructed, and then total water consumption and the virtual water flows for each economic sector are estimated to determine the virtual water trade balance of the economy. Results indicate that the study area has a trade deficit and struggles economically but is a net importer of virtual water and secures water sustainability. As this virtual water deficit relies heavily on agriculture and originates in vast total water consumption rather than a large trade deficit, a paradox occurs; water-intensive cultivations and animals that consume 91.75% of water resources end up appearing to be water-saving. Further research is needed to strike a balance between economic growth and environmental protection.

U.S.-China Economic Tensions—Will Biden Get Right What Trump Got Wrong?

U.S.-China Economic Tensions—Will Biden Get Right What Trump Got Wrong? Yukon Huang (bio) Although President Biden has vowed to reverse many of Trump's policies, both administrations see China as a strategic threat and great-power rival. This reflects popular sentiments expressed in various polls that China has become an "overwhelming geopolitical concern."1 Biden has characterized the U.S.-China confrontation as "a battle between the utility of democracies in the twenty-first century and autocracies."2 At the same time, Biden wants to avoid a total collapse in U.S.-China relations since China is a partner as well as competitor and rival, depending on the issue. If tensions are inevitable, then Biden's challenge is to differentiate between real issues where progress is desired and several misguided concerns that absorbed Trump's attention. The Trump administration's misguided concerns The Trump administration's first mistake was failing to recognize that trade deficits are not the central problem. President Trump's trade war with China was fueled by his belief that China was responsible for the United States' huge trade deficits, which contributed to lost manufacturing jobs and reduced competitiveness.3 However, trade deficits are not a good indicator of the state of the economy.4 For example, when an economy is doing well, increasing household incomes result in more imports and larger trade deficits. Furthermore, the United States has been running trade deficits for over forty years, long before China became a major economic power and exporter. In other words, the trade balances of the United States and China are not linked. When U.S. trade deficits soared in the late 1990s and early 2000s, China was not running significant trade surpluses. Later, when China's surpluses rose sharply, U.S. deficits declined. U.S. trade balances are largely driven by budget deficits and China's balances by rising household savings rates with urbanization—factors that have little to do with one another.5 Even if the goal had been to reduce the bilateral trade imbalance, the Trump administration's policy would still have made little sense. China cannot buy enough from the United States to bridge the trade deficit, in part because the latter does not produce enough of the high-end consumer goods or the raw materials that the former desires. Instead, Europe supplies China with much of its high-end consumer goods while Latin America and Africa provide much of its raw materials. Moreover, U.S. restrictions prevent sales of the high-tech products China wants due to reasons of national security. Such restrictions may be strategically aimed, but their impact on trade imbalances should not be underestimated.6 Sales of military equipment generated $175 billion for the United States in 2020.7 Aside from the understandable banning of military sales to China, U.S. export earnings are reduced by tightening licensing requirements imposed on China's purchases of hi-tech products for civilian use. In addition, more than 300 Chinese companies have been added over the past year to the Commerce Department's Entity List, which further restricts access to U.S. hi-tech products.8 Cutting off sales to Chinese firms like Huawei, ZTE, and other industrial leaders not only threatens their operational existence, but also represents substantial lost revenues for American suppliers. The U.S. Semiconductor Association, [End Page 246] for example, estimates losses of $30–50 billion if such restrictions are fully implemented.9 Therefore, it is no surprise that Trump's Phase One Trade Agreement committing China to buy more failed to achieve its desired effect of boosting U.S. exports to China and lowering its overall trade deficits.10 Second, Trump echoed popular but misguided sentiments that U.S. firms have been investing too much in China at the expense of the U.S. economy. Over the past two decades, only 1–2 percent of U.S. foreign investment has been going to China.11 By contrast, the European Union (EU), which is comparable to the United States in economic size, has been investing roughly twice as much. So the question is why the United States invests so little in China rather than so much...

Trade Balance Effects on Economic Growth: Evidence from European Union Countries

A growing number of recent research analyse the trade balance impact on economic growth. However, ambiguous results of studies imply the need for the research as the deteriorating trade balance hinders economic growth. This research aims to investigate the impact of the trade balance on economic growth as well as to evaluate it during the periods of trade deficit. Our estimations are based on the European Union (EU) 28 countries panel data over the period of 1998–2018, using the OLS method of multivariate regression analysis with fixed effects and focusing on two strategies: (i) including all trade balance periods, and (ii) adding deficit dummy variable seeking to evaluate whether during deficit periods we can find different and significant effect on economic growth. Evaluating all trade balance periods, the obtained results indicate the negative and lagging impact of the trade balance on economic growth, and no significant differences of the impact were identified during the deficit periods. The deterioration of trade balance reduces average economic growth and from linear relationship evaluation, we can state that it does not matter whether it starts from trade deficit or surplus result. The results obtained may also obscure the possibility of a non-linear effect, which would suggest a stronger negative impact on economic growth when the trade balance deteriorates in the presence of a large trade deficit. When discussing directions for further research it would make sense to consider other factors, such as the size of the deficit and its permanence.

Production Globalization Makes China’s Exports Cleaner

Summary Production globalization, which is when firms expand their supply chains across national boundaries, creates an opportunity for developing countries to engage in international production networks via trade. Described as the world's factory, China specializes in assembly manufacturing mainly through processing exports. Firms use imported intermediate inputs for production and, after processing or assembly, re-export the finished products to international markets. Here, we show that the carbon efficiency of China’s processing exports is greater than that of its ordinary exports. If the impact of trade heterogeneity is ignored, then the domestic emissions embodied in China’s exports will be overestimated by 23.4%, and the foreign emissions embodied in China’s exports will be underestimated by 29.3%. If the degree of global value chain participation, which ranges from 0 to 1, increases by 0.1, although foreign emissions embodied in China’s exports would increase, the gross carbon intensity of China’s exports will decrease by 11.7%.

Factors affecting Vietnam’s trade balance in the context of the global value chain

Trade balance is one of the important macro balances and has a strong impact on the balance of payments and the overall national economy. A country with a large trade deficit may experience lowered competitiveness of goods, export growth, and economic growth. This paper focuses on analyzing the core factors affecting Vietnam's trade balance in the context of global value chain accession. The author uses Bound-Testing method and ARDL model with data from 1990 to 2018 to identify factors affecting Vietnam's trade balance. The results show that, in the long term, Vietnam’s trade balance is affected by factors – ranked from the highest to the lowest – as follows: real GDP of trading partners; Vietnam’s real GDP; multilateral effective exchange rate; foreign added value in Vietnam's exported goods and FDI capital into Vietnam. From these important findings, the author proposes some implications for policymakers so as to improve the trade balance in the context of deeper participation in the global value chain.

China’s Economic Relations with Japan, South Korea and Taiwan Sustained by Persistent Technological Gaps

Japan, South Korea and Taiwan are China’s leading sources of imports, a result of China’s efforts to attract foreign direct investment (FDI) to develop its high-technology industry in the 1990s and beyond. Foreign firms in China have relied on importing key components and capital equipment from their home countries. Despite its industrial upgrading in recent years, China continues to run an increasingly large trade deficit with the three economies due to its lack of key technology.

Bangladesh Trade with India: Trends and Patterns

Bangladesh has a large and persistent trade deficit with its neighboring country India over the years. This paper explored the trends and patterns of trade between these two countries using both aggregated and disaggregated data. More specifically, it examined the relative position of the two countries in global trade, explores the overall trend in exports to and imports from India, and the trend in trade balance using aggregate level data. Further, utilizing some disaggregated data, analysis is conducted regarding the commodity composition of Bangladesh exports to and imports from India by major product categories. Additionally, the paper estimates revealed comparative advantage (RCA) to reflect inter-industry trade based on comparative advantage by HS-2 digit commodity groups. The paper finds that India has a much stronger position in the global trade vis-A -vis Bangladesh and that India strongly dominates Bangladesh in bilateral trade, resulting in a very large and persistent trade deficit with India. At a disaggregated level, the paper finds that Bangladesh has comparative advantage in some products whereas India has comparative advantage relatively in more product categories.

Exports of Ukraine as a global challenge for its future

Exports are critical for the highly open Ukrainian economy which is characterized by the large trade deficit. Since independence the major consumers of the Ukrainian products have been the CIS and the EU. Conflict with Russia led to the significant decline of the volume of Ukraine’s export commodities. The export analysis, based on the data provided by the State Statistics Service of Ukraine for the period of 2010- 2018 allowed to identify the problems and to come up with possible solutions focusing primarily on the role of the Government of Ukraine in strengthening cooperation with the EU. Firstly, it is suggested to take the institutional steps aimed at expanding and deepening the integration towards the common economic space with the EU, especially the common customs space. Secondly, to explore the opportunities of exporting goods to the countries, with which the EU has signed regional trade agreements. The third step is related to the changing role of Ukraine in the global model of the transformation of the world economy and requires the combination of close cooperation with the EU, on the one hand, and the powerful economies, on the other, thereby contributing to the formation of non-confrontational relations between East and West.

Pregovori SAD i Japana o novom bilateralnom trgovinskom sporazumu

In an effort to reduce trade deficit, the United States has sought to introduce tariffs on imports, primarily of Chinese products. However, countries with which the United States runs large trade deficits are under pressure to negotiate about reducing the bilateral trade deficit with the United States. Among them is Japan. The US administration in bilateral trade talks with Japan toward a new bilateral trade agreement seeks to encourage US exports of agricultural products to Japan and reduce imports of Japanese cars in the US. If the trade agreement contains restrictions on the export of Japanese cars to the US market, it will damage Japanese manufacturers, but also customers in the United States, due to the higher costs of buying a car. However, it would not be the first time since Japan, under the pressure of the United States, introduced Voluntary Export Restraint (VER) in 1981 on car exports to the United States that were abolished in 1994. These restrictions have brought huge costs for both Japanese car manufacturers and consumers in the United States. The outcome of the US and Japan trade talks about a new trade agreement will show whether history repeats itself.