Optimal Export Research Articles

Optimal Export Policy With Upstream Price Competition

We present a third‐market model with a vertical trading structure, in which upstream input suppliers engage in homogeneous price competition. We show that, under downstream Bertrand competition, a non‐monotonic export policy may result. Specifically, the optimal policy of the exporting country can turn into a tax–subsidy–tax as the degree of product substitutability rises. We also confirm the conventional result for which the optimal policy is an export subsidy (tax) if there is Cournot (Bertrand) competition downstream, provided that the number of domestic suppliers is at an intermediate level. We further discuss bilateral policy interventions when both exporting countries offer a subsidy/tax to their domestic downstream firms. We show that a non‐monotonic export policy (tax–subsidy–tax) can arise even in this extended setting.

The Two Distinct Types of SecA2-Dependent Export Systems.

In addition to SecA of the general Sec system, many Gram-positive bacteria, including mycobacteria, express SecA2, a second, transport-associated ATPase. SecA2s can be subdivided into two mechanistically distinct types: (i) SecA2s that are part of the accessory Sec (aSec) system, a specialized transporter mediating the export of a family of serine-rich repeat (SRR) glycoproteins that function as adhesins, and (ii) SecA2s that are part of multisubstrate systems, in which SecA2 interacts with components of the general Sec system, specifically the SecYEG channel, to export multiple types of substrates. Found mainly in streptococci and staphylococci, the aSec system also contains SecY2 and novel accessory Sec proteins (Asps) that are required for optimal export. Asp2 also acetylates glucosamine residues on the SRR domains of the substrate during transport. Targeting of the SRR substrate to SecA2 and the aSec translocon is mediated by a specialized signal peptide. Multisubstrate SecA2 systems are present in mycobacteria, corynebacteria, listeriae, clostridia, and some bacillus species. Although most substrates for this SecA2 have canonical signal peptides that are required for export, targeting to SecA2 appears to depend on structural features of the mature protein. The feature of the mature domains of these proteins that renders them dependent on SecA2 for export may be their potential to fold in the cytoplasm. The discovery of aSec and multisubstrate SecA2 systems expands our appreciation of the diversity of bacterial export pathways. Here we present our current understanding of the mechanisms of each of these SecA2 systems.

Trade and Welfare Effects of Export Tax: Theory and Evidence from China's Incomplete Export VAT Rebate

While China was reducing tariffs as part of the WTO accession process, it was also effectively restricting exports in some sectors by reducing the rebates of the value added tax (VAT) for exporters. We use a multi-sector multi-country Ricardian model to examine the extent to which these de facto export tax changes benefited China and nullified the benefits to the rest of the world of China’s trade liberalization. We show that trade liberalization benefited China’s trade partners both through an improvement in their terms of trade and through a reallocation of resources from protected imported sectors to exportable sectors. We find that the partial rebate policy on VAT exports provided a small effect overall on the welfare of China and trading partners, although some countries lost as much as 2/3 of their gain from China’s liberalization based on tariffs alone. We also use our model to solve for China’s optimal export taxes and calculate the impact of optimal export taxes on China and the rest of the world.

Subcontracting bargaining power and the trade policy

ABSTRACTIn this paper, we consider that the split of surplus from a subcontracting deal depends on the relative bargaining powers of domestic and foreign firms. The finding shows that a domestic optimal export policy is a tax (subsidy) if the bargaining power of the domestic firm is sufficiently small (large). We also demonstrate that a domestic firm’s higher bargaining power increases (may decrease) domestic profit if the export policy is exogenous (endogenous). In the presence of an outsider option, the domestic optimal export policy will be threatened by the outsider option if the domestic firm’s bargaining power is sufficiently small, and thus a large bargaining power increases the optimal export tax. At the same time, the foreign firm may still subcontract to the domestic firm even if the domestic firm has a higher total marginal cost of the intermediate good than the outsider option.

Strategic Trade Policy in the Presence of International Outsourcing in a Duopoly Model

This paper analyzes how domestic government sets its optimal export policy in a duopoly model when its domestic firm can only outsource its input while the rival firm is able to both produce and outsource its input. First we analyze the strategic outsourcing behavior of the foreign firm. We find that the foreign firm’s decisions on whether to outsource input or to make it by itself depend on the trade policy taken by the domestic government. The foreign firm will strategically outsource the entire quantity of its input production to the supplier with an input price higher than its in-house cost, if the domestic firm is subsidized by the domestic government. However, when the domestic firm is being charged a positive export tax by the domestic government, the foreign firm will decide to make input by itself despite the lower input price under the outsourcing regime. From the domestic government’s point of view, we find that the conditions for the foreign firm’s decisions correspond to the domestic social welfare maximization problem. When the foreign firm chooses to outsource its input to the supplier, the domestic government will impose a negative export tax on its firm, namely subsidy. While when the foreign firm chooses to make input by itself, the domestic government will impose an export tax on its firm as trade policy.Keywords: Trade Policy, Export Tax, Subsidy, Outsourcing

Maximizing the economic return from Egypts export of the most important vegetable crops in the foreign markets

This study is set to examine the possibility of maximizing the returns of Egyptian vegetable exports: fresh potatoes, onions, and tomatoes, through the optimal distribution of exports to international markets. Linear programming model is formulated to determine the optimal distribution of exports among the importing countries. This model is restricted by export capacity, import capacity, and suggested organization constraints, determining the optimal plan for various scenarios. The mathematical analysis is based on secondary data from the Central Agency for Public Mobilization and Statistics of Egypt and the United Nations Comrade Database for the period of 2010- 2014. The model solution is obtained using the General Algebraic Modeling System (GAMS). The results show that the major export markets for Egyptian potatoes are Russia, Italy, and Germany, representing altogather about 69% of Egyptian exports. For Egyptian onions, Saudi Arabia, Kuwait, Jordan, and Syria together accounted for 77% of the total exported quantity. For Egyptian tomato exports, Syria, Saudi Arabia, Libya, and Iraq accounted for 85% of the total tomatoes exports from Egypt. The results of the various scenarios showed that there is a prospect to increase the Egyptian export returns through geographical re-distribution of exports from potatoes, onions, and tomatoes. Under the capacity of export-import constraints (Scenario No. 1), the total export value would increase by 19.26, 33.95 and 45.30% for potatoes, onions, and tomatoes, respectively. Under countries group constraint (Scenario No. 2), the export value increases by 12.67, 26.49 and 35.85% for these crops, respectively, more than the current export values. Under the suggested model (Scenario No. 3), the export value would increase by 9.56, 25.45 and 25.26% for potatoes, onions, and tomatoes respectively, much more than the current values of exports. Egyptian exports of potatoes would be directed to many countries: the United Kingdom, Greece, Italy and Russia. For onions, higher quantities would be exported to Saudi Arabia, Kuwait, Belgium, and Romania. The most important export markets for Egyptian tomatoes would be Iraq, Italy, Syria, and Saudi Arabia. The study recommends to re-distribute the Egyptian exports of vegetable crops in the international markets to maximize export returns. These models can be used as a tool for the Egyptian decision makers about optimum export distribution for export development. Key words: Optimal geographic distribution, export development, linear programming, optimization technique.

Cost-effectiveness, Competitiveness and Export Performance of Indian Private Firms

This paper formulates a model of the optimal export decision of private firms and then empirically studies the effect of firm size, R&D activities, competitiveness and trade policies on export performance of Indian private firms during the period 1975–1986. India practised restrictive trade and industrial policies and introduced partial liberalization of trade policies in the early 1980’s to encourage exports. The paper argues that the Cragg model is more appropriate to model firms’ export behaviours under India’s restrictive trade policies than the commonly used Tobit model. The evaluation of the export promotion and partial import liberalization policies of 1980 based on the Tobit model is found to be qualitatively quite different from the evaluation based on the Cragg model. The LR and LM specification tests reject the Tobit model against the Cragg model in all specifications.

Interdependence of Trade Policies in General Equilibrium

We characterize the optimal trade tax/subsidy schedule in generalequilibrium multiple-sector gravity models and find that: ( i ) The optimal tariffs are uniform across sectors, despite sectoral variations in trade elasticities, transport costs and demand characteristics; ( ii ) The optimal export subsidy for a sector is increasing in that sector’s trade elasticity. Moreover, trade policies are interdependent: ( iii ) Import tariffs across sectors are complementary and ( iv ) Import policy is only an imperfect substitute for export policy. These policy interdependencies play an important role in the optimal design of trade agreements and provide a novel perspective on the WTO’s ban on export subsidies. Fitting our model to trade data, we show that these policy interdependencies are also quantitatively significant. Finally, ( v ) non-revenue trade barriers (such as import bans) could be optimal in a subset of sectors.

Cost-Effectiveness, Competitiveness and Export Performance of Indian Private Firms

This paper formulates a model of the optimal export decision of private firms and then empirically studies the effect of firm size, R&D activities, competitiveness and trade policies on export performance of Indian private firms during the period 1975–1986. India practised restrictive trade and industrial policies and introduced partial liberalization of trade policies in the early 1980’s to encourage exports. The paper argues that the Cragg model is more appropriate to model firms’ export behaviours under India’s restrictive trade policies than the commonly used Tobit model. The evaluation of the export promotion and partial import liberalization policies of 1980 based on the Tobit model is found to be qualitatively quite different from the evaluation based on the Cragg model. The LR and LM specification tests reject the Tobit model against the Cragg model in all specifications.

The United States-Canada softwood lumber trade: An actual versus optimal export tax

By developing a two-country two-stage game model, this study examines an optimal level of export tax under the framework of the 2006 United States (U.S.)-Canada Softwood Lumber Agreement (SLA 2006). The theoretical results suggest that marginal lumber production costs in Canada and U.S. lumber production capacity along with linear demand parameters determine an optimum rate of export tax on Canadian lumber exports to the U.S. The empirical estimation reveals that the monthly optimal export tax during the SLA 2006 period follows the actual export tax closely with a monthly rate ranging from −4% to 19%.

Optimization of High-Tech Products Export Program in Terms of Resource and Time Constraints

Background/Objectives: The article discusses the conflict between the satisfaction of domestic demands and the export product supply in conditions of limited production capacities of high-technology enterprises. Methods/Statistical Analysis: Economic and mathematical modeling has been applied to objectively determine the conditions of the proposed dynamic strategy application and assess its effectiveness. The optimality criterion is considered to be the total volume of high-tech products supply to the domestic market for the planned period. Findings: The authors have built a dynamic model of a high-tech enterprise or industry, the production of which is distributed between the export and the domestic market supply. The dynamic problem of optimal production distribution between the internal and external markets has been solved. The authors have substantiated the structure of the optimal dynamic export strategy: first of all, the priority shall be given to the product export in order to increase capacity, and at a certain point it is necessary to focus the attention on the preferential satisfaction of the domestic market. The conditions for the effective implementation of this strategy have been determined; the authors have proposed the method of assessing benefit from its use ensuring a potentially attainable growth in high-tech products supply for domestic customers for the planned period. The dependence of the benefit from exchange rate changes, duration of the planning period and from the minimum acceptable volume of supplies to the domestic and foreign markets has been studied. Application/Improvements: In conditions of investment resources deficit and depreciation of the domestic currency, it is expedient to give preference to export supplies, which will quickly increase the production capacity of enterprises.

The Impact of Regret on Exports

Abstract We examine optimal production and export decisions of a firm facing exchange rate uncertainty, where the firm’s management is not only risk averse but also regret averse, i.e., is characterized by a utility function that includes disutility from having chosen ex post suboptimal alternatives. Experimental and empirical results support the view that managers tend to be regret averse. Under regret aversion a negative risk premium need not preclude the firm from exporting which would be the case if the firm were only risk averse. Exporting creates an implicit hedge against the possibility of regret when the realized spot exchange rate turns out to be high. The regret-averse firm as such has a greater ex ante incentive to export than the purely risk averse firm. Finally, we use a two-state example to illustrate that the firm optimally exports more (less) to the foreign country than in the case of pure risk aversion if the low (high) spot exchange rate is more likely to prevail. Regret aversion as such plays a crucial role in determining the firm’s optimal allocation between domestic sales and foreign exports.

Sharing the gains from EU–Western Balkan renewable electricity cooperation

The EU directive on renewable energy sources enables EU Member States to import renewable electricity from non-EU countries and count these imports towards their renewable energy targets. This article investigates whether such cooperation can be beneficial for selected Western Balkan countries and help them to increase their domestic renewable electricity supply: could wind power exports to the EU from Bosnia and Herzegovina, Serbia, Albania and the Former Yugoslav Republic (FYR) of Macedonia enable additional investments in domestic generation, without ‘selling out’ the exporter countries’ best generation sites? Or would exports rather conflict with the Western Balkans countries’ domestic efforts to reach their renewable energy targets and increase the domestic electricity supply? For this, a model was developed in Visual Basic to optimize, from the exporters’ perspective, the optimal export level to trigger investments but maximize the wind power supply for domestic use. The analysis takes into account the wind potential, support and price levels in the EU and Western Balkans, investor requirements and financing conditions in the investigated countries.The article shows that cooperation offers a way both for EU Member States and some Western Balkan countries to expand renewable electricity supply and reach their renewable energy targets in a cost-effective way. Partial exports of wind power would allow Serbia, Albania and the FYR of Macedonia to reach their 2020 wind targets. This would not be possible under their existing support schemes or electricity prices. The results indicate that Bosnia and Herzegovina lacks cost-efficient potentials and cannot achieve its wind target in the base case, with or without exports.Climate policy relevanceThe results show that wind power cooperation between the EU and Western Balkan countries may simultaneously increase the renewable electricity generation available for the domestic markets in the host countries and help EU Member States to achieve their renewable energy and decarbonization targets. Hence, wind power exports are a way for both the EU and the Western Balkans to provide more carbon-neutral electricity in a cost-effective manner and thus support the achievement of renewable energy and climate targets.

Endogenous trade participation with price rigidities

This paper investigates the interaction of endogenous export participation and nominal rigidities and its implications for the dynamics of intensive and extensive margins of trade. I develop a two-country dynamic stochastic general equilibrium model wherein firms make state-dependent decisions on entry and exit in the export market, and where price adjustments are staggered across firms and time.My model reveals that, when an aggregate shock has significant effects on optimal export prices, such as a shock to domestic productivity or monetary policy, it generates large responses in the number of exporters. These movements in turn amplify responses along the intensive margin of trade and international transmission of the shock. I trace this result to the micro-level price rigidities in my model. Because staggered price changes delay intensive margin adjustments among incumbent exporters following aggregate shocks, they permit sizable shifts in the profitability of export participation. Whereas such shifts are virtually eliminated in models of exporter entry and exit with flexible prices, here they are sufficient to induce quantitatively important movements along the extensive margin of trade.

Environmental Protection in the Presence of Unemployment and Common Resources

AbstractThis paper examines the effects of an export tax (on a processed resource good), the number of harvesters and an afforestation policy in a small, open economy with urban unemployment. The export tax increases the urban unemployment rate, but improves the quality of the environment. Here, the optimal export tax is lower than the adjusted marginal environmental damage. Reducing the number of harvesters has a similar resource allocation effect to that of an export tax. However, the afforestation policy can resolve the trade‐off between urban unemployment and the quality of the environment and may also improve the welfare of a country.

Optimal Monopolist Export Pricing with Dynamic Demand and Learning Curve Effects

This paper addresses incomplete exchange rate pass-through (ERPT) and pricing-to-market (PTM) by proposing an optimal control model of dynamic monopolistic pricing on a foreign market, which accounts for dynamic demand effects (such as diffusion or saturation) and learning curve effects. It is shown how the optimal dynamic export pricing results in partial or full ERPT in the long-term equilibrium. Moreover, transitional price dynamics are illustrated, which may explain dumping, i.e., temporary prices below unit costs, and (asymmetric) short-run overshooting dynamics of the optimal export price level as a reaction to exchange rate changes.

Comparative Advantage and Optimal Trade Policy *

Abstract The theory of comparative advantage is at the core of neoclassical trade theory. Yet we know little about its implications for how nations should conduct their trade policy. For example, should import sectors with weaker comparative advantage be protected more? Conversely, should export sectors with stronger comparative advantage be subsidized less? In this article we take a first stab at exploring these issues. Our main results imply that in the context of a canonical Ricardian model, optimal import tariffs should be uniform, whereas optimal export subsidies should be weakly decreasing with respect to comparative advantage, reflecting the fact that countries have more room to manipulate prices in their comparative-advantage sectors. Quantitative exercises suggest substantial gains from such policies relative to simpler tax schedules.

Extension of Long-Staehler’s Model on Optimal Export Tax in the Case of Privatization

This paper extends Long and Staehler’s model and studies optimal export tax in the case of privatization. The authors find that optimal export tax increases with the degree of privatization if product differentiation exists. The authors provide a counterexample to Long and Staehler’s model and reach a different conclusion. This finding emphasizes that the relationship between the variables of optimal export tax and conditions of asymmetric cost and product differentiation is quite different from Long and Staehler’s model. Since optimal export tax is endogenous in the model, the authors also consider the potential endogeneity of privatization decision, which is an important issue in a traditional mixed duopoly analysis.

The Losses from Trade Restrictions: Policy Dynamics with Firm Selection and Endogenous Markup

AbstractIn this paper, I explore the aggregate effects of trade restrictions in a two‐country, dynamic, general equilibrium (DGE) model with firm selection and variable adjustment of markup. As a response to the trade collapse in the global crisis of 2008 and 2009, temporary trade restrictions have emerged in several countries. With analyzing the dynamics of a negative macroeconomic shock in the home economy first, and the subsequent introduction of trade restrictions in the foreign economy second, I show that both economies are in a worse position than they were during the economic downturn. The follow‐ups to the recession and trade restrictions are investigated through three mechanisms: (1) variable markup as a new avenue of increasing competitive pressure for producers (e.g. more competitive firms lower their markups); (2) average individual firms' specific productivity cut‐off, which induces their optimum export choice (e.g. an increase in the export productivity cut‐off means exporting becomes more difficult than before.); and (3) the movement of international relative prices (e.g. the real exchange rate and terms of trade).

Optimal Export Tax in Terms of Home Country's Adjustment Weight

Treating export tax of a large country as equivalent to a sales tax, this paper derives all formulae at autarky, free trade, and after tax and offers all possible comparisons. All derived formulae are in terms of three adjustment weights of home country and the ratio of inverse demand slopes. For the first time, it derives a formula for the net welfare gain which is a concave quadratic function in export tax. It finds formulae for the optimal export tax and for the maximum net welfare gain.