Potential Trade Research Articles

Green subsidies as strategic trade policy tools

In a third-country market model in which two export countries adopt environmental policies (taxes and subsidies), this article analyses how an abatement (“green”) subsidy can become a potential strategic trade policy tool. When governments set the optimal policy considering their local environmental damages, a rich set of equilibria arises. In contrast to the standard result, it is shown that subsidising pollution abatement can 1) emerge as the unique Pareto-efficient Nash equilibrium of the policy game, 2) be the only feasible environmental policy when environmental awareness is low, irrespective of the efficiency of the cleaning technology, and 3) emerge as the unique Pareto-inefficient Nash equilibrium of the policy game at the end of the ecological transition. The article also tackles some dynamic issues that the policy game implies.

An Exploration of the Relationship Between Public Infrastructure and Economic Growth in Northeast India: A Panel Data Approach

In this article, we have used a panel data approach to explore the relationship between public infrastructure and economic growth in Northeast India using data from all eight states from 2004–05 to 2018–19. The findings reveal that all public infrastructures do not contribute productively to economic growth. Certain infrastructure sectors, such as agriculture-related and healthcare-related infrastructure, affect the growth prospects of the northeastern region of India. One plausible reason could be the current level of some public infrastructure, which is not developed sufficiently enough. Therefore, India must address the infrastructural gap in its northeastern region in order to leverage the region’s trade potential and establish it as the country’s growth engine. To meet the infrastructure demand with limited fiscal space, the government needs to foster an environment that encourages public–private partnerships in infrastructure. Sharing benefits with private participation could be another way to attract private investment in the infrastructure sector of the region. JEL Codes: C23, H54, O47, R53

BCBimax Biclustering Algorithm with Mixed-Type Data

The application of biclustering analysis to mixed data is still relatively new. Initially, biclustering analysis was primarily used on gene expression data that has an interval scale. In this research, we will transform ordinal categorical variables into interval scales using the Method of Successive Interval (MSI). The BCBimax algorithm will be applied in this study with several binarization experiments that produce the smallest Mean Square Residual (MSR) at the predetermined column and row thresholds. Next, a row and column threshold test will be carried out to find the optimal bicluster threshold. The existence of different interests in the variables for international market potential and the number of Indonesian export destination countries is the reason for the need for identification regarding the mapping of destination countries based on international trade potential. The study's results with the median threshold of all data found that the optimal MSR is at the threshold of row 7 and column 2. The number of biclusters formed is 9 which covers 74.7% of countries. Most countries in the bicluster come from the European Continent and a few countries from the African Continent are included in the bicluster.

Synergizing trade and sustainability: advancing SDG 14 through international trade dynamics

This paper explores the intricate relationship between international trade and the achievement of the United Nations Sustainable Development Goal 14 (Life Below Water), focusing on the potential of trade to contribute positively to marine conservation and sustainable use of ocean resources. By examining the intersection of economic, social, and environmental dimensions, the study delves into how trade policies and practices can be aligned with environmental objectives, particularly concerning marine ecosystems. A principal challenge identified is the tension between economic growth driven by international trade and the sustainability of marine ecosystems, exacerbated by practices such as overfishing and pollution from maritime transport. Another significant challenge is the lack of robust enforcement mechanisms for existing environmental provisions in trade agreements. To address these challenges, the paper recommends the integration of stringent and enforceable environmental clauses in trade agreements, coupled with the promotion of sustainable trade practices through international cooperation and capacity building. Furthermore, the study suggests the adoption of innovative trade mechanisms, such as eco-certification and the implementation of Marine Protected Areas (MPAs), to enhance the protection of marine life, support sustainable fisheries, and reduce ocean pollution. The paper concludes with specific policy recommendations for leveraging international trade as a tool for the sustainable management of marine resources, ultimately contributing to the broader agenda of sustainable development.

Economy-wide Impacts of India–UAE CEPA: A CGE Analysis

The present study investigates the potential trade effects of tariff liberalisation under India–United Arab Emirates (UAE) Comprehensive Economic Partnership Agreement (CEPA) using general equilibrium analysis. The study specifically examines output, employment, exports and welfare effects of India–UAE CEPA in computable general equilibrium (CGE) framework using the Global Trade Analysis Project (GTAP) model and database version 10. The study indicates output gains in manufacturing sector for both countries and an increase in demand for unskilled labour in India. The study argues that the CEPA will result in an increase in global exports of all commodity groups for both India and UAE and a substantial gain in bilateral exports of both countries. The present study suggests that deeper integration through tariff reduction on imports under India–UAE CEPA will be welfare enhancing for both India and UAE. Overall results show that there is a lot of untapped potential to bring the welfare gains for both trading partners. Given the present schedule of tariff reduction of CEPA, a win–win scenario will emerge for both partners in short as well as long run. Finally, the study cautioned about the implications of sensitive list for trade effects and protection from misuse of rules of origin in the CEPA. JEL Codes: F1, F13, F14, F15, F17

INDUSTRIAL DEVELOPMENT AND COMPARATIVE REVIEW OF BRICS SPECIALIZATIONS

In modern conditions of global economic relations, BRICS is of strategic importance for the member countries of this association. The purpose of the article is to analyze the directions of industrial development of the BRICS and their impact on the foreign trade potential of the member countries of this association. The article highlights the basic stages of analyzing the impact of industrial specializations of countries on their foreign trade. On the basis of the selected stages a macroeconomic review and analysis of the industrial profiles of the BRICS member countries were carried out, in particular, information on basic specialization sectors was systematized, divided into primary, secondary and tertiary sectors of the economy, which occupy significant shares in the GDP structure of the bloc countries and determine the vector of foreign trade (export-import) activities of the countries. Based on the UNCTAD open data base, the authors investigated the radars of comparative advantages of the BRICS countries based on the application of the Balassa coefficient (coefficient of relative advantages), which allowed drawing conclusions about the advantages and export specializations of the BRICS member countries. Conclusions are drawn about the high potential of foreign trade cooperation between the BRICS member countries and more intensive build-up of foreign trade potential taking into account the upcoming expansion of the BRICS in 2024.

Research on Export Flow and Potential of Agricultural Products in China Based on Machine Learning Algorithm

The MLR (multiple linear regression) method in machine learning algorithm is a comprehensive method to study the correlation of variables, and it is also an important measure to study the relationship between variables by using linear fitting method. By combining qualitative analysis with quantitative analysis, this paper will use MLR model to make an empirical analysis of the determinants of agricultural trade flow, and use the estimated parameters to calculate the agricultural trade potential of China. The results show that the economic scale and distance have an important influence on the export flow of agricultural products in China, indicating that the economic scale is an important factor affecting the export flow of agricultural products. Regional trade arrangements have dual effects of trade transfer and trade creation, and free trade arrangements have created favorable conditions for trade expansion between countries with different demand and income levels. China's exports to Russia, Thailand, Singapore, the Philippines, Malaysia and Indonesia are in a state of deficiency, and there is still potential for developing agricultural products exports to these countries.

A Study on Export Trade Efficiency and Potential of Korean Semiconductor Industry: Empirical Evidence from 72 Trade Export Countries

Purpose - The semiconductor industry is an integral part of the Korean economy. Trade competition in semiconductors, the core component of the fourth industrial revolution, has become increasingly fierce. In this context, this study aims to empirically analyze the current situation, international competitiveness, and challenges faced by Korea’s semiconductor export trade from the perspective of trade efficiency by using Korea’s semiconductor export trade data. Design/Methodology/Approach - Using a stochastic frontier gravity model, this study analyzes the data of 72 countries and regions that have been the main targets of Korea’s semiconductor exports for the past 22 years using an empirical approach to investigate the main factors affecting Korea’s semiconductor export trade, trade efficiency, and trade potential. Findings - From the division of semiconductor export market type, there are 13 saturated countries, and the trade volume accounts for 77.86% of the total trade volume of Korea’s semiconductor exports. There were 31, 16, and 12 expansion, development, and iceberg-type countries, respectively. In addition, the regression results show that Korea’s population size and the R&D expenditures of the countries with which it trades have a significantly positive effect on semiconductor exports. Research Implications - To date, no more systematic empirical research literature on the efficiency of Korean semiconductor export trade has been found, and this study fills the gap in the literature in this area through an empirical analysis approach. This study aims to provide a reference value in Korea’s semiconductor export trade.

Heterogeneous Impacts of the Korea-Japan Trade Dispute on Bilateral Agri-Food Trade

Purpose - The purpose of this paper is to provide a rigorous quantitative assessment of the heterogeneous impacts of the Korea-Japan trade dispute on bilateral agri-food trade across different product categories. Design/Methodology/Approach - Based on a structural gravity model and a difference-in-differences approach, the paper estimates the effects of the dispute on trade flows in both aggregated and disaggregated HS 2-digit product levels. The analysis utilizes annual bilateral trade data from 2017-2022 and monthly data for 2019. Findings - The findings reveal significant declines in Japanese exports of vegetable products and prepared foodstuffs to Korea, consistent with the theoretical prediction that sectors with higher average consumer animosity would be more negatively affected. However, the results also point to potential trade diversion and substitution effects, as evidenced by the increase in Korean exports of animal/vegetable oils to Japan post-dispute. Research Implications - The findings have important implications in understanding the complex effects of trade disputes on sensitive sectors like agriculture. These emphasize the need to consider sector-specific dynamics and both short-term and long-term effects when assessing the consequences of trade tensions. The study contributes to the literature on the heterogeneous impacts of trade conflicts, and provides insights for evidence-based policymaking in navigating the global trade landscape.

The impacts of technological change policies on water uses and virtual water trade in water-constrained settings

Virtual water trade, which underlines the importance of inter-regional commodity transactions for enhancing water management, has often been recommended as an alternative to technological advancements in addressing water scarcity and increasing water savings in dry regions. Sectoral adjustment policies that focus on enhancing the productivity of specific sectors therefore should prioritize sectors with high growth impact potential but low virtual water demand. However, the diverse understanding of the concept and differing assessment techniques employed by various research communities complicate the debates surrounding the policy relevance of the virtual water trade. This study proposes a novel and integrated approach to evaluating virtual water content and flows endogenously, leveraging the advantages of Input-Output and Computable General Equilibrium (CGE) modeling methods. The quantification of the method is exemplified in the case of Uzbekistan (Central Asia), where water is a limited yet essential resource for sustainable economy and environmental systems. Specifically, this study examines the impacts of changes in economy-wide and sector-specific Total Factor Productivity (TFP) and water productivity on water uses, virtual water flows, and economic outcomes. The findings reveal that TFP improvements in livestock and fodder crop production and water productivity enhancements in gardening are recommendable options to constrain the net virtual water trade and enhance economic growth in Uzbekistan. The study also shows a high sensitivity of virtual water flows to technological changes, highlighting the importance of considering options for improving productivity when analyzing the potential of virtual water trade.

Evaluating Partners for Renewable Energy Trading: A Multidimensional Framework and Tool

The worsening climate crisis has increased the urgency of transitioning energy systems from fossil fuels to renewable sources. However, many industrialized countries are struggling to meet their growing demand for renewable energy (RE) through domestic production alone and, therefore, seek to import additional RE using carriers such as hydrogen, ammonia, or metals. The pressing question for RE importers is therefore how to select trading partners, i.e., RE exporting countries. Recent research has identified a plethora of different selection criteria, reflecting the complexity of energy systems and international cooperation. However, there is little guidance on how to reduce this complexity to more manageable levels as well as a lack of tools for effective partner evaluation. This article aims to fill these gaps. It proposes a new multidimensional framework for evaluating and comparing potential RE trading partners based on four dimensions: economy and technology, environment and development, regulation and governance, and innovation and cooperation. Focusing on Germany as an RE importer, an exploratory factor analysis is used to identify a consolidated set of composite selection criteria across these dimensions. The results suggest that Germany’s neighboring developed countries and current net energy exporters, such as Canada and Australia, are among the most attractive RE trading partners for Germany. A dashboard tool has been developed to provide the framework and composite criteria, including adjustable weights to reflect the varying preferences of decision-makers and stakeholders. The framework and the dashboard can provide helpful guidance and transparency for partner selection processes, facilitating the creation of RE trade networks that are essential for a successful energy transition.

From colonization to cooperation: Significance of the India-UK free trade agreement

The trade history of India with European Union countries, particularly the United Kingdom (UK), is well established. India has regularly maintained a trade surplus with the UK since the fiscal year 2004–2005, in contrast to its trade relations with the rest of the globe. This study seeks to delve into India's trade potential with the UK, focusing on the HS-2 digit (Harmonized System) over the period 2001–2021. This research employs several trade indices to gather insights into the shared trade potential between two nations. The study's findings explain that India's trade intensity with the UK is comparatively lower when contrasted with its trade patterns with other global partners. The results of the Revealed Comparative Advantage and Trade Potential index indicate numerous sectors where India can seize opportunities to enhance its trade with the UK. In summary, the study emphasizes that although trade between India and the UK has been growing gradually, there is still unrealized potential that may result in greater welfare gains for both countries. This study identified a significant research gap that needs to be investigated. In conclusion, the study makes a strong case for the anticipated economic integration, which is best illustrated by the creation of a Free Trade Agreement between India and the UK, as a promising opportunity for the improvement of both countries. This proposed FTA represents a perfect example of a win‒win situation in which both parties stand to gain significantly and witness a boost in their overall economic well-being.

Analysis of Road 3 Asia (R3A)’s Impacts on Border Trade of Thailand

Trade opening has become an important asset for economic development in many countries and an important engine of economic globalization (Wang, Shan-Li, et al, 2020). With continuous foster on the regional economic cooperation, countries with close proximity further promote the mobility and development of infrastructures and policies. Nevertheless, testing a trade integration model of bilateral trade is not sufficiently well estimated with the Bayesian approach to provide practical evidence of trade integration. Moreover, in identifying the factors determining trade integration, testing using the Bayesian gravity equation is essential. After performing a series of simulation experiments, a relationship between bilateral trade volume and simulated trade determinants was predicted for the trade model. The results of the estimated coefficients on GDP in Thailand and GDP of Yunnan province, China are positively significant predictors of the trade growth. The distance between the countries has a negatively significant estimation that implies barriers in trade. The model predicts trade integration, especially towards the trade on route R3A. The Bayesian approach of the gravity model gives robust estimates for determining the impact factor for the bilateral trade, including the fact that the elasticities of total trade volume with respect to distance, population, and the exchange rate of Thailand are negative while the GDP per capita are positively significant. Further, economic size, GDP per capita, and exchange rate of the destination, and population and area of Yunnan province are positively predicted by the model. The estimated parameters are directly the elasticities, in which increases in GDP is consistent with the higher trade volumes. Further, evidence of the gravity equation is used for understanding trade potential, and after some integrations, the estimation is applied for the real trade. The measures of bilateral trade resistance or costs associated with the trade flow has influenced the expanding of the bilateral trade in the model in the GMS economies. Finally, trade integration can be implemented with evidence and estimates of the gravity model. The Bayesian experiment for the estimation of the impacts of the trade integration on route R3A predicts an increase of GDP, population, exchange rate, and GDP per capita as predominant predictors in the Bayesian gravity model. Thus, the results revealed that economic size, bilateral distance, and GDP per capita has affected the plausible trade agreements for trade integration on route R3A.

Renewable energy trading: Assessment by blockchain

Renewable energy trading could be considered the next step in power trading's development. It is probable that individuals currently involved in power trading will need to upgrade their data collection, processing, and reporting systems. This article provides a comprehensive evaluation of renewable energy trading utilizing Blockchain technology. Initially, the paper examines country-specific renewable energy trading with a focus on India, China, the US, France, and Germany's renewable energy policies. Moreover, the paper presents potential renewable energy trading markets such as peer-to-peer, over the grid, and partially or fully independent microgrid's. This paper shows the appraisal of bond, commodity, derivative, and algorithm-based renewable energy trading using different Blockchain methods, including Ethereum and R3 Corda. It is find out during the renewable energy trading, proposers of bid, also include capital cost of the renewable energy power plant, salvage value after useful life of different component of renewable energy power plant. It is also find out proper trading is to be done with offering subsidies of up to 70 % of the capital cost, and with a 30 % viability gap finance (VGF) at this cost.

FORMATION OF A MODEL FOR MANAGING THE POTENTIAL OF REGIONAL MARKETS

In an unstable and rapidly changing economic environment, it becomes even more difficult to determine the state and prospects of development of specific markets, especially regional ones, where specific conditions are in place. In order to effectively coordinate the development of a particular regional market, it is necessary to clearly define the extent to which its potential has been exploited and to identify the factors that influence the formation of the regional market's potential. The subject of the study is the theoretical and methodological foundations of managing the potential of regional markets. The aim of the study is to develop a model for managing the potential of the regional market. Methodology. To achieve the goal of the study, the following tasks were set and solved: a critical analysis of approaches to the definition of the concept of "regional market potential" was carried out, the theoretical and methodological foundations for the formation of a model for managing the potential of the regional market were substantiated, the components of this model were clarified, and the types of links between the components of the model for managing the potential of the regional market were identified. The paper uses the following methods and approaches to research: abstract and logical approach used in the study of the theoretical and methodological foundations of interaction management, analysis of theoretical approaches to the formation of a model for managing the potential of the regional market, inductive and deductive (used to determine the factors influencing the formation of a model for managing the potential of the regional market), systematisation and generalisation (to clarify the concept of "regional market potential"). Results. The research considers the processes of formation and management of the potential of regional markets. It reveals the essence of the concept of "potential of the regional market" on the basis of studying the definition of the concept of "potential". The article describes and groups approaches to determining the market potential of a region and formulates its own definition of the regional market potential as "the upper limit of production, sales and consumption of a certain type of product in the region, at which the financial interests of market participants are maximally satisfied, for which the existing resources are sufficient". The publication identifies the factors influencing the state of the regional market potential: industrial capacities, development of regional infrastructure and logistics, demographic situation, population income and purchasing power, resource provision of the region, opportunities for international trade. The article characterises the structure of the regional market potential: the forming component (production, consumer and trade potential) and the ensuring component (socio-economic potential of the region). A model of management of the regional market potential is proposed. Practical implications. The proposed model will help to clarify the role and functional relationships between the components of the regional market potential and take into account the peculiarities of the functioning of regional markets in the implementation of market forecasts. Value/originality. In the structure of the regional market potential, unlike the well-known ones, the forming and ensuring components of the regional market potential are distinguished. The addition of the trade potential component to the traditional forming components, such as consumer and production potential, will allow taking into account trade opportunities and conditions for fast and high-quality trade organisation in the region.

Tariff Rate Uncertainty and the Structure of Supply Chains

We show that reducing the probability of a trade war promotes long-term importer-exporter relationships that ensure provision of high-quality inputs via incentive premia. Empirically, we introduce a method for distinguishing between these long-term relationships--which the literature has termed "Japanese" due to their introduction by Japanese firms--from spot-market relationships in customs data. We show that the use of "Japanese" relationships varies intuitively across trading partners and products and find that the use of such relationships increases after a reduction in the possibility of a trade war. Extending the standard general equilibrium trade model to encompass potential trade wars and relational contracts, we estimate that eliminating "Japanese" procurement reduces welfare about a third as much as moving to autarky.

Research on the Potential of China’s Export of Edible Fungus Products to ASEAN

With the rapid development of China’s agriculture, edible fungus products have been highlighted in the trade as it occupies an important position owing to their diverse advantages. The “Belt and Road” initiative and the construction of the “China-ASEAN Free Trade Area” promote the bilateral trade between China and ASEAN, which requires studying the potential of exporting Chinese edible fungus products to ASEAN. Therefore, the current situation and existing problems of the export of fungus products were explored in three dimensions: trade scale, product type, and country structure. The panel data from 9 countries (China and ASEAN countries) from 2003 to 2022 was analyzed using the Stochastic Frontier Gravity Model to investigate factors affecting the export volume and potential of edible fungus products. The spatial value of trade potential was estimated and suggestions were made for Chinese edible fungus products exported to ASEAN.

The Influencing Factors of Exports of Sichuan under the Belt and Road Initiative: An Empirical Study Based on the Extended Trade Gravity Model

This study investigates the influencing factors of exports in Sichuan Province in the context of the Belt and Road Initiative. Based on the panel data of Sichuan's exports to fifty-three countries along the Belt and Road from 2011 to 2022, this study tests eleven potential influencing factors using an expanded trade gravity model. And the results show that the economic development level of both Sichuan and the Belt and Road member countries have significant positive correlation with the export volume; while the distance, foreign merchant participation in Sichuan, exchange rate of RMB and human capital level of Sichuan are significantly negative. Moreover, the trade potential coefficient of each Belt and Road member country is calculated to decide the trade type. Lastly, the c onclusions and strategical suggestions are put up to further explore the trade potential with Belt and Road countries and expand Sichuans export volume.

Electricity grids and geopolitics: A game-theoretic analysis of the synchronization of the Baltic States’ electricity networks with Continental Europe

Can supply of electricity be used as an energy weapon? This question rises in importance as more countries trade electricity across borders to smooth out grid stability issues and improve cost-efficient dispatching across large geographic areas. In the context of the Baltics’ disentanglement from the BRELL (Belarus, Russia, Estonia, Latvia, and Lithuania) electricity grid and synchronization with Europe, we develop a game-theoretic model and examine the strategies of the involved parties in light of the potential for electricity trade to be used as a geopolitical weapon. We conceptualize the process of the synchronization project as a sequential-move game between three actors (Russia, the Baltic states, and the EU-U.S.). Our findings suggest that, in large part due to reputational concerns, Russia is unlikely to cooperate in the synchronization process. Instead, our model predicts that Russia will not wait for the Baltic states to complete their synchronization with the European grid before disconnecting them from the BRELL system. Direct Russian cyberattacks against Baltic grids are not implemented and the Baltics do not have to make concessions, provided that Western allies signal a strong likelihood of deterrent retaliation. We offer policy recommendations for Europe, Russia and the Baltic states.

Estimating the Expected Commercial Potential of Saudi Date Exports to Middle Eastern Countries Using the Gravity Model

Date production farms account for 10% of total income in the agricultural sector. Although Saudi exports of dates reach many countries, they are still of lower quantity compared to the size of their production. This study investigates the possibility of expanding external marketing of date exports by increasing the marketing efficiency of the existing market, which is expected to lead to increased returns. Therefore, this research uses the gravity model to identify the most critical factors affecting Saudi date exports to Middle Eastern countries. The results indicated the positivity of the per capita GDP in Saudi Arabia, the common border in influencing the increase in date exports, and the opposite effect of membership in the Gulf Cooperation Organization (GCC). In estimating the potential and expected trade capabilities with the Middle Eastern countries, the study results show that the actual value of date exports to the countries of the Middle East represents about 83.37% of its expected potential date trade, and it is possible to increase the export value by 16.63%, or USD 12.75 million. The study provides recommendations to improve date trade further.