Trade Integration Process Research Articles

How Can Tariff Elimination and Trade Facilitation Affect East African Economies?

The article assesses the potential economic implications of tariff elimination and trade facilitation (TF) in the context of the African Continental Free Trade Area (AfCFTA) agreement for East Africa. Using the most recent GTAP database and computable general equilibrium model, the article provides additional evidence on the socio-economic benefits of the ongoing trade integration process. The results show that the elimination of tariffs would improve economic dynamism in most sectors of activity and household consumption. However, the elimination of tariffs alone would not be sufficient to achieve a significant level of trade integration. From a policy perspective, although a gradual implementation of tariff elimination is more beneficial for the zone, the results highlight the relevance of combining tariff elimination with complementary TF reforms. These reforms amplify the socio-economic gain from the AfCFTA. JEL Codes: F13, F14, F15, E23, C68

Monetary policy between Mexico, United States of America, and Canada

This article examines the evolution of the monetary policy of the economies that make up the North American Free Trade Agreement (NAFTA), for the period 1980-2015. Based on an empirical analysis, which includes the scrutiny of stylized facts of the monetary variables of Canada, the United States and Mexico, causality tests Granger quality and error correction models (VEC), it is concluded that, in parallel to the trade integration process of these countries, the monetary side of NAFTA exhibits divergences and convergences that imply an asymmetric integration of the economy Mexican with the United States and, to a lesser extent, with Canada.

Monetary Policy between Mexico, United States of America, and Canada

This article examines the evolution of the monetary policy of the economies that make up the North American Free Trade Agreement ( NAFTA ), for the period 1980-2015. Based on an empirical analysis, which includes the scrutiny of stylized facts of the monetary variables of Canada, the United States and Mexico, causality tests Granger quality and error correction models ( VEC ), it is concluded that, in parallel to the trade integration process of these countries, the monetary side of NAFTA exhibits divergences and convergences that imply an asymmetric integration of the economy Mexican with the United States and, to a lesser extent, with Canada.

PRIORITY FORMATS OF TRADE INTEGRATION OF COUNTRIES

Abstract. The study is devoted to the problem of trade integration of countries, in the context of globalization, the development of foreign trade is one of the main factors in the competitiveness of the national economy. Partnership with the EU is strategic for Ukraine. The aim of the study is to reveal the key characteristics and manifestations of the asymmetric development of trade integration of Ukraine and the EU and to identify priority areas of trade and economic cooperation. The object of the study is the process of trade integration of countries on the example of Ukraine with the EU. Methods, measures and tools of trade and economic cooperation between Ukraine and the EU in the context of integration are the subject of the study. The study is devoted to the characteristics of the partnership between Ukraine and the European Union in the context of the Deep and Comprehensive Free Trade Area (DCFTA), which came into force on September 1, 2017 and is part of the Association Agreement. The dynamics of indicators of Ukraine’s economy development and foreign trade sphere is quantitatively estimated. An analysis of relations between Ukraine and the EU was conducted and it was concluded that the EU is a priority partner of Ukraine, as on average 42% of Ukraine’s goods and services are exported to Europe in recent years. The existing asymmetries of trade and economic integration of Ukraine and the EU, which are manifested in technological disproportion, raw material exports from Ukraine and high-tech imports, a negative balance and the constant growth of the negative trade balance of Ukraine are pointed out. To assess the effectiveness of Ukraine’s trade policy measures in terms of the DCFTA, a gravity model was built, which allowed to state that bilateral trade between the EU and Ukraine is more elastic than the dynamics of economic growth of EU GDP and less elastic than the dynamics of Ukraine’s GDP. The study confirmed that the DCFTA between Ukraine and the EU has already significantly affected the growth of trade turnover between these countries. The main integration opportunities and threats of cooperation between Ukraine and the EU have been identified. The main tools of trade integration are highlighted and the priority goals of trade integration of countries are identified in our study of Ukraine and the EU. Keywords: trade integration, trade policy, DCFTA, FTA, globalization, international trade. Formulas: 2; fig.: 1; tabl.: 4; bibl.: 19.

DOMINANTS OF INTERNATIONAL TRADE INTEGRATION DEVELOPMENT

Introduction. The dynamic development of trade and integration processes, their expansion and deepening necessitate the identification of key dominants of this process and the factors that influenced their formation and development. The purpose of the study is to determine the modern dominants of the development of international trade integration and to identify the factors of their formation. Results. The article identifies and substantiates the key dominants of international trade integration, namely: transgeographic spatial localization, which is manifested in the emergence of international trade integration at the interregional and sometimes intercontinental level; trade liberalization, which takes place at both the global and regional levels and is manifested in the reduction of tariffs, removal of non-tariff barriers and the growth of the total number of regional trade agreements; multilevel trade integration - modern integration processes cover not only countries, subregions and regions, but also corporations, small and medium enterprises through their inclusion in global value chains; multilevel implementation of trade integration processes requires the formation of a multilevel regulatory system. The dynamics of the share of exports of interregional and intercontinental trade and integration associations in world exports of goods and services is analyzed. The determining factors of the dominants of international trade integration are singled out and classified. It is determined that economic factors, to a greater extent, affect trade liberalization and multilevel integration processes. Conclusions. Integration processes are an integral part of modern global economic development. They are developing quite dynamically at all levels. Among the modern dominants, it is necessary to single out transgeographic spatial localization, trade liberalization, multilevel trade integration, formation of a multilevel system of regulation. However, it should be added that in a turbulent economic environment, which can generate or transform modern factors, there is a transformation of the dominants of international trade integration. Keywords: international trade integration, trade liberalization, multilevel international trade integration, regional trade agreements, integration associations.

EUROPEAN UNION AND TRADE INTEGRATION: DOES THE HOME BIAS PUZZLE MATTER?

This paper analyses the size of the border effect or home bias within the European Union (EU) with the aim to quantify its impact in the trade integration process which started in 1992. The gravity model serves as a general framework where the use of sectoral data allows obtaining a more accurate measure of the border effects. The econometric analysis applied to a gravity model that contains a high disaggregation in the data introduces heteroskedasticity problems together with the presence of zero values, therefore, in order to obtain consistent estimates, the use of the Poisson Pseudo-Maximum Likelihood estimation method is recommended. Our results show that the bilateral trade ?ows depend upon the size and proximity of the trade partners, together with other variables as adjacency or language. Evidence in favour of a positive and diminishing border effect has been found for the period 1995-2006 and it accounts for 20% to 22% within the EU-19.

Trade integration in the European Union: Openness, interconnectedness, and distance

This article presents a set of indicators to measure regional trade integration, focusing on the case of the European Union. We propose measures of openness, connectedness and integration which are tuned to evaluate not only how these components contribute to the advance of international integration, but also to control for the potential threat posed by the proliferation of regional trade agreements to trade globalization. Although this and related questions have been examined from several perspectives, the present article explicitly attempts to quantify how regional trade agreements either intensify or thwart trade globalization. Results show that the process of trade integration has intensified among European Union members, whereas integration with non-members is advancing slowly. Our indicators provide a more complete view of the differing speeds of integration, which depend on whether the component of integration considered is openness or connectedness.

Productivity Growth and Value Chains in Four European Countries

Advanced economies have been witnessing a pronounced slowdown of productivity growth since the global financial crisis that is accompanied in recent years by a withdrawal from trade integration processes. We study the determinants of productivity slowdown over the past two decades in four closely integrated European countries, Austria, Denmark, Germany and the Netherlands, based on firm-level data. Participation in global value chains appears to have affected productivity positively, including through its effect on TFP when facilitated by higher investment in intangible assets, a proxy for firm innovation. Other contributors to productivity growth in firms are workforce aging, access to finance, and skills mismatches.

Productivity Growth and Value Chains in Four European Countries

Advanced economies have been witnessing a pronounced slowdown of productivity growth since the global financial crisis that is accompanied in recent years by a withdrawal from trade integration processes. We study the determinants of productivity slowdown over the past two decades in four closely integrated European countries, Austria, Denmark, Germany and the Netherlands, based on firm-level data. Participation in global value chains appears to have affected productivity positively, including through its effect on TFP when facilitated by higher investment in intangible assets, a proxy for firm innovation. Other contributors to productivity growth in firms are workforce aging, access to finance, and skills mismatches.

ASYMMETRY OF THE DEVELOPMENT OF THE WORLD AGRICULTURAL MARKET

It was determined that urgent in the 21st century the problem of food security remains quite due to the dynamic of global and trade-integration processes, causing contradictions and asymmetries of economic development. These processes are rather ambiguous because they exert varying effects on countries, depending on the level of their economic development. Such imbalances have led to asymmetries in the development of the World market for agricultural products. It was noted that asymmetries in the agrarian market are a clear manifestation of imbalances in the World economy, which have arisen due to differences in the levels of economic development and the potential of individual regions and countries.The purpose of the work was to reveal the key characteristics and manifestations of the asymmetric development of the World market for agro-food products and to justify the mechanisms for achieving equilibrium. The purpose of the scientific research is to substantiate the impact of asymmetries on the World economic system, to determine their role in the development of the World agro-food market, their characteristics, to study the structure of the global market.The following methods of scientific research were used to achieve the goal and to solve the tasks of the article: system-structural analysis of economic processes and phenomena, method of quantitative and qualitative comparisons, tabular method of calculating the degree of influence. A review of the scientific literature was also conducted; the statistical reports and programs of development of global international institutions were analyzed; approaches to leveling the negative impact of asymmetries in the development of the agrarian market were determined.The scientific novelty of the obtained results is to study the World agro-food system, to identify and to structure the main asymmetries of development, the determinants of their deepening, to substantiate the directions of their overcoming.It is substantiated that among the main mechanisms of overcoming the asymmetric development of agro-food market the most effective one is the activity of international organizations, mainly concentrating on the development and implementation of local and global projects and programs. In order to overcome the threats and risks arising from the asymmetric development of the agri-food markets, it is advisable to create international initiatives to support the agricultural sectors and agricultural enterprises of various organizational and legal forms. An effective mechanism to counterbalance the negative impact of asymmetries is to reduce the inequalities in the economic development of individual regions and countries through the implementation of development programs.

Trade Shocks, Growth and Resilience: Eastern Europe’s Adjustment Tale

EU11 economies are among the most open economies globally. The process of trade integration and the creation of GVCs also drove a significant inflow of FDI into these countries. While integration into the EU and FDI have enhanced their growth potential, these developments have also made them more vulnerabilities to external shocks. During the Great Recession, these countries have experienced major volatility with long lasting social and political impact. Looking forward, domestic and EU-level reforms should focus on mitigating these vulnerabilities by increasing economic and social resilience.

Trade integration and regional income disparities in a growth model with the service sector and footloose capital

ABSTRACTThis paper proposes a North–South growth model of endogenous industry location which is consistent with recent empirical work showing that regional income disparities have increased in many countries with the process of trade integration. The model incorporates a service sector that benefits from intersectoral knowledge spillovers from the manufacturing sector. We find that, when these spillovers are local, trade integration leads to an increase in interregional real income inequality.

Disappearing Borders in the Visegrad Countries

The aim of this paper is to evaluate the trade integration process of the Visegrad countries from a special point of view, namely by estimating border effects in the countries. The regressional analysis run with two different estimators (OLS vs. PPML) on two different model specifications suggests that between 1995 and 2011 the V4 countries were integrating continuously into the Single Market of the European Union. The results also show that the size of border effect is fairly sensitive to the estimator and particularly to the specification chosen by the researcher. According to the country-level estimation, Hungary seems to be the most integrated country getting the lowest home bias parameters followed by the Czech Republic, Slovakia and Poland, respectively.

Business Cycles in the Maghreb : Does Trade Matter?

In this paper, we test the Frankel & Rose hypothesis of Optimum Currency Area for the Maghreb countries by demonstrating how the co-movements of outputs would respond to a trade integration process. In particular, by using panel analysis over the period 1980~2010, we evaluate if a monetary integration project across these countries is endogenous. Our main result suggests that while trade intensity may help to harmonize business cycles, the magnitude of this harmonization is lower for the Maghreb countries than for industrial countries. This result is robust even when we take into consideration many control variables including intra-industry trade, economic diversification, and financial integration. Therefore, we suggest that an acceleration of trade linkage as well as product diversification should take place prior to any move towards monetary union across the Maghreb countries.

Direct Bilateral Free Trade Agreement (BFTA) to ASEAN's Intra-Regional Trade & lndividual Country's Investment Creation: The Case of Indonesia, Malaysia & Thailand 1988-2008

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The Border Effect and the Nonlinear Relationship between Trade and Distance

AbstractThe border‐effect literature confirms that sub‐national units tend to trade more with the rest of their country than with foreign markets. However, it is likely that ongoing processes of trade integration will generate a trade‐off between internal and external integration for sub‐national units within countries. In this paper we estimate the internal and external border effect, using a novel dataset that captures intra‐ and international shipments between Spanish regions and regions in eight European countries with alternative treatments of the nonlinear relationship between distance and trade.

Regional Economic Integration in South Asia: Prospects and Challenges

Realizing its importance, the South Asian region has also embarked upon various processes of regional economic integration. However, the South Asian regional integration process is fraught with difficulties, especially due to a lack of understanding about the very economics of regional economic integration. Thus, this paper dwells upon some of the conceptual issues pertaining to regional economic cooperation in general and specific to the South Asian region. It also documents the progress made in SAARC, the SAFTA trade liberalization and associated mechanisms alongside the nature of safeguards provided for. In this respect, developmental perspectives of safeguards are put forth. Some fresh insights on the status of SAARC trade integration process in a dynamic setting are also brought out. The paper also highlights the potentials for deeper economic integration in the region. The paper further illustrates some of the areas wherein project-based cooperation is feasible in the region. Finally, the paper makes an objective assessment of the regional integration process and identifies certain policy-induced and structural constraints that have important policy-implications.

Financial and trade integration in the EU countries

Because of the creation and enlargement of the Eurozone, the importance of monetary integration is increasing and is the subject of a number of theoretical and empirical studies. The adoption of a common currency has to be accompanied by financial market integration. The aim of the paper is to assess the relationship between financial and trade integration in the EU member countries (divided into three subsamples: EU27, EU10, and EU17) over the period 1993–2012 (and two subperiods 1993–2007 and 2008–2012). We use quantity-based measures of financial integration derived from the countries’ international investment positions with a view to the foreign trade and the method of correlation analysis (including the moving correlation method). We conclude that the progress in financial integration was smaller in the EU10 countries compared to the EU16 countries, i.e. the pace of financial integration was higher in the EU16 countries than in the EU10 countries. The process of trade integration in all EU countries was not as fast as the process of financial integration. We also conclude that there is a linear association between financial and trade integration in the pre-crisis period (1993–2007), especially in the EU10 countries (compared to the EU16 countries). However, this relationship was seriously weakened by the financial crisis. Financial and trade integration are interconnected processes and should not be assessed separately. However, world trade (and thus financial integration) can be undermined by limiting trade finance as a result of tightening financial regulation and supervision after a decade of loose regulation and supervision (e.g. by the implementation of the Basel III capital framework).

Trade integration and the skill premium: Evidence from a transition economy

Relatively little attention has been given to documenting the evolution of the skill premium (defined as the ratio of the wages of skilled to unskilled workers) in the economies of Central and Eastern Europe, most likely due to the lack of readily available data. In this article, we first uncover the patterns of the skill premium for a subset of transition economies, and then we turn our focus to the case of Slovenia, where we highlight the negative correlation between the skill premium and international trade after 2000, when Slovenia’s trade with its largest partner, the European Union (EU), increased and intensified. To conduct our analysis, we develop an applied general equilibrium model, and combining a Social Accounting Matrix, Household Budget Surveys, and the EU KLEMS Growth and Productivity Accounts database, we calibrate it to match the Slovenian data. We next perform a numerical experiment that consists of Slovenia joining the EU and quantify the impact of this trade integration process on the skill premium. We also conduct additional sensitivity experiments to quantify how our model’s predictions vary with some of the model’s parameters, including the role of sectoral productivity growth. We find that trade liberalization leads to a fall in the skill premium of roughly up to 4.5%. This implies that our model is able to account for approximately 46% of the actual decrease in the skill premium observed in Slovenia for our period of analysis.

Agricultural Productivity in the WANA Region

The interest of governments, international organizations, NGOs and the general public has recently been aroused by studies considering the use of existing agricultural technology, the use of innovations in such technology and the production of agricultural goods. The attention received by such studies has grown as a result of an unprecedented wave of trade liberalization in the world (involving bilateral, regional and multilateral trade-integration processes), coupled with concerns over food security, high rates of population growth and the use of limited and frequently degraded natural resources. In this context, the Malmquist Index, used to measure agricultural productivity, is a powerful tool, providing insights into whether or not a country is approaching what may be termed “best practice” by using and disseminating existing technology (efficiency change), and/or by innovating technology (technical change). Using the Malmquist Index on a sample of 12 countries within West Asia and North Africa (WANA) indicated that, between 1961 and 1997, Turkey, Tunisia, Syria and Algeria (in that order) were the “most productive” countries. Following them, in terms of agricultural productivity, were Iran, Egypt, Jordan and Morocco, while Pakistan, Sudan, Yemen and Ethiopia were the “least productive” countries of the 12 considered. Recurring negative results, with respect to both technical change and efficiency change, in Ethiopia, Sudan, Pakistan and Yemen, suggest that governments and national and international organizations and research institutions should make greater efforts to strengthen agricultural research and extension services if food security and competitiveness are to be improved.