Recent Trade Research Articles

Free economic zones as a modern development institution in international business

An analysis of the activities of leading world and domestic companies from 1995 to 2020 showed that the transformation of the global economic order, sanctions, wars, the imposition of protective duties for more recent key trading partners, and the reorientation of major sales markets lead to new rules for conducting international business between countries and companies who participate in world trade. The object of this article is free economic zones as an institution for the development and support of companies in international business. The subject of the study is the various forms and methods provided by the free economic zones that ensure the competitiveness and promotion of companies in the global trade in goods and services. The result of the study is to identify a new development vector for Russian companies participating in international business by using the potential of free economic zones. The application of existing mechanisms and proposing new mechanisms for supporting companies in free economic zones will become an important platform for business transformation, the search for new partners, and the establishment of cooperative ties with other participants in international trade. The results can be used by domestic companies participating in international business to promote them in new regional and global markets by using the support mechanisms provided by this development institution.

Riding the storm out: the short- and long-term effects of export promotion on firm performance during an economic downturn

This study evaluates the short- and long-term impact of export promotion by focusing on a Spanish program to support beginning exporters. Based on the observations of 1884 firms over the period of 2005-2014, the findings demonstrate that the program had a positive impact on participants' export and economic performance, and the effects were persistent. The paper concludes that focusing export promotion towards SMEs and beginning exporters and ensuring a balanced mix of various forms of assistance are critical to the effectiveness and lasting effects of export promotion. It also shows that, during the recent great trade collapse starting in 2008, firms using this type of assistance outperformed firms in the control group and the national average regarding both export growth and survival rates. These results are encouraging regarding the countercyclical potential of export promotion. The findings have significant implications for scholars, managers and policymakers.

COVID-19, Sino-Nigeria Economic Relations and Consequences of Trade Deficits in Nigeria

The COVID-19 Pandemic has disrupted the world economic and diplomatic relations between nations. The study investigates the effect of COVID-19 Pandemic on the political and economic ties between China and Nigeria. The consensus from recent literature shows that the Coronavirus pandemic has adversely affected economic and diplomatic relations between the two states. In particular, it has exposed Nigeria’s over-reliance on importation from China. A mixed methodology was used to perform analysis of recent and past trade relations between China and Nigeria. We analyzed secondary data from UN COMTRADE on past trade relations with China. The outcome of the study shows that Nigeria trade relationship with China is booming. However, in the last decade, Nigeria has imported more foreign products from China than exportation. We also outline a necessary readjustment for trade balance to ensure an equal exporting opportunity to China to boost the Nigeria economy. It is crucial to stabilize relations between China and Nigeria as both countries need each other towards Sino-Nigeria Economic partnership.

Trade Friction and Chinese Innovation: A Case Study of the Semiconductor Industry

Major Chinese innovative technologies still depend on imported foreign core technologies. This dependence could affect sustaining growth in technological innovation for the Chinese Hi-Tech industry, which is one of the areas that has been most affected by the recent US-China trade conflict. The research explores if there is an impact of tension in trade scene on innovation in core technologies from the perspective of Hi-Tech industry experts in China. The method used a combination of semi-structured interviews and questionnaires addressed to experts and managers in the Chinese Hi-Tech industry. The statistical analysis used regression analysis of the experts’ answers where the findings propose a possible positive impact on endogenous innovation in the long term if it is combined with government policies that enhance innovation and increase R&D expenditures. The paper also highlighted the challenges that affect innovation in this industry and stresses the importance of the role of the entrepreneurial state that helped China to achieve breakthroughs in other domains. A case study of the semiconductor industry was analysed as a far-reaching endeavor, taking into account the scale of the challenges and the way forward for this significant core technology on which all of China’s Hi-Tech industries and exports depend.

Ekonomska konfrontacija SAD i Kine - paradoksalni rezultat

The paper analyzes the confrontation between the United States and China in the recent trade war that resulted in the new trade deal between the two countries at the beginning of this year. After giving a short background, the paper gives an overview of the U.S. - China economic relations, the trade war and the results of the new trade deal. The general conclusion is that the trade war initiated by the United States through the introduction and raising of tariffs was ineffective with the U.S. bearing the costs. The overambitious quantitative goals of the new trade deal are unrealistic and will probably not be achieved. The trade war also undermined the international order of which the rules of conduct of international trade are a significant part. The trade war as well as the U.S. opposition to the appointments of appellate judges in the WTO have undermined this organization as the institutional foundation of international trade. Paradoxically, in order to oppose what are perceived as unfair trade practices within the system of free trade by China, the U.S. has adopted state-managed trade. The new trade deal with China will only strengthen the U.S. interdependence with China as well as the Chinese system of state capitalism that in the U.S. view was seen as the root of the problem in its trade with China. In short, the trade war and the resulting deal were self-defeating in terms of the goals that they were supposed to achieve.

Poverty and Economic Dislocation Reduce Compliance with COVID-19 Shelter-in-Place Protocols

Shelter-in-place ordinances were the first wide-spread policy measures aimed to mitigate the spread of COVID-19. Compliance with shelter-in-place directives is individually costly and requires behavioral changes across diverse sub-populations. Leveraging county-day measures on population movement derived from cellphone location data and the staggered introduction of local mandates, we find that economic factors have played an important role in determining the level of compliance with local shelter-in-place ordinances in the US. Specifically, residents of low income areas complied with shelter-in-place ordinances less than their counterparts in areas with stronger economic endowments, even after accounting for potential confounding factors including partisanship, population density, exposure to recent trade disputes, unemployment, and other factors. Novel results on the local impact of the 2020 CARES Act suggest stimulus transfers that addressed economic dislocation caused by the COVID-19 pandemic significantly increased social distancing.

The UK’s Post-Brexit Investment Policy: An Opportunity for New Design Choices

Brexit presents an important opportunity for the UK to reimagine its investment policy. The UK formulated its independent investment policy, separate from the European Union’s, more than a decade ago. Since then, State practice relating to investment protection, facilitation, liberalisation and dispute resolution has changed. New model bilateral investment treaties (BITs) and other recent international investment agreements offer innovations. The UK can learn from these developments in formulating its post-Brexit investment policy. The UK’s recent policy documents suggest that its investment policy will closely track its historical practice. The UK has historically offered investment protection to foreign investors in its BITs. Investors have been allowed to initiate arbitration against States. However, the UK’s current negotiations with the EU suggest that investor protections may be more limited. This article begins by describing the UK’s existing trade agreements and recent trade practice as an EU Member State. It also describes the anticipated impact of Brexit on these arrangements and practices. The next section explains the likely direction of the UK’s future investment policy, as indicated in recent policy documents. The final section offers ideas for selected design choices that the UK could make in formulating its investment policy.

Quality of Independent Expert Reports Used in Australian Takeovers

In this article, the authors investigate whether there has been an improvement in the quality of independent expert reports following ASIC's revisions to RG111 and RG112. These revisions include additional disclosures on the valuation methodologies used and explanation if the valuation was materially different from the company's recent trading price. It was expected that these revisions have led to an improvement in report quality where quality is determined by the accuracy of the expert's valuation. Results show that after the 2011 revisions, valuations became more accurate based on updated measures of report quality. However, experts with higher fees did not provide higher quality reports on average. The findings indicate that the independence provisions within the new rules were effective. Furthermore, they warn commissioning firms that higher fees are not necessarily indicative of higher quality reports.

Gravity models in international trade analysis: testing the country similarity theory 50 years

The article assessed the potential use of gravity models to test the impact of various socio-geographical factors on international and inter-regional trade. The potential of gravitational modeling was estimated based on testing the theory of Linder’s Country similarity theory on recent trade data. This theory was one of the key theories of international trade in the post-war period. The classical gravity model of international trade can be used to test the change in the importance of the country similarity factor over a certain time period. The gravity model will demonstrate more significant results compared to its classical version (excluding the country similarity factor) in the case of a positive effect of the similarity factor on the volume of bilateral trade between countries. The analysis of recent trade data allowed us to assess the extent of change in the country similarity factor over the past 70 years. This period was accompanied by high growth in international trade, as well as the involvement of developing countries in the international division of labor. Vigorous market competition for the production of industrial goods led to the fact that manufacturers were forced to cut costs by moving their main production capacities to developing countries, which significantly differ from them in their level of economic development. The country similarity factor has lost its significance in this new system of international trade relations. As a result, at present the country similarity factor is not a key factor explaining the volume of trade relations between different countries.

International Trade Policy During COVID-19

Recent trade policy implemented to avoid shortages of essential medical equipment amid COVID-19 has been related to the country’s trade imbalances in these goods.

한·중미 5개국 FTA 발효에 따른 중미시장 활용방안(Trade and Investment Implications of Korea-Central America Free Trade Agreement)

한·중미 5개국 FTA 발효에 따른 중미시장 활용방안(Trade and Investment Implications of Korea-Central America Free Trade Agreement)

Cyclical and Structural Aspects of the Recent Export Trends: Evidence from Korea

Purpose – This paper investigates the recent trade collapse, recovery, and prolonged slowdown to shed light on the discussions about whether the current slowdown is structural or cyclical. I examine structural, cyclical, and heterogeneous aspects of the recent trade trends using detailed statistics of a small open economy, South Korea, whose economic success and growth have been heavily dependent on exports. Design/methodology – I use both aggregated and disaggregated trade statistics of South Korea. I apply the following methodologies: 1) I decompose the trade growth into the extensive and the intensive margin and observe the effect of prices over time. 2) I estimate the trade-income elasticities focusing on the world’s import demand, separately for goods from the world and from Korea. 3) I compare the drop in goods exports in slowdown and trade collapse, which are the two unusual periods in the recent history when world trade has substantially dropped altogether. Findings – I show that while the last drop of trade after 2015 has cyclical aspects, there is evidence that the continued slowdown from 2012 is structural: 1) the so-called ‘China factor’ is found in the analysis of trade-income elasticity of the world and China for imports from Korea. 2) The bilateral trade barriers between Korea and its principal trading partners are universally tightening. 3) Firm sizes, destination countries, and the mode of transactions affect disaggregated trade flows during the slowdown periods. Originality/value – This paper contributes to the debate regarding whether the current trade slowdown is structural or cyclical. I provide two concrete evidence that the export drop in 2015 stems from low oil prices: one is the divergence of Korean export value index from its export quantity index, which started in late 2014 when oil prices plunged. I also contribute to the literature by providing evidence that Korea’s trade barriers with important trading partners are steadily increasing since 2012 as the protectionist measures toward Korea’s export products are steeply increasing after the global financial crisis.

IMF Research Bulletin, Fall-Winter 2019

It has been two years since the trade tensions erupted and not only captured policymakers’ but also the research community’s attention. Research has quickly zoomed in on understanding trade war rhetoric, tariff implementation, and economic impacts. The first article in the December 2019 issue sheds light on the consequences of the recent trade barriers.

Trade Models and Macroeconomics

This paper discusses some macro links that are missing from trade models. A multicountry macroeconometric model is used to analyze the effects on the United States of increased import competition from China, an experiment that is common in the recent trade literature. In the macro story a fall in Chinese export prices is stimulative. Domestic prices fall, which increases real wage rates and real wealth, which increases household expenditures. In addition, the Fed may lower the interest rate because of the lower prices, which is stimulative. Trade models do not have these channels, and they likely overestimate the negative effects or underestimate the positive effects on total output and employment from increased Chinese import competition. They lack some important aggregate demand channels, which are not likely second order.

CETA, an Innovative Agreement with Many Unsettled Trajectories

Can trade agreements integrate innovations and progressive dispositions? In this era of fast changes linked to globalization and technological changes which fuel discontent, this question has emerged in the literature and in the negotiation processes of many recent agreements. In the first section of this article, we will introduce the structural changes that are beneath the surface of recent trade agreements using a typology of trade agreements enabling comparative analysis. In the second section, we will discuss some of the most important innovations of the Comprehensive Economic and Trade Agreement (CETA) negotiated by Canada and the European Union. In the third section, we will see that part of the innovative nature of CETA, its evolutionary nature, brings many unsettled trajectories. In the fourth section, we will discuss how CETA is further unsettled in its trajectory because it puts into relation two distinctive integration models highlighted in our typology, one developed in Europe and the other in North America and, furthermore, because of the more general context that also puts into play Asia and China as emerging shapers of economic trade agreements.

On the “Invisible Inventory Conundrum” in RFID‐Equipped Supply Chains: A Data Science Approach to Assessing Tag Performance

Recent trade reports suggest that RFID implementation continues to lag lofty projections. A primary concern is that, despite the high cost of implementing RFID systems, realized read‐rates fall short of expectations. This results in the invisible inventory conundrum whereby tagged merchandise may still not be accurately represented in inventory records. Drawing from data science to address this issue, we ask: How can directed data mining models be used to identify laboratory test performance criteria for RFID tags that operate reliably across the idiosyncratic facilities (i.e., unique DCs, warehouses, and stores) that comprise apparel retailers’ supply chains? We investigate this question by advancing a methodology that integrates laboratory test performance data, field tests of RFID tags fixed to apparel items and scanned under normal operating conditions, and the application of five directed data mining models to the integrated data set of laboratory and field test results. Our analyses of 45,416 observations show that two directed data mining models may identify—with near‐100% accuracy—laboratory test criteria that discriminate tags having 99% or greater read‐rates in the field. Accordingly, our study validates a generalizable methodology for identifying technical performance standards for tags that operate reliably within apparel retailers’ supply chains.

Defending the Rule-based Trading Regime: The Multilateral Trading System at Risk and Required Responses

The current trade turmoil is not limited to negative economic effects stemming from the series of recent trade measures erected by the United States as part of the escalating U.S.–China trade war. The more serious issue that will unfold in the middle to long term is the potential collapse of the rule-based trading regime. The weakening of the multilateral trading system centered by the World Trade Organization (WTO) seems to continue. East Asia has been one of the largest beneficiaries of the rule-based trading regime in its course of extending and deepening international production networks and must now take proactive moves to defend and preserve this stable economic environment. Two crucial tasks in the preservation of the WTO are efforts to maintain the functionality of the dispute settlement mechanism and the revival of the WTO as a forum for future trade negotiations. At the same time, East Asia must develop a network of mega–free trade agreements (FTAs) to partially supplement a possible loss of the multilateral framework.

Management, productivity and firm heterogeneity in international trade

Purpose This paper aims to analyse the relevance of management and productivity in the behaviour of firms in international trade. Design/methodology/approach Using a survey of Spanish manufacturing firms, the authors use a management quality index to serve as a proxy for the good management practice of the firm. Findings The results demonstrate that exporter and multinationals firms are more productive and better managed than domestic firms. Furthermore, in the periods in which switcher firms decide to export or to invest abroad, they are better managed but are not more productive than in the rest of the periods. Finally, results indicate that regardless of its positive relationship with productivity, management also has a direct impact on the firm’s probability of exporting and involving in foreign direct investment. Originality/value This paper aims to reconcile the recent international trade literature, which focusses on the role of productivity heterogeneity in international trade, with the international business literature, concentrated on depicting the key management practices that impact internationalization.

Market Uncertainty and International Trade

We study the consequences of market uncertainty on international trade. An increase in foreign market uncertainty dampens China's aggregate exports on both the extensive and intensive margins. The adverse effects are more pronounced in industries facing tighter financial constraints than in others. We propose a dynamic trade model to explain the facts. Greater uncertainty depresses a firm's expected value of exporting and borrowing capacity, leading to fewer exporters and a smaller average size of exports. Under calibrated parameters, the uncertainty shock accounts for a sizeable fraction of China's trade collapse in the 2008 financial crisis and the recent trade war.

Addressing Domestic Regulation Affecting Trade in Services in CETA, CPTPP, and USMCA: Revolution or Timid Steps?

Abstract The number of international agreements purporting to liberalise trade, mainly focused on reducing protectionist measures through the imposition of general principles, has increased greatly over the last 25 years. More recently, the United States and the European Union (EU) concluded comprehensive agreements covering trade in goods, trade in services, and foreign investment. This article inquires whether, and the extent to which, such agreements represent a departure from previous practice. It focuses on (a) the instruments employed to address domestic regulation affecting trade in services and (b) three specific agreements concluded between 2016 and 2018: the EU-Canada Comprehensive Economic and Trade Agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and the United States-Mexico-Canada Agreement. While these recent Preferential Trade Agreements put forward novel approaches to regulatory diversity affecting trade in services, it is too early to ascertain whether these will have any ground-breaking impact in terms of services trade liberalisation.