Trade Arrangements Research Articles

Volatility and Sluggishness across SGX MSCI Taiwan Index Futures and Cash Markets

While the law enabling a futures exchange to operate in Taiwan was enacted in March 1997, it was not until July 1998 that Taiwan Futures Exchange (TAIFEX) started trading its first futures contract. However, Singapore Exchange Derivatives Trading Limited (SGX-DT) launched the first exchange-traded stock index futures on Taiwan stocks on January 9, 1997. With its first-mover advantage and international financial strengths, SGX MSCI Taiwan stock index futures contracts and related trading arrangements provide equity market investors with excellent hedging, speculation and arbitrage opportunities never existed before. This paper uses earlier daily SGX-DT MSCI Taiwan cash index rates of return to investigate the influences of SGX-DT futures trading on Taiwan's cash and futures markets, and tests both the volatility and sluggishness on the cash market before and after stock index futures listing. It is found that the price of stock index futures is more volatile than the corresponding cash index. Furthermore, the introduction of stock index futures contracts has certain influence on the volatility and sluggishness of the cash market. Other institutional factors affecting index futures are also discussed.

Comment on “International and Regional Cooperation: Asia's Role and Responsibilities”

Comment on “International and Regional Cooperation: Asia's Role and Responsibilities”

MAKING EAST ASIAN REGIONALISM WORKS

For the past few years, regionalism has been progressing in East Asia with the likes of Cina, Japan, and Korea (CJK) as the most prominent actors. Unfortunately, with the absence of trade arrangement amongst the CJK, the present regional trade scheme is not sufficient to reach sustainability. This paper uncovers the inefficient scheme through Engle-Granger Cointegration and Error Correction Mechanism. Moreover, the paper underlines the importance of triangular trade agreement for accelerating the phase of growth in CJK which eventually create a spillover effect to East Asia as a whole. Employing Two Stage Least Squares in a static panel fixed effect model, the paper argues that the spillover effect will function as an impetus for creating region-wide FTA. Furthermore, the paper also identifies a number of economic and political factors that can support the formation of East Asian Regionalism.JEL Classification: F15, C13, C22, C33Keywords: Regionalism, Engle-Granger Cointegration, Error Correction Mechanism, Fixed Effect, Two Stage Least Squares

Assessing Labour and Environmental Regimes in Regional Trading Arrangements

This article examines environmental and labour regimes in twenty-eight leading regional trade agreements (RTAs). It identifies the different legal regimes regulating labour and the environment within the territories of the parties to these regional agreements. To produce a comparative assessment of the scope and strength of these regimes, the research uses a multidimensional method of legal analysis. This article argues that as the impact of other international law sources in the World Trade Organization (WTO), including labour and environmental law seems to be narrowing, labour and the environment regulation within RTAs is expanding. These ‘behind-the-border’ regulatory commitments are made more enforceable when they are linked to trade agreements because trade retaliatory measures are potentially permitted in the event of non-compliance. This article concludes that despite the shift towards including labour and environmental regulation within RTAs, there are strict limits to how far these regimes can promote these issues. This has implications for the use of RTAs as a forum for this type of regime.

Enhancing Civilisational Dialogue between Malaysia and the European Union

Cooperation between the European Union (EU) and Malaysia started with the 1980 European Commission-ASEAN Agreement which has made it possible for Malaysia to benefit from a number of ASEAN and Asia-wide cooperation programmes. The EU Delegation to Malaysia was opened in 2003 and since then dialogue, policy interaction and cooperation with both federal and state authorities, the Malaysian and EU business community as well as the civil society has increased progressively. Moreover, Malaysia is also the EU’s second most important trading partner in ASEAN. No bilateral preferential trade arrangements exist between Malaysia and the EU, but under the new Generalised System of Preferences (GSP), in force since January 2006, the share of Malaysia’s merchandise exports to the EU eligible for preferential treatment rose from 16 per cent to 81 per cent. Over 70 per cent of Malaysia’s exports to the EU now enter duty-free. Malaysia records a trade surplus with most EU Member States.

MAKING EAST ASIAN REGIONALISM WORKS

For the past few years, regionalism has been progressing in East Asia with the likes of Cina, Japan, and Korea (CJK) as the most prominent actors. Unfortunately, with the absence of trade arrangement amongst the CJK, the present regional trade scheme is not sufficient to reach sustainability. This paper uncovers the inefficient scheme through Engle-Granger Cointegration and Error Correction Mechanism. Moreover, the paper underlines the importance of triangular trade agreement for accelerating the phase of growth in CJK which eventually create a spillover effect to East Asia as a whole. Employing Two Stage Least Squares in a static panel fixed effect model, the paper argues that the spillover effect will function as an impetus for creating region-wide FTA. Furthermore, the paper also identifies a number of economic and political factors that can support the formation of East Asian Regionalism.JEL Classification: F15, C13, C22, C33Keywords: Regionalism, Engle-Granger Cointegration, Error Correction Mechanism, Fixed Effect, Two Stage Least Squares

Poverty Impacts of Preferential and Multilateral Trade Liberalization on the Philippines: A Computable General Equilibrium Analysis

The Philippines has been participating in preferential and multilateral trade liberalization since the 1990s. However, the poverty effects of these trading arrangements are not yet fully known. This paper, which uses a computable general equilibrium (CGE) model, finds that reducing both Most-Favored-Nation (MFN) tariff rate and ASEAN Free Trade Area’s Common Effective Preferential Tariff (CEPT) rate, combined with enhancing direct income taxes to offset the loss in tariff revenue, are instrumental in reducing poverty in the country. It also shows that the relatively poor and less-skilled household groups, like agricultural workers and industrial workers, as well as the poorest of the poor, gain from such trading arrangements because these substantially lower consumer prices. As such, this paper proposes that the Philippine government be more active and further promote preferential and multilateral trade liberalization in order to help eradicate poverty.

The Impact of External Shocks and Preferencial Trade Arrangements on the Agricultural Gross Domestic Product of Peru, 1950-2007

This paper examines the impact of external shocks and six preferential trade arrangements faced by the Peruvian economy during the period 1950-2007. The focus was the agricultural gross domestic product (GDP), its external and internal components, and the associated two sets of relative prices. The main results are on the one hand, that the per capita GDP shocks have affected the per capita agricultural GDP, its two components, and the associated price indices of the external agricultural GDP component. The impact on the prices of the agricultural GDP, particularly on the internal component, has been weaker. On the other hand, the set of six preferential arrangements has not affected the rate of growth of the per capita agricultural GDP and its internal GDP component in a statistically significant way. These arrangements affected, with different degrees of robustness, the agricultural GDP associated prices, particularly the external component.

Carbon, Trade Policy and Carbon Free Trade Areas

This paper discusses both the potential contribution that trade policy initiatives can make towards the achievement of significant global carbon emissions reduction and the potential impacts of proposals now circulating for carbon reduction motivated geographical trade arrangements, including carbon-free trade areas. We first suggest that trade policy is likely to be a relatively minor consideration in climate change containment. The dominant influence on carbon emissions globally for the next several decades will be growth more than trade and its composition, and in turn, the size of trade seemingly matters more than its composition given differences in emission intensity between tradables and non-tradables. We then note that differences in emissions intensity across countries are larger than across products or sectors and so issues of country discrimination in trade policy (and violations of MFN) arise. We next discuss both unilateral and regional carbon motivated trade policy arrangements, including three potential variants of carbon emission reduction based free trade area arrangements. One is regional trade agreements with varying types of trade preferences towards low carbon-intensive products, low carbon new technologies and inputs to low carbon processes. A second is the use of joint border measures against third parties to counteract anti-competitive effects from groups of countries taking on deeper emission reduction commitments. A third is third-country trade barriers along with free trade or other regional trade agreements as penalty mechanisms to pressure other countries to join emission-reducing environmental agreements. We differentiate among the objectives, forms and possible impacts of each variant. We also speculate as to how the world trading system may evolve in the next few decades as trade policy potentially becomes increasingly dominated by environmental concerns. We suggest that the future evolution of the trading system will likely be with environmentally motivated arrangements acting as an overlay on prevailing trade and financial arrangements in the WTO and IMF, and eventually movement to linked global trade and environmental policy bargaining.

An Analysis on Macroeconomic Effects of Free Trade Arrangements of Korea, China, and Japan Using the GTAP CGE Model

An Analysis on Macroeconomic Effects of Free Trade Arrangements of Korea, China, and Japan Using the GTAP CGE Model

Gains from expanded irrigation water trading in Egypt: An integrated basin approach

Economic development and population growth in Egypt continue to increase the demands for water. Meeting these demands places increasing stress on Egypt's water institutions to support the country's need for food, urban, industrial, and environmental water uses. Many studies have examined measures to increase Egypt's effective water supplies or reduce its water demands. However, no research to date has examined economically efficient and culturally acceptable water institutions for improving the economic performance of Egyptian agricultural water use. The aim of this study is to examine the potential for irrigation water trading as a measure to improve the economic efficiency of Egyptian agricultural water use of the Nile River. Using data on Egyptian land, water, and agriculture, a catchment scale framework is developed to characterize hydrologic and economic impacts of limited water trading by irrigated agriculture while respecting hydrologic, environmental, food security, and institutional constraints. Results suggest that expanded water trading among Egyptian farmers could raise the economic performance of Egypt's irrigation water use. That improved performance could increase national farm income by 6.3 to 7.9% annually with little or no loss in water-related benefits outside agriculture. Worldwide, solutions to safeguard food production are needed fast. Institutionalizing currently informal water trading arrangements could be a prototype for measures to promote food and water security in Egypt and in other countries with similar water management challenges.

The Proposed Australia-China FTA: Protectionism over Complementarity?

This article deals with the proposed high-profile Australia-China Free Trade Agreement (FTA). It recognizes their economic complementarities for an FTA. However, their negotiations reveal many competing interests, militating against an FTA. If political enthusiasm succeeds in concluding this FTA, it is likely to fall short of delivering the projected economic benefits. This FTA will possibly be an inward looking discriminatory trading arrangement with exclusive preference to each other in selective sectors and protection against non-members, inconsistent with Article XXIV of the General Agreement on Tariffs and Trade (GATT). Such protectionist obsessions have become an obstructive alternative to multilateral nondiscriminatory trade rendering it more onerous and less viable. Concluding such an FTA, at a time when World Trade Organization (WTO) Panels and Appellate Body (AB) are increasingly dealing with FTA disputes, may result in a legal challenge. The booming Australian and Chinese export sectors need open global markets to maximize their full trade potentials, which can be achieved through the completion of the Doha Round.

Are the British electricity trading and transmission arrangements future-proof?

In Great Britain, electricity is traded in an energy-only market that relies upon bilateral trading until shortly before real time. The GB System Operator also uses bilateral trading to respond to changes in demand and generation and resolve transmission constraints. Prices are not explicitly spatial, although well-placed generators can charge the system operator more for their output. This paper argues that these arrangements are not well-suited for the challenges of accommodating nearly thirty percent of intermittent wind generation, often located far from demand. The market design already implemented in the north-eastern United States is likely to be more efficient.

Exchange traded contracts for difference: Design, pricing, and effects

AbstractContracts for Difference (CFDs) are a significant financial innovation in the design of futures contracts. Over‐the‐counter trading in the UK is significant and has created controversy, but there is no published academic research into the design, pricing, and effects of CFDs. This study analyzes CFD contract design and pricing. It uses a unique database of trades and quotes on exchange traded equity CFDs introduced by the Australian Securities Exchange to test theoretical pricing relationships, and draws out implications for successful design and trading arrangements for the introduction of new derivative contracts. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark

Testing Conflicting Political Economy Theories: Full‐Fledged versus Partial‐Scope Regional Trade Agreements

We apply a duration analysis to test the conflicting predictions of the median voter model and the lobbying model using panel data on regional trade agreement (RTA) formation. Our results show that the pro‐labor prediction of the median voter model is supported by the full‐fledged free trade areas and customs unions (FTAs/CUs), while the pro‐capital prediction of the lobbying model is supported by the partial‐scope preferential trade arrangements among developing countries. This finding holds better for the country pairs with more different capital‐labor ratios as a result of the stronger distributional effects of RTAs. The support for the median voter model (lobbying model) is stronger when the two countries in a pair have left‐oriented (right‐oriented) governments. I also find stronger support for the median voter model for the subset of FTAs/CUs with service coverage and stronger support for the lobbying model for countries that place higher weight on political contribution.

Supply Chain Dispute Resolution

This paper examines how supply chain conflicts across domestic and international jurisdictions arise and become resolved given that conventional conflict resolution tribunals cannot effectively settle fast enough to serve the needs of supply chain partners. Observations from the field should guide practitioners, and in combination with information technology, may lead to best practice rules in dispute resolution. For this study, the Delphi Method was selected, in which a panel of 14 experts participated in three rounds of successive surveys over a one-year period. Survey data was collected by mail as well as via telephone conversations and interviews, while under the Delphi method, the content of the second questionnaire was derived from the responses of the first questionnaire. All participants were supply chain experts in the United States from eight different industrial sectors, and none of the participants interacted with one another. End results show that supply chain’s relationships are very private trade arrangements and that disputes arise, predictably, from common performance criteria such as quality, timely delivery and payment issues.

The ASEAN-China Investment Agreement: A Regionalization of Chinese New BITs

On 15 August 2009, the Agreement on Investment of the Framework Agreement on Comprehensive Economic Cooperation between China and the Association of Southeast Asian Nations was signed in Bangkok, Thailand. The Investment Agreement is the last one of the ASEAN-China free trade agreements. This paper analyzes the provisions of the new agreement, especially those on the scope of application, national treatment, MFN treatment, expropriation, and investor-state dispute resolution. Then, the paper compares the new agreement with other international investment agreements concluded by China or ASEAN. In comparison with the existing BITs between China and individual ASEAN member states, there are significant changes in the Investment Agreement which provides higher standard of investment protection. In this respect, the Investment Agreement is ‘new wine in a new bottle’. Nevertheless, such a standard of investment protection is common in the BITs signed by China since 2000 which constitute a new generation of Chinese BITs. Moreover, unlike some other investment agreements in the free trade arrangements, such as the Chapter 11 of the NAFTA and the ASEAN Comprehensive Investment Agreement, the Investment Agreement rarely touched upon the issue of investment liberalization, although the Framework Agreement of ASEAN-China FTA provided for creating a liberal investment regime and the ASEAN member states had insisted on provisions of investment liberalization in the negotiations of the Investment Agreement. In this respect, the Investment Agreement represents ‘old wine in the new bottle’. This paper concludes that China is not prepared to undertake investment liberalization obligations in its FTAs, negotiating an investment agreement in China’s FTA arrangements has been regarded as an opportunity to update its old BITs. The ASEAN-China Investment Agreement is rather a regionalization of Chinese BITs and an example of China’s influence on rule-making on regional level.

The Impact of Preferential Trade Arrangements on EU Imports from Developing Countries: The Case of Fresh Cut Flowers

AbstractThis study examines the effects that the Generalized System of Preferences schemes for developing countries (GSP + ) have on European Union (EU) demand for imported cut flowers. Without GSP + , a tariff would be applied to flowers from Colombia and Ecuador. Results show that Colombian carnation prices have a negative effect on EU flower expenditures, resulting in preferential treatment for Colombia being mostly trade‐creating. When a tariff is applied to Colombia, imports of Colombian carnations and Kenyan roses fell by 7.3% and 1.9%, respectively, and other flowers from Ecuador and Israel fell by 1.9% and 1.8%, respectively. Total EU flower imports fell by 1.4%.

Estimates of trade-related adjustment costs in Syria

The scope and complexity of international trading arrangements in the Middle East, as well as their spotty historical record of success, underscore the urgent need for an adequate understanding of the relative costs and benefits of participation in preferential trading arrangements and, more generally, of changes in the domestic import regimes. This paper seeks to address this problem by providing estimates of the adjustment costs associated with two broad classes of hypothetical trade policy scenarios for Syria: participation in the proposed EU-Syria Association Agreement, and border tax-related changes affecting the domestic import regime. We find that the revenue consequences of the first scenario are likely to be low if an appropriate stepwise implementation of the agreement can be ensured; our analysis of the second scenario suggests that all border taxes can be eliminated, and the number of tariff bands reduced, while ensuring revenue neutrality, if a VAT of a reasonable size is introduced.

An Assessment of Barbados' Competitiveness within the EU Market 1992-2006

This paper assesses Barbados' competitiveness within the EU market in light of its recent signing of an Economic Partnership Agreement (EPA) with the EU in 2008. Using SITC data from 1992-2006, indices of revealed comparative advantage (RCA) were calculated. We found that Barbados possesses comparative advantages in Live Animals; Raw Sugars, Beet and Cane; and Spirits. However, policies such as the EU's Common Agricultural Policy (CAP), stringent sanitary and phytosanitary requirements, onerous rules of origin and non-tariff barriers including technical barriers to trade, threaten to undermine these advantages. These developments strongly suggest that Barbados must move agriculture up the value chain and increase value-added, as well as integrate it more fully with other sectors of its economy. Greater attention must be focused on countries in the EU other than the UK, if full advantage is to be taken of the EPA, as the UK market is already mature. There is evidence that export opportunities to these countries exist in other commodity groups (Fuels, Lubricants, etc.; Animal, Vegetable Oils Fats, Wax; Chemicals, Related Products; Manufactured Goods). When these issues are placed within the context of Barbados' history of weak capacity to take advantage of the market access opportunities available from their trading arrangements, the overarching challenge for Barbados is one of effective market access. This will require, among other things, a capable export promotion agency. The export of non-traditional commodities should be promoted, and greater support, perhaps in the form of incentives, should be provided to large firms that are not yet exporters to encourage them to look beyond the domestic market.