Trade Liberalization Policies Research Articles

Impact of trade and investment on income surge in Bangladesh: Evidence from trade liberalization regime

Trade and investment are crucial drivers of economic growth. Successful execution of trade and investment policy can elevate a developing country to a sustained growth path and make it self‐reliant. Bangladesh implemented a trade liberalization policy in the 1980s, deviating much from its conservative trade policy. This article assesses the impacts of trade, investment in physical as well as human capital, and a few trade policy variables on income surge for the liberalized regime. The econometric analysis finds that export, import, and domestic investment stimulate income. The impact of foreign investment is not conducive. Public spending on education also contributes to the income surge. Among the policy variables, trade openness and currency depreciation produce a beneficial impact. Population growth retards economic growth. The baseline results hold in the estimations involving several specifications of variables and testified as robust. The article views that a comprehensive approach to trade and investment policy would ensure the comparative advantage of trade and the well‐being of Bangladesh.

Who Benefits from Free Trade?

How is wealth distributed when the economy grows? I study this question in the context of African countries and ethnic groups. If wealth is distributed proportional to population, larger ethnic groups should benefit more when economic activity increases. Using nighttime light and individual level data to geographically locate wealth, I find the exact opposite: Smaller ethnic groups, particularly those in political power, benefit more from increased economic activity than larger ones. The results indicate that political elites in power redistribute wealth from larger ethnic groups. As a result, people’s satisfaction with democracy and trust in institutions reduces, casting a shadow on the implementation of trade liberalization policies in developing countries. Instrumental variables estimating exploiting exogenous variation in trading activity confirm initial results.

Urbanization, trade openness, and industrialization as a determent of clean energy consumption: Evidence from BRI nations

Energy and economic policies should include the intricate interconnections among urbanization, trade openness, industry, and the utilization of renewable energy. This study investigates the intricate connections among nations involved in the Belt and Road Initiative (BRI). The study employed panel econometric techniques, including DSUR, Cup-BC, and CUP-FM, to document independent variables' elasticities. Study findings suggest that urbanization is initially negatively correlated with renewable energy consumption (REC) because of the rising demand for energy, particularly non-renewable sources. Urbanization beyond a certain threshold fosters renewable energy, showcasing the positive effects of Renewable Energy Certificates (RECs). The influence of urbanization on energy use has changed throughout time. Furthermore, there is an initial positive relationship between trade openness and REC, indicating that adopting liberalized trade policies encourages the use of clean energy. Nevertheless, over time, this connection becomes less strong, suggesting a critical moment when the promotion of trade openness may lead to an increase in the use of non-renewable resources. Industrialization first stimulates the need for traditional energy sources but ultimately encourages using renewable energy. The U-invert connection demonstrates the interplay between industrialization and energy consumption patterns, emphasizing the need for flexible policies. Our study assists policymakers and stakeholders in effectively addressing energy sustainability concerns related to the Belt and Road Initiative (BRI).

THE IMPACT OF TRADE LIBERALIZATION ON THE PERFORMANCE OF TANZANIA’S EXPORT SECTOR – A TIME SERIES ANALYSIS FROM 1980 TO 2019

 Aim: This article aims to enhance understanding of the impact of trade liberalization on Tanzania’s export performance. As many studies conducted, both in developing and developed countries, have yielded mixed results and the relationship varies across different nations, it is difficult to provide a definitive answer to the question of whether trade liberalization affects Tanzania’s export sector without first conducting an empirical analysis. Methods: This study employs a quantitative research methodology because it allows for a larger sample size, greater objectivity, and accuracy. Due to the nature of the study and the data used, a statistical study design was chosen. Macroeconomic data spanning 1980 to 2019 was obtained from the World Bank and the Tanzania Bureau of Statistics to analyze the effects of trade liberalization on export performance using vector error correction and autoregressive distributed lag models. Results: The results reveal a sig­nificant positive correlation between trade liberalization and subsequent export performance, as well as the interdependencies between trade liberalization and foreign direct investment (FDI) strategies. There is a re­ciprocal relationship between trade liberalization and exchange rates, implying the significance of competent exchange rate management in enhancing export competitiveness. Conclusions: The study concludes that trade liberalization, FDI, and export performance have a long-term positive correlation. This implies that a carefully executed trade liberalization policy is crucial not only for the expansion of the export industry sector and the influx of capital, but also for the transformation and development of the nation.growth.

Unveiling the asymmetric effects: global value chain participation and income inequality

ABSTRACT This study employs a panel nonlinear ARDL model to analyse the asymmetric effects of global value chain participation and its components (forward and backward participation) on income inequality across 29 economies spanning from 2004 to 2018. The findings reveal that global value chain participation is negatively associated with income inequality in the long run, as it stimulates employment opportunities, economic growth, and access to markets. Concomitantly, our study sheds light on whether the effects of global value chain participation vary across its components within the selected economies. Both positive and negative changes in backward participation have positive and significant effects on income inequality in the long run. Simultaneously, adverse changes in forward participation contribute to an upward trajectory in income inequality over the same period. The comprehensive analysis highlights the multi-faceted dynamics between a country’s involvement in global value chains and income disparities within that nation. Given the findings, policymakers need to make it a top priority to boost their economies’ participation in global value chains. This can be accomplished through a multi-pronged strategy that includes trade liberalization policies, measures to attract foreign direct investment, and robust infrastructure development initiatives.

Trade liberalization, wage inequality, and monetary policy

We build a dynamic model of two countries, two sectors and two factors with firm heterogeneity and price rigidity to analyze the short-run and long-run consequences of trade liberalization and its interaction with monetary policy. We find that price rigidity slows down the reallocation process and might imply temporary falls in real wages for some workers. The stance of monetary policy also has a big impact on real wages and real GDP.

The impact of trade on environmental quality and sustainable development in Ghana

Since gaining independence in 1957, Ghana has significantly increased its economic ties with the global community through trade liberalization policies. However, this integration has profoundly affected the environment, particularly in utilizing natural resources, and has subsequently impacted sustainable development. This study examines the relationship between trade, environmental considerations, and sustainable development within the Ghanaian context. Using the autoregressive distributed lag (ARDL) error correction estimation technique, we found that trade positively impacts sustainable development in Ghana despite causing adverse environmental effects. This suggests that economic gains are prioritized over environmental preservation, indicating weak sustainability. However, sustainable development requires a balance between economic, social, and environmental factors, and a shift towards strong sustainability may be necessary for long-term sustainability. Therefore, pivotal policy interventions are warranted to navigate the path toward strong sustainability. Mechanisms that ensure the judicious pricing of Ghana's forest and natural resources are necessary to optimize resource exploitation while mitigating negative externalities. Ghana can promote inclusive and sustainable development by establishing a delicate balance between economic expansion and environmental stewardship.

Agricultural Land Market in Ukraine: Challenges of Trade Liberalization and Future Land Policy Reforms

After over 20 years of a strict moratorium on the turnover of agricultural land in Ukraine, an official market for this type of land has recently been established. The purpose of this study was to examine the functioning of the fundamental elements of this market from the moment of its introduction on 1 July 2021 until today, as well as to understand the possible directions for its further development. The analysis of the agricultural land market and the visualization of the obtained results were carried out using the PostgreSQL database, Python and SQL programming languages, and the QGIS and Metabase tools. It was found that the volume of the agricultural land market remains insignificant, as the total area of sold land during this period made up only 0.7% of the arable land area of Ukraine. Prices for land plots remained at the level of their normative monetary value and are still relatively low, which indicates the significant undercapitalization of agricultural land as a production factor. The stability of agricultural land prices under the influence of various factors also indicates their relative virtuality, which, taking into account the further lifting of restrictions on the size of land plots to be sold as of 1 January 2024, requires the use of appropriate land policy instruments in order to fully utilize the multipurpose role of land in the achievement of the Sustainable Development Goals, which should be based on a human-rights-based approach to rural development, food security, and land policy.

Investigating the Effect of Trade Openness and Agriculture on Deforestation in Cameroon

This study aimed to measure the effect of trade openness and agriculture on deforestation in Cameroon from 1980 to 2021 by using a fully modified ordinary least squares (FMOLS) approach. Data used are from the World Bank and FAO. The results obtained indicate that when trade openness increases, deforestation also increases, but when trade openness increases up to a certain threshold, deforestation decreases. This study also reveals that agriculture is one of the major causes of deforestation in Cameroon. Agricultural output and agricultural value-added both have a positive and significant impact on deforestation. There is an inverted curve relationship between economic growth and deforestation in Cameroon, this shows that the EKC is respected with deforestation as it is postulated that at higher levels of income, GDP turns to reduce deforestation meaning a unit change in GDP2 leads to a reduction of deforestation. We recommend the implementation of concrete actions and strict environmental policies focused on a green economy, to control the exploitation of natural resources with particular attention to the sustainable exploitation of wood. Sustainable agricultural practices should also be implemented, as well as more suitable liberal trade policies.

Trading Off Equality and Employment Gains in Sub-Saharan Africa

ABSTRACT This study examines the interaction of trade, inequality, and unemployment in Sub-Saharan Africa (SSA) from 1997 to 2021. Results from the mean group and pooled mean group estimation revealed that international trade explains a 6% rise in inequality and a 43% rise in unemployment. Our findings provide evidence that international trade, as currently structured, is not beneficial to SSA countries, despite the adoption of trade liberalization policies and regional trade agreements (RTAs). We argue that SSA countries could still derive gains from trade if they undertake massive structural reforms that address labor market frictions and skills gaps in the region.

Updating the analysis of rice import liberalization in Japan: a dynamic-stochastic CGE modelling approach

ABSTRACT Food self-sufficiency is a central pillar of agricultural policy in Japan, and a high import tariff strictly protects the domestic rice market. Most existing studies investigate the deterministic impacts of the rice trade liberalization policy in the country; one, in particular, developed a static-stochastic computable general equilibrium (CGE) model to estimate how risky the policy would be in securing the food supply, which fails to account for the long-term effects of a free trade policy. We analyse the impacts of rice trade liberalization in Japan, constructing the first global-scale dynamic-stochastic CGE model. We update the policy analysis of the previous study by extending the static-stochastic model to a dynamic-stochastic framework that allows us to analyse the long-term impacts of the policy in a probabilistic manner. The primary findings are that household welfare converges at a higher level in the long term than in the short term. Second, the shocks to household welfare from abroad persistently become more significant over time. Finally, we have determined that the optimal level for government strategic rice reserves is 300 thousand tons. Therefore, it is apparent that the current stock level of 1000 thousand tons is not cost-effective.

Identifying the sources of economic growth in Sri Lanka under trade liberalization: the primal and dual total factor productivity growth

We explore the sources of economic growth in Sri Lanka for the period during which it implemented a liberalized trade policy. We first calculate the primal and dual total factor productivity growth (TFPG), and then evaluate the roles of FDI and exports in driving TFPG. Results show that the average annual primal TFPG for 1980–2019 is 2.1%, constituting 43% of output growth. The corresponding dual TFPG is 3.3%. This divergence between primal and dual calculations is due to market imperfections, regulations, government monopolies, and issues in national accounts compilations. Regression results show that FDI has been a significant driver of Sri Lanka’s TFPG. Moreover, we find that both factor accumulation and TFPG are important sources of output growth. This is the first study that calculates dual TFPG for Sri Lanka. It provides policymakers the direction for implementing targeted policies to enhance Sri Lanka’s long-term growth prospects.

Effect of Public Debt on the twin deficits using a Threshold time series model: Case Study of Jordan 1980-2020

This study examines the Effect of Public Debt on the twin deficits using the threshold time series model of the Jordanian economy from 1980-2020. The independent variables were relied upon: private saving, production gap, economic growth, trade openness, and budget deficit. In addition to public debt as a threshold variable. The results indicated that the optimal number of model systems is six systems only, which means that there are only five thresholds. The results also showed that three threshold values are significant, but there are two values of the threshold which are not significant, but there are two values of the threshold which are not significant. The results support the Keynesian view of the strong and positive relationship between the current account balance deficit, saving, budget deficit, and trade openness in Jordan during the period 1980-2020. Work must be done to reduce the budget deficit or to enhance saving and investment, or both in Jordan, which may help reduce the current account deficit. However, it requires radical reforms in the trade and financial sectors to achieve efficient markets. To increase external competitiveness, it is necessary to put in place incentive policies for production to increase exports to take advantage of trade liberalization policies in the field of specialization in production.

Türkiye'de Yapısal Değişim, Ticari Açıklık, Yenilenebilir Enerji ve Ekonomik Büyüme Bağlantısı, 1970-2020

Purpose: This paper aims to investigate the effects of structural change, trade openness, and renewable energy on economic growth in Türkiye. 
 Design/Methodology: Structural change is defined as the shift of resources from the agricultural sector to the industrial sector and then to the services sector. In the structural change process, it is accepted that the manufacturing industry is the engine of growth. However, since the mid-1970s, especially in the post-1980 period, the manufacturing industry has lost its importance. In addition, trade liberalisation and energy policies came to the fore in this process. In this context, this paper analyses the determinants of economic growth within the framework of the structuralist approach. For this, we apply the ARDL bounds test approach and apply FMOLS, DOLS, and CCR for robustness check.
 Findings: According to the ARDL bounds test results, the manufacturing industry, renewable energy, and trade openness affect economic growth positively; however, the coefficient of renewable energy is statistically insignificant. The results of the robustness check (FMOLS, DOLS, and CCR) also confirm these findings. The effect of the manufacturing industry on economic growth is greater than that of other variables.
 Limitations: To analyse the impact of structural change on economic growth in the Türkiye, the study is limited to the period 1970-2020.
 Originality/Value: The originality of our paper is that it analyses the impact of structural transformation (such as the manufacturing industry, trade openness, and renewable energy) on long-run economic growth in Türkiye.

The impact of FDI on economic growth in developing countries: the role of FDI inflow and trade openness

This study examines the relationship between foreign direct investment (FDI) inflow, trade openness, and the influence of FDI on economic growth. The threshold methodology and GMM estimation are employed to analyze panel data from 60 developing countries in the period between 1995 and 2019. This study demonstrates the positive impact of FDI on economic growth in developing countries. However, the study also finds a significant threshold of FDI inflow relative to GDP that changes the impact of inward FDI on GDP growth. Regarding the role of trade openness, a significant threshold is found, which also indicates the absorptive capacity of the host countries. Moving from below to above this threshold, an increase in FDI inflow leads to a lower increase in economic growth. An increase in FDI relative to GDP stimulates growth only when the host country has sufficient absorptive capacity with regard to trade openness above the threshold. We suggest developing countries tighten the coherence of trade liberalization and FDI attraction policies to obtain the benefits of FDI and make changes to attract new investors when they succeed in attracting massive FDI inflows.

Free Trade‐Populism and Nativist‐Protectionism: Trade Policy and the Sweden Democrats

The past three decades have seen the entry and increased influence of radical right parties into the European party landscape. These parties harness disaffection with the status quo by appealing to nativist or authoritarian tendencies in the electorate. Their policies often center around the protection of the “common man” from foreign or elite forces (particularly, cultural and economic globalization) and their emergence has been linked to decreasing support for globalization—the so-called “globalization backlash.” Several authors note that although radical right parties advocate economic protectionism to attract voters, who are disaffected by globalization, they say little about how this is manifested in advocacy of concrete policy measures. This speaks to the need for more systematic study of the trade policies of radical right parties. This article studies the Swedish radical right party, the Sweden Democrats (ostensibly free traders), to advance an argument based on the core ideology of radical right parties, nativism, and populism. In doing so, the article contributes to the literature that stresses cultural rather than economic foundations for opposition to globalization. Moreover, this article widens the definition of protectionism from that germane to the literature on radical right parties to include non-tariff barriers to trade (in addition to tariffs and quotas), providing a more up-to-date and multifaceted account of the range of trade policy instruments that radical right parties may advocate. I find that populism inspires advocacy of liberal trade policies, while nativism inspires protectionist trade policies. Protectionism almost exclusively consists of non-tariff barriers.

Trade Disruption, Industrialisation, and the Setting Sun of British Colonial Rule in India

Abstract Colonial trade prompted the colonies to specialise in primary products. Did this eliminate industrialisation opportunities in the colonies, and did it make them more politically dependent on the coloniser? To answer these questions, we examine the impact of the World War I trade shock on industrial growth and support for the anti-colonial movement in India. We find that districts more exposed to a drop in imports experienced faster industrial growth in 1911–1921, thereafter remaining on a higher level of industrial employment. All evidence points to an increase in Indian productivities as the reason for this, suggesting that liberal trade policies may not have been optimal for colonial India. We also find that districts, which industrialised faster thanks to WWI were more likely to support the Indian National Congress. This is consistent with the view that specialisation in primary products made the colonies more politically dependent on the coloniser.

Trade Policy and Manufacturing Sub-Sector Output in Nigeria (1986-2020)

The objective of the research was to determine the relationship between trade policy and the output of the manufacturing sector. Three hypotheses were formulated. The study adopted ordinary least squares econometric approach on the time series data from 1986 to 2020 to generate the estimates of the models to test the hypotheses at 5% level of significance. The research concluded that there is a positive relationship between manufacturing sector output the and trade liberalization while there is a negative relationship between trade protectionism and manufacturing sector output in Nigeria for the period under review. It was therefore concluded that, since the manufacturing sector is the driver of economic growth in any economy, protection as good as it is may not positively impact the manufacturing sector if other stimulating policies are not adopted simultaneously. Liberalized trade policy should be maintained in manufacturing subsectors that utilize imported manufacturing input alongside other incentivizing policies.

Firm specifics, Trade liberalization, and export intensity with the moderating role of location advantages- Empirical evidence from Vietnam

Vietnam has experienced an impressive period of economic growth recently. Since the foreign trade relation of Vietnam expanded, the export sector has been outperformed with a double-digit growth rate, especially Ho Chi Minh City (HCMC). To study the impact of firm specifices, trade liberalization on export intensity (EI) of Vietnamese exporters with moderating effect of location advantages on the relationship between firm specifics and EI, data was collected from 61 exporters listing in Vietnam stock markets from 2010 to 2020. The regression test was carried out by applying GMM model and showed that firm productivity has a negative impact on EI while cost to income ratio has a psotive impact on EI at the significance level of 5%. Trade liberalization has a positive impact on EI significantly at 5%. The findings confirmed the moderating role of firm location in the relationship between firm specifics and EI. The findings support RBV theory, and trade liberalization policy. Keywords: Trade liberalization, location advantages, export intensity, Ho Chi Minh City, Vietnam.

Investigating causality between natural resource rents, openness, and economic growth: A quantile approach

AbstractIn the present study, the causality between resource rents, openness, and economic growth was investigated using the quantile causality method and quarterly data (2006–2021) in Iran. The advantage of this method is that it makes it possible to investigate the relationships of variables in the conditional distribution tail and all quantiles by using quantile‐based conditional regressions. The results showed a bi‐direction causality between resource rents and growth in the tail of the distribution. Therefore, in the upper median quantiles, the causality is from the resources rent to growth, and in the lower quantiles, the causality is in the opposite direction. The results confirmed, in general, the presence of bi‐direction causality between economic growth and openness in quantiles. In the middle quantile, there is a uni‐direction causality relationship from growth to the trade openness, and in the upper quantile, there is causality from openness to economic growth. In addition, the results showed evidence of a tail dependency between resource rents and trade openness, in some quantiles, the causal relationship is from openness to the resources rent, and in the median quantiles, the causality is from rent to openness. These results show that the rent effect of natural resources can be considered as an opportunity for economic growth by adopting appropriate and flexible policies by governments. We recommend the implementation of more trade liberalization policies to maximize the benefits from trade openness, especially in the countries where the resource curse phenomenon reported. Important policy implications can be learned from the empirical results.