Trade Liberalization Research Articles

Empirical analysis of trade costs and their impact on carbon emissions in RCEP countries

Global economic integration and environmental issues have attracted widespread attention in recent years. As one of the world's most significant free trade agreements, the Regional Comprehensive Economic Partnership (RCEP) significantly impacts trade and the environment. However, research on the relationship between trade costs and carbon emissions still needs to be completed. This study explores the relationship between trade costs and carbon emissions within the framework of the Trade Benefit Theory, which posits that trade liberalization and openness generate economic benefits through increased efficiency, technological advancement, and economic growth. This study analyzes panel data from 12 RCEP countries from 2001 to 2014, employing static and dynamic panel models to examine the relationship between trade costs and carbon emissions. The analysis utilizes mixed regression, fixed (random) effects models, and the systematic GMM method. The results indicate that decreases in trade costs are associated with reduced environmental pollution, aligning with the Environmental Kuznets Curve (EKC) hypothesis, which posits an N-shaped relationship between trade costs and carbon emissions. Implementing RCEP facilitates a decrease in trade-related pollution, suggesting that reducing trade costs can help mitigate environmental pollution. Furthermore, the observed N-shaped EKC for trade costs and carbon emissions highlights the potential of RCEP to reduce the impact of trade-related pollution.

Analysis of Indonesian coal export policy

Indonesia's coal exports play an important role in driving the country's economy and are one of its main export commodities. As one of the world's largest coal producers, Indonesia consistently contributes significantly to the global market. This research aims to provide an in-depth analysis of the export policy of coal commodities in Indonesia. The research method is qualitative, using a descriptive analysis approach. The study examines policies related to coal exports, including government regulations, trade rules, environmental regulations, and other policies that influence the Indonesian coal export process or policy changes that affect Indonesian coal exports. At the same time, it analyses the effects and implications of these policies on the export of coal commodities in Indonesia. The research uses the theory of trade liberalism as a framework to address the research objectives. The findings indicate that Indonesia's coal export policy significantly impacts the coal industry, the national economy and international market dynamics. Although mercantilism may persist for a certain period, the dominance of liberalism, which adheres to the principles of market mechanism, has successfully surpassed the influence of mercantilism. Thus, this research contributes to a better understanding of the role of coal in Indonesia's export context and provides a basis for future policy improvements.

RCEP: IMPLICATIONS AND CHALLENGES FOR THE EUROPEAN UNION IN A CHANGING GLOBAL ECONOMY

The Regional Comprehensive Economic Partnership (RCEP), emanating from the core principles of the Association of South East Asian Nations (ASEAN), represents a significant evolution in regional economic cooperation. This article delves into the intricate dynamics of RCEP, emphasizing its inception, growth, and the profound implications it holds for the European Union (EU). Tracing the history of ASEAN and its expansion, the paper examines how the ASEAN's Free Trade Agreements (FTAs) with nations outside Southeast Asia, including China, South Korea, New Zealand, Australia, and India, laid the groundwork for RCEP. The study highlights the strategic objectives of RCEP in fostering trade liberalization and economic integration among its member states, while also addressing disputes and promoting regional stability. The signing of RCEP in November 2020 marked a pivotal moment in Asia-Pacific economic relations, promising significant shifts in global trade dynamics. This research critically analyses the potential impact of RCEP on the EU, particularly in terms of trade, foreign direct investment (FDI) inflows, and the broader implications for the global multilateral trading system. The paper also explores how RCEP could reshape the EU's role and strategies in regional and global economic contexts, assessing the challenges and opportunities it presents for EU-ASEAN collaborations. The evolving relationship between Southeast Asia and the EU under the shadow of RCEP, including the promotion of regional trade at micro and macro levels, forms a critical part of this analysis. The study aims to provide comprehensive insights into the multifaceted effects of RCEP on the EU, offering valuable perspectives for policymakers and stakeholders in both regions.

Intellectual property rights protection and the dynamic gains from trade

AbstractThis paper presents a dynamic general equilibrium model with two structurally identical open economies. Trade liberalization promotes innovation and growth when intellectual property rights (IPR) protection is sufficiently weak. Trade on the other hand does not affect innovation and growth when IPR protection is strong. We show that this result holds for both horizontal and vertical endogenous growth models, which have so far had contradictory predictions on how trade affects innovation. The reason for this supposed contradiction are implicit IPR protection assumptions in the two different types of growth models, strong protection in the horizontal model and weak protection in the vertical model. The IPR protection assumption makes a big difference for the size of the gains from trade. In a simple numerical example we show that assuming weak IPR protection can imply more than five times higher overall gains from trade. We also build a North–South model and add another aspect of IPR protection influencing the duration of Northern patents, namely imitation in the South. In the asymmetric model with a competitive fringe in the South, IPR protection no longer plays a crucial role for the dynamic gains from trade.

Poverty, Unemployment and Human Development in Nepal: Effectiveness of Economic Reformation Policies of 1990s

Nepal initiated economic reformation measures during late 1980s under the guidance and support of IMF and world Bank when its balance of payment (BoP) turned negative in 1982/83 and remained negative for three consecutive years. The sequential governments after restoration multiparty democracy in Nepal in 1990 implemented various measures of economic reformation related to trade liberalisation, investment and foreign exchange regimes, unification of the exchange rate, rationalisation of the tariff structure and tax system, promotion of export and strengthen public expenditure management were introduced. The aim of these reformation policies was to reduce poverty by accelerating economic growth and increasing employment opportunities. This paper attempts to evaluate effectiveness of these economic reformation policies of 1990s in reducing poverty and unemployment and improve human development condition in Nepal. It is descriptive and analytical in nature. Secondary sources of data have been used to carry out this paper. Books, research articles, reports of national and international agencies have been used as secondary sources of data. Descriptive statistical tools have been used to interpret results. This paper finds that reformation policies of 1990s have remained ineffective to reduce poverty and unemployment and improve human development condition at expected level.

How Does Trade Liberalization in Imports Affect China's Export Growth Pattern?

Abstract Optimizing export growth patterns and improving the quality of export trade have become prominent issues that need to be addressed urgently in the context of increasing global economic uncertainty. This study utilizes matched data from the CEPII database (1995–2020) and WTO tariff database, adopts a product-level perspective based on the triple margins of exports, and uses an individual-time two-way fixed-effects model to investigate the impact of import trade liberalization on China's export growth pattern. The research findings are as follows: (1) Increasing levels of import trade liberalization are beneficial for enhancing the extensive margin, intensive margin, and quantity margin of products, while exerting a restraining effect on the price margin. This strengthens the price advantage of Chinese products, indicating that import trade liberalization helps optimize China's export growth pattern. (2) Compared with the intensive margin, import trade liberalization has a more significant promoting effect on the extensive margin. (3) The conclusions drawn from heterogeneity analysis suggest that trade liberalization has a more pronounced effect on the extensive margin, intensive margin, and quantity margin of products in medium-high technology industries, differentiated products, and intermediate goods. This study holds important theoretical and practical significance for evaluating the economic benefits of expanding imports, optimizing China's export growth pattern, and improving the quality of export trade.

Misallocation under Trade Liberalization

This paper formalizes a classic idea that in second-best environments trade can induce welfare losses: incremental income losses from distortions can outweigh trade gains. In a Melitz model with distortionary taxes, we derive sufficient statistics for welfare gains/losses and show departures from the efficient case (Arkolakis, Costinot, and Rodríguez-Clare 2012) can be captured by the gap between an input and output share and domestic extensive margin elasticities. The loss reflects an endogenous selection of more subsidized firms into exporting. Using Chinese manufacturing data in 2005 and model-inferred firm-level distortions, we demonstrate that a sizable negative fiscal externality can potentially offset conventional gains. (JEL D22, F14, H25, L60, O19, P31, P33)

Comments by Nam Seok Kim, on How Does Trade Liberalization in Imports Affect China's Export Growth Pattern?

Comments by Nam Seok Kim, on How Does Trade Liberalization in Imports Affect China's Export Growth Pattern?

Trade Openness and Agricultural Export Performance in Nigeria: An Econometric Approach

This study investigates the relationship between trade openness and agricultural export performance in Nigeria. Utilizing an Autoregressive Distributed Lag (ARDL) model, the analysis examines the short-run and long-run effects of trade openness on the agricultural export sector. Empirical findings reveal a significant positive correlation between trade openness and agricultural export performance. The study underscores the importance of trade liberalization in enhancing the competitiveness of Nigeria’s agricultural exports in the global market. However, it also highlights the need for complementary policies to address infrastructure, institutional challenges, and exchange rate volatility to fully maximize the benefits of trade openness.

Impact of Trade Liberalization Policies on Investment and Development in Developing Countries

Purpose: The aim of the study was to analyze the impact of trade liberalization policies on investment and development in developing countries Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: Trade liberalization policies have led to increased foreign direct investment (FDI) inflows and export opportunities in developing countries. However, they have also posed challenges such as heightened competition and vulnerability to external shocks. The effectiveness of trade liberalization policies varies across countries and depends on factors such as institutional capacity, infrastructure, and trade-related regulations. Unique Contribution to Theory, Practice and Policy: Dependency theory, institutional theory & stages of economic development theory may be used to anchor future studies on the impact of trade liberalization policies on investment and development in developing countries. Policymakers should prioritize the design and implementation of targeted interventions aimed at maximizing the benefits of trade liberalization while mitigating its potential adverse effects. Moreover, policymakers should prioritize investments in education, healthcare, and social protection to enhance human capital development and ensure that the benefits of trade liberalization are equitably distributed across society

Moving towards food security in South Asian region: Assessing the role of agricultural trade openness, production and employment

Despite several accomplishments in addressing malnutrition, the issue of food scarcity remains a persistent concern all over the globe, particularly in the South Asian region. One recommended solution to address this situation involves advocating for further liberalization of global food trading and opening employment opportunities. In this context, using panel data spanning 2000–2019, this study makes a novel attempt to quantify the impact of agricultural trade openness and agricultural employment on food security in countries belonging to the South Asian region while controlling the tariff and agricultural production. Using “Fully Modified Ordinary Least Square (FMOLS)” and “Dynamic Ordinary Least Square (DOLS)” modeling, this article concludes that increased agricultural trade openness hinders food security in this region. Because, the member countries of South Asia are heavily reliant on food imports to meet their domestic needs, implying that the expenses of food imports exceed the potential benefits of increasing exports. Moreover, tariffs have a detrimental impact on food security in this region. However, production and employment in the agricultural industry augment earnings, strengthen the capacity to buy food, and ensure adequate nutrition intake over the long term. The study's findings suggest that these nations should prioritize food self-sufficiency to expand agricultural exports and lessen their reliance on imported food. More than that, economies should provide rewards to broaden their agricultural production locally, which aids in reducing hunger and uplifting food security.

Impacts of trade facilitation on greenhouse gas emissions in the Belt and Road Initiative countries

The Belt and Road Initiative (BRI) trade facilitation could generate both economic and environmental impacts. Nevertheless, the resulting impacts on greenhouse gas (GHG) emissions remain unclear. Here we apply a global computable general equilibrium model to simulate the economic changes induced by BRI trade facilitation and thereby assess the GHG emissions burdens within China and the main economic corridors. We show that trade facilitation results in economic improvement at the expense of emissions for most BRI countries. Yet economic growth in these countries has outstripped emissions growth. Especially for countries within the New Eurasian Land Bridge (ELB), most of them even have achieved decoupling of economic growth from emissions under trade facilitation, which is mainly benefited from the decrease of non-CO2 GHG emissions. We stress that non-CO2 GHGs mitigation in more developing regions is essential to achieve an economic-environmental win-win state, in the context of future global trade liberalization.

The effect of NAFTA on Mexico's wage gap

This paper studies how the North American Free Trade Agreement (NAFTA) affected the wage gap between high and low-paid workers within Mexico, considering internal migration. In low-skilled, labor-abundant developing countries, trade liberalization should theoretically increase the wages of low-skilled workers, decreasing income inequality. However, anecdotal evidence indicates that NAFTA increased the gap between rich and poor in Mexico, and empirical evidence is mixed (Hirte et al. 2020; Brülhart 2011; Bosch and Manacorda 2010; Nicita 2009; Chiquiar 2008; Hanson 2007; Gonzalez-Rivas 2007). Because trade may affect wages differently across regions within the country, accurate measures of wage effects must incorporate internal migration; otherwise, apparent wage convergence or divergence might only reflect a geographic resorting of workers. We evaluate wage changes by considering rural-to-urban migration. We first find a slight decrease in both internal and external migration in the years after NAFTA. Then, we find that all male workers see a wage reduction from trade openness, although the harm of high-wage workers almost doubled that of their counterparts with low wages. NAFTA also mitigated some of the wage differentials between the North and South. In summary, trade liberalization has reduced wage differentials among working-age men in urban areas.

Exploring the Development Trends of the International Consumer Market Based on Economic Globalization

It is well-known that international trade is crucial for a country's economic status on the global stage, prompting nations to focus on the development of their trade sectors. Various measures are employed to compete for shares in the international market. For example, some economies, in pursuit of national interests, resort to trade barriers, which impacts the liberalization of trade. Currently, the global economic development trend is unclear, and the international trade environment is becoming increasingly complex with the emergence of new technologies and demands, leading to new trends in international trade. In this context, international trade enterprises must actively engage in this trend, grasp the new development trends, and bravely face challenges. This paper mainly discusses the basic concepts of economic globalization and international trade, analyzes the development trends of international trade under economic globalization, and proposes the current status and strategies for international trade development under the backdrop of economic globalization.

Municipality manufacturing agglomerations unveiled: Exploring spatial structural transformation in Mexico under import substitution and trade liberalisation

This paper conducts a comprehensive long-run analysis of the global spatial concentration and locational dynamics of manufacturing agglomerations in Mexico. While prior research on Mexico has examined the impact of trade liberalisation on processes of regional convergence or divergence, effects on the scale, location and dynamics of agglomerations and local specialisation remain underexplored. To address this gap in the literature, we use a newly-collated municipality-level dataset containing more granular data distinct from more frequently used state-level data. Our analysis spans the period 1950–2019, capturing the full extent of the growing importance of the manufacturing sector and providing a nuanced perspective on the evolution of agglomerations and local specialisation patterns. We investigate shifts in agglomeration during import substitution and following the introduction of trade liberalisation, examining whether new agglomerations emerged or existing ones attracted further economic activity and how these changes impacted local specialisation. In extension, we also examine recent trends, assessing the persistence or alteration of agglomeration dominance in the north of the country. In doing so, our analysis provides valuable insights into the intricate dynamics of agglomerations and local specialisation and their significance in shaping regional disparities.

Pollution reduction by rationalization hypothesis and water pollution in China

This paper empirically investigates pollution reduction by rationalization hypothesis in China. We study the heterogeneous firm’s export effect on water pollution in China. We use China’s firm-level data from 2000 to 2012 to estimate the firm’s heterogeneity of export effect, composition effect, and technique effect on water pollution. We find that intra-industry agglomeration produces a competition effect, and more productive firms can export with less polluted water. More productive firms can export with less polluted water by reallocating more productive labor from dirty firms. We find an inverted U-shaped relationship between a firm’s productivity and water pollution. Intra-industry agglomeration drives up labor productivity; higher productive firms export while producing more polluted water initially. When a firm’s productivity is increasing, export activity produces less polluted water. More export induces less water pollution for high productivity firms. We conclude that the mechanism of pollution reduction by rationalization hypothesis does exist for water pollution in China. Trade liberalization causes some firms to become cleaner, even though we observe relatively clean exporting firms and relatively dirty domestic producers at different productivity stages. Productivity-induced rationalization causes water pollution to fall with high firm productivity. Water pollution in different regions has disparities. Eastern area in China is more likely to produce more polluted water than the rest of China.

Do deep regional trade agreements facilitate international research collaboration?

ABSTRACT We examine whether regional trade agreements (RTAs) facilitate international research collaboration. First, using a two-country model of a continuum of oligopolistic industries with process research and development (R&D) investment and spillovers, we analyze whether trade liberalization through a trade agreement with shallow or deep economic integration increases the number of firms that collaborate. We then empirically investigate the effects of shallow and deep RTAs by employing data on patents with multiple inventors from different countries at the United States Patent and Trademark Office for 114 countries/regions over 1990–2015. We interpret co-inventions by inventors from different countries as evidence of international research collaboration. We find that both shallow and deep RTAs are positively associated with research collaboration among member countries, and that the effect of deep RTAs on international research collaboration is stronger than that of shallow RTAs under certain conditions.

Soybean overweight shock (SOS): The impact of trade liberalization in China on overweight prevalence

This study investigates the overweight effect of the soybean import shock (referred to as the soybean overweight shock or “SOS”) on China, the largest importer of soybeans worldwide. By using China's soybean import liberalization in 1996 as a natural experiment, which involved the removal of soybean tariff rate quota (TRQ) policy and a reduction in soybean import tariffs from 114% to 3%, we found significant SOS effects. The soybean import shock can account for 10.76% of the observed increase in overweight probability between 1989 and 2006. Mechanism analysis finds that the exposure to the soybean import shock leads to a significant decrease in the market price of soybean oil and an increase in soybean oil consumption, it also increases the likelihood of being overweight through dining out, eating food prepared outside, and eating fried foods. Additionally, we discovered stronger SOS effects in urban residents, females and individuals with relatively lower family income.

Does opening up change customs? Evidence from trade liberalization and marriage payments in China

AbstractThere is widespread concern about whether opening up changes cultural customs. However, empirical evidence remains limited. In this paper, we provide new evidence on this issue by examining the impact of trade liberalization on marriage payment customs in China. We first provide a conceptual framework based on a labor market perspective to illustrate how trade liberalization has driven changes in marriage payment customs. Then, using China's World Trade Organization accession as a quasi‐natural experiment, this paper uses the difference‐in‐differences strategy and China's large‐scale household survey data to conduct an empirical study. Our results suggest that trade liberalization has reduced marriage payments in China, especially the bride price but not the dowry. Evidence from industry and census surveys suggests that the declining earning ability of marriageable men and the increasing relative economic status of women have driven down the bride price from the supply and demand sides, respectively. We also find that the impact of trade liberalization has been concentrated on southern and rural households. In addition to the decline in the bride price, the bad practice of child marriage in China has also been alleviated as a result.

Prospect of trade and innovation in renewable energy deployment: A comparative analysis between BRICS and MINT Countries

The current study explores the impact of technological innovation and trade openness on clean energy while accounting for economic growth, access to electricity, pollution, industrial restructuring, and urbanization using data from 1990 to 2020 for both the MINT and BRICS economies. A series of tests were performed for a robust analysis using second generation econometrics approaches before proceeding to investigate the long-run linkages between renewable energy and the duo of innovation and trade using the Prais-Winsten regression model with panel-corrected standard errors (PCSE). The Driscoll-Kraay standard errors test was applied for robustness checks. The results, firstly confirm the presence of heterogeneity, cross-sectional dependence, and cointegration among the selected variables. Secondly, technological innovation as a renewable energy determinant demonstrated negative elasticities in both BRICS countries and the full sample, but a positive elasticity in the MINT countries. Thirdly, concerning trade liberalisation, negative elasticities were obtained for the full sample and MINT countries, while the elasticities were positive for the BRICS bloc. Fourthly, the roles of economic growth and environmental pollution reveal a negative impact on renewable energy consumption for all samples while urbanisation and industrial restructuring promote renewable energy developments only in the BRICS bloc. Policy implications are discussed.