Trade Policy Makers Research Articles

Tariff Negotiations Under Free Trade Agreements: The Case of Mongolia and the Republic of Korea

One of the principal reasons for the establishment of Free Trade Agreements (FTAs) between countries is to negotiate the reciprocal reduction and/or elimination of customs tariffs. According to Mongolian law, the Customs General Administration of Mongolia (CGAM) is responsible for determining the optimal rate and amounts of customs duties. As such, it plays a leading role in the negotiation of tariffs and the implementation of FTAs with partner countries. This paper examines the legal text of tariff negotiations and the modality of reducing tariffs, and determines specific goods of interest for tariff negotiations within the framework of the agreement between Mongolia and the Republic of Korea (ROK), based on analysis of the revealed comparative advantage (RCA) index. The results of the analysis show that, during the negotiation process, Mongolia should focus on textiles and apparel, as well as agricultural production, while the ROK should concentrate on automobiles, items of machinery and their parts, tobacco, cosmetics and noodles. This study should prove useful to Mongolian Customs experts and tariff negotiation team members, trade policy makers and domestic producers.

Trade wars and trade disputes: The role of equity and political support

AbstractRecent theoretical and quantitative analysis of trade wars is grounded in a relatively narrow treatment of optimal tariff theory and noncooperative Nash equilibria. The lynchpin of this approach is the assumption that trade policy makers are rational and have a simple well‐established objective function to optimize. We argue that the preferred specification of this objective function ignores inequality at its peril. We work with a quantitative trade model, introducing a comprehensive tariff‐space grid search new to the literature. This allows us to explicitly check for the presence of multiple Nash outcomes. We show that including income inequality—a primary focus of the earlier literature—as a determinant of social welfare can substantially change noncooperative Nash outcomes. We also show that the optimal tariff of the US falls by half when the social welfare function includes inequality as an objective. Hence, the economic outcomes of actual trade wars may be very different from what recent estimates grounded in optimal tariff theory would suggest.

Uncovering the endogenous features of potassium salts' global transfer: A complex network perspective.

Potassium is a decisive strategic resource to ensure food safety production and supply, which many nations define as a critical metal. Due to the unbalanced distribution of resources and production capacity and the separation of the primary potassium-consuming and supplying countries, international trade is the main supply channel for potassium-consuming countries to acquire enough resources. Understanding the characteristics of potassium trade networks and the evolution of trade patterns is essential for supply security. To explore this issue, this paper employs the complex network theory to quantitatively analyze the evolution characteristics of the global potassium trade network (PTN) from 2000 to 2021. The results show (1) Overall, the potassium trade shows a trend of gradual prosperity, efficiency, and concentration; (2) During the two decades, the main exporting countries of potassium remained stable, while imports changed significantly; (3) The evolution of the potassium trade community has characterized the fragmentation-regionalization-high concentration over time; (4) The trade flow of PTN is unbalanced, and few countries show outstanding capabilities but a single function. These findings would help trade policymakers manage the supply of strategic raw materials more effectively.

Private Equity-Acquired Physician Practices And Market Penetration Increased Substantially, 2012-21.

Private equity (PE) firms have been acquiring physician practices at an increasing rate, raising concerns about such firms' penetration at the physician level into local markets and the impact on health care quality and prices. However, limited knowledge exists about the extent of PE firms' control in local markets. By linking data on PE acquisitions to physician data and using full-time-equivalent physicians as the base of assessment, we estimated the local market share of each PE firm within ten physician specialties at the Metropolitan Statistical Area (MSA) level. PE-acquired physician practice sites increased from 816 across 119 MSAs in 2012 to 5,779 across 307 MSAs in 2021. Single PE firms had significant market share, exceeding 30percent in 108 MSA specialty markets and exceeding 50percent in 50 of those markets. The findings raise concerns about competition and call for closer scrutiny by the Federal Trade Commission, state regulators, and policy makers.

Foreign Exchange Reserves and Economic Growth of Brazil: A Nonlinear Approach

Foreign Exchange Reserves and Economic Growth of Brazil: A Nonlinear Approach

Analysis of Food Supply Chain Digitalization Opportunities in the Function of Sustainability of Food Placement in the Western Balkans Region

This paper aims to analyze and define incentives for the implementation of modern technology and digitalization of the Food Supply Chain (FSC) in the function of sustainability of the food retail sector of the Western Balkans (WB) region. The survey method was applied to a sample of 255 employees. We tested the importance of certain indicators for the implementation of the digitalization process, such as the application of Blockchain Technology (BT), the use of modern IT solutions for traceability, the implementation of the Internet of Things (IoT), the introduction of Artificial Intelligence (AI), development of a system for electronic food placement, implementation of standards, measures, and procedures for regulating the digitalization process, continuous training of employees and economic and financial measures and incentives. A special segment of research deals with the impact of the implemented digitalization process on the sustainability of food placement. The research was conducted among employees of SMEs, large-scale business entities, and retail chains. The research results showed significant deviations from the mentioned incentives to the digitalization process depending on the size of the FSC participants. The work has practical implications because the obtained results show the FSC management, trade policy makers, and competent institutions (ministries, chambers of commerce, professional associations) what measures to apply in order to improve a more efficient implementation of the digitalization process of food placement and lay the foundation for the sustainability of the FSC. Guidelines for future research are outlined in the paper.

Crafting consensus: Indonesia’s discursive strategies in legitimising free trade policy

ABSTRACT Despite its emphasis on trade, the Regional Comprehensive Economic Partnership (RCEP) has been perceived as a liberalisation agenda motivated primarily by strategic concerns with fewer economic benefits. This article analyses the strategies of Indonesia's trade policymakers to legitimize its leading role in RCEP. It is argued that Indonesia's legitimation strategy is implemented through the invocation of two discourses: Indonesia's historical position as a regional leader and bridge-builder and the internationalisation of small and medium enterprises (SMEs). While the former is utilised as a coordinative discourse to provide an overarching vision for other state agencies with a protectionist bent, the latter is employed as a communicative discourse to challenge domestic contestations, especially those from civil society and business interests. This article contributes to the study of trade policy discourse by investigating the role of policymakers in mobilising discourses as a strategy for legitimising a strategically-driven liberalisation agenda.

Modeling the impact of logistic performance, economic features, and demographic factors of countries on the seaborne trade

The shipping industry continues to have strong growth prospects due to increased efficiency and economic liberalization. Through seaborne trade, port infrastructure and logistics impact economic growth in developing countries. This makes studying the factors affecting seaborne trade for such countries particularly important. The current paper aims at analyzing the impact of logistics, economic, and demographic variables on seaborne commodity trade between Qatar, Oman, Turkey, Pakistan, and Iran. Employing a gravity model, results show that a 1% improvement in Logistics Performance Index (LPI) consignments in the importing country can result in a 0.8% increase in total trade flows. Based on results, a 1% increase in the tariff rate reduces the value of trade by 0.4%. Furthermore, a 0.5% increase in trade is caused by the increase in population of the destination country. A sensitivity analysis also shows that logistics variables are more significant than economic and demographic variables. It can be concluded that trade policymakers in developing countries can get better results by improving logistics performance and investing on logistics infrastructure leads to more trade.

Building trust in digital trade will require a rethink of trade policy-making

Abstract In 2019, Shinzo Abe, then Prime Minister of Japan, stated that if the world wanted to achieve the benefits of the data-driven economy, members of the World Trade Organization should find a common approach to combining ‘data free flow with trust’. However, he never explained what these rules should look like and how nations might find an internationally accepted approach to such rules. In this paper, I argue that trade policy-makers must pay closer attention to users’ concerns if they truly want to achieve ‘data free flow with trust’. I begin with an examination of what the most recent digital trade/ecommerce agreements say about trust and discuss whether they actually meet user concerns. Next, I turn to three different examples of online problems that users have expressed concerns about, namely internet shutdowns/censorship, disinformation, and ransomware, describing how these may yield both trade distortions and less trust online. I argue that policy-makers should address these issues if they believe trade agreements should build trust in cross-border data flows. Moreover, I argue how policy-makers respond to user concerns is as important as what they include in trade agreements. Finally, I note that trade negotiators will need to rethink how they involve the broad public in digital trade policy-making, while recognizing that trade policy agreements may not be the best place to address these problems.

Digital disruption: artificial intelligence and international trade policy

AbstractDigitalization of the global economy is occurring apace and has spurred a new wave of trade negotiations, as governments and technology firms vie to establish international rules and standards for the digital era. This article examines the ways that trade policy-makers are responding to artificial intelligence (AI), arguably the most disruptive of the new digital technologies. In a digitalized global economy, trade rules have implications for AI innovation, uptake, and governance, yet existing trade rules have significant shortcomings and need updating in order to assist with effective AI governance. Updating is happening but, so far, the changes focus on promoting AI and disproportionately reflect the interests of large technology firms, the major innovators and owners of AI. New digital trade rules include stringent intellectual property protections for source code and algorithms, and strong commitments to enable the free flow of data across borders. However, much less progress has been made in addressing cross-border risks and harms associated with AI, in areas such as competition policy; ethical, transparent, and accountable use of AI; personal data protection; and protections against the exploitative use of algorithms in consumer and labour markets.

Between Innovation and Precedent the Treaty of Waitangi exception clause in Aotearoa New Zealand’s free trade agreements

New Zealand includes a Treaty of Waitangi exception clause in all its free trade agreements. The clause aims to protect Māori interests arising from the government’s Treaty of Waitangi obligations. But despite changes to New Zealand’s trade agreements, an evolving relationship between the New Zealand government and Māori, and debate over the adequacy of the clause, the exception clause has remained unchanged for 20 years. We suggest that the reproduction the same text helps New Zealand negotiators to credibly argue that inclusion of the clause is required for domestic political reasons. Yet this textual stability also hinders innovation. At the international level, FTA partners might balk at any widening of policy discretion afforded by a revised clause. At the domestic level, revising the clause would require difficult debate over the extent of appropriate protections for Māori in New Zealand’s trade agreements. As calls to change the exception clause grow, New Zealand trade policymakers will need to carefully balance innovation and precedent.

Impact of the U.S.–China trade war on the operating performance of U.S. firms: The role of outsourcing and supply base complexity

AbstractMultinational corporations have benefited tremendously from free trade in the past few decades. However, the dynamism of international relations, paired with the global recession, has rekindled the debate over frictionless trade. In this study, we examine how trade friction, created by tariff trade barriers, affects the operational performance of domestic firms which source from the affected countries. We also investigate how various supply chain characteristics and strategies can moderate the impact of such trade friction. Motivated by the 2018 U.S.–China trade war, we conducted a difference‐in‐difference analysis to examine the impact of trade tariffs on performance indicators of U.S. firms with direct supplier connections in China. Specifically, we found that U.S. firms with direct supply partners (i.e., first‐tier suppliers) in China had a worse performance than the U.S. firms without direct supply partners in China in terms of inventory (i.e., days of supply) and profitability (return‐on‐assets). We further found that the negative impacts were more severe for firms with a higher degree of outsourcing, and horizontal and spatial supply base complexity. We discuss the implications for international operations management, supply chain networks, supply risk management, and provide suggestions to supply chain practitioners and trade policymakers.

Trade in health products and population health: A long‐run relation

AbstractThe effect of trade on different economic outcomes has been extensively studied but the literature on the specific effects of trade on health outcomes has remained relatively scanty. Our paper fills in the gap by examining the long‐run association between import expenditures on health products and longevity in a cross‐country panel setting of 32 developed and 24 developing countries, covering 1990–2018. It accounts for both time‐series properties and cross‐country heterogeneity, while remaining robust to omitted variables and endogeneity problems, by applying panel cointegration techniques. The results reveal that per capita medical import expenditure on pharmaceuticals, aggregate medical products and medicines have contributed around 0.34, 0.35 and 0.30 percentage points, respectively to the annual increase in life expectancy for an average country in our sample. The findings suggest that higher per capita import expenditure on health products can increase longevity significantly in the long‐run. The results remain robust to cross‐sectional dependence, sub‐samples of developed and developing countries and alternate measures of health outcomes such as adult mortality rates. These findings set the context for treating health product imports as critical for long‐term improvements in population health and outlines the need for greater coordination between health and trade policymakers for improving population health.

Has South Korea Really Benefited from FTAs?

This study aims to reveal the actual effect of FTAs on South Korea's foreign trade volumes of main export and import products separately. The econometric approach of our study follows the gravity model with a panel dataset of 47 countries that have FTA with South Korea for the years between 2001-2018 by using 2-digit HS (Harmonized System) classification for main export and import goods. The study reveals that even though signing the FTA affects positively the trade volume of South Korea and partner countries, the export of South Korea i s affected positively only f or t he b ase metals & articles products while the import of South Korea increases for mineral products, chemical or allied industries products and machinery & mechanical appliances after the FTAs entered into force. Our findings contribute to the literature by ascertaining a new estimation model and original empirical results for South Korean trade policy makers.

Export of agricultural products from Serbia to the EU: Panel gravity model

This paper will analyse the export of agricultural products of Serbia to the EU during the period from 2001 to 2017. A panel gravity model was used to assess the effects of trade flows. The main advantage of the gravity model is the application of basic indicators of the economy and the ability to evaluate panel series. The obtained results show that the size of the economy, measured by gross domestic product, the size of the market of foreign trade partners, measured by population, and the distance between trading partner countries, have measurable effects on the export of agricultural products from Serbia to the EU. Using a simple econometric model, we analysed the effects of Serbia's international trade and noticed that there is significant room for improving the exchange between Serbia and EU members. A multi-variable model would provide more information to trade policy makers.

Firm level assessment of Pakistan and Malaysia Free Trade Agreement

The core idea of this paper is to assess before and after effect of Pakistan and Malaysia Free Trade Agreement (FTA) on firm level financial factors. The empirical analysis covers the balanced panel data for the period from 2003 to 2014 and uses regression analysis. This study finds that due to change in trade policy, profits decrease, increase in leverage and decline dividend payouts of the firms, which are facing import and export competition. Nonetheless, the firms, which are export oriented and other firms, which enhance their competency by importing latest technology leads toward surge in profits, lower leverage and increase in dividend payments. The contribution of this study is to assist the trade policy makers in formulating the agreements with other ASEAN member countries as well as the corporate managers to make the international trade strategy for the firm to compete in the South East Asian region. To the best of the knowledge, this topic has not been addressed in the literature before.

Are there dynamic productivity gains from agricultural trade?

PurposeThe primary purpose of this paper is to take an in-depth look at the question of whether liberalizing trade in agriculture can generate dynamic productivity gains comparable to those in the manufacturing sector.Design/methodology/approachIn contrast to the manufacturing sector that has generated firm/plant-level trade data, there is a lack of farm-level trade data that are needed for empirical measurement of dynamic productivity gains. Therefore, the authors use thought experiments to analyze the sequence of events that would occur when trade is liberalized for agriculture; delineate the expected behaviors of the actors involved in the trade and draw inferences about whether there would be dynamic productivity gains from agricultural trade.FindingsThe central finding is that there would be little dynamic gain from agricultural trade at the farm level due to the limited role of producers in shaping their international competitiveness. Yet, agricultural trade may generate dynamic gains if states or input supply corporations respond to the freer trade environment by making more investments for research and development (R&D). Further, when intraindustry prevails, there can be productivity gains at the industry level due to the transfer of resources from less to more efficient farm producers.Originality/valueThe findings of the paper are expected to present insights into value for researchers working in the area of agricultural trade; for agricultural trade policymakers in developing countries and for trade negotiators engaged in reforming or designing World Trade Organization (WTO)’s trade rules for agriculture.

A Reappraisal of the Prebisch-Singer Hypothesis Using Wavelets Analysis

The Prebisch-Singer (PS) hypothesis, which postulates the presence of a downward secular trend in the price of primary commodities relative to manufacturers, remains at the core of a continuing debate among international trade economists. The reason is that the results of testing the PS hypothesis depend on the starting point of the technical analysis, i.e., stationarity, nonlinearity, and the existence of structural breaks. The objective of this paper is to appraise the PS hypothesis in the short- and long-run by employing a novel multiresolution wavelets decomposition to a unique data set of commodity prices. The paper also seeks to assess the impact of the terms of trade (also known as Incoterms) on the test results. The analysis reveals that the PS hypothesis is not supported in the long run for the aggregate commodity price index and for most of the individual commodity price series forming it. Furthermore, in addition to the starting point of the analysis, the results show that the PS test depends on the term of trade classification of commodity prices. These findings are of particular significance to international trade regulators and policymakers of developing economies that depend mainly on primary commodities in their exports.

Income shifting and U.S. international trade in goods statistics

Intrafirm trade represents greater than one-third of total U.S. international trade in goods. Since these are not arm’s-length transactions, trade policymakers have voiced concerns that income shifting may distort international trade in goods statistics through the manipulation of transfer prices. Using country-level data on intrafirm exports and imports, we estimate a path analysis that simultaneously tests how and to what extent tax-motivated transfer pricing and real investment decisions affect intrafirm trade in goods statistics. Contrary to speculation, we do not find an economically significant relation between transfer pricing and intrafirm trade in goods statistics. In contrast, we find that tax-motivated location decisions create a 21 (20) percent or $819.7 ($927.1) million difference in mean intrafirm exports (imports) between the U.S. and a low- and high-tax country. This study provides trade policymakers with relevant information about the extent to which real investment decisions and accounting manipulations affect intrafirm trade in goods statistics and contributes to the international trade and income shifting literatures.

Is the WTO in Sync with the Business Community?

AbstractThe World Trade Organization (WTO) and the General Agreement on Tariffs and Trade (GATT) have played an important role in creating a predictable framework for companies conducting business internationally. Business leaders continue to express support for the institution in surveys but, privately, trade policymakers and opinion leaders in Geneva have questioned the commitment of business leaders to engage in the work of the WTO. As the institution faces its latest crisis, it is natural for the WTO’s supporters to turn to the business community for help – in making the economic case to policy makers for the rules‐based trading system, in encouraging governments to resolve their differences and make progress on key issues that threaten the system, and in identifying issues and opportunities where the WTO can serve as a forum to support trade‐related economic growth. The time and effort that businesses invest in this work depends, in part, on how they perceive the institution and, at the end of the day, how much they feel they are getting out of it. This paper therefore poses the question of whether the WTO is ‘in sync’ with the business community.