World Trade Organization Accession Research Articles

COMPARISON OF INDONESIA'S EXPORT-IMPORT WITH CHINA AFTER THE AGREEMENT ON AGRICULTURE (AoA)

The agricultural sector is the most important sector in the Indonesian and Chinese economies. The role of this sector is not only in international trade activities, but also plays a role in the domestic economy, including food sufficiency. The agricultural policies of Indonesia and China are not only oriented to increasing agricultural productivity for trade purposes but also to improving the standard of living of the people, especially farmers. The flow of economic liberalization brought by the World Trade Organization (WTO) has become a dilemma for Indonesian and Chinese agriculture. On the one hand, the WTO accession decision opens access to wider international trade, but on the other hand, both countries must protect their agriculture through the determination of prices for agricultural products by the government. This paper aims to find out the comparison of Indonesia's exports and imports with China in the field of trade in agricultural products after the implementation of the Agreement on Agriculture (AoA) or agricultural agreements which are part of the WTO from January 1, 1995, to the present. The results of the study obtained that the comparison of Indonesia's exports and imports with China was more optimal. From the research results, it can be used as a comparison for the government in determining further policies to get maximum results.

Firm‐level trade effects of WTO accession: Evidence from Russia

AbstractThis paper examines the impact of Russia’s World Trade Organization (WTO) accession on international trade patterns at the firm level. A large literature of cross‐country studies examines the long‐run trade effects of the General Agreement on Tariffs and Trade (GATT)/WTO membership. Our paper contributes to this literature by bringing short‐run micro‐level evidence from the experience of a large trading country. Using customs data on the monthly import and export transactions of Russian firms over the period 2011–2015, we investigate the short‐run responses of firm‐level trade along the intensive and extensive margins following Russia’s WTO accession in 2012. Our results indicate an increase in the number of foreign countries that Russian firms export to or import from, and a significant increase in the number of exported products. The evidence on the effects of the WTO accession on the intensive margin of firm‐level trade is mixed. Additionally, we find suggestive evidence that the Russian retaliatory food embargo imposed in response to the Crimean economic sanctions might have been intended as a protectionist policy to help out a vulnerable domestic industry (i.e. agriculture) directly impacted by the country’s WTO accession.

WTO accession and firm exports in developing economies

The World Trade Organization (WTO) has a significant impact on international business activities due to its actions and decisions that set the rules of international trade. However, our understanding of how WTO affects firm behavior is limited. Taking advantage of the variations in entry dates to the World Trade Organization, we perform difference-in-differences estimation to examine whether a country’s accession to the WTO significantly increases firms’ export intensity. In addition, we apply insights from the threat-rigidity hypothesis to argue that firms’ reactions to supranational institutions vary depending on how managers perceive the institutional environment. We find that firms from countries that enter the WTO experience significantly higher growth in export intensity when their managers have positive perceptions about domestic institutions. In contrast, accession to the WTO does not significantly increase firms’ export intensity whose managers perceive domestic institutions as obstacles. Our findings suggest that supranational institutions, such as the WTO, play an important role in the strategic decisions that firms make. However, the full value of such institutions can only be realized if the managers are aware and positively disposed to engage with these institutions.

WTO Accession and Exports: Firm Level Evidence from Developing Economies

The World Trade Organization (WTO) has a significant impact on international business activities due to its actions and decisions that set the rules of international trade. However, our understanding of how WTO affects firm behavior is limited. Taking advantage of the variations in entry dates to the World Trade Organization, we perform difference-in-differences estimation to examine whether a country’s accession to the WTO significantly increases firms’ export intensity. In addition, we apply insights from the threat-rigidity hypothesis to argue that firms’ reactions to supranational institutions vary depending on how managers perceive the institutional environment. We find that firms from countries that enter the WTO experience significantly higher growth in export intensity when their managers have positive perceptions about domestic institutions. In contrast, accession to the WTO does not significantly increase firms’ export intensity whose managers perceive domestic institutions as obstacles. Our findings suggest that supranational institutions, such as the WTO, play an important role in the strategic decisions that firms make. However, the full value of such institutions can only be realized if the managers are aware and positively disposed to engage with these institutions.

Export spillover from foreign direct investment in China during pre- and post-WTO accession

This study investigates the effects of export spillover from foreign direct investment (FDI) before and after China’s World Trade Organization (WTO) accession, with particular consideration of the FDI source country and firm ownership structure. It uses a Chinese manufacturing firm-level panel dataset, for the period 1998–2007. In general, there are no spillover effects among state-owned enterprises (SOEs). This study finds negative horizontal and positive vertical spillovers associated with FDI from Hong Kong, Macao, and Taiwan (HMT) among non-SOEs. Furthermore, non-HMT FDI, which is predominantly from the Organisation for Economic Co-operation and Development (OECD) countries, have statistically significant positive horizontal and vertical spillover effects on the export performance of private Chinese firms. Positive forward spillovers occurred only after China joined the WTO, while positive backward spillovers existed during both the pre- and post-WTO periods. China’s entry into the WTO intensified the forward linkage of production, implying that greater availability of high-quality inputs produced by non-HMT foreign multinationals benefited the export performance of private domestic firms.

One Stone, Two Birds: Can China Leverage WTO Accession to Build the BRI?

The efficacy of the World Trade Organization (WTO), as an international forum seeking to provide a uniform platform to Member States for bilateral and multilateral negotiations and further the spirit of a new international economic legal order, is challenged constantly. This article explains how China is using the WTO accession process to leverage its domestic interests towards the Belt & Road Initiative (BRI) to obtain greater commitments from existing and potential BRI nations. It is shown that after the BRI’s official establishment in 2013, China’s trade commitments from potential accession countries are becoming more pronounced, with increasing and sometimes onerous expectations of the acceding countries, due to the lack of any standard format for bilateral accession protocols. WTO law is increasingly part of BRI hard law governance practices, suggesting encroachment of BRI disputes within the WTO dispute settlement framework to establish a novel approach to dispute resolution. Since rules-based trade practices are needed, Member States should not adopt accession protocols that are either too rigid or too flexible, thereby creating glaring loopholes to be misused. WTO’s overall objective of furthering trade liberalization can be achieved only by keeping track of techniques adopted by developed countries when negotiating with developing and least developed countries such that potential members are not discouraged from joining the new economic order from the outset. BRI, Belt and Road Initiative, WTO, accession, SCM agreement, subsidies, services, telecommunications, trade-related investment measures, LDC Guidelines

Import competition and firm innovation: Evidence from China

This paper investigates whether and how import competition affects firm innovation. Using China's World Trade Organization (WTO) accession as a quasi-natural experiment, we find that import competition reduces firm innovation, which is consistent with the Schumpeterian effect. We also find heterogeneous treatment effects across firm productivity and patent types in a way consistent with preference and knowledge spillover effects, but not with escape-competition and trapped-factor effects.

Trade-Policy Dynamics: Evidence from 60 Years of U.S.-China Trade

We study the growth of Chinese imports into the United States from autarky during 1950-1970 to about 15 percent of overall imports in 2008, taking advantage of the rich heterogeneity in trade policy and trade growth across products during this period. Central to our analysis is an accounting for the dynamics of trade, trade policy, and trade-policy expectations. We isolate the lagged effects of past reforms and the current effects of uncertainty about future reforms. We build a multi-industry, heterogeneous-firm model with a dynamic export participation decision to estimate a path of trade-policy expectations. We find that being granted Normal Trade Relations (NTR) status in 1980 was largely a surprise and that, in the early stages, this reform had a high probability of being reversed. The likelihood of reversal dropped considerably during the mid 1980s, and, despite China's accession to the World Trade Organization (WTO) in 2001, changed little throughout the late 1990s and early 2000s. Thus, although uncertainty depressed trade substantially following the 1980 liberalization, much of the trade growth that followed China's WTO accession was a delayed response to previous reforms rather than a response to declining uncertainty.

China’s Accession to the WTO and the Collapse That Never Was

This article examines the application of neoclassical economics to the discussion of China’s transition to the market in the 1990s and its accession to the World Trade Organization (WTO) in 2001. It shows how this theory shaped, and misled, forecasts of the impact of that accession and of China’s subsequent economic performance. It discusses the debate between mini-bang and big-bang transition policies in the 1990s and shows the two sides shared far more in common than separated them. Both sides misestimated, in fact grossly underestimated, the dynamism of China’s economy. It shows how widely anticipated predictions of crisis and collapse with China’s WTO accession were the natural result of the assumptions of the neoclassical model. It suggests that a rival model of market transition based on Bukharin and Kuznets has much to offer. JEL Classification: P22, P26, P21, B24

Trade policy uncertainty and innovation: Firm level evidence from China’s WTO accession

This study proposes a novel channel through which trade liberalization may induce innovation through the reduction of trade policy uncertainties (TPU) in destination markets. To verify this linkage, we utilize the significant reduction of TPU engendered by China’s accession to the World Trade Organization (WTO) in 2001 as a quasi-natural experiment. We find that reduction in TPU significantly encourages firms’ patent application: firms in sectors with a larger reduction in uncertainty filed more invention patent applications after China’s WTO accession. We also find that firms’ innovation responses to TPU reduction vary by productivity, ownership, exporting status, and the irreversibility of investment.

Do firm boundaries matter? The impact of Chinese imports on US conglomerates

The purpose of this paper is to use China’s World Trade Organization accession as a quasi-natural experiment and examine whether conglomeration affects firmss’ ability to respond to a significant increase in competitive pressure. Conglomerate segments have higher sales growth and higher profitability than singlesegment firms, when they face intensified import competition. Conglomerates’ outperformance is not observed when the markets in which segments operate already have high product market competition. Overall, conglomeration encourages competitiveness, and internal resources are allocated to relatively competitive segments.

INPUT TRADE LIBERALIZATION AND MARKUP DISTRIBUTION: EVIDENCE FROM CHINA

We utilize an unprecedented liberalization episode in China, namely its World Trade Organization accession, to estimate the impact of trade liberalization on firm markup and markup distribution. Using a panel data quantile regression, we show that the impact of tariff reduction on markup can be heterogeneous to different firms, resulting in an unevenly distributed markup change across firms. In particular, reduction in output tariff reduces markup and markup dispersion, while reduction in input tariff increases markup and markup dispersion. (JEL F12, F13)

WTO accession, trade expansion, and air pollution: Evidence from China’s county‐level panel data

AbstractThis study provides evidence that trade expansion has contributed to the degradation of air pollution in China. On the basis of different responses of counties’ trade to China's World Trade Organization accession at the end of 2001, we exploit air pollution data from NASA to construct a difference‐in‐differences predicted trade as an instrument for our identification. We document statistically significant and robust evidence on trade expansion, which accounts for approximately 60% and 20% for the increase of PM2.5 and SO2, respectively, in China. Findings on trade pollution relation are robust to various tests. Deterioration in the environment is mainly driven by scale and trade in polluting sectors.

WTO Accession and Developing Countries: Ethiopia in Focus

The objective of this paper is to present a survey of trade issues in WTO membership from the perspective of developing countries putting Ethiopia in focus. Developing countries are a large percentage of the World Trade Organization (WTO) membership, in which Ethiopia is on process of acquiring membership. I examines the experiences of least developing countries (LDCs) acceded to World Trade Organization (WTO) in relation to their accession process, terms of accession and implementation of commitments with a view to drawing lessons which could be relevant to Ethiopia to devise successful strategies and avoid mistakes in an effort to gain maximum benefits from its WTO membership. Since accession to the WTO is not an end in itself, Ethiopia should carefully and strategically negotiate to reap the potential benefits of membership in light of its long-term development strategies.

Markups, Market Imperfections, and Trade Openness: Evidence from Ghana

Abstract This article investigates the impact of Ghana’s World Trade Organization (WTO) accession on firm-level product and labor market imperfections. The article exploits a rich dataset of firm-level information to estimate markups and the degree of monopsony power enjoyed by manufacturing firms. The results indicate that price-cost margins declined while the degree of monopsony power increased in the wake of WTO accession. These diverging dynamics suggest that firms compress real wages to offset loss of market power in the product market due to increased international competition. This gives rise to an increase in the market imperfection gap, which gradually erodes the pro-competitive gains from trade. The article contributes to the literature by identifying channels through which allocative inefficiencies and misallocation can persist even after trade liberalization.

The impact of trade agreements on world export prices

AbstractThis paper uncovers new stylized facts on the relation between economic integration and world trade prices. Using free on board export price data for the universe of manufacturing products, we show that a country's membership in the WTO (World Trade Organization) or in a PTA (Preferential Trade Agreement) is associated with an increase in export prices of differentiated goods. For the WTO, this effect is captured by the countries that were subject to rigorous WTO accession procedures. We also exploit the importance of the depth of a PTA and of its different provisions. Whereas the effect of the depth per se is not significant, individual provisions evoke distinct effects on prices. In particular, we find that PTAs with provisions on investments are associated with higher export prices. The results are consistent with theoretical models that relate competition to the innovation behavior of firms.

EU’s New Anti-dumping Methodology and the End of the Non-market Economy Dispute?

The EU’s New Anti-Dumping (‘AD’) Methodology effectively maintains the long-standing distinction between market economies and non-market economies (‘NMEs’) and continues the entrenched practice of treating China discriminatively in AD actions. China challenged this discriminatory treatment immediately after the expiry of the relevant parts of section 15 of its World Trade Organization (WTO) Accession Protocol which permits such practices purportedly for fifteen years only. For unknown reasons, China decided to suspend the panel proceedings before the panel report was about to be released. While the suspension means that WTO Members including the EU may continue their existing AD practices against China, it would not stop China from retaliating against such discriminatory treatment. More significantly, the suspension does not mean the end of the dispute as China is likely to pursue it once the appellate function of the WTO is revived.

Foreign competition and the durability of US firm investments

AbstractHow does the exposure to product market competition affect the investment horizon of firms? We study if firms have an incentive to shift investments toward more short‐term assets when exposed to tougher competition. Based on a stylized firm investment model, we derive a within‐firm estimator using variation across investments with different durabilities. Exploiting the Chinese World Trade Organization (WTO) accession, we estimate the effects of product market competition on the composition of US firm investments. Firms that experienced tougher competition shifted their expenditures toward investments with a shorter durability. This effect is larger for firms with lower total factor productivity.

Empirical evidence on surrogate country method for non‐market economy: US anti‐dumping policy towards China

AbstractWhether the non‐market economy (NME) treatment on China can be maintained even after the expiry date under Section 15 of China's World Trade Organization (WTO) Accession Protocol is one of the most controversial issues in the WTO. In fact, the key issue of the NME status in the anti‐dumping (AD) proceedings turns out to be how surrogate countries are selected in relation to dumping margin calculation. This paper reviews the US practices concerning the application of the surrogate country method. Despite the general perception of capricious and random selection of surrogate countries, the Department of Commerce has maintained a consistent pattern for applying the criteria. This seemingly consistent practice, however, raised systematic problems—but not at a significant scale—in dumping margin calculation concerning Chinese products. This result sheds an interesting light on the current WTO disputes concerning the China's NME status. At least in terms of the US AD practices, the result of the WTO dispute settlement process may not have a significant impact on the China's exportation.

Determinants of China’s Rice Export after WTO Accession: A Gravity Model Analysis

This paper applied the commodity-specific gravity approach to investigate the influenced factors to China’s rice export to its major trading partners after World Trade Organization (WTO) accession over 2001- 2014 period. The gravity model was augmented with factors from both exporter’s and importer’s sides. The empirical results revealed that, excepting distance, the remained variables including Gross Domestic Product, population, income, exchange rate, production and price had statistical significance and correlated with the total export as hypothesized. Among these variables, price and production reported as the best predictors, explaining 81.30% and 80.54% variation in China’s total export, respectively. Moreover, the determinants of China’s rice export highly depended on the components of exporter side than that of importer sides. This study results provide the statistical and practical significance for trade policy formulation to promote China’s rice exports in world markets.