On The Pollution Content of China’s Trade: Clearing the Air?

This study compares alternative measures of the potential and actual pollution content of China’s trade using an environmental I-O methodology. Using the conventional, potential measure adopted by other researchers, we find that China ‘saves’ on local environmental resources by exporting goods that on average embody less pollution content than imports would if they were produced locally in China. A less positive, assessment of the environmental impact of China’s trade emerges, however, if the assumption of a common technology for producing exports and imports is dropped. Using an actual pollution content methodology for measuring the pollutants embodied in the production of both exports and imports, we find that China is actually a net exporter of embodied pollutants.Trade, pollution content, China

Are Inequality and Trade Liberalization Influences on Growth and Poverty?

Trade, Inequality, Growth, Poverty, Developing countries

Country Trade Costs, Comparative Advantage and the Pattern of Trade: Multi-Country and Product Panel Evidence

This paper investigates whether differences across countries in overall country-specific trade costs affect comparative advantage. It does so by examining whether the commodity composition of countries’ trade is driven by differences in countries’ trade costs, as well as by differences in traditional factor endowments. Industry export shares across up to 71 countries and 158 manufacturing industries for five year periods over the period 1972 to 1992 are shown to be greater in trade cost sensitive industries for countries with relatively low national trade costs. This is after controlling for factor-intensity differences across industries and for endowment differences (physical and human capital) between countries. Further, these relationships are more evident in exporting to global markets than to local or regional markets.Trade costs, comparative advantage

Trade Facilitation in Developing Countries

Measures to actively facilitate trade are increasingly seen as essential to assist developing countries in expanding trade and benefiting from globalisation. Although often viewed as narrowly concerned with the ease and speed of Customs procedures, even greater trade cost reductions and trade and welfare benefits may be reaped from a broader view of trade facilitation (TF) that incorporates transportation, distribution and communication issues. A number of TF reforms are particularly beneficial: improving procedures, especially Customs clearance; introducing automation and use of information technology; reducing excessive documentation requirements; addressing lack of transparency in import and export requirements; addressing lack of modernisation of and cooperation between Customs and other government agencies. The review identifies the types of TF reforms that could address these problems and deliver a return in terms of increased revenue collection efficiency, reductions in trade costs and promotion of greater regional cooperation (at least in Customs and transport, especially as many TF measures are appropriate for inclusion in regional integration agreements).Trade Facilitation, Regional Integration

EU-ACP Economic Partnership Agreements and ACP Integration

The direct effects of EPAs on ACP countries arise from the requirement to eliminate tariffs on most imports from the EU. While consumers gain from cheaper imports, the government losses tariff revenue and producers face increased completion, implying adjustment costs. This paper estimates the consumer welfare and revenue impact for a sample of 34 ACP countries of eliminating tariffs on imports from the EU under an EPA, and discusses the associated adjustment costs. Although the ACP overall and on average experiences consumer welfare gains, the gains (or any losses) are small and associated with significant revenue losses and potential adjustment costs. As the gains are associated with increased imports from the EU, larger welfare gains tend to be associated with larger revenue losses and adjustment costs. There is scope for tax substitution to address revenue concerns, but addressing adjustment costs (especially employment) will be much more difficult. ACP countries can exclude up to 20% of imports from the EU from tariff elimination (sensitive products). The paper argues that regionally traded goods should be classified as sensitive and excluded from liberalization. Although this reduces consumer welfare gains (or increases welfare losses), these are likely to be more than offset by the benefits from lower revenue losses and trade effects that reduce adjustment costs. This also serves to encourage increased intra-regional trade: regional exporters gain from the preservation of their regional market share and in all countries domestic producers are likely to produce some regionally traded goods.ACP, EPAs, Imports, Welfare Effects, Integration

Export response to trade liberalisation in the presence of high trade costs: Evidence for a landlocked African economy

The paper investigates the relative importance of trade policy and 'natural' sources of export taxation in Malawi, a landlocked African economy. These sources of export taxation are in turn used to explore how export supply would respond to trade liberalisation as opposed to measures which lower other international trade costs. The findings indicate that trade policy barriers are now only a limited source of 'true' export taxation and that trade policy reform needs to be complemented with reforms to reduce international trade, including transport, costs

Regional Heterogeneity and China’s International Trade: Sufficient Lumpiness or Not?

This paper explores whether there is sufficient lumpiness or heterogeneity in the relative endowments (capital, labour and skills) of the regions of China to affect China’s specialization and trade patterns. It does so using both the lens condition to identify the violation of factor price equalization across regions, and direct evidence on regional trade and specialization. The results are sensitive to the level of regional aggregation. The paper concludes, however, that China was sufficiently lumpy as recently as 2004 to affect it pattern of international trade.Trade, lumpiness, regions, China

Endowment Differences and the Composition of Intra-Industry Trade

This paper investigates the relationship between differences in endowments and different types of trade, in particular vertical intra-industry trade (VIIT). We build a general equilibrium framework based on a hybrid of the Chamberlain-Heckscher-Ohlin and the specific factors models that generates predictions about how the shares of different types of intra-industry and net trade flows change with differences in endowments. We also present some empirical evidence for European Union trade with its 51 major trading partners. The econometric models of the determinants of the different types of trade confirm the theoretical predictions, namely that the effect of cross country differences in the endowments of trading partners on the share of vertical IIT in total bilateral trade differs from their effect on both horizontal IIT and net trade. The share of horizontal IIT (net trade) decreases (increases) for all increases in absolute endowment differences, but the share of vertical IIT can both increase and decrease with increases in endowment differences.Intra-industry trade, factor endowments

Adjusting to Bilateral Trade Liberalisation under an EPA: Evidence for Mauritius

This paper estimates the impact and adjustment costs for Mauritius of eliminating tariffs on imports from the EU under an EPA, considering trade, revenue, welfare, production and employment effects, and considering the potential benefit of preserving preferential access to the EU market. Assuming ‘immediate’ complete elimination of all tariffs on imports from the EU, there is a small welfare loss (-0.17% of 2002 GDP) unless we include potential production gains (generating a welfare gain of 0.06% of GDP). Excluding up to 20% of imports as sensitive products, the overall welfare loss is -0.19% of GDP. However, potential adjustment costs are much greater than these low welfare effects suggest: tariff revenue will fall by 33-52% of 2002 levels, domestic (non-export) production will decline by almost a quarter and direct employment by 12% (about 11,000 jobs lost overall). Preferences under an EPA are unlikely to support any growth in the major export sectors (sugar and garments), so absorbing the adjustment costs will be difficult.EU-ACP, Economic Partnership Agreements, Mauritius