Author Archives: jdingel

Exports that don't cross borders

Deemed exports:

Most companies recognize that U.S. export control laws apply to shipments of products or technical data out of the United States to another country. Despite recent efforts by the U.S. Department of Commerce to increase awareness about how the export control rules apply to other transactions, however, some companies still do not realize that the sharing of technology or source code with a foreign national is also an export – even when the foreign national is within the United States. Under the “deemed export rule” in the Export Administration Regulations (EAR), a transfer of technology or source code (except encryption source code) is “deemed” to be “an export to the home country or countries of the foreign national.”

Update: Professors take note!

[Hat tip: Sabrina]

Exports that don't cross borders

Deemed exports:

Most companies recognize that U.S. export control laws apply to shipments of products or technical data out of the United States to another country. Despite recent efforts by the U.S. Department of Commerce to increase awareness about how the export control rules apply to other transactions, however, some companies still do not realize that the sharing of technology or source code with a foreign national is also an export – even when the foreign national is within the United States. Under the “deemed export rule” in the Export Administration Regulations (EAR), a transfer of technology or source code (except encryption source code) is “deemed” to be “an export to the home country or countries of the foreign national.”

Update: Professors take note!

[Hat tip: Sabrina]

Further reading for Economist subscribers

Last month on Trade Diversion:

A new discussion paper by Antoni Estevadeordal, Caroline Freund, and Emanuel Ornelas says that regional trade deals amongst Latin American countries have been building blocks for multilateral liberalization — “there is strong evidence that preferences induce a faster decline in external tariffs in free trade areas“.

This contrasts with Nuno Limão’s results for the United States and Europe, where “multilateral tariff reductions in PTA goods were smaller than those in similar goods not imported from PTA partners.”

Last week’s Economist:

In fact, the evidence is mixed. One study argues that America cut multilateral tariffs more slowly on goods to which it had extended preferential access. A new analysis reaches the opposite conclusion for Latin America. The history of the past two decades suggests the two can coexist. Multilateralism has hardly been moribund as regional deals have mushroomed. The Uruguay round of global trade talks ended, the WTO came into being and the Doha round began.

You read it here (with citations!) first.

The relevance of going alone

Simon Lester inquires about unilateral trade liberalization:

Where exactly would be today in terms of free trade, without international agreements or organizations? My best guess is that trade barriers would be much higher, but is there some small chance that if we had spent the last 50 years talking about tariff cuts as something other than “concessions,” we would actually have made more progress?

“Much higher” may be too strong a statement. Remember that it’s surprisingly difficult to find evidence that WTO membership liberalizes trade using a naive indicator like formal membership.

For developing countries, a World Bank number I’ve often seen attributes two-thirds of their liberalization in recent decades to unilateral actions.

It’s also worth noting that most of the tariffs cuts being discussed at the WTO’s Doha Round of negotiations concerned bound rates that were significantly above the current applied rates.

If unilateral trade liberalization resulted in respectable outcomes while multilateral fora captured the attention of most policymakers, then perhaps fifty years of thinking differently would have paid significant dividends.

[Title reference]

Atypical thoughts on foreign aid

Oxford’s Adrian Wood proposes capping development assistance:

Some developing countries, most of them in Africa, have had high levels of aid dependence – in excess of 10 per cent of gross domestic product, or half of government spending – for decades. It is questionable whether this has been helpful.

There are various reasons to be concerned about high aid dependence, but the most worrying is the undermining of good governance by distortion of political accountability. Governments that are highly dependent on aid pay too much attention to donors and too little to their citizens. This might not matter if the interests of citizens and donors were identical. But all donors have some non-developmental motives and, even when they seek to promote development, they have their own priorities. The result is confused and shifting policies, volatile aid and spending and, as a result, slower growth.

I therefore propose that donors collectively set an upper limit on the amount of aid they give to any developing country. This limit should be 50 per cent of the amount of tax revenue that the aid-receiving government raises from its own citizens, by non-coercive means and excluding revenue from oil and minerals…

About 30 countries with populations over 1m, of which more than 20 are in Africa, now get aid above this limit and in about half of them aid is more than 100 per cent of taxes…

A lot of countries, including some in Africa, still get too little aid – well below my 50 per cent limit and below what they could put to good use – so part of the agenda should still be to increase aid. But the dangers to development of too much aid for too long are sufficiently serious that donors also need to think strategically about upper limits.

Update: Bill Easterly notes that it isn’t likely to happen.

A guide to the very basics of Dixit-Stiglitz

Are you starting a (graduate) course in international trade this fall? If so, you’ll soon be encountering the so-called Dixit-Stiglitz CES function, a demand system that underlies trade economists’ work on everything from the gravity equation to the organization of multinational enterprises.

Because the specification is so popular, economists frequently skip to its well-known results, like consumers’ Marshallian demand functions and firms’ pricing strategies, without deriving them. And professors introducing the topic sometimes ask students to derive the results without giving them much guidance.

Here’s my introductory guide to the Dixit-Stiglitz demand system. It walks through the most basic derivations step-by-step, in hopes of helping those students so frustrated with wading through tedious algebra and integrals that they’ve turned to Google searching for a very basic introduction to Dixit-Stiglitz lite.

Comments and corrections (!) are most welcome; my email address is on the first page of the pdf.

Richard N. Cooper defends the US current account deficit

Richard N. Cooper defends global imbalances in the JEP:

I argue that the generally rising U.S. trade deficit over the last 10-15 years is a natural outcome of two important forces in the world economy — globalization of financial markets and demographic change — and therefore that the U.S. current account deficit is likely to remain large for at least a decade. In a globalized market, the United States has a comparative advantage in producing marketable securities and in exchanging low-risk debt for higher-risk equity. It is not surprising that savers around the world want to put a growing portion of their savings into the U.S. economy. I argue that serious efforts to reduce the U.S. deficit, even collaborative efforts with other countries, may well precipitate a financial crisis and an economic downturn every bit as severe as the one that many fear could result from a disorderly market adjustment to the trade deficit.

While Martin Feldstein disagrees:

I believe that such enormous deficits cannot continue and will decline significantly in the coming years. This paper discusses the reasons for that decline and the changes that are needed in the U.S. saving rate and in the value of the dollar to bring it about. Reducing the U.S. current account deficit does not require action by the U.S. government or by the governments of America’s trading partners. Market forces alone will cause the U.S. trade deficit to decline further. In practice, however, changes in government policies at home and abroad may lead to faster reductions in the U.S. trade deficit.