This working paper (pdf) sounds cool:

The poor performance of many African economies has been associated with low growth of exports in general and of manufacturing exports in particular. In this paper we draw on micro evidence of manufacturing firms in five African countries – Kenya, Ghana, Tanzania, South Africa and Nigeria – to investigate the cause of poor exporting performance. We exploit a data set which has a much longer panel dimension than has been used before to assess the relative importance of self-selection based on efficiency and firm size as determinants of export participation. We show that firm size is a robust determinant of the decision to export. It is not a proxy for efficiency, for capital intensity, for sector or for time-invariant unobservables. In contrast the evidence for self-selection into exporting is very weak. Finally our use of a longer run panel than has been available before has allowed us to separate out the roles of ownership and skills as possible determinants of participation in exporting. We find that both foreign ownership and skills are significant determinants of exporting.

Abstracts from last weekend’s IPES conference at Princeton that caught my eye:

Daniel Kono of UC-Davis:

Most research on democracy and trade policy indicates that democracies are more liberal than autocracies. I argue, in contrast, that the effects of democracy on trade policy vary across trading partners. Because the typical median voter has a low capital endowment relative to the national mean, (s)he benefits from trade with relatively capital-abundant countries but is hurt by trade with relatively labor-abundant ones. Democracy, which increases the median voter’s influence, thus leads to trade liberalization with wealthier countries but increased protection against poorer ones. I test and find support for this hypothesis using dyadic trade flows from 1950-2000 and dyadic trade barriers in the 1990s. My results imply that democratization has led and will lead to discrimination in international trade, primarily via nontariff barriers. The spread of democracy thus heightens the need for multilateral trading rules that combat the discriminatory use of such measures.

Nikolaos Zahariadis of Alabama-Birmingham:

Why is there still so much protectionism in light of political rhetoric extolling the virtues of free trade, favorable economic theory and evidence, and legal pressure to dismantle protectionist measures? The answer rests on four factors and their interactions: globalization, asset specificity, political power, and institutional access. I test the argument using data from 14 EU member states during the period 1992-2004. The findings clarify the variable impact of globalization on demands for protection, the impact of institutions on rent-seeking and rent-supplying behavior, and the conditions affecting domestic coalition formation. Politicians face an uncomfortable dilemma. Globalization and democracy appear to be on a collision course: the more globalization undermines democratic politics, the more democratic politics will strive to tame globalization.

[Hat tip: Drezner]

Sebastian Mallaby, abridged:

The two parties have opposing attitudes on the subject of trade: Republicans see it as a source of growth, Democrats as a source of inequality. This split is undermining the U.S. ability to play its traditional postwar role in driving global trade liberalization. And if anti-trade Democrats can win elections when unemployment stands at 4.4 percent, they may do even better next time…

[T]he real reason Democrats oppose trade has little to do with foreigners’ stance on union rights or endangered species and a lot to do with the fact that trade harms some U.S. workers… So labor and environmental clauses will never reconcile Democrats to trade. To forge a bipartisan consensus, we need a different approach. Here is a three-part formula.

First, Democrats need to be honest about development in the poor world. It’s wrong to pretend that labor regulations, whether inserted in trade agreements or adopted by governments, are a powerful engine of rising living standards in developing countries…

Republicans need to get serious about the fact that, since 1980 or so, real incomes for the majority of Americans have stagnated. Republicans cannot expect support for trade unless they do more to compensate workers who get hit by globalization. They should be working with Democrats to improve the social safety net, linking progress on that front to continued trade liberalization.

Finally, both parties should cooperate on overhauling the nation’s farm program, which comes up for renewal next year…

Of course, it’s a long shot…

Clive Crook:

[B]uilding a coalition of support for open international markets is a great political challenge. The truth is, this administration has never so much as tried. It has scored dismally low marks on trade policy, frequently caving to protectionist interests on demand. The president’s standing is so low that if he were to reverse himself now and try to support liberal trade, he might actually set the cause back even more. In all, the outlook for open markets has rarely seemed so bleak.

Under what scenario would increased efforts by the President to support trade liberalization result in damage to the cause?

A bit of a hiccup heading into this weekend’s APEC meeting hosted by Vietnam:

The bill, which would have granted Vietnam ”permanent normal trade relations” with the US, is needed for the country to enjoy the full benefits of its forthcoming membership of the World Trade Organisation. The House of Representatives voted 228 to 161 to pass the bill, but it failed to reach the two-thirds majority needed to pass it under an accelerated process chosen by the Republican leadership of the House.

Susan Schwab, US trade representative, used her opening press conference at the Apec conference in Hanoi on Wednesday to argue that the defeat arose from procedural problems, not deep-seated rejection of trade deals.

“You have to be a student of our congressional system to understand the vote that took place yesterday,” she told reporters. “The fact is that there was strong bipartisan support in favour of permanent normal trade relations for Vietnam in the House of Representatives”.

With many lawmakers yet to return to Washington after the midterm elections last week, the House failed to muster the two-thirds majority required, Ms Schwab said.

A fresh batch of NBER papers was announced yesterday. Here’s what may interest trade people:

Shang-Jin Wei & Zhiwei Zhang:

Trade reform conditions are common in IMF supported programs. Of the 99 countries that had IMF programs during 1993-2003, 77 had conditions on trade reforms in their programs. Since the WTO has not been found especially effective in promoting trade openness for most developing countries, it is of great interest to see if the IMF has been more effective as it combines carrots and sticks not available to the WTO. Yet, the effectiveness of trade conditions in IMF programs has not been systematically studied. Using a unique dataset, this paper provides such an assessment. It finds that trade conditions are associated with an increase in trade openness on average, but the effect comes mostly from countries that, by some measure, have a high degree of “willingness to reform.”

Jiandong Ju & Shang-Jin Wei:

International capital flows from rich to poor countries can be regarded as either too small (the Lucas paradox in a one-sector model) or too large (when compared with the logic of factor price equalization in a two-sector model). To resolve the paradoxes, we introduce a non-neo-classical model which features financial contracts and firm heterogeneity. In our model, free trade in goods does not imply equal returns to capital across countries. In addition, rich patterns of gross capital flows emerge as a function of financial and property rights institutions. A poor country with an inefficient financial system may simultaneously experience an outflow of financial capital but an inflow of FDI, resulting in a small net flow. In comparison, a country with a low capital-to-labor ratio but a high risk of expropriation may experience outflow of financial capital without compensating inflow of FDI.

Richard E. Baldwin & Virginia Di Nino:

This paper tests whether trade in new goods is partially responsible for the pro-trade effects of the euro and provides a measure of the size of the effect. It works with a very large data set (about 16 million observations) covering twenty countries at the most disaggregated level of trade data that is publicly available. Using predictions from a heterogeneous-firms trade model in a multi-country environment to structure our empirical model, we find that the euro had a positive impact on trade overall. Our findings provide supportive but not conclusive evidence for the new-goods hypothesis. We also determined the pro-trade effect of euro-usage on non-Euroland nations trading with euro-users. We confirmed the absence of trade diversion for non-Eurozone EU members with sizeable overall increase comparable to that of members.

Larry Summers echoes my interpretation of the electoral impact on trade policy:

The challenge for trade policy in the next two years will be more to resist protection than to further liberalisation, since both parties want to respond to the economically anxious middle class that disproportionately projects its anxieties on trade agreements. [FT]

On the other hand, Dan Griswold claims that the partisan shift matters:

The election means that the president’s trade agenda has come to a screeching halt. [AFP]

What? I must have missed Bush’s swiftly speeding trade agenda! The election is a tap on the brakes of a vehicle was coming to a rolling stop anyway.

This Thomas Friedman clip is saddening.

During a CNBC interview with Tim Russert in late July, the acclaimed savant made a notable confession: “We got this free market, and I admit, I was speaking out in Minnesota – my hometown, in fact – and guy stood up in the audience, said, ‘Mr. Friedman, is there any free trade agreement you’d oppose?’ I said, ‘No, absolutely not.’ I said, ‘You know what, sir? I wrote a column supporting the CAFTA, the Caribbean Free Trade initiative. I didn’t even know what was in it. I just knew two words: free trade.'”

Jagdish Bhagwati: “Of course, those who are used to sound bites and cannot think of more than two words at the same time will read ‘free trade areas’ as ‘free trade.'” (Free Trade Today)

“Adam Smith, the legendary Scottish economist, is to appear on the new £20 note – the first Scot to adorn an English banknote, and the first economist.” Also to appear: a pin factory enjoying division of labor.

The authors of a forthcoming Economics Letters article (pdf) gathered data from Amazon’s American, British, and Canadian web sites to demonstrate international price discrimination. According to the authors, Americans pay significantly more for textbooks on average. They offer a number of demand-side hypotheses but do not test them.

I’ve found a number of cases where American customers can save money by purchasing their textbooks from amazon.co.uk and paying for international shipping (£6.98) rather than using amazon.com. Check it out:

Prices reported in USD with an exchange rate of 1.88 USD per GBP.