Comtrade data in Stata

Markus Eberhardt describes how to pull Comtrade data straight into Stata:

11/03/2011 UN COMTRADE data in Stata: Mitch Abdon of the Stata Daily blog recently suggested a way of combining the UN ComtradeTools and Stata. Comtrade is the International Merchandise Trade Statistics (IMTS) of the UN, which records item-level trade for all countries in the world and contains around 1.8 bn observations from 1962 onwards. Access to this data is free, but for technical reasons a maximum of 50,000 observations per query (even more reason to use the Stata Daily application). Having installed the software which allows one to download Comtrade data (registration/subscription required for access) there are a number of simple steps to pull this data directly into Stata and save it. In fact, the entire process is run from within Stata once everything is installed. Since I had some minor trouble setting up and getting this tool to work I’ve written a simple Stata 10 do-file with additional information.

Sutton & Trefler: “Deductions from the Export Basket: Capabilities, Wealth and Trade”

If you’re keen on the literatures about trade and product quality or economic growth and the export basket, you should probably check out NBER 16834:

This paper re-explores the relation between a country’s level of wealth and the mix of products it exports. We argue that both are simultaneously determined by countries’ capabilities i.e. by countries’ productivity and quality levels for each good. Our theoretical setup has two features. (1) Some goods have fewer high-quality producers/countries than others i.e. there is Ricardian comparative advantage. (2) Imperfect competition allows high- and low-quality producers to coexist, which we refer to as ‘product ranges’. These two features generate a very particular non-monotonic, general equilibrium relationship between a country’s export mix and its wage (GDP per capita). We show that this non-monotonicity permeates the 1980-2005 international data on trade and GDP per capita. Our setup also explains two other facets of the data: (1) Product ranges are huge and (2) for the poorest third of countries, changes in export mix substantially over-predict growth in GDP per capita. This suggests that the main challenge for low-income countries is to raise quality and productivity in their existing product lines.

Innovating in trade finance

Trade finance has been a hot topic since the “great trade collapse” began in 2008. We’ve had job-market papers, numerous VoxEU columns, and an AEA session. At the Atlantic, Liam Casey, CEO of a supply-chain services provider, says that trade finance is overdue for innovation:

[M]ost banks still push antiquated trade finance products — most notably, letters of credit. This instrument is based on an old supply chain model that was risky and involved huge amounts of money and long delivery times. Financial institutions had to extend a line of credit against raw materials inventory or decide when to make payments to sellers on behalf of buyers.

Today’s supply chain transaction times are much shorter and transaction amounts are much smaller. Information, product and cash flows are all interconnected. Controlling the flow of information allows you to control the flow of products, which in turn leads to a controlled flow of cash. Such short supply chain cycles make financing much easier. It reduces the working capital required to make a product, and with no inventory stocks, fast transit times and the best inventory visibility in the industry, risk is dramatically reduced. The impact of this new model on global commerce is huge, facilitating more and more startups to get into business with less capital and less risk.

Adapting to change and staying flexible is how businesses stay relevant – especially in the supply chain and technology sector. Chinese mainland banks are well positioned to take advantage of opportunities in trade finance because they understand China, they understand commerce and the supply chain, and they know where to look for risk in the pre-shipment stage of the supply chain. With regards to the post-shipment side of the business, where the Western banks are comfortable, Chinese banks such as China Merchants Bank are rapidly learning global business systems and developing their expertise. Western banks need to move fast to catch up. They need to develop new trade finance products to stay relevant and adapt in today’s market.

[HT: LWS]

Foreign competition and quality upgrading: Evidence from French firms

Julien Martin and Isabelle Mejean describe quality upgrading by French firms in response to different forms of international competition:

What is the impact of low-wage countries’ competition on the quality of high-wage countries’ exports? To answer this question, we develop a new method that uses firm-level data to measure quality changes in sectoral exports. Over 1995-2005, we measure a 11% increase in the mean quality of France’s aggregate exports, driven by a reallocation of demand in favor of higher quality producers. The phenomenon is significantly more pronounced in markets where the penetration of developing countries has increased while it is negative where firms face increased competitive pressures from high-wage countries. These results are consistent with within-product specialization along the vertical dimension. They suggest that, over the period, France has specialized in the production of higher quality goods. In our data, around one fifth of the measured quality improvement in France’s aggregate exports is attributable to low-wage countries’ competition. In turn, its increasing specialization in higher quality goods has limited France’s market share loss over the period.

They’ve written a VoxEU column summarizing their findings.

Preferential trade and economic efficiency

Daniel Altman makes (what I believe is) a novel claim:

Already, we’ve seen rich and poor countries shifting their attention to regional trade deals. Diverse groups of countries can do a lot by trading amongst themselves, exploiting differences in costs, resources, and technologies. Pretty soon, we should see a few large regional blocs dominating global trade. The ones that lower trade barriers faster will grow faster, too. In these cases, the poorer countries would be expected to catch up to the richer ones. When that happens, the wealthier blocs will start to look at the blocs that lagged behind for new trading relationships, and the barriers will start to fall between the blocs. In the end, we’ll have something very close to a global trade deal – and we will have arrived at that deal in a much more organic, economically efficient way. [emphasis added]

Yes, preferential trade is an importance force shaping the WTO talks. Yes, preferential trade is more politically palatable than multilateralism. But more economically efficient?

Most who are relatively optimistic about the dynamics of preferential trade don’t claim it’s the best path (Baldwin: “(1) Regionalism is here to stay; world trade is regulated by a motley assortment of unilateral, bilateral and multilateral trade agreements; (2) this motley assortment is not the best way to organise world trade”). How would large trade blocs be more economically efficient than a global trade deal?

Progress in the US-Mexico trucking dispute

WSJ:

President Barack Obama and Mexican President Felipe Calderon reached a deal resolving a longstanding dispute over cross-border trucking that has subjected the U.S. to billions of dollars in punitive tariffs.

The plan, unveiled at a news conference by the two presidents, will allow for half of those tariffs to be lifted immediately. It will establish a reciprocal, phased-in pilot program that allows Mexican trucks to operate inside the U.S. provided they comply with a series of safety and driver-skills and language tests monitored by the U.S. Department of Transportation.

Will Doha conclude in 2011?

ECIPE is hosting an online symposium asking “Will the Doha round be concluded in 2011?”

Most of the answers are in the negative. Frank Lavin simply says: “No“, because the political will isn’t present. Claude Barfield says that the recent flurry of activity in Geneva hasn’t been matched by an uptick in interest in Washington, though the Obama administration could always shift its position.

Jeff Schott, whose piece carries the most optimistic headline, “Substantial progress can be made“, writes:

Substantial progress can be made in 2011 on a Doha Round agreement. Even under the best of circumstances, however, the end game negotiations could not be concluded this year.

The reason for this downbeat assessment is simple. Despite the positive charge from G-20 leaders in Seoul last November, and despite technical work undertaken by Geneva officials since then, the major trading nations have not yet begun to negotiate with each other.

Trade blogging links

Three pieces worth reading in full:

  • Simon Lester, refuting Daniel Altman, explains some of the problems with preferential trade deals and why the WTO won’t be made obsolete by the proliferation of PTAs.
  • Mike Konczal summarizes a new paper (pdf) by David Autor, David Dorn, and Gordon Hanson that analyzes effect of import competition on U.S. local labor markets that were differentially exposed to the rise of China trade between 1990 through 2007 due to differences in their initial patterns of industry specialization.
  • David Warsh discusses Peddling Protectionism: Smoot-Hawley and the Great Depression, Doug Irwin’s new book, in the context of explaining Smoot-Hawley’s role in the Great Depression.