WTO disputes in 2010

The first WTO dispute of 2010 is, according to Simon Lester, a “classic de facto discrimination case.” The US complaint against the Philippines:

Distilled spirits produced from certain materials that are typically produced in the Philippines are taxed at a low rate. Other distilled spirits are taxed at significantly higher rates. The Philippines’ taxes on distilled spirits appear not to tax similarly imported distilled spirits compared to directly competitive or substitutable domestic distilled spirits. The taxes appear to be applied in a way that affords protection to the domestic products.

The Doha stall will likely last into 2011, so, as has been the case for a couple years, the WTO’s importance to the global trading system in 2010 will be its role in global trade governance and dispute resolution.

Exporting raises productivity in sub-Saharan African manufacturing firms

Now here’s something you don’t see every day – evidence that exporting raises firm-level productivity. The conventional evidence says that exporters are more productive because of selection effects rather than learning-by-exporting (Clerides, Lach, and Tybout, QJE, 1998). But things may be different in Africa:

Proponents of trade liberalization argue that exporting helps firms to achieve higher productivity levels. This hypothesis is examined for a panel of manufacturing firms in nine African countries. The results indicate that exporters in these countries are more productive and, more importantly, exporters increase their productivity advantage after entry into the export market. While the first finding can be explained by selection–only the most productive firms engage in exporting–the latter cannot. The results are robust when unobserved productivity differences and self-selection into the export market are controlled for using different econometric methods. Scale economies are shown to be an important channel for the productivity advance. Credit constraints and contract enforcement problems prevent firms that only produce for the domestic market from fully exploiting scale economies.

Johannes Van Biesebroeck (2005), “Exporting raises productivity in sub-Saharan African manufacturing firms,” Journal of International Economics, 62(2): 373-391.

Arkolakis, Costinot, and Rodriguez-Clare: “New Trade Models, Same Old Gains?”

NBER Working Paper No. 15628:

Micro-level data have had a profound influence on research in international trade over the last ten years. In many regards, this research agenda has been very successful. New stylized facts have been uncovered and new trade models have been developed to explain these facts. In this paper we investigate to which extent answers to new micro-level questions have affected answers to an old and central question in the field: How large are the gains from trade? A crude summary of our results is: “So far, not much.”

What they’re saying is:

Our analysis focuses on models featuring five basic assumptions: Dixit-Stiglitz preferences, one factor of production, linear cost functions, complete specialization, and iceberg trade costs… A common estimator of the gains from trade… only depends on the value of two aggregate statistics: (i) the share of expenditure on domestic goods, which is equal to one minus the import penetration ratio, and (ii) a gravity-based estimator of the elasticity of imports with respect to variable trade costs, which we refer to as the “trade elasticity.”… within that particular, but important class of models, the mapping between trade data and welfare is independent of the micro-level details of the model we use…

A direct corollary of our analysis under perfect competition is that two very well-known gravity models, Anderson (1979) and Eaton and Kortum (2002), have identical welfare implications. In Anderson (1979), like in any other “Armington” model, there are only con- sumption gains from trade, whereas there are both consumption and production gains from trade in Eaton and Kortum (2002). Nevertheless, our results imply that the gains from trade in these two models are the same: as we go from Anderson (1979) to Eaton and Kortum (2002), the appearance of production gains must be exactly compensated by a decline in consumption gains from trade.

What border effect?

Hillberry & Hummels “Trade responses to geographic frictions: A decomposition using micro-data” (European Economic Review, 2008):

The highly non-linear effect of distance on trade may help explain some results in the ‘‘home bias’’ literature. While our estimates on 3-digit zip code data reveal that intra-state shipments are significantly higher than cross-state shipments, this effect disappears entirely when shipment distances are measured more accurately using 5-digit zip codes. We instead find that the ‘‘borders’’ between 5-digit zip codes represent a sizeable barrier to trade. We consider these zip-code effects the reductio ad absurdum of the home bias literature. While one can imagine many barriers to trade that operate at national borders, it is harder to conceive of what barriers plausibly operate at state borders, and harder still to imagine those associated with 5-digit zip codes. Our results suggest that ‘‘home bias,’’ at least in state borders, is an artifact of geographic aggregation. Since shipments drop off extraordinarily rapidly over very short distances, attempts to measure border effects on larger geographical groupings are nearly certain to ascribe the non-linear effects of distance to ‘‘home bias’’ dummy variables.

Measuring protectionist actions during the crisis: What’s the counterfactual?

Dani Rodrik:

The GTA’s latest report identifies no fewer than 192 separate protectionist actions since November 2008, with China as the most common target. This number has been widely quoted in the financial press. Taken at face value, it seems to suggest that governments have all but abandoned their commitments to the World Trade Organization and the multilateral trade regime.

But look more closely at those numbers and you will find much less cause for alarm. Few of those 192 measures are in fact more than a nuisance. The most common among them are the indirect (and often unintended) consequences of the bailouts that governments mounted as a consequence of the crisis. The most frequently affected sector is the financial industry.

Moreover, we do not even know whether these numbers are unusually high when compared to pre-crisis trends. The GTA report tells us how many measures have been imposed since November 2008, but says nothing about the analogous numbers prior to that date. In the absence of a benchmark for comparative assessment, we do not really know whether 192 “protectionist” measures is a big or small number.

Waugh: “International Trade and Income Differences”

Forthcoming in the AER:

I develop a novel view of the trade frictions between rich and poor countries by arguing that to reconcile bilateral trade volumes and price data within a standard gravity model, the trade frictions between rich and poor countries must be systematically asymmetric, with poor countries facing higher costs to export relative to rich countries.

I provide a method to model these asymmetries and demonstrate the merits of my approach relative to alternatives in the trade literature. I then argue that these trade frictions are quantitatively important to understanding the large differences in standards of living and total factor productivity across countries.

Available ungated at the Minneapolis Fed.

Job market papers in international trade

I’ve tried to pull together some of the job market papers featuring trade theory and empirics. I neglect international finance and open economy macro papers here. Feel free to add more in the comments.

Saroj Bhattarai (Princeton) “Optimal Currency Denomination of Trade: Theory and Quantitative Exploration”

Lorenzo Caliendo (Chicago) “Estimates of the Trade and Welfare Effects of NAFTA”

Camila Campos (Yale) “Incomplete Exchange Rate Pass-Through and Extensive Margin of Adjustment”

Arpita Chatterjee (Princeton) “Why Do Similar Countries Choose Different Policies? Endogenous Comparative Advantage, and Welfare Gains”

John Dalton (Minnesota) “Explaining the Growth in Manufacturing Trade”

Swati Dhingra (Madison) “Trading Away Wide Brands for Cheap Brands”

Brian Kovak (Michigan) “Regional Labor Market Effects of Trade Policy: Evidence from Brazilian Liberalization”

Zhiyuan Li (UC Davis) “Task Offshoring and Organizational Form: Theory and Evidence from China”

Lin Lu (Minnesota) “Trade and Variety: The Effect of Within-Country Income Inequality”

Asier Mariscal (Chicago) “Global ownership patterns”

Carlos Noton (Berkeley) “Structural Estimation of Price Adjustment Costs in the European Car Market”

Soonhee Park (Michigan) “International Fragmentation and Work Effort: Networks, Loyalty and Wages”

Ana Maria Santacreu (NYU) “Innovation Diffusion and Trade: Theory and Measurement”

Gloria Sheu (Harvard) “Price, Quality, and Variety: Measuring the Gains from Trade in Differentiated Products”

Victor Shlychkov (Columbia) “Organizational Forms of Importing Firms in U.S. Manufacturing”

Yoichi Sugita (Columbia) “Matching, Quality, and Comparative Advantage: A Unified Theory of Heterogeneous Firm Trade”

John Tang (Berkeley) “Pollution Havens and the Trade in Toxic Chemicals: Evidence from U.S. Trade Flows”

Marc Teignier-Baque (Chicago) “The Role of Trade in Structural Transformation”

Jade Vichyanond (Princeton) “Intellectual Property Protection and Patterns of Trade”

Kevin Wiseman (Minnesota) “Location, productivity, and trade“

Finicelli, Pagano, and Sbracia: “Trade-revealed TFP”

To the extent that you’re willing to believe in a particular model, you can pull off some interesting exercises, such as “trade-revealed TFP“:

We introduce a novel methodology to measure the relative TFP of the tradeable sector across countries, based on the relationship between trade and TFP in the model of Eaton and Kortum (2002). The logic of our approach is to measure TFP not from its “primitive” (the production function) but from its observed implications. In particular, we estimate TFPs as the productivities that best fit data on trade, production, and wages. Applying this methodology to a sample of 19 OECD countries, we estimate the TFP of each country’s manufacturing sector from 1985 to 2002. Our measures are easy to compute and, with respect to the standard development-accounting approach, are no longer mere residuals. Nor do they yield common “anomalies”, such as the higher TFP of Italy relative to the US.

Via Agent Continuum.

Peri & Requena: “The Trade Creation Effect of Immigrants”

Giovanni Peri & Francisco Requena have a new NBER working paper:

There is abundant evidence that immigrant networks are associated with larger exports from the country where they settle to their countries of origin. The direction of causality of this association is less clearly established… Using micro data on individual trade transactions from Spanish provinces between 1995 and 2008 and data on the stock of immigrants in those provinces by country of origin… we find that immigrants significantly increase exports (elasticity of 0.10), that the effect is almost entirely due to an increase in the extensive margin and that the effect is somewhat stronger for differentiated goods.