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Article
Publication date: 7 March 2016

Young-Han Kim and Eui-Hyun Ha

Rules of origin (ROOs) are often cited as major trade barriers even after tariff barriers are removed with the formation of preferential trade agreement (PTA) as shown in…

Abstract

Purpose

Rules of origin (ROOs) are often cited as major trade barriers even after tariff barriers are removed with the formation of preferential trade agreement (PTA) as shown in a survey result that a large number South Korean firms in the textile industry give up utilizing tariff-free exports to the USA after the bilateral Free Trade Agreement (FTA) due to ROOs. The purpose of this paper is to examine the impact of ROOs on the equilibrium FTA regime and the welfare effects.

Design/methodology/approach

The authors determine the impact of ROOs on the equilibrium FTA regime based on an oligopolistic model where there are asymmetry in production technologies of intermediate goods and the capacity of outsourcing intermediate goods.

Findings

The authors demonstrate that ROOs are used as a protective trade policy against the FTA member country with an outsourcing option for technologically dominant intermediate goods.

Practical implications

The non-cooperative features of ROOs found in this paper necessitates the introduction of an international coordination mechanism to avoid the prisoners’ dilemma-type implementation of ROOs.

Originality/value

This paper provides a theoretical frame to analyze the protective effects of ROOs under PTAs.

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Book part
Publication date: 1 October 2008

Eric W. Bond and Constantinos Syropoulos

Purpose – This chapter examines how preferential liberalization between a pair of countries affects the terms of trade and welfare of the liberalizing countries and on the…

Abstract

Purpose – This chapter examines how preferential liberalization between a pair of countries affects the terms of trade and welfare of the liberalizing countries and on the rest of the world (ROW). We adopt a model with symmetric countries that generalizes previous work by relaxing assumptions on functional forms, which allows for the possibility that exports of member countries are complements for exports of the ROW.

Methodology/approach – This chapter uses general equilibrium welfare analysis for a three-country trade model.

Findings – We show that Kemp–Wan tariff adjustments require a decrease (increase) in the external tariff of members in a preferential trade agreement to accompany internal liberalization in the neighborhood of internal free trade when member goods are substitutes (complements) for non-member goods. However, the adjustment path of the external tariff to reductions in the internal tariff could be non-monotonic when preferences are not of the CES type.

Practical implications – Our results are of interest for the design of rules for multilateral trade agreements with respect to preferential liberalization, since they indicate how tariffs must be adjusted to eliminate negative impacts on non-member countries.

Details

Globalization and Emerging Issues in Trade Theory and Policy
Type: Book
ISBN: 978-1-84663-963-0

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Article
Publication date: 21 March 2016

Davit Sahakyan

The purposes of this paper are to provide a new framework for the (re)assessment of North-South relations, with a specific focus on North-South preferential trade…

Abstract

Purpose

The purposes of this paper are to provide a new framework for the (re)assessment of North-South relations, with a specific focus on North-South preferential trade agreements (PTAs); advance a new mechanism of how first-order, i.e. Southern countries’ first, North-South PTAs can affect the outcomes of second-order, i.e. Southern countries’ subsequent, North-South PTA negotiations; and re-examine the effects of North-South power asymmetries on the outcomes of North-South PTA negotiations.

Design/methodology/approach

The paper focuses on how North-South power asymmetries affect the outcomes of North-South PTA negotiations. It introduces the concept of “first-order” and “second-order” North-South PTAs to show that the “order” of an agreement can be a crucial factor in PTA negotiations. The claims of the paper are also supported by primary data obtained through the author’s personal interviews with European Union and USA trade officials and policy-makers (see Appendix).

Findings

The paper advances a new theoretical framework that takes a longer-term view on North-South trade relations, whereby, against the backdrop of the proliferating PTAs, first-order North-South agreements can raise the bargaining powers of Southern countries during subsequent North-South PTA negotiations, with strong implications for both developed and developing countries.

Research limitations/implications

The paper is largely theoretical. A systematic empirical study of North-South PTAs will be required to validate or refute the theoretical framework advanced in this paper.

Originality/value

The paper introduces a new variable, namely the “order” of an agreement, which affects the logic of North-South PTA negotiations. Hence, the paper sets out a new theoretical framework that allows for a more accurate assessment of North-South power asymmetries and their effects on the outcomes of North-South PTA negotiations.

Details

Journal of International Trade Law and Policy, vol. 15 no. 1
Type: Research Article
ISSN: 1477-0024

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Article
Publication date: 2 September 2014

Kenneth A. Reinert

The purpose of this paper is to develop a formal representation of the imperfect substitutes model (ISM) of partial equilibrium, trade policy analysis and to conduct…

Abstract

Purpose

The purpose of this paper is to develop a formal representation of the imperfect substitutes model (ISM) of partial equilibrium, trade policy analysis and to conduct sensitivity analysis on the behavioral parameters of the model.

Design/methodology/approach

The paper develops an ISM in a manner that is conformable to more complex, applied general equilibrium models of trade policy analysis.

Findings

The paper presents a set of sensitivity analyses on key behavioral parameters for a better understanding of the model's properties.

Research limitations/implications

Sensitivity analysis on the values of behavioral parameters in ISMs needs to be conducted by trade policy modelers.

Practical implications

The ISM is made more explicit here than in most representations, something that will be of great use to practitioners.

Originality/value

While widely used in trade policy circles, the ISM is rarely explicitly formulated, nor the role of its behavioral parameters explored.

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Article
Publication date: 22 October 2018

Lubna Uzair and Ahmad Nawaz

This paper aims to empirically examine the trade creation and diversion impacts on merchandise imports of Pakistan under the Pakistan–China Free Trade Agreement (FTA). The…

Abstract

Purpose

This paper aims to empirically examine the trade creation and diversion impacts on merchandise imports of Pakistan under the Pakistan–China Free Trade Agreement (FTA). The analysis of Pakistan’s preferential treatment with its largest trade partner as well as the most substantial exporter of the world will help to shape trade policy, open windows for academic research and also gives an immense contribution in literature.

Design/methodology/approach

A disaggregated panel data on the imports of Pakistan from China and other WTO member countries and tariff concessions at Harmonized System (HS) two-digit level used for the agreement period of 2006-2012. The empirical analysis takes care of bias through robust and panel-corrected standard errors with time, industry-specific effects and controlling for multilateral trade resistance.

Findings

Evidence found in support of trade creation under the Pakistan–China FTA. It means overall this agreement increased the welfare of Pakistani consumers.

Practical implications

Findings are in favour of negotiations and signing for the next round of this agreement and with other major trade partners like the US and Saudi Arabia.

Originality/value

It is worth investigating empirically the impact of preferential trade liberalization between Pakistan – a developing country – and China – the largest importer of the world – explicitly, in the form of trade creation or diversion. The empirical assessment of this FTA signed with the world’s largest exporter will not only contribute immensely to the literature but also help in trade policy formulation and open windows for academic research. Another unique aspect of this study is the use of disaggregated data consisting of all goods imports along with tariff concessions at two-digit Harmonized System (HS) code.

Details

Journal of Chinese Economic and Foreign Trade Studies, vol. 11 no. 3
Type: Research Article
ISSN: 1754-4408

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Book part
Publication date: 24 September 2010

Robert Scollay and John Gilbert

Regional trading arrangements are proliferating at a rapid pace in the Asia-Pacific region, although the architecture that will eventually emerge remains uncertain. In…

Abstract

Regional trading arrangements are proliferating at a rapid pace in the Asia-Pacific region, although the architecture that will eventually emerge remains uncertain. In this chapter we explore the economic implications for both China and its trading partners of the current crop of preferential arrangements and potential future developments in the Asia-Pacific region, using computable general equilibrium simulations. By doing so the chapter aims to identify factors that are likely to weigh heavily in the economic interests of the different participants in some of the alternative ways in which the trade architecture of the region might develop, and the extent of convergence or divergence in these interests.

Details

New Developments in Computable General Equilibrium Analysis for Trade Policy
Type: Book
ISBN: 978-0-85724-142-9

Keywords

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Article
Publication date: 25 January 2008

Longyue Zhao, Mariem Malouche and Richard Newfarmer

The purpose of this paper is to provide a timely review and analysis of China's regional trade agreements, its motivations, and its economic implications for Association…

Abstract

Purpose

The purpose of this paper is to provide a timely review and analysis of China's regional trade agreements, its motivations, and its economic implications for Association of Southeast Asian Nations (ASEAN)‐China Free Trade Agreement (ACFTA) member countries and other trading partners.

Design/methodology/approach

The paper uses the SMART model of the World Integrated Trade Solution to quantify the economic implications of the ACFTA on merchandise trade flows among member countries and other trading partners. Then, for comparative purposes, the impact of two possible paths beyond the ACFTA is simulated: an East Asia Free Trade Agreement (EAFTA) and the possible Doha Round multilateral trade liberalization.

Findings

The paper finds that, if regional and bilateral trade arrangement (RTA) were only concentrated in tariff reductions, the impact on trade flows would be quite limited. China's trade liberalization will bring the similar impacts to ASEAN in three of the scenarios modeled. Japan and Korea would get more market access to China if an EAFTA were to become reality. Only in a multilateral liberalization would all RTA member countries and the rest of the world benefit.

Research limitations/implications

Three limitations are noteworthy. First, these types of models capture only static gains from trade. Second, the simulations do not include services liberalization, which could readily provide benefits in several multiples of merchandise trade, and third, it is assumed that full removal of all border barriers at once, in a multilateral scenario, would be of illuminating heuristic value but is unlikely to occur in reality.

Originality/value

The paper demonstrates the wisdom of China's simultaneous pursuit of unilateral, regional and multilateral liberalization – because the wider the trading group involved in the liberalization, the more China and its partners will benefit. The tariff reductions in RTAs will have limited effects on expanding merchandise trade, especially when compared with comprehensive and multilateral liberalization agreements.

Details

Journal of Chinese Economic and Foreign Trade Studies, vol. 1 no. 1
Type: Research Article
ISSN: 1754-4408

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Article
Publication date: 8 February 2013

Krishna Chikhuri

The aim of this paper is to deal with the linkage between agricultural trade liberalization and food security in Sub‐Saharan Africa.

Abstract

Purpose

The aim of this paper is to deal with the linkage between agricultural trade liberalization and food security in Sub‐Saharan Africa.

Design/methodology/approach

The analysis uses the GTAP model which is a global dynamic applied general equilibrium model to assess how the multifarious trade and support policies in agriculture affect the poor in the Sub‐Saharan African group based on food security concerns. The policy strategies analyzed are two liberalization scenarios based on the proposals made in the present round of agricultural negotiations in terms of market access and export competition, plus a free agricultural trade benchmark scenario.

Findings

The results of alternative trade liberalization strategies on key food security indicators in the SSA region are ambiguous. The impact varies depending on the extent of liberalization and also the comparative advantage of the SSA group at the sectoral level.

Originality/value

Despite several studies on food security, especially after the food crisis in 2008, very little research has focussed on the agricultural trade liberalization impact with a CGE approach.

Details

International Journal of Social Economics, vol. 40 no. 3
Type: Research Article
ISSN: 0306-8293

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Article
Publication date: 21 October 2013

Louis Dodson

The entry into force of the EU-CARIFORUM Economic Partnership Agreement (EPA) marks the beginning of a new era of trade relations, from preferential treatment to…

Abstract

Purpose

The entry into force of the EU-CARIFORUM Economic Partnership Agreement (EPA) marks the beginning of a new era of trade relations, from preferential treatment to reciprocity, between the member states of the European Union (EU) and the Caribbean Forum (CARIFORUM) of African, Caribbean and Pacific (ACP) states. In light of the controversy regarding the impact of the agreement, an assessment is made on the static welfare impact it is likely to generate on consumers in Guyana.

Design/methodology/approach

The assessment is done through the application of a partial equilibrium model to the 2008 import and tariff data of Guyana. The model captures the static welfare effect that will be occasioned by a change in tariff on imports.

Findings

The study finds that there will be a static net welfare loss to the tune of US$31.01 million or 2.2 percent of Guyana's GDP obtained for 2008. The loss is due to a large trade diversion effect which is the product of the fact that over the years Guyana imported little from the EU relative to the rest of the world minus CARIFORUM sources.

Originality/value

Unlike its forerunner, the import data used in this study is for the year immediately before the entering into force of the EU-CARIFORUM EPA and reflects the exact amount of imports that will be liberalized by Guyana. In addition, the study is broader in scope as it focusses on the EU-27, which is the exact number of EU member states with whom Guyana has signed the aforementioned agreement. Subject to its exactness, the study is better positioned in having its findings be used as a yardstick, given the periodic mandatory review of the EU-CARIFORUM EPA.

Details

World Journal of Entrepreneurship, Management and Sustainable Development, vol. 9 no. 4
Type: Research Article
ISSN: 2042-5961

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Book part
Publication date: 18 August 2006

Richard Pomfret

This chapter reviews the evolution of thinking about regional trade agreements (RTAs) and the policy developments reflected in three waves of RTAs during the last half…

Abstract

This chapter reviews the evolution of thinking about regional trade agreements (RTAs) and the policy developments reflected in three waves of RTAs during the last half century. Desirable and undesirable features of RTAs can be identified, but the central message concerns the ambiguity of outcomes. The chapter concludes with a discussion of the role of the nation state and of multilateral institutions and the scope for intermediate levels of organization created by RTAs.

Details

Regional Economic Integration
Type: Book
ISBN: 978-0-76231-296-2

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